Today’s News 3rd January 2019

• Break The Cycle: In 2019, Say No To The Government's Cruelty, Brutality. And Abuse

  Authored by John Whitehead via The Rutherford Institute,

  “The greater the power, the more dangerous the abuse.”—Edmund Burke

  Folks, it’s time to break the cycle.

  Let’s make 2019 the year we say no to the laundry list of abuses – cruel, brutal, immoral, unconstitutional and unacceptable – that have been heaped upon us by the government for way too long.

  

  Let’s make 2019 the year we stop living in a state of utter denial, desensitized to the government’s acts of violence, accustomed to reports of government corruption, and anesthetized to the sights and sounds of Corporate America marching in lockstep with the police state.

  Let’s make 2019 the year we refuse to allow the government’s abusive behavior to be our new normal. There is nothing normal about egregious surveillance, roadside strip searches, police shootings of unarmed citizens, censorship, retaliatory arrests, the criminalization of lawful activities, warmongering, indefinite detentions, SWAT team raids, asset forfeiture, police brutality, profit-driven prisons, or pay-to-play politicians.

  Here’s just a small sampling of what we suffered through in 2018.

  The government failed to protect our lives, liberty and happiness. The predators of the police state wreaked havoc on our freedoms, our communities, and our lives. The government didn’t listen to the citizenry, refused to abide by the Constitution, and treated the citizenry as a source of funding and little else. Police officers shot unarmed citizens and their household pets. Government agents—including local police—were armed to the teeth and encouraged to act like soldiers on a battlefield. Bloated government agencies were allowed to fleece taxpayers. Government technicians spied on our emails and phone calls. And government contractors made a killing by waging endless wars abroad.

  The president became more imperial. Although the Constitution invests the President with very specific, limited powers, in recent years, American presidents (Trump, Obama, Bush, Clinton, etc.) have claimed the power to completely and almost unilaterally alter the landscape of this country for good or for ill. The powers amassed by each successive president through the negligence of Congress and the courts—powers which add up to a toolbox of terror for an imperial ruler—empower whomever occupies the Oval Office to act as a dictator, above the law and beyond any real accountability. The presidency itself has become an imperial one with permanent powers.

  Police became a power unto themselves. Lacking in transparency  and accountability,  protected by the courts and legislators, and rife with misconduct, America’s police forces were a growing menace to the citizenry and the rule of law.  Shootings of unarmed citizens,  police misconduct and the use of excessive force continued to claim lives and make headlines. One investigative report found that police shoot Americans more than twice as often as previously known, a number that is underreported and undercounted.  That doesn’t account for the alarming number of unarmed individuals who died from police using tasers on them.

  911 calls turned deadly. Here’s another don’t to the add the growing list of things that could get you or a loved one tasered, shot or killed, especially if you are autistic, hearing impaired, mentally ill, elderly, suffer from dementia, disabled or have any other condition that might hinder your ability to understand, communicate or immediately comply with an order: don’t call the cops.

  Traffic stops took a turn for the worse. Police officers have been given free range to pull anyone over for a variety of reasons and subject them to forced cavity searches, forced colonoscopies, forced blood draws, forced breath-alcohol tests, forced DNA extractions, forced eye scans, forced inclusion in biometric databases. This free-handed approach to traffic stops has resulted in drivers being stopped for windows that are too heavily tinted, for driving too fast, driving too slow, failing to maintain speed, following too closely, improper lane changes, distracted driving, screeching a car’s tires, and leaving a parked car door open for too long. Unfortunately, traffic stops aren’t just dangerous. They can be downright deadly at a time when police can do no wrong—at least in the eyes of the courts, police unions and politicians dependent on their votes—and a “fear” for officer safety is used to justify all manner of police misconduct.

  The courts failed to uphold justice. A review of critical court rulings over the past decade or so, including some ominous ones by the U.S. Supreme Court, reveals a startling and steady trend towards pro-police state rulings by an institution concerned more with establishing order and protecting the ruling class and government agents than with upholding the rights enshrined in the Constitution. For example, despite the fact that a 26-year-old man was gunned down by police who banged on the wrong door at 1:30 am, failed to identify themselves as police, and then repeatedly shot and killed the innocent homeowner who answered the door while holding a gun in self-defense, the justices of the high court refused to intervene to address police misconduct. Despite the fact that police shot and killed nearly 1,000 people nationwide for the third year in a row (many of whom were unarmed, mentally ill, minors or were shot merely because militarized police who were armed to the hilt “feared” for their safety), the Supreme Court has failed to right the wrongs being meted out by the American police state.

  The Surveillance State rendered Americans vulnerable to threats from government spies, police, hackers and power failures. Thanks to the government’s ongoing efforts to build massive databases using emerging surveillance, DNA and biometrics technologies, Americans have become sitting ducks for hackers and government spies alike. Billions of people were affected by data breaches and cyberattacks in 2018. On a daily basis, Americans are being made to relinquish the most intimate details of who we are—our biological makeup, our genetic blueprints, and our biometrics (facial characteristics and structure, fingerprints, iris scans, etc.)—in order to navigate an increasingly technologically-enabled world. The Department of Homeland, which has been leading the charge to create a Surveillance State, began deploying mandatory facial recognition scans at airports and improperly gathering biometric data on American travelers. Police were gifted with new surveillance gadgets that allows them to scan vehicles for valuable goods and contraband. Even churches got in on the game, installing “crime cameras” to monitor church property and churchgoers. The Corporate State tapped into our computer keyboards, cameras, cell phones and smart devices in order to better target us for advertising. Social media giants such as Facebook granted secret requests by the government and its agents for access to users’ accounts. Triggered by background noise, Google Assistant has been actively recording phone users’ conversations. And our private data—methodically collected and stored with or without our say-so—was repeatedly compromised and breached.

  Mass shootings claimed more lives. Mass shootings have taken place at churches, in nightclubs, on college campuses, on military bases, in elementary schools, in government offices, and at concerts. In almost every instance, you can connect the dots back to the military-industrial complex, which continues to dominate, dictate and shape almost every aspect of our lives.

  The rich got richer, and the poor went to jail. Not content to expand the police state’s power to search, strip, seize, raid, steal from, arrest and jail Americans for any infraction, no matter how insignificant, the Trump administration gave state courts the green light to resume their practice of jailing individuals who are unable to pay the hefty fines imposed by the American police state. These debtors’ prisons play right into the hands of those who make a profit by jailing Americans.  This is no longer a government “of the people, by the people, for the people.” It is fast becoming a government “of the rich, by the elite, for the corporations,” and its rise to power is predicated on shackling the American taxpayer to a debtors’ prison guarded by a phalanx of politicians, bureaucrats and militarized police with no hope of parole and no chance for escape.

  The cost of endless wars drove the nation deeper into debt. America’s war spending has already bankrupted the nation to the tune of more than $20 trillion dollars. Policing the globe and waging endless wars abroad hasn’t made America—or the rest of the world—any safer, but it has made the military industrial complex rich at taxpayer expense. Approximately 200,000 US troops are stationed in 177 countries throughout the world, including Africa, where troops reportedly carry out an average of 10 military exercises and engagements daily. Meanwhile, America’s infrastructure is falling apart. The interest on the money America has borrowed to wage its wars will cost an estimated $8 trillion.

  “Show your papers” incidents skyrocketed. We are not supposed to be living in a “show me your papers” society. Despite this, the U.S. government has introduced measures allowing police and other law enforcement officials to stop individuals (citizens and noncitizens alike), demand they identify themselves, and subject them to patdowns, warrantless searches, and interrogations. These actions fly in the face of longstanding constitutional safeguards forbidding such police state tactics.

  The plight of the nation’s homeless worsened. In communities across the country, legislators adopted a variety of methods (parking meters, zoning regulations, tickets, and even robots) to discourage the homeless from squatting, loitering and panhandling. One of the most common—and least discussed—practices: homeless relocation programs that bus the homeless outside city limits.

  The government waged war on military veterans. The government has done a pitiful job of respecting the freedoms of military veterans and caring for their needs once out of uniform. Despite the fact that the U.S. boasts more than 20 million veterans who have served in World War II through the present day, the plight of veterans today is America’s badge of shame, with large numbers of veterans impoverished, unemployed, traumatized mentally and physically, struggling with depression, suicide, and marital stress, homeless, subjected to sub-par treatment at clinics and hospitals, left to molder while their paperwork piles up within Veterans Administration offices, and increasingly treated like criminals— targeted for surveillance, censorship, threatened with incarceration or involuntary commitment, labeled as extremists and/or mentally ill, and stripped of their Second Amendment rights—for daring to speak out against government misconduct.

  Free speech was dealt one knock-out punch after another. Protest laws, free speech zones, bubble zones, trespass zones, anti-bullying legislation, zero tolerance policies, hate crime laws and a host of other legalistic maladies dreamed up by politicians and prosecutors (and championed by those who want to suppress speech with which they might disagree) have conspired to corrode our core freedoms, purportedly for our own good. On paper—at least according to the U.S. Constitution—we are technically free to speak. In reality, however, we are only as free to speak as a government official—or corporate entities such as Facebook, Google or YouTube—may allow. The reasons for such censorship varied widely from political correctness, safety concerns and bullying to national security and hate crimes but the end result remained the same: the complete eradication of free speech.

  Police became even more militarized and weaponized. Despite concerns about the government’s steady transformation of local police into a standing military army, local police agencies continued to acquire weaponry, training and equipment suited for the battlefield—with full support from the Trump Administration. Even purely civilian government agencies are arming their employees to the hilt with guns, ammunition and military-style equipment, authorizing them to make arrests, and training them in military tactics. There are now reportedly more bureaucratic (non-military) government civilians armed with high-tech, deadly weapons than U.S. Marines. For instance, the IRS has 4,487 guns and 5,062,006 rounds of ammunition in its weapons inventory.

  The government waged a renewed war on private property. The battle to protect our private property has become the final constitutional frontier, the last holdout against our freedoms being usurped. We no longer have any real property rights. That house you live in, the car you drive, the small (or not so small) acreage of land that has been passed down through your family or that you scrimped and saved to acquire, whatever money you manage to keep in your bank account after the government and its cronies have taken their first and second and third cut…none of it is safe from the government’s greedy grasp. At no point do you ever have any real ownership in anything other than the clothes on your back. Everything else can be seized by the government under one pretext or another (civil asset forfeiture, unpaid taxes, eminent domain, public interest, etc.).

  Police waged a war on kids. So-called school “safety” policies, which run the gamut from zero tolerance policies that punish all infractions harshly to surveillance cameras, metal detectors, random searches, drug-sniffing dogs, school-wide lockdowns, active-shooter drills and militarized police officers, turned schools into prisons and young people into prisoners. The Justice Department announced that it will provide funding for schools that want to hire more resource officers, while President Trump indicated that he wants to “harden” the schools. What exactly does hardening the schools entail? More strident zero tolerance policies, greater numbers of school cops, and all the trappings of a prison complex (unsurmountable fences, entrapment areas, no windows or trees, etc.). According to the Washington Post, more than 4 million children endured lockdowns last school year, leaving many traumatized.

  The Deep State took over. The American system of representative government was overthrown by the Deep State—a.k.a. the police state a.k.a. the military industrial complex—a profit-driven, militaristic corporate state bent on total control and global domination through the imposition of martial law here at home and by fomenting wars abroad. When in doubt, follow the money trail. It always points the way.

  The takeaway: Everything the founders of this country feared has come to dominate in modern America.

  Yet as I make clear in my book Battlefield America: The War on the American People, if freedom is to survive at all, “we the people” will need to stop thinking as Democrats and Republicans and start thinking like true patriots. As Edward Abbey warned, “A patriot must always be ready to defend his country against his government.”

  Let’s not take the mistakes, carnage, toxicity and abuse of this past year into 2019.

  As long as we continue to allow callousness, cruelty, meanness, immorality, ignorance, hatred, intolerance, racism, militarism, materialism, meanness and injustice—magnified by an echo chamber of nasty tweets and government-sanctioned brutality—to trump justice, fairness and equality, there can be no hope of prevailing against the police state.

  

• Canadian Mortgage Credit Growth Drops To 22 Year Low Signalling The End Of The Housing Boom

  Submitted by Steve Saretsky of VanCityGuide

  Canada’s mortgage credit growth continued to decelerate in Q3 2018. Per a recent report from RBC, mortgage credit growth decelerated to 3.2%, the weakest pace of growth in 22 years. 

  

  The result of banks reigning in loan growth is significant for a number of reasons. Over 90% of new money is created through banks issuing new loans, with a large portion of that growth derived through new mortgage loans. Essentially banks are shrinking the growth of new money supply, which is also called M1 and is considered the most liquid portion of the money supply because it contains currency and assets that can be quickly converted to cash. 

  

  As credit growth begins to contract it is effectively reducing aggregate demand, not only for housing but also has a subsequent knock-on effect, slowing new spending and wage growth. This ultimately impacts debt servicing, as wage growth is needed to offset the increasing rise of interest payments. Per RBC, Interest payments rose at their fastest rate (14.8% y/y) since 2007. 

  

  This is also important to keep in mind for rent prices. As rents are typically tied to the labour market. Rents rise when the housing boom is in full swing because credit growth is abundant, this then pushes home prices higher, which propels banks to issue more loans, creating a self fulling prophecy. The creation of this new credit drives wages higher, improving the quality of the borrowers who are witnessing strong wage growth. As unemployment falls an inflow of new migrants come looking to participate in the exciting economic prospects, many of whom become employed in the booming construction sector. These inflows push the vacancy rates even lower. 

  However, like all cycles, they must eventually end, and the boom ultimately sows the seeds of its own demise. The slowdown of credit stalls wage growth, asset prices come to a standstill, and construction begins to slow. This results in job loss, and inflows of migrant workers turns to outflows. Today, we have home sales plunging, prices declining, and wage growth (a lagging indicator)  is decelerating, construction remains strong but has also begun to slow. While each cycle may differ ever so slightly, the outcome is almost always the same. I am hesitant to proclaim ‘This time is different’.

  

• The Atomic Bombing Of Japan, Reconsidered

  Authored by Alan Mosley via The Mises Institute,

  In the summer of 1945, President Harry Truman found himself searching for a decisive blow against the Empire of Japan. Despite the many Allied victories during 1944 and 1945, Truman believed Emperor Hirohito would urge his generals to fight on. America suffered 76,000 casualties at the battles of Iwo Jima and Okinawa, and the Truman administration anticipated that a prolonged invasion of mainland Japan would bring even more devastating numbers. Even so, plans were drawn up to invade Japan under the name Operation Downfall.

  

  The estimates for the potential carnage were sobering; the Joint Chiefs of Staff pegged the expected casualties at 1.2 million. Staff for Admiral Chester Nimitz and General Douglas MacArthur both expected over 1,000 casualties per day, while the personnel at the Department of the Navy thought the totals would run as high as 4 million, with the Japanese incurring up to 10 million of their own. The Los Angeles Times was a bit more optimistic, projecting 1 million casualties.

  With those numbers, it’s no wonder the US opted to (literally) take the nuclear option by dropping Little Boy on Hiroshima on August 6, and then Fat Man on Nagasaki on August 9. Japan formally surrendered 24 days later, sparing potentially millions of U.S. servicemen, and vindicating the horrifying-yet-necessary bombings.

  At least this is the common narrative that we’re all taught in grade school. But like so many historical narratives, it’s an oversimplification and historically obtuse.

  When Truman signed off on the deployment of the newly-developed atomic bombs, he was convinced that the Japanese were planning to prosecute the war to the bitter end. Many have argued that the casualty estimates compelled him to err on the side of caution for the lives of his boys in the Pacific. But this ignores the fact that other significant figures surrounding Truman came to the opposite conclusion. General Dwight D. Eisenhower, chief among the naysayers, said,

  “I was against (use of the atomic bomb) on two counts. First, the Japanese were ready to surrender and it wasn’t necessary to hit them with that awful thing. Second, I hated to see our country be the first to use such a weapon.”

  Although he made this statement publicly in 1963, he made the same argument to then Secretary of War Henry Stimson in 1945, as recounted in his memoirs:

  “I voiced to him my grave misgivings, first on the basis of my belief that Japan was already defeated and that dropping the bomb was completely unnecessary, and secondly because I thought that our country should avoid shocking world opinion by the use of a weapon whose employment was, I thought, no longer mandatory as a measure to save American lives. It was my belief that Japan was, at that very moment, seeking some way to surrender with a minimum loss of ‘face.’”

  Another prominent figure who echoed Eisenhower’s sentiments was Fleet Admiral William D. Leahy. He ranked as the senior-most United States military officer on active duty during World War II and was among Truman’s chief military advisors. In his 1950 book I Was There, Leahy wrote,

  “It is my opinion that the use of this barbarous weapon at Hiroshima and Nagasaki was of no material assistance in our war against Japan. The Japanese were already defeated and ready to surrender because of the effective sea blockade and the successful bombing with conventional weapons.”

  With mainland Japan under a blockade, Japanese forces in China and Korea were effectively cut off from reinforcements and supplies.

  Ward Wilson of Foreign Policy wrote that the most solemn day for Japan was August 9, which was the first day that the Japanese Supreme Council met to seriously discuss surrender. The date is significant because it wasn’t the day after the Hiroshima bombing, but rather the day the Soviet Union entered the Pacific Theatre by invading Japanese-occupied Manchuria on three fronts. Prior to August 8, the Japanese had hoped that Russia would play the role of intermediary in negotiating an end to the war, but when the Russians turned against Japan, they became an even bigger threat than America, as indicated by documents from leading Japanese officials at the time.

  Russia’s move, in fact, compelled the Japanese to consider unconditional surrender; until then, they were only open to a conditional surrender that left their Emperor Hirohito some dignity and protections from war-crimes trials. Ward concludes that, as in the European theatre, Truman didn’t beat Japan; Stalin did.

  Harry Truman never expressed regret publicly over his decision to use the atomic bombs. However, he did order an independent study on the state of the war effort leading up to August of 1945, and the strategic value of the Hiroshima and Nagasaki bombings. In 1946, the U.S. Bombing Survey published its findings, which concluded as follows:

  “Based on a detailed investigation of all the facts and supported by the testimony of the surviving Japanese leaders involved, it is the Survey’s opinion that certainly prior to 31 December 1945 and in all probability prior to 1 November 1945, Japan would have surrendered even if the atomic bombs had not been dropped, even if Russia had not entered the war, and even if no invasion had been planned or contemplated.”

  This is an intensive condemnation of Truman’s decision, seeing as Russia did enter the war, and that plans for an invasion had been developed.

  As Timothy P. Carney writes for the Washington Examiner, the fog of war can be a tricky thing. But if we’re forced to side with Truman, or Eisenhower and the other dissenting military leaders, the Eisenhower position isn’t merely valid; it actually aligns better with some fundamental American values. Given all the uncertainty, both at the time and with modern historical revisionism, it’s better to look to principle rather than fortune-telling. One principle that should be near the top of everyone’s list is this: it’s wrong to target civilians with weapons of mass destruction. The deliberate killing of innocent men, women, and children by the hundreds of thousands cannot be justified under any circumstances, much less the ambiguous ones Truman encountered. Whether his decision was motivated by indignation toward Japanese “ pigheadedness” or concern for his troops, Truman’s use of such devastating weapons against non-combatants should not be excused. Americans must strive for complete and honest analysis of the past (and present) conflicts. And if she is to remain true to her own ideals, America must strive for more noble and moral ends—in all conflicts, domestic and foreign—guided by our most cherished first principles, such as the Golden Rule. At the very least, Americans should not try so hard to justify mass murder.

  

• Taiwan Will "Never Accept" Reunification With Beijing, President Says

  Following a menacing speech by Chinese President Xi Jinping where he threatened violence against Taiwan should it pursue de jure independence from China and laid bare his intentions to push for a “one country, two systems” arrangement for what China considers to be a ‘rogue province’, pro-independence Taiwanese President Tsai Ing-wen clapped back at Xi in comments to the BBC on Wednesday, where she said the island would never accept reunification with China on Beijing’s terms.

  

  After defending the status quo and calling on Beijing to “face the reality” of Taiwan’s continued independence, Tsai declared on Wednesday that the island, which has functioned like a de facto country since 1949, when defeated nationalists led by Kuomintang leader Chiang Kai Shek fled across the Strait of Taiwan to seek refuge from the Communists, would never agree to the “one country, two systems” arrangement like the one that governs Hong Kong.

  But on Wednesday, Taiwan’s President Tsai Ing-wen said the island would never accept reunification with China under the terms offered by Beijing.

  “I want to reiterate that Taiwan will never accept ‘one country, two systems’. The vast majority of Taiwanese public opinion also resolutely opposes ‘one country, two systems’, and this is also the ‘Taiwan consensus’.”

  Under the “one country, two systems” formula, Taiwan would have the right to run its own affairs; a similar arrangement is used in Hong Kong.

  Since cementing his untrammeled power over the Chinese government and clearing the path for lifetime rule, Xi has exerted more pressure on Taiwan to bend to Beijing’s will. Last year, he successfully pressed for global airlines to identify Taiwan as a part of China, and has authorized threatening military exercises in the Taiwan Strait.

  But what are the chances that Xi adopts a more aggressive posture toward Taiwan, one that potentially involves military conflict? One BBC analyst said this possibility remains remote.

  If anything, China will probably step up its efforts to interfere with Taiwan’s elections to undermine pro-independence parties, while strengthening trade and other economic ties.

  China may be a rising military superpower, but sending an invading army across the choppy, well-defended waters of the Taiwan strait would still be a huge military gamble, with success far from guaranteed.

  Beyond the slightly more strident tone, Mr Xi’s speech does not appear to signal any dramatic change in those calculations, especially when you take into account the more conciliatory passages offering a further strengthening of trade links.

  If there is to be any warfare, it is likely to be of the cyber kind; China is reported to be stepping up its efforts to influence Taiwan’s elections to hurt the prospects of independence-leaning parties and politicians.

  The hope has long been that it will be China’s growing economic might, not military force, that will eventually pull Taiwan into its embrace.

  But as the trade war with the US simmers and Chinese leaders wary of foreign interference, Xi’s threats to strike back against foreigners who interfere with Taiwan could create further tension with the US, particularly after a Chinese admiral threatened to “sink two aircraft carriers” to send the US a message.

  

• The Military & Political Trends Of 2018 That Will Shape 2019

  Via SouthFront.org,

  2018 was marked by notable and sometimes alarming political, military and security developments around the world.  The Middle East, Eastern Europe, the Caucasus, Central Asia and East Asia once again became the scenes of global and intra-regional standoffs. A characteristic feature of the past year was the fact that almost all cross-border regions as well as regions which directly concern the economic and security interests of the USA, the EU, the People’s Republic of China and the Russian Federation have been drawn into the confrontation between global forces. This leads to the conclusion that there are no more “safe havens” in today’s world.

  In the first half of the year, the world was balancing on the brink of a new and wider cycle of violence in the Middle East conflict.  Many believed that exactly this could finally destroy the fragile world security order based on the Post Cold-War system of international relations. However, by the end of the year, the situation had changed and confrontation between the key powers has now shifted to Eastern Europe and Asia.

  This development is the result of the following factors:

  • The situation in Syria has stabilized, as a result of a series of successful military operations by the Syrian-Iranian-Russian alliance and diplomatic measures undertaken in the framework of the Astana format.

  • The US and key EU states concentrated their main attention on different regions in various corners of the world. This was conditioned by the interests of the Euro-Atlantic elite and new economic and by the new diplomatic approach of the Trump administration.

  • The US changed the focus of its foreign policy towards the active deterrence of China, instead of a possible cooperation. For this reason, the US employed measures to contain the economic expansion of China in the US market as well as in those foreign regions where the interests of US and Chinese corporations competed.

  • Germany, the most powerful European economic center, sent strong signals that its interests did not correspond with Euro-Atlantic interests.

  • The regime of Ukrainian President Petro Poroshenko and its backers employed active measures to fuel tensions in Eastern Europe and the Black Sea region during the last two months of the year.

  Throughout the year, the United States, which remains the only world superpower, successfully alienated some of its key partners and sharpened tensions with its competitors. It appeared to be engaged in an economic war with China, an economic and diplomatic conflict with the EU and, a diplomatic conflict with Turkey – over the Kurdish issue and Ankara’s military and economic cooperation with Russia. The US withdrew from the Iran nuclear deal as well as intensified the conflict with the Middle Eastern country in diplomatic, economic and even military spheres.

  The Trump administration spent a notable amount of time threatening North Korea with an invasion and promising not to do this if a denuclearization deal were to be reached. However, it appeared that despite showing a readiness to negotiate, the North Korean elites decided that they were not prepared to sell their national interests, as they see them, for the remote chance of being accepted as a junior partner of the US-dominated “international community”. After this and in the second part of the year Trump suddenly lost interest in the Korean peace process which could signals that Korean issues were needed and used mainly to support Trump’s personal domestic political agenda.

  In its turn, US-Russia relations have been further damaged. Washington increased sanction pressure on Moscow and officially declared its readiness to withdraw from key US-Russian arms reduction deals.

  Top US officials, including military, often name Russia and China among the key challenges faced by the country. However, there is a difference in the approach employed towards these two powers.

  Speaking to cadets at Virginia Military Institute on September 25, US Secretary of Defense James Mattis stressed that Russia and “the nuclear threat” are now key challenges for the US.

  “There’s also other challenges out there as well, but in terms of urgency, I’d say North Korea. In terms of power right now, it is probably Russia and the nuclear threat. And in terms of long-term political will, it’s China.

  But China does not have to be a threat. We can find a way to work together with China. We’re two nuclear-armed superpowers and we’re going to have to learn how to manage our relationship, and I do believe we can do that,” Mattis stated.

  Russia is mostly seen as a military threat in the event of a large regional or global conflict while in the case of China, the Washington establishment is mostly concerned with its economic and diplomatic influence around the world. This US stance could shift in the future with the further growth of the Chinese Armed Forces’ military capabilities.

  There is a logical explanation why the current Washington establishment pays so much attention to Russia. The US has long been facing a crisis in its social economic development model. If the US wants to maintain the living standards of its domestic population, it has to keep up the current level of consumption, which is impossible in the modern world without further expansion and colonial-style exploitation of “overseas” territories. Therefore, Russia could be considered as the only appropriate target of these efforts, because China is already incorporated into the system of international trading and finances and its internal political situation is much more stable.

  This complex yearlong trip of the US administration was in many cases fueled by the populist attitude of Donald Trump personally. The US President was actively exploiting various types of foreign enemy – the Assad government, the Chinese, the Russians, Iran and North Korea, which his administration was “defeating” in twitter and mainstream media to solve its own domestic political problems and to justify its course.

  Being an experienced showman, the US President was shuffling these foreign enemies hiding failures and showcasing the successes of his administration. For example, despite the obvious failure of the regime-change and anti-Iranian efforts in Syria, the US found time to show its supreme military power by launching another missile strike on the war-torn country. The economic war with China was justified as necessary measures to defend US domestic industry. The expanding anti-Russia sanctions, which since 2014 have failed to deliver a devastating blow to Russia’s economy, were used as an example of Trump’s firm policy towards Vladimir Putin, who is undertaking hostile actions against Western democracy. The anti-Iranian campaign in support of Israeli regional expansion appeared to be described as anti-terror efforts and was even used to turn a blind eye to the unprecedented murder of a journalist in a Saudi consulate in Istanbul. All the abovementioned was deftly packaged by Trump into his concise statement on the assassination of Saudi journalist Jamal Khashoggi: “The world is a very dangerous place!”.

  In 2019, Trump will likely continue juggling with enemies, threats and challenges, which he and his team will be confronting via twitter and other tools of US foreign policy. Meanwhile, the main threat to international peace and security will remain the US desire to withdraw from the INF Treaty and to not deal with the New Strategic Arms Reduction Treaty. In particular, these possible developments could lead to direct threats to European homeland security.

  Another threat to European security is a possible hot regional war in Eastern Europe, which may start in Ukraine.

  On November 25, the Russian Federal Security Service (FSB) Border Service opened fire on and damaged Ukrainian warships, which were advancing in Russian territorial waters in the Black Sea off Crimea. After the short close-quarter firefight, two Ukrainian ships were towed and one ship escorted by Russian forces to the Russian port of Kerch. The data available from both sides, Ukrainian and Russian, demonstrates that the Ukrainian warships intentionally entered Russian territorial waters and were moving more deeply into them. Such a military action with the to be expected intense political coverage is not possible without a direct order from the Ukrainian top military-political leadership.

  Exploiting the incident, Ukraine imposed martial law and heightened its propaganda campaign claiming that Russia was about to invade Ukraine. At the same time, military tensions increased in the east of the country as the Ukrainian Army deployed additional troops and heavy weapons in the region of Donbass.

  The Ukrainian leadership was fueling military tensions in order to create the appearance of a direct military threat to national security thus justifying political persecutions and censorship. Ukraine is set to hold a presidential election in early 2019 and, according to polls, incumbent president Poroshenko has little chance of staying in power unless the election is delayed or the situation changed dramatically, for example because of war. The West is also concerned about the situation. If the current Ukrainian foreign policy were to change, the Washington and Brussels establishment could lose 5 years’ worth of hacking out a foothold in the political life or even in the economic landscape of Ukraine.

  The wars in Syria and Yemen, the Israeli-Arab tensions in Palestine as well as the conflict between the US-Israeli-Saudi bloc and the Iran-Hezbollah bloc remained the main hot points in the Middle East.

  The smoldering conflict in Syria is one of the key hot points in the Middle East. In 2018, the Syrian-Iranian-Russian alliance achieved a series of important victories against militants in the countryside of Damascus and in southern Syria establishing a full control of these important areas. The US-led coalition and Israel attempted to prevent these advances by indirect and even direct military actions, including the US-led missile strike on government targets in April. However, all these attempts failed to change the situation at the strategic level.

  The Turkish Armed Forces (TAF) accompanied by Turkish-backed militant groups captured Afrin in northern Syria from the Kurdish People’s Protection Units (YPG). US-led forces used most of the year to consolidate their control of the desert areas on the eastern bank of the Euphrates and to show that they are fighting ISIS in the Euphrates Valley.

  The military situation in Syria as of December 2018:

  • Turkey and its proxies, usually referred as the Turkish-backed Free Syrian Army (TFSA), control the area of Afrin and the al-Bab-Azaz-Jarabulus triangle.
  • The US-led coalition and its proxies, known as the Syrian Democratic Forces (SDF), control the northeastern part of Syria.
  • Various militant groups, first of all Hayat Tahrir al-Sham, are in control of the most of Idlib -province and nearby areas.
  • ISIS cells still operate on the eastern bank of the Euphrates River and in the Homs-Deir Ezzor desert.
  • The southern and central parts of the country, including the most populated areas, are in the hands of the Damascus government.

  Northern Syria is a big knot of contradictions, with every party (Syria, Turkey, Iran, Russia, and of course the US) seeking to implement their own plans.

  The Assad government is still viewed as illegitimate by Ankara, though Erdogan prefers not to mention it officially if this is possible. Turkish authorities have also repeatedly claimed that Ankara is fulfilling its obligations under the de-escalation zones agreement. However, no practical steps have been made by Ankara to separate Turkish-backed “moderate” factions from the terrorist groups in Idlib or to combat the terrorists there.

  Turkey considered ISIS and Kurdish armed groups to be terrorists. After ISIS suffered defeat, Kurdish armed groups remained the only point in that category. Some Kurdish leaders hoped that Erdogan may lose the presidential election and thus the Turkish stance on the Kurdish issue in northern Syria will soften. However, this has never happened.

  On June 4, 2018, Ankara and Washington approved the “road map” for the town of Manbij in northern Aleppo, which is currently controlled by the Kurdish-dominated SDF. According to Turkey’s Foreign Minister Mevlut Cavusoglu, the first phase of the “road map” would see a withdrawal of Kurdish units from the town, which would come under joint patrols of Turkish and US troops. Turkish top officials also claimed that the agreement implied creating a town administration out of local inhabitants after the Kurdish armed groups’ departure. Turkey also insisted that all Kurdish armed groups within the SDF have to be disarmed or even disbanded in the framework of the roadmap.

  Nonetheless, the turn of events appeared to be at odds with Ankara’s desires. The YPG once again claimed that it had withdrawn its members from Manbij. US and Turkish forces started patrols north of the town, on the contact line between the SDF/YPG and Turkish-held areas. No Turkish troops entered Manbij. The political and military control over the town remained in the hands of the YPG-affiliated bodies. Furthermore, the US continued providing Kurdish fighters with various military supplies, including weapons and armoured vehicles, and training. No further joint US-Turkish steps to settle the Manbij issue in favor of the Erdogan government were made.

  Moreover, the problem is also that for Erdogan, Afrin, Al-Bab, and Manbij are not enough. He has repeatedly vowed to completely clear Kurish armed groups from the area from Manbij to Sinjar, which means operations in Qamishli, Kobani and Haskah, the main YPG strongholds in Syria. Thus, in order to achieve own goals the Erdogan government is balancing between the US-led bloc and the Syrian-Iranian-Russian alliance.

  From Russia’s point of view, the strategic priority is Syria’s territorial integrity and the prevention of radical islamists from coming to power. Russia is open to dialogue with a moderate part of the Syrian opposition and is ready to participate in the talks. The leadership likely understands that Turkey is a temporary ally of Russia in Syria, where the two countries together with Iran are guaranteeing the ceasefire in de-escalation zones.

  Thus, some Russian experts claim that Turkey is allied with the US against Russia, which does have some basis. Turkey is in NATO, Ankara has supported and is still supporting the opposition, especially radical armed groups in Idlib, which are not willing to negotiate with Assad. The conflict of objectives between Turkey and the Syrian-Iranian-Russian alliance has become obvious when the SAA started preparing for a possible military operation in Idlib.

  However, Turkey’s, Syria’s, and therefore also Russia’s interests coincide on the question of Syrian Kurdistan. After Russian forces were dispatched to Syria and particularly after the liberation of Aleppo in 2017, Moscow tried to act as an intermediary between the Kurds and Damascus, trying to convince the latter to create Kurdish autonomy. But the Kurdish leaders rejected talks with Damascus and instead placed their hopes in an alliance with the US. It does not matter whether they picked that option because they felt Washington was the best hope to gain quick independence for Rojava or because of a cash stimulus from US emissaries. Most likely both factors played a role. The prospect of a pro-US Kurdish “independent” state formation was extremely worrisome to Ankara, Damascus, and Tehran, prompting them to close ranks.

  Thus, the Kurds have lost their chance to get a wide autonomy within Syria and become a bargaining chip in the negotiations between major players involved in the conflict.

  The Astana process format also deserves a few words. In the framework of this formant, Russia, Turkey, and Iran have affirmed their determination to fight terrorism and also those organizations which are considered terrorist by the UNSC, oppose separatism aimed at undermining territorial integrity and the sovereignty of Syria and the security of neighboring countries, continue joint efforts to promote political reconciliation among the Syrians themselves in order to facilitate the earliest possible launch of the Constitutional Committee in Geneva. But the actual situation is radically different. Ankara de-facto controls part of Syria, with the fight against Kurdish armed groups and the expansion of own influence in the war-torn country being the motives. Turkey also lacks a UNSC mandate or a permission from Damascus to deploy forces in the country. These are undoubtedly violations of Ankara’s commitments to the Astana agreements and of Syria’s sovereignty. The participation of the Syrian opposition in the negotiations is also a problem. Many factions just sabotage the talks.  Moreover, there are no significant results in the realm of political decisions on the country’s future, even though they sides continue to affirm their unity in this effort. One could draw the conclusion that the Astana format is not effective and is only a platform for meetings among heads of states, since each country and Turkey in particular is pursuing its own interests.

  If one examines Russian participation in the conflict, there is still no evidence that Russia plans to impose a solution for a future Syria by force. Troops and equipment are being withdrawn from Hmeimim, which indicates a gradual drawdown of the military operation and a shift towards diplomatic means. However, while it’s possible to observe the successful implementation of this approach in some separate regions of the country, it has faced significant difficulties on the regional level.

  The September 17 announcement of the demilitarized zone in northwestern Syria by President Putin and his Turkish counterpart are a part of the wider strategy aimed at reaching a kind of peaceful settlement to the conflict and to de-escalate the situation. The success of this effort depends on the ability and willingness of the sides to employ the agreement on the ground and to force radical militants to demilitarize at least the 15-20km deep area.

  There are many potential clashes of interests between Turkey and Syria, including the Kurdish issue, mutual territorial claims, and ideological and political incompatibility. Since the very start of the protests in Syria, Turkey has rendered and continues to render help to the armed groups and political opposition. Moreover, the bilateral relations are made more complicated by the Euphrates river (nearly half the water is taken by Turkey which deprives countries downstream of water), the looting of industrial enterprises of the manufacturing center of Syria – Aleppo (equipment from nearly 1,000 factories were transported to Turkey). Ankara still believes Assad ought to leave his post, although in the last year its rhetoric concerning Assad’s legitimacy has softened. This was due to the growth of Russian influence on the theater of operations, military defeat suffered by several groups backed by Turkey, and also by the political and economic pressure exerted by Moscow after the Su-24 incident. This shaped Turkish policy toward Syria.

  In the best outcome scenario for Syria, Iran, and Russia, Turkey would not plan to annex the Syrian territory it controls in the north of the country in order to avoid a negative reaction from these three states. These territories may be used as bargaining chips in order to gain preferential treatment for work in post-war Syria, thus expanding and strengthening its sphere of influence in that country and strengthening Turkey as a regional power. It’s possible that the Syrian border territories will see something akin to a trans-border protectorate, without redrawing national boundaries. Turkey has already transformed the agglomeration of its proxies into something like a unified opposition, with whom Ankara imagines Assad will discuss the future of Syria, thus giving it a place in the war-destroyed country and thus ensuring Turkey’s interests are safeguarded.

  In the contemporary military and diplomatic reality surrounding the Syrian crisis, Ankara is pursuing the following tactical goals:

  • To eliminate or at least disarm and limit influence of US-backed Kurdish armed groups in northern Syria;
  • To strengthen a united pro-Turkish opposition Idlib and to eliminate any resistance to it, including in some scenarios the elimination of Hayat Tahrir al-Sham and its allies;
  • To facilitate return of refugees from Turkey to Syrian areas under its own control;

  If these goals are achieved, Ankara will significantly increase its influence on the diplomatic settlement of the crisis and on the future of the post-war Syria. The returned refugees and supporters of militant groups in the Turkish-controlled part of Syria will become an electoral base of pro-Turkish political figures and parties in case of the implementation of the peaceful scenario. If no wide-scale diplomatic deal on the conflict is reached, one must consider the possibility of a pro-Turkish quasi-state in northern Syria, confirming the thesis that Erdogan is seeking to build a neo-Ottoman empire.

  However, military and diplomatic successes were partially undermined by the economic crisis faced by the country in the middle of the year. The security situation in the southern and eastern parts of Turkey also remains complicated. According to the Turkish Internal Ministry, security forces are carrying out over 2,000 operations and neutralize dozens of terrorists every week in order to keep the situation under control.

  From its turn, the Syrian-Iranian-Russian alliance continue to pursue the following goals in Syria:

  • To eliminate the remaining ISIS cells operating in the central Syria desert;
  • To increase pressure on Hayat Tahrir al-Sham in the provinces of Idlib, Latakia and Aleppo in the framework of the de-escalation agreement reached during the Astana talks.

  The Russian Special Operations Forces and the Aerospace Forces will continue providing support to government forces in their key operations against terrorists. Nonetheless, the direct involvement of Russian forces will decrease, while negotiators on the ground and on a higher diplomatic level, will play an increasingly important role. The defeat of Hayat Tahrir al-Sham in the province of Idlib will require at least a limited coordination with Turkey and a large-scale humanitarian operation to evacuate civilians from the area controlled by the terrorist group.

  In turn, the US will continue working on establishing independent governing bodies that will aim to manage the areas held by the coalition and the SDF and that will be hostile to the Assad government. This effort is obstructed by a complicated situation in the coalition-occupied areas, because of the tensions between the Kurdish-dominated SDF and the local Arab population. Indeed, Kurdish SDF units have already complicated relations with US-backed Arab armed groups, which are also a part of the SDF.

  At the same time, US-Turkish relations will continue to experience friction over US military support to Kurdish armed groups, which are the core of the SDF. Ankara describes these groups as terrorist organizations. Continued US support for armed Kurdish groups may further increase the likelihood of improved Russian-Turkish relations and greater cooperation between Ankara and Moscow in how deal with resolving the Syrian conflict. Ankara will continue to pressure Washington to abandon its Kurdish proxies at every turn, and every US attempt to avoid this reality faces will be met with another Turkish move to boost economic and military cooperation with Russia.

  Furthermore, Russian-Turkish relations are being strengthened by major joint economic and military deals, including the TurkStream gas pipeline, the Akkuyu Nuclear Power Plant and the S-400 air defense system deal. These cooperative economic and military arrangements will continue to increase tensions between Washington and Ankara.

  The successful military operation in Syria has undoubtedly boosted the Russian role in the Middle East region in general, allowing it to act as a mediator in conflicts between nations. Moscow actively cooperates with Teheran supporting the Assad government and combating terrorism in Syria. At the same time; however, Russia has been able to leverage its reputation as the global power that is willing and capable of working with other regional players, including Israel, Saudi Arabia and Qatar in order to settle the conflict in Syria, thus avoiding a large-scale escalation or even a wider war in the region. Through its campaign in Syria, Moscow promoted its economic interests. President Bashar al-Assad and other officials have repeatedly stated that Syria is going to grant all the contracts on restoration of the country’s infrastructure to its allies – i.e. Iran and Russia. Russian companies are already participating in the energy projects, both oil and natural gas, in the country and are preparing to expand their presence in the country. Syria will be able to rebuild after a devastating war and Russia will increase its economic and political power in the region, while further securing economic benefits for its citizens at home.

  The operation also contributed to Russia’s national security. As it was noted in the start of this video, Russia has always been a target of terrorist activity of various radical groups, including ISIS and al-Qaeda. Some Western state actors have endorsed at least a part of this activity. It is notable that no major terrorist attacks have been carried out inside Russia since 2015. Russian forces eliminated a large number of militants in Syria who were members of terrorist groups originating in its Southern Caucasus regions created in the post-USSR era. This is already proving to be a major blow to the remaining cells of these groups hiding in Russia, because they have lost their most experienced and ideologically motivated members in Syria. The expansion of Russian military infrastructure, including naval and air bases in Syria, shows that Moscow is not going to withdraw from the country in the near future. Russia will continue its efforts to defeat terrorism and to settle the conflict using a variety of military and diplomatic measures.

  On the other hand, considering the current situation in the country, it does not seem possible for the Damascus government to restore control of the entire country in the immediate future.

  In December 2018, the Trump administration announced the withdrawal of US troops from Syria. In 2019, the US will likely focus on promoting its interests in the region mainly through its allies and local forces under its control.

  The stabilization of the situation in Syria also contributed to the growth of Iranian influence in the entire region.

  The key to the success of Iranian foreign missions is Sepah-e Pasdaran-e Enghelab-e Eslami, the “Corps of Guardians of the Islamic Revolution,” often mistranslated in the West as the “Iranian Revolutionary Guard Corps.”  The Sepah is the voluntary army created and dedicated to the defense of the revolutionary order founded by the Ayatollah Ruhollah Khomeini.  Headed by Major General Mohammad Ali Jafari, the 120,000-strong force consists of land, air, sea and aerospace branches dedicated to the territorial defense of the Islamic Republic and to preventing the subversion of it society by outside influences considered harmful by the leadership.  As opposed to the conventional Iranian Armed Forces, the Sepah train to carry out irregular warfare.  Due to the subversive and irregular style of combat in which the Syrian rebels and Daesh engage, it was quite natural for the Iraqi and Syrian Governments to petition the Iranians to send Sepah units to advise their conventional militaries and to found units patterned after the Sepah in organization and tactics.  In Iraq the Popular Mobilization Units are largely Shiite and a large component of these have pledged allegiance to Ayatollah Khamenei.  In Syria, the Sepah helped to reorganized and train local militias already formed by the Syrian Arab Army and, as the need for manpower increased, transported units of their Iraqi militias to fight in Syria.  The Syrians formed an umbrella group for all of these militias called the National Defense Forces, specifically modelled after the Basij militia in Iran, a voluntary paramilitary formation dedicated to civil defense and the prevention of foreign infiltration into Iranian society.  The NDF now numbers anywhere from 50,000 to 100,000 members and has recently volunteered to fight the Turkish Army in Afrin.

  As can be seen from the examples given, the Iranian foreign missions in Lebanon, Iraq and Syria have been highly successful due mainly to the expertise of the Sepah personnel sent and their intimate knowledge of irregular warfare.

  All of these developments have been met with displeasure by Israel, Iran’s main regional antagonist. Due to the precarious beginnings of their state and the continued occupation of foreign land in contravention to international law, the Israelis have had to rely upon the United States as a diplomatic guarantor at the United Nations as a military supplier.  The enmity between the Zionist State and the Islamic Republic is ideological, each state possessing a religious identity and existing with a purpose beyond the abundance of material goods and individual rights prized by the West.  Despite the recurring slogan of ‘Down with Israel’ (a closer translation of the famous Marg bar Israel than the usual ‘Death to Israel’ which appears in the Western press), the Iranians do not actively seek the destruction of the State of Israel but rather the cancellation of its provocative and unjust behaviors, such as: the occupation of most of the West Bank, of the Golan Heights and of East Jerusalem/Al-Quds, and permitting religiously-motivated settlers to continue to build compounds in the West Bank and in East Jerusalem.  Conversely, Israel wants Iran to stop its armament program to Hezbollah and has made it a practice to cross into foreign airspace, usually that of Syria, to attack what it believes to be convoys laden with military hardware destined for Lebanon.  The mutual suspicion between Israel and Iran takes shape locally at Israel’s northern border, across which Hezbollah with the permission of the Lebanese Government has created a multi-layered defensive network consisting of anti-tank and anti-infantry obstacles along with an interconnected bunker system.  Behind these ground defenses lies the missile arsenal, kept up to date by Iran and the cause of grave anxiety in Israel.  Iranian-Lebanese relations are more friendly than not, although the old fault lines from the Lebanese Civil War still exist with nearly all Shia Muslims supporting Iran and most Sunni Muslims and Christians opposing it.  Despite this state of opinion, Lebanon has welcomed Iranian overtures to come to its aid but keeps at a respectful distance due to fear of the US.  Be that as it may, it is widely accepted that Hezbollah can protect Lebanon from another Israeli invasion whereas the Lebanese Army cannot, and so the relationship between Hezbollah and Iran continues.

  The overall estimation of Iran’s position in the Middle East and Persian Gulf region depends upon its domestic strength and the success of its regional foreign policy. Regionally, the invitation given by its allies Syria, Iraq and (in a passive manner) Lebanon have allowed Iran to greatly expand its soft-power influence against the US/Israel bloc, thus giving what it perceives to be a needed security buffer against the continual efforts of its enemies to overtly or covertly force regime change; this soft-power influence also protects Shia populations, which it considers vulnerable to Western attack or bad influence.  The ties of political, civil and religious culture have allowed the Iranians to advance strong ties with the Iraqis and Syrians, and the brotherhood forged in the fight against ISIS and other militant groups continues to mean an advancement of Iranian interests regionally. While the defense budget of Iran is dwarfed by those of the United States and Israel, its expertise in asymmetrical warfare combined with its tactical use of advisors and diplomacy have seen Iran advance its regional standing since 2003 to the great consternation of its archenemy Israel and its patron the United States.

  In 2018, Iran faced increasing sanction and military pressure from the US, which appeared to be ready to do whatever it takes to support Tel Aviv. In November, the White House announced “the toughest sanctions regime ever imposed on Iran”. The sanctions targeted “critical sectors of Iran’s economy, such as its energy, shipping, shipbuilding, and financial sectors”. In fact, the US re-imposed all pre-nuclear deal sanctions and introduced fresh ones. The new sanction list included over 700 entities and individuals, including 300 new names. Trump and members of his administration concentrated special attention on threatening Iran’s oil export.

  In 2019, Iran will face further pressure from the US-Israeli-Saudi bloc on economic, diplomatic and even military fronts. Teheran will likely attempt to contain the US-led bloc by employing its asymmetric capabilities in the region and around the world as well as by strengthening its ties with the US geopolitical competitors – China and Russia. The EU will attempt to act as a neutral side in the US-Iranian conflict and will work to develop ways allowing it to continue economic cooperation with Iran at least in some fields.

  Throughout 2018, Israel employed a wide range of military and diplomatic measures in order to pursue and promote its interests in the Middle East. A major part of Israeli military efforts was focused on Syria and the Gaza Strip. Tel Aviv also played the role of Washington’s key ally in the region receiving multiple advantages from this.

  Despite this, the US-Israeli bloc has not been able to achieve their goals in the war torn region. These goals were to replace the Assad government with a loyal regime and to limit the influence of its adversaries – Hezbollah and Iran. In fact, the conflict has led to a significant growth of Iranian influence and of the activity of Hezbollah.

  The US decision to recognize Jerusalem as the capital of the Israeli state and the attempts of the Trump administration to intervene in any case where Israeli interests are allegedly under-respected have already led to a further escalation regarding the Palestinian and Israeli transborder issues. Moreover, the US withdrawal from the Iran Nuclear Deal forced Teheran to take a toughter stance on regional issues, including its ballistic and military programs and investments in the conflicts in Syria, Iraq and Yemen.

  The situation in and near the Gaza Strip is especially tense. Clashes between Palestinian protesters and Israeli forces have resulted in hundreds of killed and thousands of injured Gazians. The number of Israeli strikes on various Palestinian targets has grown while Palestinian armed groups have also expanded mortar and rocket shelling of southern Israel.

  Israel also adopted a basic law declaring itself the nation-state of the Jewish people. The law set Hebrew as the official state language, removing Arabic and declared Jerusalem the Israeli capital. The law further established “developing Jewish settlement as a national interest and will take steps to encourage, advance, and implement this interest.” This move became another factor fueling Arab-Israeli tensions in the region.

  In view of this, Russia has for a long time been working to remain ready to cooperate with all sides in order to defeat terrorism and to put an end to the Syrian conflict. The Russian military established de-confliction lines with the US-led coalition and the Israeli Defense Forces (IDF). Efforts from the Russian side allowed the situation near the Golan Heights to be de-escalated and prevented further confrontation between Israeli forces and Iranian-backed units in southern Syria. Furthermore, Moscow has avoided engaging in the smoldering Syrian-Israeli conflict and took no direct steps to repel any of the Israeli strikes on Syria.

  However, the situation changed on September 18 when a Russian IL-20 reconnaissance plane was shot down in the eastern Mediterranean during an Israeli air raid on Syria. Russia said that the situation was caused by the “hostile actions” of Israel and responded by supplying S-300 air defense systems to the Syrian Air Defense Force, contributing additional efforts to modernize and expand the air defense network of the Syrian military as well as increased EW activity and an increased number of live fire naval drills in the eastern Mediterranean.

  While it is unlikely that the Russian military will be publicly involved in the repelling of Israeli strikes on Syria, it will take some steps under the Syrian flag. These steps may include:

  • providing the SADF with additional intelligence as well as means and measures to repel Israeli aggression;
  • further supplies of modern air defense systems to Syria;
  • coordination of the SADF efforts to repel Israeli strikes through their military advisers embedded with the crews of the Russia-supplied air defense systems.

  Since late September, in consequence of these developments the Israeli Defense Forces (IDF) had significantly decreased their military activity in Syria. Instead, the country’s political and military leadership was focusing on attempts to restore “working relations” with Russia, which would allow the IDF to restore their lost freedom of operations against Iranian and Hezbollah targets. Nonetheless, this is unlikely to work in the near future if Tel Aviv offers no concessions to Moscow.

  The current level of media and political hysteria in Israel and the US, which is worsened by the complicated situation in the region, could once again put the Middle East on the verge of a hot regional war.

  The war in Yemen is also a source of instability in the region. In 2018, the Saudi-led coalition was unable to deliver a devastating blow to the Houthis and thus achieve a decisive victory in the conflict. Saudi Arabia and its allies had to establish a naval and ground siege of the Houthi-held area causing a deep humanitarian crisis in this part of the country. Houthi-led forces were responding with cross-border raids and missile strikes on Saudi targets creating a zone of instability right on the Saudi-Yemeni border and in southern Saudi Arabia itself.

  This as well as a complicated diplomatic and media situation in which, the kingdom found itself after an ill-conceived decision to assassinate an opposition Saudi journalist in its own consulate in the Turkish city of Istanbul, forced the Saudi leadership to take some open steps in the direction of settlement of the Yemeni conflict. In mid December, the warring sides reached a shaky ceasefire agreement. However, no comprehensive diplomatic solution was reached and the violence continued. It’s hard to expect that in 2019 the Saudi-led coalition will be able to stabilize its southern border.

  Additionally, Saudi foreign policy suffered painful blows in Syria and Iraq where Iran, the main Saudi regional competitor, is successfully expanding its influence. The diplomatic economic conflict with Qatar also resulted in no achievements for the Saudi leadership.

  The foreign policy failures of the ruling members of the House of Saud remained one of the key risk factors in the destabilization of Saudi Arabia as a nation-state. The invasion in Yemen was draining state finances and fueling the social and political tensions in the kingdom.

  Other already “traditional” sore points remained the high level of corruption, interconfessional conflicts, drug abuse as well as tensions within the royal family. In economic terms, the kingdom was neither able to launch nor join any global projects or initiatives, which would tug its economy, consolidate elites or at least draw society’s attention away from current issues. The aforementioned factors will remain the main security and economic challenges for Saudi Arabia in 2019.

  In 2018, a new crisis erupted in Armenia, a state in the South Caucasus. The balance of power, self-perception of local ethnic groups, and the influence of socio-economic and cultural ideological groups on public policy have significantly changed in the country. These changes are multidirectional, increasing the risk of a new armed conflict with Azerbaijan.

  As a result of an acute internal crisis and a series of street protests Nikol Pashinyan, an opposition leader and a leader of the neoliberal, formally pro-US political party “Way Out Alliance”, seized power in the parliamentary republic.

  Despite the formally pro-western position of his party, Pashinyan changed his public foreign policy rhetoric after the situation had entered into a revolutionary phase of the race for power. In addition, there is an acute regional issue – an unresolved territorial dispute over the Nagorno Karabakh region and some nearby areas between Armenia and its Turkic neighbor Azerbaijan, also a post-USSR state. Pro-Armenian forces captured Nagorno Karabakh in the early 90s triggering an armed conflict between Armenia and Azerbaijan. Further development of this conflict and the expected offensive by pro-Azerbajian forces was stopped by a Russian intervention in May 1994. By end of 2018, Nagorno Karabakh and the nearby areas are still under the control of Armenian forces, de-facto making it an unrecognized Armenian state – Arts’akhi Hanrapetut’yun (Arts’akh).

  From all the aforementioned regional players, Russia is the only power, which has been a strategic ally and a military defender of Armenia and its interests. Armenia is a member state of the Collective Security Treaty Organization (CSTO) and the Eurasian Customs Union (ECU).

  Meanwhile, the importance of the Armenian foothold in the South Caucasus for Russia has decreased. The importance of the Russian military base in Armenia has decreased because of the expansion of Russian military infrastructure in the Middle East, including naval and air bases in Syria. The political importance of Armenia has also decreased because of improved Russian-Turkish relations, which are strengthened by major joint economic projects, including the TurkStream gas pipeline and the Akkuyu Nuclear Power Plant. At the same time, Armenian has little economic value for the Russian state or private companies. Its only value is found in the nostalgic memories of a part of the Armenian diaspora with Russian citizenship. Additionally to the aforementioned factors, the Russian political leadership seems to be more cautious in forecasting and assessing the course of Armenian foreign policy, analyzing in depth actions and rhetoric of representatives of the Armenian elites. This shift was expected. For a long time, Armenia has pursued a foreign policy that was significantly at odds with the foreign policy position of its formal strategic ally. Furthermore, while enjoying Russian military protection, Armenia has declined to support Russia over key issues on the international agenda.

  All these are objective factors, limiting the maneuverability of the relatively pro-Washington establishment in Armenia. Therefore, it decided to implement a double standard policy, de-facto providing a pro-Western course, but maintaining a relatively pro-Russian public rhetoric and standing on ceremony. If this situation develops further, in 2019, Moscow may use this as a formal pretext to reshape its presence, first of all military, in the region as well as the format of diplomatic relations with Armenia. In the worst case scenario, the current Armenian leadership would find itself without direct Russian support in a possible conflict with Azerbaijan for the Nagorno Karabakh region.

  The instable political situation in Georgia is also contributing to the instability in the Southern Caucasus.

  In Central Asia, Afghanistan was the main point of instability. In 2018, the US-led bloc once again appeared to be unable to defeat the Taliban. In turn, the Afghan movement only expanded its influence across the country, controlling or contesting at least a half of it. In 2019, the situation will likely become even worse for the US and its allies if they reach no agreement with the Taliban or undertake no decisive steps such as the deployment of additional troops to turn the tide in its favor. Another way out is a complete US withdrawal from the country which would be answering Taliban demands and could lead to or be a part of a US-Taliban agreement. Meanwhile there is little hope of the actual implementation of such a peace agreement because it would concede that thousands of American soldiers’ lives had been wasted and 18 years of US policy towards Afghanistan had failed. It would be a major blow to the image of the United States as the leading world power.

  Tajikistan is another point, which could negatively affect regional security. Cells of the Taliban and ISIS expanded their presence within the country in 2018. The main reasons are the complicated social and economic situation in Tajikistan, which is a result of the approaches being employed by the current government as well as the common economic doldrums in the region. If the situation develops further in the same direction in 2019, this country could become a new hot spot in the region.

  Another important factor influencing the situation in the Central Asia, the Asia-Pacific and even Africa is the US-Chinese standoff. Tensions between the two states are rising in the economic, diplomatic and military spheres. Since the start of 2018, the US has imposed a series of tariffs on a wide range of Chinese goods and, according to President Trump, is ready to take further steps to defend US national interests. According to the Trump administration the tariffs are needed to protect US businesses, especially industry and intellectual property, and to reduce the trade deficit with China. Since the start of the “trade war”, US and Chinese top officials have held a series of meetings but have found no options to resolve the existing differences.

  Furthermore, on September 20, the US sanctioned a Chinese defense agency and its director for purchasing Russian combat aircraft and S-400 surface-to-air missiles. The State Department claimed that its actions weren’t intended to undermine the military capabilities or combat readiness of any country, but rather to punish Russia in response to its alleged interference in the US election process. In response, China’s Foreign Ministry said the action was unjustifiable and demanded the US withdraw the penalties or “bear the consequences.”

  The conflict expanded into the military and political field. Speaking at a UN Security Council meeting on September 26, President Trump accused China of “attempting to interfere” against his administration in the upcoming 2018 election in the US. However, the US president provided no evidence for his claims. Additionally, the Trump administration approved the sale of $330 million of military equipment to Taiwan. This move caused another round of tensions with China.

  The balance of power in the Asia Pacific region in general and particularly in the South China Sea and East China Sea are also a hot point in US-China relations. The US is actively working military and diplomatic levels to deter the growing Chinese influence. The US Armed Forces send warships and jets close to Chinese military facilities built on artificial islands, and hold drills near the contested area. The Chinese side is not going to abandon its South China Strategy and responds in a similar manner.

  The Washington leadership is concerned by the further increase of Chinese military capabilities, including power projection capabilities, as well as its diplomatic and economic influence around the world. In 2019, this trend will develop further.

  The Chinese deep ties with North Korea and the deepening ties with Russia are another focus of tensions between Beijing and Washington.

  As to North Korea, in the first half of the year the US presented itself as the defeater of the Kim regime who had forced Pyongyang to denuclearize, abandon the missile program and accept a peace talk. However, in the second half of the year, it appeared that the peace process between the North and the South was developing on an equal basis and far beyond the model desired by the Trump administration. Such mutual give-and-take developments make it difficult to take further steps towards changing the North Korean regime and spreading American influence to the north of the peninsula. At the end of 2018 the White House started to throw sand in the wheels of peace building in the Korean Peninsula. The framework of the ongoing peace process does not satisfy Trump.  This is not price which he is willing to pay to lose a bogeyman as Kim, who was exploited as such to justify a good part of current foreign policy and defense spending.

  Washington sees Chinese and Russian activity in Africa as one more threat to its global influence. China has already been widely acknowledged on the continent as an important player in economic and even political areas. In 2018 Beijing strengthened its position in the region.

  Moscow was resuming its influence in Africa. The growing Russian military, diplomatic and economic activity in central Africa, especially in the Central African Republic and Chad, became a target of mainstream media speculations in the second half of 2018. In fact, Beijing and Moscow are steadily regaining ground from the US-led bloc in the region.

  A complex diplomatic, military and economic cooperation with China is a part of Russia’s “turn to the East” strategy. In January-November 2018, the trade between the countries grew by 27.8% in comparison to the same period in 2017. Russian exports to China in this period were valued at 53,782,900,000 USD while Chinese exports to Russia were 43,452,700,000 USD. The total commodity circulation by the end of the year was about 100 Billion USD. The commodity circulation grew significantly between Russia and other Asian states, in particular Singapore and Thailand. In 2019, Moscow will continue to adapt its economic and diplomatic policy in response to US attempts to isolate it.

  Meanwhile, the European partners of the US have suffered significant economic losses from the sanction regime imposed on Russia. According to experts, European business losses can be estimated in hundreds of billions USD.

  In Latin America, 2018 brought notable changes in the political landscape both at intraregional and transregional levels. Over the past decades, the United States has pursued a de-facto colonization policy towards its southern neighbors, exploiting all available resources from natural to human. At the same time, the US leadership lavishly supported the establishment cronies of its allies in the region. However, in 2018, the rhetoric and actions of the US towards Latin America changed significantly. The Trump administration made a series of harsh statements about Latin American countries and undertook some unfriendly acts. This applies to both traditional allies and traditional opponents.

  As for the latter, the US President declared the so-called “axis of evil in Latin America” as being Cuba, Venezuela, Bolivia and Nicaragua. Then Trump’s National Security Adviser John Bolton branded Cuba, Venezuela and Nicaragua a “troika of tyranny”. However, in practice this US posture only strengthened cooperation between the aforementioned states and united their policiesy towards the US leadership.

  US-Mexican relations also deteriorated. One of the main reasons was the issue of illegal migration from Mexico, which concerned especially the border states of the US. Trump actively used this topic for a domestic ideological struggle with his opponents inside the country. In the second half of the year, the Trump administration even sent regular army troops to the border, threatening that they, in some cases, will have the right to use live fire against migrants. At the same time, Trump continued to push his project of a border wall on the southern US border.

  Venezuela faced an acute round of internal struggle for political power between different factions. The struggle was further worsened by a complicated economic situation. Washington attempted to use both these factors to change the regime in the country, but was not able to do so.

  The 2018 G20 summit hosted by Brazil was the most notable international relations event in the region. Some in the US administration believe that Brazil may shape its foreign policy course toward a more pro-US stance with its new elected president. However, despite the fact that Jair Bolsonaro is considered to be a “friend of the United States,” he is in fact only a friend of Trump’s “conservative concept” and nothing more. The new president of Brazil will certainly be a sincere ally of the US, but only until the time when or if supporters of the three new “-ism”s: neoliberalism, globalism, transhumanism or, putting all together, neo-colonialism come back to full power in the United States.

  Despite some disagreements the Columbian regime remained the main American ally in the region.

  As to Cuba, by the end of the year, Trump had lost a window of opportunity for drawing the country into the US sphere of influence. The main reason for this being the shortsighted policy of his administration.

  Intolerance for other points of view, lack of foresight, credibility gaps, double standards, hostility, irrationality, devaluation of democratic procedures, and the resulting dismantlement of the existing system of international relations – all of these definitions can be applied to describe the policy of the global players in 2018. More and more symptoms of a systemic crisis can be distinctly observed. The depth of the divisions between the sides reached an unprecedented level when they almost could not be resolved via negotiations and mutual concessions, at least within the framework of the existing system of international affairs.

  Furthermore, the ruling establishment of the world’s sole superpower, the U.S., has shown that it is not going to lower itself to equitable negotiation with other powers.

  There are no signs that this situation will improve in 2019. The standoff between the leading powers, including sanctions, arms race, direct and indirect military confrontation, will not decrease. There is a high threat of the resumption or even the launching of new armed conflicts primarily in Eastern Europe and the Middle East. These conflicts may be larger in scale than all of the previous conflicts of the 21th century. Social, ethnic and ideological disputes in Europe, Russia and the U.S. may lead to the destruction of state institutions, and thus civil disorder and conflicts. Terrorist organizations will continue to pose a significant threat.

  Global economic issues and the state of international affairs will contribute to the further fragmentation of the world and the growth of isolationist tendencies. 2019 could prove the pivotal year in marking the final breakdown of the existing model of international relations and the intensification of the conflict between global powers, as they seek to shape the new world order. Regardless, it is safe to assume that in 2019 the world will remain a “very dangerous place”.

  

• Trump: Syria Is "Sand And Death", US Exit Will Be "Over A Period Of Time"

  After early this week Trump’s promised “full” and “immediate” US troop withdrawal from Syria was put on shaky ground following a prior meeting with hawk Sen. Lindsey Graham, and following immense push back from the career Washington deep state, the president is showing signs that he could be changing his tune. 

  President Trump said on Wednesday the US will get out of Syria “over a period of time” and in such a way that will protect America’s Kurdish partners on the ground, at a moment pro-Turkish forces backed by Turkey’s army are set to invade and annex Kurdish enclaves in the north of the country. 

  President Donald Trump: …”United States wants to protect Kurds in Syria even as it pulls forces out.” pic.twitter.com/jNcP0a30Ot

  — Mutlu Civiroglu (@mutludc) January 2, 2019

  https://platform.twitter.com/widgets.js

  During a Wednesday Cabinet meeting in front of reporters – the first of the new year – Trump did not provide a timetable for a planned military exit while strongly emphasizing he would “not forget” the extraordinary sacrifices the Kurds made in the fight against ISIS. 

  The president said: 

  We have to help them, I want to help them…

  They fought with us, they died with us… thousands of Kurds died fighing ISIS. they died for us and with us, and for themselves… I don’t forget.

  He did, however, deny widespread reports that he had discussed setting a four month timetable for the withdrawal of 2000+ American troops. Previous language of a “hasty” pullout decision reportedly in part prompted Defense Secretary Jim Mattis to resign.

  

  On Monday Trump appeared to back off prior language of an “immediate” and hasty pullout while emphasizing the operation would be slow. “We’re slowly sending our troops back home to be with their families, while at the same time fighting Isis remnants,” he stated on Twitter Monday.

  But he also indicated he’s committed to seeing it through: “If anybody but Donald Trump did what I did in Syria, which was an ISIS loaded mess when I became President, they would be a national hero,” Trump tweeted. “ISIS is mostly gone, we’re slowly sending our troops back home to be with their families, while at the same time fighting ISIS remnants.”

  Notably, he also told reporters on Wednesday: “Syria was lost long ago. we’re not talking about vast wealth. we’re talking about sand and death,” while also noting: 

  “It’s not my fault. I didn’t put us there.”

  And in a statement sure to give John Bolton a conniption fit, Trump commented in response to a question on Iran’s role in Syria, saying “they can do what they want there, frankly.”

  US President #Trump about #Syria:

  – We lost it long before
  – Kurdish YPG sells oil to Iran
  – US Army leaving Syria
  – USA still is going to protect YPG pic.twitter.com/SEY6f33T4n

  — Ali Özkök – علي أزكوك (@Ozkok_) January 2, 2019

  https://platform.twitter.com/widgets.js

  Advocates for a continued US military presence in Syria argue that any pullout would be a gift to Russia, Iran, and Damascus. As a compromise US commanders are currently requesting that Kurdish YPG fighters be allowed to keep their US-supplied weapons, which would anger Turkey.  

  Meanwhile, the position of French forces involved in the coalition operation to support the Kurds is also made precarious by a US pullout. Macron previously blasted Trump’s announced exit, saying “an ally should be dependable.” Likely it would be impossible for French forces – which maintain a handful of forward operating bases – to stay if American forces completely withdraw. 

  Syrian Kurdish representatives are currently urging Macron to stay the course in Syria even if the US draws down. Simultaneously there appears increasing indirect coordination between the YPG and the Syrian Army, as talks with Damascus are also said to be making positive momentum in terms of a future settlement of Syria’s Kurdish enclaves.  

  

• Luxury Real Estate Crash: One Of America's Most Expensive Mansions Sells For 73% Below Ask 

  After four years on the market, an overpriced 60,000-square-foot Hillsboro Beach estate known as “Le Palais Royal” was recently auctioned off. First listed for a then record-setting national price of $139 million in 2014, the mansion was quickly bumped up to $159 million the following year. The listing was withdrawn in 2016/17 after no buyers came forward. It went to auction via Concierge Auctions, in conjunction with Ralph Arias of ONE Sotheby’s International Realty, on November 12.

  Thanks to property records that were updated on December 28, the final selling price of the estate came in at $42.5 million, a 73% reduction from the 2015 asking price, said Forbes.

  Designed by Miami-based architect Denio Madera, the home features 11-bedrooms, 22-bathrooms with over 60,000 square feet of space, a private IMAX theater, putting green, multiple pools and waterfalls, and 22-karat gold leaf detailing on pretty much every surface. The estate sits on five-acres that stretches from the oceanfront to the Intracoastal Waterway and features docks for two megayachts.

  The new owner is an LLC affiliated with former Teavana creators, Andrew and Nancy Mack. They sold Teavana to Starbucks for a reported $620 million in 2012.

  The seller, Robert Pereira, founder of the Massachusetts-based construction company Middlesex Corp., possibly lost tens of millions of dollars on the transaction; Pereira told The Wall Street Journal in 2015 that the build costs exceeded $100 million.

  Auction representatives previously stated that the auction had attracted 11 bidders, with over 29 tours of the estate and over 1,800 interested parties. Even though the final sale did not meet the nine-figure asking price, the deal smashed records for the most expensive home to be sold at auction in the US.

  

  

  

  

  

  

  

  

  Price cuts tend to be a great leading indicator and give a forward-looking view into the real estate market. So, when one of America’s most expensive homes experiences 73% collapse in asking price from 2015, it probably signals that a luxury real estate market crash could be ahead.

  

• The Great Myth Of The Anti-War Left Exposed

  Authored by Andrew Moran via Liberty Nation,

  Otto von Bismarck once said, “People never lie so much as after a hunt, during a war or before an election.” For decades, a common myth pervading the American political arena has been that the left is anti-war.

  

  But they are as much opposed to war as Sen. Lindsey Graham (R-SC) – at least he is honest about his appetite for blood and desire for perpetual regime change, no matter who occupies the Oval Office. So, from where did this mendacity come?

  In 2008, the United States was entrenched in an election battle and two major wars – Afghanistan and Iraq. The Democrats portrayed themselves as the anti-war party, promising to correct the foreign disasters of the incumbent administration. Since then, it’s as if former President George W. Bush never departed. The Democrats have championed military interventions, twiddled their thumbs under President Barack Obama, and nominated a hawk to lead the party in 2016.

  Progressives, the same ones who, under Republican administrations, routinely held massive anti-war rallies on days that ended in “y,” have been eerily silent for the last ten years.

  Today, the left has united with the neoconservatives in opposition to President Donald Trump’s decision to bring 2,000 troops home from Syria and potential plans to withdrawfrom Afghanistan. Because they loathe Trump so much and don’t want him to be portrayed as a more peaceful president than his predecessor, leftists demand that U.S. forces permanently stay in the region, facing death or serious injury.

  Is this a case of Freaky Friday politics, or has the left always been pro-war?

  Anti-War Democrats, Please Stand Up

  Attempting to locate a handful of consistent anti-war Democrats is like trying to spot Vice President Mike Pence with a woman other than his wife at a restaurant: It’s never going to happen.

  Even Sen. Bernie Sanders (I-VT), the man who switches from Independent to Democrat when it suits the occasion, has come out of the closet on occasion as a hawk. In addition to supporting the so-called Little War in Kosovo in the 1990s, Sanders revealed to ABC News in September 2015 that the U.S. could use its military forces when not attacked and apply sanctions on adversaries.

  For the last century, virtually every war, invasion, and occupation have been given the stamp of approval by Democrats. President Woodrow Wilson dragged the U.S. into one of those wars-to-end-all- wars fiascos. President Harry Truman sent thousands of young men to their deaths in Korea, setting the stage for perpetual global interventionism. President Lyndon Baines Johnson escalated American involvement in Vietnam. The Democratic leadership approved of the Iraq War, and Obama destabilized an entire region, killed American citizens, and intensified the drone bombing campaign.

  Outside of Capitol Hill, the predominantly left-leaning mainstream media have never seen a war it didn’t like. In the last two years alone, the vacuous TV commentators have employed the same two strategies: Demand action against Russia (eh, Paul Begala?) and oppose President Trump for using diplomacy and other tactics to institute peace.

  So, how exactly is the left anti-war?

  The Born-Again Right

  When it comes to foreign policy, there are now three wings of the GOP: hawks, doves, and those who realize the doctrine of the last 20 years has failed.

  One of the biggest surprises since Trump’s election is that the right has become increasingly more cautious about seeking dragons to slay and erecting Old Glory on every plot of land in the world. House Republicans have slashed foreign aid in the billions, Senate Republicans have voted to endAmerica’s role in Yemen’s humanitarian crisis, and prominent figures in the White House have asked one simple question: Why should the United States be the policeman of the world?

  Stephen Miller, a senior adviser to the president, recently dismantled the hawkish Counterfeit News Network when he told Wolf Blitzer:

  “What I’m talking about, Wolf, is the big picture of a country that through several administrations had an absolutely catastrophic foreign policy that cost trillions and trillions of dollars and thousands and thousands of lives and made the Middle East more unstable and more dangerous. And let’s talk about Syria. Let’s talk about the fact — ISIS is the enemy of Russia. ISIS is the enemy of Assad. ISIS is the enemy of Turkey. Are we supposed to stay in Syria generation after generation, spilling American blood to fight the enemies of all those countries?”

  Had Obama uttered these fiery remarks in ’08, they would have been the headline for many outlets that covered the interview. Instead, The Washington Post reported, “Wolf Blitzer tells Stephen Miller to ‘calm down’ during heated interview.” The Huffington Post ran with this headline: “CNN’s Wolf Blitzer Tells Stephen Miller to ‘Calm Down.’”

  Comments that should draw praise from the left have been met with mockery and scorn.

  US Foreign Policy

  H.L. Mencken was right when he said that “every decent man is ashamed of the government he lives under.” There is no other area in government that should instill more shame in the population than foreign policy.

  The political theater of sending young men and women overseas to fight in wars is a tragicomedy: a comedy for those who don’t have to wield a weapon and a tragedy for those who do. It is easy and comfortable for politicians and pundits, a paltry few of whom have ever done any of the fighting, to shout platitudes as if they were reincarnated John Waynes.

  It’s clear that politicians of all stripes have blood on their hands. The only difference is that some policymakers showcase this human flesh with pride, while others pretend to be benevolent. Trump’s foreign policy has not been perfect, but it has been far superior to what has transpired over the years. To rebuke the president’s withdrawal of soldiers in an NPC-like manner makes you complicit to atrocity.

  

• Why Has Global Liquidity Crashed Again?

  Authored by Michael Howell via CrossBorder Capital,

  All around is crashing: Can the centre hold?

  • Global Liquidity falling at its fastest rate since 2007/08 Crisis

  • Over-zealous Central Banks are largely to blame. Not a broken banking system like 2007/08 Crisis

  • Squeeze evidenced by flat yield curves and negative ‘real’ term premia

  • In the US, the impact of ‘reverse’ QE is equivalent to another 10 rate hikes

  We will enter 2019 with Global Liquidity tumbling at its fastest rate since the 2007/08 Financial Crisis. Yet again investors are learning the hard lesson that low nominal interest rates are a dangerously ambiguous guide to monetary conditions.

  Already risk asset markets are skidding, in response to tight liquidity, and economic slowdown and probable recessions lie ahead. The future looks especially bad for those economies, firms and institutions that have spent the last decade kicking the proverbial debt can down the road. High debt levels always demand high liquidity to facilitate re-financing. Systemic risks rise if debt cannot be re-scheduled.

  

  Figure1 shows the scale of the recent drop in Global Liquidity. Liquidity here refers to funding liquidity, rather than market liquidity, although the two are closely linked. Since end-January 2018, World private sector liquidity has fallen by some US$3 trillion, with roughly two thirds of the drop coming from the Developed economies, while World Central Bank liquidity has fallen by another US$1.1 trillion, with two-thirds of its drop recorded in Emerging Markets, paced by their large foreign reserve losses. Added together, Global Liquidity has in total fallen by just over US$4 trillion to US$124.1 trillion.

  This 3% drop looks more serious when set against its 7% ‘normal’ trend. Put another way, after its brief recovery Global Liquidity has fallen back again to stand some 25% below its long-term trend. The table reports the latest weekly activities of the key Central Banks: only China’s People’s Bank (PBoC) is still expanding its balance sheet. And, measured in current US dollars, latest data show World Central Bank money is down by nearly 10% at an annualised 3-month clip.

  What to Watch?

  We monitor Global Liquidity by closely watching three channels:

  • Central Bank liquidity injections

  • Private sector liquidity provision

  • Cross-border capital flows

  The first channel is now fashionably dubbed ‘QE’ or quantitative easing and measures the activities of policy makers in the money, repo and debt markets. The second looks beyond credit at all forms of cash generation by the private sector. It embraces bank credit, shadow bank credit and household and corporate savings flows in retail and, particularly, wholesale markets, and covers a history of financial engineering that extends back to the UK fringe banks in the 1970s and Japanese zaitech in the 1980s. Cross-border flows include all forms of net investment, but they are noteworthy because foreign currency borrowings, e.g. Eurodollars, are often used as collateral and levered up by domestic credit providers. It follows that Central Bank liquidity and cross-border flows represent what we term primary liquidity, while banks and shadow banks provide secondary liquidity.

  We define Liquidity broadly to include ‘global’ or cross-border effects, and deeply, insofar that it extends beyond the traditional financial sector, to include corporate cash flows, and beyond retail banking by embracing wholesale money and repo markets.

  The link between the volume of liquidity and interest rates was anyway never one-to-one: a fact that is especially true in the post-2008 period. Moreover, the link between bank reserves, money and liquidity has been similarly blurred; with the size of Central Bank balance sheets playing a more complex role in the funding structure since they simultaneously affect both the supply of cash and the availability of collateral. According to Adrian and Shin (2009):“The money stock is a measure of the liabilities of deposit-taking banks, and so may have been useful before the advent of the market-based financial system. However, the money stock will be of less use in a financial system such as that in the US. More useful may be measures of collateralized borrowing, such as the weekly series of primary dealer repos.” Adrian and Shin, Money, Liquidity And Monetary Policy, New York Fed Staff Papers, January 2009 Funding and the specific role played by Central Banks are critical factors explaining the liquidity cycle.

  Central Banks have an outsized-effect in deregulated financial systems, where retail deposits are not the sole funding source, because what matters most is the ability to re-finance positions and at the margin Central Banks are the marginal suppliers of liquidity. Put another way liquidity is not fungible in crises, the very times that it matters most, and so Central Bank interventions are required. Since the supply of liquidity to roll-over existing positions matters more than the demand for finance for new projects, the size of the Central Bank balance sheet often outweighs the impact of interest rates. It follows that the relationship between interest rates and the supply of liquidity is rarely one-to-one. Central Bank interventions into the money markets significantly affect the elasticity of the financial system: in short, quantities matter and Central Banks increasingly determine the volume of funding liquidity and often directly impact the amount of market liquidity in modern financial systems.

  

  Figure 2 shows the dramatic expansion in the size of the US dollar money markets to around US$9 trillion and the dominant role played by the US Federal Reserve in the period since 1980. These markets have increasingly supplemented retail deposits and now fund a rising proportion of US credit and liquidity, notably wholesale lending activity. Admittedly, following the 2007/08 Crisis, they have essentially flat-lined in size. Although the money markets are exploited by both traditional banks and shadow banks as financing pools, what sets traditional banks apart from all other financial institutions is their ability to issue liabilities, e.g. demand deposits, that serve the non-bank sector as a means of payment. Consequently, traditional banks do not face the same funding constraints as other financial intermediaries, so making their lending more elastic. In theory, as long as capital requirements are met, the traditional banking system can accommodate additional credit demands by simply creating new means of payment in the process of making new loans.

  What shadow banks do is to transform these bank assets and liabilities and refinance them as longer and more complex intermediation chains, e.g. A lends to B who lends to C, etc. In doing this they provide alternative stores of value, e.g. asset backed securities, to institutional investors that do not want to hold all of their liquid assets as (uninsured) demand deposits. However, shadow banks largely repackage and recycle existing savings. By lengthening intermediation chains they became involved in large volumes of wholesale funding, without creating much new lending. The data show that they are involved in 66% of gross funding, but directly account for barely 15% of new lending. Shadow banks, therefore, increase the elasticity of the traditional banking system by relaxing banks’ capital requirements, through, say, selling loans externally to GSEs or internally to off balance sheet vehicles, so boosting the credit multiplier.

  A speculative appetite to borrow always exists and seemingly is independent of interest rates. Keynes dubbed this the ‘unborrowed fringe’. Yet, shadow banks could not have originated the credit boom that preceded the 2007/08 Crisis, since they themselves depend on bank credit. The fragility of this wholesale funding model based on short-term repos has heightened systemic risks, not least because it is market collateral-based and highly pro-cyclical, and it always threatens to feed-back negatively on to the funding, as well as the lending books of traditional banks. Traditional economics misses the importance of this gross funding dimension, because it takes every credit as a debt (debit), every debt as a credit: so assets and liabilities must match, and the system always balances to zero. Thus, it never acknowledges just how big these numbers are: regardless of how much credit or debt there is in the system, the net figure is always the same. But knowing this fact is akin to scaling the World’s longest ladder and promising never to fall off!

  The vital role that Central Banks play in this funding mechanism is also not well understood, even by the policy-makers themselves. For example, some experts have even claimed that collateral, such as Treasury notes that were purchased by policy-makers as part of QE operations, when released back into the market from the asset side of the Fed balance sheet:

  “is a far better lubricant for the financial system than the reduction in reserves balances on the liability side of the Fed balance sheet. … Thus, a leaner central bank balance sheet… could justify a much higher policy rate in this cycle than currently being anticipated.” Singh, FT April 2017

  This is dangerous talk, particularly if it has recently played a role in persuading policy-makers to become more cavalier in their tightening actions. We maintain that the size of the Central Bank balance sheet serves as an unambiguous guide to the availability rather than simply the cost of primary funding. Thus, quantitative tightening is likely to have an out-sized effect in the modern financial system. This can be seen in Figure 3 which highlights the close relationship between movements in the size of the US money markets and changes in the size of the Federal Reserve balance sheet. The latest drop in the balance sheet spells out an ominous warning for US money market conditions.

  This Is A Different Crisis To 2007/08

  Therefore, we suggest that, unlike the 2007/08 Crisis which was more about a broken banking system involving the sudden collapse of leverage among over-extended banks and shadow banks, the current credit squeeze looks more like the 1997/98 Asian Crisis when Central Banks, led by the US Fed, tightened the supply of primary liquidity and cross-border flows rapidly retreated. This time around financial markets are probably even more interconnected and more global. Consequently, this could be an Asian Crisis-like sell-off, but one not only confined to Asia. This is shown in Figure 4, which depicts the two moving-parts that explain fluctuations in total credit – changes in the credit multiplier (black line) and growth in the monetary base (orange line).

  

  Although the supply of primary liquidity dipped, the 2007/08 Crisis was dominated by a forced de-leveraging as shown by the skidding credit multiplier– the ratio between total credit and the official monetary base. In fact, pace its absolute decline in 2006, the US Federal Reserve’s balance sheet subsequently expanded rapidly as the crisis unfolded. This is shown by the orange line in Figure 4. The explanation for this collapse is that in the run-up to 2007/08 shadow banks had been borrowing against new collateral, such as US dollar deposits, and re-hypothecating existing collateral (i.e. the so-called collateral multiplier) to create what might be dubbed a ‘shadow monetary base’. We can crudely estimate the size this notional shadow base by keeping the credit multiplier fixed at its previous average value and calculating the funding ‘gap’ required to justify rising total credit. This is shown in Figure 5. On the same chart we have added the cumulative flows of cross-border capital to Emerging Markets because these flows were likely dominated by dollar loans that were probably being sourced from the same off-shore wholesale markets. Not surprisingly, the two series co-move closely.

  The Collapse of World Central Bank Money

  In contrast, today’s monetary problem is more about the other component, namely tight primary liquidity. This has four dimensions:

  • US Federal Reserve tightening

  • Tightening by other major Central Bank (e.g. ECB and BoJ)

  • USD Area tightening (e.g. Emerging Market Central Banks)

  • Legislative onslaught against the Eurodollar/ off-shore wholesale markets

  

  Figure 6 examines the growth in Central Bank money, broken-down into three parts: the US Federal Reserve, Central Banks in the non-US Developed markets and Emerging Market Central Banks. The scale of the current liquidity squeeze goes beyond the US Fed raising the bar on its ‘reverse QE’ to US$50 billion per month and the ECB halting its QE from year-end. The chart shows how the US Fed has been tightening QE policy since 2015. The major non-US Central Banks started easing later and only began tightening earlier this year. Similarly, with Emerging Market Central Banks and as Figure 7 highlights, the EM cycle has been (as usual) largely dictated by underlying foreign exchange reserve movements. This, in turn, likely reflects an additional negative spill-over from US Fed tightening. Summarising the aggregate story, the chart shows that all three groups are now contributing to the sharpness of the overall liquidity slowdown.

  The fourth component of tightening is harder to pin-down because data is scarce. However, we suggest that the offshore wholesale markets are under fire from the US Federal Authorities, who seem keen to regain control of US dollar liquidity.

  The Eurodollar markets, which lie outside of US Fed or Treasury control, were a major factor behind the wayward shadow banking boom ahead of the 2007/08 Crisis. There have been three moves made to regain control: (1) the planned replacement of (uncollateralised) LIBOR with the new secured SOFR on-shore money market interest rate; (2) the 2018 tax amnesty that facilitated the repatriation of off-shore US corporate deposits, and (3) the recent removal of the tax allowance for interest payments on off-shore inter-bank loans. These official directives should substantially reduce the future attractions of using the Eurodollar markets. One way to show their impact is in Figure 8, which plots the amount of net funding that US-based banks receive from international banks. Since this represents dollar funding, the likely foreign sources are the Eurodollar markets. Figure 8 highlights the sizeable decline from the US$750 billion peak in 2015.

  

  Other Evidence of Tightness

  The scale of this tightness can be seen in two other statistics: (1) the ‘real’ term premia on US 10-year Treasuries, and (2) the flat slope of the G4 yield curve. The 10-year Treasury is the canonical ‘safe’ asset for World investors and a low term premia suggests a high demand for ‘safe’ assets. To remove the distorting effects of inflation expectations on term premia, we calculate an inflation-adjusted series or ‘real’ term premia. When the net demand for safe assets is ‘normal’, the real term premia should be around zero: greater demand for safety pushes it lower, and greater risk appetite among investors should push it higher. Consequently, these real term premia movements provide another way of judging whether monetary conditions are too loose or too tight.

  Figure 9 plots the ‘real’ term premia for 10-year Treasuries against Fed Funds. It shows that because of the effect of reverse QE, the ‘true’ Fed Funds rate is nearer to 5% than the prevailing 2.5% target: in other words, tight liquidity conditions are equivalent to the Fed undertaking around 20 rate hikes rather than the nine it has so far implemented this cycle.

  

  In Figure 10, we show the relationship between Global Liquidity and the term structure of World interest rates as depicted by the slope of the G4 government yield curve. Term premia again play a role here because tight liquidity conditions, by forcing investors into demanding more ‘safe’ assets, push up bond prices and simultaneously pull down their yields and term premia. Thus, the general ‘flatness’ of yield curves across the major economies again testifies to generally weak Global Liquidity conditions. It is simply not the case, as many suggest, that Central Bank QE lowers bond yields. Rather, because government bonds are ‘safe’ assets, ‘reverse QE’, in fact, causes lower yields, and QE raises bond yields. This follows because term premia widen as the extra liquidity persuades investors to take more risks, so shifting asset allocation from ‘safe’ bonds to risky equities.

  Conclusion

  We expect a major policy easing in 2019. However, only China’s PBoC (People’s Bank) among the majors is so far easing monetary policy. We anyway see China as leading this cycle. The US Fed is likely to follow given the scale of tightness in domestic and Global Liquidity and this must involve greater liquidity injections, rather than simply interest rate cuts. We have no view whether this takes the formal shape of an explicit ‘QE4’ policy or if it involves an unannounced increase in the size of the Fed’s balance sheet.

  Whichever, the immediate implications will be a yield curve steepening and ultimately a weaker US dollar. Financial shares and Emerging Markets may prove the main beneficiaries.

  

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