- Roger Waters Stunned At Assange's Plight: "Orwell & Huxley Were Both Right"
Roger Waters Stunned At Assange’s Plight: “Orwell & Huxley Were Both Right”
Pink Floyd frontman Roger Waters has been an outspoken advocate for Julian Assange, but the most recent sight of the reporter’s physical and mental health, at his recent court appearance, has Waters stepping up his criticism of the establishment’s slow-assassination of the exposer of US war crimes.
Referring to a UK judge’s decision on Monday to deny the WikiLeaks founder a delay in US extradition proceedings, Waters proclaimed:
“Orwell and Huxley were always arguing about who had the closest view of what dystopia might look like in the future… I think we got a lot of both.”
As RT summarizes, the world described by George Orwell in ‘1984’ was one of mass surveillance and paranoia, where anyone could be snatched off the street by the state and made disappear for ‘wrongthink’. In ‘Brave New World’ Aldous Huxley, on the other hand, described a future where mass entertainment and the easy availability of pleasure-giving drugs made dissent virtually impossible.
“We have the ‘Big Brother’ Orwellian dystopian nightmare, it happened two days ago in that magistrate’s court,” he explained to RT.
And, exposing our ‘Brave New World’-isms, Waters points out that:
“You only have to look out in the street and see the people, the walking dead going by… and taking absolutely no notice of the fact that this journalist is being murdered by our government.”
“And we walk by with our earbuds in… clicking away on our iPhones as we walk unthinking, unfeeling, uncaring through our lives, and allow this bullshit to take place in our names, in our courts,” Waters concluded.
Together with veteran journalist John Pilger, the Pink Floyd frontman hosted a rally for Assange in front of the British Home Office in September, that went unreported by every single British newspaper.
As Craig Murray recent concluded, the campaign of demonisation and dehumanisation against Julian, based on government and media lie after government and media lie, has led to a situation where he can be slowly killed in public sight, and arraigned on a charge of publishing the truth about government wrongdoing, while receiving no assistance from “liberal” society.
Unless Julian is released shortly he will be destroyed. If the state can do this, then who is next?
Tyler Durden
Wed, 10/30/2019 – 02:45 - Sweden: What To Do About Gang Violence?
Sweden: What To Do About Gang Violence?
Authored by Judith Bergman via The Gatestone Institute,
“Since 2015, 32 people have been shot dead in 30 separate acts in Malmö’s latest murder wave. Our survey of the murders shows that more than 120 young men are linked to them in different ways”, according to a recent series of reports about gang violence in the Swedish mainstream newspaper, Sydsvenskan.
“There is much talk about ‘gang wars’ in Malmö,” the report relates.
“Nothing indicates that there are fixed groupings with hierarchical structures and regulated activities in Malmö’s crime world. Rather, on the contrary — everything can be seen as one single gang. And there is civil war [within the gang]. We have mapped 200 criminals in the city. Most of them know each other – they have grown up together, been schoolmates, shared housing and moved in the same circles. Of these, we have selected 20 men for closer examination. Either because they are suspected of having shot, planned or otherwise contributed to the murders. Or that they themselves have fallen victim. And for being identified… as central people in Malmö’s crime world in recent years. At least 18 of the murders have, according to our review, occurred within the relatively narrow circle of these 20 men”.
The report then mentions that “17 of the 20 surveyed men have Swedish citizenship and 14 are born in Sweden.”
“Almost everyone has parents who have come here mainly from the Middle East and Africa. Altogether, they have been convicted of at least 180 crimes — everything from driving a car without a driver’s license to robbery, weapons crimes, assault and murder. One of them is on Europol’s list of our continent’s most wanted criminals, suspected of having ordered two murders… Half of them have parents who are also convicted of crimes. Drug crimes, harassment, money laundering, theft, smuggling and serious abuse. But there are also examples of parents with stable incomes and an academic background”.
In Sweden, crucial societal issues, such as who is behind the current crime epidemic, are a public taboo. Swedish authorities have only published statistics about the ethnic backgrounds of criminals twice: in 1996 and in 2005. In 2017, Minister of Justice Morgan Johansson — who is also Minister of Justice and Migration in the current Swedish government — refused to publish statistics about the ethnic origins of criminals in Sweden. “So the political conclusions that I need to make, I can already make with existing international and Swedish studies,” he said at the time.
The majority of the political parties in the Swedish parliament agreed with him. They said they did not think such a statistic was needed.
This summer, nevertheless, a private foundation, Det Goda Samhället (“The Good Society”) published a report, based on statistics from Swedish authorities. The report showed:
“For the first time now, more crimes — in absolute terms — are committed by persons of foreign background than by persons of Swedish origin…The most crime-prone population subgroup are people born [in Sweden] to two foreign-born parents”.
The mainstream Swedish media, however, largely ignored the privately published report.
This general suppression of information is why Sydsvenskan’s account is especially remarkable — although in recent years, media reports have become slightly more common. It is hard, after all, completely to escape reality. In 2017, when Stockholm was hit by a wave of murders, the Swedish mainstream media outlet Expressen, did a report about the 49 criminal networks in the capital that showed the networks consisted of between 500 and 700 gang members. 40.6% of the gang members that Expressen surveyed were foreign-born; 82.2% had two parents who were foreign-born. Their main country of origin was Iraq, followed by Bosnia, Lebanon, Somalia, Syria and Turkey.
More remarkably, Sydsvenskan’s report also indicated that nothing could be done about the hardened criminals:
“With the exception of three people in the survey, all have been offered help since they were boys. Some of them were already registered with the police as ten-year-olds… They have undergone programs… far from the criminal environment in Malmö… It has not worked… what the social services have done so far does not help, and there are no more measures to try out”.
These are facts that mainstream politicians have avoided discussing openly for years. The question is: How do you solve a critical societal problem, especially one that is literally maiming and killing people, without talking about it openly?
Even the Swedish government, however, has realized that it is time to tackle the gang violence, which, with its waves of shootings and bombing, is fast derailing Swedish society. Some commentators have likened the situation to a state of war. The government therefore recently presented a new initiative that seeks to tackle the gang violence. The government proposal, however, never specifically mentions who is mainly behind the gang violence and that its own migration policies have in large part created the situation in which Swedish society now finds itself.
The proposals to tackle gang violence include: More detentions for those who commit serious crimes, faster prosecutions, better opportunities to access the assets of criminals, increased investments in schools and social services in “vulnerable areas”, more social services in the evenings and weekends in “vulnerable areas”, stricter penalties for those recruiting young people to crime, stricter penalties for weapons and explosives offenses and better witness protection programs.
Ulf Kristersson, leader of the largest opposition party, the center-right Moderate Party, criticized the government for not suggesting harder crackdowns on gang crime. The Moderate Party would have liked to see larger investments in the police, doubling the penalties for gang criminals and a system of visitation zones, among other things.
One might ask whether it is likely that the government’s rather mild proposals for tackling gang violence will make enough difference at this point. Gang crime has become extremely violent and extremely serious. The Nigerian gang Black Axe, for instance, engages in drug-trafficking and prostitution and also operates extensively in Italy, where Italian police have described it as using “urban guerrilla warfare which continued for days at a time” to maintain territorial control. Swedish police estimate that the gang, which has been establishing itself in Stockholm for the past five years, seems pretty thoroughly entrenched. “In my opinion,” said the head of police squad, Lennart Karlsson, “this is one of the world’s most effective crime syndicates. So unfortunately for us, they probably have a pretty bright future.”
In addition to Black Axe, There are approximately 50 other criminal gangs, encompassing around 1,500 criminals, operating in Stockholm, according to recent information from the police. Stockholm is currently going through a wave of shootings; by the beginning of August there had already been 58 this year. According to the police’s expert on gang violence, Gunnar Appelgren, the harm is considerably more serious today than it was five years ago, because the criminals now make greater use of automatic weapons.
It does not seem likely that any of these hardened criminals will be swayed much by “increased investments in schools and social services in ‘vulnerable areas'”, as one of the government proposals suggests. Maybe some of the other proposals will improve the situation, but a far harsher crackdown on gang violence might regrettably be needed.
Tyler Durden
Wed, 10/30/2019 – 02:00 - China Blasts Trump Admin For "Economic Bullying Behavior" Over 5G Equipment Ban
China Blasts Trump Admin For “Economic Bullying Behavior” Over 5G Equipment Ban
Round the clock, investors are blasted with trade tweets from President Trump. These tweets are meaningless to an extent, with only one intention to control the economic narrative to drive the stock market higher. So with trade optimism and stock prices at record highs levels, it seems like China is ruining the party on Tuesday morning.
New details are emerging from AP News of souring relations between China and the US — not exactly improving as per the tweets President Trump has recently unleashed right before the stock market opens and during the morning hours.
Chinese Foreign Ministry spokesman Geng Shuang accused the US of “economic bullying behavior” after US officials cited national security concerns in using Chinese equipment in US communication networks.
Shuang told reporters that Beijing would “resolutely oppose the US abusing state power to suppress specific Chinese enterprises with unwarranted charges in the absence of any evidence.”
“The economic bullying behavior of the US is a denial of the market economy principle that the US has always advertised,” Shuang said, adding the economic sanctions would “undermine the interests” of US businesses and consumers, especially in rural areas.
“We would like to urge the US once again to stop abusing the concept of national security,” Shuang said.
The Trump administration has intervened in communication networks, picking winners and losers over the last several years, all in the name of national security.
President Trump is gifting the buildout of US’ 5G networks to companies that are aligned with his administration, rather than letting the industry decide which 5G products are the best and most cost-effective. The administration is likely setting up for a complete ban on Huawei and ZTE 5G equipment in US communication networks.
Federal Communications Commission (FCC) Chairman Ajit Pai announced Monday that the agency, in an upcoming vote on Nov. 19, will likely ban all US carriers from using federal subsidies to purchase 5G equipment from Chinese companies.
“The concern is that hostile foreign actors could use hidden ‘backdoors’ to our networks to spy on us, steal from us, harm us with malware and viruses, or otherwise exploit our networks,” Pai said on Monday. “And there are mounting reasons to believe that the Chinese firms Huawei and ZTE pose an unacceptable risk to US national security.”
The FCC ruling could also force companies that operate communication networks in the US to swap out already installed Chinese equipment for other brands, and the move could cost smaller companies in rural towns more than $1 billion.
Despite President Trump’s tweets generating an illusion of warming ties between the US and China (all to pump the stock market), the decoupling of the world’s largest two economies continues.
Tyler Durden
Wed, 10/30/2019 – 01:00 - They Live, We Sleep: Beware The Growing Evil In Our Midst
They Live, We Sleep: Beware The Growing Evil In Our Midst
Authored by John Whitehead via The Rutherford Institute,
“You see them on the street. You watch them on TV. You might even vote for one this fall. You think they’re people just like you. You’re wrong. Dead wrong.”
We’re living in two worlds, you and I.
There’s the world we see (or are made to see) and then there’s the one we sense (and occasionally catch a glimpse of), the latter of which is a far cry from the propaganda-driven reality manufactured by the government and its corporate sponsors, including the media.
Indeed, what most Americans perceive as life in America—privileged, progressive and free—is a far cry from reality, where economic inequality is growing, real agendas and real power are buried beneath layers of Orwellian doublespeak and corporate obfuscation, and “freedom,” such that it is, is meted out in small, legalistic doses by militarized police armed to the teeth.
All is not as it seems.
This is the premise of John Carpenter’s film They Live, which was released more than 30 years ago, and remains unnervingly, chillingly appropriate for our modern age.
Best known for his horror film Halloween, which assumes that there is a form of evil so dark that it can’t be killed, Carpenter’s larger body of work is infused with a strong anti-authoritarian, anti-establishment, laconic bent that speaks to the filmmaker’s concerns about the unraveling of our society, particularly our government.
Time and again, Carpenter portrays the government working against its own citizens, a populace out of touch with reality, technology run amok, and a future more horrific than any horror film.
In Escape from New York, Carpenter presents fascism as the future of America.
In The Thing, a remake of the 1951 sci-fi classic of the same name, Carpenter presupposes that increasingly we are all becoming dehumanized.
In Christine, the film adaptation of Stephen King’s novel about a demon-possessed car, technology exhibits a will and consciousness of its own and goes on a murderous rampage.
In In the Mouth of Madness, Carpenter notes that evil grows when people lose “the ability to know the difference between reality and fantasy.”
And then there is Carpenter’s They Live, in which two migrant workers discover that the world is not as it seems. In fact, the population is actually being controlled and exploited by aliens working in partnership with an oligarchic elite. All the while, the populace—blissfully unaware of the real agenda at work in their lives—has been lulled into complacency, indoctrinated into compliance, bombarded with media distractions, and hypnotized by subliminal messages beamed out of television and various electronic devices, billboards and the like.
It is only when homeless drifter John Nada (played to the hilt by the late Roddy Piper) discovers a pair of doctored sunglasses—Hoffman lenses—that Nada sees what lies beneath the elite’s fabricated reality: control and bondage.
When viewed through the lens of truth, the elite, who appear human until stripped of their disguises, are shown to be monsters who have enslaved the citizenry in order to prey on them.
Likewise, billboards blare out hidden, authoritative messages: a bikini-clad woman in one ad is actually ordering viewers to “MARRY AND REPRODUCE.” Magazine racks scream “CONSUME” and “OBEY.” A wad of dollar bills in a vendor’s hand proclaims, “THIS IS YOUR GOD.”
When viewed through Nada’s Hoffman lenses, some of the other hidden messages being drummed into the people’s subconscious include: NO INDEPENDENT THOUGHT, CONFORM, SUBMIT, STAY ASLEEP, BUY, WATCH TV, NO IMAGINATION, and DO NOT QUESTION AUTHORITY.
This indoctrination campaign engineered by the elite in They Live is painfully familiar to anyone who has studied the decline of American culture.
A citizenry that does not think for themselves, obeys without question, is submissive, does not challenge authority, does not think outside the box, and is content to sit back and be entertained is a citizenry that can be easily controlled.
In this way, the subtle message of They Live provides an apt analogy of our own distorted vision of life in the American police state, what philosopher Slavoj Žižek refers to as dictatorship in democracy, “the invisible order which sustains your apparent freedom.”
We’re being fed a series of carefully contrived fictions that bear no resemblance to reality.
The powers-that-be want us to feel threatened by forces beyond our control (terrorists, shooters, bombers).
They want us afraid and dependent on the government and its militarized armies for our safety and well-being.
They want us distrustful of each other, divided by our prejudices, and at each other’s throats.
Most of all, they want us to continue to march in lockstep with their dictates.
Tune out the government’s attempts to distract, divert and befuddle us and tune into what’s really going on in this country, and you’ll run headlong into an unmistakable, unpalatable truth: the moneyed elite who rule us view us as expendable resources to be used, abused and discarded.
In fact, a study conducted by Princeton and Northwestern University concluded that the U.S. government does not represent the majority of American citizens. Instead, the study found that the government is ruled by the rich and powerful, or the so-called “economic elite.” Moreover, the researchers concluded that policies enacted by this governmental elite nearly always favor special interests and lobbying groups.
In other words, we are being ruled by an oligarchy disguised as a democracy, and arguably on our way towards fascism—a form of government where private corporate interests rule, money calls the shots, and the people are seen as mere subjects to be controlled.
Not only do you have to be rich—or beholden to the rich—to get elected these days, but getting elected is also a surefire way to get rich. As CBS News reports, “Once in office, members of Congress enjoy access to connections and information they can use to increase their wealth, in ways that are unparalleled in the private sector. And once politicians leave office, their connections allow them to profit even further.”
In denouncing this blatant corruption of America’s political system, former president Jimmy Carter blasted the process of getting elected—to the White House, governor’s mansion, Congress or state legislatures—as “unlimited political bribery… a subversion of our political system as a payoff to major contributors, who want and expect, and sometimes get, favors for themselves after the election is over.”
Rest assured that when and if fascism finally takes hold in America, the basic forms of government will remain: Fascism will appear to be friendly. The legislators will be in session. There will be elections, and the news media will continue to cover the entertainment and political trivia. Consent of the governed, however, will no longer apply. Actual control will have finally passed to the oligarchic elite controlling the government behind the scenes.
Sound familiar?
Clearly, we are now ruled by an oligarchic elite of governmental and corporate interests.
We have moved into “corporatism” (favored by Benito Mussolini), which is a halfway point on the road to full-blown fascism.
Corporatism is where the few moneyed interests—not elected by the citizenry—rule over the many. In this way, it is not a democracy or a republican form of government, which is what the American government was established to be. It is a top-down form of government and one which has a terrifying history typified by the developments that occurred in totalitarian regimes of the past: police states where everyone is watched and spied on, rounded up for minor infractions by government agents, placed under police control, and placed in detention (a.k.a. concentration) camps.
For the final hammer of fascism to fall, it will require the most crucial ingredient: the majority of the people will have to agree that it’s not only expedient but necessary.
But why would a people agree to such an oppressive regime?
The answer is the same in every age: fear.
Fear is the method most often used by politicians to increase the power of government. And, as most social commentators recognize, an atmosphere of fear permeates modern America: fear of terrorism, fear of the police, fear of our neighbors and so on.
The propaganda of fear has been used quite effectively by those who want to gain control, and it is working on the American populace.
Despite the fact that we are 17,600 times more likely to die from heart disease than from a terrorist attack; 11,000 times more likely to die from an airplane accident than from a terrorist plot involving an airplane; 1,048 times more likely to die from a car accident than a terrorist attack, and 8 times more likely to be killed by a police officer than by a terrorist , we have handed over control of our lives to government officials who treat us as a means to an end—the source of money and power.
As the Bearded Man in They Live warns, “They are dismantling the sleeping middle class. More and more people are becoming poor. We are their cattle. We are being bred for slavery.”
In this regard, we’re not so different from the oppressed citizens in They Live.
From the moment we are born until we die, we are indoctrinated into believing that those who rule us do it for our own good. The truth is far different.
Despite the truth staring us in the face, we have allowed ourselves to become fearful, controlled, pacified zombies.
We live in a perpetual state of denial, insulated from the painful reality of the American police state by wall-to-wall entertainment news and screen devices.
Most everyone keeps their heads down these days while staring zombie-like into an electronic screen, even when they’re crossing the street. Families sit in restaurants with their heads down, separated by their screen devices and unaware of what’s going on around them. Young people especially seem dominated by the devices they hold in their hands, oblivious to the fact that they can simply push a button, turn the thing off and walk away.
Indeed, there is no larger group activity than that connected with those who watch screens—that is, television, lap tops, personal computers, cell phones and so on. In fact, a Nielsen study reports that American screen viewing is at an all-time high. For example, the average American watches approximately 151 hours of television per month.
The question, of course, is what effect does such screen consumption have on one’s mind?
Psychologically it is similar to drug addiction. Researchers found that “almost immediately after turning on the TV, subjects reported feeling more relaxed, and because this occurs so quickly and the tension returns so rapidly after the TV is turned off, people are conditioned to associate TV viewing with a lack of tension.” Research also shows that regardless of the programming, viewers’ brain waves slow down, thus transforming them into a more passive, nonresistant state.
Historically, television has been used by those in authority to quiet discontent and pacify disruptive people. “Faced with severe overcrowding and limited budgets for rehabilitation and counseling, more and more prison officials are using TV to keep inmates quiet,” according to Newsweek.
Given that the majority of what Americans watch on television is provided through channels controlled by six mega corporations, what we watch is now controlled by a corporate elite and, if that elite needs to foster a particular viewpoint or pacify its viewers, it can do so on a large scale.
If we’re watching, we’re not doing.
The powers-that-be understand this. As television journalist Edward R. Murrow warned in a 1958 speech:
We are currently wealthy, fat, comfortable and complacent. We have currently a built-in allergy to unpleasant or disturbing information. Our mass media reflect this. But unless we get up off our fat surpluses and recognize that television in the main is being used to distract, delude, amuse, and insulate us, then television and those who finance it, those who look at it, and those who work at it, may see a totally different picture too late.
This brings me back to They Live, in which the real zombies are not the aliens calling the shots but the populace who are content to remain controlled.
When all is said and done, the world of They Live is not so different from our own. As one of the characters points out, “The poor and the underclass are growing. Racial justice and human rights are nonexistent. They have created a repressive society and we are their unwitting accomplices. Their intention to rule rests with the annihilation of consciousness. We have been lulled into a trance. They have made us indifferent to ourselves, to others. We are focused only on our own gain.”
We, too, are focused only on our own pleasures, prejudices and gains. Our poor and underclasses are also growing. Racial injustice is growing. Human rights is nearly nonexistent. We too have been lulled into a trance, indifferent to others.
Oblivious to what lies ahead, we’ve been manipulated into believing that if we continue to consume, obey, and have faith, things will work out. But that’s never been true of emerging regimes. And by the time we feel the hammer coming down upon us, it will be too late.
So where does that leave us?
The characters who populate Carpenter’s films provide some insight.
Underneath their machismo, they still believe in the ideals of liberty and equal opportunity. Their beliefs place them in constant opposition with the law and the establishment, but they are nonetheless freedom fighters.
When, for example, John Nada destroys the alien hyno-transmitter in They Live, he restores hope by delivering America a wake-up call for freedom.
That’s the key right there: we need to wake up.
Stop allowing yourselves to be easily distracted by pointless political spectacles and pay attention to what’s really going on in the country.
The real battle for control of this nation is not being waged between Republicans and Democrats in the ballot box.
As I make clear in my book Battlefield America: The War on the American People, the real battle for control of this nation is taking place on roadsides, in police cars, on witness stands, over phone lines, in government offices, in corporate offices, in public school hallways and classrooms, in parks and city council meetings, and in towns and cities across this country.
The real battle between freedom and tyranny is taking place right in front of our eyes, if we would only open them.
All the trappings of the American police state are now in plain sight.
Wake up, America.
If they live (the tyrants, the oppressors, the invaders, the overlords), it is only because “we the people” sleep.
Tyler Durden
Wed, 10/30/2019 – 00:05 - Retired General: Trump's Syria Oil Plan Turns US Troops Into "Pirates"
Retired General: Trump’s Syria Oil Plan Turns US Troops Into “Pirates”
After President Trump suggested on Sunday that he would like to make a deal with Exxon Mobil or “one of our great companies” to go into occupied Syria and take the oil, one of the few former top defense officials to explicitly condemn the plan which clearly smacks of naked US imperialism was retired General Barry McCaffrey.
Referencing Trump’s comments, an outraged McCaffrey posed the question on Twitter, “WHAT ARE WE BECOMING… PIRATES?”
He further stressed that the oil “belongs to Syria” and that ultimately “we lack Congressional authority to stay” in the country at all.
US convoy this week in northeast Syria. Image source: AP The former US Army four star and MSNBC regular was one the few mainstream pundits this week to critique Washington’s Syria policy by questioning the entirety of America’s presence there in the first place, essentially calling it ‘illegal’.
Most establishment commentators have thus far ignored the imperialist aggression aspect of what appears a big oil grab on yet another US-occupied piece of the Middle East, and opted to argue the Pentagon should be “doing more” for the Syrian Kurds —meaning more of the same endless US occupation.
The United States Military Securing Syria’s Oil. https://t.co/7pl3J6Qn2w
— Joshua Landis (@joshua_landis) October 29, 2019
https://platform.twitter.com/widgets.js
On Monday Defense Secretary Mark Esper spelled out that a deployment of some few hundred US troops will deny Syrian government access to oilfields in the northeast, instead ensuring they stay in Kurdish-led SDF hands.
The immediate justification given by the Pentagon chief was the usual ‘defeat ISIS’ mantra (despite, ironically, their leader Baghdadi being taken out in Saturday’s US raid into Idlib).
4-Star General Barry McCaffrey “We want to make sure that SDF does have access to the resources in order to guard the [IS] prisons, in order to arm their own troops, in order to assist us with the ‘defeat ISIS’ mission,” Esper said.
One international legal expert, Anthony Cordesman, told The Guardian of the Pentagon plan that, “In international law, you can’t take civilian goods or seize them. That would amount to a war crime.”
Of course, it’s not as if Washington ever stopped to think twice about such abstract concepts as ‘international law’ — especially when in comes to military action and adventurism in the Middle East.
Tyler Durden
Tue, 10/29/2019 – 23:45 - "The Most Dangerous Moment In Human History"
“The Most Dangerous Moment In Human History”
Authored by Ray McGovern via ConsortiumNews.com,
Oct. 27, 1962, is the date on which we humans were spared extinction thanks to Soviet Navy submarine Captain Vasili Alexandrovich Arkhipov.
Arkhipov insisted on following the book on using nuclear weapons. He overruled his colleagues on Soviet submarine B-59, who were readying a 10-kiloton nuclear torpedo to fire at the USS Randolph task force near Cuba without the required authorization from Moscow.
Communications links with naval headquarters were down, and Arkhipov’s colleagues were convinced WWIII had already begun. After hours of battering by depth charges from US warships, the captain of B-59, Valentin Grigorievich Savitsky, screamed, “We’re going to blast them now! We will die, but we will sink them all — we will not disgrace our Navy!” But Captain Arkipov’s permission was also required. He countermanded Savitsky and B-59 came to the surface.
Much of this account of what happened on submarine B-59 is drawn from Daniel Ellsberg’s masterful book, “The Doomsday Machine” — one of the most gripping and important books I have ever read. Dan explains, inter alia, on pages 216-217 the curious circumstance whereby the approval of Arkhipov, chief of staff of the submarine brigade at the time, was also required.
Ellsberg adds that had Arkhipov been stationed on one of the other submarines (for example, B-4, which was never located by the Americans), there is every reason to believe that the carrier USS Randolph and several, perhaps all, of its accompanying destroyers would have been destroyed by a nuclear explosion.
Equally chilling, says Dan:
The source of this explosion would have been mysterious to other commanders in the Navy and officials on the ExComm, since no submarines known to be in the region were believed to carry nuclear warheads. The clear implication on the cause of the nuclear destruction of this antisubmarine hunter-killer group would have been a medium-range missile from Cuba whose launch had not been detected. That is the event that President Kennedy had announced on October 22 would lead to a full-scale nuclear attack on the Soviet Union.
‘The Most Dangerous Moment in Human History’
Historian Arthur Schlesinger Jr., a close adviser to President John F. Kennedy, later described Oct. 27, 1962, as Black Saturday, calling it “the most dangerous moment in human history.” On that same day, the Joint Chiefs of Staff recommended an all-out invasion of Cuba to destroy the newly emplaced Soviet missile bases there. Kennedy, who insisted that former US Ambassador to Russia Llewelyn Thompson attend the meetings of the crisis planning group, rejected the advice of the military and, with the help of his brother Robert, Ambassador Thompson, and other sane minds, was able to work out a compromise with Soviet leader Nikita Khrushchev.
As for the Joint Chiefs of Staff, the president had already concluded that the top military were unhinged Russophobes, and that they deserved the kind of sobriquet used by Under Secretary of State George Ball applied to them — a “sewer of deceit.” As Ellsberg writes (in his Prologue, p. 3):
“The total death toll as calculated by the Joint Chiefs, from a US first strike aimed at the Soviet Union, its Warsaw Pact satellites, and China, would be roughly six hundred million dead. A hundred Holocausts.” And yet the fools pressed on, as in trying to cross “The Big Muddy.”
Intelligence Not So Good
The pre-Cuban-missile crisis performance of the intelligence community, including Pentagon intelligence, turned out to hugely inept. The US military, for example, was blissfully unaware that the Soviet submarines loitering in the Caribbean were equipped with nuclear-armed torpedoes. Nor did US intelligence know that the Russians had already mounted nuclear warheads on some of the missiles installed in Cuba and aimed at the US (The US assumption on Oct. 27 was that the warheads had not been mounted.)
It was not until 40 years later, at a Cuban crisis “anniversary” conference in Havana, that former US officials like Defense Secretary Robert McNamara and National Security Advisor McGeorge Bundy learned that some of their key assumptions were dead and dangerously wrong. (Ellsberg p. 215ff)
Today the Establishment media has inculcated into American brains that it is a calumny to criticize the “intelligence community.” This is despite the relatively recent example of the concocting of outright fraudulent “intelligence” to “justify” the attack on Iraq in 2003, followed even more recently, sans evidence, falsely accusing Putin himself of ordering Russian intelligence to “hack” the computers of the Democratic National Committee. True, the US intelligence performance on Russia and Cuba in 1962 came close to getting us all killed in 1962, but back then in my view it was more a case of ineptitude and arrogance than outright dishonesty.
As for Cuba, one of the most consequential CIA failures was the formal Special National Intelligence Estimate (SNIE) of Sept. 19, 1962, which advised President Kennedy that Russia would not risk trying to put nuclear-armed missiles in Cuba. To a large extent this judgment was a consequence of one of the cardinal sins of intelligence analysis — “mirror imaging.” That is, we had warned the Russians strongly against putting missiles in Cuba; they knew the US, in those years would not take that kind of risk; ergo, they would take us at our word and avoid blowing up the world over Cuba. Or so the esteemed NIE estimators thought.
The Russians, too, were mirror imaging. Khrushchev and his advisers regarded US nuclear war planners as rational actors acutely aware of the risks of escalation, who would shy away from ending life immediately for hundreds of millions of human beings. Their intelligence was not very good on the degree of Russophobia infecting Air Force General Curtis LeMay and others on the Joint Chiefs of Staff, who were prepared to countenance hundreds of millions of deaths in order “to end the Soviet threat.” (Ellsberg was there; he provides a first-hand account of the craziness in “The Doomsday Machine.”)
Where Did the Grenade Launchers Go?
I reported for active duty at Infantry Officers School at Fort Benning, Georgia, on Nov. 3, 1962, six days after the incident. Most of us new lieutenants had heard about a new weapon, the grenade launcher, and were eager to try it out. There were none to be found. Lots of other weapons normally used for training were also missing.
After we made numerous inquiries, the brass admitted that virtually all the grenade launchers and much of the other missing arms and vehicles had been swept up and carried south by a division coming through Georgia a week or so before. All of it was still down in the Key West area, we were told. Tangible signs as to how ready the JCS and Army brass were to attack Cuba, were President Kennedy to have acceded to their wishes.
Had that happened, it is likely that neither you nor I would be reading this. Yet, down at Benning, there were moans and groans complaining that we let the Commies off too easy.
* * *
Ray McGovern works with Tell the Word, a publishing arm of the ecumenical Church of the Saviour in inner-city Washington. He was an Army infantry/intelligence officer from 1962-64 and later served as Chief of CIA’s Soviet Foreign Policy Branch and morning briefer of the President’s Daily Brief. He is co-founder of Veteran Intelligence Professionals for Sanity (VIPS).
Tyler Durden
Tue, 10/29/2019 – 23:25 - Saudi Sheikh Made Illegal Political Contribution To Obama's 2012 Inaugural Through Prolific Straw Donor
Saudi Sheikh Made Illegal Political Contribution To Obama’s 2012 Inaugural Through Prolific Straw Donor
A Saudi Sheikh and air conditioning magnate made a massive, illegal political contribution to Barack Obama’s inaugural committee in 2012, which was funneled through a prolific (and recently busted) DC straw donor who has operated on both sides of the aisle for years.
Sheikh Mohammed Al Rahbani According to court documents and an analysis of campaign finance records by The Associated Press, Sheikh Mohammed Al Rahbani attempted to send $850,000 to Obama’s committee – which included a picture with Obama. Of that, straw donor Imaad Zuberi recently pleaded guilty to stealing $752,000. He also admitted to concealing his work as a foreign agent.
Imaad Zuberi, far left, arrives at Trump Tower in New York on Dec. 12, 2016 Zuberi – a top fundraiser for both Obama and Hillary Clinton during their presidential campaigns, marks “the latest in a string of cases that highlight the prevalence of banned foreign money in American politics and the often lax approach campaigns take in vetting contributions,” writes AP.
The criminal case against Zuberi doesn’t explain why Rahbani would have wanted to contribute to American political campaigns.
His company SAFID — a manufacturer of air conditioning-related products — is active throughout the Middle East and says on its website that it has worked on projects financed by the Saudi government.
Rahbani, in a few past interviews, has talked about his support of Obama. He posted pictures on his website of himself and his wife standing with Obama, former Vice President Joe Biden and their spouses at a 2013 inaugural event. The website was taken down shortly after Zuberi’s plea was made public. –The Associated Press
Donations funneled through Zuberi include those to Sen. Lindsey Graham, President Trump’s 2016 inaugural committee, and Democratic Rep. Eliot Engel, chairman of the House Foreign Affairs Committee. Graham gave some of those donations in 2017.
After President Trump’s 2016 victory, Zuberi immediately put on a MAGA hat, pumping “nearly $1 million” into Trump’s inaugural committee from unknown sources.
Zuberi has also been under scrutiny by federal prosecutors in New York after he donated $900,000 to Trump’s inaugural committee and $100,000 to a Republican campaign committee. Those donations occurred around the time Zuberi accompanied Qatar’s foreign minister to a meeting at Trump Tower.
Trump’s inaugural committee has not been accused of wrongdoing in connection with the money it received from Zuberi. It says it has cooperated with the federal inquiry. –The Associated Press
According to FEC records, Zuberi and his family made hundreds of donations to Republicans and Democrats across the political spectrum – often going to influential or outspoken lawmakers, such as Graham and Engel.
One campaign, not identified by name, accepted donations made in the name of one of Zuberi’s dead relatives, prosecutors said. Another political committee took donations from a person Zuberi invented.
Some donations reported by political campaigns were made in Rahbani’s and others’ names but were paid for with credit cards belonging to Zuberi or his wife, prosecutors said.
…
Zuberi has also been under scrutiny by federal prosecutors in New York after he donated $900,000 to Trump’s inaugural committee and $100,000 to a Republican campaign committee. Those donations occurred around the time Zuberi accompanied Qatar’s foreign minister to a meeting at Trump Tower. –The Associated Press
AP draws a parallel between the Zuberi case and two associates of Rudy Giuliani, Lev Parnas and Igor Fruman, who have been charged with making unlawful campaign contributions to US candidates and committees – including a $325,000 contribution to a group which supports Trump’s reelection, at a time when they were lobbying US lawmakers for the ouster of the US ambassador to Ukraine.
And in April, “a Washington political consultant was sentenced to three years of probation after admitting he made a $50,000 straw donation on behalf of a wealthy Ukrainian client who wanted tickets to Trump’s inauguration,” according to the report.
“I’m deeply concerned about foreigners trying to intervene in our elections, and I don’t think we’re doing enough to try to stop it,” said FEC chairwomn Ellen Weintraub. “They don’t get a say in who we elect — or at least they’re not supposed to.“
Tyler Durden
Tue, 10/29/2019 – 23:05 - Bitcoin & The Denationalization Of Money
Bitcoin & The Denationalization Of Money
Authored by Ralph Fucetola via The Mises Institute,
“The modern central bank business model is being disrupted” claims Saifedean Ammous, economics professor and author of The Bitcoin Standard: The Dcentralized Alternative to Central Banking. Ammous’ well-written exposition of an Austrian-School understanding of the nature of money – in a free market and not – concludes with several chapters directed toward the technology and economics of Bitcoin, the original blockchain crypto-currency. He answers the key questions regarding Digital Money (Chapter 8), What is Bitcoin Good For? (Chapter 9), and Bitcoin Questions (Chapter 10).
Professor Ammous sees Bitcoin as another, and very powerful, “disrupter” technology that provides the first real challenge to the global fiat money system run by nation states in a century. That is, it’s the first real challenge since the modern state retreated from the classical gold standard.
Reviewing the work of Austrian-School scholars, including Menger, Mises, and Rothbard, Ammous shows that the three classical attributes of valid market money – scalability, salability and stability – are being met by the digital currency.
He further shows, through a clear technical analysis, that Bitcoin is a superior form of value-conserving money, since it is, unlike all other goods (except human time) “strictly” scarce and not just relatively scarce.
Ammous tackles the toughest issue yet: the relationship between Bitcoin and the fiat central banking system, with its use of the Dollar and Special Drawing Rights to settle accounts between banks. (Gold is hidden somewhere in the background in various vaults.) In the process, he convincingly suggests the transaction costs of using Bitcoin as a non-governmental medium to settle accounts are quite low while the transaction or counterparty risks are virtually zero.
He then argues that, as Bitcoin continues to appreciate against both Gold and Fiat, central banks will find it impossible to continue to ignore Bitcoin as a Reserve against deposits. But then he goes further, in the Austrian tradition of applying general principals to the real world, as Hayek did in his “Denationalization of Money.” Ammous imagines how a nongovernmental (a “Decentralized Autonomous Organization,” as he terms it) banking system based on Bitcoin and on blockchain tokens could be convertible into Bitcoin through third party intermediaries (“banks”) providing affordable, non-fiat, currency transfers.
Ammous’s vision for a freer future leaps from his assertions of how powerfully Bitcoin disrupts the globalists’ fiat central banking system.
Sound money, the professor teaches us, leads to peace and prosperity while unsound money leads to devastation:
“If the modern world is ancient Rome, suffering the economic consequences of monetary collapse … then Satoshi Nakamoto is our Constantine, Bitcoin is our solidus, and the Internet is our Constantinople. For Ammous, Bitcoin serves as a monetary lifeboat for people forced to transact and save in monetary media constantly debased by governments… the real advantage of Bitcoin lies in it being a reliable long-term store of value, and a sovereign form of money that allows individuals to conduct permissionless transactions…”
Ammous’ concludes by arguing that Bitcoin is positioned to be the Global Unit of Account that disrupts the fiat central banking system which has allowed the modern state to engage in levels of tyranny and destruction rarely possible in previous human history:
“Monetary status is a spontaneously emergent product of human action, not a rational product of human design.”
The value of Bitcoin to our liberty and our culture remains to be tested against the realities of our world. But it’s not hard to embrace the hope that Ammous is right.
Tyler Durden
Tue, 10/29/2019 – 22:45 - Masturbating Australians May Soon Have To Use Facial Recognition To Access Online Porn
Masturbating Australians May Soon Have To Use Facial Recognition To Access Online Porn
Australian lawmakers looking to limit kids’ access to online pornography have come up with one possible solution; facial recognition.
“Home Affairs is developing a Face Verification Service which matches a person’s photo against images used on one of their evidence of identity documents to help verify their identity,” reads a recent regulatory filing. “This could assist in age verification, for example by preventing a minor from using their parent’s driver license to circumvent age verification controls.”
Home Affairs has acknowledged that the Face Verification Service was nonoperational, as it required the passage of biometric legislation through Parliament – while last week, the Parliamentary Joint Committee on Intelligence and Security said that new bills do not have sufficient privacy safeguards and needed to be redrafted, according to ZDnet.
In 2016, the first phase of Australian’s biometric Face Verification Service (FVS) was launched, “giving a number of government departments and the Australian Federal Police the ability to share and match digital photos of faces.” Needless to say, the program has expanded beyond its original scope.
Initially, the system was fairly limited. It only included photos of people who had applied to become Australian citizens. And use of the database was supposed to be limited to a handful of government agencies with a compelling need for it.
But since then, the government has steadily expanded the system. Photos from other sources were added to the database. And Australia has been trying to develop a more sophisticated Face Identification Service that can identify unknown persons.-Ars Technica
On Thursday, Committee Chair Andrew Hastie said that the committee heard concerns over privacy and the need to ensure that appropriate oversight was in place to protect individuals’ rights.
“The committee acknowledges these concerns and believes that while the Bill’s explanatory memorandum sets out governance arrangements, such as existing and contemplated agreements and access policies, they are not adequately set out in the current Bill,” he said.
“In the committee’s view, robust safeguards and appropriate oversight mechanisms should be explained clearly in the legislation.”
In other news, brick-and-mortar porn shops and trenchcoat sales may have a bright future in the land down under.
Tyler Durden
Tue, 10/29/2019 – 22:25 - U.S. Shale Braces For Brutal Earnings Season
U.S. Shale Braces For Brutal Earnings Season
Authored by Nick Cunningham via OilPrice.com,
A lot of big names will report third quarter earnings this week, and the results are expected to be worse than the same period in 2018.
The timing comes as the shale sector is facing somewhat of a reckoning. After years of price volatility – with more downs than ups – oil prices have failed to return even remotely close to pre-2014 levels. For several years, shale E&Ps took on debt and issued new equity, promising investors that they would profit both from a rebound in prices and from rapid production growth.
They delivered on gains to output, but not on profits. At some point in the last year, investors really began to lose faith. Oil stocks have been the worst performers in the S&P 500 this year.
The latest release of earnings will probably do little to quell unease from big investors. Oil and natural gas prices have dropped this year, by about 17 percent and 31 percent, respectively. Job cuts have returned and bankruptcies are on the rise again.
The oil majors are pressing forward with their aggressive shale development plans. That may prevent a noticeable decline in production. But their earnings – many of the majors report this week – are expected to be down roughly 40 percent from a year ago, which will raise some tough questions.
Some of the largest banks have slashed their credit lines to smaller shale E&Ps. According to Reuters, JPMorgan Chase, Wells Fargo and the Royal Bank of Canada are among some of the lenders that have reduced the amount of credit they are offering to drillers.
The so-called credit redetermination period happens twice a year, and banks tend to offer financing based on a company’s reserves. Lower prices lower that assessment because some reserves become uneconomic to produce. As a result, the ability to access financing becomes more restricted.
Closing off the ability to borrow money could force more companies into bankruptcy. There have been roughly 199 bankruptcies from North American oil and gas companies since 2015, according to Haynes and Boone, LLP. Through September, there have been 33 bankruptcies in 2019, the highest number since 2016. There were 7 bankruptcies in September alone.
As Reuters notes, the backup plans for stressed shale companies are limited. Asset sales may not be a viable path – M&A activity has fallen sharply as buyers spurn troubled projects. In fact, activity in M&A is so weak that investment banks are slashing positions on their energy desks.
Likewise, returning to equity markets for a cash injection is essentially a non-starter. And as mentioned, banks are loath to agree to lend more. The only option is to cut spending.
Last week, the U.S. rig count fell by 21, the largest decline in six months. In fact, the rig count has declined for 11 consecutive months as drillers pull back.
“As yet, the decline in drilling activity is not reflected in lower production growth, but this is probably only a question of time,” Commerzbank said in a note on Monday.
“It is already the case that shale oil production is rising noticeably only in the Permian Basin, and only slightly at Bakken. It is already falling in other shale plays such as Eagle Ford and Anadarko.”
There is also growing scrutiny on the amount of oil and gas produced relative to what companies have promised. Bloomberg profiled a former hedge fund manager who has paid particular attention to Apache Corp., a company that “shale doubters” believe is overestimating the ratio of oil to gas that some its assets can produce.
This has led some analysts to cut their forecasts for production growth.
“The downgrade reflects lower oil prices, lower rig counts, capital constraints, pipeline bottlenecks and a negative trend in well-productivity,” Rob West, Research Associate at the Oxford Institute for Energy Studies, wrote in a commentary.
“After all, 2019 has been a punishing environment for any company to lower its production guidance, raise its capex or report an operational mishap.”
After Concho Resources revealed disappointing results from its 23-well “Dominator” project a few months ago, which set off a steep slide in its share price, there will probably be intensified scrutiny on any production misses this time around.
However, Rob West of OIES adds that concerns about productivity may be “premature,” and that drillers still have plenty of ways to keep logging productivity gains. The mishaps this year need not be the end of the story, West said.
Still, for now, investors are losing interest, and that may not change until and unless there is a major change in the industry’s outlook. The third quarter results probably won’t provide that catalyst. “People are ignoring shale names now and they’re sort of disgusted with them almost,” Rohan Murphy, an analyst with Allianz Global Investors in London, told Reuters in an interview.
Tyler Durden
Tue, 10/29/2019 – 22:05 - FOMC Preview: If The Fed Doesn't Cut, Brace For Impact; If The Fed Cuts… Then What?
FOMC Preview: If The Fed Doesn’t Cut, Brace For Impact; If The Fed Cuts… Then What?
Press for time? Then the following excerpt from Curvative Securities’ Scott Skyrm is all you need to know what to expect tomorrow:
Given the Fed is in easing mode and dumping liquidity into the market, it is unlikely they will NOT ease tomorrow. With over $200 billion in RP operations and $60 billion a month of QE Lite, it would throw the markets in turmoil if the Fed did not ease. For tomorrow, look for guidance about future rate cuts.
The market is pricing about a 40% chance of another cut within the next five months, though I believe the Fed will pause easing after tomorrow and any future rate cuts will be “data dependent.”
Have a little more free time? Then read on the following FOMC preview, courtesy of RanSquawk:
The Fed is expected to lower rates by 25bps to 1.50-1.75%; key will be whether the Committee signals that it is now on pause, or whether the door to further cuts remains open. While market pricing and the analyst consensus are looking for a rate cut, some – such as Jefferies – have warned that there may be enough for the Fed to pause at this meeting. The FOMC will publish its rate decision on 31st October 2019 at 2:00pm EDT. Post-meeting press conference with Fed Chair Powell scheduled for 2:30pm EDT.
RATES:
The Street expects the Fed to cut rates for the third straight meeting, lowering the federal funds rate target by 25bps to 1.50-1.75%; money markets price the cut with over 90% certainty.
Another two rate cuts are priced in by the end of 2020.
The Fed’s September economic projections envisaged the FFR target at 1.75-2.00% at end of both 2019 and 2020 (rates are currently within this bracket), rising to 2.00-2.25% by end-2021. Any decision to cut rates will likely face dissent from Eric Rosengren and Esther George, both of whom have dissented previously.
IS A CUT A DEAD CERT?
Given the two cuts already implemented, some question whether the FOMC needs to lower rates further. After all, consider that as BofA’s David Woo said earlier this week, “Over the past 30 years the Fed has never cut more than 75bp at a stretch without the US economy going into a recession.“
- Diminishing the case for a cut: data has generally held up well (payroll growth close to trend, jobless rate falling to 50-year lows; consumer spending has been stable, and confidence remains firm; CPI has been rising, though this is yet to be seen in PCE; however, internationally, downside surprises in China GDP growth and the subdued outlook in the Eurozone could add to the Fed’s caution, although US/China trade talks have been progressing well, as has Brexit, likely mitigating some of the Fed’s global concerns); meanwhile, equities are lingering near record highs, and financial conditions continue to loosen since September. Fed communications have also been generally constructive, with little signs that policymakers judge the outlook to have materially deteriorated since its last meeting.
- However, on the other side of the coin, analysts have noted that the Fed has historically not tended to lean against aggressive market pricing, supporting the case for a cut.
FUTURE SIGNALS:
Looking ahead, markets are expecting just over one cut through the end of the year (including this week’s potential cut), suggesting there is be a feeling that the so-called ‘insurance cuts’/’mid-cycle adjustment’ are done; and looking to next year, markets price one to two rate cuts in 2020.
The notion that if the FOMC cuts, it will be on hold in December is given further credence by the Fed’s ‘insurance cut’ playbook in the 1990s, where on two occasions it cut by a cumulative 75bps before holding rates. How it frames such a ‘pause’ will be crucial; will it explicitly state that rate cuts are over? Will it retain a more data-dependent outlook? Within its statement, attention will be on the line that the Fed will “will act as appropriate to sustain the expansion” which in recent months the market has taken as a sign that additional cuts were on the horizon. The prevailing wisdom appears to be that the Fed will pause, whether or not it explicitly states it, and any further rate cuts may push accommodation to levels that implies it is more than a ‘mid-cycle adjustment’. It is worth keeping an eye on the vote of James Bullard, who last month argued for a deeper 50bps rate cut, which could show the appetite among the doves for further lowering of the FFR target (note: Bullard will vote in October and December, and then will next vote on policy in 2021).
REPO OPERATIONS:
Intra-meeting, the Fed announced that it would purchase T-Bills at a rate of USD 60bln per month. The intra-meeting nature of the announcement is understood to be significant as a signal that the Fed considers these operations as only part of the technical aspects of monetary policy implementation, rather than the sort of balance sheet expansion seen during the crisis, which was designed to crowd investors out of safer assets to help stoke economic activity. Since the Fed began overnight repo operations, its balance sheet has grown by USD 200bln as the central bank offers ample liquidity to prevent any jam-up in repo markets. The Fed has and will continue to emphasize that these operations ‘are not QE’. According to a recent newswire survey, 56% of economists surveyed think the Fed will find enough T-bills for its monthly purchases; 22% believe that the US Treasury will raise its bill issuance to accommodate the Fed; some economists also believe that the Fed will need to boost its bill-buying to include coupon-bearing Treasuries with up to three years in maturities (NOTE: The Treasury’s quarterly refunding announcement is due ahead of the FOMC meeting on Wednesday).
SRF ANNOUNCEMENT:
The Fed is expected to announce a more permanent operation in 2020, with the launch of a standing repo facility. There are many facets that still need to be worked-out, according to reports, like access to the SRF as well as the rates used to enable counterparties to engage with the market without any negative perceptions around the health of the banks; the Fed must also ensure that any SRF does not kill the private sector repo market. Accordingly, Chair Powell may allude to the background work being carried out, but may be light on specifics.
Tyler Durden
Tue, 10/29/2019 – 21:45 - Not Even The Algos Have Any Idea What's Going On Any More
Not Even The Algos Have Any Idea What’s Going On Any More
With the S&P hitting an all time high just as the Fed is set to cut rates for the 3rd time in four months due to the “slowing economy” amid an earnings season that will show the first earnings recession in three years, not to mention near record outflows from stocks (and inflows to bonds)…
… which somehow has resulted in a surge in stocks, even as CEO sentiment crashes to financial crisis lows…
… it is safe to conclude that no human really has a clue what is going on.
But did you know that algos also no longer have any idea what to make of this market?
According to Credit Suisse prime brokerage data, market-neutral quants, the ones who got crushed hardest during the September quantastrophe that sent growth stocks tumbling and value stocks surging…
… have cut their gross stock allocations to the lowest in nearly five years, as the following Bloomberg chart shows.
The main reason for the deleveraging – or degrossing – is that quants no longer have a sense of what the market may do at any moment; meanwhile the violent whiplash that market neutral quants suffered during the early-September growth scare, has forced them to take down gross exposure further amid rising factor volatility as the anxiety-ridden rally of 2019 rolls on.
“It looks nice – the market’s up 20%, but it’s been a wild ride underneath the covers,” Mark Connors, global head of risk advisory at Credit Suisse told Bloomberg. “The factor path has been unpredictable.”
And sure enough, after it was left for dead following a decade of underperformance, last week the “value” strategy revived once more as hopes for a U.S.-China trade deal buoyed economic prospects, just weeks after a rotation in the opposite direction driven in part by recession fears.
As Bloomberg notes, while the initial take on such violent, unexplained moves is that they are due to late-cycle fragility as investors turn on every economic and political headline on a dime, Bloomberg also notes that some suspect the choppy rotations have been exacerbated by deleveraging among systematic funds, who find market’s bizarre moves to be too volatile for their current risk profile.
“Quants sometimes can be a canary in the coal mine,” said Melissa Brown, managing director of applied research at Qontigo. “Maybe we are going to see going forward more volatility in style factors as funds need to deleverage or people pull their money.”
Maybe. And if we do, we will see another circular loop emerge, as deleveraging funds force other funds to deleverage, resulting in even less liquidity, more volatility, and even more deleveraging, until some “bottom” is finally reached.
Meanwhile, some factors are becoming even more sensitive to shifts in positioning. The strength of the recent rally – short squeeze if you will – in cheap cyclical shares, for instance, caught many by surprise given the lack of a fundamental catalyst, Bank of America strategists wrote.
Pointing out the blatantly obvious, Los Angeles Capital Management’s Hal Reynolds said that “we are in a choppier environment,” noting that “compression in returns and pick-up in risk have both occurred this year, leading to the reduction in risk budgets.”
Meanwhile, as quants turned tail, some other – more-carbon driven – hedge funds turned more bullish. For example, macro funds and commodity trading advisors, which mostly trade index futures rather than individual stocks, have expanded their long bets this month, according to Credit Suisse data. Meanwhile, conventional long-short stock pickers boosted their net exposure to the highest since March as they covered shorts amid the surprise resurgence this month of “economic recovery” trades betting on higher inflation and growth.
Financial stocks have outperformed, while defensive sectors from consumer staples to utilities have lost money — a reversal of market trends seen earlier this year. Meanwhile, Deutsche Bank’s consolidated equity positioning index shows that overall equity positioning has now moved from neutral to slightly overweight.
Ironically, the deciding factor whether equity quants return to the market and boost their equity allocation, may be in the hands of bond CTAs, whose performance has been critical to explain not just the recent plunge in bond yields and surge in negative yielding debt to a record notional of $17 trillion, but also to understand the performance of defensive, “bond-like” stocks in recent months.
Commenting on the risk of a potential positioning reversal by bond CTAs, Nomura’s Masanari Takada writes that “the rise in yields thus far accompanying the recovery in sentiment can, of course, be interpreted positively as part of the general move toward healthier markets. But we see something troubling in recent movements by systematic trend-following players. Trend-following algo traders, as typified by CTAs, have built up substantial long bond futures positions over the past year. While developments differ by region, CTAs have now reduced these long positions by only around 40-50% from their peak in summer 2019. Considering the collapse in upward momentum for bond prices, we see a risk that trend-followers could cut their longs further in the interest of avoiding losses. While the figures we give below are merely estimates of the room for a further rise in yields based on CTAs’ positions, we hope they will be of use when looking for near-term inflection points and thinking about a risk scenario in which CTAs completely close out these positions.”
Looking at the potential liquidation risk, Nomura’s quants note that CTAs have unwound their long positions by roughly 45% from the peak (28 August 2019), and point out that potential triggers at 10yr UST yields of
- around 1.76% (the average cost of CTAs’ net buying since June),
- around 1.90% (average cost since April), and
- around 2.05% (average cost since March).
In the near term, the threshold to pay attention to is the second of these, 1.90%. In the extreme case in which yields were to break above 2.05% (the third trigger line), Nomura would expect an across-the-board collapse in CTAs’ long UST futures positions, which could cause yields to shoot up to around 2.5%.
In the end, however, as Nomura correctly notes, “whether CTAs close out their long bond futures positions and make a clear shift to long equity futures positions tends to be determined by the state of the global economy.” And considering the lack of upward economic momentum at present, the risk of an extreme mechanistic sell-off of bond futures that ignores the economic facts on the ground is unlikely to materialize.
Tyler Durden
Tue, 10/29/2019 – 21:25 - Turkey 'Double Whammy': US House Recognizes Armenian Genocide, Approves Sanctions Over Syria Incursion
Turkey ‘Double Whammy’: US House Recognizes Armenian Genocide, Approves Sanctions Over Syria Incursion
Late in the day Tuesday the US House of Representatives voted overwhelmingly in favor of adopting a historic resolution recognizing the Armenian Genocide. This, it should be noted, on the 96th anniversary of the founding of Turkey as a republic no less.
And in another major simultaneous “gift” to Turkey’s Erdogan — what headlines are already calling a “double whammy” — the House also voted overwhelmingly to approve a biting sanctions bill that if signed into law would crush Turkey’s economy and target Erdogan’s financial assets personally over his controversial military incursion into northern Syria.
Armenian Genocide vote in the House Ankara has for years successfully lobbied against any such Congressional resolution on the 1915 Armenian genocide, treating it as an embarrassing and grievous wound to its reputation, also given the severe censorship within the country over this chapter in modern Turkey’s history.
It’s de facto illegal in Turkey to even acknowledge it, and over the past years multiple journalists, Armenians among them, have gone to jail for writing about the historic mass killings.
Turkey’s Ministry of Foreign Affairs was quick to condemn the resolution, H.R.296, dismissing it as a “delusion” of the “Armenian lobby and anti-Turkey groups” and further that it will only serve to damage future US-Turkey relations.
The measure recognizes the systematic killing of 1.5 million Armenians by Turkish military forces of the Ottoman Empire from 1915 to 1923. It also recognizes other Christian groups exterminated by Turkish Muslim forces, including “Greeks, Assyrians, Chaldeans, Syriacs, Arameans, Maronites, and other Christians,” according to the resolution’s text.
Historical photo of the Armenian Genocide, via AFP/BBC: “Skulls lie in the ruined Armenian village of Sheyxalan in 1915” (pic: Armenian Genocide Museum-Institute) The Congressional text is scathing in its condemnation, beginning with:
Affirming the United States record on the Armenian Genocide.
Whereas the United States has a proud history of recognizing and condemning the Armenian Genocide, the killing of 1.5 million Armenians by the Ottoman Empire from 1915 to 1923, and providing relief to the survivors of the campaign of genocide against Armenians, Greeks, Assyrians, Chaldeans, Syriacs, Arameans, Maronites, and other Christians;
Whereas the Honorable Henry Morgenthau, United States Ambassador to the Ottoman Empire from 1913 to 1916, organized and led protests by officials of many countries against what he described as the empire’s “campaign of race extermination”, and was instructed on July 16, 1915, by United States Secretary of State Robert Lansing that the “Department approves your procedure … to stop Armenian persecution”;…
And ending with:
Resolved, That it is the sense of the House of Representatives that it is the policy of the United States to—
(1) commemorate the Armenian Genocide through official recognition and remembrance;
(2) reject efforts to enlist, engage, or otherwise associate the United States Government with denial of the Armenian Genocide or any other genocide; and
(3) encourage education and public understanding of the facts of the Armenian Genocide, including the United States role in the humanitarian relief effort, and the relevance of the Armenian Genocide to modern-day crimes against humanity.
Concerning Syria, the successful sanctions vote in the House was also meant as a rebuke not only to Erdogan for his ordered attacks on Kurds, but to Trump, after the recent Pence-brokered ceasefire deal and US draw down from border areas, touted by Trump as a great achievement toward peace.
oh man, she all lives matter’d the armenian genocide https://t.co/y7jLjAJwYy
— Bobby Lewis (@revrrlewis) October 29, 2019
https://platform.twitter.com/widgets.js
The president is not expected to sign into effect any new sanctions related to ‘Operation Peace Spring,’ barring a major development or egregious and significant Turkish breach of terms of the US-brokered ceasefire.
Tyler Durden
Tue, 10/29/2019 – 21:05 - George Papadopoulos Wants To Fill Rep. Katie Hill's Seat
George Papadopoulos Wants To Fill Rep. Katie Hill’s Seat
Former Trump campaign adviser George Papadopoulos wants former Rep. Katie Hill’s seat in Congress. Hill, a California Democrat, resigned on Sunday amid a House Ethics Committee probe into allegations that she had inappropriate sexual relations with a staffer.
Papadopoulos – who the FBI under James Comey sent a portly, well-paid spy and his honeypot assistant “Azra Turk” to befriend – filed his statement of candidacy with the Federal Election Commission on Tuesday for California’s 25th district, according to Axios.
The 32-year-old former Trump aide and energy consultant pleaded guilty of making false statements to the FBI.
Of note, Hill flipped a red seat blue during the last election cycle, which suggests Papadopoulos may actually have a shot of becoming a United States lawmaker.
He also launched a campaign website, georgeforcongress.com, that shows him wearing sunglasses with a target over part of his face asking visitors to “join George” and “donate today.” The website appeared to have been taken down later on Tuesday.
The website said he is “running to put California’s 25th Congressional District seat back in Republican hands. Help fight back against Democrat corruption by joining George’s campaign today!” –NBC News
A key player in the ‘Russiagate’ saga, Papadopoulos was told by a member of the Clinton Foundation, Joseph Mifsud, that Russia had compromising information on then-presidential candidate Hillary Clinton. He later repeated this to Australian diplomat Alexander Downer, who relayed it to Australian intelligence – which told the FBI, which kicked off operation Crossfire Hurricane; the Obama administration’s official counterintelligence investigation into President Trump.
After three years of investigation by the DOJ, Special Counsel Robert Mueller concluded that Trump did not coordinate efforts with Russia during the 2016 US election, nor could Mueller conclude that Trump had obstructed the investigation into said non-collusion.
Tyler Durden
Tue, 10/29/2019 – 20:45 - Watch: Guerilla Journalists Sneak Onto Jeffrey Epstein's 'Pedo Island'
Watch: Guerilla Journalists Sneak Onto Jeffrey Epstein’s ‘Pedo Island’
A group of guerilla journalists from We Are Change snuck onto Jeffrey Epstein’s island, Little St. James, where they recorded the island’s features in high-definition.
Founder Luke Rudowski and a crew were able to book a ride onto the deceased pedophile’s island, where they found a series of “satanic gargoyles” and explored landmarks such as Epstein’s strange cube-shaped ‘temple.’
Watch:
We Are Change bills itself as a “nonpartisan, independent media organization comprised of individuals and groups working to expose corruption worldwide.”
Rudowski is a frequent presence at the annual Bilderberg meetings. and was arrested in 2009 for attempting to ask New York City Mayor Michael Bloomberg about his refusal to pay for the healthcare of 9/11 first responders. He has previously worked for Infowars.
Tyler Durden
Tue, 10/29/2019 – 20:22 - Cyberattack Shuts Down India's Largest Nuclear Power Plant
Cyberattack Shuts Down India’s Largest Nuclear Power Plant
India’s second (and largest) nuclear power unit stopped operating on 19th October 2019. It is suspected that the Kudankulam Nuclear Power Plant was hit by a cyberattack and the authorities were already alerted of the threat months in advance. Even as cybersecurity experts are investigating the case, the authorities were quick to dismiss any occurrence of a spyware infiltrating their systems. The power plant project built in collaboration with Russia has been a target of foreign players since its inception.
Kudankulam Nuclear Power Plant hit by Cyberattack
Nuclear Power Unit stops operating
The second 1,000 MW nuclear power unit at Kudankulam, owned by the Nuclear Power Corporation of India Ltd (NPCIL) stopped power generation on Saturday 19th October, said Power System Operation Corporation Ltd (POSOCO). The atomic power plant stopped generation about 12.30 a.m. on Saturday owing to “SG level low”, the company added. The expected date of the unit’s revival is not known. The NPCIL has two 1,000 MW nuclear power plants at Kudankulam Nuclear Power Project (KNPP) built with Russian equipment.
Official statement from Kudankulam Power Plant Project on Cyberattack
While cybersecurity experts are investigating the breach, the Kudankulam Nuclear Power Plant in Tamil Nadu has denied being the victim of a cyber attack and denied any incident of a spy virus having infected the systems at the plant. The statement asserted that since “Kudankulam Nuclear Power Plant Project (KKNPP) and other Indian Power Plants Control Systems are stand alone and not connected to outside cyber network and Internet, any cyberattack on the Nuclear Power Plant Control Systems is not possible.” This however, is a false assertion which was exposed when Israeli intelligence targeted Iranian Nuclear facility (which also was not connected to Internet) with Stuxnet.
Prior warning
More than a month before the unit stopped operating, the National Cyber Security Coordinator Office was notified of an intrusion of their systems by cyber threat intelligence analyst, Pukhraj Singh. The alert was generated on investigation by cybersecurity firm Kaspersky into spy tools dubbed DTrack.
Seeing KKNPP’s press release, I would like to add that I notified Lt Gen Rajesh Pant (National Cyber Security Coordinator) on Sep 4. Follow-up emails were exchanged, acknowledging the issue. I would solicit no further enquiries on the matter, requesting privacy. https://t.co/SMdABbJcvQ
— Pukhraj Singh (@RungRage) October 29, 2019
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DTrack Data Collection
DTrack data dump of the power plant also revealed statically encoded login credentials among other things:
Kudankulam Nuclear Power Plant DTrack data collection
Kudankulam Nuclear Power Plant DTrack data collection
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Login credentials
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Local IP, MAC, OS install information (including registered org) via registry
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Browser history
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Connectivity to local IP
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Compspec, ipconfig, netstat info
> net use \\\\10.38.1.35\\C$ su.controller5kk /user:KKNPP\\administrator
DTrack – Spy Tool
Kaspersky Global Research and Analysis Team have discovered a previously unknown spy tool, which had been spotted in Indian financial institutions and research centers. Called Dtrack, this spyware reportedly was created by the Lazarus group and is being used to upload and download files to victims’ systems, record key strokes and conduct other actions typical of a malicious remote administration tool (RAT).
In 2018, Kaspersky researchers discovered ATMDtrack – malware created to infiltrate Indian ATMs and steal customer card data. Following further investigation using the Kaspersky Attribution Engine and other tools, the researchers found more than 180 new malware samples that had code sequence similarities with the ATMDtrack, but at the same time were not aimed at ATMs. Instead, its list of functions defined it as spy tools, now known as Dtrack. Moreover, not only did the two strains share similarities with each other, but also with the 2013 DarkSeoul campaign, which was attributed to Lazarus – an infamous advanced persistence threat actor responsible for multiple cyberespionage and cyber sabotage operations.
Dtrack can be used as a RAT, giving threat actors complete control over infected devices. Criminals can then perform different operations, such as uploading and downloading files and executing key processes.
In a breach of national security, INS Vikrant, India’s first Indigenous Aircraft Carrier (IAC) was hit by an espionage attack where a hard disk and a multi function control (MFC) processor were stolen from the ship docked at the Cochin Shipyard Ltd (CSL) https://t.co/UZNMUJmO59
— Sabena Siddiqi (@sabena_siddiqi) October 28, 2019
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Entities targeted by threat actors using Dtrack RAT often have weak network security policies and password standards, while also failing to track traffic across the organization. If successfully implemented, the spyware is able to list all available files and running processes, key logging, browser history and host IP addresses, including information about available networks and active connections.
The newly discovered malware is active and based on Kaspersky telemetry, is still used in cyberattacks.
“Lazarus is a rather unusual nation state sponsored group. On one hand, as many other similar groups do, it focuses on conducting cyberespionage or sabotage operations. Yet on the other hand, it has also been found to influence attacks that are clearly aimed at stealing money. The latter is quite unique for such a high profile threat actor because generally, other actors do not have financial motivations in their operations,” said Konstantin Zykov security researcher, Kaspersky Global Research and Analysis Team.
“The vast amount of Dtrack samples we found demonstrate how Lazarus is one of the most active APT groups, constantly developing and evolving threats in a bid to affect large-scale industries. Their successful execution of Dtrack RAT proves that even when a threat seems to disappear, it can be resurrected in a different guise to attack new targets.
A scientist with the National Remote Sensing Centre (NRSC) of the Indian Space Research Organisation (ISRO) was on Tuesday found murdered in his apartment in #Hyderabad.https://t.co/JQ5G7naiK9
— GreatGameIndia (@GreatGameIndia) October 2, 2019
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The Foreign Hand
In 2012, the then Prime Minister of India Manmohan Singh in a starting disclosure claimed that foreign intelligence agencies were involved in the sabotage of the Kudankulam Nuclear Power Plant Project (KNPP), a bedrock of India-Russia alliance. Manmohan Singh was referring to the anti-nuclear protests in Kudankulam, which he claimed were orchestrated by American-backed NGOs.
After repeated denials for over a year from fishermen and farmers who were opposing the protest against the KNPP that they were being funded from overseas, the police in the southern Indian town opened a case against a “suspicious money transfer” from London.
The police said T. Ambika, wife of anti-KNPP activist Kumar alias Thavasi Kumar, received around $55,000 in her account with Canara Bank’s Kudankulam Banch from a particualar Anand based in the United Kingdom. Officials from the bank let the police know about the deposit in the account. The police then started an enquiry about the money being sent from a foreign destination to one associated with the ongoing anti-KNPP struggle.
Intelligence Report
According to a secret Intelligence Bureau document in possession of GreatGameIndia the protests were spear-headed by Ohio State University funded, SP Udaykumar, and a host of Western-funded NGOs. The larger conspiracy was unraveled when a German national provided Udaykumar a scanned map of all nuclear plant and uranium mining locations in India. The map included contact details of 50 Indian anti-nuclear activists revealing an intricate Network aimed to ‘take-down’ India’s nuclear program through NGO activism.
An enquiry of Udaykumar had revealed a deep and growing connection with US and German entities. In July 2010, Udaykumar received an unsolicited contract from the Kirwan Institute for Study of Race and Ethnicity at the Ohio State University, USA as a Consultant on “Group, Race, Class and Democracy issues through NGOs”. He was paid $21,120 upto June 2011 in a US bank account in his name and was contracted to earn another $17,600 upto April 2012 for fortnightly reports. These reports were significant in the fact that they were very brief lists of three general articles or books purported to have been read in the past fortnight, none relating to anti-nuclear activism, his main interest.
As a result, Udaykumar’s contact in Germany, one Sonntag Rainer Hermann (German national) was deported from Chennai on February 27, 2012. Hermann’s laptop contained a scanned map of India with 16 nuclear plants (existing or proposed) and five uranium mine locations marked prominently. The map also included contact details of 50 Indian anti-nuclear activists hand-written on small slips of paper along with a Blackberry PIN graph. The map was sent via email to five prominent anti-nuclear activists, including Udaykumar.
Map acquired from a German spy by the Intelligence Bureau with 16 nuclear plants (existing or proposed) and five uranium mine locations marked prominently.
Sustained analysis revealed that the name slips on the map were hand-written in order to avoid possible detection by text search algorithms said to be installed at e-gateways.
Based on the above enquiry, network analysis of all anti-nuclear NGO activity in India revealed the existence of
One ‘Super Network’ (prominently driven by Greenpeace and renowned activists) and
Five ‘Territorial Networks’ based out of
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Tamil Nadu (Idinthakarai, District Tirunelveli),
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Kerala (Trivandrum),
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Andhra Pradesh (Hyderabad),
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Gujarat (Ahmedabad),
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Meghalaya (Shillong)
The map clearly indicated the involvement of an organized agency and/or a highly professional, well-funded entity, which expends considerable effort in masking its origins.
Tyler Durden
Tue, 10/29/2019 – 20:05 -
- 26 Million Californians Under Red Flag Warning As "Remarkable And Dangerous" Santa Ana Approaches
26 Million Californians Under Red Flag Warning As “Remarkable And Dangerous” Santa Ana Approaches
Over 26 million Californians are under red flag warnings as residents of heavily populated Southern California brace for a record-strong Santa Ana wind event slated to begin Tuesday night and last through at least Thursday morning.
The notice comes as fire crews battle at least 11 blazes throughout the state.
In the northern part of the state, a critical wildfire danger exists in the North Bay region where the Kincade Fire is has burned over 75,000 acres and was just 15% contained as of 11 a.m. on Tuesday. Battling the blaze are over 4,500 fire personnel across 86 crews, 27 helicopters, 549 fire engines, 66 bulldozers and 42 water tankers. 124 structures have been destroyed in the fire.
BREAKING VIDEO: The #KincadeFire seen from Middletown, California; the fire has scorched over 74,000 acres and is 15% contained pic.twitter.com/ZFQJlQscKn
— News Breaking LIVE (@NewsBreaking) October 29, 2019
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Critical weather conditions (dry and windy) will be a threat to parts of California again on Tuesday. @NWSSPC @NWSSacramento @NWSBayArea @NWSLosAngeles @NWSSanDiego @NWSEureka @NWSHanford @NWSMedford pic.twitter.com/ljbeMtDv9U
— NWS Western Region (@NWSWestern) October 28, 2019
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747 Global SuperTanker makes a drop over the Kincade Fire. #KincadeFire @kron4news pic.twitter.com/iBkqugBcx9
— Chuck Clifford (@chuckclifford) October 29, 2019
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To the south, the Getty Fire is raging west of Interstate 405 in Los Angeles, forcing wealthy residents seek shelter at a makeshift evacuation center at the Westwood Recreation Center. The 656-acre fire which was sparked when a branch fell on power lines (operated by the Los Angeles Department of Water and Power) is just 5% contained.
At least 16 schools in the Los Angeles Unified School District are now closed due to fire conditions.
According to CNN and NOAA the current threats include:
• A “remarkable and dangerous” Santa Ana winds event in Southern California — perhaps the strongest this season — is expected to bring gusts of 60-70 mph in the valleys and up to 80 mph in the mountains from late Tuesday night into Wednesday, the National Weather
• Strong winds Tuesday afternoon in Northern California, with gusts up to 50 mph, the weather service’s Storm Prediction Center says.The worsening conditions come as firefighters across the state battle at least 11 wildfires that have combined to leave thousands of people under evacuation orders.
In western Los Angeles, where the Getty Fire has charred more than 650 acres since Monday, the expected winds mean roughly 20,000 people under evacuation orders there “will not be returning to their homes this evening,” Mayor Eric Garcetti said.
“Stay away until we lift that order,” Garcetti said in a news conference Tuesday morning. –CNN
@LianaBrackett Here was my view coming home from pdx today. #KincadeFire pic.twitter.com/OEAjpjXXqZ
— cynpalmer (@cyn_palmer) October 29, 2019
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Tyler Durden
Tue, 10/29/2019 – 19:45 - Hornberger: The Evil Of The Drug War
Hornberger: The Evil Of The Drug War
Authored by Jacob Hornberger via The Future of Freedom Foundation,
With the exception of the U.S. national-security state and its foreign policy of empire and intervention and its torture, state-sponsored assassinations, coups, alliances with dictatorial regimes, invasions, occupations, wars of aggression, illegal and unconstitutional wars, mass secret surveillance, indefinite detention, secret prison camps, drug experimentation on unsuspecting people, denial of due process, denial of trial by jury, kangaroo military tribunals, and other dark-side practices, it would be difficult to find a better example of an evil and immoral program than the war on drugs.
Consider:
1. Everyone, including the most ardent drug-war proponent, agrees that this decades-long program has failed to achieve its goal, which is a drug-free society.
2. If failure was the only consequence of this program, that would be one thing. But it’s not. Drug laws have brought Into existence drug gangs, drug cartels, gang wars, drug assassinations, drug kidnappings, burglaries, robberies, murders, muggings, and official corruption.
3. The drug war is also the most racially bigoted government program since segregation, perhaps even more so. Under segregation, government officials used the force of law to keep the races separated, but at least they permitted blacks to keep living in the community. With drug laws, they have been able to remove blacks entirely from communities and relocate them into places called penitentiaries, where they are forced to spend a large portion of their lives. They have also been able to use drug laws to harass, abuse, insult, and humiliate African-Americans, Latinos, and other racial minorities.
That’s not to say, of course, that all law-enforcement agents and all judges are racially bigoted. It is simply to say that for those who are racially bigoted, the drug war is like heaven on earth, in that it enables them to exercise their bigotry in a legal manner and even get praised for it.
4. The drug war has played a major role in the destruction of liberty in America. Just think: They actually put people into jail for doing nothing more than ingesting a substance that politicians and bureaucrats, both at the state and federal level, don’t approve of.
Who cares whether politicians and bureaucrats approve of a particular substance? What business is that of theirs?
Actually, it’s none of their business what a person puts into his mouth. Freedom necessarily entails the right to ingest whatever a person wants to Ingest, no matter how harmful or destructive it might be. When people live in a society where government officials can punish them for ingesting unapproved substances, there is no way that people in that society can legitimately be considered free.
The repeal of drug laws — all drug laws, not just marijuana laws — is a necessary pre-requisite for a free society. It’s also a prerequisite for a just and humane society, one that treats drug addiction and drug use as a private problem, not a criminal-justice one.
Tyler Durden
Tue, 10/29/2019 – 19:25 - BOJ To Start Lending ETF Shares To Prevent Market Freeze
BOJ To Start Lending ETF Shares To Prevent Market Freeze
While most central banks are contemplating how to gently break it to the public that since they are out of ammo with interest rates at all time low, and $15 trillion in global sovereign debt is now yielding negative – a financial abortion which suggests the value of money is negative – the only hope markets have to avoid collapse is for central banks to start buying stocks in the open market, the BOJ has no such problems: after all the Japanese central bank (alongside its Swiss peer) has for years been quite open that it purchases stocks and ETFs directly. Unfortunately, in its efforts to stabilize the market, the BOJ has been purchasing a little too many ETFs and it now owns far too much.
Last May, speaking to Japanese parliamentarians, BOJ Governor Haruhiko Kuroda noted that the central bank now owns nealry 80% of the country’s stock of ETFs, the result of a program begun in 2010 and ramped up in 2013.
Unfortunately, the program failed in its immediate task: the main goal of ETF buying was to lower Japan’s equity-risk premium – the extra returns investors expect for buying stock rather than simply parking their money in riskless government debt. A lower premium should raise stock prices and make equity financing easier for listed companies. But at just shy of 7%, Japan’s premium remains stubbornly above the U.S.’s 6%—with the gap little changed in six years – according to Aswath Damodaran, professor of finance at New York University’s Stern School of Business.
Now what is truly terrifying is that the impact of the BOJ’s massive equity purchases is actually not easily visible in Japanese stock valuations as share prices have actually fallen as a multiple of earnings during the course of the program.
Meanwhile, unlike the trillions in bonds the BOJ owns as part of its QE program, the equity purchased by the central bank does not mature and is “owned” by the bank’s until it is sold.
And while the BOJ has a long way to go before crossing that particular bridge, in the meantime it has come across a major hurdle to its monetary operations: it now owns so many ETFs, it is effectively freezing up the market.
According to the Nikkei, in order to restore some functionality to the market where volumes have collapsed in recent years, the BOJ will soon start lending shares in exchange-traded funds to brokerages as early as next spring to try to restore some of the liquidity it has drained out of the market.
As the Nikkei explains, the central bank began considering ETF lending in April “as part of a plan to improve the sustainability of its asset-buying, which has distorted markets due to its sheer scale.”
With its ETF holdings of 28.9 trillion yen ($266 billion) as of March 31, which amount to nearly 80% of the entire ETF market, the BOJ is on track to surpass the world’s largest pension fund, the Government Pension Investment Fund, as the top holder of Tokyo-listed stocks as early as next year.
Why is the BOJ suddenly worried about adding market liquidity after draining it for years? For one reason, retail investors have largely abandoned the market as a result of the illiquid conditions; more importantly, by renting out ETFs to the market, the BOJ will make it easier for itself to conduct its own ETF purchases, as well as offset some of the costs through lending fees.
According to Eiji Dohke, an analyst at SBI Securities, brokerages could borrow ETFs from the BOJ and then short-sell them back to the bank, which however could be a problem and a major conflict of interest as the BOJ is interested in pushing asset prices higher.
In any event, market makers, such as brokerages and high-frequency traders, need to keep ETF inventory on hand to ensure that retail investors can readily buy and sell. But the risk of price fluctuations limits the amount they can hold at once, making it difficult to fulfill large buy orders; as such the BOJ’s purchases have in effect paralyzed the market. Being able to borrow from the BOJ as needed would let market makers cover such shortfalls.
* * *
Last April, BOJ head Haruhiko Kuroda told reporters that the goal of the lending program was to improve the functioning of the ETF market. Frequent ETF lending, mainly by pension funds, contributes to the abundant liquidity of the U.S. market. The proposal, which is still being finalized, has drawn criticism.
So how will the liquidity injection be implemented? In a market briefing, the BOJ said it planned to take bids for ETF lending once per month. This would require market makers to estimate demand a month in advance. Excess ETFs not sold to investors would return to the central bank, but market makers would still have to eat the cost of borrowing them.
“Being able to borrow from the BOJ whenever there’s demand and settle the transaction then would be ideal. Once a month is too little,” a market player said.
So for all those still wondering if the end of capital markets will come with a bang, or a whimper, Japan proudly lights the way: we are nearing a time when trades will only take place once a month, and only with the BOJ’s blessing, as the entire world succumbs to central planning that would make Josef Stalin green with envy.
Tyler Durden
Tue, 10/29/2019 – 19:09
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