- In Rare Compromise, Turkey 'Pauses' Gas Exploration Near Greece After EU & US Pressure
In Rare Compromise, Turkey ‘Pauses’ Gas Exploration Near Greece After EU & US Pressure
Tyler Durden
Wed, 07/29/2020 – 02:45The Turkish gas and oil exploration drama in the East Mediterranean which put Greece and Cyprus on a war footing with Turkish forces has taken a surprise turn.
Amid the ratcheting pressure on Ankara over alleged incursions into Greece and Cyprus’ economic zones coming from the European Union and United States, it appears Turkey has backed down for now.
Days ago France’s Emmanuel Macron even invoked the threat of EU sanctions, citing that it’s “not acceptable for the maritime space of a European Union member state to be violated or threatened.” Turkey has frequently been source of rifts among fellow NATO member states.
Via AP For the first time, Turkey says its ambitious and expansive, but hugely controversial, gas exploration initiative is on hold. On Tuesday TRT World reports that “Turkey has said it could pause energy-exploration operations in the Eastern Mediterranean Sea for a while pending talks with Greece.”
The announcement came from the office of the president, with spokesman Ibrahim Kalin revealing in a CNN Turk interview that Erdogan told his aides to “be constructive and put this on hold for some time”.
He identified that the seismic exploration vessel “Oruc Reis” was set to search for hydrocarbons “180 kilometers from the island of Meis (Kastellorizo in Greek)” — an area Greece recently said it would deploy military assets to if the Turkish operation was initiated.
“Despite this our president said while the negotiations are continuing, let’s be constructive and hold (energy search) for a while,” the presidential spokesman said.
The Greek Navy has said it’s in a state of “heightened readiness” in response to any incursion of Greece’s territorial waters. It boils down to how the rival longtime enemies interpret their offshore zones, with Turkey in the past years using especially its so-called “Turkish Republic of Northern Cyprus” to lay claim to waters entirely surrounding the island.
Below is a Turkish interpretation of its rightful waters, within which some of Greece’s easternmost islands are located:
Likely helping Turkey to hit the pause button was a forceful message out of US Ambassador to Greece Geoffrey Pyatt earlier this week: “I want to echo the clear message from Washington and elsewhere in Europe, urging Turkish authorities to halt operations that raise tensions in the region, such as plans to survey for natural resources in areas where Greece and Cyprus assert jurisdiction in the eastern Mediterranean,” he said.
Pompeo also earlier this month asserted that the US clearly backed Greece, Cyprus, and the EU’s interpretation of the economic zones and Turkish violations of that territory.
- Israel Rolls Out Dystopian "Cyber Espionage Award" For US-Backed Digital Saboteurs
Israel Rolls Out Dystopian “Cyber Espionage Award” For US-Backed Digital Saboteurs
Tyler Durden
Wed, 07/29/2020 – 02:00Authored by Raul Diego via MintPressNews.com,
A “mastermind in the field of cyber espionage” will be awarded a lifetime achievement by the state of Israel in September. The “Israel Defense Award” ceremony is slated to take place in the residence of President Reuven Rivlin, himself a former member of the IDF’s intelligence corps, Haman, which is tasked with “collecting, disseminating, and publishing intelligence information.” In addition, prizes will also be handed out to members of three secret cybersecurity projects developed by Mossad, the IDF, the Shin Bet and MAFAT (Administration for the Development of Weapons and Technological Infrastructure) that have made a “long-standing contribution to national security and for initiating many technological solutions”, not to mention the forging of close ties to the U.S. National Security state.
The identity of the “legendary” Israeli spy who is slated to receive the official commendation has not been revealed and has only been referred to as “Aleph”; said to be in his forties and well-known both in Israeli and American intelligence circles. He is described as a “phenomenon” of the cyber field who turned down a lucrative career in the tech industry in order to serve the national interest. The mystery-man was credited with creating a “significant part” of the work in Israeli cybersecurity by an unnamed acquaintance.
Current Israeli Defense Minister and Alternate Prime Minister, Benny Gantz announced the winners and heaped praise on Israel’s “human capital,” whose work proves that there are “no borders in the war on Israel’s security.” Indeed, this statement by the IDF’s former chief of staff can be corroborated by taking a look at the corporate partners who are a part of the winning projects; the first of which is a joint collaboration between the Israeli national intelligence agency, Mossad, the Rafael Company, the Israeli Air Force and a new IDF Intelligence Unit 9900, which “provided the IDF with unique capabilities” and “technological breakthroughs.” The Rafael Company, (Rafael Advanced Defense Systems Ltd.), is also involved in the second project to be recognized by the Israeli state, along with Elbit Systems. Both of these companies have major cybersecurity contracts outside of Israel and the U.S., in particular.
Critical infrastructure
Elbit Systems received a contract from the U.S. government last year to build an “integrated” surveillance system across the Arizona-Mexico border spanning over 200 linear miles. They have since deployed dozens of “sophisticated” cameras on towers along the border and have also secured multi-million dollar contracts to equip an unnamed Southeast Asian navy’s ships with their AI-enabled technology for “complex reconnaissance missions.”
The Rafael Company, meanwhile, is a major player in international weapons systems development and is the principal creator of the “Iron Dome” anti-missile technology through a subsidiary company, mPrest. The Iron Dome software is currently running on “critical infrastructure systems” in the United States and has been a recent subject of concern for the U.S. military, who refused to integrate the software into its air defense systems after the Israeli company failed to provide the source code, resulting in the loss of a $600 million-dollar contract for the Tel-Aviv-based company.
The Rafael Company subsidiary, nevertheless, has partnered with several American utility companies, providing “mission-critical monitoring” services to sectors of the U.S. power grid. mPrest’s “System of Systems” has been integrated by San Diego Gas & Electric (SDG&E), Southern Company – the second-largest utility company in the United States – and others. The New York Power Authority (NYPA) entered into a partnership with the Israeli company in 2017 to deploy their technology in a number of utility plants across the state.
Leaks by #Israel‘s #intelligence agency, the #Mossad, point to Israel as being behind a month-long string of deadly attacks against #Iran targeting #Iranian civilian and #military #infrastructure, including a #hospital, killing 19 people. https://t.co/NVewNRY0tS #cybersecurity pic.twitter.com/QtWFYFqh2c
— MintPress News (@MintPressNews) July 28, 2020
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In the official statement issued by Gantz announcing the prize winners, he gave special attention to the fact that their work “was done in secret,” while President Rivlin lauded the “long nights, days, weeks and months of exhausting and grueling work” put forward by the recipients of the Eliyahu Golomb award, named after the commander and chief architect of the Haganah (the Defence) militia – a paramilitary organization that would eventually become the IDF after the founding of the Jewish state and progenitor of terrorist organizations like Irgun and the Stern Gang.
Old collaborators
The history of the Haganah provides a unique look into the permanent relationship between certain U.S. interests and the state of Israel, dating back to its gestation period during the British mandate of Palestine, as well as a direct link to Israel’s present-day cybersecurity technology apparatus through a young RCA engineer from New York, Dan Fliderblum, who was recruited by the Zionist guerilla to set up a “network of secret radio transmitters in Palestine” to protect their illegal arms smuggling operation. Fliderblum would later change his name to David Avivi and pioneer the Isreali electronics industry.
At the time, an organized crime association comprised of the Sicilian and Jewish mafias, often referred to as “Murder, Inc.” controlled the Port of New York. Meyer Lansky, as leader of the New York crime families, was approached by Haganah operative and close aid to Ben-Gurion, Yehuda Arazi, to help move weapons to Palestine. Arazi was an underground agent who had been doing Ben-Gurion’s bidding throughout Europe for years and was sent to the United States by the future first Prime Minister of Israel to procure heavy armaments, including “aircraft, artillery pieces, tanks [and] antiaircraft guns.”
Jewish mobsters in the United States would henceforth play a pivotal role in obtaining and providing financial and other resources to the Haganah. Notorious Jewish gangsters, like Bugsy Siegel, Longy Zwillman, and Moe Dalitz, met with another Haganah agent every week in 1946 in the back of a Los Angeles restaurant to arrange or deliver money to finance the ongoing war in Palestine.
The extent of the mob’s involvement in these operations came to light when the FBI seized a B-25 bomber obtained by the “syndicate” was forced to return to Newark by bad weather, causing the entire shipment of aircraft, which included twenty AT-6 airplanes, to be confiscated.
As for the man whose name dons the prize Israel will award its undisclosed cyber-tech heroes in a few months’ time, it was his arguments in favor of a “much more extensive and orderly defensive force,” that convinced Ben-Gurion to move ahead with the creation of the IDF and, along with it, the establishment of less suspect partnerships that wouldn’t hinder the social advancement of the Jews involved, like the case of Miami mob figure Sam Kay, who it is claimed, was motivated to aid the Haganah’s arms-smuggling operation to “clean up” his own image and help his daughter marry up.
The candidates
The partners of today’s IDF-linked tech initiatives read more like a blue-chip investment portfolio than a police rap sheet, but the scope of the crimes dwarf those that occurred in the days of jukeboxes and trench coats. The myriad cybersecurity, AI, and IoT startups emerging out of Israel’s state-funded organizations have extensive ties to Fortune 100 companies like Apple, Google, Microsoft, and many others. The vast majority of these startups originate in military outfits like Unit 8200, which has been the center of offensive cyber warfare technology like Stuxnet, co-developed with the United States to take down an Iranian nuclear facility in 2010, among other covert operations and initiatives.
The Natanz enrichment facility was significantly damaged by a ‘mystery’ fire early this month, via Iran Atomic Energy Organization/AFP While Israel won’t reveal the names of the winners selected for the Israel Defense prize awarded every year for the past six decades, we can take a few educated guesses as to who might have been some of the finalists. People like Lior Div come to mind; founder of a cybersecurity company called Cybereason, which has been running simulations on behalf of the U.S. government of a foreign-hacked 2020 general election. The table-top exercise predicted dozens of dead Americans, hundreds injured, and an election that never happens.
Div fits the age-range given for the winner of the lifetime achievement award but would be eliminated from consideration if we take the claim seriously that the recipient shied away from the millions he could have made in the private sector. Lior Div’s company is currently valued at just over $1 billion and his own net worth can be assumed to be near that, at least.
There are other potential nominees, such as Amit Yoran, who certainly fits the bill of an individual who is “known in [the Israeli] and the American intelligence community” as reported in several pieces about the mysterious “Aleph.” Yoran fits the age profile, as well, and as former Cybersecurity chief at DHS has the credentials to be recognized in both the halls of the Mossad and CIA’s Langley headquarters. But, he too has thrown his hat into the private sector many times and is currently CEO of a cybersecurity firm called Tenable, which offers solutions to address “vulnerabilities and misconfigurations in your modern IT environment.”
If lifetime achievement is the true criteria, then former head of Mossad, Tamir Pardo, might be considered as the potential candidate that could claim that a “not insignificant part of [Israel’s Defense] work was created by him personally due to his special talent.” Pardo served under Bibi Netanhayu’s brother, Yoni’s military command, and has been a member of Israel’s top brass for a very long time. Pardo once described Mossad as a “criminal organization with a license.” But, far from a critique, Pardo followed his controversial statement by admitting it was “the fun part.”
- The COVID-Hysteria Campaign – The Ultimate Divide And Conquer Strategy
The COVID-Hysteria Campaign – The Ultimate Divide And Conquer Strategy
Tyler Durden
Tue, 07/28/2020 – 23:55Authored by Russ Bangs via Off-Guardian.org,
“It has frequently been observed that terror can rule absolutely only over people who are isolated against each other and that therefore one of the primary concerns of tyrannical government is to bring this isolation about. Isolation may be the beginning of terror; it certainly is its most fertile ground; it always is its result. This isolation is, as it were, pretotalitarian; its hallmark is impotence insofar as power always comes from people acting together, acting in concert; isolated people are powerless by definition.”
– Hannah Arendt, The Origins of Totalitarianism
Western civilization, led by the US government and media, has embarked upon a campaign of mass psychological terrorism designed to cover for the collapsing economy, set up a new pretext for Wall Street’s ongoing plunder expedition, radically escalate the police state, deeply traumatize people into submission to total social conformity, and radically aggravate the anti-social, anti-human atomization of the people.
The pretext for this abomination is an epidemic which objectively is comparable to the seasonal flu and is caused by the same kind of Coronavirus we’ve endured so long without totalitarian rampages and mass insanity.
The global evidence is converging on the facts: This flu is somewhat more contagious than the norm and is especially dangerous for those who are aged and already in poor health from pre-existing maladies. It is not especially dangerous for the rest of the population.
The whole concept of “lockdowns” is exactly upside down, exactly the wrong way any sane society would respond to this circumstance.
It’s the vulnerable who should be shielded while nature takes its course among the general population, who should go about life as usual. Dominionist-technocratic rigidity can’t prevent an epidemic from cycling through the population in spite of the delusions of that religion, especially since Western societies began their measures far too late anyway.
So it’s best to let herd immunity develop as fast as it naturally will, at which time the virus recedes from lack of hosts (and is likely to mutate in a milder direction along the way). This is the only way to bring a safer environment for all including the most vulnerable.
The fact that most societies have rejected the sane, scientific route in favor of doomed-to-fail attempts at a forcible violent segregation and sterilization is proof that governments aren’t concerned with the public health (as if we didn’t know that already from a thousand policies of poisoning the environment while gutting the health care system), but are very ardent to use this crisis they artificially generated in order radically to escalate their police state power toward totalitarian goals.
The whole concept of self-isolation and anti-social “distancing” is radically anti-human. We evolved over millions of years to be social creatures living in tight-knit groups. Although modern societies ideologically and socioeconomically work to massify and atomize people, nevertheless almost all of us still seek close human companionship in our lives.
(I suspect most of the internet police-state-mongers are not only fascists at heart but are confirmed misanthropic loners who couldn’t care less about human closeness.)
This terror campaign seeks to blast to pieces any remaining human closeness, which means any remaining humanity as such, the better to isolate individual atoms for subjection to total domination. Arendt wrote profoundly on this goal of totalitarian governments, though even she didn’t envision a state-driven cult of the literal physical repulsion of every atom from every other atom.
So far the people are submitting completely to a terror campaign dedicated to the total eradication of whatever community was left in the world, and especially whatever community was starting to be rebuilt.
Some dream of this terror campaign somehow bringing about a magical collective transformation. They don’t explain how that is supposed to happen when everyone’s so terrorized they’re desperate to detach physically from their own shadows, let alone physically come together with other people. But any kind of political or social action, any kind of movement-building, requires close person-to-person contact.
It seems that for most erstwhile self-alleged dissidents, the fact that social media is no substitute for face-to-face organizing and group action, a fact hitherto universally acknowledged by these dissidents, is another truth suddenly to be jettisoned replaced by its complete antithesis.
Thus the terror campaign is a virus causing those it infects to abdicate all activism and all prospect for all future activism, for as long as they remain insane with the fever of this propaganda terror.
Far more profoundly and evoking despair, the terror campaign is a virus causing those it infects to fear and loathe all human contact, all companionship, all closeness, all things which ever made us human in the first place. Prior totalitarian regimes sought this lack of contact and trust through networks of informers.
These networks are part of today’s terror campaign as well, encouraged from above and spontaneously arising from below as a result of the feeling of terror as well as the exercise of prior petty-evil intentions on the part of petty-evil individuals.
But today’s totalitarian potential is far worse than this. Now the regimes aspiring to total domination have terrorized and brainwashed the vast majority of people into an automatic physical distrust of all other people. One no longer fears that someone is an informer, but fears the very existence of another human being.
Any kind of human relations, from personal friendship and romance to friendly social gatherings and clubs to social and cultural movements become impossible under such circumstances. This threatens to be the end of the very concept of shared humanity, to be replaced by an anthill of slave atoms with no consciousness beyond fear and the most animal concern for food and shelter, which already is allowed or denied in the same way experimenters do with lab rats.
And the more people fear and loathe the literal physical existence of all other people, the more the situation becomes ripe for every epidemic of murder, from the spiking rate of domestic violence and killings to incipient lynch mobs to pogroms to Nazi-style extermination campaigns.
This is the system’s end goal. It’s the logical end where every trend of today leads. All of it is trumped up over an epidemic which objectively is a flu season somewhat rougher than average.
Why do the people want to surrender and throw away all reality and future prospect of shared humanity, happiness, freedom, well-being, over so little? Is this really a terminal totalitarian death cult, the globe as one massive Jonestown?
So far it seems this is what the majority wants. If they don’t really want this consummation of universal death in spirit, emotion and body, they’d better snap out of their terror-induced mental delirium fast, before it’s too late.
- Iran's IRGC Attacks US Carrier Mock-Up In Massive Drill Off Hormuz Strait
Iran’s IRGC Attacks US Carrier Mock-Up In Massive Drill Off Hormuz Strait
Tyler Durden
Tue, 07/28/2020 – 23:35New satellite images have confirmed that Iran has moved its mock US aircraft carrier to the strategic Strait of Hormuz for use in live-fire drills, which state media says have commenced.
Analysts say the mock-up actually appears close to America’s fleet of Nimitz-class carriers, commonly stationed in the region and routinely traversing the contested Strait of Hormuz. It even includes fake fighter jets parked on the deck.
Iran’s refurbished mockup aircraft carrier is seen towed by a tugboat near Bandar Abbas, via Maxar Technologies/Reuters. The fake carrier been estimated to be at some 650 feet long and 160 feet wide. Timing-wise it should be noted that the real USS Nimitz just entered the Persian Gulf area via the Indian Ocean just days ago.
According to an AP-CBS report:
Iran’s paramilitary Revolutionary Guard fired a missile from a helicopter targeting a replica aircraft carrier in the strategic Strait of Hormuz, state television reported on Tuesday, an exercise aimed at threatening the U.S. amid tensions between Tehran and Washington.
The maritime tracking analysis site Tanker Trackers showed that Iran cleared its shipping lanes to make way for the military drills.
We have located the mock aircraft carrier which Iran has deployed to the edge of the Strait of Hormuz. It is not blocking any international maritime traffic, but Iran’s tankers have vacated the immediate proximity and are now anchored between the islands of Qeshm and Larak. #OOTT pic.twitter.com/9LPDrnKkbi
— TankerTrackers.com, Inc.⚓️🛢 (@TankerTrackers) July 28, 2020
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According to Iranian state media, IRGC used “long-range ballistic missiles with the ability to hit far-reaching aggressor floating targets,” according to Guard’s deputy commander for operations, Abbas Nilforoushan.
State media subsequently published a photo set of the mock carrier being attacked, some of which were dated to Monday.
Iran’s PressTV described the multi-branch drills as “massive” — also said to include helicopters attacking the mock carrier:
According to the IRGC’s Sepah News, the final phase of the exercises, codenamed Payambar-e A’zam (The Great Prophet) 14, kicked off on Tuesday across land, air and sea in the general area of Hormozgan Province, west of the Hormuz Strait and in the Persian Gulf.
Several units from IRGC’s Navy and Aerospace Division are taking part in the maneuvers, which feature missiles, vessels, drones, and radars, and are designed to practice both offensive and defensive missions.
Some reports said nearby surface missiles were also used during the drills.
Meanwhile, Iran’s air and naval military drills in the strait have put US forces in the region on high alert.
A US Navy statement on Tuesday slammed the drills as “irresponsible and reckless”.
#US Navy slams #Iran’s manoeuvre in Persian Gulf calling it ‘irresponsible and reckless’
There were reports last night that troops in Al Dafra AFB, UAE, were asked to stay in bunkers, due to #IRGC’s drill and missile tests.
— Nafiseh Kohnavard (@nafisehkBBC) July 28, 2020
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It comes as the Trump administration has shown no signs of letting up on the ‘maximum pressure’ campaign targeting Iran.
This even amid the current showdown with Beijing which has resulted in tit-for-tat consulate closures in the past week, and as the US Navy is increasingly active over the South China Sea.
* * *
Video of this week’s Iranian military drills featuring the mock aircraft carrier:
روابط عمومی سپاه از آغاز مرحله نهایی رزمایش پیامبر اعظم سپاه در خلیج فارس و تنگه هرمز خبر داد. در این رزمایش یگانهای مختلف سپاه انهدام و مقابله با ناو هواپیمابر آمریکایی را تمرین کردند. برای نخستین بار رصد منطقه رزمایش با استفاده از تصاویر ارسالی ماهواره نور صورت می پذیرد. pic.twitter.com/adc6xt3z6b
— خبرگزاری فارس (@FarsNews_Agency) July 28, 2020
- FOMC Preview: The Fed Must Find Ways To "Out Dove" Market Expectations
FOMC Preview: The Fed Must Find Ways To “Out Dove” Market Expectations
Tyler Durden
Tue, 07/28/2020 – 23:18While nobody expects any fireworks from the Fed tomorrow or any major market-moving announcement, the FOMC meeting will likely involve a debate over the toolkit with a discussion of how to pivot from “stabilization” to “accommodation” policies according to BofA strategists, who notes that while there likely is an agreement that the next steps should accomplish the goal of “enhancing forward guidance,” they do not think Fed officials have settled on the strategy.
Amid growing fears of covid chaos and renewed economic shutdowns, Powell will likely be grilled on, and will discuss some of the Fed’s options while the minutes released in three weeks will provide more clarity. That said, the statement is likely to provide little new insight, with only a few edits to the current conditions paragraph to highlight improvement thus far, but also express caution over recent signs of slowing in some of the high-frequency indicators.
More importantly, the rates and FX markets expect no new policy action to be taken at the July FOMC meeting, which should lead to a muted reaction across markets (it also sets up markets for a surprise). Instead, according to BofA, market participants will be much more focused on the guidance and “stage setting” that Chair Powell provides on what the next easing steps might look like. On net, a discussion of additional easing measures in the Powell press conference – such as forward guidance, asset purchase duration, and YCC/YCT – risks lower real rates, flatter curve, and weaker USD (and, in the worst case, a very adverse reaction across risk assets).
Economics: a policy discussion
As BofA frames it, there seems to be an agreement among Fed officials on the “what” but not the “how.” The consensus appears to be to send a strong signal that the Fed will be committed to accommodative policy, remaining at the ZLB, well into the recovery and perhaps even until full employment has been reached and inflation is able to run at/above the 2% target. This would be a more dovish strategy than following the 2008-09 recession when the Fed pursued a “normalization” policy, pushing up interest rates prior to achieving trend 2% inflation or closing the output gap. Back then the Fed discussed the balancing act between increasing rates earlier but slower, or waiting and having to hike more quickly. Looking back, it seems many Fed officials believe that waiting longer might have been prudent given that 2% inflation was not achieved and the Fed ended up reversing some of the hikes later in the recovery.
There are several options for the Fed to enhance forward guidance, which are not mutually exclusive:
- the primary focus is on language, potentially using both outcome and calendar-based language. Fed officials seem particularly focused on making sure 2% inflation is reached, which means likely explicitly supporting an overshoot of the inflation target (something which the record surge in gold is clearly sniffing out). This could be done through a commitment to keep rates at zero until 2% is reached on a trend basis but also, perhaps, by reinforcing this language with calendar guidance.
- The secondary focus is on balance-sheet policies such as yield curve caps or targets (YCT) or a change in the composition of the balance sheet (QE). While YCT on the short to medium end of the curve seems like an attractive option, it is still novel and Fed officials appear to want more time to study such a program. Recent language from Fed officials suggests our expectation for YCT to be introduced at the September meeting might end up being too early.
The Fed can choose to employ one or all of these strategies at the same time or phased in, depending on the state of the economy and markets (as a reminder, the worse the economy and the lower the S&P500, the greater the flexibility Powell will have to unleash the next phase, whatever it may be). Certainly, if facing a weaker economy with low realized and expected inflation, the Fed would likely need to be more aggressive. Another scenario would be if the market prematurely prices in hikes thereby tightening financial conditions. The Fed might look to fight this market pricing and push out hike expectations, which could be done through calendar guidance or YCT, most directly (unless of course the Fed wants to push the market lower so it has more degrees of freedom).
Meanwhile, the Fed is also engaging in a prolonged framework review that will likely guide the policy decision. The annual Jackson Hole conference will also take place virtually at the end of August. It has historically been a good forum for central bankers to debate policy and will likely be focused on the best way to achieve enhanced forward guidance.
Fed markets programs: extension likely
The July FOMC meeting will likely see some communication around an extension of Fed and Treasury markets programs. Most markets programs are slated to expire in September as shown in the table below.
However, it is virtually assured that these will all be extended as the Fed will want to keep these programs indefinitely in place to guard against the risk of a more material economic slowdown and potential tightening of financial conditions (and also because any of the “temporary” aspects of the covid crisis are really permanent). BofA anticipates that most programs will be extended until March 2021 (in reality they will never expire). This would reduce the risk of a material tightening of financial conditions in 2H and smooth volatility stemming from year-end dealer balance-sheet constrains.
Most of the programs require Treasury approval for extension, and it is safe to assume that both the Fed and Treasury will be supportive of pushing out their deadline.
Rates: September stage setting and twist potential
According to BofA STIR strategists, the US rates market expects no new policy action to be taken at the July FOMC meeting. Instead, market participants will be much more focused on the guidance and “stage setting” that Chair Powell provides on the next steps to ease policy, including enhanced forward guidance, asset purchase adjustments, and yield curve control (YCC)/yield curve targeting (YCT).
While no change is expected to the Fed’s settings for administered rates (IOER, ON RRP) at this meeting, the rates market is already expecting a very dovish message from the Fed with the timing of the first rate hike not until late 2024 or early 2025 (if ever).
The main challenge for the Fed will be to find ways to “out dove” market expectations in their next easing round likely through:
- the establishment of an inflation framework that ensures a “durable” increase in core PCE at or above 2% for 6 or 12 months before the first rate increase and
- a potential reallocation of Treasury purchases to remove additional duration risk from the market.
BofA discusses the potential for a Fed UST twist and likely market reaction below:
Why twist? Recent media reports have suggested the Fed is considering changing the composition of their UST and MBS toward longer-dated securities to further ease financial conditions. This theme was furthered on last week by headlines from William Dudley, former NY Fed head, who noted that the Fed could extend its purchase duration. Both sets of comments come in the context of a Fed that is seeking to “pivot” from market stabilization to monetary easing via some combination of forward guidance, asset purchases, and potential YCC / YCT.
How to twist? The Fed has clear logic to twist upon implementation of enhanced forward guidance or YCC. The argument to twist would be most impactful if the Fed incorporated any calendar dimension to its guidance. For example, a credible Fed commitment not to raise rates or implement YCC until at least end ’22 / end ’24 would reduce the need to purchase securities at this part of the curve. The slated purchases could then be reallocated to longer-dated maturities to extract more duration risk from the market while keeping total purchase quantity the same or lower.
The Fed is currently purchasing $80bn/month of USTs (in proportion to USTs outstanding). BofA shows hypothetical Fed purchase scenarios below (Table 2) where the Fed could cease buying the 0-2.25Y or 0-4.5Y part of the curve, leave TIPS purchases unchanged, and distribute the remaining purchases in proportion to debt outstanding. The Fed could also remove more 10Y duration equivalent risk from the market while maintaining the current monthly purchase pace or lowering it to $65bn/m.
Twist effectiveness? Recall the 2011 twist and relevance of a similar policy today.
2011 twist: The Fed announced its most recent twist in September 2011 (a combination of short-term UST sales and longer-dated UST purchases) in reaction to the sharp risk off and economic slowdown following the US downgrade. This policy was mentioned in the August meeting minutes and was implemented the following meeting. The weighted average maturity of purchases increased substantially while keeping the total amount of UST holdings the same, on average (Chart 1, Table 2). Long-end rates declined materially the day the twist was announced and the curve aggressively bull flattened (Chart 2, Table 3). The month after the twist, rates sold off but the curve remained flatter.
Effectiveness today: Today is very different from 2011 and the Fed knows it. Comparing today vs September 2011: 10 and 30Y rates are 135-200bp lower, curves are significantly flatter, 10Y term premium measures have fallen 80-200bp, the real neutral rate (real 5y5y) has dropped 160bp, and the Chicago Fed fin conditions index is easier (Table 4).
The June FOMC meeting minutes reflect that the Committee is well aware of these dynamics: “declines in the neutral rate of interest, term premiums, and low levels of longer-term yields would likely act as constraints on the effectiveness of asset purchases in the current environment“. However, Treasury WAM and longer-dated issuance is higher, which a Fed twist would offset.
Twist impact: Fed twist would likely result in (1) 30Y UST rally and curve bull flattening, likely on par with 2011, and (2) spread curve steepening. The spread curve move would be driven by a modest cheapening of short-dated USTs vs OIS (less Fed buying) and a richening of longer-dated USTs vs OIS (more Fed buying). Bank front-end policing would likely limit the potential for a material UST-OIS cheapening.
Bottom line: there is rising likelihood for a “twist” operation, especially since the Fed seemingly wants to ease more. This risks wider 30Y spreads and reinforces even lower longer-dated real rate view (currently 10Y TIPS is at a record low -0.93%). Guidance on the likelihood of a Fed twist from Powell’s press conference or July FOMC minutes release (29 August) will be of keen interest to the rates market and the outlook for the long end of the curve. That said, not even BofA expects the Fed to commit to such a policy at this meeting, but likely start the stage-setting process this week.
* * *
Impact on the dollar
With an uneventful FOMC meeting widely anticipated, there is only moderate risk to FX and USD specifically. Still, potential discussion of the Fed’s toolkit (specifically options to ramp up monetary policy support in the event that downside risks are realized) seems a negative USD risk, in BofA’s view, as it is likely to reinforce the widespread belief among market participants in the Fed “put” that has driven up risk assets and undermined the greenback since end-March. For the same reason, extension of current programs may also weigh on USD. And while perception that a credible and effective set of additional Fed stimulus options exists, it would serve to further undermine USD per above, while as BofA ominously warns, “perception that the Fed is out of ammo could cause a reassessment of the Fed “put” and support USD via lower risk assets.”
Sharp USD weakness over in the second half of July has accelerated into this FOMC meeting. Over the last week, the DXY is about -3% lower, with EUR and SEK leading the pack of outperformers against USD. Much of the recent USD weakness is due to (1) buoyancy in risky “reflation”-sensitive assets, which continue to decouple from challenging economic conditions and recently worsening COVID-19 dynamics; as well as (2) the accelerating EUR rally driven by market participants concerned over missing out on bullish price action post-EU Recovery Fund approval (which however does not equate to broad dollar weakness as discussed previously).
Looking forward, BofA expects a reversal in USD weakness despite persistent over-valuation, and forecasts EUR/USD is 1.08 at end-2020 due to COVID-19-related risks to the global and US economies although it concedes that “persistently frothy risk appetite is a risk to this call.”
- Kennedy Jr. Warns Parents About Danger Of Using Largely-Untested COVID Vaccines On Kids
Kennedy Jr. Warns Parents About Danger Of Using Largely-Untested COVID Vaccines On Kids
Tyler Durden
Tue, 07/28/2020 – 23:15Authored by Martin Berger via GlobalResearch.ca,
Environmental lawyer Robert F. Kennedy Jr. warned Americans on Thursday to be cautious about any new coronavirus vaccine, pointing out that key parts of testing are being skipped.
“The Moderna vaccine, which is the lead candidate, skipped the animal testing altogether,” Kennedy said during an online debate on mandatory vaccinations with renowned Harvard law professor Alan Dershowitz. The debate was aired by Valuetainment and moderated by Patrick Bet-David.
Kennedy is part of a political family, being the son of Senator Robert F. Kennedy and the nephew of President John F. Kennedy. Both were murdered in the 1960s.
Another aspect of testing was equally unsatisfying, Kennedy said. The Moderna vaccine was tested “on 45 people. They had a high-dose group of 15 people, a medium-dose group of 15 people, and a low growth group of 15 people.”
“In the low-dose group, one of the people was so sick from the vaccine they had to be hospitalized,” he explained.
“That’s six percent. In the high-dose group, three people got so sick they had to be hospitalized. That’s twenty percent.”
In spite of these significant problems,
“they’re going ahead, and making two billion doses of that vaccine.”
Another problem with the testing of the coronavirus vaccine is that it’s tested not on “typical Americans,” but a carefully selected group of people who don’t suffer from certain conditions.
“They use what they call exclusionary criteria,” Kennedy said.
“They are only giving these vaccines in these tests that they’re doing to the healthiest people.”
“If you look at their exclusionary idea criteria: You cannot be pregnant, you cannot be overweight, you must have never smoked a cigarette, you must have never vaped, you must have no respiratory problems in your family, you can’t suffer asthma, you can’t have diabetes, you can’t have rheumatoid arthritis or any autoimmune disease. There has to be no history of seizure in the family. These are the people they’re testing the vaccine on.”
He asked,
“What happens when they give them to the typical American? You know, Sally Six-Pack and Joe Bag of Donuts who’s 50 pounds overweight and has diabetes.”
Kennedy stressed several times that
“any other medicine … that had that kind of profile in its original phase-one study would be [dead on arrival].”
“No medical product in the world would be able to go forward with the profile that Moderna has,” he reiterated.
During the course of the debate, Kennedy also talked about the regular vaccines most people take, from Hepatitis B to the flu shot, emphasizing that no proper testing had ever been done, which is mandatory for any other medication. Vaccines “are the only medical product that does not have to be safety-tested against a placebo,” he explained.
In a study involving placebos, one group of people would be injected with the actual vaccine, while another group would be injected with saline solution, which would not have any effect in preventing a particular disease. The people who are part of the study would then be observed to see if there are any differences between the two groups, both regarding the disease vaccinated against, and side effects.
As these tests are never done on vaccines, “nobody knows the risk profile of any vaccine that is currently on the schedule. And that means nobody can say with any scientific certainty that that vaccine is averting more injuries and deaths than it’s causing.
In fact, it should be the opposite, Kennedy said, with vaccines being tested even more thoroughly than any other medication.
“It’s a medical intervention that is being given to perfectly healthy people to prevent somebody else from getting sick,” he pointed out.
“And it’s the only medicine that’s given to healthy people … and particularly to children who have a whole lifetime in front of them. So you would expect that we would want that particular intervention to have particularly rigorous guarantees that it’s safe.”
Kennedy said
“it’s not hypothetical that vaccines cause injury, and that injuries are not rare. The vaccine courts have paid out four billion dollars” over the past three decades, “and the threshold for getting back into a vaccine court and getting a judgment – [the Department of Health and Human Services] admits that fewer than one percent of people who are injured ever even get to court.”
He mentioned another reason not to trust blindly any company currently producing vaccines in the United States. Each one of the four vaccine producers “is a convicted serial felon: Glaxo, Sanofi, Pfizer, Merck.”
“In the past 10 years, just in the last decade, those companies have paid 35 billion dollars in criminal penalties, damages, fines, for lying to doctors, for defrauding science, for falsifying science, for killing hundreds of thousands of Americans knowingly.”
“It requires a cognitive dissonance,” Kennedy commented, “for people who understand the criminal corporate cultures of these four companies to believe that they’re doing this in every other product that they have, but they’re not doing it with vaccines.”
While Kennedy is often described as being against vaccines altogether, he stressed that he does not oppose vaccines, as such. He accused his critics of “marginalizing me and silencing me” by misrepresenting his actual position.
In May, Kennedy signed an appeal created by Archbishop Carlo Maria Viganò aimed at raising public awareness among people, governments, scientists, and the media about the serious dangers to individual freedom caused during the spread of Covid-19.
The appeal raised concern at one point about a COVID-19 vaccination in relation to human freedom.
“We also ask government leaders to ensure that forms of control over people, whether through tracking systems or any other form of location-finding, are rigorously avoided. The fight against Covid-19, however serious, must not be the pretext for supporting the hidden intentions of supranational bodies that have very strong commercial and political interests in this plan. In particular, citizens must be given the opportunity to refuse these restrictions on personal freedom, without any penalty whatsoever being imposed on those who do not wish to use vaccines, contact tracking or any other similar tool.”
The appeal made it clear that for Catholics it is “morally unacceptable to develop or use vaccines derived from material from aborted fetuses.”
Comments on the YouTube video of the debate between Kennedy and Dershowitz indicated, almost unanimously, that Kennedy had won the debate. Dershowitz conceded many points, arguing, however, that from the point of view of constitutional law, the coronavirus vaccine could be made mandatory.
Dershowitz, who has provided legal counsel to and defended people like Donald Trump, Jeffrey Epstein, and Julian Assange, cited a 1905 Supreme Court ruling as precedent. Jacobson v. Massachusetts upheld the authority of states to enforce compulsory vaccination laws.
Kennedy clarified that the state government at the time had offered people to either be vaccinated or pay a five dollar fine. Dershowitz’s argument, however, was that based on constitutional law, including this precedent, “the state has the power to literally take you to a doctor’s office and plunge a needle into your arm.”
Kennedy said,
“I think there’s a big constitutional chasm between, you know, that remedy, which is paying a fine, and actually going in and holding somebody down and forcibly injecting them.”
President Trump has already said that the new coronavirus vaccine would not be mandatory, but available for those “who want to get it. Not everyone is going to want to get it.” A LifeSiteNews petition saying no to mandatory vaccinations has garnered more than 650,000 signatures and can still be signed here.
The ethical issue of many vaccines being derived from cell lines of aborted babies was not discussed during the debate.
- Florida Man Used PPP Loans To Buy Lamborghini Huracan, Goes On Spending Spree
Florida Man Used PPP Loans To Buy Lamborghini Huracan, Goes On Spending Spree
Tyler Durden
Tue, 07/28/2020 – 22:55For months, we’ve warned loans granted under the Paycheck Protection Program (PPP) for businesses seeking coronavirus relief funds were susceptible to fraud.
A Florida man was charged Monday after using PPP loans to buy a 2020 Lamborghini Huracan, according to the U.S. Department of Justice (DoJ).
2020 Lamborghini Huracan. h/t Fox News, DoJ David T. Hines of Miami, Florida, fraudulently obtained $3.9 million in PPP loans and used those funds to buy the Huracan, shop at luxury stores, and splurge on fancy Miami resorts.
Our story on the guy who feds say used PPP loan money to buy a Lambo, Setai and Fontainebleau stays and Saks sprees. @wsvn #7News #Miami @USPIS_MIA @TheJusticeDept pic.twitter.com/KfKD2g4KxD
— Sheldon Fox-7 News (@fox_sheldon) July 28, 2020
https://platform.twitter.com/widgets.js
The DoJ charged Hines,29, with one count of bank fraud, one count of making false statements to a bank and one count of engaging in transactions in unlawful proceeds.
The DoJ complaint claims the man requested $13.5 million in PPP loans for four companies with dozens of employees.
“In the days and weeks following the disbursement of PPP funds, the complaint alleges that Hines did not make payroll payments that he claimed on his loan applications,” according to the complaint. “He did, however, make purchases at luxury retailers and resorts in Miami Beach.”
In early July, we reported a Texas man received almost $1 million in PPP loans to support 51 employees at his “Texas Barbecue” company, though the company never existed. The man used the loans to trade cryptocurrency on Coinbase.
Not too long ago, Treasury Secretary Steven Mnuchin said that he is considering “forgiving all small loans, but would need fraud protection,” for businesses. The government has so far approved about $518.1 billion spread over 4.9 million PPP loans since the pandemic began.
The LA Times notes there are at least a dozen PPP fraud cases filed in 11 states in July. Many of these cases are blatant fraud, such as falsifying tax or business records, lying on applications, and misusing the money.
While safeguards to prevent PPP fraud appear to be lacking, Senate Republicans have unveiled even more PPP loans for business, which has really upset the Tea Party. “Republicans are now no different than socialist Democrats when it comes to debt,” Senator Rand Paul said.
- With 'Liability Shield' Red-Line Looming Over Stimulus Bill, Schumer Claims Dems "Have A Lot Of Leverage & Aren't Afraid To Use It"
With ‘Liability Shield’ Red-Line Looming Over Stimulus Bill, Schumer Claims Dems “Have A Lot Of Leverage & Aren’t Afraid To Use It”
Tyler Durden
Tue, 07/28/2020 – 22:35While the to-ing and fro-ing over whether $200 is too little and $600 is too much plays out, the bigger issue separating the two sides of the aisle over the next US aid package is unlikely to find a goldilocks ‘just right’ outcome anytime soon.
As a reminder the Senate GOP plan includes:
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$1,200 direct payments, CARES redux
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PPP sequel “to help prevent more layoffs”
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Federal UI bonus, hints at $200/week
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Money for schools
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$ for testing, treatment, vaccines
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Liability shield for biz/hospitals/entities
Senate Majority Leader Mitch McConnell reaffirmed that his proposed changes to liability law must be included wholesale in the aid package during an interview on CNBC, saying…
…the legislation “will have liability protection in it, so we’re not negotiating with the Democrats over that.”
On the other side, as Bloomberg reports, Senator Dick Durbin, the chamber’s No. 2 Democrat, said he doesn’t see any reason his party would support the plan to shield businesses, schools and other organizations from lawsuits over Covid-19 infections from employees or customers.
“This is an effort by the Republicans to seize the moment and to push through changes in tort law that they have been longing for for decades that have nothing to do with Covid-19.”
House Speaker Nancy Pelosi said that the first day of negotiations did not go well:
“It wasn’t a good way for us to begin the discussion.”
Schumer was less pessimistic, and more bombastic, proclaiming that Democrats have the power and Republicans are desperate:
“I think Republicans are reading the polls. The president is slumping, their Republican Senate candidates are slumping in the polls. They have to show something,”
Adding that:
“We don’t have a majority in the Senate and we can’t pass it alone, but we have a lot of leverage and we’re going to use it,”
But on the bright side, we did not get leaked photos of her standing and pointing across the cabinet desk at members of the Trump admin.
Finally, Trump weighed in, giving himself an out by saying that there are some things in the Republican package that he doesn’t support.
The Senate Republicans’ more modest $1 trillion stimulus package unveiled yesterday remains a far cry from the blockbuster $3.5 trillion proposal that Democrats have proposed and thus, by the end of the farcical theater pretending to be a negotiation, the final sum will likely be closer to the latter than the former…
McConnell is somewhat cornered by pressure from more fiscally responsible conservatives (of course that is all relative). As Senator Kevin Cramer, a North Dakota Republican warned:
“The bigger the price tag gets, the fewer Republicans that will support it.”
And if they do, one wonders what that will do the price of gold?
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- China Has Quietly Cut Dollar Usage In Cross-Border Trade By 20%
China Has Quietly Cut Dollar Usage In Cross-Border Trade By 20%
Tyler Durden
Tue, 07/28/2020 – 22:15The chorus calling for a weaker dollar is getting louder, and now includes none other than a stark warning from Goldman Sachs, which in a stunning shot across the bow of the modern monetary system warned overnight that U.S. monetary and fiscal policy (i.e., helicopter money a/k/a MMT) is triggering currency “debasement fears” and that for the first time “real concerns are emerging” about the future of the dollar as a reserve currency.
And while the DXY Index got a rare reprieve from the selling on Tuesday – despite Goldman’s ominous warning – gold continued marching higher, even as technical indicators show signs of near-record overextension.
As Bloomberg’s Ye Xie summarizes, “it seems like a perfect storm for the U.S. currency: the relentless decline of real yields, the U.S.’s inability to control the virus, the overhang of the twin deficits and the dear valuation.” Adding to reserve currency concerns, Bridgewater’s Ray Dalio – who is clearly talking either his or Beijing’s book although these days the two appear interchangeable – warned a Sino-U.S. “capital war” could harm the dollar.
Meanwhile, as Rabobank’s Michael Every has been discussing for the past few months, with the U.S. now using the privileged role of the dollar for political gains, such as penalizing banks over issues in Hong Kong and Xinjiang for instance, it will naturally alarm politicians in other countries, Xie adds.
Indeed, as Xie adds, China is already is quietly reducing its reliance on the dollar in cross-border trade and services. The percentage of the payments and receipts denominated in yuan in total FX transactions by banks for their clients increased to 37% in June, from 19% two years ago, according to data compiled by the State Administration of Foreign Exchange, with the Bloomberg strategist also calculating that the usage of the dollar has declined to 56% from 70% – a decline of ~20%.
While this shift partly reflects local companies’ desire to limit their exposure to FX volatility, it may also mirror an intentional nudge from the authorities… and it’s not just trade.
Picking up on his recent observation that Jack Ma’s decision to list his giant Ant Group in Shanghai and Hong Kong (where it is seeking a $200BN valuation) instead of the US, coupled with the exodus of U.S.-listed Chinese companies from America, Xie writes that this underscores the shift in capital markets, and adds that “by extension, one has to wonder what Beijing might to do with its $1.1 trillion Treasury holdings.”
Guo Shuqing, the party secretary of the PBOC, delivered a stern warning on the U.S. currency last month: “Some people say, ‘Domestic debt is not debt, but external debt is debt. For the United States, even external debt is not debt.’ This seems to have been the case for quite some time in the past, but can it really last for a long time in the future?”
As Xie concludes referring to the chart above, “apparently China isn’t waiting to find out the answer.”
- Is It Time To Defund The Defunders?
Is It Time To Defund The Defunders?
Tyler Durden
Tue, 07/28/2020 – 21:55Authored by Jim DeMint, op-ed via The Hill,
Like many Americans, Republicans have had a hard time coming up with a plan to fight back against antifa and the outraged mobs that have terrorized communities across the country. The main goal of these rioters is to defund police departments. It is so insane that it is hard to respond with anything more than confused laughter.
But conservatives in Congress have the right idea to defund the defunders.
Let us back up from the cable news hysteria and remember something important.
Police departments are the primary reason we have the government. When you get right down to it, the government has a monopoly on the legitimate use of force, which means its emissaries are paid to commit premeditated violence when necessary to enforce the laws. Police officers are the emissaries who carry guns and swear to use them only to enforce the laws written by the people.
Yet the party of big government has become so drunk on its “wokeness” that it now wants to eliminate the most basic core functions of the government like fighting crime, enforcing the laws, and protecting public safety. Defunding the police would be like putting on a football game without referees. Someone has to call penalties or the contest will descend into a brawl. There would be more injuries than points.
This principle can be doubly applied when you talk about criminals. What exactly is supposed to deter murderers, drug dealers, human traffickers, and sexual predators from openly plying their trade if there’s no one to stop them? If your city council defunds the police department, and you see a robbery taking place, who do you call? If criminals break into your own house, what are you supposed to do?
The activists have no answer to this. The best they have come up with is to replace police officers with social workers. They seem not to understand that the reason adults become criminals is because the authority structures of family and society have failed and, when that happens, the heroic efforts of social work have proven incapable of fixing the problem. What exactly are social workers supposed to do to armed bank robbers or drug cartel hit squads? Sing “Imagine” by John Lennon to them?
But it is much worse than that. After all, this summer we have seen a glimpse of what life would be like without police in Seattle and Portland. In Seattle, a mob took over a neighborhood, turned it into an autonomous zone, established physical barriers, and declared it an independent state not subject to the city or state. The local government told law enforcement to stand down. What followed was weeks of violent chaos.
The situation was perhaps even worse in Portland. The occupiers were not just trying to establish an autonomous zone outside the authority of the city and state. They actively tried to destroy the legitimate authority of their community. They attacked individuals, threw bottles at police officers, and set fire to the federal courthouse and other property. The liberal politicians in charge have largely sided with the mob. They are more upset about President Trump trying to restore order than the violent mob destroying their city.
These liberal politicians also seem to want to defund police departments. If cities and states are crazy enough to throw their people to the wolves, the Constitution may give them the right to be crazy, although when it involves federal laws and property, the federal government has legitimate reasons to intervene. But if these cities and states refuse federal support, the rest of us should not have to subsidize such lunacy.
Congress must ensure this country has serious leaders. Our lawmakers cannot just lock their doors and hide from the mob. They must take necessary action. When Congress passes its spending bills, it should deny federal law enforcement funds to city councils and state legislators that defund their police. If these mobs want to risk the lives of their fellow citizens to act cool, make them do it on their own dime. It is time to defund the defunders.
- Which Part Of "You Get Nothing" Isn’t Clear?
Which Part Of “You Get Nothing” Isn’t Clear?
Tyler Durden
Tue, 07/28/2020 – 21:35By Bloomberg’s Rick Green and Madeleine Ngo
The warning to shareholders of newly bankrupt Ascena Retail Group Inc. could hardly have been more direct. There it is, in black-and-white, on page 5 of the court declaration filed by Ascena’s most senior official just hours into the case:
“Existing common equity in Ascena will be canceled.” Full stop. Creditors will take ownership of the retail chain, which Ascena also made plain.So how did stock investors respond? By bidding up the shares just shy of 120%, on off-the-charts volume.
It was a similar story for bankrupt Global Eagle Entertainment Inc. The airborne Wi-Fi service jumped more than 50% on July 24 after its court filing, despite warning shareholders earlier in July that they stood to lose everythingto creditors in a Chapter 11 case. And it hearkens back to Hertz Global Holdings Inc., whose stock became Example A of post-bankruptcy rallies.
The persistent mania for busted companies baffles financial advisers. “What’s going on here? I really couldn’t tell you; it’s not something I would ever recommend to anyone,” said George Gagliardi at Coromandel Wealth Management in Lexington, Massachusetts.
“People have too much money to play with,” said Dennis Nolte, an adviser at Florida’s Seacoast Investment Services.
“Most of these traders won’t be around when the bankruptcy proceedings are complete. Just turn the light off when you leave the room, if the lights aren’t turned off by the utility company because there’s no money to pay the bill.”
- Rockets Pound U.S. Bases In Iraq Following Hezbollah-Israeli Escalation
Rockets Pound U.S. Bases In Iraq Following Hezbollah-Israeli Escalation
Tyler Durden
Tue, 07/28/2020 – 21:15Submitted by SouthFront,
On July 27, fighting broke out between Israeli forces and Hezbollah along the Israeli-Lebanese contact line. This became the heaviest open confrontation between the sides in about a year. The incident occurred in an area known as Chebaa Farms, which was occupied by Israel in the 1967 Middle East war.
Israeli shelling started at around 3:30 p.m. local time which lasted for about an hour and a half. The Israeli Defense Forces (IDF) claimed that they had repelled an infiltration attempt by a Hezbollah unit and there were no casualties among IDF forces. The exchange of fire came as the IDF was on heightened alert for a possible attack by Hezbollah, after an Israeli airstrike in Syria killed a Hezbollah member earlier in July.
In a televised address, Israeli Prime Minister Benjamin Netanyahu warned Hezbollah that it is “playing with fire,” and stated that “Hezbollah and Lebanon bear full responsibility for this incident and any attack from Lebanese territory against Israel.”
In its own turn, pro-Hezbollah sources claimed that Hezbollah targeted a vehicle and a battle tank of the IDF with anti-tank guided missiles.
Hezbollah itself described Israeli claims about the outcome of the clashes as fake and aimed to boost the morale of Israeli forces by fabricating fictitious victories. It also rejected reports about strikes on IDF targets.
“The answer to the martyrdom of [our] brother, Ali Kamel Mohsen, in the vicinity of Damascus airport has not been given yet. Zionist occupiers must still wait for that answer and their punishment at the hands of the resistance forces,” Hezbollah said.
A few hours after the incident on the Lebanese-Israeli contact line, rockets struck US-operated military bases in Iraq. The strike on Camp Speicher, located near Tikrit, caused a large explosion on the site. At the same time, at least three rockets targeted another US-operated military base – Camp Taji, located near Baghdad. According to local media, one rocket hit an Iraqi helicopter while another landed in an artillery weapon depot. The third rocket landed in the area of the 2nd Air Force Squadron but did not explode.
Local sources claim that the strikes came in response to a drone strike on the al-Saqer military camp, south of Baghdad, on July 26. This camp is operated by the Popular Mobilization Units. This branch of the Iraqi Armed Forces is often described by Washington and mainstream media as Iranian proxies and even terrorists.
Even if the incidents in Iraq and the Lebanese-Israeli border were not linked, they serve as strong evidence of the escalating tensions in the Middle East. Despite the defeat of ISIS and the relative de-escalation of the conflict in Syria, the region still remains in a permanent state of escalation. However, now, the source of these tensions is the developing conflict between the Israeli-US bloc and Iranian-led forces.
- COVID-Carrying Defector Fled Sex Abuse Charges & Debts By Fleeing Back To North Korea
COVID-Carrying Defector Fled Sex Abuse Charges & Debts By Fleeing Back To North Korea
Tyler Durden
Tue, 07/28/2020 – 20:55We may have rushed to judgment over the weekend when we reported on what appeared to be the first public confirmation of a widespread outbreak of COVID-19 within North Korea’s borders. When we read the story, reported by KCNA, the North Korean state news agency (fortunately they publish in English), we found it stretched the bounds of credulity.
The North Korean government claimed the reason for the lockdown on the border area between North and South Korea was a defector who had left the country years ago had sneaked back across the border from South Korea, carrying COVID-19 with him.
It is said that, sometimes, truth can be stranger than fiction (somebody said that once. We forget who. But we digress). Needless to say, we were surprises when we saw the following Reuters headline: “Escape to North Korea: Defector at heart of COVID-19 case fled sex abuse investigation”.
So, you’re telling me that somebody who had the temerity and good fortune to survive the exceedingly dangerous trip across the DMZ – over fences sheathed in barbed wire, and fields and fens littered with mines and other unpleasant surprises – was crazy enough to sneak back in to North Korea? What could possibly motivate somebody to do something so seemingly absurd?
According to Reuters, the defector – who was barely 21 when he fled North Korea 3 years ago – was fleeing charges that he sexually assaulted another North Korean defector during a meeting in a private residence.
SEOUL (Reuters) – Last week, a 24-year-old defector returned to North Korea the way he left in 2017, authorities say, but with a coronavirus pandemic raging in the background this time, his illicit trip drew far more attention.
Things only get weirder from there.
South Korea has identified the man only by his surname, Kim, and said he was the “runaway” who North Korea accuses of illegally crossing their shared border last week with symptoms of COVID-19.
Facing a sexual assault investigation, Kim evaded high-tech South Korean border control systems by crawling through a drain pipe and swimming across the Han River to the North on July 19, the South Korean military has said. He appears to have spent several days there before being caught.
South Korean military chief Park Han-ki told parliament on Tuesday that Kim, who is 163 cm (5.35 ft) tall and weighs 54 kg (119 lb), cut his way through barbed wire fences installed at the end of the pipe leading to the river.
A Seoul official told Reuters that Kim is believed to have taken a similar path when he defected to the South in 2017, and authorities say he scoped out the area earlier in July, apparently in preparation.
Kim’s story as a defector begins and, so far, ends in the city of Kaesong, a North Korean border town that hosted a now-shuttered inter-Korean factory park and liaison office.
When that industrial project was shut down amid rising tensions over North Korea’s nuclear weapons programme in 2016, the economic shock prompted Kim to try his luck in the South in 2017, he said in a YouTube video filmed with a fellow defector in South Korea in June.
Rather than make his way through China, as the vast majority of North Korean defectors usually do, Kim headed south via the porous sea border toward the heavily guarded Demilitarized Zone that divides the two Koreas.
“After passing through barbed-wire fences, I encountered minefields, which I bypassed and came to a reed field near the Han River where I stayed hidden for about three hours,” he said in the video, adding that he was living off mere bread crumbs.
He started swimming, following the lights on the southern bank of the river. When he finally made land, he let out a cry for help, and was found by a unit of South Korean soldiers.
But it wasn’t just charges of rape that motivated the young man to flee. He reportedly owed nearly $17k in debt to a fellow defector.
Little is known about how Kim made a living in South Korea, but a source with knowledge of his background told Reuters that he owed 20 million won ($16,800) to at least one fellow defector from Kaesong.
“He had expressed his wish to become a security lecturer for students, like many other defectors do, but it never happened, partly because of the pandemic,” the source said on anonymity due to the sensitivity of the issue.
According to police, a female defector in her 20s filed a complaint on June 12, accusing Kim of sexually assaulting her at his home. They interviewed him once on June 21, and he denied the accusations.
The investigation gathered steam when one of Kim’s acquaintances reported to police on July 19 that he threatened the woman and planned to flee to the North, a police official said.
So this guy went through all the trouble of sneaking into North Korea just to crawl through a sewage-filled drain pipe back into North Korea, where he presumably will be blown to pieces by an anti-aircraft gun for showing such profound disrespect to the dear leader. If he’s especially unlucky, they’ll blame him for the entire outbreak. COVID-19 has probably been circulating in North Korea for months. But in the official history of the Worker’s Party, the South Korean aggressors sent this traitorous defector to poison the country and undermine the regime.
What this Kim guy did – that’s like Andy Dufresne hitchhiking all the way back from Mexico just to crawl back up the drain pipe into his old cell.
- ShopRite Pilots Salad-Making Robot 'Sally'
ShopRite Pilots Salad-Making Robot ‘Sally’
Tyler Durden
Tue, 07/28/2020 – 20:35by Krishna Thakker of GroceryDive
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ShopRite is piloting Sally, a salad-making robot manufactured by tech firm Chowbotics, at its store in Carteret, New Jersey, the company announced in a press release. Sally gives customers a contactless alternative to the self-service salad bars.
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The robot has 22 ingredients including dressings, fruits, nuts, vegetables and proteins like eggs, chicken and ham. Customers can order a grain bowl, pasta salad or custom salad that contains two base ingredients, up to six toppings, and a dressing. Its chef-recommended recipes include a chicken brown rice bowl and a Cobb salad.
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ShopRite said it hopes to roll out salad bars similar to Sally at other locations.
Sally allows retailers like ShopRite to offer a “salad bar” experience to customers without exposing them to the risks posed by self-serve food stations, which supermarkets had to close down in response to the pandemic.
Customers receive a glove from a dispenser to wear as they tap the screen to order their salad. Later this year, Chowbotics plans to roll out an app that will allow shoppers to place their order on a mobile device and get a QR code which the machine can scan, which will make their transaction completely touch-free.
“Prior to the COVID-19 pandemic, my family’s ShopRite store was looking for a salad bar solution that was touchless, fresh, and innovative. The current health crisis made it even more of a priority,” said Jonathan D’Orsi, vice president of operations at the ShopRite store in Carteret, said in the press release.
Although grocers have largely shut down their salad bars because of the pandemic, they had already begun to see a decline in salad bar usage before the public health crisis started. According to Nielsen data, salad bar sales declined 6.5% last year compared to 2018. Sally could remove the need for workers to refill a whole salad bar daily and reduce waste.
Even after the pandemic ends, customers may never want to go back to eating from a traditional salad bar. Investing in a technology like Sally now prepares ShopRite for shopping habits down the road.
Before arriving at ShopRite, Sally made its grocery debut at a Heinen’s store in Pepper Pike, Ohio. Chowbotics, which told Grocery Dive that prior to COVID-19 grocery stores were not a focus for the company, plans to launch at additional food retailers in the coming weeks.
Meanwhile, it seems that yet another occupation just went extinct at the hands – or in this case knives – of a robot.
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- China Says Mysterious Seed Packages Are "Forged" And Aren't Really From The Country's Postal Service
China Says Mysterious Seed Packages Are “Forged” And Aren’t Really From The Country’s Postal Service
Tyler Durden
Tue, 07/28/2020 – 20:15It was just two days ago that we highlighted a mysterious trend that was sweeping the U.S.: citizens were receiving unsolicited packages of seeds, with return addresses from China, for apparently no reason at all.
In our report, we suggested the mailings could be some sort of agricultural warfare brewing between the U.S. and China – where agriculture remains a key point of trade tensions – and where a cold war of sorts appears to be bubbling up under the surface.
After multiple reports in the U.S. media regarding the seeds, China’s Foreign Ministry responded on Tuesday by saying that China Post (the country’s state owned mail service) “has strictly followed regulations that ban the sending and receiving of seeds,” according to Bloomberg.
Further, Chinese Foreign Ministry spokesman Wang Wenbin says that the parcels were “forged” and “not from China”. China has supposedly requested that the U.S. mail the seeds back to China so they could investigate further.
The response is anything but re-assuring. We’re not postmaster generals but we find the idea of being able to forge mailing labels – and get products to their final destination – in this day and age where even the decrepit U.S. postal service is mostly digital, as a difficult one.
Recall, we wrote days ago that Americans across the country were starting to report receiving unsolicited packages of different types of seeds that they didn’t order – and don’t know anything about – at their door. The return address on the packages is always from China.
The Washington State Department of Agriculture wrote about the phenomenon on their Facebook page on July 24, 2020 and said that the seeds are being shipping in packaging that identifies the contents as jewelry. Similar advisories have been issued in Virginia, Utah, Kansas, Arizona and Louisiana.
Facebook users have been adding photos in the comments section of the post sharing photographs of seeds they have received from China. “It’s not a joke. I got some the other day!!!” one user commented, stating that the package identified the contents as a “Rose flower stud earring”.
“Look’s like it’s all across the country,” stated an Indiana resident who also received seeds in the mail unsolicited.
At least 40 residents in Utah were said to have been mailed the unsolicited packages, according to the Daily Mail. The Kansas Department of Agriculture and the Arizona Department of Agriculture also addressed the phenomenon, as did the Louisiana Department of Agriculture and Forestry, who said:
“Right now, we are uncertain what types of seeds are in the package. Out of caution, we are urging anyone who receives a package that was not ordered by the recipient, to please call the LDAF immediately. We need to identify the seeds to ensure they do not pose a risk to Louisiana’s agricultural industry or the environment.”
There had been similar reports from Virginia’s Department of Agriculture and Consumer Services. “The seeds have yet to be identified, but officials speculate that the seeds may be of an invasive plant species and are advising residents not to use them,” Fox News reported.
“Taking steps to prevent their introduction is the most effective method of reducing both the risk of invasive species infestations and the cost to control and mitigate those infestations,” VDACS wrote in a press release.
Public Asked To Report Receipt of any Unsolicited Packages of Seeds. Learn more: https://t.co/RY9u4nR1QK pic.twitter.com/ZzNaO2ZaYz
— VDACS (@VaAgriculture) July 24, 2020
https://platform.twitter.com/widgets.js
Twitter is also littered with reports of people receiving these seeds:
We have received 2 of those packages here in Indiana. One from China, and one from Kyrgystan. pic.twitter.com/Fm6CBxf1mD
— Don ⭐⭐⭐ (@SmallTownIndy) July 26, 2020
https://platform.twitter.com/widgets.js
The Washington State Department of Agriculture has advised people on its Facebook page:
1) DO NOT plant them and if they are in sealed packaging (as in the photo below) don’t open the sealed package.
2) This is known as agricultural smuggling. Report it to USDA and maintain the seeds and packaging until USDA instructs you what to do with the packages and seeds. They may be needed as evidence.
Anyone who has received seeds in the mail can report them to the United States Department of Agriculture by visiting their website here. The site says:
If individuals are aware of the potential smuggling of prohibited exotic fruits, vegetables, or meat products into or through the USA, they can help APHIS by contacting the confidential Antismuggling Hotline number at 800-877-3835 or by sending an Email to SITC.Mail@aphis.usda.gov.
USDA will make every attempt to protect the confidentiality of any information sources during an investigation within the extent of the law.
- Gold's Record Price Is All About Currency Debasement
Gold’s Record Price Is All About Currency Debasement
Tyler Durden
Tue, 07/28/2020 – 19:55Authored by Michael Maharrey via SchiffGold.com,
Gold broke its all-time price record on Monday and held above that level throughout the day.
So, what is this telling us?
It’s easier to understand gold’s record-breaking move up if you look at it from the other side of the equation. The dollar is now at its all-time low compared to gold.
In simple terms, the dollar is losing value.
This is a direct result of US government borrowing and spending backed by Federal Reserve money printing.
TD Securities reiterated that dollar debasement is driving gold in a note.
“The USD weakens amid massive fiscal and central bank stimulus, a bloating debt pile and a slow growth environment.”
Since the economy crashed thanks to the governments’ shutdowns in response to the coronavirus, the federal government has borrowed trillions of dollars for its stimulus program. The June budget deficit was bigger than all but five of the yearly deficits in history. Meanwhile, the Fed is monetizing a big chunk of that debt through its government bond purchase program. In effect, it is buying up US debt and paying for it with money printed out of thin air.
All of this money creation is inflation. The rising price of gold reflects the inflationary pressure.
As more dollars go into circulation, each individual dollar is worth less, all other things equal. That’s why the price of gold is going up in dollar terms. We have more dollars chasing roughly the same amount of gold. That means it takes more dollars to buy an ounce.
This isn’t mere speculation. Money supply growth hit a new all-time high for the third month in a row in June. The only time we’ve seen money supply growth anywhere near this level was during the inflationary years of the 1970s. In June, year-over-year growth in the money supply came in at 34.5%. That was up from 29.5% in May.
The “true” or Rothbard-Salerno money supply measure (TMS) – is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure of money supply fluctuations than M2. The Mises Institute now offers regular updates on this metric and its growth. This measure of the money supply differs from M2 in that it includes Treasury deposits at the Fed (and excludes short-time deposits, traveler’s checks, and retail money funds).
As you can see from the chart, the Fed’s balance-sheet was already growing in late 2019 with the quantitative easing the central bank refused to call quantitative easing. But total Fed assets surged to over $7 trillion in June. That set a new all-time high and propelled the Fed balance sheet far beyond anything seen during the Great Recession’s multiple rounds of QE. The Fed’s assets are now up more than 600% from the period immediately preceding the 2008 financial crisis.
Some people in the mainstream are speculating that gold could be near its top. But that would assume the money printing is about to come to an end. There’s no reason to believe that. As Peter Schiff tweeted after gold pushed above its record price:
This record won’t last long as the dollar’s decline is only just getting started. It’s about to plunge to new depths taking the American standard of living down with it.”
Congress is working on another stimulus package that will mean trillions more in borrowing and spending. And the Fed will have to monetize all that debt. Jerome Powell has already committed to “do whatever we can, for as long as it takes.”
In other words, there is no reason to believe the monetary debasement is going to end any time soon. That’s extremely bullish for gold – and silver too.
Deutsche Bank chief US economist Matt Luzzetti projects the Fed’s balance sheet will continue to explode.
We find that the Fed will need to provide significant accommodation – roughly equal to a fed funds rate of -5% — and that QE and forward guidance could be insufficient. Assuming limited impact from forward guidance given that markets are pricing negative rates, our estimates range from an additional $5tn to $12tn more of balance sheet expansion needed. Our preferred calibration sits towards the high end of that range.”
We may see some profit-taking and corrections in the price of gold in the near-term, but given the economic dynamics and the trajectory of government and central bank policy, it appears gold still has a long way to run up.
- One Chick-Fil-A Franchise Is Offering Free Food For Your Coins
One Chick-Fil-A Franchise Is Offering Free Food For Your Coins
Tyler Durden
Tue, 07/28/2020 – 19:35Amid the nationwide coin shortage, businesses across the U.S. have been offering their customers specials to bring in coins. Smaller mom and pop convenience stores may offer a cup of coffee, while other companies – notably Chick-fil-A – are even going as far as offering free food.
At one Chick-fil-A in Lynchburg, Va., the company is offering coupons for a free entree in exchange for every $10 in rolled coins that guests provide, in addition to the same amount in cash. Each guest is limited to 10 coupons maximum, according to the Hill and the company’s Facebook page.
The store is allowing customers to come in on Wednesday between 9AM and 11AM to redeem the coupon. The company has said on its Facebook page that the response has been “overwhelming” and that they will definitely do another special of the sorts.
The special comes as the nation faces a massive coin shortage as a result of the coronavirus lockdown, which eliminated not only the amount of people going to stores – but specifically the amount of people using cash to pay for things.
The Federal Reserve imposed a rationing order last month, which limits the number of coins given to regional banks. Fed Chair Jerome Powell had said: “With the partial closure of the economy, the flow of funds through the economy has stopped. We are working with the Mint and the Reserve Banks and as the economy reopens we are starting to see money move around again.”
Chick-fil-A commented: “Due to the decrease in coin circulation nationwide, some restaurants may choose to offer incentives like this one to ensure they maintain enough coins to provide guests proper change, should they choose to pay with cash. This is not a national promotion, as Chick-fil-A restaurants are individually owned and operated.”
- Absentee Ownership: How Amazon, Facebook, & Google Ruin Commerce Without Noticing
Absentee Ownership: How Amazon, Facebook, & Google Ruin Commerce Without Noticing
Tyler Durden
Tue, 07/28/2020 – 19:15Authored by Matt Stoller via BIG,
Welcome to BIG, a newsletter about the politics of monopoly and finance. If you’d like to sign up, you can do so here. Or just read on…
Three housekeeping items. First, a colleague and I wrote up for Politico a piece on the American tradition of taking on monopoly power, going all the way back to the 1600s. Second, I co-authored a report explaining how Amazon acquired its market power and the list of laws that need reform to make the corporation safe for democracy. Third, there is another antitrust suit against the cheer monopolist Varsity Brands. If you’re in that world, there’s more info at: https://www.takebackcheer.com
Tomorrow, the CEOs of Apple, Google, Facebook, and Amazon will testify before the House Antitrust Subcommittee. If done right, this hearing could be the most important hearing on monopoly power in decades. So today, in preparation, I’m going to write about how big tech regulates American commerce, using some stories I worked on over the past few weeks.
And now… let’s start with a weird picture of a Chinese return address…
Facebook, Google, and Counterfeiting
Last week, I got an email from a frustrated customer of the luxury shoe brand Rothy. “On Memorial Day weekend,” she wrote. “I was on Facebook and there was a sale on my favorite shoe brand, Rothy. The sponsored advertisement said Rothy so I clicked on it and ordered 2 pairs of shoes. When they arrived a few days later, I immediately knew they were counterfeit shoes. I went onto Paypal and requested a refund. A few days later, I received a response that I have to return them to China in order to provide a refund. The return address was in complete Chinese characters. How do Americans write 12 chinese characters?”
Rothy’s is a high quality branded women’s apparel company focusing on sustainability. Rothy shoes and bags are well-made, and the company charges a reasonably high price for them, a price chosen to convey that the Rothy brand means quality. It does not, as a rule, ever put its shoes on sale. I went back and forth with this customer, and she told me that she had called Rothy to complain, and “they shared that they are getting hammered by fraud on Facebook and Instagram but can’t get these goliaths to stop it.”
Such a high quality brand offers an enticing target for Chinese counterfeiters, who have found the perfect criminal accomplice: Facebook. Chinese counterfeiters are buying ads offering Rothy’s shoes for a low price, and directing people to fake websites. People then buy the shoes, which are counterfeit, and customers then complain to Rothy’s. Facebook does take fake ads down, but it is reactive, not proactive about doing so. Rothy’s is in a constant whack-a-mole trying to find the fake ads so they can get Facebook to act.
It gets even more interesting when you throw the Facebook ad boycott into the mix. A few weeks ago, Rothy’s, like a lot of companies, pulled its ads from Facebook in solidarity with Black Lives Matter over Mark Zuckerberg’s policies around hate speech. Many companies did so, which had an interesting effect on ad prices. Facebook ad prices are done on an auction model, which means that high ad demand pushes prices up, and low ad demand pushes them down. With a boycott going on from advertisers, ad prices on that particular day were likely lower than usual. With no Rothy ads on Facebook and Instagram, and low ad prices, Chinese counterfeiters took advantage, and Facebook and Instagram were full of ads for fake Rothy’s. In other words, intentionally or not, Facebook damaged Rothy’s business by allowing counterfeiters to steal the company’s brand equity when the company sought to make a political point with its ad spending.
Why does Facebook enable such scams? It’s simple. The law lets Facebook make a lot of money enabling counterfeiting. Section 230 of the Communications Decency Act immunizes Facebook from any consequences for the content of ads bought on their platform; they can’t be sued for facilitating fraud and counterfeiting, so they don’t have any incentive to do anything about it. With no one at Facebook actually paying attention to the scam artists who are buying these ads, scams proliferate.
Contrast ad buying on Facebook with that of television ad purchases. Facebook’s ad sales are automated; anyone can just open a Facebook ad account and start buying advertising, with no third party audits on who is seeing the ad or where that ad is directing people. When you buy a television ad, by contrast, the process involves people at the TV networks interacting with ad agencies, as well as third party auditing through tracking companies. The automating of the ad buying process enables Facebook to have a higher profit margin, because they don’t have to hire anyone to vet advertising sales, especially when ad buyers are using small amounts of money. It also enables straightforward fraud.
Lest you think such negligence or bad behavior by Facebook is a one-off, automated ad systems run by both Facebook and Google routinely enable such brand destruction. Costco, for instance, has had to deal with fake coupons passed around on Facebook. Here’s what that fake coupon looked like:
So has Krogers, which had to deal with a counterfeit ad promoting a fake contest for free groceries.
Thank you for reporting this. This giveaway is fraudulent. Please do not click on it or provide any personal information. Our digital team is aware of this issue and is investigating. Thank you for bringing this to our attention.
— Kroger (@kroger) December 26, 2019
https://platform.twitter.com/widgets.js
Scammers regularly rip off Kickstarter products, as Matt Binder on Mashable reported last year. “Scammers find an interesting or popular product from crowdfunding sites such as Kickstarter or Indiegogo, rip the item’s details, photos, and videos, and push them via Facebook ads as their own products,” Binder wrote. “Victims of the fraud are either never sent the product or receive a knockoff version.:
This dynamic involved something an early 20th century economist named Thorstein Veblen called “Absentee Ownership,” which is when the locus of control and the locus of responsibility are different. Facebook isn’t legally responsible for the consequences of what goes up on its network, but it still has control over what goes up on its network. Meanwhile, Rothy’s has responsibility for its brand, but no control over how Facebook sells advertising by counterfeiters exploiting its brand.
The same incentives apply to Google, which has earned millions of dollars from companies selling fake health care plans, and has allowed advertisers to put up ads for fake customer service for Netflix as well as fake Microsoft Windows support. (Amazon has its own counterfeiting problem, which the Department of Homeland Security noted awhile back.)
Ultimately, fraud and counterfeiting destroy commerce, and make it impossible for people to create branded goods. There are two legal drivers of absentee ownership that enable this kind of bad behavior. The first is Section 230 of the Communications Decency Act, which immunizes these platforms from legal liability for enabling fraud and counterfeiting. (Incidentally, Senator Josh Hawley just introduced a bill today to strip this liability protection from companies that sell targeted ads, aka Google and Facebook, and that would solve this problem). The second is the refusal to enforce antitrust law; Facebook’s purchase of Instagram means that a potential competitor to Facebook was taken out of commission. It is possible Instagram might have tried to compete for ad dollars by promising a safer space for advertising, but since Zuckerberg bought this nascent competitor, Instagram never ended up being able to create a differentiated offering.
Monopolies are bad, but monopolies who don’t have to take responsibility for what they destroy are even worse.
So that’s story one, here’s story two.
“I’m from Amazon and I’m here to help.”
A few weeks ago, I got an email from a shoe retailer who told me about something odd happening with Amazon. He told me that his Amazon sales, which had been generally a high turnover reasonable business, were suddenly down 40%. He uses Amazon’s warehousing and logistics business, which is called Fulfillment by Amazon, which meant Amazon took care of making sure that his inventory got to customers.
Only, now that there were fewer sales, inventory began piling up, and he started getting warnings from Amazon that his metrics were below their standards and he was in jeopardy of losing storage capacity for the upcoming holiday season. This kind of million dollar penalty happens often among merchants who sell on Amazon, often randomly and for no discernible reason.
Increases or decreases in sales are a regular topic on the Amazon Seller Forums for merchants who have to sell through its Marketplace. Sometimes Amazon changes its algorithms or features for business reasons. But often stuff just breaks, and no one bothers to fix it. It’s hard to conceptualize this if you’ve never sold through Amazon, because as a consumer, the experience is generally good. But if Amazon has market power over you, the experience is one of hostile neglect. As one merchant put it:
Never expect Amazon to fix broken features unless it will add to their bottom line or the media get involved. Sometimes Amazon acts like that passive boyfriend who never really breaks up with you, they just ghost you until you give up. That is why some features/functions “break” and how much of Amazon’s seller support works.
Over the course of a week and a half, I tried to figure out what was going on with this Amazon algorithm change. It was a fascinating experience. At first, I thought it was an intentional conspiracy by Amazon, where Amazon was trying to further monopolize control over customers. The corporation, under this theory, would be directing consumers who normally bought from independent merchants to Zappos, which is an Amazon subsidiary.
That regulation of who sells what happens through what is called the Buy Box, which is the piece of web real estate shown to consumers that lets them buy an item. The screenshot of the Buy Box is below. Consumers can pick which merchant they buy from, but as you can tell from the small text in the red box, they are very unlikely to do so. So winning the Buy Box determines whether you can sell through Amazon. Suddenly, the theory went, Amazon was automatically awarding the Buy Box to its own branded subsidiary for unknown business purposes.
I confirmed that Amazon had done this for Zappos with a number of different brands. I even saw a letter from a major product company telling its retailers that yes, indeed, Zappos now had the advantage on them through Amazon. Over the next week, product makers complained to Zappos about the situation. Their other third party channels were being destroyed, which meant the brands would become entirely dependent on Amazon/Zappos. The situation returned to normal, Zappos stopped immediately winning the Buy Box. But then a few days later, it flipped back; Zappos started getting its immense advantage again. Finally, in the middle of last week, it returned to the status quo of Zappos being one of many merchants that could win the Buy Box.
But something about the story didn’t quite make sense. There was no obvious reason for the changes, as Amazon benefits whether Zappos makes the sale or not. As the Institute for Local Self-Reliance just put out, Amazon makes a lot of money from third party merchants.
It also turns out there was a much larger set of algorithm changes beyond the specific line of business I was tracking. Thousands of merchants were suffering, and sellers were also trying to figure out whether the change in the Buy Box was a technical glitch or something more sinister. The truth was, no one knew, and Amazon was denying anything was wrong (which is their usual tactic, whether something was broken or not). Here are some of the cries from help from merchants whose businesses, and thus livelihoods, had suddenly fallen apart:
“I’m having the same issue. Called support and they just gave me the rundown of how my account is fine and that lots of factors control the buybox. Very scary.”
“I am also a victim of this Glitch since July 1st…Lost a lot of sale and buy box even though my rates are the lowest…Please help… I even tried to add my items to the cart to purchase but was not able to add them to my cart… I am desperate for the help.”
“Just because Amazon CAN help doesn’t mean they WILL.”
“Like many things on Amazon, stuff just breaks and no one ever tends to fix it. You can report these but you are just wasting your time as they will just heal randomly but no one from Amazon support will ever be able to actually resolve these issues and instead will just cut and paste random junk about buy boxes.”
There is now an entire media ecosystem and consulting world surrounding how to succeed on Amazon, replete with specialized software tools designed to win the Buy Box. One common piece of advice to deal with the recent Buy Box glitch was, “When Amazon sales plummet because of a glitch, one short-term solution is to lower your price by 1-2 percentage points to win the Buy Box. Then, as soon as you win it, raise the price. You won’t be able to do this manually, though. You need a real-time repricer like Sellery to stay ahead.” In other words, the way to deal with Amazon’s neglect is to buy consulting and software services.
In the end, I couldn’t figure out what was actually happening. Amazon’s secret algorithm toys with hundreds of thousands of businesses, with no recourse or transparency, and no active regulation even by Amazon itself.
This situation reflects the same absentee ownership dynamic on display in the counterfeiting ads enabled by Facebook and Google above. Amazon has control of the Marketplace structure, how consumers buy, and even the inventory of third parties, but it doesn’t have responsibility for any of it. Amazon gets paid whether it makes Zappos a dominant seller or whether it extracts fees from merchants for its warehousing and marketplace services, or whether its algorithm has glitches or not. It can’t be sued, because all merchants have to sign arbitration clauses in their contracts that prohibit lawsuits. Amazon is the government of online commerce, and who goes bankrupt based on Amazon’s arbitrary decisions is literally irrelevant to Bezos.
In 1986, Ronald Reagan made a famous joke about the coercive power of an incompetent and haphazard government over independent farmers, saying “The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.’” Today, for merchants in America, Amazon is that government.
Congress versus $5 Trillion
These stories brings us to the big hearing tomorrow. After a year of investigating, the Antitrust Subcommittee now has the four CEOs up to testify at noon, men who in aggregate represent $5 trillion of market capitalization and the raw power over the channels of commerce that amount of money represents.
Congress has dealt with the power of monopolies. In 1950, Congressman Emanuel Celler, chair of that same Antitrust Subcommittee, wrote in Reader’s Digest on a threat made by General Electric in the refrigerator industry. A GE salesman had told a customer of a rival that GE would sell compressor’s “at any cost,” with the goal of killing off a competitor, the Tecumseh Company. GE CEO Charles Wilson, in testifying before Congress, was asked about this situation, to which Wilson admitted that, yes, a salesman had made such an offer, but not under orders. Wilson had talked to the President of Tecumsah to let him know that GE had no intention of destroying its rival. “I told him it was bunk,” said Wilson, “and that the salesman had been talked to.”
Celler wrote that, while it was good that GE had decided not to ruin its competition, the problem was the power it had to do so in the first place. “I don’t like to see men first terrorized,” Celler noted, “and then relieved to find that Charles Wilson is feeling kindly and won’t let his men shoot.” And that is the feeling that merchants have with Amazon, Facebook, Google, and Apple. They just hope that Jeff Bezos, Mark Zuckerberg, Sundar Pichai, Tim Cook or one of their underlings, are feeling kindly.
There are reasons to be wary of this hearing. As Dave Dayen noted, the format is such that each member of Congress gets only five minutes to grill all four CEOs, though members can stay for multiple rounds. These CEOs are going to be testifying remotely instead of in-person, which means they can be surrounded by lawyers who give them answers off screen. And while I had hoped for subpoenas for documents, it seems less likely that the Judiciary committee wants to fight to get such information. One of Facebook’s original investors, Roger McNamee, told CNBC that “This is at best the first step in a long process…Each one deserves a multi-day hearing.” He’s right, and I suspect there will be more hearings in future Congress’s.
Even so, just having these CEOs being forced to answer is a meaningful step forward. And some of the members genuinely understand the stakes. Here’s Congresswoman Pramila Jayapal, who pointed out that the problem of big tech is fundamentally political. “We need to move very quickly, as a Congress,” she said, “to reassert our authority into regulation of these tech companies and [their] anticompetitive practices.”
In America, the law is meant to protect us from arbitrary threats and the abuse of power in our commercial sector, in particular from monopolies and financial predators. It’s been a long time, over forty years, since policymakers even understood that their job was, in part, to regulate commerce so as to promote fair competition and the liberty that comes with it. As a result, others regulate our commerce, the most significant being Facebook, Google, Amazon, and Apple. But the tide is turning. These men will in the end have to answer for how they regulate, and the public, through Congress, will finally start getting a say.
Thanks for reading. Send me tips, stories I’ve missed, or comment by clicking on the title of this newsletter. And if you liked this issue of BIG, you can sign up here for more issues of BIG, a newsletter on how to restore fair commerce, innovation and democracy. If you really liked it, read my book, Goliath: The 100-Year War Between Monopoly Power and Democracy.
* * *
P.S. A contact sent this note to me that I found interesting on Amazon/Whole Foods and cattle ranching.
I came across an Amazon scam yesterday that I’ll pass along for your files. I was talking to a farmer/rancher who lives up the road from me…she and her husband do mostly dairy, but they do some beef cattle too. She said slaughter houses are backed up by several months right now (COVID), so they haven’t been able to get their beef slaughtered. But, there’s a guy who buys 12-18 steer a month from them…she asked him what he does with them…he puts them in a pasture for a month and then sells them as “grass fed” (which rich suburbanites pay a premium for) to Whole Foods (who has front-of-the-line status at slaughter houses)…mind you, they feed these animals primarily grain (which is fine, but not what people think they’re buying) – only in the last month of their lives are they “grass fed”…and right now it works particularly well because Amazon can butt in line at the slaughter house. Fucking ridiculous…people pay primo $ for what is really just standard beef, and it gets to market easily while others wait.
- US-China Military Conflict Deemed "Highly Likely" To "Almost Certain" Over Next 3 Years
US-China Military Conflict Deemed “Highly Likely” To “Almost Certain” Over Next 3 Years
Tyler Durden
Tue, 07/28/2020 – 18:55A top independent Australia-based think tank which regularly advises the Canberra government has produced a “risk assessment” studying the likelihood of America and China going to war. Involving defense experts around the world, the study was undertaken on the heels of the US sending two carrier strike groups to sail through the South China Sea in provocative “freedom of navigation” operations.
Given that “normalization” with China — a longtime foreign policy emphasis which goes back to Nixon and Carter — appears to have gone out the window during this latter half of the Trump administration, there’s lately been much forecasting on the potential for the US and China to stumble into war. While there’s already for the past couple years been much ink spilled over the possibility of the US and China falling into the so-called Thucydides Trap, this latest assessment is among the most dire predictions to date in terms of conclusions reached.
Via Getty Images/Daily Express Top daily newspaper The Australian introduces that leaders in Canberra woefully underestimated the potential for significant regional conflict upon being warned over a decade ago.
“Back 14 years ago in 2006 Australia’s top defence analysts, Air Power, set out in a long document for the Foreign Affairs Committee the emerging power of China contrasting with the looming American decline. It was a remarkable forecast,” the report begins.
Defense leaders at the time ignored and dismissed what they saw as an overly pessimistic view of US capabilities and its role in the world, The Australian continues:
In response the then Department of Defence deputy secretary strategy Michael Pezzullo reflecting his department’s view said:
“It is predicated upon a radically different set of strategic circumstances which, I must say, I do not necessarily see even in the most speculative parts of my crystal ball.”
“It would also require a massive erosion of the US military capability edge which, again, I do not foresee even in the most speculative part of my crystal ball.”
But the new Air Power assessment, which takes into account soaring tensions of the past two months, is being received with a new urgency.
Crucially, the new analysis deems that within the next three years a direct military conflict between the US and China ranges from “highly likely” to “almost certain”:
The defence “crystal ball“ gave the wrong signals but It took almost 14 years for them to discover their error and the options available in 2006 have now mostly disappeared. The defence mistakes have been compounded by similar mistakes by the Department of Foreign affairs.
AirPower last week contacted major defence to strategists around the world to undertake a “risk assessment” of military conflict between China and the US. They rate conflict in the next 12 months as “likely”; over the next two years as “highly likely” and over the next three years as “almost certain”.
Indeed we’ve already seen language out of both sides which too easily shifted from a ‘war of words’ within the usual economic and diplomatic realms, to the more unusual military threats.
Via the Blavatnik School of Government: “When a rising power threatens to displace a ruling one, the most likely outcome is war. Twelve of 16 cases in which this occurred in the past 500 years ended violently.”
Consider for example the Chinese military’s recent response to America’s dramatically ramped up air and navy operations over the South and East China seas: The South China Sea is fully within the grasp of the Chinese People’s Liberation Army (PLA), and any US aircraft carrier movement in the region is solely at the pleasure of the PLA, which has a wide selection of anti-aircraft carrier weapons like the DF-21D and DF-26 “aircraft carrier killer” missiles.
Meanwhile, whether it’s pre-November “distraction” or not, it remains that Washington hawks have appeared to focus their near and long term sights on Beijing, thus at the very least “normalization” is now a thing of the past, with war inching closer on the horizon.
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