Today’s News 31st January 2016

• Deep State: Inside Washington's Shadowy Power Elite

  This “state within a state” hides “mostly in plain sight, and its operators mainly act in the light of day,” says Lofgren, and yet the “Deep State does not consist of the entire government.”

  “Our plutocracy, whether the hedge fund managers in Greenwich, Connecticut, or the Internet moguls in Palo Alto, now lives like the British did in colonial India: ruling the place but not of it. If one can afford private security, public safety is of no concern; to the person fortunate enough to own a Gulfstream jet, crumbling bridges cause less apprehension, and viable public transportation doesn’t even compute. With private doctors on call and a chartered plane to get to the Mayo Clinic, why worry about Medicare?”

   

  ? Mike Lofgren, The Deep State: The Fall of the Constitution and the Rise of a Shadow Government

   

  "Our analyses suggest that majorities of the American public actually have little influence over the policies our government adopts. Americans do enjoy many features central to democratic governance, such as regular elections, freedom of speech and association, and a widespread (if still contested) franchise.

   

  But we believe that if policymaking is dominated by powerful business organizations and a small number of affluent Americans, then America’s claims to being a democratic society are seriously threatened."

   

  Martin Gilens and Benjamin I. Page, Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens, Princeton 2014

  "As a congressional staff member for 28 years specializing in national security and possessing a top secret security clearance, I was at least on the fringes of the world I am describing, if neither totally in it by virtue of full membership nor of it by psychological disposition.

   

  But, like virtually every employed person, I became, to some extent, assimilated into the culture of the institution I worked for, and only by slow degrees, starting before the invasion of Iraq, did I begin fundamentally to question the reasons of state that motivate the people who are, to quote George W. Bush,  'the deciders.'

   

  Cultural assimilation is partly a matter of what psychologist Irving L. Janis called groupthink,  the chameleon-like ability of people to adopt the views of their superiors and peers. This syndrome is endemic to Washington: The town is characterized by sudden fads, be it negotiating biennial budgeting, making grand bargains or invading countries. Then, after a while, all the town's cool kids drop those ideas as if they were radioactive.

   

  As in the military, everybody has to get on board with the mission, and questioning it is not a career-enhancing move. The universe of people who will critically examine the goings-on at the institutions they work for is always going to be a small one. As Upton Sinclair said,  'It is difficult to get a man to understand something when his salary depends upon his not understanding it.'"

  Mike Lofgren

  h/t Jesse's Cafe Americain blog

  *  *  *

  As we previously concluded, for all intents and purposes, the nation is one national “emergency” away from having a full-fledged, unelected, authoritarian state emerge from the shadows. All it will take is the right event—another terrorist attack, perhaps, or a natural disaster—for such a regime to emerge from the shadows.

  As unnerving as that prospect may be, however, it is the second shadow government, what former congressional staffer Mike Lofgren refers to as “the Deep State, which operates according to its own compass heading regardless of who is formally in power,” that poses the greater threat right now.

  Consider this: how is it that partisan gridlock has seemingly jammed up the gears (and funding sources) in Washington, yet the government has been unhindered in its ability to wage endless wars abroad, in the process turning America into a battlefield and its citizens into enemy combatants?

  The credit for such relentless, entrenched, profit-driven governance, according to Lofgren, goes to “another government concealed behind the one that is visible at either end of Pennsylvania Avenue, a hybrid entity of public and private institutions ruling the country according to consistent patterns in season and out, connected to, but only intermittently controlled by, the visible state whose leaders we choose.”

  This “state within a state” hides “mostly in plain sight, and its operators mainly act in the light of day,” says Lofgren, and yet the “Deep State does not consist of the entire government.”

  Rather, Lofgren continues:

  It is a hybrid of national security and law enforcement agencies: the Department of Defense, the Department of State, the Department of Homeland Security, the Central Intelligence Agency and the Justice Department. I also include the Department of the Treasury because of its jurisdiction over financial flows, its enforcement of international sanctions and its organic symbiosis with Wall Street.

   

  All these agencies are coordinated by the Executive Office of the President via the National Security Council. Certain key areas of the judiciary belong to the Deep State, such as the Foreign Intelligence Surveillance Court, whose actions are mysterious even to most members of Congress. Also included are a handful of vital federal trial courts, such as the Eastern District of Virginia and the Southern District of Manhattan, where sensitive proceedings in national security cases are conducted.

   

  The final government component (and possibly last in precedence among the formal branches of government established by the Constitution) is a kind of rump Congress consisting of the congressional leadership and some (but not all) of the members of the defense and intelligence committees. The rest of Congress, normally so fractious and partisan, is mostly only intermittently aware of the Deep State and when required usually submits to a few well-chosen words from the State’s emissaries.

  In an expose titled “Top Secret America,” The Washington Post revealed the private side of this shadow government, made up of 854,000 contract personnel with top-secret clearances, “a number greater than that of top-secret-cleared civilian employees of the government.”

  Reporting on the Post’s findings, Lofgren points out:

  These contractors now set the political and social tone of Washington, just as they are increasingly setting the direction of the country, but they are doing it quietly, their doings unrecorded in the Congressional Record or the Federal Register, and are rarely subject to congressional hearings…

  The Deep State not only holds the nation’s capital in thrall, but it also controls Wall Street (“which supplies the cash that keeps the political machine quiescent and operating as a diversionary marionette theater”) and Silicon Valley.

  As Lofgren concludes:

  [T]he Deep State is so heavily entrenched, so well protected by surveillance, firepower, money and its ability to co-opt resistance that it is almost impervious to change… If there is anything the Deep State requires it is silent, uninterrupted cash flow and the confidence that things will go on as they have in the past. It is even willing to tolerate a degree of gridlock: Partisan mud wrestling over cultural issues may be a useful distraction from its agenda.

  Remember this the next time you find yourselves mesmerized by the antics of the 2016 presidential candidates or drawn into a politicized debate over the machinations of Congress, the president or the judiciary: it’s all intended to distract you from the fact that you have no authority and no rights in the face of the shadow governments.

  

  

  

  

  

• The United States Of Crazy Laws

  Presented with no comment… apart from Arizona wins!

   

  

  

  Click image for large legible version

  Source: The Burning Platform blog
  

  

  

  

  

  

• Glistening Gold & The Rumble In The Ruble – America's "Tribute Scam" Is Unraveling Fast

  Beforer we discuss The Empire of Chaos ongoing attacks on "The Assassin Putin" and The Master of the Universe attempts to topple any challenge to Washington's global hegemony, we thought the following chart may give some much needed context for where the pain really is – the drop in the oil price in local currency terms has been the least of all major nations… for Russia

  

   

  While a case can be made that for Moscow it would be a tremendous waste of hard-earned foreign exchange to try to counter a rig against their currency they simply cannot beat, as the entire fiat financial power of the US is against them.

  As Pepe Escobar via DoomsteadDiner.net notes,  Russia’s Central Bank by now should be all-out selling rubles for gold, and building Russia’s gold reserves.

  Well, it is happening, somewhat.

   

  Last week, Russia’s Central Bank estimated gold reserves to have reached 1,415 metric tons in 2015 – over 17 percent more than 2014, valued at almost $48.6 billion. The share of monetary gold in Russia’s foreign currency reserves rose from 11.96 percent to 13.18 percent.

   

  That’s still not good enough. Why? A harsh answer would be that the Russian Central Bank and the Ministry of Finance, as some analysts argue, are in effect run by saboteurs and vassals of the US financial elite, a.k.a. the Masters of the Universe.

   

  Still, the Russian Central Bank did not intervene to prop up the ruble. And they should not. The best course of action would be to let the ruble go, ending almost all imports, thus forcing self-sufficiency. Or introduce capital controls, with only approved transactions involving foreign currencies. It did work for Malaysia, for instance, after the 1997 Asian financial crisis.

   

  Forget about a China crash

   

  A serious case can be made that Russia does not need much Western foreign investment. That was mostly encouraged by the Central Bank, who held interest rates higher in Russia than the US and EU, naturally leading Russian companies to borrow abroad in US dollars or Euros.

   

  The responsibility of Russia’s Central Bank is to create domestic credit to build the industries that have been cut off from Russia by the falling ruble. This is not inflationary; the increased production out of these investments would nullify the inflationary implications on the newly created credit.

   

  The Russian Central bank instead went for tight money to fight inflation. It would have been much more profitable for Russia to fight inflation by creating credit at low interest rates to finance the construction of the industries necessary to replace the import of foreign products.

   

  Now let’s look at the Russia-China strategic partnership. While Russia may be on the ropes, China is not. China will grow at an estimated 6.5 percent this year – versus 7 percent in 2015. Amid an astounding web of economic restructuring and de-leveraging, US multinationals such as Apple and GM certainly have no interest in a Chinese “crash”.

   

  A key indicator to watch is the growth in China’s demand for oil. Construction has ebbed; but not car manufacturing, which is pumping out 25 million vehicles per year.

   

  To deal with China, the Masters of the Universe deployed a different strategy; they tried to stop Chinese economic growth from fueling the rise in the oil price. Thus the offensive by the usual Wall Street suspects trying to crash China’s stock market using cash settlement on A shares. It did not work.

   

  Now, the Masters of Universe, remote-controlling the Saudis, are essentially trying to pull the plug on global stock markets. One could call it a trillion dollar cash settlement derivative game. There’s no evidence this will be enough to break Russia.

   

  The “assassin” versus the fifth column

   

  Masters of the Universe hysteria on getting rid of President Putin (and reinstating vassal oligarchs) by any means available has reached fever pitch; the latest manifestation is “Putin The Assassin”, with crucial assistance provided by British“intelligence”.

   

  There is no question Masters of the Universe operatives are behind the collapse in oil and ruble prices. Somewhat it’s a repeat of the scenario in mid-2014, when the oil price crashed and there was no visible increase in output; what happened was the – invisible – dumping of seven million barrels a day of Gulf oil under orders by the Masters of the Universe, according to surefire (American) banking sources.

   

  The Fed mightily contributed to the present disorder by raising interest rates when the US economy was sick, while cash settlement manipulators in Wall Street used this as the basis for their move to tank the markets. It goes without saying that the usual suspects will make hundreds of billions of dollars out of the current market crash. A good place to watch is what goes on inside BlackRock.

   

  Into this gloomy scenario steps in none other than the aspiring Master of the (New) Universe, Chinese President Xi Jinping, in his high-profile tour of the Middle East. Xi’s three-pronged business/charm offensive in Saudi Arabia, Iran and Egypt should be interpreted as Beijing’s shot at reshaping Southwest Asia in a framework closer to the Shanghai Cooperation Organization (SCO).

   

  Xi as much as anyone knows very well how the whole American economy – based on a worthless global reserve currency – is fuelled by a rapacious, barely disguised tribute, paid by every nation in the world to the Empire of Chaos. And Xi knows how this tribute scam is unraveling, fast.

   

  In Riyadh, Xi even implied, in a very Chinese, nuanced way, that the House of Saud would be doing a very good deal if it eventually dropped Washington as the Mafia-style protector, as well as the petrodollar as the privileged conduit for recycling Saudi oil income. What about yuan-denominated bonds and yuan-based oil benchmarks?

   

  Needless to add, should the House of Saud even contemplate such a move en masse, a CIA-engineered coup in Riyadh would be a certainty, and all House of Saud assets confiscated – as many a Master of the Universe minion in the Beltway is already advocating off the record.

   

  So we have the Saudis – following Masters of the Universe orders – frantically dumping securities on the market while the Russian Central bank wavers on what to do next.

   

  Yet even if the Saudis managed to dump their $8 trillion in estimated assets Russia, adopting the correct strategy, could still move to a self-sufficiency that the US – or the EU – can’t even dream of. And on top of it enjoying full employment – while the West crashes itself down as their markets disintegrate.

  So, Russian Central Bank and Finance Ministry, the steaming hot ball is in your court.

  

  

  

  

  

• Peak "Sharing Economy" – Syphilis Rates Soar To Record Highs

  "What's mine is yours, for a fee," is the mantra of the new normal "sharing economy," as various segments of our heretofore under-utilized assets are 'rented' out for the enjoyment of others. However, as The LA Times reports, perhaps we are sharing just a little too much. As we previously noted, sexually transmitted diseases are on the rise across the nation, but the problem is particularly acute in Los Angeles County with health officials pointing the finger at casual sex arranged through social media as "the perfect storm."

   

  

   

  Not only does the county have the most cases, it also has some of the highest rates of chlamydia, gonorrhea and syphilis in California and the nation.

  Some public health experts have blamed the heavy use of online dating apps, arguing that they lead to more casual sex among people 25 and younger, who are the most likely to be infected and also the least inclined to seek testing.

  STDs spread in large part because people don't get tested enough, so undiagnosed infections are unknowingly transmitted from one person to another.

   

  As technology improves, Gaydos thinks people will eventually be able to pick up an STD test from a drugstore and get results immediately, much like a pregnancy test. "But in the meantime, they need to be tested."

   

  Dozens of organizations now offer STD tests that can be ordered online and mailed to homes. The customer provides a sample, sends it back to a lab and receives results within a few days.

   

  But as these tests become more popular, experts warn that they may not always be accurate.

   

  "We don't know — they could be doing [the testing] in their garage, they could be doing this on their kitchen table," said Dr. Charlotte Gaydos, an STD expert and professor at Johns Hopkins University School of Medicine.

  We can se the SuperBowl advert now – "Clap? There's An 'App' For That!"

  *  *  *

  So, in a consequence-free world of money printing to enable everything, too much of a good thing is bad for you after all…which reminds us…

  What's dangerous and eats nuts?

   

  …

   

  …

   

  Syphillis.

  

  

  

  

• A Chinese Banker Explains Why There Is No Way Out

  Over the past year, we have frequently warned that the biggest financial risk (if not social, which in the form of soaring worker unrest is a far greater threat to Chinese civilization) threatening China, is its runaway non-performing loans, which at anywhere between 10 and 20% of total bank assets, mean that China is one chaotic default away from collapsing into the post “Minsky Moment” singlarity where it can no longer rollover its bad debt, leading to a debt supernova and full financial collapse. And as China’s total leverage keeps rising, and according to at least one estimate is now a gargantuan 350% of GDP (incidentally the same as the US), the threat of a rollover “glitch” gets exponentially greater.

  To be sure, in recent months the topic of China’s bad debt has gained increasingly more prominence among the mainstream, and notably none other than Kyle Bass has made the bursting of China’s credit cycle the basis for his short Yuan trade as noted here previously:

  What I think the narrative will swing to by the end of this year if not sooner, is the real issue in China is not simply that profits have peaked. The real issue is the size of their banking system. Do you remember the reason the European countries ended up falling like dominoes during the European crisis was their banking systems became many multiples of their GDP and therefore many, many multiples of their central government revenue. In China, in dollar terms their banking system is almost $35 trillion against a GDP of $10 and their banking system has grown 400% in 8 years with non-performing loans being nonexistent. So what we are going to see next is a credit cycle, and in a credit cycle you see some losses, but if China’s banking system loses 10%, you are going to see them lose $3.5 trillion.

  And judging by the surge in recent and increasingly louder calls for a Chinese devaluation, some advocating a major one-off currency debasement, Bass’ perspective is certainly prevalent among the trading community. Bank of America goes so far as to speculate that the “upcoming G20 meeting in Shanghai offers an opportunity for policy makers to seize the “expectations” initiative via a one-off China devaluation.” It does, however, also add that the “risk is markets need to panic first” before instead of piecemeal devaluation, China follows through with a Plaza Accord-type currency intervention.

  Friday’s adoption of NIRP by Japan, which send the US Dollar soaring, has only made any upcoming future Chinese devaluation even more likely.

  But whether China devalued or not, one thing is certain: it is next to impossible for China – under the current socio economic and financial regime – to stop the relentless growth in NPLs, which even by conservative estimates at in the trillion(s), accounting for at least 10% of China’s GDP.

  Sure enough, a cursory skimming of news from China reveals that even Chinese bankers now “admit the NPL situation is dire, but will keep on lending” anyway.

  As the Chiecon blog notes, NPL “ratios might be closer to 10%… supported by revelations in this article, where Chinese bankers complain of missing performance targets, spiraling bad loans, and end of year pay cuts.”

  “Right now, we’ve nowhere to issue new loans” said Mr. Zhang, a general manager in charge of new loans at one of the listed commercial bank branches. Zhang believes NPL ratios have yet to peak, with SME loans the worst hit area. Ironically this has forced Zhang to direct lending back to the LGFVs, property developers and conglomerates, industries which the Chinese government had previously instructed banks to restrict lending to, based on oversupply and credit risk fears.

  But the main reason why China is now trapped, and on one hand is desperate to stabilize its economy and stop growing its levereage at nosebleed levels, while on the other hand it is under pressure to issue more loans while at the same time it is unwilling to write off bad loans, can be found in the following very simple explanation offered by Mr. Zhou, a junior banker at a Chinese commercial bank.

  “If I don’t issue more loans, then my salary isn’t enough to repay the mortgage, and car loan. It’s not difficult to issue more loans, but lets say in a years time when the loan is due, if the borrower defaults, then I wont just see a pay cut, I’ll be fired, and still be responsible for loan recovery.“

  And that, in under 60 words, explains why China finds itself in a no way out situation, and why despite all its recurring posturing, all its promises for reform, all its bluster for deleveraging, China’s ruling elite will never be able to achieve an internal devaluation, and why despite its recurring threats to crush, gut and destroy all the evil Yuan shorts, ultimately it will have no choice but to pursue an external devaluation of its economy by way of devaluing its currency presumably some time before its foreign reserves run out (which at a $185 billion a month burn rate may not last for even one year).

  However, before it does, it will make sure that it also crushes every Yuan short, doing precisely what the Fed has done with equity shorts in the US over the past 7 years.

  

  

  

  

• I-Owe-Ah & The Crime Called Ethanol

  Submitted by Eric via EricPetersAutos.com,

  Ethanol – corn alcohol – won’t take you as far as a gallon of gas.

  

   

  But that doesn’t mean it is isn’t powerful stuff.

  Politically powerful stuff.

  Republican presidential candidate Ted Cruz is feeling the heat right now as the ethanol lobby pressures him to openly commit to expanded support for federal ethanol mandates – a kowtow every recent presidential candidate from both parties has done up to now.

  The ethanol lobby’s potency derives not only from the money it has and the campaign contributions it can make (or not) but also from the fact that – in a presidential election  year – the Iowa Caucuses are critical.

  And Iowa is a farm state.

  Cruz has at least criticized the federal Renewable Fuels Standard – the law behind the force-feeding of ethanol alcohol down the gullets of Americans and their cars.

  But The Lobby is very persuasive.

  

   

  And we are not talking “family farms” here but rather, enormous agricultural combines that exploit the family farmer by applying artificial economic pressure (via government subsidies) to divert food crops to ethanol production. Corn that  would otherwise be used to feed people – or animals that feed people – ends up being used to make ethanol, which is then mixed with gas in various concentrations.

  Currently, 40 percent of the U.S. corn crop goes to ethanol production – up from just 10 percent as recently as 2005.

  Most of the unleaded gas available in the United States is actually 10 percent ethanol and 90 percent gasoline. This fuel is labeled “E10″ gas.

  Which would be ok … if that’s what the market wanted.

  But it’s actually what the government (and corn lobby) want.

  And now they want more.

  

   

  Specifically, they want ethanol concentrations upped to 15 or even 25 percent (E15 and E25). And they want whomever is nominated and ultimately elected president to make it so.

  Big money – and big pressure.

  Cruz recently stated that “market access (for ethanol) is critical” and even gone so far as to argue that anti-trust laws be “vigorously enforced to ensure that the oil and gas industry cannot block access to the market for ethanol producers.”

  But ethanol has never been blocked from entering the market. The problem is just the opposite. Ethanol producers want a “market” created for their product – enforced by government. They want to suppress the market’s verdict about ethanol, bypass the preferences expressed by Americans for gasoline rather than ethanol-adulterated “gas.”

  

   

  They want ethanol forced down our throats – and into our tanks.

  Ethanol sounds good – superficially – because it is “renewable” and produced here in America. The problem is that a gallon of ethanol-laced contains less energy than a gallon of straight gasoline. Your car’s fuel economy goes down on ethanol and ethanol-blend fuels – by as much as 5-10 percent vs. straight gasoline because the engine has to burn more ethanol-adulterated fuel to get the equivalent energy out of it vs. a gallon of pure gasoline.

  So, Cruz’s statement (in a recent op-ed) that ethanol “could prove quite popular with American consumers” is based on a misunderstanding of the nature of ethanol as a fuel.

  Similarly his statements regarding octane.

  Ethanol can be used as an octane enhancer, but unless an engine was designed to operate on high octane fuel, using high octane fuel will usually result in reduced fuel economy. Octane is just a measure of a fuel’s burn rate, not its quality. High-octane premium is just the ticket for high-compression/high-performance engines designed for such fuels. But most cars are designed to run on regular (lower octane) unleaded – and so ethanol’s octane enhancing properties are irrelevant.

  

   

  And ethanol in higher concentrations – such as E15 and E25 and E85 (15 percent, 25 percent and 85 percent ethanol, respectively) will cause physical damage to engines and fuel systems not specifically designed and built to handle high-alcohol-concentrations.

  Alcohol is by nature corrosive – and it attracts moisture. If you read your vehicle’s owners manual you will find explicit warnings about using any gasoline with more than 10 percent ethanol (E10) unless the engine was designed for it – and an advisory that any damage resulting from its use will not be covered buy the vehicle’s warranty.

  So, Cruz is misinformed, minimally, when he states that “the EPA – through regulations used in vehicle emissions tests – imposes a hard wall against mid-level ethanol blends such as E25, making it largely illegal to sell gasoline with higher blends of ethanol.”

   

  

  The fact is that even E15 – 15 percent alcohol – would be disastrous for millions of vehicles currently in service. And not just for them, either. Virtually all the lawn mower, chainsaw and recreational power equipment (e.g., boat) engines currently in service cannot handle ethanol concentrations higher than 10 percent.

  Neither can the infrastructure.

  Pipelines and tanker trucks and the in-ground tanks where fuel is stored generally can’t stand up to higher-than-10-percent ethanol fuels. The fuels would have to be transported and stored separately – which involves duplication of effort – which adds another layer of artificial (government-imposed) costs.

  

   

  The only “hard wall” limiting ethanol concentrations in fuel is the limitation imposed by how much damage to our cars and wallets we’re willing to tolerate for the sake of the corn lobby.

  Cruz would be taking a political risk to say so openly – especially ahead of the Iowa Caucuses. But – as Donald Trump has shown – the public is desperate for straight-talking leaders who will stand up for them rather than serve as water-carriers for the “interests” that seem to own the government and use it for their benefit.

  Cruz has said he favors an “all of the above” policy when it comes to fuels – and that Washington “shouldn’t be “picking winners ands losers.”

  Exactly so.

  

  

  

  

  

• 2016's "Biggest Risk": Markets Will "Need To Panic" To Wake Up "Impotent" Policymakers

  On Friday, we brought you the 4 “D’s” of deflationary doom from BofA’s Michael Hartnett.

  For those who missed it, Hartnett says the reason “an almost manic monetary policy been so ineffective at generating a broad, sustained economic recovery,” is that the following four secular deflationary factors are conspiring to impede a robust recovery:

  • 1. Debt levels remain very large: according to the BIS, global debt as a share of GDP was 246% in Q4’2000, 269% in Q4’2007 and 286% in Q2’2014.
  • 2. Deleveraging has impeded the housing recovery and its “multiplier” effect: CoreLogic’s Housing Credit Index, which measures mortgage credit availability in the US, has plunged from 100 to 42 in the past seven years; US mortgage credit outstanding has fallen more than $1tn since its peak of $14.8tn in ’08.
  • 3. Demographics reveal a dramatic aging of the developed world’s population: in the next 10 days, 112,000 people in the US, Europe and Japan will reach the retirement age of 65.
  • 4. Disruption via innovation in robotics, AI and so on, which the World Economic Forum forecasts will cause the loss of a net 5.1mn jobs in the next 5 years.

  And so, those are the factors that explain why the DM world is stuck in neutral when it comes to economic activity. As BofA also suggested, the fact that the “recovery” isn’t really a recovery goes a long way towards explaining why populist candidates and political parties are polling so well across the developed world.

  So what, pray tell, can policy makers do to right the ship now that the world appears to have been thoroughly Japanified? 

  Well, to let BofA’s Hartnett tell it, there needs to be some manner of “global policy coordination” à la The Plaza Accord to reignite “corporate and household animal spirits” and combat the dreaded 4 “C’s”: China, commodities, credit, and the consumer. 

  This policy coordination could come at the G20 Finance Ministers and Central Bank meeting in Shanghai next month, Hartnett writes.

  We’ve long argued that if you want proof that the Keynesian insanity employed by DM central bankers has demonstrably failed, you needn’t look further than global demand and trade, which are both in the doldrums. 

  In short, if you want to resuscitate demand, you need policies that have a real impact on those from whom final demand emanates. Inundating Wall Street with fungible liquidity doesn’t accomplish that. It may drive asset prices higher, but Ben Bernanke’s fabled “wealth effect” pretty clear doesn’t exist. 

  So what’s the answer, you ask? Is there any hope for centrally planned markets in the wake of the extreme turbulence that played havoc with equities in January? Can central bankers reclaim the narrative on the way to orchestrating a real recovery? 

  Well, probably not, but BofA says there are 4 points that must be addressed if officials intend to attempt a coordinated policy response to anemic global growth. Below, find commentary on a possible “Shanghai Accord”.

  *  *  *

  From BofA

  In addition to the risk of a deeper profit recession, there is no doubt the recent sell-off has been exacerbated by policy impotence; the sense that policy-makers have little solution for global demand deficiency. A weak, disjointed recovery may also be threatened by the political shift toward capital controls in China, border controls in Europe and the US, as well as more aggressive redistributive taxation at a time of ongoing fiscal austerity.

  There are some echoes of the period leading up to the 1985 Plaza Accord between the United States, France, West Germany, Japan, and the United Kingdom, which agreed to weaken the US dollar to help the US improve its huge trade deficit and spur economic growth out of the doldrums of the early-1980s. This pro-growth agreement was spurred by weak growth, macro divergence, and interestingly in light of the current political trends, rising protectionism in the US. Leading up to the 1985 accord, interest rates and inflation were low, but macro cycles were out of sync and exchange rates were targeted to induce macro convergence. In addition, West Germany agreed to tax cuts, the UK agreed to reduce its public expenditure and transfer monies to the private sector, while Japan agreed to open its markets to trade, liberalize its internal markets and manage its economy by a true yen exchange rate. All agreed to increase employment.

  Most important was that the global policy cooperation inspired corporate and household animal spirits.

  In a similar fashion, we would argue that the upcoming G20 Finance Ministers and Central Bank meeting in Shanghai (Feb 26-27th) offers an opportunity for policy-makers to seize the “expectations” initiative. It’s probably too early to expect a Shanghai Accord, and our deep concern is that the macro and the markets may first need to worsen to inspire the correct policy response. But absent a rapid improvement in the 4C’s, we believe the investment bulls will need to sit on the sidelines until a G20 meeting announces:

  • A one-off devaluation in the Chinese currency
  • Fed announces swap lines, or other measures of financial system support, to avert contagion into fragile EM’s
  • The US Treasury announces it will act to pursue dollar stability, so as to help end the death spiral in US manufacturing, oil, and EM
  • The US, Germany, UK and France promise fiscal stimulus to boost public investment, especially in high-quality infrastructure

  *  *  *

  The danger, Hartnett concludes, is that in order for officials to agree on the four measures outlined above, markets will need to collapse first. We close with BofA’s simple conclusion: 

  “2016 risk is that markets need to panic [before there’s a coordinated policy response].”

  

  

  

  

  

• 2 Of The World's 20 Most Violent Cities Are In America

  While Caracas – the capital of socialist utopia Venezuela where gun control is extreme – remains the number one most violent city in the world, there are two new entrants from the USA into the World's Top 20 least desirable places to walk the streets – St. Louis (15th most violent city in the world) and Baltimore (19th). America, land of the free to indiscrimanently kill other people?

  As Statista's Nial McCarthy details, out of the world's 50 most violent cities, 41 are in Latin America including 21 in Brazil.

  The Mexico Citizens Council for Public Security releases its findings on the homicide rate in cities with populations over 300,000 every year. This infographic shows the world's top 20 cities, with Caracas, Venezuela, in first place with 119.87 homicides per 100,000 residents in 2015.

   

  San Pedro Sula, Honduras (111.03 homicides per 100,000) came second with San Salvador, El Salvador (108.54 homicides per 100,000) rounding off the top three. The majority of the violence in Latin America can be attributed to drug trafficking, gang warfare and political instability.

  The following map shows the number of homicides per 100,000 residents in 2015…

  
  You will find more statistics at Statista

  And here is the Top 50 – including 4 American cities…

  

   

  Exceptional USA not #1? Something to "shoot" for in 2016…

   

  h/t The Burning Platform blog

  

  

  

  

  

• The Happiest Place On Earth?

  …if you are an immigrant…

  As OneNewsNow reports, an attorney representing laid-off Disney workers claims the Fortune 500 company broke federal laws when it replaced them with immigrants.

  Attorney Sara Blackwell filed a federal lawsuit this week on behalf of two former tech employees of Disney after the corporation hired H-1B visa recipients from overseas.

   

  The employees were among approximately 250 laid off approximately a year ago, and some of them have filed complaints with the Equal Opportunity Employment Commission, The Orlando Sentinel reported.

   

  Blackwell tells OneNewsNow she is accusing Disney of violating Title VII, which bans discrimination under the Civil Rights Act of 1964.

   

  The lawsuit also accuses Disney of RICO-like violations, claiming it colluded with two hiring firms to misrepresent hiring plans in visa paperwork. 

   

  If a judge dismisses the lawsuit, Blackwell says, “I have 31 other plaintiffs that I can bring. It’s not going to stop me.”

   

  Disney said in a statement that the lawsuits are “based on an unsustainable legal theory and are a misrepresentation of the facts.”

  Congratulations, you’re going to unemployment-land…

  

  Source: Townhall.com

  

  

  

  

  

• The Chinese Economy Is Sinking, Not Transitioning

  Submitted by Jeffrey Snider via Alhambra Investment Partners,

  It makes for quite the juxtaposition, though perhaps not so jarring given that global banks are still enormous and disparate operations. On the one hand, Citigroup’s CEO was eminently confident from within the confines of Davos and the status quo:

  The market is “adjusting” to a series of headwinds that can be overcome, Citigroup CEO Michael Corbat said Thursday, a day after theS&P 500 fell to its lowest level in nearly two years.

   

  “We view what’s going on really as more a repricing than any big fundamental shift,” he told CNBC’s “Squawk Box” at the World Economic Forum in Davos, Switzerland.

  The question is who is the “we” to which he is referring? It was just a year ago that no bank would even contemplate the possibility of recession entering Janet Yellen’s perfect year, especially as it was setup by “unquestionable” growth in the middle of 2014 (best jobs market in decades). This January, however, while Citi’s CEO downplays recent turmoil, the staff inside his very own bank is thinking very much otherwise:

  The global economy is on the brink of a recession, with central bank stimulus less forthcoming and growth weakened by the slowdown in China, Citigroup warned on Thursday.

   

  The bank cut its 2016 global growth forecast to 2.7 percent from 2.8 percent and slashed its outlook for the U.S., U.K. and Canada, plus several emerging markets including Russia, South Africa, Brazil and Mexico. [emphasis added]

  That’s a lot of slashing in order to be so sanguine. I don’t agree with the premise, namely that this is all or even mostly due to China (the Chinese sell their industrial production to whom?), but the condition of the Chinese economy offers more universal interpretations upon these kinds of circumstances. That starts with the idea that China is slowing but within a more cheering transition to consumer rather than investment-led activity and margins. It is this idea that manufacturing and production matter, but not nearly as much as they used to and thus not enough to make a full recessionary difference right now.

  After some minor encouragement in December, industrial factors in January have turned (yet again) to the depressively concerning. Today it was industrial profits.

  Profits earned by Chinese industrial firms in December fell 4.7 percent from a year earlier, the seventh straight month of declines, as the slowing economy hits sales and forces many companies to cut prices to win business.

   

  The weak performance is bound to spark fresh concerns about investment cuts, job losses and bad loans in the world’s second-largest economy, and could put more pressure on China’s stock markets, which have been pummelled [sic] to 14-month lows.

  China’s stock market is a small, relative matter; the more troubling imbalances lie and remain elsewhere. This change in production profitability is concerning on three fronts; first in terms of where China’s economy, even in just industry, might actually be at right now. GDP says slowing but rather steady; these figures and many others suggest quite the opposite.

  China saw annual industrial ¬profits fall for the first time in more than a decade, prompting calls for strong stimulus to boost growth, even as Premier Li Keqiang on Wednesday vowed to cut loans to zombie firms and ¬increase financial support for high-tech industries.

   

  The gloomy figures add to the economy’s grim start to the year, coming amid growing panic over the depreciation of the yuan and state media reports on short sellers’ “attacks” in manipulating the market for the renminbi and other Asian currencies.

  “For the first time in more than a decade” is becoming a consistent qualifier for these sorts of economic indications. A week ago, China reported electrical output and steel production now at just such historical comparison:

  China’s output of electric power and steel fell for the first time in decades in 2015, while coal production dropped for a second year in row, illustrating how a slowing economy and shift to consumer-led growth is hurting industrial consumers.

   

  China’s economy grew at its weakest pace in a quarter of a century in 2015 and efforts to restructure have not only slashed demand but also exposed massive overcapacity in industrial sectors such as coal, steel and power.

  Despite these dire results and measurements, there is still this tug of “consumer-led transition” that, as noted in the quote above, remains as a bulwark optimistic sentiment. It can be distilled as if an economy operates in completely discrete and replaceable fashion; as if when industry struggles then services will just continue on that much better until industry no longer matters at all; and if industry really, really struggles, consumption and the service economy should only factor a minor nuisance being so separated. There are no such Chinese walls (pun intended) within an economic system (which extends globally).

  That brings up the second contradiction noted by persistently decreasing industrial activity in China (and elsewhere). To this point, despite production and output cuts (and to capex and capacity growth) there has yet to be the major transition to across-the-board resource reduction, including and especially labor. In other words, consumption in China might not look as bad as production but only because there are time lags and frictions (as economists call them) that forestall synchronization even in these downward recessionary legs. Once production stalls and contracts long enough, especially in profitability terms, businesses will eventually seek to harmonize production with their resources – the very bad news of total cutbacks, including and especially pay and then labor in full.

  To wit:

  China’s business confidence and recruitment activity slipped to record lows in January, a survey showed, adding to signs of weakness in the world’s second-largest economy that could prod policymakers to roll out more support measures…

   

  The staffing index fell to 50.3 in January, near the 50 no-change mark, from 50.8 in December, hitting its lowest since the survey began, as businesses have become more hesitant to recruit as economic activity weakens, the survey showed.

  And:

  The slowdown in the Chinese economy has spread its tentacles to China’s white-collar workers who have received fewer year-end bonuses, according to a survey carried out by a recruitment company.

   

  The study by Zhaopin, a Beijing-based recruitment website, said 66 per cent of the 10,615 white-collar workers polled had not received, or expected, a year-end bonus.

  That compares with the 61.2 per cent who gave the same answer when polled the previous year.

   

  About 14 per cent of the people surveyed did get a bonus for 2015.

   

  The average paid out was over 10,000 yuan (HK$12,000), nearly 3,000 yuan down from 2014, the survey showed. Workers were polled in 32 cities across China.

  The production decay is only, perhaps, just now starting to impact the wider Chinese economy. It counts not just in resource management and eventual capitulation on those terms, but also financial terms – precisely the problem with China’s “outflows.” This is the third worrisome notice from China’s industrial profitability, namely that defaults or at least perceptions of default risk will only exacerbate an already tenuous position for China’s financial networks; especially its “dollar” short.

  As the eurodollar standard built China in what looked like “hot money” inflows, that created lending formation and chained liabilities predicated on China being China forever; not China placing all its hopes and dreams on an unproven and hardly-detected consumer transition (that wasn’t really specified until economists started to belatedly recognize “something” was wrong with industry where they were sure nothing ever could be wrong). There are enormous financial implications in the slowdown as it reaches unknowable trigger points, some of which we have undoubtedly already witnessed. If you are a “dollar” provider into China’s banks, as NPL’s rise with this production massacre you are not going to remain statically attached while it all seems to get worse and worse (especially as central bankers and “experts” continue to protest there isn’t anything wrong in the first place that temporary tweaks won’t alleviate).

  

  Economics becomes finance, and finance only furthers those negative economics. Financial distress in and of China both confirms the onrushing economic disaster as it was, while suggesting, because financial imbalance has not yet relented, not even close, much more to come.

  Our three parts then sum to: China’s industry persists at only getting worse even though it has already reverted to a state not seen in a decade or more; consumer appearances may seem generally optimistic despite all that but only because industrial activity has yet to fully make adjustments through resources and labor; and financial trends are likely already at the stage of self-reinforcement within and without. You can see why China’s problems might trouble Citi’s economists and staff researchers in a way that perhaps the bank’s CEO might rather gloss over and around.

  “Our” problem is that these trends and analytics are not just for and of China. There are no discrete pockets of fortified economic resolve with which to withstand a global “manufacturing recession.” There are only interconnections between individual economic circumstances that are augmented, amplified and affected by reflexivity in financial markets and conditions. That Citigroup is now recognizing this as a very real possibility, in sharp contrast to last January’s “transitory” commandment, shows how truly far along the economic and financial disease has infiltrated – globally. After all, China’s vast industrial might was built through eurodollars to service “global consumers”, of which Americans account for the bulk; upward as well as downward.

  

  

  

  

  

• Here's Which Stocks Sovereign Wealth Funds Will Be Selling In 2016

  Back in August we explained why the headline figures for EM FX reserves paint an incomplete picture with regard to the UST liquidation among commodity producers and emerging market reserve managers.

  As Credit Suisse wrote last year, “for oil exporting nations, central bank official reserves likely underestimate the full scale of the reversal of oil exporters’ ‘petrodollar’ accumulation because a substantial part of their oil proceeds has previously been placed in sovereign wealth funds (SWFs), which are not reported as FX reserves (with the notable exception of Russia.”

  In other words, official data on FX reserves don’t tell the whole story. Not by a long shot. In fact, “oil exporting countries hold about $1.7trn of official reserves but as much as $4.3trn in SWF assets.”

  

  This has very real implications for markets.

  As a reminder, SWFs hold a variety of assets including equities. Just as FX reserve drawdowns act like QE in reverse, SWF sales put pressure on markets and drain liquidity from the system. Put simply: when the funds that have for years plowed their commodity proceeds into assets suddenly cease to be net exporters of capital, everyone should pay attention.

  Just four days ago we showed you which stocks are most likely to be sold by EM governments and wealth funds. For those who missed it, here’s the list:

  

  Earlier this month, we also discussed how large the equity outflow is likely to be.

  According to JP Morgan, SWFs will sell some $75 billion in equities this year. “Assuming selling in accordance to the average allocation of FX Reserve Managers and SWF across asset classes, we estimate that the sales of bonds by oil producing countries will increase from -$45bn in 2015 to -$110bn in 2016 and that the sales of public equities will increase from -$10bn in 2015 to -$75bn in 2016,” the bank’s Nikolaos Panigirtzoglou wrote.

  This week, Panigirtzoglou is out with a closer look at exactly what stocks are most vulnerable to SWF selling.

  *  *  *

  From JP Morgan

  For the oil producers that have SWF assets (other Middle Eastern, Norway, African and Latam countries), we assume a current account deficit for 2015 of around $40bn, again based on previous IMF estimates. This current account deficit was likely funded via depletion of SWF assets.

  What does this mean in terms of asset selling by SWFs and reserve managers? For the asset allocation of SWFs into public equities, government bonds, corporate bonds, cash and alternatives, we used information available from Norway, Abu Dhabi, Kuwait and Qatar investment authorities, which should be largely representative of the SWF universe. Using AUM weights results in a weighted asset allocation of 51% to public equities, 18% to government bonds, 7% to corporate bonds, 19% to alternatives such private equity and real estate and 6% to cash. For FX reserve managers, to accommodate the difference in the asset allocation of Saudi Arabia FX reserves (which accounted for the majority of reserve depletion of oil producing countries), we assume a 20% allocation to equities, 67% to government bonds, 3% to corporate bonds and 10% to cash.

  Assuming selling in accordance to the average allocation of FX reserve managers and SWFs above, and assuming no selling of alternative assets given their illiquidity, we estimate that in 2015, oil-producing countries sold $90bn of government bonds, $50bn of public equities, $7bn of corporate bonds and $15bn of cash instruments.

  What about 2016? For 2016, assuming an average oil price of $35, i.e. close to current prices, we project the current account balance for oil-producing countries to worsen from around $80bn in 2015 to $240bn in 2016. This estimate is based on the same sensitivity of the current account balance to the change in oil prices as last year – i.e. between 2014 and 2015. This dis-saving of $240bn should be mostly met via depletion of official assets, i.e. FX reserve and SWF assets ($220bn) rather than issuance of government debt ($20bn). For 2016, we assume a similar depletion in FX reserves as last year of around $130bn, and the remainder $90bn met from SWF asset depletion.

  Again, assuming selling in accordance to the average allocation of FX reserve managers and SWFs above, and assuming no selling of alternative assets, these assumptions would imply selling of $107bn of government bonds, $80bn of public equities, $12bn of corporate bonds and $19bn of cash instruments. Thus, the selling of government bonds by reserve managers and SWFs this year will likely be similar to last year, but worse for equities and corporate bonds.

  Within equities which sectors are most vulnerable? We aggregate publically available holdings data to see how overweight these SWFs funds are positioned in terms of sectors and regions relative to the composition of the MSCI AC World index. With the caveat that these publicly available data represent only a portion of their public equity holdings, we find that SWFs are most overweight Financials and Consumer Discretionary, and most underweight Healthcare, Consumer Staples and Technology. In terms of regional allocation, they appear overweight Europe, Middle East and Africa and Developed Asia and underweight North America and Emerging Asia. In terms of absolute holdings, they are more heavily invested in Western European equities as well as Mid East and Africa. Across sectors, they are more heavily invested in Financials and Consumer Discretionary (Figure 3 and Figure 4). 

  

  *  *  *

  Bear in mind that these estimates are conservative. The Saudis burned through $19 billion in reserves in December and Norway is tapping its massive rainy day fund as well. 

  Expect SWF flows to be a major talking point if commodity prices remain in the doldrums.

  

  

  

  

  

• The Bank Of Japan – Ringing In The Keynesian Endgame

  Submitted by Pater Tenebrarum via Acting-Man.com,

  Let’s Do More of What Doesn’t Work

  It is the Keynesian mantra: the fact that the policies recommended by Keynesians and monetarists, i.e., deficit spending and money printing, routinely fail to bring about the desired results is not seen as proof that they simply don’t work. It is regarded as evidence that there hasn’t been enough spending and printing yet.

   

  

  BoJ governor Haruhiko “Fly” Kuroda: is that a windshield I’m seeing?

   

  At the Bank of Japan this mantra has been gospel for as long as we can remember. Japan has always exhibited an especially strong penchant for central planning. We still recall that many Western observers were beginning to wonder in the late 1980s whether the Japanese form of state capitalism administered by the powerful Ministry of Trade and Industry and the BoJ wasn’t a superior economic system after all. Then this happened:

   

  

  The Nikkei Index from 1989 to 2003. Japan’s seemingly never-ending boom coupled with forever rising stock prices, carefully administered by Tokyo’s powerful bureaucrats, suddenly became an intractable bust – click to enlarge.

   

  This sudden change in fortunes should perhaps have been taken as a hint that central planning of the economy wasn’t such a good idea after all. That was not the conclusion of Japan’s movers and shakers though (or anyone else’s, for that matter). Instead it was decided that what was required were better planners, or at least a better plan.

  For decades Japanese policymakers have been inundated with well-meaning advice by prominent Western economists. Even Ben Bernanke famously admonished them to just print more. According to Bernanke, holding interest rates at zero and implementing several iterations of QE were indicative of “policy paralysis” – after all, these efforts were obviously just not big and bold enough!

   

  Going Big and Failing Again

  After the reelection of Shinzo Abe and the installation of Haruhiko Kuroda as BoJ governor, the BoJ decided to simply continue doing what it has always done – more than 20 years of utter failure notwithstanding. However, in deference to the admonitions of the Bernankes and Krugmans of this world, it increased the size of its meddling by an order of magnitude:

   

  

  Assets held by the Bank of Japan: since Kuroda has started this “QE on steroids” program in 2012, the central bank’s balance sheet has grown in parabolic fashion – click to enlarge.

   

  In short, over the past four years the BoJ has thrown all remaining caution to the wind, with the declared goal of reviving Japan’s economy and creating an annual “inflation” rate of 2%. However, it seems now that even that was not enough just yet!

  As an aside to this: no-one knows or can sensibly explain what lowering the purchasing power of one’s currency by exactly 2% p.a. is supposed to achieve. There exists neither theoretical nor empirical evidence that could possibly support the notion that it is a desirable goal. It is just another Keynesian mantra. Central bankers have basically pulled the 2% figure out of their hats.

  The BoJ has certainly succeeded in devaluing the yen’s external value and impoverishing Japan’s citizens accordingly. It has also created a short term windfall for people buying Japanese stocks. To give you a rough idea how its “success” has manifested itself otherwise, here are a few charts illustrating the situation. The first one shows the quarterly annualized growth rate of Japan’s machinery orders (note the most recent figure, which has been released only last week):

   

  

  The most recent data point of the BoJ-engineered “recovery”: machinery orders plunge by 14.4% – click to enlarge.

   

  And here is the monthly growth rate in manufacturing production – a sector that due to its export prowess was supposed to be an especially great beneficiary of Kuroda’s destruction of the yen:

   

  

  Japan’s manufacturing production, monthly annualized growth rate – the December data haven’t been released yet, but in light of last quarter’s machinery orders, production growth will likely be back in negative territory – click to enlarge.

   

  In light of the enormous decline of the yen’s exchange rate since 2012, one would normally expect that the BoJ has at least succeeded in achieving its bizarre goal of raising the consumer price inflation rate to 2%. Well, it did – for exactly one month. However, that was mainly due to a hike in the sales tax, so it can actually not be attributed to the BoJ. Japan’s consumers have been very lucky so far – the planned assault on their wallets has turned out to be a complete dud as well:

   

  

  Japan’s consumer price inflation rate, month-on-month. No dice, so far – click to enlarge.

   

  The Time for More Insanity has Come

  Stock markets around the world have recently swooned, with the Nikkei delivering an especially weak performance. After assuring everyone that the BoJ saw no need to add to its already enormous debt monetization program, Mr. Kuroda seems to have been convinced by recent market volatility that is was time to move on from an insane monetary policy to even more insane monetary policy. As Reuters reports:

  “The Bank of Japan unexpectedly cut a benchmark interest rate below zero on Friday, stunning investors with another bold move to stimulate the economy as volatile markets and slowing global growth threaten its efforts to overcome deflation.

   

  Global equities jumped, the yen tumbled and sovereign bonds rallied after the BOJ said it would charge for a portion of bank reserves parked with the institution, an aggressive policy pioneered by the European Central Bank (ECB).

   

  “What’s important is to show people that the BOJ is strongly committed to achieving 2 percent inflation and that it will do whatever it takes to achieve it,” BOJ Governor Haruhiko Kuroda told a news conference after the decision.

  (emphasis added)

  Obviously, the BoJ cannot allow Draghi to get away with imposing policies that are even more crazy than its own. So it has now caught up with the lunatics running the monetary asylum in Europe. It is actually quite amusing that this admission of the complete failure of the policies implemented to date apparently caused stock markets to rally. JGB yields declined by more than 56% (!) on the day to a mere 10 basis points, and the yen got kneecapped, surrendering much of the gains it has achieved in recent weeks.

   

  

  JGB yields plunge by 13 basis points to just 10 basis points – a loss of 56% in just one trading day – click to enlarge.

   

   

  

  The yen is murdered, surrendering a large part of the gains it has made since early December – click to enlarge.

   

  As to the BoJ’s commitment to “achieve inflation”, it may well end one day with price inflation going from zero to infinity in the space of a few months. Kuroda should be thankful that Japan’s citizens haven’t lost confidence in the currency yet in spite of his efforts; one of these days they will, and then it will probably be “game over” in a flash.

  We should also point out that there is actually no deflation in Japan. There never has been and very likely, there never will be. Here is a chart of Japan’s narrow money supply M1, which consists of currency and demand deposits:

   

  

  Japan’s narrow money supply M1 since the 1950s. What terrible, terrible deflation! – click to enlarge.

   

  Reuters then unquestioningly parrots the official “reasoning” for why falling prices are allegedly “dangerous” (never mind that prices haven’t really fallen in Japan anyway – at best they were stable for a number of years) – readers are evidently supposed to just accept these unproven assertions as if it were perfectly obvious that they are true:

  “In adopting negative interest rates Japan is reaching for a new weapon in its long battle against deflation, which since the 1990s have discouraged consumers from buying big because they expect prices to fall further. Deflation is seen as the root of two decades of economic malaise.”

  This shows how utterly divorced from reality today’s mainstream economists and central bankers are – not to mention how lazy financial journalists are, who never seem to question this nonsense. The above assertion even flies into the face of economics 101. People buy less when prices decline? Since when? In what universe? Japanese consumers are allegedly waiting since the 1990s for “prices to fall further”? To call this utter bullsh*t feels almost like an insult to bullsh*t.

  We guess the billions of people in the world who keep buying smart phones, computers, TV sets and all the other things that are continually falling in price in spite of the ministrations of central bankers must represent the “exception from the rule”.

   

  

  Japan’s consumer price index has recently reached a new multi-decade high. Shouldn’t the central bank be glad that prices have actually been stable for so long? – click to enlarge.

   

  In his press conference Kuroda uttered the following:

  “Kuroda said the world’s third-biggest economy was recovering moderately and the underlying price trend was rising steadily.

   

  “But there’s a risk recent further falls in oil prices, uncertainty over emerging economies, including China, and global market instability could hurt business confidence and delay the eradication of people’s deflationary mindset,” he said.

   

  “The BOJ decided to adopt negative interest rates…to forestall such risks from materializing.”

  Perhaps Kuroda should instead have pondered what risks are likely to materialize on account of the imposition of negative interest rates. We have already discussed this topic extensively in the context of the ECB’s decision to introduce negative rates, but here is a brief reminder:

  Neither zero nor negative originary interest could possibly exist in an unhampered free market economy. Time preference cannot become zero or negative. Conceivably it could become zero if one were to fall into a black hole (it is theorized that no time passes there), or if scarcity were completely eliminated one day and no economic or technological progress would be seen as possible anymore. Neither of these hypothetical cases will ever be of practical importance.

  Other than that, the only thing artificially imposed negative rates will achieve is to destroy what is left of the economy – they will slowly but surely transform prosperity into poverty. As Ludwig von Mises has warned:

  “Not the impossible disappearance of originary interest, but the abolition of payment of interest to the owners of capital, would result in capital consumption. The capitalists would consume their capital goods and their capital precisely because there is originary interest and present want-satisfaction is preferred to later satisfaction.

   

  Therefore there cannot be any question of abolishing interest by any institutions, laws, and devices of bank manipulation. He who wants to “abolish” interest will have to induce people to value an apple available in a hundred years no less than a present apple.

   

  What can be abolished by laws and decrees is merely the right of the capitalists to receive interest. But such laws would bring about capital consumption and would very soon throw mankind back into the original state of natural poverty.”

  As we have always said in these pages, the cunning plan of the mad hatters running the world’s central banks seems to consist of making people richer by making them poorer. One can safely assume that they haven’t really thought this one through.

   

  Conclusion

  It appears to us that the ever more desperate monetary policy measures adopted by the BoJ are coming closer and closer to crossing a point of no return. In other words, the BoJ seems to be entering what is popularly known as the “Keynesian endgame”. Once the threshold beyond which confidence is finally lost is crossed, the long maintained sophisticated fiat money Ponzi scheme and the associated three card Monte played between central banks, commercial banks and government treasuries will come to a screeching halt.

  Naturally, we cannot tell you where this threshold precisely lies or how quickly said “endgame” will be playing out. Nor do we know with any precision what gyrations we may yet see as the situation evolves. We do however know that Kuroda’s decision has brought the world another step closer to the end. It would be a dangerous error to believe that such policies can be adopted without inviting severe consequences.

  Kuroda is a member of a small coterie of central planners running the worlds currency systems, who are completely divorced from reality and are playing with the savings and lives of millions. They are implementing extremely risky experiments and evidently haven’t even the faintest inkling of what the ultimate outcome will be.

  Unfortunately, none of us can do anything to stop them. It is therefore vitally important that one make a plan for oneself. It is quite ironic actually: the very people the economy depends on the most with respect to wealth creation are also most likely to be terrified by these developments. Consequently they are likely to withdraw more and more from genuine wealth creation activities. They will simply be far too busy trying to save themselves while it’s still possible.

  

  

  

  

  

• Ignore Day To Day Market Spikes: Are Stocks Being Accumulated Or Distributed?

  While on any given day, stocks may tumble or surge as marginal buyers send increasingly illiquid indices lower or higher on ever lower volume, a more important question is what is taking place below the surface: are large holders looking to offload large exposure (by selling), or vice versa.

  For the answer we go to Bank of America, which has models to measure precisely this.

  The first one, the Volume Intensity Model (VIM), measures short-term accumulation (up volume or buying) vs. distribution (down volume or selling). According to BofA, VIM remains negative across the board since distribution crossed above accumulation in mid-Nov. Accumulation remains low and has reflected a “buyers’ strike”.

  Of all indices, the selling is most pronounced among tech-heavy names, with distribution in the NASDAQ highest since Sept. 2011; NYSE distribution is highest since Oct. 2014 with similar extremes on the S&P 500 and Russell 2000.

  As BofA’s Stephen Suttemeir notes, this is tactical oversold reading similar to the Williams %R and VXV/VIX ratio. However, he adds that “any near-term oversold bounce as a “sell strength” rally as bullish “mean-reverters” take temporary control from more bearish “trend followers”. He concludes that “weight of the evidence supports the trend followers.”

  

   

  For the response on longer-term accumulation (up volume or buying) relative to distribution (down volume or selling), we refer to BofA’s VIGOR model. A rising VIGOR shows net accumulation, which is bullish. A falling VIGOR shows net distribution, which is bearish. More from BofA:

  VIGOR broke below the October 2015 and October 2014 lows on S&P 500 to complete a top. Meanwhile, VIGOR has held the breakdowns on Russell 2000 and NYSE and continues to weaken. The risk is that NASDAQ Comp will follow with a sustained move below the Oct. 2015 low to complete a top as well. Weak VIGOR suggests a sell strength environment.

  

   

  So while it is clear that as of this moment distribution is clearly overpowering accumulation, one final follow up is which sectors are seeing the biggest in and outflows. One way to gauge the sector rotation is to use relative strength and relative momentum, which is tracked by the relative rotation graph (RRG). The weekly RRG shows Telecom, Utilities and Staples as leadership; Tech, Industrials and Discretionary as weakening; and Financials, Materials and Energy as lagging. Health Care is improving and closing in on the leadership quadrant. The RRG reflects a defensive or risk off market. Tech and Discretionary have been big leadership groups (think FANG), but are only weakening and have not yet shifted to lagging sectors.

  

  

  

  

  

  

• The Islamization Of America In 2015, Part 2

  Submitted by Soeren Kern via The Gatestone Institute,

  • More than half (51%) of Muslims in America believe they should "have the choice of being governed according to Sharia." Only 39% of those polled said that Muslims in the U.S. should be subject to American courts. Nearly a quarter believed that, "It is legitimate to use violence to punish those who give offense to Islam by, for example, portraying the prophet Mohammed." Nearly one-fifth of Muslim respondents said that the use of violence in the U.S. is justified in order to make Sharia the law of the land in this country. – Poll commissioned by the Center for Security Policy, Washington, D.C.

  • "Ramadan is a special prayer time, a time for religion. We double-park here every Friday and they [allow it], but today they gave us all tickets, almost 100 cabs. This has never happened before. I can't help but to think they are being prejudiced. They don't understand. We have to be here." – Mohammad Zaman, New York City cab driver.

  • "We have no way … to know who these people are … we don't have databases on these individuals so we can't properly vet them, to know where they came from, to know what threat they pose." – Michael McCaul, Chairman of the House Committee on Homeland Security, commenting on the Obama administration plan to resettle Syrian refugees in the U.S.

  • ISIS is operating training camps just a few miles from El Paso, Texas. – Judicial Watch, citing Mexican law enforcement and intelligence sources.

  • Officials at Mason High School in Mason, Ohio, canceled "hijab day" after parents expressed opposition. Female students were asked to wear a headscarf, or hijab, for an entire school day, followed by a time for reflection and discussion.

  The following is a chronological survey of some of the main stories about Islam and Islamism in America during the second quarter of 2015. Part 1 of this series can be found here.

  Left: In June 2015, the New York Police Department issued parking tickets to more than 100 Muslim cab drivers parked illegally outside a mosque on the Upper West Side during Ramadan. Right: In January 2015, after complaints from Muslim students at the University of Minnesota, the university ordered that posters depicting a caricature of Mohammed be taken down. The ban was later rescinded.

  APRIL 2015

  April 1. Ahlam Ahmed, an 18-year-old year-old from Queens, said she wanted to become the first female Muslim firefighter in New York City. Ahmed stands five feet tall and weighs just 105 pounds. In an interview with the Village Voice, Ahmed expressed more concern over the dress code than the physical requirements for the job. "I have to be covered," she said. "I love wearing the scarf. It's for protection." FDNY press officer Elisheva Zakheim said: "We try to accommodate religious practices, but safety is our first concern, be it male or female. We approach a lot of these questions on a case-by-case basis."

  April 2. A study by the Washington, DC-based Pew Research Center forecast that, if current trends continue, there will be more Muslims in North America than Jews by 2035. The study, "The Future of World Religions: Population Growth Projections, 2010-2050," states that in the United States, Muslims will comprise 2.1% of the population in 2050, up from 0.9% in 2010. Jews, meanwhile, will fall to 1.4% of the U.S. population from 1.8% in 2010.

  April 2. A newsletter distributed by the Republican Central Committee in Bonneville County, Idaho, included an article, "Islam in Idaho," which warned that Muslims are "infiltrating" the state, and that Muslims have been taught to "be ready to rise up and kill" non-Muslims. The article called on readers to "demand that our lawmakers and law enforcers pay attention and ascertain whether or not there is a potential threat."

  April 7. U.S. President Barack Obama, speaking at an Easter prayer breakfast at the White House, criticized "less-than-loving" Christians. His remarks came just days after he sanitized any reference to Islam after jihadists slaughtered 148 Christians at a college in Garissa, Kenya. Bill Donohue, president of the Catholic League, said Obama's comments at the prayer breakfast were "very disturbing." He added:

  "This comes right on the heels of Muslim madmen singling out Christians, calling them out by name, knowing which ones they wanted to execute, in Kenya. We have a president who never mentions the word 'Christians' except when he wants to denigrate them."

  He doesn't want to offend Muslims. But he obviously doesn't mind offending Christians. Somehow it's okay to speak about Christians disappointing him, because they don't always act with love. Well, that's true. But what a grand opportunity to make a statement about what happened last week in Kenya. And once again, he's silent with Christians when it comes to us being the victims of genocide."

  April 7. A scheduled screening of "American Sniper" at the University of Michigan was abruptly cancelled after school officials received complaints that the film perpetuates "negative and misleading stereotypes" against Muslims. A statement said: "While our intent was to show a film, the impact of the content was harmful, and made students feel unsafe and unwelcomed at our program." On April 16, the university reversed its decision.

  April 8. Writing in a magazine called Index on Censorship, the organizers of a women's conference at the University of South Dakota recounted attempts by Muslim groups to ban a screening of Honor Diaries, a documentary film about the worldwide problem of honor killings and other violence against women.

  April 8. The Council on American-Islamic Relations (CAIR) demanded that a high school teacher in Richmond, Texas, be disciplined for distributing "virulently anti-Muslim" material to students. The 8-page handout, distributed in a senior economics class at Richmond's Foster High School, said that "Islam is more of an ideology than a religion. It is also an ideology of war." The document also said that Muslims believe all governments except Islamic ones should be overthrown. "Only a strong response to this attempt at student indoctrination will send a message that our schools must never be incubators of hate," said CAIR.

  April 10. A HuffPost/YouGov poll found that more than half (55%) of Americans say they have unfavorable views of Islam, and six in 10 either are not interested or do not know whether they want to learn more about the faith. Just 7% said they had a very favorable view of the religion, and 14% said they saw it somewhat favorably.

  April 13. Writing in Time magazine, Muslim feminist Asra Nomani described how Muslim groups pressed Duke University to cancel a speech she was invited to give to argue for a progressive, feminist interpretation of Islam in the world. The president of the Duke chapter of the Muslim Students Association sent an email to Muslim students about Nomani's "views" and alleging that she was in a nefarious "alliance" with "Islamophobic speakers." After she asked for evidence against her, Duke University re-invited her. Nomani wrote:

  "This experience goes beyond feminism to a broader debate over how too many Muslims are responding to critical conversations on Islam with snubs, boycotts, and calls for censorship, exploiting feelings of conflict avoidance and political correctness to stifle debate. As a journalist for 30 years, I believe we must stand up for America's principles of free speech and have critical conversations, especially if they make people feel uncomfortable.

   

  "By standing on stage, I was standing up to the forces in our Muslim communities that are increasingly using tactics of intimidation and smears such as "Islamophobe," "House Muslim," "Uncle Tom," "native informant," "racist" and "bigot" to cancel events with which they disagree.

   

  "These dynamics of silencing are often used against women such as Ayaan Hirsi Ali, a Somali-born activist and author of a new book, Heretic. Brandeis University uninvited her from speaking after protests from the Council on American-Islamic Relations and the Muslim Students Association last year, and the Muslim Students Association at Yale University protested her speech at the university last fall."

  April 13. Nearly 300 Muslim delegates from more than 20 states met with elected officials and congressional staffers on Capitol Hill during the first-ever National Muslim Advocacy Day. The event was sponsored by the US Council of Muslim Organizations (USCMO), a coalition of American Muslim groups, some of which are linked to the Muslim Brotherhood. Former FBI counterterrorism agent John Guandolo said the event was a "cunning bid by radical Islam to gain political power in the United States."

  April 14. Judicial Watch, citing Mexican law enforcement and intelligence sources, reported that ISIS is operating training camps just a few miles from El Paso, Texas:

  "The exact location where the terrorist group has established its base is around eight miles from the U.S. border in an area known as "Anapra" situated just west of Ciudad Juárez. Another ISIS cell to the west of Ciudad Juárez, targets New Mexico towns for easy access to the United States.

   

  "During the course of a joint operation last week, Mexican Army and federal law enforcement officials discovered documents in Arabic and Urdu, as well as "plans" of Fort Bliss. Muslim prayer rugs were recovered with the documents during the operation.

   

  "According to these same sources, "coyotes" engaged in human smuggling — and working for Juárez Cartel — help move ISIS terrorists through the desert and across the border. These specific areas were targeted for exploitation by ISIS because of their understaffed municipal and county police forces, and the relative safe-havens the areas provide for the unchecked large-scale drug smuggling that was already ongoing.

   

  "Mexican intelligence sources report that ISIS intends to exploit the railways and airport facilities in the vicinity. The sources also say that ISIS has "spotters" to assist with terrorist border crossing operations. ISIS is conducting reconnaissance of regional universities; the White Sands Missile Range; government facilities in Alamogordo, NM; Ft. Bliss; and the electrical power facilities near Anapra and Chaparral, NM."

  April 14. Students at Union Grove High School in Wisconsin were asked to "pretend you're a Muslim" and "give three examples of what you do daily for your religion and any struggles you face." WISN talk radio host Vicki McKenna posted the writing assignment on Twitter. "I feel that the purpose of the assignment is to show prejudices towards Muslims in America or to invent them or exaggerate them," said one parent.

  April 14. The Justice Department said U.S. citizens and residents can now find out whether they are on the "no-fly" list and possibly receive a summary of the reasons for their placement in the secret database. Around 47,000 people are on the no-fly list, 800 of whom are Americans. They are barred from boarding a U.S. carrier, a U.S.-bound flight or entering U.S. airspace.

  April 16. A legislative committee in Augusta, Maine, voted 8-2 to reject a bill that attempted to codify the state and U.S. constitutions as the law of the land. The legislation, LD 330, was modeled after a law passed in Tennessee aimed at preventing the use of Muslim Sharia law in state courts there.

  April 17. Officials at Mason High School in Mason, Ohio, canceled "hijab day" after parents expressed opposition. Female students were asked to wear a headscarf, or hijab, for an entire school day, followed by a time for reflection and discussion. Principal Mindy McCarty-Stewart said the "Covered Girl Challenge," sponsored by MHS' Muslim Students Association, was meant to combat stereotypes Muslim women may face when wearing head coverings. Former school board candidate Sharon Poe said: "My belief is wearing these hijabs represents the oppression of women and Sharia law. I do not recall ever getting an email announcing a Christian Cross Wearing day or a booth for information about the Christian persecution from Islamic terrorists. What happened to the argument of the separation of church and state?"

  April 20. The US Council of Muslim Organizations (USCMO), a coalition of groups, defended Turkey ahead of Armenian Genocide Remembrance Day on April 24. The USCMO published a statement opposing any recognition of the genocide of Armenian Christians in 1915 by the Ottoman Turks. The group claims there has not been a "proper investigation of these events by independent historians."

  April 20. Turkish media reported that U.S. President Barack Obama had agreed to accompany Turkish President Recep Tayyip Erdogan at the inauguration ceremony of a $100 million mega-mosque in Lanham, Maryland.

  April 22. Amir from Seattle, Washington, sought advice on his student loans from financial guru Steve Rhode:

  "I recently called to ask if I could get a lower pay-off amount as the original loans were 32K and now they are up to about 64K because of deferment and interest. They said no. My conditions have changed. I was born into Islam, however, never knew much about my religion. Since 2012, I have been learning more about my faith and it is strictly forbidden in my faith to have dealings with interest. I am offering to pay off the original amount I owe. However, due to religious reasons, I would like them to recognize that my awareness and conditions have changed from the time of originally accepting the loan. Can I get the interest wiped out and close this account and case with just paying the original amount borrowed?"

  April 22. Mohamed S. Abdullahi, 30, of Phoenix, Arizona, was arrested after physically and sexually assaulting a woman after their arranged marriage. Police said the victim's parents had married her to Abdullahi without her knowledge. After she learned of the marriage, she fled the state, but returned two weeks later to finish high school. The victim's family members reportedly took her to Abdullahi's residence against her will on April 20. Police said Abdullahi punched, bit and strangled her before sexually assaulting her.

  April 23. In a letter, U.S. Representatives Keith Ellison (D-MN) and André Carson (D-IN) asked the Obama administration to ban Dutch lawmaker Geert Wilders from visiting the United States because of his anti-Islam views: "We respectfully request that the U.S. government deny Mr. Wilders entry due to his participation in inciting anti-Muslim aggression and violence. Mr. Wilders' policy agenda is centered on the principle that Christian culture is superior to other cultures."

  April 24. The U.S. Justice Department said it would "monitor" an Arkansas gun range that declared itself a "Muslim-free zone." The Council on American-Islamic Relations (CAIR) complained about statements by Jan Morgan, the owner of Gun Cave Shooting Range in Hot Springs. In a letter addressed to Attorney General Eric Holder, CAIR said the range was "systematically banning Muslims from a place of business" and that doing so was "a violation of federal laws prohibiting racial and religious discrimination."

  April 24. The University of Maryland (UMD) postponed a screening of the film, American Sniper, after the UMD's Muslim Students Association complained that the film "only serves to fuel hatred, promote Islamophobia, and discriminate against Muslim individuals." One of UMD's most famous graduates, retired American football quarterback and current sports commentator Boomer Esiason, tweeted he was "never donating another dime" to the school. "As a 9/11/01 victim I'm deeply saddened and insulted. #ChrisKyle is a hero!" Pastor Franklin Graham wrote:

  "Can you believe that the University of Maryland canceled a screening of the movie American Sniper after Muslim students complained? Shame on the University of Maryland for listening to these voices! If these Muslim students can't support the military members who do their job to protect us, let them leave America and go to a Muslim country. God bless America and our heroes!"

  April 28. A middle school teacher in Georgia was fired after she criticized President Barack Obama and his supporters in front of students. Nancy Perry allegedly told students at Dublin Middle School that Obama is Muslim and Christians should not support him.

  April 29. The board of the Metropolitan Transportation Authority (MTA) voted 9-2 to ban political and religious ads on all subways and buses in New York City. The move came a week after Manhattan federal Judge John Koeltl ordered the MTA to run an ad from the American Freedom Defense Initiative, a free speech advocacy group. The ad featured a Muslim man with his face covered and the Hamas quote: "Killing Jews is worship that draws us close to Allah."

  April 29. An internal investigation found that the College of Liberal Arts at the University of Minnesota did not violate university policies on discrimination when it published a flyer depicting a caricature of Mohammed. Controversy erupted in January, when several professors organized a panel discussion about the Charlie Hebdo massacre. The panel was promoted with a flyer which recreated a Charlie Hebdo cover, with a red "CENSORED" stamp on top of it. After Muslim students complained, the university ordered that the posters be taken down, but then reversed the ban, saying it was a mistake. "There is no question in my mind that this poster was protected speech," said Jane Kirtley, a professor of media ethics and law. Professor Bruno Chaouat, who helped to organize the event, said the university's decision to launch an investigation was part of a worrisome trend: "I think what's going on is a global problem … of self-censorship."

  MAY 2015

  May 1. The Islamic Society of Milwaukee, Wisconsin, purchased a former Lutheran church across from the University of Wisconsin-Milwaukee Union and will convert it into a mosque for a growing east side Muslim community. The Islamic Society purchased property — including a 3,150-square-foot worship space and adjacent triplex — for $700,000. In March, the Islamic Society opened a new $3 million mosque in Brookfield — a first for Waukesha County.

  May 3. Elton Simpson, 30, and Nadir Hamid Soofi, 34, were killed by police after they opened fire outside the Muhammad Art Exhibit and Cartoon Contest in Garland, Texas. ISIS claimed responsibility for the shooting, believed to have been the first ISIS-inspired attack on U.S. soil. Simpson, a convert to Islam with a long history of extremism, had been prosecuted in 2010 for lying to the FBI after he spoke of joining Al Shabaab, a terrorist group in Somalia.

  May 3. A contract employee at Syracuse Hancock International Airport in Syracuse, New York, was charged with making a terrorist threat after he said he would bring a gun to work and "shoot everybody." Mohammad Salak, a 33-year-old employee of the company Envoy, hired by United Airlines to handle ground services, became the focus of an investigation after fellow employees accused Salak of saying:

  "They don't know where I'm from. I've been in wars. I've killed people and killing somebody is nothing to me. I'll leave here and go get my mask and my gun and come and kill everybody."

  Police later determined the threats were directed at fellow employees, not travelers or members of the public passing through the airport. The Onondaga County District Attorney's Office significantly reduced the initial charge against Salak from the felony of making a terroristic threat, to misdemeanor menacing, then to disorderly conduct.

  May 4. A new instruction manual issued by the Islamic State advises its supporters in the United States and Europe on ways to disguise themselves and their motives when trying to plan and carrying out "lone wolf" attacks. The guide notes:

  "Don't make it too obvious you have become a practicing Muslim. For example: If you haven't grown a beard, don't grow it now, because you will bring unwanted attention onto yourself. Mujahideen in Muslim lands remove their beards for deceptive purposes."

   

  "When a Muslim goes out in public, he wants to fit into society to make himself look as normal as possible. Remember this isn't because he fears his Islamic identity, but he is doing this so he is not suspected of being an outsider enemy."

   

  "Making yourself look more friendly and open minded to the Western public. For example: Muslims who call themselves by a Western nickname gain more acceptances by their non-Muslim colleagues."

   

  "People with Islamic names get less jobs than those with Islamic names. This alias might be important if you need an important position in a specific job, i.e. Mujahideen send people to work in power plants or enemy governmental positions to spy on and leak reports to the Islamic State leadership (as double agents)."

  May 6. Carmen Harlan, an anchorwoman for WDIV, NBC TV's local affiliate in Detroit, Michigan, angered local Muslims with comments she made about the ISIS threat in Michigan: "Given the fact that we have the largest Arab population outside the Middle East, I guess this [a higher risk of ISIS threats] should not come as a real surprise."

  The American-Arab Anti-Discrimination Committee (ADC) called for an apology, saying that Harlon was guilty of making "blanket generalizations about an entire group, unfairly exposing Muslim-Americans and Arab-Americans to contempt and ridicule while subjecting them to marginalization in their schools, places of employment, and other spheres of society."

  May 7. Noelle Velentzas, 27, and Asia Siddiqui, 31, both of Queens, New York, pleaded not guilty to charges of planning to build an explosive device for ISIS-inspired attacks in New York City. The two were arrested on April 2. Police searching their homes found gas tanks, a pressure cooker, fertilizer, handwritten notes on recipes for bomb making and jihadist literature. Velentzas told an informant that she could not understand why American citizens were traveling overseas to wage jihad when they could simply "make history" at home, according to court papers.

  May 8. Police in San Jose, California, arrested Mohammad Khaliqi, 31, for attempting to rape a 13-year-old girl as she returned home from school. The girl told investigators that Khaliqi had forced his way through the front door of her home as she went inside. She fought him off and he fled before police arrived. The girl then locked the door after he left, hid in a closet and texted her father: "DADDY COME HOME NOW. SOME GUY TRIED TO RAPE ME."

  May 13. The planning commissioner of El Monte, a city in Los County, California, faced pressure to resign after he wrote that a ban on Islam "sounds good" on his Facebook page. Art Barrios shared a news article on Facebook with the headline "China makes major moves to ban Islam." He added a comment: "Sounds good maybe the rest of the world should do the same." The Council on American-Islamic Relations (CAIR) called for his resignation. Barrios said his Facebook post was in reference to Islamic extremists "that are going out and killing other people." He said:

  "I thought it was about time that we stop kowtowing to the Islam that's doing the racist things and doing the things that are bad for any religion. I'm an American citizen. I have the right to think anything I want to think … I have the right to do what I want to do."

  Haroon Manjlai, the public affairs coordinator for CAIR-LA said:

  "Neither the article nor Mr. Barrios' comment on the article give any indication that he was talking about Muslim extremists. It sounded like he was talking about the religion as a whole and that is extremely insensitive and un-American."

  May 14. Lawmakers in South Carolina indefinitely postponed a vote on legislation that would prohibit the use of any foreign laws, including Islamic Sharia law, which violate the U.S. Constitution.

  May 15. The New York Times published an opinion article that called for an infusion of 50,000 migrants from Syria to revitalize Detroit:

  "Detroit, a once great city, has become an urban vacuum. Its population has fallen to around 700,000 from nearly 1.9 million in 1950. The city is estimated to have more than 70,000 abandoned buildings and 90,000 vacant lots. Meanwhile, desperate Syrians, victims of an unfathomable civil war, are fleeing to neighboring countries, with some 1.8 million in Turkey and 600,000 in Jordan. Suppose these two social and humanitarian disasters were conjoined to produce something positive."

  May 15. The Sheen Center for Thought and Culture, a performance center in downtown Manhattan, canceled an event featuring a new play by Neil LaBute on the grounds that it was offensive to Muslims. The event, "Playwrights for a Cause," featuring four new short plays about censorship in the arts, was set to take place on June 14. The Sheen Center said it "will not be a forum that mocks or satirizes another faith group." LaBute responded:

  "This event was meant to shine another light on censorship and it was unexpected to have the plug pulled, quite literally, by an organization that touts the phrase 'for thought and culture' on their very website. Both in life and in the arts, this is not a time to hide or be afraid? recent events have begged for artists and citizens to stand and be counted."

  May 21. The Texas Senate passed a measure that would prevent any 'international law' from being used in Texas civil courts. The bill does not specifically mention Islamic Sharia law, but guarantees that no laws from 'foreign courts' will be adopted by Texas civil court judges. "It's just to provide some belt and suspenders to make sure that, with judicial discretion, we don't trump Texas law, American law, with a foreign law regarding family law," said State Senator Donna Campbell. Muslim groups said the bill is a "solution looking for problem."

  May 21. The Chairman of the House Committee on Homeland Security, Michael McCaul, said that a plan by the Obama administration to resettle Syrian refugees in the U.S. is a "serious mistake" and should be stopped until safeguards are in place:

  "We have no way … to know who these people are … we don't have databases on these individuals so we can't properly vet them, to know where they came from, to know what threat they pose, because we don't have the data to cross-reference them with. While there are a lot of mothers and kids, there are also a lot of males of the age that could conduct terrorist operations."

  A group of Senate Democrats urged the Obama administration to allow at least 65,000 Syrian refugees to settle inside the United States.

  May 26. Public school officials in Nashville, Tennessee, announced that six schools in South Nashville, home to a burgeoning Muslim community, would begin offering Arabic language classes. Each of the schools has students who speak Arabic as their primary language. Political commentator Allen West said:

  "So the schools were chosen because there's a high number of native Arabic speakers in the neighborhood. Why exactly do they need Arabic lessons? Wouldn't English be more appropriate? And why is it the public school's role to help keep students "connected to their native culture?" I thought that was their parents' role. I thought the purpose of the American public school system was to keep Americans connected to their American culture."

  May 28. The governing board of the Washington, DC Metro system banned "issue-oriented" advertising on its trains and buses. The move came after the American Freedom Defense Initiative, a free speech advocacy group, sought to place ads featuring a cartoon of Mohammed. A top Metro official said:

  "My view is, you put that ad up on the side of a bus, you turn that bus into a terrorism target. I think it's a very bad outcome for everybody. But it's a risk we don't want to put our passengers under."

  AFDI's president, Pamela Geller, responded:

  "These cowards may claim that they are making people safer, but I submit to you the opposite. They are making it far more dangerous for Americans everywhere. Rewarding terror with submission is defeat. Absolute and complete defeat."

  Also in May, a study released by research corporation Westat, and commissioned by the US Department of Justice, estimated that 23-27 honor killings occur in the United States every year. The study, "Honor Violence Measurement Methods," noted that 91% of victims in North America are murdered for being "too Westernized," and in incidents involving daughters 18 years or younger, a father is almost always involved.

  The report — which identified four types of honor violence: forced marriage, honor-based domestic violence, honor killing and female genital mutilation — also estimated that 1,500 forced marriages occur in the United States every year.

  A separate study by the Population Reference Bureau estimated that 507,000 women and girls in the United States are at risk or have already undergone female genital mutilation (FGM), more than twice the number estimated in 2000.

  JUNE 2015

  June 1. The U.S. Supreme Court ruled in favor of Samantha Elauf, an American Muslim woman who was denied a job at Abercrombie & Fitch because she wears a hijab headscarf. Elauf claimed the company did not offer her a job because her religious identity violates Abercrombie's "look policy." The company said the scarf clashed with its dress code, which calls for a "classic East Coast collegiate style." Justice Antonin Scalia wrote: "An employer may not make an applicant's religious practice, confirmed or otherwise, a factor in employment decisions."

  June 3. United Airlines apologized after a flight attendant's refusal to give an unopened can of soda to a Muslim passenger led to a social media firestorm. Tahera Ahmad, 31, a Muslim chaplain at Northwestern University, was traveling from Chicago to Washington, DC, on May 29 when she said she asked for an unopened can of Diet Coke. Ahmad said the flight attendant told her she was "unauthorized to give unopened cans to people because they may use it as a weapon on the plane." Ahmad wrote on her Facebook page that she was in "tears of humiliation from discrimination."

  Other passengers on the flight later contradicted Ahmad's account. They said she became irate after the flight attendant handed her an unopened can of Diet Coke rather than a Coke Zero, as she had requested. The flight attendant returned with a Coke Zero, but said Ahmad could not have the entire can because there was not enough to go around for other passengers. Ahmad then went into a rage: "What, do you think I will use this as a weapon? Why can't I have the whole can? I think you are discriminating against me. I need your name." According to passengers seated near Ahmad, she kept repeating, "I need your name. I am being discriminated against." Ahmad then got on her phone and "started spinning this story on social media and she was never in tears."

  One observer noted:

  "What's really remarkable about this story is, near as I can tell, at no point … did any of these major media outlets try and independently verify the details of Ahmad's story. I would like to note that what's happened with this story is a complete and total perversion of journalism. Whether it's simply for clicks or because folks are anxious enough to promote any account of injustice that reinforces the media's center-left world view, it is inexcusable to turn someone's one-sided Facebook post into a national news story without making an effort to verify the details."

  June 4. A Department of Homeland Security Inspector General report found that the Transportation Security Administration (TSA) had failed to identify 73 airport workers with links to terrorism. The revelation came just days after an internal investigation of the TSA found security failures at dozens of the nation's busiest airports, where undercover investigators were able to smuggle mock explosives or banned weapons through checkpoints in 95% of tests.

  June 5. Michael Wolfe, 24, of Austin, Texas, was sentenced to almost seven years in federal prison and five years of supervised release for attempting to engage in violent jihad in Syria. According to the Justice Department, Wolfe admitted that he planned to travel to the Middle East to provide his services to ISIS. Wolfe also admitted to participating in physical fitness training, acquiring a U.S. passport, and trying to conceal his communications about foreign travel to join ISIS. Wolfe purchased plane tickets to Europe so he could meet with an undercover FBI agent, who he believed would help him travel to Syria through Turkey. Wolfe was arrested on June 17, 2014 in Houston as he attempted to board a flight to Canada.

  June 7. Munther Omar Saleh, 20, a college student in Queens, New York, was arrested and charged with trying to learn how to build a pressure cooker bomb for an attack in New York City on behalf of the Islamic State.

  June 9. The owners of the Empire State Building reached a confidential settlement with a Muslim family booted from the building's observation deck because they were praying. Fahad and Amina Tirmizi, of Long Island, New York, said in their federal lawsuit that they and their two young children had begun silently reciting their evening prayers in a quiet spot on the 86th-floor deck at about 11 p.m. July 2, 2013, when two security guards "forcibly escorted" them down to the lobby and out of the of the building. The couple was seeking $5 million in damages in the suit, filed in March 2014 in Manhattan federal court.

  June 9. The New York Police Department said it was working to recruit more Muslims. There currently are about 800 Muslim uniformed police officers out of about 35,000, according to the NYPD Muslim Officers Society. "The more Muslims who work in the NYPD the better," said Ibrahim Hooper, a spokesman for the Council on American-Islamic Relations (CAIR). "This is a way to break down the mistrust and create bridges in the community."

  June 12. Four Muslims who accused the FBI of putting them on a no-fly list because they refused to become informants said they would seek damages, even though the travel ban has been lifted. Plaintiff lawyer Robert Shwartz told U.S. District Judge Ronnie Abrams that "various FBI agents punished the men and put them on [the list] because they refused to become informants at their mosques." As a result, they suffered the "stigma of being treated as threats to aviation security." Shwartz added: "Money relief is really the only relief."

  June 12. Khalifa Said Derenkai, of Salt Lake City, Utah, filed a lawsuit against Pan Am International Flight Academy, based in Las Vegas, Nevada, for refusing to let him use a flight simulator. Derenkai says he was scheduled for flight simulator training, but Pan Am school manager Phil Spessard looked up his LinkedIn profile and denied him access to a flight simulator. Derenkai, originally from Eritrea, said Spessard reported him to the FBI's Terrorism Taskforce because he "looked suspicious" because of his African origins. Derenkai said he was seeking $400,000 in compensatory damages and punitive damages for discrimination.

  June 18. Samuel Rahamin Topaz, 21, of Fort Lee, New Jersey, was charged with planning to travel overseas to support the Islamic State. Topaz was arrested one day after federal prosecutors charged Fareed Mumini, 21, of Staten Island, New York, with trying to stab an FBI agent who was executing a search warrant at his home. A criminal complaint alleged that Mumini had pledged allegiance to the Islamic State, and that if he failed to join the group overseas, he planned to attack law enforcement in the United States.

  June 19. Justin Nojan Sullivan, 19, of Burke County, North Carolina, was arrested on charges of planning terrorist attacks in the United States on behalf of ISIS. The criminal complaint alleges that the FBI became aware of Sullivan's plans to obtain a semi-automatic AR-15 rifle, which he planned to use to kill a large number of U.S. citizens. An undercover FBI agent made contact with Sullivan beginning on or about June 6, 2015. Sullivan described himself to the agent as "a mujahid," and as a Muslim convert living in the eastern United States. Sullivan also told the agent that "the war is here," and gave the agent the opportunity to join what he called the Islamic State of North America, whose "doctrine is guerilla warfare in and out."

  June 23. A judge in St. Louis, Missouri, ruled that Raja Naeem, a Pakistani taxi driver, has a right to wear religious attire while working. Naeem had been battling the Metropolitan Taxicab Commission, which licenses drivers in the St. Louis area, for years regarding his clothing. The commission requires drivers to wear black pants and a white, button-down shirt. The commission said the dress code makes it easier for the public to identify licensed drivers. After a court ruling in 2013, the commission offered a compromise: a kurta, the loose-fitting clothing worn on the torso. Naeem said his freedom of religious expression was still being violated. Judge Robert Dierker ruled: "Mr Naeem's right to express his religious beliefs by his mode of dress is directly infringed by the Commission's dress code. The Missouri Constitution clearly prohibits such infringement."

  June 23. A poll commissioned by the Washington, DC-based Center for Security Policy found that more than half (51%) of Muslims in America believe they should "have the choice of being governed according to Sharia." Only 39% of those polled said that Muslims in the U.S. should be subject to American courts. Nearly a quarter of the Muslims polled believed that, "It is legitimate to use violence to punish those who give offense to Islam by, for example, portraying the prophet Mohammed." Nearly one-fifth of Muslim respondents said that the use of violence in the United States is justified in order to make Sharia the law of the land in this country.

  June 23. During an Iftar dinner to celebrate the Muslim holiday of Ramadan, U.S. President Barack Obama lamented the "distorted impression" that many Americans have of Muslims: "Here in America, many people personally don't know someone who is Muslim. They mostly hear about Muslims in the news — and that can obviously lead to a very distorted impression."

  June 26. The New York Police Department issued parking tickets to more than 100 Muslim cab drivers parked illegally outside a mosque on the Upper West Side during Ramadan. Cabby Mohammad Zaman, who was slapped with a $115 ticket for double parking, said:

  "This is a special prayer time, a time for religion. We double-park here every Friday and they [allow it], but today they gave us all tickets, almost 100 cabs. This has never happened before. I can't help but to think they are being prejudiced. They don't understand. We have to be here."

  June 29. Walmart apologized after the bakery at a store in Slidell, Louisiana refused a man's request for a Confederate flag cake, but accepted a design with the ISIS flag. Chuck Netzhammer said he ordered the image of the Confederate flag on a cake with the words, "Heritage Not Hate," but the bakery said no. "I went back yesterday and managed to get an ISIS battle flag printed. ISIS happens to be somebody who we're fighting against right now who are killing our men and boys overseas and are beheading Christians," Netzhammer said. "That's an ISIS battle flag cake that anybody can go buy at Walmart. But you can't buy a Confederate flag toy, with like, say, a 'Dukes of Hazzard's' car."

  

  

  

  

  

• A Bullish Blast From The Past

  The first time the S&P 500 was at the current levels was early June 2014… i.e. your equity market investment has returned nothing for 19 months.

  

   

  In the interests of “fair and balanced” reporting we offer the following “Sincere” headline from 2014… making it clear just what to do next.

  

  h/t @StockCats

  So you know what to do. Or does the phrase “permanently high plateau” ring any bells for anyone?

  

  

  

  

• Another Nail In The US Empire Coffin: Collapse Of Shale Gas Production Has Begun

  Via SRSroccoReport.com,

  The U.S. Empire is in serious trouble as the collapse of its domestic shale gas production has begun.  This is just another nail in a series of nails that have been driven into the U.S. Empire coffin.

  Unfortunately, most investors don’t pay attention to what is taking place in the U.S. Energy Industry.  Without energy, the U.S. economy would grind to a halt.  All the trillions of Dollars in financial assets mean nothing without oil, natural gas or coal.  Energy drives the economy and finance steers it.  As I stated several times before, the financial industry is driving us over the cliff.

  The Great U.S. Shale Gas Boom Is Likely Over For Good

  Very few Americans noticed that the top four shale gas fields combined production peaked back in July 2015.  Total shale gas production from the Barnett, Eagle Ford, Haynesville and Marcellus peaked at 27.9 billion cubic feet per day (Bcf/d) in July and fell to 26.7 Bcf/d by December 2015:

  

  As we can see from the chart, the Barnett and Haynesville peaked four years ago at the end of 2011.  Here are the production profiles for each shale gas field:

  

  According to the U.S. Energy Information Agency (EIA), the Barnett shale gas production peaked on November 2011 and is down 32% from its high.  The Barnett produced a record 5 Bcf/d of shale gas in 2011 and is currently producing only 3.4 Bcf/d.  Furthermore, the drilling rig count in the Barnett is down a stunning 84% in over the past year.

  

  The Haynesville was the second to peak on Jan 2012 at 7.2 Bcf/d per day and is currently producing 3.6 Bcf/d.  This was a huge 50% decline from its peak.  Not only is the drilling rig count in the Haynesville down 57% in a year, it fell another five rigs this past week.  There are only 18 drilling rigs currently working in the Haynesville.

  

  The EIA reports that shale gas production from the Eagle ford peaked in July 2015 at 5 Bcf/d and is now down 6% at 4.7 Bcf/d.   As we can see, total drilling rigs at the Eagle Ford declined the most at 117 since last year.  The reason the falling drilling rig count is so high is due to the fact that the Eagle Ford is the largest shale oil-producing field in the United States.

  

  Lastly, the Mighty Marcellus also peaked in July 2015 at a staggering 15.5 Bcf/d and is now down 3% producing 15.0 Bcf/d currently.  The Marcellus is producing more gas (15 Bcf/d) than the other top three shale gas fields combined (12.1 Bcf/d).

  I have posted the Haynesville shale gas production chart below to discuss why U.S. Shale Gas production will likely collapse going forward:

  

  What is interesting about the Haynesville shale gas field, located in Louisiana and Texas, is the steep decline of production from its peak.  On the other hand, the Barnett (chart above in red) had a much different profile as its production peak was more rounded and slow.  Not so with the Haynesville.  The decline of shale gas production at the Haynesville was more rapid and sudden.  I believe the Eagle Ford and Marcellus shale gas production declines will resemble what took place in the Haynesville.

  All you have to do is look at how the Eagle Ford and Marcellus ramped up production.  Their production profiles are more similar to the Haynesville than the Barnett.  Thus, the declines will likely behave in the same fashion.  Furthermore drilling and extracting shale gas from the Haynesville was a “Commercial Failure” as stated by energy analyst Art Berman in his Forbes article on Nov 22 2015:

  The Haynesville Shale play needs $6.50 gas prices to break even. With natural gas prices just above $2/Mcf (thousand cubic feet), we question the shale gas business model that has 31 rigs drilling wells in that play that cost $8-10 million apiece to sell gas at a loss into a over-supplied market.

   

  

   

  At $6 gas prices, only 17% of Haynesville wells break even (Table 3) and approximately 115,000 acres are commercial (Figure 2) out the approximately 3.8 million acres that comprise the drilled area of the play.

   

  The Haynesville Shale play is a commercial failure. Encana exited the play in late August. Chesapeake and Exco, the two leading producers in the play, both announced significant write-downs in the 3rd quarter of 2015.

  Basically, the overwhelming majority of the shale gas extracted at the Haynesville was done so at a complete loss.  So, why do they continue drilling and producing gas in the Haynesville?

  The reason Art Berman states is this:

  What we see in the Haynesville Shale play are companies that blindly seek production volumes rather than value, and that care nothing for the interests of their shareholders. The business model is broken. It is time for investors to finally start asking serious questions.

  Chesapeake is one of the larger shale gas producers in the Haynesville as well as in the United States.  According to its recent financial reports, Chesapeake received $1.05 billion in operating cash in the first three-quarters of 2015, but spent $3.2 on capital expenditures to continue drilling.  Thus, its free cash flow was a negative $2.1 billion in the first nine months of 2015.  And this doesn’t include what it paid out in dividends.

  The same phenomenon is taking place in other companies drilling for shale gas in the other fields in the U.S.  This insanity has Berman perplexed as he states this in another article from his site:

  This has puzzled me because the shale gas plays are not commercial at less than about $6/mmBtu except in small parts of the Marcellus core areas where $4 prices break even. Natural gas prices have averaged less than $3/mmBtu for the first quarter of 2015 and are currently at their lowest levels in more than 2 years.

  The reason these companies continue to produce shale gas at a loss is to keep generating revenue and cash flow to service their debt.  If they cut back significantly on drilling activity, their production would plummet.  This would cause cash flow to drop like a rock, including their stock price, and they would go bankrupt as they couldn’t continue servicing their debt.

  Basically, the U.S. Shale Gas Industry is nothing more than a Ponzi Scheme.

  The Collapse Of U.S. Shale Gas Production Even At Higher Prices

  I believe the collapse of U.S. shale gas production will occur even at higher prices  Why?  Because the price of natural gas increased from $2.75 mmBtu in 2012 to $4.37 mmBtu in 2014, but the drilling rig count continued to fall:

  

  As the price of natural gas increased from 2012 to 2014, gas drilling rigs fell 40% from 556 to 333.  Furthermore, drilling rigs continued to decline and now are at a record low of 127.  Just as Art Berman stated, the average break-even for most shale gas plays are $6 mmBtu, while only a small percentage of the Marcellus is profitable at $4 mmBtu.

  Looking at the chart again, we can see that the price of natural gas never got close to $6 mmtu.. the highest was $4.37 mmBtu.  Thus, the U.S. Shale Gas Industry has been a commercial failure.

  Now that the major shale gas producers are saddled with debt and many of the sweet spots in these shale gas fields have already been drilled, I believe U.S. shale gas production will collapse going forward.  If we look at the Haynesville Shale Gas Field production profile, a 50% decline in 4 years represents a collapse in my book.

  The Two Nails In The U.S. Empire Coffin

  As I stated in several articles and interviews, ENERGY DRIVES THE ECONOMY, not finance.  So, energy is the key to economic activity.  Which means, energy output and the control of energy are the keys to economic prosperity.

  While the collapse of U.S. shale gas production is one nail in the U.S. Empire Coffin, the other is Shale Oil.  U.S. shale oil production peaked before shale gas production:

  

  This chart is a few months out of date, but according to the EIA’s Productivity Reports, domestic oil production from the top four shale oil fields peaked in April of 2015… three months before the major shale gas fields (July 2015).

  Unfortunately for the United States, it was never going to become energy independent.  The notion of U.S. energy independence was built on hype, hope and cow excrement.  Instead, we are now going to witness the collapse of U.S. shale oil and gas production.

  The collapse of U.S. shale oil and gas production are two nails in the U.S. Empire coffin.  Why?  Because U.S. will have to rely on growing oil and gas imports in the future as the strength and faith of the Dollar weakens.  I see a time when oil exporting countries will no longer take Dollars or U.S. Treasuries for oil.  Which means… we are going to have to actually trade something of real value other than paper promises.

  I believe U.S. oil production will decline 30-40% from its peak (9.6 million barrels per day July 2015) by 2020 and 60-75% by 2025.  The U.S. Empire is a suburban sprawl economy that needs a lot of oil to keep trains, trucks and cars moving.  A collapse in oil production will also mean a collapse of economic activity.

  Thus, a collapse of economic activity means skyrocketing debt defaults, massive bankruptcies and plunging tax revenue.  This will be a disaster for the U.S. Empire.

  

  

  

  

  

• Tempers Flare Anew As Turkey Accuses Russia Of Violating Airspace

  Back in November, Turkey very nearly started a world war when Ankara decided it would be a good idea to shoot down a Russian warplane near the Syrian border.

  Only one of the two Su-24 pilots survived after the plane was ambushed by two Turkish F-16s.

  The other pilot was killed by the Syrian resistance and in a brazen move, the FSA destroyed a Russian search and rescue helicopter with a US-supplied TOW hours after the plane was downed.

  That incident triggered a rather heated war of words between Ankara and Moscow, with The Kremlin launching a PR campaign that accused Turkey of aiding and abetting Islamic State by, among other things, facilitating the group’s illicit oil trafficking business.

  Since then, Russia has also deployed S-400 advanced missile defense systems to Latakia which effectively means that Turkish F-16s are no longer allowed in the skies above Syria.

  Well, just when you thought the tensions between Erdogan and Putin were calming down, Turkey has summoned the Russian ambassador over what Ankara claims was another violation of Turkish airspace by Russian jets.

  “Turkey said Saturday that a Russian warplane breached its airspace, accusing Moscow of seeking to escalate tensions and warning of consequences two months after Turkish F-16s downed a Russian jet for violating its territory from Syria,” WSJ reports. “A Russian Su-34 entered Turkey’s airspace at 11:46 a.m. local time on Friday, despite repeated warnings from Turkish radar operators in Russian and English, the Foreign Ministry in Ankara said in an emailed statement Saturday.”

  “We are issuing an explicit and clear call to the Russian Federation to act responsibly in the matter of not violating the Turkish airspace, and therefore NATO airspace,” Turkey said, as though Russia had somehow forgotten that Turkey was a NATO member.

  We hope cooler heads will prevail in Ankara this time around because if Erdogan shoots down another Russian plane, they’ll be long range bombers over Erdogan’s $615 million palace.

  In any event, we’re sure Erdogan will write this off as a misunderstanding.

  After all, it was the Turkish President himself who in 2012 said “a short-term border violation can never be a pretext for an attack.”

  Meanwhile, assuring tensions between the two nations remains at their highest in years, a Turkish ultranationalist who bragged about killing the pilot of a Russian bomber shot down by Turkish fighter jets has showed up for the funeral of a fellow militant in Istanbul. Moscow has demanded the man’s arrest on war crime charges.

  Alparslan Celik is a Turkish citizen, the son of a former district mayor elected from Turkey’s Nationalist Movement Party (MHP) and a member of the party’s unofficial youth military arm, Bozkurtlar.

  He appeared in Istanbul on Wednesday for the funeral of Ibrahim Kucuk, the head of the MHP bureau in Istanbul’s Fatih district, who was killed in an airstrike in a Turkmen village in Syria, the Hurriyet newspaper reported.

  “The martyr [Kucuk] was our friend. He was with us in Bayirbucak and Turkmen Mountain. We were together,” he told journalists referring to the northwestern region of Syria, where ethnic Turks are an ethnic majority. The Turkish government has been supporting Turkmen militias in Syria, including the group in which Celik is deputy commander.

  

  Alparslan Celik is seen during an interview with the Do?an news agency in northwestern province of Kocaeli on Jan. 28. (Photo: DHA)

  Previously Celik challenged the Russian threat to his life, vowing he will continue to fight to defend the Turkmens’ territory in Syria against government forces backed by Russia.

  He confirmed that rebel groups fighting against Syrian government forces in the Turkmen region have been getting military support from Turkey.

  Underlining the rebels’ need to have air defense weapons to protect themselves against Russian jets, Celik reportedly praised Turkey’s assistance that has been given to Turkmens in the region; however, he said the amount of support is still not sufficient.

   

  He complained about still being provided with the same rudimentary weapons as the ones those given to them while they were fighting Syrian and Iranian forces — before the involvement of Russia on the side of the Syrian government.

  He reportedly told the news agency: “The same [kind of] weapons are coming today when we are fighting against Russia, which is a world power. We are not equipped with the weapons to counter their high-tech devices. But they [weapons] are certainly coming from the Turkish state. The [sort of] weapons that work in combat at close quarters. But we don’t have an air defense system… What we are asking from the Turkish state is to provide us with air defense weapons.”

  Celik previously implied he had killed Oleg Pe?kov, a Russian pilot, as he parachuted from his plane, which was hit by a Turkish jet for allegedly violating Turkish airspace. A Turkish F-16 shot down the Russian pilot’s Su-24 on Nov. 24, an act that has led to a crisis in relations between the two countries. Pe?kov was one of the two pilots in the downed jet that fell over Syrian territory near the Turkish border after being hit by a missile.

  The video of the mid-air execution can be found here.

  As for Russian threats, he is not afraid: “I have no such fear [of death]. We will continue our fight to the last person, the last breath, [and] the last drop of blood,” Celik told the Dogan news agency on Thursday.

  Putin may promptly oblige.

  

  

  

  

  

• Japan Just Lit the Fuse on a $9 Trillion Debt Bomb

  On Friday the Bank of Japan implemented Negative Interest Rate Policy, or NIRP.

   

  It is the second Central Bank to do so. The European Central Bank or ECB first went to NIRP in June 2014.

   

  Thus, between Japan and Europe, over 20% of the world’s GDP is being managed by a Central Bank with NIRP.

   

  More importantly, TWO major currencies in the world are now at NIRP while the US Dollar is at 0.5%.

   

  Why does this matter?

   

  Because hundreds of billions of Dollars in capital will be fleeing Japan to come to the US.

  The US Dollar has been in a bull market since mid-2014. It is not coincidence that it started when the Euro first went to NIRP: the minute the EBC implemented NIRP money began fleeing the Euro and moving into the US Dollar.

  

  To put this into perspective, this move was larger in scope than the “flight to safety” that occurred in 2008 when everyone thought the world was ending.

   

  The reason this is problematic?

   

  There are over $9 trillion in BORROWED US Dollars sloshing around the financial system.

  And much of it is parked in assets that are denominated in emerging market currencies (the very currencies that have imploded as the US Dollar rallied).

   

  This is the US Dollar carry trade… and it is larger in scope that the economies of Germany and Japan… combined.

  ALL of this DEBT is at risk of blowing up when the US Dollar began to rally. And now that both Europe AND Japan are implementing NIRP, the US Dollar bull market is only going to get worse.

  How bad?

  The US Dollar has broken out of the single BIGGEST falling wedge pattern in history. You are looking at a 40 year chart pattern that has been broken.

  

  This tells us that something absolutely MASSIVE is happening in the financial system right now. That "something" is the beginning of a $9 trillion debt implosion.

  Another Crisis is coming. Smart investors are preparing now.

  We just published a 21-page investment report titled Stock Market Crash Survival Guide.

   

  In it, we outline precisely how the crash will unfold as well as which investments will perform best during a stock market crash.

   

  We are giving away just 1,000 copies for FREE to the public.

   

  To pick up yours, swing by:

  https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

   

  Best Regards

   

  Graham Summers

  Chief Market Strategist

  Phoenix Capital Research

   

   

   

   

  

  

  

  

• Is The Bear Market Back? Here Is Google's Answer

  In a word – “Yes”

   

  

  Source: Google Trends

   

  It appears the “herd” was right last time.

  

  

  

  

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