Feb 21

Today’s News 21st February 2018

  • History Lessons From Years Under Islamism

    Authored by Majid Rafizadeh via The Gatestone Institute,

    In Iran, my generation, the first after Islamism came to power, is called the Burnt Generation (Persian: Nasl-e Sukhteh). Our generation earned this name for having to endure the brutality of the Islamist and theocratic regime from the time we were born, to adulthood.

    This brutality included the regime’s merciless efforts, such as mass executions, to establish its power, impose its barbaric and restrictive rules, and brainwash children and indoctrinate the younger generation with its extremist ideology through various methods including elementary schools, universities, state-controlled media outlets, imams and local mosques, and promoting chants such as “Death to America” and “Death to Israel”.

    Women and men were segregated. Teenagers were prevented from performing daily activities considered harmless by most of the world. Any kind of enjoyable social activities were barred, including listening to music, dancing, drinking, dating, women participating in a chess championship unless you were wearing a hijab or attending a football match or other sporting event if men were playing in it. If it made you smile, if it gave you hope, it was probably against the law, such as what could be worn, whom you were allowed to talk to, what you could listen to, and whether or not you pray or fast during Ramadan. Even the most personal and private issues became the business of the regime’s forces.

    The main purpose of these restrictions and the intense control of the people, especially youths, was for the regime to expand its Islamist agenda domestically and abroad. These laws were enforced with cruel and violent punishments such as public flogging along with the threat of even more dire consequences, including stoning, public hanging and amputations. My generation was raised in an atmosphere of terror. While the rest of the world became more modern and developed, we were left to grapple with following Islamist laws and restrictions that were impossible to obey.

    My generation in Iran should be seen as a lesson for the West. Almost every state (and non-state actors) underestimated the power that these Islamists could wield. Warning signs were overlooked. No one believed that such a massive change could occur and be enforced. Many underestimated the crimes that these Islamists were willing to commit to maintain their power once they came into control. To this day, they continue to prove that there are no limits to the cruelty and lack of humanity that they will engage in, such as conducting mass executions, executing children and pregnant women, stoning, amputations, public hanging, flogging, torture, and rape just to maintain this power.

    Jahangir Razmi’s Pulitzer Prize-winning photograph of the execution of Kurdish men and others by the Iranian Islamic regime in 1979.

     

    Many underestimated the smooth-talking strategy that these Islamists were using for decades to seize power. The radical group of Ayatollah Khomeini deceived many Iranians and the international community into believing that they were peaceful and divine people. Once they had power, the truth was revealed; by then it was too late to prevent the abuse that unfolded.

    My father’s generation in Iran lived in an environment in which the Islamist party of the country’s clergy cunningly depicted themselves as intending no harm, supportive of the people, and not interested in power. So, before the revolution, many Iranians did not think that Khomeini’s party would be committing the atrocities that they are committing now or that they would have such an unrelenting hunger for power.

    Instead, the country thought it was on a smooth path towards democracy, with no expectation of returning to a barbaric era. Even then-US President Jimmy Carter viewed Khomeini as a good religious holy man. According to recently declassified documents, the Carter administration even paved the way for Khomeini to return to Iran. Many internationally known scholars such as Michelle Foucault thought highly of the Islamic revolution. Foucault’s enthusiasm can be seen in his articles in European newspapers, written right before and after the revolution.

    They portrayed themselves as leaders of the people, as spiritual and peaceful. However, once the Islamists rose to the top, all hell broke loose. As soon as they had a stranglehold on the country, they shifted gears to become one of the most ruthless regimes in history. Once in power, their true face was revealed; at that point, there was no way to turn back.

    Thousands upon thousands of people were executed simply for voicing their opinion. Many also died for crimes they likely did not commit. The Islamic law (sharia) of the ruling Shiite party was imposed on everyone. Women were forced to wear a hijab and were stripped of their rights. They could no longer leave the country without the permission of their husbands. A women could not work in any occupation if her husband did not agree to it. Women’s testimony in court, under sharia, is worth half a man’s testimony. Women are banned from pursuing certain educational fields or occupations, such as being judges. Women are prohibited from entering sports stadiums or watching men’s sports. Women are entitled to receive half as much inheritance as their brothers or other male relatives.

    Many were shocked that this political party, which spoke about the religion of peace, would do such things. Iranians, however, did not just submit to these new laws; they rose up in protest. This uprising was met with torture, rape, and death. With the regime eager to wipe out anyone who dared to resist, the people had no choice but to surrender. Everyone’s daily activities were now under the scrutiny of the Islamists.

    In a four month period, some 30,000 political prisoners were hanged simply for suspected loyalties to anti-theocratic resistance groups, mainly the PMOI — incidents largely ignored by media outlets.

    These are only few examples of the Islamists’ atrocities that took hold of a once thriving and modernizing country. Information about their crimes against humanity would fill several books. As bad as you may think all this is, you must understand that the reality is far, far worse. The Islamist Republic of Iran, according to Human Rights Watch, became the world leader in executing children. The legal age for girls to marry was reduced to 9. Women needed the approval of their parents to marry, and girls could not object to their guardian’s decision in marrying them off.

    It may be hard to believe that such a murderous force could come into power so easily and fast. What is important to understand is that the Islamists and their followers work covertly in a society for decades to deceive the people and reach the top. Iran’s was a meticulously planned takeover that no one saw coming. The Islamists’ willingness to be patient to complete their control of the society cannot be underestimated.

    Despite openly reading about all this, many will still think it is impossible for something like this to happen in their country. What they fail to understand is that Iran is an example of exactly how successful this meticulous grab for power can be.

    Seeing these shrewd and calculating strategies, Islamists in other countries including the West are pursuing the same techniques on the path to seizing power. It is a quiet, subtle process, until the moment you wake up with no rights, a culture of fear, and no promise that you will live in freedom or even to see the next day.

    Now, those Islamists, whom almost everyone made light of, have not only been in power for almost four decades; they have expanded their expansionist ideology to other nations and taken first prize as being the world’s leading state sponsor of terrorism and among its leading executioners.

    This is a history lesson that Western and non-Islamist countries cannot afford to ignore. It is not just about history; it is about what can happen at any moment, in any country. It is about what is happening right now, beneath our noses — in East Asia, Canada, South America and Europe. The only defense is to recognize it and confront it at its roots, before it has the opportunity to woo your politicians. Once they worry more about their popularity with voters than about the future of the country you are electing them to run, you are done. Once there is control of the ballot box, there will be more and more control over every aspect of your life, destroying any future you had planned and leaving the country you once had loved in ruins.

  • India To Build Major Overseas Military Base Off Africa To Combat China

    India is preparing to construct a significant overseas military base on an island in Seychelles, an archipelago of 115 islands in the Indian Ocean, off East Africa to counter growing Chinese influence in the Indian Ocean.

    Last month, Seychelles and India signed a twenty-year agreement, permitting the Indian military to build an airbase and naval installations on Assumption Island, a small island in the Outer Islands of Seychelles north of Madagascar, said Seychelles News Agency.

    “This [agreement] reinforces our commitment to not only further deepen India-Seychelles relations, but to also take our partnership to another level,” Indian Foreign Secretary Subrahmanyam Jaishankar said in a statement.

    “The [mutual] co-operation is exemplified by the operationalization of the Coastal Surveillance Radar System [CSRS] in March 2016, and our commitment to augment the defense assets and capability of Seychelles,” he added.

    The agreement enhances India’s military capabilities and maritime surveillance of Seychelles’ Exclusive Economic Zone (EEZ) of 1.37 million square km. Assumption Island will serve as a strategic staging area for the Indian military, as the island chain resides between crucial global shipping lanes.

    This is key as in 2016 alone, “approximately 40 million barrels of oil per day — equivalent to just under half of the world’s total oil supply — traveled through Indian Ocean entry and exit points, including the Straits of Hormuz, Malacca, and Bab el-Mandeb,” said CNN.

    The EIA classifies the region as a significant chokepoint for maritime transit of oil. More specifically, the EIA calculates roughly 5.8 million barrels per day travels directly by Seychelles, which then ultimately flows to the West. This would indicate India does not just recognize Seychelles as a critical part of its global energy security, but perhaps, India’s push to control the island is a proxy of Washington.

    All estimates in million barrels per day. Includes crude oil and petroleum liquids. Based on 2016 data. Source: U.S. Energy Information Administration

    India has already provided Seychelles with military aircraft, helicopters, and naval boats. It has installed a coastal surveillance radar system on one of Seychelles’ islands to conduct intelligence gathering activities. Throughout the years, the waters around Seychelles have seen an abundance of Indian warships conducting anti-piracy patrols

    Senior Indian naval officials have stated that the development of military installations on Seychelles is to offset China’s maritime Silk Road strategy in the Indian Ocean.

    As CNN notes, India is attempting to better posture itself in the Indian Ocean despite its neighbor and long-standing rival China, who is already situated with military installations in the region.

    Under Chinese President Xi Jinping, China’s naval reach has grown considerably, expanding far beyond its immediate coastline into areas not previously considered within its sphere of influence.

    In July last year China established its first overseas military base in Djibouti, near the Bab el-Mandeb Strait, among the world’s busiest shipping lanes and one of three crucial Indian Ocean arteries.

    The strait, which is only 29 kilometers (18 miles) wide at its narrowest point, connects the Mediterranean Sea via the Suez Canal, and the Red Sea to the Gulf of Aden and the Indian Ocean beyond.

    The opening of the Djibouti base was followed several months later by the country’s controversial acquisition of the Hambantota port in Sri Lanka, just 22.2 kilometers (13.8 miles) by some estimates from the primary Indian Ocean sea lane that links the Malacca Straits to the Suez Canal.

    Malcolm Davis, a senior analyst at the Australian Strategic Policy Institute in Sydney, described the Hambantota deal — which saw Sri Lanka grant China a 99-year lease on the port to service some of the billions in debt it owes to Beijing — as part of a “determined strategy by China to extend its influence across the Indian Ocean at the expense of India.”

    “That port then gives them not only a strategic access point into India’s sphere of influence through which China can deploy its naval forces, but it also gives China an advantageous position to export its goods into India’s economic sphere, so it’s achieved a number of strategic aims in that regard,” said Davis.

    Indian military officials said Seychelles and Assumption Island are a powerful combination in extending the reach of India’s naval operations, which it intends to rotate aircraft and ships throughout the region.

    “The development is a clear indicator that India’s geostrategic frontier is expanding in tandem with China’s growing strategic footprint in the Indo-Pacific,” Captain Gurpreet Khurana, of the Indian Navy’s National Maritime Foundation, said.

    As India fears encirclement by militarist China in the Indian ocean, it only leaves us to believe that these nuclear-armed neighbors could be headed for another military conflict. The last time this occurred it was the war of 1962, which India is making the needed preparations on Seychelles’ chain of islands that will ensure another defeat is not an option.

  • Brandon Smith: New Fed Chairman Will Trigger A Historic Stock Market Crash In 2018

    Authored by Brandon Smith via Alt-Market.com,

    Ever since the credit and equities crash of 2008, Americans have been bombarded relentlessly with the narrative that our economy is “in recovery”. For some people, simply hearing this ad nauseam is enough to stave off any concerns they may have for the economy. For some of us, however, it’s just not satisfactory. We need concrete data that actually supports the notion, and for years, we have seen none.

    In fact, we have heard from officials at the Federal Reserve that the exact opposite is true. They have admitted that the so-called recovery has been fiat driven, and that there is a danger that when the Fed finally stops artificially propping up the economy with constant stimulus and near zero interest rates, the whole farce might come tumbling down.

    For example, Richard Fisher, former head of the Dallas Federal Reserve, admitted a few years ago that the U.S. central bank has made its business the manipulation of the stock market to the upside:

    What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.

    It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow.

    I’m not surprised that almost every index you can look at … was down significantly.

    Fisher went on to hint at the impending danger (though his predicted drop is overly conservative in my view), saying: “I was warning my colleagues, don’t go wobbly if we have a 10-20% correction at some point…. Everybody you talk to … has been warning that these markets are heavily priced.”

    One might claim that this is simply one Fed member’s point of view. But it was recently revealed that in 2012, Jerome Powell made the same point in a Fed meeting, the minutes of which have only just now been released:

    “I have concerns about more purchases. As others have pointed out, the dealer community is now assuming close to a $4 trillion balance sheet and purchases through the first quarter of 2014. I admit that is a much stronger reaction than I anticipated, and I am uncomfortable with it for a couple of reasons.

    First, the question, why stop at $4 trillion? The market in most cases will cheer us for doing more. It will never be enough for the market. Our models will always tell us that we are helping the economy, and I will probably always feel that those benefits are overestimated. And we will be able to tell ourselves that market function is not impaired and that inflation expectations are under control. What is to stop us, other than much faster economic growth, which it is probably not in our power to produce?

    When it is time for us to sell, or even to stop buying, the response could be quite strong; there is every reason to expect a strong response. So there are a couple of ways to look at it. It is about $1.2 trillion in sales; you take 60 months, you get about $20 billion a month. That is a very doable thing, it sounds like, in a market where the norm by the middle of next year is $80 billion a month. Another way to look at it, though, is that it’s not so much the sale, the duration; it’s also unloading our short volatility position.”

    Keep in mind, that Jerome Powell is now the CHAIRMAN of the Federal Reserve. In 2012, he was well aware of the exact effects that the removal of stimulus (which includes low interest rates) would have on the false recovery in stock markets. He continues…

    “My third concern — and others have touched on it as well — is the problems of exiting from a near $4 trillion balance sheet. We’ve got a set of principles from June 2011 and have done some work since then, but it just seems to me that we seem to be way too confident that exit can be managed smoothly. Markets can be much more dynamic than we appear to think.

    When you turn and say to the market, “I’ve got $1.2 trillion of these things,” it’s not just $20 billion a month — it’s the sight of the whole thing coming. And I think there is a pretty good chance that you could have quite a dynamic response in the market.

    I think we are actually at a point of encouraging risk-taking, and that should give us pause.

    Investors really do understand now that we will be there to prevent serious losses. It is not that it is easy for them to make money but that they have every incentive to take more risk, and they are doing so. Meanwhile, we look like we are blowing a fixed-income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road. You can almost say that that is our strategy.”

    If Powell was fully conscious in 2012 of what would happen in markets due to the Fed’s balance sheet reductions, the question is, will he be honest about it now? My suspicion is that he will not, given that his very first interaction with the American public after becoming head of the Fed was to regurgitate the same nonsensical talking points that we heard from Janet Yellen for years.

    The mainstream media is desperately attempting to suggest that Powell may “surprise investors” with a change in rate hike policies and the reduction of the balance sheet, but so far the markets are not buying this.

    Powell’s first day as Chairman was greeted with the sharpest drop in U.S. equities in years. Yellen’s parting gift to investors in January was an $18 billion reduction in the Fed balance sheet, $6 billion more than the Fed originally claimed would occur. It is clear to me that just as stocks climbed in direct correlation to the Fed balance sheet, so too will they fall in direct correlation to the Fed balance sheet. Only a week after the balance sheet was cut more than expected, stocks fell by nearly 10%.

    So, the question now is, will Powell continue this trend of rate hikes and balance sheet reductions, being that he is recorded as knowing what the results will be? I believe that this is exactly what he will do. Why? Because the Fed’s goal is the deliberate controlled demolition not only of U.S. markets but also U.S. debt instruments and the dollar.

    If I am wrong, then Powell, knowing the threat, will reverse rate hike policies and stop dumping the balance sheet in an effort to prop up the system. If I am right, then we will see Powell continue these policies over the course of 2018 and allow the system to implode.

    How will this influence the price of gold? Well, in the near term we could see a measured decline or a stagnant metals market as we have seen so far this month. That said, when the real equities crisis kicks in, expect metals to skyrocket as investors rush to safety. The psychology of the markets will come into play far more than fundamentals for a time. One must account for willful ignorance and how long it can be maintained before facts take over.

    There are a few major issues that come into play in terms of interest rate hikes and the balance sheet, including the fact that corporate debt is now at levels far beyond that held just before the crash of 2008. We are also witnessing the highest consumer debt levels in history, while personal savings have plunged.

    Treasury yields are also spiking to 10 year highs, decoupling from stocks and suggesting that balance sheet reductions might be contributing to a flight from equities.

    Stock buybacks, fueled by low interest rates, have helped pump up stocks for years. However, most companies are prohibited from buybacks right before they report their earnings.  Not to mention, the amount of debt companies have accumulated is reducing their ability to purchase stocks. Without buybacks, we have seen what happens – complete market mayhem. If this is what takes place in a month of reduced buybacks, what will happen when interest rates are raised high enough to make borrowing capital from the Fed prohibitive (ie, too expensive)?

    What does all this translate into? The reality that there is NO MECHANISM within our economy that is buoyant enough to keep markets afloat when the Fed backs away. Nearly everyone is in massive debt, there is no one left to buy at the level needed except the Fed.

    We are only standing at the beginning of this apparent new trend in equities, but it will be interesting to see what the reaction will be within the system as the Fed continues hiking rates and reducing the balance sheet. Will the beginning of every month in 2018 be met with a brand new storm of selling and panic? It’s hard to say. However, the math certainly does not support a bull market through the rest of this year.

    In the meantime, it is likely that blind faith in positive returns will spark intermittent buying events in the short term, and unaware investors (and algorithms) will see this as vindication that buying will always be the answer. But, these buying events so far seem to be met with even more severe downturns. It will not take very many Fed meetings to discern whether or not the central bank will continue to back up stocks. To me, it appears that the decision to pull the plug has already been made.

  • Russian "Troll Farm" Indictment Shredded By Journalist Who First Profiled It In 2015

    Following Special Counsel Robert Mueller’s indictment of 13 Russian nationals and three entities behind a Russian “troll farm” said to have meddled in the 2016 U.S. election (admittedly, with zero impact), two people familiar with both the ads purchased by Russians on Facebook, and the “troll farm” in question have refuted Mueller’s narrative over the course of four days. Indeed, things don’t seem to be going well for the Russia investigation, which started out with serious claims of Collusion between the Trump campaign and the Kremlin, and has been reduced to CNN diving through the garbage of a Russian troll farm.

    About that troll farm…

    Adrian Chen, staff writer for The New Yorker – who first profiled the indicted Russian troll farm in 2015, sat down with MSNBC’s Chris Hayes, where he proceeded to deflate Mueller’s big scary indictment to nothing.

    “Tried to tamp down the troll farm panic on @chrislhayes show last night,” Adrian Chen tweeted. “It’s 90 people with a shaky grasp of English and a rudimentary understanding of U.S. politics shitposting on Facebook.“

    Watch: 

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

    Chen then responded to a tweet saying the IRA has 300-400 individuals. “That was the entire Internet Research Agency,” Chen wrote.” The American department had ~90 people, according to the Russian journalists who did the most in-depth investigation.”

    Chen links to a Washington Post article which profiles Russian journalists who also investigated said troll farm.

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    A brief review:

    • The former director of the FBI has assembled a “dream team” of investigators for his Special Counsel probe and concluded that 13 Russians and 3 entities tried to meddle in the election after an entire year of investigation.
    • Those efforts had zero impact on the election
    • Facebook’s VP of ads is on record saying “I have seen all of the Russian ads and I can say very definitively that swaying the election was *NOT* the main goal
    • The same FB Exec noted that most of the ads were purchased after the election.
    • Suggesting that the real, underlying narrative is one of US media propaganda, he was then made to walk back his comments and apologize for his “uncleared thoughts” 
    • CNN is rooting around in the trash outside the troll farm.

    And for all of this, Obama and Congress slapped sanctions on Russia, evicted two diplomatic compounds, and launched several Congressional investigations over.

    But at least the US Military Industrial Complex is happy, while the stock of Boeing has never been higher.

  • Nancy Pelosi Caught Off Guard By Heckler: "How Much Are You Worth Nancy?"

    During a Tuesday stop-off in Phoenix to trash talk the “disastrous” GOP tax cuts at the Arizona Center for Economic Progress, House Minority Leader Nancy Pelosi was startled at a question over her net worth by an audience member who couldn’t stomach the top Democrat’s ivory-tower oratory over wealth inequality. 

    Pelosi has embarked on a 100-city taxpayer funded junket organized by Democrats to frame the Republican tax cuts as an assault on low income Americans.

    “It can’t possibly be a statement of values for us to talk about, as Martin Luther King said, … ‘God never intended for one group of people to live in superfluous inordinate wealth while others live in abject deadly poverty,’” Pelosi pontificated, hypocritically.

    “So these are kitchen table issues for most of America’s families. Most people are not in deadly poverty, but some are. But most people have to struggle to …”

    Pelosi’s needle skips as an audience member asked the richest woman in Congress:

    “How much are you worth, Nancy?” 

    A flustered Pelosi shot back:

    “No, we’re not talking about that … In any event … I can out … I’m a mother of five, I can speak louder than anybody.” 

    Watch:

    Of note, the 77-year-old Pelosi is estimated to have a net worth of $100,643,521 according to OpenSecrets.org, making her the 6th richest member of the House in 2015.  We wonder if Pelosi’s San Francisco pizza parlor is included in the calculation?

    Pelosi, of course, wants to pay as little tax as possible

    And here we arrive at the heart of why wealthy ivory-tower Democrats are the penultimate hypocrites. While spending her career espousing higher taxes for the rest of us and denouncing income inequality, Pelosi has engaged in a series of complex tax schemes to avoid paying as much tax as possible. 

    As the Washington Free Beacon reports: 

    House Minority Leader Nancy Pelosi (D., Calif.), who often rails against income inequality and calls on the wealthy to pay its “fair share” in taxes, took pains in late December to try to preserve tax breaks for two of her multi-million-dollar homes one last time before the new tax law kicked in.

    Largely thanks to her husband Paul, a real-estate and venture-capital investor, Pelosi is the wealthiest woman in Congress with a net worth of more than $100 million and the seventh wealthiest member overall, according to the Center for Responsive Politics.

    Just days after President Trump signed the sweeping tax bill into law late last month, Pelosi and her husband tried to preserve $64,000 in property tax breaks, known as the state and local taxes (SALT) deductions, for her two California homes. The new tax law limits the deduction to $10,000 and went into effect Jan. 1.

    Seems like Nancy’s little propaganda junket is off to a bad start… 

  • Florida Teachers' Pension Fund Is Long AR-15 Gunmaker Stock

    On Tuesday afternoon, Bloomberg  was surprised to learn that as it was going through the 2,416 equity investments of the Florida state pension plan, which amount to over $37 billion in market cap, it found a surprising entry: 41,129 shares in American Outdoor Brands (valued at a meager $528,000, including $306,000 in unrealized profits) according to a Dec. 31 securities filing  listing the plan’s holdings. The company, formerly known as Smith & Wesson, is the market of the semiautomatic AR-15 assault rifle that was used in the Valentine’s Day shooting on the Marjory Stoneman Douglas High School in Parkland, Florida.

    In other words, as Bloomberg puts it, “as Florida teachers grieve over the mass shooting that left 17 students and colleagues dead last week, some of them may be surprised to learn they’ve been helping fund the firearms industry—including the company that made the gun used that bloody Wednesday.”

    In addition to American Outdoors, the filing showed that the Florida Retirement System Pension Plan also invested in gun company stock issued by Sturm & Ruger, Vista Outdoor and Olin Corp. All of these companies manufacture firearms or ammunition, including assault rifles.

    We expect that these holdings will be liquidated promptly in the aftermath of the highly politicized shooting, and that the anticipation of said liquidation is why AOBC tumbled 5% today.

    Students at the school who escaped have been calling for gun control measures on social media and in news interviews all day Tuesday, and were scheduled to attend a gun-safety reform rally Tuesday in Tallahassee, the state capital, hosted by the Florida Coalition to Prevent Gun Violence. The Florida State Board of Administration, or SBA, which manages the teachers’ pension fund, is also based there.

    “As fiduciaries, the SBA must act solely in the interest of the participants and beneficiaries,” John Kuczwanski, a spokesman for the agency, said in an emailed statement. “As primarily passive investors, we essentially own the entire market subject to any legal limitations.”

    True, but that does not matter: after the 2012 Sandy Hook Elementary School shooting in Connecticut, in which 26 elementary school students and teachers were gunned down, CalSTRS and the California Public Employees’ Retirement System sold off their stakes in both Sturm Ruger and Smith & Wesson.

    The same will take place over the coming days as the political scandal over the Parkland shooting peaks, and numerous pension systems seek to put pressure on gunmakers by dumping their stock.

    Tangentially, speaking of passive investors owning the “entire market”, one wonders when the “central bank” that is the Swiss National Hedge Fund Bank will decide that its ownership of tens of billions in FAANG stocks is starting to have a pronounced market impact.

    The good news for the Florida pension fund is that its sale of AOBC shares will hardly have an impact on its P&L, or the market; meanwhile its top holdings – like of most other pension funds – remain the 4 megatechs: AAPL, MSFT, AMZN and FB. And until the tidal wave of anti-monopolist/media resentment is unleashed, they have little to worry about.

  • The Military-Industrial Complex Is Winning The "Guns Vs. Butter" War In America

    Authored by Major Danny Sjursen via TimDispatch.com,

    Think of it as the chicken-or-the-egg question for the ages: Do very real threats to the United States inadvertently benefit the military-industrial complex or does the national security state, by its very nature, conjure up inflated threats to feed that defense machine? 

    Back in 2008, some of us placed our faith, naively enough, in the hands of mainstream Democrats — specifically, those of a young senator named Barack Obama.  He would reverse the war policies of George W. Bush, deescalate the unbridled Global War on Terror, and right the ship of state. How’d that turn out? 

    In retrospect, though couched in a far more sophisticated and peaceable rhetoric than Bush’s, his moves would prove largely cosmetic when it came to this country’s forever wars: a significant reduction in the use of conventional ground troops, but more drones, more commandos, and yet more acts of ill-advised regime change.  Don’t get me wrong: as a veteran of two of Washington’s wars, I was glad when “no-drama” Obama decreased the number of boots on the ground in the Middle East.  It’s now obvious, however, that he left the basic infrastructure of eternal war firmly in place. 

    Enter The Donald.

    For all his half-baked tweets, insults, and boasts, as well as his refusal to read anything of substance on issues of war and peace, some of candidate Trump’s foreign policy ideas seemed far saner than those of just about any other politician around or the previous two presidents.  I mean, the Iraq War was dumb, and maybe it wasn’t the craziest idea for America’s allies to start thinking about defending themselves, and maybe Washington ought to put some time and diplomatic effort into avoiding a possibly catastrophic clash or set of clashes with Vladimir Putin’s Russia. 

    Unfortunately, the White House version of all this proved oh-so-familiar.  President Trump’s decision, for instance, to double down on a losing bet in Afghanistan in spite of his “instincts” (and on similar bets in Somalia, Syria, and elsewhere) and his recently published National Defense Strategy (NDS) leave little doubt that he’s surrendered to Secretary of Defense James Mattis and National Security Advisor H.R. McMaster, the mainstream interventionists in his administration.

    In truth, no one should be surprised.  A hyper-interventionist, highly militarized foreign policy has defined Washington since at least the days of President Harry Truman — the first in a long line of hawks to take the White House.  In this context, an ever-expanding national security state has always put special effort into meeting the imagined needs (or rather desires) of its various component parts.  The result: bloated budgets for which exaggerated threats, if not actual war, remain a necessity. 

    Without the threat of communism in the previous century and terrorism (as well as once again ascendant great powers) in this one, such bloated budgets would be hard to explain.  And then, how would the Army, Navy, Air Force, and Marines get all the weaponized toys they desired?  How would Congressional representatives in a post-industrial economy get all those attractive “defense” jobs for their districts and how would the weapons makers get the government cash they crave?

    The 2-2-1 Threat Picture

    With that in mind, let’s take a look at the newly released National Defense Strategy document.  It offers a striking sense of how, magically enough, the Pentagon’s vision of future global policy manages to provide something for each of its services and their corporate backers.

    Start with this: the NDS is to government documents what A Nightmare on Elm Street is to family films; it’s meant, that is, to scare the hell out of the casual reader.  It makes the claim, for instance, that the global “security environment” has become “more complex and volatile than any we have experienced in recent memory.”  In other words, be afraid, very afraid.  But is it true?  Is the world really more volatile now than it was when two nuclear superpowers with enough missiles to destroy the planet several times over faced off in a not-so-Cold War?

    Admittedly, the NDS does list and elaborate some awesome threats — and I think I know just where that list came from, too. When I went through the document, I realized that I had heard it all before.  Back in 2015, when I taught history at West Point, a prominent departmental alumni — a lieutenant general by the name of H.R. McMaster who, today, just happens to be President Trump’s national security advisor — used to drop by occasionally.  Back then, he commanded the Army Capabilities Integration Center, which was basically a future-planning outfit that, in its own words, “develops concepts, learns, and integrates capabilities to improve our Army.” 

    In 2015, McMaster gave us history instructors a memorable, impromptu sermon about the threats we’d face when we returned to the regular Army.  He referred, if memory serves, to what he labeled the two big threats, two medium threats, and one persistent threat that will continue to haunt our all-American world.  In translation: that’s China and Russia, Iran and North Korea, and last but not necessarily least Islamist terrorism. And honestly, if that isn’t a lineup that could get you anything you ever dreamed of in the way of weapons systems and the like, what is? 

    So can we be surprised that, in the age of McMaster and Mattis, the new NDS just happens to lay out the very same lineup of perils? 

    The Two Bigs: “Revisionist Powers”

    The document kicks off with a pivot of sorts: forget (but not forever!) the ongoing war on terror.  The U.S. military is on to even more fearsome things.  “Inter-state strategic competition [which, in Pentagonese, means China and Russia], not terrorism, is now the primary concern in U.S. national security,” the document insists.  Those two countries are — the Pentagon’s most recent phrase of eternal damnation — “revisionist powers” that “want to shape a world consistent with their authoritarian model.”  In other words, they have the staggering audacity to actually want to assert global influence (the very definition of evil in any power other than you-know-who).   

    This section of the NDS reads like a piece of grim nostalgia, a plunge back into the pugnacious language of the long-gone Cold War.  It’s meant to be scary reading.  It’s not that Russian irredentism or Chinese bellicosity in the South China Sea aren’t matters for concern — they are — but do they really add up to a new Cold War?

    Let’s begin, as the document does, with China, an East Asian menace “pursuing” that most terrifying of all goals, “military modernization” (as, of course, are we), and seeking as well “Indo-Pacific Regional hegemony” (as, of course, has… well, you know which other country).

    The National Defense Straregy isn’t, however, keen on nuance.  It prefers to style China unambiguously as a 10-foot-tall military behemoth.  After all, countering a resurgent China in the Taiwan Straits and the South China Sea ensures a prominent role for the Navy and its own air force of carrier-based naval aviators.  In fact, the military’s latest “AirSea Battle” doctrine hinges on a potential conflict in a place that bears a suspicious similarity to the Taiwan Straits (and thanks to the catchy name, the Air Force gets in on the action as well).  Consider all of this a formula for more blue-water ships, more advanced fighter planes, and maybe even some extra amphibious Marine Corps brigades.

    But what about the poor Army?  Well, that’s where that other revisionist power, Russia, comes in.  After all, Putin’s government is now seeking to “shatter” the North Atlantic Treaty Organization.  No point, naturally, in reminding anyone that Washington was the country that expanded what was, by definition, an anti-Russian military alliance right up to Russia’s borders, despite promises made as the Soviet Union was collapsing.  But this is no time to split hairs, so bottom line: the Russian threat ensures that the Army must send more combat troops to Europe.  It may even have to dust off all those old Abrams tanks in order to “deter” Vladimir Putin’s Russia.  Ka-ching!  (Consider this, by the way, a form of collusion with Russia that Robert Mueller isn’t investigating.) 

    If you look at the Pentagon’s 11 “defense objectives” included in the National Defense Strategy document, you get a sense of just how expansive the one great non-revisionist power on the planet actually is.  Yes, the first of those sounds reasonable enough: “defending the homeland from attack.” Skip down to number five, though — “Maintaining favorable regional balances of power in the Indo-Pacific, Europe, the Middle East, and the Western Hemisphere” — and you’re offered a vision of what an expansionist attitude really is.  Although the NDS claims this country is threatened by the rise of Russia or China in just two of these areas (the Indo-Pacific and Europe), it asserts the need for favorable “balances of power” just about everywhere! 

    By definition, that’s an urge for hegemony, not defense!  Imagine if China or Russia staked out such claims.  An unbiased look at that set of objectives should make anyone (other than a general or an admiral) wonder which is really the “rogue regime” on this planet.

    The Two Mediums: “Rogue States”

    Now, on to the next group of threats, Uncle Sam’s favorite bad boys, North Korea and Iran.  North Korea, we’re told, is a land of “outlaw actions” and “reckless rhetoric” (never to be compared to the statesmanlike “fire and fury” comments of President Donald Trump). And indeed, Kim Jong-Un’s brutal regime and the nuclear weapons program that goes with it are cause for concern — but they also turn out to be deeply useful if you want to provide plenty of incentive for the funding of the Air Force’s and the Navy’s trillion dollar nuclear “modernization” effort (that already looks like it may actually cost more like $1.7 trillion).  In other words, more nuclear subs, heavy bombers, and intercontinental ballistic missiles, not to speak of the immense cost of recent investments in such missile defense systems as Terminal High Altitude Area Defense (THAAD) and Ground-Based Midcourse Defense (GMD).

    In this way, “rogue states” couldn’t be more helpful.  Take Iran, which, according to the NDS, “remains the most significant challenge to Middle East stability.”  Hmmm.  It’s hard not to wonder why ISIS, Bashar al-Assad’s rump Syria, Saudi terror bombing in Yemen, even old-fashioned al-Qaeda (and its new-fashioned affiliates) don’t give Iran at least a run for its money when it comes to being the clearest-and-presentest danger to the region and to the United States.  (And that’s assuming that, in the Middle East, the U.S. hasn’t been the greatest danger to itself.  Exhibition one being the decision to invade Iraq in 2003.) 

    No matter.  Anti-Iranian hysteria sells fabulously in Washington, so who wouldn’t want to run with it?  In fact, the alleged Iranian threat to us is the gift that just keeps giving inside the Beltway.  Iran’s nuclear threat — though there’s no evidence that the Iranians have cheated on the nuclear deal President Obama signed with them in 2015 and that President Trump is so eager to abrogate — guarantees yet another windfall for all the services.  The Army’s air defense programs, for example, should get a long-needed shot in the arm; the Navy will clamor for more Aegis cruisers (with anti-ballistic systems on board); and the Air Force will certainly need yet more bombers for the potential preemptive strike against the nuclear threat that isn’t there.  Everyone wins (except perhaps the Iranian people)!

    One “Persistent Condition”: Terrorism

    And then, of course, there’s terrorism or, to be more exact, Islamist terrorism, that surefire funder of the twenty-first century.  It may no longer officially be the military’s top priority, but the National Defense Strategy assures us that it “remains a persistent condition” as long as terrorists “continue to murder the innocent.” The proper question, though, is: How big of a threat is it?  As it turns out, not very big, not for Americans anyway.  Any of us are so much more likely to choke to death or die in a bicycle or car accident than lose our lives at the hands of a foreign-born terrorist. 

    And here’s another relevant question: Is the U.S. military actually the correct tool with which to combat persistent terrorism?  The answer, it seems, is no.  Though U.S. Special Operations forces deployed to 75% of the world’s countries in 2017, the number of Islamist threat groups has only risen in certain areas like Africa thickest with those special operators.  It turns out that all the advising and assisting, all the training and coaching, has only made matters worse.  As for those overstretched forces, relentless deployments are evidently breaking them down as reports indicate that rates of mental distress and suicide are again on the rise among them.

    Still, here’s the positive part of the NDS’s continuing emphasis on “degrading” terrorist groups and “countering extremism”: it ensures a financial and manpower bonanza for U.S. Special Operations Command (SOCOM).  In the Obama years, that “elite” set of forces already experienced a leap in numbers to almost 70,000. (By the way, at what point in the escalation game do such troops stop being so “special”?)  Since SOCOM, a joint command that’s home to personnel from all the services, hadn’t yet been dealt into this NDS version of largesse, it’s lucky that terrorism and the war on it isn’t going anywhere anytime soon, which means that SOCOM will never want for funds or stop growing.

    Guns Versus Butter

    In 1953, Republican President Dwight Eisenhower, a West Point graduate and retired five-star general, gave a speech that couldn’t have been more unexpected from a career military man.  He reminded Americans that defense and social spending were always in conflict and that the “guns” versus “butter” tradeoff couldn’t be a more perilous one.  Speaking of the growth of the defense budget in that tense Cold War moment, he asserted that:

    “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed… This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.”

    Those words still seem salient today.  As Americans experience acute income inequality, the rising cost of a college education, and ongoing deindustrialization in the heartland, the country’s runaway spending continues to rise precipitously.  The planned 2019 Pentagon budget is now expected to hit a staggering $716 billion — more than much of the rest of the world’s defense spending combined.

    The battle between “guns and butter” is still raging in the United States and, if the new NDS is any indicator, the guns are winning.

    *  *  *

    Major Danny Sjursen, a TomDispatch regular, is a U.S. Army officer and former history instructor at West Point. He served tours with reconnaissance units in Iraq and Afghanistan. He has written a memoir and critical analysis of the Iraq War, Ghost Riders of Baghdad: Soldiers, Civilians, and the Myth of the Surge. He lives with his wife and four sons in Lawrence, Kansas.  Follow him on Twitter at @SkepticalVet and check out his new podcast Fortress on a Hill, co-hosted with fellow vet Chris “Henri” Henrikson.

    [Note: The views expressed in this article are those of the author, expressed in an unofficial capacity, and do not reflect the official policy or position of the Department of the Army, the Department of Defense, or the U.S. government.]

  • China's "New Silk Roads" Reach Latin America

    Authored by Pepe Escobar via The Asia Times,

    Beijing is turbo-charging its infrastructure connectivity across the region and the Caribbean…

    A sharp, geoeconomic shift took place last month in Santiago, Chile at the second ministerial meeting of a forum grouping China and the 33-member Community of Latin American and Caribbean States. 

    The Chinese Foreign Minister, Wang Yi, told his audience that the world’s second-largest economy and Latin America should join efforts to support free trade. This was about “opposing protectionism” and “working for an open world economy,” he said.

    After encouraging Latin American and Caribbean nations to participate in a major November expo in China, Wang delivered the clincher – Latin America should play a “meaningful” role in the ‘New Silk Roads’, known as the Belt and Road Initiative. The Chinese media duly highlighted the invitation.

    The Latin American stretch of the Belt and Road project may not turn out to be as ambitious as the Eurasia program. Yet the trend is now clear with Beijing turbo-charging its infrastructure connectivity drive across the region and the Caribbean, with more deals on the way.

    The strategic imperative is to build smooth connections across the continent, converging on its Pacific coastline – and forward through maritime supply lines to the Chinese seaboard. You could call it the Pacific Maritime Silk Road. 

    Last year, Chinese banks and institutions invested US$23 billion in Latin America – the biggest surge since 2010. And they are all in for the long haul.

    Predictably, fellow BRICS member Brazil is the largest recipient of Chinese foreign investment for the past 10 years at about $46.1 billion, plus more than $10 billion in acquisitions. Russia, Indian and South Africa are the other nations that make up the BRICS bloc.

    Costs plummeted

    Marcos Troyjo, the director of the BricLab at Columbia University, has broken down the numbers. Up to mid-2010, Brazil was very expensive. Then suddenly costs plummeted because of the exchange rate or devaluation of companies.

    Large Brazilian groups were badly damaged by the incredibly complex ‘Operation Car Wash’ corruption investigation. The infrastructure industry depended on state funds, which suddenly dried up and a wild privatization spree followed with Chinese, American and European groups taking advantage.     

    China is already the top trading partner of Brazil, Argentina, Chile and Peru. Others will inevitably follow. This is not only because China’s imports of commodities, such as iron ore, soy and corn tend to rise, but also because the Asia Infrastructure Investment Bank will increase lending. 

    China’s master plan for Latin American trade and investment follows what is dubbed the “1+3+6” framework, mapped out by President Xi Jinping in July 2014 at a summit in Brasilia. 

    The “1” refers to the cooperation plan itself, guiding specific projects and ranging from 2015 to 2019 as Beijing aims for $250 billion in direct investment and around $500 billion in trade.

    The “3” is about the key areas of cooperation – trade, investment and finance.

    And the “6” prioritizes cooperation in energy and resources, and infrastructure construction, as well as agriculture, manufacturing, scientific and technological innovation, alongside information technology.

    The top three Latin American powers, Brazil, Argentina and Mexico, who also happen to be G20 members, are all into major infrastructure expansion, which fits into Beijing’s plan.

    Of course, there will be serious snags along the way, such as the $50 billion Nicaragua Inter-Oceanic Canal, now competing with a surge in Panama-China relations after the country broke ties with Taiwan. And the game-changing, transcontinental, Atlantic-Pacific railway between Brazil and Peru is also a long way away. 

    But Foreign Minister Wang was been careful to explain how this proposed Latin Belt and Road program will benefit the Latin American region. “It has nothing to do with geopolitical competition,” he said. “It follows the principle of achieving shared growth through discussion and collaboration. It is nothing like a zero-sum game.”

    In the end, China’s geopolitical rewards will end up positively riling the Trump administration, which has taken its eye off the ball in its own backyard. Rex Tillerson, the Secretary of State, decided to hit the road a few days after the China-Latin America summit in Santiago with pit stops in Mexico, Argentina, Peru, Colombia, and Jamaica.

    He underlined the Monroe Doctrine a cornerstone of US policy in the region. “[It] clearly has been a success, because … what binds us together in this hemisphere are shared democratic values.”

    ‘Imperial powers’

    Tillerson then bashed China, saying Latin America “does not need new imperial powers.”  The Global Times stressed how Tillerson  “showed disdain” to China’s “constructive approach.” “China has no military bases in the region and has dispatched no troops to any of the Latin American countries,” it said.

    Tillerson most of all bashed Venezuela. He suggested sanctions aimed at “the regime” and not “the Venezuela people,” and claimed that President Nicolas  Maduro could face a military coup even though Washington was not gunning for a regime change.

    In fact, doubts persist on whether President Donald Trump will even show up at the next Summit of the Americas in April in Peru. The contrast is stark with President Xi, who has visited three times since 2012.

    Still, a rash of academic papers has shown how Brazil and Argentina have reoriented their foreign policy from a “pro-South” stance towards a pro-US neoliberal view. Yet, China keeps advancing – geoeconomically and geopolitically.

    And that appears to be a trend. Washington will need to invest in a much more sophisticated game if it is to compete economically against China. That would turn out to be the ideal trade and investment scenario which would profit Latin America the most.

    Public opinion seems to have made up its mind. Across Latin America, according to a Gallup poll, approval of US foreign policy has dropped from 49% in 2016 to 24% last year. Approval of President Trump stands at a dismal 16%.

    In sharp contrast, China’s investment through the Belt and Road Initiative has given President Xi a distinct advantage. 

  • FOMC Minutes Preview: "The Most Likely Surprise Is 4 Rate Hikes In 2018"

    The Dollar is suddenly rising and rate hike expectations are now at their highest of the cycle – 2.76 hikes in 2018 are priced in – (despite stocks still not being anywhere near back to pre-Powell-put-implied levels).

    But as Rafiki Capital Management’s Steven Englander notes, the most likely surprise in the Fed Minutes tomorrow is that they may be leaning to four hikes in 2018, but the biggest surprise would be growing support to aim for above two percent inflation temporarily to make up for previous misses to the downside.

    The three versus four hike debate is already in the open with several FOMC participants referring to the possibility of four hikes.

    About 70bps are now priced in, versus around 65bps just before the meeting. The FOMC meeting occurred before high AHE and inflation prints, but in recent meetings the Minutes’ discussion has become more confident that inflation is picking up.  I think the risk is much greater that they signal growing confidence on inflation moving towards target more quickly than any indication that two hikes might be more appropriate than three.  

    This would not mean a strong, overt signal of four hikes but it is likely they could convey ‘three, maybe four’ as their stance. 

    They are unlikely to go full hawkish in the Minutes as there have been only moderate hawkish signals since, and monetary policy was probably discussed in between tinkling champagne glasses at Fed Chair Yellen’s last meeting.

    The problem for the inflation doves is that even if they are ultimately proved right, there haven’t been any recent data releases that would support the view that inflation will persist below two percent. The characterization of the dovish stance in the December Minutes now reads too aggressive:

    ‘With core inflation readings having moved down this year and remaining well below 2 percent, some participants observed that there was a possibility that inflation might stay below the objective for longer than they currently expected. Several of them expressed concern that persistently weak inflation may have led to a decline in longer-term inflation expectations; they pointed to low market-based measures of inflation compensation, declines in some survey measures of inflation expectations, or evidence from statistical models suggesting that the underlying trend in inflation had fallen in recent years.”

    Many of the factors the doves cite had turned before the FOMC (and have continued to move in that direction) so the discussion of downside inflation risk will become more tentative, and of upside risk, more concrete. 

    The bigger issue is whether they want to temporarily aim for inflation above two percent.  That discussion is simmering but with the January 31 meeting having been Fed Chair Yellen’s last, I doubt that they wanted to stir that pot just yet, given that they are in no position to make a decision.

    Recent Fed Statements have referred to the ‘symmetric inflation goal’ and The Statement on Longer term Goals and Monetary Policy Strategy, released at the January meeting, also refers to  ‘symmetric’ targeting of two percent inflation. 

    To most of us a symmetric inflation target means that we are as grieved by missing 0.2 percentage point to to the downside as to the upside. If you wanted to make up for past misses, it would be more correct to refer to a price level target. However, the June 2017 Minutes said:

    “It was also suggested that the symmetry of the Committee’s inflation goal might be underscored if inflation modestly exceeded 2 percent for a time, as such an outcome would follow a long period in which inflation had undershot the 2 percent longer-term objective.”

    which looks as if ‘symmetric’ could be seen as meaning making up for downside inflation misses with upside misses, at least in part. And some FOMC participants have used symmetric in a similar context.

    So far the Minutes have been coy about this possibility. The Minutes to the Dec. 2017 meeting stated:

    “…a few participants suggested that further study of potential alternative frameworks for the conduct of monetary policy such as price-level targeting or nominal GDP targeting could be useful.”

    I doubt there would be much change in this language until they have a good idea where they are headed and that is not the case now.  The mention in recent speeches has been casual, more discussed as a possible tweak, than pushed as a full-fledged policy alternative, so even it there are good arguments for it, I doubt that tomorrow’s Minutes is where it would be introduced as a full-fledged alternative. If I am wrong and the Minutes sound as if this target shift is under serious consideration, the USD would come under significant renewed pressure. 

    We would probably see some curve steepening as the shift is digested. 

    Bottom line: I go in with a hawkish lean, thinking that 75-80bps of 2018 hikes is closer to accurately pricing in the fed tilt and the current economic/inflation outlook.

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