- Is Europe Doomed By Vassalage To Washington?
Authored by Paul Craig Roberts,
“One Ring to rule them all . . . and in the darkness bind them.”
J.R.R. Tolkien, The Lord of the RingsWorld War II resulted in Europe being conquered, not by Berlin but by Washington.
The conquest was certain but not all at once. Washington’s conquest of Europe resulted from the Marshall Plan, from fears of Stalin’s Red Army that caused Europe to rely on Washington’s protection and to subordinate Europe’s militaries to Washington in NATO, from the replacement of the British pound as world reserve currency with the US dollar, and from the long process of the subordination of the sovereignty of individual European countries to the European Union, a CIA initiative implemented by Washington in order to control all of Europe by controlling only one unaccountable government.
With few exceptions, principally the UK, membership in the EU also meant loss of financial independence. As only the European Central Bank, an EU institution, can create euros, those countries so foolish as to accept the euro as their currency no longer have the power to create their own money in order to finance budget deficits.
The countries that joined the euro must rely on private banks to finance their deficits. The result of this is that over-indebted countries can no longer pay their debts by creating money or expect their debts to be written down to levels that they can service. Instead, Greece, Portugal, Latvia, and Ireland were looted by the private banks.
The EU forced the pseudo-governments of these countries to pay the northern European private banks by suppressing the living standards of their populations and by privatizing public assets at pennies on the dollar. Thus retirement pensions, public employment, education and health services have been cut and the money redirected to private banks. Municipal water companies have been privatized with the result being higher water bills. And so on.
As there is no reward, only punishment, for being a member of the EU, why did governments, despite the expressed wishes of their peoples, join?
The answer is that Washington would have it no other way. The European founders of the EU are mythical creatures. Washington used politicians that Washington controlled to create the EU.
Some years ago CIA documents proving that the EU was a CIA initiative were released. See: http://www.telegraph.co.uk/news/worldnews/europe/1356047/Euro-federalist… and http://benwilliamslibrary.com/blog/?p=5080
In the 1970s my Ph.D. dissertation chairman, then a very high-ranking official in Washington with control over international security affairs, asked me to undertake a sensitive mission abroad. I refused. Nevertheless, he answered my question: “How does Washington get foreign countries to do what Washington wants?”
“Money,” he said. “We give their leaders bagfuls of money. They belong to us.”
The record is clear that the EU serves the interests of Washington, not the interests of Europe. For example, the French people and government are opposed to GMOs, but the EU permits a “precautionary market authorization” of GMO introduction, relying perhaps on the “scientific findings” of the scientists on Monsanto’s payroll. When the US state of Vermont passed a law requiring labeling of GMO foods, Monsanto sued the state of Vermont. Once the paid-off EU officials sign the TTIP agreement written by US global corporations, Monsanto will take over European agriculture.
But the danger to Europe goes far beyond the health of European peoples who will be forced to dine on poisonous foods. Washington is using the EU to force Europeans into conflict with Russia, a powerful nuclear power capable of destroying all of Europe and all of the United States in a few minutes.
This is happening because the paid-off with “bagfuls of money” European “leaders” had rather have Washington’s money in the short-run than for Europeans to live in the long-run.
It is not possible that any European politician is sufficiently moronic to believe that Russia invaded Ukraine, that Russia any moment will invade Poland and the Baltic states, or that Putin is a “new Hitler” scheming to reconstruct the Soviet Empire. These absurd allegations are nothing but Washington propaganda devoid entirely of truth. Washington’s propaganda is completely transparent. Not even an idiot could believe it.
Yet the EU goes along with the propaganda, as does NATO.
Why? The answer is Washington’s money. The EU and NATO are utterly corrupt. They are Washington’s well paid whores.
The only way Europeans can prevent a nuclear World War III and continue to live and to enjoy what remains of their culture that the Americans have not destroyed with America’s culture of sex and violence and greed, is for the European governments to follow the lead of the English and exit the CIA-created European Union. And exit NATO, the purpose of which evaporated with the collapse of the Soviet Union, and which is now being used as an instrument of Washington’s World Hegemony.
Why do Europeans want to die for Washington’s world hegemony? That means Europeans are dying for Washington’s hegemony over Europe as well.
Why do Europeans want to support Washington when Washington’s high officials, such as Victoria Nuland, say “Fuck the EU.”
Europeans are already suffering from the economic sanctions that their overlord in Washington forced them to apply to Russia and Iran. Why do Europeans want to be destroyed by war with Russia? Do Europeans have a death wish? Have Europeans been Americanized and no longer appreciate the historic accumulation of artistic and architectural beauty, literature and music achievements of which their countries are custodians?
The answer is that it makes no difference whatsoever what Europeans think, because Washington has set up a government for them that is totally independent of their wishes. The EU government is accountable only to Washington’s money. A few people capable of issuing edicts are on Washington’s payroll. The entire peoples of Europe are Washington’s serfs.
Therefore, if Europeans remain the gullible, insouciant, and stupid peoples that they currently are, they are doomed, along with the rest of us.
On the other hand, if the European peoples can come to their senses, free themselves from The Matrix that Washington has imposed on them, and revolt against Washington’s agents who control them, the European peoples can save their own lives and the lives of the rest of us.
- Is War Inevitable In The South China Sea?
Authored by Pepe Escobar, originally posted Op-Ed via RT.com,
Since the recent ruling by The Hague in favor of the Philippines and against China over the South China Sea, Southeast Asia has been engulfed on how to respond. They dithered. They haggled. They were plunged into despair.It was a graphic demonstration of how “win-win” business is done in Asia. At least in theory.
In the end, at a summit in Vientiane, Laos, the 10-nation Association of Southeast Asian Nations (ASEAN) and China finally settled for that household mantra – “defusing tensions”.
They agreed to stop sending people to currently uninhabited “islands, reefs, shoals, cays, and other features” after ASEAN declared itself worried about land reclamation and “escalations of activities in the area”.
And all this without even naming China – or referring to the ruling in The Hague.
China and ASEAN also pledged to respect freedom of navigation in the South China Sea (which Washington insists is in danger); solve territorial disputes peacefully, through negotiations (that happens to be the official Chinese position), also taking into consideration the UN Convention on the Law of the Sea (UNCLOS); and work hard to come up with a Code of Conduct in the South China Sea (that’s been going on for years; optimistically, a binding text will be ready by the first half of 2017).
So, problem solved? Not really. At first, it was Deadlock City. Things only started moving when the Philippines desisted to mention The Hague in the final statement; Cambodia – allied with China – had prevented it from the start.
And that’s the heart of the matter when it comes to ASEAN negotiating with China. It’s a Sisyphean task to reach consensus among the 10 members – even as ASEAN spins its role as the perfect negotiation conduit. China for its part prefers bilaterals – and has applied Divide and Rule to get what it wants, seducing mostly Laos and Cambodia as allies.
That threat by a peer competitor
The strategic geopolitical centrality of the South China Sea is well known: A naval crossroads of roughly $5 trillion in annual trade; transit sea lanes to roughly half of global daily merchant shipping, a third of global oil trade and two-thirds of all liquid natural gas (LNG) trade.
It’s also the key hub of China’s global supply chain. The South China Sea protects China’s access to the India Ocean, which happens to be Beijing’s crucial energy lifeline. Woody Island in the Paracels, southeast of Hainan island, also happens to be a key bridgehead in One Belt, One Road (OBOR) – the New Silk Roads. The South China Sea is strictly linked to the Maritime Silk Road.
The arbitration panel in The Hague (composed of four Europeans, one American of Ghanaian descent and, significantly, no Asians) issued a ruling that is non-binding; moreover, it was not exactly neutral, as China, one the conflicting parties, simply refused to take part.
Beyond these expressions of mutual ASEAN-China understanding, hardcore action will keep everyone’s juices flowing. The Pentagon, predictably, won’t refrain from its FON (Freedom of Navigation) program, which has recently featured several B-52 overflights in the South China Sea along with the usual US Navy patrols.
But now Beijing is counter punching in style – showing off one of its H-6K long-range nuclear-capable bombers overflying Scarborough Shoal, near the Philippines. That only increased Pentagon paranoia, because the real game in the South China Sea revolves to a large extent over China’s aerial and underwater military strategy.
To understand the progression, we need to go back to the early 1980s, when the Little Helmsman Deng Xiaoping set up China’s first Special Economic Zone (SEZ) in Shenzhen. From the start, the whole Chinese miracle always depended upon China’s eastern seaboard’s fabulous capacity to engage in global trade. More than half of China’s GDP depends on global trade.
But, strategically, China has no direct access to the open seas. Geophysics is implacable: there are islands all around. And geopolitics followed; many of these are and can become a problem.
Wu Shicun, the president of China’s National Institute for South China Sea Studies, has been constant over the years; all of Beijing’s actions boil down to securing strategic access to the opens seas. This may be construed in the West as aiming for a “Chinese lake”. But it’s in fact about securing its own naval backyard. And that implies, predictably, deep suspicion about what the US Navy may come up with. The Defense Ministry loses sleep about it 24/7.
For Beijing, it’s crystal clear; the eastern seaboard must be protected at all costs – because they are the entry and exit point of China’s global supply chains. Yet as Beijing improves its military sophistication, the hegemon – or exceptionalist – machine gets itchier and itchier. Because the whole ingrained exceptionalist worldview can only conceive it as a “threat” by a peer competitor.
The larger-than-life “access” drama
From Exceptionalistan’s point of view, it’s all about the myth of “access”. The US must have full, unrestricted “access” to the seven seas, the base of its Empire of Bases, post-Rule Britannia system: the “indispensable nation” ruling the waves.
But now Beijing has reached a new threshold. It’s already in the position to successfully defend the strategic southern island of Hainan. The Yulin naval base in Hainan is the site of China’s expanded submarine fleet, which not only features stalwarts such as the 094A Jin-class submarine, but the capability to deliver China’s new generation ICBM, the JL-3, with an estimated range of 12,000km.
Closed Off: China to hold S. China Sea drills, warns against ‘freedom of navigation’ patrols https://t.co/iLVBWsXDKh pic.twitter.com/vzFM8Brvno
— RT (@RT_com) July 18, 2016
Translation: China now can not only protect, but also project power, aiming ultimately at unrestricted access to the Pacific.
The US counter punch to all this is “Anti-Access”, or A2, plus Area Denial, which in Pentagonese turns out as A2/AD. Yet China has evolved very sophisticated A2/AD tactics, which include cyber warfare; submarines equipped with cruise missiles; and most of all anti-ship ballistic missiles such as the Dongfeng 21-D, an absolute nightmare for those sitting duck billion-dollar US aircraft carriers.
A program called Pacific Vision, funded by the Pentagon’s Office of Net Assessments, eventually came up with the Air-Sea Battle concept. Virtually everything about Air-Sea Battle is classified. As the concept was being elaborated, China has mastered the art of very long range ballistic missiles – a lethal threat to the Empire of Bases, fixed and/or floating.
What is known is that the core Air-Sea Battle concept, known in Orwellian Pentagonese as “NIA/D3”,“networked, integrated forces capable of attack-in-depth to disrupt, destroy and defeat adversary forces”. To break through the fog, this is how the Pentagon would trample over Chinese A2/AD. The Pentagon wants to be able to attack all sorts of Chinese command and control centers in a swarm of “surgical operations”. And all this without ever mentioning the word “China”.
So these are the stakes. The indispensable nation’s military hegemony over the whole South China Sea must always be undisputed. Always. But already it is not. China is positioning itself as a cunning, asymmetrical aspirant to “peer competitor”. For the moment Beijing ranks second in the Pentagon’s list of “existential threats” to the US. Were not for Russia’s formidable nuclear power, China would already be number one.
At the same time China does not need to launch any military offensive against an ASEAN member; it’s bad for business. The environment after The Hague’s ruling – as the Laos summit proved – points toward long-term diplomatic solutions. But make no mistake; at some point in the future, there will be a serious confrontation between the US and China over “access" to the South China Sea.
- Yuan Strengthens Most Since 2010 As China Manufacturing Spikes To 17-Month Highs AND Tumbles To 7-Month Lows
In a miracle of modern goal-seeking, China's Manufacturing PMI clung to within an inch of 'stable' 50 level for the 20th month (actually missing expectations of 50.0, printing 49.9) But while manufacturing is its lowest since Feb, the non-manufacturing PMI jumped to 53.9 – its highest since Dec 15. Even better, just 45 monutes after this data, Caixin released their manufacturing PMI data which smahed expectations, surging to 50.6 – its highest since Feb 2015. Following the notable USD weakness on Friday (thanks to BoJ disappointment), and the apparent recovery of the Chinese economy (just need another trillion or two of credit to keep the dream alive), PBOC strengthened the Yuan fix by 0.35% – the most since mid-June… extending the 9-day gain to the most since Sept 2010.
Manufacturing slipped to a 5-month low…
Services hits 7-month (2016) highs…
But Caixin Manufacturing (weighted more towards smaller-caps rather than official PMI's weighting towards SOEs) surged to 19 month highs… thanks to the quickest rise in outstanding business since March 2011.
Commenting on the China General Manufacturing PMI data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:
“The Caixin China General Manufacturing PMI came in at 50.6 for July, up significantly by 2.0 points from the reading for June, marking the first expansion since February 2015. The sub-indexes of output, new orders and inventory all surged past the neutral 50-point level that separates growth from decline. This indicates that the Chinese economy has begun to show signs of stabilizing due to the gradual implementation of proactive fiscal policy. But the pressure on economic growth remains, and supportive fiscal and monetary policies must be continued.”
Evercore ISI notes the following a China's most crucial recent developments…
- “Severe challenges” in the China economy says Beijing, worse than “persistent downward pressure” – their characterization of the last several months.
- Two components to this change. One, managing expectations down. Two, showing the upcoming G20 (Sep 4-5) attendees that the officials are on the case.
- Conflicting Beijing comments. Saying ‘foundation of stable economic development not solid’ – bad. Then saying the ‘long-term positive trend in fundamentals has not changed’ – good.
- China budget deficit now 4.2% of GDP, vs. 2.2% in worst of 2008-09 global crisis amid a big stimulus program. More stimulus coming.
- CBRC (banking authority) tightening regulations to contain growing risks from sketchy practices in the ‘Wealth Mgmt Products’ arena. NPL fears also.
- Media control even tighter by Beijing. All original ‘current affairs news’ is now banned by internet portals. Managing what people see – not the path of modern market economies.
- Yuan strengthened this last week, mostly on Friday. Think of this as more USD weakness than Yuan strength.
And that Yuan strength continues as PBOC fixes the currency stronger by the most since mid June…
- *CHINA STRENGTHENS YUAN FIXING BY 0.35%, MOST SINCE JUNE 23
This is the 8th Yuan strengthening in 9 days… the biggest strengthening since Sept 2010…
Is this the post G-20 agreement? Fed promises not rose rates, China allows Yuan to rise.. world remains stable into the election to try to ensure HRC wins?
Charts: Bloomberg
- What If?
- America's Recent Achievements In The Middle East
Authored by Eric Zuesse,
Here are before-and-after pictures of what the U.S. government has achieved, in the Middle East:
What’s especially interesting there, is that in all of these missions, except for Iraq, the U.S. was doing it with the key participation of the Saud family, the royals who own Saudi Arabia, and who are the world’s largest buyers of American weaponry. Since Barack Obama came into the White House, the operations — Libya, Yemen, and Syria — have been, to a large extent, joint operations with the Sauds. ‘We’ are now working more closely with ‘our’ ‘friends’, even than ‘we’ were under George W. Bush.
As President Obama instructed his military, on 28 May 2014:
When issues of global concern do not pose a direct threat to the United States, when such issues are at stake — when crises arise that stir our conscience or push the world in a more dangerous direction but do not directly threaten us — then the threshold for military action must be higher. In such circumstances, we should not go it alone. Instead, we must mobilize allies and partners to take collective action. We have to broaden our tools to include diplomacy and development; sanctions and isolation; appeals to international law; and, if just, necessary and effective, multilateral military action. In such circumstances, we have to work with others because collective action in these circumstances is more likely to succeed.
So: ’we’ didn’t achieve these things only on our own, but instead in alliance with the royals of Saudi Arabia, Qatar, UAE, Kuwait, and other friendly countries, which finance jihadists everywhere but in their own country. And, of course, all of ‘us’ are allied against Russia, so we’re now surrounding that country with ‘our’ NATO partners before we do to it what we’ve previously done to Iraq, Libya, Yemen, and Syria. America is becoming even more ambitious, because of ‘successes’ like these in Iraq, Libya, Syria, Yemen, and Ukraine.
The United States has been the great champion of ‘democracy’ throughout the world. And these are are some of the results of that ‘democracy’. ‘We’ are spreading it abroad.
‘Our’ latest victory has been ‘our’ spreading it to Ukraine. No country is closer to Russia than that.
Inside America, the term that’s used for referring to anyone who opposes this spreading of ‘democracy’, is ‘isolationist’, and this term is imported from the meaning that it had just prior to America’s joining World War II against Hitler and other fascists. Back in that time, an “isolationist” meant someone who didn’t want to defeat the fascists. The implication in the usage of this term now, is that the person who is an ‘isolationist’ is a ‘fascist’, just as was the case then. It’s someone who doesn’t want to spread ‘democracy’. To oppose American foreign policy is thus said to be not only ‘right wing’, but the extremist version of that: far right-wing — fascist, perhaps even nazi, or racist-fascist. (Donald Trump is rejected by many Republicans who say that he’s ‘not conservative enough’. Democrats consider him to be far too ‘conservative’. The neoconservative Democrat Isaac Chotiner, whom the Democratic neoconservative Slate hired away from the Democratic neoconservative The New Republic, has headlined at Slate, “Is Donald Trump a Fascist?” and he answered that question in the affirmative.) George Orwell dubbed this type of terminological usage “Newspeak.” It’s very effective.
Studies in America show that the people who are the most supportive of spreading ‘democracy’ are individuals with masters and doctoral degrees (“postgraduate degrees”). Those are the Americans who vote for these policies, to spread American ‘democracy’, to foreign lands. They want more of this — more of these achievements. (Hillary Clinton beat Bernie Sanders nationwide among the “postgraduate” group.) Some of these people pride themselves on being “technocrats.” They claim that the world needs more of their ‘expertise’. Lots of them come forth on the ‘news’ media to validate such invasions as Iraq in 2003, Libya in 2011, Syria after 2011, etc. Almost all of them possess doctoral degrees. This shows what they have learned. They are the most employable, the highest paid, the most successful, in their respective fields.
After all: ‘democracy’ is not for amateurs. It’s only for people who take instruction, and who do what they are told. But, told by whom? Whom are they obeying? Do they even know? In any organization, when an instruction is issued, is it always easy to know who issued it? And what happens to a person who doesn’t carry it out? There is a winnowing process. The constant survivors are the ones who rise from that process, and who ultimately win the opportunity to issue some of the instructions themselves. These people are the wheat; everybody else is chaff, which gets discarded, in a ‘democracy’.
* * *
Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.
- If You Disagree With This Harvard Economist You May Be Stupid And A Racist
Shocked by the inexplicable realization that Americans are stubbornly unwilling to bow down and blindly accept the political and economic views of the educated elites in this country, Harvard Professor Gregory Mankiw recently took to the New York Times to pen an op-ed where he concluded that the only possible reason for the lack of conformity to his point of view is the stupidity and racism of the electorate. An article by Adam Button at forexlive, called our attention to the recent op-ed which he described as a "dazzling display of contempt for the public from a Harvard professor who can't believe that voters aren't listening to the gospel of the economic elites."
Questioning why American's object to increasing globalization, Professor Mankiw pointed to three main conclusions:
"The first is isolationism more broadly. Trade skeptics tend to think, for example, that the United States should stay out of world affairs and avoid getting involved in foreign conflicts. They are not eager for the United States to work with other nations to solve global problems like hunger and pollution."
"The second is nationalism. Trade skeptics tend to think that the United States is culturally superior to other nations. They say the world would be better if people elsewhere were more like Americans."
"The third is ethnocentrism. Trade skeptics tend to divide the world into racial and ethnic groups and think that the one they belong to is better than the others. They say their own group is harder working, less wasteful and more trustworthy."
In summary, Professor Mankiw concludes that "…isolationist, nationalist, ethnocentric worldview is related to one’s level of education…the more years of schooling people have, the more likely they are to reject anti-globalization attitudes." So if we understand Professor Mankiw correctly, we disagree with him because we're stupid, and because we're stupid we're also necessarily racist. Got it.
Lest you think that Mr. Mankiw only holds contempt for American dissenters, he points out that the British people are stupid and racist as well:
"…the recent Brexit vote was strongly correlated with education. Districts with a high percentage of college graduates tended to vote to remain in the European Union, while those with a small percentage tended to vote to leave."
We're happy to note that Mr. Mankiw did find some cause for optimism, noting that populations tend to grow smarter over time. If we're lucky, hopefully our offspring can all reach the level of enlightenment of Professor Mankiw, though it will probably take another 100-200 years, or so.
"In the long run, therefore, there is reason for optimism. As society slowly becomes more educated from generation to generation, the general public’s attitudes toward globalization should move toward the experts. The short run in which we find ourselves now, however, is another story."
Frankly, we're happy that Professor Mankiw is drawing attention to the infallible intellect of our our ivy league educated economic and political elite. Given the horrific record of the Fed in recent years, creating bubble after bubble while laying ruin to global economies, we think the Fed could benefit from some smart people like Professor Mankiw.
Janet L. Yellen – Brown University – BA in Economics; Yale University – Ph.D. in Economics
Lael Brainard – Wesleyan University – BA; Harvard University – Ph.D. in Economics
Stanley Fischer – London School of Economic – BS/MS in Economics; MIT – Ph.D. in Economics
Jerome H. Powell – Princeton University – AB in Politics
Daniel K. Tarullo – Georgetown University; Duke University
Wait a minute….
- "Time's Up – The Pain Must Begin Now"
Submitted by Chris Hamilton via Econimica blog,
In 2010, Social Security (OASDI) unofficially went bankrupt. For the first time since the enactment of the SS amendments of 1983, annual outlays for the program exceeded receipts (excluding interest credited to the trust funds). The deficit has grown every year since 2010 and is now up to 8% annually and is projected to be 31% in 2026 and 44% by '46. The chart below highlights the OASDI annual surplus growth (blue columns) and total surplus (red line). This chart includes interest payments to the trust funds and thus looks a little better than the unvarnished reality.
For a little perspective, the program pays more than 60 million beneficiaries (almost 1 in 5 Americans), OASDI (Old Age, Survivors, Disability Insurance) represents 25% of all annual federal spending, and for more than half of these beneficiaries these benefits represent their sole or primary source of income.
The good news is since SS's inception in 1935, the program collected $2.9 trillion more than it paid out. The bad news is that the $2.9 trillion has already been spent. But by law, Social Security is allowed to pretend that the "trust fund" money is still there and continue paying out full benefits until that fictitious $2.9 trillion is burned through. To do this, the Treasury will issue another $2.9 trillion over the next 13 years to be sold as marketable debt so it may again be spent (just moving the liability from one side of the ledger, the Intergovernmental, to the other, public marketable). However, according to the CBO, Social Security will have burnt through the pretend trust fund money (that wasn't there to begin with) by 2029.
Below, the annual OASDI surplus (in red) peaking in 2007, matched against the annual growth of the 25-64yr/old (in blue) and 65+yr/old (grey) populations. The impact of the collapse of the growth among the working age population and swelling elderly population is plain to see. And it will get far worse before it eventually gets better.
From 2017 through 2029, the present 170 million person 25-64yr/old population will grow by just 5 million. The current 51 million person 65+yr/old population will grow by 22 million. And it won't get much better after that as the older population keeps swelling with boomers living progressively longer.
Beginning in 2030 benefits will have to be paired up with tax collections according to current law. By present calculations, this means an initial 29% reduction in benefits. The reductions will only become larger from there. The average benefit check in 2016 is $1341/mo, or $16,000/yr. A 29% reduction on the average payment will be <-$390/mo> and the reductions will keep growing for the rest of our lives. For couples, this means their initial combined benefit will be $22.850 instead of $32.000.
Americans turning 67 in 2030 will be told that after being mandated to pay their full share of SS taxation throughout their working lifetime, they will not see anything near their full benefits in their latter years. However, those in retirement now and those retiring between now and 2029 are being paid in full despite the shortfall in revenue. They will be paid in full until this arbitrary "trust fund" is theoretically drained.
I have no intention of funding, in full, current retirees benefits with my tax dollars only to know I will hit the finish line with a 30%+ reduction that will only worsen over time. My goal is to pay it forward to my kids and then do my best to never to be a burden to them. The SS (OASDI) benefits must be cut now to be in line with revenues. Raise taxes, lower benefits…your choice. But I'm not about to make the old whole so I can then subsequently see my generation go bankrupt in my latter years.
Conclusion-
1- There was a trust fund, but Executive and Congressional tinkering along the way has seen that is has been entirely spent (artificially and temporarily boosting the economy along the way). It's gone and issuing more debt in it's place is just asinine.
2- With immediate effect, benefits must be cut or taxes raised…you choose. We can't pretend any longer and attempt to push the consequences out another generation.
Times up. The pain must begin now and must be shared equally by all.
- Why The IRS Is Probing The Clinton Foundation
"Clinton Cash" author, Peter Schweizer, recently took to the airwaves to explain why the IRS investigation of the Clinton Foundation should be a "big deal" (also see Clinton Cash: "Devastating" Documentary Reveals How Clintons Went From "Dead Broke" To Mega Wealthy") even though he expressed some "skepticism" over the ability of Obama's IRS to run an impartial investigation. As we we've reported (see "IRS Launches Investigation Of Clinton Foundation"), the IRS recently launched an investigation of the Clinton Foundation after receiving a letter signed by 64 Republicans of the House of Representative which described the Clinton Foundation as a “lawless ‘pay-to-play’ enterprise that has been operating under a cloak of philanthropy for years.”
Somehow we, too, are doubtful that the IRS will lead this investigation with the same kind of vigor they displayed when looking into local Tea Party organizations and religious charities during the last election cycle.
When asked why the IRS should be concerned about the Clinton Foundation, Mr. Schweizer explained:
"The big deal is that…there are international anti-bribery standards that say bribing a public official can mean giving them money, giving their family money, or giving their charity money. Just because it's a charity doesn't mean that it's not important or not interesting…it constitutes bribery every bit as much as if somebody's putting money in somebody's pocket for a benefit."
Mr. Schweizer continued by calling into question why foreign governments and wealthy foreign individuals, many from the middle east, would contribute money to the Clinton Foundation given the limited scope of their actual charitable outreach:
"When you look at the people who are giving large sums of money overseas they are people who have histories of corruption or being involved in bribery scandals."
We're certain Mr. Schweizer is "overreacting". After all we're pretty sure the State of Kuwait, Friends of Saudi Arabia, United Arab Emirates, The Government of Brunei Darussalam and The Sultanate of Oman, all Clinton Foundation contributors (see full list below), are eagerly involved in the Clinton Foundation's project entitled "No Ceilings: The Full Participation Project" whose stated goal is building an "evidence-based case to chart the path forward for the full participation of girls and women in the 21st century."
A full list of entities/individuals that have made
bribescontributions in excess of $1mm to the Clinton Foundation over the years can be found below (click for a larger image):
Finally, when asked why the Obama administration would allow the Clinton Foundation to continue to solicit cash from foreign governments even as she served as Secretary of State, Mr. Schweizer noted that, in fact, Obama conditioned his appointment of Clinton to Secretary of State on her agreement to "disclose all donors"…a condition which Clinton promptly ignored.
"We know now that there at least 1,100 contributions from foreign sources they still haven't disclosed."
The full interview with Mr. Schweizer can be viewed below:
Watch the latest video at video.foxnews.com
In light of the IRS investigation, we also decided to take a quick look at the Clinton Foundation financials (full reports can be found here). To our "surprise," we discovered that, in fact, only 13.6% of the $248 million of expenditures made by the Foundation in 2014 were for "direct program expenditures" while the remainder went to salaries and amorphous expense buckets like "Professional and Consulting" and "Meetings and Training." We're very hopeful that this is the type of "efficiency" that Hillary can bring to the various federal organizations. After all, spending 13.6 cents of every dollar on actual stated objectives would be a huge improvement for many federal entities.
The full 2014 audited financials of the Clinton Foundation can be viewed below:
- Goldman Turns Outright Bearish: Says To "Sell" Stocks Over Next 3 Months
One month after Goldman strategists downgraded equities to neutral on growth and valuation concerns back in May, the firm turned up the heat on the bearish case with a June report by Christian Mueller-Glissmann, in which the Goldman strategist said that equity drawdown risk “appears elevated” with S&P 500 trading near record high, valuations stretched, lackluster economic growth and yield investors being “forced up the risk curve to equities.” Specifically Goldman warned to prepare for a “major drawdown.”
We, however, were skeptical, and concluded our take on Goldman’s newfound skepticism as follows: “we can’t help but be concerned that the last time Goldman warned about a big drop in the market a month ago, precisely the opposite happened. Will Goldman finally get this one right, or did the firm just say the magic words for the next leg higher in stocks? “
Well, Goldman was right about a brief “drawdown” in stocks just a few weeks later following the Brexit swoon, which however on the back on unprecedented central bank verbal support, resulted in one of the biggest rallies yet, not to mention a historic short squeeze, and indeed led to the next leg higher in stocks, to fresh all time highs to be precise.
So for those who believe that Goldman is just another incarnation of Dennis Gartman and are still bearish, you may want to close out any remaining short positions because moments ago, the same Christian Mueller-Glissman released a new report in which Goldman has gone outright bearish, with a “tactical downgrade to equities for the next 3 months.”
Here is the reasoning behind Goldman’s creeping sense of gloom:
- The rally in risky assets over the past few weeks has continued n and broadened – the S&P 500 has made all-time highs, the VIX has fallen, bonds and ‘safe havens’ started to sell off, and cyclicals have outperformed defensives.
- We think a key driver of the recovery has been a combination of the light positioning into Brexit and the search for yield amid expectations of easing.
- However, given equities remain expensive and earnings growth is poor, in our view equities are now just at the upper end of their ‘fat and flat’ range.
- Our risk appetite indicator is near neutral levels and its positive momentum has faded, suggesting positioning will give less support and we will need better macro fundamentals or stimulus to keep the risk rally going, but market expectations are already dovish and growth pick-up should take time.
- As a result, we downgrade equities tactically to Underweight over 3 months, but remain Neutral over 12 months. We remain Overweight cash and would look for resets lower in equities to add positions.
First off, in its attempt to skim over its most recent erroneous call, Goldman’s global risk appetite indicator “signalled a persistent lack of risk appetite ahead of Brexit (and in general since 2015), with our indicator mostly negative, and a sharp decline post the Brexit vote. The lack of positioning was a key reason why we decided to stay Neutral on equities despite the quick relief rally. Since then, our risk appetite indicator has increased further, indicating a continuation of the risk appetite reversal. We think the negative asymmetry in risky assets is increasing again. A positive level of the risk appetite indicator is not a bearish signal per se – the indicator can remain in positive territory for prolonged periods of time without any risk of drawdowns as long as macro fundamentals remain supportive. However, with our risk appetite indicator now in neutral territory, the market is more vulnerable to growth and policy disappointments, in our view. In addition, its positive momentum has faded and we are back at the levels we saw ahead of the last 3 drawdowns.”
Goldman adds the following:
While the initial risk appetite reversal had both risky and ‘risk-off’ assets rallying alongside each other in a strong search for yield, a more reflationary rally has occurred since July 8, during which bonds and other ‘risk-off’ assets such as gold and the Yen started to sell off, up until Friday. Alongside this, cyclicals and financials outperformed, while low vol stocks underperformed (Exhibit 3). The cyclicals vs. defensives roundtrip, for example, has happened across regions (Exhibit 4) and has been particularly strong in EM and Japan (supported by the financials’ rally after the recent BoJ decision), but we believe a large part of the reversal is now done and without a sustained pick-up in growth, the more pro-cyclical rally is running out of steam.
In short, Goldman’s doubling down on a bearish forecast have nothing to do with a change in fundamentals (which have not improved according to the firm) and everything to do with a shift in sentiment and positioning. To wit:
We think this reversal in positioning increases the likelihood of an equity pullback given that our fundamental view has not changed: valuations still appear high and we still expect poor earnings growth across regions. In our view, equities remain in their ‘fat and flat’ range and are now just near the upper end. As a result, we downgrade equities to Underweight in our 3-month asset allocation. Until the growth situation improves, we are not that constructive on equities, particularly after this type of rally and amid continuing concerns about the sustainability of stimulusled growth in China, global policy uncertainty (and in Europe in particular), dovish central bank expectations, and heightened prospects of unknown shocks (e.g. Turkey recently). We remain Overweight credit, which has less negative asymmetry than equities, in our view.
So, if one believes that Goldman is going to be right this time, how should one trade the coming risk asset swoon? Some ideas from the taxpayer-backed hedge fund:
Cross-asset volatility has reset significantly lower, particularly relative to where recent realised levels are.
We remain Overweight cash over 3 months to benefit from a pick-up in volatility and look for opportunities to re-enter upon pullbacks in equity, as we remain Neutral over 12 months. We think the negative asymmetry for risky assets and for bonds could require more aggressive risk management. We highlight the following cross-asset opportunities:
- Call-overwriting across indices
- Short-dated S&P 500 options: Long OTM calls for investors worried about a squeeze higher, long puts for hedges
- Long-dated Nikkei vol
- Long gold vol
- Long MSCI EM puts to hedge positions
Finally some thoughts from Goldman on the underlying macro situation…
Macro surprises have been positive, but from a low bar
The recent pro-cyclical tilt of the equity rally might in part be due to expectations of more reflationary central bank polices, but it has also been supported by a better macro backdrop relative to expectations. Our global macro surprise index (MAP) had an increase in July, driven by developed markets (Exhibit 14). And the correlation of equities with macro surprises has been positive, i.e. it’s a ‘good news is good news’ environment as dovish Fed expectations have been anchored. However, the positive macro surprises might in part be due to lowered expectations into and after Brexit. Friday’s US GDP release came in below expectations, primarily owing to a sizeable inventory correction.
… and the market’s take on monetary policy, which is at odds with an economy that is supposedly improving:
The current dovish Fed pricing is at odds with current macro trends, the significant easing of financial conditions during the relief rally and our economists’ forecast of above 2% US GDP growth in 2H2016. The repricing of Fed hikes since the beginning of the year has been extreme and now little is priced until 2018 (Exhibit 16). Our economists see a 65% probability of a hike this year (45% for December and 20% for September) post the Fed’s recent meeting as the FOMC indicated nearterm risks to the economic outlook have diminished, although Friday’s US GDP came in below expectations. Bearish rate shocks have put upward pressure onglobal bond yields, which could continue.
In short, Goldman believes the key risk to sentiment, and pricing, is that monetary policy expectations will disappoint.
So far, both the BoE and ECB have been on hold. Our economists expect the BoE to announce a 25 bp cut in the bank rate, Gilts and corporate bond purchases and an extension of the Funding for Lending Scheme. And they expect the ECB to extend its asset purchase programme to the end of 2017 (currently March 2017) at the September meeting, and the key according to which purchases under the PSPP are taking place to be changed from the ECB’s capital key to market capitalisation of debt outstanding. New fiscal easing in Japan is also broadly expected in the near term (see Japan Views: Economic stimulus package upwards of ¥28 tn, but real water component likely only around ¥5 tn over several years, July 27, 2016), but we have concerns that this fails to sustainably boost the market, as has often been the case in the past (see Japan Strategy Views: History Lessons, July 26, 2016). Unless expectations can be met or exceeded, the chances of another drawdown are heightened, in our view.
Taking all this into considerations, Goldman’s latest conclusion is relative simple: sell.
Policy uncertainty is still high post Brexit and has increased further in Europe, the US and China, in our view. In Europe, the Brexit negotiations are likely to take time; in the US, the general election cycle is starting; and in China, concerns have picked up – in fact, our economists have highlighted again a significant pick-up in FX outflows in June amid RMB weakening. Geopolitical risks have also moved again into focus with further terror attacks globally and the attempted military coup in Turkey on July 15, 2016. With equities at the high end of their range, we think shocks such as these can drive downside from here.
Will Goldman again be wrong? It’s distinctly possible, in which case we expect the firm to capitulate some time in September, when the S&P is around 2,300 and urging what clients it has left to buy stocks at all time highs. That would clearly market the moment to sell everything. On the other hand, considering Goldman dreadful forecasting record over the past year, it is about time the firm got one reco right, if only purely statistically. But just to be safe, it may be wisest to wait until Gartman turns “pleasasntly long.”
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