- Global Oil Shipments Depend On These Major Chokepoints
Global Oil Shipments Depend On These Major Chokepoints
A massive container ship remains wedged in the Suez Canal, blocking a crucial global trade artery for a sixth consecutive day. The 224,000 ton Ever Given measures 400 meters, nearly as long as the Empire State building is tall. The Suez Canal Authority stated that the vessel ran aground during a dust storm with low visibility and freeing it could prove a complex process with the potential to take days. The incident has already caused major tailbacks at both ends of the canal with at least 150 vessels, mainly container ships and oil tankers, dropping anchor.
🇪🇬#Egipto– imágenes áreas muestran la escala de los atascos frente al canal de Suez a causa del portacontenedores encallado MV Ever Given. El buque Ever Given de bandera panameña cubría la ruta desde #China🇨🇳 a #PaisesBajos🇳🇱. pic.twitter.com/W9rgxJZW9f
— DATOS #Elecciones2021 (@Datoworld) March 28, 2021
https://platform.twitter.com/widgets.js
The Suez Canal serves as a crucial passageway and it allows ships to avoid the much longer route around the Cape of Good Hope on the southern tip of Africa. With just over 50 ships passing through it per day on average, delays are likely to have repercussions ranging from higher shipping contracts and oil prices to lawsuits over late cargo.
As Statista’s Niall McCarthy notes, if the situation is not resolved swiftly, the impact on oil prices could be significant given that around 10 percent of seaborne oil transits the Suez Canal.
By some estimates, around 10 million barrels of oil are now backed up at both ends of it.
The Suez Canal is one of several key oil chokepoints around the globe and a Lloyd’s List Intelligence analysis published by the Financial Times found that 4.6 million barrels passed through it daily in 2018.
You will find more infographics at Statista
That is still substantially less than some other vulnerable transit points around the world such as the Stait of Malacca which sees 15.7 million barrels pass through it and the Strait of Hormuz where nearly 17 million barrels pass per day.
The latter is still considered the biggest chokepoint to global supply and Iran has frequently threatened to shut it down over the years. Its strategic importance was illustrated on numerous occasions such as Operation Praying Mantis and the downing of Iran Air Flight 655 in 1988.
Threats to shut down the Strait of Hormuz are taken seriously, particularly by the United States, and a heavy military presence is maintained in the region.
Tyler Durden
Mon, 03/29/2021 – 02:45 - Erdoganistan: The New Islamic Superpower?
Erdoganistan: The New Islamic Superpower?
Authored by Giulio Meotti via The Gatestone Institute,
“It was a very special day, July 24 [2020],” said France’s leading expert on Islam, Gilles Kepel.
“It was pilgrimage time to Mecca and, due to the pandemic, no one was there! It was the anniversary of the Treaty of Lausanne, the origin of modern Turkey within its current borders. Erdogan was about to twist the arm of the secular Ataturk, who had turned the old Hagia Sophia basilica into a museum that he had donated ‘to humanity’. Erdogan… turned it back into a mosque”.
This was the moment, remarked Kepel – who just published a new book, “Le Prophète et la Pandémie” [“The Prophet and the Pandemic“] — that Turkish President Recep Tayyip Erdogan became the new leader of the umma, or global Islamic community. “Erdogan is trying to appear as the champion of Islam, just like Ayatollah Khomenei in 1989”.
Both Khomeini and Erdogan seem to have been committed to erasing secularism and ties with Western culture from their respective countries; to heading a battle against Saudi Arabia for supremacy of the Islamic world and to re-Islamizing their societies. Veiled women, for instance was rarely seen in Tehran before Khomeini, and Erdogan reintroduced it into Turkish society.
The Iranian mullahs were also able to impose on the international arena the use of the word “Islamophobia”, but now it is Turkey that is leading the ideological persecution of the “Islamophobes”. Under the auspices of Turkish diplomat Volkan Bozkir, President of the 75th Session of the United Nations General Assembly, the UN just celebrated the “International Day against Islamophobia” and Secretary General Antonio Guterres himself strongly denounced an “epidemic of Islamophobia“. Erdogan was promoting his global campaign of victimization by “Islamophobia”, while in fact it is the critics of extremist Islam who are in danger and frequently killed.
This grotesque and shameful conference was organized by the Organisation of Islamic Cooperation (OIC), an entity made up of 56 mainly Muslim countries, plus “Palestine”. In the OIC, states such as Pakistan punish “blasphemy” with death; Saudi Arabia flogs and jails liberal bloggers such as Raif Badawi, and Turkey fills its jails with writers and journalists, to mention just a few of members.
On that July 24, in 2020,, Erdogan challenged Europe and the West by re-appropriating what had been, for a thousand years, the largest church in Eastern Christianity. The lack of response on the part of the West most likely convinced him that the moment was right. No one paid attention or countered the act.
Unlike Iran and Saudi Arabia, Turkey is a democracy. It is in talks with the European Union about its possible membership; it is pampered in Washington; it is the second-largest army in NATO, and stands as Asia’s gateway to Europe.
The Financial Times (FT) has dedicated a series of analyses to Erdogan’s grand plan for hegemony. In Africa, for the past 15 years, for instance, the Turkish president has spearheaded a mega-relaunch of his alliances. Since 2009, Turkey has increased the number of embassies there from 12 to 42. Erdogan has even been a frequent visitor, making trips to more than 20 capitals. The government has set itself the goal over the next few years of doubling Turkey’s trade volume with Africa to $50 billion, about a third of its current trade with the European Union.
Turkey has also chosen the Balkans as a battlefield — “the region,” according to the FT, “is symbolically very important, since much of it was ruled by Istanbul during the Ottoman Empire”. Then, there is Europe:
“Several European countries have voiced concern over activity by Turkey’s intelligence service on their soil and the use of state-trained Turkish imams to spy on the diaspora”.
Erdogan’s goal in Europe seems to be to use the Turkish diaspora as a political instrument of pressure on states (in particular Germany, France, Austria, Belgium and Holland) and as the base for his hegemony.
In the Caucasus, Turkey supported Azerbaijan’s war against Armenia in Nagorno-Karabakh presumably to create a Turkic-Islamic corridor between Azerbaijan, Turkey and other Muslim countries. Erdogan also apparently makes use of mercenaries. The Indian media reported a contingent sent to Kashmir to support Pakistan. Turkey has also previously used “Sadat” mercenaries against the Armenians, as well as in the Libyan and Syrian civil wars.
In the latest issue of the Reveue des deux mondes, the French philosopher Michel Onfray remarked that there is a clash of civilizations and that Erdogan now leads the Islamist side. “It began in 1989 with the fatwa against Salman Rushdie,” he wrote.
“No Western country reacted except with words – as if they thought a verbal spell might work! With the beheading of Professor Samuel Paty it is this Judeo-Christianity that is being attacked — in Armenia, Islam is attacking the oldest Christianity in Europe …. Europe is afraid of Erdogan and his ability to cause damage. This Tamerlane in the making threatens, insults, attacks, [and] supports those who threaten us, insult us and attack us”.
That, Onfray continues, was the meaning of the Turkish aggression against Karabakh:
“Armenia is being attacked by Azeris and Muslim Turks who want its total disappearance. It is the result of a war of civilizations. What is happening in this country, which is the cradle of Christian civilization, is what awaits us here, in the tomb of the Judeo-Christian civilization itself. The battle lost in Armenia is the first of a war waged in the West against the Judeo-Christian civilization”.
Erdogan has not even tried to hide his ideological vision. “The crescent and star embellish the skies of Karabakh now thanks to the efforts of our Azerbaijani brothers and sisters”, the Turkish president proclaimed after the war. “The Azerbaijani flag flies proudly over Nagorno-Karabakh as a symbol of our martyrs’ valor”.
One of Erdogan’s advisors, the retired Turkish general Adnan Tanrıverdi, who founded the mercenary agency “Sadat”, articulated the vision of a unified Islamic superpower. His Justice Defenders Strategic Studies Center called it “Asrica“, the union of Africa and Asia, 61 countries whose capital is Istanbul and under the aegis of this “Erdoganistan”. They include 12 countries of the Middle East, namely Bahrain, United Arab Emirates, Palestine, Iraq, Qatar, Kuwait, Lebanon, Syria, Saudi Arabia, Oman, Jordan and Yemen; eight in Central Asia, Azerbaijan, Kazakhstan, Kyrgyzstan, the Turkish Republic of Northern Cyprus, Uzbekistan, Tajikistan, Turkey and Turkmenistan; four in the Near East, namely Afghanistan, Bangladesh, Iran and Pakistan; three in Southeast Asia, Brunei, Indonesia and Malaysia; six in North Africa, namely Algeria, Chad, Morocco, Libya, Egypt and Tunisia; six in East Africa, including Djibouti, Eritrea, Comoros, Mozambique, Somalia and Sudan; ten in northwestern Africa and South America, ie Western Sahara, Gambia, Guinea, Guinea Bissau, Mali, Mauritania, Senegal, Sierra Leone, Guyana and Suriname; eight in South West Africa, namely Benin, Burkina Faso, Gabon, Cameroon, Niger, Nigeria and Togo; and four in Europe, Albania, Bosnia-Herzegovina, Kosovo and Macedonia.
Turkey evidently wants to be a great neo-Ottoman Emipire and the only one capable of leading the Muslim world. The conversion of Hagia Sophia into a mosque seems to have been intended as a watershed in Islamic history that heralds the establishment of a powerful league of Muslim nations to face the West under the Turkish leadership.
Three seas surround Turkey: the Eastern Mediterranean, the Black Sea and the Aegean Sea. Turkey recently launched a large naval exercise. The Turkish Ministry of Defense announced that 82 warships, 17 naval aviation craft, amphibious forces, air force units and special operations teams engaged in exercises that ended on March 8.
“Blue Homeland” — Mavi Vatan in Turkish — is the geopolitical concept that marks Erdogan’s agenda for the coming years. Conceived by nationalist Admiral Cem Gurdeniz, it is the “diplomacy of drills and warships” that pursues “the return of Turkey to the sea, the union between Anatolia and the eastern Mediterranean”. The goal is clear: to control the sea, to control energy resources and to impose its influence. Erdogan announced that it will no longer be called “Aegean”, but the “sea of islands”.
Ankara is on a collision course with Greece and Cyprus over who has the right to exploit the eastern Mediterranean’s oil and gas deposits. “They will understand that Turkey has the political, economic and military power to tear up immoral maps and imposed documents,” Erdogan said.
Turkey has problems with Cyprus, which, unlike the Turks, belongs to the European Union but not to NATO. Turkey, which invaded the island in 1974, remains the only country to recognize Turkish-occupied Northern Cyprus as a state. The Republic of Cyprus, which is majority-Greek Cypriot, wants to make deals with foreign energy companies, while Turkey, to the island’s north, wants economic rights in the waters that Cyprus considers its own.
While the new sultan extends his influence to Syria, Libya and the Caucasus, he also extends it within the Mediterranean. For pacifist Europe, that sea only exists when it comes to bringing in migrants.
President Erdogan, in an official visit to Paris on January 5, 2018, proceeded to launch this provocative phrase to the leaders of the French Council for Muslim worship: “The Muslims of France are under my protection”. Those were the first lines of an inquiry by the France’s Journal du Dimanche. Several reports sent to the Elysée Palace by the Directorate General for Internal Security (DGSI), which the newspaper was able to consult, reveal the scope, forms and objectives of a “real infiltration strategy” through networks managed by the Turkish embassy and the Turkish spy agency, the MIT. “They act mainly within the Turkish immigrant population, but also through Muslim organizations and also recently in local political life, through the support given to elected officials”.
“These actions have different objectives,” commented the journalist Mohamed Sifaoui.
“First, to improve the image of the Turkish regime in the diaspora and in French society. Then, to defend Erdogan’s image at all costs. And finally, of course, the spread of an Islamist vision of Islam”.
Sifaoui cites as an example the latest charter wanted by French President Emmanuel Macron, the charter of principles present in the law that strengthens “republican principles,” and is currently being examined by Parliament:
“It was not signed by the two Turkish federations, at the request of Ankara, because it is a charter that recalls the fundamental principles important for the Republic and which the Turkish regime clearly opposes… What the Turkish regime is doing is using its diaspora as a Trojan horse.”
The Brookings Institution wrote in 2019:
“According to the [French] ministry of interior, 151 imams have been sent by Turkey (which has undertaken a spate of religious outreach to Muslims across Europe over the past decade)…”
Just as Turkey controls 400 mosques out of 2,500 in France. It is Ahmet Ogras, apparently close to Erdogan, who for two years occupied the symbolic position of president of the French Council for Muslim Worship — as Turkish voters in France are generally more pro-Erdogan than in Turkey. During the presidential elections of 2014, Erdogan won 66% of the votes cast by Turkish citizens in France, compared to only 51.79% in Turkey. First- and second-generation Turkish immigrants in France continue to watch Turkish television, which is extremely submissive to Erdogan’s power. In French public schools, 180 teachers, directly appointed by Ankara, are responsible for teaching the Turkish language.
These efforts make up the great project of conquest by Erdogan the Islamizer.
Erdogan recently withdrew Turkey from an international treaty on preventing violence against women. With this decision, it seems that the president is determined to increase impunity around murder of women and “honor killings”, which common in Turkey.
In Erdogan’s Turkey, school textbooks have been rewritten to refer to Jews and Christians as gavur, “infidels,” according to a new study published by the Institute for Monitoring Peace and Cultural Tolerance in School Education (IMPACT-se). Earlier Turkish textbooks referred to the members of the two religions as the “peoples of the Book”. “School books have been used as a weapon in Erdogan’s attempts to Islamise Turkish society and to trace back to a nostalgic era of Turkish domination,” wrote IMPACT-se’s CEO, Marcus Sheff.
These are some of the findings of the study: Jihad was introduced in textbooks and transformed into the “new normal”, with martyrdom in battle glorified. Ethno-nationalist religious goals of neo-Ottomanism and pan-Turkism are taught. Therefore, Islam is described as a political issue, with science and technology used to further its goals. There is an emphasis on concepts such as “Turkish world domination” and “Turkish or Ottoman ideal of world order”. According to the curriculum, the “Turkish basin” extends from the Adriatic Sea to Central Asia. The curriculum adopts an anti-American stance, and shows sympathy for the motives of ISIS and al-Qaeda. Turkey takes anti-Armenian and pro-Azerbaijani positions. The identity and cultural needs of the Kurdish minority continue to be largely neglected. The pogroms of 1955 against the Greek community in Istanbul are ignored.
At schools, during the term of Erdogan, maps showing Turkish power have appeared. Reference is made to the “Turkish heritage from the Adriatic Sea to the Great Wall of China”: “Turkish cultural artifacts can be seen in a vast region, starting with the countries of Central and East Asia, such as China and Mongolia, and extends to Herzegovina and Hungary…”
“We are a large family of 300 million people from the Adriatic to the Great Wall of China,” Erdogan said in a speech from Moldova.
Europe, the US, NATO and the Free World might start worrying. Erdogan seems aiming to be the new Islamist wolf in sheep’s clothing.
Tyler Durden
Mon, 03/29/2021 – 02:00 - In Quest Of A Multipolar Economic World Order
In Quest Of A Multipolar Economic World Order
Professor Michael Hudson and Pepe Escobar discuss the emerging economic world order which they define not so much as a conflict between nations, but a rivalry between two competing models of the economy.
The finance capital driven model of the West with a domination of the FIRE sector, versus the mixed economy model represented by China and Russia which seeks to rein in rent seeking, combined with public banking and state funded infrastructure to support market compliant industrial development.
In Professor Hudson’s view, this model was advocated by classical economists, from Mill, Ricardo, to Henry George; and is largely responsible for the West’s past successes.
Transcript via The Saker (emphasis ours)
Ibrahima: [00:00:00] Good morning or good evening, depending on where you are located and welcome to the Henry George School. My name is Ibrahima Drame and I’m the director of education. It’s a great honor to have you with us today for another joint webinar co-organized with the International Union for Land Value Taxation with two great thinkers, Professor Michael Hudson and Pepe Escobar to discuss the emerging economic world order.
I ‘d like to, thank Michael and Pepe for accepting to share their ideas with us my friend Alanna Hartzok co-founder of Earth Rights Institute, who will be moderating the session this morning. So, before I hand it over to Alana, I’d like to ask all attendees to keep muted until we open the Q&A session. And of course, in the meantime, you are free to use the chat and, please do so responsibly. So, Alanna, please go ahead and introduce our speakers.
Alanna: [00:00:55] Yes. Happy to do so I’m also an administrator for the International Union for Land Value Taxation, and we are on the web@theiu.org. I’m so delighted to have Michael Hudson and Pepe Escobar join us once again for “In Quest of a Multipolar World Order”.
Michael Hudson is an American economist and professor of economics at the university of Missouri, Kansas City and a researcher at the Levi Economics Institute at Bard college. He’s a former Wall Street analyst, political consultant, commentator, and journalist.
He’s also teaching at the University for Sustainability in Hong Kong. Michael was the author of J is for Junk Economics, Killing the Host, The Bubble and Beyond, Super Imperialism: the Economic Strategy of American Empire. And he has a new edition of that coming up now. Also, Trade Development and Foreign Debt ,and The Myth of Aid, and others.
Those books have been translated into Japanese, Chinese, German, Spanish, and Russian, and they are very popular in China right now, I might add.
Pepe Escobar, born in Brazil is a correspondent editor at large at Asia times and columnist for Consortium News and Strategic Culture, Moscow. He has extensively covered Pakistan, Afghanistan, Central Asia, China, Iran, Iraq and the wider Middle East Pepe is the author of Globalistan: How the Globalized World is Dissolving into Liquid War, Red Zone Blues: a Snap of Bagdad during the Surge. He was contributing editor to the Empire and the Crescent. His last two books are Empire of Chaos and The Raging Twenties: Great Power Rivalry Meets Techno Feudalism. Pepe is also associated with the Paris based European Academy of geopolitics.
He does have a new book out, The Raging Twenties, which is a collection of his excellent essays and articles for the several publications, for which he writes. So, when he’s not on the road and covering the New Silk Road, he is living in Sao Paulo, Paris, and most recently in Bangkok. So welcome both of you.
I must say that, for the chat, if you have questions, viewers, listeners, please ask your questions in the chat. And then we will ask them at the end of the conversation between Pepe and Michael. Thank you. Go right ahead.
* * *
Pepe Escobar: [00:03:38] Michael you want to start?
Michael Hudson: [00:03:41] Oh no, I don’t know what to talk about.
Pepe Escobar: [00:03:44] Come on now you should start. OK, why don’t you start with your last revised chapter for Super Imperialism.
Michael Hudson: [00:03:51] All right. 50 years ago, I wrote Super Imperialism about how America dominates the world financially, and gets a free ride.
I wrote it, right after America went off gold in 1971, when the Vietnam war – which was responsible for the entire balance-of-payments deficit – forced the country to go off gold. And everybody at that time worried the dollar was going to go down. There’d be hyperinflation. But what happened was something entirely different.
Once there was no gold to settle U.S. balance-of-payments deficits, America strong armed its allies to invest in US Treasury bonds, because central banks don’t buy companies. They don’t buy raw materials. All they could buy is other government bonds. So, all of a sudden, the only thing that other people could buy with all the dollars coming in were US Treasury securities. The securities they bought essentially were to finance yet more war making and the balance-of-payments deficit from war and the 800 military bases America has around the world.
The largest customer – I think we discussed this before – was the Defense Department and the CIA. They looked at it as a how-to-do-it book. That was 50 years ago. What I’ve done is not only re-edit the book and add more information that’s come out, but I’ve summarized how the last 50 years has transformed the world. It’s a new kind of imperialism. There was still a view, 50 years ago, that imperialism was purely economic, in the sense that there’s still a rivalry, for instance, between America and China, or America and Europe and other countries. But I think the world has changed so much in the last 50 years that what we have now is not really so much a conflict between America and China, or America and Russia, but between a financialized economy, run by financial planners allocating resources and government spending and money creation, and an economy run by governments democratic or less democratic, but certainly a mixed economy.
Everything that made industrial capitalism rich, everything that made America so strong on the 19th century, through its protective tariffs, through its public infrastructure investment all the way down through world war two and the aftermath, was that we had a mixed economy in America. Europe also had a mixed economy, and in fact, every economy since Babylon has had a mixed economy.
But in America you’ve had something entirely different since 1980. Something that was not foreseen by anybody, because it seemed to be so disruptive: namely, the financial sector saying, “We need liberty – for ourselves, from government.” By “liberty” they meant taking planning and subsidy, economic and tax policy, out of the hands of government and put into the hands of Wall Street. The result was libertarianism as a “free market.” In the form of a centralized economy that is concentrated in the hands of the financial centers – Wall Street, the City of London, the Paris Bourse. What you’re having today is an attempt by the financial sector to take on the role that the landlord class had in Europe, from feudal times through the 19th century. It’s a kind of resurgence of feudalism.
If you look at the last 200 years of economic theory from Adam Smith and Marx, onward, everybody expected a mixed economy to become more and more productive, and to free itself from the landlords – and also to free itself from banking. The expectation was to make land a public utility, the tax base, and to make finance basically something public. Government would decide who gets the funding. hus, the idea of finance in the public sector was going to be pretty much what it is in China: You create a bank credit in order to finance capital investment in factories. It means the production of machinery, agricultural modernization, transport infrastructure of high-speed trains, ports and all of that.
But in the United States and England, you have finance becoming something completely different. Banks don’t lend money to build factories. They don’t create money to make means of production. They make money to take over existing assets. Some 80% of bank loans are mortgage loans to transfer the ownership of real estate.
But of course, that’s what created a middle class in the United States. The middle class was able to buy its own housing. It didn’t have to pay rent to landlords or absentee owners, or to warlords and their descendants as in England and Europe. They could buy their own homes. What nobody realized is that if you borrowed the money to take a mortgage, there’s still an economic rental value. Most of it is no longer paid to the landlords. It’s paid to the banks. And so in America and Europe, the banks now play the role that landlords played a hundred years ago.
Just as landlords are trying to do everything they could through the House of Lords in England and the upper houses of government in Europe, they’re trying to block any kind of democratic government. The fight really is against government that would do anything that is not controlled by the 1%, and by the banks. Essentially, the merger between Finance, Insurance and Real Estate – the FIRE sector. So, you have a relapse of capitalism in the West back into feudalism, but feudalism with a financialized twist much more than in medieval times.
The fight against China, the fear of China is that you can’t do to China what you did to Russia. America would love for there to be a Yeltsin figure in China to say, let’s just give all of the railroads that we’ve built, the high-speed rail, let’s give all the factories to individuals and let them run everything. Then Americans will lend them the money or buy them out and thus control them financially. China’s not letting that happen. And Russia stopped that from happening. The fury in the West is that the American financial system is unable to take over foreign resources and foreign agriculture. It is left only with military means of grabbing them, as you are seeing in the Near East, and you’re seeing in Ukraine right now.
Pepe Escobar: [00:10:40] Well, as an introduction, Michael that was perfect, because now, now we have the overall framework, especially geo-economic and historically, at least for the past 70 years. Let’s put it this way.
I have a series of questions for you. I was saving one of these for the end, but I think I should start really the Metallica way. Let’s go heavy metal for a start, right? So considering what you describe as a new kind of imperialism, and the fact that this sort of extended free lunch cannot apply anymore because of sovereigns around the world, especially Russia in China. I tried to formulate the idea that there are only three real sovereign powers on the planet, apart from the hegemon: Russia, China and Iran. These three, which happened to be the main hub and the main focus of not only of the New Silk Road but of the Eurasia integration process, are actively working for some sort of change of the rules that predominated for the past 70 years.
So my first question to you would be, do you see any realistic possibility of a Bretton Woods 2.0, which would imply the end of dollar hegemony as we know it? These petrodollar recyclings, on and on and on, with the very important presence of that oily hacienda in Saudi Arabia. And do you think this is possible considering that president Putin himself only a few days ago reiterated once again that the US is no longer agreement-capable. That destroys already the possibility of the emergence of the new rules of the game, but do you think this is still realistically possible?
Michael Hudson: [00:12:47] I certainly do not see any repetition of a Bretton Woods because as I described in Super Imperialism, Bretton Woods was designed to make American control over Britain over Europe total. Bretton Woods was a US-centered system to prevent England from maintaining its empire. That was okay. It also was to prevent France from maintaining its empire, and for America to take over the Sterling Area. The World Bank was to prevent other countries from becoming independent and feeding themselves, to make sure that they supported plantation agriculture, not land reform. The one single fight of the World Bank was to prevent land reform and to make sure that America and other foreign investors would take over the agriculture of these countries.
Very often people think of capitalism, certainly in the sense that Marx described in Volume One, as being limited to the exploitation of wage labor by employers. But capitalism also is an appropriation of the land rent, the agricultural rent, the natural-resource rent, the oil and mineral rent. The idea of Bretton Woods was to make sure that other countries could not impose capital controls to prevent American finance coming in and appropriating their resources. The aim was to make the loans to governments so that they would not create their own money to promote their own social development, but would have to borrow from the World Bank and the IMF. That essentially meant borrowing from the Pentagon and the State Department in U S dollars. They would dollarize their economies and the economic surplus would all be sucked abroad. The economic rents from oil, agriculture and mining would all be sucked into the United States.
That kind of Bretton Woods cannot be done again. Since Bretton Woods was an idea of centralizing the world’s economic surplus in a single country, the United States, no, that can never be done again.
What is happening? You mentioned the world of a free lunch That’s was the theme of my Super Imperialism: When America issues dollars, and these end up in central banks, what can these banks do with them? All they really can do is lend them back to the United States Government. So America got a financial free lunch. It can spend and spend on its military, or bump up corporate takeovers of other countries. The dollars have gone out, but foreign countries can’t cash them in for gold. They have nothing to cash them into. All they can do is finance the U S budget deficit by buying more and more Treasury IOUs. These are the liabilities side of the balance sheet of foreign military bases and related operations.
What’s is ironic now is what has happened in the last few years in the fight against Russia and China. America has killed the free lunch. It said, okay, now we’re going to have sanctions against Russia and China. We’re going to grab whatever money you have in foreign banks, like we grabbed Venezuela’s money. We’re going to excommunicate you from the SWIFT bank clearing system. So, you can’t use banking. We’re going to put sanctions against banks that deal with you.
So Russia and China have seen that they can’t deal with dollars anymore, because the United States just unilaterally rejected their use by any country that does not follow its military and financial diplomacy. If countries do have dollars as reserves and lend them back to the United States, it’s going to spend them on building more military bases around Russia and China, to make them waste their money on military defense spending. So, America itself has ended the free lunch, by the way in which it’s fighting against China and Russia.
And now Russia and China, as you pointed out, are de-dollarizing. They’re trading in each other’s currency. They’re doing the opposite of what Bretton Woods tried to create. They’re inspiring monetary independence from the United States. Bretton Woods sponsors dependence on the United States, a centralized system dependent ultimately on Wall Street financial planners. What China and Russia are trying to create is an economy that’s not run by the financial sector, but run by, industrial and economic engineering principles.
At issue is what kind of an economy we need in order to raise living standards and, wages and self-sufficiency and preserve the environment. What is needed for the ideal world that we want? Well, for starters you’re going to need a lot of infrastructure. In America and Britain, infrastructure has been privatized. It has to make a profit. And railroads or electric utilities, as you’ve just seen in Texas, are natural monopolies. For 5,000 years, infrastructure in Europe, the Near East and Asia was kept in the public domain. If you give it to private owners, they’ll charge a monopoly rent.
China’s idea is to provide the educational system freely, and let everybody try to get an education. In America, to get an education you have to go into debt for between $50,000 and $200,000. Most of whatever you make is going to be paid the creditor. But in China, if you give free education, the money that students earn will be spent into the economy, buying the goods and services that they produce. So the economy will be expanding, not shrinking, not being sucked up into the banks that are financing the education. The same avoidance of privatized financialized or monopolized rent-seeking applies to the railroads, and also to healthcare.
If you provide healthcare freely then employers do not have to pay for it. In the United States, if companies and their employees have to pay for healthcare, this means that employees have to be paid a much higher wage in order to afford the healthcare. They also have to be paid more in order to afford the privatized transportation that gets them work, or auto loans in order to drive to work. Such costs are free or at least subsidized in other countries. Their governments can create their own credit. But in the United States and Europe, governments feel that they have to borrow from the wealthy and pay interest. China’s government doesn’t need to borrow from a wealthy bondholding class. It can simply print the money. That’s Modern Monetary Theory. As Donald Trump has explained in the United States, we can print whatever we want. Dick Cheney said that deficits don’t matter, because we can just print what we need to invade Iraq or bomb Libya. And of course, Stephanie Kelton and my other colleagues in MMT at Kansas City for many years have been saying that.
The banks fear this because they see that Modern Monetary Theory no longer gives them control. They want the rich One Percent to be able to have a choke point on the economy, so that that people cannot survive without borrowing and paying interest. They want to control the choke points to extract economic rent. So you have the West turning into a rent-extractive economy, a rent-seeking economy. The ideal of Russia, China, and other countries is that not only of Mar, but also of Adam Smith, John Stuart Mill and even Ricardo in the sense that the aim of classical economics was to free economies from economic rent. The American economy is all about extracting rent through the real estate sector, the financial sector, the health insurance sector, monopolies and the infrastructure sector.
The US economy has been Thatcherized and Reaganized. The result is a fight of rentier economic systems against China and Russia. So it’s not simply a fight between who makes the best computer chips and the best iPhones. It’s over whether we are going to have a fallback of civilization back into feudalism, back into control by a narrow class at the top of the economy – the 1% – or are we going to have democratic industrialization? That used to be called socialism, but it also was called capitalism. Industrial capitalism was evolving toward socialism. It was socialized medicine, socialized infrastructure, socialized schooling. So, the fight against socialism is also a fight against what made industrial capitalism so successful in the United States and Germany.
What you’re seeing now is a fight for what direction civilization will follow. You can’t have a Bretton Woods for a single worldwide organization, because the United States would never join what it can’t control. The United States accuses a country trying to make its labor force prosperous, educated and healthy instead of sick with shorter lifespans of being communist or socialist. That means independent of the U.S. financialized “Free World” austerity economics.
Pepe Escobar: [00:21:40] Well, you put it very starkly. The opposition between two completely different systems, what the Chinese are proposing, including, from productive capitalism to trade and investment all across Eurasia and beyond, including Africa and parts of Latin America as well. Recognizing the rentier obsession of the 0.01% that controls the U S financial system, in terms of facts on the ground: Are we going slowly but surely and ominously toward an absolute divorce of a system based on rentier ultra-financialization, which is the American system, not productive capitalism at all?
I was going through a small list of what the U S exports. It’s not long, as you know. Agricultural products, always privileging US farmers. Hollywood? We are all hostages of Hollywood all over the world. Pop culture? That’s not the pop culture that used to be absolutely impregnable and omniscient during the sixties, the seventies, during the Madonna, Michael Jackson era and in the eighties? Infotech? And that’s where a big bet comes in. This is maybe the most important American export at the moment, because American big tech controls social networks all over the planet.
Big pharma? Now we see the power of big pharma with the whole COVID operations, right? But Boeing prefers to invest in financial engineering instead of building decent products. Right? So, in terms of being a major superpower, the hyper power, that’s not much. Obviously, buyers all over the world already noticed that. So, what is China proposing in terms of the New Silk Road? It is a foreign policy strategy, a trade investment and sustainable development strategy applied not only to the whole of Eurasia, but beyond Eurasia to grow a great deal of the global South. That’s why we have global South partners to the New Silk Road. 130 and counting as we speak. Right?
So, the dichotomy could not be clearer. What will the 0.0 0.1% do? They don’t have anything seductive to sell. To all those nations in the global South to start with; the new version of the non-aligned movement, the countries that are already part of New Silk Road projects. We could see this by the end of last year when the China European union agreement was more or less sealed. It’s probably going to be sealed in 2021 for good.
At the same time, we had the Regional, Economic and Comprehensive Partnership at the ASEAN 10, my neighbors here, the Association of South East Asian Nations, China, Japan, South Korea, Australia, and New Zealand. So, when you have the China -EU deal, and when you have R C E P, you have China as the number one trade partner on the planet, no competition whatsoever.
Every one of these players wants to do business with China. They’re privileging doing business with China to doing business with US, especially with a country that once again, according to President Putin is non-agreement-capable. So, Michael, what is your key economic view of the next steps? Are we going toward the divorce of the American financialization system and the Eurasia-and-beyond integration system?
Michael Hudson: [00:25:51] Well, you you’ve made the whole point clear. There is a basic incompatibility between a rentier society controlled by the finance and real estate interests – and military interests – and an industrial democracy. For industry in England and Europe in the 19th century, the fight for democratic reform was to increase the role of the House of Commons against the House of Lords in England and other lower housse in Europe was a fight to get labor on the side of industry to get rid of the landlord class. And it was expected that once you had capitalism free of the landlord class, free of something that wasn’t really industrial capitalism at all (it was a carry-over from feudalism), you wouldn’t have this overhead of the idle 1%, only consuming resources and going to war.
World War I changed all that. Already in the late 19th century the landlords and the banks fought back. They fought back largely through the Austrian School of individualism and the English marginalists, and they euphemized it as free markets. That slogan meant giving power to the monopolists, to the oppressors, to violence. A free market was where armies can come in, take over your country, impose a client dictatorship like Pinochet in Chile or the neo-Nazis in Ukraine. Americans call that a free market. The Free World was a world centrally planned by the American military and finance. So, it’s Orwellian double-think. The dynamic of this world is shrinking because it’s polarizing. You’ve seen with the COVID pandemic in the United States, the economy has polarized much more sharply between the 1%, the 10% and the rest of the economy.
Well, as opposed to that, you have economies that are not run by a rentier class, and that do not have a banking class and landlord class controlling the economy. The kind of arrangement that you had in Germany in the late 19th century: government, industry and labor coordinated. The question was how to provide the financing for industry so that banks can provide not only industrial capital formation, but public funding to build infrastructure and uplift the population.
China is doing just what made America rich in the 19th century, and what made Germany rich. It’s the same logic of industrial engineering. This plan is based on economic expansion, environmental preservation and economic balance instead of concentration, so this is going to be a growing economy. So, you’re having a growing economy outside of the United States and a shrinking economy in the States and its satellites in Europe.
Europe had a choice: Either it could shrink and be an American satellite economy, or it could join the growth. Europe has decided unanimously to forego growth and become a set of client oligarchies and kleptocracies. It is willing to let its financial sector take over just as in America. That’s a “free market,” because I’m told by American officials that they can just buy the European politicians, they’re bribable. Being up for sale is what a free political market means. That’s why when President Putin says that America and Europe are not agreement-capable, it means they’re just in it for the money. There’s no ideology there. There is no idea of overall social benefit. The system is based on how to get rich, and you can get rich by being bribed. That’s why you go into politics. As you can tell in America with the Supreme Court’s Citizens United ruling saying that politics can be personally financed.
So, you’re having two incompatible systems. They’re on different trajectories. If you have a system that is shrinking like the West and growing in the East, you have resentment. People who obtain their wealth in crooked ways, or without working, by inheritance or by crime, by exploitation, they will fight like anything to keep that. People who actually create wealth – labor and capital – they’re not willing to fight. They just want to be creative. So you have a destructive military force in the West, and basically a productive economic growth force in Eurasia. The clash now is occurring largely in Ukraine. You’re having the United States back the neo-Nazis.
Pepe Escobar: [00:30:40] The old Nazi movement!
Michael Hudson: [00:30:41] Yes. It’s the same swastika carrying group that threatened Russia in World War II. This is like waving a red flag before a bull. Putin continues to remind the Russians of what happened with the 22 million that died, in World War II. He said that Russia was not going to let it happen again.
You can be certain that Russia is not going to be sucked into invading Ukraine. The United States has its military advisors that the Vineyard of the Saker has a very good report on. America’s trying to needle Russia into fighting back against the terrorist groups, but Russia has no desire at all to do that. There’s nothing that Russia has to gain by taking it over. It’s essentially a bankrupt country.
The United States is trying to provoke a response so that it can accuse Russia of attacking the West. The result will probably be that Russia will simply provide arms to the Eastern Ukrainians to fight back the invasion. You’re going to have a wasteland in Western Ukraine and Poland. This wasteland may be the new buffer state between Europe and Russia. Already you have maybe 10% of Ukrainians having moved to Russia and the East, the other 10% are now plumbers in England and Europe. They’re in flight, and they’re beginning to look like Latvia and other neoliberalized countries. If you want to see their future, look at Latvia, Estonia and Greece. That’s the American plan. Essentially, an emigration of skilled labor, a sharp reduction of living standards, a 20% decline in population. Although it may appear to have more income, all this income and GDP is essentially interest collection and rents paid to the FIRE sector – as if these payments were for “real product.”
All the American GDP growth is essentially payment to the banks, to the landlords and the monopolists. The population and employees are not sharing in the GDP growth. It’s concentrated at the top. High finance is like the Roman Empire: “They make a desert, and call it growth.”
Rome was a predatory economy held by military force that ultimately collapsed, and America is on the same trajectory as Rome. And its managers know this. I have spoken to American policymakers and they say, “We’re going to be dead by then. It doesn’t matter if the West loses. I’m going to get rich. I’m going to buy a, farm in New Zealand and make a big bomb shelter there and live underground,” like a cave dweller. The financial time frame, the predatory rentier timeframe, is short-term. The Eurasian time frame is long-term. So you’ve got the short term burning what wealth it has, as opposed to the longer term building it up.
What you can see in the COVID bill that President Biden just got passed in the Senate. They call it a stimulus bill, but if you’re starving, if you haven’t been able to pay your rent, if you’re six months behind in your rent and you get enough money to pay the landlord, at least one month back rent, that’s not a stimulus, that’s survival. And it’s a one-time payment. This kind of “stimulus” checks that America’s sending out are sent out every month in Germany and parts of Europe. The whole idea in Europe is, “Okay, you have a pandemic, you have business interrupted. We’re going to proclaim a pause: You don’t pay the rent, but the landlords are not going to pay the banks. And the banks are not going to be in arrears. We’re just going to have a pause so that when it’s all over and cure people, we’ll go back to normal.” Well, China and Russia are already pretty much there and where you are, in Thailand, already back to normal.
They don’t have an abnormal thing, but America has pushed anybody who’s renting or who’s bought a house on mortgage credit, or who has credit-card debt or personal debt or automobile debt – they’re way behind. These stimulus checks are just being used to pay the banks and the landlords not to not to buy more goods and services. All they’re trying to do is to get out of the hole that they’ve been dug into in the last 12 months. That’s not a stimulus. That’s a partial, desperation payment.
This problem never existed, in other civilizations. You have the whole tradition of the ancient Near East. That’s what my book “… and Forgive them their Debts” is all about. The whole idea is that when there is an economic interruption, you don’t leave people in debt. You wipe out the arrears that have mounted up. You simply wipe out the tax arrears, the rent arrears and other payment arrears.
So once the crisis is over, you can start from a normal position again. But there’s no normalization in America. You’re starting from a position, even more behind financially than when you went in. The foreign economies of China and Russia don’t have a backlog of arrears as a deficit. So, the West is beginning with 99% of its population deeper into debt to the 1%. That polarization between the 1% and the 99% doesn’t exist in China. And in Russia, Putin is trying to minimize it, given the legacy of the kleptocracy that the neoliberals put in. He’s still trying to deal with that, but you really have a difference in economic systems and the direction in which these systems are moving.
Pepe Escobar: [00:36:27] I’m really glad that you brought up Ukraine, Michael, because US foreign policy – even, before Trump, and now with the new Biden-Harris administration – basically boils down to sanctions, sanctions, sanctions – as we know, provocations, which is what they’re doing to Greece and certainly in Syria. They already did that with bombing a few days ago.
In the case of Ukraine and Donbass, it’s absolutely crazy, because NATO so-called strategists, when you talk to them in Brussels, they know very well that each state or whatever they weaponize and financialize to profit Kiev to mount some sort of offensive against the Donbass. Even if they would have like 300,000 soldiers, like 30,000 in Donbass. If the Russians see that this is going to get really heavy, if they intervene directly with their bombing, with their super missiles, they can finish this story in one day. And if they want, they could finish the whole story, including invading Ukraine in three days, like they did in 2008 with Georgia, and still keep the provocations loosely acted on by people from inside the Pentagon. So we have sanctions, we have nonstop provocations, and we have also a sort of fifth column, elements inside or at the top of government. I would love to have your personal analysis on the role of super Mario “Goldman-Sachs” Draghi, now in Italy, which is something I had been discussing with my Italian friends. There’s more or less a consensus among very well informed, independent Italian analysts that Draghi may be the perfect Trojan horse to accelerate the destruction of the Italian state. That will accelerate the globalist project of the European union, which is absolutely non-state centric. That is also part of the great reset. So, if you could briefly talk to us about the role of Super Mario at the moment.
Michael Hudson: [00:38:55] Well, Italy is a very good example to look at. When you have a country that needs infrastructure and public, social democratic spending, you need a government to create the credit. But when Americans – and specifically the University of Chicago free-market lobbyists – created the Eurozone financial system, their premise was that governments should not create money. Only banks should be allowed to do that, for the benefit of their stock and bond holders. So, no European governments can run a budget deficit large enough to cope with the coronavirus or with the problems that have been plaguing Italy for a decade. They can’t create their money to revive employment, to revive infrastructure or to revive the economy.
The European central bank only lends to other central banks. It’s created trillions of euros just to buy stocks and bonds, not to spend into the economy, not to hire labor, not to build infrastructure, but just to save the holders of the stocks and bonds from losing money from falling asset prices. That makes 1% or 5% of the population richer. So in practice, the function of the European Central Bank is to create money only for the purpose of saving the wealthiest 5% from losses on their stocks and bonds.
The cost of this limitation is to impoverish the economy and to basically make it looking like Greece, which was a dress rehearsal for how the Eurozone was going to reduce Europe to debt dependency. Under feudalism, everybody had to have access to the land by becoming a serf. Well now you’re in debt peonage, modern, finance capitalism’s version of serfdom.
So, Italy says, “We’re going to need government spending. We’re going to need to do in our way what China’s doing in its way, and what Russia is doing in its way. We’re going to have some kind of government program. We can’t just let the economy be impoverished simply because the University of Chicago has designed a plan for Europe to prevent the Euro from being a rival to the dollar. If there’s no European Central Bank to pump euros into the world economy, then only dollars will be left for central bank reserves.
The United States doesn’t ever want a rival. It wants satellites. That’s what it’s basically turned Europe into. I don’t see any response outside of Italy for an attempt to say they can’t be a part of this system and so should withdraw from the Eurozone. When I was in Greece years ago, we all thought it might join with Italy, Portugal and Ireland and say that the system wasn’t working. But everybody else said no, no, the Americans will just simply get us out of office one way or another. And in Italy, of course, if you look at what happened after World War II, the great threat was Italian communism. You had the Americans essentially say, “Well, we know the answer to communism. It’s fascism,” and you saw them buying politicians. They did every dirty trick in the book in order to fight any left wing group in Italy, just as they did in Yugoslavia, and just as they did in Greece. They wiped out the partisans, all the leading anti-Nazi groups from Greece to Italy to elsewhere. All of a sudden, they were all either assassinated or moved out of office – and replaced by the very people that America had been fighting against during World War II.
Well, now Italy is finally coming to terms with this and trying to fight back. You’re having what’s happening there, between Northern Italy and Southern Italy, the same splits as in other countries.
Pepe Escobar: [00:42:53] Yeah. Well, I’m going to bring up, perhaps an even more extreme case now Michael, which is the case of Brazil, which at the moment is in the middle of an absolutely out of this world mix of telenovela and Kabuki theater that even for most Brazilians, is absolutely incomprehensible, because it’s like a fragmentation bomb exploding over and over again, a Groundhog Day of fragmentation bombs.
In fact, it’s completely crazy. Lula is back in the picture as well. We still don’t know how the guys who run the show, the Brazilian military, are going to deal with him. I bring up this case because it’s happened in the past 48 hours. It has convulsed Brazil completely, and large parts of Latin America, because it is a telenovela with one cliffhanger after another, sometimes in a matter of minutes. But it encompasses all the basic themes of what really interests the 0.01%, which we can identify as a class war against labor, which is the system in Brazil since the coup against Dilma. A war against mixed economies, economic sovereignty, which is something that the masters of the universe of the 0.01% cannot wage against Russia in China. But that was very successfully waged against Brazil and implemented in Brazil. In fact, in a matter of two years they completely devastated the country in every possible sense, industrially, sociologically, you name it…
And of course, because the main objective is something that you keep stressing over and over again: unipolar rentier dominance. So, Brazil, I would say is the extreme case not only in the global South, but in planetary terms. Let’s say, the last frontier of the rentier economy is when you manage to capture a country that was slowly emerging as a leader in the global South, an economic leader. Don’t forget that a few years ago Brazil was the sixth largest economy in the world, and on the way to become the fifth. Now it’s the 12th, falling down nonstop and controlled by a mafia. That includes, not by accident, a Chicago boy Pinochetista minister Paulo Guedes, who is implementing in the 21st century something that was implemented in Chile in the seventies and in the eighties. They were successful. Apparently, at least so far, Brazil is so disorganized as a nation, so shattered so fragmented and atomized as a nation that basically it depends on the re-emergence of a single political leader
In this case it is Lula, to try to rebuild the nation from scratch. Even in a position where he cannot control the game, he can interfere in the game, which is what happened 24 hours ago when he gave a larger-than-life press conference, mixed with a re-presentation of himself as a statesman. He said, look, the whole thing is shattered, but there is some light at the end of the tunnel. But still, he cannot confront the real masters of the universe that have allowed this to happen in the first place.
So just to give an example to many of you who are not familiar with some details of the Brazilian case, it involves directly the Obama-Biden scheme or the Obama-Biden larger operation. When Biden was vice president in 2013, in May he visited Brazil for three days and he met with president Dilma. They discussed very touchy subjects, including the most important one: the absolutely enormous, pre-salt oil reserves. Obviously, the Americans wanted to be part of the whole thing, not by accident. You know what happened one week later: the start of the Brazilian color revolution, and this thing kept rolling and rolling and rolling.
We got to the coup against Dilma in 2016, we got to the carwash operation landing Lula in jail. And we got to the election of Bolsanaro. And now we are in a place where even if the military control the whole process, even Bolsanaro is becoming bad for business. But will he become bad for the rentier class business, for the 0.01% in the US that has all the connections in their new, large neo-colony in the tropics, which has enormous strategic value, not to mention unforeseen wealth resources? So, this is an extreme case, and I know that you follow Brazil relatively closely. So, your geo-economic and geopolitical input on the running telenovela I think would be priceless for all of us.
Michael Hudson: [00:48:50] Well, this problem goes back 60 years. In 1965 João Goulart, the former president of Brazil, came to New York and we met with each other. He explained to me how the U.S.-backed military got rid of him in 1964 because he wasn’t representing the banking class. He said that they built Brasilia, just in order to be apart from the big industrial cities and their constituencies. They wanted to prevent industry and the democracy and the population from controlling the government.
So, they built Brasilia. He said, “Maybe they’ll use it as an atom bomb site. It certainly doesn’t have economic value.” Well, fast forward, in 1982, after Mexico defaulted on its foreign debt in 1972, nobody would invest in Latin America. And by 1990, Brazil was paying 45% interest per year to borrow the dollars to be able to finance its deficit, which is mainly flight capital by the wealthy. Well, I think I’d mentioned before here, I was hired by Scudder Stevens and Clark to create the first Sovereign Debt bond fund. Brazil and also Argentina were paying 45%. Just imagine that. That’s a fortune every year. No American would buy it, no European would buy it. Who bought it? The Brazilians and the Argentineans bought it. They’re the government, they’re the central bankers. They’re the president’s family. They’re the 1% – the only people that would hold Brazil’s dollar debt. So when Brazil pays its foreign Yankee Dollar debt, it’s paying its own 1% who are holding it offshore, for instance in the Dutch West Indies where the fund was located for tax-avoidance purposes. They pretend to be American imperialists, but actually are local imperialists.
Toward the end of Lula’s rule the Brazilian Council of Economic Advisors brought Jamie Galbraith, Randy Wray and me down for a discussion. They were worried because Lula, in order to get elected, had to meet with the banks and agree to give them what they wanted. The banks told him “We can see that you have the power to be elected. We don’t want to have to fight you in dirty ways. We will let you be elected, but you’re going to have to support the policies, certainly the financial policies that we want.” Lula made a kind of a devil’s agreement with them because he didn’t want to be killed, and they were willing to do some good things.
So, he was sort of a Bernie Sanders type character. Okay, you have to go along with a really bad system in order to get something good done, because Brazil really needs something good done. Well, the fact is that the financial groups couldn’t take even the little bit he did, because one of the characteristics of financial wealth is to be addictive. It’s not like diminishing marginal utility. If you give more food to an employee or to a worker at the end of the meal, you’re satiated, you don’t want much more. If you give enough money, they buy a few luxuries and then, okay, they save it. But if you give more money to a billionaire they want even more, and they grow even more desperate. It’s like a cocaine addict. The Brazilian ruling class wanted it so desperately that they framed up and controlled the utterly corrupt judiciary. The judiciary in Brazil is almost as corrupt as it is in New York city
Pepe Escobar: More, even more.
Michael Hudson: They frame them up and they want totalitarian control. And that is what a free market is: Totalitarian control by the financial class. It’s freedom for the financial class to do what they want to the rest of the economy. That’s libertarianism. It’s a free market, it’s Austrian economics. It’s the right wing’s fight against government. It’s a fight against any government strong enough to resist the financial and real estate interests. Brazil is merely the most devastating example of this, because it takes such a racial turn there. Brazilians want to make a fortune tearing down the Amazon, cutting up the Amazon, selling the lumber to China, turning the Amazon into soya production to sell to China. But for that, you have to exterminate the indigenous population that wants to use the land to feed itself. So you see the kind of race war and ethnic war that you have, not to mention the war against the blacks in the Brazilian slums that Lula tried so much to overcome.
So you have a resumption of the ethnic war there. On Wall Street I had discussions with money managers back in 1990. They saw it as a lnog=term burden, and wondered whether that’s going to be a model for what’s happening in the United States with the ethnic war here.
Essentially, it’s a tragedy what’s happening in Brazil, but it’s pretty much what happened in Chile under Pinochet, which is why they have the Pinochetista and the Chicago boys that you mentioned.
Pepe Escobar: [00:54:07] Absolutely. Coming back to China, Michael, what we had a few days ago, they are still discussing it. It goes on until the 15th of March, the approval of the five-year plan, which is not actually the five-year plan. It’s actually three five-year plans in one, because they are already planning for 2035, which is something absolutely unimaginable anywhere in the West. Right? So, it’s a different strategy: productive investment, expansion of social welfare and solidifying it with technological improvements. I would say by 2025, China would be very close to the same infotech level of the US, which is part of the Made in China 2025 policy, which is fantastic. They stopped talking about it, but they are still implementing the technological drive in all those standard areas that they had codified a few years ago. And I found this notion particularly fascinating, because it is on one sense socialism with some Confucianist elements, but it’s also very Daoist. The dual development strategy, which is an inversion and expansion of domestic investment and consumption, balancing all the time with projects across Eurasia. Not only affiliated with the Belt and Road, with the New Silk Road, but all other projects as well. So, when you have a leadership that is capable of planning with this scope, amplitude, breadth and reach, compare that to the money managers in the West, whose planning goes not even quarterly in many cases, but just for 24 hours.
So our dichotomy between rentier capitalism, financialization, industrial capitalism or whatever we want to call it, and state planning with the view of social benefit, is even starker. I’m not saying that the Chinese system can be exported to the rest of the world, but I’m sure that all across the global South people are looking at Chinese policies, how they are planning long-term, how they are always fine tuning, and what they develop and discuss.
For instance, this week there were over 3000 recommendations coming from different counties and villages and regions and local leaders, et cetera. Some of them are incorporated into the five-year plan as well. So this, as you said in the beginning, is a frontal shock of two systems. Sooner or later we’re going to have the bulk of the global South, including nations that nowadays are still American vassals or satrapies or puppets or poodles. They’re going to see which way the wind was blowing. Right?
Michael Hudson: [00:57:27] Why can’t the Chinese system be exported to the West? That’s a good question. Let’s suppose how would you make American industry able to follow the same productive path that China did. Well, for one thing, the biggest element in workers budget today is housing: 40%. There was one way to get rid of the high housing prices that essentially are whatever a bank will lend. The banks lend essentially the economic rent. There’s a very simple way to keep housing prices down: Tax the land rent. Use the tax system not to tax labor, because that increases the cost of labor, and not tax industrial capital, but tax the land, the real estate and the banks.
Well, suppose you were to lower the price of housing in America from 40% to 10% like China. This is the big element in the cost-structure difference. Well, if people only had to pay 10% of their income for housing, then all the banks would go under, because 80% of the bank loans are mortgage loans.
The function of housing in a financialized economy is to force new buyers and renters into debt to the banks, so that the banks end up with all of the lend rent that the landlord class used to get. That’s their business plan. This is what’s preventing America from being like China.
What if America would try to develop a high-speed railroad like China? Well, then you need the right of way. You’d need to you have to have the railroads go in a straight line. As we’ve mentioned before, they need a right of way, which it doesn’t have because that would conflict with private property and most of the right of way is a very expensive real estate. So, you can’t have high-speed rail in the United States, like in China.
Suppose you would have a low-cost public education. well then, you get rid of the whole means of siphoning off labor’s income to pay for education loans. Suppose you had public healthcare, and prevent Americans from getting sick like they do in, China and Thailand, where, where you are. In that case the health insurance and pharmaceutical companies wouldn’t be able to make their interest and dividend payments. So, you could not have America adopt a China-type industrial program without what would be really a revolution against the legacy of monopoly of a private banking, of finance and all the fortunes that have been built up financially in the last 40 years, since 1980.
Pepe Escobar: [01:00:22] So, what’s going to happen in the short to mid-term in the US, Michael? We are seeing the corrosion of the whole system, not only externally in terms of foreign policy and the end of the free lunch, but internally with those 17 million plus deplorables being literally canceled from public debate, from the impoverishment of the middle classes, with over 50 million people in America, which are becoming literally poor. Obviously the American dream ended a few decades ago, but now that it’s not even a glimpse that there could be a renewal of the American dream. So we have a larva of civil war situation degrading on a daily basis. What’s the end game? What exactly does Wall Street, the American ruling class, the guys who have lunches at the Harvard club – what do they ultimately want?
Michael Hudson: [01:01:31] Well, what you call a disaster for the economy is a Bonanza for the 1%. This is a victory for finance. You look at it as a collapse of industrial capitalism. I look at it as the victory of rentier finance capitalism. You’re having probably 10 million Americans that are going to be thrown out of their apartments and their homes in June, when the moratorium on rents and mortgages ends. You’re going to have a vast increase in the homeless population. That will probably represent an increase in people who use the subways. Where else are they going to live? A large number of private capital firms have been created in the last year of wealth accumulation. They’re looking forward to great opportunities to pick up real estate at bargain prices, for the commercial real estate that’s broke, and all the buildings and restaurants that have to be sold because they can’t meet their mortgage payments or rents, all the houses that are going under. Private capital can come in and do what was done after the Obama evictions.
Private capital can do what Blackstone did. It can buy them out for pennies on the dollar. So they’re looking at their own 20-year plan. Their 20-year plan is to grab everything!
Pepe Escobar: [01:02:51] What’s going to happen with the surplus population Michael, we’re talking about tens of millions of people. It reminds me of those, the projection of those World Bank projections in the early 1980s, when the World Bank projected that the global economy could actually work with only 20% of the global population implying that 80% of the global population was expendable. Are we watching this happening in the West in the next few months and years?
Michael Hudson: [01:03:22] It’s being compressed into a very short time frame. I heard this from the Club of Rome back in the 1970s when I was with the United Nations UNITAR. Their idea was that the world had too much population and needed to cut it back. It was a giant austerity plan. That was what really spurred Liberation Theology. The Catholic Church saw that cutting the population meant vast birth control. At a Chase Manhattan meeting I talked to the former head of the World Bank, John McCloy, who was also the chairman of Chase Manhattan. I asked him what he thought about Robert McNamara and his population control. And he said, “He just wants to stuff it up women. He doesn’t care if they get sick.” McCloy added, “He’s not a Wall Street boy.” I could see that he was appalled by it, but I wouldn’t use his words for the record, because he used little more vulgar language for just where McNamara was trying to stuff up the population control.
Liberation theology was backed by the Catholic church advocating land reform to feed the population if we’re not going to cut it back. Well, of course the result was that America defined a free market as being when its Special Forces go in and shoot the nuns after raping them. They killed liberation theologists. They killed indigenous leaders. They recognized that you can’t have a free market Chicago-style without being able to kill everybody who disagrees with you and who thinks that the market is for the people, not for the 1%. In my talks with the Catholic Church, I mean, it’s sort of hilarious given my background, which is not exactly religious. But I was working very closely with them at that time, because they were the only ones with an economic plan for how you can avoid this population collapse. The wealthy elite only need a few people. This was before mechanization, already in the 1970s. So, there was this idea that there were too many poor people that don’t make enough money for the rich people. We’ve got to get rid of them.
Many liberals supported them. Bob Heilbroner at the New School criticized me for working with some Liberation Theologists. It was the Catholic Church that published my first book, and articles. So, what you’re seeing today is an almost cosmic inversion of everything that people wanted until about the last century. Every country wanted more population. The idea was that population was the source of an army. It was a workforce to produce more goods and services. But now in the West, a population is who you want to get rid of. All you need is an economy that only has a few people and the rich. China, Russia, and Asia want to use the population and essentially, how to enrich the population so we can all have a world of prosperity and leisure.
Pepe Escobar: [01:06:12] Absolutely. I’m glad that you brought up Russia and China, because they are not on board. They diplomatically made it very clear that they are not on board for the great reset. Herr Schwab’s absolutely ominous idea and concept, which is supported by the IMF, by the World Bank, by Prince Charles, by big multinational corporations, et cetera. It’s very crazy, because eugenicist ideas are at the heart of the great reset. We’re not only talking about that strange character, Bill Gates; it goes much deeper than that. It’s eugenicist ideas in terms of culling of population by all means necessary. So, we are back to the same scenario that you were discussing decades ago.
Alanna: [01:07:06] Michael, when you said importantly that we could get the cost of housing down from 40% of income in the United States, can you give more detail on what people can do?
Michael Hudson: [01:07:22] The problem is what we can do without a revolution. In the United States you have Ms. Pelosi and the Democrats in Congress having a new voting law that tries to prevent any third party from being developed in the United States. So there can only be one party, the duopoly between the Republicans and the Democrats. You can’t have a Green Party. That’s being essentially ruled out. You can’t have any political alternative and you cannot have a parliamentary system like you have in Europe’s representative voting. The only choice you have is what flavor of oligarchy you want. You can have a Republican white oligarchy, or a mixed identity politics Democratic party, but none of this identity can have to deal with wage-earners, debtors or renters. So there’s very little, that they can do. If you need housing, you don’t have an alternative. You rent or go into debt to a bank to outbid other people who are trying buy the house, and the house is worth however much a bank will lend.
The Federal Reserve has flooded the economy with such low-interest credit that banks are able to lend more and more against housing. There’s been a huge increase in mortgage refinancing here. People have been able to get through the pandemic by borrowing more money against houses whose market value is rising, because banks are lending so much more debt to equity. So, what people think is making them rich is the housing that’s going up in price. Well, it’s actually the debt that has been going up. They think that they’ve been getting rich, but they’ve been more and more having to go into debt as a condition to get housing, just as they have to go into debt as a condition for getting an education and getting a job, or to get a car to drive to the job, or just to break even and feed themselves.
So unless people have an idea that there is an alternative, they’re not going to be able to create a political movement to create one. And in the United States, if you study economics you’re only taught University of Chicago neoliberal mainstream economics. There’s no more history of economic thought, so you don’t read Adam Smith, John Stuart Mill or Marx. There’s no economic history. So, you don’t know what’s the fight against feudalism was all about. You don’t have an idea that there’s an alternative. As Margaret Thatcher said, There Is No Alternative.
Well, of course there’s an alternative, but if people don’t know that there’s an alternative, they’re going to fall for this line, that there’s no alternative to the “free market” controlled by the 1% – freedom only for the 1% and debt peonage for the 99%. Unless they know that, I don’t have much hope that the people here can do very much at all.
Alanna: [01:10:26] So Michael, what about one city that it’s desperate that could be educated, that there is an alternative with clarity about a land value tax system and a public bank. For instance, the city of Baltimore that desperately needs a new economy. Can you give us some hope that we could focus on a city level and begin building a template for how cities and like Sao Paulo where Pepe is born from the cities that desperately need change? Michael, can you give us some sort of template?
We know the federal government is hopeless for us now for we, the people. Texas is having a vote to form the Republic of Texas to secede to have a beginning conversation. There are other growing secessionist movements in the United States. Could we imagine that there could be an implosion away from centralized control to the us to a regional and city level. Michael, give us some hope.
Michael Hudson: [01:11:30] I can’t give you hope. I am all in favor of public banking and I’m on Ellen Brown’s board of directors for her group. However, supposing you had a public bank in Baltimore and the public bank said, we want to provide credit for Baltimore people to be able to afford homes. They would still have to out create enough credit and enough debt to outbid what commercial banks are lending other people that want to buy houses there. So, you can’t have an Island of efficiency and public banking in a system that basically is still financialized. The problem is systemic.
It goes to the courts. You talk about seceding. Then of course it’s possible. And people in Texas were talking about seceding in the 1840s when it was largely a German population. There were more publishers publishing German language books in Texas than there were English language books. But now, I think the way Texans think, if they were to succeed it is not going to be along the lines of public banking that you want . It would be a private bank owned by the oil companies that calls itself, a public bank. We’re in a world of Orwellian rhetoric.
What can the Americans do? They already have voted. We have democracy, they’ve voted for what they wanted to do. What did they vote for? They want shorter lifespans, lower wages, less education and less public services. Their choice is to get these things by a Democrat or by a Republican. But that’s the only choice they have. Other countries have a choice to emigrate, as the Ukrainians and the Greeks and Latvians have done. But I have no idea where Americans can emigrate to.
Alanna: [01:13:21] Perhaps they could emigrate to some of Bill Gates, who now owns more agricultural land. He’s a top agricultural landowner in the United States. So, there are plenty of vacant lots all over our cities. What about some direct land-rights movements? Michael, what about depositing the land rent in Baltimore in a public bank and generating a local based economy?
Michael Hudson: [01:13:45] I think that’s unlikely as long as the city is controlled by the landlord interests. Almost all cities are controlled by the landlord interest. This is what Thorstein Veblen wrote about in Absentee Ownership in 1923. As long as you have the system that already was pretty clear a century ago, it doesn’t help to build up a few vacant lots and say, okay, we’re not going to tax that, because pretty soon you’re going to have people selling out the vacant lots and they will be gentrified.
A hundred years ago you had communities that were founded by followers of Henry George. They had the idea that, just that you have, we’re going to collect the land rent. They’ve all now become bourgeois, gentrified yuppie communities.
It’s a fight of economic systems. It’s a systemic fight. You can’t fix it at the margin. The problem goes deep to the core.
Alanna: [01:14:40] Well, the city of Allentown, Pennsylvania voted in land rent to shift largely to land rent. That was a vote. Can the people not vote in an economic democracy once they have the understanding of how to do so. And the landlord population is after all the majority. The minority is that landlord ownership. Can we not have the majority vote in a land rent system?
Michael Hudson: [01:15:05] Good question. If you said, okay, we are now going to tax all of the land rent, the problem is that as of right now, most land rent is pledged to the banks as mortgage interest. The banks have lent money against the rent-of-location – the fact that some houses and some properties and homes are in a better location than others, near parks and schools. Suppose that all of a sudden the owners would have to pay the full land tax that you and Henry George’s followers want. How are they going to pay the banks? Are they going to pay the land rent on top of the mortgage interest, or are they going to default?
The reality is you would have massive defaults and foreclosures by the banks taking over the properties of families and cities that had collected the land rent for themselves. You can’t have the same rent paid to two different parties. You have the land rent either paid to the government or paid to the banks. If you pay it to the government, then you’ll take it away from the banks. And the banks will use American law to say that this is appropriation of property without compensation. You really would need a new constitution, and that would need a revolution. A revolution is a step function, a discontinuity. You cannot have a continuity to make a rational economic system pasted on to an irrational economic system at the margin. You have to have a revolution.
Alanna: [01:16:33] The template needs to be for a nonviolent revolution based on the Jubilee principles that you teach so well Michael, of debt cancellation and restore the land for the people.
Michael Hudson: [01:16:46] You may be non-violent. But the bankers and the landlords are not. One group will be non-violent and the other will be violent. Who’s going to win?
Alanna: [01:16:56] That’s where getting the military to understand the new system comes in.
Michael Hudson: [01:17:01] Well it’s true that much of the military did defect to Russia’s Communists in October 1917. But I’m not sure today’s military is like that. They’ll have special advisors, Blackwater or whatever that group was in Afghanistan. We don’t have as much military as we have the advisers that we’ve hired, or we’ll just bring our foreign legion in. We’ll bring ISIS and they’ll fight for the landlords.
Alanna: [01:17:31] Well, it’s the same thing globally. It’s the same thing of what this discussion is Pepe and Michael about “in quest of a multipolar world” the hegemon up against up against three rivals as Pepe points out Iran, China and Russia, trying to be sovereign. We are again at a violent point.
Michael Hudson: [01:17:56] Yep, absolutely.
Pepe Escobar: [01:17:58] Yep. I think people want to ask a few questions. So, before we move to the questions, I selected one particular sentence, which more or less encapsulates where we are at the moment geopolitically. I don’t know if you agree with me. So I’m, throwing this fragmentation bomb out. Zbig Brzezinski in the famous, The Grand Chessboard published in 1997. I think this sentence is more or less the definition of the empire of chaos in the modern era until now. So, what was Zbig saying? The three grand imperatives of Imperial geostrategy are:
To prevent collusion and maintain security dependence among the vassals. So a security dependence among vassals – so far, basically Germany and Japan, which are the key hubs in the Rimland and to control the heartland and isolate the Heartland. If America could control two key hubs in the Rimland they will get the job done, which is more or less what happened for decades, right?
Continuing with Zbig. Tributaries, pliant and protected. Then we can go all the way from Latin America to the Middle East, especially in Saudi Arabia, right? And to keep the barbarians from coming together. So when he wrote that in 1997, he meant the barbarians, obviously Eurasia, like the old rear Asia of the golden horde invading Kiev in the 13th century. But he meant essentially Russia and China. So, what do we have now? We have the three sovereigns getting together. Iran Russia and China. We have a strategic partnership between peer competitors, Russia and China, which was a Brzezinski and his acolytes’, supreme nightmare. The Americans need to prevent the emergence of a peer competitor in Eurasia.
Now they have a strategic partnership. So now, what that means is that Pax Americana in a nutshell is completely unraveling. That’s when we reached the possibility of a sort of Samson option by the 0.001%. They are little by little being expelled from Eurasia. So, this could create the conditions for an absolutely demented Dr. Strangelove kind of adventure, which even some generals in the US are already saying they are. These people are completely nuts. They are talking about the possibility of a nuclear war without advising the population of the United States and the rest of the world that the next war is going to be the last. So, this is where we are at the moment, I would say an incandescent crossroads, all of our history. And even if we look in real-politic terms some of the possibilities are beyond the ominous, right?
Michael Hudson: [01:21:21] Well, if you’re China or Russia, I think you’re saying that there was a kind of inversion of the direction of barbarism of the Golden Horde. Today, Europe is the barbarian trying to break into the Eurasian core. Think of what Brzezinski said about how the barbarians can prevent their own allies from working together in Europe. I think your point is quite right. If it’s an atomic war, and it will wipe out the world. As you know, I worked with Herman Kahn for many years. He said that there are going to be some survivors. I think that in Russia the other day President Putin said if there’s any missile of any kind coming in, it’s assumed to be atomic. And they’re going to retaliate in kind.
I can imagine Mr. Putin and Mr. Biden getting together and saying, “Look, I know that you’re trying to provoke us. We are going to respond militarily, but let’s not fight against each other. We have 20 atom bombs. We’ll take out England and London, Manchester and Frankfurt, but not Berlin because that’s East German; but Munich, Stuttgart, and certainly Brussels and Paris just to show you what can be done. You can try to use your defense to stop it, but let’s agree we’ll only knock out each other’s proxies. We won’t go to war with each other.”
I can imagine the Americans saying, “Well, that’s fine. No more Europe. So now we will be the leaders. We won’t have Europe to contend with anymore. We will just have ourselves. This will sort of stabilize things for the next 50 years. Europe will be devastated, and we can help rebuild it like we did after World War II. And this time, we’ll lock in our control even more. Russia and China can go their own way. And then, in 50 years, we’ll see whether there’s any kind of relation that we can have.”
I can see them making a deal like that. The Americans want war. The people that Biden has appointed have an emotional hatred of Russia. I’ve spoken to government people who are close to the Democratic Party, and they’ve told me that there’s a pathological emotional desire for war with Russia, largely stemming from the fact that the Tzars were anti-Semitic and there’s still the hatred about their ancestors: “Look what they did to my great-grandfather.” And so they’re willing to back the Nazis, back the anti-Semites in Ukraine. They’re willing to back today’s anti-Semites all over the world as long as they’re getting back at this emotional focus on a kind of post 19th-century economy.
I’ve met these people. Their emotion is one of hatred and anger. You can look at their face and see what they’ve become. This is really dangerous. They are crazy. And Putin is quite right. America has got its power by breaking contracts. It broke all of the contracts with the native Americans to take their land. It’s broken the Iranian contract. It broke most recently the Ukrainian Minsk agreement, and the JCP before. So what’s the point of making an agreement with any Americans, if they’re going to say, “Okay, now that we’ve got a compromise. You’ve given me and we’ve given. Now, let’s take that as a beginning point. We’re going to break that old agreement and we’re going to ask you for yet more.” They call that salami tactics. Slicing and slicing and slicing. So, I can see that essentially America telling Ukrainians, “Let’s you and Russia fight – to the last Ukrainian.”
And I think it would be Western Ukrainians, the people who used to be part of Poland.
Pepe Escobar: [01:25:00] And we, we call it, Bandera Land. Perfect. Okay.
Questions and Answers
Alanna: [01:25:06] Now David Spangler once said that the “role of the prophet is to preach the doom, to wake people up”. And that we’re certainly preaching, showing the doom right now. And the role of the priest is to show the new way, the new direction. So do we want to have another half hour or so for this? Can Pepe and Michael stay on because we do have some questions from those who’ve been listening. I see Ed Dodson’s hand is up, and then Tom Rossman, and then I’ll be looking at the chat questions.
Ed are you able to talk with us now and ask your question?
Ed Dodson: [01:25:46] Okay. As I’m listening to you, Michael, and not to you Pepe so much, but Michael’s gloom and doom, I keep thinking that the one opportunity the people of the world have is to go back to Proudhon and the whole concept of mutualism to create societies within societies. With all the positive components that have been raised, public banking and labor organizations, I just wonder. I know you have a relationship with Richard Wolf, Michael, in your conversations with him, he’s so positive about the socialism attached to the cooperative movement and places like Mondragon are these avenues. And Pepe you might want to comment on this, about countries other than the Western democracies. Is this an opportunity for people to come together under a common philosophy, a set of principles that would operate independent of the nation-state?
Michael Hudson: [01:26:57] There are many areas where a mutualism works. Farmer’s markets, distributors and small factories like in Mondragon. However, how are you going to have a mutual oil company? That’s very capital intensive. How will you have mutualism in a high-speed railway transport system? How will you have mutualism in building a system of foreign ports? Like what China’s doing with the belt and road extension.
Mutualism is very good when labor is the main element of all this. But once you have a strong capital element, and where it’s very capital intensive with not much labor, it’s very hard to see where the mutualism is. Suppose an oil company 10 oil producers making $10 million a year in profit. Are they going to just give each other a million dollars each? What about the rest of the economy? One mutual group can be cut off from another. In fact, when I went through the Basque country (I was brought over by the labor unions) some of the unions were complaining that Mondragon doesn’t want labor unions.
Yes, it’s a cooperative, but they don’t want a labor union. So, mutualism can only work as a particular sector of the economy. It can’t be the economy. Proudhon wrote a lot about compound interest. He said that debt is going to grow so large that it can’t be repaid. You’ll have to be able to deal with that. So you can’t really have a mutual banking based on compound interest and everybody getting deeper and deeper into debt. Proudhon-style also wanted to tax the land and Marx wrote a long discussion explaining why a Proudhon mutualism wouldn’t work. In The Poverty of Philosophy, a response to Proudhon’s Philosophy of Poverty, he pointed out what was progressive and predominant to a point, became unprogressive after a point.
Alanna: [01:28:49] Okay, thank you, Michael. I want to read this from Carl Sanchez in the chat. He says that the purpose of the federal government is to form a more perfect union. Do you think it’s possible to rally the reds and blues into a coalition of purples to reassert those government goals?
Michael Hudson: [01:29:17] Well, you already have them together we already have a purple. You have the blue Wall Street and the red oil industry and mining industry. You have both kinds of the rentier 1% all together in one happy purple rentier duopoly controlling the political system.
Alanna: [01:29:34] Well then, relevant to the impossible task. Walter wants to know what’s the new HR 1 law, Michael that you mentioned that prevents or will prevent third parties.
Michael Hudson: [01:29:43] I think it’s 700 pages. so I can’t go through the whole thing. But there’s a lot of discussion in today’s Internet about it. If you look at Naked Capitalism, the site run by Yves Smith, she has a citation of articles that explain why it’s aimed to prevent the green party or any other kind of reform party. The idea is to prevent any alternative to the hardline democratic pro-Wall Street, pro-pharmaceutical industry. Essentially you’re going to have Obamanomics with a sledgehammer, particularly against the Black and Hispanic populations.
Tom Rossman: [01:30:29] Great. Thanks Alanna. So your comments about the war reminded me of an Albert Einstein quote. He said, I do not know with what weapons world war three will be fought but world war four will be fought with sticks and stones. So, it kind of reminded me of that. And so, my question is you know, based on the fact that, you know, it’s pretty, pretty well established that narratives really drive people’s economic behavior.
What is the type of narrative that can kind of shift the Overton window in the direction that we all seem to want to go? And if there isn’t a narrative that could shift the Overton window, is the only alternative then revolution – potentially violent revolution.
Michael Hudson: [01:31:11] Well, my narrative is about how civilization has developed. I published the first volume of “… and Forgive them their Debts” to show how civilization took off, and narrates how the idea was to create resilience in an economy – how you would wipe out the debt, you would wipe out of the debt bondage, you’d restore free liberty to the people. That worked for thousands of years.
I’m just finishing now the second volume, The Collapse of Antiquity. That’s about how Greece and Rome, and hence subsequent Western civilization, made a complete break from the Near East. They didn’t cancel the debts. Western civilization was oligarchic from the beginning. There never was really a democracy here except for a very short revolution in the seventh and sixth centuries BC, catalyzed by the “tyrants.” What you think of as democracy, the rule by the people overthrowing the oligarchy, was called tyranny in Greece. In Rome it was called “seeking kingship,” because what did kings were able to do. Kings kept the oligarchs in place, just as the tyrants redistributed the land and cancelled the debts in Corinth and other Greek cities, and finally Solon did that in an Athens after Sparta did it . So if you see that our civilization doesn’t have to be this way, that Western civilization has taken a wrong turn – and it’s a rentier turn that earlier civilizations didn’t have – then you can see there is an alternative. And once you see there is an alternative, you have a narrative that can show the kind of future.
Well, Marx had one kind of alternative like that worked in the late 19th century. The classical economists had an alternative leading into Marxism. I’m now publishing my long lecture series in China on The Fight for Civilization: Rentier Capitalism, Industrial Capitalism or Socialism. I’m trying to show what is positive in China system and still needs to be done. There are plenty of alternatives, but the fact is that the West – as Pepe and I’ve described – are set on fighting against an alternative that would make other people prosperous. They fought against the Soviet Union in the Cold War. You have the ruling classes in America and Europe wanting to concentrate all the wealth in their own hand. They’re against the whole wave of democratic reform that the 19th century was all for. The 19th century was for a land tax. It was for public banking. It was all public infrastructure to lower the cost of doing business. This was taught in the business schools in America. But all that has been expurgated from economic history and from the history of social thought – into the memory hole, as George Orwell would say. So, you have to let people know that there’s been a whole suppressed history, not only of civilization but as recently as the 19th century concerning where civilization was going. There has been a counter-revolution. In America you have people saying anything that promotes democracy, anything that’s antiwar is a propaganda for Russia, because who’s trying to avoid war Russia. So, if you believe what Alanna believes and you want a peaceful world, then you’re pro-Putin.
Alanna: [01:34:33] David Lee has a question for Pepe. He says, what do you think are the possibilities that Lula can (A) be allowed to win an election in Brazil, and (B) return Brazil to the BRICS?
Pepe Escobar: [01:34:50] Wow. Assuming he would run and win an election, the first things he will do of course, is to get the back to BRICS. That is what Lula would do in terms of policy, because he believes in it. And because he was one of the main drivers of the BRICS union, but because Putin and (as I get from our connections in Moscow, in Beijing, they are dying for it to happen. Obviously, their ministry of foreign affairs cannot express this in public, especially the Chinese, because the Chinese are very reactive and very cautious in terms of emitting their opinions on internal policy, even if they’re their allies.
I’m trying to get some feedback from Russian analysts in the next few days about what happened in Brazil in this past few days, and to see how the Kremlin and the ministry of foreign affairs view the possibility of Lula being back in the game. But the most important thing is whether he will be allowed to be back in the game. Considering the Kabuki telenovela configuration moment that’s a major if. This would only happen if there is a deal cut in the shadows. Lula is very good at cutting deals. He’s a master negotiator, probably in terms of an international statesman, he’s the number one master negotiator in the world for the past two decades. But this is very, very complicated because it involves the military, who run the show in Brazil. It involves the Brazilian ruling class the 0. I would say the 0.00001% in Brazil. You have no idea in terms of an absolutely rapacious, ignorant, arrogant, and absolutely disgusting ruling class. I had the displeasure to meet these people when I still lived in Brazil years ago. So, if they think that Lula might be good for business, which means their own exploitation business, rentier business inside Brazil, allied and as subordinates to the masters of the universe in New York and the beltway, they would allow it.
But then, Lula will have to convince more than just these people. He’ll have to convince the military and he’ll have to convince the market – you know, this entity that rules Brazil and is reaping all the benefits of the destruction of Brazil. And the fourth component is the media. In Brazil that means the Globo network, which plays a role that in the US would be equivalent to all the major US networks, plus CNN, Fox and all that, but concentrated in only one media and buyer. This is very complicated because they have the same interest of the Brazilian ruling class. They have the same interests of the military, and they have their own monopolistic interests in terms of controlling the flow of public information to the mass of Brazilians. But now at least there is a counter movement, which is via social networks and the internet.
So they have been losing ground, but still, if you look at the 8:00 PM newscast in Brazil, every night people who are in the middle of the Amazon or in the deserts, in the Northeast, they are tuning to Globo and they get their news from Globo Open TV, not paid cable. So if Lula wins, wow, this is titanic. If he’s able to navigate all of these interests and prove to them that he is good for their business, this means that you have to make a lot of concessions, just like Michael explained to us in the beginning. He had to make concessions when he was first elected . And even with that, he managed to turn a little bit of the game around in Brazil, in terms of bringing 30 million people out of poverty. In terms of having a more decent minimum wage, you name it, and basic income for a lot of people in the middle of nowhere. So to have this back under negotiation, it is going to be much harder than it was in the early two thousands, right before Shock and Awe, by the way. It’s, crazy to remember that the first Lula government came to power two months before Shock and Awe, which we’re going to have the anniversary next week,. So, it’s complex. It’s extremely complicated to explain this to an international audience. The complexity of the game in Brazil is absolutely mind boggling. And the absolute majority of the Brazilians have no clue what’s going on because it’s one fragmentation bomb after another, like a semiotic free for all. It’s completely crazy, but if there’s only one person that could pull that off, that would be Lula.
Alanna: [01:40:10] Well praise be Lula. This is a question and a rather long comment that will draw out more on this “in quest of a multipolar world”, and it’s for both of you to respond because he mentioned both of you. This is from Zach for Pepe. What, what do you believe is the future of the Shanghai Cooperation Organization? Will it become stronger and work a closer Alliance between its member States, sort of like NATO, or it will keep being a loose association? And then, where is India going to orient to? He’s also curious about the Bretton Woods and how it was established, was it the brainchild and one or two economists, like Keynes? Was It designed by a genius? How are we going to relate to this Bretton Woods? Are we going to be able to break free? Are Russia and China clearly going to break free?
Michael Hudson: [01:41:08] That’s what the talk is about you know. I think the first discussion of the Shanghai Cooperation Organization in the Western media was an op-ed I did for the Financial Times of London. Nobody was mentioning it.
The idea was that it was only marginal, it’s going to go away. There was always a sense of denial in the West that the Shanghai Cooperation Organization could develop a different economic philosophy of development. And that’s what we’re really talking about. It’s not simply an organization of people wanting to help each other. It’s the way they’re trying to help each other. It’s a mode of development. It’s the idea that any rent-yielding resource – banking, land, natural resources and natural infrastructure monopolies – should be in the public domain to provided basic needs to everybody freely. That essentially means that the private sector won’t have to pay for services that should be available to everybody, at the minimum cost. If you privatize them as in the West, they’re going to be provided at a financialized maximum cost, including interest rates, dividends management fees, corporate manipulation for capital gains, and stock and bond buyback programs. It’s a whole different economic philosophy.
Well, there is no need for China or Russia or Iran to go to war to do this. They’re doing it. They can do it quite simply. They don’t need a revolution to do it, because they don’t have a vested interest fighting against them and killing them if they do it. If the West wants to resist this, and all the West can do is number one, kill its own leaders who want to do something like this. If they have a Latin American leader, if you have Venezuela trying to use this oil wealth for the public good, then you isolate and attack Venezuela. If you have a Honduran president who wants to distribute the land, you have a coup d’ etat and give it to the drug dealers to run. They’ll be pro-American. If you have anyone in the West who tries to do something productive, you marginalize them and prevent them. And if there’s a threat of China and Russia and Iran growing, then you try to do what Americans did to Russia in the 1920s. You will fight it militarily you at their borders, you fund color revolutions, so that they have to dissipate the wealth that they create in military overhead to match the military overhead of the United States. The dream today is to make Ukraine Russia’s Afghanistan.
Pepe Escobar: [01:43:53] Yeah, absolutely.
Michael Hudson: [01:43:55] Yeah. The difference is what gives China and Russia the advantage. Defense is only 10% as expensive as offense. America needs a huge offense, and it needs huge corruption. To be offensive, America has to corrupt European politics, corrupt the labor union, the corrupt the whole educational system, corrupt the media into junk media and junk economics.
And it has to have enormous profits for the military-industrial complex. That is America’s version of industrial capitalism. All China and Russia have to do is develop high-speed missiles, the defensive missiles to stop it. So they’re not being bled. It’s not going to be Russia’s Afghanistan. It’s America’s Afghanistan all over again.
Pepe Escobar: [01:44:47] I was just the one to compliment one minute what Michael said and answering the question as well, in terms of the importance of the Shanghai Cooperation Organization. It has changed so much in the past few years. I remember years ago, I used to mention the Shanghai Cooperation Organization to people in Brussels, the European Union or European commission. They were saying, “No way. It’s not important. It’s ridiculous. It’s a talk shop, blah, blah, blah, blah.” Years ago, in fact in the early 2000s, it was essentially Russia, China and four of the central Asian states against terrorism, against separatism. And then, little by little, they started to evolve. Now it’s also a trade and investment cooperation organization. I went to some of the round tables of the Shanghai Cooperation Organization, for instance, in the St Petersburg Economic Forum. There’s always a meeting of the SCO and it’s absolutely fascinating. You have Russians, Chinese and a lot of central Asians (not a single one Westerner) discussing trade deals. They are not only discussing terrorism, but also discussing the Islamic movement of Uzbekistan allied with the Taliban, that kind of things. They are discussing business. And now it’s even more important, because now with the expansion you have Russia, China, the Central Asians, and India and Pakistan as well. And sooner or later, not only as observers, but as full members, you’re going to have Turkey and Iran.
So, this means every single major player in the Eurasian arc, in the heartland in fact, is part of the Shanghai Cooperation Organization. To give a practical example, the solution for Afghanistan is being debated by them for years now. The Russian solution for Afghanistan was discussed with China and the other central Asians, especially Tajikistan and Uzbekistan, which are neighbors of Afghanistan.
They want an SCO-brokered Asian solution for the Afghan problem. So what the Americans are proposing –or the American plan B’s, or C’s with the same Zalmay Khalilzad – they know this thing’s never going to work. And they have a direct conversation with Afghanistan, because Afghanistan is an associate member of the SCO as well. So it makes total sense. We see them all converging. You have the original economic union, the Shanghai Cooperation Organization, the Belt and Road initiative, the Asian Infrastructure Investment Bank – everybody’s converging and following more or less the same path. Later, you’re going to have a total integration of these organizations working for a common purpose in terms of security, of course, but also especially in terms of business.
Michael Hudson: [01:47:57] So the question is, why are other people not discussing what you and I are discussing? Why are people only talking about this on the web? Nothing in The New York Times or other mainstream media.
Pepe Escobar: [01:48:06] Nothing Michael. You will never read something like this in the Washington Post or The New York Times. They don’t even know what the Shanghai Cooperation Organization is.
Alanna: [01:48:19] Well, there’s more questions and comments coming in on chat, and we’re not going to be able to handle now, but I’m thinking maybe I’ll just copy and paste what everybody’s asked, and we’ll have another session with all the questions may be a good idea.
Pepe Escobar: Fantastic I think that’s a very good idea Alanna.
Alanna: Okay, great and thank you both, this has been sponsored by the Henry George School of Social Science. Please go to their website. They’re doing a lot of online courses on land rents and the land rent problem. The International Union for Land Value Taxation, iu.org. Please also sign up for our newsletter and connect with people around the world. We’re looking for socializing the land rents.
We’re now starting a conversation with the public banking Institute with a focus on Baltimore, which is why I had those questions. So again, I’m going to copy everything from chat. And then we’ll talk about having a session that will start in with the questions. I think has been a great overview.
We know we’re at a dangerous point. We know that we, the people, have got to get it together and provide a really clear direction now to the world. We are the people who are really thinking and concerned and, in many ways, privileged. I think we’re going to need to get to the military and get to those kinds of power people, and get them to think in terms of who are they protecting?
What are they protecting? What side are they going to be on? Because clearly, we do need a nonviolent revolution, we’re at a dangerous point. So, thank you, Michael Hudson and Pepe Escobar. Thank you so very much all the best of both of you forever.
Pepe Escobar: [01:49:56] Thank you, Michael. Thanks a lot. Thanks everybody.
Ibrahima: [01:49:59] Thank you all very much. And we hope to see you again.
Pepe Escobar: [01:50:04] Absolutely.
Tyler Durden
Sun, 03/28/2021 – 23:50 - Baltimore City No Longer Prosecutes Prostitution, Drug Possessions
Baltimore City No Longer Prosecutes Prostitution, Drug Possessions
A little more than a year ago, right around the time the virus pandemic lockdowns began, Baltimore City State’s Attorney Marilyn Mosby halted prosecuting minor traffic violations, prostitution, drug possession, and other minor offenses, a move directed at preventing outbreaks of COVID-19 in regional jails, according to local news channel WBAL.
The easing of Baltimore’s policing resulted in a miracle: crime in nearly every category decreased, confirming what Mosby and some criminal justice experts argued for years: rough policing doesn’t work to prevent more violent crimes.
On Friday, Mosby held a press conference in her first public appearance since a lien for nonpayment of back taxes was placed on her home. She told reporters they could speak to her attorney about those issues. She went on to say putting people behind bars for petty offenses isn’t working:
“A year ago, we underwent an experiment in Baltimore… What we learned in that year, and it’s so incredibly exciting, is there’s no public safety value in prosecuting these low-level offenses. These low-level offenses were being, and have been, discriminately enforced against Black and Brown people.
“The era of ‘tough on crime’ prosecutors is over in Baltimore. We have to rebuild the community’s trust in the criminal justice system and that’s what we will do, so we can focus on violent crime.”
And with that success, she said, her “COVID policies will now become permanent. And America’s failed war on drugs and users across the metro area is “over.”
This is a complete shift in how the city handles crime. In the last 12 months, violent crime is down 20%, and property crime has fallen 36%. Homicides were a tad bit lower but remained some of the highest in the country on a per capita basis.
Mosby asked public health researchers at Johns Hopkins University to review the crime data over the last year. What they noticed was a dramatic reduction in calls to police concerning drugs and prostitution.
“Clearly, the data suggest there is no public safety value in prosecuting low-level offenses,” Mosby said at the news conference.
Hopkins researchers also found 1,431 people who had charges or warrants were immediately dismissed at the beginning of the pandemic. Only 5 out of 1,431, or .0003%, were rearrested.
Susan G. Sherman, a behavioral health professor at Johns Hopkins, told WaPo that data on repeat offenders with only five reentered the system is “pretty unbelievable.”
“In a world where drug decriminalization is happening around the country, the impact on the community is important,” Sherman said, and Mosby “really values having an understanding of these impacts.”
“When it comes to violent offenses, carjackings, murders, armed robberies, attempted murders, and drug distribution, we are still prosecuting you. The police will still arrest you. But on these low-level crimes, we are no longer using our limited resources on these low-level offenses,” Mosby said.
A year ago, Baltimore underwent a grand experiment on policing, and perhaps it’s working. Here’s a former police officer’s take on all of this:
“Crime is a symptom of the disease of our society. For years, we’ve asked the police to address this disease by locking people up. We merely addressed the symptom. Not the disease,” said retired Baltimore police major Mike Hillard, of Law Enforcement Action Partnership.
Mosby’s pandemic social experiment has so far resulted in possibly a new direction for the city. But whether the experiment in Baltimore can be replicated elsewhere remains to be seen. Other liberal cities have tried this and miserably failed, resulting in soaring crime all around.
San Fransico is one of those liberal cities that has defunded police and eased rules on petty crimes but has seen an explosion of all sorts of violent and non-violent crimes. Murders are up, people are quickly exiting the metro area, and as we come to find out more recently, businesses are leaving too.
Due to rampant shoplifting, nearly a dozen Bay Area Walgreens have closed up shop. The crime is so bad in the metro area that even TV reporters are being robbed.
As for Baltimore, it remains to be seen if crime in general will stay low given Mosby’s actions as pandemic restrictions are being lifted, warmer weather is ahead, and the opioid crisis in the city continues to rage on.
Tyler Durden
Sun, 03/28/2021 – 23:25 - Congress, In Five-Hour Hearing, Demands Tech CEOs Censor The Internet Even More Aggressively: Greenwald
Congress, In Five-Hour Hearing, Demands Tech CEOs Censor The Internet Even More Aggressively: Greenwald
Authored by Glenn Greenwald via greenwald.substack.com,
Over the course of five-plus hours on Thursday, a House Committee along with two subcommittees badgered three tech CEOs, repeatedly demanding that they censor more political content from their platforms and vowing legislative retaliation if they fail to comply. The hearing — convened by the House Energy and Commerce Committee’s Chair Rep. Frank Pallone, Jr. (D-NJ), and the two Chairs of its Subcommittees, Mike Doyle (D-PA) and Jan Schakowsky (D-IL) — was one of the most stunning displays of the growing authoritarian effort in Congress to commandeer the control which these companies wield over political discourse for their own political interests and purposes.
Facebook CEO Mark Zuckerberg, Twitter CEO Jack Dorsey, and Google/Alphabet CEO Sundar Pichai testify before the House Energy and Commerce Committee, Mar. 25, 2021 As I noted when I reported last month on the scheduling of this hearing, this was “the third time in less than five months that the U.S. Congress has summoned the CEOs of social media companies to appear before them with the explicit intent to pressure and coerce them to censor more content from their platforms.” The bulk of Thursday’s lengthy hearing consisted of one Democratic member after the next complaining that Facebook CEO Mark Zuckerberg, Google/Alphabet CEO Sundar Pichai and Twitter CEO Jack Dorsey have failed in their duties to censor political voices and ideological content that these elected officials regard as adversarial or harmful, accompanied by threats that legislative punishment (including possible revocation of Section 230 immunity) is imminent in order to force compliance (Section 230 is the provision of the 1996 Communications Decency Act that shields internet companies from liability for content posted by their users).
Republican members largely confined their grievances to the opposite concern: that these social media giants were excessively silencing conservative voices in order to promote a liberal political agenda (that complaint is only partially true: a good amount of online censorship, like growing law enforcement domestic monitoring generally, focuses on all anti-establishment ideologies, not just the right-wing variant). This editorial censoring, many Republicans insisted, rendered the tech companies’ Section 230 immunity obsolete, since they are now acting as publishers rather than mere neutral transmitters of information. Some Republicans did join with Democrats in demanding greater censorship, though typically in the name of protecting children from mental health disorders and predators rather than ideological conformity.
As they have done in prior hearings, both Zuckerberg and Pichai spoke like the super-scripted, programmed automatons that they are, eager to please their Congressional overseers (though they did periodically issue what should have been unnecessary warnings that excessive “content moderation” can cripple free political discourse). Dorsey, by contrast, seemed at the end of his line of patience and tolerance for vapid, moronic censorship demands, and — sitting in a kitchen in front of a pile of plates and glasses — he, refreshingly, barely bothered to hide that indifference. At one point, he flatly stated in response to demands that Twitter do more to remove “disinformation”: “I don’t think we should be the arbiters of truth and I don’t think the government should be either.”
Zuckerberg in particular has minimal capacity to communicate the way human beings naturally do. The Facebook CEO was obviously instructed by a team of public speaking consultants that it is customary to address members of the Committee as “Congressman” or “Congresswoman.” He thus began literally every answer he gave — even in rapid back and forth questions — with that word. He just refused to move his mouth without doing that — for five hours (though, in fairness, the questioning of Zuckerberg was often absurd and unreasonable). His brain permits no discretion to deviate from his script no matter how appropriate. For every question directed to him, he paused for several seconds, had his internal algorithms search for the relevant place in the metaphorical cassette inserted in a hidden box in his back, uttered the word “Congressman” or “Congresswoman,” stopped for several more seconds to search for the next applicable spot in the spine-cassette, and then proceeded unblinkingly to recite the words slowly transmitted into his neurons. One could practically see the gears in his head painfully churning as the cassette rewound or fast-forwarded. This tortuous ritual likely consumed roughly thirty percent of the hearing time. I’ve never seen members of Congress from across the ideological spectrum so united as they were by visceral contempt for Zuckerberg’s non-human comportment:
But it is vital not to lose sight of how truly despotic hearings like this are. It is easy to overlook because we have become so accustomed to political leaders successfully demanding that social media companies censor the internet in accordance with their whims. Recall that Parler, at the time it was the most-downloaded app in the country, was removed in January from the Apple and Google Play Stores and then denied internet service by Amazon, only after two very prominent Democratic House members publicly demanded this. At the last pro-censorship hearing convened by Congress, Sen. Ed Markey (D-MA) explicitly declared that the Democrats’ grievance is not that these companies are censoring too much but rather not enough. One Democrat after the next at Thursday’s hearing described all the content on the internet they want gone: or else. Many of them said this explicitly.
At one point toward the end of the hearing, Rep. Lizzie Fletcher (D-TX), in the context of the January 6 riot, actually suggested that the government should create a list of groups they unilaterally deem to be “domestic terror organizations” and then provide it to tech companies as guidance for what discussions they should “track and remove”: in other words, treat these groups the same was as ISIS and Al Qaeda.
Words cannot convey how chilling and authoritarian this all is: watching government officials, hour after hour, demand censorship of political speech and threaten punishment for failures to obey. As I detailed last month, the U.S. Supreme Court has repeatedly ruled that the state violates the First Amendment’s free speech guarantee when they coerce private actors to censor for them — exactly the tyrannical goal to which these hearings are singularly devoted.
There are genuine problems posed by Silicon Valley monopoly power. Monopolies are a threat to both political freedom and competition, which is why economists of most ideological persuasions have long urged the need to prevent them. There is some encouraging legislation pending in Congress with bipartisan support (including in the House Antitrust Subcommittee before which I testified several weeks ago) that would make meaningful and productive strides toward diluting the unaccountable and undemocratic power these monopolies wield over our political and cultural lives. If these hearings were about substantively considering those antitrust measures, they would be meritorious.
But that is hard and difficult work and that is not what these hearings are about. They want the worst of all worlds: to maintain Silicon Valley monopoly power but transfer the immense, menacing power to police our discourse from those companies into the hands of the Democratic-controlled Congress and Executive Branch.
And as I have repeatedly documented, it is not just Democratic politicians agitating for greater political censorship but also their liberal journalistic allies, who cannot tolerate that there may be any places on the internet that they cannot control. That is the petty wannabe-despot mentality that has driven them to police the “unfettered” discussions on the relatively new conversation app Clubhouse, and escalate their attempts to have writers they dislike removed from Substack. Just today, The New York Times warns, on its front page, that there are “unfiltered” discussions taking place on Google-enabled podcasts:
New York Times front page, Mar. 26, 2021 We are taught from childhood that a defining hallmark of repressive regimes is that political officials wield power to silence ideas and people they dislike, and that, conversely, what makes the U.S. a “free” society is the guarantee that American leaders are barred from doing so. It is impossible to reconcile that claim with what happened in that House hearing room over the course of five hours on Thursday.
Tyler Durden
Sun, 03/28/2021 – 23:00 - Hackers Simultaneously Attack Australian Parliament, TV Network
Hackers Simultaneously Attack Australian Parliament, TV Network
Hackers were able to disrupt live broadcasts from an Australian news channel at the same time Parliament’s House email system was taken offline for a concurrent breach, according to Sky News.
As a result of the attack, Channel Nine’s Sunday morning news program – “Weekend Today” – did not air, along with the station’s 5pm news show. Future programming is expected to progress on schedule. Channel Nine is investigating whether the hack was a matter of “criminal sabotage or the work of a foreign nation,” according to the report.
Meanwhile, the Australian government was forced to cut access to IT and emails at Parliament House via an external provider was compromised.
Andrew Hastie in Canberra. Picture: Gary RamageSource:News Corp Australia “The issue relates to an external provider, and once the issue was detected the connection to government systems was cut immediately as a precaution,” said Andrew Hastie, assistant minister of defense, in a statement to News.com.au. “Cyber security is a team effort and a shared responsibility. It is vital that Australian businesses and organisations are alert to this threat and take the necessary steps to ensure our digital sovereignty.”
Nine Entertainment, the broadcaster’s parent company, which also owns the Sydney Morning Herald and The Age newspapers, confirmed that it had been targeted by an attack, but it is unclear whether the incidents are linked.
In its statement Channel Nine said: “A cyber attack on our systems has disrupted live broadcasts today however, we have put processes in place to ensure we’re able to resume our normal broadcast schedule.” –Sky News
Meanwhile all parliamentary staff received a Sunday night email warning over a potential messaging scam which hit senior ministers – including Finance Minister Simon Birmingham. According to News.com.au, it is unknown if the parliamentary issue and the messaging scam are related.
“The AFP is aware of a messaging scam currently targeting Commonwealth Parliamentarians and Australian High Office Holders, which presents as a request from a trusted colleague,” reads the email.
“The scam originates over WhatsApp and asks recipients to download the Telegram application for the purposes of further communication. The message also asks for the recipient to forward the Two Factor Authentication (2FA) codes to the sender. Doing this will allow the sender to ‘take over’ the Telegram account. The request is not genuine and may be used as an attempt to obtain information from you or your phone.”
“If you receive a message claiming to be from an associate which asks you to download a new messaging platform – for example – the Telegram application – do not download it.”
Tyler Durden
Sun, 03/28/2021 – 22:35 - US Military Launches Task Force To Fight 'Information War' Against China
US Military Launches Task Force To Fight ‘Information War’ Against China
Authored by Dave DeCamp via AntiWar.com,
The head of US Special Operations Command (SOCOM) told the Senate Armed Services Committee on Thursday that the command launched a new task force to focus on information operations to counter China in the Pacific.
According to a report from C4ISRNET, the task force, known as the Joint Task Force Indo-Pacific team, will focus “on information and influence operations in the Pacific theater.” Gen. Richard D. Clarke, the commander of SOCOM, said the task force will work with “like-minded partners” in the region.
Image source: US Navy/Flickr “We actually are able to tamp down some of the disinformation that they [China] continuously sow,” Clarke said. It’s not clear exactly what this new task force will be doing, but the C4ISRNET report suggested that offensive cyber operations could be part of the influence campaign.
Gen. Paul Nakasone, the head of US Cyber Command, also spoke with senators on Thursday and pointed to offensive cyber operations the command took prior to the 2020 election that he claims thwarted election interference.
“The idea of operating outside of the United States, being able to both enable our partners with information and act when authorized. This is an active approach to our adversaries,” Nakasone said. “It’s been most effective as we’ve seen with the 2018 and 2020 elections with adversaries attempting to influence us, attempting to interfere but not being able to do that.”
Gen. Clarke also spoke of information operations conducted under SOCOM’s Special Operations Forces, specifically a group known as Military Information Support Operations professionals that are deployed at embassies around the world.
“By working closely with those partners to ensure that our adversaries, our competitors are not getting that free pass and to recognize what is truth from fiction and continue to highlight that to using our intel communities is critical,” he said.
The Biden administration has made it clear that countering Beijing is its top foreign policy priority. The task force shows that Washington’s campaign against Chinese influence will be played out in many theaters.
Tyler Durden
Sun, 03/28/2021 – 22:10 - Nuclear Energy In The World 10 Years After Fukushima
Nuclear Energy In The World 10 Years After Fukushima
The March 2011 Fukushima disaster was the most severe nuclear accident since Chernobyl.
Its terrifying consequences led some countries to reconsider their attitude to nuclear energy with states like Germany deciding to phase out the technology.
However, elsewhere, nuclear power continues to be a major source of electricity supply.
The United States, with 96 commercial reactors, remains the world’s largest producer of commercial nuclear power.
As Bisconti Research national poll, held in June 20202, revealed that 60% of respondents favored the use of nuclear energy, with only 25% opposing it.
Tyler Durden
Sun, 03/28/2021 – 21:45 - Hedge Fund CIO: "Sinners Have Become The System And Will Be Eternally Supported By Policy"
Hedge Fund CIO: “Sinners Have Become The System And Will Be Eternally Supported By Policy”
By Eric Peters, CIO of One River Asset Management
Sinners
“At some point on the current path, policy makers will attempt to normalize,” said the CIO. We were discussing sequencing, recognizing its centrality to macro trading, investing. “They will start by attempting to taper Fed purchases,” he said, the US central bank currently creating $120bln per month and using it to purchase debt. “Perhaps they signal that they intend to lower the deficit.” But of course, that would only be after they first lift the deficit to fund America’s coming $3trln Recovery Plan. “And at that point, the clock starts ticking,” he said.
“Even if one thinks the current policy path inevitably leads to a substantial inflation, there are enough orthodox policy makers that we can be confident they’ll try to avert that outcome,” continued the same CIO. “So what we need to figure out is how far they’ll let stocks and inflation run before they’re compelled to taper,” he said. “And then we’ll need to judge how long it will take for the economy and/or market to take a deep dive.” Not long. “When they then quickly pivot and aggressively ease, their predicament will be clear for all to see.”
“Given the size of the stimulus and deficits at this stage, if policy makers are seen to be unable to normalize in any material way, that will be the stage in the sequencing when the great reset begins,” explained the same CIO. “Markets at that point will move very fast.” Maintaining calm given current policy settings requires inflation expectations to remain anchored and investors to believe policy can be normalized. “I am often a bit early on the very big trades, but this whole sequence appears sure to play out over the coming three years.”
“The biggest macro change in the past 50yrs was the taming of inflation,” said Marco Polo, my favorite macro modeler. “Paul Volcker was a byproduct of the political choice to anchor inflation in a post-gold-standard world. It required great resolve, and management of a domestic financial crisis induced by the high interest rates needed to get the job done. Don Kohn observed that the Volcker master lesson ‘was to protect the system but not the sinner – and that required facts, analysis, and flexibility.’ Volcker was the first Fed Chair who required a personal bodyguard. The Hunt brothers (silver), Penn Square and Continental Illinois (oil) and the entire Farm Credit System were all strained by his decisions and Volcker was the first Fed Chair who required a personal bodyguard. The resolve to tackling inflation cannot be overstated.”“The virtuous cycle of declining government bond yields in the past three decades that followed Volcker’s attack on inflation has been an overwhelmingly positive impulse to financial portfolios,” explained Marco Polo. “Government bonds played a large role, directly or indirectly through other assets that benefited from lower bond yields. To illustrate the point, I built a simple dynamic portfolio of stocks, bonds, the US dollar, and commodities. Allocations to those asset classes are selected depending on the state of the macro economy.”
“When things are good and getting better, asset allocation is split between stocks and commodities; bonds are the asset allocation when things are good but weakening; long US dollar exposure is deployed in downturns; stocks and foreign currency allocations are the benchmark in early upturns,” continued Marco. “The states of the macro economy are probability weighted and rebalanced over time to arrive at a balanced portfolio. The annualized monthly return of such an approach since Sep 1981 is +7.5% with volatility of less than 6%. Not bad for a passive, blunt approach.”
“Let’s include a long-bond overlay to the asset allocation in all macro states so that the average gross portfolio exposure is 2x,” said Marco. “Think of this leverage as a move out the risk spectrum. The historical performance jumps to +11.5% and the Sharpe rises to more than 1.5x. Of course, asset managers did not initially have the foresight to implement such a portfolio nor did financial intermediaries have the risk appetite to provide short-term funding. But with time and reinforcement from policy actions that tell us sinners have now become the system and will thus be eternally supported by policy, portfolios have pushed far out the risk spectrum taking long duration exposure directly or indirectly. It is all the same trade.”“Recent correlations reinforce the point. The US TIPs and Tesla daily correlation is nearly 30% this year. TIPs act like a low-beta play on highly valued growth companies. Both are bets on duration. The difference today from the past is today’s low starting point of bond yields. At steeply negative real yields and very low nominals, the role of bonds in a portfolio becomes heavily challenged. German bund performance in the Mar 2020 period is also a good reminder. Bund prices rose sharply over 7wks during the pandemic and reversed that move in 10-days.”
“Bunds provided no protection to slower-moving asset allocators. Ten-year German real yields now trade -1.75%. They have no value as an investment, nor as a risk-mitigator,” said Marco. “Asset managers have no choice but to explore alternatives to bonds and find risk mitigators to long duration exposure. And official institutions have little choice but to lean against any undesired rise in ‘risk free’ yields. Everyone is a sinner now, the system is held hostage. After all, 44% of outstanding Treasury securities are held between the Fed and foreign official institutions. And at any wobble they buy more.”
Tyler Durden
Sun, 03/28/2021 – 21:20 - Archegos Fallout Begins: Nomura Crashes 15% After Reporting Record $2BN Loss From "Transactions With US Client"
Archegos Fallout Begins: Nomura Crashes 15% After Reporting Record $2BN Loss From “Transactions With US Client”
Back in May 2016, Japanese mega-bank Nomura, announced that it had suffered its biggest-ever loss in history (of a rather tame by Western standards $40 million) from a single client, and which it then quickly blamed on an “incompetent” bond trader. Fast forward to today, when Nomura just suffered a far, far greater loss from a single client, this one is anything but boring.
Early on Monday local time, Nomura Holdings said it may have incurred a “significant loss” arising from transactions with a U.S. client.
The estimated amount of the claim against the client is about $2 billion based on market prices as of March 26, the Japanese brokerage said in a statement. The estimate is “subject to change depending on unwinding of the transactions and fluctuations in market prices.”
Nomura is currently evaluating the extent of the possible loss and the impact it could have on its consolidated financial results.
The Japanese brokerage also canceled plans to sell dollar-denominated bonds.The news, incomplete as it may be, was enough to send Nomura stock crashing 15%, wiping out all March gains, and the biggest one day drop in a decade.
While it wasn’t immediately clear if Nomura’s loss is linked to the spectacular margin call at Tiger Cub Bill Hwang’s Archegos Capital which we noted earlier (accurately noting that the unwind is probably not yet done), the two are almost certainly linked especially as some have noted that in the case of Nomura, the bank owned some $10MM shares in Chinese tech firm GSX which imploded, via leveraged swaps to clients. Since GSX was one of the firms aggressively dumped by Hwang, one can see how the house of cards, having crippled Prime Brokers, may be spreading down the investment bank foodchain next.
The brokers became involuntary principals here, as they owned the shares outstanding on leveraged swaps to their clients. If the client can’t meet the margin calls, the brokers take huge losses. For example, Nomura “owns” 10M shares of $GSX as of 12/31/20.
— Diogenes (@WallStCynic) March 29, 2021
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Meanwhile, as we asked earlier, the real question is whether the liquidation of the handful of highly concentrated stocks is over, or whether the selling cascade is only just starting.
now that the entity liquidating media/Chinese tech stocks is know, will the market
I) keep pressing them lower to hurt Hwang’s “idea dinner” pals, or
ii) ramp them as no more selling pressure— zerohedge (@zerohedge) March 28, 2021
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One thing we do know: as of Sunday night, the seller was not done yet, as this Bloomberg headline confirms:
- *VIACOMCBS HOLDER SAID TO OFFER 45M SHR BLOCK VIA MORGAN STANLEY
Some more details:
Morgan Stanley was shopping a large block of ViacomCBS Inc. shares on Sunday, according to a person familiar with the matter, the latest in a flurry of block trades that began before the weekend.
About 45 million shares were offered Sunday on behalf of an undisclosed holder, the person said. The media giant was also the subject of at least one large block trade on Friday through Goldman Sachs, a person familiar with the matter told Bloomberg at the time.
Incidentally, just last Monday, ViacomCBS sold $3BN in common and preferred stock, including 20mm shares of VIAC stock at $85. With the stock now trading at roughly 50% of this price, the company should immediately announce a 20MM shares (or more) stock buyback to i) take advantage of the plunge in the price and ii) to contain investor panic due to one shareholder’s forced liquidation. Indeed, moments ago, Tencent just announced a $1BN share buyback to offset just this liquidation-driven drop in the stock price.
And while we wait for that to happen at VIAC, DISCA and other, we still have two big questions: i) is Archegos still dumping, or is this now a fellow Hedge funders who was also margined out on a similar portfolio, and ii) just how bad is the pain – as more prime brokers issue urgent margin calls – and how widespread will the liquidation chain stretch…
Tyler Durden
Sun, 03/28/2021 – 20:53 - Biden Staffer Blocks Ted Cruz From Taking Video At Border Facility
Biden Staffer Blocks Ted Cruz From Taking Video At Border Facility
Authored by Jack Phillips via The Epoch Times (emphasis ours),
Sen. Ted Cruz (R-Texas) said he was told by a Biden administration staffer that he could not record a video at a Border Patrol facility along the U.S.-Mexico border.
“Please give dignity to the people. Please give dignity to the people. … Please respect the people, the rules,” the so-called staffer told Cruz while blocking the camera with her face, according to a video he showed Fox News.
“So you work for the commissioner, you’re a senior adviser, you were hired two weeks ago and you’re instructed to ask us to not have any pictures taken here because the political leadership at DHS does not want the American people to know it,” Cruz said in response to the official.
Sens. Ted Cruz (R-Texas), Thom Tillis (R-N.C.), and Susan Collins (R-Maine) are seen at an unspecified location near the Rio Grande River in Texas, on March 26, 2021. (Courtesy of Sen. Ted Cruz) She did not disclose her identity, and The Epoch Times has contacted the Department of Homeland Security (DHS) for comment.
The staffer then told him:
“Please don’t treat the people as such,” to which Cruz responded that “your policies are unfortunately trying to hide them.”
“I understand that you were instructed,” Cruz said.
“I respect them, and I want to fix this situation, and the administration that you work for is responsible for these conditions.”
Cruz and more than a dozen Republican senators went to the border last week, with many describing overcrowded and severe conditions in facilities used to hold unaccompanied minors—children who unlawfully enter the country without an adult.
These are the pictures the Biden administration doesn’t want the American people to see. This is why they won’t allow the press.
This is the CBP facility in Donna, Texas.
This is a humanitarian and a public health crisis. pic.twitter.com/UlibmvAeGN
— Ted Cruz (@tedcruz) March 26, 2021
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In recent weeks, Republicans have blamed President Joe Biden’s administration for the surge in illegal immigration, although Biden in a press conference said such surges are routine and blamed the previous administration for the humanitarian conditions on the border.
The senator also posted photos that the “Biden administration doesn’t want the American people to see,” according to a tweet that included images of a crowded illegal immigrant facility in Donna, Texas—near the border.
“This is why they won’t allow the press. This is the CBP facility in Donna, Texas. This is a humanitarian and a public health crisis,” Cruz tweeted.
Journalists will be eventually allowed to go to the border to film Border Patrol facilities after they have been largely denied access, according to White House press secretary Jen Psaki in a Sunday interview.
Some Democrats whose districts lie on the border have said Biden needs to take action immediately to deal with the situation.
Rep. Henry Cuellar (D-Texas) told CBS News on Sunday that numerous family units who crossed the border illegally have been released into the United States without a notice to appear in court.
“They’re supposed to appear, show up, maybe in 60 days, report to an ICE office,” he said. “This is unprecedented.”
Tyler Durden
Sun, 03/28/2021 – 20:30 - 10 Reasons Why Freedom Is Dangerous
10 Reasons Why Freedom Is Dangerous
The number one thing that terrorizes us in this world and gets in the way of you having a better life… freedom!
Here is JP Sears’ top ten “science-based” reasons why freedom is bad:
1. Freedom requires you to think for yourself (…think the thoughts they hand you… so turn on your TV. It’s like psychological breadline where you can get your very nourishing thought handouts from… and that should be the only place you get them from).
2. Freedom will make you uncomfortable at times.
3. With freedom, no one’s controlling you…
4. Freedom requires self-responsibility.
5. Freedom comes with free speech (99.98% of all speech is hate speech… and hate speech is objectively defined as speech that you subjectively hate which is all speech that represents thoughts that don’t come from the one true source that you get your thoughts from)
6. With freedom you constantly learn and grow.
7. With freedom you can’t just print money when want more of it.
8. With freedom you can protest, but you can’t peacefully protest.
9. With freedom you’re allowed to not trust those who try to control you.
10. Freedom gives you equal opportunity, not equality of outcome (leaving people’s outcomes to what they earn through work and effort levels promotes hate and incentivizes prosperity).
So with all that said, what should we do?
“Communism needs your vote…freedom destroys lives, robs people of their dignity and takes away their birthright of being controlled.”
Enjoy:
Tyler Durden
Sun, 03/28/2021 – 20:00 - Re-Fund The Police? LA County Increases Funding by $36 Million Months After Budget Cuts
Re-Fund The Police? LA County Increases Funding by $36 Million Months After Budget Cuts
Authored by Zachary Steiber via The Epoch Times,
Officials in Los Angeles County on Thursday voted to increase funding to local law enforcement by $36 million, months after the Los Angeles Police Department’s budget was cut by $150 million.
The Los Angeles County Metropolitan Transportation Authority’s board unanimously agreed to increase funding to its five-year contract with the LAPD, the Long Beach Police Department, and the Los Angeles Sheriff’s Department.
The board includes Los Angeles Mayor Eric Garcetti, a Democrat.
The authority’s CEO, Phillip Washington, said before the vote that he wanted to find a balance between people complaining about law enforcement and those who wanted increased funding.
“Our hope is that of the public and the board understands that we’re trying as a staff to get to a good balance, to get to a good balance here in terms of policing on our system, trying to get to a happy medium here understanding both perspectives,” he said.
“And I do understand both perspectives from a lived experience. And as an African American male, I understand completely what we are saying about policing. But also, as someone who reviews every incident report on the system, I do believe we need some level of security on the system.”
Several members of the public disagreed.
“I don’t think that safety is something that should be balanced. I think when the board votes, they should vote for what they think is the safest thing, whether that’s all ambassadors or all police. We don’t want to look for a balance. I don’t think the public is necessarily the best skill to weigh in on that,” one told board members.
“And I did want to mention, I don’t know if it was mentioned, but the LAPD, I ride the bus and the train and I see them on the bus in the train, and they represent Los Angeles, they look like Los Angeles, they look like me. They look as much like Los Angeles as this board, if not more.”
The decision on the funding increase was originally planned for last month, but the board decided to postpone it. The increase was originally proposed as $111 million. The original contract, approved in early 2017, was $645.7 million. It represented a new approach, bringing on the LAPD and Long Beach police after Metro previously only contracted with the county’s sheriff.
In addition to approving a lower amount than requested, Garcetti and several members amended the motion to direct Metro’s CEO to use at least $40 million in the next budget to invest in transit ambassadors and other alternatives to using law enforcement to police public transportation.
The increase in funding was requested “to cover significant costs incurred … to:
(1) augment outreach services to the unhoused population, address crime trends, sexual harassment; and
(2) enhanced deployments to cover special events, employee, and customer complaints, or other unforeseen circumstances,” according to a board report.
The Los Angeles City Council in July 2020 slashed $150 million in funding from the LAPD, cutting the number of officers by 231. Los Angeles, like most major cities, saw an increase in murders last year.
Tyler Durden
Sun, 03/28/2021 – 19:30 - Gun Group At Iowa State University Faces Backlash Over Event About 3D-Printed Weapons
Gun Group At Iowa State University Faces Backlash Over Event About 3D-Printed Weapons
Some Iowa State University students are upset at members of a student organization for promoting an event about 3D-printed guns in the wake of two mass shootings, one in Boulder, Colorado, and the other in Atlanta, according to Ames Tribune.
A schoolwide email sent Tuesday by “Students for 2A” invited students to learn about 3D-printed firearms. The email titled “Do you want to learn about 3D-printed firearms? read:
“Are you curious about 3D-printed firearms? Are you curious about home gunsmithing at all? Are you looking for a new hobby? Join Students for 2A on Monday, the 29th at 7 PM in Carver Hall room 305! We will be presenting on the recent history and legality of homemade firearms, talking about some 3D-printed projects we completed, talking about how you can get started, and, most importantly, answering the questions you have! This presentation has been a year in the making, and if you are interested in firearms, it is not one you want to miss!”
Some students are upset with the pro-Second Amendment rights group, whose email announcement of the event was poorly timed.
An open letter to administrators criticized the email’s timing and had more than 100 signatures, the Iowa State Daily reported.
The letter said members of Students for 2A “did not understand the emotional intensity the events of the past week have taken on students.”
“The University should release a statement condemning the timeliness, insensitivity, and potentially harmful and triggering nature of the email,” the letter said. “The student organization, Students for 2A, should also release a statement acknowledging the harm caused.”
Iowa State spokesperson Angie Hunt said members of Students for 2A followed university protocol in planning the event, adding that the presentation is “not a demonstration of 3D printing or weapons.”
“While not everyone may support the topic, all students have the right to gather and discuss issues that others may feel are controversial or do not align with their values,” Hunt said in a statement. “We understand our students’ concerns, and as a campus community, we mourn with those who have lost loved ones in the recent violent mass shooting tragedies in Boulder and Atlanta.”
According to the Students for 2A’s Iowa State website, the group has 45 members and is affiliated with the National Rifle Association. Under “useful links,” the group links to a website called CTRL+Pew, which appears to be a database of 3D-printed weapons. Digging further into CTRL+Pew, there is an entire library of weapons that anyone can easily download and print.
The timing of the email by members of Students for 2A may have been a little insensitive, considering most colleges are super liberal and don’t tolerate guns. What’s more interesting is that younger generations are intrigued by 3D printers and their ability to print weapons.
We noted last month that anyone can 3D print this weapon at home for under $350.
Tyler Durden
Sun, 03/28/2021 – 19:00 - Morgan Stanley Asks: Will The Market Move Towards The Fed, Or Will The Fed Shift Its Reaction Function Towards The Market
Morgan Stanley Asks: Will The Market Move Towards The Fed, Or Will The Fed Shift Its Reaction Function Towards The Market
By Vishwanath Tirupattur, head of Credit Securitized Products Research and Strategy at Morgan Stanley.
A year ago this week, global equities bottomed as jobless claims spiked to all-time highs with the shutdown of the global economy as a result of the pandemic, and gloom started to set in. It was also around this time that massive monetary and fiscal policy intervention began, matching the enormity of the catastrophe. Today, hope is growing for light at the end of the tunnel, and the return of March Madness is a sign that we are on the path back towards normalcy.
Vis-à-vis our 2021 Outlook published in November 2020, the US economy is aligning with our economists’ bull case, to which we assigned a likelihood of 20%. The bull case envisioned stronger growth than their above-consensus base case, with multiple COVID-19 vaccines increasing the speed and size of the roll-out, along with a more proactive US fiscal response than in their base case. This is exactly what we are seeing. The US$1.9 trillion American Rescue Plan was more than double our base-case expectation of 2021 fiscal stimulus, and another US$2+ trillion infrastructure package is in the works. The vaccine roll-out in the US has gathered pace, and the timeline for vaccinations has been brought forward, with 87.3 million people in the US receiving at least one dose of a COVID-19 vaccine and 47.4 million fully vaccinated as of last Thursday, according to the Centers for Disease Control and Prevention. Clearly, progress on the vaccination front has not been uniform globally, as parts of Europe and many emerging market economies lag the US. Still, growth is tracking the bull case narrative in our 2021 Outlook.
In the last six to eight weeks, risk assets have seemed listless. Since early February, the S&P 500 index is more or less unchanged and US investment grade credit spreads have stayed within a narrow range around mid-90bp. On the other hand, interest rates have risen steadily. Benchmark US 10-year Treasury yields have climbed about 60bp over the same period. Here is where fiscal and monetary policy meet face to face, and we need think about monetary policy in relation to fiscal policy. Let us dig into the underlying tensions in this policy confluence.
The conventional response to stronger-than-expected growth coupled with steep declines in headline unemployment would have steered monetary policy towards tightening in anticipation of higher inflation. In fact, the bond market is pricing in a 25bp rate hike at the start of 2023 and two more hikes of that size by the end of 2023. The thesis is that trillions of dollars in stimulus and an accelerating vaccination campaign mean front-end rates cannot stay this low without inflation spiraling out of control.
However, the FOMC’s ‘dot plot,’ Chair Powell’s comments during the post-FOMC meeting press conference last week and subsequent pronouncements by Fed officials have been stridently dovish and notably at odds with the bond market As Ellen Zentner, Matthew Hornbach and colleagues note, “Policy makers did not just ‘double down’ on dovish guidance, they ‘tripled down‘.” They highlight that even though the median FOMC participant now believes core inflation will remain at or above 2% through 2023, that alone is not grounds for thinking about rate hikes because strong labor market conditions consistent with maximum employment take primacy in the Fed’s reaction function. The Fed has not just raised the bar on the timing of future rate hikes. The Chair sounded equally dovish on tapering asset purchases when he stated, “We have said that we would continue asset purchases at this pace until we see substantial further progress, and that’s actual progress, not forecast progress. That’s a difference from our past approach.”
The conventional policy response reflected in the bond market stands in stark contrast to the Fed’s unequivocal message. Will the market move towards the Fed, or will the Fed shift its reaction function towards the market’s conventional thinking? Our global macro strategists Matthew Hornbach and Guneet Dhingra believe in the former, suggesting investors treat the recent technical-driven price action as noise and focus on the Fed’s signal. They recommend an overweight in the belly of the Treasury yield curve via 5s30s curve steepeners. Our economists continue to expect that conditions will be in place for the Fed to raise rates in 3Q23, with balance sheet tapering to start in January 2022.
Clearly, we are in uncharted waters in terms of policy. As my colleagues Andrew Pauker, Michael Wilson and team caution, this policy response may mean that the current economic cycle could run hotter but shorter than the prior three. They posit that risk-asset leadership is already shifting from ‘early-cycle’ to ‘mid-cycle,’ and that investors should position accordingly.
Tyler Durden
Sun, 03/28/2021 – 18:30 - US Believes China "Flirting" With Taiwan Takeover: It's "Closer Than Most Think"
US Believes China “Flirting” With Taiwan Takeover: It’s “Closer Than Most Think”
A weekend report in Financial Times suggests the world is closer than ever to witnessing a major conflict flare up over Taiwan. Multiple alarming quotes from top American defense officials included in the report reveal that Washington fears China is now in the process of planning a takeover of the US-backed democratic island.
Ironically the report was published shortly on the heels of the Chinese Air Force’s largest ever incursion into Taiwan’s air space Friday, which saw a whopping 20 aircraft, including four long-range bombers, breach the country’s southwest defense zone. FT concludes based on the US officials interviewed for the report that the Biden administration now sees Beijing as actively “flirting with the idea of seizing control of Taiwan as President Xi Jinping becomes more willing to take risks to boost his legacy.”
Getty Images
Such a scenario would force Washington’s hand — it would have to decide to either go to war on behalf of its tiny ally halfway across the world against the massive and formidable People’s Liberation Army (PLA) — or sit back and watch from the sidelines somewhat helplessly.
“China appears to be moving from a period of being content with the status quo over Taiwan to a period in which they are more impatient and more prepared to test the limits and flirt with the idea of unification,” one senior US official was cited in the report as saying.
The pessimistic assessment was reportedly based on the Biden admin monitoring Chinese military movements and behavior over the prior two months.
The official stated that Xi sees this as a crucial part of his legacy moving forward. The Chinese president “sees capstone progress on Taiwan as important to his legitimacy and legacy,” the official was quoted further as saying. “It seems that he is prepared to take more risks,” the official said.
The Biden administration has concluded that China “is flirting with the idea of seizing control of Taiwan as President Xi Jinping becomes more willing to take risks to boost his legacy.” https://t.co/pLTPj9qVcR
— Axios (@axios) March 27, 2021
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This appears to also be the assessment of Admiral John Aquilino, who’s been tapped to head US forces in the Pacific. He testified before the Senate Armed Services Committee this past week week that the threat to Taiwan “is much closer to us than most think,” according to CNN.
He told the briefing of Beijing’s hostile intentions for asserting control over Taiwan that it’s now “their No. 1 priority.”
Interestingly, Aquilino actually suggested that the recent prediction of a “within 6 years” takeover timeframe earlier this month stated by outgoing Indo-Pacom commander Adm Philip Davidson was too conservative. “My opinion is that this problem is much closer to us than most think and we have to take this on,” Aquilino said.
And then there’s the assessment of top White House Asia official Kurt Campbell, who concludes, “…nowhere have we seen more persistent and determined activities than the military, diplomatic and other activities directed at Taiwan.” However, it should be noted that FT emphasized that Taiwan’s government and military leadership itself doesn’t share this assessment of any ‘imminent’ invasion threat in the works — or if so they’re at least not willing to state it openly.
Tyler Durden
Sun, 03/28/2021 – 18:00 - Alternatives To Censorship: Interview With Matt Stoller By Matt Taibbi
Alternatives To Censorship: Interview With Matt Stoller By Matt Taibbi
Authored by Matt Taibbi via TK News,
Led by Chairman Frank Pallone, the House Energy and Commerce Committee Thursday held a five-hour interrogation of Silicon Valley CEOs entitled, “Disinformation Nation: Social Media’s Role in Promoting Extremism and Misinformation.”
As Glenn Greenwald wrote yesterday, the hearing was at once agonizingly boring and frightening to speech advocates, filled with scenes of members of Congress demanding that monopolist companies engage in draconian crackdowns.
Again, as Greenwald pointed out, one of the craziest exchanges involved Texas Democrat Lizzie Fletcher:
Fletcher brought up the State Department’s maintenance of a list of Foreign Terrorist Organizations. She praised the CEOs of Twitter, Facebook, and Google, saying that “by all accounts, your platforms do a better job with terrorist organizations, where that post is automatically removed with keywords or phrases and those are designated by the state department.”
Then she went further, chiding the firms for not doing the same domestically. asking, “Would a federal standard for defining a domestic terror organization similar to [Foreign Terrorist Organizations] help your platforms better track and remove harmful content?”
At another point, Fletcher noted that material from the January 6th protests had been taken down (for TK interviews of several of the videographers affected, click here) and said, “I think we can all understand some of the reasons for this.” Then she complained about a lack of transparency, asking the members, “Will you commit to sharing the removed content with Congress?” so that they can continue their “investigation” of the incident.
Questions like Fletcher’s suggest Congress wants to create a multi-tiered informational system, one in which “data transparency” means sharing content with Congress but not the public.
Worse, they’re seeking systems of “responsible” curation that might mean private companies like Google enforcing government-created lists of bannable domestic organizations, which is pretty much the opposite of what the First Amendment intended.
Under the system favored by Fletcher and others, these monopolistic firms would target speakers as well as speech, a major departure from our current legal framework, which focuses on speech connected to provable harm.
As detailed in an earlier article about NEC appointee Timothy Wu, these solutions presuppose that the media landscape will remain highly concentrated, the power of these firms just deployed in a direction more to the liking of House members like Fletcher, Pallone, Minnesota’s Angie Craig, and New York’s Alexandria Ocasio-Cortez, as well as Senators like Ed Markey of Massachusetts. Remember this quote from Markey: “The issue isn’t that the companies before us today are taking too many posts down. The issue is that they’re leaving too many dangerous posts up.”
Remember: the last time Congress summed social media CEOs to be interrogated, Sen. @EdMarkey left no doubt about what the demand of Democrats is when doing this: we want you to censor more (and obviously, the content they want censored is from their political adversaries): pic.twitter.com/j64rCdZ82L
— Glenn Greenwald (@ggreenwald) February 20, 2021
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These ideas are infected by the same fundamental reasoning error that drove the Hill’s previous drive for tech censorship in the Russian misinformation panic. Do countries like Russia (and Saudi Arabia, Israel, the United Arab Emirates, China, Venezuela, and others) promote division, misinformation, and the dreaded “societal discord” in the United State? Sure. Of course.
But the sum total of the divisive efforts of those other countries makes up at most a tiny fraction of the divisive content we ourselves produce in the United States, as an intentional component of our commercial media system, which uses advanced analytics and engagement strategies to get us upset with each other.
As Matt Stoller, Director of Research at the American Economic Liberties Project puts it, describing how companies like Facebook make money:
It’s like if you were in a bar and there was a guy in the corner that was constantly egging people onto getting into fights, and he got paid whenever somebody got into a fight? That’s the business model here.
As Stoller points out in a recent interview with Useful Idiots, the calls for Silicon Valley to crack down on “misinformation” and “extremism” is rooted in a basic misunderstanding of how these firms make money. Even as a cynical or draconian method for clamping down on speech, getting Facebook or Google to eliminate lists of taboo speakers wouldn’t work, because it wouldn’t change the core function of these companies: selling ads through surveillance-based herding of users into silos of sensational content.
These utility-like firms take in data from everything you do on the Web, whether you’re on their sites or not, and use that information to create a methodology that allows a vendor to buy the most effective possible ad, in the cheapest possible location. If Joe Schmo Motors wants to sell you a car, it can either pay premium prices to advertise in a place like Car and Driver, or it can go to Facebook and Google, who will match that car dealership to a list of men aged 55 and up who looked at an ad for a car in the last week, and target them at some other, cheaper site.
In this system, bogus news “content” has the same role as porn or cat videos — it’s a cheap method of sucking in a predictable group of users and keeping them engaged long enough to see an ad. The salient issue with conspiracy theories or content that inspires “societal discord” isn’t that they achieve a political end, it’s that they’re effective as attention-grabbing devices.
The companies’ use of these ad methods undermines factuality and journalism in multiple ways. One, as Stoller points out, is that the firms are literally “stealing” from legitimate news organizations. “What Google and Facebook are doing is they’re getting the proprietary subscriber and reader information from the New York Times and Wall Street Journal, and then they’re advertising to them on other properties.”
As he points out, if a company did this through physical means — breaking into offices, taking subscriber lists, and targeting the names for ads — “We would all be like, ‘Wow! That’s outrageous. That’s crazy. That’s stealing.’” But it’s what they do.
Secondly, the companies’ model depends upon keeping attention siloed. If users are regularly exposed to different points of view, if they develop healthy habits for weighing fact versus fiction, they will be tougher targets for engagement.
So the system of push notifications and surveillance-inspired news feeds stresses feeding users content that’s in the middle of the middle of their historical areas of interest: the more efficient the firms are in delivering content that aligns with your opinions, the better their chance at keeping you engaged.
Rope people in, show them ads in spaces that in a vacuum are cheap but which Facebook or Google can sell at a premium because of the intel they have, and you can turn anything from QAnon to Pizzagate into cash machines.
After the January 6th riots, Stoller’s organization wrote a piece called, “How To Prevent the Next Social Media-Driven Attack On Democracy—and Avoid a Big Tech Censorship Regime” that said:
While the world is a better place without Donald Trump’s Twitter feed or Facebook page inciting his followers to violently overturn an election, keeping him or other arbitrarily chosen malignant actors off these platforms doesn’t change the incentive for Facebook or other social networks to continue pumping misinformation into users’ feeds to continue profiting off of ads.
In other words, until you deal with the underlying profit model, no amount of censoring will change a thing. Pallone hinted that he understood this a little on Thursday, when he asked Zuckerberg if it were true, as the Wall Street Journal reported last year, that in an analysis done in Germany, researchers found that “Facebook’s own engagement tools were tied to a significant rise in membership in extremist organizations.” But most of the questions went in the other direction.
“The question isn’t whether Alex Jones should have a platform,” Stoller explains. “The question is, should YouTube have recommended Alex Jones 15 billion times through its algorithms so that YouTube could make money selling ads?”
Below is an excerpted transcript from the Stoller interview at Useful Idiots, part of which is already up here. When the full video is released, I’ll update and include it.
Stoller is one of the leading experts on tech monopolies. He wrote the Simon and Schuster book, Goliath: The Hundred Year War Between Monopoly Power and Democracy, and is a former policy advisor to the Senate Budget Committee. His writing has appeared in the Washington Post, the New York Times, Fast Company, Foreign Policy, the Guardian, Vice, The American Conservative, and the Baffler, among others. Excerpts from his responses to questions from myself and Katie Halper are below, edited for clarity:
Matt Taibbi: There’s a debate going on within the Democratic Party-aligned activist world about approaches to dealing with problems in the speech world. Could you summarize?
Matt Stoller: There are two sides. One bunch of people has been saying, “Hey, these firms are really powerful…” This is the anti-monopoly wing. Google and Facebook, let’s break them up, regulate them. They’re really powerful and big, and that’s scary. So, without getting in too deep, there’s the Antitrust subcommittee, that’s been saying, “Hey, these firms are really powerful, and they’re picking and choosing winners.” Usually, they talk about small businesses, but the issue with speech is the same thing.
Then there’s another side, which is, I think, noisier and has more of the MSNBC/CNN vibe. This is the disinformation/misinformation world. This is the Russiagate people, the “We don’t like that Trump can speak” type of people. What their argument is, effectively, is that firms haven’t sufficiently curated their platforms to present what they think is a legitimate form of public debate. They’re thinking, “Well, we need to figure out how to get them to filter differently, and organize discourse differently.”
Ideologically, they just accept the dominance of these firms, and they’re just saying, “What’s the best way for these firms to organize discourse?”
Taibbi: By conceding the inevitability of these firms, they’re making that concession, but saying they want to direct that power in a direction that they’d like better.
Stoller: That’s right. I mean, there’s a lot of different reasons for that. Some of them are neoliberal. A lot of the law professors are like, “Oh, this is just the way of technology, and this is more efficient.” Therefore, the question is, “How do you manage these large platforms?” They’re just inevitable.
Then there are people who are actually socialists who think, “Well, the internet killed newspapers. The internet does all of these things. Also, there’s a bunch of them that never liked commercial press in the first place. A lot of well-meaning people were like, “We never liked advertising models to begin with. We think everything should be like the BBC.”
So, those are the two groups that accept the inevitability thesis. It’s really deep-rooted in political philosophy. It’s not just a simple disagreement. Then there are people like us who are like, “No, no. Actually, technology is deployed according to law and regulation, and this specific regulatory model that we have, the business structures of these firms, the way they make money from advertising, those are specific policy choices, and we can make different ones if we want.”
Katie Halper: When you say socialist, some may identify as socialists, but that there’s a general group of people who just believe, “We oppose hate speech and White supremacy,” and so we have to make these companies that are evil, and give them moral authority and a content moderation authority, which is an inherent contradiction/wishful thinking/inconsistent paradox.
In other words, you’re saying leftists, right? Leftist, not liberals, not neo-liberals, not even liberals, but people who are really would identify as left.
Stoller: Yes. There’s a part of the socialist world that’s like, “What we really want is egalitarianism in the form of a giant HR compliance department that tells everyone to be tolerant.” Right? Then there are most people who are like, “No. I just don’t like wall street and I want people to be equal and everyone should have a little bit over something,” and they both call themselves socialists.
Taibbi: You and the American Economic Liberties Project have said, there’s a reason why taking Trump off Twitter isn’t going to fix the problem, because you’re not fixing those incentives. Can you talk about what those incentives are, and why they cause the problems?
Stoller: Google and Facebook, they sell ads, right? They collect lots of information on you and they sell ads and ads are valuable for two reasons. One, you’re looking at them. Two, if they know who you are and they know information about you, then they can make the ad more valuable. A random ad space isn’t worth very much, if you’re showing it to some undefined person. An ad space you’re showing to a 55-year-old man who’s thinking of buying a luxury car, somebody will pay a lot for that ad space, if you know who that person is and you know that that person has actually been browsing luxury car websites and reading the Wall Street Journal about how best to liquidate their portfolio or something to buy a luxury item.
Google and Facebook want to sell that advertising particularly on their properties, where they get to keep 100% of the profits. If Google sells an ad on YouTube, they get to keep the money. Facebook sells an ad on Instagram or Facebook, they get to keep the money. So, their goal is to keep you using their sites and to collect information on you.
Taibbi: What methods do they use to keep you on the sites?
Stoller: They have all sorts of psychological tricks. Engagement is the way that they talk about it, but it’s like if you go and you look for something on YouTube, they’re going to send you something that’s a little bit more extreme. It’s not necessarily just political. It’s like if you’re a vegetarian, they’ll say, or if you look at stuff that’s like, “Here’s how to become a vegetarian,” they’ll say, “Well, about becoming a vegan?” If you look at stuff that suggests you’re a little bit scared of whether this vaccine will work, if you search for, “I would want to find safety data on this vaccine,” eventually, they’ll move you to like serious anti-vax world.
So, the question that we have to ask is whether you should block crazy people from saying things, or do something else… Like Alex Jones, for example, is crazy person or an entertainer, he says things that I don’t particularly like or agree with. The question, though, isn’t whether Alex Jones should have a platform. We’ve always allowed people to go to the corner of the street and say whatever they want or to write pamphlets or whatever.
The question is, should YouTube have recommended Alex Jones 15 billion times through its algorithms so that YouTube could make money selling ads? That’s a different question than censorship.
Taibbi: Conversely they’re not recommending other material that might discourage you from believing Alex Jones.
Stoller: Right. The other thing is, it’s not just that they want to create more inventory so they can sell ads. It’s also the kinds of ads that they’re selling. So, you can sell an ad based on trust. The New York Times or the Wall Street Journal — I hate using them as examples — they have an audience and people. They built that audience by investing in content, and then they sell ads to that audience, and the advertiser knows where that advertising is going and it’s based on trust.
The alternative model which we have now is simply based on clickbait. It’s just, “Generate as many impressions as possible, and then sell those impressions wherever the person is on the web.” That creates a kind of journalism, which is designed to get clicks or not even journalism. It’s just you’re creating content just to get engagement and not actually to build trust.
So, what this business model does, we call it surveillance advertising, but it’s an infrastructure player, a communications player manipulating you so that they could put content, engage content in front of you. What that does is it incentivizes a low trust form of content production. It both kills trusted content producers, a.k.a. local newspapers, because you no longer need to be able to put advertising in the Pittsburgh Post-Gazette, or whatever. You can just geotarget those people through Google and Facebook. You can get some Eastern European to falsify stories and people will click on that.
So, it kills legitimate newspapers and it creates an incentive for low trust content, fraudulent content, defamatory content, whatever it is that will keep people engaged and is often fraudulent. It hits really local newspapers and niche newspapers the most, so Black-owned newspapers and also newspapers having to do with hobbies. The actual issue is more about niche audiences themselves, and the kind of low-trust content that we’re encouraging with our policy framework, versus what we used to do, which we would encourage higher trust forms of content.
Taibbi: How would you fix this problem, from a regulatory perspective?
Stoller: The House Antitrust Subcommittee had a report where they recommended what we call regulated competition. That would say, “Okay. You break up these platforms in ways that wouldn’t interfere with the efficiency of that particular network system.” So, Google and YouTube don’t need to be in the same company, you could separate them out.
There are ways that you’d have to handle the search engine. You couldn’t split Facebook into five Facebooks, because then you wouldn’t necessarily be able to talk to your friends and family, but you could separate Instagram and Facebook easily. You could force interoperability and then split up Facebook if you want to do that. So, you could separate those things out and then ban surveillance advertising for a starter.
Taibbi: What would that do to content if you ban surveillance advertising? ANd how would that work?
Stoller: It would force advertisers to go back to advertising to audiences. So, they would no longer be able to track you as an individual and say, “We know this is what you’re interested in.” They would go to what’s called contextual advertising, and they would say, “Okay. If you’re on a site that has to do with tennis, then we’ll advertise tennis rackets on that site because we assume that that people are interested in tennis rackets.”
That’s called contextual advertising, versus the current system: you read an article about tennis in a tennis magazine and the platforms say, “Oh, that’s expensive to buy an ad there, so we’ll track you around the web and when you’re on Candy Crush, we’ll show you a tennis racket ad.” That’s the surveillance advertising model we have. That pulls all the power to Google and Facebook who are doing all the tracking, versus the contextual ad where the power is actually with the tennis racket site that has the relationship with the people interested in tennis.
Taibbi: So, the idea would be you would create a sort of a firewall between the utilitarian functions of a site like Facebook or Google, that provide a service where either you’re searching for something or you’re communicating with somebody, and they wouldn’t be allowed to take that data from that utility-like function to sell you an ad?
Stoller: That’s right. Germany is hearing a court case saying that you can’t combine advertising from Facebook, Instagram, and WhatsApp, and then third parties to create a super profile of someone and show them ads. They were saying that’s an antitrust violation. There’s a court hearing on that, but, more broadly, that’s what you have to do.
Ultimately, what we would want is we would want to have subscription-based communication networks paying for services. This is something that’s worked for thousands of years. I give you something in value, you give me money. It’s an honest way of doing business. If I don’t value it enough to give you money, then I won’t get it.
If people are like, “Oh, I don’t want to pay for Facebook, or I don’t want to pay for YouTube,” or whatever it is, that makes no sense. You’re already paying. You’re either paying with a Friday night you spend surfing YouTube, where they sell a bunch of ads and you give up your Friday night — or you pay with money, and it’s an honest transaction, and it’s in the long run, a lot cheaper and more honest method of payment.
For more of this interview, check out UsefulIdiots.Substack.Com in the next days. For Stoller’s writings on the subject, see here.
Tyler Durden
Sun, 03/28/2021 – 17:30 - Traders Brace For More Turmoil After Archegos Forced Liquidations
Traders Brace For More Turmoil After Archegos Forced Liquidations
Yesterday, in the aftermath of Friday’s bizarre, furious liquidation which saw a dramatic plunge in the price of various Chinese tech stocks…
… as well as a collapse in the price of media giants such as ViacomCBS and Discovery…
… which wiped out $33BN of value off all the companies involved as Goldman Sachs and Morgan Stanley sold blocks of shares worth $20BN at discount prices throughout the day, we pointed to Tiger Cub Bill Hwang’s Archegos Capital Management family office and asked if “This Was The Fund That Sparked The Massive Media Stock Liquidations.”
Today, both the FT and Bloomberg confirm that it was indeed Hwang responsible for the forced unwinds that shook the market on Friday.
Archegos Capital, a private investment firm, was behind billions of dollars worth of share sales that captivated Wall Street on Friday — a fire sale that has left traders scrambling to calculate how much more it has to offload, according to people with knowledge of the matter. The fund, which had large exposures to ViacomCBS and several Chinese technology stocks, was hit hard after shares of the US media group began to tumble on Tuesday and Wednesday.
As we speculated, the initial plunge in media names prompted a margin call from one of Archegos’ prime brokers, which in turn then prompted a cascade of similar cash calls from other Prime Brokers said FT sources. According to Bloomberg, Morgan Stanley traded about $13 billion, including Farfetch, Discovery, Baidu and GSX Techedu, while Goldman Sachs sold $6.6 billion worth of shares of Baidu, Tencent Music Entertainment Group and Vipshop Holdings. That sale was followed by the sale of $3.9 billion of shares including ViacomCBS Inc. and iQiyi, a Goldman email to clients said.
At the same time, traders buying the large blocks of stock – which were being intermediated by such firms as Goldman Sachs – were told the share sales had been prompted by a “forced deleveraging” by a fund.
Meanwhile, adding insult to injury, a handful of completely clueless sellside “analysts” who had no idea a fund was forced to dump its positions and were scrambling to explain the price action, rushed to downgrade companies such as ViacomCBS – because on Wall Street, price dictates fundamentals apparently – and only added to the liquidation frenzy even though their arguments were completely false (just as they had been on the upside when these same clueless penguins rushed to upgrade the companies).
In any case, Archegos is now finished: as the FT reports, “the firm’s website is no longer available and the company did not return multiple requests for comment. The fund’s head trader in New York hung up the phone when contacted by the Financial Times.”
Not surprisingly, this is not the Hwang’s first forced unwind: the New York-based asset manager previously ran the Tiger Asia hedge fund but he returned cash to investors in 2012 when he admitted wire fraud relating to Chinese bank stocks. Hwang paid $44MM in fines to settle illegal trading charges with the SEC in 2012, and in 2014 he was banned from trading in Hong Kong.
While the forced liquidations at Archegos – which describes itself as a “purposeful community of investment industry professionals” whose core values are “Excellence, Integrity, Learning/Doing/Teaching, Caring/Sharing” and others according to an archived version of its now deleted website – only hit its own P&L as it does not manage outside money, there is plenty of “outside money” invested in the names that got hit on Friday as countless shareholders were crushed.
For those other investors, the question – as we asked earlier – is whether the fire sales are over. Some traders say the pattern of recent selling, which ran for several days but reached a peak on Friday, suggests the bulk has been completed. Others think the scale of leverage that Archegos appears to have used means billions of dollars’ worth of positions could still remain to be sold.
now that the entity liquidating media/Chinese tech stocks is know, will the market
I) keep pressing them lower to hurt Hwang’s “idea dinner” pals, or
ii) ramp them as no more selling pressure— zerohedge (@zerohedge) March 28, 2021
https://platform.twitter.com/widgets.js
According to the FT, Archegos’ name is a biblical Greek word meaning chief, leader, or prince, used in relation to Jesus. In a 2018 YouTube video, Hwang said his investments were “not all about money”, adding that “God certainly has a long-term view”.
“We love seeing in our little eyes what God is doing through investing and capitalism and how . . . it can be done better.”
But while Hwang may believe he is God, or at least Jesus (and certainly would love to have his money) others don’t have that kind of patience, and asBloomberg writes this morning, global traders are bracing for what’s shaping up to be “one of the most anticipated opens for U.S. equities in months” following an extraordinary $20 billion wave of block trades Friday that rattled investors worldwide.
Sharif Farha, a Dubai-based portfolio manager at Safehouse Global Consumer Fund, said ViacomCBS and Discovery may actually recover on Monday and noted that the market’s fundamentals remain intact.
“The correction was not structural,” he said, and he is right: anyone who bought at Friday’s lows on the forced selling is likely set to make a killing in the coming days.
While Farha expects benign price action to start the day, but anticipation for Monday’s open remains high: “Traders everywhere know the story and will be glued to their screens,” he said.
To be sure, the possibility of additional block trades – either at Hwang or other funds that have similar exposure – looms over the market, while the traditional end-of-quarter volatility which we discussed last week may contribute to sharper swings on high-flying stocks. ViacomCBS and Discovery have rallied this year.
Then again, what has soared higher may just come down and stay down: “What most people appear to have missed is that both of these companies have seen their share prices almost quadruple since October last year,” CMC Markets analyst Michael Hewson said in a note on Sunday, referring to ViacomCBS and Discovery.
It didn’t help that last Monday ViacomCBS reported an offering of $2 billion in shares after closing at a record high. The stock fell 9.1% the following day. On Friday, a downgrade by Wells Fargo and the large block trades compounded the selling pressure. it has since wiped out more than half its value in just the past 5 days!
Meanwhile, as Bloomberg notes Viacom and Discovery shares are also echoing volatility in a host of companies that soared on lockdown trades, including Zillow Group and Peloton and to some degree the entire blank-check SPAC space. Earlier this month, data compiled by Susquehanna showed that volatility futures expiring three months from now were hovering 20% above the average level or prior instances when the VIX traded at 20.
“We have seen an increase in volatility in equities capital markets, tech, working-from-home names with retail stepping back and more rotation to value in the last few weeks,” said Barclays strategist Emmanuel Cau. “It may have hurt a number of funds that were overly exposed to these trades.”
“The markets could start trading in a friendly manner at the beginning of the week,” said Andreas Lipkow, Comdirect Bank strategist, echoing what we said in “Brace For A Frenzy Of Stock Buying On March 29.” He added that “although there is currently some major profit-taking and unusual block trade activities, these market asymmetries can currently still be processed well.”
But perhaps just as remarkable as the Archegos liquidation, was the elephant in the room, namely the action in the last minutes of trading on Friday. U.S. equities notched their biggest gain in three weeks on Friday which saw the S&P 500 explode 1.7% higher after trading in the red for much of the day, as the bull market celebrated its first anniversary since hitting pandemic-era lows.
We hope that this is not what the Fed has in mind when it talks about “price stability.”
Tyler Durden
Sun, 03/28/2021 – 17:00 - Elite Philanthropy Mainly Self-Serving
Elite Philanthropy Mainly Self-Serving
Authored by Zipporah Osei via The Academic Times (emphasis ours),
Philanthropy among the elite class in the United States and the United Kingdom does more to create goodwill for the super-wealthy than to alleviate social ills for the poor, according to a new meta-analysis.
High-end philanthropy might not be shaking up the social order (AP Photo/Mark Lennihan) A group of U.K. researchers reviewed 263 journal articles, books and studies on elite philanthropy to better understand the role it plays in this new age of inequality. In the United States, the wealth gap between richest and poorer families has more than doubled since the 1980s, and in the United Kingdom, the incomes of the richest fifth are 12 times as much as the incomes of the poorest fifth.
The researchers’ paper, published in a special issue of the International Journal of Management Reviews, lays out how on the whole, the elite class mainly donates to causes that provide themselves with some type of benefit. The researchers defined “elite philanthropy” as “the preserve of wealthy individuals and close family members” who became rich through entrepreneurship, either by starting a new business or expanding an inherited one. These individuals generally have extensive local, national and international business networks, the researchers said, and occupy positions with the “field of power,” a social space at the top of society that allows them to impact policy and practice.
Until recently, philanthropy hadn’t been taken seriously as part of mainstream management and organizational research, but Newcastle University professor Charles Harvey said it’s important that academia moves in this direction as many of the wealthiest philanthropists have entrepreneurial backgrounds.
“In the last decade, we’ve seen tech and finance money finding its way into philanthropic funding led by people like Bill Gates and Christopher Hohn,” said Harvey, one of the paper’s authors. “But entrepreneurship has enabled philanthropy for centuries so it’s important to understand how the philanthropic sector supports the economic sector.”
Many people mistakenly view elite philanthropy as a benign force for good rather than an avenue for the super-wealthy to translate economic capital into social and cultural capital, according to the researchers. Elite philanthropy, the study argues, is transactional, as there are also material benefits in addition to the cultural capital. In 2017, the United States increased the proportion of income that can be deducted from 50% to 60%, which directly benefits the elite; and in the United Kingdom, efforts to reduce philanthropic tax relief fell through in 2012 after pushback from wealthy philanthropists.
Households in the top 0.1% reduced the share of their income they donated by half from 1980 to 1990 after changes to the tax code reduced the amount of money they could deduct from charitable contributions, according to a study published in Cambridge University Press. That trend continued in future decades: In 2018, the 20 richest Americans donated $8.7 billion to charity, which is just .8% of their net worth as a group.
Where wealthy elites donate their money is shaped by where they can have the most influence on a local, national and international level, researchers said; maintaining their “field of power,” which allows them to use their business ties to influence the political sphere, is also a motivating factor in their philanthropy. For example, one study of 194 elite philanthropists in the United States found that 104 of them actively worked to sway public policy by funding research and advocacy organizations.
Because elite philanthropy affords a higher degree of influence to a select group of people, it’s important to examine its benefits and pitfalls more thoroughly, the researchers argue. While investments in philanthropy are beneficial to society at large, the current state of investments has only a moderate redistributive effect between the rich and the poor. Most of the money has not only been kept within developed countries but also within elite circles, rather than going to causes that impact a larger share of the world’s population such as disease prevention in developing nations.
Universities and colleges such as Harvard and Oxford, which already boast large endowments, are by far the largest beneficiaries of elite philanthropy. Money is also shared to arts and culture organizations and environmental causes, but in most fields accounts for only a small portion of nonprofit organizations’ income. In this way, wealthy people’s charity serves to support institutions that have directly benefited them, all while giving them the goodwill to influence other sectors of society, according to Harvey.
The researchers present four types of elite philanthropy that are distinguished by a focus in either developed or developing countries. Institutionally supportive philanthropy supports organizations and causes in developed countries, while developmental philanthropy focuses on developing nations. These two are more customary forms of philanthropy. The other two types take a newer, more entrepreneurial approach: Market-oriented philanthropy uses market-reinforced solutions to help developed nations; and transformational philanthropy seeks to invest in solutions that will not only combat social problems but also create wealth in developing countries.
Someone practicing customary philanthropy might donate a large sum of money to a nonprofit focused on eliminating child hunger, while an example of entrepreneurial philanthropy would be Facebook founder Mark Zuckerberg investing $24 million in a startup that trains and recruits software developers in Africa.
Contrary to popular belief, though, donations and investments in developing countries make up only a small proportion of elite philanthropy, and investments like these have only become more popular in the last decade or so, according to Harvey.
“As the differentials between the rich and poor get wider, you might expect the rich to give more as a percentage of income but the opposite is true. It’s really just a few percentage points, a small amount relative to the amount of wealth that these people hold as a class,” Harvey said. “That’s not to say that there aren’t some super generous people within that class, but the class as a whole is not generous.”
Internationally, the biggest givers are actually governments. Between 2013 and 2015, governments of developed nations provided $462 billion in overseas aid while philanthropists contributed $24 billion, according to data from the Organization for Economic Co-operation and Development.
The research isn’t intended to dissuade wealthy philanthropists from donating or to make the argument that no good comes from the investments they do make, said Mairi Maclean, a professor at the University of Bath.
“Individually there are some very impressive people helping important causes,” she said, recalling conversations she’s had with philanthropists who work on prison reform and disease prevention, among other causes. “But we’re looking at this systematically and on that level, a lot of improvements can be made.”
The study “Elite philanthropy in the United States and United Kingdom in the new age of inequalities,” published Feb. 21 in the International Journal of Management Reviews, was authored by Mairi Maclean, University of Bath; Charles Harvey and Ruomei Yang, Newcastle University; and Frank Mueller, Durham University.
Tyler Durden
Sun, 03/28/2021 – 16:30
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