- How A United Iran, Russia, & China Are Changing The World
Submitted by Federico Pieraccini via Strategic-Culture.org,
The two previous articles have focused on the various geopolitical theories, their translations into modern concepts, and practical actions that the United States has taken in recent decades to aspire to global dominance. This segment will describe how Iran, China and Russia have over the years adopted a variety of economic and military actions to repel the continual assault on their sovereignty by the West; in particular, how the American drive for global hegemony has actually accelerated the end of the 'unipolar moment' thanks to the emergence of a multipolar world.
From the moment the Berlin Wall fell, the United States saw a unique opportunity to pursue the goal of being the sole global hegemon. With the end of the Soviet Union, Washington could undoubtedly aspire to planetary domination paying little heed to the threat of competition and especially of any consequences. America found herself the one and only global superpower, faced with the prospect of extending cultural and economic model around the planet, where necessary by military means.
Over the past 25 years there have been numerous examples demonstrating how Washington has had little hesitation in bombing nations reluctant to kowtow to Western wishes. In other examples, an economic battering ram, based on predatory capitalism and financial speculation, has literally destroyed sovereign nations, further enriching the US and European financial elite in the process.
Alliances to Resist
In the course of the last two decades, the relationship between the three major powers of the Heartland, the heart of the Earth, changed radically.
Iran, Russia and China have fully understood that union and cooperation are the only means for mutual reinforcement. The need to fight a common problem, represented by a growing American influence in domestic affairs, has forced Tehran, Beijing and Moscow to resolve their differences and embrace a unified strategy in the common interest of defending their sovereignty.
Events such as the war in Syria, the bombing of Libya, the overthrowing of the democratic order in Ukraine, sanctions against Iran, and the direct pressure applied to Beijing in the South China Sea, have accelerated integration among nations that in the early 1990s had very little in common.
Economic Integration
Analyzing US economic power it is clear that supranational organizations like the World Trade Organization, International Monetary Fund and the World Bank guarantee Washington’s role as the economic leader. The pillars that support the centrality of the United States in the world economy can be attributed to the monetary policy of the Fed and the function of the dollar as a global reserve currency.
The Fed has unlimited ability to print money to finance further economic power of the private and public sector as well as to pay the bill due for very costly wars. The US dollar plays a central role as the global reserve currency as well as being used as currency for trade. This virtually obliges each central bank to own reserves in US currency, continuing to perpetuate the importance of Washington in the global economic system.
The introduction of the yuan into the international basket of the IMF, global agreements for the Asian Infrastructure Investment Bank (AIIB), and Beijing’s protests against its treatment by the World Trade Organization (WTO) are all alarm bells for American strategists who see the role of the American currency eroding. In Russia, the central bank decided not to accumulate dollar reserves, favoring instead foreign currency like the Indian rupee and the Chinese yuan. The rating agencies – western financial-oligarchy tools -have diminishing credibility, having become means to manipulate markets to favor specific US interests. Chinese and Russian independent rating agencies are further confirmation of Beijing and Moscow’s strategy to undermine America’s role in western economics.
De-dollarization is occurring and proceeding rapidly, especially in areas of mutual business interest. In what is becoming increasingly routine, nations are dealing in commodities by negotiating in currencies other than the dollar. The benefit is twofold: a reduction in the role of the dollar in their sovereign affairs, and an increase in synergies between allied nations. Iran and India exchanged oil in rupees, and China and Russia trade in yuan.
Another advantage enjoyed by the United States, intrinsically linked to the banking private sector, is the political pressure that Americans can apply through financial and banking institutions. The most striking example is seen in the exclusion of Iran from the SWIFT international system of payments, as well as the extension of sanctions, including the freezing of Tehran's assets (about 150 billion US dollars) in foreign bank deposits. While the US is trying to crack down on independent economic initiatives, nations like Iran, Russia and China are increasing their synergies. During the period of sanctions against Iran, the Russian Federation has traded with the Islamic Republic in primary commodities. China has supported Iran with the export of oil purchased in yuan. More generally, Moscow has proposed the creation of an alternative banking system to the SWIFT system.
Private Banks, central banks, ratings agencies and supranational organizations depend in large part on the role played by the dollar and the Fed. The first goal of Iran, Russia and China is of course to make these international bodies less influential. Economic multipolarity is the first as well as the most incisive way to expand the free choice before each nation to pursue its own interests, thereby retaining its national sovereignty.
This fictitious and corrupt financial system led to the financial crisis of 2008. Tools to accumulate wealth by the elite, artificially maintaining a zombie system (turbo capitalism) have served to cause havoc in the private and public sectors, such as with the collapse of Lehman Brothers or the crisis in the Asian markets in the late 1990s.
The need for Russia, China and Iran to find an alternative economic system is also necessary to secure vital aspects of the domestic economy. The stock-market crash in China, the depreciation of the ruble in Russia, and the illegal sanctions imposed on Iran have played a profound role in concentrating the minds of Moscow, Tehran and Beijing. Ignoring the problem borne of the centrality of the dollar would have only increased the influence and role of Washington. Finding points of convergence instead of being divided was an absolute must and not an option.
A perfect example, explaining the failed American economic approach, can be seen in recent years with the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), two commercial agreements that were supposed to seal the economic trade supremacy of the US. The growing economic alternatives proposed by the union of intent between Russia, China and Iran has enabled smaller nations to reject the US proposals to seek better trade deals elsewhere. In this sense, the Free Trade Area of ??the Asia Pacific (FTAAP) proposed by Beijing is increasingly appreciated in Asia as an alternative to the TPP.
In the same way, the Eurasian Union (EAEU) and the Commonwealth of Independent States (CIS) have always been key components for Moscow. The function these institutions play was noticeably accelerated following the coup in Ukraine and the resulting need for Russia to turn east in search of new business partners. Finally, Iran, chosen by Beijing as the crossroad of land and sea transit, is a prime example of integration between powers geographically distant but with great intentions to integrate vital structures of commerce.
The Chinese model of development, called Silk Road 2.0, poses a serious threat to American global hegemonic processes. The goal for Beijing is to reach full integration between the countries of the Heartland and Rimland, utilizing the concept of sea power and land power. With an investment of 1,000 billion US dollars over ten years, China itself becomes a link between the west, represented by Europe; the east, represented by China itself; the north, with the Eurasian economic space; the south, with India; Southeast Asia; the Persian Gulf and Middle East. The hope is that economic cooperation will lead to the resolution of discrepancies and strategic differences between countries thanks to trade agreements that are beneficiary to all sides.
The role of Washington continues to be that of destruction rather than construction. Instead of playing the role of a global superpower that is interested in business and trade with other nations, the United States continues to consider any foreign decision in matters of integration, finance, economy and development to lie within its exclusive domain. The primary purpose of the United States is simply to exploit every economic and cultural instrument available to prevent cohesion and coexistence between nations. The military component is usually the trump card, historically used to impose this vision on the rest of the world. In recent years, thanks to de-dollarization and military integration, nations like Iran, Russia and China are less subject to Washington's unilateral decisions.
Military deterrence
Accompanying the important economic integration is strong military-strategic cooperation, which is much less publicized. Events such as the Middle East wars, the coup in Ukraine, and the pressure exerted in the South China Sea have forced Tehran, Moscow and Beijing to conclude that the United States represents an existential threat.
In each of the above scenarios, China, Russia and Iran have had to make decisions by weighing the pros and cons of an opposition to the American model. The Ukraine coup d’état brought NATO to the borders of the Russian Federation, representing an existential threat to the Russia, threatening as it does its nuclear deterrent. In the Middle East, the destruction of Iraq, Libya and Syria has obliged Tehran to react against the alliance formed between Saudi Arabia, Turkey and the United States. In China, the constant pressure on South China Sea poses a serious problem in case of a trade blockade during a conflict. In all these scenarios, American imperialism has created existential threats. It is for this reason natural that cooperation and technological development, even in the military area, have received a major boost in recent years.
In the event of an American attack on Russia, China and Iran, it is important to focus on what weapon systems would be used and how the attacked nations could respond.
Maritime Strategy and Deterrence
Certainly, US naval force place a serious question mark over the defense capabilities of nations like Russia, China and Iran, which strongly depend on transit via sea routes. Let us take, for example, Russia and the Arctic transit route, of great interest not only for defense purposes but also being a quick passage for transit goods. The Black Sea for these reasons has received special attention from the United States due to its strategic location. In any case, the responses have been proportional to the threat.
Iran has significantly developed maritime capabilities in the Persian Gulf, often closely marking ships of the US Navy located in the area for the purposes of ??deterrence. China's strategy has been even more refined, with the use of dozens, if not hundreds, of fishing boats and ships of the Coast Guard to ensure safety and strengthen the naval presence in the South and East China Sea. This is all without forgetting the maritime strategy outlined by the PLA Navy to become a regional naval power over the next few years. Similar strategic decisions have been taken by the navy of the Russian Federation. In addition to having taken over ship production as in Soviet times, it has opted for the development of ships that cost less but nevertheless boast equivalent weapons systems to the Americans carrier groups.
Iran, China and Russia make efficiency and cost containment a tactic to balance the growing aggressiveness of the Americans and the attendant cost of such a military strategy.
The fundamental difference between the naval approach of these countries in contrast to that of the US is paramount. Washington needs to use its naval power for offensive purposes, whereas Tehran, Moscow and Beijing need naval power exclusively for defensive purposes.
In this sense, among the greatest weapons these three recalcitrant countries possess are anti-ship, anti-aircraft and anti-ballistic systems. To put things simply, it is enough to note that Russian weapons systems such as the S-300 and S-400 air-defense systems (the S-500 will be operational in 2017) are now being adopted by China and Iran with variations developed locally. Increasingly we are witnessing an open transfer of technology to continue the work of denying (A2/AD) physical and cyberspace freedom to the United States. Stealth aircraft, carrier strike groups, ICBMs and cruise missiles are experiencing a difficult time in such an environment, finding themselves opposed by the formidable defense systems the Russians, Iranians and Chinese are presenting. The cost of an anti-ship missile fired from the Chinese coast is considerably lower than the tens of billions of dollars needed to build an aircraft carrier. This paradigm of cost and efficiency is what has shaped the military spending of China, Russia and Iran. Going toe to toe with the United States without being forced to close a huge military gap is the only viable way to achieve immediate tangible benefits of deterrence and thereby block American expansionist ambitions.
A clear example of where the Americans have encountered military opposition at an advanced level has been in Syria. The systems deployed by Iran and Russia to protect the Syrian government presented the Americans with the prospect of facing heavy losses in the event of an attack on Damascus. The same also holds for the anti-Iranian rhetoric of certain American politicians and Israeli leaders. The only reason why Syria and Iran remain sovereign nations is because of the military cost that an invasion or bombing would have brought to their invaders. This is the essence of deterrence. Of course, this argument only takes into partial account the nuclear aspect that this author has extensively discussed in a previous article.
The Union of the nations of the Heartland and Rimland will make the United States irrelevant
The future for the most important area of ??the planet is already sealed. The overall integration of Beijing, Moscow and Tehran provides the necessary antibodies to foreign aggression in military and economic form. De-dollarization, coupled with an infrastructure roadmap such as the Chinese Silk Road 2.0 and the maritime trade route, offer important opportunities for developing nations that occupy the geographical space between Portugal and China. Dozens of nations have all it takes to integrate for mutually beneficial gains without having to worry too much about American threats. The economic alternative offered from Beijing provides a fairly wide safety net for resisting American assaults in the same way that the military umbrella offered by these three military powers, such as with the the SCO for example, serves to guarantee the necessary independence and strategic autonomy. More and more nations are clearly rejecting American interference, favoring instead a dialogue with Beijing, Moscow and Tehran. Duterte in the Philippines is just the latest example of this trend.
The multipolar future has gradually reduced the role of the United States in the world, primarily in reaction to her aggression seeking to achieve global domination. The constant quest for planetary hegemony has pushed nations who were initially western partners to reassess their role in the international order, passing slowly but progressively into the opposite camp to that of Washington.
The consequences of this process have sealed the destiny of the United States, not only as a response to her quest for supremacy but also because of her efforts to maintain her role as the sole global superpower. As noted in previous articles, during the Cold War the aim for Washington was to prevent the formation of a union between the nations of the Heartland, who could then exclude the US from the most important area of ??the globe. With the fall of the Iron Curtain, sights were set on an improbable quest to conquer the Heartland nations with the intent of dominating the whole world. The consequences of this miscalculation have led the United States to being relegated to the role of mere observer, watching the unions and integrations occurring that will revolutionize the Eurasian zone and the planet over the next 50 years. The desperate search to extend Washington's unipolar moment has paradoxically accelerated the rise of a multipolar world.
In the next and final article, I will throw a light on what is likely to be a change in the American approach to foreign policy. Keeping in mind the first two articles that examined the approach by land theorized by MacKinder as opposed to the Maritime Mahan, we will try and outline how Trump intends to adopt a containment approach to the Rimland, limiting the damage to the US caused by a complete integration between nations such as Russia, China, Iran and India.
- U.S. Healthcare Is A Global Outlier (And Not In A Good Way)
Historically, the United States has spent more money than any other country on healthcare.
In the late 1990s, for example, the U.S. spent roughly 13% of GDP on healthcare, compared to about a 9.5% average for all high income countries.
However, as Visual Capitalist's Jeff Desjardins notes, in recent years, the difference has become more stark. Last year, as Obamacare continued to roll out, costs in the U.S. reached an all-time high of 17.5% of GDP. That’s over $3 trillion spent on healthcare annually, and the rate of spending is expected accelerate over the next decade.
HIGH COSTS, HIGH BENEFIT?
With all that money being poured into healthcare, surely the U.S. must be getting better care in contrast to other high income countries.
At least, that’s what one would think.
Today’s chart comes to us from economist Max Roser (h/t @NinjaEconomics) and it shows the extreme divergence of the U.S. healthcare system using two simple stats: life expectancy vs. health expenditures per capita.
Courtesy of: Visual CapitalistTHE DIVERGENCE OF U.S. HEALTHCARE
As you can see, Americans are spending more money – but they are not receiving results using the most basic metric of life expectancy. The divergence starts just before 1980, and it widens all the way to 2014.
It’s worth noting that the 2015 statistics are not plotted on this chart. However, given that healthcare spend was 17.5% of GDP in 2015, the divergence is likely to continue to widen. U.S. spending is now closing in on $10,000 per person.
Perhaps the most concerning revelation from this data?
Not only is U.S. healthcare spending wildly inefficient, but it’s also relatively ineffective. It would be one thing to spend more money and get the same results, but according to the above data that is not true. In fact, Americans on average will have shorter lives people in other high income countries.
Life expectancy in the U.S. has nearly flatlined, and it hasn’t yet crossed the 80 year threshold. Meanwhile, Chileans, Greeks, and Israelis are all outliving their American counterparts for a fraction of the associated costs.
- How George Soros Destroyed The Democratic Party
Submitted by Daniel Greenfield via FrontPageMag.com,
It was the end of the big year with three zeroes. The first X-Men movie had broken box office records. You couldn’t set foot in a supermarket without listening to Brittney Spears caterwauling, “Oops, I Did It Again.” And Republicans and Democrats had total control of both chambers of legislatures in the same amount of states. That was the way it was back in the distant days of the year 2000.
In 2016, Republicans control both legislative chambers in 32 states. That’s up from 16 in 2000.
What happened to the big donkey? Among other things, the Democrats decided to sell their base and their soul to a very bad billionaire and they got a very bad deal for both.
It was 2004. The poncho was the hottest fashion trend, there were 5 million new cases of AIDS and a former Nazi collaborator had bought the Democrat Party using the spare change in his sofa cushions.
And gone to war against the will of the people. This was what he modestly called his own “Soros Doctrine”.
“It is the central focus of my life,” George Soros declared. It was “a matter of life and death.” He vowed that he would become poor if it meant defeating the President of the United States.
Instead of going to the poorhouse, he threw in at least $15 million, all the spare change in the billionaire’s sofa cushions, dedicated to beating President Bush.
In his best lisping James Bond villain accent, Soros strode into the National Press Club and declared that he had “an important message to deliver to the American Public before the election” that was contained in a pamphlet and a book that he waved in front of the camera. Despite his “I expect you to die, Mr. Bond” voice, the international villain’s delivery was underwhelming. He couldn’t have sold brownies to potheads at four in the morning. He couldn’t even sell Bush-bashing to a roomful of left-wing reporters.
But he could certainly fund those who would. And that’s exactly what he did.
Money poured into the fringe organizations of the left like MoveOn, which had moved on from a petition site to a PAC. In 2004, Soros was its biggest donor. He didn’t manage to bring down Bush, but he helped buy the Democratic Party as a toy for his yowling dorm room of left-wing activists to play with.
Soros hasn’t had a great track record at buying presidential elections. The official $25 million he poured into this one bought him his worst defeat since 2004. But his money did transform the Democrat Party.
And killed it.
Next year the Democracy Alliance was born. A muddy river of cash from Soros and his pals flowed into the organizations of the left. Soros had helped turn Howard Dean, a Vermont politician once as obscure as this cycle’s radical Vermont Socialist, into a contender and a national figure. Dean didn’t get the nomination, but he did get to remake the DNC. Podesta’s Center for American Progress swung the Democrats even further to the left. And it would be Podesta who helped bring Hillary down.
The Democrats became a radical left-wing organization and unviable as a national political party. The Party of Jefferson had become the Party of Soros. And only one of those was up on Mount Rushmore.
Obama’s wins concealed the scale and scope of the disaster. Then the party woke up after Obama to realize that it had lost its old bases in the South and the Rust Belt. The left had hollowed it out and transformed it into a party of coastal urban elites, angry college crybullies and minority coalitions.
Republicans control twice as many state legislative chambers as the Democrats. They boast 25 trifectas , controlling both legislative chambers and the governor’s mansion. Trifectas had gone from being something that wasn’t seen much outside of a few hard red states like Texas to covering much of the South, the Midwest and the West.
The Democrats have a solid lock on the West Coast and a narrow corridor of the Northeast, and little else. The vast majority of the country’s legislatures are in Republican hands. The Democrat Governor’s Association has a membership in the teens. In former strongholds like Arkansas, Dems are going extinct. The party has gone from holding national legislative majorities to becoming a marginal movement.
And the Democrats don’t intend to change course. The way is being cleared for Keith Ellison, the co-chair of the Congressional Progressive Caucus with an ugly racist past, to head the DNC. Pelosi will oversee the disaster in the House. And Obama will remain the party’s highest profile national figure.
There could hardly be a clearer signal that the left intends to retain its donkey herding rights. Soros and his ilk have paid for the reins. That is why Pelosi, with her access to donors, will retain her position.
The left had recreated the Democrat Party and marginalized it. Much of this disaster had been funded with Soros money. Like many a theatrical villain, the old monster had been undone by his own hubris. Had Soros aided the Democrats without trying to control them, he would have gained a seat at the table in a national party. Instead he spent a fortune destroying the very thing he was trying to control.
George Soros saw America in terms of its centers of economic and political power. He didn’t care about the vast stretches of small towns and villages, of the more modest cities that he might fly over in his jet but never visit, and the people who lived in them. Like so many globalists who believe that borders shouldn’t exist because the luxury hotels and airports they pass through are interchangeable, the parts of America that mattered to him were in the glittering left-wing bubble inhabited by his fellow elitists.
Trump’s victory, like Brexit, came because the left had left the white working class behind. Its vision of the future as glamorous multicultural city states was overturned in a single night. The idea that Soros had committed so much power and wealth to was of a struggle between populist nationalists and responsible internationalists. But, in a great irony, Bush was hardly the nationalist that Soros believed. Instead Soros spent a great deal of time and wealth to unintentionally elect a populist nationalist.
Leftists used Soros money to focus on their own identity politics obsessions leaving the Dems with little ability to interact with white working class voters. The Ivy and urban leftists who made up the core of the left had come to exist in a narrow world with little room for anything and anyone else.
Soros turned over the Democrats to political fanatics least likely to be able to recognize their own errors. His protégés repeated the great self-destruction of the Soviet Union on a more limited scale
Soros fed a political polarization while assuming, wrongly, that the centers of power mattered, and their outskirts did not. He was proven wrong in both the United States of America and in the United Kingdom. He had made many gambles that paid off. But his biggest gamble took everything with it.
"I don’t believe in standing in the way of an avalanche," Soros complained of the Republican wave in 2010.
But he has been trying to do just that. And failing.
"There should be consequences for the outrageous statements and proposals that we've regularly heard from candidates Trump and Cruz," Soros threatened this time around. He predicted a Hillary landslide.
He was wrong.
As Soros plowed more money into the left, its escalating radicalism alienated more of the country. Each “avalanche” was a reaction to the abuses of his radicals. It wasn't Trump or Cruz who suffered the consequences. It wasn't even his own leftists. Rather it was the conservative and eventually the moderate wings of the Democrat party who were swept away by his left-wing avalanches.
The left did not mourn the mass destruction of the moderates. Instead it celebrated the growing purity of the Democrats as a movement of the hard left. It did not notice or care that it was no longer a political force outside a limited number of cities. It anticipated that voters would have no choice but to choose it over the "extremist" Republicans.
It proved to be very, very wrong.
George Soros spent a fortune to turn a national party favorable to the left into an organization that has difficulty appealing to anyone not on the left. He wanted to control a country he did not understand. And, as the left so often does, he achieved his goals and in doing so destroyed them.
- Is 2017 The Year Silicon Valley Experiences The Dark Side Of "It's Different This Time"?
With 2016 now in the rearview mirror. The one thing that was supposed to be included in that vision was the successful resurgence of IPO’s across “The Valley”. 2016 was supposed to be “the year” of the comeback for unicorn cash-out dreams after what can only be described as a “not as advertised” 2015. For if one needs remembering: 2015 was the worst year for tech IPO’s since 2009.
Here’s another problem nobody seems willing to discuss: 2015 may have been the high-water mark going forward when compared to 2016. Yet, not too worry we’re told! For has been reported via many a media source 2017 is shaping up be? Hint: The year it comes back.
Here is a chart from an article just this past August titled “Tech IPO Clog Poised To Burst” To wit:
The prevailing premise, once again, throughout “The Valley” is that “next year” should be the return of those unicorn dreams. After all, how could 2016 be any worse than 2015 was the premise at the beginning of year. The issue? Look at the above chart for clues. Or, as we like to say here in reality, “A whole lot worse!” For 2016 now makes not only 2008 look good. It makes 2009 look terrific in comparison.
Yet, this hasn’t slowed down one next-in-rotation fund manager to proclaim how “social” or “tech” is just “crushing it”. The real issue is that many who have “invested” based on a lot of this trite have found their portfolios have been the ones getting crushed. Case in point: Twilio™. To wit:
(Source)
Now I’m not intentionally pointing out this company for any other reason than its IPO was proclaimed across the media and “The Valley” as to be “the” one as to show just how resilient not only the demand for IPO’s would be, but also how “worth it” their heralded valuations were. Once again, the problem? It did just that.
I have read articles emanating from “The Valley” as late as only weeks ago where it’s touted Twillio’s share price is up over 111% since it’s IPO. Sounds great, but it’s not only disingenuous, it’s damn right shameful to use that as the sole metric for validity to the premise that IPO’s or “tech’s” resurgence when looking at the above chart. For if you are one of the unfortunate that bought shares on the open market only a few weeks after the IPO? There’s no “crushing it” gains for you – you got crushed, with probably more pain to come.
There was also another “It’s different this time” proclamation which was supposed to prove 2016 to all the “nay-sayers” just how much people like myself “don’t get” social/tech/The Valley/etc. For it was we who needed to see the brilliance of their decision-making processes. And none was so heralded as to what 2016 was supposed to be than the resurgence of Twitter™, with its now multi-tasking CEO.
How did all that work out? Well, as they say in “The Valley”, let’s look at another “picture” shall we?
Again, all I’ll say to the above is this: If this is what the term “crushing it” now means in “The Valley”? I envision 2017 is going to take crushing up to 11!
So with all the above for some context. No opinion for comparison would be complete without also including the “holy grail” of everything tech/The Valley/IPO’s, and more. Let alone all that it is said to encompass: Facebook™ (FB).
Now one couldn’t be held for lying to state FB stock is indeed up since the end of 2015. However, would that be telling you the “truth” if one was to only state that one metric? Especially if you were trying to get a correct handle of the “health” or “potential profits” still promised in the “everything social” land of riches arguments?
As I highlighted on the chart above: If you purchased shares on Feb 1st of 2016 after what was heralded as an earnings report that “crushed it”, and was touted as (here’s that term again) “the” earnings report to shut all the “doom-and-gloomers” up once and for all. Guess what? Hint: You’re right back where you started.
And for those who decided 2016 was indeed the year where “tech” resurged and was caught up in the whole IPO of the afore-mentioned Twillio in July? It’s more than likely FB in 2016 is now a wash at best, a painful loss at worse. For it fell over 15% lower a mere 45-ish trading days later after those “lifetime highs” to end the year.
However even that doesn’t really encapsulate the whole. For if one can remember (after all it was just these last few weeks) the “markets” have been on an absolute tear to make (once again) never before seen in the history of mankind highs. And what was FB’s valuation doing during all this? Hint: Look at the chart above. e.g., The exact opposite.
Another meme that keeps getting perpetuated is the argument “There’s still so much V.C. capital just looking for investment it must surely mean these companies (i.e., The Unicorns) have legitimate ‘so worth it’ valuations for further cash-out riches. This alone proves the nay-sayers don’t know what they’re talking about.” To which I say: Really? Then let’s argue a few points shall we?
Let me start with this one point: If I said to you, “Hey, want me to show you how to make $1.00 into millions”? You’d probably wouldn’t even dignify the response with a no, you’d just walk away for you knew (at least I hope you would) if it seems to good to be true, it probably is. Now, with that said answer this:
How is “investing” some trifle sum (e.g., a few $Million) which instantaneously gives one the ability to claim they’re worth $Billions any different? Couple that with – the metrics for those claims are all based on “because they say so”.
Yes, the accounting for said valuations are based on 1+1= whatever we say it is. Not anything which is based in reality as you or I may understand. Or said differently: It makes Non-GAAP accounting look down right conservative in comparison.
This is the dirty-liitle-secret in the underbelly of all that is “unicorn” in my view. And sooner, rather than later, I believe this spurious type of accounting will someday find its way into the courts and be abolished. However, that’s for another day.
If you want an example? Try to square-the-circle that Theranos™ (remember them?) along with its founder Elizabeth Holmes was not only said to be worth, but was proclaimed throughout the business media that she personally was worth a fortune of $4.5 BILLION dollars. While the company itself was worth some $9 BILLION based on what I found to be one of the best lines (as in the form of a question) I can remember that came back in July from a Fortune™ article. The line?
“How on earth did it [Theranos] manage to raise $400 million in funding at a $9 billion valuation?”
Yes indeed, it was a good question. Problem was people like myself have been asking that of unicorns since 2008. Not after one of its most proclaimed archetype’s crashes and burns where even the likes of Icarus himself might marvel.
And speaking of “unicorns”. As 2016 has now come and gone what are we supposed to infer by the ever-increasing troubles emanating from the prized “decacorn” holding stable? (e.g., The Uber™, AirBnB™ types et al)
It would seem with every passing day (which has now morphed into years) waiting for that “perfect” cash-out point as to IPO seems to only be met with one reglatory hurdle after another. Which could, if found the ruling/rulings go against them, eviscerate their valuation-gone-wild models/metrics that would make even a glue factory blush for efficiency.
Uber is being sued (again) based on workers wages, classification, and more. China is now an after thought which in 2016 was supposed to be its primary goal if I’m not mistaken. And AirBnB still has its regulatory hurdles to be weeded out through the courts. If many of these go against them, then they face an all too, and very real valuation problem do they not?
Oh, yeah, and don’t forget “decacorn” stands for a unicorn worth $10’s of BILLIONS in valuation terms. You know where “The Valley” states reality for making the argument that a so-called “glorified taxi-app” is said to be worth more than the likes of GM™, Ford™, Nissan™, Hyundai™, and others, because “Its disruptive”, so of course “It’s totally worth it” and it must be worth more.
That’s not hyperbole on my part. You can find those exact words and arguments across the media and especially anywhere that’s Silicon Valley centric. Again, truly ponder that last statement. And if in the end you can’t shake an image of a sock-puppet from entering your mind? Don’t worry, I believe that proves you can still think clearly and understand true reality.
So now why has all the above happened? And why do I believe there’s far more of a “dark side” to all this “it’s different this time” fantasy world that Silicon Valley or “The Valley” as I like to say hasn’t a clue is on the horizon?
Here’s the equation I believe will not only send shock waves, but will bring down many a valuation edifice within “The Valley” in 2017. And here it is:
First: The Fed. And Second: Rate hikes.
Two very short sentences containing nothing more than two words each but their implications could have exponentially explosive results. For what they portend is that “It’s different this time” may indeed be exactly that.
What I hoped you may have noticed during this discussion is the one thing myself and very few others pointed out would happen if the hypothesis we’ve been articulating over the last few years was correct. That hypothesis has always been “Without the Fed. pumping in unlimited funds via the QE programs, and a “death-grip” to the zero bound (aka ZIRP) the first ones to show how much of a facade these “markets” where would be seen directly in the “tech” space.
Notice anything similar in any of the above? Hint: Without QE, everything came to a screeching halt at best, and a complete reversal of fortunes for many at worst. And I believe it’s only just begun. Why?
This past December, much like the one in 2015, the Fed. once again raised rates. However, this one in-particular is the one that may catch a lot of onlookers (especially most of the financial press) by surprise, and it’s for this reason:
If you watched the presser (and I suggest one do just that) following the rate hike given by Ms. Yellen, one thing is very front and center: She vociferously argued, or defended the idea of not only raising, but raising more than many presumed (now the working number of hikes is up to 3 from 2) coupled with her again animated defense of possibly even raising more, and more quickly should the Fed’s assessment to anything “fiscal” coming out of congress warrants it. When only weeks before she was arguing a possible need to run a “high-pressure” economy. That in-and-of-itself is a 180 from her (e.g., The Fed’s) implied stance.
(Just to clarify: “vociferously” and “animated” for Ms. Yellen is my assessment as I compare to her characteristic usually monotone readings or discussions at other events. Your interpretations may differ.)
So now with the 800lb. “It’s different this time” gorilla in the room I’d like to make a hypothesis for you to consider. I’m not saying “prediction” because that’s for fools. Nobody, and mean just that no-body knows what the future holds. All we can do is “look at the charts” (i.e., teas leaves) coupled with our best assumptions of what is correlation and/or causation, filtered through any acumen we might have gained over the years, then hopefully put ourselves in the best position for either possible gain, or to sidestep harm. Nothing more.
If we look only at the above charts to my eye one thing can be rationally inferred: Without the Fed. the “everything social” argument is D.O.A. Period.
What can also be logically asked is this: Why did FB’s valuation begin dropping and has never recovered during which supposedly as we were all being screamed at that “They were crushing it!” in every metric or mobile assumption. Again, it was touted as “You nay-sayers just don’t get it!” And yet, their valuation kept falling? And continued in the face of a rally into year-end that’s now gone into the record books under the classification of “historic”?
Was this in part due to a reasonable assumption that the one buyer who was buying so much stock in FB during 2016 promptly decided if the Fed. was indeed going to raise it couldn’t buy any more out of concerns of future funding costs?
Oh, and just to clarify – that buyer was the Swiss National Bank. Second to none in its FB shareholdings. Yes, even to Mark himself.
And if one can answer “yes” to that question in even a remote possibility, then what does that do to a whole lot of other companies within the “markets”? Hint: Here’s just one article for you to ponder coupled with the above implications. To wit:
Once again I can’t make this argument more forcefully than what the “tea leaves” or “charts” imply surrounded with the rationalization that the Fed. may indeed be far more aggressive in hiking with this new administration in power than the previous. And if that has even the remotest possibilities of being true? Based on what one could reasonably infer that took place over 2016 in total?
“It’s different this time” may take on a meaning never dreamed of within Silicon Valley, “The Valley”, and in particular, the “markets” as a whole.
And if I’m wrong, I’ll just leave you with one last point to consider…
If there’s so much more room to go in the “everything social” model as is professed via the media and every next-in-rotation fund manager that can elbow their way onto a television set. As one of my favorite Batman® characters was fond of saying, “Riddle me this!”
If FB, and or the “everything social” model is still in its nascent beginnings with so much more room to grow? Then why was Mark Zuckerberg ready, and seemingly willing in 2016 to sell his shares, and leave FB with the very real possibly of having to give up control to go into politics for two years? You know – if FB is the end all, be all of the “everything social” argument?
All I’ll say is this: “The Valley” had better be hoping – it is a whole lot different this time – than what it may end up being.
We shall see soon enough.
- California Democrats Legalize Child Prostitution
A couple of days ago we highlighted some of the ridiculous new state laws that will go into effect across the country starting today (see “Here Are Some Of The Ridiculous New State Laws That Will Take Effect January 1st – Happy New Year!“). And while there was plenty of lunacy noted within the post, apparently we overlooked one of California’s finest achievements of 2016, namely the legalization of child prostitution.
Now, we know what you’re thinking…California’s liberal lawmakers in Sacramento are certainly well left of center and maybe a bit kooky but they would never do something quite that ridiculous. Well, we had the same thought so we decided to track down the actual text of the legislation, Senate Bill No. 1322, and, unfortunately, they did do something that ridiculous.
Below is the first page of SB1322 which notes that while “existing law makes it a crime to solicit or engage in any act of prostitution” SB1322 “would make the above provisions inapplicable to a child under 18 years of age.”
Of course, as the LA Times pointed out, the bill, which was authored by Los Angeles Democrat Holly Mitchell, is founded on the premise that keeping young children out of the juvenile justice system and instead placing them in the hands of Social Services would be better for their ultimate rehabilitation.
Gov. Jerry Brown in 2014 signed legislation placing sex trafficking victims without legal guardians under the authority of the dependency system, which centers on caring for abused and neglected children.
SB 1322 drew the support of a large coalition of advocates who said the bill was a step further in that direction, taking young victims entirely out of the juvenile justice system. But law enforcement officials oppose the move, saying the state’s child welfare system is woefully low on resources.
And while Mitchell’s efforts may be well intentioned, it simply proves once again how completely ignorant our elected officials are to the unintended consequences resulting from the practical application of their ridiculous laws. Certainly anyone with just a modest IQ and a touch of business sense, should be able to quickly deduce that SB 1322 provides a huge incentive for pimps and human traffickers to target underage girls rather than adults. As Travis Allen, a rare California Republican serving in Sacramento, noted in an op-ed published by the Washington Examiner, “immunity from arrest means law enforcement can’t interfere with minors engaging in prostitution — which translates into bigger and better cash flow for the pimps.”
Unfortunately, the reality is that the legalization of underage prostitution suffers from the fatal defect endemic to progressive-left policymaking: it ignores experience, common sense and most of all human nature — especially its darker side.
The unintended but predictable consequence of how the real villains — pimps and other traffickers in human misery — will respond to this new law isn’t difficult to foresee. Pimping and pandering will still be against the law whether it involves running adult women or young girls. But legalizing child prostitution will only incentivize the increased exploitation of underage girls. Immunity from arrest means law enforcement can’t interfere with minors engaging in prostitution — which translates into bigger and better cash flow for the pimps. Simply put, more time on the street and less time in jail means more money for pimps, and more victims for them to exploit.
As Alameda County District Attorney Nancy O’Malley, a national leader on human trafficking issues, told the media, “It just opens up the door for traffickers to use these kids to commit crimes and exploit them even worse.” Another prosecutor insightfully observed that if traffickers wrote legislation to protect themselves, it would read like SB 1322.
So, congratulations on the new legislation, Ms. Mitchell. Just like your $15 minimum wage will simply result in a whole bunch of low-income folks getting fired over the coming years, we suspect you just doomed a lot more vulnerable teenage girls to the sex trade.
Senate Bill 1322 can be read in its entirety below:
- The Same Idiots Who Pushed the Iraq War Are Now Stirring Up Hysteria About Russia
The propaganda about Iraq having weapons of mass destruction was one of the most blatant examples of “fake news” in American history.
Now, many of the same idiots who pushed the Iraq war lies are stirring up hysteria about Russia.
For example, the Washington Post’s editorial page editor Fred Hiatt cheerleaded for the Iraq war. Now, the Washington Post under Hiatt’s leadership has been the main source of the most breathless anti-Russian hysteria.
ABC News political analyst Matthew Dowd – chief strategist for the Bush-Cheney ’04 presidential campaign – was a big booster for the Iraq war. Now, Dowd Tweets that you’re only a patriot if you blindly accept what President Obama and the intelligence services claim without any proof.
George W. Bush’s speechwriter David Frum – who pushed many of the biggest lies about the Iraq war – is now trying to ridicule anyone who doesn’t accept the evidence-less claims that Russia hacked the Democratic party as a Kremlin stooge.
Similarly, Jonathan Chait championed the Iraq war. And now he’s ridiculing those asking for evidence before jumping headlong into anti-Russia hysteria.
These guys all have a track record of pushing false stories which get us into disastrous wars … why should we listen to them now?
Other Recent Stories:
- If There Really Was Evidence Of Russian Hacking, The NSA Would Have It
Submitted by David Spring via TurningPointNews.org,
On December 29, 2016, the Hill posted an article discussing a 13 page report by the FBI and DHS claiming that their 13 page report was “evidence” of Russian hacking in US elections.
http://thehill.com/policy/national-security/312132-fbi-dhs-release-report-on-russia-hackingWikileaks has repeatedly stated that the source of its leaks was a disgruntled Democratic Party insider.
http://www.dailymail.co.uk/news/article-4034038/Ex-British-ambassador-WikiLeaks-operative-claims-Russia-did-NOT-provide-Clinton-emails-handed-D-C-park-intermediary-disgusted-Democratic-insiders.htmlHowever, President Obama issued a press release on December 29 2016 using the DHS-FBI report to justify increasing sanctions against Russia.
https://www.whitehouse.gov/the-press-office/2016/12/29/statement-president-actions-response-russian-malicious-cyber-activityI therefore decided to see what the evidence was of Russian involvement in US Elections. The Hill article linked to this 13 page government press release as its proof of Russian hacking.
https://www.us-cert.gov/sites/default/files/publications/JAR_16-20296.pdfThe government press release written by DHS-FBI did not mention Wikileaks in its report. Nor did the report provide any evidence of Russian hacking in the US elections. Instead, the press release stated that “technical indicators” of Russian hacking were in the “CSV file and XML file attached with the PDF.” However, there was no CSV or XML file or link attached with the PDF. I was eventually able to find these two files at this link.
https://www.us-cert.gov/security-publications/GRIZZLY-STEPPE-Russian-Malicious-Cyber-ActivityTo see the evidence of Russian hacking first hand, I downloaded the CSV file and converted it into a spreadsheet. The CSV file and the XML file both contained the same data. Here is the XML link to this data which can be viewed online in a web browser.
https://www.us-cert.gov/sites/default/files/publications/JAR-16-20296.xmlBoth files provide a list of 895 “indicators” of Russian Hacking. Unfortunately, nearly all of these indicators are simply IP addresses. In other words, it is a list of 895 servers from from more than 40 countries around the world. But the list also includes a few website domain names. (Domain names are simply the name of the website such as Youtube.com). I looked up these website domain names with the the following tool which tells us who owns the domain names and where they are located:
https://www.whois.net/My review of these domain names confirmed that none of these domain names have any relationship to Russian government hackers. Here are the results for four of the domain names provided by the DHS and the FBI as evidence of Russian hacking:
ritsoperrol.ru is not in use. It is registered to a private person. The named server hosting the domain is nserver: ns0.xtremeweb.de. This is a German web hosting and consulting company whose address and phone number are publicly listed on their website. It is highly unlikely that Russian hackers would use a public German web host to register and host their domain names.
littlejohnwilhap.ru is not in use and is available to be purchased. It is unlikely that Russian hackers would use a domain name like this to launch a cyber attack on the US.
wilcarobbe.com is taken and is not in use. It is registered to Arsen Ramanov in Groznenskaya Russia. His address, phone number and email address are all publicly listed. It is highly unlikely that Russian hackers would use a domain name that was publicly listed. Hackers are not idiots.
one2shoppee.com is taken and is registered with GoDaddy.com. It is not currently in use. But it is highly unlikely that Russian Hackers would register their domain names with GoDaddy – which is a US server. In fact, it is very unlikely that Russian hackers would ever use any US servers. They would only use their own servers.
How did these four domain names get on a list of Russian hackers? It is possible that some unknown agents took over these domain names and may have used them for some kind of hacking activity. However, the agents could have just as easily been from the US as from Russia. In fact, it is not likely that these domain names were taken over by Russian hackers for the simple reason that Russian hackers are way to smart to be using these silly tactics.
None of the 885 IP addresses have any confirmed relationship to Russian Government Hackers
An IP address is simply a numerical designation for a server. The 885 IP addresses listed in the DHS – FBI CSV file were even more interesting. The IP addresses were located on servers from the US and more than 40 nations around the world including more than 30 IP addresses supposedly located in China. Here are a few of the IP addresses
- 167.114.35.70
- 185.12.46.178
- 46.102.152.132
- 178.20.55.16
I looked up several of these IP addresses using the following tool:
http://whatismyipaddress.com/ip-lookupHere are a four examples of IP addresses in the DHS-FBI report:
167.114.35.70 is a Canadian Corporate server specializing in the promotion of Bitcoin. They are within a few miles of the US border.
185.12.46.178 is a Swiss corporate server associated with the domain name leavesorus.com. The domain name leavesorus.com is currently available to be purchased. This indicates that this is a fake domain name and likely a fake corporation.
46.102.152.132 is another Swiss corporate server this one specializing in emails and associated with the domain name maxsultan.xyz which is a fake domain name. This also indicates that this is another fake corporation.
178.20.55.16 is a proxy server with no known location but has been used as a TOR router exit node. A proxy server is another name for a mirror or server used to bounce information from one server to another in order to hide the true location of the original server. This proxy server is associated with the domain name nos-oignons.net. This domain name was registered on December 31 2012 and is valid until December 31 2017. In other words, whoever got this domain name paid for its use for 5 years. But they did registered the domain name anonymously. The website associated with this server appears to be a group in France promoting the TOR router. They became an association in May 2013 – 5 months after getting the domain name. The group currently has 5 members and it costs one Euro to join this group. Their website was reported 9 days ago as having been infected with the Zues virus. This infection does not leave tracks on server logs. So it is difficult to tell where it came from. Removal of this virus requires a complete rebuild of the server. In short, some agency decided to take out this server and then use it to make a cyber attack on some US government agency and thus have the IP address listed on the DHS-FBI list as one of 895 indicators of Russian hacking.
Many of the IP addresses yielded the same dead end or otherwise highly suspicious result – meaning that some very large agency is using hundreds of servers in various countries around the world as a front for hacking attacks. I recently researched a series of attacks on my personal websites from hundreds of IP addresses using hundreds of servers that were supposedly located in the Ukraine. I was able to confirm the exact location in the Ukraine that was supposedly being used to launch literally thousands of attacks on my websites. However, it is not credible that anyone in the Ukraine has the millions of dollars needed to be running hundreds of servers in a remote Ukrainian location. Nor is it likely that anyone in rural Ukraine would even have the knowledge to take care of hundreds of servers even if they did have the millions of dollars needed to plow into buying these servers. Nor are they likely to have the knowledge needed to be running very complex cyber attacks. Ukraine is just not a good location for servers. This experience convinced me that attacks were being launched from other locations and were merely being routed through Ukraine in order to mislead people about where the attacks were really coming from.
Next, the CSV file provided by DHS-FBI listed the physical location of all 885 IP addresses. What is most ironic is that, only two of the 885 IP addresses were from servers in Russia. The most common location of the hacking servers was the United States. Over 30 of the servers were supposedly located in China. But it is known that the NSA has the ability to use satellite mirrors to hide the locations of their servers – making folks believe that the attacks are coming from China (or Ukraine or Mongolia) when in fact they are coming from servers located in the US.
Here are 50 more servers. Again, no Russians:
Here are 50 more servers. How can servers in the US be used as evidence of Russian hacking?
Here is another batch of 50 servers. Again, no Russians.
Wait a Minute… Is this the Smoking Gun???
Actually, there were two Russian servers located on lines 259 and 261. Here are the IP addresses.- 93.171.203.244
- 95.105.72.78
Here is more information about each of these:
93.171.203.244 This is a clean broadband server located near Ufa which is a city in Russia with one million people. It is associated with an organization called Miragroup Ltd. The website is rxbrothers.ru. Naturally, this is a fake domain name which is available to be purchased. Miragroup is actually a corporation located in Great Britain.
95.105.72.78 is another clean broadband server located near Ufa. The organization is JSC Ufanet and the website is ufanet.ru which is a public broadband service started in 1997. Someone apparently is using this broadband service to hack the US government. Could this be the smoking gun that the Russian government is attacking the US? Think about it. If you were a Russian hacker, would you really use a public server located in some Russian town? I don’t think so. This is more like evidence that some hacker was using the local public library.
Imagine someone launching a cyber attack from the Seattle Public library – and then our government declaring that they have evident that the mayor of the City of Seattle was responsible for the attack because “nothing happens in Seattle without the approval of the Mayor!”. This is worse than a silly accusation. It is ridiculous. It is irresponsible.
Real Russian Hackers do not use Windows Servers
Only three of the servers provided in the DHS/FBI report included detailed information (despite the fact that the IP addresses provided information on all 895 servers and that DHS/FBI certainly have detailed information on all of the servers). All three servers listed in the report were Windows servers. It is highly unlikely that Russian hackers or Chinese hackers would be using Windows servers. Instead, all real hackers use Linux servers because Linux servers are much more secure than Windows servers.
https://techlog360.com/top-15-favourite-operating-systems-of-hackers/If there really was evidence of Russian hacking, the NSA would have it
Former NSA leader turned whistleblower William Binney recently stated that if the Russians really did hack the Democratic Party servers, the NSA would certainly have real evidence (not the nonsense put out in the DHS-FBI CSV file). Here is his quote from a December 29 2016 article by Glenn Greenwald: “The bottom line is that the NSA would know where and how any “hacked” emails from the DNC, HRC or any other servers were routed through the network. This process can sometimes require a closer look into the routing to sort out intermediate clients, but in the end sender and recipient can be traced across the network.”
https://theintercept.com/2016/12/29/top-secret-snowden-document-reveals-what-the-nsa-knew-about-previous-russian-hacking/Edward Snowden has not only confirmed that the NSA has this ability – but that he himself used an NSA program called XKEYSCORE to monitor such attacks.
https://theintercept.com/2016/07/26/russian-intelligence-hack-dnc-nsa-know-snowden-says/Anyone with any kind of technical background in defending against hacker attacks would understand that what Binney, Snowden and Greenwald are saying is true. The evidence of their truth – most of which was supplied by Snowden from NSA documents – is overwhelming.
Conclusion
An important research principle is to follow the money. People around the world need to ask themselves who has the money and technical ability to be running hundreds and perhaps thousands of real servers and real IP addresses from fake corporations using fake websites in fake locations in more than 40 nations around the world? What agency has already been proven to be running mass surveillance on billions of people in more than 40 nations all around the world? Whose military cyber budget is more than 10 times larger than the cyber warfare budget of the rest of the world combined? There is certainly an elephant in the room – but it is not a Russian elephant.
At a televised press conference on April 2016, former NSA agent, Edward Snowden asked the Russian leader Vladimir Putin if the Russian government engaged in mass surveillance of millions of people in a manner similar to the NSA. Putin replied that Russian law prohibited the Russian government from engaging in mass surveillance. Putin then pointed out that the Russian military budget was less than 10% of the US military budget. So even if they wanted to engage in mass surveillance, they simply did not have the money.
https://www.theguardian.com/world/video/2014/apr/17/snowden-putin-russia-surveillance-phone-in-videoPeople also need to ask themselves why the FBI DHS chose to place their evidence in a CSV file and XML file rather than a normal document or spreadsheet. If this were real evidence, it would have been placed directly in the PDF report for everyone to read – not hidden away in a file the general public has little ability to read.
Finally, for the FBI or the DHS to claim that the XML-CSV file contains evidence or even indicators of Russian hacking is simply a false statement. It is a perfect example of fake news. Any news agency promoting this claim without doing even the most basic of research that would easily confirm it is false, should be listed as a fake news agency.
The real question that we should all be asking is why the DHS and FBI would destroy their reputation by posting such a fake report?
Several years ago, our CIA claimed that Iraq had weapons of mass destruction. We now know that Iraq had no weapons of mass destruction – meaning that we went to war and spent over a trillion dollars on a fake report. Is this new fake report a pretext for launching a cyber war against Russia? Is it intended to justify increasing US military spending?
It is hard to say what the real purpose of this fake DHS-FBI report is. But the fact that this silly list of IP addresses was the best evidence they could provide should be a strong indication that there really is no evidence of Russian hacking. Instead, it is more likely that Wikileaks is telling the truth in stating that they got the emails from a disgruntled Democratic Party insider.
- Drug Cartels Get Involved As Mexicans Rage, Protest Surging Gas Prices
Even as Mexico has reasons to be concerned about the upcoming presidential inauguration of Donald Trump, who has vowed to make life, and especially trade relations, for Mexicans far more “complicated” under his administration, the population of Mexico has far more pressing problems at this moment, because just days after the finance ministry announced on December 27 that it would raise the price of gasoline by as much as 20.1% to 88 cents per liter while hiking diesel prices by 16.5% to 83 cents, the hikes went into effect on January 1, welcoming in the new year with a surge in the price of one of Mexico’s most important staples and leading to widespread anger, protests and in some cases violence.
As Telesur reports, the people of Mexico “are entering the New Year in a state of rage and anxiety” with protests planned for Sunday to strongly denounce the government’s huge hike in gasoline prices. The sharp rise in gasoline prices has been called the “gasolinazo” in Spanish, which roughly translates to “gasoline-punch.”
Asalto pic.twitter.com/lv7beYCQCG
— Gustavo Vela (@GustavoVela71) December 30, 2016
The price increase comes as part of a planned liberalization of Mexico’s energy market, which involves the move from subsidies that kept gas prices low to a market-based pricing scheme that will adjust prices at the pump based on supply and demand. And while Mexico’s unpopular president Enrique Pena Nieto had promised that fuel prices will fall thanks to his 2014 energy reforms, which dismantled the seven-decade-old national ownership of petroleum resources by state-owned firm Pemex, the initial move in prices has been higher, and decidedly so, by roughly 20% for gasoline and slightly less for diesel.
The price ceiling will then be adjusted daily starting Feb. 18, before letting supply and demand determine them in March, although it is the immediate shock that is of concern to the peace and stability in Mexico.
Case in point, around 100 protestors blocked a service station in Acapulco on Friday, while on Saturday an assembly of popular organizations in Chihuahua state’s capital pledged to block all commercial transportation from entering or exiting the city as a means toward paralyzing the economy and pressuring the federal government to reverse the hikes. The assembly of people’s organizations also announced their intention to block major highways and railways in response to what they see as a neoliberal looting of Mexico and handover of its resources to private capital, according to a statement.
On Sunday, the day the price hikes went into effect, Excelsior reported that angry citizens protested in several spots of the capital, Mexico City, blocking roads, demanding a return to lower gas prices.
But before readers blow this off as just another protest by an angry population which fails to grasp the “global deflationary collapse” while focusing on “fringe, outlier events” – at least in the words of central bankers – things suddenly got serious when none other than the country’s powerful Jalisco New Generation cartel has entered the fray, threatening to burn gas stations in response to the price hikes, according to Jalisco authorities cited by TeleSur.
Gunmen torched vehicles and blockaded roads during a military operation to
arrest two leaders of the Jalisco New Generation cartel.“They are speculating in order to obtain million dollar profits from the majority of the people who don’t make even a minimum wage, we have already realized that the (shortage) of fuel is because dealers don’t want to sell fuel unless they can do so at a profit, all of our people are now ready to start the mission,” the Mexican drug cartel stated in a WhatsApp message circulating in Jalisco.
“The CJNG, in support of the working class, commits itself to making burn all the gasoline stations that to December 30 of the current year, at 10:00 p.m.” — before the price increases go into effect — “have not normalized the sale of fuel at the fair price,” the message said, according to the Mexican news outlet Aristegui Noticias.
Making matters worse is that Mexico was already facing fuel shortages prior to the price hike, angering Mexicans in several states. Ahead of the price hike many people have said they’d hoard gasoline, buying it from stations that in many states are already dealing with supply shortages. Illegal gas sales have popped up, and protests have already taken place in some parts of the country, with more planned in the days of the new year.
“The fuel price increase causes outrage. People are right: it’s not fair. I support each family, I share their outrage and anger,” Aristoteles Sandoval, the governor of western Jalisco state, wrote on Twitter. Sandoval’s criticism drew particular attention because he is a member of Pena Nieto’s ruling Institutional Revolutionary Party or PRI. Furious opposition governors plan to meet with federal government officials next week to discuss the price hike.
Meanwhile, the unpopular price hike is also becoming a key political talking point: “We just had a security meeting (between governors and Pena Nieto) days ago and there was not one comment about this situation,” said Mexico City’s Mayor Miguel Angel Mancera, a member of the opposition Party of the Democratic Revolution or PRD.
The protests are the latest expression of widespread antipathy toward Pena Nieto, whose popularity according to Telesur has plummeted below 25% this year due to his government’s widespread perception of collusion with cartels and failure to address drug-related violence, disappointing economic growth, violent repression of social movements and his unpopular decision to host Donald Trump before the anti-immigrant Republican won the U.S. presidential election.
Not helping matters, Finance Minister Jose Antonio Meade defended the fuel price increase, saying it would not trigger more inflation and that eventually the “final price for consumers will be among the most competitive in the world.” For now, however, the response has been a negative one, with social media criticism leveled at Meade, who has been portrated as “chupasangre”, or “bloodsucker.”
José Antonio Meade un chupasangre que quiere ser presidente. Él autorizó el gasolinazo. Monero Rocha pic.twitter.com/goJnHPp056
— Gustavo Vela (@GustavoVela71) December 29, 2016
In Mexico City, service station worker Maria de la Luz Lopez, quoted by Telesure, was worried that the price increases could hurt her. “I’m afraid that to compensate for the increase, (customers) will no longer give us tips,” said Lopez who, like many in her field, does not earn a wage and depends on the generosity of drivers.But ultimately, the price shock will hit those who are hurting the most. The increases would mean Mexicans, of whom 52% live in poverty, would spend more of their annual income on fuel than the residents of 59 other countries, according to data compiled by Bloomberg.
“We see the gasolinazo as an attack against the population, as a robbery, taking into account the levels of income of the population,” Jose Narro, director of the workers’ group Coordinadora Nacional Plan de Ayala, told Reforma.
Making matters worse, and refuting the promises of the finance minister, the Mexican central bank has warned that gas price increases would boost inflation at a time when the peso has already plunged against the US dollar due to the Trump victory.
With or without the involvement of the cartels, Mexico’s economy is likely to undergo a turbulent period of decline, which will be music in the ears for Mexico’s opposition politicians, such as leftist opposition leader Andres Manuel Lopez Obrador who is likely to benefit from Pena Nieto’s error, and who has put blame for the gasolinazo on the shoulders of Pena Nieto’s center-right Institutional Revolutionary Party and the conservative National Action Party, calling the former “corrupt and cynical” and the latter hypocrites.
The policy and its rollout have further diminished the perception of the Mexican president and his party, which has been a trend for some time.
“Mexicans were promised lower electricity prices, they got higher electricity prices. Mexicans were told austerity was needed, they got a congress that showers itself with bonuses,” Dutch journalist Jan-Albert Hootsen, wrote on Facebook. “Mexicans were promised more security and a fairer justice state, they got homicide rates back at the level of 2012, the Ayotzinapa massacre and its botched investigation, etc.”
“If you say one thing and are then time and time again perceived to do the exact opposite, what starts off as irritation among the public at some point will simply boil over,” Hootsen concluded.
For those on the lookout for new gray, or even black swans, in the new year, keep an eye on the public mood in Mexico as a result of the now effected surge in gas prices.
- A Biased 2017 Forecast, Part 1
Submitted by Jim Quinn via The Burning Platform blog,
“The idea that the future is unpredictable is undermined every day by the ease with which the past is explained.” – Daniel Kahneman, Thinking, Fast and Slow
A couple weeks ago I was lucky enough to see a live one hour interview with Michael Lewis at the Annenberg Center about his new book The Undoing Project. Everyone attending the lecture received a complimentary copy of the book. Being a huge fan of Lewis after reading Liar’s Poker, Boomerang, The Big Short, Flash Boys, and Moneyball, I was interested to hear about his new project. This was a completely new direction from his financial crisis books. I wasn’t sure whether it would keep my interest, but the story of Daniel Kahneman and Amos Tversky and their research into the psychology of judgement and decision making, creating a cognitive basis for common human errors that arise from heuristics and biases, was an eye opener.
In psychology, heuristics are simple, efficient rules which people often use to form judgments and make decisions. They are mental shortcuts that usually involve focusing on one aspect of a complex problem and ignoring others. These rules work well under most circumstances, but they can lead to systematic deviations from logic, probability or rational choice theory. The resulting errors are called “cognitive biases” and many different types have been documented.
Heuristics usually govern automatic, intuitive judgments but can also be used as deliberate mental strategies when working from limited information. Kahneman and Tversky created the heuristics and biases research program, which studies how people make real-world judgments and the conditions under which those judgments are unreliable. Their research challenged the idea that human beings are rational actors, but provided a theory of information processing to explain how people make estimates or choices. Kahneman won a Nobel Prize in economics for his work in behavioral economics.
To put their research into terms the common person can understand, human decision making is extremely flawed due to our biases, feelings, irrational thought processes and beliefs in falsehoods. It’s over-confidence in our decision making ability that causes us the most problems. For the average person this can result in financial hardship, frustration or a premature death.
When high level government officials, bankers or corporate executives make flawed decisions due to their biases, it can mean war, financial disasters, depressions, or disastrous legislation like Obamacare. Hubris, egotism and faulty reasoning, as noted by Mark Twain one hundred and fifty years ago, can kill you and in some cases lead to war and unthinkable levels of death and destruction.
“It’s not what you don’t know that kills you, it’s what you know for sure that ain’t true.” – Mark Twain
In the seven weeks since the election of Donald Trump as our next president, I’ve witnessed the largest case of hindsight bias in world history. Hindsight bias, also known as the knew-it-all-along effect or creeping determinism, is the inclination, after an event has occurred, to see the event as having been predictable, despite there having been little or no objective basis for predicting it.
On November 7 the “expert” pollsters like Nate Silver; every corporate mainstream media network, newspaper, and website; along with elitist economists, professors, Hollywood movie stars, Wall Street bankers, and billionaire oligarchs; were 100% sure Hillary Clinton was going to be elected president. Only the deplorables thought otherwise – and they spoke loudly. Putin had nothing to do with the result.
These very same “experts” and “deep thinkers” now act as if Trump’s election was foreseeable, predictable and the likely outcome. They bloviate about how and why he won as if they knew it was going to happen. When 99% of all establishment “experts” were sure Trump was going to be crushed in a Clinton landslide, why should anyone listen to a word they say?
The same people who didn’t see even the faintest possibility of a Trump victory now expect the ignorant masses to believe their analysis of what will happen next. I would like to attribute their obtuseness to cognitive biases, but I believe it is more insidious. The Deep State propaganda machine is hard at work spreading falsehoods.
“A reliable way to make people believe in falsehoods is frequent repetition, because familiarity is not easily distinguished from truth. Authoritarian institutions and marketers have always known this fact.” – Daniel Kahneman, Thinking, Fast and Slow
The onslaught of 2017 predictions from a myriad of Wall Street “experts” talking their book, highly educated economists demonstrating their lack of prescience, mainstream media pundits peddling propaganda and cheerleaders cheering for their home teams, has already begun. I haven’t written an annual forecast article in a few years because I was tired of being wrong. Since I have no newsletters or books to sell, no investments to peddle, and no agenda to push, an annual forecast will just be my best guess at what will happen in 2017.
The two biases most likely to color my analysis are confirmation bias (The tendency to focus on information in a way that confirms my preconceptions) and pessimism bias (The tendency to overestimate the likelihood of negative things happening). My family and friends think I’m a pessimist. I think I’m a realist. I try to use data to back-up my conclusions, but as George Dvorsky points out, our brains often lead us astray.
“The human brain is capable of 1016 processes per second, which makes it far more powerful than any computer currently in existence. But that doesn’t mean our brains don’t have major limitations. The lowly calculator can do math thousands of times better than we can, and our memories are often less than useless — plus, we’re subject to cognitive biases, those annoying glitches in our thinking that cause us to make questionable decisions and reach erroneous conclusions.” – George Dvorsky
My predictions will be framed by my belief we are midway through a Fourth Turning era of crisis. The three catalysts framing this Fourth Turning are debt, civic decay, and global disorder. No amount of normalcy bias, optimism bias, over-confidence, or desire for the status quo, will take precedence over the uncontrollable mechanisms propelling this Fourth Turning.
We are in the midst of a once in a lifetime crisis and there is only one thing more frightening than not knowing what is coming next, and that is living in a world run by “experts” who think they know exactly what is going to happen next. These are the same “experts” who didn’t see the 2005 housing bubble, the 2008 financial collapse, the EU implosion, Brexit, or the Trump presidency.
“It’s frightening to think that you might not know something, but more frightening to think that, by and large, the world is run by people who have faith that they know exactly what is going on.” – Amos Tversky
I try to understand the world around me every day, but the hyper-complexity, noise, Deep State propaganda, and volume of data points is overwhelming to our easily distracted brains. I have constructed a story in my mind of how things will develop over the next five to ten years based upon the generational theory put forth by Strauss & Howe in their book The Fourth Turning. It is not a story with a happy ending.
I don’t have high confidence that I understand how it will play out and what specific events will propel history in the making. I can admit my deficiencies, while people in power with the ability to blow up the world overestimate their understanding of the world and ignore the role of chance in events.
“We are prone to overestimate how much we understand about the world and to underestimate the role of chance in events.” – Daniel Kahneman, Thinking, Fast and Slow
Knowing what I don’t know about the unknowns, I’ll try and use what I do know to make some prognostications about 2017:
Debt Forecast
It is fascinating to me no one seems all that worried about the systematically dangerous levels of global debt supporting essentially bankrupt governments, banks and consumers. Global debt stood at $142 trillion at the end of 2007, just prior to a worldwide financial meltdown, caused by too much bad debt in the financial system.
To “fix” this problem, central bankers around the globe ramped up their electronic printing presses to hyper-drive and created another $57 trillion of debt by mid-2014. They haven’t taken their foot off the gas since. Today, global debt most certainly exceeds $225 trillion and has surpassed 300% of global GDP. Rogoff and Reinhart made a pretty strong case that when debt to GDP exceeds 90%, disaster will follow.
Global debt issuance reached a record $6.6 trillion in 2016, with corporations accounting for $3.6 trillion – most of which was used to buy back their stock at all-time highs. What could possibly go wrong? The level of normalcy bias amongst financial “experts”, the intelligentsia, and the common man is breathtaking to behold. We are in the midst of the mother of all bubbles, never witnessed in the history of mankind, and we pretend everything is normal, with no consequences for our reckless disregard for honesty, rational thinking, or simple math.
The 2000 dot.com bubble and the 2008 housing bubble were one dimensional. This mother of all bubbles required the global coordination and unprecedented irresponsible intervention of the US Federal Reserve, the European Central Bank (ECB), the Bank of Japan (BOJ), the Bank of England (BOE) and the Swiss National Bank (SNB) to lead the world to the brink of monetary disaster. The highly educated theorists running these central banks have created tens of trillions in unpayable debt while suppressing interest rates to zero or below at the behest of their Deep State masters.
The result is simultaneous bubbles in stocks, bonds and real estate. The pin destined to pop all the bubbles is slightly higher interest rates. The 1% increase in the 10 Year Treasury is already causing havoc in the housing market, the bond market and is hammering pension funds. With the hundreds of trillions in globally interconnected derivatives primed to detonate, 2017 could be an explosive year.
Here are a few things I think could happen in 2017 on the economic front:
- The national debt stands at $19.9 trillion and will reach $20 trillion before Obama departs. With spending on automatic pilot and tax revenue in decline, the national debt will reach $21 trillion in 2017. With most of the debt financed short-term, the increase in rates will ratchet the interest on the debt from $433 billion to over $550 billion.
- With the CPI increasing by over 3% in the first few months of the year, the Fed will continue to raise rates, and the 10 Year Treasury will breach the 3% level.
- Home prices have surpassed the 2006 peak, even though existing home sales are still 20% below 2006 levels and housing starts are 50% below 2006 levels. The entire “recovery” has been engineered by the Fed and Wall Street at the high end of the market. With mortgage rates up 1% already, the further increase will result in existing home sales and housing starts falling by 20% in 2017 and home prices falling by 5% to 10%.
- The short-term OPEC agreement will allow oil prices to move back to $60 per barrel, further eating into consumer discretionary spending. Desperate fracking companies needing cash flow to service their debt will ramp up. Bankrupt or near bankrupt countries like Venezuela, Mexico, and Iran will also increase production. With a slowing global economy and surging supply, prices will collapse again into the $40s in the second half of the year.
- Holiday sales for the bricks and mortar retailers will be reported in January as lukewarm at best. By February, the store closing announcements will reach into the hundreds. Sears will finally declare bankruptcy and shutter at least 50% of their stores. Mall developers will begin to declare bankruptcy as vacancies and rising interest rates create a perfect storm.
- Consumer debt will reach the previous high of $1 trillion, as subprime student loan and auto debt continues to accumulate at an astounding pace. The spigot for student loans is likely to be tightened under Trump, with over 25% of the loans effectively in default. Auto sales (if you can call six year financing and 40% leases, sales) peaked in 2016. Millions of auto buyers are underwater on their loans, subprime auto loans are going into default quicker than you can say Cadillac Escalade, and higher interest rates will price out more potential suckers.
- The faux jobs recovery is running out of steam. With non-existent wage growth, surging costs for rent, health care, energy, and credit cards tapped out, American families will hunker down and reduce spending further. With consumer spending accounting for 68% of GDP, this will lead to an official recession by the middle of 2017.
- All the recent surveys showing consumer confidence soaring and optimism for 2017 are based on nothing but hope. The promises of a Trump administration will not come to fruition until 2018 at the earliest. He will meet resistance from Democrats across the board and resistance amongst his own party. His grand plans for massive tax cuts and spending increases will run into the reality of $1 trillion annual deficits. As reality sets in, and recession arrives, the unwarranted optimism will fade rapidly. Tax cuts will be tempered by reduced spending plans.
- The USD hitting fourteen year highs against the basket of worldwide currencies does not bode well for bringing manufacturing jobs back to make America great again. The reason for the strong dollar is because we are the best looking horse in the glue factory. With Europe and Japan promoting negative interest rates and the Fed slowly raising rates, the dollar will continue to rise. This will hurt our manufacturing businesses, increase our $500 billion annual trade deficit further, and depress the profits of our global corporations.
- With rising inflation, rising interest rates, stagnant wages, falling corporate profits, stock valuations at all-time highs, and corporations no longer able to finance stock buy backs at no cost, the stock market will finally hit the wall after a seven year bull market. This last surge of euphoria, based on nothing but Trumpmania sweeping Wall Street, will constitute the final blow-off. The market is currently valued to provide nominal returns of less than 1% over the next twelve years and is likely to experience an abrupt sell-off of 50% in the near future. I believe the near future will be 2017. I think the powers that be will be testing Trump’s mettle in his first year to see if he’ll play ball and do their bidding.
“The illusion that we understand the past fosters overconfidence in our ability to predict the future.” – Daniel Kahneman, Thinking, Fast and Slow
In Part Two of this article I will ponder how much further our civic decay and global disorder will advance in 2017. Over-confidence, hubris and arrogance of our leaders will be the driving factors.
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