- Hillary Clinton Is Backed By Major Republican Donors
Authored by Eric Zuesse,
An analysis of Federal Election Commission records, by TIME, which was published on 23 October 2015, showed that the 2012 donors to Romney’s campaign were already donating more to Hillary Clinton’s 2016 campaign than they had been donating to any one of the 2016 campaigns of (listed here in declining order below Clinton) Lindsey Graham, Rand Paul, Carly Fiorina, Chris Christie, Rick Perry, Mike Huckabee, Donald Trump, Bobby Jindal, Rick Santorum, George Pataki, or Jim Gilmore. Those major Romney donors also gave a little to two Democrats (other than to Hillary — who, as mentioned, received a lot of donations from these Republican donors): Martin O’Malley, Jim Web, and Lawrence Lessig. (Romney’s donors gave nothing to Bernie Sanders, and nothing to Elizabeth Warren. They don’t want either of those people to become President.)
Clinton is the only Democratic candidate who is even moderately attractive to big Republican donors.
In ascending order above Clinton, Romney’s donors were donating to: John Kasich, Scott Walker, Ben Carson, Marco Rubio, Ted Cruz, and Jeb Bush. The top trio — of Bush, Cruz, and Rubio — together, received around 60% of all the money donated for the 2016 race by the people who had funded Mitt Romney’s 2012 drive for the White House.
So: the Democrat Hillary Clinton scored above 14 candidates, and below 6 candidates. She was below 6 Republican candidates, and she was above 11 Republican candidates (Lindsey Graham, Rand Paul, Carly Fiorina, Chris Christie, Rick Perry, Mike Huckabee, Donald Trump, Bobby Jindal, Rick Santorum, George Pataki, and Jim Gilmore). The 6 candidates she scored below were: Jeb Bush, Ted Cruz, Marco Rubio, Ben Carson, Scott Walker, and John Kasich.
This means that, in the entire 17-candidate Republican field, she drew more Republican money than did any one of 11 of the Republican candidates, but less Republican money than did any one of 6 of them. So, if she were a Republican (in what would then have been an 18-candidate Republican field for 2016), she would have been the 7th-from-the-top recipient of Romney-donor money.
Therefore, to Republican donors, Hillary Clinton is a more attractive prospect for the U.S. Presidency than was 64% of the then-current 17-member Republican field of candidates.
Another way to view this is that, to Republican donors, a President Hillary Clinton was approximately as attractive a Presidential prospect to lead the nation as was a President Graham, or a President Kasich — and was a more attractive prospective President than a President Lindsey Graham, a President Rand Paul, a President Carly Fiorina, a President Chris Christie, a President Rick Perry, a President Mike Huckabee, a President Donald Trump, a President Bobby Jindal, a President Rick Santorum, or a President George Pataki.
To judge from Clinton’s actual record of policy-decisions, and excluding any consideration of her current campaign-rhetoric (which is directed only at Democratic voters), all three of those candidates who were in Clinton’s Republican-donor league — Graham, Clinton, and Kasich — would, indeed, be quite similar, from the perceived self-interest standpoint of the major Republican donors.
As to whether any one of those three candidates as President would be substantially worse for Republican donors than would any one of the Republican big-three — Bush, Cruz, and Rubio — a person can only speculate.
However, the main difference between Clinton and the Republican candidates is certainly the rhetoric, not the reality. The reason for that Democratic rhetoric is that Ms. Clinton is competing right now only for Democratic votes, while each one of the Republican candidates is competing right now only for Republican votes.
Hillary Clinton’s rhetoric is liberal, but her actual actions in politics have been conservative, except for her nominal support for liberal initiatives that attracted even some Republican support, or else that the Senate vote-counts (at the time when she was in the Senate) indicated in-advance had no real chance of becoming passed into law. In other words: her record was one of rhetoric and pretense on a great many issues, and of meaningful action on only issues that wouldn’t embarrass her in a Democratic primary campaign, to attract Democratic voters.
In terms of her actual record in U.S. public office, it’s indistinguishable from that of Republican politicians in terms of corruption, and it’s indistinguishable from Republican politicians in terms of the policies that she carried out as the U.S. Secretary of State for four years. Her record shows her to be clearly a Republican on both matters (notwithstanding that her rhetoric has been to the exact contrary on both matters).
In a general-election contest against the Republican nominee, Clinton would move more toward the ideological center, and so also would any one of the Republican candidates, who would be nominated by Republican primaries and so running against her in the general election, to draw votes from the center as well as from the right. The rhetorical contest would be between a center-right Clinton and a slightly farther-right Republican; but, at present, the rhetorical contest is starkly different on the Democratic side than it is on the Republican side, simply because the candidates are trying right now to appeal to their own Party’s electorate (Democrats=left; Republicans=right) during the primary phase of the campaign, not addressing themselves now to the entire electorate (as during the general-election campaign).
Only in the general-election contest do all of the major candidates’ rhetoric tend more toward the center. The strategic challenge in the general election is to retain enough appeal to the given nominee’s Party-base so as to draw them to the polls on Election Day, while, at the same time, being close enough to the political center so as to attract independent voters and crossover voters from the other side.
A good example of the fudging that typically occurs during the general-election phase would be the 2012 contest itself. Both Barack Obama and Mitt Romney drew closer to the rhetorical center during the general-election matchup; but they were actually much more similar to each other than their rhetoricever was. (After all, Obamacare is patterned upon Romneycare.) During the general-election Romney-Obama contest, Romney famously said that Russia "is without question our number one geopolitical foe, they fight for every cause for the world's worst actors.” Then, Obama criticized that statement, by saying, "you don't call Russia our No. 1 enemy — not Al-Qaida, Russia — unless you're still stuck in a Cold War mind warp.” But, now, as President, Obama’s own National Security Strategy 2015 refers to Russia on 17 of the 18 occasions where it employs the term “aggression," and he doesn’t refer even once to Saudi Arabia that way, even though the Saudi royal family (who control that country) have been the major funders of Al Qaeda, and though 15 of the 19 perpetrators on 9/11 were Saudis — none of them was Russian — and though 92% of the citizenry in the nation that the Saud family owns and whose ‘news’ media and clerics drum into those people’s heads the holiness of jihad, approve of ISIS (which the Saud family prohibit inside Saudi Arabiua even while supporting and funding the jihadists in Syria and elsewhere), and though the Sauds as the country’s leaders are using American weapons and training to bomb and starve-to-death Yemenis. Instead of calling the Saudi regime “aggressors,” we supply arms to them, and cooperate with them against their major oil-competitor, Russia. (For example, we arm the Saudi-funded jihadists that Russia is bombing in Syria, because Syria is a key potential pipeline route into Europe for Saudi oil and Qatari gas, to replace Russian oil and gas in Europe. So, we support the jihadists, even though Obama’s rhetoric opposes them — and even though Obama killed Osama bin Laden, whose Al Qaeda was funded mainly by the Saud family and their friends. Hillary Clinton is even more hawkish against Russia than is Obama. She would be even better for Republican donors than Obama has been.)
Also regarding such fudging: on 27 March 2009, President Obama in secret told the assembled chieftains of Wall Street, “My administration is the only thing between you and the pitchforks. … I’m protecting you.” Romney could have said the same, if he had been elected. And President Obama’s record has now made clear that he indeed has fulfilled on that promise he made secretly to them. The reality turned out to be far more like Romney, than like Obama’s campaign rhetoric had ever been. Similarly, on Obama’s trade-deals (TPP, TTIP, and TISA), he has been very much what would have been expected from Romney, though Obama in the 2008 Democratic Presidential primaries had campaigned against Hillary Clinton for her having supported and helped to pass NAFTA. Obama’s trade-deals go even beyond NAFTA, to benefit international mega-corporations, at the general public’s expense.
What Hillary’s fairly strong appeal to Romney’s financial backers shows is that the wealthy, because of their access to leaders in government, know and recognize the difference between what a candidate says in public, versus what the winning public official has said to them (in private) and actually does while serving in office. They know that she keeps her promises to them, not her promises to the electorate.
Hillary Clinton is a good investment for a billionaire — even for the 70% of them who are Republicans. And, based on those 2015 donation-figures, it seems that they would prefer a President Hillary Clinton, over a President Donald Trump. However, their three favorite candidates, in order, were: Jeb Bush, Ted Cruz, and Marco Rubio. But, in a Clinton-versus-Trump contest, Hillary Clinton would likely draw more money from Republican mega-donors than Trump would, and, of course, she would draw virtually all of the money from Democratic mega-donors.
In such an instance, Hillary Clinton would probably draw a larger campaign-chest (especially considering super-pacs) than any candidate for any political office in U.S. (or global) history. Hillary Clinton would almost certainly be the most-heavily-marketed political product in history, if she becomes nominated and ends up running against Trump.
* * *
Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.
- "There Will Be Hyperinflation" Japanese Lawmaker Warns "Kuroda Got It Wrong" With NIRP
Following The Bank of Japan's voyage into NIRP never-never-land, the market has sent a clear signal of its displeasure and now a growing number of Japanese officials (and former officials) are questioning Kuroda and Abe's Peter-Pan-ic dream that 'they' can fly. Having called for sub-zero rates more than two decades ago, Takeshi Fujimaki, the Japanese banker turned opposition lawmaker, warns "The BOJ is trapped," now that QQE efforts have flattened the yield curve, since "if the curve is steep, banks can make profits even at negative rates. It was a mistake to adopt negative rates after QQE." But it is Fujimaki's parting comment that should have most concerned, "Japan has ballooning debt and the BOJ is financing debt, that’s the problem… it will bust and there will be hyperinflation."
First – once again the lying ensues:
- *KURODA: BOJ EASING IS HAVING INTENDED EFFECTS
Doesn't look like it…
Governor Haruhiko Kuroda’s decision to charge for some deposits parked at the central bank is punishing those who hold the cash he just spent 2 1/2 years pumping into the economy. And, as Bloomberg reports, the BOJ is boxing itself into a corner because it won’t be able to stop its asset purchases once inflation takes hold, raising the specter of fiscal collapse as yields soar, 65-year-old Takeshi Fujimaki, the Japanese banker turned opposition lawmaker, said.
"The BOJ is trapped,” Fujimaki, who has been predicting an eventual default in Japan over the past 20 years, said in a Feb. 16 interview at his office in Tokyo. “Minus rates weaken the yen and push up inflation, but the BOJ doesn’t have the courage to expand negative rates because that will expedite a fiscal collapse."
While the European Central Bank has the same policies, Japan’s problem is that it adopted them in the reverse order, flooding the system with cash under qualitative and quantitative easing and then penalizing holders of cash with negative rates, Fujimaki said. That includes the central bank that now owns more than a third of the country’s government bonds.
“As a result of QQE, the yield curve has flattened and because bank deposits aren’t negative, banks are suffering from reserve curve that’s hurting their profitability,” said Fujimaki, who was briefly at Soros Fund Management in 2000, joined the Tokyo office of Morgan Guarantee Trust Co. in 1985 and won his upper house seat in July 2013. “If the curve is steep, banks can make profits even at negative rates. It was a mistake to adopt negative rates after QQE.”
It certainly seems like a problem…
As Bloomberg concludes, Japan has the world’s heaviest debt burden, with the ratio of borrowing to gross domestic product more than twice the average for Group of Seven nations. It will rise to 250 percent by 2018 from 246 percent in 2015, according to the International Monetary Fund.
“Japan has ballooning debt and the BOJ is financing debt, that’s the problem,” Fujimaki said. “The yen will weaken further and the risk heightens of a hard landing. There is no debate on an exit policy, so once the economy improves, it will bust and there will be hyperinflation. ”
And finally, as if that was not enought, just tonight we get more Peter-Pan(ic) ravings – this time from Aso:
- *ASO: SALES TAX IMPORTANT FOR CONFIDENCE IN GOVT. BONDS
- *ASO: NO DOUBT THAT JAPAN ECONOMIC FUNDAMENTALS ROBUST
Well with JGB yields at record lows after all the idiocy they have done, "confidence" may be misplaced. But as far as "robust" economic fundamentals – that is a fairy tale that noone believes:
There's this…
- *JAPAN 4Q PRIVATE CONSUMPTION FELL 0.8% Q/Q
Or this…
Oh, and this…
But apart from that – yeah, it's robust. Are Japanese leaders simply relying on a media that is now under their direct control and a population aging into senility that will soon be unable to comprehend anything?
- "Private Capital Is Running Away From Trouble"
By Keith Dicker of IceCap Asset Management
Journey to the Center of the Earth
Question: Why is the world in an economic funk?
Answer: Private Capital is running away from trouble
Chart 2 shows two variables. The BLUE line shows the amount of quantitative easing or money printing in the USA. Up until September 2008, the amount of money made available to the economy increased in a gradual manner. Thereafter it became a gong show.
The RED line shows the Velocity of Money. Velocity of money is just another way to measure how well the economy is doing. And, while they are loathe to admit it, it is one of THE most important data points monitored by central banks every minute of the day.
Velocity of money measures how fast money swishes around an economy. The faster it swishes around, the faster the economy is growing. Naturally, the opposite is also true and this is what is happening today.
“Why is the world in an economic funk?” is the wrong question. Instead, the correct question to ask is “why is the velocity of money declining?”
And more importantly, “Why, despite the printing of trillions of Dollars, Yen, Sterling and Euros, is the Velocity of Money declining?”
The answer of course is quite simple: Private Capital does not like the actions by central banks and governments, and is therefore withdrawing their money from the global economy. And it is heading towards the center of the earth. Yes, it really is as simple as that.
Yet, the irony is that our central banks and governments have no clue as to the risks they have created.
They honestly believe their efforts to stimulate the economy is groovy. But since their stimulus isn’t working – the answer is to do more of the same.
Maybe we should make them all memorize Einstein’s quote “Insanity: doing the same thing over and over again and expecting different results.”
Yes, the insanity continues. And judging by recent actions, it will continue for a while longer, until that is, the bond market makes them stop.
Fortunately, we are getting closer to a resolution. And when (not if) it happens, it will be spectacular.
The question of course is “will you see it coming”?
* * *
By our estimate, today’s market is equivalent to late 2006 or early 2007. We could be off by as many as 12-15 months, and until it happens most investors, advisors and managers will continue to sing along, whistling happy-go-lucky tunes.
We wish them luck.
Meanwhile, if you find it difficult understanding the banking and insurance industry don’t feel bad, after all they do play by different accounting rules than every other company.
Instead, simply follow interest rates around the world. The closer long-term rates get to ZERO%, and the increase in government bonds trading at NEGATIVE interest rates, the closer we are experiencing a fairly big shift in financial markets.
To understand why we expect the bond bubble to end sooner versus later, grab a drink and stare at Chart 3 on this page.
Currently, over $5.5 TRILLION of bonds pay investors a NEGATIVE INTEREST RATE. In other words, investors are PAYING governments for the privilege of lending them money.
If you don’t understand interest rates, just accept that interest rates should always be a POSITIVE #. Otherwise, it just doesn’t make sense, it’s illogical. it’s ridiculous. It’s absurd. Yet, this is the journey created by our central banks and governments all in the name of making the world a better place.
From a different perspective – these negative interest rates should be viewed as your best financial gift ever.
Understanding why this is happening, tracking the absurdity behind it all and monitoring global interest rates will provide you the little nudge needed to know when the bubble will break. We’re not there yet. But, we’re getting a lot closer.
No market acts in isolation. Stocks, bonds, currencies, gold, Super Bowl tickets – they are all influenced by each other.
When the bond market reaches its zenith, it will likely be getting little fan fare – instead, other asset classes such as stocks and currencies will still be getting all of the attention (again – sorry Bonfire of the Vanities).
We anticipate significant capital running away from perceived dangers, and towards the bond market for safety.
And once this capital is resting comfortably, that dreaded “oops” feeling suddenly appears, making investors’ faces turn white – the bond market was the biggest trouble after all.
* * *
Read the full presentation in the pdf below
- As The Bush Dynasty Ends, This Is What Jeb Spent $130 Million On
The Bush dynasty ended not with a bang, but a whimper on Saturday when Jed Bush officially threw in the towel at the feet of Donald Trump, but not before spending $130 million for his now failed presidential campaign.
As the NYT reminds us, when Jeb Bush formally entered the presidential campaign in June, there was already more money behind him than every other Republican candidate combined. When he suspended his campaign on Saturday night in South Carolina, Mr. Bush had burned through the vast majority of that cash without winning a single state. It may go down as one of the least successful campaign spending binges in history.
Here are some of the things Jed spent his backers’ money on:
Positive Advertising: $84 Million
When Mr. Bush finally did get in the race, he needed to reintroduce himself to the Republican electorate. After all, it had been eight years since the end of his final term as Florida’s governor, and he had spent the intervening period as a philanthropist, consultant and investment banker. His campaign and a super PAC supporting him spent heavily on sunny advertising spots in the hopes of announcing Mr. Bush to the post-Tea Party Republican Party as a credentialed conservative.
Clubbing: $94,100
Instead of spending last winter on the hustings of Iowa and New Hampshire, Mr. Bush held off, instead using the first half of 2015 to raise money in places like New York, Chicago, Texas and Florida. His goal: Raise enough money for a “super PAC” to scare other candidates — especially those with a similar political profile — out of the race. Over the entire campaign, Mr. Bush’s team racked up tens of thousands of dollars in dinner and event tabs at the Yale Club, the Union League Club of Chicago, Nantucket’s Westmore Club, and more than two dozen other haunts of the well heeled and racquetball-inclined.
Valets: $15,800
Donors’ cars don’t park themselves. With an aggressive fund-raising schedule and several major donor gatherings, Mr. Bush and the super PAC, Right to Rise, incurred a proportional parking tab.
People: $8.3 Million
As Mr. Bush’s campaign matured, he and the group supporting him built one of the largest organizations of any candidate in either party, banking that his superior fund-raising would sustain his high overhead costs, which in turn would yield him wins or near-wins in states like Iowa and New Hampshire, where organizing is critical. But Mr. Bush’s message — experience, civility and technocratic competence — did little to win over voters mesmerized by the billionaire provocateur Donald J. Trump, who outshone his rivals with a bare-bones organization and millions in free media exposure.
Branding: $88,387
Right to Rise, the super PAC supporting Mr. Bush, and then his campaign directly, retained 30 Point Strategies, a public relations company in Bethesda, Md., specializing in “thought leadership” and “brand journalism,” according to the firm’s website. But in the end, the most lasting label of Mr. Bush was supplied by Mr. Trump: “low energy.”
Vegas, Baby: $48,544
Mr. Bush and his staff racked up sizable travel bills, including $3.3 million in airfare and hundreds of thousands of dollars at hotels, ranging from a Best Western in Phoenix to the Biltmore in Coral Gables, Fla. But what stands out is the Bush team’s taste for the Vegas Strip, where aides and allies patronized the Bellagio, the Wynn and the Venetian, owned by Sheldon Adelson, the Republican megadonor.
The Consultants: $10 Million
A well-funded candidate tends to attract hordes of consultants, and Mr. Bush had plenty. All told, his team paid consulting fees to around 140 different companies or individuals, including senior campaign staff members, opposition research firms, and get-out-the-vote operatives in Iowa and South Carolina.
Pizza: $4,837
As his fortunes declined this winter, Mr. Bush sharply pared back employees’ salaries and consulting fees, even laying off some campaign staff members to bring down costs. But let it never be said that Mr. Bush allowed his team to go hungry. His campaign and super PAC were particularly fond of the pizza, whether from Domino’s or from Pizza Ranch, the Iowa chain.
* * *
Or as summarized best by a tweet…
Summing up: a Bush spends fortune to lose war against extremists.
— Paul Musgrave (@rpmusgra) February 21, 2016
- Raoul Pal Previews "The Big Reset": How The Kondratieff Winter Unwinds
The last time we hosted a video by RealVision’s Raoul Pal, he laid out what indicators he looks at to decide if the next crisis has arrived, of which global ISM was notable but global trade was the key one, and explained that while the Fed is clearly aware of the economy’s deteriorating condition, it is Yellen’s job to preserve a sense of confidence and security until the bitter end.
In his latest video released this past week, we are that much closer to the end as the title of his interview with Grant Williams makes clear: The Reset Part 2.
In it Pal, who like us has been skeptical on the future of Deutsche Bank and most other European banks, walks us through his thoughtsfor predicting the collapse of several European banks from a Macro perspective. He explains what CoCo bonds are and how they are creating a market death-spiral for bank stocks which will ultimately trade at 0.
In the full 45-minute long video, Grant and Raoul discuss the impact and influence of monetary policy in this current economic environment, the policies in place and the possible monetary strategies/tactics to fend of deflation.
Raoul also takes aim at the global liquidity crisis, QE and the effects on the real economy and financial markets. The point at the fact that on a global spectrum, they’re no longer booming and growing economies of any significant magnitude – namely China – can no longer absorb all the deflationary waves of other economies. Raoul reflects on how much of CB liquidity injections (i.e.QE)/monetary expansion has been mainly flowed into the institutions which cannot provide that liquidity to the markets nor the real economy, creating massive mechanical financial black holes of illiquidity.
They two go through the probabilistic outcomes we could expect in the “next” recession; from a Chinese implosion, Japanese collapse, European banking sector crash, USD bull run, loss of Central Bank omnipotence, and other less than enjoyable outcomes.
Raoul then looks at what a NIRP world would look like, where wealth is taxed upon and considers the possibilities in portfolio construction and attractive trades such as long Treasuries. Here, Pal goes one better than Guggenheim which forecast the 10 Year at below 1% by year end, and forecasts that the yield on the 10Y will slide to 0.5% posing a complex systemic risks to pension funds and along with Central Banks, could begin to own large chunks of stock markets.
Naturally, with a rather sour outlook on risky assets, Pal then looks at the dynamics of gold as an and explains how he believes the market and price-action will react and play out.
As Pal says: “In the end, we are just part of the business cycle, if you create a debt super-cycle, you are going to get a bust.”
Finally, they both discuss the different unwinds of this Kondratieff winter
phase, acknowledging the possibilities of a “Fourth Turning” in the form
of geopolitical unrest, a.k.a. war.And while there is much more in the full interview, here is the real question Pal is trying to answer before the big reset:
“I think the most likely outcome, in the next recession one of the big uglies comes out.
I don’t know which one it’s going it be – it’s a race between China and a 50% deval versus a total collapse internally of their economy because of their credit bubble; whether it’s Japan which we have all been waiting for and it hasn’t happened but maybe it happens; or maybe it’s the European banking sector forcing the hand of everybody else, and suddenly all the collateral in the system is worthless again because the European government bonds are worthless again; whether it’s just the loss of central bank control over the monetary system; whether it’s the dollar wildly overshooting and then maybe some debt jubilee and debt forgiveness that needs to happen.
There’s a whole host of things, it’s almost impossible to know which one it is but what we need to care about is not trying to spot the one it’s about is there going to be a domino effect.”
As usual, RealVision has provided Zero Hedge readers with a free trial to its extensive one of a kind video library of countless informative interviews, which can be accessed at the following link.
- The Monetary Policy "Berlin Wall" Is Coming Down
Submitted by Adam Taggart via PeakProsperity.com,
As we've been watching closely, something is wrong with the big banks. Their shares have lost 25-33% of their market value since the beginning of the year. What's going on?
The turmoil seems greatest in Europe, where bank shares have fallen the hardest, and negative interest rates have appeared with increasingly frequency across member countries.
To make sense of it all, we've invited Steen Jakobsen back on, Chief Investment Officer of Saxo Bank, who can provide an eyes-on-the-ground perspective on the European banking system from his location in Copenhagen:
Clearly what we've seen over the course of the first quarter this year is that the ability of central banks to do their magic in terms of talking to the market with the rhetoric of "low for longer" and the likes is running on empty now.
If we look back in chronological order of what happened this year, first we had, of course, the Fed with Yellen and Fischer backing down slightly from the three to four hikes they promised in December. That was followed very quickly by, of course, Draghi promising to do 'Whatever it takes!' yet again in March this year. Then the BOJ went negative on interest rates and a number of European central banks followed suit. So much so that actually right now if you look at the G7 governments, about 50 percent of all G7 government is now trading at a negative yield, which seems to be the new solution from central banks.
I think the market is seeing right through that because, of course, at the center of all of this at all times will be the banking system, a banking system that is getting penalized for the negative interest rate. Coming from a country which has some experience with negative interest rates, what is really happening to the banking sector here is that, as a depositor, I get paid 0% to have my money in the bank. I should, in reality, be paying 30-, 40-, 50-basis points, but so far I've been cushioned by the banks. That cushion is costing the banks money.
Likewise, that is reason why negative interest rates are not having any bearing in terms of growth. Very dramatically last week I made the headline that, to some extent, in a monetary-policy history perspective, this could be the Berlin Wall coming down because we've had the Greenspan put, then the Bernanke put. But there doesn't exist a Yellen put for a number of reasons. Not because of her, but just because time has run out. So I think that explains the volatility.
The real question for an investor, in my opinion, is to ask yourself: Is this merely the latest "extend and pretend" maneuver, which is about to happen again with Draghi coming full online in March and the BOJ doing another desperate action and the Fed backing down. Or is it the end of the debt cycle? That is the trillion-dollar question right now.
Click the play button below to listen to Chris' interview with Steen Jakobsen (40m:01s)
- The World Is Hoarding Gold: "This Was Just A Taste Of What's To Come"
Submitted by Mac Slavo via SHTFPlan.com,
Earlier this month, as retail investors lost confidence in the global economy and broader stock markets, an air of panic began to set in. Reports indicate the lines were literally forming around the block at gold stores throughout London and elsewhere. It was, by all accounts, the very scenario one might expect in an environment where trust in government and central banks has been eroded.
But it’s only the beginning, explains Auryn Resources executive chairman Ivan Bebek in an interview with SGT Report, as nation states and large investors are trying to get their hands on gold as fast as they can:
Before any big move in gold we have always seen extreme volatility or volatility pick up. This was just a taste of what’s to come in the next few years… We’ll look back at this and be reflecting on how minimal this move was compared to what’s going to happen as we go forward…
It’s a smart money trend… they can see where their countries are going… where the world economy is going… it’s surprising how late they are to the party… late to a very small door to get a bit of gold that’s out there… it’s going to be a remarkable reaction when that all comes to fruition. They’re just positioning themselves for what’s to come and that’s what they have to do. And getting back into the gold trade, the gold business and hoarding gold… they’re doing that because they see a very big gold market coming ahead like the rest of us.
Full Video Interview:
And while there is most certainly big money moving into gold ahead of negative interest rates, a potential ban on high denomination cash bills and the global calamity to come, Bebek highlights the fact that retail investors haven’t yet begun to get involved on any meaningful scale. Many remain committed to the view of mainstream financial pundits and entrenched analysts talking their books, so they’re going to hold on to their more traditional investments until such time that they see everyone else panic. And when that inevitable rush to the exit door comes they’ll be looking to shift their capital into safe haven assets, along with the rest of the herd.
But just as there will be only one exit door for the mob trying to sell, there will also be a small entrance way for those looking to protect themselves with gold:
When you took the 2011 gold run to $1900… and you took the market cap of all the gold companies in the world… they would have fit into one big tech company on the NASDAQ. That’s how small the world gold investing market is.
So, when you look at the size and scope of the money that can come into the gold market… the door on the way out and the door on the way in… it’s really small.
…
This is the start of the turn and it’s a very small door, meaning there are very few gold investments to make. In a few years there will be hundreds of gold companies like ourselves, or even thousands like there were before.
But that first wave is where all the money is made. You can go back to 2002 – 2004 and you look at the first wave and you look at what happens when gold starts to move… what happens to gold equities… the 100%, 200%, 1000%, and 10,000% returns… those all can happen from this point forward.
It’ll be the place to put your money. At the same time, the early few years will be where most of the money is made percentage-wise.
What we saw in London a couple of weeks ago was a microcosm of what’s to come. Though there remain those like former Federal Reserve Chairman Ben Bernanke who say central banks and governments buy gold not because it’s money but because it’s tradition, that narrative, says Bebek, has fallen apart:
Five or six years ago they got onto that page, but now they can no longer say it. When you have China, Germany, Europe and all these world economies believing that it’s not a tradition… that they need to own it as a currency… it doesn’t matter what they say because the demand is so big worldwide… actions are bigger than words… the world is hoarding gold… they’re starting to go long gold… so that defeats the whole argument they have been making.
We know for a fact that the smart money including major global players like George Soros and Carl Icahn are gobbling up all the gold they can get their hands on. When the rush for the exit in global equities starts – and you better believe it will – there will be an equally panicked rush into safe haven assets.
We literally saw how small the door was as people lined up to get their hands on physical gold. Now imagine, as Auryn Resources’ Ivan Bebek noted, what that line will look like on a global scale and what it will do to gold prices.
- As Foreign Central Banks Quietly Park $250 Billion In Cash At The Fed, A Mystery Emerges
When the Fed unveiled its reverse repo program several years ago, it was meant to be a means for the Federal Reserve to soak up excess liquidity from domestic financial institutions when the Fed eventually proceeded to hike interest rates, as it did in mid-December. However, one look at the chart below shows something odd: while the liquidity which the domestic financial sector parked at the Fed clearly spikes at quarter and year end, this has been solely for window dressing purposes to make bank and money market balance sheets appear strong than they are for regulatory purposes, overall usage of the Fed’s domestic reverse repo has actually declined since the Fed’s rate hike.
There has been much confusion why this is, with experts such as Wedbush’s Scott Skyrm scratching their heads and deciding that there continues to be a substantial mismatch between what the prevailing liquidity level should be at a Fed Funds rate of 25 – 50 bps, and what is actually taking place in the open market if such a thing even exists. The implication is that banks continue to find better uses for their cash than giving it to the Fed to receive the guaranteed rate which on the domestic facility is about 0.25%.
However, while use of the Fed’s domestic reverse repo program has declined in recent weeks, an unexpected market participant has taken the place of domestic financial entities: foreign central banks.
As the chart below shows, the Fed’s offshore peers have been aggressively parking their overnight deposits at the Fed’s reverse repo facility designed for “foreign official and international accounts”, one which was has been around in some iteration ever since the 1970s, and whose usage has soared by $50 billion since the Fed’s rate hike and by a whopping $150 billion since the beginning of 2015.
Why the dramatic surge?
The answer is not exactly clear, but has to do with the interest that the Fed is paying on the foreign reverse repo. While the Fed for unknown reasons does not disclose what rate it pays its foreign central bank peers, according to the WSJ, analysts estimate it to be between 0.33% to 0.35%. By comparison the domestic facility is about 10 basis points lower.
As the WSJ writes, questions related to this murky facility abound: “we would like to know how the rate is determined because we want to have a clearer understanding of how the program is interrelated with the demand for bills,” said Joseph Abate, money markets analyst at Barclays PLC.
Zoltan Pozsar, a researcher at Credit Suisse Group AG , wrote in a client note this month that the rate on the foreign repo pool has been rising, giving incentive to foreign account holders to put their money there, and it would be useful if the Fed provided more information. The Fed “has some explaining to do,” he wrote.
The Fed itself keeps disclosure on the facility to a minimum. This is what the NY Fed says on its website:
The New York Fed provides limited investment services to its foreign official and international account holders. Principal among these is the foreign repurchase agreement pool (foreign repo pool). This investment service operates as follows: at the end of each business day, cash balances across these accounts are swept and invested in an overnight repurchase agreement using securities held in the System Open Market Account (SOMA). At maturity, on the following business day, the securities are repurchased at a repurchase price reflecting a rate of return tied to comparable market-based Treasury repo rates.
The foreign repo pool is a short-term liquid, U.S. dollar investment option for account holders and supports daily cash management needs to clear and settle securities. This investment service has been a standard provision of the New York Fed to foreign public sector account holders for many years and is separate from monetary policy operations, including the overnight and term reverse repo operations.
That’s about all that is known about the program: the Fed keeps most details of the foreign repo program confidential, including users’ identities, the daily market-based rate, and how that rate is derived, in part to protect activity by foreign official institutions. Unlike some fixed rates, foreign reverse repo rates aren’t published daily. When asked by the WSJ, the Fed declined to comment on them.
As the WSJ’s Katy Burne writes, “the program now seems to be at the center of how they are building a liquidity cushion at a time of heightened market uncertainty and relatively unattractive rates on bank customer deposits.”
To be sure, the global dollar shortage first profiled here nearly a year ago is a factor:
Lately, market conditions have put a premium on the availability of U.S. dollars and lent new importance to the facility, as investor anticipation of additional Fed rate increases has squeezed emerging-market economies with weakening currencies. Because institutions have flocked to dollar assets, borrowers overseas may now struggle to raise enough cash to pay down debts.
Already, central banks in emerging markets have run down their foreign-currency reserves at the fastest pace since the financial crisis.
And yet here they are, sweeping dollar deposits and parking them at the Fed in hopes of collecting a meager interest boost.
A key factor likely has to do with with arbing short term Treasury bills: as noted above, the rate on the facility is estimate at 0.33% to 0.35%. A such it provide an immediate arbitrage to the 0.26% rate available on one-month Treasury bills.
Ironically, while the Fed’s facility provide far better liquidity options, in that the cash is only locked up overnight, it also pays a higher interest than Bills that have a far longer maturity; Bills which when if sold move the market and may result in capital losses.
Indeed, as the WSJ notes, recently, yields on ultra-short-dated bills have been climbing, in part because the U.S. Treasury Department has issued more of them. The drop in price has reversed the premium demanded last year when the bills were in tight supply. But the rate on the foreign repo pool remains higher than the rate on one-month bills and the domestic repo program.
What also explains this drop in price is that as foreign institutions increasingly use the Fed’s facility, they move some of their dollars out of Treasurys and into the facility, the price of Treasurys falls and the yield rises.
As expected, according to ICAP’s Lou Crandall, “much of the recent activity can be explained by Japanese officials liquidating U.S. Treasury notes and parking the proceeds in the foreign facility, judging from the changing reserve assets reported by Japanese authorities.”
Others agree: “Peter Yi, who oversees about $230 billion of short-term fixed income products at Northern Trust Asset Management, said central bank’s use of the foreign repo pool has been contributing to higher Treasury bill rates.”
And of course, if indeed the Fed is paying a premium to comparably risky securities, then there is no question why foreign central banks would be rushing into the safety of the printer of the world’s reserve currency.
The question is why is the Fed effectively allowing this arbitrage, one which reduces foreign demand for short-term securities, in the process boosting their yield, while providing what amounts to yet another handout to offshore entities.
Recall that as we first reported in 2011, it was the Fed’s generous payment of interest on excess reserves to foreign commercial banks that provided a big boost to those same deeply insolvent banks, who had parked hudnreds of billions in excess reserves with the Fed during QE1, 2 and 3, which incidentally is the Fed’s own money created out of thin air.
In fact, according to the latest Fed data, foreign banks remain the single biggest beneficiary of the Fed’s generous excess reserve policy, with some $1.1 trillion in reserves – more than either large or small domestic commercial banks – parked at the Fed belonging to foreign commercial banks: these reserves now collect a rate of 0.50% per year, a rate which is set to rise with every incremental rate hike.
While it is debatable if the billions in interest the Fed paid to foreign banks was equivalent to a slow-motion cash bailout (one set to increase), what is not debatable is that the same Fed which for 7 years provide generous funding to offshore commercial banks, is now granting foreign central banks the same arbitrage privilege, one which worst of all, is almost entirely shrouded in secrecy.
Perhaps during the next congressional testimony, instead of populist pandering, the Fed can ask Janet Yellen just why the Federal Reserve is making its reverse repo facility be a more attractive “investment” for foreign central banks than the ultra short-term securities issued by the Treasury of the world’s reserve currency. In effect, the Fed has made its own “product offering” a more attractive investment than the government which it, by definition, is supposed to serve.
And finally one last question: if U.S. citizen savers get a 0.0% interest rate courtesy of the Fed despite the Fed’s rate hike, why are foreign central banks getting 0.35% from the Fed?
- A "Nervous" NATO Fears Turkey, Russia May Soon Go To War
If you want our take – and let’s face it, you must because that’s why you’re here – we wouldn’t put too much faith in today’s announced Syrian “ceasefire” agreement.
Although the deal calls for the cessation of hostilities as of Saturday at midnight, you shouldn’t expect the Russians and the Iranians to halt their advance on Aleppo and likewise, you shouldn’t expect Turkey to stop shelling the Azaz corridor in a largely transparent effort to keep the supply lines to the rebels open.
The stakes are simply too high now. As we’ve explained exhaustively, the fall of Aleppo to Hezbollah and the Russians would for all intents and purposes be the end of the rebellion. Assad would once again control the bulk of the country’s urban backbone in the west and that would mean his rule would be effectively restored.
Additionally, don’t expect Hezbollah to simply pack up and head back to Lebanon once the rebels are defeated. Iran will most likely keep Hassan Nasrallah’s army in place to provide security as well as members of the various Shiite militias the Quds called over from Iraq. Similarly, the Russians won’t be going anywhere either. Vladimir Putin now has an air base and a naval base in Syria and The Kremlin will want to protect those installations vociferously during what is likely to be a turbulent couple of years following the demise of the rebel cause.
Turkey and Saudi Arabia know all of this and they’re fuming mad. The last thing Saudi Arabia wants is for Tehran to preserve the Shiite crescent and the supply line to Lebanon and Turkey is now in a bitter feud with the Russians following Erdogan’s ill-fated move to down an Su-24 near the border on November 24.
Both Riyadh and Ankara have indicated that they would participate in ground operations in Syria and most recently, the Turks have been busy shelling the Syrian Kurds to keep what’s left of the supply lines to the rebels open and prevent the Russian-backed YPG from consolidating territorial gains and uniting a Kurdish proto-state on Turkey’s border.
All of the above has NATO rattled, but the thing that worries the alliance the most is the possibility that Turkey will end up in an armed, direct confrontation with Russia. Were Russia to attack Turkey, NATO would be obligated to defend Ankara but that defense would mean going to war with Moscow and, most likely, with Iran.
Below, find some insightful – if slightly biased – commentary from Der Spiegel on NATO’s “Article 5” problem.
* * *
From “Putin Vs. Erdogan: NATO Concerned Over Possible Russia-Turkey Hostiities” as published in Der Spiegel
It was a year deep in the Cold War, a time when the world was closer to nuclear war than ever. There were myriad provocations, red lines were violated, airspace was infringed upon and a plane was shot down.
The situation was such that an accidentally fired missile or a submarine captain losing his cool would have been enough to trigger World War III. It was 1962, the year of the Cuban Missile Crisis — an incident the current Russian prime minister finds himself reminded of today. At the Munich Security Conference last weekend, Dimitri Medvedev invoked the danger of a new Cold War. “Sometimes I think, are we in 2016 or 1962?”
Officials in Berlin have likewise been struck recently by a strange sense of déjà vu.
Syria is the Cuba of 2016 and the risk of an international confrontation there is growing by the day.
Officials in Angela Merkel’s Chancellery in Berlin are concerned about how close NATO has already come to a conflict with Russia. Indeed, Syria could become a vital test case for the military alliance. But the situation is complex: In order to thwart Putin, NATO must make it clear that it stands behind its member states in their moment of need. Yet NATO also wants to avoid a military conflict with Russia at all costs.
Officials at NATO headquarters in Brussels view the situation between Ankara and Moscow as being extremely volatile. “The armed forces of the two states are both active in fierce fighting on the Turkish-Syrian border, in some cases just a few kilometers from each other,” one NATO official says.
Since Russia became a party to the war in Syria at the end of September, there has been a significant risk of open confrontation between Moscow and Ankara. Russia has thrown its support behind the troops loyal to Syria’s unscrupulous dictator Bashar Assad while Turkey is supporting the rebels who would like to topple his autocracy.
The conflict intensified at the end of November when Turkey shot down a Russian warplane and now Putin has forged an alliance with the Syrian Kurds, Erdogan’s archenemies. The Turkish president holds the Syrian Kurds responsible for the attack on Wednesday in the Turkish capital, which saw an explosion in central Ankara kill 28 and wound 61. Syrian Kurds have denied responsibility, but the bombing has ratcheted up tensions between Ankara and Moscow even further.
Turkey too has done its part in recent weeks to ratchet up the escalation. Turkish troops are now firing artillery across the border at Kurds in Syria and Ankara has also been thinking out loud about possibly sending ground troops into Syria to take on the Kurds.
That would be a nightmare for the West: Direct fighting between the Kurds and the Turks could mean that Russian troops would be soon to follow. What, though, would happen were a NATO member state to fire at Russian soldiers? Officials in the Chancellery hope that the alliance wouldn’t be directly called on to get involved, as long as the fighting was limited to Syrian territory.
In an effort to prevent further escalation, NATO has made it exceedingly clear to the Turkish government that it cannot count on alliance support should the conflict with Russia head up as a result of a Turkish attack. “NATO cannot allow itself to be pulled into a military escalation with Russia as a result of the recent tensions between Russia and Turkey,” says Luxembourg Foreign Minister Jean Asselborn.
Should Turkey be responsible for escalation, say officials in both Berlin and Brussels, Ankara would not be able to invoke the NATO treaty. Article 4 of the alliance’s founding treaty grants member states the right to demand consultations “whenever, in the opinion of any of them, the territorial integrity, political independence or security of any of the Parties is threatened.” Turkey has already invoked this article once in the Syrian conflict. The result was the stationing of German Patriot missiles on the Syrian border in eastern Turkey.
The decisive article, however, is Article 5, which guarantees that an “armed attack against one or more of (the alliance members) in Europe or North America shall be considered an attack against them all.” But Luxembourg’s Foreign Minister Asselborn notes that “the guarantee is only valid when a member state is clearly attacked.”
“We are not going to pay the price for a war started by the Turks,” says a German diplomat. Because decisions taken by the North Atlantic Council, NATO’s primary decision-making body, must always be unanimous, it is enough for a single country to exercise its veto rights, the official says. But, the official adds, it won’t get that far: there is widespread agreement with the US and most other allies that Turkey would get the cold shoulder in such a case.
* * *
Yes, but as Erdogan advisor Seref Malkoc made clear over the weekend, Ankara is getting fed up with the “cold shoulder” and if there’s anything the Turks aren’t scared to do, it’s act unilaterally.
While NATO might indeed scold Ankara and seek to stay out of an open conflict in the initial stages, it’s unlikely that the alliance would stand idly by should Russia and Turkey actually go to war.
As a reminder, Turkey has already gotten two strikes. Erodgan downed a Russian drone and then shot down a Russian warplane. Turkey is now shelling areas where Russian and Iranian forces are very likely to be operating, if not now, then within a couple of weeks.
We can promise you that when it comes to shooting at Russian assets, be they planes, drones, or soldiers, Turkey will not get a strike three.
- Wikileaks Releases Proof Of NSA Spying On Merkel, Netanyahu, Berlusconi And Others
In a shocking new set of cables released by Julian Assange's Wikileaks organization, highly classified documents show that the NSA bugged meetings between UN Secretary General Ban Ki-Moon's and German Chancellor Angela Merkel (over climate change); between Israel prime minister Netanyahu and Italian prime minister Berlusconi (begging for help to deal with Obama); between key EU and Japanese trade ministers discussing their secret trade red-lines at WTO negotiations; as well as details of a private meeting between then French president Nicolas Sarkozy, Merkel and Berlusconi, exclaiming that the Italian banking system would soon "pop like a cork." Time for some more explaining Mr.President.
Some documents are classified TOP-SECRET / COMINT-GAMMA and are the most highly classified documents ever published by a media organization.
WikiLeaks editor Julian Assange said:
"Today we showed that UN Secretary General Ban KiMoon's private meetings over how to save the planet from climate change were bugged by a country intent on protecting its largest oil companies.
We previously published Hillary Clinton orders that US diplomats were to steal the Secretary General's DNA.
The US government has signed agreements with the UN that it will not engage in such conduct against the UN–let alone its Secretary General. It will be interesting to see the UN's reaction, because if the Secretary General can be targetted without consequence then everyone from world leader to street sweeper is at risk."
Some examples are as follows:
European NSA Intercepts
EU, Japan Study Ways to Respond to U.S. Tactics in Doha Round Talks
Date 2006
Classification TOP SECRET//COMINT//NOFORN
WikiLeaks Synopsis
NSA report on intercepted Japanese diplomatic talks reveals details on U.S. and EU participation in Japanese economy, and commitment of EU to avoid "under-the-table" deals with the U.S.
(TS//SI//NF) EU, Japan Study Ways to Respond to U.S. Tactics in Doha Round Talks
(TS//SI//NF) The EU and Japan were engaged as of early December in strategy sessions aimed at a common handling policy to deal with potential U.S. moves in the Doha Round negotiations. There was a conviction in both Brussels and Tokyo, according to Japanese reporting, that great care must be taken to avoid falling prey to U.S. moves designed to extort concessions through exaggerated initial demands. Regarding U.S. domestic supports for agriculture, for example, Japanese Minister of Agriculture, Forestry, and Fisheries Toshikatsu Matsuoka and EU Agriculture Commissioner Marianne Fischer-Boel recently pondered whether to jump-start the negotiations by asking the U.S. for a specific dollar figure in reduced supports. The problem for the EU, it was noted, is whether or not the proposed $17 billion mark is an acceptable point of departure, since U.S. supports at that level are judged to be in no way comparable to the breadth of market access that Brussels put on the table last July. A figure of $14 to $15 billion would be more in line with the EU's thinking, Fischer-Boel indicated. The EU also had concerns that Washington may be headed for a showdown with developing countries over special products. As for sensitive products, Fischer-Boel's deputy chef de cabinet, Klaus-Dieter Borchardt, hinted to the Japanese that the EU may be willing to go lower than its current official limit of 8 percent, possibly as low as 4 to 5 percent; however, that would be hard for Japan to accept. Borchardt also tried to allay Japanese fears that the EU might try again to enter into a bilateral, under-the-table deal with the U.S. (as had happened in Cancun in 2003), saying that Brussels had learned its lesson with respect to such back-door actions.
Unconventional
Japanese leadership
Z-3/OO/33343-06, 291712Z
United Nations Intercepts
Japan Seeks Long-Term Pact With Specific Figures on Climate Change at G-8
Date 2008
Classification TOP SECRET//COMINT//NOFORNWikiLeaks Synopsis
Intercepted communication between Japanese and German diplomats reveal plans and concerns regarding the negotiations on climate change to be had at the G-8 summit in Copenhagen in 2009.Japan Seeks Long-Term Pact With Specific Figures on Climate Change at G-8 (TS//SI//NF)
(TS//SI//NF) Japan, preparing for its role as chairman of the Group-of-8 (G-8) summit at Lake Toya early in July, has given notice that it intends to strive for a long-term commitment on climate change with specific figures, while Germany believes that the crucial issue at the summit is whether the U.S. will accept going beyond Heiligendamm (the site of last year's G-8 summit) language in the framework of the G-8 if the emerging countries do not accept numerical targets at the Major Economies Meeting (MEM). (According to press reports, leaders from 16 countries, including the members of the G-8 plus China, India, Brazil, Australia, Indonesia, South Korea, South Africa, and Mexico, plan to discuss climate change on the margins of the G-8 summit in Japan.) Masaharu Kono, Japan's G-8 sherpa, emphasized Tokyo's position in an exchange with his German counterpart, Bernd Pfaffenback, on 17 June, while Pfaffenback provided his country's take on the issues to be addressed at Lake Toya. The German also noted that, in response to a U.S. request, his country would likely give up its demand for a 25- to 45-percent mid-term carbon dioxide reduction at the MEM. In addition, he does not believe that the emerging economies are willing to go beyond the Bali language at present, his feeling being that they prefer instead to wait until next year's G-8 summit in Copenhagen, because they do not wish to give up things now that they might be prepared to give up later. It is also Pfaffenback's position that a failure of the emerging economies to accept a long-term goal with numbers, even in brackets, would pose difficulties for the G-8 and possibly lead to a clash at the summit itself if there is no fallback position.
Unconventional
German leadership, Japanese diplomatic
Z-3/OO/4860-08, 191611ZItaly Intercepts:
Italy Would Help Israel Mend Relations With U.S.
Date 2010
Classification TOP SECRET//COMINT//ORCON/REL TO USA, FVEYWikiLeaks Synopsis
Intercepted communication between Italian PM Berlusconi and Israeli PM Netanyahu show that Berlusconi promised to assist helping Israel in mending damaged relationship with the U.S.Italy Would Help Israel Mend Relations With U.S. (TS//SI//OC/REL TO USA, FVEY)
(TS//SI//OC/REL TO USA, FVEY) Israel has reached out to Europe, including Italy, for help in smoothing out the current rift in its relations with the United States, according to Italian diplomatic reporting of 13 March. Speaking with Italian Prime Minister (PM) Silvio Berlusconi, Israeli PM Binyamin Netanyahu insisted that the trigger for the dispute–Israel's decision to build 1,600 homes in contested East Jerusalem–was totally in keeping with national policy dating back to the administration of Golda Meir, and blamed this mishandling on a government official with poor political sensitivity. The objective now, Netanyahu said, is to keep the Palestinians from using this issue as a pretext to block a resumption of talks or to advance unrealistic claims that could risk sinking the peace negotiations altogether. Continuing, he asserted that the tension has only been heightened by the absence of direct contact between himself and the U.S. President. In response, Berlusconi promised to put Italy at Israel's disposal in helping mend the latter's ties with Washington. Other Israeli officials, meanwhile, believed that this tiff goes far beyond merely the question of the construction plans, marking instead the lowest point in U.S.-Israeli relations in memory.
SCS, Unconventional
Italian leadership
3/79/37-10, 161635Z; 3/OO/506688-10, 171833Z
* * *
European Leaders Hold Berlusconi Accountable on Italian Financial Situation
Date 2011
Classification TOP SECRET//COMINT//NOFORNWikiLeaks Synopsis
Intercepted communication of Berlusconi's personal advisor on international relations, Valentino Valentini, describes concerns on the Italian financial crisis expressed by French President Sarkozy and German Chancellor Merkel to the Italian Prime Minister, and show that they pressured Berlusconi to take action.European Leaders Hold Berlusconi Accountable on Italian Financial Situation (TS//SI//NF)
(TS//SI//NF) A 22 October meeting attended by German Chancellor Angela Merkel, French President Nicolas Sarkozy, and Italian Prime Minister (PM) Silvio Berlusconi was later described by the Italian's personal adviser on international relations, Valentino Valentini, as tense and very harsh toward the Rome government. Merkel and Sarkozy, evidently brooking no excuses with respect to Italy's current predicament, pressured the PM to announce strong, concrete palliatives and then to implement them in order to show that his government is serious about its debt problem. Sarkozy was said to have told Berlusconi that while the latter's claims about the solidity of the Italian banking system may be true in theory, financial institutions there could soon "pop" like the cork in a champagne bottle, that "words are no longer enough," and that Berlusconi must now "make decisions." Also on the 24th, Valentini indicated that EU Council President Herman Van Rompuy had urged Italy to undertake policies aimed at reducing the impression within the EU that the country is weighed down with an enormous debt at a moment in time when it also is struggling with low productivity and showing little dynamism. In Van Rompuy's opinion, Spain is the model that Italy should now be seeking to emulate.
Unconventional
Italian leadership
Z-3/OO/550156-11, 251344Z
- The Follies & Fallacies Of Keynesian Economics
Submitted by Richard Ebeling via EpicTimes.com,
Eighty years go, on February 4, 1936, one of the most influential books of the last one hundred years was published, British economist, John Maynard Keynes’s The General Theory of Employment, Interest and Money. With it was born what has become known as Keynesian Economics.
Within less than a decade after its appearance, the ideas in The General Theory had practically conquered the economics profession and become a guidebook for government economic policy. Few books, in so short a time, have gained such wide influence and generated so destructive an impact on public policy. What Keynes succeeded in doing was to provide a rationale for what governments always like to do: spend other people’s money and pander to special interests.
In the process Keynes helped undermine what had been three of the essential institutional ingredients of a free-market economy: the gold standard, balanced government budgets, and open competitive markets. In their place Keynes’s legacy has given us paper-money inflation, government deficit spending, and more political intervention throughout the market.
It would, of course, be an exaggeration to claim that without Keynes and the Keynesian Revolution inflation, deficit spending, and interventionism would not have occurred. For decades before the appearance of Keynes’s book, the political and ideological climate had been shifting toward ever-greater government involvement in social and economic affairs, due to the growing influence of collectivist ideas among intellectuals and policy-makers in Europe and America.
Before Keynes: Wise Free Market Policies
But before the appearance of The General Theory, many of the advocates of such collectivist policies had to get around the main body of economic thinking which still argued that, in general, the best course was for government to keep its hands off the market, maintain a stable currency backed by gold, and restrain its own taxing and spending policies.
The free market economists of the eighteenth and nineteenth centuries had persuasively demonstrated that government intervention prevented the smooth functioning of the market. They were able to clearly show that governments have neither the knowledge nor the ability to direct economic affairs. Freedom and prosperity are best assured when government is, in general, limited to protecting people’s lives and property, with the competitive forces of supply and demand bringing about the necessary incentives and coordination of people’s activities.
Lessons Learned: Gold Money and Balanced Budgets
During the Napoleonic wars of the early nineteenth century, many European countries experienced serious inflations as governments resorted to the money printing press to fund their war expenditures. The lesson the free market economists learned was that the hand of the government had to be removed from the handle of that printing press if monetary stability was to be maintained. The best way of doing this was to link a nation’s currency to a commodity like gold, require banks to redeem their notes for gold on demand at a fixed rate of exchange, and limit any increases in the amount of bank notes in circulation to additional deposits of gold left in the banks by their depositors.
They also concluded that deficit spending was a dangerous means of funding government programs. It enabled governments to create the illusion that they could spend without imposing a cost on society in the form of higher taxes; they could borrow and spend today, and defer the tax cost until some tomorrow when the loans would have to be repaid.
These free market economists called for annually balanced budgets, enabling the electorate to see more clearly the cost of government spending. If a national emergency, such as a war, were to force the government to borrow, then when the crisis passed, the government should run budget surpluses to pay off the debt.
Keynes’ Thinking on Markets, Wages and Government
These were considered the tried and true policies for a healthy society. And these were the policies that Keynes did his best to try to overthrow in the pages of his book, The General Theory. He argued that a market economy was inherently unstable, open to swings of irrational investor optimism and pessimism, which resulted in unpredictable and wide fluctuations in output, employment, and prices.
Only government, he believed, could take the long view and rationally keep the economy on an even keel by running deficits to stimulate the economy during depressions and surpluses to rein it in during inflationary booms. He therefore attacked the notion of annual balanced budgets; instead, government should balance its budget over the “business cycle,” that is, deficits during recessions and surpluses during full employment and economic growth years.
But to do this job, Keynes said, the “barbarous relic” of the gold standard should not hamstring governments. Wise politicians, guided by brilliant economists like himself, had to have the flexibility to increase the money supply, manipulate interest rates, and change the foreign-exchange rates at which currencies traded for each other. They required this power so they could generate any amount of spending needed to put people to work through public-works projects and government-stimulated private investments. Limiting increases in the money supply to the quantity of gold would only get in the way, Keynes insisted.
Keynes believed not only that the market economy could not keep itself on an even keel he also believed that it would be undesirable to allow the market to work. He once said that to have the market determine prices and wages to balance supply and demand was to submit society to a cruel and unjust “economic juggernaut.” Instead, he wanted wages and prices to be politically fixed on the basis of “what is ‘fair’ and ‘reasonable’ as between the [social] classes.”
During the Great Depression years of mass unemployment, he argued that the level of wages imposed by trade unions were to be viewed as sacrosanct, even if many workers were priced out of the market because the level was higher than potential employers thought those workers were worth. The government, instead, was to print money, run deficits, and push up prices to any level needed to make it again profitable for employers to hire workers. In other words, perpetual price inflation was to be the means to assure “full employment” in the face of aggressive trade unions demanding excessive wages.
The “Austrian” Alternative to Keynesian Economics
What Keynes completely discounted and, in fact, rejected was the alternative “Austrian” interpretation of the causes and cures for the Great Depression, as formulated by Ludwig von Mises, Friedrich A. Hayek and others. For the Austrian Economists, monetary expansion and interest rate manipulation had set in motion serious and distorting imbalances between savings and investment that resulted in mal-investment of capital, and misdirection of resources and labor – even though this happened in the United States under the seeming non-inflationary circumstances of a relatively stable price level.
Keynes’s new “macroeconomics” of focusing primarily on economy-wide statistical averages and aggregates – such as “aggregate demand,” “aggregate supply,” output and employment “as a whole” – hide from view all the real “microeconomic” relationships and interconnections between numerous individual supplies and demands that were being thrown out of coordination and balance due to the monetary policies of central banks.
When the financial and economic crisis of 1929-1930 began to snowball into wider and wider circles of falling output and rising unemployment, the Austrians had emphasized that a rebalancing throughout many parts of the economy required price and wage adjustments, and labor, capital and resource reallocations to restore coordination between those interconnected supplies and demands.
But this was the explanation and solution to the Great Depression that John Maynard Keynes rejected and refused to understand.
Deficit Spending and Special Interest Politics
In addition, when the balanced-budget rule was overthrown there was no longer any check on government spending. As economists, James M. Buchanan, and Richard E. Wagner pointed out in Democracy in Deficit (1977), once government is freed from the restraint of making taxpayers directly and immediately pay for what it spends, every conceivable special-interest group can appeal to the politicians to feed their wants. The politicians, desiring votes and campaign contributions, happily offer to satisfy the gluttony of these favored groups. At the same time, the taxpayers easily fall prey to the delusion that government can give something for nothing to virtually everyone at no or little cost to them.
Indeed, politicians can now play the game of offering more and more dollars to special interests, while sometimes even lowering taxes. The government simply fills the gap by borrowing, imposing a greater debt burden on future generations. Either taxes will have to go up in the years ahead or the government will turn to the printing press to pay what it owes, all the while claiming that it’s being done to generate “national prosperity” and fund the “socially necessary” programs of the welfare state.
And no need to worry about all this in the present, Keynes assured us, after all “in the long run we are all dead,” as he famously once said. Our problem, of course, is that we are increasingly living through the long-run consequences of Keynes’ short-run policies.
Enduring Wisdom of the Free Market Economists
The free market economics that preceded Keynes had been founded on two insights about man and society.
First, there is an invariant quality to man’s nature that makes him what he is; and if society is to be harmonious, peaceful, and prosperous, men must reform their social institutions in a way that directs the inevitable self-interests of individual men into those avenues of action that benefit not only themselves but others in society as well.
They therefore advocated the institutions of private property, voluntary exchange, and peaceful, open competition. Then, as Adam Smith had concisely expressed, men would live in a system of natural liberty in which each individual would be free to pursue his own ends, but would be guided as if by an invisible hand to serve the interests of others in society as the means to his own self-improvement.
Second, it is insufficient in any judgment concerning the desirability of a social or economic policy to focus only upon its seemingly short-run benefits. The laws of the market always bring about certain effects in the long run from any shift in supply and demand or from any government intervention in the market order. Thus, as French economist Frederic Bastiat emphasized, it behooves us always to try to determine not merely “what is seen” from a government policy in the short run, but also to discern as best we can “what is unseen,” that is, the longer-run consequences of our actions and policies.
The reason it is desirable to take the less immediate consequences into consideration is that longer-run effects may not only not improve the ill the policy was meant to cure, but can make the social situation even worse than had it been left alone. Even though the specific details of the future always remain beyond our ability to predict fully, one use of economics is to assist us to at least qualitatively anticipate the likely contours and shape of that future aided by an understanding of the laws of the market.
Keynes’s assumptions deny the wisdom and the insights of those free market economists. The biased emphasis is toward the benefits and pleasures of the moment, the short run, with an almost total disregard of the longer run consequences.
Keynes’s economics of the short-run, led Austrian economist, F. A. Hayek, to lament in 1941:
“I cannot help regarding the increasing concentration on short-run effects . . . not only as a serious and dangerous intellectual error, but as a betrayal of the main duty of the economist and a grave menace to our civilization . . . It used, however, to be regarded as the duty and the privilege of the economist to study and to stress the long run effects which are apt to be hidden to the untrained eye, and to leave the concern about the more immediate effects to the practical man, who in any event would see only the latter and nothing else. . . .
“It is not surprising that Mr. Keynes finds his views anticipated by the mercantilist writers and gifted amateurs; concern with the surface phenomena has always marked the first stage of the scientific approach to our subject . . . Are we not even told that, “since in the long run we all are dead,” policy should be guided entirely by short-run considerations. I fear that these believers in the principle of ‘après nous le deluge’ [‘after us, the flood’] may get what they have bargained for sooner than they wish.”
Keynes’s Ideology of Ethical Nihilism
On what moral or philosophical basis, it is reasonable to ask, did Keynes believe that policy advocates such as himself had either the right or the ability to manage or direct the economic interactions of multitudes of peoples in the marketplace? Keynes explained his own moral foundations in Two Memoirs, published posthumously in 1949, three years after his death. One memoir, written in 1938, examined the formation of his “Early Beliefs” as a young man in his twenties at Cambridge University in the first decade of the twentieth-century.
He, and many other young intellectuals at Cambridge, had been influenced by the writings of philosopher G. E. Moore. Separate from Moore’s argument, what are of interest are the conclusions reached by Keynes from reading Moore’s work. Keynes said:
“Indeed, in our opinion, one of the greatest advantages of his [Moore’s] religion was that it made morals unnecessary . . . Nothing mattered except states of mind, our own and other people’s of course, but chiefly our own. These states of mind were not associated with action or achievement or consequences. They consisted of timeless, passionate states of contemplation and communion, largely unattached to ‘before’ and ‘after’.”
In this setting, traditional or established ethical or moral codes of conduct meant nothing. Said Keynes:
“We entirely repudiated a personal liability on us to obey general rules. We claimed the right to judge every individual case on its own merits, and the wisdom, experience and self-control to do so successfully. This was a very important part of our faith, violently and aggressively held . . . We repudiated entirely customary morals, conventions and traditional wisdoms. We were, that is to say, in the strict sense of the term immoralists . . . We recognized no moral obligation upon us, no inner sanction to conform or obey. Before heaven we claimed to be our own judge in our own case.”
Keynes declared that he and those like him were “left, from now onwards, to their own sensible devices, pure motives and reliable intuitions of the good.”
Then in his mid-fifties, Keynes declared in 1938, “Yet so far as I am concerned, it is too late to change. I remain, and always will remain, an immoralist.” As for the social order in which he still claimed the right to act in such unrestrained ways, Keynes said that “civilization was a thin and precarious crust erected by the personality and the will of a very few, and only maintained by rules and conventions skillfully put across and guilely preserved.”
Thus, the decisions concerning the affairs of society are to be made on the basis of the self-centered “state of mind” of the policymakers, with total disregard of traditions, customs, moral codes, rules, or the long-run laws of the market. Their rightness or wrongness was not bound by any independent standard of “achievement and consequence.”
Instead it was to be guided by “timeless, passionate states of contemplation and communion, largely unattached to ‘before’ and ‘after’.” The decision-maker’s own “intuitions of the good,” for himself and for others, were to serve as his compass. And let no ordinary man claim to criticize such actions or their results. “Before heaven,” said Keynes, “we claimed to be our own judge in our own case.”
Here was an elitist ideology of nihilism. The members of this elite were self-appointed and shown to belong to this elect precisely through mutual self-congratulations of having broken out of the straightjacket of conformity, custom, and law.
For Keynes in his fifties, civilization was this thin, precarious crust overlaying the animal spirits and irrationality of ordinary men. Its existence, for whatever it was worth, was the product of “the personality and the will of a very few,” like himself, naturally, and maintained through “rules and conventions skillfully put across and guilely preserved.”
Society’s shape and changing form were to be left in the hands of “the chosen” few who stood above the passive conventions of the masses. Here was the hubris of the social engineer, the self-selected philosopher-king, who through manipulative skill and guile directed and experimented on society and its multitudes of individuals.
Keynes’s arrogance and self-confidence in his ability to manage and manipulate public opinion and public policy was expressed shortly before his death in 1946. Friedrich Hayek once recounted a conversation he had with Keynes in the immediate post-World War II period.
Hayek asked Keynes if he was not concerned that some of his own intellectual disciples were taking his ideas into dangerous and undesirable directions.
“After a not very complementary remark about the persons concerned he proceeded to reassure me: those ideas had been badly needed at the time he had launched them. But I need not be alarmed; if they should ever become dangerous I could rely upon him that he would again quickly swing round public opinion – indicating by a quick movement of his hand how rapidly that would be done. But three months later he was dead.”
Politicians Hear Keynes’ Defunct Voice in the Air
In one of the most famous passages in The General Theory, Keynes said,
“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”
Eighty years after the appearance of The General Theory, many practical men of affairs and politicians in authority remain the slaves of defunct economists and academic scribblers. The tragedy for our times is that among the voices they still hear in the air as they corruptly mismanage everything they touch is that of John Maynard Keynes.
- What Could Go Wrong? Saudis Want To Give Surface-To-Air Missiles To Syrian Rebels
When the Russians started flying from Latakia on September 30 it put the Syrian opposition in a decisively precarious situation.
Whereas the Syrian air force was largely out of date and relied on replacement parts and continual maintenance to remain viable, Moscow brought one of the most formidable sky attacks on the planet to a fight against rebels with zero air capability and exceptionally limited capacity to defend themselves against an aerial assault.
Starting in October, the Russian Defense Ministry began posting video clips (hundreds of them) depicting strikes on a variety of rebel and militant targets and The Kremlin also went out of its way to capture full color, HD footage of Su-34s and long-range bombers in action over Syria where the opposition was quite simply powerless to defend itself.
For about a month (sometime between mid-November and mid-December) it appeared that President Obama was right. The fanfare around the initial wave of Russian airstrikes had subsided and the push north to Aleppo appeared to have stalled. The “quagmire” it seemed, was real. Then, suddenly, Hezbollah surrounded Aleppo and reports indicated the Russian air force had implemented what amounts to a scorched earth policy when it comes to the militants battling Iranian forces.
Once it became apparent that the country’s largest city would soon be recaptured by forces loyal to Assad, both Turkey and Saudi Arabia began to weigh their options. A ground assault by Ankara and Riyadh would be a veritable nightmare for the US and the West. It would invariably devolve into a direct conflict with Iranian forces and the first time a Russian jet hit Saudi or Turkish troops the world would be plunged into a global conflict with the potential to drag every nation in the developed world to war.
So far, the Turks and the Saudis haven’t invaded, although Ankara is now shelling the YPG in the Azaz corridor in an effort to roll back Kurdish efforts to consolidate border gains. According to Saudi Foreign Minister Adel al-Jubeir, Riyadh’s next move may be to introduce surface-to-air missiles so that the rebels will be able to defend themselves against the Russian air attack.
“Is Saudi Arabia in favor of supplying anti-aircraft missiles to the rebels?,” Der Spiegel asked al-Jubeir on Friday. Here was the minister’s response:
Yes. We believe that introducing surface-to-air missiles in Syria is going to change the balance of power on the ground. It will allow the moderate opposition to be able to neutralize the helicopters and aircraft that are dropping chemicals and have been carpet-bombing them, just like surface-to-air missiles in Afghanistan were able to change the balance of power there. This has to be studied very carefully, however, because you don’t want such weapons to fall into the wrong hands.
Now obviously, the whole “dropping chemicals” line is a ruse. The only thing introducing advanced surface-to-air missiles would do is allow the opposition to shoot at Russian air power and that’s completely at odds with the following response al-Jubeir gave when asked about the kingdom’s relationship with the Russians:
Other than our disagreement over Syria, I would say our relationship with Russia is very good and we are seeking to broaden and deepen it. Twenty million Russians are Muslims. Like Russia, we have an interest in fighting radicalism and extremism. We both have an interest in stable energy markets. Even the disagreement over Syria is more of a tactical one than a strategic one. We both want a unified Syria that is stable in which all Syrians enjoy equal rights.
No, no you both do not want that. Syria was already a state where citizens enjoyed equal rights, loosely speaking. That’s not to say that Assad tolerated much in the way of dissent when it came to his grip on power, but when it came to Mid-East states where different sects and religions could live alongside one another, things were going ok in Syria before Riyadh, Washington, Doha, and Ankara decided to play on fears of Iranian influence to whip impoverished Sunnis into a sectarian frenzy.
The hypocrisy and outright absurdity only gets worse from there (in fact, this is one of the most egregious interviews in recent memory with a Saudi official) and we’ve included some of the “highlights” (or “lowlights” as it were) below, but the point here is that the Saudis appear set to supply surface-to-air missiles to the rebels. We’re not sure how today’s announced “ceasefire” will ultimately affect those plans, but it’s worth noting that when the US, Turkey and the Saudis supplied TOWs to the opposition in an effort to combat the advance of pro-government armored vehicles, the FSA ended up using one of the weapons to destroy a Russian search and rescue helicopter. Footage of that effort was posted by the FSA on YouTube.
Does Saudi Arabia really believe the best idea is to supply the rebels with the capability to shoot at the Russian air force? At what point do Washington’s Sunni allies admit that this has been a giant mistake that’s cost the lives of hundreds of thousands of people? Perhaps most importantly, when will the US and NATO finally admit that they are on the wrong side of the sectarian divide and thus on the wrong side of history? Does The Pentagon really want to get behind arming Sunni extremists (who espouse the same ideology as ISIS and al-Nusra) with weapons to shoot down Russian warplanes?
We’ve said it before and we’ll say it again: the traditional distinction between the “good” guys and the “bad” guys no longer holds. Long live the “good” guys – whoever they are.
* * *
Excerpts from Adel al-Jubeir’s interview with Der Spiegel (try not to laugh):
SPIEGEL: Russian Prime Minister Dmitry Medvedev spoke of the danger of “World War III” at the Munich Security Conference.
Al-Jubeir: I think this is an over-dramatization. Let’s not forget: This all began when you had eight- and nine-year-old children writing graffiti on walls. Their parents were told: “You will never see them again. If you want to have children, go to your wife and make new ones.” Assad’s people rebelled. He crushed them brutally. But his military could not protect him. So he asked the Iranians to come in and help. Iran sent its Revolutionary Guards into Syria, they brought in Shia militias, Hezbollah from Lebanon, militias from Iraq, Pakistan, Afghanistan, all Shia, and they couldn’t help. Then he brought in Russia, and Russia will not save him. At the same time, we have a war against Daesh (the Islamic State, or IS) in Syria. A coalition that was led by the United States, with Saudi Arabia being one of the first members of that coalition.
SPIEGEL: That sounds well and good, but you are also providing support to the opposing camp in a war. Even more than your relationship with Russia, the world is worried about the deep schism between Saudi Arabia and Iran.
Al-Jubeir : Iran has been a neighbor for millenia, and will continue to be a neighbor for millenia. We have no issue with seeking to develop the best terms we can with Iran. But after the revolution of 1979, Iran embarked on a policy of sectarianism. Iran began a policy of expanding its revolution, of interfering with the affairs of its neighbors, a policy of assassinating diplomats and of attacking embassies. Iran is responsible for a number of terrorist attacks in the Kingdom, it is responsible for smuggling explosives and drugs into Saudi Arabia. And Iran is responsible for setting up sectarian militias in Iraq, Pakistan, Afghanistan and Yemen, whose objective is to destabilize those countries.
SPIEGEL: Your Iranian counterpart, Foreign Minister Mohammad Javad Zarif, accused Saudi Arabia of provoking Iran by actively sponsoring violent extremist groups.
Al-Jubeir: What’s the provocation that he’s talking about?
SPIEGEL: Is Saudi Arabia not financing extremist groups? Zarif speaks of attacks by al-Qaida, the Syrian al-Nusra and other groups — of attacks on Shiite mosques from Iraq to Yemen.
Al-Jubeir: Yes, but that’s not us. We don’t tolerate terrorism. We go after the terrorists and those who support them and those who justify their actions. Our record has been very clear, contrary to their record. They harbor al-Qaida leaders. They facilitate al-Qaida operations. They complain about Daesh, but Iran is the only country around the negotiating table that has not been attacked by either al-Qaida or Daesh.
SPIEGEL: How do you explain the ideological closeness between the Wahhabi faith in Saudi Arabia and Islamic State’s ideology? How do you explain that Daesh applies, with slight differences, the same draconian punishments that the Saudi judiciary does?
Al-Jubeir: This is an oversimplification which doesn’t make sense. Daesh is attacking us. Their leader, Abu Bakr al-Baghdadi, wants to destroy the Saudi state. These people are criminals. They’re psychopaths. Daesh members wear shoes. Does this mean everybody who wears shoes is Daesh?
SPIEGEL: Are you contesting the similarities between the extremely conservative interpretation of Islam in Saudi Arabia and Islamic State’s religious ideology?
Al-Jubeir: ISIS is as much an Islamic organization as the KKK in America is a Christian organization. They burned people of African descent on the cross, and they said they’re doing it in the name of Jesus Christ. Unfortunately, in every religion there are people who pervert the faith. We should not take the actions of psychopaths and paint them as being representative of the whole religion.
SPIEGEL: Doesn’t Saudi Arabia have to do a lot more to distance itself from ISIS and its ideology?
Al-Jubeir: It seems people don’t read or listen. Our scholars and our media have been very outspoken. We were the first country in the world to hold a national public awareness campaign against extremism and terrorism. Why would we not want to fight an ideology whose objective is to kill us?
SPIEGEL: At the same time, your judges mete out sentences that shock the world. The blogger Raif Badawi has been sentenced to prison and 1,000 lashes. On Jan. 2, 47 men were beheaded, among them Sheikh Nimr al-Nimr. His nephew Ali has been sentenced to death as well and his body is to be crucified after the execution.
Al-Jubeir: We have a legal system, and we have a penal code. We have the death penalty in Saudi Arabia, and people should respect this. You don’t have the death penalty, and we respect that.
SPIEGEL: Should we respect the flogging of people?
Al-Jubeir: Just like we respect your legal system, you should respect our legal system. You cannot impose your values on us, otherwise the world will become the law of the jungle. Every society decides what its laws are, and it’s the people who make decisions with regards to these laws. You cannot lecture another people about what you think is right or wrong based on your value system unless you’re willing to accept others imposing their value system on you.
SPIEGEL: Is it even compatible with human rights to display the body of an executed person?
Al-Jubeir: This is a judgment call. We have a legal system, and this is not something that happens all the time. We have capital punishment. America has capital punishment. Iran has capital punishment. Iran hangs people and leaves their bodies hanging on cranes. Iran put to death more than a thousand people last year. I don’t see you reporting on it.
- Safes Sell Out In Japan, 1,000 Franc Note Demand Soars As NIRP Triggers Cash Hoarding
Negative rates may not have found their way to bank deposits in most locales (yet), but that doesn’t mean the public isn’t starting to see the writing on the wall.
At first, NIRP was an anomaly. An obscure policy tool that most analysts and market watchers assumed would be implemented on a temporary basis in a kind of “let’s see if this is even possible” experiment with an idea that, from a common sense perspective, makes no sense.
But then a funny thing happened. Central banks from Denmark to Sweden to Switzerland went negative and stayed there. They even doubled down, taking rates even more negative and before you knew it, the public started to catch on.
When NIRP failed to resuscitate global growth and trade, the cash ban calls began. The thinking is simple (if crazy): if you do away with physical banknotes, the effective lower bound is thereby eliminated. You can make rates as negative as you like because the public has no recourse as people aren’t able to push back by eschewing their bank accounts the mattress.
If that seems far-fetched, consider that the ECB is seriously considering pulling the €500 euro note and the calls are growing louder for the Fed to drop the $100 bill. Of course officials are pitching the big bill bans as an attempt to fight crime – because only a criminal would pay with a $100. But the underlying push is for a cashless society wherein monetary authorities can effectively force citizens to spend and thereby boost the economy by simply making interest rates deeply negative.
Now that the cash ban calls have gotten sufficiently loud to be heard by the generally clueless masses and now that the likes of Jose Canseco are shouting about negative rates, savers are beginning to pull their money out of the banks.
“Look no further than Japan’s hardware stores for a worrying new sign that consumers are hoarding cash–the opposite of what the Bank of Japan had hoped when it recently introduced negative interest rates,” WSJ wrote this morning. “Signs are emerging of higher demand for safes—a place where the interest rate on cash is always zero, no matter what the central bank does.”
“In response to negative interest rates, there are elderly people who’re thinking of keeping their money under a mattress,” one saleswoman at a Shimachu store in eastern Tokyo told The Journal, which also says at least one model costing $700 is sold out and won’t be available again for a month.
“According to the BOJ theory, they should have moved their funds into riskier but higher-earning assets. Instead, they moved into pure cash that earned nothing,” Richard Katz, author of The Oriental Economist newsletter wrote this month.
Meanwhile, in Switzerland, circulation of the 1,000 franc note soared 17% last year in the wake of the SNB’s move to NIRP.
“One consequence of the decision to cut the Swiss central bank’s deposit rate into negative territory in late 2014, and deepen the negative rate to -0.75% early last year, may have been to increase stockpiling,” WSJ reports. “Holding money in cash would protect it from the risk of Swiss banks at some point charging a broad range of customers to deposit money.”
“The connection between the increasing circulation of the big Swiss bill and the central bank policy is obvious,” Karsten Junius, chief economist at Bank J. Safra Sarasin said.
Well yes, it is. Just as the connection between soaring safe sales in Japan and Haruhiko Kuroda’s NIRP push is readily apparent.
So once again, we see that when one experiments with policies that fly in the face of logic (like charging people to hold their money), there are very often unintended consqeuences and when you combine sluggish demand with NIRP in a monetary regime that still has physical banknotes, you get a run on cash. And on safes to store it in.
One Japanese lawmaker brought up the soaring safe sales in parliament on Monday. “It suggests a vague sense of unease among the public,” Katsumasa Suzuki remarked.
We’re not sure “vague sense of unease” quite covers it. People are rushing to buy safes to hoard their money in because the head of the central bank has lost his mind…
Perhaps “palpable sense of panic,” better describes the situation.
In response to Suzuki Finance Minister Taro Aso could only muster the following: “There is money, but there is no demand. That is the biggest problem.”
- Peter Schiff Warns "The Fed's Nightmare Scenario Is Becoming Reality"
Submitted by Peter Schiff via Euro Pacific Capital,
Operating under the mistaken belief that a modest dose of inflation is either a prerequisite for, or a by-product of, economic growth, the nation’s top economists have been assuring us for quite some time that inflation will stay very low until the currently mediocre economy finally catches fire. As a result, they believe that the low inflation of the past few months has frustrated Federal Reserve policy makers, who have been supposedly chomping at the bit to keep hiking rates in order to restore confidence in the present and to build the ability to cut rates in the future if the nation were to ever, god forbid, enter another recession.
In the weeks leading up to the Fed’s December 16 decision to raise rates by 25 basis points (their first increase in nearly a decade) the consensus expectations on Wall Street was that the Fed would deliver three or four additional interest rate hikes in 2016. But with the global markets now in turmoil, GDP slowing, and the stock market off to one of its worst starts in memory, a consensus began to emerge that the Fed is reluctantly out of the rate hiking business for the rest of the year.
With such thoughts firmly entrenched, many were largely caught off guard by the arrival last Friday (February 19th) of new inflation data from the Labor Department that showed that the core consumer price index (CPI) rose in January at a 2.2 % annualized rate, the highest in more than 4 years, well past the 2.0% benchmark that the Fed has supposedly been so desperately trying to reach. It was received as welcome news.
A Reuter’s story that provided immediate reaction to the inflation data summed up the good feeling with a quote by Chris Rupkey, chief economist at MUFG Union Bank in New York, "It is a policymaker's dream come true. They wanted more inflation and they got it." The widely respected Jim Paulsen of Wells Capital Management said that the stronger inflation, combined with upticks in consumer spending and jobs data would force the Fed to get on with more rate hikes.
But higher inflation is not “a dream come true". In reality it is the Fed’s worst possible nightmare. It will expose the error of their eight-year stimulus experiment and the Fed’s impotence in restoring health to an economy that it has turned into a walking zombie addicted to cheap money.
While most economists still want to believe that the recent slowdown in economic growth (.7% annualized in the 4th quarter of 2015, which could be revised lower on Friday) was either caused by the weather, confined to manufacturing, oil related, or just some kind of statistical fluke that will likely reverse in the current quarter, and that the stock market declines of 2016 have resulted from distress imported from abroad, a much more likely trigger for all these developments can be found in the Fed’s own policy.
The Chinese economic deceleration and market turmoil made little impact on U.S markets prior to the Fed’s rate hike. And although U.S. markets rallied slightly in the days around the historic December rate hike, they began falling hard just a few days later. Stocks remained on the downward path until a recent rally inspired by dovish comments from various Fed officials which led many to conclude that future rate hikes may be fewer and farther between then was originally believed.
In truth, the markets and the economy have been walloped not just by December’s quarter point increase, but from the hangover from the withdrawal of QE3, and the anticipation of higher rates in 2016, all of which contributed to a general tightening of monetary policy.
The correlation between monetary tightening and economic deceleration is not accidental. As it had been in Japan before us, the unprecedented stimulus that has been delivered by central banks, in the form of zero percent interest and trillions of dollars in quantitative easing bond purchases, failed to create a robust and healthy economy that could survive in its absence. Our stimulus, which was launched in the wake of the 2008 crash, may have prevented a deeper contraction in the short term, but it also prevented the economy from purging the excesses of artificial boom that preceded the crash. As a result, we are now carrying far more debt, and the nation is far more levered than it was prior to the Crisis of 2008. We have been able to muddle through with all this extra debt only because interest rates remained at zero and the Fed purchased so much of the longer-term debt.
In the past I argued that even a tiny, symbolic, quarter point increase would be sufficient to prick the enormous bubble that eight years of stimulus had inflated. Early results show that I was likely right on that point. The truth is that the economy may be entering a period of “stagflation” in which very low (or even negative) growth is accompanied by rising prices. This creates terrible conditions for consumers whereby prices rise but incomes don’t. This leads to diminished living standards.
The recent uptick in inflation does not somehow invalidate all the other signs that have pointed to a rapidly decelerating economy. Just because inflation picks up does not mean that things are getting better. It actually means they are about to get a whole lot worse. Stagflation is in fact THE nightmare scenario for the Fed. If inflation catches fire now, the Fed will be completely incapable of controlling it. If a measly 25 basis point increase could inflict the kind of damage already experienced, imagine what would happen if the Fed made a real attempt to raise rates to get out in front of rising inflation? With growth already close to zero, a monetary shock of 1% or 2% rates could send us into a recession that could end up putting Donald Trump into the White House. The Fed would prefer that fantasy never become reality.
But the real nightmare for the Fed is not the extra body blow higher prices will deliver to already bruised consumer, but the knockout punch that will be delivered to its own credibility. The markets believe the Fed has a dual mandate, to promote employment and to maintain price stability. But it is currently operating like it has just a single unspoken mandate: to continue to shower markets with easy money until asset prices and incomes rise high enough to reduce the real value of our debts to the point where they can actually be serviced with higher rates, regardless of what happens to employment or consumer prices along the way.
If you recall back in 2009 and 2010, when unemployment was in the 8% to 10% range, former Fed Chair Ben Bernanke initially indicated that the fed would raise rates from zero once unemployment fell to 6.5%. At the time I wrote that it was a bluff, and that if those goalposts were ever reached, they would be moved. That is exactly what happened. But when 5% unemployment finally backed the Fed into a credibility corner it had to do something symbolic. This resulted in the 25 basis points we got in December. Yet even as official unemployment is now 4.9%, the Fed can postpone future, more damaging rate hikes, so long as low-inflation provides the cover.
But can the Fed get away with moving its inflation goal post as easily as it had for unemployment? In fact, the Fed has already done so, with little backlash at all. When created by Congress the Federal Reserve was tasked with maintaining “price stability”. The meaning of “stability” should be clear to anyone with a rudimentary grasp of the English language: it means not moving. In economic terms, this should mean a state where prices neither rise nor fall. Yet the Fed has been able to redefine price stability to mean prices that rise at a minimum of 2% per year. Nowhere does such a target appear in the founding documents of the Federal Reserve. But it seems as if Janet Yellen has borrowed a page from activist Supreme Court justices (unlike the late Antonin Scalia) who do not look to the original intent of the framers of the Constitution, but their own “interpretation” based on the changing political zeitgeist.
The Fed’s new Orwellian mandate is to prevent price stability by forcing price to rise 2% per year. What has historically been seen as a ceiling on price stability, that would have forced tighter policy, is now generally accepted as being a floor to perpetuate ultra-loose monetary policy. The Fed has accomplished this self-serving goal with the help of naïve economists who have convinced most that 2% inflation is a necessary component of economic growth.
But as officially measured consumer prices surpass the 2% threshold by an ever-wider margin, (which could occur in earnest once oil prices find a bottom) how far up will the Fed be able to move that goal post before the markets question their resolve? Will the Fed allow 3% or 4% inflation to go unchallenged? President Nixon imposed wage and price controls when inflation reached 4%. It’s amazing that 2% inflation is now considered perfection, yet 4% was so horrific that such a draconian approach was politically acceptable to rein it in.
Once markets figure out that the Fed is all hat and no cattle when it comes to fighting inflation, the bottom should drop out of the dollar, consumer price increases could accelerate even faster, and the biggest bubble of them all, the one in U.S. Treasuries may finally be pricked. That is when the Fed’s nightmare scenario finally becomes everyone’s reality.
- ISIS Goes Full-Wall Street, Rigs FX Rates To Generate Extra Profits
While such things are virtually impossible to verify due to the difficulty of getting “inside the caliphate” so to speak, word on the jihadist circuit is that ISIS is running short on money.
Successive rounds of Russian strikes on crude tankers and on the group’s oil infrastructure have crippled the illicit oil trade and tax revenue has also fallen in the wake of Baghdad’s decision to stop paying the salaries of public sector workers in Islamic State-held Mosul and other militant strongholds. Typically, Baghdadi would tax those earnings by 20% to 50%, creating a key revenue stream for the caliphate.
Additionally, ISIS is now reportedly beginning to release captives for as little as $500 and has moved to accept only US dollars as payment for utility bills, a policy we said is somewhat ironic given that it was last August when the group released a propaganda video promising to bring back the gold dinar to replace “a worthless “piece of paper called the Federal Reserve dollar note.”
But perhaps the surest sign yet that the self-styled caliphate is running into financial trouble comes from several on-the-ground sources who told AP last week that ISIS is no longer giving away free Snickers bars and Gatorade to its fighters.
Now, we learn that Islamic State has resorted to a tried and true method of generating “a little” extra profits here and there: currency manipulation.
“The group earns dollars by selling basic commodities produced in factories under its control to local distributors, but pays monthly salaries in dinars to thousands of fighters and public employees,” currency traders in Mosul told Reuters. “It earns profits of up to 20 percent under preferential currency rates it imposed last month that strengthen the dollar when exchanged for smaller denominations of dinars.”
It’s a simple concept. ISIS takes in dollars, pays salaries in dinars, and calls the exchange rate whatever Bakr al-Baghdadi wants it to be.
“At the official rate set by the Iraqi government, $100 is currently valued at around 118,000 dinars,” Reuters goes on to note. “In Mosul, the same amount costs 127,500 dinars when purchased with 25,000-dinar notes, the largest bill in circulation, [and] the rate rise to 155,000 dinars when purchased with 250-dinar notes – the smallest bill available.”
Presto: magic profits at the expense of the populace.
There’s no way around this for Iraqis living under ISIS rule. “Nobody would risk [setting up parallel trading],” traders told Reuters.
This underscores the extent to which simply bombing cash centers and vaporizing currency won’t be sufficient to completely cripple the group’s finances. ISIS has capitve populations in two large urban centers – Mosul and Raqqa. Those populations can be exploited and extorted to plug the gaps and the group is pushing to capture key oil assets in Libya which they hope will help to replace what’s been lost to the Russians in Syria.
Of course the real irony here is that ISIS has learned that when it comes to illicit gains, nothing beats white collar crime. Sure you can rape and pillage and even set out to establish your very own oil trafficking routes, but when it comes to racking up effortless gains, nothing works like rigging rates, a concept those “other” international criminal organizations (banks) figured out long ago.
We’re reminded of the rather unfortunate incident that unfolded last year at HSBC when a group of bankers dressed up like Jihadi John and staged a mock execution. It appears the line between investment banks and terrorist organizations is getting more blurry by the day…
- Japan Signals That the End Game Has Begun
Quietly as an aside in a speech, the Head of the Bank of Japan, Haruhiko Kuroda, confessed that QE has little if any impact on GDP growth.
I touched upon this issue previously, but I want to reiterate it here because it is absolutely ASTOUNDING.
The Bank of Japan is the global leader for monetary policy. Indeed, it has been experimenting with severe monetary policy for DECADES.
The Fed first implemented ZIRP and QE in 2008. The ECB first cut rates to ZIRP in 2014 and implemented QE in 2015.
The Bank of Japan began easing back in the early ‘90s. It implemented ZIRP for the first time in 1999. Thus it has been maintaining ZIRP for the better part of two decades.
The Bank of Japan also launched its first QE program in 2001. And it never looked back. Currently its balance sheet is over $3 trillion, equal to over 65% of Japan’s GDP.
To give some perspective on this, the Fed’s balance sheet even after its $3.5 trillion expansion is a mere 25% of US GDP. For the Fed to approach a balance sheet expansion equal to that of Japan it would need to grow its balance sheet to OVER $11 TRILLION!
In short, the Bank of Japan is THE leader for Central Banker monetary policy.
This is why the Head of the Bank of Japan, Haruhiko Kuroda’s admission that Japan has a GDP “potential” of 0.5% of less is such a huge deal. It is effectively the head of the single most aggressive Central Bank on the planet admitting that no matter how much QE or ZIRP he employs there is a definitive ceiling (a low one at that) for GDP growth.
Imagine if an athlete stated that no matter how much he or she trained there would be next to no improvement… or better yet, imagine if a Doctor told you that no matter how much medicine or treatment you took, you would not recover from an illness?
That is what Kuroda admitted regarding Central Bank monetary policy.
Frankly, I am shocked he said it. But then again, he and his bank are over two decades into the biggest monetary failure in history (despite 16 years of ZIRP and 15 years of QE, Japan’s growth rate continues to trend down).
I’m not surprised that the markets haven’t reacted to this. It’s so incredible that virtually no one caught on. And truth be told, it’s going to take the markets months to truly “get” Kuroda’s confession. Once this happens, the REAL Crisis (the crisis of faith in Central Banks) will have officially begun.
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- Valeant Crashes To 3-Year Lows After-Hours On News May Restate Earnings
It’s been an ugly few days for Valeant. Following Wells Fargo downgrade and Jim Chanos warnings over PBMs broadly based on Deutsche Bank’s analysis, as well as the copany’s delay to file on time, Dow Jones reports after-hours that Valeant is set to restate earnings after an internal review.
Maybe this explains CEO Pearson’s sudden “pneumonia”:
The stock is down 10% after-hours, down 18% on the day and back at levels not seen since early 2013.
More details from the WSJ which reports that Valeant likely needs to restate some of its previous financial results based on the findings of an internal investigation into its business, according to people familiar with the matter.
The potential revisions concern revenue that Valeant booked when its drugs were shipped to a distributor, some of the people said. The period in question is late 2014 and early 2015, some people said.
What is surprising is that the WSJ’s language does not make an ironclad case that a restatement is imminent:
The drug company’s board has been meeting in recent days, and a decision on the potential revision hasn’t yet been finalized, some of the people said. The company has until next week to report fourth-quarter earnings or seek an extension.
Is it possible that some long leaked the rumor to a WSJ reporter to take advantage of the plunge in the after hours and lower their cost basis, and then Valeant announces that none of this is true?
The answer will be revealed in a few days, if not hours, but until then what we do know is that while pharmaceutical companies typically are allowed to treat shipments to distributors as revenue, because of Valeant’s extremely close ties to the distributor in question, the sales may require a different accounting treatment, the people said.
“Another issue is whether the sales to the distributor, Philidor Rx Services LLC, should have been reported as related-party transactions, one of the people said. Valeant had an option to buy Philidor, and Valeant officials were heavily involved at the pharmacy in its early days, The Wall Street Journal has reported.”
As a reminder, both the company and Bill Ackman defended the Philidor relationship, which means that if indeed there is a restatement, suddenly VRX may be liable for 10(b)-5 breach, something we doubt it would impose upon itself voluntarily.
In any case, keep a close eye on the newsflow. There may be more to this story than just what the WSJ reports.
- No Way Out
Submitted by Jim Quinn via The Burning Platform blog,
I know there are many people out there who don’t watch the daily drivel emanating from their 72 inch HD boob tubes. I don’t blame them. Most of the shows on TV are dumbed down to the level of their audience of government educated zombies. The facebooking, twittering, texting, instagraming generation is too shallow, too self-consumed, and too intellectually lazy to connect the dots, understand symbolism or learn moral lessons from well written thought-provoking TV shows. But there have been a few exceptions over the last few years. Breaking Bad, House of Cards, and Walking Dead are intelligent, brilliantly scripted, morally ambiguous, psychologically stimulating TV shows challenging your understanding of how the world really works.
The Walking Dead is much more than a gory, mindless, teenage zombie flick. Personally, I find myself interpreting the imagery, metaphorical storylines, and morality lessons of Walking Dead within the larger context of cultural, political, and social decay rapidly consuming our society today. I don’t pretend to know the thought process or intent of the writers, but I see plot parallels symbolizing current day issues plaguing our empire of debt. Their mid-season opener was one of the most intense shocking episodes of the entire series. It was titled No Way Out, as the main characters appeared to be trapped in a no win situation with long odds and little hope of surviving.
From my vantage point I see four explicit types of characters inhabiting the world of the Walking Dead.
There are the infected mindless zombies roaming the countryside in search of flesh to consume. They are oblivious to the world around them, unable to think, feel, or act human. They can be distracted and led in different directions by loud noises or other diversions.
Then there are the still human zombies inhabiting the walled city of Alexandria who are sentient, thinking, frightened men and women, not prepared to face the harsh reality of an unfair brutal world and the consequences of not fighting the forces of evil. They cower behind their walls and hope for the best.
There are bands of nomadic lawless gangs wandering the barren countryside, living off the scraps left behind by civilization and taking what they want through brute force. They abandoned any sense of morality as the world spun out of control. Killing innocent people to achieve their ends is fair game in their survivalist worldview. They see anarchy as an opportunity to loot, steal, murder and disrespect the rights of others.
Anarchy is essentially the absence of institutional coercion. It doesn’t mean chaos, with human beings automatically becoming bandits and murderers. Humans cooperate, trade, exercise personal responsibility and create social order without the dictates of a government ruler. What binds society together are not thousands of overbearing laws and a ruthless police state, it’s basically peer pressure, moral suasion, and social censure. We interact with other humans every day, without some higher authority dictating how it should be done.
The cohort of decent men and women trudging through the southern regions of a fallen America experience horrific scenes, but maintain their humanity despite anarchy. The main characters (Rick, Daryl, Michone, Carol, Carl, Glenn and Maggie) approach every day with their eyes wide open. In a setting where there is no government, no enforceable laws, no police, and no higher authority to provide guidance on how to approach every dangerous situation and ethical dilemma, they choose the honorable path.
As the crumbling remnants of a once mighty nuclear superpower decays, this tight knit group of heavily armed citizens rely upon their guile, intelligence, courage, and moral backbone to try and rebuild a new society. They are honorable, bold and resolute as they fight the ravenous brain dead zombies and the malicious roving mobs swarming over the apocalyptic terrain, while attempting to turn the cowering cowards of Alexandria into courageous patriots who see the world as it is rather than as they wish it to be. In a catastrophic situation where all governmental functions are non-existent it is those who are physically prepared, self-sufficient, mentally strong, heavily armed and able to deal with dire circumstances through the lens of reality, who will survive.
The No Way Out episode opens in the midst of a horrifying crisis within the bigger ongoing crisis. The village of Alexandria had successfully walled off their community from the outside world and had grown soft as they failed to grasp the nature of their perilous circumstances. They passively believed walls would always protect them; weapons were barbaric and unnecessary; and preparing for an adverse turn in conditions was pointless. But misfortune and a threat to their very survival did arrive. They were attacked by a band of murdering thieves and bad luck befell their community when their wall was breached. Their lack of preparation, inability to utilize firearms, and absence of courage to confront the dangerous threats, left them helpless in the face of a life or death situation.
The two types of zombies inhabiting the world of the Walking Dead represent two distinctive types of people populating our country today, as we relentlessly meander towards our own rendezvous with destiny. Our country is already disintegrating, as unpayable debt, endemic corruption, military overreach, civic decay, and moral degeneration coalesce to insure a societal collapse. It’s not a matter of if, but when. The zombies are unaware and apathetic, as their inability to think critically has left them trapped in an “all is well” paradigm peddled by their government keepers and their corporate fascist benefactors.
The American zombies resembling the infected mindless variety from Walking Dead inhabit the urban ghettos, semi-rural trailer parks, and putrefying suburban enclaves across the land. They probably constitute close to 50% of the population and continue to multiply. They are uneducated due to the dreadful government run public education system and the bad life choices of those who brought them into this world. They feed off the public welfare system, incapable or unwilling to work for a living. They are easily distracted by their iGadgets, 600 cable channels, sporting events, the latest fashions and hero worship. They don’t read books, participate in civic affairs, create cohesive communities, or think for themselves. The aimlessly shuffle through their wretched lives taking what they can and being herded by those in control. As society collapses they will panic, burn their dilapidated hovels to the ground and quickly die off, with no government to sustain them.
The next category of zombies populating America today is much like the people of Alexandria in the show. They are educated, employed, middle to upper middle class, living in suburban single family homes and townhouses, afraid of guns, trusting of authority, and are trapped in a web of normalcy bias. They’ve already forgotten the 2008 global financial crisis and believe their politician leaders that adding $70 trillion of global debt since 2008 has actually cured a disease caused by excessive unpayable debt. Since a further disaster has not materialized thus far, they convince themselves it will never occur. Therefore, they take no precautionary measures to prepare for any type of disaster, whether it is financial, societal, or related to their personal safety.
Despite clear warnings of a global conflagration already underway, these humanoid zombies optimistically believe everything will turn out for the best. The more aware among these zombies have an uncomfortable feeling about the state of affairs, as they know in their gut we are headed towards disaster. This cognitive dissonance makes them uneasy, so they purposefully avoid or disregard information that would confirm their worst fears. These zombies drive super-sized SUVs, shuttle their kids to soccer games, live in McMansions, commute to high rise office towers where they push paper, watch mainstream media, believe gun control will make them safer, and still think voting for hand-picked corporate candidates will make a difference.
They lack the intellectual curiosity to question the existing social order. They lack the courage to confront their oppressors, corrupt government, malevolent banking cabal, or corporate media mouthpieces spreading lies for the ruling oligarchy. They are completely unprepared for a world where processed toxic foodstuff isn’t plentiful and easily accessible at their local Wally World; ATM machines don’t spit out $20 bills on command; energy isn’t cheap, plentiful and accessible; and they are no longer protected from bad guys by government thugs. In a societal collapse their lack of self-sufficiency, firearms training and mental toughness to deal with a dreadful reality will result in most losing their lives. A segment of this zombie population can be salvaged if they can be convinced of the jeopardy in which they have been placed. With proper leadership and example to follow, the courage to resist and survive can be regained.
The nomadic lawless gangs committing acts of aggression against the well-intentioned decent survivors of the collapse know they are acting in a criminal manner, don’t care, and rationalize their psychotic disregard for moral standards because there is no institutional authority to stop them from raping, pillaging and murdering. I liken this segment to the criminal sociopathic Wall Street bankers; bought off crooked political class; government apparatchiks and surveillance state thugs; corporate fascists; military industrial complex; shadowy string pulling billionaires; propaganda spewing corporate media; and the leeches who suckle off this evil prototype. This gang of lawless psychopaths has no concern for the greater good or their fellow man. Their only objective is to pillage the remaining wealth of the nation, with no concern for laws, regulations, morality, decency, or the victims of their ravenous sacking of America. They are the real enemy.
Lastly, we have the self-reliant, courageous, disciplined characters that represent the last best hope for humanity in the apocalyptic world of the Walking Dead. Despite the catastrophic circumstances they face on a daily basis, they never lose their integrity or their humanity. Kindness, generosity, intelligence, adaptability, and situational awareness complement their courageousness and willingness to use whatever means necessary to survive. A common thread among the main characters is their ability to utilize weapons, think strategically, act as a team, and approach every situation in a realistic, resolute mode. They choose to not deny reality. Lying to yourself about the desperateness of your situation does you no good. They choose living over despair and death.
The people represented in our society by Rick, Daryl and their motley crew of freedom loving patriots is the gun clingers referred to by Obama in 2008:
“They get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.”
They are also derogatorily referred to in the corporate media as preppers, gun nuts, survivalists, right wing extremists, and potential domestic terrorists. Ron Paul supporters, Christian conservatives and anyone believing strongly in the 2nd Amendment is considered suspect by those in power. DHS is spying on them, the IRS is harassing them, the liberal media scorns them, and the president wants to disarm them. It is the hard working, self-reliant, morally upstanding, gun owning citizens of this country who have been screwed by the onslaught of illegal immigrants, the Wall Street owned Federal Reserve, and the corporate fascists who have written the laws and trade legislation which has enriched them while destroying the working middle class.
Wall Street/K Street oligarchs have financialized every aspect of our society, gutted the productive industries, indebted our grandchildren to the tune of $200 trillion, and destroyed the jobs needed to sustain our nation. The frantic efforts of the Federal Reserve, their minions in NYC & DC, and the propaganda press to prop up this hollowed out carcass of a country are failing. The debt is too vast; the corruption too entrenched; the vital systems too damaged; populace too apathetic and distracted by bread and circuses; and leaders too feckless to do what it would take to save the country.
When it all falls apart, it will be the small minority of gun clinging men and women who know what needs to be done and will do it. These people only represent a small percentage of society. They will do the heavy lifting during the coming crisis, because they have retained their moral compass, believe in the Constitution, and don’t need Big Brother and thousands of heavy handed laws to do what’s right. There is good and evil in this world. Bad people will need to be dealt with brutally and swiftly. The approximately 40 million households with a gun owner are our last line of defense against a government losing control, zombie hordes that will rampage when the EBT deposits stop, and the unprepared normalcy bias infected multitudes. It will require courage, endurance, and community team work to survive the perils ahead in order to rebuild our once great nation. A coercive overbearing bloated government will not be part of the solution.
In the meantime, there are lessons to be learned from the No Way Out episode. Rick and a group of the main characters needed to disguise themselves as flesh eating zombies in order to secure the weapons they needed to fight off the mindless voracious hordes overrunning their community. Until the SHTF moment descends upon our country, those whose eyes are open to the imminent threats will need to blend in with the iGadget addicted masses, while continuing to prepare, build supplies, accumulate weapons and ammunition, and becoming more proficient in using those weapons. They will need to stay under the radar of the corporate fascist military surveillance state until it crumbles in a heap of diseased debris. When the vast majority have been brought up to believe the only boundaries are those exerted through force by the authorities, and that governmental power disappears, the bad people take whatever they want, by force, unless good people fight back.
When their plan to blend in with the zombies goes awry due to fear and hesitation by some of the Alexandrians, loss of life ensues and Rick’s son Carl is shot in the eye. This event creates a turning point in the battle between the immense throng of zombies and the minority of fanatical freedom lovers. Rick goes rogue and single-handedly begins taking on the thousands of voracious zombies in a display of rage and retribution for his son’s life threatening injuries. Sometimes a single act of defiance can change the course of history.
When Rick dashes outside and begins to fight the zombies he has no concern for his own safety. His act of boldness and bravery leads his clan of fearless troops to enter the fray and kill even more zombies. Even the formerly passive priest Gabriel and the cowardly Eugene take up arms and battle the forces of evil. But, the most uplifting occurrence is seeing the previously weak willed inhabitants of Alexandria become inspired by Rick’s courage and valor to find their nerve and finally fight for their community. They didn’t fight for their country or because they were commanded to, but for their fellow man. They were still vastly outnumbered, but Daryl’s intelligence and understanding of the situation led him to implement an audacious strategy to lure the brain dead zombies to a fiery demise. His astuteness saved the day, proving the majority does not always win and the good people can prevail.
The lesson I deduced from this chapter of the Walking Dead is one of hope. The authorities pulling the strings of our increasingly mentally infected country prefer mindless, non-thinking, easily manipulated zombies so they can retain their power, control, and strip mining wealth operation. We only exist for the benefit of the state. Society does not have to be built for the benefit of an essentially criminal organization – the coercive state. There is nothing in human nature that makes it impossible to create a community of people that respect each other’s natural rights and follow accepted moral standards for working out differences. There will always be a few criminals and sociopaths to deal with, but the community can self-police and rid themselves of these vermin. These are the people who usually gravitate to and flourish within a government police state.
When the ongoing crisis worsens over the next few years, with government collapsing under the weight of debt and corruption, societal implosion results in civil chaos, and economic calamity befalls the nation, the brain dead zombie class will have no hope. It will require a tireless minority to prevail. We will need men and women to step up and lead through example. There is a segment of the sentient zombie class who can be awoken from their self-induced stupor by an irate few who set brushfires of freedom in their hearts and souls. The odds of a few rag tag farmers defeating the greatest military power on earth were virtually impossible in the 1770s . But through noble citizen leadership, fortitude while facing extreme adversity, and courage in the face of death, a minority of good people prevailed.
At the end of the episode, Rick finally sees a way out. As Carl lies unconscious in bed Rick tells him he underestimated the Alexandrians and vows to rebuild the community. They rose to the challenge. Rick adds that for the first time since before waking up in the hospital in King County, he feels truly hopeful for the future. “I want to show you the new world,” he says. Carl’s fingers grip Rick’s hand. The immediate future is bleak, but there is hope. The country and our future will be determined by those who are most prepared and willing to do whatever it takes to reinstitute the principles upon which this country was built. There is a way out. Are you prepared?
“It does not take a majority to prevail … but rather an irate, tireless minority, keen on setting brushfires of freedom in the minds of men.” ? Samuel Adams
- Mining Giant BHP Billiton Slashes Dividend By 75% On 92% Profit Plunge, Announces $4.9 Billion Shale Writedown
And the dividend hits just keep on coming.
Moments ago, Australian mining giant BHP Billiton announced that underlying H1 profit plunged 92% from $4.9 billion to just $412 million, well below the lowest forecast and certainly below the consesus estimate of a $727 million profit. This was on revenue of $15.7 billion which also missed expectations of $16.02 bilion, generating $4.599 billion in EBITDA and $1.2 billion in Free Cash Flow, on Operating cash flow of $5.26 billion, down 45%. The company’s net loss was $5.67 billion for the period ended December 31, also missing the estimate of of a $5.48 billion loss.
BHP also announced a 40% cut to CapEx, which declined to just $3.6 billion in the first half.
The big hit to earnings came from the company’s massive writedown of $4.9 billion in U.S. shale, thus further proviking questions about just how underreserved US banks are to the energy and commodity sector.
BHP’s net debt was $25.9 billion as of December 31, for a net gearing ratio of 2.7%
But the biggest surprise was BHP’s announcement that for the first time since 1988 it slashed its dividend by a whopping 75% from $0.62 to $0.16. The cut marked an end to BHP’s commitment to its progressive payout policy, which held that it would pay a steady or higher dividend at each half-year result.
We continue to expect virtually all energy-facing companies to follow in BHP’s footsteps and limit cash outflow to an absolute minimum, meaning many more dividend and GDP-reducing CapEx cuts are imminent.
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