Today’s News 26th April 2016

• "Brexit" – What Else Is Wrong With The European Union?

  Submitted by Josephine Bacon via The Gatestone Institute,

  • Ever since the inception of the European Economic Community, British politicians across the entire political spectrum have been perceptive enough to realize that Britain will lose its sovereignty and turn into a vassal of the France-Germany axis.

  • This month, in March, an official audit reported that EU auditors refuse to sign off more than £100 billion ($144 billion) of EU spending. The Brussels accounts have not been given the all-clear for 19 years in a row.

  There is a joke going around the internet it how the European Union works (or doesn't):

  Pythagoras's theorem – 24 words.
  Lord's Prayer – 66 words.
  Archimedes's Principle – 67 words.
  10 Commandments – 179 words.
  Gettysburg address – 286 words.
  U.S. Declaration of Independence – 1,300 words.
  U.S. Constitution with all 27 Amendments – 7,818 words.

  EU regulations on the sale of cabbage – 26,911 words.

  Why are EU Regulations so long? Maybe because they have to be translated into the 18 official languages? Interpreters also have to be found who can work into and from those languages at the European Parliament. The translation budget is massive. One of the official languages currently is Irish. It can confidently be said that there is no one in the Republic of Ireland who does not speak English; many Irish do not even speak or understand Irish, and certainly none of Ireland's politicians will be fluent only in Irish. But all of the "acquis," the body of regulations that are already part of the EU body of laws, also have to be translated into the languages of candidates for EU membership, such as Turkey, thus adding more languages to the tally each time a new regulation is passed. If Catalonia breaks away from Spain and remains a member of the EU, Catalan will need to be added, even though Catalan politicians all speak perfect Spanish.

  Corruption and Waste

  This month, in March, an official audit reported that EU auditors refuse to sign off more than £100 billion ($144 billion) of EU spending. The Brussels accounts have not been given the all-clear for 19 years in a row. Moreover, the EU is apparently less than incompetent at managing the funds it has.

  This is happening at a time when the EU is demanding that the UK pay it £1.7 billion ($2.45 billion). It was reported on September 17, 2015 in the Daily Mail newspaper that Britain had reluctantly paid this sum, which prime minister David Cameron himself, a fan of staying in Europe, has described as "appalling."

  Also reported on September 17 in the Daily Telegraph, was that, according to the annual report of the European Court of Auditors, £5.5 billion ($7.9 billion) of the EU budget last year was misspent because of controls on spending that were deemed by experts to be only "partially effective."

  The audit, published on March 17, 2016, found that £109 billion ($157 billion) out of a total of £117 billion spent by the EU in 2013 alone was "affected by material error" — that is, disappeared into various people's pockets.

  Thanks to the European Union, the Value Added Tax (VAT), the tax which in the UK replaced purchase tax in 1973, is now applied to services as well as goods. Such a tax discriminates against service-based economies, such as those of the developed countries, because such economies are taxed so they cannot compete with services provided outside the EU. Each member country's tax regime is micro-managed by the European Union. The former purchase tax was specifically designed for taxing luxury goods, but the VAT is now imposed even on essentials needed by the poorest members of society. Furthermore, the VAT discriminates against women because the EU requires the member states to tax products used by only one gender, such as tampons.

  The "Traveling Circus"

  Few people outside European parliamentary circles are aware that there is an EU "traveling circus." Once a month, the European Parliament moves from Brussels in Belgium to Strasbourg in France. Even though Members of European Parliament (MEPs) voted to scrap this move, the French government, which initiated this madness in the first place, has the power to block any such decision and is apparently determined to do so. That is another fact which goes unmentioned by those determined to keep the UK in the EU. When this author challenged an MEP, Mary Honeyball, on the subject, she claimed that it was "being dealt with," but the French government is fiercely opposed to keeping the parliament exclusively in Brussels and it has the power to block any such reform. The cost of the "travelling circus" alone is conservatively estimated at £130 million ($187 million) a year.

  Free Movement of Labour

  The free movement of labour between EU member states was always going to be a non-starter. Has anyone noticed the hordes of British plumbers and electricians emigrating to Bulgaria and Romania? The movement of skilled and unskilled labour from the poorest countries of the EU to the wealthier ones — those that offer generous benefits to the unemployed and even subsidise low wages — has always been a fact of life, one seriously underestimated by successive British governments. The British suffer most because, of all the countries of the EU, the UK offers the most generous benefits. The so-called "freedom of movement," which has proved to be just a one-way street, is only one of the reasons why Britain needs to regain control of its own destiny and stop being subservient to laws being made by unelected, overpaid, un-unelectable bureaucrats in Brussels.

  But Will There Be a Brexit?

  Unfortunately, most voters in the British referendum glean their information from the sound bites of politicians on television. This circumstance leaves the public open to manipulation, uninformed, and ignorant of the facts. One fact, however, that cannot be ignored is that ever since Britain joined the European Economic Community in 1973, British politicians across the entire political spectrum from left (Tony Benn) to right (Enoch Powell) were perceptive enough to realize that Britain would lose the power to make its own laws and turn into a vassal of the France-Germany axis.

  

  Leaving the European Union will give the UK back its sovereignty and leave it free to make alliances not only with its former European partners, but with other Commonwealth countries, to say nothing of the United States, and Central and South America.

  

  

• "A Total Game Changer" – From Over-Population To De-Population

  Submitted by Chris Hamilton via Hambone's Stuff blog,

  Strangely, the world is suffering from two seemingly opposite trends…overpopulation and depopulation in concert.  The overpopulation is due to the increased longevity of elderly lifespans vs. depopulation of young populations due to collapsing birthrates.  The depopulation is among most under 25yr old populations (except Africa) and among many under 45yr old populations.

  So, the old are living decades longer than a generation ago but their adult children are having far fewer children.  The economics of this is a complete game changer and is unlike any time previously in the history of mankind.  None of the models ever accounted for a shrinking young population absent income, savings, or job opportunity vs. massive growth in the old with a vast majority reliant on government programs in their generally underfunded retirements (apart from a minority of retirees who are wildly "overfunded").  There are literally hundreds of reasons for the longer lifespans and lower birthrates…but that's for another day.  This is simply a look at what is and what is likely to be absent a goal-seeked happy ending.

  In a short yet economically valid manner, every person is a unit of consumption.  The greater the number of people and the greater the purchasing power, the greater the growth in consumption.  So, if one wanted to gauge economic growth, (growth in consumption driving economic growth), multiply the annual change in population by purchasing power (wages, savings) per capita.  Regarding wage growth, I hold wages flat as from a consumption standpoint, wage growth is basically offset by inflation.  Of course, there is another lever beyond this which central banks are feverishly torqueing; substituting the lower interest rates of ZIRP and NIRP to boost consumption from a flagging base of population growth.  (There is one more boost to consumption, huge increases in social transfer payments primarily among the advanced economies…but while noted, these are a story for another day.)

  THE DETAILS

  The chart below is total annual population growth broken down by OECD nations (33 wealthiest nations…representing 1.3 billion people, OECD members), BRIICS (Brazil, Russia, India, Indonesia, China, S. Africa…representing 3.4 billion people), and the RoW (Rest of the World…representing about 3 billion people).  Takeaways – 1) total annual population growth peaked in 1988 and has been decelerating since falling 13% & now down 12m/yr from peak.  2) Growth has been shifting away from the BRIICS to the RoW.

  

   

  Below, global annual total population change vs. under 45 annual population change broken down by OECD, BRIICS, and the Rest of World.  What should be clear…1) under 45 population growth has fallen by nearly 60% & is down 44m/yr from peak growth.  2) All under 45 population growth (net) is among the poorer nations of the Rest of the World.  Growth has shifted from rich to middle to poor nations and from young to old.  Those with little income, savings, and/or access to credit can't consume much.  Elderly on fixed incomes, declining vitality, and credit averse won't consume much.  Clearly, the impact of the slowing and shifting population growth on slowing growth of consumption should be easily understood.

   

  

   

  Global annual population growth by GDP per capita.  OECD nations given an average of $40k per capita, BRIICS $15k per capita, and the RoW $8k per capita (below).  Annual growth in consumption peaked in 1989 and has been falling since…of course this is unadjusted for the big impact that credit has to increase real consumption.

   

  

   

  Global annual under 45 population growth by GDP per capita further broken down by growth among OECD, BRIICS, & RoW (below).  The deceleration of global GDP per capita is entirely among the under 45 OECD and BRIICS which have nearly entirely ceased.  The only under 45 growth in consumption is among the decelerating RoW.

   

  

   

  Below, 0-64yr/old annual global population growth vs. 0-64yr/old population growth among combined OECD, China, Brazil, and Russia vs global debt growth.  The surge in debt since 1988 coinciding with the collapse of growth among the wealth OECD and aspiring BRIICS (growth has fallen from 30m/yr to 3m/yr (90% decline) and growth among the RoW has entirely stalled since '88 at +55m/yr.  The central bank response to take interest rates to ZIRP (and now NIRP) has been an attempt to maintain consumption growth against declining population growth.  Only central bankers know what they'll do as under 65yr/old populations begin outright shrinking nearly everywhere but Africa?!?

   

  

   

  A look at annual global populations; young vs. old (below).  The 0-5yr/old population has stalled but nowhere near so for the 75+yr/old population.  In 1950 there were ten "babes" for every 75+yr/old…by 2050, the two groups are estimated to be 1:1 but this estimate is likely to be far too optimistic if economic conditions continue deteriorating.

  

  US 20-59yr/old annual population growth vs. the Federal Reserves FFR (%) and US total debt (below).  Federal Reserve actions have been and remain a simple (ultimately unwinnable) fight vs. the decelerating growth among the core US population since the early 1980's.  The great recession of 2008-'09 shouldn't be a shocker given the sharp 20-59yr/old population growth deceleration culminating in '07.

   

  

   

  Below, Japan's 20-59yr/old annual population growth vs. BOJ interest rate and Japanese federal debt.  Japan's annual core population turned negative in '00 and interest rates hit ZIRP and debt creation took off.  Japan's plan to monetize likely well in excess of 100% and maybe ultimately 1,000% or 10,000% of GDP is a curious solution which may lead to an eventual hiccup which leaves Japanese society in absolute chaos (2nd chart below).  But if it were only Japan that had this plan…but alas, it is the same for all major central banks presently or eventually facing depopulation.  (Debt in chart below is denominated in Yen, not dollars).

   

   

  

   

  

  Below, Germany's 20-59yr/old annual population change vs. debt to GDP.  Germany's 20-59yr/old population turned negative in '94 but the implementation of the Euro and Euro wide market (with the Maastrich treaty in 1992 and implementation Euro area wide in 1999) quintupled Germany's available export base under a now common currency (2nd chart below).  The impact was a stay of execution for Germany but a grinding, terminal cancer for the remainder of the Euro area.

   

  

  

   

  Below, China's annual 20-59yr/old population change, Bank of China interest rates, and China total debt growth.  Annual Chinese core population growth has collapsed since '08 by 90% and will turn negative in 2018 and remain increasingly negative for decades thereafter.  The insane Chinese debt ramp to offset the declining population growth has no possible means to resolve in any manner but catastrophe. 

   

  ***Noteworthy, despite China's recent elimination of it's "one child policy", it should be noted that China's birthrates are higher than Japan, S. Korea, Taiwan, and many EU nations…none of whom have any policies restricting births and most with policies to encourage higher fertility.  The elimination of the "one child" policy in China is unlikely to have significant impact…family finances and struggling economies are far more likely to determine family formation in China and world-over.***

  

   

  CONCLUSION

  An economic and financial system premised on perpetual growth was bound to run into trouble (what do you do when you have taken a wrong turn?…apparently just keep going!).  The inevitable deceleration of population growth was the trigger that turned central bankers into pushers offering ever cheaper credit.  The lower rates drove unsustainable rates of consumption absent even further rate cuts and likewise drove overcapacity which likewise needed even lower rates.  But negative rates of NIRP are simply no longer under the heading of capitalism (a market that doesn't value capital likely isn't capitalism?!?).  When we've clearly changed "ism's"…we've crossed the Rubicon.

  What happens as population growth turns to population decline is honestly and literally a complete and total game changer.  A flat to declining number of buyers and consumers opposite ramping elderly sellers plus their unfunded liabilities is a problem with no happy resolutions.  Currencies (what will constitute "money"), "free-markets", and perhaps the basis of civilization hang in the balance of the transition from high population growth to potential outright depopulation.

  I believe this is the correct lens through which to view and understand why growth is perpetually weakening, why commodity overcapacity and slowing demand will only accelerate, why the Treasury market continues to see "buying" despite the near total absence of buyers (Treasury Mystery), why equities are a "buy" (but for all the wrong reasons), and why precious metal valuations are so extremely suspect in the face of a monetary onslaught. 

   

  

  

• The Separation Of Bathroom & State

  Submitted by Roy Cordato via The Mises Institute,

  The saga of the so-called Charlotte bathroom ordinance — and the state of North Carolina’s response to it — has taken on a life of its own. At the national level leftists are accusing North Carolina of bigotry while, in the name of tolerance, a growing list of performers and businesses are boycotting the state. Unfortunately, what has gotten lost in all the rhetoric surrounding this issue is the truth about both the original Charlotte law and the state’s response to it.

  In late February the Charlotte, North Carolina, city council passed an “antidiscrimination” law, scheduled to go into effect on April 1. It was aimed at protecting what, in the view of the city council, are the rights of those in the gay, lesbian, and transgender community. The centerpiece of this law was a provision that prohibits businesses providing bathrooms, locker rooms, and showers from segregating usage of those facilities by gender, biologically defined. Biological males or females must be allowed to use the facilities of the opposite sex if they claim that that is the sex they identify with psychologically. (Note, no proof was required.)

  Much of the criticism of the Charlotte bill was centered around two issues: the religious freedom of business owners and the privacy rights of people, particularly women, using public bathroom and shower facilities. Most of the vocal opposition to the ordinance came from religious organizations and advocacy groups that focused on traditional values. As argued by John Rustin, President of the Family Policy Council:

  Similar ordinances have been used to force small business owners like florists, bakers, photographers and bed-and-breakfast owners and others either to conform to a government-dictated viewpoint in violation of those sincerely held religious beliefs or to face legal charges, fines and other penalties that have ultimately caused some to go out of business.

  Private Property, Not Religion, Is the Key

  While religious liberty is an important concern, the issue is much broader. This ordinance was an assault on the rights of private property owners and economic freedom, regardless of one’s religious beliefs.

  The primary targets of the Charlotte ordinance were privately owned businesses that offer bathrooms, changing rooms, showers, etc., for their customer’s convenience. The decision of how to structure access to these facilities may, for some, be based on their religious beliefs but for many others it is a secular business decision. Their goal is customer satisfaction driven by the desire to make a profit and earn a living. The property that they use is privately owned, the investments that they make come from private funds, and those who reap the rewards or suffer the losses are private entrepreneurs. The bathrooms in their establishments are part of the product that they provide.

  In a free society based on property rights and free markets, as all free societies must be, a privately owned business would have the right to decide whether or not it wants separate bathrooms strictly for men and women biologically defined, bathrooms for men and women subjectively or psychologically defined, completely gender neutral bathrooms with no labels on the doors, or no bathrooms at all.

  Businesses Seek to Please Their Customers

  Their goal is to provide the products and services that most of their customers want in an environment that those customers feel comfortable in. This environment may indeed be different for different establishments depending on the desires and cultural makeup of their clients. This Charlotte ordinance told businesses that they are not allowed to adjust their decisions regarding their bathroom, locker room, or shower facilities in order to accommodate customer preferences. In this sense the now overturned Charlotte ordinance was a gross violation of property rights and economic freedom and on libertarian grounds needed to be overturned.

  So what was the state of North Carolina’s response to all this? In fact, it was to restore freedom and property rights and to guarantee those rights across the state. The law in North Carolina that so many progressives are up in arms about does not prohibit businesses from having bathrooms, locker rooms, showers, etc., that allow use by people of all genders defined biologically, psychologically, or whatever. In a “myths vs facts” explanatory statement put out by the governor of North Carolina this was made quite clear:

  Can private businesses, if they choose, continue to allow transgender individuals to use the bathroom, locker room or other facilities of the gender they identify with …?

   

  Answer: Yes. That is the prerogative of private businesses under this new law. …The law neither requires nor prohibits them from doing so.

  In other words, the state of North Carolina codified a basic libertarian principle: the separation of bathroom and state.

  The only place where bathrooms, showers, etc., must conform with biological sex is in government owned facilities — courtrooms, city halls, schools, etc., where this separation is not possible. So yes, in North Carolina 12-year old boys, defined by what body parts they are sporting, may not use the girls’ locker room and showers after gym class at the local public middle school. Of course private middle schools are free to do what they want. If not believing that this is unjust discrimination makes me a bigot, then so be it.

  So where does this approach leave the issue of religious freedom? For the most part, and particularly in cases like this, religious freedom is nothing more than the right to use your own property in a way that comports with your religious beliefs. This applies not only to the issue of who gets to use what bathrooms but also to the Little Sister’s of the Poor and Obama’s contraceptive mandate, and most of the other religious freedom cases that are of concern to traditional values advocates. If property rights and economic freedom are the values that are upheld, then religious freedom will take care of itself.

  

  

• Cash-Starved ISIS Offers Incentive Pay For Fighters: $50 Per "Female" Sex Slave

  ISIS appears to be at a bit of a crossroads. As we detailed yesterday, faced with a cash crunch and significant military losses, the organization is becoming quite strained. The group has reached the point where the rank and file are becoming frustrated and have started to defect.

  

  In order to stop the defections, ISIS dug deep in its bag of incentives and decided to employ the carrot and stick method.

  First we learned of the stick, which is to literally freeze members to death if they're caught trying to defect.

  As we wrote yesterday

  According Iraqi media agency Al Sumaria News, the 45 defectors attempted to flee the battlefield during recent fights in Iraq. They accused deserters were executed by being locked in morgue freezers in Mosul for 24 hours, left for a slow, presumably agonizing death.

   

  Their bodies were reportedly then stretched out along the sides of the road at city entrances to act as a warning to any other fighter who might have second thoughts.

  Now, courtesy of the Washington Post, we learn what the carrot is. A wage voucher obtained by the post details out the fact that ISIS is now paying soldiers extra cash for each additional family member. Also, as a sick and twisted added bonus, anyone who has a sex slave gets another $50… USD of course.

  The base salary offered to the worker named al-Jiburi was a pittance, just $50 a month. But even the cash-challenged Islamic State knew it had to do more to sustain the loyalty of a man with nine mouths to feed.

   

  A crinkled wage voucher breaks it down by family member:

  • For each of his two wives, al-Jiburi would receive an extra $50.
  • For each of his six children under age 15, he would get another $35.
  • Any “female captive” – sex slave – would entitle him to an additional $50.

  For al-Jiburi, described in the document as a service worker for the terrorist group, the monthly total came to $360, payable in U.S. greenbacks.

  The voucher that shows the breakdown is shown below – the article notes that the document was dated within the last six months, and was found along with other documents in Syria and Iraq.

  

   

  Although the article goes on to caution any predictions about the collapse of ISIS, what's taking place is an indication that the group is in rough shape, and is now turning on its own. We certainly won't make any predictions, but none of this bodes well for the sustainability of the organization – which perhaps even more worryingly leaves ISIS fighters with even less to lose by their actions.

  

  

• A Look Inside Europe's Largest Foreigner "Ghetto"

  On the heels of State Department spokesman John Kirby's renewed proclamation that "US is committed to admitting more refugees," we thought this brief clip from France's picturesque Mantes La Jolie (in the western suburbs of Paris) – Europe's largest "ghetto" – would be useful…

  

   

  Here's the postcard…

  

   

  Le Val-Fourré, the largest housing project in the district, is extremely ghettoized, and is dominated by immigrants from the Maghreb, the majority of whom are Moroccan, and sub-Saharan immigrants.

  

   

  The friendly local inhabitants – who seem to be integrating into European culture so well – appear to not take kindly to police driving through the middle of their road-blockage, drug-dealing, motorbike-racing, street party… and trouble ensues…

  h/t LiveLeak

  It is any wonder the police stayed away from Mollenbeek?

  *  *  *

  Coming to a 'picturesque city in America' any day now.

  

  

• Seymour Hersh: Saudis Paid Pakistan to Hold bin Laden To Prevent U.S. Interrogation

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  In the aftermath of the most signifiant geopolitical event of my lifetime, the attacks of September 11,2001, the U.S. government proceeded to concoct a fairytale for public consumption in order to advance imperial ambitions overseas and a implement a domestic surveillance state at home. This should be obvious to everyone by now.

  The official 9/11 story has been filled with holes since the very beginning, but a traumatized American public was too gullible and emotionally damaged to see them. Those of us who saw such inconsistencies and pointed them out have been derided as “conspiracy theorists” for years, yet fifteen years later, the biggest “conspiracy theory” in modern American history is rapidly becoming conspiracy fact.

  At the very least, we now know there was Saudi involvement far beyond just the 15 of 19 hijackers who were Saudi nationals, but that’s still just scratching the surface. Once people come to terms with the fact the tale they’ve been told was completely invented, other obvious questions will have to be asked. Most critically, the question of World Trade Center 7.

  As I wrote in the recent post, 60 Minutes Explores the Saudi Links to 9/11 Attacks:

  I still haven’t seen a convincing explanation for how a 47-story tower that wasn’t hit by a plane imploded on itself. The very serious experts tell us that WTC7 collapsed due to fires caused by debris from the collapse of the nearby North Tower of the World Trade Center. So not only are we supposed to believe a massive office building came down demolition style without being hit by a plane, here’s the real kicker. A study from the National Institute of Standards and Technology (NIST) admits that the collapse of WTC 7 is the first known instance of a tall building brought down primarily by uncontrolled fires.

  Yes, it’s true, and we desperately need to get to the bottom of this.

  

  But I digress. The main thrust of this article is to highlight some new revelations from Pulitzer Prize winning journalist Seymour Hersh. Last May, he published a blockbuster article challenging the entire government story surrounding the death of Osama bin Laden, something I highlighted in the post: U.S. Officials Panic About Seymour Hersh Story; Then Deny His Claims Using Jedi Mind Tricks.

  Well he’s back, and he recently shared more groundbreaking information in a fascinating interview with AlterNet. Here are some choice excerpts:

  Ken Klippenstein: In the book you describe Saudi financial support for the compound in which Osama Bin Laden was being kept in Pakistan. Was that Saudi government officials, private individuals or both?

   

  Seymour Hersh: The Saudis bribed the Pakistanis not to tell us [that the Pakistani government had Bin Laden] because they didn’t want us interrogating Bin Laden (that’s my best guess), because he would’ve talked to us, probably. My guess is, we don’t know anything really about 9/11. We just don’t know. We don’t know what role was played by whom.

  Bingo. We don’t know anything, except that the U.S. government has been lying to the public for 15 years.

  KK: So you don’t know if the hush money was from the Saudi government or private individuals?

   

  SH: The money was from the government … what the Saudis were doing, so I’ve been told, by reasonable people (I haven’t written this) is that they were also passing along tankers of oil for the Pakistanis to resell. That’s really a lot of money.

   

  KK: For the Bin Laden compound?

   

  SH: Yeah, in exchange for being quiet. The Paks traditionally have done security for both Saudi Arabia and UAE.

   

  KK: Do you have any idea how much Saudi Arabia gave Pakistan in hush money?

   

  SH: I have been given numbers, but I haven’t done the work on it so I’m just relaying. I know it was certainly many—you know, we’re talking about four or five years—hundreds of millions [of dollars]. But I don’t have enough to tell you.

   

  KK: Why didn’t they apprehend Bin Laden? Can you imagine the intelligence we could have gotten from him?

   

  SH: The Pakistani high command said go kill him, but for chrissake don’t leave a body, don’t arrest him, just tell them a week later that you killed him in Hindu Kush. That was the plan.

   

  Many sections, particularly in the Urdu-speaking sections, were really very positive about Bin Laden. Significant percentages in some areas supported Bin Laden. They [the Pakistani government] would’ve been under great duress if the average person knew that they’d helped us kill him.

   

  KK: In the book you quote a Joint Chiefs of Staff adviser who said that Brennan told the Saudis to stop arming the extremist rebels in Syria and their weapons will dry up—which seems like a rational request—but then, you point out, the Saudis ramped up arms support.

   

  Seymour Hersh: That’s true.

   

  KK: Did the U.S. do anything to punish the Saudis for it?

   

  SH: Nothing. Of course not. No, no. I’ll tell you what’s going on right now … al Nusra, certainly a jihadist group… has new arms. They’ve got some tanks now—I think the Saudis are supplying stuff. They’ve got tanks now, have a lot of arms, and are staging some operations around Aleppo. There’s a ceasefire and even though they’re not part of it, they obviously took advantage of the ceasefire to resupply. It’s going to be bloody.

   

  KK: Just to be clear, the U.S. hasn’t done anything to punish or at least disincentivize the Saudis from arming our enemies in Syria?

   

  SH: Quite the contrary. The Saudis and Qatar and the Turks put money into those arms [sent to Syrian jihadis].

   

  You’re asking the right questions. Do we say anything? No. Turkey’s Erdogan has played a complete double game: for years he supported and accommodated ISIS. The border was wide open—Hatay Province—guys were going back and forth, bad guys. We know Erdogan’s deeply involved. He’s changing his tune slightly but he’s been deeply involved in this.

   

  Let me talk to you about the sarin story [the sarin gas attack in Ghouta, a suburb near Damascus, which the U.S. government attributed to the Assad regime] because it really is in my craw.  In this article that was this long series of interviews [of Obama] by Jeff Goldberg…he says, without citing the source (you have to presume it was the president because he’s talking to him all the time) that the head of National Intelligence, General [James] Clapper, said to him very early after the [sarin] incident took place, “Hey, it’s not a slam dunk.”

   

  You have to understand in the intelligence community—Tenet [Bush-era CIA director who infamously said Iraqi WMD was a “slam dunk”] is the one who said that about the war in Baghdad—that’s a serious comment. That means you’ve got a problem with the intelligence. As you know I wrote a story that said the chairman of the Joint Chiefs told the president that information the same day. I now know more about it.

   

  The president’s explanation for [not bombing Syria] was that the Syrians agreed that night, rather than be bombed, they’d give up their chemical weapons arsenal, which in this article in the Atlantic, Goldberg said they [the Syrians] had never disclosed before. This is ludicrous. Lavrov [Russia’s Foreign Minister] and Kerry had talked about it for a year—getting rid of the arsenal—because it was under threat from the rebels.

   

  The issue was not that they [the Syrians] suddenly caved in. [Before the Ghouta attack] there was a G-20 summit and Putin and Bashar met for an hour. There was an official briefing from Ben Rhodes and he said they talked about the chemical weapons issue and what to do. The issue was that Bashar couldn’t pay for it—it cost more than a billion bucks. The Russians said, ‘Hey, we can’t pay it all. Oil prices are going down and we’re hurt for money.’ And so, all that happened was we agreed to handle it. We took care of a lot of the costs of it.

   

  Guess what? We had a ship, it was called the Cape Maid, it was parked out in the Med. The Syrians would let us destroy this stuff [the chemical weapons]… there was 1,308 tons that was shipped to the port…and we had, guess what, a forensic unit out there. Wouldn’t we like to really prove—here we have all his sarin and we had sarin from what happened in Ghouta, the UN had a team there and got samples—guess what?

   

  It didn’t match. But we didn’t hear that. I now know it, I’m going to write a lot about it.

   

  Guess what else we know from the forensic analysis we have (we had all the missiles in their arsenal). Nothing in their arsenal had anything close to what was on the ground in Ghouta. A lot of people I know, nobody’s going to go on the record, but the people I know said we couldn’t make a connection, there was no connection between what was given to us by Bashar and what was used in Ghouta. That to me is interesting. That doesn’t prove anything, but it opens up a door to further investigation and further questioning.

  Now watch his interview with Democracy Now, taped earlier today:

  And just like that, conspiracy theory once again becomes conspiracy fact.

  As I tweeted the other day:

  Advice: If there's ever another big terror attack against the U.S. don't be so quick to give up your rights based on a government fairytale.

  — Michael Krieger (@LibertyBlitz) April 21, 2016

  

  

• A Bird's-Eye View Of How The US Economy Is Falling Apart (In 4 Simple Charts)

  Submitted by Tony Sagami via MauldinEconomics.com,

  My college-aged kids love him. I’m not talking about Stephen Curry or Justin Bieber (although they love them too); I’m talking about Bernie Sanders.

  Whether you support him or not, my guess is that most Americans my age are very surprised about his popularity. However, it shouldn’t be a surprise given the economic stress many Americans face.

  The four charts below capture the essence of what I’m talking about…

  A shrinking middle class and a growing lower class

  

  Sadly, roughly 50 million Americans live below the poverty line—the largest number in our nation’s history—and the poorest 40% of all Americans now spend more than 50% of their incomes just on food and housing.

  Consumer sentiment is plummeting

  No wonder that consumer sentiment has been sinking fast, which is a very troubling sign for our consumer-driven economy.

  

  Spending is slowing

  That consumer angst translates into a drop in spending. The Commerce Department reported that retail sales dropped by 0.3% in March, well below the +0.1% gain Wall Street was expecting.

  

  The biggest drop was in auto spending, which was down 2.1%.  One of the weakest sectors, however, was restaurants.

  

  Wages are shrinking

  I suspect the root of the issue is wages… or lack thereof. The reality is that inflation-adjusted wages—despite the recent minimum wage increase in several states—have been shrinking.

  A recent report concluded, “In real terms, the average wage peaked more than 40 years ago.”

  

  Check out these discouraging numbers:
  •    39% of American workers make less than $20,000 a year.
  •    52% of American workers make less than $30,000 a year.
  •    63% of American workers make less than $40,000 a year.
  •    72% of American workers make less than $50,000 a year.

  Debt is piling up

  And it doesn’t help that Americans continue to rack up debt. 

  Example: Outstanding auto loans have hit more than a trillion dollars. With an average balance of $12,000 per person, that consumes nearly 8% of the average borrower’s disposable income!

  No wonder that an estimated 62% of Americans are living paycheck to paycheck.

  And all of us—low, medium, and high income combined—are working longer than ever to pay a growing tax bill. Tax freedom day (the day when the nation as a whole has earned enough to pay the state and federal tax bill for the year) arrived on April 24, according to the nonpartisan Tax Foundation.

  That means all the money we made in the first 114 days of 2016 went to taxes.

  

  

• Malaysian Ringgit Tumbles After 1MDB Default Raises Spectre Of Sovereign Failure

  Update: after widening by 2bps earlier, Malaysia CDS is now +4 at 167bps and starting to move as macro “analysts” finally catch up on the entire story and comprehend the implications.

  * * *

  Malaysian CDS rose to near 3-month highs and the Ringgit has spiked over 300 pips – back near recent lows – after the Malaysian slushfund government investment fund 1MDB is reportedly in default. This is exactly the scenario we laid out last week that initially sent the currency lower and CDS higher, as the Abu Dhabi sovereign wealth fund has by all appearances started a potential waterfall default on Malaysian sovereign debt (due to cross-default triggers at the sovereign).

  As we reported one week ago, Malaysia government investment fund was put into default by the Intl Petroleum Investment Co. Moments ago, the 5 day grace period on the missed $50.3 million payment on the TIAMK 5.75% 2022s privately placed by 1MDB Energy (Langat) expired, and as Bloomberg reported, 1MDB is now officially in default after missing its interest payment.

  The big question now is – as SocGen explores – Given the default of 1MDB, Could a Malaysian Sovereign Default Occur?

  While we await confirmation of whether the missed $50.3m on the TIAMK 5.75% 2022s privately placed by 1MDB Energy (Langat) has been made good as we approach the end of the five-day grace period today (25 April 2016), wire service reports (e.g. Bloomberg) indicate that 1MDB has met with holders of the Malaysian Ringgit (or MYR) SUKUK bonds which were issued by the 1MDB to “seek waivers from triggering cross default”.

   

  We understand that the dispute over the non-payment of the missed $50.3m coupon which was originally due on 18 April 2016 relates to the now widely reported dispute between the two guarantee providers on the 5.75% TIAMK 2022 bonds – namely 1MDB and Abu Dhabi’s International Petroleum Investment Corporation (or IPIC). The dispute relates to the alleged non-conformance of terms to a ‘side’ agreement between the two parties made in May/June 2015 in relation to IPIC assumin  the obligations on the $3.5bn of 1MDB bonds issued in 2012, including the TIAMK 2022s (both the 5.75% TIAMK 2022s – which were privately placed – and the 5.99% TIAMK 2022 public bonds).

   

  We understand that the latest “waivers from triggering cross default” were sought by holders of MYR 5bn of SUKUK bonds issued by 1MDB and which carry an explicit guarantee by the Government of Malaysia (or GoM). The MYR SUKUKs were presumably issued by 1MDB’s predecessor, the “Terengganu Investment Authority Berhad” (or TIA) in May 2009, prior to the name change to 1MDB in September 2009 following its takeover by the federal government. We understand that the MYR SUKUKs were issued in eight tranches of 5.75% 30-year paper of between MYR600m and MYR650m for MYR5bn in total – they will mature in May 2039. The language of the explicit guarantee states that a default will occur (and possibly cross-default) when (among other things): “… the Issuer fails to or makes default in the payment of any amount (whether principal, profit or any other amount) due from it under the IMTN [i.e. the SUKUK bonds] or any of the other transaction documents on the due date (whether formally demanded or not) or on demand …”. We believe the waiver sought from the holders of the MYR SUKUK issue could be to avoid triggers on the GoM’s other debt/liabilities.

   

  It is also worth keeping in mind the following disclosures made by the GoM in the Supplement (dated 19 April 2016) to their Offering Circular (dated 11 April 2016) for the dual-tranche $2bn of USD SUKUK bonds (10-year and 30-year) that was issued last week:

   

  “As at the date of this Supplement, this dispute [i.e. between 1MDB and IPIC] concerning the obligations of 1MDB and IPIC under the IPIC Term Sheet] has yet to be resolved. If the interest payments under the 2022 Notes are not made on or before April 25, 2016, it would constitute an event of default thereunder, which could result in acceleration of the 2022 Notes and could result in cross-defaults or cross-acceleration of other indebtedness of 1MDB by the relevant creditors (emphasis ours). The total principal amount of such other relevant indebtedness of 1MDB which could become due and payable as a result of the foregoing, and to which the Government is potentially exposed by way of guarantees for such debt is RM5.8 billion [USD1.48bn equiv.]. In addition, the Government is potentially liable for up to U.S.$3.0 billion in principal, plus interest, under its letter of support as set out above [namely the OGIMK 2023s]. If 1MDB were unable to make such payments as they become due, the Government does not believe that any amounts that it would be required to pay with respect to the indebtedness of 1MDB would be material to the Government.”

   

  Should the $50.3m coupon for the 5.75% TIAMK 2022s remain unpaid after today, we would think (although details are unavailable) the coupon would need to be paid within ten days of the bond trustees invoking the bond guarantee after receipt of the 75% quorum. In the meantime, the non-payment of the missed coupon is especially credit negative for the IPIC bond complex, especially given the existence of cross-default language in the IPIC bond complex which we understand (based on reports e.g. The Edge) could total some $16bn of the company’s bond debt.

   

  As for the 1MDB bond complex, despite the lack of cross-default language with regards to the the 4.22% OGIMK 2023s and the 5.99% TAIMK 2022, the presence of the “explicit” guarantee by the GoM in relation to the MYR SUKUK bonds could risk cross-default triggers at the sovereign. We note that 5-year MALAY CDS are currently indicated at 162 (vs ~155 as at the end of last week). The 4.22% OGIMK (which carry a Letter of Support from the GoM) were last indicated (on Bloomberg at 89.5 /91.00 (or at Z+469 bp), with the 5.99% TIAMK 2022s at 99.125 100.50 (or at Z+463 bp).

  *  *  *

  For now CDS is edging higher but MYR is the market moving fastest…

  

  

  

• It Is Harder To Become A Chinese Civil Servant Than Get Into Princeton

  A record-setting 115,831 Chinese people lined up for Hubei province's civil services exam on Friday… all knowing that the 6,500 open positions meant the chances of acceptance were lower than that of getting into Princeton or Yale…

  Up from 106,000 last year, China People's Daily reports this year's applicants the most numerous ever…

  

   

  Applicants across 25 cities sat for China's national exam for access to the civil service, comprising tests of professional ability and language.

  

  

  Each year, authorities are extremely careful to avoid irregularities, but this year, the human resources department of east China's Jiangxi Province said on Saturday evening that it has started investigating the alledged leak of the provincial civil service exam.

  The annual exams kicked off on Saturday in several provinces across China including Jiangxi. However, some people posted on their social network accounts suggesting the exam information might have been leaked because the questions were the same as on their practice materials.

   

  In addition, a few people were spotted distributing the answers for the tests outside the exam sites after the first test in the morning concluded.

   

  

   

  As the exam is conducted jointly, several provinces are involved.

   

  So far, only Jiangxi Province has responded to the situation.

   

  China's revised criminal laws shows zero-tolerance to exam-related misconduct and has defined cheating on major national exams as a criminal crime.

   

  

   

  People found guilty of cheating face up to seven years in jail.

  

  

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