- Is The Violent Dismemberment Of Russia Official US Policy?
Authored by Erik D’Amato via The Ron Paul Institute for Peace & Prosperity,
If there’s one thing everyone in today’s Washington can agree on, it’s that whenever an official or someone being paid by the government says something truly outrageous or dangerous, there should be consequences, if only a fleeting moment of media fury.
With one notable exception: Arguing that the US should be quietly working to promote the violent disintegration and carving up of the largest country on Earth.
Because so much of the discussion around US-Russian affairs is marked by hysteria and hyperbole, you are forgiven for assuming this is an exaggeration. Unfortunately it isn’t. Published in the Hill under the dispassionate title “Managing Russia’s dissolution,” author Janusz Bugajski makes the case that the West should not only seek to contain “Moscow’s imperial ambitions” but to actively seek the dismemberment of Russia as a whole.
Engagement, criticism and limited sanctions have simply reinforced Kremlin perceptions that the West is weak and predictable. To curtail Moscow’s neo-imperialism a new strategy is needed, one that nourishes Russia’s decline and manages the international consequences of its dissolution.
Like many contemporary cold warriors, Bugajski toggles back and forth between overhyping Russia’s might and its weaknesses, notably a lack of economic dynamism and a rise in ethnic and regional fragmentation. But his primary argument is unambiguous: That the West should actively stoke longstanding regional and ethnic tensions with the ultimate aim of a dissolution of the Russian Federation, which Bugajski dismisses as an “imperial construct.”
The rationale for dissolution should be logically framed: In order to survive, Russia needs a federal democracy and a robust economy; with no democratization on the horizon and economic conditions deteriorating, the federal structure will become increasingly ungovernable…
To manage the process of dissolution and lessen the likelihood of conflict that spills over state borders, the West needs to establish links with Russia’s diverse regions and promote their peaceful transition toward statehood.
Even more alarming is Bugajski’s argument that the goal should not be self-determination for breakaway Russian territories, but the annexing of these lands to other countries. “Some regions could join countries such as Finland, Ukraine, China and Japan, from whom Moscow has forcefully appropriated territories in the past.”
It is, needless to say, impossible to imagine anything like this happening without sparking a series of conflicts that could mirror the Yugoslav Wars. Except in this version the US would directly culpable in the ignition of the hostilities, and in range of 6,800 Serbian nuclear warheads.
So who is Janusz Bugajski, and who is he speaking for?
The author bio on the Hill’s piece identifies him as a senior fellow at the Center for European Policy Analysis, a Washington, D.C. think-tank. But CEPA is no ordinary talk shop: Instead of the usual foundations and well-heeled individuals, its financial backers seem to be mostly arms of the US government, including the Department of State, the Department of Defense, the US Mission to NATO, the US-government-sponsored National Endowment for Democracy, as well as as veritable who’s who of defense contractors, including Raytheon, Bell Helicopter, BAE Systems, Lockheed Martin and Textron. Meanwhile, Bugajski chairs the South-Central Europe area studies program at the Foreign Service Institute of the US Department of State.
To put it in perspective, it is akin to a Russian with deep ties to the Kremlin and arms-makers arguing that the Kremlin needed to find ways to break up the United States and, if possible, have these breakaway regions absorbed by Mexico and Canada. (A scenario which alas is not as far-fetched as it might have been a few years ago; many thousands in California now openly talk of a “Calexit,” and many more in Mexico of a reconquista.)
Meanwhile, it’s hard to imagine a quasi-official voice like Bugajski’s coming out in favor of a similar policy vis-a-vis China, which has its own restive regions, and which in geopolitical terms is no more or less of a threat to the US than Russia. One reason may be that China would consider an American call for secession by the Tibetans or Uyghurs to be a serious intrusion into their internal affairs, unlike Russia, which doesn’t appear to have noticed or been ruffled by Bugajski’s immodest proposal.
Indeed, just as the real scandal in Washington is what’s legal rather than illegal, the real outrage in this case is that few or none in DC finds Bugajski’s virtual declaration of war notable.
But it is. It is the sort of provocation that international incidents are made of, and if you are a US taxpayer, it is being made in your name, and it should be among your outrages of the month.
- NYC's Housing-Market Weakness Spreads From Manhattan To The Outer Boroughs
Throughout vast swaths of New York City, members of the city’s vast middle class work force can barely afford even a modest apartment. Yet for years after the post-crisis housing market recovery began, that reality did little to slow down the rise in home valuations as foreign capital and rock bottom interest rates fueled a buying frenzy, pushing rents ever-higher. But after citywide rents peaked in 2014, the NYC housing market, particularly the most expensive areas of Manhattan, has started to soften.
But whereas only a few quarters ago that weakness was largely confined to the top tiers of the city’s housing market, the pressure on sellers to lower their asks has swiftly spread. Now, in almost every neighborhood in Manhattan and in nearly every one of Brooklyn’s trendiest neighborhoods, more than one-fifth of sellers have been forced to lower their asks – sometimes substantially so – as mortgage rates rise and global growth begins to slow.
Here’s more from Bloomberg:
In almost every Manhattan neighborhood, at least a fifth of the listings got a price cut in the last three months of 2018, data from StreetEasy show. The biggest share was in the East Village, where 33 percent of homes were offered for less.
Inventory is piling up across the city, and that’s good news for buyers in search of a bargain. For sellers with dreams of making a big profit, it’s time for a reality check.
“What we’re seeing right now is a lot of folks being forced to adjust their expectations,” said Grant Long, senior economist at StreetEasy. “We expect that prices are going to have to come down even more for it to make sense for a lot of buyers who are in the market.”
In Brooklyn, 21 percent of listings in trendy Williamsburg were reduced. The share was 22 percent in nearby Greenpoint, and 39 percent in Fort Greene.
Unsurprisingly, one exception to the trend of price declines in trendy neighborhoods is Queens’ Long Island City, soon to be the host of Amazon’s new HQ2 (or one of them, at least). Only 12% of sellers in LIC had to lower their expectations.
As we pointed out earlier, the softness in NYC is having a knock-on effect on markets outside of NYC: In tony Greenwich, Conn., home sales plunged during Q4 as buyers who were forced to lower the ask on their NYC apartments cut their budget for homes in Greenwich. And with brokers warning about the looming impact of Trump’s SALT elimination, sellers who are holding out for a better price might soon wish they had sold sooner.
- 5G, Huawei, and Us – America Hates Competition
While no one, including me, doubts that the intensity of corporate espionage that goes on in the tech industry the latest news in the Trump Administration’s assault on Chinese telecom giant Huawai should dispel any doubts as to what the real issue is.
The Trump administration is preparing an executive order that could significantly restrict Chinese state-owned telecom companies from operating in the U.S. over national security concerns, according to people familiar with the matter.
Reached by Bloomberg, a spokesman for the White House National Security Council wouldn’t confirm whether an order is in the works, but did state that “the United States is working across government and with our allies and like-minded partners to mitigate risk in the deployment of 5G and other communications infrastructure.” In the statement, spokesman Garrett Marquis also said that “communications networks form the backbone of our society and underpin every aspect of modern life. The United States will ensure that our networks are secure and reliable.”
As always with statements in stories planted in major U.S. media houses like these what isn’t said is more important than what is said.
There are two major bones of contention with Huawei from the U.S. government’s perspective.
First is that Huawei is way ahead of everyone else in 5G technology.
They have the only end-to-end technology stack in the industry. Turnkey 5G networks from antennas and chips to the power stations needed to operate them. Simply peruse their website to see what I’m talking about.
All across the “Five Eyes” countries we have seen announcement after announcement of their banning Huawei 5G equipment from their networks. This is as much economic protectionism as it is about ‘national security.’
But, the real issue here is that, in very short order, Huawei has become a global leader in 5G infrastructure technology which the U.S. is falling behind on. And now with this arrest [Huawei CFO Weng Wanzhou] Trump is betting that he can scare everyone else into not buying their superior products through the ruinous application of sanctions policies.
The West has been systematically cutting Huawei out of the global 5G rollout because of ‘security’ concerns. More like profit concerns. It is, simply, typical protectionism by Mr. Tariff himself.
And he’s made no bones about any of this. Trump has stated quite emphatically that all a policy has to do is pass his ‘America First’ sniff test and it’ll get implemented.
And since he’s not a deep thinker, all he cares about are first-order effects and how he can sell it on his Twitter feed to his now brain-dead base who believes all of this ‘China hacked muh everything’ narrative we’re being inundated with all of a sudden.
So that’s the first angle on this.
But, the real issue isn’t just Huawei’s technological advantage which will put it in the driver’s seat to connect most of the unconnected world.
The real issue is that nothing has changed since a 2014 report from The Register that Huawei categorically refuses to install NSA backdoors into their hardware to allow unfettered intelligence access to the data that crosses their networks.
However, documents disclosed by Edward Snowden this year suggest Huawei may be more sinned against than sinner. The US National Security Agency’s ‘Tailored Access Operations’ unit broke into Huawei’s corporate servers, and by 2010 was reading corporate email and examining the source code used in Huawei’s products.
“We currently have good access and so much data that we don’t know what to do with it,” boasted one NSA briefing. The slides also disclose the NSA intended to plant its own backdoors in Huawei firmware.
So, make no mistake, the China hawks in the Trump administration are willing to derail a much-needed technology rollout in order to maintain complete control over data flow which four years ago was beyond their ability to process.
John Bolton is willing to start WWIII over a couple of pipe bombs thrown at the U.S. embassy in Baghdad, for pity’s sake. Is it so far-fetched to believe he doesn’t want us to have 5G data access without the security blanket of spying on anyone he wants at any time?
Never forget that when they are presenting you with one bogeyman it is to distract you from the real one — them. We know from the myriad of leaks and data breaches that all of our data winds up in the hands people we didn’t give consent to.
We know that the NSA has access to any information it wants, obtained via the fiction of ‘legal channels.’ So why should we go through the fiction of pretending like Huawei is the real threat?
They may very well be, but it hasn’t been proven and it would be bad business for them to actually do so.
The national security angle is simply about Huawei refusing the U.S. repeatedly on granting backdoor access to our information.
It reveals both an insecurity and an insanity that grips every society in the late stages of Imperialism. As the competitive edge is lost the threat of competition fuels paranoia and the need to control everything.
But it is this need for control and the diverting of an ever-increasing proportion of the country’s resources to it that drives further loss of competitive edge.
Simply put capital isn’t going into innovation, it’s going into defending your moats, as Warren Buffet would put it. Moats around your business aren’t permanent. They require maintenance and innovation to remain strong.
Banning Huawei’s 5G network technology will ensure the communications gap between the U.S. and the rest of the world remains since the best products will not be on the market to spur competition, drive prices and costs down which fuel the next round of innovation.
Even as patriots worried about China’s most nefarious schemes we should not be applauding this. Because 5G itself is technology so far in advance of where we are now it means a completely different Internet architecture.
We’re staring at one capable of resisting the ham-fisted control techniques currently in place to keep us bottled up behind pay-walls, app-stores and, most importantly, hub and server connectivity.
Bandwidth so wide it means peer-to-peer networks so fast we won’t need sites like YouTube or Periscope to do citizen journalism. Deplatforming will become harder and harder. Decentralized data storage on blockchains which they can’t hack, etc.
And that’s what truly scares these people. What happens when the net itself becomes so decentralized they won’t be able to pick up a phone and take you offline?
As always, regulators and generals like John Bolton are fighting the last war. And if history tells us anything those people always lose.
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- Visualizing The Snowball Of Global Government Debt
Over the last five years, markets have pushed concerns about debt under the rug.
But, while economic growth and record-low interest rates have made it easy to service existing government debt, Visual Capitalist’s Jeff Desjardins points out that it’s also created a situation where government debt has grown in to over $63 trillion in absolute terms.
The global economic tide can change fast, and in the event of a recession or rapidly rising interest rates, debt levels could come back into the spotlight very quickly.
THE DEBT SNOWBALL
Today’s visualization comes to us from HowMuch.net and it rolls the world’s countries into a “snowball” of government debt, colored and arranged by debt-to-GDP ratios. The data itself comes from the IMF’s most recent October 2018 update.
Courtesy of: Visual Capitalist
The structure of the visualization is apt, because debt can accumulate in an unsustainable way if governments are not proactive. This situation can create a vicious cycle, where mounting debt can start hampering growth, making the debt ultimately harder to pay off.
Here are the countries with the most debt on the books:
Note: Small economies (GDP under $10 billion) are excluded in this table, such as Cabo Verde and Barbados
Japan and Greece are the most indebted countries in the world, with debt-to-GDP ratios of 237.6% and 181.8% respectively. Meanwhile, the United States sits in the #8 spot with a 105.2% ratio, and recent Treasury estimates putting the national debt at $22 trillion.
LIGHT SNOW
On the opposite spectrum, here are the 10 jurisdictions that have incurred less debt relative to the size of their economies:
Note: Small economies (GDP under $10 billion) are excluded in this table, such as Timor-Leste and Solomon Islands
Macao and Hong Kong – both special administrative regions (SARs) in China – have virtually zero debt on the books, while the official country with the lowest debt is Brunei (2.8%).
- "The People" Know What They Want And Just Might Get It – Good And Hard
Authored by James George Jatras via The Strategic Culture Foundation,
A survey of nations in what was once known quaintly as the Free World shows some of them engaged in what could best be described as a cold civil war.
Such a condition is inherently unstable. One possible future is one where the cold conflict becomes hot with unforeseeable consequences. Another is that one side successfully represses the other before violence reaches a certain threshold.
Now before we go any further, let’s make one thing clear. Whatever the country and its specific ills, we can be sure that Vladimir Putin is the culprit. According to Stephen Collinson of CNN (“Another good day for Putin as turmoil grips US and UK”):
‘In London, Theresa May on Tuesday suffered the worst defeat in the modern parliamentary era by a prime minister, as lawmakers shot down her Brexit deal with the European Union by a staggering 432 votes to 202.
‘The United States, meanwhile, remains locked in its longest-ever government shutdown, which is now entering its 26th day, is nowhere near ending and is the culmination of two years of whirling political chaos sparked by President Donald Trump.
‘It’s hard to believe that two such robust democracies, long seen by the rest of the world as beacons of stability, have dissolved into such bitter civic dysfunction and seem unmoored from their previous governing realities. [ … ]
‘The result is that Britain and the United States are all but ungovernable on the most important questions that confront both nations.
‘That’s music to Putin’s ears.
‘The Russian leader has made disrupting liberal democracies a core principle of his near two-decade rule, as he seeks to avenge the fall of the Soviet empire, which he experienced as a heartbroken KGB agent in East Germany.
‘Russia has been accused of meddling in both the Brexit vote and the US election in 2016 — the critical events that fomented the current crisis of the West.’
It isn’t exactly clear how the “meddling” of which the coryphaeus of the Kremlin is merely “accused” managed to entice Theresa May into botching (or sabotaging) Brexit talks or to embolden Donald Trump into finally standing his ground on his top campaign pledge. Even Collinson admits that folks in the US and UK may have had something to do with the ruckus: “Supporters of Trump in the US and Brexit in Britain see their revolts as uprisings against distant or unaccountable leaders who no longer represent them or share their values.”
Harrumph! Why should anyone care what the great unwashed think about accountability or values? What matters, say “skeptics” like Collinson, is that the proles’ getting uppity might be “deeply corrosive to the international political architecture that has prevailed for over 70 years.” Let’s get our priorities straight!
While Britain and the US are entertaining distractions, the current main feature is the jacquerie going on in France. To be sure, many wonder if les gilets jaunes are a genuine, grassroots rebellion of ordinary Frenchmen, or some kind of Astroturf comparable to “color revolutions” that western governments and their accomplices like George Soros have sponsored in many countries. While there is some evidence of agents provocateurs (the expression is French, after all) working for the Emmanuel Macron regime – can we start using that word now, like “Assad regime,” “Putin regime,” etc.? – and minor involvement of groups like Antifa committing vandalism with an aim to discredit the yellow vests, the definitive attestation of authenticity was pronounced by world-class poseur and shill for plutocracy and warmongering, Bernard-Henri Lévy: “It’s a real social movement, but it’s one driven by sad, mortifying, and destructive forces.”
Any movement Lévy calls sad, mortifying, and destructive – that’s French for “deplorable” – can’t be all bad, especially with some monarchists involved. It’s rather ironic, though, given that barely a year ago some were comparing vain little Macron to Napoleon.
What is perhaps most detestable to bien pensants like Collinson and Lévy is that the social basis of the yellow vests is readily identifiable. They’re who we used to call simply French working people. As geographer Christopher Guilluy describes in Spiked:
‘Paris creates enough wealth for the whole of France, and London does the same in Britain. But you cannot build a society around this. The gilets jaunes is a revolt of the working classes who live in these places.
‘They tend to be people in work, but who don’t earn very much, between 1000€ and 2000€ per month. Some of them are very poor if they are unemployed. Others were once middle-class. What they all have in common is that they live in areas where there is hardly any work left. They know that even if they have a job today, they could lose it tomorrow and they won’t find anything else.
‘Not only does peripheral France fare badly in the modern economy, it is also culturally misunderstood by the elite. … One illustration of this cultural divide is that most modern, progressive social movements and protests are quickly endorsed by celebrities, actors, the media and the intellectuals. But none of them approve of the gilets jaunes. Their emergence has caused a kind of psychological shock to the cultural establishment. It is exactly the same shock that the British elites experienced with the Brexit vote and that they are still experiencing now, three years later.
‘The Brexit vote had a lot to do with culture, too, I think. It was more than just the question of leaving the EU. Many voters wanted to remind the political class that they exist. That’s what French people are using the gilets jaunes for – to say we exist. We are seeing the same phenomenon in populist revolts across the world. [ … ]
‘The Parisian economy needs executives and qualified professionals. It also needs workers, predominantly immigrants, for the construction industry and catering et cetera. Business relies on this very specific demographic mix. The problem is that ‘the people’ outside of this still exist. In fact, ‘Peripheral France’ actually encompasses the majority of French people. [ … ]
Think of the ‘deplorables’ evoked by Hillary Clinton. There is a similar view of the working class in France and Britain. They are looked upon as if they are some kind of Amazonian tribe. The problem for the elites is that it is a very big tribe.
‘The middle-class reaction to the yellow vests has been telling. Immediately, the protesters were denounced as xenophobes, anti-Semites and homophobes. The elites present themselves as anti-fascist and anti-racist but this is merely a way of defending their class interests. It is the only argument they can muster to defend their status, but it is not working anymore.
‘Now the elites are afraid. For the first time, there is a movement which cannot be controlled through the normal political mechanisms. The gilets jaunes didn’t emerge from the trade unions or the political parties. It cannot be stopped. There is no ‘off’ button. Either the intelligentsia will be forced to properly acknowledge the existence of these people, or they will have to opt for a kind of soft totalitarianism.’
Unfortunately, “soft totalitarianism” is not out of the question, whether in France or other countries in which populism threatens to upend the elites’ neoliberal gravy train and all the social and moral baggage that comes with it. Guilluy sees the revolt in France as beyond control by the “normal political mechanisms.” That may be true, at least in France, at least for now.
But the US may be another story. At the end of this week all Washington was atwitter with an alleged bombshell (relax, in the US legacy media every other story is a “bombshell,” especially if it involves dirt on Trump) that former Trump attorney, “fixer,” and alleged literal bagman Michael Cohen had actually been instructed by his erstwhile client to commit perjury. Unlike much else thrown at Trump, this story (reported in Buzzfeed, which by total coincidence played a key early role in publicizing the US-UK Deep’s State’s “dirty dossier”) would constitute an impeachable crime. In an extraordinary move, Grand Inquisitor Robert Mueller released a statement through a spokesman indicating the report was “not accurate” but not specifying in what regard. As of this writing Buzzfeed stands by the story and asked for clarification by Mueller’s office, which may or may not be forthcoming.
Whatever the fate of this report, make no mistake: there will be more of the same, an endless parade of them. The fact that such reports might turn out not to be true makes little difference. Their existence is sufficient to keep Trump constantly on the defensive pending his removal, one way or another.
Elizabethtown College Professor Emeritus Paul Gottfried describes how grandees of the GOP are already getting set to restore the status quo ante in collusion with their nominal Democrat adversaries once the interloper is gone:
‘… in the next few years, a working alliance will develop between regular Democrats—particularly New Democrats from red states—and the milquetoast Republican establishment. … Such an alliance would reflect electoral reality, as the Right seems to be growing weaker, not stronger, since the election of Trump two years ago. The ever ambitious Mitt Romney fired on his party’s leader prematurely, but his political instincts may be right after all. The GOP is likely to move leftward because that’s where a majority of the voters are, and if this happens to Trump’s detriment, Romney will hope to pick up the pieces. Neoconservatives and much of the authorized conservative movement would no doubt welcome the Utah senator or someone like him as the kind of “conservative” they could work with were he to run for the presidency.
‘If the elections since 2018 have shown anything, it’s this: blue electoral areas have remained quite solid, while traditionally red ones, even in the Deep South, are up for grabs. That’s because the party perceived as being further to the left has benefited from its growing coalition. If there’s another explanation, I can’t seem to find it. It would not be unusual to have two national parties that are recognizably on the left contending for power. The parties now running the major Western European countries are all to the left of our present GOP.
‘In a possible alliance, the GOP, as the ideologically and electorally weaker side, will readily cooperate with establishment Democrats. They will undoubtedly find such shared concerns as confronting Putin “the thug” and supporting the Likud Party in Israel. They should have no trouble reaching an agreement on giving amnesty to all non-criminal illegal immigrants once Trump is no longer on the scene.
‘There is no reason to think that this political shift won’t continue. We are looking at a process that’s been brought about by college educators, the culture industry, the mass media, and mass immigration, and the momentum may be extremely hard to reverse or even to stop. America’s future won’t necessarily be British Columbia’s, whose provincial legislature features only parties of the left and which hasn’t elected a conservative to a provincial office since the early 1990s.’
The celebrated Sage of Baltimore, H. L. Mencken observed that “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” This begs the question, though, of who the “common people” are. In contrast to France, where Guilluy’s “peripheral France” is still a majority of the French population, US elites in both parties are looking to the day when America’s “deplorables” are a minority (which we already may be) that will continue to shrink. Anyone who might object to ethnic and moral replacement is clearly a racist and “white supremacist,” comparable to France’s “xenophobes, anti-Semites and homophobes.” In the not too distant future, Guilluy’s “normal political mechanisms” may be more than sufficient to handle what’s left of a disappearing America.
If Trump is going to build that Wall, he’d better do it damn fast.
- Hong Kong Housing Market Enters Correction Territory
After notching its longest streak of declining prices since at least 2016, what was formerly the world’s hottest housing market has officially entered correction territory, as a single interest rate hike by monetary authorities (which prompted HSBC, one of the most active banks in the region, to raise its prime lending rate) has gone a long way toward offering some badly needed relief for prospective homebuyers in the city’s middle class.
According to Bloomberg, secondary home prices in Hong Kong have shed 9.8% from their August peak to hit their lowest level since February 2018.
Though one broker quoted by Bloomberg carefully insisted that, while “correction” was an appropriate word to describe what is happening in the market, calling it a “collapse” would be a bridge too far.
“You can say it’s a correction with a 10 percent drop in prices, though it’s not a collapse,” said Patrick Wong, a real estate analyst with Bloomberg Intelligence.
Particularly because a looming vacancy tax trade-war related volatility suggest that the market still has another 5% to 10% to go until it bottoms out (then again, considering that Hong Kong is the world’s most expensive housing market, a chasm between bids and asks could push it even lower, particularly as anxious government officials actively try to pull the rug out from under robust prices.
Various factors have combined to put downward pressure on home values, from worsening sentiment due to volatile markets and the U.S.-China trade war, to interest-rate rises and a looming vacancy tax. Prices still probably have about 5 to 10 percent further to drop, Wong said.
The dip has been welcomed by would-be home buyers trying to get on the property ladder as well as government officials concerned about affordability. The question is how long the softness will last, particularly considering demand is still strong and there are growing signs the U.S. Federal Reserve may pause its upward trajectory.
For what it’s worth, Citigroup has prices bottoming in the next two months as buyers swoop in to take advantage of relatively good deals; Morgan Stanley expects prices to rise 2% this year for similar reasons.
- The US Military Is Winning… No, Really, It Is!
Authored by Nick Turse via TomDispatch.com,
A Simple Equation Proves That the U.S. Armed Forces Have Triumphed in the War on Terror…
4,000,000,029,057. Remember that number. It’s going to come up again later.
But let’s begin with another number entirely: 145,000 — as in, 145,000 uniformed soldiers striding down Washington’s Pennsylvania Avenue. That’s the number of troops who marched down that very street in May 1865 after the United States defeated the Confederate States of America. Similar legions of rifle-toting troops did the same after World War I ended with the defeat of Germany and its allies in 1918. And Sherman tanks rolling through the urban canyons of midtown Manhattan? That followed the triumph over the Axis in 1945. That’s what winning used to look like in America — star-spangled, soldier-clogged streets and victory parades.
Enthralled by a martial Bastille Day celebration while visiting French President Emmanuel Macron in Paris in July 2017, President Trump called for just such a parade in Washington. After its estimated cost reportedly ballooned from $10 million to as much as $92 million, the American Legion weighed in. That veterans association, which boasts 2.4 million members, issued an August statement suggesting that the planned parade should be put on hold “until such time as we can celebrate victory in the War on Terrorism and bring our military home.” Soon after, the president announced that he had canceled the parade and blamed local Washington officials for driving up the costs (even though he was evidently never briefed by the Pentagon on what its price tag might be).
The American Legion focused on the fiscal irresponsibility of Trump’s proposed march, but its postponement should have raised an even more significant question: What would “victory” in the war on terror even look like? What, in fact, constitutes an American military victory in the world today? Would it in any way resemble the end of the Civil War, or of the war to end all wars, or of the war that made that moniker obsolete? And here’s another question: Is victory a necessary prerequisite for a military parade?
The easiest of those questions to resolve is the last one and the American Legion should already know the answer. Members of that veterans group played key roles in a mammoth “We Support Our Boys in Vietnam” parade in New York City in 1967 and in a 1973 parade in that same city honoringveterans of that war. Then, 10 years after the last U.S. troops snuck out of South Vietnam — abandoning their allies and scrambling aboard helicopters as Saigon fell — the Big Apple would host yet another parade honoring Vietnam veterans, reportedly the largest such celebration in the city’s history. So, quite obviously, winning a war isn’t a prerequisite for a winning parade.
And that’s only one of many lessons the disastrous American War in Vietnam still offers us. More salient perhaps are those that highlight the limits of military might and destructive force on this planet or that focus on the ability of North Vietnam, a “little fourth-rate” country — to quote Henry Kissinger, the national security advisor of that moment — to best a superpower that had previously (with much assistance) defeated Nazi Germany and Imperial Japan at the same time. The Vietnam War — and Kissinger — provide a useful lens through which to examine the remaining questions about victory and what it means today, but more on that later.
For the moment, just remember: 4,000,000,029,057, Vietnam War, Kissinger.
Peace in Our Time… or Some Time… or No Time
Now, let’s take a moment to consider the ur-conflict of the war on terror, Afghanistan, where the U.S. began battling the Taliban in October 2001. America’s victory there came with lightning speed. The next year, President George W. Bush announced that the group had been “defeated.” In 2004, the commander-in-chief reported that the Taliban was “no longer in existence.” Yet, somehow, they were. By 2011, General David Petraeus, then commander of U.S. forces in Afghanistan, claimed that his troops had “reversed the momentum of the Taliban.” Two years later, then-commander General Joseph Dunford spoke of “the inevitability of our success” there.
Last August, President Trump unveiled his “Strategy in Afghanistan and South Asia.” Its “core pillar” was “a shift from a time-based approach to one based on conditions”; in other words, the “arbitrary timetables” for withdrawal of the Obama years were out. “We will push onward to victory with power in our hearts,” President Trump decreed. “America’s enemies must never know our plans or believe they can wait us out.”
The president also announced that he was putting that war squarely in the hands of the military. “Micromanagement from Washington, D.C., does not win battles,” he announced. “They are won in the field drawing upon the judgment and expertise of wartime commanders and frontline soldiers acting in real time, with real authority, and with a clear mission to defeat the enemy.” The man given that authority was General John Nicholson who had, in fact, been running the American war there since 2016. The general was jubilant and within months agreed that the conflict had “turned the corner” (something, by the way, that Obama-era Secretary of Defense Leon Panetta also claimed — in 2012).
Today, almost 17 years after the war began, two years after Nicholson took the reins, one year after Trump articulated his new plan, victory in any traditional sense is nowhere in sight. Despite spending around $900 billion in Afghanistan, as the Special Inspector General for Afghanistan Reconstruction determined earlier this year, “between 2001 and 2017, U.S. government efforts to stabilize insecure and contested areas in Afghanistan mostly failed.” According to a July 30, 2018, report by that same inspector general, the Taliban was by then contesting control of or controlled about 44% of that country, while Afghan government control and influence over districts had declined by about 16% since Nicholson’s predecessor, General John Campbell, was in command.
And that was before, last month, the Taliban launched a large-scale attack on a provincial capital, Ghazni, a strategically important city, and held it for five days, while taking control of much of the province itself. Finally driven from the city, the Taliban promptly overran a military base in Baghlan Province during its withdrawal. And that was just one day after taking another Afghan military base. In fact, for the previous two months, the Taliban had overrun government checkpoints and outposts on a near-daily basis. And keep in mind that the Taliban is now only a fraction of the story. The U.S. set out to defeat it and al-Qaeda in 2001. Today, Washington faces exponentially more terror groups in Afghanistan — 21 in all, including an imported franchise from the Iraq War front, ISIS, that grew larger during Nicholson’s tenure.
Given this seemingly dismal state of affairs, you might wonder what happened to Nicholson. Was he cashiered? Fired, Apprentice-style? Quietly ushered out of Afghanistan in disgrace? Hardly. Like the 15 U.S. commanders who preceded him, the four-star general simply rotated out and, at his final press conference from the war zone late last month, was nothing if not upbeat.
“I believe the South Asia Strategy is the right approach. And now we see that approach delivering progress on reconciliation that we had not seen previously,” he announced. “We’ve also seen a clear progression in the Taliban’s public statements, from their 14 February letter to the American people to the recent Eid al-Adha message, where [Taliban leader] Emir Hibatullah acknowledged for the first time that negotiations will, quote, ‘ensure an end to the war,’ end quote.”
In the event that you missed those statements from a chastened Taliban on the threshold of begging for peace, let me quote from the opening of the latter missive, issued late last month:
“This year Eid al-Adha approaches us as our Jihadi struggle against the American occupation is on the threshold of victory due to the help of Allah Almighty. The infidel invading forces have lost all will of combat, their strategy has failed, advanced technology and military equipment rendered useless, [the] sedition and corruption-sowing group defeated, and the arrogant American generals have been compelled to bow to the Jihadic greatness of the Afghan nation.”
And those conciliatory statements of peace and reconciliation touted by Nicholson? The Taliban says that in order to end “this long war” the “lone option is to end the occupation of Afghanistan and nothing more.”
In June, the 17th American nominated to take command of the war, Lieutenant General Scott Miller, appeared before the Senate Armed Services Committee where Elizabeth Warren (D-MA) grilled him on what he would do differently in order to bring the conflict to a conclusion. “I cannot guarantee you a timeline or an end date,” was Miller’s confident reply.
Did the senators then send him packing? Hardly. He was, in fact, easily confirmed and starts work this month. Nor is there any chance Congress will use its power of the purse to end the war. The 2019 budget request for U.S. operations in Afghanistan — topping out at $46.3 billion — will certainly be approved.
#Winning
All of this seeming futility brings us back to the Vietnam War, Kissinger, and that magic number, 4,000,000,029,057 — as well as the question of what an American military victory would look like today. It might surprise you, but it turns out that winning wars is still possible and, perhaps even more surprising, the U.S. military seems to be doing just that.
Let me explain.
In Vietnam, that military aimed to “out-guerrilla the guerrilla.” It never did and the United States suffered a crushing defeat. Henry Kissinger — who presided over the last years of that conflict as national security advisor and then secretary of state — provided his own concise take on one of the core tenets of asymmetric warfare: “The conventional army loses if it does not win. The guerrilla wins if he does not lose.” Perhaps because that eternally well-regarded but hapless statesman articulated it, that formula was bound — like so much else he touched — to crash and burn.
In this century, the United States has found a way to turn Kissinger’s martial maxim on its head and so rewrite the axioms of armed conflict. This redefinition can be proved by a simple equation:
0 + 1,000,000,000,000 + 17 +17 + 23,744 + 3,000,000,000,000 + 5 + 5,200 + 74 = 4,000,000,029,057
Expressed differently, the United States has not won a major conflict since 1945; has a trillion-dollar national security budget; has had 17 military commanders in the last 17 years in Afghanistan, a country plagued by 23,744 “security incidents” (the most ever recorded) in 2017 alone; has spent around $3 trillion, primarily on that war and the rest of the war on terror, including the ongoing conflict in Iraq, which then-defense secretary Donald Rumsfeld swore, in 2002, would be over in only “five days or five weeks or five months,” but where approximately 5,000 U.S. troops remain today; and yet 74% of the American people still express high confidence in the U.S. military.
Let the math and the implications wash over you for a moment. Such a calculus definitively disproves the notion that “the conventional army loses if it does not win.” It also helps answer the question of victory in the war on terror. It turns out that the U.S. military, whose budget and influence in Washington have only grown in these years, now wins simply by not losing — a multi-trillion-dollar conventional army held to the standards of success once applied only to under-armed, under-funded guerilla groups.
Unlike in the Vietnam War years, three presidents and the Pentagon, unbothered by fiscal constraints, substantive congressional opposition, or a significant antiwar movement, have been effectively pursuing this strategy, which requires nothing more than a steady supply of troops, contractors, and other assorted camp followers; an endless parade of Senate-sanctioned commanders; and an annual outlay of hundreds of billions of dollars. By these standards, Donald Trump’s open-ended, timetable-free “Strategy in Afghanistan and South Asia” may prove to be the winningest war plan ever. As he described it:
“From now on, victory will have a clear definition: attacking our enemies, obliterating ISIS, crushing al-Qaeda, preventing the Taliban from taking over Afghanistan, and stopping mass terror attacks against America before they emerge.”
Think about that for a moment. Victory’s definition begins with “attacking our enemies” and ends with the prevention of possible terror attacks. Let me reiterate: “victory” is defined as “attacking our enemies.” Under President Trump’s strategy, it seems, every time the U.S. bombs or shells or shoots at a member of one of those 20-plus terror groups in Afghanistan, the U.S. is winning or, perhaps, has won. And this strategy is not specifically Afghan-centric. It can easily be applied to American warzones in the Middle East and Africa — anywhere, really.
Decades after the end of the Vietnam War, the U.S. military has finally solved the conundrum of how to “out-guerrilla the guerrilla.” And it couldn’t have been simpler. You just adopt the same definition of victory. As a result, a conventional army — at least the U.S. military — now loses only if it stops fighting. So long as unaccountable commanders wage benchmark-free wars without congressional constraint, the United States simply cannot lose. You can’t argue with the math. Call it the rule of 4,000,000,029,057.
That calculus and that sum also prove, quite clearly, that America’s beleaguered commander-in-chief has gotten a raw deal on his victory parade. With apologies to the American Legion, the U.S. military is now — under the new rules of warfare — triumphant and deserves the type of celebration proposed by President Trump. After almost two decades of warfare, the armed forces have lowered the bar for victory to the level of their enemy, the Taliban. What was once the mark of failure for a conventional army is now the benchmark for success. It’s a remarkable feat and deserving, at the very least, of furious flag-waving, ticker tape, and all the age-old trappings of victory.
- Extremely Disturbing Footage Of Deadly Mexico Pipeline Explosion Surfaces
Extremely disturbing footage of the aftermath of a giant fireball that burst from an illegal gasoline pipeline tap near a small town north of Mexico City has surfaced online.
As we reported earlier, at least 66 people have been confirmed dead after a geyser of gasoline ignited at the site of the illegal tap, instantly engulfing the surrounding area in flames.
Reports from the scene described piles of charred bodies so badly burned that responders struggled to separate and identify the individuals.
In the video, people are seen throwing themselves on the grass and in water to try and extinguish the flames.
The horrific incident took place as locals had gathered around a ruptured Pemex pipeline to collect the fuel that was spilling out. The company blamed the fire on thieves drilling into the pipe.
- BofA Sees 3 Paths For The Market: Stairs, Escalator, Roller-Coaster
Among the most memorable events of 2018 is that one of closest correlations across major asset classes – that between stocks and bonds – broke down, prompting Deutsche Bank strategist Torsten Slok to exclaim that “something is wrong.”
“What is safe to say is that there is something driving equities lower, which is not impacting rates. Or there is something keeping long rates high, which is not impacting equities,” Slok mused in a note in late December, discussed here.
Slok also predicted that anyone expecting this divergence to collapse shortly may be disappointed since the breakdown of the positive correlation between stocks and bond yields may not just be a temporary problem as the federal government is projected to notch annual trillion dollar deficits for a “very long time, prompting traders to demand even higher bond yields in the future regardless if stocks underperform.
And yet, the breakdown of the bond/equity correlation appears to already be over because as Bank of America observes in its latest weekly Rates report, this dynamic once again changed in the last two months as markets repriced the growth outlook and equity markets sold off, the belly of the curve (5y-7y) led the Treasury market rally, in sharp contrast to the first three quarters of 2018. As a result, 5y-30y curve became increasingly directional with equity markets during risk-off moves (Chart 2).
What prompted this “renormalization” in one of the historically stongest market correlations?
According to BofA, the heart of the concern is global growth. As a result, headlines on central bank dovishness and trade talk progress only provide temporary relief and are discounted by rates investors. By the same logic, investor risk appetite may only be altered materially when US and China data stand on solid footing.
This change in risk appetite has been reflected in flow data as shown in Chart 3 above. Over the course of the Q4 risk-off move, mutual fund flows shifted from the front-end to the long end, similar to the behavior in January 2016. As such, until the market receives new information on growth outlook, for better or worse, Bank of America notes that both the Fed and the markets may need to be patient.
Which brings us to the key question that needs to be answered to determine future asset returns heading into 2019, namely “how much” and “how fast” the US economy is going to slow down, as opposed to the “if” question.
Unfortunately, according to Bank of America, we have to be patient to get a clearer sense of the above question but the next few weeks will be critical as Q4 earnings are released from corporate America and January data start to come in.
As a result, BofA sees three paths for the market:
- The stairs scenario: while there have been scary prints in global data, there is still a possibility that the US economy is weathering the global slowdown just fine. At least some of the most reliable indicators for predicting a recession are still far from stress levels. The flipside is that if what we’ve seen so far is a bad dream, the pause that the Fed is currently engineering may be short lived once we are back on track later this year. In this case, supply pressure would have a much bigger impact than in 2018, and a belly led sell-off could reverse the long end steepening we’ve seen, and the supply pressure could really kick in; the result would be a rerun of the late summer of 2018 when rising yields sparked an equity slump.
- The escalator scenario: Irrespective of the ongoing sharp bull market rally in stocks, BofA believes that it is increasingly likely that the markets will experience a more volatile H1. As discussed above, while the rest of the world has been dealing with growth roadblocks all of last year, asset prices in the US only re-priced recently. Meanwhile, according to time-zone analysis from BofA, the Treasury rally since Q4 2018 showed that almost the entire 50bp move in 10y UST was done during US hours, reflecting domestic investors pricing in a weaker growth outlook. The silver lining is that while data continues to be sluggish, markets and sentiment were able to at least push central bankers and politicians to be more accommodative, leaving the outlook for H2 a little brighter (for now).
- The roller-coaster scenario: the economy would be a mess in this case, which however is far from reality at least based on recent data; should this scenario materialize the simple call would be to buy bonds no questions asked.
And since the observations above reflect the views of BofA’s rates team, they conclude that without new information on data, earnings, and policies, both rates and curves are likely to stay range-bound, adding that of the scenarios list above, the first one would cause the most positioning pain as investors unwind 5y-30y curve steepeners and short vol positions in the front end (the Fed is not only willing to be patient, they are also willing to be flexible). Scenario two is the most likely according to BofA, with rates continuing to follow risky assets, with the belly leading the moves.
Eventually, as more economic data emerges and solidifes the case for either an accelerating slowdown or a rebound, the Fed will have to react. As long as the Fed is on hold, BofA is confident that the time for a structural steepener is not ripe, and even though steepeners were the trade in vogue in recent weeks, 2y-10y has remained relatively flat. The bank further notes that “the recent 5y-30y steepening is a reflection of growth concerns and haven bid, rather than the beginning of a cutting cycle. “
Finally, if the economic climate improves and the hiking cycle resumes, while stocks will likely resume their slide, the 5y-30y should continue to flatten; alternatively, if the economy hits a brick wall and there is a need for the Fed to cut rates, 2y-10y curve catch up to 5y-30y.
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