Oct 05

Today’s News 5th October 2017

  • Fukushima Operator Given Green Light To Restart Nuclear Reactors

    Via TheAntiMedia.org,

    The Japanese utility Tokyo Electric Power Company (TEPCO) has received approval to operate reactors for the first time since the 2011 Fukushima meltdown.

    On Wednesday, the Nuclear Regulation Authority said TEPCO’s two reactors in northern Japan met new and stricter safety standards.

    The authority unanimously approved the draft certificate for reactors number 6 and 7 at the Kashiwazaki-Kariwa plant, marking the first step in the process toward restarting them. Portions of the plant’s reactors were damaged in a 2007 earthquake.

    Much of the Japanese public is opposed to granting TEPCO permission to once again operate reactors, and rightfully so.

    TEPCO was blamed for safety lapses in the Fukushima nuclear plant disaster after a major earthquake in March of 2011, and the tsunami that followed damaged the power supply and cooling system of three reactors at the Fukushima Daiichi plant, resulting in an unprecedented nuclear accident.

    The area around the plant will be closed for the foreseeable future, with extremely high levels of radiation still being recorded in 2017. Radiation from the damaged plant has found its way into the ocean and surrounding areas, including groundwater. The long-term effects of the disaster are still unknown.

    TEPCO said in a statement that it will continue improving safety standards at its plants while focusing on Fukushima’s decommissioning in addition to compensation for the thousands of evacuees.

  • Catalan Independence: Why The Collective Hates It When People Walk Away

    Authored by Brandon Smith via Alt-Market.com,

    I have written many times in the past about the singular conflict at the core of most human crises and disasters, a conflict that sabotages human endeavor and retards critical thought. This conflict not only stems from social interaction, it also exists within the psyche of the average individual. It is an inherent contradiction of the human experience that at times can fuel great accomplishment, but usually leads to great tragedy. I am of course talking about the conflict between our inborn need for self determination versus our inborn desire for community and group effort — sovereignty versus collectivism.

    In my view, the source of the problem is that most people wrongly assume that "collectivism" is somehow the same as community. This is entirely false, and those who make this claim are poorly educated on what collectivism actually means. It is important to make a distinction here; the grouping of people is not necessarily or automatically collectivism unless that group seeks to subjugate the individuality of its participants. Collectivism cannot exist where individual freedom is valued. People can still group together voluntarily for mutual benefit and retain respect for the independence of members (i.e. community, rather than collectivism).

    This distinction matters because there is a contingent of political and financial elites that would like us to believe that there is no middle ground between the pursuits of society and the liberties of individuals. That is to say, we are supposed to assume that all our productive energies and our safety and security belong to society. Either that, or we are extremely selfish and self serving "individualists" that are incapable of "seeing the bigger picture." The mainstream discussion almost always revolves around these two extremes. We never hear the concept that society exists to serve individual freedom and innovation and that a community of individuals is the strongest possible environment for the security and future of humanity as a whole.

    Thus, the mainstream argument becomes a kabuki theater between the "ignorantly destructive" populists/nationalists/individualists versus the more "reasonable" and supposedly forward thinking socialists/globalists/multiculturalists. The truth is, sovereignty champions can be pro-individual liberty and also pro-community or pro-nation, as long as that community is voluntary.

    Collectivists will have none of this, however, and despite their intellectual and "rational" facade, they will often turn to brutality in order to disrupt any movement to decentralize power.

    The civil unrest in the Spanish region of Catalonia is an interesting example of the tyranny of the collectivist ideology. According to mainstream doctrine, Spain is supposed to be a "decentralized unitary state" made up of "autonomous communities," all with their own statutes and self governing bodies "loosely" regulated by the Spanish constitution of 1978. Catalonia, along with a couple other regions and cities in Spain, has long fought for true autonomy from the central government in Madrid. This separatist culture was crushed under the heel of Francisco Franco's dictatorial regime after the Spanish Civil War which started in 1936.

    After Franco's death in 1975, Spain began its "transition to democracy" (democracy being the tyranny of the majority rather than tyranny by military regime). Once again, Catalonia's push for independence returned.

    The reasons for a Catalan secession are multitude and are of course noble or nefarious depending on which side you talk to. From my research, it would seem the primary drive for Catalonia is economic. Spain is one of the more indebted member states in the European Union with a national debt near 100% of GDP. The "great recession" starting in 2008 struck Spain particularly hard, with around 21% of the general population officially in poverty and over 40% of all children officially in poverty. Unemployment according to government statistics hovers near 18%.

    Catalonia is the most prosperous region in Spain's economy, accounting for nearly 20% of total GDP. Catalans also assert that taxation in their region is a primary pillar for the Spanish government, which has not returned the favor with sufficient investment in infrastructure in the region. In essence, there is a "taxation without representation" feel to the conflict, and Americans in particular know very well how that kind of situation can end.

    On the other side of the debate, it is clear that if Catalonia leaves the Spanish system on negative terms, then Spain's already crumbling economy will be destroyed. The motivation for Spain to keep control of Catalonia is high just on the grounds of economic disaster.

    Beyond the economic issue, another interesting side note on Spain is its intense social justice (cultural Marxism) programs. While Europeans often suggest Spain as being a "conservative" government, in policy and action this is simply not true.  Spain is notorious for being one of the most militantly feminist governments in the EU aside from Sweden, and this is saying something given the socialist nature of the EU. Gender laws and divorce laws in the country offer some of the most draconian double standards against men I have ever witnessed. Perhaps this will give you a kind of litmus test for the sort of culture we are dealing with here, and maybe it accounts for some discontent in certain portions of the Spanish population.

    Catalonia itself is often cited as being "more liberal" in its political orientation in comparison to the rest of Spain. Of course, the term "liberal" can mean many different things in Europe depending on the nation, and American definitions do not necessarily apply. Just as Europeans tend to have no understanding whatsoever of what "conservatism" means in the U.S., Americans have a hard time understanding all the intricacies of the various levels of "liberalism" in Europe.

    That said, what side of the political spectrum Catalonia sits on is irrelevant to greater discussion.

    What I actually enjoy pointing out here is the fact that whether you look at the Franco era of nationalist totalitarianism, or the "semi" socialist and hyper-cultural Marxist era of today, the Spanish government STILL acts the same in its despotism against Catalan separation or independence.  It is not as if the socialists set out to right the wrongs of the Franco regime once it fell. Not at all. Instead, they merely perpetuated the same attitude of centralization while wearing a smiling face. Once again, we see that there is very little difference between fascism and communism/socialism when we get down to core behaviors and policies.

    Collectivists, regardless of what other labels they use to identify themselves, have certain rules that they consistently follow in order to maintain power. One of those rules is that the collective is indivisible. They might pontificate endlessly about their superior democratic ideals, but when some people vote to leave en masse, either in polling booths or with their feet, the mask of benevolence always comes off and the true monster behind collectivism is revealed.

    As we have seen in Catalonia, this monstrous behavior is undeniable. The Spanish government has set out to prevent not just separation, it has sought to prevent the very act of voting on separation using police and military force. In essence, martial law was been declared in Catalonia in order to stop the people from enacting the very democratic ideals the Spanish government claims it enshrines.

     

    Despite the vicious measures of interference, reports suggest that the vote was still successful, with 90% of the citizenry in support of independence. What happens now is unclear, but I can tell you two things are relatively certain.

    First, a 90% vote in favor will result in a militarized response from the Spanish government. If the vote was less overwhelming, the government might attempt to pit one side of the population against the other, causing internal strife and disrupting secession. This strategy is unrealistic given the mass movement for independence. So, the only other option for the government is full blown martial law.

    Second, such a crackdown will result in a violent counter-response. This happened in the 1970s in Catalonia and I see no reason why it would not happen again. When you have almost an entire population in agreement on separation and you use force to stop them from attaining it, they will become violent. Civil war is inevitable if martial law is declared.

    It is vital that we examine the root ideological catalyst in this scenario.

    The most rational solution would be for the Spanish government to accept the Catalan vote (if they believe in "democracy" as they claim, then they have to accept it, otherwise they appear extraordinarily hypocritical). This could result in a more harmonious economic relationship and less drastic damage to Spain's fiscal structure. However, this is not going to happen. Instead, Spain is going to use the age old collectivist tactics of intimidation and carnage to oppress the Catalan's and subsume their economic production (as socialist governments always do).  When civil war erupts, and it will, production in Catalonia will grind to a standstill and Spain STILL loses 20% of its GDP.

    You see, this is a lose/lose scenario for Spain, all because the collectivist doctrine demands a jackbooted reaction to any movement for decentralization. Collectivist systems are parasitic in nature; they see the citizenry as food, as units of production for the state that cannot be allowed to leave, for the "greater good of the greater number." Collectivists rationalize their behavior as essential to the well being of the society at large, but this is dishonest, for their behavior more often harms society by crushing individual innovation and instigating wars that might not have ever happened in the first place.

    There is at the same time the matter of sovereignty movements across Europe. The only people who benefit from stopping these movements are globalists/collectivists. They may also benefit by sabotaging these movements after the fact, making an example of them and holding them up to the rest of the world as symbols of the "failures of populism."

    It is important to point out here that Catalonia is not necessarily seeking independence from the EU, only Spain.  Some might argue that this makes the Catalan vote irrelevant.  I disagree.  If Catalonia wants to be separate from Spain but still retain ties to the EU, then I suppose that is their choice, which is really the issue here – choice. Everyone should be allowed to make good and bad decisions and hopefully learn from them both. If Catalan's choice is meaningless because they will still be part of the EU, then the Spanish government should pull its national guard out and leave them to their own devices.

    Some people might also argue that if secession happened in the U.S., the response would be the same. I would argue that just because it might happen the same way, this does not mean it is right. If leftist Californians, for example, followed through with their latest threats to secede from the U.S. and a massive shift of leftists and cultural Marxists move to the state, frankly I would be ecstatic. Let these people separate and congregate. Let them fail or succeed on the merits of their own ideas and ethics. If they are allowed to organize without interference and they fail, then this is simply more proof that their ideology was unsound and impractical. California's large percentage of U.S. GDP would simply transfer to other states if in fact the productive people there are not leftists and they migrate away, leaving the separatists to wallow in their naive ideology.

    If Catalonia separates without interference and succeeds economically and socially, then perhaps it is not for Spain to try to subvert or destroy the region, but to emulate their model and learn from them. If people wish to walk away from a community, they should be allowed to do so. This is very simple. Self determination is not dependent on political expediency or mutual benefit. It is an inherent human right.  Communities and borders should be based on principles that the population stands by and every system should remain voluntary. If they do not stand by said principles and they work to thwart voluntarism, then those communities are worthless and should not exist at all.

    When a collective acts to stop people from leaving, all they are doing is exposing the fact that their reasons for existing are inadequate and unconvincing. This goes for Spain, it goes for the EU and it goes for the rest of the world. Globalists and collectivists should take note  decentralization is the true model for the future.

    In the long run, forcing people into participation in the system is a losing battle.

  • A Failing Empire, Part 2: De-Dollarisation – China and Russia's Plan From Petroyuan To Gold

    Authored by Federico Pieraccini via The Strategic Culture Foundation,

    As seen in my previous article, US military power is on the decline, and the effects are palpable. In a world full of conflicts brought on by Washington, the economic and financial shifts that are occurring are for many countries a long-awaited and welcome development.

    If we were to identify what uniquely fuels American imperialism and its aspirations for global hegemony, the role of the US dollar would figure prominently.

    An exploration of the depth of the dollar’s effects on the world economy is therefore necessary in order to understand the consequential geopolitical developments that have occurred over the last few decades.

    The reason the dollar plays such an important role in the world economy is due to the following three major factors: the petrodollar; the dollar as world reserve currency; and Nixon's decision in 1971 to no longer make the dollar convertible into gold. As is easy to guess, the petrodollar strongly influenced the composition of the SDR basket, making the dollar the world reserve currency, spelling grave implications for the global economy due to Nixon's decision to eliminate the dollar’s convertibility into gold. Most of the problems for the rest of the world began from a combination of these three factors.

    Dollar-Petrodollar-Gold

    The largest geo-economic change in the last fifty years was arguably implemented in 1973 with the agreement between OPEC, Saudi Arabia and the United States to sell oil exclusively in dollars.

    Specifically, Nixon arranged with Saudi King Faisal for Saudis to only accept dollars as a payment for oil and related investments, recycling billions of excess dollars into US treasury bills and other dollar-based financial resources. In exchange, Saudi Arabia and other OPEC countries came under American military protection. It reminds one of a mafia-style arrangement: the Saudis are obliged to conduct business in US dollars according to terms and conditions set by the US with little argument, and in exchange they receive generous protection.

    The second factor, perhaps even more consequential for the global economy, is the dollar becoming the world reserve currency and maintaining a predominant role in the basket of international foreign-exchange reserves of the IMF ever since 1981. The role of the dollar, linked obviously to the petrodollar trade, has almost always maintained a share of more than 40% of the Special Drawing Right (SDR) basket, while the euro has maintained a stable share of 29-37% since 2001. In order to understand the economic change in progress, it is sufficient to observe that the yuan is now finally included in the SDR, with an initial 10% share that is immediately higher than the yen (8.3%) and sterling (8.09%) but significantly less than the dollar (41%) and euro (31%). Slowly but significantly Yuan currency is becoming more and more used in global trade.

    The reason why the United States has been able to fuel this global demand for dollars is linked to the need for other countries to own dollars in order to be able to buy oil and other goods. For example, if a Bolivian company exports bananas to Norway, the payment method requires the use of dollars. Norway must therefore own US currency to pay and receive the goods purchased. Similarly, the dollars Bolivia receives will be used to buy other necessities like oil from Venezuela. It may seem unbelievable, but practically all countries until a few years ago used US dollars to trade amongst each other, even countries that were anti-American and against US imperialist policies.

    This continued use of the dollar has had some devastating effects on the globe. First of all, the intense use of the American currency, coupled with Nixon’s decisions, created an economic standard based on the dollar that soon replaced precious metals like gold, which had been the standard for the global economy for years. This has led to major instability and to economic systems that have in the proceeding years created disastrous financial policies, as seen in 2000 and 2008, for example. The main source of economic reliability transferred from gold to dollars, specifically to US treasury bills. This major shift allowed the Federal Reserve to print dollars practically without limit (as seen in recent years with interests rates for borrowing money from the FED at around 0%), well aware that the demand for dollars would never cease, this also keeping alive huge sectors of private and public enterprises (such as the fracking industry). This set a course for a global economic system based on financial instruments like derivatives and other securities instead of real, tangible goods like gold. In doing this for its own benefit, the US has created the conditions for a new financial bubble that could even bring down the entire world economy when it bursts.

    The United States found itself in the enviable position of being able to print pieces of paper (simply IOU’s) without any gold backing and then exchange them for real goods. This economic arrangement has allowed Washington to achieve an unparalleled strategic advantage over its geopolitical opponents (initially the USSR, now Russia and China), namely, a practically unlimited dollar-spending capacity even as it accumulates an astronomical public debt (about 21 trillion dollars). The destabilizing factor for the global economy has been Washington's ability to accumulate enormous amounts of public debt without having to worry about the consequences or even of any possible mistrust international markets may have for the dollar. Countries simply needed dollars for trade and bought US treasures to diversify their financial assets.

    The continued use of the dollar as a means of payment for almost everything, coupled with the nearly infinite capacity of the of FED to print money and the Treasury to issue bonds, has led the dollar to become the primary safe refuge for organizations, countries and individuals, legitimizing this perverse financial system that has affected global peace for decades.

    Dollars and War: The End?

    The problems for the United States began in the late 1990s, at a time of expansion for the US empire following the demise of the Soviet Union. The stated geopolitical goal was the achievement of global hegemony. With unlimited spending capacity and an ideology based on American exceptionalism, this attempt seemed to be within reach for the policymakers at the Pentagon and Wall Street. A key element for achieving global hegemony consisted of stopping China, Russia and Iran from creating a Eurasian area of integration. For many years, and for various reasons, these three countries continued to conduct large-scale trade in US dollars, bowing to the economic dictates of a fraudulent financial system created for the benefit of the United States. China needed to continue in its role of becoming the world's factory, always having accepted dollar payments and buying hundreds of billions of US treasury bills. With Putin, Russia began almost immediately to de-dollarize, repaying foreign debts in dollars, trying to offload this economic pressure. Russia is today one of the countries in the world with the least amount of public and private debt denominated in dollars, and the recent prohibition on the use of US dollars in Russian seaports is the latest example. For Iran, the problem has always been represented by sanctions, creating great incentives to bypass the dollar and find alternative means of payment.

    The decisive factor that changed the perception of countries like China and Russia was the 2008 financial crisis, as well as growing US aggression ever since the events in Yugoslavia in 1999. The Iraq war, along with other factors, prevented Saddam from starting an oil trade in euro, which threatened the dollar's financial hegemony in the Middle East. War and the America’s continued presence in Afghanistan stressed Washington’s intentions to continue encircling China, Russia and Iran in order to prevent any Eurasian integration. Naturally, the more the dollar was used in the world, the more Washington had the power to spend on the military. For the US, paying a bill of 6 trillion dollars (this is the cost of the wars in Iraq and Afghanistan) has been effortless, and this constitutes an unparalleled advantage over countries like China and Russia whose military spending in comparison is a fifth and a tenth respectively.

    The repeated failed attempts to conquer, subvert and control countries like Afghanistan, Georgia, Iraq, Libya, Syria, Donbass, North Korea, Egypt, Tunisia, Yemen and Venezuela, have had significant effects on the perception of US military power. In military terms, Washington faced numerous tactical and strategic defeats, with the Crimean peninsula returning to Russia without a shot fired and with the West unable to react. In Donbass, the resistance inflicted huge losses on the NATO-supported Ukrainian army. In North Africa, Egypt is now under the control of the army, following an attempt to turn the country into a state under the control of the Muslim Brotherhood. Libya, after being destroyed, is now divided into three entities, and like Egypt seems to be looking with favorable regard towards Moscow and Beijing. In the Middle East, Syria, Turkey, Iran and Iraq are increasingly cooperating in stabilizing regional conflicts, where needed they are backed by Russian military power and Chinese economic strength. And of course the DPRK continues to ignore US military threats and has fully developed its conventional and nuclear deterrent, effectively making those US threats null and void.

    Color revolutions, hybrid warfare, economic terrorism, and proxy attempts to destabilize these countries have had devastating effects on Washington's military credibility and effectiveness. The United States finds itself being considered by many countries to be a massive war apparatus that struggles to get what it wants, struggles to achieve coherent common goals, and even lacks the capability to control countries like Iraq and Afghanistan in spite of its overwhelming military superiority.

    No One Fears You!

    Until a few decades ago, any idea of straying away from the petrodollar was seen as a direct threat to American global hegemony, requiring of a military response. In 2017, given the decline in US credibility as a result of triggering wars against smaller countries (leaving aside countries like Russia, China, and Iran that have military capabilities the likes of which the US has not faced for more than seventy years), a general recession from the dollar-based system is taking place in many countries.

    In recent years, it has become clear to many nations opposing Washington that the only way to adequately contain the fallout from the collapsing US empire is to progressively abandon the dollar. This serves to limit Washington’s capacity for military spending by creating the necessary alternative tools in the financial and economic realms that will eliminate Washington's dominance. This is essential in the Russo-Sino-Iranian strategy to unite Eurasia and thereby render the US irrelevant.

    De-dollarization for Beijing, Moscow and Tehran has become a strategic priority. Eliminating the unlimited spending capacity of the Fed and the American economy means limiting US imperialist expansion and diminishing global destabilization. Without the usual US military power to strengthen and impose the use of US dollars, China, Russia and Iran have paved the way for important shifts in the global order.

    The US shot itself in the foot by accelerating this process through their removal of Iran from the SWIFT system (paving the way for the Chinese alternative, known as CIPS) and imposing sanctions on countries like Russia, Iran and Venezuela. This also accelerated China and Russia’s mining and acquisition of physical gold, which is in direct contrast to the situation in the US, with rumors of the FED no longer possessing any more gold. It is no secret that Beijing and Moscow are aiming for a gold-backed currency if and when the dollar should collapse. This has pushed unyielding countries to start operating in a non-dollar environment and through alternative financial systems.

    A perfect example of how this is being achieved can be seen with Saudi Arabia, which has represented the crux of the petrodollar.

    De-dollarize

    Beijing has started putting strong pressure on Riyadh to start accepting yuan payments for oil instead of dollars, as are other countries such as the Russian Federation. For Riyadh, this is an almost existential issue. Riyadh is in a delicate situation, dedicated as it is to keeping the US dollar tied to oil, even though its main ally, the US, has pursued in the Middle East a contradictory strategy, as seen with the JCPOA agreement. Iran, the main regional enemy of Saudi Arabia, was able to have sanctions lifted (especially from Europeans countries) thanks to the JCPOA. In addition, Iran was able to pursue a historic victory with its allies in Syria, gaining a preeminent role in the region and aspiring to become a regional powerhouse. Riyadh is obliged to obey the US, an ally that does not care about its fate in the region (Iran is increasingly influential in Iraq, Syria and Lebanon) and is even competing in the oil market. To make matters worse for Washington, China is Riyadh’s largest customer; and considering the agreements with Nigeria and Russia, Beijing can safely stop buying oil from Saudi Arabia should Riyadh continue to insist on receiving payment only in dollars. This would badly hurt the petrodollar, a perverse system that damages China and Russia most of all.

    For China, Iran and Russia, as well as other countries, de-dollarization has become a pressing issue.

    The number of countries that are beginning to see the benefits of a decentralized system, as opposed to the US dollar system, is increasing.

     Iran and India, but also Iran and Russia, have often traded hydrocarbons in exchange for primary goods, thereby bypassing American sanctions.

     

    Likewise, China's economic power has allowed it to open a 10-billion-euro line of credit to Iran to circumvent recent sanctions.

     

    Even the DPRK seems to use cryptocurrencies like bitcoin to buy oil from China and bypass US sanctions. 

     

    Venezuela (with the largest oil reserves in the world) has just started a historic move to completely renounce selling oil in dollars, and has announced that it will start receiving money in a basket of currencies without US dollars. (This is not to mention the biggest change to have occurred in the last 40 years).

     

    Beijing will buy gas and oil from Russia by paying in yuan, with Moscow being able to convert yuan into gold immediately thanks to the Shanghai International Energy Exchange.

    This gas-yuan-gold mechanism signals a revolutionary economic change through the progressive abandonment of the dollar in trade.

    In the next and last article, we will concentrate on how successful Russia, Iran and China have been in forging a multipolar world order with the goal of peacefully containing the fallout from the collapsing American empire, and how this alternative world order is opening up a new geopolitical landscape for America’s allies and other countries.

  • Stanford Says Soaring Public Pension Costs Devastating Budgets For Education And Social Services

    A new study from Joe Nation of Stanford’s Institute for Economic Policy Research entitled “Pension Math: Public Pension Spending and Service Crowd Out in California, 2003-2030,” says that the devastating consequences of the ill-advised, Cadillac pensions doled out to America’s public employees over the past several decades are only getting started. 

    Looking back at taxpayer contributions to public pensions in California, Nation found that they’ve increased by 5 times since 2002-2003 and are very likely to double again by 2029-2030.  Not surprisingly, that kind of hyper-inflationary growth has massively outstripped increases in tax revenue, even in the great progressive state of California (shocking, we know), meaning that pension contributions now account for 11.4% of California’s operating budget, up 3x from the 3.9% it consumed in 2002-2003.

    For more than a decade, public pension costs have been rising sharply in California. There is contentious debate about what is driving these cost increases—significant retroactive benefit increases, unrealistic assumptions about investment earnings, operational practices that mask or delay recognition of true system costs, poor governance, 1 to name the most commonly cited. But there is agreement on one fact: public pension costs are making it harder to provide services that have traditionally been considered part of government’s core mission.

     

    • Employer pension contributions (i.e., pension contributions plus debt service on any Pension Obligation Bonds) from 2002-03 to 2017-18 expanded on average 400%, i.e., contributions in nominal dollars are now five times greater.
    • Employer contributions are projected to rise an additional 76% on average from 2017-18 to 2029-30 in the baseline projection and 117%, i.e., more than double, in the alternative projection.
    • Employer pension contributions from 2002-03 to 2017-18 have increased at a much faster rate than operating expenditures. As noted, pension contributions increased an average of 400%; operating expenditures grew 46%. As a result, pension contributions now consume on average 11.4% of all operating expenditures, more than three times their 3.9% share in 2002-03.
    • The pension share of operating expenditures is projected to increase further by 2029-30: to 14.0% under the baseline projection—that is, even if all system assumptions, including assumed investment rates of return, are met—or to 17.5% under the alternative projection.
    • The average employer funding amount expressed as a percent of active member payroll, i.e., the employer contribution rate,5 has increased from 17.7% in 2008-09 to 30.8% in 2017-18. By 2029-30, it reaches 35.2% under the baseline projection and 44.2% under the alternative projection.
    • On a market basis, the average funded ratio fell from 58.5% in 2008 to 43.0% in 2015. By 2029 it improves to 48.2% in the baseline projection, but falls to 39.0% in the alternative projection. The unfunded liability per jurisdiction household on an actuarial basis also rose from an average $1,682 in 2008 to $5,071 in 2015; the unfunded liability per household on a market basis is $21,491, up from $9,127 in 2008.

    Here’s a graphical depiction of California taxpayers getting steamrolled…

    …or as a percent of total operating expenditure, if you prefer…

    What’s getting cut from California’s budget to make room for these exorbitant pension payouts?  Well, basically everything else…

    As discussed above, the pension expenditure share of the state’s operating budget increased from 2.1% in 2002-03 to 4.9% in 2008-09; it is estimated at 7.1% in 2017-18. This increasing share, despite an expanding budget, has shifted $6.0 billion in 2017-18 from other state expenditures to pensions.

     

    Changes in state expenditures by agency and department suggest that this reduction has come primarily from social services and higher education. For example, the expenditure share for the Department of Social Services (DSS) fell from 10.7% in 2002-03 to 6.0% in 2014-15 before climbing to 7.0% in 2017-18. The higher education share of operating expenditures fell from 11.3% in 2002-03 to 9.8% in 2014-15, although it increased to 10.5% in 2017-18.

     

    In addition, expenditure shares fell in several smaller departments from 2002-03 through 2014-15: the Department of Justice (0.4% to 0.2%), Department of Parks and Recreation (0.2% to 0.1%), and Department of Water Resources (0.2% to 0.1%).

    So good luck with that whole education thing kiddos because you’re grandparents are about to crush your future.

    Here is the full study:

  • Paul Craig Roberts Asks "Whose Bright Idea Was RussiaGate?"

    Authored by Paul Craig Roberts,

    The answer to the question in the title of this article is that Russiagate was created by CIA director John Brennan.

    The CIA started what is called Russiagate in order to prevent Trump from being able to normalize relations with Russia.

    The CIA and the military/security complex need an enemy in order to justify their huge budgets and unaccountable power. Russia has been assigned that role.

    The Democrats joined in as a way of attacking Trump. They hoped to have him tarnished as cooperating with Russia to steal the presidential election from Hillary and to have him impeached. I don’t think the Democrats have considered the consequence of further worsening the relations between the US and Russia.

    Public Russia-bashing pre-dates Trump. It has been going on privately in neoconservative circles for years, but appeared publicly during the Obama regime when Russia blocked Washington’s plans to invade Syria and to bomb Iran.

    Russia bashing became more intense when Washington’s coup in Ukraine failed to deliver Crimea. Washington had intended for the new Ukrainian regime to evict the Russians from their naval base on the Black Sea. This goal was frustrated when Crimea voted to rejoin Russia.

    The neoconservative ideology of US world hegemony requires the principal goal of US foreign policy to be to prevent the rise of other countries that can serve as a restraint on US unilateralism. This is the main basis for the hostility of US foreign policy toward Russia, and of course there also is the material interests of the military/security complex.

    Russia bashing is much larger than merely Russiagate.

    The danger lies in Washington convincing Russia that Washington is planning a surprise attack on Russia. With US and NATO bases on Russia’s borders, efforts to arm Ukraine and to include Ukraine and Georgia in NATO provide more evidence that Washington is surrounding Russia for attack. There is nothing more reckless and irresponsible than convincing a nuclear power that you are going to attack.

    Washington is fully aware that there was no Russian interference in the presidential election or in the state elections.

    The military/security complex, the neoconservatives, and the Democratic Party are merely using the accusations to serve their own agendas.

    These selfish agendas are a dire threat to life on earth.

  • Maduro Visits Putin, Proposes Global Oil Trade In Rubles, Yuan

    Three weeks after the US imposed financial sanctions on Venezuela in an effort to cripple its economy and choke the Maduro regime, which in turn prompted Caracas to announce it would no longer receive or send payments in dollars, and that those who wished to trade Venezuelan crude would have to do so in Chinese Yuan, today during an energy summit held in Moscow, Venezuela’s president Nicolas Maduro proposed to expand his own personal blockade of the US, by proposing that all oil producing countries discuss creating a currency basket for trading crude and refined products. One which is no longer reliant on the (petro)dollar. 

    “Developing a new mechanism of controlling the oil market is necessary,” Maduro said on Wednesday at the Russian Energy Forum, being held in Moscow this week.

    Quoted by RT, Maduro also blamed trade in crude oil paper futures as having an adverse impact on the oil market, which has undermined attempts by OPEC to stabilize prices. To counteract such “speculation”, Maduro proposed an alternative currency basket, one which is based not on the world’s reserve currency but includes the yuan, ruble, and other currencies, and which will mitigate the alleged adverse impact of futures trading.

     

     

    Maduro’s proposal is merely the latest not so veiled hint at dedolarizing the global financial system by bypassing the petrodollar entirely, and rearranging a new currency basket determined by the world’s biggest oil producer, and largest oil importer.

    Of course, Maduro is merely piggybacking on what China may already have in the works: recall that a month ago, the Nikkei Asian Review reported that China is preparing to launch a crude oil futures contract denominated in Chinese yuan and convertible into gold, potentially creating the most important Asian oil benchmark and allowing oil exporters to bypass U.S.-dollar denominated benchmarks by trading in yuan.

    Maduro also insisted that Venezuela is dealing with its debt to Russia, currently in the billions, and that Rosneft’s deal with Venezuelan state oil producer PDVSA is “subject to negotiation.” “We fulfill all the obligations to Russia. If we get more favorable terms for restructuring the debt, this will be the result of a deal between the two governments,” said Maduro. It was unclear how Putin felt toward said proposal. 

    Maduro also complained that US sanctions make it difficult to negotiate the debt issue with American debt holders (something the US is well aware of). In addition to switching to a Yuan-based basket…

    … Caracas has been framing a plan to deliver its crude to alternative markets should the White House impose sanctions on trading the country’s oil, Maduro said in response to a question on the possibility of PDVSA’s default. “Venezuela has plans A, B, C, and others. There are other international companies interested in buying oil and refined products. We will create the best terms for them,” he said.

    It remains to be seen if a last minute agreement by Russia and China to bailout Venezuela by revoking some or all of the petrodollar’s reserve currency privileges, is in store. Needless to say, such a development would be the biggest shock to the global monetary system since Nixon killed the gold standard.

  • China's Shadow-Lending Ecosystem Could Be As Large As $40 Trillion, PBOC Guesses

    Authored by Deep Throat at Deep Throat Blog

    Today, I'd like to take some time to revisit a couple of related topics that we first started discussing a few years ago. I am, of course, referring to the burgeoning increases in China's Debt levels, Shadow Bank Assets (loans) and M2, along with a high-level analysis of the most recent PBOC Financial Stability Report and FSB Global Shadow Bank Monitoring Report. (No!….please don't click this page closed….I promise this will eventually get interesting…)

    As a starting point, let's begin by reviewing the February, 2015 McKinsey report  Debt and (not much) Deleveraging .  I first referenced the report in this blog in March of 2015. The report focused on the world's, and particularly China's, rapidly building debt/leverage phenomenon (2014 Year End Data).  I encourage you to re-read the entire report, but for those of you who are pressed for time, I'll give you the executive summary bullet-points right here:

    • Debt continues to grow  
    • Reducing government debt will require a wider range of solutions
    • Shadow banking has retreated, but non?bank credit remains important
    • Households borrow more
    • China’s debt is rising rapidly

    I'm hoping that the McKinsey authors will consider updating the report, bringing the figures current, as I believe these observations, figures and analysis are even more pertinent today than they were back in 2015.

    China's Debt

    So now, using McKinsey as a reference point, let's take a look at where we are today, via the FRED (St. Louis FED)data below.

    The FRED (Federal Reserve Economic Data – Citations below) Chart below represents US Core Debt (as defined and provided by the BIS – Bureau of International Settlements) compared to China Core Debt, as a percentage of GDP.  The third (bold Red) line represents China's debt levels adjusted for a "what-if" constant I'll explain shortly.

    Lets dig into the numbers.  We see from 2006 thru 2016 US Core Debt increased modestly from roughly 220% of GDP to 250% of GDP.  However, China's Core Debt, relative to GDP nearly doubled during the same period, to roughly 260% of GDP.


    Before we discus the above, let's talk about what GDP is (and isn't).  GDP is:

    C+I+G+(NX) or:

    (Consumption + Investment + Government Spending + (Exports-Imports)).  

    First, it's important to understand that increased GDP does not necessarily increase wealth or improve quality of life.  A GDP calculation is measuring-stick for economic activity….nothing more.  A GDP figure makes no representations as to the quality, efficiency or economic utility of the activity producing the GDP.  i.e.) When my Dad was in the Army (WWII….the "big one") he talked about "practicing" digging fox holes.  He and thousands of other soldiers would be told/ordered to dig holes and fill them in…..for no apparent reason other than to keep them busy.  This activity, since he was being paid to do it, would increase GDP, even though it accomplished nothing more than wear them out and keep them out of the English pubs.

    That said, here are a few examples of things that would significantly increase GDP.

    • Building a Superhighway, Bridge or Bullet Train connecting two uninhabited deserts or islands. (I+G)
    • Building a Ghost City. (I+G)
    • A military build up. (I+G)
    • Producing millions of tons of steel and cement held in a developer's CIP inventory. (I+G+C)
    • Creating even more manufacturing capacity (factories and mines) for steel, cement, etc.(I)
    • Building infrastructure.  i.e.) Public works, water, power plants, tunnels, wells, utilities etc. (I+G)
    • Manufacturing phones, computers, clothing and consumer goods for export. (C+NX)
    • Buying tons of eCommerce stuff. (C)
    • Tearing down an abandoned building/high rise. (C+G)

    Here are a few more you might not think about…..again, these are events/activities that increase GDP but don't necessarily increase wealth or quality of life.

    • A hurricane….all of the destruction has to be financed and rebuilt. (C+I+G)
    • Public Welfare and Housing Assistance Checks (C+G)
    • Single Payer Health Care (C+G)
    • Paying 10x as much for a medical procedure as you might pay in other countries (C)

    So you get the point…..although it looks good on paper, incurring debt to build/finance things that aren't economically viable, produce little (or no) economic utility or fail to generate earnings and cash flow doesn't work too well over the long haul.  At some point, the lenders won't be paid back…..or, as should happen in a free-floating world, if they are eventually paid back, they'll be paid back with a currency having a fraction of the purchasing power of the currency they initially loaned out to finance the activity.

    China's "Productive GDP"

    Now, let's get back to the bold Red line on the chart above and take some time to coin a phrase. We'll call it "Productive GDP" or PGDP.  As any economist will tell you, desperate times call for desperate measures…..and new terminology!  Let's say that China's "Productive" GDP, for lack of a better term, is defined as GDP excluding all of the over-building, non-productive excess capacity and accounting games created simply to hit the arbitrary 7%, etched in stone, silly, CCP mandated GDP growth target.

    So let's further say that rather than the published, rock solid, 7%, annual NBS GDP growth rate, the "Productive", un-fudged, non-incentivized, PGDP growth rate is only 4.6%, (2/3rds of the published/reported rate), but still a remarkable number for an economy the size of China's.  Extrapolating the bold Red Line above, if GDP is "overstated" by a third, we illustrate/conclude that the ratio of Core Debt to "Productive" PGDP explodes to nearly 400%, much higher than the current G20 average of 240%.

    Author's Note:  You math aficionados out there might be observing that the bold red line doesn't consider the compounding impact (i.e. reducing the GDP growth rate in a prior year impacts the current year starting point).  So the method illustrated (multiplying GDP by a constant) actually overstates GDP.  That's absolutely correct.  However, since I have no actual data to base my adjustment on, it's a guess, an arbitrary adjustment, so the compounding doesn't matter.  Besides using a constant was just simply easier than trying to program the FRED model to compound the change.  In any case, I'm just illustrating a point.

    So far so good?

    Shadow Banking

    Now lets revisit the 2015 McKinsey Report (2014 data) bullet points above.  Specifically:

    • Shadow banking has retreated, but non?bank credit remains important

    Unfortunately, per the People's Bank of China (PBOC), Shadow Bank lending has reversed course abruptly and skyrocketed since the 2015 McKinsey report.  Nobody really knows how big China's Shadow Bank ecosystem is, but the PBOC recently offered a rather shocking guess in their 2017 Financial Stability Report (pg.48).  China's Off-Balance-Sheet, un-regulated, "Shadow" loans have grown to nearly US $37 Trillion (RMB 252.3 Trillion) and have surpassed China's US$34 Trillion, "On-Balance Sheet" bank assets as of the close of 2016.  They also restated the 2015 numbers, increasing the 2015 figures to US$ 28 Trillion (RMB 189 Trillion), roughly doubling the 2015 figure.

    Keep in mind, the PBOC estimating Non-Bank Shadow loans is a bit like the local Sheriff estimating "unreported financial crime".  He doesn't have authority over the mechanics of the activity, lacks enforcement resources and therefore can't do much about preventing the crime(s).  Even if he had authority and resource, he'd have a hard time zeroing in on the metric….criminals generally don't respond to surveys or self-report their schemes.  Moreover, the Sheriff would have an incentive to under-estimate the problem and hope everything works out, since, at some point, someone is going to be held accountable.  As history shows, and Chinese Bankers are well aware of this, financial scoundrels are normally exiled to horrific disgrace on a private tropical island with access to boatloads of Cayman Islands money…..so it goes.

    Again, based solely on the usual, limited transparency inherent in PBOC reporting (good things are trumpeted and bad things are swept under the rug), a disclosure like this would indicate that the problem is potentially much larger than they are letting on.  In the 2017 Financial Stability Report (an oxymoron if I've ever heard one) the PBOC restates the Shadow Bank Assets for 2014 and 2015 (as shown by the dotted line in the chart below). To my knowledge, no other major economy has ever experienced an acceleration anywhere near these levels of Non-Bank, Shadow debt relative to GDP, much less restated it in a gigantic "ooppps….our bad" buried in a couple of paragraphs in the bowels of a report.  In China….they do things big.  The bigger the better.  The two Charts below, prepared by Capital Economics illustrate that we've apparently entered uncharted waters.

    Although the fiercely independent citizens, politicians and bankers of Hong Kong and Singapore might disagree, we can generalize that the leverage in those economies (tall bars on the left of the chart) is inextricably linked to the Chinese financial system. If there were ever a potential "ground-zero" for a default-induced financial contagion Shang-Hong-apore would be it.

    Moreover, when we examine the PBOC/CE Charts above, it wouldn't be much of a reach to conclude that Shadow/Non-Bank Credit has become an absolutely essential tool for keeping all of the financial balls in the air. As reported by Ambrose Evans-Pritchard in a piece for the Telegraph:

    Jahangir Aziz and Haibin Zhu from JP Morgan said the debts of the state-owned entities (SOEs) have alone reached 90pc of GDP or $13.3 trillion.  

    Nearly 60pc of new credit this year is being used to repay old loans. It takes four times as much new credit to generate a given amount of extra of GDP as it did a decade ago. “China’s rising indebtedness has come to represent all that is disconcerting about their economy,” they said in a report entitled “The Sum of All Fears”.

    Hmmmm….."The Sum of All Fears"….catchy little title for a financial/policy report!  Tom Clancy would be proud….

    Viewed another way, when we add the current, 2016 BIS figure, roughly US$28 Trillion of China's Core Debt plus the estimated US$37 Trillion +/- of Shadow debt (RMB 253.5 Trillion), we have a Debt/PGDP ratio approaching 900% of "Productive" PGDP.  The Comparable, relatively constant, US ratio (250% +/-) is shown in blue below.

    "Total Social Financing" (TSF)

    Total Social Financing (TSF), a term of art the Chinese government introduced a few years ago to track the leverage in their economy, grew to RMB 155.99 trillion RMB (US$ 23 Trillion),  up 12.8 percent from 2015, per the PBOC Report. (Pg. 28)  The intent of this statistic is to track the "total financing" required by households and businesses.  The process goes awry when we try to decipher exactly what's included in this metric and how the data is collected.  There are numerous articles written on this topic and I've listed a few of them in the citations below.  Suffice it to say that the consensus is, that a significant amount of Non-Bank Shadow financing is excluded from TSF.  Interestingly, this metric, intended to show changes in the composition of how economic growth is financed, is actually misleading, since significant Shadow risk is omitted from the calculations.

    Some Verifiable Numbers…..Bonds

    As difficult as it is to measure China's fragmented Shadow Financial System, there are a few reported metrics which are presumably more reliable than others.  China's bond markets are one such example.  In the last two years (2015 & 2016) the value of new "Major" Chinese Bond issues (below) has actually exceeded the total amount outstanding of America's Corporate Bond market (about US$ 8.6 Trillion).  Why is all of this new debt necessary?  Again, most (60%?) of the new issues are used to roll over other bonds/debts/financing coming due.

    Continuing the theme, Non-Performing Loans (NPL's) have somehow remained relatively constant, hovering just under 2% since 2011 as shown below.  (pg. 44 of the PBOC Report)

    How can this be?  Perhaps it's just little old skeptical me, but usually, when borrowing skyrockets like this, underwriting is lax and bad loans go bad much quicker.  The universally accepted game bankers play to keep a bad loan from being reported as non-performing is to refinance it and change the terms….and (drum roll please….) ….like magic, it's a performing loan again!  In all likelihood, that's what's happening with this fake NPL statistic.  It's hard to believe that China's financial system hasn't already broken its economic foot as a consequence of kicking all of these NPL cans down the road, but somehow it just keeps chugging merrily along.  As my favorite Irish pub drinking song goes…."Roll me over in the clover…..roll me over lay me down and do it again…this is number one….we've only just begun….."

  • Las Vegas Sheriff: "You Got To Assume He Had Help" As "Mystery Woman" Emerges

    During a lengthy press conference update on the investigation into the Las Vegas massacre, Clark County Sheriff Lombardo expressed his belief that gunman Stephen Paddock had to have help at some point but sarcastically says "maybe he’s a super guy."

    Clearly showing the strains of being awake under serious stress for the last 72 hours, the sheriff explained…

     “Look at this. You look at the weapon obtaining the different amounts of tannerite available, do you think this was all accomplished on his own, face value?”

     

    “You got to make the assumption he had to have help at some point, and we want to insure that’s the answer. Maybe he’s a super guy, super hero–not a hero, super–I won’t use the word. Maybe he’s super — that was working out this out on his own, but it will be hard for me to believe that.”

     

    “Here’s the reason why, put one and one–two and two together, another residence in Reno with firearms, okay, electronics and everything else associated with larger amounts of ammo, a place in Mesquite, we know he had a girlfriend. Do you think this is all self-facing individual without talking to somebody, it was sequestered amongst himself. Come on focus folks these type of investigations have been occurring in the last few years and we have to investigate that.”

    Sheriff Lombardo began by giving more detailed timeline of the Las Vegas Police effort to breach the hotel door…

    Additionally, Sheriff Lombardo stated that the piece of paper in the gunman's hotel room was not a suicide note and that authorities have seen evidence that the shooter planned to survive and possible escape, adding that he could not disclose details…

    Police also told a news conference that 317 of the 489 people injured in the Las Vegas shooting have been discharged from hospitals.

    Lombardo also said none of the cameras Paddock put up in the hotel room where he unleashed gunfire onto a concert crowd were recording, and noted that the shooter had 1,600 rounds of ammunition and several containers of an explosive commonly used in target shooting (Ammonium nitrate and Tannerite) that totaled 50 pounds in his car.

    Earlier this afternoon, several law enforcement officials told NBC News that investigatorsare trying to identify a mystery woman seen with Stephen Paddock in the days before the Las Vegas massacre. They don't know if she has any connection to the attack, but they would like to speak with her as they build a timeline of Paddock's last days, the officials said.

    So to summarize – He had help, planned to escape (so was not a suicide mission), there is a female potential accomplice at large, and the FBI further confirmed that "no evidence at this point to say it was an act of [domestic] terrorism."

  • Will Brazil Be The Next Hotspot For Independence Movements?

    Authored by Mike Krieger via Liberty Blitzkrieg blog,

     

    If you’ve read my work over the past several weeks, you’ve probably noticed an increased fascination with secession/independence movements around the world.

    I think we’re at the very early stages of this developing trend, which will see nation-states across the world fracture for a variety of reasons.

    The historical significance of the political changes we’re about to live through cannot be overstated. As I wrote in last month’s piece, The Future Will Be Decentralized:

    To conclude, I recognize that I’m making a huge call here. I think the way human beings organize their affairs will experience the most significant paradigm level shift we’ve seen in the Western world since the end of the European feudal system hundreds of years ago. That’s how significant I think this shift will be. There are two key things that need to happen for this to occur. The first is technological innovation, and that’s already happening. The second is increased human consciousness. As Thoreau noted, in order for us to have greater self-determination we need to be ready for it. Are we ready? I think we’re getting there.

    While extremely significant, the Catalan independence movement is just the tip of the iceberg when it comes to a global drive toward political decentralization. For example, just today I came across another potential secessionist hotspot in an unexpected place, Brazil.

    Bloomberg reports:

    Inspired by the separatist vote in Catalonia, secessionists in three wealthy southern Brazilian states are redoubling their efforts to break away from the crisis-battered nation.

     

    Residents of Rio Grande do Sul, Santa Catarina and Parana states are being called to vote in an informal plebiscite on Oct. 7 on whether they want independence. Organizers are also urging residents of the three states to sign a legislative proposal for each of their regional assemblies that would call for a formal, binding referendum. The non-profit group “The South is My Country” aims to mobilize a million voters in 900 out of the region’s 1,191 cities.

     

    Cooler, whiter and richer than the rest of Brazil, these southern states have long nursed separatist ambitions. Rio Grande do Sul even briefly claimed independence 180 years ago. Few Brazilians expect the current movement to succeed any time soon, not least because it is prohibited by the Constitution. But the country’s deepest recession on record and a massive corruption scandal have exacerbated the region’s longstanding resentment towards the federal government in Brasilia. With just one year to go until general elections, the rekindling of separatist sentiment in the south is another indicator of the unsettled state of Brazilian politics.

     

    Celso Deucher, the leader of The South is My Country, says the region contributes four times as much tax as it receives and suffers from a below-average level of political representation. He argues that such an unjust situation outweighs any legal concerns.

     

    “Whenever the subject of separatism comes up, they ban it because the federal Constitution does not allow it,” he said. “But the law is not immutable.”

     

    Rio Grande do Sul is currently immersed in a financial crisis and has lost much of its economic clout, according to Fernando Schuler, a professor of political science at Insper University in Sao Paulo.

     

    “There’s a huge cultural detachment between the Tropicalia Brazil and the South,” he said. “The reasons for separation are solid, justifiable, but I don’t think they are viable.” 

    There are two aspects of the above story I’d like to address.

    First, is that, like Catalonia, the regions thinking about secession from Brazil are relatively wealthy. This is not insignificant and certainly worth thinking about when it comes to wondering what sorts of responsibility these regions should have to the former union should a peaceful breakup go forward. It’s also worth remembering that the leaders of the American revolution were also extremely wealthy. An Independence movement driven by wealthy factions doesn’t necessarily preclude the creation of a superior governing structure.

     

    The second point relates to the fact that Brazil, like Spain, apparently provide no “exit option” for any province or region which decides it no longer wishes to be part of the nation-state. As such, this is by definition an oppressive and involuntary political relationship completely inappropriate to conscious human beings. As I explained in Monday’s post, all political associations should be voluntary and it’s absurd that people are simply born into nation-states that are assumed to be forever entities with no escape latch.

    Nation-states aren’t eternal, nor should they be. The problem with nation-states is they refuse to accept this fundamental reality. As such, political dealings with the state get transformed into oppressive centralized relationships, as opposed to voluntary decentralized arrangements. It’s no surprise then that oppressive relationships work out less positively for the average person than voluntary ones where the citizen and local communities are sovereign and empowered.

    In response to the Spanish King’s extraordinarily thuggish comments regarding Catalonia yesterday, I composed several tweets relevant to today’s discussion.

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    Any nation-state constitution that claims there’s no way to separate from the centralized government is an unethical and anti-human constitution. You can’t hide behind unjust laws to defend political bondage. The sooner we recognize this truth and increasingly move toward voluntary political relationships, the better.

    *  *  *

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