Today’s News 16th May 2016

• "We're Going To Do It, F**k It" – Venezuela's Maduro Orders Military Exercises For Next Weekend

  Over the past several days, things in Venezuela have not only taken a palpable turn for the worse, but now seem to be moving at an accelerating pace toward the inevitable endgame for the Maduro regime and whatever happens next.

  As we reported on Friday night, following dramatic scenes of violence in the streets, things escalated when some 5,000 starving locals looted a supermarket looking for food, leaving countless injured. The result was an immediate, if long overdue acknowledgement by US officials that “a crisis is coming” who added that Maduro “was not likely to be able to complete his term, which is due to end after elections in late 2018” implying that a coup is likely imminent.

  They said one “plausible” scenario would be that Maduro’s own party or powerful political figures would force him out and would not rule out the possibility of a military coup.

  An interview we presented with a member of the Venezuelan national guard confirmed as much when the anonymous guardsman said that “the situation in Venezuela has never been as bad as it is now. The breaking point is near, but still not at hand. My recommendation is for people to prepare, to look for food and then to store it. Obviously, when the implosion occurs , it won’t last long. I believe it will last something like 10 days, but they will be difficult days.”

  

   

  Indeed, all that is missing is the catalyst for a broad, if violent, popular upheaval against Maduro’s failing regime.

  That catalyst may have been revealed this weekend, when Venezuela’s opposition on Saturday slammed a state of emergency decreed by President Nicolas Maduro and vowed to press home efforts to remove the leftist leader this year amid a grim economic crisis.

  As we reported yesterday, Maduro on Friday night declared a 60-day state of emergency due to what he called plots from Venezuela and the United States to subvert him. He did not provide specifics. A recording of his increasingly angry rhetoric is shown below:

   

  As Reuters adds today, “the measure shows Maduro is panicking as a push for a recall referendum against him gains traction with tired, frustrated Venezuelans, opposition leaders said during a protest in Caracas.”

  “We’re talking about a desperate president who is putting himself on the margin of legality and constitutionality,” said Democratic Unity coalition leader Jesus Torrealba, adding Maduro was losing support within his own bloc.

  “If this state of emergency is issued without consulting the National Assembly, we would technically be talking about a self-coup,” he told hundreds of supporters who waved Venezuelan flags and chanted “he’s going to fall.”

  The people’s will was already made clear late last year when the opposition won control of the National Assembly in a December election, propelled by voter anger over product shortages, raging inflation that has annihilated salaries, and rampant violent crime, but the legislature has been routinely undercut by the Supreme Court. The lit fuse is therefore entirely in the hands of the increasingly more desperate people. Protests are on the rise and a key poll shows nearly 70% of Venezuelans now say Maduro must go this year.

  Maduro has vowed to see his term through, however, blasting opposition politicians as coup-mongering elitists seeking to emulate the impeachment of fellow leftist Dilma Rousseff in Brazil.

  Saying trouble-makers were fomenting violence to justify a foreign invasion, Maduro on Saturday hinted that a violent crackdown on enemies, both foreign and domestic, may be imminent when he ordered military exercises for next weekend.

  “We’re going to tell imperialism and the international right that the people are present, with their farm instruments in one hand and a gun in the other… to defend this sacred land,” he boomed at a rally. He added the government would take over idled factories, and in the process “radicalize the revolution:”

  “Comrades, I am ready to hand over to communal power the factories that some conservative big wigs in this country have stopped. An idled factory is a factory handed over to the people. We are going to do it, fuck it!“

  Critics of Maduro, a former union leader and bus driver, say he should instead focus on people’s urgent needs.

  “There will be a social explosion if Maduro doesn’t let the recall referendum happen,” said protester Marisol Dos Santos, 34, an office worker at a supermarket where she says some 800 people queue up daily.But the opposition fear authorities are trying to delay a referendum until 2017, when the presidency would fall to the vice president, a post currently held by Socialist Party loyalist Aristobulo Isturiz.

  “If you block this democratic path we don’t know what might happen in this country,” two-time presidential candidate Henrique Capriles said at the demonstration.

  “Venezuela is a time bomb that can explode at any given moment.”

  Judging by the upcoming “military exercises”, that moment for the failed socialist nation may be as soon as next weekend. The only question is whether the military will support the increasingly unpopular president or if it will once again turn on the people as it has in recent weeks as shown in the video below of Venezuela police and anti-riot authorities cracking down with excessive force on protesters. Viewer discretion advised.

  

  

• Who Rules The World? Part 1

  Authored by Noam Chomsky, originally posted at TomDispatch.com,

  [This piece, the first of two parts, is excerpted from Noam Chomsky’s new book, Who Rules the World? (Metropolitan Books).]

  When we ask “Who rules the world?” we commonly adopt the standard convention that the actors in world affairs are states, primarily the great powers, and we consider their decisions and the relations among them. That is not wrong. But we would do well to keep in mind that this level of abstraction can also be highly misleading.

  States of course have complex internal structures, and the choices and decisions of the political leadership are heavily influenced by internal concentrations of power, while the general population is often marginalized. That is true even for the more democratic societies, and obviously for others. We cannot gain a realistic understanding of who rules the world while ignoring the “masters of mankind,” as Adam Smith called them: in his day, the merchants and manufacturers of England; in ours, multinational conglomerates, huge financial institutions, retail empires, and the like. Still following Smith, it is also wise to attend to the “vile maxim” to which the “masters of mankind” are dedicated: “All for ourselves and nothing for other people” — a doctrine known otherwise as bitter and incessant class war, often one-sided, much to the detriment of the people of the home country and the world.

  In the contemporary global order, the institutions of the masters hold enormous power, not only in the international arena but also within their home states, on which they rely to protect their power and to provide economic support by a wide variety of means. When we consider the role of the masters of mankind, we turn to such state policy priorities of the moment as the Trans-Pacific Partnership, one of the investor-rights agreements mislabeled “free-trade agreements” in propaganda and commentary. They are negotiated in secret, apart from the hundreds of corporate lawyers and lobbyists writing the crucial details. The intention is to have them adopted in good Stalinist style with “fast track” procedures designed to block discussion and allow only the choice of yes or no (hence yes). The designers regularly do quite well, not surprisingly. People are incidental, with the consequences one might anticipate.

  The Second Superpower

  The neoliberal programs of the past generation have concentrated wealth and power in far fewer hands while undermining functioning democracy, but they have aroused opposition as well, most prominently in Latin America but also in the centers of global power. The European Union (EU), one of the more promising developments of the post-World War II period, has been tottering because of the harsh effect of the policies of austerity during recession, condemned even by the economists of the International Monetary Fund (if not the IMF’s political actors). Democracy has been undermined as decision making shifted to the Brussels bureaucracy, with the northern banks casting their shadow over their proceedings.

  Mainstream parties have been rapidly losing members to left and to right. The executive director of the Paris-based research group EuropaNova attributes the general disenchantment to “a mood of angry impotence as the real power to shape events largely shifted from national political leaders [who, in principle at least, are subject to democratic politics] to the market, the institutions of the European Union and corporations,” quite in accord with neoliberal doctrine. Very similar processes are under way in the United States, for somewhat similar reasons, a matter of significance and concern not just for the country but, because of U.S. power, for the world.

  The rising opposition to the neoliberal assault highlights another crucial aspect of the standard convention: it sets aside the public, which often fails to accept the approved role of “spectators” (rather than “participants”) assigned to it in liberal democratic theory. Such disobedience has always been of concern to the dominant classes. Just keeping to American history, George Washington regarded the common people who formed the militias that he was to command as “an exceedingly dirty and nasty people [evincing] an unaccountable kind of stupidity in the lower class of these people.”

  In Violent Politics, his masterful review of insurgencies from “the American insurgency” to contemporary Afghanistan and Iraq, William Polk concludes that General Washington “was so anxious to sideline [the fighters he despised] that he came close to losing the Revolution.” Indeed, he “might have actually done so” had France not massively intervened and “saved the Revolution,” which until then had been won by guerrillas — whom we would now call “terrorists” — while Washington’s British-style army “was defeated time after time and almost lost the war.”

  A common feature of successful insurgencies, Polk records, is that once popular support dissolves after victory, the leadership suppresses the “dirty and nasty people” who actually won the war with guerrilla tactics and terror, for fear that they might challenge class privilege. The elites’ contempt for “the lower class of these people” has taken various forms throughout the years. In recent times one expression of this contempt is the call for passivity and obedience (“moderation in democracy”) by liberal internationalists reacting to the dangerous democratizing effects of the popular movements of the 1960s.

  Sometimes states do choose to follow public opinion, eliciting much fury in centers of power. One dramatic case was in 2003, when the Bush administration called on Turkey to join its invasion of Iraq. Ninety-five percent of Turks opposed that course of action and, to the amazement and horror of Washington, the Turkish government adhered to their views. Turkey was bitterly condemned for this departure from responsible behavior. Deputy Secretary of Defense Paul Wolfowitz, designated by the press as the “idealist-in-chief” of the administration, berated the Turkish military for permitting the malfeasance of the government and demanded an apology. Unperturbed by these and innumerable other illustrations of our fabled “yearning for democracy,” respectable commentary continued to laud President George W. Bush for his dedication to “democracy promotion,” or sometimes criticized him for his naïveté in thinking that an outside power could impose its democratic yearnings on others.

  The Turkish public was not alone. Global opposition to U.S.-UK aggression was overwhelming. Support for Washington’s war plans scarcely reached 10% almost anywhere, according to international polls. Opposition sparked huge worldwide protests, in the United States as well, probably the first time in history that imperial aggression was strongly protested even before it was officially launched. On the front page of the New York Times, journalist Patrick Tyler reported that “there may still be two superpowers on the planet: the United States and world public opinion.”

  Unprecedented protest in the United States was a manifestation of the opposition to aggression that began decades earlier in the condemnation of the U.S. wars in Indochina, reaching a scale that was substantial and influential, even if far too late. By 1967, when the antiwar movement was becoming a significant force, military historian and Vietnam specialist Bernard Fall warned that “Vietnam as a cultural and historic entity… is threatened with extinction… [as] the countryside literally dies under the blows of the largest military machine ever unleashed on an area of this size.”

  But the antiwar movement did become a force that could not be ignored. Nor could it be ignored when Ronald Reagan came into office determined to launch an assault on Central America. His administration mimicked closely the steps John F. Kennedy had taken 20 years earlier in launching the war against South Vietnam, but had to back off because of the kind of vigorous public protest that had been lacking in the early 1960s. The assault was awful enough. The victims have yet to recover. But what happened to South Vietnam and later all of Indochina, where “the second superpower” imposed its impediments only much later in the conflict, was incomparably worse.

  It is often argued that the enormous public opposition to the invasion of Iraq had no effect. That seems incorrect to me. Again, the invasion was horrifying enough, and its aftermath is utterly grotesque. Nevertheless, it could have been far worse. Vice President Dick Cheney, Secretary of Defense Donald Rumsfeld, and the rest of Bush’s top officials could never even contemplate the sort of measures that President Kennedy and President Lyndon Johnson adopted 40 years earlier largely without protest.

  Western Power Under Pressure

  There is far more to say, of course, about the factors in determining state policy that are put to the side when we adopt the standard convention that states are the actors in international affairs. But with such nontrivial caveats as these, let us nevertheless adopt the convention, at least as a first approximation to reality. Then the question of who rules the world leads at once to such concerns as China’s rise to power and its challenge to the United States and “world order,” the new cold war simmering in eastern Europe, the Global War on Terror, American hegemony and American decline, and a range of similar considerations.

  The challenges faced by Western power at the outset of 2016 are usefully summarized within the conventional framework by Gideon Rachman, chief foreign-affairs columnist for the London Financial Times. He begins by reviewing the Western picture of world order: “Ever since the end of the Cold War, the overwhelming power of the U.S. military has been the central fact of international politics.” This is particularly crucial in three regions: East Asia, where “the U.S. Navy has become used to treating the Pacific as an ‘American lake’”; Europe, where NATO — meaning the United States, which “accounts for a staggering three-quarters of NATO’s military spending” — “guarantees the territorial integrity of its member states”; and the Middle East, where giant U.S. naval and air bases “exist to reassure friends and to intimidate rivals.”

  The problem of world order today, Rachman continues, is that “these security orders are now under challenge in all three regions” because of Russian intervention in Ukraine and Syria, and because of China turning its nearby seas from an American lake to “clearly contested water.” The fundamental question of international relations, then, is whether the United States should “accept that other major powers should have some kind of zone of influence in their neighborhoods.” Rachman thinks it should, for reasons of “diffusion of economic power around the world — combined with simple common sense.”

  There are, to be sure, ways of looking at the world from different standpoints. But let us keep to these three regions, surely critically important ones.

  The Challenges Today: East Asia

  Beginning with the “American lake,” some eyebrows might be raised over the report in mid-December 2015 that “an American B-52 bomber on a routine mission over the South China Sea unintentionally flew within two nautical miles of an artificial island built by China, senior defense officials said, exacerbating a hotly divisive issue for Washington and Beijing.” Those familiar with the grim record of the 70 years of the nuclear weapons era will be all too aware that this is the kind of incident that has often come perilously close to igniting terminal nuclear war. One need not be a supporter of China’s provocative and aggressive actions in the South China Sea to notice that the incident did not involve a Chinese nuclear-capable bomber in the Caribbean, or off the coast of California, where China has no pretensions of establishing a “Chinese lake.” Luckily for the world.

  Chinese leaders understand very well that their country’s maritime trade routes are ringed with hostile powers from Japan through the Malacca Straits and beyond, backed by overwhelming U.S. military force. Accordingly, China is proceeding to expand westward with extensive investments and careful moves toward integration. In part, these developments are within the framework of the Shanghai Cooperation Organization (SCO), which includes the Central Asian states and Russia, and soon India and Pakistan with Iran as one of the observers — a status that was denied to the United States, which was also called on to close all military bases in the region. China is constructing a modernized version of the old silk roads, with the intent not only of integrating the region under Chinese influence, but also of reaching Europe and the Middle Eastern oil-producing regions. It is pouring huge sums into creating an integrated Asian energy and commercial system, with extensive high-speed rail lines and pipelines.

  One element of the program is a highway through some of the world’s tallest mountains to the new Chinese-developed port of Gwadar in Pakistan, which will protect oil shipments from potential U.S. interference. The program may also, China and Pakistan hope, spur industrial development in Pakistan, which the United States has not undertaken despite massive military aid, and might also provide an incentive for Pakistan to clamp down on domestic terrorism, a serious issue for China in western Xinjiang Province. Gwadar will be part of China’s “string of pearls,” bases being constructed in the Indian Ocean for commercial purposes but potentially also for military use, with the expectation that China might someday be able to project power as far as the Persian Gulf for the first time in the modern era.

  All of these moves remain immune to Washington’s overwhelming military power, short of annihilation by nuclear war, which would destroy the United States as well.

  In 2015, China also established the Asian Infrastructure Investment Bank (AIIB), with itself as the main shareholder. Fifty-six nations participated in the opening in Beijing in June, including U.S. allies Australia, Britain, and others which joined in defiance of Washington’s wishes. The United States and Japan were absent. Some analysts believe that the new bank might turn out to be a competitor to the Bretton Woods institutions (the IMF and the World Bank), in which the United States holds veto power. There are also some expectations that the SCO might eventually become a counterpart to NATO.

  The Challenges Today: Eastern Europe

  Turning to the second region, Eastern Europe, there is a crisis brewing at the NATO-Russian border. It is no small matter. In his illuminating and judicious scholarly study of the region, Frontline Ukraine: Crisis in the Borderlands, Richard Sakwa writes — all too plausibly — that the “Russo-Georgian war of August 2008 was in effect the first of the ‘wars to stop NATO enlargement’; the Ukraine crisis of 2014 is the second. It is not clear whether humanity would survive a third.”

  The West sees NATO enlargement as benign. Not surprisingly, Russia, along with much of the Global South, has a different opinion, as do some prominent Western voices. George Kennan warned early on that NATO enlargement is a “tragic mistake,” and he was joined by senior American statesmen in an open letter to the White House describing it as a “policy error of historic proportions.”

  The present crisis has its origins in 1991, with the end of the Cold War and the collapse of the Soviet Union. There were then two contrasting visions of a new security system and political economy in Eurasia. In Sakwa’s words, one vision was of a “‘Wider Europe,’ with the EU at its heart but increasingly coterminous with the Euro-Atlantic security and political community; and on the other side there [was] the idea of ‘Greater Europe,’ a vision of a continental Europe, stretching from Lisbon to Vladivostok, that has multiple centers, including Brussels, Moscow and Ankara, but with a common purpose in overcoming the divisions that have traditionally plagued the continent.”

  Soviet leader Mikhail Gorbachev was the major proponent of Greater Europe, a concept that also had European roots in Gaullism and other initiatives. However, as Russia collapsed under the devastating market reforms of the 1990s, the vision faded, only to be renewed as Russia began to recover and seek a place on the world stage under Vladimir Putin who, along with his associate Dmitry Medvedev, has repeatedly “called for the geopolitical unification of all of ‘Greater Europe’ from Lisbon to Vladivostok, to create a genuine ‘strategic partnership.’”

  These initiatives were “greeted with polite contempt,” Sakwa writes, regarded as “little more than a cover for the establishment of a ‘Greater Russia’ by stealth” and an effort to “drive a wedge” between North America and Western Europe. Such concerns trace back to earlier Cold War fears that Europe might become a “third force” independent of both the great and minor superpowers and moving toward closer links to the latter (as can be seen in Willy Brandt’s Ostpolitik and other initiatives).

  The Western response to Russia’s collapse was triumphalist. It was hailed as signaling “the end of history,” the final victory of Western capitalist democracy, almost as if Russia were being instructed to revert to its pre-World War I status as a virtual economic colony of the West. NATO enlargement began at once, in violation of verbal assurances to Gorbachev that NATO forces would not move “one inch to the east” after he agreed that a unified Germany could become a NATO member — a remarkable concession, in the light of history. That discussion kept to East Germany. The possibility that NATO might expand beyond Germany was not discussed with Gorbachev, even if privately considered.

  Soon, NATO did begin to move beyond, right to the borders of Russia. The general mission of NATO was officially changed to a mandate to protect “crucial infrastructure” of the global energy system, sea lanes and pipelines, giving it a global area of operations. Furthermore, under a crucial Western revision of the now widely heralded doctrine of “responsibility to protect,” sharply different from the official U.N. version, NATO may now also serve as an intervention force under U.S. command.

  Of particular concern to Russia are plans to expand NATO to Ukraine. These plans were articulated explicitly at the Bucharest NATO summit of April 2008, when Georgia and Ukraine were promised eventual membership in NATO. The wording was unambiguous: “NATO welcomes Ukraine’s and Georgia’s Euro-Atlantic aspirations for membership in NATO. We agreed today that these countries will become members of NATO.” With the “Orange Revolution” victory of pro-Western candidates in Ukraine in 2004, State Department representative Daniel Fried rushed there and “emphasized U.S. support for Ukraine’s NATO and Euro-Atlantic aspirations,” as a WikiLeaks report revealed.

  Russia’s concerns are easily understandable. They are outlined by international relations scholar John Mearsheimer in the leading U.S. establishment journal, Foreign Affairs. He writes that “the taproot of the current crisis [over Ukraine] is NATO expansion and Washington’s commitment to move Ukraine out of Moscow’s orbit and integrate it into the West,” which Putin viewed as “a direct threat to Russia’s core interests.”

  “Who can blame him?” Mearsheimer asks, pointing out that “Washington may not like Moscow’s position, but it should understand the logic behind it.” That should not be too difficult. After all, as everyone knows, “The United States does not tolerate distant great powers deploying military forces anywhere in the Western hemisphere, much less on its borders.”

  In fact, the U.S. stand is far stronger. It does not tolerate what is officially called “successful defiance” of the Monroe Doctrine of 1823, which declared (but could not yet implement) U.S. control of the hemisphere. And a small country that carries out such successful defiance may be subjected to “the terrors of the earth” and a crushing embargo — as happened to Cuba. We need not ask how the United States would have reacted had the countries of Latin America joined the Warsaw Pact, with plans for Mexico and Canada to join as well. The merest hint of the first tentative steps in that direction would have been “terminated with extreme prejudice,” to adopt CIA lingo.

  As in the case of China, one does not have to regard Putin’s moves and motives favorably to understand the logic behind them, nor to grasp the importance of understanding that logic instead of issuing imprecations against it. As in the case of China, a great deal is at stake, reaching as far — literally — as questions of survival.

  The Challenges Today: The Islamic World

  Let us turn to the third region of major concern, the (largely) Islamic world, also the scene of the Global War on Terror (GWOT) that George W. Bush declared in 2001 after the 9/11 terrorist attack. To be more accurate, re-declared. The GWOT was declared by the Reagan administration when it took office, with fevered rhetoric about a “plague spread by depraved opponents of civilization itself” (as Reagan put it) and a “return to barbarism in the modern age” (the words of George Shultz, his secretary of state). The original GWOT has been quietly removed from history. It very quickly turned into a murderous and destructive terrorist war afflicting Central America, southern Africa, and the Middle East, with grim repercussions to the present, even leading to condemnation of the United States by the World Court (which Washington dismissed). In any event, it is not the right story for history, so it is gone.

  The success of the Bush-Obama version of GWOT can readily be evaluated on direct inspection. When the war was declared, the terrorist targets were confined to a small corner of tribal Afghanistan. They were protected by Afghans, who mostly disliked or despised them, under the tribal code of hospitality — which baffled Americans when poor peasants refused “to turn over Osama bin Laden for the, to them, astronomical sum of $25 million.”

  There are good reasons to believe that a well-constructed police action, or even serious diplomatic negotiations with the Taliban, might have placed those suspected of the 9/11 crimes in American hands for trial and sentencing. But such options were off the table. Instead, the reflexive choice was large-scale violence — not with the goal of overthrowing the Taliban (that came later) but to make clear U.S. contempt for tentative Taliban offers of the possible extradition of bin Laden. How serious these offers were we do not know, since the possibility of exploring them was never entertained. Or perhaps the United States was just intent on “trying to show its muscle, score a victory and scare everyone in the world. They don’t care about the suffering of the Afghans or how many people we will lose.”

  That was the judgment of the highly respected anti-Taliban leader Abdul Haq, one of the many oppositionists who condemned the American bombing campaign launched in October 2001 as "a big setback" for their efforts to overthrow the Taliban from within, a goal they considered within their reach. His judgment is confirmed by Richard A. Clarke, who was chairman of the Counterterrorism Security Group at the White House under President George W. Bush when the plans to attack Afghanistan were made. As Clarke describes the meeting, when informed that the attack would violate international law, "the President yelled in the narrow conference room, ‘I don’t care what the international lawyers say, we are going to kick some ass.'" The attack was also bitterly opposed by the major aid organizations working in Afghanistan, who warned that millions were on the verge of starvation and that the consequences might be horrendous.

  The consequences for poor Afghanistan years later need hardly be reviewed.

  The next target of the sledgehammer was Iraq. The U.S.-UK invasion, utterly without credible pretext, is the major crime of the twenty-first century. The invasion led to the death of hundreds of thousands of people in a country where the civilian society had already been devastated by American and British sanctions that were regarded as “genocidal” by the two distinguished international diplomats who administered them, and resigned in protest for this reason. The invasion also generated millions of refugees, largely destroyed the country, and instigated a sectarian conflict that is now tearing apart Iraq and the entire region. It is an astonishing fact about our intellectual and moral culture that in informed and enlightened circles it can be called, blandly, “the liberation of Iraq.”

  Pentagon and British Ministry of Defense polls found that only 3% of Iraqis regarded the U.S. security role in their neighborhood as legitimate, less than 1% believed that “coalition” (U.S.-UK) forces were good for their security, 80% opposed the presence of coalition forces in the country, and a majority supported attacks on coalition troops. Afghanistan has been destroyed beyond the possibility of reliable polling, but there are indications that something similar may be true there as well. Particularly in Iraq the United States suffered a severe defeat, abandoning its official war aims, and leaving the country under the influence of the sole victor, Iran.

  The sledgehammer was also wielded elsewhere, notably in Libya, where the three traditional imperial powers (Britain, France, and the United States) procured Security Council resolution 1973 and instantly violated it, becoming the air force of the rebels. The effect was to undercut the possibility of a peaceful, negotiated settlement; sharply increase casualties (by at least a factor of 10, according to political scientist Alan Kuperman); leave Libya in ruins, in the hands of warring militias; and, more recently, to provide the Islamic State with a base that it can use to spread terror beyond. Quite sensible diplomatic proposals by the African Union, accepted in principle by Libya’s Muammar Qaddafi, were ignored by the imperial triumvirate, as Africa specialist Alex de Waal reviews. A huge flow of weapons and jihadis has spread terror and violence from West Africa (now the champion for terrorist murders) to the Levant, while the NATO attack also sent a flood of refugees from Africa to Europe.

  Yet another triumph of “humanitarian intervention,” and, as the long and often ghastly record reveals, not an unusual one, going back to its modern origins four centuries ago.

  

  

• The GOP Finally Gets It: "People Just Don't Care, Trump Rewrote The Playbook"

  In a shocking moment of clarity, that should also send shivers up the spine of the Democratic party, Republican chairman (and implicity voice of 'the establishment') Reince Priebus admitted on various Sunday talk-shows that campaign traditions don't apply to the so-called Teflon Don noting that "the public just wasn't interested" in his taxes or the various 'stories' that the Deep State is throwing at him. "I don't think the traditional playbook applies.. We've been down this road for a year. And it doesn't apply," Priebus exclaimed, and why the Clinton campaign is likely scrambling, "He's rewritten the playbook."

  Summing up the reality of the current situation – with attacks coming at presumotive GOP nominee Trump from all sides – NBC News reports that Priebus said…

  "I've got to tell you, I think that all these stories that come out – and they come out every couple weeks – people just don't care."

  Voters, Trump told ABC's George Stephanopoulos Friday morning, are not entitled to review his returns before heading to the polls, and the tax rate he pays is "none of your business." Elsewhere, Trump insisted that not only was there nothing to learn from his taxes, but that the public wasn't interested.

  When asked if that meant Trump doesn't have to release his tax returns, Priebus said that would be up to the American people.

   

  "They're going to have to decide whether that's a big issue or not," Priebus said.

   

  Speaking with Fox News Sunday, Priebus said that voters just want an "earthquake" when host Chris Wallace asked if reports of Trump repeatedly mistreating women bothered him.

  The RNC chair argued that voters aren't judging Trump based on his personal life or his past.

  "I think people are judging Donald Trump as to whether or not he's someone that's going to go to Washington and shake things up," Priebus said on ABC. "And that's why he's doing so well."

  And that is why Hillary will need every bit of help from Liberal-leaning newsfeeds, Clinton-connected reporters, and a Deep State desparate to maintain the status quo… no matter what.

  

  

  

• Former Attorney General Holds Hillary Clinton Fundraiser Despite Ongoing FBI Criminal Probe

  Before he was quietly advised last year by his superior that the time to “quit” has finally come after a career filled with gaffe after gaffe, former US Attorney General Eric Holder was best known for not prosecuting big banks due to his concern they were “Too Big To Prosecute“, clearly ignoring the optics (and reality) that this would also makes it seem that when it comes to breaking the law, banks are more powerful than the United States itself.

  Fast forward one year, when the same Eric Holder, and former Attorney General, makes headlines of a different sort. As the Hill reports, Holder will headline a “lawyers for Hillary” fundraiser for Hillary Clinton on May 31.

  Available tickets for the fundraiser, which takes place May 31, range from $500 to $2,700, according to Clinton’s campaign website. “Young lawyer” tickets, priced at $250, were sold out as of early Sunday afternoon. Actress Julianna Margulies (who played a political spouse betrayed by her husband) will also attend the fundraiser.

  An invitation for the event posted on Hillaryclinton.com reads, “Please join Lawyers for Hillary and Eric H. Holder, Jr., 82nd Attorney General of the United States and Julianna Margulies for an evening with Hillary.”

  

   

  The surreal irony of it all hardly needs no explanation. This is how the Weekly Standard puts it: “the FBI investigation of Hillary Clinton continues, but that isn’t stopping the former head of the Department of Justice from holding a fundraiser for the Democratic presidential candidate.

  As a reminder, the FBI – which is still probing Hillary – is part of the DOJ, which in turn is headed by Loretta Lynch. She got her first prominent public appointment in 1999 when she was nominated by President Bill Clinton to serve as the U.S. Attorney for the Eastern District of New York.

  We note all this just in case someone still believes that Hillary is not “Too Powerful To Prosecute.”

  

  

• The Endgame

  Submitted by Alasdair Macloed via GoldMoney.com,

  There is a growing fear in financial and monetary circles that there is something deeply wrong with the global economy. Publicly, officials and practitioners alike have become confused by policy failures, and privately, occasionally even downright pessimistic, at a loss to see a statist solution. It is hardly exaggerating to say there is a growing feeling of impending doom.

  The reason this has happened is that today’s macro-economists are a failure on the one subject about which they profess to be experts: economics. Their policy recommendations have become the opposite from what logic and sound economic theory shows is the true path to economic progress. Progress is not even on their list of objectives, which fortunately for us all happens despite their interventions. The adaptability of humans in their actions has allowed progress to continue, despite all attempts to discredit markets, the clearing centres for the division of labour.

  Ill-founded beliefs in the magic of unsound money have been shattered on the altar of experience. Macro-economists are discovering that the failure of monetary and fiscal planning are becoming a policy cul-de-sac that has generated a legacy of unsustainable debt. Those of us aware of a gathering financial crisis are discovering that governments have tamed only the statistics and not what they represent.

  There is evidence that central bank intervention began to irrevocably distort markets from 1981, when Paul Volker raised interest rates to halt the slide in the dollar’s purchasing power. It was at that point the free market relationship between the price level and the cost of borrowing changed, evidenced by the failure of Gibson’s paradox. That was the point when central banks wrested control of prices from the market. This is explained more fully below.

  The errors have been multiple. In this article I explain how and why they have arisen. This knowledge is the necessary background for an understanding of how the financial and economic crisis that increasing numbers of us expect, is likely to develop, and what action we must take as individuals to protect ourselves.

  Markets versus governments

  The starting point for today’s errors is the belief that markets sometimes fail, and that monetary and/or fiscal policies can steer markets towards a better outcome. The modern incarnation of this myth started with JM Keynes, who by the mid-thirties believed he had enough cause to overturn Say’s law, or the law of the markets. So the roots of today’s crisis go deep, and originate long before Volcker’s interest rate hike in 1981.

  Say’s law states that we produce to consume. Therefore, production is bound tightly to consumption, including deferred consumption, otherwise known as savings. And if someone consumes without producing, someone else has to produce the wherewithal. The medium of exchange that translates wages and profits arising from production into consumption is money, so we can say without contradiction that money represents the temporary storage of the profit from production, or ordinary people’s labour. It is an iron law, which invites trouble for any attempt to stimulate consumption.

  There can be no net stimulation into the private sector economy by the state, because everything has to be paid for, one way or another. For simplicity, we will disregard cross-border government subsidies, such as foreign aid. When a government pays benefits to a group of individuals, it either borrows the money from someone else, or alternatively it creates the money out of thin air. In the latter case, the benefit payments are covered by the debasement of the existing money stock, which is a hidden tax on everyone else’s money. To argue otherwise, as do those who deny Say’s law, is a fallacy that relies on a concept of financial perpetual motion.

  Keynes’s motivation was partly driven by his belief in the honest intentions of democratic government, and as we can glean from his writings, his emotional dislike of savers, the usurious rentiers who rake in interest without soiling their hands through honest work. In his General Theory, the first major work after Keynes was confident he had dispatched Say’s law to oblivion, he expressed his hope for the gradual euthanasia of the rentier, and that capital would be increased by communal saving through the agency of the State, so that it would no longer be scarce. The term, rentier, is itself a put-down in English, suggesting usurious lending. Keynes hoped that entrepreneurs, “who are certainly so fond of their craft that their labour could be obtained much cheaper than at present”, would be harnessed to the service of the community on reasonable terms of reward.

  His General Theory is proof that Keynes despised markets, and did not understand prices (see Chapter 21). With his ignorance of this most fundamental element of economics and all the other half-truths that follow, the true purpose of this propaganda is revealed: the justification for state intervention and the end of free markets. It is a thoroughly bad book, yet it has become the bedrock of mainstream economics today, even for those who deny being Keynesians.

  Upon this unsound basis, layer upon layer of further untruths have been built. When an economist conjures up a course of action based on these fairy-tales, the honest critic is at a loss where to start, because the thread of errors leading to the economist’s judgement has become so long and convoluted. Few are prepared to listen to a lengthy critique on this matter, so it is far easier for the layman and politician alike to assume that a scion of Oxford and Harvard must know what he is talking about.

  It’s both the line of least resistance, and a cop-out. The language of modern economics takes us in so completely, we often don’t realise we ourselves perpetuate the mistakes. It is time for those who wish to understand the seriousness of these cumulative errors to draw a line, and to face up to them, because to not do so could be very expensive for those with assets to protect.

  The root of the problem is in a misunderstanding of the nature of economics itself, and in the application of modern analytics.

  The analytical mistake

  The misuse of statistical information is a great evil, which has become increasingly prevalent over the years, taking a great leap forward in its destructive force with the development of computers. Computers are a wonderful facility, but they have come to replace soundly reasoned theory by advancing the role of inappropriate statistics, and their supposed mathematical relationships.

  Mathematics is appropriate for the physical sciences, but wholly inappropriate for social sciences, such as economics. Maths has an important role in business: there is an essential role in book-keeping as a means of measuring any enterprise’s progress. But it is another thing entirely to attempt to banish the uncertainties inherent in future human action by mathematical means. A businessman who fails to distinguish between mathematics as an accounting tool and its lack of predictive value will not remain in business for long. Yet there is no limitation, seemingly, on the employment of mathematics in the less certain world of a national economy.

  The mistakes, while subtle, are at least threefold.

  Even if the capture of economic activity is total and correct at a past moment in time (which it never can be), it cannot be valid thereafter, because economic activity continually evolves. No economy statically churns on an unchanging basis. The information gathered by econometricians is not only incorrect thereafter, but it misleads state planners into believing they have the evidence to manage economic activity. Misused aggregates such as gross domestic product are just accounting identities, and not the measure of progress that so many believe.

  Statistics are continually amended to show monetary and fiscal policies in the best possible light. Price inflation and unemployment numbers have evolved to the point where they do not reflect reality, yet because they are issued by a government department, they retain credibility. The result is the statistics have themselves been tamed, not what they represent.

  Meaningless averages are routinely invoked as evidence to support state intervention and planning. Thus, the CPI’s “basket of goods”, and an “average wage” are not connected to reality and conceal the fact that economic actors are individuals with diverse needs and wants. Averages should not be used as analytical tools upon which to base monetary and fiscal policy.

  It was George Canning, nearly two centuries ago, who said he could prove anything with statistics, except the truth. The attraction statistics confers for the slow-witted analyst is they avoid him having to apply original thought. It means he or she never feels the need to consider the underlying motivations of economic actors.

  A good example of this error is contained in the Barsky and Summers attempt, published in The Journal of Political Economy in 1988, to explain Gibson’s paradox . Gibson’s paradox is the observed correlation between the price level and wholesale borrowing costs, and the lack of correlation between borrowing costs and the rate of inflation. The relationship came to an end in the late seventies in the UK, where it was statistically observed from 1730 onwards. Barsky & Summers incorrectly assumed it was a phenomenon of the gold standard, and then used a mathematical model of their devising to arrive at a partial conclusion, which they admitted would require further research. In other words, their method led them into a blind alley.

  To be fair to Barsky and Summers, they are not the only high-flying economists who have failed to explain Gibson’s paradox. It was so named by Keynes after an earlier economist, and he also failed to resolve it. The evidence was plain and simple, but being unresolved Keynes simply dismissed it and its important implications as well. Milton Friedman also failed.

  By putting myself in the shoes of an entrepreneurial businessman looking to finance his production, I found the paradox was easy to resolve and explain. The businessman’s calculation is comprised of the difference between his costs of production and the selling price for his product. What does he know of the prospective selling price? He knows what similar items sell for in the current market, and it is that that sets the level of interest he is prepared to pay to finance his production. That is why interest rates correlated with the price level, and not the rate of inflation, for the two hundred years in the original study by Alfred Gibson.

  Unfortunately, this cuts across the cherished beliefs of monetary economists, who believe in the control of economic activity by managing interest rates and the expansion of the quantity of money and bank credit. For monetary policy to be valid, there must be a positive correlation between price inflation and interest rates, which Gibson’s paradox demonstrated was not true. I would also postulate that Keynes was not temperamentally inclined to understand the solution to Gibson’s paradox, because he cherished the belief that it is idle rentiers who demand usurious rates of interest and set them, not the borrower with his calculation of an investment return.

  This is why it is vital to understand the motivations of economic actors, and to not hide behind the sterile world of ivory-tower mathematics. But we have become so used to statistical modelling, that even some followers of Say’s law are subverted. The confusion of accounting identities such as GDP with the indeterminate concept of economic growth is a case in point. And many are the times we read the writings of economists, who take dodgy statistics, and use them as the basis for an equation between disparate elements to create a relationship where none actually exists. You cannot say apples are pears, but you can say they are different. You can turn apples equals pears into an equation, if you introduce a factor that always represents the difference between the two. Nonsense, of course, but this is what economists routinely do.

  A prime example is the fallacy of the velocity of money. The assumption is that a change in the quantity of money will change the level of prices. So, ?m~?p. But, it was found to the inconvenience of monetarists from David Ricardo onwards that prices p varied independently from the money quantity m, particularly in periods of less than an indeterminate long run. Therefore, the equation was modified to include another variable, dubbed the velocity of circulation to give it meaning, and it became the basis of Irving Fisher’s equation of exchange,

  M*V=P*Q

  where M is the total amount of money in circulation, V is its velocity of circulation, P is the price level, and Q is an index of final expenditures. Presented like this, we are drawn into believing that the concept of money going round and round the economy is a concept with meaning. It is not. It has no more meaning than the interposition of a variable to make an equation between apples and pears balance.

  Not once does the monetary economist stop to think that everything an individual makes from his production, besides a necessary cash float, is consumed, either today or at some time in the future. What matters is not the size of an individual’s cash balance, but the profit from his labour. That is the Say’s law relationship, denied by the monetarist.

  Ignorance in academic circles over price theory, which after all is the bedrock of economics, is staggering. It is as if Carl Menger, who convincingly proved the full subjectivity of prices back in the 1870s, never existed. This is despite the fact that for all of us the exchange of the fruits of our labour, in the form of money, for the things we individually decide we want, is our most important daily activity.

  We also ignore the fact that there are two variables in any price, changes that emanate from the goods or services being exchanged, and that of money itself. We are all aware of changes that emanate from goods and services. But few of us are aware that changes can also emanate from the money side as well. There is a reason for this. The role of money, traditionally sound money, is for it to be taken for granted. It allows us to value diverse products, and to account for our own production. It acts as the objective exchange value in a transaction. However, the purchasing power of money is never a constant and continually varies, the more so when it is unsound. So, the default assumption that all price moves come from the goods and services being bought and sold, is incorrect.

  In the old days of sound money, when gold was freely exchangeable for paper currency, price movement from the currency side was fairly minor, even over prolonged periods of time. But in today’s paradigm of fiat monetary debasement, the movement can be considerable. Consider a situation where personal preferences for holding currency a shift towards zero. The price of a good which does not move when measured in a stable currency b, will shift so that the price measured in currency a tends towards infinity. We recognise this phenomenon when talking about Zimbabwean dollars, or Venezuelan bolivars, but our minds refuse to admit to the same dynamics operating for the dollar and the other major currencies used by advanced westerners.

  Changing values for the currency may not be noticed much day-to-day, but they do interfere with annual comparisons, because the currency’s purchasing-power last year differs from this year’s. Neither does the law recognise any variance in a fiat currency’s purchasing power, a fact which central banks exploit to the full.

  Central banks print money, and they license the banks to loan credit into existence. By ignoring Say’s law, they think they can stimulate demand by cheapening and expanding credit. For a time, this trick fools people, but repeated often enough they begin to lose confidence in the currency and alter their preferences against holding it, so its purchasing power declines.

  The rate at which an inflating currency’s purchasing power declines varies from product to product, depending where the increase is applied. Since the financial crisis of 2007/08, it has been obvious that prices of financial assets have seen the bulk of monetary inflation applied to them, and prices of bonds and other securities have risen accordingly. The prices of ordinary goods and services have risen considerably less, but it is arguable how much. The officially tamed CPI has consistently recorded price inflation to be well below the Fed’s target in recent years, yet independent calculations, such as the Chapwood Index, records price inflation at about 9%. We cannot take any of these averages too seriously for the reasons mentioned above, other than to observe that price rises on Main Street appear to be significantly higher than state-sponsored econometricians tell us.

  The monetary link between prices and the quantity of money is tenuous at best, and takes no account of intertemporal factors, such as where monetary expansion is initially applied. There is little attempt to understand the implications of changing preferences for money relative to goods. It is easy to see why not only the evidence, but also sound economic reasoning, warns us that modern macroeconomists, in their desire to do away with the law of the markets, have led us to the brink of financial ruin. What is surprising is economies have survived this persistent meddling based on inappropriate information for so long, but that is explained by the extraordinary capacity of human action to adjust to and accommodate government intervention.

  The Consequences

  The endgame is now shaping up. Central banks have progressively tightened their grip on markets since Paul Volcker took control of markets by jacking up interest rates in 1981. It was at about that time Gibson’s paradox failed. The result is that debt-driven activity, encouraged by falling nominal interest rates, replaced the market-driven activity demonstrated by Gibson’s paradox over the previous 250 years.

  There are limits to excessive debt, and financial analysts are about to find out that the old adage, markets always win out in the end, is still true. The dominant market risk is over-valued government bonds, from which all other financial asset valuations flow. Therefore, a large enough rise in government bond yields is likely to create a systemic crisis in the banking system, which depends on these assets for loan collateral. The most vulnerable banks are in the Eurozone, where bond markets are at their most over-priced, and the banks most highly geared.

  When yields on government bonds rise above an as yet unknown level, central banks will have a decision to take. Are they prepared to support the entire financial system at the ultimate expense of their currencies, or do they preserve the currency? The choice has become that binary, and any fudging of this choice is unlikely to prolong the survival of the global financial system.

  When things have become this delicate, anything from Greece’s debt negotiations, Italian banking insolvencies, trouble in the physical gold market, or even just a bad statistic somewhere can act as a trigger. Brexit would certainly undermine European cohesion with potentially destabilising results, which doubtless is why all the great and the good are imploring the British electorate to vote to remain in. So far, central banks have been deferring all these problems successfully, so it will probably take something else to trigger the endgame.

  A likely culprit is the accumulating effect of monetary debasement on the finances of ordinary people. Monetary inflation transfers wealth from savers to debtors, debtors who then generally invest it inefficiently. Government spending, financed by high taxes, also destroys private wealth. Monetary inflation reduces the purchasing power of ordinary people’s wages as well, an effect which limits their ability to consume. Governments of advanced nations are simply running out of their citizens’ wealth.

  The transfer of wealth through monetary inflation is the unrecorded burden borne by the ordinary person. There is little doubt that it has affected the GDP number, which so far has shown disappointing growth in the majority of advanced nations. However, it has held up sufficiently to fool mathematical economists that there is no crisis, only disappointing growth. It bears repeating that GDP is only an accounting identity, which is increased by monetary inflation. Any offset by a price inflation deflator tends to lag the statistic, and given government desires to suppress recorded inflation, is calculated inadequately. Indeed, if one accepts that price inflation is actually far higher than that indicated by official measures of price inflation, adjusted GDP estimates in real terms have been contracting in most advanced nations ever since the financial crisis.

  The situation in Japan and the Eurozone is worse than in the US, and the destruction of private wealth has been more aggressive. The paradox is that temporarily, the yen and the euro are strong, but that is unlikely to last. The reason the yen and the euro are strong is that liquidity in the shadow banking system is being squeezed by central bank purchases of government bonds, leading to an increase in cash demand as positions financed in these currencies are unwound.

  The legacy of monetary and credit expansion since the financial crisis has actually led to a greater overall preference for holding money relative to buying goods. This is reflected in the increase in the level of bank deposits and checking accounts, the counterpart to the expansion of bank credit. In the US alone, bank deposits and checking accounts have increased from $2.33 trillion in July 2008, just before the Lehman collapse, to $10.17 trillion today, an increase of 336%, compared with an increase in official GDP of only 22% for the whole period.

  The accumulation of this money is in fickle hands, being for the most part financial. It is what used to be called hot money. Having pumped up these hot money totals, central banks have been trying to bottle them up as bank deposits, so that in aggregate, there is no escape route from zero and negative interest rates, and also in the hope that financial stability will be maintained during the implementation of further “extraordinary measures”.

  This raises a question, which no one appears to have seriously considered: what happens, when bank depositors stop increasing their preference for money relative to goods or assets, and begin to reduce it instead? The only outcome can be an unexpectedly sharp increase in the prices of whatever goods and assets the money is exchanged for, because sellers of currency will by far outweigh the buyers. In the past there has always been an escape route for investors from this problem, such as exchanging Argentinian pesos for dollars. This time it is the dollar itself, with all the other major currencies tied to it.

  It is already leading to a financial move into commodities and raw materials, which started last December. Some key commodities, most notably oil, have risen in price substantially as a result. Sellers of dollars so far have been foreign governments, particularly the Chinese, and speculative traders. But the conditions driving relative preferences against currencies seem set to accelerate. Core inflation in America is already above the Fed’s target, and almost certain to go higher, so unless the Fed starts to raise the Fed funds rate soon and significantly, the pace of the fall in purchasing power for the dollar will almost certainly increase. That binary choice, to save the system or the currency, is looming.

  Unfortunately, both the damage earlier monetary policies inflicted on the masses’ wealth, as well as the encouragement to the accumulation of unproductive debt by both private and public sectors, have between them eliminated the central banks’ room for manoeuvre. The introduction of a trend of rising interest rates, however moderate, will undermine overvalued bond markets, in turn triggering a new wave of debt liquidation by weaker borrowers. These are financial stresses that the Eurozone banks are particularly ill equipped to survive. They are so poorly capitalised and over-exposed to outrageously expensive Eurozone government bonds, it cannot be denied they are already an alarming systemic risk, even without a rise in interest rates.

  The difference between today’s impending financial crisis and the last one is that the last one drove the ordinary public away from the uncertainty of financial commitments into a preference for monetary liquidity. This time, low wage earners and small savers will probably react the same way, at least initially. But the wealthier savers and speculators now dominate the system. They have been accumulating deposits and checking account balances since 2008, and are exposed to bank counterparty risk, a point which they will quickly understand if things start sliding. Therefore, fiat currency held in the banking system is the one asset corporations, investors and the rich will most likely seek to ditch in the coming months. Their preferences will work against not only the dollar, but all other currencies as well.

  In short, growing evidence of price inflation and stagnant production can be expected to materially increase the risk of a global banking and currency meltdown. The best escape-route is ownership of anything other than purely financial assets and fiat currency deposits. No wonder the price of gold, which is the soundest of moneys, appears to have entered a new bull market.

  

  

• Goldman Cuts 2017 Oil Price Forecast Due To Slower Market Rebalancing

  In yet another paradoxical move that will leave many scratching their heads, just days after throwing in the towel on its bullish dollar call (now that it expects far less rate hikes over the next year), Goldman moments ago announced that it is also cutting back on its longer-term oil price forecasts (which paradoxically are linked to a stronger dollar) for the coming year, as a result of a rebalancing that is taking far longer to take place than previously anticipated.

  This is how Goldman explains its bearish pivot on crude:

  The inflection phase of the oil market continues to deliver its share of surprises, with low prices driving disruptions in Nigeria, higher output in Iran and better demand. With each of these shifts significant in magnitude, the oil market has gone from nearing storage saturation to being in deficit much earlier than we expected and we are pulling forward our price forecast, with 2Q/2H16 WTI now $45/bbl and $50/bbl.

   

  However, we expect that the return of some of these outages as well as higher Iran and Iraq production will more than offset lingering issues in Nigeria and our higher demand forecast. As a result, we now forecast a more gradual decline in inventories in 2H than previously and a return into surplus in 1Q17, with low-cost production continuing to grow in the New Oil Order. This leads us to lower our 2017 forecast with prices in 1Q17 at $45/bbl and only reaching $60/bbl by 4Q17.

  We have repeatedly warned that the Saudi plan to put as many marginal shale producers out of business is badly flawed as it does not take into account the trillions in excess liquidity which central banks have flooded markets with, of which tens of billions ultimately make their way into the shale sector. Now it’s Goldman’s turn to repeat this same warning.

  … while the physical barrel rebalancing has started, the structural imbalance in the capital markets remains large, with $45 bn of equity and bond issuance taking place in the US this year. As a result, we believe that the industry still has further to adjust and our updated forecast maintains the same 2016-2017 price level that we previously believed was required to finally correct both the barrel and capital imbalances, and eventually take prices to $60/bbl.

  In other words, “lower for longer” because excess supply is taking far longer to clear out.

  That said, Goldman is not entirely bearish: while it admits that US and EU demand is set to falter, it is betting all on China, precisely the one country where the recent credit tsunami pushed teapot refiners into overdrive, and where the sudden elimination of massive credit creation will result in a sharp plunge in oil demand both for internal demand and for re-exporting into various other processed grades. This is where GS sees upside demand:

  Stronger vehicle sales, activity and a bigger harvest are leading us to raise our Indian and Russia demand forecasts for the year. And while we are reducing our US and EU forecasts on the combination of weaker activity and higher prices than previously assumed, we are raising our China demand forecasts to reflect the expected support from the recent transient stimulus. Net, our 2016 oil demand growth forecast is now 1.4 mb/d, up from 1.2 mb/d previously. Our bias for strong demand growth since October 2014 leaves us seeing risks to this forecast as skewed to the upside although lesser fuel and crude burn for power generation in Brazil, Japan and likely Saudi are large headwinds this year.

  Our forecast: three months from now Goldman will be revising its Chinese demand forecast sharply lower.

  Perhaps the most informative and value-added piece in the entire Goldman report is the following infographic showing the planned and unplanned production outages and disruptions in the past 4 months.

  Large supply disruptions have pushed production sharply lower since mid-March
  Key planned and unplanned outages since mid-February (kb/d)

  

  Its commentary:

  The recent roll-over in production is the result of somewhat offsetting cross currents. (1) Production has rolled over faster than we had expected in China, India and non-OPEC Africa more than offset upside surprises in the US and the North Sea. (2) Transient but recurring disruptions have more than offset larger than expected Iran and Iraq production. And while some of the disruptions will stop such as maintenance, fires and strikes, some are likely systemic, for example in Nigeria, and we now expect production there will remain curtailed for the remainder of the year. Net, this leaves us expecting a sharp decline in 2Q output.

  In 2Q sure, but what about after? Well, as a result of the death of OPEC whose every single (now former) member is pumping at or near record amounts as all excess supply considerations have been tossed out of the Saudi window, it is here that things are about to get very interesting, and as the chart below shows, diagonal. To wit:

  This expectation for a return into surplus in 1Q17 is not dependent on a sharp price recovery beyond the $45-$55/bbl trading range that we now expect in 2016. First, it reflects our view that low-cost producers will continue to drive production growth in the New Oil Order – with growth driven by Saudi Arabia, Kuwait, Iran, the UAE and Russia. Second, non-OPEC producers had mostly budgeted such price levels and there remains a pipeline of already sanctioned non-OPEC projects. In fact, we see risks to our production forecasts as skewed to the upside as we remain conservative on Saudi’s ineluctable ramp up and Iran’s recovery.

  We expect continued growth in low-cost producer output
  Saudi Arabia, Kuwait, UAE, Iraq, Iran (crude) and Russia (oil) production (kb/d)

  

  While there is much more in the full note, the bottom line is simple: near-term disruptions have led to a premature bounce in the price of oil, however as millions more in oil barrels come online (and as Chinese demand fades contrary to what Goldman believes), the next leg in oil will not be higher, but flat or lower, in what increasingly is shaping up to be a rerun of the summer of 2015.

  This is the updated Goldman price deck:

  

   

  And visually: “A sooner but shallower deficit is leading us to pull forward our expected price recovery but lower our 2017 forecast“

  

  

  

• Zuckerberg To Meet Conservative Media Figureheads As Facebook Censorship Scandal Escalates

  After last Monday’s explosive claims published in Gizmodo, in which a former Facebook employer alleged that the “social network” has been “routinely” suppressing conservative news stories, the company and its CEO have been on the back foot defending themselves from, as expected, mostly a conservative media onslaught. In an attempt to resolve the PR crisis, Mark Zuckerberg has invited prominent conservative media figures, including Glenn Beck and Dana Perino, to a meeting at Facebook’s headquarters this week.

  As CNN reports, the meeting is scheduled for Wednesday and aims at addressing the alleged suppression of conservative news stories in Facebook’s “trending” stories section.

  Along with Perino and Beck, other confirmed attendees include Arthur Brooks of the American Enterprise Institute, CNN conservative commentator SE Cupp, and Zac Moffatt, co-founder of tech firm Targeted Victory. Moffatt was previously Mitt Romney’s digital director.

  “I’m going in with an open mind and an eagerness to learn more,” Cupp said. “Conservatives and Silicon Valley actually come down on the same side of many issues and share some common concerns. I’m sure we’ll find plenty to talk about, and I’m honored to have been included.”

  Cupp sounds like the kind of guy who if he were an analyst, would start every question to management team with “great quarter guys…” no matter how atrocious the results.

  As for Zuckerberg, we are confused why not merely show evidence that the alleged censorship never took place instead of needing to massage the messengers, in this case some of the more prominent conservative names. Last Thursday, Zuckerberg said in a blog post that he would invite “leading conservatives and people from across the political spectrum” to talk with him about the controversy.

  While hopefully not nearly in awe of Zuckerberg as a smitten Cupp, Glenn Beck wrote on Facebook early Sunday morning that “Mark wanted to meet with 8 or ten of us to explain what happened and assure us that it won’t happen again,” adding that he plans to attend.

  Referring to Zuckerberg, he said, “It would be interesting to look him in the eye as he explains and a win for all voices if we can come to a place of real trust with this powerful tool.” It is unclear if this is a preview to an upcoming sponsored message on behalf of Facebook, which after Google, is the world’s second greatest expert at advertising.

  As CNN adds, Wednesday’s meeting is said to be the first of several such conversations, signaling that Facebook is well aware of the risk to its reputation that comes from the whiff of bias. Facebook said in a statement last week that it “does not allow or advise our reviewers to discriminate against sources of any political origin, period.”

  Curiously, at the same time it was unviled that according to a Facebook manual, “trending” stories do not rely solely on algorithms. Members of the company’s Trending topics team can decide to “inject” or “blacklist” topics for specific reasons, including to prevent duplicate terns from trending.

  The manual does not list political content as an acceptable reason to reject a story. It does, however, allow human bias to be part of determining what dtory does get rejected.

  “If we find anything against our principles, you have my commitment that we will take additional steps to address it,” Zuckerberg said when he launched the investigation spurred by Gizmodo’s report. It was not immediately clear if the CIA would have a right of first refusal to said “commitment.“

  

  

• FBI Agents Busted For Planting Hidden Surveillance Microphones In Public Places

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  When a reporter for the United States Army Training and Doctrine Command interviewed Frank Zappa for the commands news syndicate, the story was held by a superior who demanded that Zappa – who had been rather hard on the army – answer one more question: just who does he think will defend the country without the army?

   

  Zappa’s reply: “From what? The biggest threat to America today is it’s own federal government…. Will the Army protect anybody from the FBI? The IRS? The CIA? The Republican Party? The Democratic Party?….The biggest dangers we face today don’t even need to sneak past our billion dollar defense system….they issue the contracts for them.” The interview was not run.

   

  *Note: It’s uncertain whether the above exchange ever took place, since the interview was never run. Nevertheless, the point is clear, instructive and serves as the perfect introduction for this post, whether the words were actually said or not.

  One of the greatest afflictions affecting these United States at the moment is the general public’s overwhelming gullibility when it comes to government. You may think this sounds insane given surveys that consistently show Congress with a less than 10% approval rating, but I think this clouds the fact that most people have yet to accept just how completely corrupt and authoritarian government has actually become.

  I don’t mean for this to become some sort of big rant against government in general. Our founders set up a brilliant system which has served the country well for over two centuries. What people seem to forget is our system of government wasn’t set up to create a new set of parental authority figures for the public. The entire intent behind the Constitution was to create a series of checks and balances to restrain government from becoming too powerful and working against the interests of the public. Government’s primary role in America is supposed to be to protect the Constitution and defend the cherished civil liberties defined within it. In 2016, it does precisely opposite.

  Our government isn’t just corrupt though. Indeed, the primary function of government at the moment is to protect status quo criminals from the public, not the other way around. This is why the rich and powerful are never held to account, which is in turn why it continues to get worse and worse. A key gatekeeper in this whole scheme against the citizenry is the FBI.

  Time and time again throughout U.S. history, you see the FBI working to undermine the public’s freedom in order to protect whatever racket their status quo masters happen to be running at the time. There are countless examples, but I’ll list a few that I’ve covered, spanning the last 50 years to the present:

  Disturbing Claim – FBI Interrogated Former Senator for Wanting “28 Pages” Declassified

  Apple Vows to Defend Its Customers as the FBI Launches a War on Privacy and Security

  Read the Letter That Turned Folk Icon Pete Seeger Into an FBI Target

  Parents Beware – The FBI is Launching Program to Recruit High School Kids

  American Justice – FBI Lab Overstated Forensic Hair Matches in 95% of Cases, Including 32 Death Sentences

  FBI Documents Show Plot to Kill Occupy Leaders If “Deemed Necessary” – Yet Details Are Kept From the Public…Why?

  The Full Letter Written by the FBI to Martin Luther King Has Been Revealed

  The list goes on and on, but you get the point. The FBI doesn’t work to protect the public. That just Hollywood and primetime television spin. Its true function is to protect government and its rich and powerful patrons from the public.

  This sad reality is about to be demonstrated once again with the Hillary Clinton email investigation. If you or me had done what she did we’d be locked away forever without a second thought, but since the FBI works to protect the powerful, nothing will happen. That’s not to say there aren’t some great people who work at the FBI. I’m sure there are, but they aren’t the people making the big decisions. The decision makers know who they work for, and it isn’t you or I.

  All you have to do is understand the umbrella the FBI works under. It operates under the jurisdiction of the Department of Justice; the same department that jumped through every hoop imaginable to avoid jailing a single bank executive during one of the most destructive white collar crime sprees in American history. The one man who ensured the bankers were protected during his tenure was none other than Eric Holder. Now that he’s spun back through the revolving door to Covington and Burling, we shouldn’t be surprised to learn that Mr. Holder is heading up a fundraiser for none other than, you guessed it, Hillary Clinton.

  The Hill reports:

  Former Attorney General Eric Holder will headline a “lawyers for Hillary” fundraiser for Democratic presidential front-runner Hillary Clinton later this month.

   

  Available tickets for the fundraiser, which takes place May 31, range from $500 to $2,700, according to Clinton’s campaign website. “Young lawyer” tickets, priced at $250, were sold out as of early Sunday afternoon.

   

  Actress Julianna Margulies also will attend the fundraiser.

   

  The fundraiser comes as the FBI continues its probe into Clinton’s use of a private email server during her tenure as secretary of State.

  Yep, that’s right. The man who ran the DOJ and had oversight over the FBI during most of the Obama administration; the same man who refused to prosecute any powerful bankers, is now hosting a fundraiser for a presidential candidate under active investigation by the FBI. The idea that Hillary Clinton will be served anything resembling justice is preposterous.

  But that’s just the tip of the iceberg. When it’s not protecting the rich and powerful from the public or creating fake terrorist plots, it’s busy spying on the peasants. The latest example comes to us courtesy of CBS News in San Francisco:

  OAKLAND (CBS SF) — Hidden microphones that are part of a clandestine government surveillance program that has been operating around the Bay Area has been exposed.

   

  Imagine standing at a bus stop, talking to your friend and having your conversation recorded without you knowing.  It happens all the time, and the FBI doesn’t even need a warrant to do it.

   

  Federal agents are planting microphones to secretly record conversations.

   

  Jeff Harp, a KPIX 5 security analyst and former FBI special agent said, “They put microphones under rocks, they put microphones in trees, they plant microphones in equipment. I mean, there’s microphones that are planted in places that people don’t think about, because that’s the intent!”

   

  FBI agents hid microphones inside light fixtures and at a bus stop outside the Oakland Courthouse without a warrant to record conversations, between March 2010 and January 2011.

   

  Harp said, “An agent can’t just go out and grab a recording device and plant it somewhere without authorization from a supervisor or special agent in charge.”

  Because that makes me feel so much better…

  If Congress wasn’t so busy being corrupt shills for the powerful it might do something to stop this. I’m not holding my breath.

  Meanwhile, as ActivistPost.com warns, the expectation of privacy while in public space is becoming more hotly debated as continuous data collection is increasingly accepted as part of our digital world.

  I have previously written about the specific threat to civil liberties that blanket WiFi coverage poses.  New York City is turning thousands of its payphones into WiFi hotspots, while “Smart Pavement” is set for a massive roll-out across the UK.  This is occurring at the same time that NY senator Schumer has called for a federal investigation into high-tech billboards that spy on the public through facial recognition and mobile phone location data. Some assume all of this is being done for advertising purposes, but it’s also been revealed that many countries are using this to measure and manipulate political opinion.

   

  We are clearly heading into very dangerous territory as all of our data is being opened up for scrutiny by government, while its own operations are being done in secret using the malleable framework of crime and terrorism to justify the means to its ends.

   

  The good news is that an increasingly aware public, as well as a rising number of courageous whistleblowers, are shining new light about the depths to which our civil liberties are being erased.

  Stay vigilant and take something from the government’s playbook – if you see something, say something.

  

  

• Libya's Central Bank Has $184 Million In Gold In Its Vault… It Just Doesn't Know The Combination

  Imagine a world in which the chief of a central bank didn't have access to cash.

  

  Libyans waited to withdraw money from an ATM. A currency shortage has roiled the country, which is struggling with an Islamic State insurgency

  Now stop imagining and take a look at the situation in Libya, where the central bank chief sits in Eastern Libya, while the headquarters is further West in Tripoli, and despite Tripoli sending $23.5 million each month to Eastern Libya, it's only a fraction of what central bank governor Ali El Hibri says is needed to pay the bills ($257 million to be exact).

  The situation becomes even more strange when the fact that Eastern Libya actually does have a significant amount of gold and silver that it could use to sell and convert to cash, but it's in a vault that requires a five-number access code that nobody seems to have. Nobody that is, except for El Hibri's counterparts in Tripoli that is, and they won't give the code out.

  Such is life now in Libya since Muammar Gaddafi was captured and killed in 2011. Eastern and Western Libya is divided into two rival governments, and even the central bankers aren't working together to solve issues.

  It's alleged that the vault has roughly $184 million worth of gold and silver within its walls, and El Hibri isn't going to wait for his colleagues in Tripoli to have a change of heart before he can get to it. While El Hibri waits for a shipment of fresh currency from a foreign printing house to come in, totaling close to $3 billion, the central bank chief has tasked a pair of safe crackers, consisting of one engineer and one   locksmith, to break into the vault and retrieve the coins.

  Although the coins apparently have Gaddafi's face on them, El Hibri has already worked a solution to that little issue by already agreeing to liquidate the treasure through gold and silver merchants provided they melt Gaddafi's likeness off.  

  

  The gold and silver coins were minted in 1979 to commemorate the 10-year anniversary of Gaddafi's rise to power. One side depicts the Italian-built colonial-era fortress in the southern city of Sabha where Gaddafi gave his first speech announcing his rule over the country. The flip side depicts a bust of the dictator wearing his colonel’s cap and military uniform. “The Great Arab Libyan Populist Socialist Republic,” is etched onto the gold and silver coins. They weigh 16 and 28 grams, respectively.

  Central bank officials in Tripoli won't comment on the matter according to the Wall Street Journal, but they have previously expressed outrage at sending money to the Eastern government, which in turn uses some of the funds to pay local militias that are acknowledged to be hostile to the Tripoli administration.

  Not only are El Hibris central bank counterparts concerned about how money is used by the East, the locals have a healthy bit of skepticism as well.

   

  "We don't trust the authorities with the gold. We're worried they'll steal it." said Waleed al-Hassi, a medical technician who said he hasn't been able to collect his public salary since November due to the cash shortage. Waleed is now having to moonlight as a taxi driver on the side to make money.

   

  The plan as it stands, is for the safe cracking duo to get beyond the first wall protecting the vault, then drill a 16-by-16-inch opening into the concrete wall so that the team can wedge themselves in and access the double doors. As far as the code, the locksmith portion of the duo plans to use "special techniques" in order to break into the 48-year old British-made vault.

  All we can say is that nothing surprises us anymore in this upside down bizarro world we live in. Actually no, we take that back, we are surprised that the Fed hasn't secretly extended a lifeline to the Libyan central bank, yet. After all, it is no stranger to quietly bailing out other banks.

  

  

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