Jul 20

Today’s News 20th July 2018

  • Calm Before The Storm? Treasury 'Risk' Hits 45-Year Low As Shorts Hit Record Highs

    Having killed the Japanese bond market, some are wondering if central bank interference has finally slayed the US Treasury market, as its numbness to news suggests a zombie-market-walking.

    The 10-year Treasury yield has moved less than 9 basis points so far in July. After retreating from its May 17th high of 3.1261%, the benchmark yield has hovered between 2.8053% and 2.8950% in July…

    Putting it on course for its smallest monthly range since 1973….

    In price-terms, the realized volatility of 10Y US Treasury Futures prices for the last 30 days is the lowest since 1998!

    As Bloomberg notes, Ian Lyngen, a strategist at BMO Capital Markets, said in a note this week that he’s fascinated with how unresponsive the yield has been to new information and “our sense is that something dramatic is nearing on the horizon.”

    And given the fact that there has never been a bigger speculative short position across the Treasury complex…

    We suspect the max-pain trade would be a yield collapse.

    We wonder if the catalyst will somehow be China?

  • US "Diplomacy"…

    Authored by John Laughland, op-ed via RT.com,

    On the world’s Grand Chessboard, the US is fighting for control and influence. And there are countries where its ambassadors are perceived more as imperial governors than simple channels of communication.

    At the height of the Maidan protests in Kiev in early 2014, a conversation was leaked between the US ambassador to Ukraine, Geoffrey Pyatt, and the then-Assistant Secretary of State in the Obama administration, Victoria Nuland. The conversation gained notoriety because Nuland said to Pyatt, “F**k the EU” and the recording was almost instantly available on Youtube.

    More shocking than Nuland’s bad language, however, was what the conversation was about. The US government officials were discussing how to put their men into power in Ukraine – which of the three then opposition factions would dominate, who would take the lead (Arseniy Yatsenyuk) and who would be excluded (Vladimir Klitschko).  At the time of this conversation, early February 2014, their enemy Viktor Yanukovych was still president. The leaked recording proved that the US and its Kiev embassy were actively involved in a regime change operation. The composition of the post-Maidan government corresponded exactly with US plans.

    What few people knew at the time was that such levels of control over the composition of foreign governments had become standard practice for US embassies all over the world. As I could see on my very numerous travels around the Balkans in the late 1990s and early 2000s, the US ambassador was treated by the political class and the media in those countries not as the officially accredited representative of a foreign government but instead as an imperial governor whose pronunciamentos were more important than those of the national government.

    This has been going on for decades, although the levels of control exercised by the United States increased as it rushed to fill the political vacuum created by the collapse of Soviet influence in Eastern Europe after 1989. In earlier times, such control, especially regime change operations, had to be conducted either covertly, as with the overthrow of Iranian prime minister, Mohammad Mosaddegh, in 1953, or by financing and arming an anti-government militia, such as in Nicaragua and elsewhere in central and South America, or by encouraging the army itself, most famously in Chile in 1973. There is a huge body of literature on this vast subject (for the coup against Mosaddegh, see especially ‘All the Shah’s Men’ by Stephen Kinzer, 2003) and there is no possibility of denying that such operations took place. Indeed, former CIA director, James Woolsey, recently admitted that they continue to this day.  

    Many of the ambassadors who engineered or attempted regime change operations in Eastern Europe and the former USSR had cut their teeth in Latin America in 1980s and 1990s. One of them, Michael Kozak, former US ambassador to Belarus, even boasted in a letter to The Guardian in 2001 that he was doing the same thing in Minsk as he had done in Managua. He wrote: “As regards parallels between Nicaragua in 1989-90 and Belarus today, I plead guilty. Our objective and to some degree methodology are the same.”

    Kozak did not mention that he also played a key role in the overthrow of General Noriega in Panama in 1989 but he is far from alone. The experience accumulated by the Americans during the Cold War, including in major European countries like Italy where US interference was key to preventing Communist victories in elections, spawned a whole generation of Kermit Roosevelts (the architect of the coup against Mosaddegh) who have made their careers over decades in the State Department. Some names, such as that of Michael McFaul, former US ambassador to Russia who made no secret of his opposition to the president of the state to which he was accredited, will be familiar to RT readers.

    Two years after the violent overthrow of Viktor Yanukovych, which he helped coordinate, Geoffrey Pyatt was appointed US ambassador to Greece. He remains in that post to this day – which is why some are asking whether his hand might be behind last week’s expulsion of Russian diplomats from Athens. Greece and Russia have customarily had good relations but they differ on the Macedonian issue. Now, the Greek government headed by the “pseudo-Euroskeptic” Alexis Tsipras, claims that four Russian diplomats were engaged in covert operations in Greece to lobby against forcing Macedonia to change its official name. 

    Like almost every other political issue these days, this relatively arcane one is regarded through the distorting prism of alleged Russian “interference“: any decision which does not consolidate the power of American-dominated supranational structures like the US or the EU is now routinely attributed to all-pervasive Russian influence, as if all dissidents were foreign agents.

    Western discussion of this subject now resembles the paranoia of the old Soviet regime, and of its satellites in Eastern Europe, which similarly attacked anti-Communists for being “fifth columnists” – the very phrase used by a prominent European politician last month to lambast all his enemies as Russian stooges.

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    US influence is suspected in this case between Greece and Macedonia because the Americans are pushing to bring the whole of the Balkan peninsula under Western control.  This has been policy for nearly thirty years – at least since the Yugoslav wars led to a US-brokered peace deal in Bosnia in 1995. In recent years the tempo has quickened, with the accession of Montenegro to NATO last year leaving only Macedonia and Serbia as missing pieces of the puzzle. The Greek victory over the name of Macedonia removes the last obstacle to that country’s accession to NATO and other “Euro-Atlantic structures” like the EU and soon only Serbia will be left. Will she last long? 

    One of the most notorious anecdotes of the Second World War was told by Churchill. While in Moscow in 1944, he and Stalin divided up Eastern Europe and the Balkans into spheres of influence, putting percentage figures to show the respective weight of the West and the USSR – 10:90 in Greece, 50:50 Yugoslavia, 25:75 in Bulgaria, and so on. Churchill recalls how this so-called Percentages Agreement was concluded in a few minutes, and how he scribbled a note of their verbal agreement on a piece of paper which Stalin glanced at for a second and then ticked off. Churchill wrote, “It was all settled in no more time than it takes to set down.”  

    Churchill then reflected that it might seem cynical to decide the fate of millions of people in such an offhand manner. Later generations have generally agreed with his self-criticism.  Today’s West would certainly never conclude such an agreement – but not because of any squeamishness or lack of cynicism on its part. Instead, the West, especially the US, could not conclude any agreement because in every case the only acceptable outcome would be 100% influence for itself. That is what Geoffrey Pyatt and his colleagues spend their entire careers trying to achieve – and, to a large extent, they succeed.

  • White House Asked 8 Times For Trump-Rouhani Meeting, Iran Says

    In a disclosure that the New York Times said showed “a previously undisclosed level of hostility among top Iranian officials toward President Trump”, the paper reported Thursday that Iran had rejected eight requests from the White House for a meeting between Trump and Iranian President Hassan Rouhani during the United Nations General Assembly last year.

    Iran
    Ayatollah Ali Khamenei

    White House and State Department officials haven’t responded to Iran’s claim, made by Rouhani’s chief of staff, Mahmoud Vaezi, at a cabinet meeting. Reports of the remark first surfaced in Iranian state media. Iran’s Foreign Ministry has previously claimed that it denied a request for a meeting between the two leaders.

    “Trump asked the Iranian delegation eight times to have a meeting with the president,” Mr. Vaezi said.

    Since then, Trump has withdrawn the US from the 2015 Iran deal and restored sanctions against the country in defiance of the wishes of Russia, China and our European partners. Iran was also included in Trump’s travel ban, which was recently upheld by the Supreme Court. Despite this, Trump has also expressed a willingness to engage Iran and negotiate, though the two sides haven’t had much, if any, contact.

    “The biggest obstacle to a U.S.-Iran dialogue is not Trump but Khamenei,” said Karim Sadjadpour, a senior fellow in the Middle East program at the Carnegie Endowment for International Peace. “Trump flew halfway around the world to meet with Kim Jong-un. Khamenei hasn’t left Iran since 1989.”

    Obama and Mr. Rouhani spoke on the phone at the end of the 2013 General Assembly as the Iranian leader headed home. That was the first time an Iranian leader had spoken with a US President since the revolution. 

    Iranian officials also have threatened to renounce the nuclear accord if its European partners cannot find ways to bypass the American sanctions, which threaten penalties on all countries that engage economically with Iran. Hostilities have endured, and though Iran has expressed openness to engaging with the European Union and the accord’s other partners, many fear it will soon collapse. But regardless of what happens, it doesn’t appear the Iranians will be “engaging” with the Trump administration any time soon.

  • The Plague Of Military Keynesianism And The Obsolescence Of War

    Authored by Tom Streithorst via The American Conservative,

    It’s become obsolete, the days of conquest are behind us, yet the military-industrial complex grinds on all the same.

    America spends more on its military than all its enemies put together yet it still can’t win wars. Failed adventures in Vietnam, Iraq, and Afghanistan have drained America’s power and diminished its prestige. The bloated Pentagon budget actually makes us weaker.

    Here’s the weird bit: nobody seems to care. If any other government department spent as much and accomplished as little, the populace would be in arms, complaining about wasteful government spending. Instead we mumble “Thank you for your service” and increase defense appropriations.

    War has always been brutal and destructive, but once upon a time it had a purpose. William of Normandy invaded Britain knowing victory would make him rich beyond dreams of avarice. Soldiers followed Genghis Khan, Hernan Cortes, and Napoleon Bonaparte for the opportunity to steal gold, land, or slaves from their defeated enemies. Loot captured in war could transform a man’s life, give him the money he needed to buy land or start a business. For thousands of years, the opportunities inherent in battle gave many men their only chance to escape their impoverished origins. Success in war could turn a brigand into a king.

    Today it is trade and technology, not conquest, that makes us rich. It is a cliché of the left that America went to war in Iraq to take their oil. This is a serious misreading of history. For one thing, had George W. Bush told Saddam to either share his oil wealth with ExxonMobil or face invasion, Saddam would have certainly complied. For another, Korean, Russian, Angolan, and Chinese companies all control more Iraqi oil fields today than do American firms. Had we gone to war to steal Iraqi oil, we might have done a better job of it.

    At least in the developed West, conquest is profitable no more. This has been true for over a century. Back in 1910, Norman Angell wrote “The Great Illusion,” a pamphlet proclaiming that war was obsolete. He noted that the intertwined nature of the global economy made war almost as destructive to the victor as the vanquished. Should they go to war, Angell observed, Germany and England would be slaughtering potential clients, not capturing prospective slaves. And victory in the Franco-Prussian War hadn’t made Germany richer: “When Germany annexed Alsatia, no individual German secured Alsatian property as the spoils of war.”

    Angell decided that since war was no longer cost effective, it was obsolete. Of course, World War I proved him wrong and generations of history teachers have mocked his mistimed prophecy. But maybe he was just ahead of the curve. Today, for America, war is nothing but expensive spectacle.

    A few months ago, the United States government determined that Bashar al-Assad’s regime used chemical weapons on his own citizens. That is a war crime, so pundits clamored for a response. Several days later, the United States, Britain, and France launched airstrikes against regime targets, firing 105 missiles. A Tomahawk cruise missile costs almost $2 million, which suggests the expense of the entire operation was probably north of $250 million. It’s hard to believe the Syrian infrastructure we blew up cost nearly as much.

    The effect of the well-publicized strike has been negligible. Most likely, that was intentional. Assad is closer than ever to winning the war in Syria so encouraging the rebels would do nothing but prolong the agony. In order to forestall escalation, we gave enough warning to Russia and Iran to get their men out of the way. The purpose of the strike wasn’t to make a difference on the battlefield, but to “send a message.” We spent a quarter of a billion dollars, blew up some buildings, killed a handful of soldiers, accomplished nothing, and most journalists applauded.

    The firepower contained in those multimillion-dollar missiles would have crushed the Carthaginians at Cannae, wiped out Wellington at Waterloo and smashed the Soviets at Stalingrad, but today all they did was generate a few headlines, which by now everyone has forgotten. It all seems pointless, stupid. Do we really spend trillions of dollars just so our leaders can posture and armchair warriors can feel butch?

    Maybe there’s a better explanation.

    Maybe the extravagant expense of the Pentagon budget is a feature, not a bug. Maybe no one objects when we spend a quarter of a billion dollars ineffectually bombing Syria or several trillion ineffectually invading Iraq because these days war profiteers make their money not by looting their enemies’ cities, stealing their land, and selling their women into slavery, but from their own governments’ spending.

    My own life confirms this intuition. The invasion of Iraq has been a disaster for the United States, for the Middle East, and for the long-suffering people of Iraq, but for many of us, it was a cash cow. For a decade, I earned a solid middle-class living working just four months a year as a news cameraman in Iraq. The war on terror bought me my house.

    Thousands of Americans (perhaps not coincidentally mostly from red states) worked as contractors for the U.S. military and pulled down salaries much higher than they would have earned in the private sector back home. A truck driver from Mississippi made over $100,000 a year hauling in supplies from Kuwait. It is shocking how little of the money America spent in that misbegotten conflict ever trickled into the Iraqi economy.

    Had our goal been to win the hearts and minds of Iraqis (or even to steal their oil), we would have hired locals to drive the trucks instead of Americans and thus garnered their loyalty. Remember, Saddam Hussein was not popular in 2003, and at least at first, Iraqis were open-minded about the American invasion. By shoveling money towards ordinary Iraqi citizens, America would have created a local constituency with solid financial reasons to support the occupation. Instead, Iraqis saw little benefit as the trillions spent on the war went straight into American pockets. The Iraqi economy was destroyed between 2003 and 2008. Halliburton’s stock price quintupled.

    The Pentagon budget creates jobs in almost every congressional district, giving congressmen solid reasons to support budget increases. Military Keynesianism is the only fiscal stimulus habitually favored by both Democrats and Republicans. Today the primary purpose of the military is not to win wars but to stimulate the domestic economy and make our leaders look manly. These are pathetic reasons to put our sons and daughters into harm’s way, not to mention slaughter the children of strangers.

    Don’t get me wrong: I have huge respect for American soldiers. The military may well be the most meritocratic and least racist large institution in America today. In fixed battle, our soldiers (and their awesome firepower) almost always emerge victorious. There is truth in the jarhead saying “Marines win battles. Politicians lose wars.” But victory in war doesn’t consist of killing lots of enemy soldiers; it lies in bending their leaders to our will, and that we have not achieved since 1945. Even the bloodthirstiest among us cannot think the wars of the past 50 years have made America stronger.

    America doesn’t need a huge army. With Canada to the north, Mexico to the south, and oceans east and west, the United States is more geographically secure than any nation in history. Britain defeated Hitler because it is an island. Russia defeated Hitler because it is a continent. America is both. Our enormous military is unnecessary to protect our homeland.

    If we need to stimulate the economy, we can do it better by investing in infrastructure, education, or providing a better safety net. We certainly don’t need a huge military so that our leaders can posture and Beltway strategists can feel macho. War doesn’t make sense anymore. It is time we recognized that. War in America today is nothing but a sorry combination of show business and fiscal stimulus. No wonder we can’t seem to win.

  • Fentanyl-Related Deaths Double In Six Months; Officials Warn The Third-Wave Will Be A "Crisis"

    According to the CDC’s Mortality and Morbidity Weekly Report, the number of overdose deaths involving fentanyl and fentanyl analogs doubled in the last several years.

    The third wave of the opioid epidemic is here, as new synthetics [fentanyl analogs] that are 10,000 times as potent as morphine and used to tranquilize elephants are attributing to the latest surge in deaths.

    The new report examined fatal overdoses that tested positive for fentanyl and compound variations of the drug from July 2016 to June 2017 in 10 states: Kentucky, Maine, Massachusetts, New Hampshire, New Mexico, Ohio, Oklahoma, Rhode Island, West Virginia and Wisconsin.

    The findings suggest the opioid epidemic has taken a turn for the worse, as the nation is not prepared for the next parabolic rise in overdoses that could severely strain the economy and or government.

    Researchers report that among 11,045 fentanyl overdose deaths examined in 10 states, 2,275 (20.6 percent) decedents tested positive for fentanyl analogs and 1,236 (11.2 percent) tested positive for carfentanil. Researchers also detected fourteen different compound variations of the drug.

    During the first half of 2017, the number of deaths with fentanyl analogs detected (1,511) nearly doubled, compared with the number during the second half of 2016 (764); deaths with carfentanil detected increased 94 percent, from 421 to 815. The proportions of deaths with fentanyl analogs or with carfentanil detected nearly doubled during this period.

    Carfentanil is 10,000 times as potent as morphine, as standard naloxone treatments are mostly ineffective. Researchers write that the “highly potent nature of many analogs, particularly carfentanil, might warrant multiple administrations of…naloxone.” In other words, researchers allude to the third wave in the opioid crisis, where overdoses of the highly potent analogs may not be reversed, even if first responders administer the reversing agents in time.

    Watch: First responders revive women with Narcan after an opioid overdose

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    Nationally, the CDC expects 2017 opioid overdose-related deaths to surge to an all-time high of 49,000. About 60 percent of those deaths are expected to be related to synthetic opioids.

    According to the CDC, there were 20,310 overdose deaths involving synthetic opioids in 2016, and that number is expected to climb 45 percent to 29,400 in 2017.

    “We need to reach patients well before they reach the point of needing emergent naloxone,” states Clare Waismann, founder of the Waismann Method™ a medical opioid treatment program.

    “While the attention is focused on addiction, the individual is forgotten. Their basic emotional needs are not met and their hope never restored,” said Waismann.

    “The dramatic rise in deaths from fentanyl and its potent analogs speak to a dire need to effective treatment programs. She adds, “The word crisis in opioid crisis is overused to the point that it sometimes loses meaning. The death rates published by the CDC yesterday [July 13] show why the word ‘crisis’ is accurate and appropriate.”

    The epidemic is so concerning that opioid-related deaths have shifted the overall life expectancy rate for the US lower for the second consecutive year. The last time this occurred, it was the early 1960s when the stock market zoomed to new highs, but then, shortly thereafter, experienced a sizeable downturn,

    America is in decline. The third wave of the opioid crisis is here. So…what now?

  • The World Explained: It's Simple – Everyone Is Smart… Except Trump

    Authored by Dov Fischer via The American Spectator,

    That’s why they all are billionaires and all got elected president…

    It really is quite simple. Everyone is smart except Donald J. Trump. That’s why they all are billionaires and all got elected President. Only Trump does not know what he is doing. Only Trump does not know how to negotiate with Vladimir Putin. Anderson Cooper knows how to stand up to Putin. The whole crowd at MSNBC does. All the journalists do.

    They could not stand up to Matt Lauer at NBC. They could not stand up to Charlie Rose at CBS. They could not stand up to Mark Halperin at NBC. Nor up to Leon Wieseltier at the New Republic, nor Jann Wenner at Rolling Stone, nor Michael Oreskes at NPR, at the New York Times, or at the Associated Press. But — oh, wow! — can they ever stand up to Putin! Only Trump is incapable of negotiating with the Russian tyrant.

    Remember the four years when Anderson Cooper was President of the United States? And before that — when the entire Washington Post editorial staff jointly were elected to be President? Remember? Neither do I.

    The Seedier Media never have negotiated life and death, not corporate life and death, and not human life and death. They think they know how to negotiate, but they do not know how. They go to a college, are told by peers that they are smart, get some good grades, proceed to a graduate degree in journalism, and get hired as analysts. Now they are experts, ready to take on Putin and the Iranian Ayatollahs at age 30.

    That is not the road to expertise in tough dealing. The alternate road is that, along the way, maybe you get forced into some street fights. Sometimes the other guy wins, and sometimes you beat the intestines out of him. Then you deal with grown-ups as you mature, and you learn that people can be nasty, often after they smile and speak softly. You get cheated a few times, played. And you learn. Maybe you become an attorney litigating multi-million-dollar case matters. Say what you will about attorneys, but those years — not the years in law school, not the years drafting legal memoranda, but the years of meeting face-to-face and confronting opposing counsel — those years can teach a great deal. They can teach how to transition from sweet, gentle, diplomatic negotiating to tough negotiating. At some point, with enough tough-nosed experience, you figure out Trump’s “The Art of the Deal” yourself.

    Trump’s voters get him because not only is he we, but we are he. We were not snowflaked-for-life by effete professors who themselves never had negotiated tough life-or-death serious deals. Instead we live in the real world, and we know how that works. Not based on social science theories, not based on “conceptual negotiating models.” But based on the people we have met over life and always will hate. That worst boss we ever had. The coworker who tried to sabotage us. We know the sons of bums whom we survived, the dastardly types who are out there, and we learned from those experiences how to deal with them. We won’t have John Kerry soothe us by having James Taylor sing “You’ve Got a Friend” carols.

    The Bushes got us into all kinds of messes. The first one killed the economic miracle that Reagan had fashioned. The second one screwed up the Middle East, where Iraq and Iran beautifully were engaged in killing each other for years, and he got us mired into the middle of the muddle. Clinton was too busy with Monica Lewinsky to protect us from Osama bin Laden when we had him in our sights. Hillary gave us Benghazi and more. And Obama and Kerry gave us the Iran Deal, ISIS run amok, America in retreat. All to the daily praise of a media who now attack Trump every minute of every day.

    So let us understand a few things:

    Negotiating with NATO:

    NATO is our friend. They also rip off America. They have been ripping us off forever. We saved their butts — before there even was a NATO — in World War I. They messed up, and 116,456 Americans had to die to save their butts. Then they messed up again for the next two decades because West Europeans are effete and so obsessed with their class manners and their rules of savoir faire and their socialist welfare states and their early retirements that they did not have the character to stand up to Hitler in the 1930s. Peace in our time. So they messed up, and we had to save their butts again. And another 405,399 Americans died for them during World War II. And then we had to rebuild them! And we had to station our boys in Germany and all over their blood-stained continent. So, hey, we love those guys. We love NATO.

    And yet they still rip us off. We pay 4% of our gigantic gross domestic product to protect them, and they will not pay a lousy 2% of their GDP towards their own defense. Is there a culture more penny-pinching-cheap-and-stingy than the fine constituents of the North Atlantic Treaty Organization? These cheap baseborn prigs will not pay their fare. They are too cheap. They expect America to send boys to die for them in one world war, then another — hundreds of thousands — and then to pay for their NATO defense even a century later.

    And then they have the temerity to cheat us further in trade. Long before Trump, they set up tariffs against us for so many things. If the average American knew how badly Europe has been ripping us off for decades with their tariffs, no one in this country would buy anything European again. We would say, as a matter of self-respect and personal pride, “I no longer will buy anything but American, no matter what it costs.”

    Every American President has complained about the cheating and imbalance — the NATO penny-pinching-cheapness, the tariff and trade imbalances. In more recent years, the various Bushes complained about it. Even Obama complained about it. But they all did it so gently, so diplomatically. They would deliver the sermon, just as the pastor predictably tells the church-goers on Sunday morning that he is against sin, and the Europeans would sit quietly and nod their heads — nodding from sleeping, not from agreeing — and then they would go back out and sin some more. Another four years of America being suckered and snookered. All they had to do was give Obama a Nobel Peace Prize his ninth month in officeand let Kerry ride his bike around Paris.

    So Trump did what any effective negotiator would do: he took note of past approaches to NATO and their failures, and correctly determined that the only way to get these penny-pinching-cheap baseborn prigs to pay their freight would be to bulldoze right into their faces, stare them right in their glazed eyes with cameras rolling, and tell them point-blank the equivalent of:

    “You are the cheapest penny-pinching, miserly, stingy, tightwadded skinflints ever. And it is going to stop on my watch. Whatever it takes from my end, you selfish, curmudgeonly cheap prigs, you are going to pay your fair share. I am not being diplomatic. I am being All-Business: either you start to pay or, wow, are you in for some surprises! And you know what you read in the Fake News: I am crazy! I am out of control! So, lemme see. I know: We will go to trade war! How do you like that? Maybe we even will pull all our troops out of Europe. Hmmm. Yeah, maybe. Why not? Sounds good. Well, let’s see.”

    So Trump stuffed it into their quiche-and-schnitzel ingesting faces. And he convinced them — thanks to America’s Seedier Media who are the real secret to the “Legend That is Trump” — that he just might be crazy enough to go to trade war and to pull American boys home. They knew that Clinton and Bush x 2 and Kerry and Hillary and Nobel Laureate Obama never would do it. But they also know that Trump just might. And if they think they are going to find comfort and moderating in his new advisers, John Bolton and Mike Pompeo, alongside him….

    Nuh-uh.

    So CNN and the Washington Post and all the Seedier Media attacked Trump for days: He is destroying the alliance! He attacks our friends!

    Baloney. Obama was the one whom the Left Echo Chamber… Chamber… Chamber never called out for attacking our friends — Israel, Britain, so many others — while cozying up to Hugo Chavez, bowing to dictators, and dancing the tango for Raul Castro. Trump is just the opposite: He knows who the friends are, and he wants to maintain and strengthen those friendships. It is no different from a parent telling a 35-year-old son: “I have been supporting you for thirty-five years. I put you through college by signing four years and $100,000 in PLUS Loans. You graduated college fifteen years ago. For fifteen years I have been asking you nicely to look for a job and to start contributing. Instead, you sit home all day playing video games, texting your friends on a smartphone I pay for, and picking little fuzz balls out of your navel. So, look, I love you. You are my flesh and blood. But if you are not employed and earning a paycheck — and contributing to the cost of this household — in six months, we are throwing you out of the house.” That boy is NATO. Trump is Dad. And all of us have been signing for the PLUS Loans.

    Negotiating with Putin

    Putin is a bad guy. A really bad guy. He is better than Lenin. Better than Stalin, Khrushchev, Kosygin, Brezhnev, Pol Pot, Mao. But he is a really bad guy.

    Here’s the thing: Putin is a dictator. He answers to no one. He does whatever he wants. If there arises an opponent, that guy dies. Maybe the opponent gets poked with a poisoned umbrella. Maybe he gets shot on the street. Maybe the opponent is forced to watch Susan Rice interviews telling the world that Benghazi happened because of a YouTube video seen by nine derelicts in Berkeley and that Bowe Berghdal served with honor and distinction. But, one way or another, the opponent dies.

    Trump knows this about Putin. And here is what that means:

    If you insult Putin in public, like by telling the newsmedia just before or after meeting with him that he is the Butcher of Crimea, and he messed with our elections, and is an overall jerk — then you will get nothing behind closed doors from Putin. Putin will decide “To heck with you, and to heck with the relationship we just forged.” Putin will get even, will take intense personal revenge, even if it is bad for Russia — even if it is bad for Putin. Because there are no institutional reins on him.

    But if you go in public and tell everyone that Putin is a nice guy (y’know, just like Kim Jong Un) and that Putin intensely maintains that he did not mess with elections — not sweet little Putey Wutey (even though he obviously did) — then you next can maintain the momentum established beforehand in the private room. You can proceed to remind Putin what you told him privately: that this garbage has to stop — or else. That if he messes in Syria, we will do “X.” If he messes with our Iran boycott, we will do “Y.” We will generate so much oil from hydraulic fracturing and from ANWR and from all our sources that we will glut the market — if not tomorrow, then a year from now. We will send even more lethal offensive military weapons to Ukraine. We can restore the promised shield to Eastern Europe that Obama withdrew. And even if we cannot mess with Russian elections (because they have no elections), they do have computers — and, so help us, we will mess with their technology in a way they cannot imagine. Trump knows from his advisers what we can do. If he sweet-talks Putin in public — just Putin on the Ritz — then everything that Trump has told Putin privately can be reinforced with action, and he even can wedge concessions because, against that background, Putin knows that no one will believe that he made any concessions. Everyone is set to believe that Putin is getting whatever he wants, that Trump understands nothing. So, in that setting, Putin can make concessions and still save face.

    That is why Trump talks about him that way. And that is the only possible way to do it when negotiating with a tyrant who has no checks and balances on him. If you embarrass the tyrant publicly, then the tyrant never will make concessions because he will fear that people will say he was intimidated and backed down. And that he never will do. Meanwhile, Trump has expelled 60 Russians from America, reversed Obama policy and sent lethal weapons to Ukraine, and is pressing Germany severely on its pipeline project with Russia.

    The Bottom Line

    At the end of the day, Donald Trump is over seventy years old. He has made many mistakes in his life. He still makes some. He is human. But Trump likewise has spent three score and a dozen years learning. He has seen some of his businesses go bankrupt, and he has learned from those experiences to be a billionaire and not let it happen again. No doubt that he has been fooled, outsmarted in years past. And he has learned from life.

    He is a tough and smart negotiator. He sizes up his opponent, and he knows that the approach that works best for one is not the same as for another. It does not matter what he says publicly about his negotiating opponent. What matters is what results months later. In his first eighteen months in Washington, this man has turned around the American economy, brought us near full employment, reduced the welfare and food stamp lines, wiped out ISIS in Raqqa, moved America’s Israel embassy to Jerusalem, successfully has launched massive deregulation of the economy, has opened oil exploration in ANWR, is rebuilding the military massively, has walked out of the useless Paris Climate Accords that were negotiated by America’s amateurs who always get snookered, canned the disastrous Iran Deal, exited the bogus United Nations Human Rights Council. He has Canada and Mexico convinced he will walk out of NAFTA if they do not pony up, and he has the Europeans convinced he will walk out of NATO if they don’t stop being the cheap and lazy parasitic penny-pinchers they are. He has slashed income taxes, expanded legal protections for college students falsely accused of crimes, has taken real steps to protect religious freedoms and liberties promised in the First Amendment, boldly has taken on the lyme-disease-quality of a legislative mess that he inherited from Reagan-Bush-Clinton-Bush-Obama on immigration, and has appointed a steady line of remarkably brilliant conservative federal judges to sit on the district courts, the circuit appellate courts, and the Supreme Court.

    What has Anderson Cooper achieved during that period? Jim Acosta or the editorial staffs of the New York Times and Washington Post? They have not even found the courage and strength to stand up to the coworkers and celebrities within their orbits who abuse sexually or psychologically or emotionally. They have no accomplishments to compare to his. Just their effete opinions, all echoing each other, all echoing, echoing, echoing. They gave us eight years of Nobel Peace Laureate Obama negotiating with the ISIS JV team, calming the rise of the oceans, and healing the planet.

    We will take Trump negotiating with Putin any day.

  • China "Weaponizes Yuan" – Weakens Fix By Most Since 2016

    On the heels of its ‘stealthy’ easing.. and not so stealthy:

    https://platform.twitter.com/widgets.js

    The PBOC just lowered the ax on the Yuan Fix – slashing their reference rate by the most since June 2016.

     

    Offshore Yuan is tumbling to new cycle lows after the fix…CNH is down over 1250 pips this week – the biggest weekly devaluation since August 2015’s plunge.

    President Trump is gonna be pissed!!

    Will China’s chaotic capital markets ripple across the world?

    Yen just snapped stronger…

    The Indonesian Rupiah tumbled 0.5%, and gold is falling…

    As we concluded previously, so how long before the trade war, which is already shifting to a currency war as a result of the recent record devaluation in the yuan, morphs into a central bank war and a renewed race to the bottom between the world’s two most important economies? .. or worst still as Bannon suggested, a kinetic war.

    Russia is an annoyance. China is our great challenge. Russia’s economy is the size of Texas or New York State? It’s got lots of nuclear weapons…but in today’s warfare…nuclear weapons are taking a less important role. Trump is trying to end the Cold War and the Korean War…and all he is getting is grief from the globalists.

    And that’s a huge problem, because not only are we adversaries with China, we are at war with China, Bannon said.

    We’re in a war with China. Ray Dalio tweeted the other day. There’s three types of war: information war, economic war, and guns-up kinetic war. They’ve been at war with us for 25 years. Many people in this room have exacerbated the rise of China.”

    Pushing back against the notion that Trump lacks grand foreign policy vision, Trump, like Reagan, is trying to build a foreign policy behind American assertiveness and optimism. Furthermore, the notion that China has advantages over the US in a trade war is laughable; the US can – and will – win, Bannon said.

    If they devalue their currency they’re just going to flood more dollars out. That’s what their own people think about their economy. We allowed them to take the South China Sea. Donald Trump is not going to back off this. Donald Trump is not going to blink. Victory is when they give us access to their markets.

    This trade war is going to end in victory and what you’re going to see is a reorientation of the entire supply chain out of China.

    But, we remind readers that ‘hope’ is not a strategy.

  • Russian Warship "Carrying $133 Billion In Gold" Discovered Off South Korea

    A South Korean marine exploration company claimed Tuesday to have discovered Dmitrii Donskoi, an armored cruiser built for the Imperial Russian Navy in the 1880s, reportedly transporting a cargo of gold worth an estimated $133 billion in today’s dollars.

    Launched in St Petersburg in August 1883, the Dmitrii Donskoi was designed as a commerce raider and fitted with both a full set of sails and a coal-fired engine. The ship spent most of its career operating in the Mediterranean and the Far East and was deployed to Imperial Russia’s Second Pacific Squadron after the Japanese fleet destroyed the majority of Russia’s naval power in the Far East in the opening salvoes of the 1904 Russo-Japanese War.

    The Dmitri Donskoii was sunk in 1905 during the Russo-Japanese war

    The squadron was then intercepted by the Japanese fleet in May 1905 and decimated at the Battle of Tsushima. Assigned to protect the transport ships at the rear of the formation, the Dmitrii Donskoi managed to evade the attacking force, but was later intercepted steaming for the Russian port of Vladivostok.

    According to the Telegraph, the Dmitrii Donskoi was carrying the fleet’s funds and went down with 5,500 boxes containing gold bars as well as a separate haul of 200 tons of gold coins. The gold was being stored in the ship’s holds to stop the Japanese seizing it. Shinil Group estimates the gold would have a total value today of just over $130 billion.

    The ship then disappeared for over a century, however it now appears its remains may have been found.

    According to Aju Business Daily, the Shinil Group, a South Korean exploration company, has indicated that it found the ship Sunday less than a mile off the Jeodong port in Ulleungdo, a South Korean island located between the Korean peninsula and Japan, at a depth of 1,423 feet in the Sea of Japan.

    “We found the body of the Dmitrii Donskoi 434 meters deep in seas 1.3 kilometers off Ulleung Island at around 9:50 a.m., Sunday,” Shinil Group said.

    On Sunday, an expedition team mobilized two human-crewed submarines as it discovered what it believed to be Donskoi. The team confirmed later that the body and cannons of the ships captured via a high-definition video camera are consistent with the ship’s schematics.

    The submarines found the ship’s name on its stern on Sunday, along with several cannons, deck guns, an anchor, two chimneys, three masts, a wooden deck and armored sides.

    “The body of the ship was severely damaged by shelling, with its stern almost broken, and yet the ship’s deck and sides are well preserved,” the company said.

    “Our discovery has finally put a stop to a controversy over Donskoi’s existence and sunken location. We’ll soon go ahead with procedures to rescue the ship,” Shinil group added.

    Shinil did not say if gold bars or coins were discovered. The group plans to recover the gold later this year with the help from companies in China, Canada, and the U.K. Here is video from the moment the ship was identified:

    The exploration firm estimates that there could be as much as 200 tons of gold ($133 billion) on the Dmitrii Donskoi. Shinil pledged to invest 10% of the treasure on Ulleung Island, which is a popular tourist destination for South Koreans. It has also worked out a deal with Russia, the rightful owner of the sunken ship, which Russia has said it would use the money for investments in railroads connecting Russia with South Korea via North Korea.

    As for the $133 billion of gold on the sunken ship, it is anyone’s guess if it exists. But if it does, then it would undoubtedly dwarf the recent discovery of $17 billion in booty off the coast of Cartagena, Colombia.

    The company said it is aiming to raise the ship in October or November. Half of any treasure found aboard the vessel would be handed over to the Russian government, which if the preliminary estimates are accurate, would amount to just over $66 billion. A portion of the rest of the treasure will be donated to joint projects to promote development in north-east Asia, the company said, such as a railway line from Russia to South Korea through North Korea.

  • Trump's Trade War May Spark A Chinese Debt Crisis

    Authored by Anne Stevenson-Yang, op-ed via BloombergQuint.com,

    There’s no chance China will cut its trade surplus with the U.S. in response to President Donald Trump’s tariff threats. For starters, Washington has made no specific demand to which Beijing can respond. But its efforts may have an unexpected side effect: a debt crisis in China.

    The 25 percent additional tariffs on exports of machinery and electronics looked, at first blush, like a stealth tax on offshoring. The focus on categories like semiconductors and nuclear components, in which U.S.-owned manufacturers in China are strong, recalled Trump’s 2016 promise to tax “any business that leaves our country.”

    It seems, though, that offshoring wasn’t the target after all. Now, with the imposition of new tariffs on low-value exports that mostly involve Asian value chains, the simple fact of selling cheap products that the U.S. buys has become the problem.

    Either way, the administration appears set on shrinking its current-account deficit (which, at a moderate 2.4 percent of GDP, is far lower than the 6 percent clocked in 2006-7) just as the Federal Reserve raises interest rates. Distress has already been registered in China. On July 19, the yuan (also known as the renminbi) hit 6.80 to the dollar, the weakest in a year and 7 percent lower than at the end of May.

    Such a move is nothing earth-shaking for less controlled currencies. But a stable renminbi is a key plank in the leadership’s promise to its people, and the exchange rate is tightly managed by the central bank.

    Chinese investors have been buying official assurances for a year that the renminbi would be a fortress, but now they’re not so sure and are exporting money again: May saw net capital outflows and a decline in the foreign-exchange reserves. The currency is the most visible sign of slippage in the image that China tries to project of an economy so brilliantly managed that the bright sun of GDP expansion is untroubled by even temporary clouds on trade, employment or consumption.

    There are many other signs: The Shanghai Composite Index of stocks has declined 7 percent in a month, dropping below the government’s red line of 3,000 for the first time since September 2016. Corporate bonds are about to set a record for the most defaults in a year. Junk bond yields are spiking. The chorus of anxiety about debt is reaching a crescendo, with daily press reports on governments that can’t pay their employees or meet pension obligations. Property prices are tumbling in some cities and frozen in others whose governments have placed a finger in the dyke by halting transactions.

    That the massive burden of debt will drag the economy into recession is as obvious as the empty towers that rise on every landscape. Precise estimates are difficult, since the government’s dedication to the optics of invincibility induces financial institutions to push debt into alternate, opaque channels. But on any metric, the amount of new lending each year grows faster than the economy, and the interest newly owed exceeds the incremental rise in GDP. In other words, the whole economy is a Ponzi scheme.

    Many analysts point out that the Chinese government owns everything, including the banks, and can just issue renminbi to infinity to keep the economy solvent. The flaw in that argument is China’s role in the global economy: It’s the world’s biggest exporter and second-biggest importer. The currency acts as the interface between the domestic and international economies, and its value is a matter of supply and demand.

    The Ponzi economy has been sustained by cheap dollars coming in through legitimate or illegitimate channels, and the problem now is that structural surpluses are disappearing and there is less ‘hot’ money from the U.S. seeking yield. When dollars enter, the central bank buys them and issues renminbi. If it has to issue more than is justified by the amount of inflows, it creates inflation, and inflation, which has toppled or almost toppled governments from the Ming dynasty to Tiananmen, is the third rail of Chinese politics.

    That brings us back to Trump and his trade war. The fundamental idea underlying this salad of a trade agenda is an old one from the right wing of the Republican Party, which believes that the U.S. has paid too dearly for its postwar leadership role under the Bretton Woods regime; putting America first means America marching alone.

    The dollar standard, and not trade policies, underpins the global system of commerce. The U.S. runs trade deficits as a consequence of its desire to own the currency that dominates global commerce, not as a casualty of predatory policies by China. The rise of the gold standard in the second half of the 19th century was the key foundation for the expansion of global trade. Its collapse, starting in 1913, drove a trade implosion.

    After Bretton Woods, the dollar took over as a global standard, and, when former President Richard Nixon made the greenback no longer redeemable for gold, it was freed to become a pure fiat currency. That meant that the U.S. could project any level of currency around the world to support its national economic growth and lifestyle improvements that exceeded productivity gains. No wonder China wishes the renminbi could do the same.

    It is tempting to see the recent yuan depreciation as a strategy to blunt the effect of U.S. tariffs, but really, the capital account is of much greater import to China Inc. than the current account. China’s central bank will almost certainly try to pull back the exchange rate in the near term: Authorities care more about the pile of reserve gold, successful stock-exchange debuts for Xiaomi Corp. and Ant Financial, and lucrative bond issues than about the private and largely foreign-owned companies that dominate exports.

    The truth is that China has followed a mercantilist trading policy since Mao Zedong. Most significantly, the investment splurge in the reform years helped political elites rake billions off the forced savings of the Chinese people. That was enabled by incoming capital, and there is no indication that will change.

    Until now, China has managed to keep its huge raft of nonperforming debt afloat thanks to capital inflows, as successive waves of quantitative easing pushed dollars into the world. A tighter dollar would seem to make the bursting of China’s credit bubble an inevitability. When that happens, the renminbi will have to depreciate sharply. This will have a deflationary impact on the world. It will also lead to a decline in China’s share of global GDP, dramatically reduce the nation’s demand for commodities, and diminish its role on the international political stage.

    Much about Chinese trade practices is genuinely unfair. But the inequity flows as much from U.S. policy favoring big corporations at the expense of workers as it does from Chinese structural subsidies. Both are difficult problems to address — much harder than penalizing exports. No one will benefit when China shrinks and turns inward. Trump should be careful what he wishes for.

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