- World Money: Five Hidden Signals From The IMF
Authored by Craig Wilson via The Daily Reckoning blog,
Less than a month ago a handful of the world’s policy makers gathered in Washington at the International Monetary Fund (IMF), no surprising headlines were run – but an obscure meeting and a discreet report launched exclusive signals for the next global economic crisis.
The panel, which included five of the most elite global bankers, was held during the IMF’s spring meetings to discuss the special drawing rights (SDR) 50th anniversary. On the surface the panel was a snoozefest, but reading beyond the jargon offers critical takeaways.
The discussion revealed what global central banks are planning for a future crisis and how the IMF is orchestrating policy for financial bubbles, currency shocks and institutional failures.
Why the urgency from the financial elites?
In theApril 2017 “Global Financial Stability Report,” IMF researchers targeted the U.S corporate debt market and how extreme changes in its equity market has left the global economy at risk. While the report may have been missed by major financial news outlets, it was enough to give major concern to those paying attention.The IMF research report noted:
“The [U.S.] corporate sector has tended to favor debt financing, with $7.8 trillion in debt and other liabilities added since 2010…”
In another segment the IMF report said:
“Corporate credit fundamentals have started to weaken, creating conditions that have historically preceded a credit cycle downturn. Asset quality—measured, for example, by the share of deals with weaker covenants—has deteriorated.”
“At the same time, a rising share of rating downgrades suggests rising credit risks in a number of industries, including energy and related firms in the context of oil price adjustments and also in capital goods and health care. Also consistent with this late stage in the credit cycle, corporate sector leverage has risen to elevated levels.”
This report together with the panel discussion highlights a very concerning trend. Jim Rickards, a currency wars expert and macroeconomic specialist, has identified the special drawing rights (SDR) as a class of world money that is a tool used to bailout central banks during crisis.
World Money, The IMF and Signals for Economic Crisis
World money was praised for its ability to be a catalyst for international loans during the IMF spring panel discussion.
The panel discussion was moderated by Maurice Obstfeld, an established academic who serves as a Director of Research at the IMF. Obstfeld is connected, knows the right people, and can see the macroeconomic implications of SDRs.
In his opening remarks Obstfeld identified, “There has been increasing debate over the role of the SDR since the global financial crisis. We in the Fund have been looking more intensively at the issue over whether an enhanced role for the SDR could improve the functioning of the international monetary system.”
“The official SDR is something we are familiar with but is there a role for the SDR in the market or a market SDR? What is the SDR’s role for the unit of account?”
Here’s the five most important signals from the world money panel, what they could mean for the international monetary system and the future of the dollar.
1. China Spars for the SDR Market
Yi Gang, the Deputy Governor of the People’s Bank of China disclosed to the IMF panel that, “China has started reporting our foreign official reserves, balance of payment reports, and the international investment position reports.”
“All of these reports, now, in China are published in U.S dollars, SDR and Renminbi rates… I think that has the advantage of reducing the negative impact of negative liquidity on your assets.”
What that means in real terms is that China views the opportunity of being a part of the exclusive world money club as an opportunity to diversify away from the U.S dollar.
The Bank of China official took that message even further saying that he hopes that China could lead in world money operations by integrating it into the private sector.
“If more and more people, companies and the market use SDR as unit of accounts – that would generate more activity in the market with focus on the MSDR. [The hope would be] that they could create more products and market infrastructures that would be available for trade products to be denominated in SDR.”
The People’s Bank of China official referenced how this trend was already underway. Just last year Standard Chartered bank began to maintain accounts in SDR’s. “In terms of the first and secondary markets they will develop fairly well.”
Perhaps the most important segment that the Chinese official signaled was his reference that, “The Official Reserve SDR (OSDR) that allocation from the IMF is very important. [This allows] Central Banks to make the SDR an official asset, and easier for them to convert that asset into the reserve currency they need.”
What that means is that China will become an even greater player in the world money market.
Nomi Prins, an economist and historian stated when analyzing China’s economic positioning, “The expanding SDR basket is as much a political power play as it is about increasing the number of reserve currencies for central banks for financial purposes.”
2. Special Drawing Rights: The Case for Liquidity and Central Banks
Jose Antonio Ocampo, one of the foremost scholars on international economics and a board member of the Central Bank of Colombia noted, “The main objective of SDR reform is actually… for it to be a major reserve asset for the international monetary system.”
“First of all, it is a truly global asset. It is backed by all of the members of the IMF and it doesn’t have the problems that come with using a national currency as international currency. Second, it has a much better form of distribution of the creation of liquidity. Because it is shared by all members of the IMF… in that regard, it does serve as unconditional liquidity.”
That means that IMF and institutional economists view the SDR as a potential way of financing not only national government loans, but markets.
The most fascinating point that Ocampo made about the SDR was about the position of conditional reserves and what it could mean for more SDR reform. Conditional reserves reference the ability of central banks to borrow and repay loans in a timely manner with conditionality.
“Countries that hold excess SDR’s should deposit them in the IMF. The IMF then could use those SDR’s to finance its lending. [This will reduce] the need to have quotas, borrowing arrangements and methods to finance IMF programs. Like any decent central bank in the world they could use their own creation of liquidity as a sort of financing of that central bank.”
While the IMF has been a “central bank for central banks” this proposal would see the international monetary system shift entirely.
Jim Rickards takes his analysis a step further showing that the liquidity and lending offer the IMF the ability to act during a crisis, as it did during the most recent global financial crisis.
Rickards, The New York Times best-selling author, reveals, “The 2009 issuance was a case of the IMF ‘testing the plumbing’ of the system to make sure it worked properly. With no issuance of SDRs for 28 years, from 1981–2009, the IMF wanted to rehearse the governance, computational and legal processes for issuing SDRs.”
“The purpose was partly to alleviate liquidity concerns at the time, but also partly to make sure the system works in case a large new issuance was needed on short notice.”
3. Elites Signaling the Blueprint Plan for World Money
Mohamed El-Erian a former Deputy Director of the IMF and the Chief Economic Adviser at Allianz (affiliated with PIMCO) was the premier panelist to discuss the future blueprint plan of world money.
El-Erian started out his discussion, “If the SDR is to play a really important role you cannot go through the official sector only today.”
He outlined the current political landscape for world money saying, “The politics today do not favor delegating economic governance from national to multilateral levels. Yet the case for the SDR is very strong.”
“It is not only about the Triffin Dilemma and [acting as] the official reserve, it’s because if you ask anybody do you want to reduce the cost of self-insurance, they’ll say yes. Do you want to facilitate diversification? They’ll say yes. If you ask anybody, do you want to make liquidity less reciprocal, they’ll say yes.”
“The SDR helps address every one of these issues. So, it solves problems not just at the official level but it solves problems in the private sector.”
To break that jargon down Jim Rickards offers, “In other words, the latest plan is for the IMF to combine forces with mega-banks, and big investors like BlackRock and PIMCO to implement the world money plan.”
“El-Erian is ‘signaling’ other global elites about the SDR plan so they can prepare accordingly.”
4. The SDR Signals Death of the Dollar
Catherine Schenk, a professor of International Economic History at the University of Glasgow, is one of the top scholars of economic relations. While speaking she took up the case of what the special drawing rights meant for the U.S dollar.
Dr. Schenk when asked whether the international market could proceed without a “lender of last resort” she pressed, “Why would you use a relatively illiquid element when you have the U.S dollar?”
“The U.S dollar has a lot of problems, some of it is unstable but the depth and liquidity of it in financial markets are unrivaled. The history of trying to create bond markets for other currencies or other instruments shows that it takes a long time.”
She then elaborated later in the conversation the premise that, “What we are talking about with the market SDR is trying to turn it and add more facilities to turn it into money. That will take time. Having reluctant issuing, I am worried about how that market it going to be created.”
As the dollar continues to have its issues what central banks like the Federal Reserve select to do matters significantly.
Christopher Whalen pens, “Whether you look at US stocks, residential housing markets or the dollar, the picture that emerges is a market that has risen sharply, far more than the underlying rate of economic growth. This is due to a constraint in the supply of assets and a relative torrent of cash chasing the available opportunities.”
Whalen then asks the bigger question and one that could specifically matter for the SDR when he notes, “What happens when this latest dollar super cycle ends?”
How the competition for the top world reserve position unfolds between the SDR and U.S dollar will be answered in time.
5. World Money Becomes Central Bank Money
During the final Q&A for the panel on the SDR’s, they were asked what the political climate looks like facing the issues of world money and the direction of political headwinds?
In response Jose Antonio Ocampo said, “In the issue of liquidity, we still have a basic problem during a crisis – which is, how do you provide liquidity during crisis?”
Ocampo, the Colombian central bank official disclosed, “My view is that it is a function for the SDR as central bank money, let’s say.”
The SDR specialist took it further, “The real question is whether any of the major actors… and whether the U.S, either from the previous administration or the current administration, was willing [to politically act]?”
He offered, “From the point of view of the U.S the use of SDR’s as a market instrument should be more problematic than the reforms of the SDR to be used as central bank money.”
Under such circumstances the demand and confidence for the U.S dollar as a global reserve would be diminished.
Jim Rickards summarizes, “By the time the final loss of confidence arrives, much of the damage will already have been done. The analytic key is to look for those minor events pointing in the direction of lost confidence in the dollar.”
“With that information investors can take defensive measures before it’s too late.”
As was confirmed by both the IMF report and the elite panel on special drawing rights, the U.S dollar is facing severe competition while undergoing a fiscal crisis.
Rickards leaves a stark warning, “The U.S. is playing into the hands of these rivals by running trade deficits, budget deficits and a huge external debt.”
- Cyber Attacks Are The Perfect Trigger For A Stock Market Crash
Authored by Brandon Smith via Alt-Market.com,
The world has been stunned over the past few days by the advent of “Ransomware;” the use of sophisticated cyber attacks on vital systems in order to (supposedly) extort capital from target businesses and institutions. I am always highly suspicious whenever a large scale cyber incident occurs, primarily because the manner in which these events are explained to the public does not begin to cover certain important realities. For example, the mainstream media rarely if ever discusses the fact that many digital systems are deliberately designed to be vulnerable.
Software and internet corporate monoliths have long been cooperating with the NSA through programs like PRISM to provide government agencies backdoor access to computer systems worldwide. Edward Snowden vindicated numerous “conspiracy theorists” in 2013 with his comprehensive data dumps, exposing collusion between corporations and the NSA including Microsoft, Skype, Apple, Google, Facebook and Yahoo. And make no mistake, nothing has changed since then.
The level of collusion between major software developers and the establishment might be shocking to some, but it was rather well known to alternative analysts and researchers. The use of legislation like the Foreign Intelligence Surveillance Act (FISA) to skirt Constitutional protections within the 4th Amendment has been open policy for quite some time. It only made sense that government agencies and their corporate partners would use it as a rationale to develop vast protocols for invading people’s privacy, including American citizens.
The issue is, in the process of engineering software and networks with Swiss cheese-like defenses in the name of “national security,” such exploits make vast spreads of infrastructure vulnerable to attack. I think it likely this was the intention all along. That is to say, the NSA and other agencies have created a rather perfect breeding ground for false flag attacks, real attacks and general crisis.
It should be noted that the Ransomware attacks which struck systems around the world used “Wannacrypt,” derived from an NSA exploit called “Eternalblue.” This program was designed to specifically target Microsoft Windows machines, no doubt using vulnerabilities which Microsoft ENGINEERED into their own software. Now, interestingly, a batch of NSA exploits was published online by a hacker group called “the shadow brokers” only last month. From the information I have gathered so far, it seems that “Eternalblue” was part of that data dump and that the Ransomware incident is directly connected.
Something else that is very interesting about Eternalblue — as CNN notes, similar exploits were used not long ago by the NSA to get backdoor access to financial data within the SWIFT banking system. This was rather odd because through international agreements the NSA already had front door access to such data. However, front door access can be tracked and traced and any illicit activity can be exposed. Therefore, the NSA must have had something more nefarious in mind than simply looking for terrorist activity, such as testing the effectiveness of their own exploits for future use in attacks.
I mention the incident with SWIFT because it brings up a potential danger that I don’t think many people have considered.
First, let’s assume for a moment that groups like the “shadow brokers” actually exist and aren’t some kind of NSA created front. These groups are using the considerable weaknesses that corporations like Microsoft put in place for the NSA in order to reap profits through criminal enterprise or to commit terrorist acts. The NSA and its Silicon Valley partners literally created this monster; a monster which has the capacity to attack otherwise secure banking networks like SWIFT.
This begs the question – how much of the global banking system and global stock exchanges are open to attack with these same NSA exploits. I would suggest that ALL of them are.
Second, let’s consider for a moment the possibility that groups like the “shadow brokers” are mostly fraudulent fronts for establishment agencies and elitists. Consider that maybe, just maybe, the NSA is releasing some of these exploits on purpose to the public. Why? Well, one might consider that issue complicated, but to summarize, it may be very advantageous for international banks and governments to deliberately place financial systems at risk.
In my article The Economic End Game Explained, I outline in detail with evidence why the establishment is seeking a major economic crisis within the near term. Organizations like the IMF have been talking excitedly for the past few years about something they call “the great global economic reset.” The details behind this “reset” are rather vague, but the general notion is that the economic systems of today are going to evolve in a painful way and that certain elements of our fiscal structure could be wiped clean altogether. In order for such a “reset” to take place, some kind of crisis event would be needed or would happen inevitably as a consequence.
In order for a new economic system to be entrenched, the old system has to be dismantled; but how can banking moguls and globalist interests succeed in doing this without taking the blame for the ultimate social and geopolitical suffering and carnage that would result? Well, they would need scapegoats.
Some of these scapegoats will be political in origin. For example, the mainstream media has been pumping out non-stop rhetoric suggesting that the next global crisis will be a direct result of the “rise of populism and nationalism” within Western societies. Meaning conservatives, classical liberals and sovereignty champions are the new patsies for economic instabilities that the globalists built into the system long ago.
Some of these scapegoats, though, will be far more illusory and intangible.
It is my belief that agencies like the NSA are unleashing some of their own exploits to the public on purpose. But what does this accomplish? For one, it makes the use of false flag attacks more viable. If attacks like Ransomware continue to escalate, the public may in a sense become normalized to them. What if one of these attacks targets major financial elements? Say the large networks of algorithmic computers that dominate stock transactions today come under threat; what would be the result? Most likely complete market disaster. And, almost everyone in the world will believe the culprit was some kind of terrorist hacking group, rather than the establishment itself, which has the most to gain from this brand of catastrophe.
Also, the establishment may simply be hoping that if they release enough of these exploits which they have been devising for years, someone will use them to attack the financial system autonomously. That is to say, the establishment does not necessarily need to use false flag attacks to bring down stock markets or banking networks. All they need to do is put the weapons out in the open and wait for someone to fall to temptation and do their dirty work for them.
I would compare this to the act of forcefully injecting millions of Muslim immigrants into western nations without a rational vetting process. If the elites want more terrorism in Europe, for instance, they don’t have to do all the work of forming domestic cells and training the members as they have done in the Middle East with ISIS. All they have to do is leave the front door wide open in the name of “humanitarianism” and allow the enemy to waltz right in.
This strategy gives the establishment plausible deniability while also giving them the crisis environment they secretly desire.
Our economy and the economies of most nations today stand upon a razor’s edge. Historically negative data is now reported weekly. Hard and “soft” data indicates a massive downturn is lurking under the surface. In fact, the ONLY elements of the economy which remain “positive” are stocks and some currencies. This is what we call a bubble scenario. The globalists have managed to stretch equities markets for years on the back of untold stimulus measures, but this illusion is quickly coming to an end.
Central banks are backing away from quantitative easing and steadily increasing interest rates, removing cheap debt as a tool to prop up stocks. The era of easy money is almost over. It seems to me that this is a perfect time for a trigger event that is completely unrelated to the financial elites, an event that will distract the public away from their culpability. This is not to say that a cyber attack on our market networks will be the only trigger event or distraction, but I am starting to think it will be a primary measure, no doubt while the world is mesmerized by James Comey "memos" and other such nonsense.
The NSA and other organizations have handcrafted global networks to fail, and not just fail, but fail spectacularly leaving maximum destruction in their wake. I do not think this was done without foresight. Events like Ransomware might only be the beginning. Watch this trend carefully, and be extra vigilant if cyber attacks begin to target financial institutions and systems. If this does happen, the “great economic reset” may not be far away.
- Brazil Plunges Into Fresh Political Crisis After Temer "Hush Money" Recordings Emerge; Market Crashes
The presidency of Brazil’s Michel Temer, who replaced disgraced and impeached predecessor Dilma Rouseff last summer, lasted about one year without a major corruption scandal.
That changed tonight, when Brazil’s O Globo newspaper which was instrumental in exposing the Carwash scandal which ultimately led to Rouseff’s downfall and the arrest and incarceration of countless politicians, reported that the chairman of meatpacking giant JBS secretly recorded his discussion with Temer about “hush money” payments to jailed former House Speaker Eduardo Cunha in return for his silence.
Brazil’s President Michel TemerThe allegations are the latest development in Operation Carwash, a sprawling corruption probe that has implicated many of Brazil’s business and political elite, including some in the president’s own party. Temer has repeatedly denied any wrongdoing.
Readers may recall that in a delightfully ironic case study of political irony and power vacuum, Eduardo Cunha, the conservative Brazilian political leader who led the push in 2016 to oust Dilma Rousseff, was sentenced in March to more than 15 years in prison himself, when a Brazil judge found him guilty of corruption, money laundering and illegally sending money abroad, all in connection with the sprawling graft investigation involving the state-run oil company Petrobras, and which Cunha himself used as a pretext to dispose of Rouseff.
The tragically ironic Cunha was the highest-profile politician to be sentenced as a result of the Operation Car Wash investigation into corruption at Petrobras, which has shaken Brazil’s political and business establishments to their core. Ultimately, he was convicted of charges that included receiving bribes during Petrobras’ acquisition of a Benin oil field for $35.5 million in 2011, and of money laundering crimes between 2011 and 2014. Yet somehow he was the man tasked with bringing justice to Rouseff.
Furthermore, Cunha, once a powerful member of Temer’s ruling party, has previously said he had compromising information about a host of senior politicians linked to a vast political bribery scandal at state oil firm Petrobras. And yet he never spokeup.
Now, not only do we know why Cunha kept silent, but there is finally proof of a corruption link between Cunha and Temer himself.
According to the O Globo report, JBS Chairman Joseley Batista recorded the discussion with Temer about hush money the executive paid to Cunha, according to the newspaper. The report did not say what Cunha was asked to keep quiet about. When Batista told Temer he was paying Cunha to remain silent, the president was recorded saying, “You need to keep that up, okay?”
Batista and TemerTemer on Wednesday acknowledged he had met with the JBS Chairman in March but denied any part in alleged efforts to keep jailed former House Speaker Eduardo Cunha from testifying.
According to O Globo, executives from JBS submitted a tape to the Supreme Court of a secret recording of Temer approving a payment to the abovementioned Cunha. Batista and his brother, JBS Chief Executive Wesley Batista, presented the recording to prosecutors as part of plea bargain negotiations underway since March.
Reuters adds that JBS also hired a law firm to discuss a leniency deal with the U.S. Department of Justice. JBS declined to comment immediately.
To be sure, the presidential press office immediately issued a statement vehemently denying the allegations. “President Michel Temer never requested payments to obtain the silence of ex-deputy Eduardo Cunha,” it said. “The president defends a deep and wide investigation to get to the bottom of the claims put forward in the media.”
Unfortunately for Temer, Brazil appears to no longer believe politician lies, especially of Temer, whose approval rating is in the single digits. As a result, as Bloomberg writes, “Brazil has plunged back into political crisis, reminiscent of the chaos surrounding last year’s impeachment process.”
Bloomberg adds that O Globo’s report caused an immediate stir in Congress, where opposition congressmen started to shout anti-government slogans. The session was subsequently suspended. Legislators from five opposition parties called for Temer’s resignation and early elections, according to a statement sent by the opposition leader in the lower house. Temer went to his official residence after an emergency meeting with some of his closest aides.
According to further press reports, legislators from 5 opposition parties have demanded Temer’s resignation and call for new elections, according to statement from lower house opposition leader’s press office. And while the US spent much of the day talking about impeachment, in Brazil they actually did it: Rede party deputy Alessandro Molon filed an impeachment request against Temer, according to his press office.
The local authorities already know what’s coming: amid growing protests in Brasilia on Wednesday evening, military police have moved into position around the presidential palace and one of the judges on Brazil’s Supreme Court has called for calm. “It’s a moment for calm, moderation and watching the institutions work,” said Marco Aurelio Mello.
“We still need more information, but on the face of it there’s enough to say that it weakens substantially the government,” said Andre Cesar, an independent political analyst. “I see a huge increase in the difficulties in approving reforms. Pension reform could take a step back.”
The head of the Brazilian Bar Association, Claudio Lamachia, said in a statement that society needs immediate answers and that the alleged recordings need to be made public as soon as possible. “Brazilians can no longer live with doubts regarding their representatives,” Lamachia said.
On Wednesday evening, people were already lining up on the streets of Sao Paolo, preparing to protest against Temer:
Anti-Temer protests gathering numbers in #SaoPaolo following audio showing #Brazil‘s president endorsing the payment for silence. pic.twitter.com/LB48zOHJgk
— Paul Antonopoulos (@oulosP) May 18, 2017
//platform.twitter.com/widgets.js
#protest now in #SãoPaulo against #Brazil #Temer caught negotiating kickbacks & for direct elections in the country (photo: Dani Sampaio) pic.twitter.com/t4ojSzwyoe
— ana cernov (@anacernov) May 18, 2017
//platform.twitter.com/widgets.js
Spontaneous protest against President Temer on Avenida Paulista after new recordings emerge. São Paulo, Brazil. ©LOST ART #foratemer pic.twitter.com/Ej2YGrPmcy
— Lost Art (@lostart) May 18, 2017
//platform.twitter.com/widgets.js
Meanwhile, the same market which soared last year after the Rouseff impeachment, for some still unknown reason, is now plunging on the news. A Brazilian ETF trading in Tokyo, tumbled more than 8% on the O Globo news, its biggest drop since September 2015.
At this point it is unclear if there is any politician left in Brazil who has not been tainted by the Carwash scandal; it is also not clear who could possibly replace Temer when he too is kicked out of office, in light of the unprecedented power vacuum on all sides that currently exists in the Latin American country.
- Are Auto-Makers Bailing On Their Job-Creation Pledges?
Carmakers quickly kowtowed to Trump after his upset victory over Hilary Clinton on Nov. 8, allowing the then-president-elect to take credit for their pledges to hire thousands of workers and keep U.S. factories open.
At the time, fears of a 35% import tariff were enough to keep them in line. But while Trump still has the support of his voter base, the administration is having a hard time whipping up votes in Congress. Trump has struggled to pass a plan to repeal and replace Obamacare – a law that almost nobody in the Republican party wants to keep. So it's difficult to imagine the administration passing something as controversial as the import tax any time soon.
But, now that its become apparent that Trump doesn't wield absolute authority over Republicans in Congress, The Wall Street Journal is asking: When will the corporate sector jump ship?
Detroit has been an engine of growth for U.S. employment since the financial crisis, with General Motors Co. , Ford Motor Co. and Fiat Chrysler Automobiles NV adding tens of thousands of jobs to keep pace with growing demand and fund autonomous-car engineering and other moonshot programs. Total auto employment manufacturing, including parts suppliers, hit 945,000 in April, 50% higher than industry employment in 2009 when GM, Chrysler and several auto suppliers were undergoing bankruptcy restructuring.
Earlier this year, company executives promised to add head count at certain factories in response to criticism from President Donald Trump.
Now, those executives are quickly retreating.
GM and Ford are making cuts to their U.S. workforces that could far outpace the job commitments made in recent months amid political pressure. Amid softening U.S. car sales and mounting investor skepticism about Detroit's ability to weather the industry's first downturn in nearly a decade, auto executives are facing a tough choice in whom to please: Wall Street or the White House.
Auto sales have fallen for four straight months. Inventory is near record highs. Used-care sales prices are falling. R&D budgets have become bloated. And interest rates are half a percentage point higher than they were five months ago.
Unless the Trump administration can swiftly furnish the 4% economic growth, these companies have every incentive to pull back. And judging by Ford's decision earlier this week to slash 10% of its workforce, they're not willing to wait.
Auto stocks have largely missed out on the broad market rally; At $33, shares of GM are trading at their November 2010 IPO price. Ford shares are down 12% YTD at $10.94, while Fiat-Chrysler has seen modest gains.
Meanwhile, Tesla shares are soaring even as Elon Musk and his merry band of futurists have yet to turn a profit. And that alone should be enough to make auto execs like Mary Barra, who receive an increasing percentage of their compensation in stock, forget all those promises made during the heady days leading up to the inauguration.
- The Most Important Question That No One Is Asking…
With every mainstream media orifice chock full of prognosticators speculating on what Trump must have done given the anonymously-sourced reports about Comey, Russia, and Cock-holsters; there appears to be one question that very few dare ask…
If Trump indeed asked Comey to end the Flynn probe, why was Comey so silent about the meeting for two months?
One such American who dared to ask the question is infamous neocon Rep. Peter King (R-NY), who told Fox News tonight that he has “real questions” for Comey…
“If Director Comey in any way thought that he was being intimidated or the president was trying to interfere with an investigation, I believe that Director Comey had an obligation to report that, report it to the Justice Department, to tell those around him,” King said.
“Because that could be considered a crime, and as director of the FBI, he had an obligation to make that known.”
He added that Comey also had an obligation to share that information with the House and Senate intelligence committees when he testified before them.
//video.insider.foxnews.com/v/embed.js?id=5437727553001&w=466&h=263
Watch the latest video at video.foxnews.com
King said he is not aware of Comey speaking to anyone in Congress about any interference in any ongoing investigations into Flynn, Russia or the Trump campaign.
“If this was as serious as it’s now being made out to be, why has Director Comey been so silent for the last two months?” King said.
Next week’s Comey hearing could be more exciting than we thought as the answer to those questions is unlikley to be covered by the standard “that’s classified” response.
We note that King’s comments – somewhat defending President Trump – come shortly after Senator McCain’s Trump-defending comments… did Trump ‘cross the aisle’ to the neocons?
- McMaken: Dismantle The FBI, And Give Its Money Back To The States
Authored by Ryuan McMaken via The Mises Institute,
With James Comey's firing, we're told the FBI is in turmoil, and Washington DC cocktail parties are all atwitter over the excitement of the scandal. But don't worry about the FBI. If history has proved anything, the Bureau, no matter how much chaos it may endure, can always rely on a fat check from Congress — funded by the American taxpayers.
But why does the US need a huge national police force at all? Can't state police forces do just as well? The FBI continues to assert never-proven claims that bigger governments are better at law enforcement than smaller onces. This myth is not only untrue, but very expensive for taxpayers.
The FBI's Gravy Train
The FBI is very well paid. The 2017 budget request for the FBI, for instance, is for $8.7 billion. That's up from 2014's budget of $8.4 billion. That may not seem like a lot compared to say, the Defense Department's typical haul of $500 to $600 billion. But as far as law enforcement agencies in the United States go, the FBI is awash in money.
It's so much money, in fact, that if the FBI were abolished, and the sum were divided up into 50 even portions for the states, each state would receive $174 million dollars.
That's not chump change. The entire public safety budget for the Illinois State Police in 2016, for example, was $242 million. Even if every state got an equal share of the FBI's budget back, the Illinois state Police could increase their public safety budget by 71 percent.
Illinois, though, is the sixth largest state (by population) in the Union. Just imagine what smaller states could do with a similar amount were those monies not used to pay for the FBI's latest efforts to raid peaceful political gatherings in Texas, or provide private luxury jets for politicians. The total budget of the Colorado State Patrol, for instance — including everything from salaries to public relations — is $144 million.
But what a great racket the FBI has going. As an arm of a federal government that prints its own money, the FBI need never worry about any meaningful budget cut. Moreover, it keeps getting bigger budgets regardless of its ineptitude. And ineptitude is easy to find. As James Bovard reported this week in USAToday:
Before the 9/11 attacks, the FBI dismally failed to connect the dots on suspicious foreigners engaged in domestic aviation training. Though Congress had deluged the FBI with $1.7 billion to upgrade its computers, many FBI agents
ad old machines incapable of searching the Web or emailing photos. One FBI agent observed that the bureau ethos is that "real men don’t type. … The computer revolution just passed us by."
The FBI’s pre-9/11 blunders "contributed to the United States becoming, in effect, a sanctuary for radical terrorists," according to a 2002 congressional investigation. (The FBI also lost track of a key informant at the heart of the cabal that detonated a truck bomb beneath the World Trade Center in 1993.)
In the late 1990s, the FBI Academy taught agents that subjects of investigations "have forfeited their right to the truth." This doctrine helped fuel pervasive entrapment operations after 9/11. Trevor Aaronson, author of The Terror Factory: Inside the FBI’s Manufactured War on Terrorism, estimated that only about 1% of the 500 people charged with international terrorism offenses in the decade after 9/11 were bona fide threats. Thirty times as many were induced by the FBI to behave in ways that prompted their arrest. The bureau’s informant program extends far beyond Muslims.
It bankrolled an extremist right-wing New Jersey blogger and radio host for five years before his 2009 arrest for threatening federal judges.
And then there are the other scandals — the perpetual false testimony from the FBI crime lab, its use of National Security Letters and other surveillance tools to illegally vacuum up Americans’ personal info, its whitewashing of every shooting by an FBI agent between 1993 and 2011, and its operation of dozens of child porn websites (another entrapment operation gone awry).
But don't worry, the FBI still has plenty of time to spy on ordinary peaceful Americans and antagonize them. Bovard continues:
From 1956 through 1971, the FBI’s COINTELPRO (counterintelligence programs) conducted thousands of covert operations to incite street warfare between violent groups, to get people fired, to smear innocent people by portraying them as government informants, and to cripple or destroy left-wing, black, communist, white racist and anti-war organizations. FBI agents also busied themselves forging "poison pen" letters to wreck activists’ marriages. COINTELPRO was exposed only after a handful of activists burglarized an FBI office in a Philadelphia suburb, seized FBI files, and leaked the damning documents to journalists.
But, the FBI's defenders will surely tell you that every penny of that 8.7 billion is there to keep you "safe." This naive position relies on the decades-old mythology behind a government agency that has long been, as Bovard has called it, a "stasi for America." Last year, I noted:
Of all federal police forces, the FBI is the most romanticized, and every FBI agent is assumed to be the modern embodiment of a fictionalized version of Eliot Ness: incorruptible, professional, and efficient. Decades of pop culture has driven this home with TV series and movies such as The Untouchables, The FBI Story, and This Is Your FBI have long perpetuated the idea that when local police fail, the FBI will step in to be more effective and simply better than every other law enforcement agency. Corruption cannot touch the FBI, we are told, and they apply the law equally to everyone.
This mythology was necessary to overcome decades-long opposition to a federal police force which was long properly viewed an an unconstitutional usurpation of state and local prerogatives.
We Don't Need Vast Government Agencies for Quality Policing
The advocates for national police also often claim that without a national police force, the individual states of the US would be overrun by criminals. The US states are too small and weak, we are told, to mount any effective opposition to sophisticated crime operations.
So, by this reasoning, small countries should have more criminal activity than larger, more powerful countries.
But where's the evidence for this? Is Switzerland crime infested while much-larger Mexico is crime free? Nope. Does Poland have sky-high homicide rates while much-more-powerful Russia is serenely peaceful? Wrong again. Indeed, no relationship whatsoever has been demonstrated between the size and scope of a country's regime, and the amount of crime it has. Brazil, after all, is an immense state both in geography and in regulatory vigor. Yet crime there is a major problem.
Moreover, even if there were some optimum minimum size for countries (which there is not) many US states have more than enough wealth, population, and power to fund immense police operations.
Texas, for instance, has approximately the same GDP and population size as Australia. If Australia is not ruled by drug runners and terrorists — as we're supposed to believe would happen to Texas without the FBI — why is Texas too small to obtain the same level and quality of law enforcement? With more than 20 million inhabitants, Florida and New York have GDPs similar to those of a mid-sized European country. Pennsylvania has a GDP equal to that of Switzerland. California has both a population and a GDP larger than that of Canada.
Moreover, without the FBI not even very small US states would be on their own since no FBI is necessary to coordinate information-sharing between states. INTERPOL, of course, has been around for decades as a body that helps police organizations share information and apprehend suspects. INTERPOL itself, however, has no agents who make arrests, and INTERPOL's budget is much, much smaller than that of the FBI.
Not even the European Union has gone so far as to create a police force that resembles the FBI in its vast power. Europol, like INTERPOL, assists in coordination among police agencies, but Europol officers do not conduct independent investigations in member countries as the FBI does in American states. Europol's budget is only a small fraction of the FBI's.
So why is the FBI necessary? If you're a DC politician, the FBI may be quite useful in terms of settling scores, finding cushy jobs for your friends, and for living out one's control-freak fantasies as appears to be the case with Jeff Sessions' revived drug war.
For ordinary Americans, though, the FBI doesn't do anything that smaller and more responsive governments can't do on their own.
- 'The Everything Bubble': Why The Coming Collapse Will Be Even Worse Than The Last
The next crash is coming, and the decision by central banks to paper over their economy's troubles with a massive injection of debt likely means that the next crash is already overdue.
Soon, investors will be forced to reconcile a massive expansion of debt and falling productivity and growth with a host of potentially disruptive crises: The advent of government-sponsored cyberwarfare, followed by the collapse of the global dollar-based monetary system. Whereas the last crisis trigger massive devaluations in the real estate and stock markets, the next crash will be the result of a triple bubble in stocks, real estate and bonds as investors bail out of traditional assets in favor of the safety of gold, silver and – perhaps – cryptocurrencies like bitcoin.
Gold analyst Mike Maloney believes that traditional assets will plunge, and gold, silver and cryptocurrencies like bitcoin will outperform, as investors seek protection from the coming collapse of the global dollar system. Maloney explains his thinking in a new YouTube video "The Everything Bubble."
In the U.S., housing prices have experienced a halting recovery since the subprime crisis. But in other markets, like New Zealand, Canada, a frenzy of buying by wealthy Chinese hoping to stash their money abroad kept prices afloat, driving the ratio of home prices to incomes to all time highs. In Canada, the affordability index – the ratio of housing prices to incomes – has risen to an all-time high of 1.4.
In the stock market, a few vulnerabilities have emerged; the ratio of debt borrowed against investors' brokerage account balances has reached all-time highs, which tells you that recent gains are vulnerable to a short-squeeze – which is when brokerages close clients out of their positions.
Worth noting: the rise in margin debt has traced the run-up in the S&P 500.
The VIX – a gauge of expected volatility – has fallen to multi-decade lows, suggesting that markets have grown complacent in the face of the coming crash. Earnings-per-share ratios are looking precariously stretched to dot-com-era levels.
And, finally, a look at intraday trading patterns also reveals signs of strain: Maloney, borrowing from the research of John Hussman of Hussman Funds, the former University of Michigan finance professor who famously predicted the 2008 crisis, explains that lately he's seen what he calls "exhaustion gaps" appearing with increasing frequency. Hussman defines an "exhaustion gap" as any time the S&P 500 opens 0.5% above its previous close while its within 2% of its all-time high. These gaps show that the supply of capital pouring into the market is thinning, or " that there are no more suckers willing to buy at the top."
Bonds have been in a "perfect bull market" for 36 years, Maloney says. But historical patters suggest that the coming shock will likely trigger its demise: Over a span of decades, interest rates have tended to spend about equal time on either side of a peak. If this pattern holds, it would mean that the decadeslong bond-market rally only has two or three years left to run, which brings us to another important question: when the crash comes, what's it going to look like?
Maloney believes it will unfold in two stages:
In the first, investors will flood into the perceived safety of bond markets, causing a temporary spike, as stocks and real estate markets collapse.
Then all three markets will plummet as the collapse of a catastrophic pile of debt brings about the end of the global dollar-based monetary system.
In the 20th Century, shifts in the global monetary paradigm have occurred about every 30-50 years.
And shifts in secular bond-market trends have tended to mirror them. Maloney, who has long advocated owning gold and silver, also revealed that he has purchased a small share of bitcoin and other cryptocurrencies, though he cautions against owning an outside position. Rising demand in the East has been offsetting falling demand in the U.S. So far, excess capacity in the U.S. market has helped compensate for this as the East has attracted Western gold.
But soon this imbalance will be ameliorated, and the price of gold – which has already risen modestly year-to-date – will see a large, sustained rise.
- Trump Responds To Appointment Of Special Counsel
President Trump has just issued the following statement in response to the news that former FBI Director Robert Mueller has been appointed as Special Counsel in an investigation looking into his campaign’s alleged collusion with Russia intended to throw the 2016 campaign. Taken at face value, it seems to confirm what the administration has said several times, namely that, like many of us, the White House is eager to proceed with, and conclude, an investigation as quickly as possible.
“As I have stated many times, a thorough investigation will confirm what we already know – there was no collusion between my campaign and any foreign entity. I look forward to this matter concluding quickly. In the meantime, I will never stop fighting for the people and the issue that matter most to the future of our country.”
NEW! Statement from President Donald J. Trump pic.twitter.com/DTEy8ILKGF
— Zeke Miller (@ZekeJMiller) May 17, 2017
//platform.twitter.com/widgets.js
Per our earlier post, in an effort to avoid any conflicts, the Department of Justice has confirmed that the White House was only informed of Acting Attorney General Rosenstein’s decision to appoint a Special Counsel in the Russia probe after the order was already signed.
Of course, we’re all waiting with bated breath to see whether Trump will offer any other, less-scripted thoughts via Twitter.
Courtesy of Bloomberg’s Jennifer Jacobs, here is a full breakdown of today’s sequence of events:
TICK-TOCK on how Trump team took the news that special counsel had been named to lead FBI’s Trump-Russia investigation. pic.twitter.com/mMK8uhkHDZ
— Jennifer Jacobs (@JenniferJJacobs) May 18, 2017
//platform.twitter.com/widgets.js
- Trump Safe? McCain Rejects Call To Impeach Trump
And just like that, Trump may have avoided near certain political doom.
As news was breaking that the DOJ had named a Special Counsel for the Russia probe, a move that will substantially ease political tensions on the Hill (and is a move which the administration would almost certainly not have allowed if it had anything material to hide), another major hurdle for Trump dissolved this afternoon, when one of the biggest “risk-factors” behind a potential Trump impeachment was removed.
Recall that in its initial analysis of the biggest risk factor facing Trump, Height Securities’ Peter Cohn said to keep a close eye on just one republican: John McCain.
Cutting to the chase, Cohn writes that ending Trump’s viability as president “depends on Republicans turning against him”, as impeachment proceedings can only begin with the majority party, and the 25th Amendment (allowing for president’s removal when unable to discharge powers/duties of his office) can only be invoked by Congress and/or vice president, majority of Cabinet.
What will Height be closely watching to see if the Trump drama enters a potentially terminal phase: the main catalyst is whether Sen. John McCain, chairman of Armed Services Committee, begins calling for Trump’s resignation, as U.S. national security issues may increase concern among Republican voters.
And while earlier today, one GOP Rep. Justin Amash already suggested that if the FBI memo story is true, impeachment would be appropriate, in the clearest sign yet that Trump may be safe after all, the Washington Examiner reported that John McCain said that calls from congressional Democrats to impeach President Trump are not “rational” adding that “I don’t think very many people take that very seriously,” he said Wednesday.
“All I can do is judge the situation as it is. Every day, we are surprised by some other twist and turn of this issue so I can only respond now and now I do not think that is a rational approach.”
Earlier in the day, Democratic representative Al Green called for Trump’s impeachment on the House floor Wednesday, accusing the president of obstruction of justice.
“I rise today, Mr. Speaker, to call for the impeachment of the President of the United States of America for obstruction of justice,” he said. “There is a belief in this country that no one is above the law. And that includes the President of the United States of America.”
While Democrats urging Trump’s impeachment had new energy following a bombshell report about Trump on Tuesday, ultimately it was all up to getting Republicans behind the push, and it was in this context that JPM said “a Trump impeachment was very, very unlikely.”
Trump – impeachment very, very unlikely and regardless it wouldn’t be positive. There is a lot of talk about Trump impeachment and how a President Pence could be a positive. It is way, way too early to begin having the impeachment conversation. Impeachment is much more a political (instead of a legal) process and w/the GOP controlling both chambers and Trump’s popularity in the party being (relatively) healthy the political dynamics don’t signal impeachment. That could change in Jan ’19 assuming Republicans lose either the House or Senate in Nov ’18 but if that happens the whole pro-growth agenda would grind to a halt. The impeachment bar is very, very high (no president ever has been removed from office as a result of impeachment; two had articles of impeachment brought up in the House before being acquitted in the Senate; one resigned before going through the process). The daily scandals obviously don’t help Trump’s political capital but market expectations for legislative action are already very low.
JPM said this before McCain had made his position clear. Now that the Arizona Senator has also voiced his support of Trump (we ignore Putin’s offer to present a transcript of the conversation with Lavrov, exonerating Trump) any likelihood of a Trump impeachment, absent some stunning finding by the Special Counsel, is materially lower (if not gone altogether), for the foreseeable future.
Digest powered by RSS Digest
Saving...