Today’s News November 11, 2015

• What’s Different about Monetary Policy?

  by Keith Weiner

   

  Many people agree that it’s important to move to a free market in money (i.e. the gold standard). They also say that it’s just as important to fight bad taxes and regulation. In their view, government interference in the economy is like friction in a car. The more friction you add, the slower the car goes. One source of friction is much the same as any other.

  Let me explain why it doesn’t quite work that way, using a few examples.

  Suppose the government imposes an expensive tax on employers based on the number of full-time employees. Full time is defined as working at least 30 hours per week. Employers respond to this tax by reducing the hours of as many employees as possible below the threshold. The law still harms employers, but less than intended. If the law were a bullet aimed at the chest of the employer, it ends up causing a flesh wound.

  Another example is a law that makes it illegal for startup companies to pitch their deals to non-accredited investors. Accredited investors form organized groups that entrepreneurs can safely go to and raise capital. It’s cumbersome, and it leaves some entrepreneurs out in the cold, but as with the employer tax, everyone works to minimize the damage.

  Both the employer tax and the investment regulation fit the analogy of friction that slows down the economy. However, our monetary system causes a different kind of effect.

  For over three decades, the interest rate has been falling. This causes all asset prices to rise. Rising asset prices incentivize people to consume their capital (as I’ve written in
  many
  articles). In short, it’s a process of converting someone’s wealth into someone else’s income. The owner of the wealth would never consume it, but the recipient of income is happy to consume most of it.

  Everyone has seen traders and money managers driving expensive cars and dining in high end restaurants. There’s nothing wrong with making a lot of money and spending it. The problem I am describing is not that they make a lot of money, but that the money they make does not come from producing anything of value. It’s other people’s life savings that they are driving and eating.

  This is the difference between monetary policy and tax or regulatory policy. Monetary policy makes people excited to destroy their wealth. There is no other kind of government intrusion in the market that sets off such a feeding frenzy of self-destructive behavior.

  How does it do this? It makes it profitable to do so. Why does someone hand over his wealth to someone else for consumption? He buys an asset in the hope that it will go up further in price. So long as asset prices are rising, people exchange their capital for a chance to win cash in the falling interest rate game.

  Most people would say that the problem is when assets fall again. They miss the point. The destruction occurs when the price is rising, and winners are spending their profits which are others’ accumulated savings. The accounting catches up eventually when prices fall back down, and then losses are taken.

  The goal of my writing is to help people come to a clear understanding and diagnosis of the problem.

  Let’s end with a sobering quote, made doubly significant by who said it and who he was quoting.

  “Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose.” – John Maynard Keynes

   

  Do you support the gold standard? Please come and be counted. Show the legislature and governor in Arizona that honest money is popular! Please come to the Monetary

  Innovation Conference in Phoenix on Nov 17 (Keith Weiner is a speaker). At the conference, speakers will discuss gold and how innovators are using it to solve real problems for real people. Please click here to register.

  

  

  

  

• China's 'Nasdaq' Rises For 6th Straight Day As Commodities, Freight Index Collapse

  The PBOC weakened the Yuan fix for the 7th straight day – the longest such streak of 'devaluation' since 2012 – which appears to have helped fuel yet another day of gains for China's most-levered Shenzhen and ChiNext stock indices (even though the USDollar is losing altitude against Asian FX). At the break we note that the lower beta CSI-300 and Shanghai Composite are diverging lower. Meanwhile, over in real economy land, Copper is hitting new lows, nickel is weak, zinc is down, and China Containerized Freight Index just hit a new record low… but when has any of that ever mattered?

   

  PBOC devalued the Yuan Fix for the 7th straight day – that is the longest streak since May 2012…Currency war death by a thousand cuts?

  

   

  But The USDollar is losing ground against Asian FX in general overnight…

  

   

  High-beta Shenzhen is now up 6 straight days…almost entirely retracing the drop from China's devaluation…

  

   

  But Shenzhen (red) and ChiNext (yellow) are notably diverging from Shanghai Composite (blue) and CSI-300 (green) in the last few days…

  

   

  However, amid all this exuberant releveraging and stability, Commodity prices are plunging and Containerized Freight (i.e. exports) costs have hit record lows…

  

   

   

  Charts: Bloomberg

  

  

  

  

  

• The Deep State: The Unelected Shadow Government Is Here To Stay

  Submitted by John Whitehead via The Rutherford Institute,

  “Behind the ostensible government sits enthroned an invisible government, owing no allegiance and acknowledging no responsibility to the people.” ? Theodore Roosevelt

  America’s next president will inherit more than a bitterly divided nation teetering on the brink of financial catastrophe when he or she assumes office. He will also inherit a shadow government, one that is fully operational and staffed by unelected officials who are, in essence, running the country.

  To be precise, however, the future president will actually inherit not one but two shadow governments.

  The first shadow government, referred to as COG or continuity of government, is made up of unelected individuals who have been appointed to run the government in the event of a “catastrophe.”

   

  The second shadow government, referred to as the Deep State, is comprised of unelected government bureaucrats, corporations, contractors, paper-pushers, and button-pushers who are actually calling the shots behind the scenes right now.

  The first shadow government, COG, is a phantom menace waiting for the right circumstances—a terrorist attack, a natural disaster, an economic meltdown—to bring it out of the shadows, where it operates even now. When and if COG takes over, the police state will transition to martial law.

  Yet as I point out in my book Battlefield America: The War on the American People, it is the second shadow government, the Deep State, which poses the greater threat to our freedoms. This permanent, corporatized, militarized, entrenched bureaucracy is unaffected by elections, unaltered by populist movements, and beyond the reach of the law.

  This is the hidden face of the police state.

  These two shadow governments, which make a mockery of representative government and the “reassurance ritual” of voting, have been a long time in the making. Yet they have been so shrouded in secrecy, well hidden from the eyes and ears of the American people, that they exist and function in contravention to the principles of democratic government.

  As the following makes clear, these shadow governments, which operate beyond the reach of the Constitution and with no real accountability to the citizenry, are the reason why “we the people” have no control over our government.

  The COG shadow government plan was devised during the Cold War as a means of ensuring that a nuclear strike didn’t paralyze the federal government.

  COG initially called for three teams consisting of a cabinet member, an executive chief of staff and military and intelligence officials to practice evacuating and directing a counter nuclear strike against the Soviet Union from a variety of high-tech, mobile command vehicles. If the president and vice president were both killed, one of these teams would take control, with the ranking cabinet official serving as president.

  This all changed after the attacks of September 11, 2001, when it became clear that there would be no warning against a terrorist attack. Instead of waiting until an attack occurred to mobilize part-time bureaucrats and activate evacuation schemes, George W. Bush opted to change COG and establish a full-time, permanent shadow government, stationed outside the capital, run by permanently appointed (not elected) executive officials.

  COG has since taken on a power—and a budget—of its own.

  Incredibly, under the Obama administration, the plans for the shadow government have expanded and grown far more elaborate and costly than many realize. It is what investigative journalist William M. Arkin refers to as “the latest manifestation of an obsession with government survival.”

  In much the same way that the nation was taken hostage after 9/11 by color-coded terror alerts and “See Something, Say Something” campaigns that transformed us into a fearful, watchful nation of suspects, the government’s efforts to prepare us for a so-called national disaster have, in turn, left us a constant state of near-emergency and acclimated us to the sight of militarized police, military drills on American soil, privatized prisons, the specter of internment camps, and the erosion of constitutional rights, especially as they pertain to so-called “extremists,” domestic or otherwise.

  Study the COG plans carefully, however, and you’ll find that the concern isn’t so much about protecting our government as it is about protecting the nation’s governmental elite.

  As Arkin reports: “Countless billions have been spent on this endeavor over the years, a secret orgy of preparedness going on behind the scenes, one that ensures Washington can defend itself, take care of its own, and survive no matter what.”

  To this end, the government has invested heavily in the “architecture of fear”: massive underground bunkers—the size of small cities—which are sprinkled throughout the country for the government elite to escape to “in case of an imminent nuclear strike so that they can set up a kind of Administration-in-exile, directing every order of business from retaliation to recovery.”

  These bunkers, strategically located around the nation’s capital and in key states, represent a who’s who on the shadow government’s payroll, with every department and agency represented, from the Department of Education and the Trademark Office to the Small Business Administration and the National Archives.

  No sector has been overlooked: military, surveillance, counterintelligence, scientific, political, judicial, corporate contractors, as well as computer programmers, engineers, fire fighters, craftsmen, security guards, branch chiefs, financial managers, supply officers, secretaries and stenographers, all of whom have been entrusted with special ID cards allowing them clearance into the doomsday survival sites. They’ve even included individuals tasked with patent and trademark processing. They even have contingency plans to save priceless works of art.

  The Federal Relocation Arc near Washington DC will reportedly serve as the emergency bunker for “every Cabinet department (and every government organization deemed essential).” Site R, a 700,000-foot facility inside Raven Rock Mountain near Camp David, will serve as a backup Pentagon. Peters Mountain near Charlottesville, Va., is the likely site for the nation’s domestic spies to hide out. Congress will retire to a subterranean facility near the posh Greenbrier resort in West Virginia, which served as an internment facility for Japanese, Italian and German diplomats during World War II. And a 600,000-square-foot complex inside Virginia’s Mount Weather is expected to be the primary relocation site for the White House, the Supreme Court and much of the executive branch.

  Built into the side of a mountain, Mount Weather, near Bluemont, Va., is staffed 24 hours a day, seven days a week. This self-contained facility contains, among other things, a hospital, crematorium, dining and recreation areas, sleeping quarters, reservoirs of drinking and cooling water, an emergency power plant, a radio/television studio and a full-time police and fire department.

  There is also an Office of the Presidency at Mount Weather, which regularly receives top-secret national security information from all the federal departments and agencies. This facility was largely unknown to everyone, including Congress, until it came to light in the mid-1970s. Military personnel connected to the bunker have refused to reveal any information about it, even before congressional committees. In fact, Congress has no oversight, budgetary or otherwise, on Mount Weather, and the specifics of the facility remain top-secret.

  These facilities reinforce a troubling government mindset that treats the American people as relatively insignificant and expendable. Because you know who’s not on the list of key-individuals-to-be-saved-in-the-eventuality-of-a-disaster? You and me and every other American citizen who is viewed as a mere economic unit to be tallied, bought and sold by those in power.

  Not to worry, however. The government hasn’t completely forgotten about us.

  In the event of a “national emergency”—loosely defined as “any incident, regardless of location, that results in extraordinary levels of mass casualties, damage, or disruption severely affecting the U.S. population, infrastructure, environment, economy, or government functions”—the executive branch and its unelected appointees will be given unchecked executive, legislative and judicial power.

  In such an event, the Constitution will effectively be suspended, thereby ushering in martial law.

  However, writing for Radar magazine, Christopher Ketcham suggests that the government won’t have completely forgotten about the rest of us. In fact, Ketcham believes that the government also has plans to imprison hundreds of thousands of “potentially suspect” Americans in detention camps.

  Ketcham describes a program created by the Department of Homeland Security that relies on a database of Americans who might be considered potential threats in the event of a national emergency. Referred to by the code name Main Core, this database reportedly contains the names of millions of Americans who, “often for the slightest and most trivial reason, are considered unfriendly, and who, in a time of panic, might be incarcerated. The database can identify and locate perceived ‘enemies of the state’ almost instantaneously.”

  Sounds unnervingly like the objectives of the government’s new Domestic Terrorism Czar and the Strong Cities network, which will be working to identify and target potential extremists, doesn’t it?

  Under Ketcham's scenario, if a terrorist attack occurs, the president will declare a national emergency, activating COG procedures and throwing the country into martial law with the shadow government at the helm. The administration will then round up the “dangerous” Americans listed in Main Core and place them in one of the many internment camps or private prisons built for just such an eventuality.

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

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

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

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

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

  Rather, Lofgren continues:

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

   

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

   

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

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

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

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

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

  As Lofgren concludes:

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

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

  

  

  

  

  

• Which 2 Nations Received 75% Of America's $5.9 Billion Foreign Military Financing?

  According to the U.S. State Government 2013-2015 Foreign Assistance report, an estimated $5.9 billion was spent on foreign military funding alone in fiscal year 2014.  This is equivalent to 17% of the estimated $35 billion spent on total global aid discussed in our previous article. U.S. foreign military aid to countries ranged from $200,000 to $3.1 billion. Of the top 10 recipients, two countries received 75% of the $5.9 billion. 

   

  Take a look on the map below to see who is getting the most foreign military financing from the U.S….

  

   

  Below is a ranking of the the top 10 recipients and their respective world regions.

  • Israel: $3.1B (Middle East)

  • Egypt: $1.3B (Africa)

  • Iraq: $300M (Middle East)

  • Jordan: $300M (Middle East)

  • Pakistan: $280M (Asia)

  • Lebanon: $75M (Middle East)

  • Philippines: $50M (Asia)

  • Colombia: $29M (Latin America)

  • Tunisia: $20M (Africa)

  Research conducted by the World Bank shows that the on average, countries spend approximately 2.2% of GDP on the military. Israel, Iraq, Jordan and Pakistan allocated above average spending towards their military in 2014. The data shows that each country spent approximately 5.2%, 4.3%, 3.5%, and 3.4% of GDP, respectively, on military expenditures. These countries are also part of the top 5 recipients of U.S. foreign military financing, totaling $4.0 billion. 

  Funding by World Region

  Approached from a different perspective, approximately 87% of the $5.9 billion was distributed among two of five world regions. The Middle East tops this list, followed by Africa.

  • Middle East: 64%

  • Africa: 23%

  • Asia: 7%

  • General Programs: 4%

  • Europe: 1%

  • Latin America: 1%

  An interesting point to note is that while the Latin American region received only 1% of foreign military financing, Colombia made the top 10 list with $28 million. The second highest recipient in Latin America was Mexico, with $7 million of U.S. funding. On the other hand, Africa received roughly 23% of military aid; however, five African countries made the bottom of the list, receiving $200,000 each (Cote d’Ivoire, Guinea, Botswana, Tanzania, and Uganda). Of the 74 countries that received U.S. foreign military funding, not all received aid in proportion to its geographic region.

  Past, Present, and Future

  Allocation of foreign military financing may differ over time as the social, economic, and political climate changes across the globe. In the past three years; however, foreign military financing has been relatively consistent, with $5.7 and $5.9 billion distributed in 2013 and 2014, respectively, and $5.6 billion requested in 2015. Additionally, Israel, Egypt, Iraq, Jordan, and Pakistan made the top 5 in all three years, receiving roughly the same amount of aid year over year. It is difficult to predict future foreign military financing allocations; however, if remaining consistent, five countries will receive approximately 89% of these distributions, leaving 69 other countries to receive the remaining 11% of funds

   

  Source: HowMuch.net

  

  

  

  

  

• On The Verge Of The Great Unraveling, Looking Back From 2050

  The future remains eternally unknown and invariably holds its surprises. Fortunately however, it will prove far less unknown because among our number we happen to have one, John Feffer, with the ability to channel a geo-paleontologist who’s had some experience with the world 35 years from now and so, unlike the rest of us, can look back on our planetary fate from what turns out to be a distinctly dystopian future.

  Submitted by John Feffer via TomDispatch.com,

  Splinterlands, The View From 2050

  Let me start with a confession. I’m old-fashioned and I have an old-fashioned profession. I’m a geo-paleontologist. That means I dig around in archives to exhume the extinct: all the empires and federations and territorial unions that have passed into history. I practically created the profession of geo-paleontology as a young scholar in 2020. (We used to joke that we were the only historians with true 2020 hindsight).  Now, my profession is becoming as extinct as its subject matter.

  Today, in 2050, fewer and fewer people can recall what it was like to live among those leviathans. Back in my youth, we imagined that lumbering dinosaurs like Russia and China and the European Union would endure regardless of the global convulsions taking place around them. Of course, at that time, our United States still functioned as its name suggests rather than as a motley collection of regional fragments that today fight over a shrinking resource base.

  Empires, like adolescents, think they’ll live forever. In geopolitics, as in biology, expiration dates are never visible. When death comes, it’s always a shock.

  Consider the clash of the titans in World War I. Four enormous empires — the Ottoman, Austro-Hungarian, Russian, and German — went into that conflict imagining that victory would give them not just a new lease on life, but possibly even more territory to call their own. And all four came crashing down. The war was horrific enough, but the aftershocks just kept piling up the bodies. The flu epidemic of 1918-1919 alone — which soldiers unwittingly transported from the trenches to their homelands — wiped out at least 50 million people worldwide.

  When dinosaurs collapse, they crush all manner of smaller creatures beneath them. No one today remembers the death throes of the last of the colonial empires in the mid-twentieth century with their staggering population transfers, fierce insurgencies, and endless proxy wars — even if the infant states that emerged from those bloody afterbirths gained at least a measure of independence.

  My own specialty as a geo-paleontologist has been the post-1989 period. The break-up of the Soviet Union heralded the last phase of decolonization. So, too, did the redrawing of boundaries that took place in parts of Asia and Africa from the 1990s into the twenty-first century, producing new states like East Timor, Eritrea, South Sudan. The break-up of the Middle East, in the aftermath of the U.S. invasion of Iraq and the “Arab Spring,” followed a similar, if far more chaotic and bloody pattern, though religious extremism more than nationalist sentiment tore apart the multiethnic countries of the region.

  Even in this inhospitable environment, the future still seemed to belong to the dinosaurs. Despite setbacks, the U.S. continued to loom over the rest of the planet as the “sole superpower,” with its military in constant intervention mode.  China was on the rise.  Russia seemed bent on reconstituting the old Soviet Union. The need to compete on an increasingly interconnected planet contributed to what seemed like a trend: pushing countries together to create economies of scale. The European Union (EU) deepened its integration and expanded its membership. Nations of very different backgrounds formed economic pacts like the Association of Southeast Asian Nations (ASEAN) and the North American Free Trade Agreement (NAFTA). Even countries without any shared borders contemplated such joint enterprises, like the Organization of Petroleum Exporting Countries (OPEC) and, later, Brazil, Russia, India, China, and South Africa (the “BRICS” nations).

  As everyone now knows, however, this spirit of integration would, in the end, go down to defeat as the bloodlands of the twentieth century gave way to the splinterlands of the twenty-first. The sense of disintegration and disunity that settled over our world came at precisely the wrong moment. To combat a host of collective problems, we needed more unity, not less. As we are all learning the hard way, a planet divided against itself will not long stand.

  The Wrath of Nations

  Water boils most fiercely just before it disappears. And so it is, evidently, with human affairs.

  Just before all hell broke lose in 1914, the world witnessed an unprecedented explosion of global trade at levels that would not be seen again until the 1980s. Just before the Nazis took over in 1932, Germans in the Weimar Republic were enjoying an extraordinary blossoming of cultural and political liberalism. Just before the Soviet Union imploded in 1991, Soviet scholars were pointing proudly to rising rates of intermarriage among the many nationalities of the federation as a sign of ever-greater social cohesion.

  And in 2015, just before the great unraveling, the world still seemed to be in the grip of what was then labeled “globalization.” The volume of world trade was at an all-time high. Facebook had created a network of 1.5 billion active users. People on every continent were dancing to Drake, watching the World Cup final, and eating sushi. At the other end of the socio-economic spectrum, more people were on the move as migrants and refugees than at any time since the end of World War II.

  Borders seemed to be crumbling everywhere.

  Before 2015, almost everyone believed that time’s arrow pointed in the direction of greater integration. Some hoped (and others feared) that the world was converging on ever-larger conglomerations of nations. The internationalists campaigned for a United Nations that had some actual political power. The free traders imagined a frictionless global market where identical superstores would sell the same products at all their global locations. The technotopians imagined a world united by Twitter and Instagram.

  In 2015, people were so busy crossing borders — real and conceptual — that they barely registered the backlash against globalization. Officially, more and more countries had committed themselves to diversity, multiculturalism, and the cosmopolitan ideals of liberty, solidarity, and equality. But everything began to change in 2015, a phenomenon I first chronicled in my landmark study Splinterlands (Dispatch Books, 2025). The movements that came to the fore in 2015 championed a historic turn inward: the erection of walls, the enforcement of homogeneity, and the trumpeting of exclusively national virtues.

  The leaders of these movements — Donald Trump in the United States, Hungarian Prime Minister Viktor Orban, Russian President Vladimir Putin, French National Front Party leader Marine Le Pen, Indian Prime Minister Nahendra Modi, Japanese Prime Minister Shinzo Abe, and Egyptian President Abdel Fattah el-Sisi, to name just a few — were not members of a single party. They did not consider themselves part of a single movement. Indeed, they were quite skeptical of anything that smacked of transnational cooperation. Personally, they were cosmopolitans, comfortable in a variety of cultural environments, but their politics were parochial. As a group, they heralded a change in world politics still working itself out 35 years later.

  Ironically enough, at the time these figures were the ones labeled “dinosaurs” because of their focus on imaginary golden ages of the past. But when history presses the rewind button, as it has for the last 35 years, it can turn reactionaries into visionaries.

  Few serious thinkers during the waning days of the Cold War imagined that, in the long run, nationalism would survive as anything more significant than flag and anthem. As the historian Eric Hobsbawm concluded in 1990, that force was almost spent, or as he put it, “no longer a major vector of historical development.” Commerce and the voracious desire for wealth were expected to rub away at national differences until all that remained would be a single global marketplace of supposedly rational actors. New technologies of travel and communication would unite strangers and dissolve the passions of particularism. The enormous bloodlettings that nations visited on one another in the nineteenth and twentieth centuries would surely convince all but the lunatic that appeals to motherland and fatherland had no place in a modern society.

  As it turned out, however, commerce and its relentless push for comparative advantage merely rebranded nationalism as another marketable commodity. Although travel and communication did indeed bring people together, they also increased the opportunities for misunderstanding and conflict. As a result, nationalism did not go gently into the night. Quite the opposite: it literally remapped the world we now live in.

  The Fracture Lines

  The fracturing of the so-called international community did not happen with one momentous crack. Rather, it proceeded much like the calving of Arctic ice masses under the pressure of global warming, leaving behind only a herd of modest ice floes. Rising geopolitical temperatures had a similar effect on the world’s map.

  At first, it was difficult to understand how the war in Syria, the conflict in Ukraine, the simmering discontent in Xinjiang, the uprisings in Mali, the crisis of the Europe Union, and the upsurge in anti-immigrant sentiment in both Europe and the United States were connected. But connected they were.

  The initial cracks in that now-dead global system appeared in the Middle East. As a geo-paleontologist, I must admit that I wasn’t particularly interested in those changes themselves, only in their impact on larger entities. Iraq and Syria, multiethnic countries forged in the post-colonial fires of Arab nationalism, split along ethnic and confessional lines. Under the pressure of a NATO air intervention led by the U.S., Libya similarly fell apart when its autocratic leader was killed and its arsenals were pillaged and sent to terror groups across a broad crescent of crisis. The fracturing then continued to spread — to Yemen, Egypt, Saudi Arabia, Lebanon, and Jordan. People poured out of these disintegrating countries like creatures fleeing a forest fire.

  This vast flood of refugees by land and sea proved to be the tipping point for the European Union. Having expanded dramatically in the 2000s, the 28-member association hit a wall of Euroskepticism, fiscal austerity, and xenophobia. As they reacted to the rising tide of refugees, the anti-immigrant forces managed to end the Schengen system of open borders. Next to unravel was the European currency system as the highly indebted countries on the periphery of the Eurozone reasserted their fiscal sovereignty.

  The Euroskeptics took heart from these developments. In 2015, the anti-immigrant Democratic Party in Sweden leaped to the top of the opinion polls for the first time. Once the epitome of tolerance and social democracy, Sweden led the great turn in Scandinavia away from the European mainland. On the heels of local elections and those for the European Parliament, the far-right National Front of Marine Le Pen became the most popular French party and, with its newfound power, began to pry apart the informal pact with Germany that had once been the engine for European integration. Euroskeptical parties consolidated power in Poland, Portugal, Hungary, and Slovakia. Desperate to curry favor with its hardcore constituents, the British Conservative Party sponsored a referendum that guided Great Britain out of the EU. What had once been only scattered voices of dissatisfaction suddenly became a rush to the exits. The EU survived for some years more — until the Acts of Dis-Integration of 2028 — but only as a shell.

  The unrest in the Middle East and the unraveling of the EU had a profound impact on Russia. The last of that country’s Soviet-era politicians had been attempting to reconstruct the old federation through new Eurasian arrangements. At the same time, they were trying to expand jurisdiction over Russian-speaking populations through border wars with Ukraine, Georgia, and Moldova. But in their grab for more, they were left with less. Mother Russia could no longer corral its children, neither the Buryats of the trans-Baikal region nor the Sakha of Siberia, neither the inhabitants of westernmost Kaliningrad nor those of the maritime regions of Primorye in the far east. Moscow’s entrance into the Syrian conflict on the side of Damascus contributed to an upsurge in separatist sentiment in the trans-Caucasus republics of Chechnya and Dagestan. In the Second Great Perestroika of 2031, Russia divided along the lines we know so well today, separating its European and Asian halves and its industrial wastelands in the north from its creeping deserts in the south.

  China found itself on a similar trajectory. A global economic slowdown frayed the unstated social contract — incremental improvements in prosperity in exchange for political quiescence — that the Communist Party had developed in the wake of the Tiananmen Square protests of 1989. Beijing’s crackdown on anything that smacked of “terrorism” only pushed the Uighurs of Xinjiang into open revolt. The Tibetans, too, continued to advance their claims for greater autonomy. Inner Mongolia, with almost twice as many ethnic Mongolians as Mongolia itself, also pulled at the strings that held China together. Taiwan stopped talking about cross-Straits reunification; Hong Kong reasserted its earlier status as an entrepôt city. But these rebellions along the frontiers paled in comparison to the Middle Uprising of the 2030s. In retrospect, it was obvious that the underemployed workers and farmers in China’s heartland, who had only marginally benefited from the country’s great capitalist leap forward of the late twentieth century, would attack the political order. But who would have thought that the middle could drop so quickly out of the Middle Kingdom?

  The United States, as we all know, has not fallen apart. But the American empire (which U.S. leaders took such pains to deny ever existed) has effectively collapsed. Once the U.S. government went into receivership over its mountainous debt and its infrastructure began to truly collapse, its vast overseas military footprint became unsupportable. As it withdrew, Washington deputized its allies — Germany, Japan, South Korea, Saudi Arabia, and Israel — to do the same work, but they regularly worked at cross-purposes and in any case held their own national interests above those of Washington.

  Meanwhile, U.S. domestic politics remained so polarized and congealed that Congress and the executive branch could not establish a consensus on how to re-energize the economy or reconceive the “national interest.” Up went higher walls to keep out foreigners and foreign products. With the exception of military affairs and immigration control, the government dwindled to the status of caretaker. Then there was the epidemic of assault rifles, armed personal drones, and WBA (weaponized biological agents), all easily downloaded at home on 3-D printers. The state lost its traditionally inviolable monopoly on violence and our society, though many refuse to acknowledge the trend, drifted into a condition closely approximating psychosis. An increasingly embittered and armed white minority seemed determined to adopt a scorched-earth policy rather than leave anything of value to its mixed-race heirs. Today, of course, the country exists in name alone, for the only policies that matter are enacted on a regional basis.

  The centrifugal forces first set in motion in 2015 tore apart the great multiethnic nations in a terrifying version of Yugoslavization that spread across the planet. Farseeing pundits had predicted a wave of separatism in the 1990s. They were wrong only in terms of pace. The fissures were slower to appear, but appear they did. In South Asia, separatist movements ate away at both India and Pakistan. In Southeast Asia, Indonesia, Malaysia, and Myanmar fractured along ethnic lines. In Africa, the center could not hold, and things inevitably fell apart — in the Congo, the Central African Republic, Nigeria, and Chad, among other places.

  There was much talk in the early twenty-first century of failed states like Afghanistan, Iraq, Somalia, Yemen, and Haiti. Looking back, it’s now far clearer that, in a certain sense, all states were failing. They had little chance against the governance-eroding winds of globalization from above and the ever-greater upheavals of non-state actors from below.

  Perhaps under the best of environmental conditions, these forces would have pushed empires, federations, and trade pacts to the edge but no further. As it happened, however, despite conferences and manifestos and sort-of-binding agreements, the global thermometer continued to rise. The effects of climate change turned out to be the proverbial tipping point. Water shortages intensified conflict throughout China, as did food shortages in Russia. The tropics, the islands, the coastlines: all were vulnerable to the rising waters. And virtually every country entered into a pitched battle over drinking water, clean air, indispensible minerals, and arable land.

  All of us have our own personal climate-change disaster stories. For instance, I lost my home in Hurricane Donald, which destroyed so much of Washington, D.C. and its suburbs in 2029. I started all over in Nebraska only to be forced to move again when the Oglala aquifer gave out in 2034, precipitating what we now call the Midwest Megadrought. And like so many others, I lost a loved one only three years ago in that terrible month of superstorms — 7/47 — which devastated such a large swath of the planet.

  What no one anticipated was the impact climate change would have on nationalism. But how else would people divvy up increasingly precious natural resources? National sentiment proved to be the go-to principle for determining what “our” people deserved and those “others” didn’t. As a result, instead of becoming an atavistic remnant of another age, nationalism has proved to be this century’s most potent ideology. On an increasingly desperate planet, we face not the benevolence or tyranny of one world, but the multiple confusions of many worlds.

  All That Was Solid

  It was not only the multiethnic nation-state that proved untenable in our century. Everything seemed to be fracturing.

  The middle class shattered. The promise of a stable job and income — the iron rice bowl in the East and the ironclad pension in the West — disappeared into a maelstrom of inequality in which the super-rich 1% effectively seceded from society while the poorest of the poor had nowhere to turn. Back in 2015, pundits loved to promote new trends like the “sharing economy” of millions of employees turned entrepreneurs or the “long tail” of a splintering consumer market. But the bottom line was grimly straightforward: the forces that could have acted to countervail the fissiparous competition of the market gradually disappeared. Gone was the guiding hand of the government. Gone were the restraining pressures of morality.

  Technology certainly played a role in this transformation, first when computers and cell phones untethered individuals from fixed workplaces and then when biochips turned each individual into his or her own “work station.” The application of market principles to every facet of existence whittled away the public sphere in favor of the private one. Such dynamics at the social level also contributed to the great fracturing that took place in the international sphere.

  Yes, I can anticipate your criticism. Perhaps it’s true that, in 2050, we are at a nadir of cooperation and some new form of centralization and globalization lies ahead. Clearly, the jihadis, who operate their mini-caliphates around the world, dream of uniting the faithful under a single banner. There are diplomats even today who hope to get all 300-plus members of the United Nations to agree to the sort of institutional reforms that could provide the world with some semblance of global governance. And maybe a brilliant programmer is even now creating a new “killer app” that will put every single person on the same page, literally.

  As a geo-paleontologist, I am reluctant to speculate. I focus on the past, on what has actually happened. Anyone can make predictions. But none of these scenarios of future integration seems at all plausible to me. “That’s the way the cookie crumbles,” we used to say when I was a kid. And a cookie can only crumble in one direction.

  Still, I would be remiss if I didn’t point out something that many have noted over the years. We have been fragmenting at precisely the time when we should be coming together, for the problems that face the planet cannot be solved by millions of individuals or masses of statelets acting alone. And yet how can we expect, with desperate millions on the move, the rise of pandemics, and the deepening of economic inequality globally, that people can unite against common existential threats? Only today can we all see clearly, as I wrote so many years ago, that the rise of the splinterlands has been humanity’s true tragedy. The inability of cultures to compromise within single states, it seems, anticipated our current moment when multiplying nation-states can’t compromise on a single planet to address our global scourges. The glue that once held us together — namely, solidarity across religion, ethnicity, and class — has lost its binding force.

  At the beginning of the great unraveling, in 2015, I was still a young man. Like everyone else, I didn’t see this coming. We all lived in a common home, I thought. Some rooms were in terrible disrepair. Those living in the attic were often exposed to the elements. The house as a whole needed better insulation, more efficient appliances, solar panels on the roof, and we had indeed fallen behind on the mortgage payments. But like so many of my peers, I seldom doubted that we could scrape together the funds and the will to make the necessary repairs by asking the richer residents of the house to pay their fair share.

  Thirty-five years and endless catastrophes later on a poorer, bleaker, less hospitable planet, it’s clear that we just weren’t paying sufficient attention. Had we been listening, we would have heard the termites. There, in the basement of our common home, they were eating the very foundations out from under us. Suddenly, before we knew quite what was happening, all that was solid had melted into air.

  

  

  

  

  

• Inside The Fukushima Radioactive Wasteland: A Trip Through The "Exclusion Zone"

  One month ago, we showed an eerie, drone’s-eye-view of the radioactive wasteland that is Fukushima, courtesy of the following video clip showcasing the toxic area located just 200 miles away from the venue of the 2020 summer Olympics.

   

  But while the scenery from above was dramatic, what about life on the actual ground? Because just like with Chernobyl, the world may have been eager to move on and leave the wasteland on its own, the empty ghost towns that neighbor ground zero remain stuck in time. This is the “exclusion zone,” and it’s one of the most radioactive places on Earth.

  Inside the zone, chunks are ripped out of buildings, totaled cars lie on the street, and clocks are stopped at the moment the tsunami struck. Nature is slowly taking over the houses and possessions of those who once called this place home.

  “I feel like I’m in a parallel world,” says Norikatsu Nakazato, who is only rarely allowed to visit his family’s 110-year-old house. “I don’t think I’ll be able to live here again in this lifetime.”

  Fusion’s Tim Pool took a trip to the heart of the exclusion zone in October to talk with Nakazato and other survivors who refuse to leave, one of whom gives the following poignant answer when asked why he won’t leave and whether he is scared. He answer is no, because “I just gave up.“

  

  

  

  

• Finland To House Refugees In Shipping Containers

  First the good news: with a cold winter about to slam Europe where thousand of refugees make their way north every day, and where many of these migrants have been scrambling to find any form of lodging ahead of the first snow, Finland has decided to generously provide much needed housing facilities.

  The bad news: said facilities are empty shipping containers and tents. Neither has heating.

  According to Reuters Finland, like Germany, has seen an acceleration in the influx of migrants this month, following a modest slow down last month, the interior ministry said on Tuesday. As a result, the Nordic nation “is preparing to house asylum seekers in tents and shipping containers.”

  The country took in just over 7,000 refugees in October – about 3,800 fewer than in September – but just last week more than 2,000 asylum seekers arrived. It expects 30,000-35,000 migrants to arrive this year, mostly from Iraq, compared with just 3,600 in 2014.

   

  “Even with new centers being opened, the reception capacity will not be sufficient, and authorities are preparing for the use of tent and container accommodation,” the ministry said in a statement.

   

  Afghanis were the biggest single group in those who arrived last week, according to ministry figures. Finland recently stopped processing asylum claims from Afghanis out of security concerns, but has narrowed asylum criteria for Iraqis and Somalis based on its assessment that the security situation has improved in both countries.

  Living in a shipping container may hardly be as comfortable an option as residing in NJ’s bankrupt Revel casino, but it is better than nothing, which is what migrants in neighboring Sweden have to look forward to. Reuters notes that Sweden, which expects 190,000 asylum seekers this year, last week warned it could no longer guarantee finding accommodation for newly arrived refugees, and applied for EU emergency aid to cope with asylum seekers.

  The worst news, however, is for residents of San Francisco: as reported previously, they too have the opportunity of living in a shipping container box, however unlike Finland’s migrants they get to pay $1000/month for the privilege.

  This is what a thousand dollars rents you in San Francisco.

  

  

  We conclude with some good news: if Finland ever runs out of empty shipping container boxes, it should just kindly ask for the port of Long Beach to send it some. After all, as we wrote a month ago, a third of all containers “shipped” from the largest west coast port are empty as a result of an accelerating global recession. At least this way instead of fooling economists about the “recovering” state of the US economy, those thousands of containers, or as they are better known in Helsinki and San Francisco “houses”, could save some lives.

  

  

  

  

  

• Dear Striking Fast-Food Workers: Meet The Machine That Just Put You Out Of A Job

  Today, U.S. fast-food workers will strike across 270 cities in a protest for higher wages and union rights that they hope will catch the attention of candidates in 2016 elections, organizers said.

  The walkouts will be followed by protests in 500 cities by low-wage workers in such sectors as fast food and home and child care, a statement by organizers of the Fight for $15 campaign said on Monday.

  The protests and strikes are aimed at gaining candidates’ support heading into the 2016 election for a minimum wage of $15 an hour and union rights, it said.

  The strikes and protests will include workers from McDonald’s, Wendy’s, Burger King , KFC and other restaurants, the statement said.

  And while we sympathize with their demands for higher wages, here is the simple reason why they will be very much futile.

  Dear fast food workers of the US – presenting you nemesis: the Momentum Machines burger maker.

  According to a recent BofA reported on how robotics will reshape the world, San Francisco start up Momentum Machines are out to fully automate the production of burgers with the aim of replacing a human fast food worker. The machine can shape burgers from ground meat, grill them to order with the specified amount of char, toast buns, add tomatoes, onions, pickles, and finally place it on a conveyor belt.
  

  The robot is shown below. It occupies 24 square feet, and is much smaller and efficient than most assembly-line fast-food operations. It provides “gourmet cooking methods never before used in a fast food restaurant” and will deposit the completed burger into a bag. It does all of this without a trace of attitude.
  

  
  

  According to public data, the company’s robot can “slice toppings like tomatoes and pickles immediately before it places the slice onto your burger, giving you the freshest burger possible.” Unlike human workers, the robot is “more consistent, more sanitary, and can produce ~360 hamburgers per hour” or a burger every 10 seconds.

  Furthermore, future generations of the device “will offer custom meat grinds for every single customer. Want a patty with 1/3 pork and 2/3 bison ground to order? No problem.”

  As the company’s website adds, “our various technologies can produce an ever-growing list of common choices like salads, sandwiches, hamburgers, and many other multi-ingredient foods with a gourmet focus.”

  But most importantly, it has no wage demands: once one is purchashed it will work with 100% efficiency for years. And it never goes on strike.

  As the company’s co-founder Alexandros Vardakostas told Xconomy his “device isn’t meant to make employees more efficient. It’s meant to completely obviate them.”

  

  The company’s philosophy on making millions of fast food workers obsolete:

  The issue of machines and job displacement has been around for centuries and economists generally accept that technology like ours actually causes an increase in employment.

  The three factors that contribute to this are

  1. the company that makes the robots must hire new employees,
  2. the restaurant that uses our robots can expand their frontiers of production which requires hiring more people, and
  3. the general public saves money on the reduced cost of our burgers. This saved money can then be spent on the rest of the economy.

  This is a major problem for the US economy, which once built on a manufacturing backbone, has seen the fastest jobs growth in recent years for workers employed by “food service and drinking places” i.e., fast food workers, waiters and bartenders.

  

   

  Finally, for those complaining that there will be no “human touch” left to take the orders, robots have that covered too:

  

   

  And now it’s time to calculate how many tens if not hundreds of billions in additional welfare spending these soon to be unemployed millions in low-skilled workers will cost US taxpayers.

  

  

  

  

  

• Supreme Court Justice Slams Cops For "Shoot First, Think Later" Mentality

  Submitted by Carey Wedler via TheAntiMedia.org,

  On Monday, the United States Supreme Court ruled to exonerate a Texas state trooper who, against orders from his superior, lethally fired his gun at a driver involved in a high speed chase. Though the majority opinion argued the officer acted reasonably, Justice Sonia Sotomayor issued a scathing dissent against the decision.

  The 2010 case involved Israel Leijas Jr., who had had been stopped by a Tulia, Texas, officer and informed he was wanted on a previously issued warrant. Leijas sped away, commencing a chase that reached speeds from 85 to over 100 miles per hour. As the chase began, the initial officer warned that Leijas might be intoxicated.

  Leijas reportedly called police multiple times from his cell phone during the chase to warn officers he had a gun and would fire at them if they attempted to capture him.

  Though officers planned to put spikes on the road at three different locations in an attempt to halt Leijas’ vehicle, Texas Department of Public Safety State Trooper Chad Mullenix wanted to shoot directly at the car to stop it. When he radioed his superior, Robert Byrd, to ask for permission, he was told to stand by until the car passed over spikes situated near an overpass where Mullenix was located. Byrd wanted to see if the spikes would effectively stop the vehicle before taking further action.

  Moments before the car reached the spikes, however, Mullenix began firing at the vehicle — in direct defiance of Byrd’s orders. The car skidded into the spikes and flipped two and a half times. Though Leijas was killed in the vehicle, authorities determined he had not been killed by the crash, but by Mullenix’s bullets. The officer shot six times, hitting Leijas in the upper body four times.

  Leijas’ family sued, arguing Mullenix used excessive force in violation of the Fourth Amendment. Mullenix argued he was entitled to the qualified immunity often granted to public officials when they act in the line of duty. Though Mullenix initially prevailed after several court battles, in 2014, the Fifth Circuit Court of Appeals overturned the prior ruling. Instead, it decided Mullenix was not entitled to immunity because the immediacy of the risk Leija posed was disputable.

  On Monday, the Supreme Court overturned that decision, finding Mullenix entitled to immunity and therefore exonerated of his charges. In its unsigned per curiam ruling, the court said, “The doctrine of police immunity protects ‘all but the plainly incompetent or those who knowingly violate the law,” NBC reported, noting the court added “its previous rulings have never said that the use of deadly force during a dangerous car chase is automatically a constitutional violation.”

  That conclusion was likely all but decided before the case even reached the Supreme Court. The court ruled on Mullenix v. Luna using only written briefings. It never heard verbal arguments or conducted a trial, which indicates “a sign that a majority of the justices considered the issue so clear cut that further briefing and courtroom argument were unnecessary,” NBC explained.

  Only one justice, Sonia Sotomayor, objected to the opinion — and in doing so, indicted a philosophy that permeates police conduct in the United States.

  She first noted that Mullenix “fired six rounds in the dark at a car traveling 85 miles per hour. He did so without any training in that tactic, against the wait order of his superior officers, and less than a second before the car hit spike strips deployed to stop it.”

  She argued that had the majority on the court correctly interpreted the case, they would have been left “with no choice but to conclude that Mullenix ignored the longstanding and well-settled Fourth Amendment rule that there must be a governmental interest not just in seizing a suspect, but in the level of force used to effectuate that seizure.”

  Sotomayor concluded:

  “By sanctioning a ‘shoot first, think later’ approach to policing, the Court renders protections of the Fourth Amendment hollow.”

  In spite of her captivating dissent, the Supreme Court ruling signals an ominous future for further police brutality cases brought before the nation’s highest court.

  

  

  

  

  

• Did Someone Try To Sabotage Russia's North Stream Gas Pipeline With An Underwater Drone

  When last we visited the Nord Stream pipeline story we noted that the prospect of doubling the line’s capacity in conjunction with Western O&G companies was effectively allowing Moscow to adopt a hardline approach in talks with Ankara.

  Turkish autocrat President Recep Tayyip Erdogan is keen on seeing Syria’s Bashar al-Assad pushed aside and, as everyone who doesn’t live in a cave knows, Russia and Iran are keen on preserving the Assad government. This makes for a rather awkward scenario. Ankara and Moscow have established deep trade ties and when Russian jets venture into Turkish airspace whilst attempting to bomb some of the very same militants Turkey has supported, the relationship becomes strained. That goes double when Turkey shoots down Russian drones. 

  Now obviously, there are very real questions about whether Erdogan can support Ankara’s assertion that Turkey can survive without Russian gas. The idea that either Russia or Turkey would jeopardize the Turkish Stream based on differences of opinion about the President of Syria is to a certain extent absurd (although what happens to that President may shape the future of energy transports from the Mid-East to Europe), but whatever the case, the Nord Stream has become key for the Russians and as we documented in the hilarious “They’re Making Idiots Of Us!”: Eastern Europe Furious At West For Doing Gas Deals With Russian Devils,” Ukraine and Slovakia aren’t pleased with Moscow’s memorandum of intent with Shell, E.On and OMV.

  Here’s a look at the Nord Stream:

  

  Well, in what certainly may be a coincidence but in what also looks remarkably suspicious given the current geopolitcal circumstances, an underwater drone “rigged with explosives” (to quote RT) was spotted near the Nord Stream by Sweden. Here’s more: 

  An unmanned military underwater vehicle rigged with explosives was spotted on the seabed in the vicinity of the Nord Stream gas pipeline in the Baltics on Friday, Swedish media report. The device is expected to be disarmed on November 9.

   

  An abandoned expendable remotely-operated mine clearance underwater vehicle allegedly with explosives onboard has been detected in multinational waters of the Baltic Sea by the Swedish Navy, Svenska Daglabet reports.

   

  The discovery was made during a routine check of the Nord Stream pipeline. Since it was discovered in the Swedish economic zone, north of the island of Gotland, the Nord Stream pipeline operator immediately notified the Swedish military.

   

  The type of ROV (remote operated vehicle) found near Gotland is typically used to disarm big unremovable munitions found on seabed, as the drone is blown up along with the dangerous object.

   

  The national identity of the drone has not been verified so far, as many countries use UUVs of a similar construction, Stolpe said.

  So, here’s a drone equipped with explosives that shows up near the Nord Stream just as the expansion of the pipeline’s capacity threatens Ukraine and Slovakia and gives Russia negotiating leverage with Ankara in the middle of war in a country that shares a border with Turkey.

  Maybe it’s nothing, but bear in mind this is Russia’s go-to pipeline at this juncture and since no one seems to want to come forward and claim they own the drone, one is certaily left to wonder if this could possibly have been an attempt at sabotage. 

  

  

  

  

  

• Guest Post: Can Europe Survive This Invasion?

  Submitted by Patrick Buchanan via Buchanan.org,

  “A modern day mass migration is taking place … that could change the face of Europe’s civilization,” warned Hungarian President Viktor Orban.

   

  “If that happens, that is irreversible. … There is no way back from a multicultural Europe,” said Orban. “If we make a mistake now, it will be forever.”

  Orban acted on his beliefs. He erected a 110-mile fence on the Serb border, redirecting hundreds of thousands of migrants away from Hungary to Croatia, thence to Austria and Germany.

  Sunday, after a third of a million had passed through, Croatia replaced a center-left with a rightist party. A fortnight ago, the right-wing eurosceptic Law and Justice Party won a landslide victory in Poland.

  Support for Angela Merkel, who has opened Germany to a million migrants, is plummeting. Bavaria’s CSU, sister party of Merkel’s CDU, is in rebellion. Bavaria has been the main port of entry for the hundreds of thousands of arriving migrants.

  Europe is undergoing the greatest mass migration since World War II, when 14 million Germans were driven out of Prussia and eastern Germany and Central and Eastern Europe.

  That mass migration halted after two years. But no end is in sight to the migrations from Africa and the Middle East.

  As long as Europe’s borders remain open, they will come. And the people who wish to come number not just in the millions but the tens and scores of millions. And they know how to get there.

  The routes — through Turkey to the Balkans on land, or across a few miles of the Med to the Greek islands, or from Libya to Lampedusa and Sicily, or into the Spanish enclaves on the Moroccan coast, or out to the Canary Islands — are arduous but not impossible.

  Why should they not come?

  Why should Arabs and Africans not flee the tyranny, terror, poverty and war that are their lot to come to Europe, live the good life, and have life’s necessities provided for their families by the munificent welfare states of northern Europe? And what is to stop them?

  Jean Revel’s “The Camp of the Saints” is proving more prophetic than Aldous Huxley’s “Brave New World” or Orwell’s “1984.”

  Considering the crises facing Europe, the question is no longer: Will the EU survive? It is Orban’s question: Will European civilization survive the century?

  This year, the EU monetary union, the eurozone, avoided breaking apart because Athens capitulated and accepted austerity, and the hard-bargaining Germans agreed to a bailout.

  How long will Greeks and Club Med members of the EU accept austerity? How long will Germans bail out nations whose people like to work fewer hours while enjoying superior social benefits?

  Under the Schengen Agreement, there are to be no barriers to trade and travel, to the movement of goods and people inside the EU.

  Yet, across Europe, fences are going up, borders are being re-established, anti-immigrant and anti-EU parties like the National Front of France’s Marine Le Pen, are gaining converts.

  If the mass migrations are not halted, the rise of nationalist regimes at the expense of Europe’s liberals and leftists is inevitable.

  With birth rates in this smallest and least populated of continents below replacement levels for decades, Europe is aging, shrinking and dying, as it is being invaded and altered forever.

  Optimists point to how America absorbed the 15 million that arrived in the Great Wave of immigration from 1890 to 1920.

  But they ignore the differences. America’s immigrants were Europeans from Christian nations coming to a country with a history of assimilation. And the Great Wave stopped in 1924, for 40 years.

  Unlike America, Europe has never known mass immigration. And those pouring into Europe are Arab, African and Muslim, not European Christians or Jews. They come from other civilizations and cultures. And they are not all assimilating but rather creating enclaves in Europe that replicate the lands whence they came.

  Last year, the Swiss voted to cut back on immigration.

  This year, with the UK Independence Party growing in popularity, Prime Minister David Cameron is demanding reforms in the EU charter, before the British vote on whether to leave the EU altogether.

  With migrants in the thousands milling around Calais and the entrance to the tunnel to Dover, Brits must be wondering whether it was wise to dig that tunnel beneath the Channel to their island home.

  The threats raised by the mass migration into Europe rise to the level of the existential.

  Can a civilization survive the replacement of the people who created it by people of other races, religions, and civilizations?

  Ask the Native Americans.

  Will Europe remain Europe if she is repopulated by Arabs, Muslims, Asians and Africans? What will hold Europe together? Free trade?

  In 1981, when Solidarity was crushed by the Warsaw regime on the orders of Moscow, Americans took up the cry — “Let Poland be Poland.”

  One day soon, a voice will arise across the Atlantic calling for an end to this invasion, by force if necessary, and declare: “Let Europe be Europe!”

  

  

  

  

  

• Microsoft Just Gave Brazilian Consumers A Stunning Inflationary Wake Up Call

  Day after day, investors hear about "foreign currency impacts" on earnings… which are dutifully shrugged off by pandering protagonists on mainstream media – "if you just ignore the currency effect, everything is awesome."

  Well the truth is – unless you have lived it and seen it, you have no idea of the massive impacts that a soaring dollar (and collapsing currencies across the emerging markets – which every firm still believes is the engine of global economic growth).

  So here, for some terrifying clarification, is Microsoft's latest product pricing announcement:

  

   

  So – for various countries from Russia to Brazil and from Algeria to New Zealand, while maintaining its USD purchase price, Microsoft has adjusted its loal price "to reflect fluctuations in the currency exchange rate."

  In the case of Brazil shown above as an example – the local price of a Microsoft product just went up from BRL 6.5 to BRL 10.3…

  That is an enormous 58% inflation in local pricing!!

  How would you imagine that will affect local demand? And this is happening in every country and for every US corporation's products.

  *  *  *

  Is The Fed about to hike rates, sending the Dollar even higher, and simultaneously crushing global demand?

  h/t ForrestM

  

  

  

  

• Son Of Billionaire Steel Magnate Plunges To His Death Amid Demise Of UK Industry

  Angad Paul, chief executive of Caparo Holdings, had done a lot of things in his 45 years. 

  He created the world’s fastest road-legal car, for instance. The Caparo T1.

  

  He also executive produced the classic “Lock, Stock, and Two Smoking Barrels“:

  

  Aside from supercars and gangster movies, Paul was, to quote FT, one of the Midlands’ leading industrialists as the head of Caparo Holdings. He was the son of Lord Paul, the 84 year old billionaire steel magnate who’s one the UK’s wealthiest people. Paul replaced his father as CEO nearly two decades ago. He was married to lawyer Michelle Bonn, 40, in 2005, and lived at his family’s home in Marylebone with his parents, Lord and Lady Paul

  

  We’re using the past tense here because on Sunday, Paul tragically fell from “high up” at his home in London. He was pronounced dead at the scene. Here’s the statement from a Met spokesperson:

  “London ambulance service and London’s air ambulance both attended and the man, believed to be in his mid-40s, was pronounced dead at the scene.

   

  “London fire brigade have also been called to the scene to assist with the recovery of the body. The man’s next of kin has been informed, although we still await formal identification. Enquiries into the circumstances of the incident continue but it is being treated as non-suspicious at this stage.”

  The timing of the “accident” raises questions. Caparo was placed in administration last month in what was characterized as a “shattering, devasting hammer blow” to the UK’s steel industry. For those who might have missed it, The Telegraph reported the following in mid-October:

  “The crisis in Britain’s steel industry could be about to claim another victim, with parts of Labour peer Lord Paul’s Caparo empire under enormous pressure.

   

  Caparo Industries, a major producer of steel products with 1,800 staff across 20 sites, was understood to be looking at all funding options over the weekend.

   

  Lord Paul – one of the country’s 50 wealthiest people, with a fortune estimated at £2bn – has a large stake in the privately-owned business through its parent company, Caparo Group. 

  And then, two days later, there was this (again from The Telegraph):

  Britain’s beleaguered steel industry has been dealt a “shattering” and “devastating hammer” blow after Caparo Industries went into administration, with doubts over the future of its 1,700 staff.

   

  The global business, which has about 20 sites in the Midlands as well as operations sites in India and the US, filed for administration as pressure on the steel industry intensifies.

   

  The problems at Caparo, first revealed on Monday by The Telegraph, came ahead of an announcement expected on Tuesday from Tata that it will slash up to 1,200 jobs at its steel plants in Scunthorpe and Scotland. It follows the closure of SSI in Redcar with the loss of 2,000 jobs.

   

  Britain’s largest union, Unite, warned of a “domino effect” in the steel industry, as it renewed calls for the Government to step in to support the sector following Caparo Industries’ collapse.

   

  “This is yet another hammer blow for steel and manufacturing communities already reeling from the closure of Redcar and job losses at Tata,” said Tony Burke, the union’s general secretary. “Ministers need to ask themselves how many more steel firms need to go to the wall before they step in. Failure to act could lead to a ‘domino effect’ taking hold across the industry.”

  Finally, more color from FT:

  Caparo, which comprises about 20 companies, was placed in administration last month, leading to the loss of 323 jobs and the closure of Black Country plants at Darlaston, Dudley and West Bromwich.

   

  Its activities range from the forging and pressing of metal products for aerospace, automotive and other industries. It also produces fastenings, wire, tubes and other accessories.

   

  The UK company is part of a global network of businesses under the Caparo name, with operations in China, India and the US.

   

  In addition to steel, Caparo’s global business is also involved in product development, materials testing services, hotels, media, furniture and interior design, financial services, energy and private equity investment.

   

  PwC, the administrators, said at the time of their appointment that 1,700 West Midlands jobs were at risk.

  It isn’t difficult to guess how this came about. Excess capacity in China (a topic we’ve covered exhaustively) and the now ubiquitous exported deflation effectively killed the industry: 

  Business Secretary Sajid Javid has called for an EU-wide emergency summit on steel. This is due to be held with the next fortnight. At the event he is expected to campaign for European consent to the UK’s early introduction of the energy compensation package and for co-ordinated EU action to stop China dumping excess steel on international markets.

   

  

  

   

  From BNP, earlier this year: 

  

  As a reminder, ArcelorMittal just reported a massive loss attributable to the same dynamic. As we noted on Friday, the obvious implication of China’s excess capacity problem is that the country will simply export its deflation…

  

  Given that, it shouldn’t come as any surprise that the world’s biggest steelmaker suspended its dividend and cut its outlook.

  Here’s more from Bloomberg: 

  The world’s biggest steelmaker on Friday cut its full-year profit target and suspended its dividend, putting the blame on the flood of cheap steel from China’s loss-making mills. The market is being overwhelmed with material coming from the nation’s state-owned and state-supported producers, a collection of industry associations said Thursday.

   

  “It is obvious that we are operating in a very challenging market,” Chief Financial Officer Aditya Mittal said on a call with reporters. “This is essentially the result of very low export prices out of China that are impacting prices worldwide.”

   

  The steel industry has been roiled by the slowest economic growth in two decades in China, the biggest consumer.

   

  The flood of cheap exports from the nation has drawn complaints from Europe and the U.S. that the shipments are unfair. Bloomberg Intelligence estimates Chinese steel shipments overseas will exceed 100 million metric tons this year, more than the combined output of Europe’s top four producing countries.

   

  While demand for steel in the company’s largest markets of the U.S. and Europe is recovering, producers’ profits are being hit by slumping prices because China has been pushing excess supply onto the world market as its economy slows.

  So again, we’re seeing disinflation (the exact opposite of what DM central bankers intended when they decided to expand their balance sheets into the trillions) as global growth and trade enters a new era, characterized by a systemic slump in demand. Here’s the damage in terms of the Arcelor’s equity:

   

  And here’s more from The New York Times on the impact of Chinese “dumping: 

  “The Chinese are dumping in our core markets,” Mr. Mittal said. “The question is how long the Chinese will continue to export below their cost.”

   

  The company’s loss for the period compared with a $22 million profit for last year’s third quarter.

   

  ArcelorMittal, which is based in Luxembourg, also sharply cut its projection for 2015 earnings before interest, taxes, depreciation and amortization — the main measure of a steel company’s finances. The new estimate is $5.2 billion to $5.4 billion, down from the previous projection of $6 billion to $7 billion.

   

  On a call with reporters, Aditya Mittal, Mr. Mittal’s son and the company’s chief financial officer, said that a flood of low-price Chinese exports was the biggest challenge for ArcelorMittal in the European and North American markets.

   

  The company estimates that Chinese steel exports this year will reach 110 million metric tons, compared with 94 million tons last year and 63 million tons in 2013. ArcelorMittal produced 93 million metric tons of steel in 2014.

  Of course when the standing government policy is to roll over bad debt and avoid SOE defaults at all costs, uneconomic producers can and will continue to produce. This means the deflationary impulse ArcelorMittal cites isn’t likely to dissipate anytime soon.

  So, it would appear that Paul is the latest “casualty” of the worldwide commodity downturn, the global deflationary supply glut, and the habitual exportation of deflation. It will be interesting to see what, if any, impact this rather morbid wake up call has on Downing Street’s “courting” of Xi.

  

  

  

  

  

• The Most Important Earnings Report You Should Know About

  Submitted by Andrew Zeitlin of Moneyball Economics

  The Most Important Earnings Report You Should Know About

  

  ROK: Better than CAT as a barometer of macroeconomic/industrial trends

  All industrial equipment uses semiconductors, and ROK (Rockwell Automation) is the premier industrial automation focused semiconductor company.

  Factories and mines are hostile environments: lots of dust, heat, chemicals, liquids and vibrations. Less than ideal conditions for delicate components like semiconductors. But increased automation means more semiconductors, and ROK specializes in making hardy components.

  ROK as best barometer

  1. Breadth of industrial customer base: hard to find a company that touches more capital intensive projects.
  2. Upstream in the demand chain: ROK demand comes in before CAT demand. In fact, that CAT extractor needed ROK chips

  Correlation to US Industrial Production

  ROK revenues strongly correlate to the US Industrial Production. That’s because much of the business is cyclical.

  The advantage comes with ROK’s forward guidance: it’s 1:1 with developments in the manufacturing space and with regional growth.

  The latest data says: US is deteriorating rapidly and so is China.

   

  Latest Earnings: Bad News

  Nothing pretty on today’s earnings call

  3QCY Revenue dropped (-10%)

  FY2016 Sales guidance lowered to -4% y/y

  “As we progressed through the quarter, conditions softened. And September was especially weak, particularly in the U.S. product businesses….September typically is the strongest month of the year.”

        – Keith Norbusch, ROK CEO

   

  The accelerating pace of contraction and regional distribution is very noteworthy

  

  • Canada, Latin America, US: Exposure to commodities is the general trend. The pace and timing of the slowdown reflects the lag in capital intensive projects. This means that the worst has not hit yet and the pain will continue at a faster pace into 1Q 2016.
  • Asia Pacific (aka China): Collapse.
  • EMEA: Good news as signs of a bottom are in place. Maybe.

  Forward Guidance

  “There appears to be a general slowdown in U.S. industrial customer spending, both capital and operating spending”

        – Theodore Crandall, ROK CFO

  Secular trends remain healthy (industrial growth continues) but near-term customers are pushing out spending. And there is no visibility.

   

  Our view: producers are still adapting to China’s real level of demand.

  At this stage, small cuts in spending (CAPEX & OPEX) until we get to 1Q 2016 and clearer visibility to Chinese demand. This is driving poor visibility.

  When does it change? MAYBE in 12 months. Maybe. And that’s based on nothing but hope. There is no customer ordering or data that ROK uses to base their 2H 2016 call for improving conditions.

  “we’re not expecting to see sequential growth until the second half of the year (2016)”

        – Theodore Crandall, ROK CFO

  Every manufacturer is looking at two options.

  • Plan A: Hold steady. Stop hiring, stop CAPEX
  • Plan B: Cut CAPEX, Cut Payrolls, Cut Orders

  Plan B is ready to go starting in January, pending customer order outlook.

  The silver lining:

  Per the ROK CFO, weaker sales means lower commissions, which equals a margin and EPS tailwind! (That was actually said on the earnings call.)

  Goodbye wage inflation.

  

  

  

  

  

• "No More Bets": New York Shuts "Illegal Gambling" Fantasy Sports Sites

  A little less than a month ago, Nevada shut down fantasy sports sites, effectively telling the likes of DraftKings and FanDuel to apply for a gaming license or face a decade in prison.

  As we noted at the time, the move came on the heels of an announcement by the FBI and the Justice Department that the US was investigating whether the business models of daily fantasy-sports sites violate a Congressional exemption around the legality of transfers from financial institutions to online gambling sites.

  Sites like DraftKings and FanDuel rely on a loophole for “games of skill” which effectively allows them to say that betting on the “skills” of others is itself a “skill.”

   That is, if I know more about how the skills of say, one NFL player stack up against the skills of another NFL player, well then I too have a “skill”, and so therefore, sites which pay me to play my skills against the skills of other fans can exploit a Congressional exemption on financial companies transferring money to online gambling sites.

  Obviously, that’s a ridiculous loophole and it looks like everyone who isn’t getting their cut (i.e. state and local goverments) have had just about enough of it because now, New York attorney general Eric Schneiderman is set to shut down FanDuel and DraftKings in NewYork. Here’s The New York Times:

  The New York State attorney general on Tuesday ordered the two biggest daily fantasy sports companies, DraftKings and FanDuel, to stop accepting bets in New York, saying that their games constituted illegal gambling under state law, according to people with knowledge of his investigation.

  
  

  The cease-and-desist order by the attorney general, Eric T. Schneiderman, is a major blow to a multibillion-dollar industry that introduced sports betting to legions of young sports fans and has formed partnerships with many of the nation’s professional sports teams. Given the New York attorney general’s historic role as a consumer-protection advocate, legal experts say the action will most likely reverberate in other states where legislators and investigators are increasingly questioning whether the industry should operate unfettered by regulations that govern legalized gambling.

  
  

  Fantasy sports companies contend that their games are not gambling because they involve more skill than luck and were legally sanctioned by a 2006 federal law that exempted fantasy sports from a prohibition against processing online financial wagering. That view is increasingly being challenged as fantasy sites have begun offering million-dollar prizes and bets on individual sports, such as golf, mixed martial arts and Nascar races, magnifying the element of chance and making the exemption more difficult to defend.

  
  

  On Tuesday afternoon, as news of the attorney general’s order began to trickle out, DraftKings sent an email to its players, saying, “Attorney General Eric Schneiderman is considering preventing New Yorkers from playing daily fantasy sports,” and added: “Hey, New York, protect your right to keep playing daily fantasy sports. Contact the attorney general today!”

  
  

  Sabrina Macias, a spokeswoman for DraftKings, said: “We’re disappointed he hasn’t taken the time to meet with us or ask any questions about our business model before his opinion.” She said the company had 500,000 users in New York State.

  
  

  In a statement, FanDuel said: “Fantasy sports is a game of skill and legal under New York state law. This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, co-workers and players across the country.”

  Right FanDuel, that’s exactly what this is and we’re not sayng that’s at all justified, but you shouldn’t exactly be surprised.

  Frankly, this is a lot like multi-level marketing or (gasp) selling drugs. That is, it’s not that it necessarily should be illegal – after all, in a free society people should be allowed to do as they please with their money and their free time – but the fact is that it ultimately is illegal, which means that when you’ve gotten away with it for years, you can’t really play the “what’s going on here?!” card as though you had no idea this was coming. 

  Anyway, weigh in as you will, but right or wrong the government is out to put an end to this industry and if you’re a betting man (or woman) we wouldn’t recommend wagering on FanDuel or DraftKings being able to fend this off.

  From here on out, please just stick to such legalized, and “regulated” gambling at the state lottery, and the stock market of course.
  

  In short.. “All. Bets. Are. Off”…

  

  

  

  

  

• Caught On Tape: University of Missouri Media Professor Incites Mob Violence Against Reporter For Doing His Job

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  

  Meet Melissa Click. Assistant Professor of Mass Media at the University of Missouri, and woman who was caught on video asking for “muscle” in order to physically remove a reporter from reporting on a story in a public place. Yes ladies and gentleman, welcome to America’s college campuses.

  If you haven’t seen this video, you must watch it immediately, and trust me, you need to watch it from beginning to end to truly understanding how dangerous Melissa’s Click’s request is. She is essentially advocating a mob of student inflict violence upon another student merely for taking pictures in public.

   

  Thanks to this, what began as protests against systemic racism at the school has morphed into another prime example of how college campuses have devolved into ignorant, pro-censorship intellectual wastelands.

  Now that you’ve watched the video, here’s some background on the incident and the key players involved from the New York Times:

  COLUMBIA, Mo. — A video that showed University of Missouri protesters restricting a student photographer’s access to a public area of campus on Monday ignited discussions about press freedom.

   

  Tim Tai, a student photographer on freelance assignment for ESPN, was trying to take photos of a small tent city that protesters had created on a campus quad. Concerned Student 1950, an activist group that formed to push for increased awareness and action around racial issues on campus, did not want reporters near the encampment.

  Reporters are supposed to go precisely where they are not wanted. Was “Concerned Student 1950” also opposed to reporters trying to get near the front lines during the Ferguson protests? The police demanded their space as well, and by these students’ twisted, infantile logic, the police should get their way.

  Protesters blocked Mr. Tai’s view and argued with him, eventually pushing him away. At one point, they chanted, “Hey hey, ho ho, reporters have got to go.”

  Yes, in 2015 students are so mentally damaged that they think it’s rebellious and brave to chant slogans against the First Amendment.

  “What is so hard about respecting our wishes?” one protester asked.

   

  “Because I have a job to do,” Mr. Tai answered. That elicited a retort: “We don’t care about your job.”

   

  As the video nears its end, the person taking the video, Mark Schierbecker, emerged from the scrum and approached a woman, later identified as an assistant professor of mass media, Melissa Click, close to the tents. When he revealed that he was a journalist, Ms. Click appeared to grab at his camera.

   

  She then yelled, “Who wants to help me get this reporter out of here? I need some muscle over here.”

  This woman should be filing for unemployment benefits yesterday.

  As the video circulated online, Mr. Tai, who won an award in June for Best Single Photograph in a college journalism awards program, received widespread support, much of it from members of the news media.

  Indeed, this is what Mr. Tai generously had to say about the incident on Twitter:

  I don't have any ill will toward the people in the video. I think they had good intentions though I'm not sure why it resorted to shoving.

  — Tim Tai (@nonorganical) November 10, 2015

  *  *  *

  For more on how American college campuses have become havens for censorship and unimaginable idiocy, see:

  From Protesting Vietnam to Demanding “Safe Spaces” – What Happened to America’s College Kids?

  Speechless – UCLA Engages in Absurd, Anti-Intellectual and Dangerous Attack on Campus Free Speech

  Rutgers University Warns Students – “There is No Such Thing as Free Speech”

  A Professor Speaks Out – How Coddled, Hyper Sensitive Undergrads are Ruining College Learning

  Statists Declare War on Free Speech – College Students Banned from Handing Out Constitutions in Hawaii

  California Student Banned from Handing Out Constitutions on Campus

  A Winter Wonderland of Fear – Cities Across the U.S. Move to Ban Unregulated Sledding

  Brave New World Revisited…Key Excerpts and My Summary

  Here We Go…Slate Magazine Bashes the First Amendment

   

  

  

  

  

  

• It's Not The Record High Debt That Is The Biggest Risk, It's This

  Earlier today, Bloomberg “discovered” that “Corporate America Has Quietly Re-levered“, reporting that “one of the biggest post-financial crisis imbalances sits on corporate balance sheets” citing a Goldman report.

  Actually it hasn’t been quiet at all: while to some this is news, our readers have been well-aware of this trend since January 2014 when we first reported that “Corporations Have Record Cash: They Also Have Record-er Debt, As Net Leverage Soars 15% Above Its 2008 Peak“, and then most recently this weekend when on Sunday we reported, again very unquietly, that “Corporate Leverage Is At Record Levels.”

  

   

  Furthermore, as we further noted in “Why The Stock Buyback Spree Is Ending” that “the 3-fold increase in share buybacks in the past five years has been the key driver of corporate re-leveraging. In large part, buybacks have been the result of strong incentives provided to corporate managers by activists in particular and equity investors in general.”

  Two days later, Goldman also confirmed this observation: “So, does this mean the levered re-cap is dead? In our view, the answer is yes for the broad market, though legacy Tech should prove an exception given substantial balance sheet capacity“

  Goldman added even scarier overtones overnight, when it said that “like a bad dream, imbalances have been building the last few years. Corporates have levered up and the M&A boom has driven goodwill to multi-year highs. With the United States on the verge of the first interest rate hikes in almost a decade, we question the sustainability of these trends. Companies that have “manufactured earnings” vs. generating organic growth and reinvesting in their businesses are in the spotlight with investors rewarding high-returning stocks while punishing those with weak balance sheets, outsized buybacks and/or EPS growth.”

  Bloomberg wasn’t too far behind in admitting what we have said three years ago when in November 2012 we revealed “Where The Levered Corporate “Cash On The Sidelines” Is Truly Going“, i.e., buybacks.

  

  * * *

  But while even Goldman has admitted that rising leverage and the soaring buybacks are, “like a bad dream”, the major problem for corporate imbalances, the truth is that surging debt is not the full story, nor is it the scariest aspect of this story.

  The real risk is that while debt is rising on both a relative and an absolute basis, EBITDA, or cash flow, of both junk companies as well as Investment Grades, has been declining for at least one year. Or rather, while junk-rated companies have seen their EBITDA decline consistently over the past 5 years, the big inflection point came in early 2014 when IG EBITDA also plateaued, and has been declining since.

  

  It is this ongoing decline in actual cash flows, which tracks the third consecutive quarter of declining Y/Y revenues (the decline in EPS is far slower as hundreds of billions in shares have been removed from the market, keeping the EPS ratio higher than where it would be) that is the biggest risk to both the S&P500 and the market, if such a thing still existed.

  Even Goldman is unable to provide a counterfactual case:

  Now, the counter-argument one hears is that the cost of this debt has never been this cheap with the average interest rate paid dropping from close to 6% to 4% in 2015. Put another way, as debt has more than doubled, the amount of interest expense has only gone up by 40%. This is all good until you normalize EBITDA. Indeed, if EBITDA was at “normalized levels” (which we define as median NTM EBITDA from 1Q07-2Q15), leverage would move to 1.75X, over 30% higher than the average over the last 10 years.

  But here is the real kicker: with even Goldman admitting that buybacks as a shortcut to creating “engineered” earnings will no longer work and instead may be punished by investors, companies refuse to accept this. Certainly don’t tell that to McDonalds, which earlier today defied S&P to announce a major debt increase to boost shareholder returns, even if it meant its A rating would be lost as it was downgraded to BBB+. Contrary to Goldman’s take, it was rewarded by shareholders.

  So even as cash flows continue to decline, companies will engage in this one and only line of defense against sellers and shorters as in a world where 2% growth is the new norm (and that with the benefit of $13 trillion in central bank liquidity). And instead of investing in the future, replenishing their asset base, this asset stripping of corporations to reward shareholders will continue.

  Until it can’t, an threshold which will certainly be catalyzed by any Fed rate hike(s).

  At that point, desperate for cash companies (loaded to the gills with debt) will again try to access the bond market and be unsuccessful. It is then when the bulk of the S&P, cash flows declining, will resort to the oldest form of capital raising in the book – selling equity. From that point onward, it will be all downhill for the market.

  The only question is how many savvy shareholders will try to frontrun it and sell while they still can, not when they have to, and are competing with management to find willing buyers.

  

  

  

  

  

• The Rise Of Trump & Sanders – Distrust & Anger Ripples Across America

  Authored by Paul Brandus, originally posted Op-Ed via MarketWatch.com,

  The ‘wasted generation’ may not bother voting, for good reason

  One year from now, we’ll elect a new president. It’ll be the first opportunity for what I call the wasted generation to vote – not that many will bother. What do I mean by wasted generation?

  I’m talking about the 15.6 million Americans born between 1995 and 1999 – the first generation of the post-World War II era to grow up in a land of diminished economic expectations, corrosive cynicism and institutional distrust.

  Think about it. Born during the petty, partisan end of the Clinton era, they were barely out of their diapers when the towers fell on 9/11 and elementary, middle school and high schoolers while their country fought, at the same time, the two longest wars in its history. They came into the world just as their parents’ incomes were probably peaking — median wages, adjusted for inflation, topped out in 1998 and 1999 — and their Moms and Dads have since been squeezed by the two most devastating stock collapses since the Great Depression and a housing collapse of historic proportions. Now they’re heading off to college or already there, and can expect to rack up nearly $29,000 in debt before even graduating.

  Older Americans may remember better times. But for this group—and tens of millions born after them—it’s all they’ve known. Cynicism, war, economic stagnation—this is their “normal.” This is what we have bequeathed them. Is it any wonder polls show that young Americans don’t trust government or big corporations? They don’t trust organized religion. They don’t trust us—the media—either, and I don’t blame them.

  They don’t trust the financial system, either. When you’re 20 and have a 40-to-50 year investment horizon, you should be plowing cash into stocks—but when the market crashes 50% like it did between March 1999 and October 2002—only to be eclipsed just five later by a 57% bloodbath, it makes it easier to understand their skittishness. No surprise, then, that anti-establishment candidates like Democrat Bernie “the markets are rigged” Sanders and Republican Donald “make America great again” Trump are popular with this young, emerging slice of the electorate.

  On Facebook, for example, nearly two million people like Sanders’s page — 600,000 more than Hillary Clinton. As for Trump, one poll showed Republican millennials backing him by a 3-to-1 margin over anyone else.

  This may sound like one of those generation gap stories, where older folks complain about the “kids” doing their own thing and the kids not trusting “anyone over 30.” It’s not. From sea to shining sea, distrust and anger ripples across America: Only about a quarter of us think the country is on the right track; it hasn’t topped 50% since December 2003.

  But it’s the corrosive effect on the millennials that’s most bothersome. Based on two decades worth of data, the Pew Research Center, a respected Washington think tank, notes that “generations carry with them the imprint of early political experiences.” In other words, it’s going to be awfully hard for millions and millions of young Americans to overcome the wide distrust they have—and again, the only thing they’ve known—of establishment institutions; the economic and political implications in the years ahead could be huge.

  Here’s the way millennials see it:

  Those that can scrape together the means to go to college know there’s now a school shooting once a week in this country.

   

  Thanks to that average $29 grand in debt and uncertain job prospects, an increasing number of them will move back in with Mom and Dad when they graduate.

   

  Invest in stocks? Even if millennials didn’t think the market was fixed they don’t have the dough.

   

  Buy a home? What a joke: the number of first-time home buyers is at its lowest level in three decades.

   

  Only a handful of these kids will have steady employment with the same company over the course of their careers; many will have multiple employers — few of which will offer pensions.

   

  Millennials don’t expect Social Security to be around in 40 years and unless painful changes are made to shore up the system, it won’t be.

   

  The slow-moving and undeniable effects of climate change will affect them far more than the rest of us; and while we bicker about the cost of action, we’re too ignorant to realize that the cost of inaction is likely to be far greater.

  Older age groups like to criticize millennials: they’re spoiled, have a sense of entitlement. Actually, the rest of us should look in the mirror. We’re leaving those who will follow one hell of a mess.

  

  

  

  

  

• America's Most 'Unequal' Big Cities Exposed

  Thanks in large part to Fed policies, if Neel Kashkari is to be believed, America as a whole has become a significantly more unequal country in the last five years. In fact, as a recent report finds, "if you look at the long-term trend, there's a really steady increase in inequality." But inequality is all about location, location, location; and, as Bloomberg reports, the idea that hard work leads to prosperity is increasingly becoming an American pipe dream, in some places more than others.

  Bloomberg ranked big cities – those with populations of at least 250,000 – based on their inequality as measured by the Gini coefficients calculated by the U.S. Census Bureau (a Gini index of zero reflects absolute equality, while an index of one represents complete inequality).

  New Orleans is the most unequal city in America, according to the Bloomberg ranking.

   

  

   

  Areas with high levels of income inequality also often have diverse populations and high levels of residential segregation, according to a report last year from Mark Mather and Beth Jarosz at the Population Reference Bureau, a Washington-based non-profit group. New Orleans has both of those factors, with blacks making up 60 percent of the population in 2014 and often living in starkly different areas than whites.

   

  "New Orleans has some very clear neighborhood segregation going on," Jarosz said in an interview. "The fact that it is the most unequal among the cities is not terribly surprising."

   

  Inequality happens when there's a concentration of people at the highest and lowest ends of the income spectrum without much middle-ground in between. Big cities are often hotbeds for such conditions because they attract rich individuals who can afford the cost of living — think rents in New York City or Los Angeles — as well as lower-income households who need access to services that large municipalities can often provide.

   

  "You get this concentration both of poverty and of wealth in the same space," Jarosz said.

   

  Places with wide ranges of educational attainment also run into inequality issues, with higher levels of schooling linked not only to a person's ability to get a job, but what type of job and what they'll be paid.

  *  *  *

  The U.S. as a whole has become a more unequal country in the last five years, with its Gini index climbing to 0.48 last year from 0.469 in 2009.

  "The overall story is that inequality has been rising steadily for about the past three decades," Jarosz said. While changes from year to year are often small or nonexistent, "if you look at the long-term trend, there's a really steady increase in inequality."

  Racially diverse cities also often exhibit higher levels of inequality, as minorities have lower incomes and higher poverty rates, Jarosz said. The median income for non-Hispanic white households was $59,622 in 2014, compared to $42,748 for Hispanic families and $35,481 for blacks, according to data from the Census bureau's American Community Survey.

   

  

  

  

  

  

  

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