- Germany’s Delegation To Russia Signals That Merkel Is Looking For New Allies
By George Friedman of Mauldin Economics
A delegation of executives from major German corporations recently met with Russian President Vladimir Putin.
Such delegations are not unusual. Sometimes it is routine, sometimes a courtesy. But occasionally, it has significance. In the case of Russia-Germany relations, such meetings are always potentially significant.
Germany’s Unsteady Relations
Two relationships are critical to Germany.
One is with the European Union, the other is with the United States. Neither relationship is stable right now. Brexit, the Spanish crisis, Germany feuding with Poland and the unsolved economic problems of southern Europe are tearing the European Union apart.
The Germans and the EU apparatus claim that none of these threaten the bloc. In fact, almost a decade after 2008, Europe appears to be achieving very modest economic growth. But the Germans know the dangers that lie ahead, even if Brussels does not.
Many of the EU’s problems are political, not economic. (I wrote about the inherent weakness of Europe in my free e-book, The World Explained in Maps, which you can find here)
Poland and Germany have butted heads over the tension between the right to national self-determination and EU rules. This is also what Brexit was about.
Spain is locked in a dispute over the nature of a nation and the right of a region to secede, while the EU considers what role it should play in the domestic matters of a member state. And although southern Europe’s problems are economic, the fact that Europe has eked out minimal growth means neither that such growth is sustainable nor that the growth rate comes close to solving the Continent’s deep structural problems.
As the de facto leader of the EU, Germany has to appear confident while considering the implications of failure.
The German relationship with the United States is unsettled—and not just because of President Donald Trump’s personality.
The strategic and economic situation in Europe has changed dramatically since the early 1990s—when the Soviet Union fell, Germany reunified and the all-important Maastricht treaty was signed—but Germany’s structural relationship with the US has not.
Both are members of NATO, but they have radically different views of its mission and its economics. Germany has the world’s fourth-largest economy, but its financial contribution to NATO doesn’t reflect that.
Then there is Russia. The American policy toward Russia has hardened since the Democratic Party adopted an intense anti-Russia stance following the presidential election—more intense even than that of the Republican Party, which has always been uneasy with Russia.
The Ukraine crisis continues to fester while US troops are deployed in the Baltics, Poland, and Romania. This has widened rifts within the EU. Germany isn’t interested in a second Cold War; Eastern Europe believes it’s already in one.
The Eastern Europeans are increasingly alienated from the Germans on the issue and more closely aligned with the Americans. At a time when German relations with key Eastern European countries are being tested, the added strain of US policy in the region is a threat to German interests.
Germany wants the Russia problem to subside. The US and its Eastern European allies think the way to accomplish that is through confrontation.
An Alternative That Germany Doesn’t Want
Germany’s foreign policy has remained roughly the same since 1991, even as the international reality has changed dramatically. This is forcing Germany toward a decision it doesn’t want to make.
It must consider what happens if the EU continues to disintegrate and if European countries’ foreign policies and politics continue to diverge.
It must consider what happens if the US continues to shape the dynamics of Europe in a way that Germany will have to confront American enemies, or refuse to do so. This isn’t just about Russia—we can see the same issue over Iran.
Germany can’t exist without stable economic partners. It has never been self-sufficient since it reunified. It must explore alternatives.
The most obvious alternative for Germany has always been Russia, either through alliance or conquest.
Germany needs Russian raw materials. It also needs the Russian market to be far more robust than it is so that it can buy more German goods.
But Russia is incapable of rapid economic development without outside help, and with the collapse of oil prices, it needs rapid development to stabilize its economy. Germany needs Russia’s economy to succeed, and what it has to offer Russia is capital, technology, and management.
In exchange, Russia can offer raw materials and a workforce.
An alignment with Russia could settle Eastern Europe in Germany’s orbit. With the way things are going, and given Germany’s alternatives, the Russian option is expensive but potentially very profitable.
But Germany has a problem with Russia. Every previous attempt at alignment or conquest has failed. Building up the Russian economy to create a robust market for German goods would certainly benefit both countries, but it would also shift the balance of power in Europe.
Right now, Germany is militarily weak and economically strong. Russia is moderately powerful militarily and economically weak. An alignment with Germany could dramatically strengthen Russia’s economy, and with it, its military power.
Having moved away from the United States and de-emphasized military power in the rest of the European peninsula, Germany could find itself in its old position: vulnerable to Russian power, but without allies against Russia.
On a Lookout for New Allies
The corporate chiefs’ trip to Russia is not a groundbreaking event, nor does it mark a serious shift in German policy. But it is part of an ongoing process. As the international reality shifts from what Germany needs, Germany must find another path.
In the short term, the United States is vulnerable to a cyclical recession, and hostility toward Germany is increasing in Europe—particularly in Eastern Europe. China is facing internal challenges of its own. There are few other options than Russia, and Russia is historically a most dangerous option for Germany.
- Introducing Cryonics: Putting Death On Ice
There is a potent thread winding its way through generations of human culture. From Ancient Egyptian rituals to Kurzweil’s Singularity, many paths have sprung up leading to the same elusive destination: immortality.
Today, as Visual Capitalist's Nick Routely notes, the concept is as popular as it’s ever been, and technological advances are giving people hope that immortality, or at very least radical life extension, may be within reach. Is modern technology advanced enough to give people a second chance through cryonics?
Today’s infographic, courtesy of Futurism, tackles our growing fascination with putting death on ice.
Courtesy of: Visual Capitalist
THE PROSPECT OF IMMORTALITY
Robert C. W. Ettinger’s seminal work, The Prospect Of Immortality, detailed many of the scientific, moral, and economic implications of cryogenically freezing humans for later reanimation. It was after that book was published in 1962 that the idea of freezing one’s body after death began to take hold.
One of the most pressing questions is, even if we’re able to revive a person who has been cryogenically preserved, will the person’s memories and personality remain intact? Ettinger posits that long-term memory is stored in the brain as a long-lasting structural modification. Basically, those memories will remain, even if the brain’s “power is turned off”.
DESCENDING INTO THE DEEP-FREEZE
There are three main steps in the cryogenic process:
1) Immediately after a patient dies, the body is cooled with ice packs and transported to the freezing location.
2) Next, blood is drained from the patient’s body and replaced with a cryoprotectant (basically the same antifreeze solution used to transport organs destined for transplant).
3) Finally, once the body arrives at the cryonic preservation facility, the body is cooled to -196ºC (-320.8ºF) over the course of two weeks. Bodies are generally stored upside-down in a tank of liquid nitrogen.
THE ECONOMICS OF CRYOPRESERVATION
At prices ranging from about $30,000 to $200,000, cryopreservation may sound like an option reserved for the wealthy, but many people fund the procedure by naming a cryonics company as the primary benefactor of their life insurance policy. Meanwhile, in the event of a death that doesn’t allow for preservation of the body, the money goes to secondary beneficiaries.
Even if we do eventually find a way to reanimate frozen humans, another important consideration is how those people would take care of themselves financially. That’s where a cryonics or personal revival trust comes into play. A twist on a traditional dynastic trust, this arrangement ensures that there are funds to cover costs of the cryopreservation, as well as ensure the grantor would have assets when they’re unthawed. Of course, there are risks involved beyond the slim possibility of reanimation. The legal code in hundreds of years could be vastly different than today.
If you created a trust for specific purposes in 1711, it is unlikely it would function in the same way today.
– Kris Knaplund, Law Professor, Pepperdine University
COLD HUMANS, HOT MARKET
At last count, there are already 346 people in the deep freeze, with thousands more on the waiting list. As technology improves, those numbers are sure to continue rising.
Time will tell whether cryonically preserved people are able to cheat death. In the meantime? The cryonics industry is alive and well.
- How Much Is Equity Research Actually Worth? Probably Less Than You Thought
Over the past several months, investment banks all across Europe have scrambled to put a price tag on their equity research after years of giving it way as a ‘freebie’ in return for trading commissions.
Of course, for wall street’s titans of finance, you know, the same guys who will look you straight in the eyes and tell you that they know with relative certainty the precise value of the synthetic CDO squared they’re selling you, we figured this would be a relatively simplistic task. Therefore, you can imagine our surprise now that the market has established a fairly wide bid-ask spread with JP Morgan on the low end at $10,000 and Barclays on the rich side at $455,000.
Luckily, since wall street’s finest don’t seem to have a clue, Bloomberg Gladfly has decided to take a look at some comps to help shed some light on the true value of equity research.
First, of course, it’s important to define what institutional clients are actually buying when they sign a research contract. As Bloomberg points out with the chart below, and contrary to popular belief, equity research demand actually has very little to do with analyst forecasts and trade ideas but rather is dependent upon which banks provide the greatest access to those highly coveted management 1x1s.
The dirty little secret on Wall Street — and why it’s so difficult to price research — is that star analysts aren’t really valued for their research at all. Ask any money manager, hedge fund or research shop, and they’ll tell you it’s all about the contacts.
Many senior analysts spend only 10 percent of their time conducting research and writing reports. Teams of junior associates (or sometimes robots) maintain financial models and blast out notes. Some use pre-recorded voice mails to alert clients to new research.
Gadfly estimates that between 50 and 70 percent of a senior analyst’s time is spent on corporate access. Things like arranging lunch with a CFO or connecting a client with a lawyer, supplier or other industry expert to delve into what the data doesn’t. For this reason, analysts are often required to log the number of phone calls, meetings and events arranged each month.
The final 20 percent of an analyst’s time is spent on pre-IPO research, conferences and bespoke projects, such as flying a drone over a retailer’s parking lot to track how full it is; scoping the laundry outside apartment blocks; or conducting so-called channel checks to see how much oil’s being pumped through a particular pipeline.
So, what does that mean for the ‘value’ of equity research? Well, Bloomberg figures those actual ‘research’ reports that flood your inbox all day long are worth basically nothing while the corporate access component of ‘research’ (i.e. those annual trips to Miami Beach where 24-year-old hedge fund analysts get to interview CEO’s between binge drinking sessions at Story) should be valued at roughly the same price as an expert network service.
Access to independent research network Smartkarma starts at $7,500 a year per user for a Spotify-like subscription that opens the door to reports from more than 400 analysts. Customers can also buy additional packages of analysts’ time, similar to the way lawyers or consultants get paid.
We reckon the closest approximation to corporate access is so-called expert networks, companies that maintain a stable of industry experts to match with fund managers and other financiers when they need quick access to esoteric information.
Industry leader Gerson Lehrman Group Inc. charges $100,000 a year, with the heaviest users paying millions of dollars, according to the Financial Times.
As for bespoke research projects, Morgan Stanley said it plans to charge $2,500 an hour for private meetings with its stock analysts, almost twice the rate of some of the best corporate lawyers. Partners at big management consulting firms such as Deloitte LLP or McKinsey & Co. charge clients anywhere from $800 to $1,300 an hour, according to career consulting guide Rocketblocks.
Then again, maybe those hedge fund managers could just ask young Trevor Worthington IV to stay home from Miami Beach and read a 10-K for free…just a thought.
- Clinton, Assange, And The War On Truth
Authored by John Pilger via Counterpunch.org,
On 16 October, the Australian Broadcasting Corporation aired an interview with Hillary Clinton: one of many to promote her score-settling book about why she was not elected President of the United States.
Wading through the Clinton book, What Happened, is an unpleasant experience, like a stomach upset. Smears and tears. Threats and enemies. “They” (voters) were brainwashed and herded against her by the odious Donald Trump in cahoots with sinister Slavs sent from the great darkness known as Russia, assisted by an Australian “nihilist”, Julian Assange.
In The New York Times, there was a striking photograph of a female reporter consoling Clinton, having just interviewed her. The lost leader was, above all, “absolutely a feminist”. The thousands of women’s lives this “feminist” destroyed while in government – Libya, Syria, Honduras – were of no interest.
In New York magazine, Rebecca Traister wrote that Clinton was finally “expressing some righteous anger”. It was even hard for her to smile: “so hard that the muscles in her face ache”. Surely, she concluded, “if we allowed women’s resentments the same bearing we allow men’s grudges, America would be forced to reckon with the fact that all these angry women might just have a point”.
Drivel such as this, trivialising women’s struggles, marks the media hagiographies of Hillary Clinton. Her political extremism and warmongering are of no consequence. Her problem, wrote Traister, was a “damaging infatuation with the email story”. The truth, in other words.
The leaked emails of Clinton’s campaign manager, John Podesta, revealed a direct connection between Clinton and the foundation and funding of organised jihadism in the Middle East and Islamic State (IS). The ultimate source of most Islamic terrorism, Saudi Arabia, was central to her career.
One email, in 2014, sent by Clinton to Podesta soon after she stepped down as US Secretary of State, discloses that Islamic State is funded by the governments of Saudi Arabia and Qatar. Clinton accepted huge donations from both governments for the Clinton Foundation.
As Secretary of State, she approved the world’s biggest ever arms sale to her benefactors in Saudi Arabia, worth more than $80 billion. Thanks to her, US arms sales to the world – for use in stricken countries like Yemen – doubled.
This was revealed by WikiLeaks and published by The New York Times. No one doubts the emails are authentic. The subsequent campaign to smear WikiLeaks and its editor-in-chief, Julian Assange, as “agents of Russia”, has grown into a spectacular fantasy known as “Russiagate”. The “plot” is said to have been signed off by Vladimir Putin himself. There is not a shred of evidence.
The ABC Australia interview with Clinton is an outstanding example of smear and censorship by omission. I would say it is a model.
“No one,” the interviewer, Sarah Ferguson, says to Clinton, “could fail to be moved by the pain on your face at that moment [of the inauguration of Trump] … Do you remember how visceral it was for you?”
Having established Clinton’s visceral suffering, Ferguson asks about “Russia’s role”.
CLINTON: I think Russia affected the perceptions and views of millions of voters, we now know. I think that their intention coming from the very top with Putin was to hurt me and to help Trump.
FERGUSON: How much of that was a personal vendetta by Vladimir Putin against you?
CLINTON: … I mean he wants to destabilise democracy. He wants to undermine America, he wants to go after the Atlantic Alliance and we consider Australia kind of a … an extension of that …
The opposite is true. It is Western armies that are massing on Russia’s border for the first time since the Russian Revolution 100 years ago.
FERGUSON: How much damage did [Julian Assange] do personally to you?
CLINTON: Well, I had a lot of history with him because I was Secretary of State when ah WikiLeaks published a lot of very sensitive ah information from our State Department and our Defence Department.
What Clinton fails to say – and her interviewer fails to remind her — is that in 2010, WikiLeaks revealed that Secretary of State Hillary Clinton had ordered a secret intelligence campaign targeted at the United Nations leadership, including the Secretary General, Ban Ki-moon and the permanent Security Council representatives from China, Russia, France and the UK.
A classified directive, signed by Clinton, was issued to US diplomats in July 2009, demanding forensic technical details about the communications systems used by top UN officials, including passwords and personal encryption keys used in private and commercial networks.
This was known as Cablegate. It was lawless spying.
CLINTON: He [Assange] is very clearly a tool of Russian intelligence. And ah, he has done their bidding.
Clinton offered no evidence to back up this serious accusation, nor did Ferguson challenge her.
CLINTON: You don’t see damaging negative information coming out about the Kremlin on WikiLeaks. You didn’t see any of that published.
This was false. WikiLeaks has published a massive number of documents on Russia – more than 800,000, most of them critical, many of them used in books and as evidence in court cases.
CLINTON: So I think Assange has become a kind of nihilistic opportunist who does the bidding of a dictator.
FERGUSON: Lots of people, including in Australia, think that Assange is a martyr for free speech and freedom of information. How would you describe him? Well, you’ve just described him as a nihilist
CLINTON: Yeah, well, and a tool. I mean he’s a tool of Russian intelligence. And if he’s such a, you know, martyr of free speech, why doesn’t WikiLeaks ever publish anything coming out of Russia?
Again, Ferguson said nothing to challenge this or correct her.
CLINTON: There was a concerted operation between WikiLeaks and Russia and most likely people in the United States to weaponise that information, to make up stories … to help Trump.
FERGUSON: Now, along with some of those outlandish stories, there was information that was revealed about the Clinton Foundation that at least in some of the voters’ minds seemed to associate you ….
CLINTON: Yeah, but it was false!
FERGUSON: … with the peddling of information …
CLINTON: It was false! It was totally false! …..
FERGUSON: Do you understand how difficult it was for some voters to understand the amounts of money that the [Clinton] Foundation is raising, the confusion with the consultancy that was also raising money, getting gifts and travel and so on for Bill Clinton that even Chelsea had some issues with? …
CLINTON: Well you know, I’m sorry, Sarah, I mean I, I know the facts ….
The ABC interviewer lauded Clinton as “the icon of your generation”. She asked her nothing about the enormous sums she creamed off from Wall Street, such as the $675,000 she received for speaking at Goldman Sachs, one of the banks at the centre of the 2008 crash. Clinton’s greed deeply upset the kind of voters she abused as “deplorables”.
Clearly looking for a cheap headline in the Australian press, Ferguson asked her if Trump was “a clear and present danger to Australia” and got her predictable response.
This high-profile journalist made no mention of Clinton’s own “clear and present danger” to the people of Iran whom she once threatened to “obliterate totally”, and the 40,000 Libyans who died in the attack on Libya in 2011 that Clinton orchestrated. Flushed with excitement, the Secretary of State rejoiced at the gruesome murder of the Libyan leader, Colonel Gaddafi.
“Libya was Hillary Clinton’s war”, Julian Assange said in a filmed interview with me last year. “Barack Obama initially opposed it. Who was the person championing it? Hillary Clinton. That’s documented throughout her emails … there’s more than 1700 emails out of the 33,000 Hillary Clinton emails that we’ve published, just about Libya. It’s not that Libya has cheap oil. She perceived the removal of Gaddafi and the overthrow of the Libyan state — something that she would use in her run-up to the general election for President.
“So in late 2011 there is an internal document called the Libya Tick Tock that was produced for Hillary Clinton, and it’s the chronological description of how she was the central figure in the destruction of the Libyan state, which resulted in around 40,000 deaths within Libya; jihadists moved in, ISIS moved in, leading to the European refugee and migrant crisis.
“Not only did you have people fleeing Libya, people fleeing Syria, the destabilisation of other African countries as a result of arms flows, but the Libyan state itself was no longer able to control the movement of people through it.”
This – not Clinton’s “visceral” pain in losing to Trump nor the rest of the self-serving scuttlebutt in her ABC interview – was the story. Clinton shared responsibility for massively de-stabilising the Middle East, which led to the death, suffering and flight of thousands of women, men and children.
Ferguson raised not a word of it. Clinton repeatedly defamed Assange, who was neither defended nor offered a right of reply on his own country’s state broadcaster.
In a tweet from London, Assange cited the ABC’s own Code of Practice, which states: “Where allegations are made about a person or organisation, make reasonable efforts in the circumstances to provide a fair opportunity to respond.”
Following the ABC broadcast, Ferguson’s executive producer, Sally Neighbour, re-tweeted the following: “Assange is Putin’s bitch. We all know it!”
The slander, since deleted, was even used as a link to the ABC interview captioned ‘Assange is Putins (sic) b****. We all know it!’
In the years I have known Julian Assange, I have watched a vituperative personal campaign try to stop him and WikiLeaks. It has been a frontal assault on whistleblowing, on free speech and free journalism, all of which are now under sustained attack from governments and corporate internet controllers.
The first serious attacks on Assange came from the Guardian which, like a spurned lover, turned on its besieged former source, having hugely profited from WikiLeaks’ disclosures. With not a penny going to Assange or WikiLeaks, a Guardian book led to a lucrative Hollywood movie deal. Assange was portrayed as “callous” and a “damaged personality”.
It was as if a rampant jealousy could not accept that his remarkable achievements stood in marked contrast to that of his detractors in the “mainstream” media. It is like watching the guardians of the status quo, regardless of age, struggling to silence real dissent and prevent the emergence of the new and hopeful.
Today, Assange remains a political refugee from the war-making dark state of which Donald Trump is a caricature and Hillary Clinton the embodiment. His resilience and courage are astonishing. Unlike him, his tormentors are cowards.
- The "Safest Home In America" Is Back On The Market
A simmering nuclear crisis, series of devastating natural disasters and a resurgence of drug-fueled crime are inspiring more Americans than ever before to buy up “doomsday prepper” gear – everything from gas masks to fallout shelters – a trend that we’ve observed time and time again.
While most Americans will need to settle for a small backyard bunker stocked with canned goods and water filters because of cost constraints, anybody looking for something slightly more stylish need look no further: A home in the Atlanta suburbs that has been described by architects as “the safest home in America” just hit the market – and it can be yours for the bargain price of $15 million.
The home, known as Rice House, is located inside a gated community in Alpharetta, Georgia, about 30 minutes northeast of central Atlanta.
The cream-colored, colonnaded facade of the Rice House, situated on 3.5 acres just outside Atlanta, hides far more than a private theater, bowling alley, and infinity swimming pool.
The master and guest bedrooms have ballistic doors that can withstand fire from an AK-47 assault rifle. The car vault is large enough to hold 30 vehicles and has an entrance designed to be concealed by a waterfall. Secret doors lead to a 15,000-square-foot bunker in which an embattled owner could conceivably hole up for years, with off-grid power and water drawn from three artesian wells drilled 1,000 feet into the ground. The house had its own security architect who spent two decades designing secure buildings for the DOJ.
Listing materials boast that it is “one of, if not the, safest home in America.”
“This is a home where you could put a $20 million painting on the wall and sleep comfortably at night,” said listing broker Paul Wegener, of Atlanta Fine Homes Sotheby’s International Realty. “The same goes for your family.”
The unnamed entrepreneur who owns Rice House spent six years and some $30 million to build the 36,000-square-foot fortress – a project that Bloomberg claims was “mostly for kicks.”
“He said to me, ‘If anyone wants to get me, they can find me at Chick-fil-A,’” the real-estate agent tasked with selling the home said. “It was something of an intellectual exercise to create an impenetrable home, a personal Batcave that the owner could peel his Bugatti Veyron out of.”
The home was just relisted for $14.7 million, a drop from the original $17.5 million. The estate also needs to be finished, a project that cost an additional $3 million to $5 million. The owner planned the Rice House as a family legacy, but decided to sell when he learned his son didn’t want to live there. The main house has been completely built, with eight bedrooms, 14 bathrooms, three kitchens, a private museum, a wine cellar, an indoor shooting range, and commercial-grade elevators.
“The mandate was the best of everything,” Wegener said. To construct the foundation, workers dug down to bedrock and then bored down into it. The walls are made from extra-strength concrete reinforced with rebar. The car vault originally was designed with 18 columns, but the owner pushed back until engineers figured out a way to use custom-made bridge beams, so no pillars would be needed to support the ceiling. The Rice House is highly energy-efficient, with geothermal heating and cooling and a solar energy system.
Though it’s not included in the listing—to maintain that hush-hush feel—the Rice House is in Country Club of the South, a location popular among athletes and other famous individuals. Retired Atlanta Braves pitcher Tom Glavine, Usher, Whitney Houston, and NBA Hall of Famer Allen Iverson have all lived there. The neighborhood has 19 tennis courts, an 18-hole, golf course designed by Jack Nicklaus, basketball courts, a concert venue—and, of course, 24-hour security.
- Gundlach Warns "The Order of The Financial System Is About To Be Turned Upside Down"
"I'm not a big fan of bonds right now," may seem like an odd way for the so-called Bond King to begin, but in an audience at Vanity Fair's Establishment Summit, DoubleLine's Jeff Gundlach told Bethany McLean, "I haven’t been really [a fan of bonds] for the past four years, even though I manage them, and institutions have to own them for various reasons."
Gundlach urged investors to be “light” on bonds.
As Vanity Fair's William Cohan reports, Gundlach admitted “I’m stuck in it,” of his massive bond portfolio, adding that interest rates have bottomed out and been rising gradually for the past six years.
Gundlach said his job now, on behalf of his clients, “is to get them to the other side of the valley.”
When the bigger, seemingly inevitable hikes in interest rates come, “I’ll feel like I’ve done a service by getting people through,” he said.
“That’s why I’m still at the game. I want to see how the movie ends.”
But it can’t end well. To illustrate his point about the risk in owning bonds these days, Gundlach shared a chart that showed how investors in European “junk” bonds are willing to accept the same no-default return as they are for U.S. Treasury bonds, pointing out that this phenomenon has been caused by "manipulated behavior" by central banks.
European interest rates “should be much higher than they are today,” he said,
“…[and] once Draghi realizes this, the order of the financial system will be turned upside down and it won’t be a good thing.
It will mean the liquidity that has been pumping up the markets will be drying up in 2018…
…Things go down. We’ve been in an artificially inflated market for stocks and bonds largely around the world.”
“My job is to find scary things,” Gundlach told McLean…
“My critics say, ‘You find seven risks for every one that exists.’ Guilty. That’s my job. My job is to try to find out what can go wrong, not cover my ears and hum. It’s better to keep your eyes open.”
- In A Dramatic Pivot, Shia Militia Leader Tells US: "Get Ready To Leave Iraq"
The Baghdad government and its paramilitary forces increasingly see American troop presence as the actual foreign menace.
A prominent Iraqi militia leader with close ties to Iran has told the United States to go home while also accusing US forces of not actually being interested in fighting ISIS: “Your forces should get ready to get out of our country once the excuse of Daesh’s presence is over," said Sheikh Qais al-Khazali, the commander of the Shiite PMU group Asaib (Popular Mobilization Unit), through the group's TV channel on Monday. The threatening statement was issued the same day Iraqi Prime Minister Haider al-Abadi publicly rejected Secretary of State Rex Tillerson's earlier suggestion that Iraqi paramilitary units who have for years fought Islamic State terrorists are actually "Iranian" and not Iraqi nationals.
On Sunday Tillerson controversially asserted that Iranian "militias" need to leave Iraq as the fight against Islamic State militants was coming to an end while in Riyadh where he engaged in rare high level talks with Abadi and Saudi Arabia’s King Salman. “Certainly Iranian militias that are in Iraq, now that the fighting against (the Islamic State group) is coming to a close, those militias need to go home,” Tillerson said during a press conference in Riyadh, just before boarding a plane for Baghdad. "All foreign fighters need to go home,” he added.
Secretary of State Rex Tillerson meets with Iraqi Prime Minister Haider al-Abadi on Monday. Image source: Government of Iraq/Prime Minister's office.But Iraqi PM Abadi pushed back against the Secretary of State in a face to face meeting in Baghdad on Monday. Abadi's words to Tillerson were publicized through a statement on the prime minister's official Facebook page posted late Monday, which has been translated by Zero Hedge (emphasis ours):
Prime Minister Dr. Haider al-Abadi during his meeting with the American Secretary of State Rex Tillerson assured him that the fighters of al-Hash'd al Shaabi [PMU militias] are Iraqi fighters who fought terrorism and protected their country, they sacrificed in order to win against Daesh [ISIS], and that Hash'd al Shaabi is an official institution under the state. The Iraqi Constitution doesn’t allow for foreign armed groups under state institutions, and further said that we should encourage these fighters because they are the hope of our country and for the region.
And a separate statement issued earlier in the day by the prime minister's media office warned, "No party has the right to interfere in Iraqi matters.” So it appears, based on today's rebuttals, that the Iraqi government and its paramilitary forces increasingly see American troop presence as the actual foreign menace which potentially threatens Iraqi national sovereignty.
Interestingly, Abadi's defense of the PMU forces appears to hinge on Article 9 section 1A of the Iraqi Constitution:
Tillerson's statements, however, are a reflection of the Washington foreign policy establishment's increased frustration at Shiite-led Iran’s expanding sway in the region, especially in Syria and Iraq. US regional allies Saudi Arabia and Israel are arguably even more frustrated, reflected in the increasingly inflammatory rhetoric coming out of both countries, and the fact that the two former enemies are finding more and more common ground against Iran and Syria.
But the US and its allies have created the very situation and conditions they now find untenable. In Syria the West's fueling of an international proxy war for regime change pushed President Assad to increasingly rely on Iranian forces in a now more than 6-year long war against both homegrown and foreign Sunni jihadists. Furthermore, Iran's chief paramilitary ally in the region, Hezbollah, has played an even bigger role in pushing out ISIS and other al-Qaeda linked insurgents from Syria's major cities.
In Iraq, Shiite parties have dominated politics since the U.S. toppled the Sunni-dominated secular Baathist regime of Saddam Hussein in 2003. Essentially, the neocons handed Baghdad to the very pro-Shia forces in Iraq that they now rant in frustration against, as is now commonly understood even among some of the very architects of Bush's war.
The ultimate fear from the perspective of the US-Israel-Saudi axis remains the possibility of, in the words of Henry Kissinger, "a Shia and pro-Iran territorial belt reaching from Tehran to Beirut" and the establishment of a supposed "Iranian radical empire." For neocons, the next Middle East threat ever-looms ad infinitum (there will always be another boogeyman…and another, and another, and another…) as an excuse to maintain America's "forever wars" in the region.
And of course, Iraqi PM Abadi understands all of this very well – he further knows that American officials believe in the principle of "sovereignty" until they simply don't, that is, up until the point that US allied sovereign governments refuse to remain pliant puppets of American interests. In this case, the some 80,000 to 100,000 Iraqi PMU militias perceived by the US as being under Iranian influence and serving Iranian interests are considered by American and Saudi officials as intolerable, even while they fight ISIS.
- MSNBC Catches Illegals Jumping Border Fence With Mexico As It Reports On Trump's Wall
In an delightfully ironic lesson why border protection is important for the US, an MSNBC crew was reporting on the prototypes of Trump’s proposed border wall near San Diego, when the interview was interrupted by a group of “migrants not from Mexico” hopping over the existing fence.
“What happened?” the MSNBC reporter shouts as a group of agents on horseback move in to catch border jumpers. “The people are crossing!”
“Almost on cue, a group of asylum-seekers, migrants not from Mexico, jumped over the existing fence to turn themselves in to border agents on horseback,” the narrator explained.
“It’s like, a small group of three people jumped over in the middle of the day,” he told a border patrol agent he was interviewing. “There’s a girl there in a pink backpack. Can you explain to me what’s going on?”
What’s going on is that, as the border agent explained, it’s just another day at work fighting the battle to secure the nation’s southern border.
“This is the reality of every day border enforcement. The United States is still the draw, the ultimate draw, for people that have dire situations where they’re at,” the agent said. “We’re going to continue to witness this. It plays out on a regular basis for us.”
“And it did here just now,” the dismayed reporter replied, as first observed by the American Mirror.
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Meanwhile, construction crews are currently erecting eight roughly 30-foot-tall prototypes for the president’s border wall in a remote section of the border near San Diego, where at least a half dozen illegal immigrants have been arrested while attempting to cross amid the construction, according to NPR. The prototypes currently include four made of solid concrete, four made of steel and concrete and one topped with spikes.
“Customs and Border Protection is paying $20 million to six construction companies from Mississippi, Maryland, Alabama, Texas and Arizona” to construct the models by the end of the month, after which CBP will evaluate them based on three criteria, NPR reports.
“We want a better barrier. One that is hard to scale, hard to penetrate and hard to tunnel under,” Roy Villareal, chief of the San Diego Border Patrol sector, told NPR. “We’re hoping innovation from private industry combined with our experience generates the next evolution of border security infrastructure.”
For those who missed it, here is our exclusive drone footage of the 8 different wall types currently under consideration.
- Ray Dalio: "This Is The Most Important Economic, Political And Social Issue Of Our Time"
Every quarter, the Fed's Flow of Funds report discloses – among many other things – the total U.S. household net worth, and every quarter for the past two years this number has steadily gone up, hitting fresh all time highs with every new release, most recently $96.2 trillion, to widespread cheers from both the financial press and the public, as well as the administration.
However, as we show every quarter, this aggregate number is largely meaningless in providing a status update on the financial state of the broader US population, as it masks a gaping chasm between the haves, or the top 10% of US society – those who benefit the most from this mostly financial-asset based increase in net worth, and the have nots, or bottom 90%, who remain largely locked out from such gains.
In fact, it was the Fed's own Triennial Survey of Consumer Finances which disclosed just how skewed this net worth distribution had become:
Today, none other than Bridgewater's Ray Dalio focuses on this topic, which he calls "the most important economic, political and social issue of our time", and defines it as "the two US economies"…
I wrote about what I see as the most important economic, political & social issue of our time: The Two US Economies. https://t.co/ZfQR4GgGev
— Ray Dalio (@RayDalio) October 23, 2017
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… that of the top 40% and the bottom 60%.
In an article published on LinkedIn this morning, Dalio writes that the Federal Reserve should more closely monitor the economic struggles of the bottom 60% of the economy when making policy since “average statistics” are camouflaging what’s really occurring in the U.S., precisely what this site has claimed quarter after quarter.
Dalio's argument focuses on the wide disparities in factors including labor, retirement savings, health care, death rates and education between the top 40% and bottom 60% of the country, and how average statistics fail to capture this increasingly bimodal distribution. And, echoing what we said most recently a month ago, the Bridgewater founder said it would be a “serious mistake” for the Fed to just focus on a national average as it could lead the policy makers to see a brighter economic picture than the reality.
Or, as we phrased it, "And there is your "recovery": the wealthy have never been wealthier, while half of America, some 50% of households, own just 1% of the country's wealth, down from 3% in 1989, while America's poor have never been more in debt."
Back to Dalio, who writes in his Daily Observations report that “because the economic, social, and political consequences of an economic downturn would likely be severe, if I were running Fed policy, I would want to take this into consideration and keep an eye on the economy of the bottom 60%." He adds that “similarly, having this perspective will be very important for those who determine fiscal policies and for investors concerned with their wealth management."
Dalio hardly breaks new ground when he then writes that the difference in the financial conditions for the two groups – largely due in part whether they can take advantage of the market rally or not, and for most of the US population, it is the latter – is a major cause of slowing growth. Furthermore, the gap between the two economies will only intensify over the next five to 10 years, as changes in demographics will challenge the government’s ability to meet pension and healthcare demands, while changes in technology will continue to impact employment.
The disparities he listed include:
- The top 40 percent now has on average 10 times as much wealth as those in the bottom 60, up from six times as much in 1980
- Just a third of the bottom 60 percent saves any of its income, compared to about 70 percent of the top 40
- Premature deaths among those in the bottom 60 percent are up 20 percent since 2000, and the odds of a premature death within that group are twice as high as the top 40
His conclusion: "We expect the stress between the two economies to intensify over the next 5 to 10 years because of changes in demographics that make it likely that pension, healthcare, and debt promises will become increasingly difficult to meet and because the effects of technological changes on employment and the wealth gap are likely to intensify. For this reason, we will continue to report on the conditions of “the top 40%” and “the bottom 60%” separately (as well as on the averages), and we encourage you to monitor them too. "
* * *
His full note is below (link):
Our Biggest Economic, Social, and Political Issue The Two Economies: The Top 40% and the Bottom 60%
To understand what’s going on in “the economy,” it is a serious mistake to look at average statistics. This is because the wealth and income skews are so great that average statistics no longer reflect the conditions of the average man. For example, as shown in the chart below, the wealth of the top one-tenth of 1% of the population is about equal to that of the bottom 90% of the population, which is the same sort of wealth gap that existed during the 1935-40 period.
To give you a sense of what the picture below the averages looks like, we broke the economy into two economies—that of the top 40% and that of the bottom 60%.* We then observed how conditions of the majority of Americans (the bottom 60%) are different from the conditions of those of the top 40%, as well as different from the picture conveyed by the average statistics. We focused especially on the bottom 60% because that’s where the majority of Americans are and because the picture of this economy is not apparent to most people in the top 40%.
The Bottom 60% Compared with the Top 40% and the “Average”
We will start off looking at income and the economic picture and then turn to some related lifestyle and political differences.
- There has been no growth in earned income, and income and wealth gaps have grown and are enormous. Since 1980, median household real incomes have been about flat, and the average household in the top 40% earns four times more than the average household in the bottom 60%. While they’ve experienced some growth recently, real incomes have been flat to down slightly for the average household in the bottom 60% since 1980 (while they have been up for the top 40%). Those in the top 40% now have on average 10 times as much wealth as those in the bottom 60%. That is up from six times as much in 1980.
- Only about a third of the bottom 60% saves any of its income (in cash or financial assets). As a result, according to a recent Federal Reserve study, most people in this group would struggle to raise $400 in an emergency.
- The rates of income and wealth changes of the middle class have been worse than those changes in any of the other groups, once you account for the social safety net and taxes. The charts below show income, adding in the impact of taxes, tax credits, benefits, and transfers (including non-monetary government transfers like Medicaid and employer health insurance). Unlike the picture of real earned incomes shown earlier, all the quintiles had seen some growth until 2008. This was primarily driven by increases in transfers, benefits, and social programs (especially medical benefits). It also lights up some differences within the bottom 60%. Note that while the conditions of those in the bottom quintile of society are terrible, and worse than those of the middle class by most measures (e.g., income, health, death rates, incarceration rates, etc.), the rate of change in these conditions has been worse for the middle class. More specifically, the middle class has experienced less post-tax and transfer income growth than the bottom quintile since 1980 (see chart on the right), partially because government support to the bottom has provided more of a cushion—though in both cases, income growth has been very low.
- The middle class has been especially hard-hit by manufacturing jobs declining about 30% since 1997, which is shown in the below chart.
- Those in the top 40% have benefited disproportionately from changes in asset values relative to those in the bottom 60%, because of their asset and liability mix. The balance sheets of these two groups, shown below, are sharply different. Though the bottom 60% has a small amount of savings, only a quarter of it is in cash or financial assets; the majority is in much less liquid forms of wealth, like cars, real estate, and business equity. For the bottom, debt is skewed toward more expensive student, auto, and credit card debt.
- The increasing disparity in financial conditions is a major cause of the slowing of growth, because those in lower income/wealth groups have higher propensities to spend than those in higher income/wealth groups. Said differently, if you give rich people more money, they probably won’t spend much of it, whereas if you give poorer people more money, they will probably spend more of it, each motivated by the extent of their unmet needs and desires.**
- Retirement savings for the bottom 60% are not even close to adequate and aren’t much improved as the economy and markets have recovered. Only about a third of families in the bottom 60% have retirement savings accounts—e.g., pensions, 401(k)s—which average less than $20,000. Further, as we do projections of pension finance, it appears unlikely that pension retirement benefits will be fully met.
- Death rates are rising and mental and physical health is deteriorating for those in the bottom 60%. For those in the bottom 60%, premature deaths are up by about 20% since 2000. The biggest contributors to that change are an increase in deaths by drugs/poisoning (up two times since 2000) and an increase in suicides (up over 50% since 2000). The odds of premature death for those in the bottom 60% between the ages of 35 and 64 are more than two times higher, compared to those in the top 40%.
- The US is just about the only major industrialized country with flat/slightly rising death rates.
- The top 40% spend four times more on education than the bottom 60%. This creates a self-perpetuating problem, because those at the bottom get a much worse education than those at the top.
- The bottom 60% increasingly believe others will take advantage of them: the percentage is 49% today versus 40% in 1990.
While conditions for the lowest income groups have long been bad, conditions of non-college-educated whites (especially males) have deteriorated significantly over the past 30 years or so. This is the group that swung most strongly to help elect President Trump. More specifically:
- Now, the average household income for main income earners without a college degree is half that of the average college graduate.
- The share of whites without college degrees who describe themselves as “not too happy” has doubled since 1990, from 9% to 18%, while for those with college degrees it has remained flat, at around 7%.
- Since 1980, divorce rates have more than doubled among middle-age whites without college degrees, from 11% to 23%.
- Prime working-age white males have given up looking for work in record numbers; the number of prime-age white men without college degrees not in the labor force has increased from 7% to 15% since 1980.
- More broadly, men ages 21 to 30 spend an average of three fewer hours a week working than they did a decade ago; most of that time is spent playing video games.
- The probability of premature death for whites without college degrees between the ages of 35 and 64 is nearly three times higher than it is for whites with college degrees, and the rate of premature deaths is up by about 25% since 2000 (while it is down for virtually every other demographic group). The US white population is unique among large groups in the developed world for seeing increases in their death rates. Below, we show premature deaths among working-age whites between the ages of 35 and 64. Again, the average obscures the picture. America’s non-white population isn’t seeing such a rise in premature deaths.
The polarity in economics and living standards is contributing to greater political polarity, as reflected in the below charts.
It is also leading to reduced trust and confidence in government, financial institutions, and the media, which is at or near 35-year lows.
In Summary
Average statistics camouflage what is happening in the economy, which could lead to dangerous miscalculations, most importantly by policy makers. For example, looking at average statistics could lead the Federal Reserve to judge the economy for the average man to be healthier than it really is and to misgauge the most important things that are going on with the economy, labor markets, inflation, capital formation, and productivity, rather than if the Fed were to use more granular statistics.
That could lead the Fed to run an inappropriate monetary policy. Because the economic, social, and political consequences of an economic downturn would likely be severe, if I were running Fed policy, I would want to take this into consideration and keep an eye on the economy of the bottom 60%. By monitoring what is happening in the economies of both the bottom 60% and the top 40% (or, even better, more granular groups), policy makers and the rest of us can give consideration to the implications of this issue. Similarly, having this perspective will be very important for those who determine fiscal policies and for investors concerned with their wealth management.
We expect the stress between the two economies to intensify over the next 5 to 10 years because of changes in demographics that make it likely that pension, healthcare, and debt promises will become increasingly difficult to meet (see “The Coming Big Squeeze”) and because the effects of technological changes on employment and the wealth gap are likely to intensify. For this reason, we will continue to report on the conditions of “the top 40%” and “the bottom 60%” separately (as well as on the averages), and we encourage you to monitor them too.
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