- AND NoW FoR IMPoRTaNT MeSSaGE FRoM THe DeeP STaTe…
- Venezuela: Forty Years Of Economic Decline, Part 1
Authored by Jose Nino via The Mises Institute,
Venezuela Before Chavez: A Prelude To Soclialist Failure
Venezuela’s current economic catastrophe is well documented. Conventional narratives point to Hugo Chávez’s regime as the primary architect behind Venezuela’s economic tragedy. While Chávez and his successor Nicolás Maduro deserve the brunt of the blame for Venezuela’s current economic calamity, the underlying flaws of Venezuela’s political economy point to much more systemic problems.
Observers must look beyond stage one, and understand Venezuela’s overall history over the past 50 years in order to get a more thorough understanding of how the country has currently fallen to such lows.
Socialism Before Chávez
Analysts like to point to rosier pictures of Pre-Chávez Venezuela, but what these “experts” conveniently ignore is that the seeds of Venezuela’s destruction were sowed during those “glory years.” Years of gradual economic interventionism took what was once a country bound to join the ranks of the First World to a middle-tier developing country. This steady decline eventually created an environment where a demagogue like Chávez would completely exploit for his political gain.
The Once-Prosperous Venezuela
To comprehend Venezuela’s long-term decline, one must look back at what made it so prosperous in the first place. Before the completion of its first oil field on April 15, 1914, Venezuela was essentially a Banana Republic marked by political instability. This was largely a consequence of its colonial past and the period following its independence from Spain. Despite gaining independence from Spain, Venezuela maintained many of its primitive political and economic practices, above all, its exclusionary mercantilist and regulatory policies that kept it in an impoverished state.
However, the discovery of oil in the early twentieth century completely changed the entire ballgame. The powerful agricultural aristocracy would be supplanted by an industrialist class that sought to open its oil markets to multinational exploitation and foreign investment. For the first time in its history, Venezuela had a relatively liberal, free market economy and it would reap countless benefits in the decades to come.
From the 1910s to the 1930s, the much-maligned dictator Juan Vicente Gómez helped consolidate the Venezuelan state and modernized an otherwise neocolonial backwater by allowing market actors, domestic and foreign, to freely exploit newly discovered oil deposits. Venezuela would experience substantial economic growth and quickly establish itself as one of Latin America’s most prosperous countries by the 1950s.
In the 1950s, General Marcos Pérez Jiménez would continue Gómez’s legacy. At this juncture, Venezuela was at its peak, with a fourth place ranking in terms of per capita GDP worldwide.
More Than Just Oil
While oil exploitation did play a considerable role in Venezuela’s meteoric ascent from the 1920s to 1970s, this only scratches the surface in explaining how Venezuela became so prosperous during this period. A combination of a relatively free economy, an immigration system that attracted and assimilated laborers from Italy, Portugal, and Spain, and a system of strong property rights, allowed Venezuela to experience unprecedented levels of economic development from the 1940s up until the 1970s.
As mentioned earlier, Venezuela was at the height of its prosperity during the military dictator Marcos Pérez Jiménez’s regime. Like Juan Vicente Gómez’s regime, Pérez Jiménez’s stewardship of Venezuela was characterized by heavy political repression.
Venezuela’s capitalist structure remained largely intact during Pérez Jiménez’s tenure, albeit with creeping degrees of state involvement. Pérez Jiménez did introduce some elements of crony capitalism, pharaonic public works projects, and increased state involvement in “strategic industries” like the steel industry. Nevertheless, the Pérez Jiménez regime was open to foreign investment, let the price system function normally in most sectors of the economy, and did not embark on creating a profligate welfare state.
The Road to Social Democracy
Despite the prosperity brought about by Venezuela’s booming economy in the 1950s, Marcos Pérez Jiménez’s government drew the ire of many left-leaning activists due its heavy-handed measures. The tipping point came in 1958, when these leftist activists, working in tandem with a sympathetic military, successfully overthrew Pérez Jiménez in a coup. Pérez Jiménez would live the rest of his life in exile and would be a figure of derision among Venezuelan intellectual and political elites, despite the unprecedented economic and social development under his watch.
Following the 1958 coup, naval officer Wolfgang Larrázabal occupied the presidency briefly until general elections were held later that year. Notable social democrat political leader Rómulo Betancourt would come out on top in these elections and assume the presidency from 1959 to 1964. The Fourth Republic of Venezuela — Venezuela’s longest lasting period of democratic rule, was established under Betancourt’s administration. In 1961, a constitution was introduced, dividing the government into 3 branches — executive, legislative, and judicial — and establishing an activist role for the Venezuelan state in economic affairs.
This political order was further consolidated by the establishment of the Punto Fijo Pact. The Punto Fijo Pact consisted of a bipartisan agreement between two political parties — Acción Democratica (Democratic Action) and COPEI (Christian Democrats) — that laid the foundation for a social democratic political order and alternation of power between the two parties.
What seemed like a genuine move toward democratic stability, Venezuela’s Fourth Republic marked the beginning of a process of creeping socialism that gradually whittled away at Venezuela’s economic and institutional foundations.
The Socialist Origins of Venezuela’s Pro-Democracy Advocates
Venezuela’s current collapse did not happen overnight. It was part of a drawn out process of economic and institutional decay that began decades before.
When Venezuela returned to democracy in 1958, it looked like it was poised to begin an era of unprecedented prosperity and political stability.
However, Venezuela’s democratic experiment was doomed from the start, and one needn’t look any further at the political background of its very own founder, Rómulo Betancourt, to understand why it’s entire political system was built on a house of cards.
Rómulo Betancourt was an ex-communist who renounced his Marxist ways in favor of a more gradualist approach of establishing socialism. Despite evolving into more of a social democrat, Betancourt still believed in a very activist role for the State in economic matters.
Betancourt was part of a generation of intellectuals and student activists that aimed to fully nationalize Venezuela’s petroleum sector and use petroleum rents to establish a welfare state of sorts. These political figures firmly believed that for Venezuela to become a truly independent country and free itself from the influence of foreign interests, the government must have complete dominion over the oil sector.
Under this premise, a nationalized oil industry would finance cheap gasoline, “free” education at all levels, healthcare, and a wide array of other public services.
This rhetoric strongly resonated among the lower and middle classes, which would form the bulwark of Betancourt’s party, Acción Democrática, voter base for years to come.
At its core, this vision of economic organization assumed that the government must manage the economy through central planning. Oil would be produced, managed, and administered by the state, while the government would try to phase out the private sector.
Interventionism from the Start
Betancourt’s administration, while not as interventionist as succeeding 4th Republic governments, capped off several worrisome policies, which included:
- Devaluation of the Venezuelan currency, the BolÃvar.
- Failed land reform that encouraged squatting and undermined the property rights of landowners.
- The establishment of a Constitutional order based on positive rights and an active role for the Venezuelan state in economic affairs
Betancourt’s government followed-up with considerable tax hikes that saw income tax rates triple to 36%. In typical fashion, spending increases would be accompanied with these increases, as the Venezuelan government started to generate fiscal deficits because of its out of control social programs. These growing deficits would become a fixture in Venezuelan public finance during the pre-Chávez era.
The Nationalization of the Oil Industry
While Betancourt did not achieve his end goal of nationalizing the Venezuelan oil industry, his government laid the foundation for subsequent interventions in that sector.
Thanks to the large oil boom of the 1970s, the government of Carlos Andrés Pérez capitalized on the unprecedented flow of petroleum rents brought about by the 1970s energy crisis where oil-producing countries like Venezuela benefited handsomely from high oil prices.
Betancourt’s vision was finally achieved in 1975, when Carlos Andrés Pérez’s government nationalized the petroleum sector. The nationalization of Venezuela’s oil industry fundamentally altered the nature of the Venezuelan state. Venezuela morphed into a petrostate, in which the concept of the consent of the governed was effectively turned on its head.
Instead of Venezuelans paying taxes to the government in exchange for the protection of property and similar freedoms, the Venezuelan state would play a patrimonial role by bribing its citizens with all sorts of handouts to maintain its dominion over them.
On the other hand, countries based on more liberal frameworks of governance have citizens paying taxes, and in return, these governments provide services that nominally protect the life, liberty, and property of its citizens. The state is not the owner, thus giving the citizens a strong check against the Leviathan should the government overstep its boundaries.
Oil Nationalization: A Pig Trough for Politicians
Pérez would take advantage of this state power-grab to finance a profligate welfare state and a cornucopia of social welfare programs that resonated strongly with the populace. As a result, deficit spending became embraced by the political class and increasing levels of foreign and public debt would become the norm in Venezuelan fiscal affairs.
At this juncture, Venezuela’s economy became overwhelmingly politicized. Oil boom periods were characterized by an inflow of petrodollars that the state used for pharaonic public works and social projects as a means to pacify the populace.
In reality, no real wealth creation took place during these boom periods, as the state redistributed the rents according to political whims and usurped functions traditionally held by civil society and private economic actors. When politicians and bureaucrats oversee businesses, decision-making is based on partisan and state interests rather than efficiency and consumer preferences.
Although the nationalization of the petroleum industry did not result in an immediate economic downturn, it laid the groundwork for institutional decay that would clearly manifest itself during the 80s and 90s.
- Close Friend of Comey, Ben Wittes, Makes Up Absurd Story About Comey Being 'Disgusted' by Trump Hug
If Comey admits to being ‘disgusted’ by ‘hugging’ Trump, I fucking promise to eat a shoe on my inactive periscope account. When I clicked on this stupid story from The Shill, I figured I’d just watch it and move on. So I got to watching it and as it went on, it became more absurd, almost perverse, in the blatancy of the lies being purported by this former Washpo editor and Brookings Institue faggot.
If you’re a democrat and believe this is a person of repute, feel free to fuck yourself. Look at this submental, literally making the story up as he went along the faggot rode paved for him by the PBS eunuch.
‘He really wanted to blend in and not be singled out. He’s wearing, if you watch the video, he’s wearing a blue blazer. And he stands in the room that is as far from Trump that is physically possible to be and also against blue drapes that are the same color as his –‘
‘He chose that spot?’
‘He chose that spot because it was almost like a chameleon or camouflaged against the wall.’
Fuck yourself Ben Wittes.
It’s worth noting, Wittes has a black belt in Taekwondo. I still like my chances in beating him senseless, if afforded the chance, however.
Content originally published at iBankCoin.com
- The Russian Obsession Goes Back Decades
Authored by Jacob Hornberger via The Future of Freedom Foundation,
Just consider the accusations that have been leveled at the president:
- He has betrayed the Constitution, which he swore to uphold.
- He has committed treason by befriending Russia and other enemies of America.
- He has subjugated America’s interests to Moscow.
- He has been caught in fantastic lies to the American people, including personal ones, like his previous marriage and divorce.
President Donald Trump?
No, President John F. Kennedy.
What lots of Americans don’t realize, because it was kept secret from them for so long, is that what Trump has been enduring from the national-security establishment, the mainstream press, and the American right-wing for his outreach to, or “collusion with,” Russia pales in comparison to what Kennedy had to endure for committing the heinous “crime” of reaching out to Russia and the rest of the Soviet Union in a spirit of peace and friendship.
They hated him for it. They abused him. They insulted him. They belittled him. They called him naïve. They said he was a traitor.
All of the nasties listed above, plus more, were contained in an advertisement and a flier that appeared in Dallas on the morning of November 22, 1963, the day that Kennedy was assassinated. They can be read here and here.
Ever since then, some people have tried to make it seem like the advertisement and flier expressed only the feelings of extreme right-wingers in Dallas. That’s nonsense. They expressed the deeply held convictions of the Joint Chiefs of Staff, the CIA, the conservative movement, and many people within the mainstream media and Washington establishment.
In June 1963, Kennedy threw down the gauntlet in a speech he delivered at American University, now entitled the “Peace Speech.” It was one of the most remarkable speeches ever delivered by an American president. It was broadcast all across the communist Soviet Union, the first time that had ever been done.
In the speech, Kennedy announced that he was bringing an end to the Cold War and the mindset of hostility toward Russia and the rest of the Soviet Union that the U.S. national-security establishment had inculcated in the minds of the American people ever since the end of World War II.
It was a radical notion and, as Kennedy well understood, a very dangerous one insofar as he was concerned. The Cold War against America’s World War II partner and ally had been used to convert the United States from a limited-government republic to a national-security state, one consisting of a vast, permanent military establishment, the CIA, and the NSA, along with their broad array of totalitarian-like powers, such as assassination, regime change, coups, invasions, torture, surveillance, and the like. Everyone was convinced that the Cold War — and the so-called threat from the international communist conspiracy that was supposedly based in Russia — would last forever, which would naturally mean permanent and ever-increasing largess for what Kennedy’s predecessor, President Dwight Eisenhower, had called the “military-industrial complex.”
Suddenly, Kennedy was upending the Cold War apple cart by threatening to establish a relationship of friendship and peaceful coexistence with Russia, the rest of the Soviet Union, and Cuba.
Kennedy knew full well that his actions were considered by some to be a grave threat to “national security.” After all, don’t forget that it was Guatemalan President Jacobo Arbenz’s outreach to the Soviets in a spirit of friendship that got him ousted from power by the CIA and presumably targeted for assassination as part of that regime-change operation. It was Cuban leader Fidel Castro’s outreach to the Soviets in a spirit of friendship that made him the target of Pentagon and CIA regime-change operations, including through invasion, assassination, and sanctions. It was Congo leader’s Patrice Lamumba’s outreach to the Soviets in a spirit of friendship that got him targeted for assassination by the CIA. It would be Chilean President Salvador Allende’s outreach to the Soviets in a spirit of friendship that got him targeted in a CIA-instigated coup in Chile that resulted in Allende’s death.
Kennedy wasn’t dumb. He knew what he was up against. He had heard Eisenhower warn the American people in his Farewell Address about the dangers to their freedom and democratic way of life posed by the military establishment. After Kennedy had read the novel Seven Days in May, which posited the danger of a military coup in America, he asked friends in Hollywood to make it into a movie to serve as a warning to the American people. In the midst of the Cuban Missile Crisis, when the Pentagon and the CIA were exerting extreme pressure on Kennedy to bomb and invade Cuba, his brother Bobby told a Soviet official with whom he was negotiating that the president was under a severe threat of being ousted in a coup. And, of course, Kennedy was fully mindful of what had happened to Arbenz, Lamumba, and Castro for doing what Kennedy was now doing — reaching out to the Soviets in a spirit of friendship.
In the eyes of the national-security establishment, one simply did not reach out to Russia, Cuba, or any other “enemy” of America. Doing so, in their eyes, made Kennedy an appeaser, betrayer, traitor, and a threat to “national security.”
Kennedy didn’t stop with his Peace Speech. He also began negotiating a treaty with the Soviets to end above-ground nuclear testing, an action that incurred even more anger and ire within the Pentagon and the CIA. Yes, that’s right — they said that “national security” depended on the U.S. government’s continuing to do what they object to North Korea doing today — conducting nuclear tests, both above ground and below ground.
Kennedy mobilized public opinion to overcome fierce opposition in the military, CIA, Congress, and the Washington establishment to secure passage of his Nuclear Test Ban Treaty.
He then ordered a partial withdrawal of troops from Vietnam, and told close aides that he would order a complete pull-out after winning the 1964 election. In the eyes of the U.S. national-security establishment, leaving Vietnam subject to a communist takeover would pose a grave threat to national security here in the United States.
Worst of all, from the standpoint of the national-security establishment, Kennedy began secret personal negotiations with Soviet Premier Nikita Khrushchev and Cuban leader Fidel Castro to bring an end to America’s Cold War against them. That was considered to be a grave threat to “national security” as well as a grave threat to all the military and intelligence largess that depended on the Cold War.
By this time, Kennedy’s war with the national-security establishment was in full swing. He had already vowed to tear the CIA into a thousand pieces and scatter it to the winds after its perfidious conduct in the Bay of Pigs fiasco. By this time, he had also lost all confidence in the military after it proposed an all-out surprise nuclear attack on the Soviet Union, much as Japan had done at Pearl Harbor, after the infamous plan known as Operation Northwoods, which proposed terrorist attacks and plane hijackings carried out by U.S. agents posing as Cuban communists, so as to provide a pretext for invading Cuba, and after the Cuban Missile Crisis, when the military establishment accused him of appeasement and treason for agreeing not to ever invade Cuba again.
What Kennedy didn’t know was that his “secret” negotiations with the Soviet and Cuban communists weren’t so secret after all. As it turns out, it was a virtual certainty that the CIA (or NSA) was listening in on telephone conversations of Cuban officials at the UN in New York City, much as the CIA and NSA still do today, during which they would have learned what the president was secretly doing behind their backs.
Kennedy’s feelings toward the people who were calling him a traitor for befriending Moscow and other “enemies” of America? In response to the things that were said in that advertisement and flier about him being a traitor for befriending Russia, he told his wife Jackie on the morning he was assassinated: “We are heading into nut country today.” Of course, as he well knew, the nuts weren’t located only in Dallas. They were also situated throughout the U.S. national-security establishment.
- 31 Fascinating Facts On The Early History Of The US Dollar
Today, we all know the U.S. dollar as an iconic currency that is recognizable to people around the world.
And while Visual Capitalist's Jeff Desjardin has previously looked at the buying power of the U.S. dollar over time, as well as important events like the Great Depression, we have not looked at the history of the dollar itself.
How and why was it conceived, and why do we call it a “dollar” or a “buck”? How did the dollar’s early history help to shape today’s world?
Courtesy of: The Money ProjectBefore the Dollar
For the early colonists, currency was a bit of a free-for-all.
Officially, cash was denominated in pounds, shillings, and pence, but in reality things were a different story. Cash was often scarce, and colonists needed to be innovative to fulfill transactions. At various points in time, they used tobacco, beaver skins, and wampum in the place of money. Some colonies even tried to issue their own fiat currencies – many of which went bust.
As it turned out, the Spanish dollar was often the most abundant form of cash – and this is what led to U.S. currency eventually being denominated in dollars.
The Revolution
During the American Revolution in 1775, the Continental Congress issued a money known as the Continental Currency to try and fund the war. The government printed too many, and the value of a Continental diminished rapidly.
Just five years later, after runaway inflation, the Continental was worth 2.5% of its face value. Benjamin Franklin rightly noted that the depreciation of the Continental had, in fact, acted as a tax to pay for the war. Holders of the currency – everyday people – were punished by losing massive amounts of buying power. Interestingly, this is where we get the phrase “Not worth a Continental”.
Birth of the Dollar
The failure of the Continental Currency must have been top of mind during the writing of the Constitution. A clause was even added, under Article 1, Section 10, to make sure such a failure would never happen again. It was written that states were not permitted to “coin Money; emit Bills of Credit; [or] make any Thing but gold and silver Coin a Tender in Payment of Debts.”
And so, the Coinage Act of 1792 created the U.S. dollar as a standard unit of currency. The U.S. Mint was authorized to oversee coinage, and the Act also established a penalty of death for debasing coinage issued by the Mint.
The Almighty Buck
In the 19th Century, a new slang term emerged for the dollar.
Especially in the Great Lakes area, different amounts of money were equated with animal skins. One particular reference showed that in Ohio in 1851, the skin of a muskrat was worth $0.25, and that of a doe was worth $0.50. Meanwhile, the skin of a buck was equal to the “almighty dollar” – and hence, the word “buck” became synonymous with the U.S. dollar.
The Civil War
Leading up to the Civil War, private banks around the country issued their own paper currencies.
With 10,000 or so of these currencies in circulation as the war broke out, governments soon found it very cumbersome to try and pay debts with many different types of notes. As a result, the $10 Demand Note was the first official paper currency issued in 1861 by the government to help finance the war.
The North began paying debts with a fiat currency called the “greenback”, while Confederate states issued their own paper currency as well. The latter was worthless by the time the Confederacy lost the war.
The Counterfeiting Problem
Around this time, counterfeiting was a widespread problem with greenbacks and all the private notes that were circulating. More than 1/3 of bills were fake at this time.
Sophisticated counterfeit operations were happening in British Canada, and some bank engravers would even moonlight as counterfeiters, using the same plates and dyes they had from their day job.
To deal with the problem, the Secret Service was formed in 1865.
The Modern Dollar
Counterfeiting measures have come a long way since the late 19th century. Today, it’s estimated that less than 0.01% of notes are fake.
Learn more about the modern U.S. dollar in the next part of this series.
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The Money Project is an ongoing collaboration between Visual Capitalist and Texas Precious Metals that seeks to use intuitive visualizations to explore the origins, nature, and use of money.
- Inside The US Government's Plan To Survive Nuclear War (While The Rest Of Us Die)
Authored by Sadie Dingfelder, originally posted at The Washington Post,
In 2011, a staffer at Washingtonian found a government ID in a Metro parking garage and gave it to Garrett M. Graff (the magazine’s editor-in-chief at the time) to track down its owner. “Since I reported about that world, he figured I’d know what to do with it,” Graff says.
Graff immediately noticed something strange.
“The back of the ID had these evacuation instructions on it. And so I got on Google Maps and followed the instructions and they led to a road that very clearly went into the side of a mountain, and you can see on the Google satellite view big concrete bunker doors.”
Raven Rock, a hollowed out mountain near the Maryland-Pennsylvania border, is reportedly one of the undisclosed locations Dick Cheney worked from after 9/11.
That discovery inspired Graff to comb through newly declassified documents to learn more about the U.S. government’s plans in the event of a nuclear war or other catastrophe. His research culminated in the new book “Raven Rock: The Story of the U.S. Government’s Secret Plan to Save Itself — While the Rest of Us Die.”
At first, the government didn’t plan to let “the rest of us die.”
“In the early 1950s, the government really hoped and believed it would be able to save most Americans,” Graff says.
As bombs became more destructive, “plans and ambitions gradually shrunk until, realistically, the best they could hope to do is save the senior leadership.”
Drills and disasters have shown that the federal government is too complex and unwieldy to pluck out of D.C. by helicopter and set up in an underground bunker — though that was, and still is, the basic plan, Graff says.
One such shelter is the mountain fortress Graff tracked down: Raven Rock. Here’s more on it, plus other tidbits from doomsday scenarios past and present.
Raven Rock
This compound, carved out of a mountain near the Pennsylvania-Maryland border, contains several freestanding, multistory buildings (on giant, shock-absorbing springs) for a total of 900,000 square feet of office space. It has its own subterranean water supply, too. Raven Rock is where top government and military officials would hide out in the event of a major attack on Washington, D.C.; it was reportedly one of the “undisclosed locations” former Vice President Dick Cheney worked from in the aftermath of the Sept. 11 attacks.
Mount Weather
Another major underground government complex, Mount Weather has been in use since the 1950s. Located at the border of Loudoun and Clarke counties in Virginia, the 600,000-square-foot bunker inside the mountain was once (and still may be) the official evacuation site for Supreme Court justices, documents such as the U.S. Constitution and the Declaration of Independence, and the National Gallery of Art’s most valuable paintings.
E-4B ‘doomsday planes’
These custom-built 747s, also known as “Air Force One When It Counts,” are flying war rooms that follow the president when he travels internationally.
When POTUS is stateside, one plane sits ready on a runway at a Nebraska military base, “fully staffed with battle planners and war planners and meteorologists and anything else you might need to run a nuclear war,” Graff says. The planes are protected from electromagnetic pulse attacks with a fine wire mesh, and they can unfurl a 5-mile-long wire that allows communication with nuclear submarines.
Survival crackers
In the 1960s, the U.S. government distributed 150 million pounds of wheat crackers and biscuits to fallout shelters across America. Packages are still routinely found unopened in civic building basements, and apparently they don’t taste great. “I did actually find on eBay a box of them, but I haven’t been brave enough to try them in part because I have watched enough YouTube videos of other people trying them to know how disgusting they actually are,” Graff says.
Button #13
In the late 1970s, the D.C. mayor’s emergency control center at 300 Indiana Ave. NW had a Plexiglas-shielded button that, when pressed, triggered “Emer-zak,” the broadcast of emergency messages to lobbies, elevators and anywhere else served by the Muzak system.
* * *
While much of this is known, given the recent "Gotham Shield" nuclear attack drill and Washington D.C.'s recent "terror attack drill", one can't help but wonder if these old bunkers and emergency systems are getting dusted off… just as Hawaiian officials have already demanded.
- Chinese Phone Giant Admits To "Unprecedented Degree" Of Falsified Revenue
Fabricating data in China, it turns out, is not only a favorite government pastime. Publicly traded, if state-owned, phone giant Unicom Group fabricated financials relating to 1.8 billion yuan ($261 billion) in revenue over a five-year period from 2012 to 2016 – or as the company admitted, it engaged in an "unprecedented degree of falsified revenue." This is China we are talking about, where the definition of "unprecedented" is very different from the US.
Lest there be any confusion, Bloomberg further elucidated that Unicom "engaged in organized, cross-departmental faking of financial figures" – according to an internal document leaked to Bloomberg. The disclosure is just another reminder of just how endemic fraud is at both government agencies and various enterprises in China. Recall that back in January, People’s Daily confirmed what everyone had known: the government was officially making up numbers in the rust-belt province of Liaoning, and fabricated fiscal numbers after the local economy was crippled by the commodity crunch.
In a statement provided to Bloomberg, company officials claimed the fraud had a “relatively small impact” on the company and that figures had already been corrected in its financial statements. To assure investors, the company claims it has now strengthened oversight, having sacked 70 managers who were allegedly responsible for the fraud. It has also strengthened its monitoring efforts. Of course, with non-existant government oversight, corrupt auditors and "pay me as you go along" internal supervision, the numbers will remain as cooked as ever.
What was interesting was the timing of the leak: the report appeared as the Unicom Group is preparing to raise billions in capital from private investors after the firm was one of six state-owned enterprises selected for a pilot program in mixed ownership. Some have speculated that the leaker is either a disgruntled insider, or a case of industrial sabbotage with the document being passed to Bloomberg by a bidder hoping to buy at a more attractive price.
Hong-Kong based analyst Steven Liu of China Securities International also downplayed the significance of the disclosure, arguing the “irregularities” wouldn’t materially impact the company's bottom line. What was to be expected: after all Liu has a buy rating on the stock.
Here are a few more selections from the leaked document, courtesy of Bloomberg:
- About 17% of the total falsified revenue came from Shaanxi’s Tongchuan and Yulin cities, while the Hanzhong branch falsified more than a third of its revenue
- Penalties ranged from dismissals to administrative warnings, suspended party membership and salary deductions
- Managers were punished according to the Communist Party disciplinary guidelines
- The nature and repercussions of the fraud are "unprecedented" in Unicom’s history, according to the document
The news rocked shares of Unicom on Thursday; they closed at HK$10.24 after falling 3.2%, the largest drop in a month. Shares of China United Network Communications, its Shanghai-listed arm, have been suspended since late March, pending further disclosure of its mixed-ownership plan. Who knows what fraud is hiding there.
Despite authorities’ claims to the contrary, the fraud is, of course, representative of how managers at large Chinese corporates react when the numbers don't match their expectations. The Hong-Kong listed arm of the company has seen revenue fall during each of the last three years, together with profits for the last two as competition in the space has intensified. The leak offers a glimpse into how Chinese firms react when business starts to slow: managers hoping to preserve their reputations, not to mention their jobs, and keep the government-funded money spigot flowing have every incentive to falsify revenues and profit figures.
Incidentally, US companies do the same thing, only there it's called non-GAAP EPS (and revenue) and adjusted effective tax rate and remains perfectly legal.
- Is There A Coup Attempt Underway In America?
Authored by Mike Krieger via Liberty Blitzkrieg blog,
Personally, I’m horrified by the fact that Goldman Sachs goons are in total control of the Trump administration’s economic policy. I’m also horrified that our new President’s first overseas trip will be to the terrorist state of Saudi Arabia, a autocratic, brutal monarchy with undeniable ties to 9/11. I’m likewise disgusted by Attorney General Jefferson Sessions’ oppressive and uncivilized relaunch of the misguided and disastrous “war on drugs.” Finally, I’m very troubled by the fact Mike Flynn attempted to disrupt a military operation using Syrian Kurds to rout ISIS in Raqqa because Turkey didn’t like it, given he was working as a paid agent of Turkey months earlier and never disclosed it.
There are a plethora of things to be deeply concerned about when it comes to Trump, yet the coup attempt against him being launched by elements of the deep state, corporate media and Hillary dead-ender Democrats is more concerning still. It’s obvious what’s happening right now is not a sincere attempt to hold a President accountable, or fight him on policy or personnel choices. Rather, this all seems to be a very deliberate and premeditated attempt to remove him from office.
What’s so troubling about what I just wrote is not so much that I think it, but that it’s becoming accepted truth by a growing number of mainstream Americans. For example, can you believe CNBC actually published a post with the following title?
Here are a few excerpts from the piece:
There is, indeed, a bombshell of a story coming out of the news that President Donald Trump revealed sensitive information during his White House meeting with Russian officials last week. But it’s not that President Trump committed any crime. The really alarming news is that the duly-elected President of the United States appears to be the target of a political coup.
First, let’s be clear: President Trump has been sloppy, arrogant, and just plain misguided plenty of times during his short tenure in office — including the way he handled the firing of FBI Director James Comey and the hiring and firing of National Security Adviser Michael Flynn. And if he did unnecessarily compromise the source of the sensitive information he shared with the Russians, shame on him.
But a president cannot be removed from office for arrogance and sloppiness…
Here’s the kicker: None of this is actually working where it counts. Again, we have not one piece of evidence of any impeachable act. And it’s not even truly working in the polls. President Trump’s approval ratings may be lower than any modern president this early in his tenure, but they’re still higher than they were throughout the election. If anything, these constant attacks coming from this obviously angry and potentially illegal place are only strengthening the resolve of Trump’s base of supporters. They elected a guy they believed was truly the enemy of the established political class. And right on cue, the established political class is stopping at nothing to prove them right.
For all the things President Trump has said that have dragged down the level of our American political discourse, this sustained takedown effort is worse. And it’s not clear how this is going to end. Unlike President Trump, the leakers remain anonymous and thus unaccountable. They can presumably go on forever.
And President Trump doesn’t seem like he’s going to stop fighting back or irritating and threatening his political opponents.
But don’t fool yourself into thinking this is OK or even tolerable. The bottom line is that we have some very powerful people in Washington who really don’t like how democracy played out this time around and what they do to attack it next isn’t going to be any better than what they’re doing now.
Luckily the American people remain wisely circumspect about all of this. President Trump’s polls aside, the voters are still giving him a decent shot to govern. And unaccountable people in Washington shouldn’t be trying to make that decision for us.
Once again, I want to remind you the above was published at CNBC. Sure it’s a vapid Wall Street oligarch-worshipping rag, but it’s still pretty mainstream.
Moreover, it’s not just CNBC writers and obscure bloggers such as myself who are coming to these sorts of conclusions.
For example, listen closely to what Dennis Kucinich had to say on the topic in a recent interview.
I agree with Dennis completely, and another troubling aspect of all this is that the hysteria incessantly being driven by the corporate press in its attempt to destroy Trump is distracting attention away from genuine scandals. For example, yesterday’s McClatchy story on Mike Flynn’s undisclosed work as a agent of Turkey, and how that may have influenced his foreign policy recommendations appears to be a very real and extremely concerning scandal. Yet it gets buried in the hyperbole and hysteria, and millions of people end up tuning everything out.
The road we’re headed down is unhealthy, counterproductive and extremely dangerous. As is typically the case, you can thank the corporate press.
- Chinese Fighter Jets Conduct "Unprofessional" Inverted Intercept Of US Radiation Detector Over Yellow Sea
In the second incident between US and Chinese planes this year, two Chinese Su-30 fighter jets came within 150 feet of a U.S. Air Force WC-135 radiation detection plane while it was flying over the Yellow Sea in international airspace on Wednesday, CNN reports, citing an unidentified U.S. official.
The Chinese jets came within 150 feet of the US plane, with one of the Su-30s flying inverted, or upside down, directly above the American plane, the official said.
As CNN reports, the US plane involved was an Air Force WC-135 jet.
Dubbed the "Constant Phoenix," the four-engine WC-135 jet looks for distinctive elements a nuclear test of any type would emit into the air. The collected samples can be analyzed to determine exactly what occurred.
The WC-135 has been regularly deployed on routine missions in Northeast Asia, according to the US official. The planes have been used in the past to gather evidence of possible nuclear tests by North Korea.
There was a modest reaction in USDJPY on the headline…
This is the second 'intercept' this year. In February, US defense officials said there was an "unsafe" close encounter between a US Navy P-3 Orion aircraft and a Chinese surveillance aircraft over the South China Sea. In that incident, a US official told CNN the US Navy plane had to alter course to ensure there wasn't a collision with what one official said was a People's Liberation Army Air Force KJ-200. The planes came within 1,000 feet of each other, US officials said.And with a second carrier heading towards the Korean Peninsula, we suspect more are inevitable (despite US officials saying close encounters between US and Chinese forces are extremely rare).
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