Jan 06

Today’s News 6th January 2016

  • KiM JoNG BooM!

    KIM JONG BOOM

  • How Corrupt Is the American Government?

    Government corruption has become rampant:

    • Senior SEC employees spent up to 8 hours a day surfing porn sites instead of cracking down on financial crimes
    • NSA spies pass around homemade sexual videos and pictures they’ve collected from spying on the American people
    • Investigators from the Treasury’s Office of the Inspector General found that some of the regulator’s employees surfed erotic websites, hired prostitutes and accepted gifts from bank executives … instead of actually working to help the economy
    • The Minerals Management Service – the regulator charged with overseeing BP and other oil companies to ensure that oil spills don’t occur – was riddled with “a culture of substance abuse and promiscuity”, which included “sex with industry contacts”
    • Agents for the Drug Enforcement Agency had dozens of sex parties with prostitutes hired by the drug cartels they were supposed to stop (they also received money, gifts and weapons from drug cartel members)
    • The former chief accountant for the SEC says that Bernanke and Paulson broke the law and should be prosecuted
    • The government knew about mortgage fraud a long time ago. For example, the FBI warned of an “epidemic” of mortgage fraud in 2004. However, the FBI, DOJ and other government agencies then stood down and did nothing. See this and this. For example, the Federal Reserve turned its cheek and allowed massive fraud, and the SEC has repeatedly ignored accounting fraud (a whistleblower also “gift-wrapped and delivered” the Madoff scandal to the SEC, but they refused to take action). Indeed, Alan Greenspan took the position that fraud could never happen
    • Paulson and Bernanke falsely stated that the big banks receiving Tarp money were healthy when they were not. The Treasury Secretary also falsely told Congress that the bailouts would be used to dispose of toxic assets … but then used the money for something else entirely
    • The American government’s top official in charge of the bank bailouts wrote, “Americans should lose faith in their government. They should deplore the captured politicians and regulators who distributed tax dollars to the banks without insisting that they be accountable. The American people should be revolted by a financial system that rewards failure and protects those who drove it to the point of collapse and will undoubtedly do so again.”
    • Congress has exempted itself from the healthcare rules it insists everyone else follow
    • Law enforcement also grabs massive amounts of people’s cash, cars and property … even when people aren’t CHARGED with – let alone convicted of – any crime
    • Private prisons are huge profit-making centers for giant companies, and private prison corporations obtain quotas from the government, where the government guarantees a certain number of prisoners at any given time
    • The government covered up the health risks to New Orleans residents associated with polluted water from hurricane Katrina, and FEMA covered up the cancer risk from the toxic trailers which it provided to refugees of the hurricane. The Centers for Disease Control – the lead agency tasked with addressing disease in America – covered up lead poisoning in children in the Washington, D.C. area (the Centers for Disease Control has also been outed as receiving industry funding)
    • In response to new studies showing the substantial dangers of genetically modified foods, the government passed legislation more or less PUSHING IT onto our plates
    • Government scientists originally pushed fluoridation of water as “safe and effective” because fluoride is a major byproduct of making nuclear weapons … and the government ordered them to downplay the risks of fluoride exposure in order to prevent massive lawsuits by those suffering injury from poisoning
    • The Bush White House worked hard to smear CIA officers, bloggers and anyone else who criticized the Iraq war
    • The FBI smeared top scientists who pointed out the numerous holes in its anthrax case. Indeed, the head of the FBI’s investigation agrees that corruption was rampant
    • Warmongers in the U.S. government knowingly and intentionally lied us into a war of aggression in Iraq. The former head of the Joint Chiefs of Staff – the highest ranking military officer in the United States – said that the Iraq war was “based on a series of lies”. The same is true in Libya, Syria and other wars. Indeed, the U.S. has often launched or proposed launching wars based upon FALSE PREMISES
    • When the American government got caught assassinating innocent civilians, it changed its definition of “enemy combatants” to include all young men – between the ages of say 15 and 35 – who happen to be in battle zones. When it got busted killing kids with drones, it changed the definition again to include kids as “enemy combatants”
    • The government treats journalists who report on government corruption as CRIMINALS OR TERRORISTS. And it goes to great lengths to smear them. For example, when USA Today reporters busted the Pentagon for illegally targeting Americans with propaganda, the Pentagon launched a SMEAR CAMPAIGN against the reporters. But  journalists who act as mere cheerleaders for the government who never criticize are protected and rewarded

    The biggest companies own the D.C. politicians. Indeed, the head of the economics department at George Mason University has pointed out that it is unfair to call politicians “prostitutes”. They are in fact pimps … selling out the American people for a price.

    Government regulators have become so corrupted and “captured” by those they regulate that Americans know that the cop is on the take. Institutional corruption is killing people’s trust in our government and our institutions.

    Neither the Democratic or Republican parties represent the interests of the American people. Elections have become nothing but scripted beauty contests, with both parties ignoring the desires of their own bases.

    Indeed, America is no longer a democracy or republic … it’s officially an oligarchy. And the allowance of unlimited campaign spending allows the oligarchs to purchase politicians more directly than ever.

    No wonder polls show that the American people say that the system is so thoroughly corrupt that government corruption is now Americans’ number one fear.

    And politicians from both sides of the aisle say that corruption has destroyed America. And see this.

    Moreover, there are two systems of justice in America … one for the big banks and other fatcats … and one for everyone else. Indeed, Americans have .

    Big Corporations Are Also Thoroughly Corrupt

    But the private sector is no better … for example, the big banks have literally turned into criminal syndicates engaged in systemic fraud.

    Wall Street and giant corporations are literally manipulating every single market.

    And the big corporations are cutting corners to make an extra penny … wreaking havoc with their carelessness. For example:

    • U.S. military contractors have pocketed huge sums of money earmarked for humanitarian and reconstruction aid. And see this (whistleblowers alerted the government about the looting of Iraq reconstruction funds, but nothing was done)
    • There is systemic corruption among drug companies, scientific journals, university medical departments, and medical groups which set the criteria for diagnosis and treatment

    (Further examples here, here, here, here and here.)

    We’ve Forgotten the Lessons of History

    The real problem is that we need to learn a little history:

    • We’ve known for thousands of years that – when criminals are not punished – crime spreads
    • We’ve known for centuries that powerful people – unless held to account – will get together and steal from everyone else

    Beyond Partisan Politics

    Conservatives and liberals tend to blame our country’s problems on different factors … but they are all connected.

    The real problem is the malignant, symbiotic relationship between big corporations and big government.

  • Global Corporate Debt is Coming Unglued

    Standard & Poor’s slashed the credit ratings of 112 corporations around the globe to default (D) or selective default (SD) in 2015, according to S&P Capital IQ Global Credit. The highest number of global defaults since nightmare-year 2009, when a previously unthinkable 268 companies defaulted, and not far behind the second highest default tally of 125, in 2008.

    The oil & gas sector led with 29 defaulters (26% of the total). Metals, mining, and steel followed with 17 defaulters (15% of the total). The consumer products sector and the bank sectors tied for the third place, each with 13 defaulters (12% of the total).

    So where are the defaulters? In Russia and Brazil? The economies of both countries have been ravaged by deep recessions and other problems. They rank high on the list but the country with most of the defaulters is… the US.

    In total, 66 defaulters were US issuers, up 100% from 33 in 2014, and the highest since 2009. US defaulters accounted for 59% of the global total. Some of this dominant share of defaulters can be attributed to the size of the US economy and the enormous size of its credit market. But the US is also the epicenter of oil & gas defaults, with contagion now spreading to other sectors.

    An indication of what’s coming in 2016 is the Standard & Poor’s Distress Ratio. It’s the proportion of junk-rated bonds with yields that exceed Treasury yields by at least 10% (option-adjusted spread). And this Distress Ratio soared in December to 24.5%, up from around 5% in 2014. There are now 437 bond issues tangled up in the ratio:

    US-SP-Distress-ratio-2013-2015

    Of those 437 bond issues in the Distress Ratio, 127 have been issued by oil & gas companies. The metals, mining, and steel sector has 71 bond issues in the ratio. The remaining 239 issues are spread over other sectors. And a number of these distressed issuers will default down the line. So defaults in the US are likely to get even uglier in 2016.

    Emerging Markets were in second place with 25 defaulters, up from 15 in 2014 and the highest since 2009, according to S&P Capital IQ Global Credit, “owing largely to a credit spillover effect of the increasingly unfavorable geopolitical climate in Brazil and Russia.” Brazil sported eight defaulters, and Russia seven, thus occupying the second and third country-rank behind the US.

    In Europe, where QE and negative yields are raging, S&P downgraded 16 issuers to default, up 167% from 2014, despite the current monetary policies that should make defaults virtually impossible. The remaining 5 defaulters were spread over other developed nations (Australia, Canada, Japan, and New Zealand):

    Global-corporate-defaults-2004-2015

    There are different reasons companies can be downgraded to D or SD. Of the 112 defaulters, 36 (or 32% of the total) undertook “distressed debt exchanges,” a favorite extortion method in the US oil & gas sector, whereby the company tells investors to swap existing bonds for new bonds with a huge haircut, or risk an even worse fate in bankruptcy court. This tool is becoming increasingly popular: in 2015, 32% of defaults were distressed debt exchanges, up from 23% in 2014.

    Another 32 defaulters failed to make interest or principal payments, while 22 filed for bankruptcy. Among the remaining defaulters, 11 were the result of regulatory interventions.

    Standard & Poor’s global “weakest links” – companies on the lower end of the junk-bond spectrum most in danger of defaulting – reached 195 in December, the highest since March 2010 (when there were 203), representing $234 billion in rated debt, with oil & gas in first place and financial institutions (!) in second place:

    Drops in oil prices affected the profitability of oil and gas companies, where spreads have widened considerably. This spread expansion has had a spillover effect upon the broader range of speculative-grade rated firms, where spreads have widened considerably leading to increased default risk.

    What’s next in the US? Standard & Poor’s upgraded 18 companies with total debt of $49 billion, but downgraded 60 companies with a breath-taking total debt of $1.3 trillion (with a T).

    So 2015 ended on an ugly note. But there is still no crisis of any kind. Yes, the price of commodities has collapsed, but money is still nearly free for high-grade borrowers. Numerous governments and corporations can borrow at negative yields, thus getting paid to borrow, a central-bank engineered absurdity. And many more can borrow below the rate of inflation – i.e. for free. And yet, defaults are surging.

    And it’s just the beginning.

    The non-dollar world has piled on nearly $10 trillion in dollar-denominated debt, betting that the dollar would never rise, and that US interest rates would stay low. But the dollar has soared and US interest rates are rising. The last time this happened was 1997. It triggered massive currency outflows from those countries and all kinds of crises, including the big one at the time, the Asian Financial Crisis, according to the economists at National Bank of Canada, who added, “It would be foolish to rule out a similar if not a more devastating outcome.” Read… What Will Knock the Dollar off its Perch?

  • "Presidentialism" Not Serving American Politics Well

    Authored by Ben Tanosborn,

    Here we are heralding the entrance of a new year with myriad problems confronting us; some problems appearing as daily spoken realities – those principally dealing with the economy, war and terrorism; others, subliminally present, silenced by national choice – such as bigotry, an ever-expanding income-wealth inequality and the prospect of a world without US economic and military hegemony.  The subliminal topics appearing as taboo, where neither government nor most of us dare go or openly discuss.  We are ushering 2016 as yet another presidential election year where once again our once reliable presidential system is demonstrating its incapacity to reach political consensus in a diverse nation where the preponderance of voters is no longer centrist “across the board” as in generations past.  

    Results from Spain’s December 20 general election brought both reality and questions which had been accosting me from my early days of inquiry about politics to my current cynicism which defines the idea of democracy, and self-governance, as just a placebo prescribed by those elites who alternatively rule over us in this United States.

    I go back to my teen years when I first questioned which system of government, within the context of democracy, would probably be best: Parliamentarism or Presidentialism. And I recall choosing one over the other depending on my political feelings at that time.  Now, after years of swinging back and forth, I am about to reach the conclusion, this time permanently, without the residue of reservations that I had in the past, that at least in this 21st Century America, Presidentialism is not serving us well; and that, braiding it with our insufferable two-party, money-lubricated, political machine has placed us among the worst governed major nations on earth – something which our false pride and concomitant ignorance refuse to acknowledge time and again.  Pride and ignorance which have nurtured cancerous instincts in conflict with world peace and brotherhood through militarism, bigotry, jingoism, and a shameful enjoyment of our “empire-feel”; perhaps a great outcome for the ruling elites of the nation but a sorry aftermath for a commoner citizenry which has been profoundly deceived.

    A most interesting new approach to American politics has resulted for me from Spain’s recent elections, something which can only happen, or be invited to happen, under Parliamentarism.  Instead of the customary two major political forces that usually vie for absolute power, the People’s Party or Partido Popular (PP) – most often tagged as center-right in the right-left political spectrum, and the Socialist Workers’ Party or Partido Socialista Obrero Español (PSOE) – center-left deceivingly misnamed by appropriating the terms workers and socialist, there were two other major political parties of new vintage sculpted from recent popular movements sprouting from both the left and a “modified center”: We Can (Podemos) and Citizens-Party (Ciudadanos).

    In the past, much in the fashion of Republicans and Democrats in the US, PSOE and PP alternated holding the reins of power – notwithstanding the required coalitions in two nationalistic (separatist) regions: the autonomous communities of Catalonia and the Basque Country.  In a political patronage-prone culture such as Spain, this system of spoils under the two-party yoke has always kept the level of economic corruption high; but as austerity measures were imposed to cope with the most recent world recession, citizen-democracy became invigorated, thus the advent of two new political formations, Podemos and Ciudadanos, for the most part carved from the membership in the two “now-is-my-turn” ruling parties.

    Now, after the vote of the 73 percent turnout has been counted, there are not just two but four political forces vying for power, where coalition-consensus will win the day for a new government to emerge: PP with 29 percent of the popular vote and 123 (35%) seats in the Cortes; PSOE, tallying 22 percent and 90 (26%) seats; Podemos gathering 21 and 69 (20%) seats; Ciudadanos with 14 percent and 40(11%) seats; and multiple other parties together garnering the other 14 percent of the popular vote and the remaining 28 seats in the 350-member Cortes.  Under a parliamentary system where no winner takes it all, Spain will have to reach political compromise and stability in a democratic consensus government.  Something expected to happen, accommodating the sound of all major voices.

    These four political forces in Spain bring to mind that our presidential system of winner-take-all will be trying to squeeze in perhaps more than half dozen socio-political forces in the United States, all without coalition or compromise, under the umbrellas held by our “faithful and reliable” Tweedledee and Tweedledum political parties.

    Evangelicals, Tea-partiers, Progressives, Libertarians, Ghettofied Blacks, Unionized Labor, and other groups will be tapped and lured by the career politicians in the two parties to receive their financial support and vote, in most instances without political voice… only the prospect that their vote will bring about a government that will provide “the lesser of two evils,” a proposition that the American electorate has, erroneously, accepted as a political act of faith.

    Our system of Presidentialism may have served us well in the past but its rigidity in the political process denies the multiple voices that need to be heard in a democracy, nor offers the required tools for political compromise.  Sadly… here we are, stepping into 2016 with the possible political prospect of having to elect as chief executive of this nation either a lady with questionable trust-credentials or a boisterous charlatan.

    May the Almighty have mercy on us in 2016!

  • North Korea Confirms It Conducted "Successful Hydrogen Bomb Test" As "Act Of Self-Defense" Against US

    North Korea has confirmed that it has "successfully tested a hydrogen bomb." The test was "an act of self-defense" against threats like the US.

     

    This is the 3rd test during Obama's administration…

     

     

    As we detailed earlier…

    A 5.1-magnitude earthquake detected near North Korea’s nuclear test site appears to have been artificial, according to South Korea’s meteorological service, raising the prospect the isolated regime tested a nuclear device. As Bloomberg reports, the "earthquake" follows North Korea’s threat in September that it is ready to use atomic weapons against the U.S. at any time and that its main nuclear facility was fully operational. The Pentagon is reportedly "looking into" the quake reports.

    Coincidence?

    As AP reports,

    South Korean officials detected an "artificial earthquake" near North Korea's main nuclear test site Wednesday, a strong indication that nuclear-armed Pyongyang had conducted its fourth atomic test. North Korea said it planned an "important announcement" later Wednesday.

     

    A confirmed test would mark another big step toward Pyongyang's goal of building a warhead that can be mounted on a missile capable of reaching the U.S. mainland.

     

    The U.S. Geological Survey measured the magnitude of the seismic activity at 5.1 on its website. An official from the Korea Metrological Administration, South Korea's weather agency, said it believed the earthquake was caused artificially based on their analysis of the seismic waves and that it originated 49 kilometers (30 miles) north of Kilju, the northeastern area where North Korea's main nuclear test site is located. The country conducted all three previous atomic detonations there.

     

    South Korean government officials couldn't immediately confirm whether a nuclear blast or natural earthquake had taken place.

     

    North Korea conducted its third nuclear test in February 2013.

     

    Another test would further North Korea's international isolation by prompting a push for new, tougher sanctions at the United Nations and worsening Pyongyang's already bad ties with Washington and its neighbors.

     

    Pyongyang is thought to have a handful of crude nuclear weapons. The United States and its allies worry about North Korean nuclear tests because each new blast brings the country closer to perfecting its nuclear arsenal.

     

    Since the elevation of young leader Kim Jong Un in 2011, North Korea has ramped up angry rhetoric against the leaders of allies Washington and Seoul and the U.S.-South Korean annual military drills it considers invasion preparation.

    *  *  *

    South Korea is responding:

    “We are checking whether this is indeed a nuclear test or something else,” said a spokesman of the South’s Defense Ministry, who spoke on customary condition of anonymity.

    • *S. KOREA TO CONVENE NATIONAL SECURITY MEETING AT 12PM: YONHAP
    • *BOK TO HOLD MEETING AT 2 P.M. LOCAL TIME TO DISCUSS N. KOREA

    *  *  *

    It appears Kim has had enough playing second geopolitical pain-in-the-ass fiddle to Syria so decided to get back in the headlines.

    Ironic really after Kim Jong-Un's "fabulous" year.

     

    Various twitter sources report that North Korea is due to make an "important announcement" at 2230ET.

  • Visualizing How The Global Economy Played Out In 2015

    Many people start a new year with renewed optimism. However, "New Year, Same Problems" is the meme of 2016… and recent trading has dashed some of that optimistic 'This time it's different' hope.

     

     

    Courtesy of: Visual Capitalist

     

    NEW YEAR, SAME PROBLEMS

    Most investors and central bankers find themselves between a rock and a hard place to start 2016.

    The Federal Reserve finally raised rates in December, but mainly in the interest of preserving credibility.

    While unemployment itself has looked good enough and there has been some wage growth, the labor force participation is at 62.5%, which is essentially its lowest mark since 1977. Meanwhile, the stock market has been volatile, junk bonds have been hammered, and manufacturing contracted in December at the fastest pace in the U.S. in more than six years.

    Most major central banks still have rates close to zero, which gives little policy ammunition for any additional stimulus. The flipside of these record-low rates has been soaring (or extremely bubbly) asset prices that have failed to trickle down to Main Street.

    A slowing China and general oversupply has led to slumping commodity prices.

    Oil has been hammered down to its lowest price since 2003. Copper is trading at $2/lb, which is comparable to its price during the Financial Crisis. These low input prices, in theory, are great for consumers and manufacturers. In reality, however, they usually mean that economic growth is grinding to a halt.

    It’s hard to say where markets will turn in 2016, but for now it will continue to be much of the same volatility until the picture becomes clearer.

    Original graphic by: The Straits Times

  • Central Bank Money Printing – The Rotten Philosophy That Lies Beneath

    Submitted by Richard Ebeling via The Future of Freedom Foundation,

    If advocates of freedom were to make up a list of New Year’s resolutions for 2016, one of the most important items should be ending government’s monopoly control over money. In a free society, people in the marketplace should decide what they wish to use as money, not the government.

    For more than two hundred years, practically all of even the most free market advocates have assumed that money and banking were different from other types of goods and markets. From Adam Smith to Milton Friedman, the presumption has been that competitive markets and free consumer choice are far better than government control and planning – except in the realm of money and financial intermediation.

    This belief has been taken to the extreme over the last one hundred years, during which governments have claimed virtually absolute and unlimited authority over national monetary systems through the institution of paper money.

    At least before the First World War (1914-1918) the general consensus among economists, many political leaders, and the vast majority of the citizenry was that governments could not be completely trusted with management of the monetary system. Abuse of the monetary printing press would always be too tempting for demagogues, special interest groups, and shortsighted politicians looking for easy ways to fund their way to power, privilege, and political advantage.

    The Gold Standard and the Monetary “Rules of the Game”

    Thus, before 1914 the national currencies of practically all the major countries of what used to be called the “civilized world” were anchored to market-based commodities, either gold or silver. This was meant to place money outside the immediate and arbitrary manipulation of governments. Any increase in gold or silver money required private individuals to find it profitable to prospect for it in various parts of the world; mine it out of the ground and transport it to where it might be refined into usable forms; and then mint part of any new supplies into coins and bullion, with the rest made into various commercial and industrial products demanded on the market.

    The paper currencies controlled by governments and their central banks were supposed to be issued only as claims to – as money substitutes for – quantities of the real gold or silver money deposited by members of the society in banks for safekeeping and the convenience of everyday business in the marketplace.

    Government central banks were meant to see that the society’s medium of exchange was properly assayed and minted, and to monitor and police private banks and itself to make sure that the “rules” of the gold (or silver) standard were properly followed.

    Bank notes were to be issued or deposit accounts increased in the banking system as a whole only when there had been net additions to the quantity of the commodity money within the economy. Any withdrawals of the commodity money from the banking system was to be matched by a decrease in the total quantity of bank notes in circulation and in deposit accounts payable in money.

    Did government’s always play by these “rules”? Unfortunately, the answer is, “No.” But, by and large, in the half-century or so before the beginning of the First World War, governments and their central banks managed their national currencies with surprising restraint.

    If we look for a reason for this restraint, a leading one was that for a good part of this earlier era the predominant set of ideas was that of political and economic liberalism. But we need to remember that at that time “liberalism” meant an advocacy and defense of individual liberty, secure private property rights, free markets, free trade, and limited government constitutional under impartial rule of law.

    But, nonetheless, these national currencies were government-managed paper monies linked to gold or silver by history and tradition, and more or less left fairly free of direct and abusive political manipulation, due to the prevailing political philosophy of the time that considered governments as protectors of individuals’ rights to their lives, liberty and honestly acquired property.

    Political Paternalism and Monetary Central Planning

    However, in the decades leading up to the First World War the political trends began to change. New ideals and ideologies started to appear and gained increasing hold over people’s minds. The core conception was a growing belief in the necessity for and the good that could come from political paternalism. Government’s were not simply to be impartial “umpires” who enforced the rule of law and protected people and their property from violence and fraud. No, government was to intervene into the social and economic affairs of men, to regulate markets, redistribute wealth, and pursue visions of national greatness and collective welfare.

    This meant a change in the political philosophy behind the government’s control of the monetary system, as well. In the decades after the First World War, in the 1920s, 1930s, and 1940s, the government monetary managers increasingly became monetary central planners. The central bankers were to manipulate the supply of money and credit in the economy to achieve various goals: stabilize the price level; maintain full employment; peg or change foreign exchange rates; lower or raise interest rates to influence the amount and the types of investments undertaken by private borrowers and investors; and, whenever and however necessary, increase the quantity of money to fund government deficits needed by politicians and interest groups to feed their insatiable appetite for power, privilege and political plunder.

    The triumph of Keynesian Economics in the post-World War II period resulted in a near monopoly of academic and public policy advocates who argued that private enterprise was inherently unstable and frequently unfair, and could only be allowed to exist and function in a wider environment of dominating government control. The consequence was a government constantly increasing in size, scope, and pervasive supervision and intrusion into every corner of personal, social, and economic life.

    Big Government, Big Spending and the Monetary Printing Press

    But big governments cost big sums of money. About a hundred years ago in America, in 1913, all levels of government combined – Federal, state, and local – absorbed only around eight percent of the nation’s income and output. Today, all levels of government seize nearly fifty percent of all that is earned and produced in the United States. That cost of government is even more if we add the financial burdens imposed on private enterprise to comply with the strangling spider’s web of regulations and controls imposed on businessmen going about their business.

    During the seven years of the Obama Administration, the Federal government has accumulated over eight trillion dollars in additional debt. About at the same time, the Federal Reserve – America’s central bank – had created around four trillion dollars of new money in the banking system. In other words, the Federal Reserve has, in fact, produced out of thin air a sum of new money equal to fifty percent of all the Federal government has borrowed during this period.

    The economics textbooks usually sanitize this type of process with a sterile terminology that calls it, “monetizing the debt.” An earlier generation of economists and critics of political paternalism used to call this process paper money inflation and debauchery of the currency: the diluting of the value of the money in people’s pockets through monetary depreciation and currency devaluation.

    Political Demagogy, Fiscal Burdens and the Danger of Inflation

    As a result of the growth of the modern welfare state, America and the other major Western countries of the world have become, in the words of the late Nobel Prize-winning economist, James Buchanan, perpetual democracies in deficit, funded in total or in good part by, now, trillions of dollars created by government monetary monopolies – the central banks.

    Today, we are reaping the whirlwind of decades of political paternalism and monetary central planning. Nations like Greece have been at the edge of financial bankruptcy and debt default. And countries like the United States, which are woven tightly with networks of special interest groups living off the redistributed plunder of other more productive members of society, seem to regularly lurch from one fiscal crisis to another. The current politics of redistributive paternalism seems to offer little way to stop the worsening avalanche of massive annual deficits and mounting national debt.

    The demagogues and political tricksters harangue about “soaking the rich” to fund the unfunded “entitlements” of social security and Medicare through the rest of the 21st century. They demand that “big business” pay for the government’s misguided economic policies and to cover the costs of other parts of the welfare state.

    The politicians of plunder have also taken recourse to that last refuge of every political scoundrel: a call to “patriotism.” It is your duty as a “good citizen” to pay an increasingly higher and higher “fair share” in taxes; to cooperatively be subservient and obedient to the demands and needs of government; and to sacrifice your freedom and the fruits of your own hard-earned honest labor for “the national interest” and “the common good.”

    It is worth remembering that those in the political arena who claim to know what is in “the national interest” and for “the common good” are the same ones who also assert the right to compel you to conform to their vision of a “just” and “fair” America, regardless of much you may honestly disagree or desire to peacefully go your own way.

    A central tool for governments to maintain their authority in society and their control over people’s lives is the ability to make the citizenry accept and use their monopoly medium of exchange. This is a lynchpin in the government’s ability to transfer the people’s wealth and privately produced output to satisfy the “needs” of government spending.

    It makes each and every citizen an existing and potential victim of government abuse of the monetary printing press, since paper currencies are no longer in anyway linked to or limited by a market-based supply of a real commodity such as gold or silver. We should not presume that runaway hyperinflations and the accompanying destruction of a society’s medium of exchange only occur in places like 1920s Germany or contemporary African nations like Zimbabwe. That, “it can’t happen here.” It can happen anywhere.

    The Bankruptcy of the Welfare State and Redistributive Dependency

    The fact is, the modern welfare state is bankrupt. It is bankrupt ideologically; no one really any longer believes that the Interventionist- Redistributive State will bring mankind material happiness or social harmony. Everyone knows that it is nothing more than a vast and corrupt political machine through which, as Frederic Bastiat said long ago, everyone tries to live at everyone else’s expense.

    In the process, the productive capacity of the society slowly grinds to a halt, as more and more people turn from productive self-responsibility to redistributive dependency. It also generates a mental attitude and a political presumption of legitimacy to that redistributive dependence that pervades each and every income group and social category throughout the nation.

    Most opinion polls show that a fairly sizable majority of the American people think that government is too big, spends too much, and taxes far too excessively. But once the questions turn to “specifics” of cutting particular government programs, it is soon seen how the tentacles of the welfare state reach into virtually everyone’s pocket.

    It is not only that government taxes people in varying amounts to feed the redistributive process. It is also the case that there are few people in the land who do not have some type of money, program, or benefit put into their pockets by government. Most people cannot imagine living without their government redistributive “fix.” And, admittedly, breaking people’s addiction to their government benefits, subsidies, protections, and special favors would and will involve serious withdrawal pains.

    This also means that the welfare state is rapidly reaching financial bankruptcy, as well. Neither taxation nor borrowing of private savings can or will be able to cover all the costs of current and future government spending under existing interventionist and redistributive legislation and regulation.

    The government may very well, therefore, use its most important financial resource to keep moving the wheels of political spending. They may more and more turn the handle of the monetary printing press, and they may turn it faster and faster.

    Hyperinflations and Opting Out of Government Monopoly Money

    Time after time, history has demonstrated that when serious price inflations move into disastrous hyperinflations, people first discount and then abandon the government’s monopoly money. They shift into alternative currencies of choice that they consider more stable, more predictable, and more wealth and income preserving that the increasingly worthless pieces of paper money that their own government spews out in increasing quantities.

    Now such a monetary disaster is not preordained. It is not written in some “big book” in the sky. Governments and societies have in the past pulled back and stopped short of following a path leading to social and economic ruin. America, too, may yet slow down or bring to a halt the political course it is currently traveling. The future is unpredictable and trends have changed many times in the past.

    But . . . forewarned is forearmed. So how might any of us be able to shelter ourselves from the possible coming fiscal and monetary storms? Central to such precautionary actions is to hedge against the possible radical depreciation and or even destruction of the government’s currency.

    To the extent that one sees such a danger and has the financial wherewithal to “plan ahead,” individuals should be legally allowed to opt-out of the government’s monopoly money. In other words, every American should be free from the government’s power to compel its citizens to use and accept in trade and in settlement of debts its own monopoly money.

    We should not be lulled into a false sense of currency security due to the low rate of price inflation as measured by the Consumer’s Price Index, or the declared fears of “price deflation” mostly resulting from the steep declines in some important commodity prices such as the cost of a barrel of crude oil. These things, in the right circumstances, can turn around faster than is often imagined.

    F. A. Hayek and Choice in Currency

    Everyone should be free to choose the currency or commodity they wish to hold and use as a medium of exchange without legal restriction, penalty, or political prejudice.

    Monetary freedom would not only give every citizen a legal right to protect and secure his income, wealth and market transactions from abusive mismanagement of the government’s monopoly monetary printing press. It could also serve as a check on the degree of such government abuse.

    A little more than forty years ago, in September 1975, Austrian economist and Nobel Laureate, Friedrich A. Hayek, delivered a lecture on, Choice in Currency: A Way to Stop Inflation, in Lausanne, Switzerland, and said:

    There could be no more effective check against the abuse of money by the government than if people were free to refuse any money they distrusted and to prefer money in which they had confidence. Nor could there be a stronger inducement to governments to ensure the stability of their money than the knowledge that, so long as they kept the supply below the demand for it, that demand would tend to grow. Therefore, let us deprive governments (or their monetary authorities) of all power to protect their money against competition: if they can no longer conceal that their money is becoming bad, they will have to restrict the issue.

     

    Make it merely legal and people will be very quick indeed to refuse to use the national currency once it depreciates noticeably, and they will make their dealings in a currency they trust.

     

    The upshot would probably be that the currencies of those countries trusted to pursue a responsible monetary policy would tend to displace gradually those of a less reliable character. The reputation of financial righteousness would become a jealously guarded asset of all issuers of money, since they would know that even the slightest deviation from the path of honesty would reduce the demand for their product.

    Taking away from the government its power of compelling the citizenry to accept money that it monopolistically controls and abuses may serve as an important legal and economic change to force the government and those who live at its spending trough to face the reality of the welfare state’s ideological and fiscal bankruptcy before it is too late to avert a complete collapse of the society.

    Choice in currency may be a valuable avenue for helping to restore the American tradition and practice of individual rights, free markets, and limited government under the rule of law. And it can be an important legacy for our children and grandchildren, so they may, hopefully, live out their lives in more liberty for the remainder of the twenty-first century.

     

  • Dow Futures Plunge 170 Points After Yuan Crashes To 5-Year Lows As PBOC Loses Control

    Dow futures are down over 170 points from the cash close, testing the lows of the day following carnage in the Chinese currency markets. Despite the biggest drop in onshore Yuan since August devaluation, Offshore Yuan has collapsed to its lowest since September 2010. What is more worrisome (or positive for Kyle Bass) is that the spread between onshore and offshore Yuan has blown out to 1250 pips – a record – indicating dramatic outflows and/or expectations of further devaluation to come.

    Yuan is in free-fall… Offshore Yuan is down over 400 pips from intraday highs, testing 6.6800

     

    CNH-CNY spread is now over 1320 pips – as it appears The PBOC is losing control.

    And although Chinese stocks are "stable" thanks to some National Team play…

     

    US equity futures are tumbling off the bounce close, trading back near the day's lows…

     

    It appears Kyle Bass was right:

    "Given our views on credit contraction in Asia, and in China in particular, let's say they are going to go through a banking loss cycle like we went through during the Great Financial Crisis, there's one thing that is going to happen: China is going to have to dramatically devalue its currency."

    And it is – sanctioned by The IMF…

     

    Charts: Bloomberg

  • China Set To Establish No-Fly Zone Over Islands After Successful Test Flight

    When last we checked in on the dispute over Beijing’s land reclamation efforts in the South China Sea, several dozen protesters from the Philippines were camped out on Pagasa island in a demonstration aimed at raising awareness of what they say is an illegal occupation of the Spratlys.

    To let China tell it, it’s the other way around.

    That is, the Filipino troop presence in the archipelago represents an illegal occupation of territory that belongs to Beijing and China would be well within its rights to forcibly expel the occupying army.

    The entire dispute centers around China’s construction of some 3,000 acres of new sovereign territory atop reefs in disputed waters. Although other countries have undertaken similar efforts, Beijing’s project is by far the most ambitious and Washington’s regional allies fear China is attempting to build what amount to a series of forward military operating bases in the Spratlys. The argument over the new islands reached a crescendo in October when the US sent a warship to the region in what Washington called a “freedom of navigation” exercise but what was, in reality, a show of force.

    For those unfamiliar with the history here, the alarm bells didn’t start ringing in earnest until April, when satellite images showed China was building a runway on Fiery Cross reef. The 10,000 foot airstrip is long enough to accommodate fighter jets and surveillance aircraft and has been variously described as “a game changer” and an effort to “vastly expand China’s zone of competition with the US.” Here’s a look at the runway in question when it was one-third complete:

    On Saturday, Beijing tested the runway for the first time, a move which drew sharp criticism from the islands various claimants. Vietnam, for instance, has filed a formal diplomatic complaint. 

    “China’s first landing of a plane on one of its new island runways in the South China Sea shows Beijing’s facilities in the disputed region are being completed on schedule and military flights will inevitably follow,” Reuters writes, adding that “China’s increasing military presence in the disputed sea could effectively lead to a Beijing-controlled air defence zone, ratcheting up tensions with other claimants and with the United States in one of the world’s most volatile areas.” Here’s more:

    Vietnam said the plane landed on Jan 2 and launched a formal diplomatic protest, while Philippines Foreign Ministry spokesman Charles Jose said Manila was planning to do the same. Both have claims to the area that overlap with China.

     

    “That’s the fear, that China will be able take control of the South China Sea and it will affect the freedom of navigation and freedom of overflight,” Jose told reporters.

     

    In Washington, State Department spokesman John Kirby said China’s landing of the plane “raises tensions and threatens regional stability.”

     

    Senator John McCain, the chairman of the influential U.S. Senate Armed Services Committee, criticised the Obama administration for delaying further “freedom of navigation” patrols within 12 nautical miles of the islands built by China.

     

    China has been building runways on the artificial islands for over a year, and the plane’s landing was not a surprise.

     

    The runway at the Fiery Cross Reef is 3,000 metres (10,000 feet) long and is one of three China was constructing on artificial islands built up from seven reefs and atolls in the Spratlys archipelago.

     

    The runways would be long enough to handle long-range bombers and transport craft as well as China’s best jet fighters, giving them a presence deep into the maritime heart of Southeast Asia that they have lacked until now.

     

    The airfield on Fiery Cross Reef will serve to “significantly” cut travel time between the Spratly islands and mainland China, the official Xinhua news agency reported, citing a top engineer from the transport ministry.

     

    Foreign ministry spokeswoman Hua Chunying said at the weekend that the test flight was intended to check whether the runway met civilian aviation standards and fell “completely within China’s sovereignty”.

     

    Asked about McCain’s remarks on Tuesday, she said: “We hope the U.S. can take an objective and fair attitude, and not make statements that confuse the situation and are harmful to regional peace and stability,” she said.

    Right. So once again, both sides are accusing the other of jeopardizing “regional peace and stability.” And while Beijing insists the airstrip is being tested for civilian purposes, analysts say it’s just a matter of time before fighter jets touch down on Fiery Cross. “The next step will be, once they’ve tested it with several flights, they will bring down some of their fighter air power – SU-27s and SU-33’s – and they will station them there permanently,” Leszek Buszynski, a visiting fellow at the Australian National University’s Strategic and Defence Studies Centre says. “That’s what they’re likely to do.”

    After that, China will effectively establish a no-fly zone according to Ian Storey, a South China Sea expert at Singapore’s ISEAS Yusof Ishak Institute. “As these facilities become operational, Chinese warnings to both military and civilian aircraft will become routine,” Storey said. “These events are a precursor to an ADIZ, or an undeclared but de facto ADIZ, and one has to expect tensions to rise,” he says.

    If that’s the case then the ball is now back in Obama and Abe’s court. Pressure will now mount for the US and Japan to take concrete steps to deter China from effectively seizing control of key shipping lanes through which some $5 trillion in global trade passes each year. How far Washington is willing to go to beat back Xi’s ambitious maritime powerplay is as yet unclear, but if the past is any guide, you can expect The White House to err on the side of cowardice caution.

  • Will Mideast Allies Drag Us Into War?

    Submitted by Patrick Buchanan via Buchanan.org,

    The New Year’s execution by Saudi Arabia of the Shiite cleric Sheikh Nimr Baqir al-Nimr was a deliberate provocation.

    Its first purpose: Signal the new ruthlessness and resolve of the Saudi monarchy where the power behind the throne is the octogenarian King Salman’s son, the 30-year-old Defense Minister Mohammed bin Salman.

     

    Second, crystallize, widen and deepen a national-religious divide between Sunni and Shiite, Arab and Persian, Riyadh and Tehran.

     

    Third, rupture the rapprochement between Iran and the United States and abort the Iranian nuclear deal.

    The provocation succeeded in its near-term goal. An Iranian mob gutted and burned the Saudi embassy, causing diplomats to flee, and Riyadh to sever diplomatic ties.

    From Baghdad to Bahrain, Shiites protested the execution of a cleric who, while a severe critic of Saudi despotism and a champion of Shiite rights, was not convicted of inciting revolution or terror.

    In America, the reaction has been divided.

    The Wall Street Journal rushed, sword in hand, to the side of the Saudi royals: “The U.S. should make clear to Iran and Russia that it will defend the Kingdom from Iranian attempts to destabilize or invade.”

     

    The Washington Post was disgusted. In an editorial, “A Reckless Regime,” it called the execution risky, ruthless and unjustified.

    Yet there is a lesson here.

    Like every regime in the Middle East, the Saudis look out for their own national interests first. And their goals here are to first force us to choose between them and Iran, and then to conscript U.S. power on their side in the coming wars of the Middle East.

    Thus the Saudis went AWOL from the battle against ISIS and al-Qaida in Iraq and Syria. Yet they persuaded us to help them crush the Houthi rebels in Yemen, though the Houthis never attacked us and would have exterminated al-Qaida.

    Now that a Saudi coalition has driven the Houthis back toward their northern basecamp, ISIS and al-Qaida have moved into some of the vacated terrain. What kind of victory is that — for us?

    In the economic realm, also, the Saudis are doing us no favors.

    While Riyadh is keeping up oil production and steadily bringing down the world price on which Iranian and Russian prosperity hangs, the Saudis are also crippling the U.S. fracking industry they fear.

    The Turks, too, look out for number one. The Turkish shoot-down of that Russian fighter-bomber, which may have intruded into its airspace for 17 seconds, was both a case in point and a dangerous and provocative act.

    Had Vladimir Putin chosen to respond militarily against Turkey, a NATO ally, his justified retaliation could have produced demands from Ankara for the United States to come to its defense against Russia.

    A military clash with our former Cold War adversary, which half a dozen U.S. presidents skillfully avoided, might well have been at hand.

    These incidents raise some long-dormant but overdue questions.

    What exactly is our vital interest in a permanent military alliance that obligates us to go to war on behalf of an autocratic ally as erratic and rash as Turkey’s Tayyip Recep Erdogan?

    Do U.S.-Turkish interests really coincide today?

    While Turkey’s half-million-man army could easily seal the Syrian border and keep ISIS fighters from entering or leaving, it has failed to do so. Instead, Turkey is using its army to crush the Kurdish PKK and threaten the Syrian Kurds who are helping us battle ISIS.

    In Syria’s civil war — with the army of Bashar Assad battling ISIS and al-Qaida — it is Russia and Iran and even Hezbollah that seem to be more allies of the moment than the Turks, Saudis or Gulf Arabs.

    “We have no permanent allies … no permanent enemies … only permanent interests” is a loose translation of the dictum of the 19th century British Prime Minister Lord Palmerston.

    Turkey’s shoot-down of a Russian jet and the Saudi execution of a revered Shiite cleric, who threatened no one in prison, should cause the United States to undertake a cost-benefit analysis of the alliances and war guarantees we have outstanding, many of them dating back half a century.

    Do all, do any, still serve U.S. vital national interests?

    In the Middle East, where the crucial Western interest is oil, and every nation — Saudi Arabia, Iran, Iraq, Libya — has to sell it to survive — no nation should be able drag us into a war not of our own choosing.

    In cases where we share a common enemy, we should follow the wise counsel of the Founding Fathers and entrust our security, if need be, to “temporary,” but not “permanent” or “entangling alliances.”

    Moreover, given the myriad religious, national and tribal divisions between the nations of the Middle East, and within many of them, we should continue in the footsteps of our fathers, who kept us out of such wars when they bedeviled the European continent of the 19th century.

    This hubristic Saudi blunder should be a wake-up call for us all.

  • Keynesian Economics 101 (In 4 'Simple' Lessons)

    Since Keynesian economics has reined supreme among mainstream economists for decades, you might want to know some of the basics.

     

    Keynesian Economics 101 Lesson 1

     

    Keynesian Economics 101 Lesson 2

     

    Keynesian Economics 101 Lesson 3

     

    Keynesian Economics 101 Lesson 4

     

    If this is confusing to you though, don’t worry about it! There are people in charge who have it all under control.

    Source: The Austrian Insider

  • Is The US Criminalizing Free-Speech?

    Submitted by Judith Bergman via The Gatestone Institute,

    • Is this House Resolution a prelude? Has Attorney General Lynch seen the potential for someone lifting her "mantle of anti-Muslim rhetoric"? And what is "anti-Muslim rhetoric" exactly? Criticizing Islam? Debating Mohammed? Discussing whether ISIS is a true manifestation of Islam? Who decides the definition of "hate speech" against Muslims?

    • Of all 1,149 anti-religious hate crimes reported in the United States in 2014, only 16.1% were directed against Muslims, according to the FBI. By contrast, over half of all anti-religious hate crimes were directed against Jews – 56.8%.

    • Why this lopsided, discriminatory House Resolution in favor of a religious group that statistically needs it the least?

    • Are the Attorney General and the eighty-two House Democrats out to destroy the First Amendment and introduce censorship? A House Resolution could be reintroduced later as binding legislation.

    Eighty-two leading Democrats have cosponsored a House Resolution (H.Res. 569) "Condemning violence, bigotry, and hateful rhetoric towards Muslims in the United States".

    The Resolution was introduced in the House of Representatives by Democrat Donald S. Beyer (Virginia) on December 17, 2015 — a mere 15 days after Tashfeen Malik and Syed Farook gunned down 14 innocent Americans and wounded 23 in an ISIS-inspired terror attack at a Christmas party in San Bernardino, California.

    The House Resolution states, "the victims of anti-Muslim hate crimes and rhetoric have faced physical, verbal, and emotional abuse because they were Muslim or believed to be Muslim," and the House of Representatives "expresses its condolences for the victims of anti-Muslim hate crimes."

    What victims? Of all 1,149 anti-religious hate crimes reported in the United States in 2014, only 16.1% were directed against Muslims, according to the FBI. By contrast, over half of all anti-religious hate crimes were directed against Jews – 56.8%. The fewest, 8.6% of anti-religious hate crimes, were directed against Christians (Protestants and Catholics).

    The Resolution goes on to denounce "…in the strongest terms the increase of hate speech, intimidation, violence, vandalism, arson, and other hate crimes targeted against mosques, Muslims, or those perceived to be Muslim."

    The House Resolution singles out Muslims in the United States as an especially vulnerable religious group that needs special protection to the extent that the Resolution "urges local and Federal law enforcement authorities to work to prevent hate crimes; and to prosecute to the fullest extent of the law those perpetrators of hate crimes."

    The reason for the introduction of this House Resolution at this point in time makes more sense if seen in conjunction with statements made by Attorney General Loretta Lynch on December 3, at a dinner celebrating the 10th anniversary of the Muslim Advocates — an organization that, according to its own website, has "powerful connections in Congress and the White House" and ensures that, "the concerns of American Muslims are heard by leaders at the highest levels of government." Muslim Advocates goes on to say, "As a watchdog of justice, we use the courts to bring to task those who threaten the rights of American Muslims."

    At the dinner, Attorney General Lynch stated that she is concerned about an

    "incredibly disturbing rise of anti-Muslim rhetoric… The fear that you have just mentioned is in fact my greatest fear as a prosecutor, as someone who is sworn to the protection of all of the American people, which is that the rhetoric will be accompanied by acts of violence. Now obviously, this is a country that is based on free speech, but when it edges towards violence, when we see the potential for someone lifting that mantle of anti-Muslim rhetoric — or, as we saw after 9/11, violence directed at individuals who may not even be Muslims but perceived to be Muslims, and they will suffer just as much — when we see that we will take action."

    Is this House Resolution a prelude to the Attorney General taking that action? Has she seen the potential for someone lifting her "mantle of anti-Muslim rhetoric"? And what is "anti-Muslim rhetoric" exactly? Criticizing Islam? Debating Mohammed? Discussing whether ISIS is a true manifestation of Islam? Who decides the definition of what is considered hate speech against Muslims?

    Are the Attorney General and the eighty-two House Democrats out to destroy the First Amendment and introduce censorship?

    U.S. Attorney General Loretta Lynch (left) said on December 3, "[W]hen we see the potential for someone lifting that mantle of anti-Muslim rhetoric… when we see that we will take action."

    A House Resolution could be reintroduced later as binding legislation. Americans should be deeply concerned about this. The part of the House Resolution that should most concern Americans is the urging of "local and Federal law enforcement authorities to work to prevent hate crimes; and to prosecute to the fullest extent of the law those perpetrators of hate crimes."

    What is a hate crime in this context? The law already prohibits violence and threats of violence, and law enforcement authorities are supposed to prosecute those — intimidation, destruction, damage, vandalism, simple and aggravated assault. However, as this resolution includes "bigotry" and "hateful rhetoric" in its title, Americans should worry that it is those that the House Resolution is really alluding to, when it urges law enforcement authorities to prevent and prosecute hate crimes.

    Why would the House of Representatives find it necessary to make such redundant statements, if not in order to redefine the concept of a hate crime?

    Notably, no similar House Resolution has appeared condemning the much higher percentage of hate crimes against Jews — over three times as many as against Muslims. As long as the House is going down the road of condemning hate crimes, why does it not even mention once the much more widespread hate crimes that American Jews are experiencing? Why does it not mention the hate crimes against Christians, which after all are only 7.5% percent fewer than those against Muslims? Why this lopsided, discriminatory House Resolution in favor of a religious group that statistically needs it the least?

    The House Resolution is unsettlingly similar to the UN Human Rights Commission's Resolution 16/18, which is an attempt to establish Islamic "blasphemy laws," making criticism of religion a criminal offense. The UNHRC Resolution would apply internationally (non-binding as of yet, except, presumably, for the countries that want it to be binding), and infractions would be punishable by law. In some Islamic countries, at the moment, the punishment is death — a sentence often handed down in trials that use questionable jurisprudence. Last year alone, a Saudi court sentenced a blogger, Raif Badawi to 1,000 lashes ("lashed very severely," the court order read) and ten years in jail. Outside of any courts, in 2015 alone, in Bangladesh, four secular bloggers on four separate occasions were hacked to death by people who apparently did not agree with what they said.

    The UNHRC Resolution, originally known as "Defamation of Islam," was changed in later versions — it would seem for broader marketability — to "Defamation of Religions."

    Long sought by the 57-member Organization of Islamic Cooperation, UNHRC Resolution 16/18 was co-sponsored by the United States, along with Pakistan. During a series of closed-door meetings over at least three years, it was spearheaded by Secretary of State Hillary Clinton.

    "At the invitation of Secretary of State Hillary Clinton," begins the document of the US Mission in Geneva, "representatives of 26 governments and four international organizations met in Washington, D.C. on December 12-14, 2011 to discuss the implementation of United Nations Human Rights Council Resolution (UNHRC) 16/18 on 'Combating Intolerance, Negative Stereotyping and Stigmatization of, and Discrimination, Incitement to Violence and Violence Against, Persons Based on Religion or Belief.'"

    UNHRC Resolution 16/18, also known as the "Istanbul Process" (where the original meeting on the topic took place), is an Orwellian document that claims to protect freedom of religion, while attempting to criminalize internationally anything that might be considered "incitement to violence." The late PLO Chairman Yasser Arafat used to tell his people, "I don't have to tell you what to do. You know what to do." Each word could be in Pat the Bunny. Would Arafat's statement be considered incitement to violence?

    UNHRC Resolution 16/18 was passed on March 24, 2011, without a vote.

    According to the journalist Abigail Esman, writing in Forbes:

    Resolution 16/18 seeks to limit speech that is viewed as "discriminatory" or which involves the "defamation of religion" – specifically that which can be viewed as "incitement to imminent violence… [T]his latest version, which includes the "incitement to imminent violence" phrase – that is, which criminalizes speech which incites violence against others on the basis of religion, race, or national origin – has succeeded in winning US approval – despite the fact that it (indirectly) places limitations as well on speech considered "blasphemous."

    In answer to a reproof — from the U.S Department of State, no less — Esman wrote, "By agreeing to criminalize 'incitement to violence' and to use all means at its disposal to prevent and to punish such actions, the US has – however unwittingly – enabled the OIC to use the measure against us – and other members of the free world."

    Many extremist Muslims, however, seem to have no problem criticizing other religions, as well as other Muslims. Some "criticize" Christians, as we have witnessed, by slitting their throats, or by burning or drowning them alive. Many extremist Muslims also seem to have no problem criticizing Jews – starting with calling them descendants of apes and pigs (Surah 5. Al-Maida, Ayah 60). Some Muslims write that all Jews should be killed:

    the Islamic Resistance Movement aspires to the realisation of Allah's promise, no matter how long that should take. The Prophet, Allah bless him and grant him salvation, has said: "The Day of Judgement will not come about until Moslems fight the Jews (killing the Jews), when the Jew will hide behind stones and trees. The stones and trees will say O Moslems, O Abdulla, there is a Jew behind me, come and kill him. Only the Gharkad tree, (evidently a certain kind of tree) would not do that because it is one of the trees of the Jews." (related by al-Bukhari and Moslem).

    One therefore cannot help wondering — and one should wonder – to what extent H.Res. 569 is the "nose of the camel under the tent."

    As of now, H.Res. 569 has been referred to the House Committee on the Judiciary. Americans had better hope that the House Committee will see it for what it is: An attempt to destroy the First Amendment, shield Islam from criticism, and bring "Death to Free Speech."

  • Meet The "Trader" Who Earns $30K "On A Bad Month" Working Just One Hour A Day

    On Sunday, July 12, 2015, 21-year old Elijah Oyefeso had a bad morning.

    Somehow, he managed to crash his blue Bentley Continental into his metallic gold Lamborghini Gallardo.

    Before:

    After: 

    But for Oyefeso, the crash was of no consequence. “Life goes on,” he said, laughing off the accident. 

    Why was a wreck involving nearly a half million in luxury cars no big deal for Oyefeso, you ask? Because this college dropout makes between £70,000 £80,000 on a “good month” trading stocks just one hour a day – or so he claims. According to the Daily Mail, Oyefeso “started by using his student loan” which he apparently pyramided into a small fortune. His Instagram profile reads: “MY NAME IS ELIJAH, & BEFORE I TURNED 20 I BOUGHT A LAMBO/BENTLEY WHICH REALLY PISSED ME OFF CUS I WAS TOO BROKE TO BUY A JET,” a riff on a now famous line from the big screen adaptation of Jordan Belfort’s story. 


    In addition to luxury cars, Oyefeso has a thing for fine watches and flashing his wealth on social media. Have a look, for instance, at the following image which depicts a Rolex, some money, and, somewhat inexplicably, a Wing Stop to-go cup:

    With a bit of hard work and dedication, you too can have a $20,000 watch, a roll of 20s, and carryout from Wing Stop: “If you work hard you don’t need to look at the price tag, you just get it,” Oyefeso boasts. Here’s more: 

    Elijah went to the University of Buckingham to study business management but put his student loan to good use. 

     

    He said: ‘I used my student loan during university and I thought “I could actually do this”.

     

    Elijah dropped out of university and started investing in the stock market with the cash sum. Within nine months, he claimed he was making tens of thousands of pounds.

     

    He claims his income on a ‘bad month’ will be between £20,000 and £30,000, while it can be over £40,000 more on a good month. 

     

    Elijah, who featured in Channel 4’s Rich Kids Go Shopping on Channel 4, was filmed as he traded online, making £1,000 in just 15 minutes.

     

    ‘I’ve been trading for three years, I know when to stop,’ he said. 

     

    The most he’s lost in one go is nearly £10,000. ‘When you lose it, you get back up. If you lose 12 times, you get back up 12 times.

     

    ‘You want to leave a name when you’re gone. Think about JP Morgan, the assets are worth 2.6 trillion. So that’s a lot.’

     

    Elijah, who listens to classical music while trading, said: ‘There’s a saying, you are who you chill with. I chill with people who have half a million in the bank.

     

    ‘Earning £20 to £30,000 a month, in my world that’s not good. It motivates you to do more.’

     

    Elijah also has a collection of expensive watches, ranging from a Rolex to a Cartier watch costing £21,000 which he has only worn a couple of times.  

     

    But he loves his watch collection, he said: ‘You’ve got to treat them like princesses.’

     

    He’s even given them names, calling one watch Michelle and another Aaliyah after the singer.

    There you have it. The American dream, only across the pond in the UK. Take out a student loan, invest in stocks, and ride the central bank put on your way to social media fame and fortune. But trading isn’t Oyefeso’s only source of income. As the Mail goes on to document, “he set up DCT Training Group to help others to get into trading, but after a free trial of five days he charges £107 a month for his expertise.”

    Every new member gets a big shout out on Oyefeso’s Twitter account. Here’s a representative tweet:

    What does DCT do you ask? Well, let’s ask them. Here’s a bit of info from the official webpage: 

    The benefits of options trading include low capital investment to get started and no leverage on your investment. Meaning if you invested £10 on a trade you could only lose £10 and your balance could never end up in the negative. It allows high rewards with fast returns. We don’t have to sit around waiting for weeks to see a return on our investment as returns can be made in a matter of minutes. Everything is a controlled risk as you set the investment amount and duration. 

     

    We provide real time signals to new traders who do not necessarily hold the experience or skills to analyse markets for themselves or use technical indicators to predict the movement direction on an asset. These signals are sent out to notify them on when we spot a potentially profitable trade. Signals are calculated indications produced from our own technical analysis of the current markets and will guide you on the start time of the trade, expiry time, and the execution range. 

    • We send around 10 signals throughout the day. Return rates are usually around 70 – 85% profit back on successful trades. We advise spreading your investment by putting a small % of your balance on each trade. 
    • Trading signals simplify everything for you and enables you to place educated trades within a few minutes. You simply set the trade and wait for the expiry time. Hassle free and no waiting around or having to keep an eye on the markets. 
    • We average around 7/8 successful trades out of 10 on a consistent basis.

    Basically, for £107 a month, Oyefeso will send you 10 options tips per day out of which “7-8” will be “successful.” 

    As anyone who’s ever traded options knows, that’s a virtual impossibilty. The idea that DTC bats .800 on 10 options trade ideas each and every trading day is borderline absurd and it’s also worth noting that Oyefeso isn’t exactly being transparent when he tells clients “your balance could never end up in the negative.” An amateur could, for instance, forget to close an in-the-money position at expiry and get assigned. That wouldn’t put someone “in the negative” per se (you’d be “in the positive” by definition), but coming up with the cash to buy 100 share lots of expensive stocks might not be what some of Oyefeso’s clients bargained for. Also, successfully trading options requires the careful and vigilant management of volatile positions. It’s not exactly a job that lends itself to working “one hour” per day.

    In addition to equity options, Oyefeso is apparently an expert in commodities and FX. “We produce signals for all major markets (commodities, indices, stocks and forex) the right asset, predetermined time period and direction for a profitable trade,” DCT’s web site says. We assume he’s 70-80% accurate on those calls as well.

    We imagine there are plenty of “traders” out there who would enjoy living a lifestyle of Cartiers, Bentleys, and Wing Stop, especially if all you have to do is follow Oyefeso’s “alerts”. The question is how he and the legions of CB put-surfing, 17-year old hedge fund managers will fare on days like August 24, when everything falls apart in a harrowing bout of flash crashing madness during which not even the “all weather” Ray Dalios of the world manage to make money. Actually that’s not the question. The question is whether Oyefeso is for real, or whether sometime in the not-so-distant future, we’ll discover that the old adage “if something sounds too good to be true, it probably is,” applies to 21-year old college dropouts driving golden Lamborghinis…

  • The Shale Defaults Begin Here: Banks Quietly Shrink These 25 Companies' Credit Facilities

    Everyone knows that at $35/barrel oil, virtually every US shale company is cash flow negative and is therefore burning through cash and other forms of liquidity such as bank revolvers and term loans, just as everyone knows that should oil remain at these prices, the US shale sector is facing an avalanche of defaults.

    What is less known is who will be the next round of companies to default.

    One good place to get an answer is to find which companies’ bankers are quietly tightening the liquidity noose (because they don’t want to be stuck holding worthless assets in bankruptcy or for whatever other reason), by quietly reducing the borrowing base on existing credit facilities.

    It is these companies which find themselves inside this toxic feedback loop of declining liquidity, which forces them to utilize assets even faster, thus even further shrinking the borrowing base against which their banks have lent them money, that will be at the forefront of the epic bankruptcy wave that is waiting to be unleashed across the US, leading to tens of billions of defaults junk bonds over the next 12-18 months.

    So, without further ado here are 25 deeply distressed companies, whose banks we found have quietly shrunk the borrowing base of their credit facilities anywhere from 6% in the case of Black Ridge Oil and Gas to a whopping 51% for soon to be insolvent New Source Energy Partners.

    Source: Bloomberg

  • Here's The Ultra-Clever Way That The Chinese Are Circumventing Capital Controls

    Submitted by Simon Black via SovereignMan.com,

    Well, it happened again.

    China’s stock market plunged, sending more than half a trillion dollars to money heaven.

    What a surprise, it turns out that a massive credit bubble is actually unsustainable and will eventually burst. Shocker.

    And just like what happened last year when Chinese stocks tanked, the government is stepping in to centrally plan the stock market recovery.

    Last year we saw some of the most extraordinary tactics; China’s government jailed short-sellers (i.e. people who bet on stocks declining), and they even encouraged their citizens to BORROW money against their homes to buy stocks.

    But no centrally planned bailout is complete without the cherry on top– capital controls.

    Capital controls are like a bear trap for your savings. They’re what governments impose when they want to hold your money hostage.

    In Europe, for example, governments have propped up failing banking systems by imposing withdrawal restrictions, preventing people from taking out too much of their own money.

    The ultimate example of this was the Cyprus bank freeze back in 2013, when the government locked an entire nation out of their bank accounts.

    (This is one of the most important reasons why a critical component of any Plan B is to hold some savings offshore at a well-capitalized foreign bank in a jurisdiction with minimal debt.)

    The ongoing war on cash is another form of capital controls.

    Governments and economists around the world are increasingly calling for outright bans on physical cash, claiming that only criminals and terrorists need to use cash.

    In reality, though, banning cash forces people to keep their money inside the banking system.

    And in Europe in particular, the banking system is in pitiful condition—highly illiquid, poorly capitalized, and now starting to pass on negative interest rates to customers.

    (This is a big reason why it makes sense to hold some physical cash—another important part of a Plan B. More on this later in the week.)

    Perhaps most commonly, governments impose capital controls to prop up a failing currency, preventing people from taking money out of the country, or conducting any foreign exchange.

    This has long been one of the dominant forms of capital controls in China.

    Last year amid China’s ongoing financial crisis, the government there tightened some forms of capital controls (curiously while loosening others).

    Chinese citizens now have strict limitations on the amount of money they can withdraw while traveling abroad, plus restrictions on how much money they can transfer overseas.

    But for any Chinese citizen with savings right now, it’s pretty obvious what’s happening. And they want to get their money out of the country.

    Chinese have an inherent distrust of government. They don’t sing pointless songs about their freedom.

    Chinese people know that they’re not free. And they know they need to take steps to do something about it before they get wiped out.

    But it raises a difficult question– how do you get money out of the country when the government has imposed strict capital controls?

    With a little creativity, there’s always a way.

    Bitcoin has been a popular alternative in China because people can easily cross borders with vast sums of money encrypted inside their mobile phones.

    But there’s a new tactic that Chinese are using now: domains.

    Yes, those domains. As in Internet “.com” domains.

    The domain business used to be a thriving industry. No doubt, people made huge sums of money in the great “.com land grab” more than a decade ago.

    But all the good domain names have been gobbled up, which means that domains can now be very expensive.

    Facebook bought FB.com for $8.5 million five years ago. Sex.com sold for $14 million in 2014. 360.com sold for $17 million last year.

    It’s not unusual for a domain to sell for millions… and a five or six figure price tag is nothing.

    (When I started my bank last year, I found that any .com domain with the word “bank” in it cost anywhere from $10,000 to $350,000. Unbelievable.)

    So it’s safe to say that most of the easy money has already been made in buying and selling .com domains.

    But… Chinese aren’t looking to make money. They’re not buying domains as investments– they’re using domains to TRANSPORT money.

    Think about it– if you have $50,000 that you really need to get out of China, you can buy an expensive domain today.

    Naturally there are no restrictions (for now) on buying a .com domain. So the sale goes through without any problems.

    But domains are international. Almost anyone in the world can buy or sell a .com domain.

    So later, you travel overseas, open a foreign bank account, then sell your domain to someone else.

    The proceeds of that sale get paid to your new bank account abroad. And, presto! You’ve just moved a lot of money overseas, completely circumventing capital controls.

    Naturally there are some costs involved, including some brokerage fees for buying/selling the domain.

    But for Chinese citizens whose alternative is to let their savings remain trapped within a failing system, they’ll gladly pay a few percent to move their money abroad.

    I find this an incredibly clever solution. It’s the digital equivalent of moving money using rare coins and collectibles.

    A lot of folks may be surprised to find that many rare coins can cost thousands, tens of thousands, even millions of dollars.

    You can buy a rare coin and transport vast sums of wealth across a border with nothing more than an old nickel in your pocket.

    Domains are an even more elegant solution because it doesn’t even exist in the physical world.

    It just goes to show that no matter how destructive a government gets, no matter how desperate their measures, there are always ways to defeat them.

  • Caption Contest: "Make America Great Again" Edition

    “Making America great again” one convert at a time…

  • Nomi Prins' Financial Road Map For 2016: "The Potential For Chaotic Fluctuations Is Greater Than Ever"

    Authored by Nomi Prins, author of "All The Presidents' Bankers", via NomiPrins.com,

    We are currently in a transitional phase of geo-political-monetary power struggles, capital flow decisions, and fundamental economic choices. This remains a period of artisanal (central bank fabricated) money, high volatility, low growth, excessive wealth inequality, extreme speculation, and policies that preserve the appearance of big bank liquidity and concentration at the expense of long-term stability. The potential for chaotic fluctuations in any element of the capital markets is greater than ever. 

    The butterfly effect – the flutter of a wing in one part of the planet altering the course of seemingly unrelated events in another part – is on center stage. There is much information to process. So, I’d like to share with you – not my financial predictions for 2016 exactly – – but some of the items that I will be examining from a geographical, political and financial perspective as the year unfolds.

    1) Central Banks: Artisans of Money

    Since the Fed raised (hiked is too strong a word) rates by 25 basis points on December 16th, the Dow has dropped by about 3.5%. Indicating a mix of fear of decisive movements and a market awareness deficit regarding the impact of its actions, the Federal Reserve hedged its own rate rise announcement, noting that its "stance of monetary policy remains accommodative after this increase.”

    These words seem fairly clear: there won’t be many, if any, hikes to come in 2016 unless economies markedly improve (which they won’t, or the words would be much more definitive.) Still, Janet Yellen did manage to alleviate some stress over the Fed's inaction on rate rises during the past 7 years, by invoking the slighted action possible with respect to rates. 

    Projections are past reactions here. The Fed, to save face more than anything or to “appear” conclusive, raised the Fed Funds rate (the rate US banks charge each other to borrow excess reserves, of which about $2.5 billion are with the Fed anyway), to .25-.50% from 0-.25%. And yet, the effective rate stood within the old Fed target range, or at an average of .20% on December 31 for various reasons, the timing of which was not lost on the Fed. It was at .35% or so on the first day of 2016. The Fed’s rate move was tepid, and it’s possible the Fed moves rates up another 25 or 50 basis points over 2016, but less likely more than that and more likely it engages in heightened currency swap activities with other central banks as a way to “manage” rates and exchange rates regardless.

    Meanwhile, most other central banks (Brazil being an extreme counter example) remain in easing mode or mirror mode to the Fed. It’s likely that more creative QE measures amongst the elite central banks will pop up if liquidity, markets or commodities head southward. Less powerful central banks will attempt to respond to the needs of their local economies while balancing the strains imposed upon them by the elite central banks.

    2) Global Stock Markets

    They say that behavior on the first day of the year is indicative of behavior in the year to come. If so, the first trading day doesn’t bode well for the rest. Turmoil began anew with Asian stock markets crumbling at the start of 2016. In China, the Shanghai Composite hit two circuit breakers and China further weakened the yuan.

    Yes, there’s the prevailing growth-decline story, a relic of 2015 “popular opinion”, being served as a reason for the drop. But also, restrictions on short selling by local Chinese companies are expiring. Just as in last August, China will have to balance imposing fresh sell restrictions with market forces pushing the yuan down.

    The People’s Bank of China will likely inject more liquidity through further reserve requirement reductions and rate cuts to counter balance losses. The demise in stock values is not simply due to slower growth, but to high debt burdens and speculative foreign capital outflows; the story of China as a quick bet is no longer as hot as it was when China opened its markets to more foreign investors in mid-2014, since which volumes and volatility increased. It will be interesting to see if China responds with more capital controls or less, and how its  “long-game” of global investments plays out.

    Blood shed followed Asian into European markets. Subsequently, the Dow dropped by about 1.6% unleashing its worst start to a year since the financial crisis began. Last year's theme to me was volatility rising; this year is about markets falling, even core ones. This is both a reaction to global and local economic weakness, and speculative capital pondering definitive new stomping grounds, hence thinner and more dispersed volumes will be moving markets.

    3) Global Debt and Defaults

    As of November 2015, Standard & Poor’s tallied the number of global companies that defaulted at 99, a figure only exceeded by that of 222 in 2009. Debt loads now present greater dangers. Not only did companies (and governments, of course) pile on debt during this zero interest rate bonanza period; but currency values also declined relative to the dollar, making interest payments more expensive on a local basis.

    If the dollar remains comparatively strong or local economies weaken by an amount equivalent to any dollar weakening, more defaults are likely in 2016. In addition, the proportion of junk bonds relative to investment grade bonds grew from 40% to 50% since the financial crisis, making the likelihood of defaults that much greater. Plus, the increase in foreign, especially dollar, denominated debt in emerging markets will continue to hurt those countries from a sovereign downgrade and a corporate downgrade to default basis.

    I expect sovereign downgrades to increase this year in tandem with corporate downgrades and defaults. Also, as corporate defaults or default probabilities increase, so does corporate fraud discovery. This will be a year of global corporate scandals.

    In the US about 60% of 2015 defaults were in the oil and gas industry, but if oil prices stay low or drop further, more will come. Related industries will also be impacted. In mid-December, Fitch released its leveraged loan default forecast of the TTM (Trailing Twelve Month index) predicting a 2.5% rise in default rates for 2016, or $24 billion in global defaults. That’s an almost 50% increase in default volume over 2015, and more than the total over the 2011-2013 period. Besides higher energy sector defaults, the retail sector could see more defaults, as consumers lose out and curtail spending.

    4) Brazil and Argentina

    Brazil is a basket case on multiple levels with nothing to indicate 2016 will be anything but messier than 2015. Even the upcoming Olympics there have reeked of scandal in the lead up to the summer games.

    Brazilian corporations have already sold $10 billion in assets to scrape together cash in 2015, a drop in the bucket to what’s needed. Brazil’s main company, Petrobras, is mired in scandal, its bond and share prices took massive hits last year as it got downgraded to junk, and a feeding frenzy between US, Europe and China for any of its assets on the cheap won’t be enough to alter the downward trajectory of Brazilian’s economy. In fact, it will just make recovery harder as core resources will be effectively outsourced.

    Fitch downgraded seven Brazilian sub nationals to junk, with more downgrades to come. Brazil itself was downgraded to junk by S&P with no positive outlook from anywhere for 2016. Falling revenues plus higher financial costs due to higher debt burdens will accentuate trouble. In addition, pension funds are going to be increasingly underfunded, which will enhance local population and political unrest, as unemployment increases, too.

    Though Brazil will have the toughest time relative to neighboring countries, Argentina, will not be having a walk in the park under its new government either. The new centrist government removed currency capital controls in a desperate bid to attract capital. This resulted in crushing the Argentinean Peso (a.k.a. “Marci’s devaluation”) and will only invite further speculative and political volatility into the country. It could get ugly.

    5) The Dollar and Gold

    Despite what will be a year of continued pathways to trade and currency arrangements amongst countries trying to distance themselves from the US dollar, the fact that much of the world is careening toward global Depression will keep the dollar higher than it deserves to be. It will remain the comparative currency of choice, as long as central banks continue to fabricate liquidity in place of government revenues from productive growth.

    Outside the US, most central banks (except Brazil which has a massive inflation problem) have maintained policies of rate reduction, lower reserve requirements, and other forms of QE or currency swap activities. As in 2015, the dollar will be a benefactor, despite problems facing the US economy and its general mismanagement of monetary policy. But the US dollar index and the dollar itself might exhibit more volatility to the downside this year, straying from its high levels more frequently than during 2015.

    Last year, given the enhanced volatility in various markets, I expected gold to rise during the summer as a safe haven choice, which it did, but it also ended the year lower in US dollar terms. Because the US dollar preserved its strength, the dollar price of gold fell during the year – yet not by as much as other commodities, like oil.

    I take that as a sign of gold finding some sort of a floor relative to the US dollar, with the possibility of more upside than downside for 2016, though in similar volatility bands to the US dollar. Gold relative to the Euro was just slightly down for 2015, relative to the approximate 10% decline in value relative to the US dollar. Considering the home currency is important when examining gold price behavior.

    Also, it’s important to note that investing in gold requires a longer time horizon – months and years, rather than weeks and months – and should be done through physical gold, coins or allocated bars depending on disposable investment thresholds, not paper gold. 

    In addition, as I mentioned last year, routinely extracting cash from bank accounts and keeping it in safe non-bank locations, remains a smart defensive play for 2016.

    6) The People’s Economies

    As companies default and economies suffer, industries will inevitably shed jobs this year around the world. The Fed’s publicly expressed optimism about employment figures and the headline figure decrease in US unemployment will be met with the realities of companies cutting jobs to pay the debts they took on during the ZIRP years and due to decreased demand.

    Unemployment is already rising in many emerging countries, and it will be important to note what happens in Europe and Japan, as well as the US in that regard.  This Recession 3.0 (or ongoing Depression) could fuel further artisanal money practices that might again be good for the markets and banks, but not for real economies or jobs lost through reactive corporate actions.  

    7) Oil

    With Saudi Arabia and Iran pissed off at each other in a round of tit-for-tat power positioning, it’s unlikely either OPEC heavy weight will reduce oil production, this while tankers worldwide remain laden with their loads and rigs are quiet. Tankers off the coast of Long Beach in California for instance, that used to come in and unload, remain in stalling patterns away from the shoreline, waiting for better prices. This means tankers are making money on storage, but also that extra oil supplies are hovering off shore, and even if prices rise, release of that supply would have a dampening consequence on prices.

    Oil futures have been a generally highly speculated product, so I’ve never believed that simple supply and demand ratios drive the price of spot oil as it relates to the futures price of oil. Only in this case, not only is there oversupply and weakening demand, but speculators are playing to the short side as well. That combination seems destined to keep oil prices low, or push them lower in the near future, but should be closely watched.

    Meanwhile, signs of knock on problems are growing. In China, for instance, shipyards are struggling because global rig customers don’t need their rig model orders fulfilled.  

    8) Europe

    While Greece faces more blood-from-a-stone extortion tactics and none of the Troika get why austerity measures don't actually produce local revenues at high enough levels to pay expensive debts to foreign investors and multinational entities, other parts of Europe aren’t looking much better for 2016. Spain is facing political unrest, Italy, despite exhibiting a tenuous recovery of sorts, still has a major unemployment problem, and the Bank of Portugal lowered its growth estimates – for the next two years.

    Mario Draghi, European Central Bank (ECB) head decided to extend Euro-QE to March 2017 from September 2016, having had the markets punish his less enthusiastic verbiages about QE late last year, because he has no other game. The Euro will thus likely continue to drop in value against the dollar, negative interest rates will prevail, and potential bail ins will appear if this extra dose of QE doesn’t keep the wheels, big banks and core markets of Europe properly greased.

    9) Mexico

    The Mexican Peso closed near record lows vs. the dollar for 2015. Much of the Peso’s weakness was attributed to low oil prices and Mexico’s dependence on its oil sector, but the Peso was already depreciating before oil prices dropped. If the US dollar remains comparatively high OR if oil prices continue to remain low or drop, the Peso is likely to do the same.

    When I was in Mexico a few years ago, addressing the Senate on the dangers of foreign bank concentration, there were protests throughout Mexico City on everything from teachers’ pay to the opening of Pemex, Mexico’s main oil company to foreign players. The government’s promise then was that foreign firms would provide capital to Mexico as well as industry expertise that would translate to revenues. Oil prices were hedged then at 74 dollars per barrel. With oil prices at half of that, many of those hedges are coming off this year and that will cause additional pain to the industry and Pemex.

    That said, though Mexico will feel the global Depression pain this year as a major player, it is still set to have a much better year than Brazil on every level; from a higher stock market to a higher currency valuation relative to the US dollar to lower inflation to lower unemployment to a better balance of trade with the US than Brazil will have with China. Plus, it has far less obvious inbred corporate-government corruption.

    10) Elections and Media Coverage

    It’s been a minute since the last debate or late night show fly-by from any Presidential hopeful, but this is the year of the US election. I look forward to continuing to post my monthly wrap on TomDispatch as the Democratic and Republican nominees emerge. I will be taking stock of the most expensive election in not just US history, but in the history of the World. Look for more on the numbers behind the politics later this month.

    From a financial standpoint, this election has low impact on flows of capital. Given the platforms of everyone in reasonable contention (with the exception of Bernie Sanders’ platform), no one will actually touch excessive speculation, concentration risk in the banking or other critical sectors like healthcare, or meaningfully examine the global role of artisanal central bank policy, particularly as emanating from the Fed. 

    Elsewhere, economic stress throughout the globe and a general sense of exasperation and distrust with politicians is putting new leaders in place that are pushing for more austerity or open capital flow programs rather than foundational growth and restrictions on the kind of flows that cause undue harm to local economies. That is a recipe for further economic disaster that will fall most heavily on populations worldwide. 

  • Islamic State's New "Jihadi John" Was Bouncy Castle Salesman, Nirvana Fan, Aspiring Dentist

    Back in November, The Pentagon claimed to have killed Mohammed Emwazi – better known by his stage name “Jihadi John” – in a drone strike near Raqqa.

    Emwazi was infamous for his role in catapulting ISIS into the public’s collective consciousness. Clad in black and brandishing a Bowie knife, the Brit beheaded hostages dressed in bright orange jumpsuits in some of the first Islamic State propaganda videos to garner widespread Western media coverage.

    Late last week, ISIS released a new video featuring a British executioner who has apparently taken up the mantle in Emwazi’s absence. Dubbed the “the new Jihadi John” by the British press, the masked executioner reads the following message to Prime Minister David Cameron, who recently won parliamentary support for British airstrikes on Raqqa:

    This is a message to David Cameron. Oh slave of the White House, oh mule of the Jews. How strange it is that we find ourselves today hearing an insignificant leader like you challenge the might of the Islamic State. How strange it is that the leader of a small island threatens us with a handful of planes. One would have thought you would have learned the lessons of your pathetic master in Washington and his failed campaign against Islamic State.

     


     

    It seems that you, just like your predecessors Blair and Brown, are just as arrogant and foolish. In fact David, you are more of an imbecile. Only an imbecile would dare to wage war against a land where the law of Allah reigns supreme. And where the people live under the justice and security of the Sharia.

     

    Only an imbecile would dare to anger a people who love death the way that you love your life. Oh British Government. Oh people of Britain. Know that today your citizenship are under our feet. And that the Islamic State, our country, is here to stay. And we will continue to wage jihad, break borders and one day invade your land where we will rule by the sharia.

    So who is the “new and improved” Jihadi John, you ask? Apparently he’s British Indian Siddhartha Dhar. Here’s Reuters: 

    The masked militant in an Islamic State video showing the killing of five men accused by the group of being Western spies is believed to be a Londoner known as Sid who once sold inflatable bouncers.

     

    Siddhartha Dhar, who left Britain for Syria while on police bail after his arrest on suspicion of belonging to a banned group and encouraging terrorism, has been identified by media as the spokesman in the militant organization’s latest film.

     

    Dhar, who is also known as Abu Rumaysah, is one of Britain’s most high-profile Islamists and an associate of Anjem Choudary, Britain’s best-known Islamist preacher who is due to go on trial next week accused of terrorism offences.

     

    A convert from Hinduism who lived in east London, Dhar regularly attended protests staged by the now banned organization al-Muhajiroun and had often spoken to the media in support of radical Islamic causes.

     

    Since leaving Britain he gained further attention through online videos in which he exhorted life under Islamic State.

    That’s right ladies and gentlemen, Islamic State’s newest Western executioner was a bouncy castle salesman.

    But that’s not all. Dhar is also “a former Arsenal and Nirvana fan” who “enjoyed drinking, would take girls to his favourite action movies, and dreamed of being an NHS dentist,” according to the Daily Mail. “Dhar’s family say he was a ‘sensitive boy’ who ‘changed’ as a teenager after the death of his father and converted to Islam, shunning TV and music, sleeping on the floor and even telling his mother he couldn’t love her anymore because she is not a Muslim,” DM wrote on Tuesday. “He stopped studying and rented bouncy castles for children’s parties while supporting banned militant group Al-Muhajiroun and running ‘roadshows’ aimed at attracting troubled youngsters in inner-cities.”

    Apparently, Dhar skipped bail in September 2014 and fled Britain for Syria. He announced his arrival in the “caliphate” by posting the following picture on Twitter which depicts his young son holding a pistol:

    “I was in a state of shock,” Dhar’s sister Konika Dhar told BBC. “I believed the audio to resemble, from what I remember, the voice of my brother but having viewed the short clip in detail, I wasn’t entirely convinced which put me at ease.” Here’s a documentary about Dhar and his family shot by Vice News in 2014: 

    The ISIS video in which Dhar appears also features a toddler dressed in fatigues and donning an ISIS headband. Following the execution of five prisoners, the child proclaims that ISIS will “kill the kaffir (unbelievers) over there”.

    “Sunday Dare, a Londoner of Nigerian origin, identified the child as his four-year-old grandson Isa,” Reuters reports. “Dare told British media his daughter, who grew up a devout Christian named Grace before converting to Islam and changing her name to Khadijah, had taken London-born Isa to Syria with her to join Islamic State.” Here’s Sputnik: 

    The child featured in the video has been identified by his grandfather who told Channel 4 news in Britain that he recognized the boy and condemned the footage. Sunday Dare, said: “It’s propaganda; they are just using a small boy. He doesn’t know anything. They are just using him as a shield.”

    His jihadi bride mother had previously posted a picture of her son carrying an AK47 assault rifle 18 months ago, provoking a debate in the British media over whether the image and subsequent identity of her elder child dressed in camouflage clothing should be revealed by the press.

     

    London Mayor Boris Johnson has said the child whose face is featured in almost every British newspaper and online news website, “should be brought back to the UK and taken into care.” 

    Like us, you’re probably struggling to comprehend all of this.

    Bouncey castle salesmen?

    Mothers taking their children to the caliphate to grow up in the Islamic State? 

    Has the whole world gone crazy?

    Then, we remembered an image from an ISIS propaganda video released last summer and suddenly, all of the above made sense:

  • Hong Kong Publishers Reportedly Being Kidnapped By Chinese Authorities, Taken To Mainland

    Submitted by Mike Krieger via Liberty Blitzkrieg blog,

    A Hong Kong lawmaker said Sunday he believes Chinese security officers kidnapped five publishing company employees who have gone missing in the city, possibly because of a planned book about the former love life of President Xi Jinping.

     

    The five work for a publishing house known for producing books critical of the Chinese government.

     

    The disappearances add to growing unease that freedoms in the semi-autonomous Chinese city are being eroded.

     

    Under Hong Kong’s mini-constitution, it enjoys freedom of speech and Chinese law enforcers have no right to operate in the city.

     

    It is unclear where the men are or how they went missing.

     

    – From the AFP article: Missing Hong Kong Booksellers “Working on Book on Xi’s Love Life”

    For several years now, I’ve periodically observed that China’s increasingly aggressive crackdown on dissent serves as a harbinger of far more difficult times ahead. The thinking goes that if anyone is privy to the severe fragility of the country’s economic situation, it would be Chinese leadership. As such, desperate moves by Chinese leadership should foretell drastically worse economic and social conditions.

    As an example, here’s an excerpt from this summer’s post, Chinese Authorities Arrest Over 100 Human Rights Activists and Lawyers in Desperate Crackdown on Dissent:

    While China doesn’t have any illusion of democracy to begin with, that doesn’t make the situation any less significant. While media attention has been focused on the popping of China’s stock market bubble, what has been far more interesting is the government’s terrified response. It has simply put, entered full on panic mode. Freezing trading in a large percentage of listed equities, and even threatening to arrest so-called “malicious short sellers.”

     

    I have long stated that the situation in China is much more fragile than anyone cares to recognize or admit. I continue to think revolution/regime change in China presents a real risk in the years ahead, and I think the Communist Party is well aware of it. This is precisely why the heavy hammer of government is coming down upon political (and economic) dissent with increased force.

    The scramble to crack down on dissent has become so intense Chinese authorities seem to be now exerting illegal force against residents of Hong Kong. Of course, this story is long in the making, as the massive protests that broke out a little over a year ago known as the “umbrella revolution,” was in fact a protest against Beijing’s moves to ensure that Hong Kong leadership remain loyal puppets to the authorities on the mainland. As the Guardian explained at the time:

    Hong Kong, a former British colony of 7 million people, has been governed under a “one country, two systems” framework since it was handed back to Chinese control in 1997. The principle is simple in theory — Beijing is responsible for the city’s defence and foreign affairs; Hong Kong enjoys limited self-governance and civil liberties, including an independent judiciary and unrestricted press.

     

    Its top political post – that of chief executive – is chosen by a “nominating committee” of 1,200 people, most of them from pro-Beijing elites. Yet when Beijing regained control over the city, it promised that the region would be able to elect its top leader by universal suffrage by 2017. The group guiding the current protests – set up 18 months ago by two professors and a baptist minister under the banner Occupy Central with Love and Peace — threatened to paralyse the city’s central business district if Beijing broke its word.

     

    Nobody knew when, or if, the protest would occur, but in August Beijing passed a reform framework to stipulate universal suffrage on its own terms – only two or three committee-vetted candidates who “love the country” would be allowed to run. Activists considered this the last straw. Students began a class boycott last Monday and, galvanised by a city-wide surge in support, staged a large-scale protest outside of the city government headquarters on Friday night. Occupy Central mobilised on Sunday. The rest is unfolding as you read.

    So the writing has been on the wall for quite some time. Emboldened, it appears Chinese authorities are now simply kidnapping people in Hong Kong they deem to be subversive.

    Bloomberg reports:

    The disappearance of a Hong Kong-based publisher of books critical of China’s Communist Party is fueling concerns that tactics used to limit dissent on the mainland are being exported to the former British colony.

     

    Lee Bo, part owner of Causeway Bay Books, was reported missing Friday by his wife, who said her last contact with him was from a telephone number from Shenzhen, across the mainland border. Hong Kong police have asked their Chinese counterparts about the 65-year-old bookseller, who disappeared from Hong Kong several months after four others related to the store vanished.

     

    Concerns about encroachment on Hong Kong’s freedoms under President Xi Jinping sparked the student-led democracy protests that paralyzed parts of the city for months in 2014. Since coming to power, Xi has embarked on a campaign on the mainland to tighten the party’s grip on power that has included secret detentions and convictions for spreading information deemed dangerous.

     

    “The possible intrusion into Hong Kong by law enforcement agencies in China would shatter the sense of security that is provided by One Country, Two Systems,” said Albert Ho, a lawmaker and chairman of the Hong Kong Alliance in Support of Patriotic Democratic Movements in China, referring to the blueprint for Hong Kong’s autonomy. “If that sense of security is being shattered, then the underlying confidence in ‘One Country, Two Systems’ would be torn apart.”

     

    Lee’s bookstore was popular among tourists from mainland China as a source of salacious books about the country’s elite banned on the mainland. He was last seen leaving a warehouse on Hong Kong island used by the company.

     

    Lee’s wife approached local police on Monday and withdrew a request for help, the South China Morning Post reported, citing a government official it didn’t identify. Taiwan’s Central News Agency also published a handwritten letter said to be faxed from Lee to a bookstore colleague. In it, he said he took his “own way” to China to assist in an investigation that might take some time.

    Yes, of course. Totally normal to leave a warehouse and then disappear to the Chinese mainland in order to “help with an investigation,” without telling your wife first.

    Lee’s case is resonating among Hong Kong’s pro-democracy activists, who seized city streets for almost three months in 2014 after China unveiled a plan to elect the city’s leader from a pool of candidates vetted by Beijing. A video in which Agnes Chow — a member of the pro-democracy student group Scholarism — described Lee’s disappearance as a “white terror incident” has garnered more than 800,000 views.

     

    Xi has been cracking down on dissent in China since he took over as party chief in November 2012, overseeing a more restrictive ideological environment. In the most recent summer, dozens of members of the so-called rights-defense movement were detained over allegations they attempted to manipulate court cases.

     

    Lee’s disappearance came after four of his colleagues vanished within days of each other. Bookstore manager Lam Wing-kei; general manager of the publishing house Lui Bo; and business manager, Cheung Jiping, went missing in October while visiting the mainland, the South China Morning Post reported. Gui Minhai, a co-owner with Lee of the publisher Mighty Current, disappeared from his apartment in Thailand the same month.

     

    The reach of China’s law enforcement agencies has riled authorities in other countries. Australia’s government last year expressed “deep concerns” after China sent two police officers to Melbourne in late 2014 without permission to question a suspected economic fugitive. The Obama administration has requested that China recall agents pursuing Chinese corruption suspects in the U.S., the New York Times reported in August.

    How do you say panic in Mandarin?

    The AFP adds some additional tidbits to the developing story:

    A Hong Kong lawmaker said Sunday he believes Chinese security officers kidnapped five publishing company employees who have gone missing in the city, possibly because of a planned book about the former love life of President Xi Jinping.

     

    The five work for a publishing house known for producing books critical of the Chinese government.

    The disappearances add to growing unease that freedoms in the semi-autonomous Chinese city are being eroded.

     

    Under Hong Kong’s mini-constitution, it enjoys freedom of speech and Chinese law enforcers have no right to operate in the city.

     

    It is unclear where the men are or how they went missing.

     

    Ho said it was “outrageous” for Lee to have disappeared in the city.

     

    “We have a reason to believe he was politically abducted and illegally transferred to the mainland,” he said.

     

    Lee’s wife said Saturday her husband told her he was “assisting in an investigation” in a phone call after he failed to return home for dinner Wedesday.

     

    She reported him missing to police Friday and said the call he made to her was from a number in the neighbouring Chinese city of Shenzhen.

     

    “He said he wouldn’t be back so soon and he was assisting in an investigation,” she said.

     

    Agnes Chow of leading student campaign group Scholarism appealed to the international community for help.

     

    “I hope everyone in the world who believes in universal values of freedom and human rights could stand up,” she said in a Facebook post.

     

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