- America's Great Lie. Europe's Great Shame. Russia's Great Case
Authored by Eric Zuesse via Strategic-Culture.org,
The West owes Russia a hell of a lot; but what it owes Russia first is a deep apology, and a welcome into Europe, of which Russia has been and is an extremely important nation, and very unjustly denied its rightful place there. What doesn’t belong in Europe is the U.S., not in any way whatsoever, especially since the U.S. is now a dictatorship. (Anyone who says it’s not a dictatorship and who doesn’t click onto that link to find out that he’s been snookered to think it’s still a democracy, should just stop reading here right now, because this aricle is going to be suitable only for people with open, critical, inquiring minds — not for closed-minded or stupid readers.)
Why does America’s anti-Russia military club NATO still exist, after the Soviet Union’s equivalent Warsaw Pact disbanded in 1991 when the Soviet Union and its communism voluntarily ended?
NATO is nothing but America’s anti-Russia military club, against Russia and against any nation (such as Iraq, or Libya, or Syria) that supports Russia.
We killed Gaddafi in Libya because he supported Russia in international relations. We produced the failed state and jihadist mayhem that now exists there; we destroyed Libya and now the refugees from there are flooding into Europe, along with the refugees from our attacks to bring down Assad in Syria.
We overthrew (via a bloody coup and no ‘democratic revolution’ such as the West lies to assert) Yanukovych in Ukraine allegedly because he turned down the EU’s offer to Ukraine after learning that the price-tag for Ukrainians would be $160 billion if Ukraine were to comply with the EU’s demands. But the U.S. was already organizing the coup against him starting a year before the coup, and nine months before Yanukovych turned down the EU’s offer.
We are trying to overthrow Assad in Syria because he supports Russia in international relations.
This isn’t bullying?
This is ‘democracy’?
This is dictatorship: totalitarianism in the West, against Russia and any other nation that isn’t buckling to the U.S. aristocracy and its allied aristocracies in Europe, and (especially with the new bellicose nationalistic Abe government), also in Japan.
This is ugly.
This can’t be published in Western major ‘news’ media: it is samizdat, in the Western dictatorships, but it is all demonstrably true, nonetheless.
Here is how it started — the original sin of the post-Cold-War West, which has produced the problems of today and the future:
Let’s start with the results of a 2009 investigation by Germany’s Spiegel, or Mirror, magazine, which is a mainstream German news site, that’s a bit more honest than America’s equivalents:
They headlined, very directly: «NATO's Eastward Expansion: Did the West Break Its Promise to Moscow?»
They identified what that «promise» was, which Russia claims was violated, and which Spiegel was investigating: «that NATO's expansion into Eastern Europe violated commitments made during the negotiations over German reunification». The next sentence in Spiegel’s report states unequivocally their conclusion: «Newly discovered documents from Western archives support the Russian position».
The question Spiegel’s article discusses isn’t whether NATO’s continued existence is an evil, but instead whether NATO should have extended eastward up to Russia’s own borders — whether, to make this matter quite clear now, if the USSR had won, and its Warsaw Pact and not NATO had continued (though neither should have continued), the Warsaw Pact should have extended itself all the way to including Mexico and/or Canada?
How would the American people have felt about that possibility – nuclear missiles aimed against them at their own border? It’s so obviously disgusting (vile, actually – and what was John F. Kennedy determined to do if the USSR had placed nuclear millies in Cuba?), but do you learn in Western ‘news’ media that this is what the United States has done and is doing to Russia, and to Russia’s allies?
Here is how even Spiegel concluded that the West lies about this history, though Spiegel is itself a Western mainstream medium and so avoids saying it outright that directly, and instead veils the truth so that only the few people with brains and open minds will get the important point:
Spiegel makes clear that their investigation of the actual paper record shows that the then merely West German side, which was negotiating reunification of Germany with the then merely Eastern half of Germany, is exactly in accord with what Russia’s allegations have been saying all along, and exactly the opposite of what West Germany’s Foreign Minister then, Hans Dietrich Genscher, has been asserting to have been the case. Here is how we learn this from Spiegel:
Jack Matlock, the US ambassador in Moscow at the time, has said in the past that Moscow was given a «clear commitment». Hans-Dietrich Genscher, the German foreign minister in 1990, says this was precisely not the case.
After speaking with many of those involved and examining previously classified British and German documents in detail, SPIEGEL has concluded that there was no doubt that the West did everything it could to give the Soviets the impression that NATO membership was out of the question for countries like Poland, Hungary or Czechoslovakia.
On Feb. 10, 1990, between 4 and 6:30 p.m., Genscher spoke with Shevardnadze. According to to the German record of the conversation, which was only recently declassified, Genscher said: «We are aware that NATO membership for a unified Germany raises complicated questions. For us, however, one thing is certain: NATO will not expand to the east». And because the convers[at]ion revolved mainly around East Germany, Genscher added explicitly: «As far as the non-expansion of NATO is concerned, this also applies in general».
Never does Spiegel state outright that Genscher was lying; but, an intelligent person recognizes that if «the non-expansion of NATO… applies in general», then the promise made was excluding any eastward expansion of NATO at all. Not only «NATO will not expand to the east», but NATO will not expand. How much clearer can it be than that?
In other words: Genscher lies when he says that there was no «clear commitment».
For some reason, Russian officials don’t accuse the West of having «lied». Perhaps they feel that it would only exacerbate relations even further than the West itself has already done by its constant lying. However, wouldn’t it be better for the confrontation to come upon the battlefield of truth, than upon the battlefield of war?
The U.S. and its allies have been lying through their teeth in order not only to continue NATO, but to extend it up to Russia’s borders — in other words: for conquest.
For more about this key historical reality, the reader can click here, to see that there’s lots more than just the record disproving Genscher’s lies, but especially the record disproving the lies by U.S. officials.
Let me then summarize that here: George Herbert Walker Bush and Mikhail Gorbachev were the principals (Bush for the U.S. aristocracy; Gorbachev for the populations of the Soviet Union). Genscher and James Baker and Eduard Shevardnadze, etc. were merely agents; and Bush had his agents lie to Gorbachev’s agents, to say that NATO would not expand at all eastward. But he then, only later, instructed them not to follow through on what they had said, not to behave truthfully — but instead to set things up so as to allow the U.S. military alliance to extend right up to Russia’s borders. Here is how he instructed them to perform in this shameful (and potentially catastrophic) manner in private:
West German transcripts from the two leaders’ February 24–25 summit at Camp David show [that] Bush made his feelings about compromising with Moscow clear to Kohl: ‘To hell with that!’ he said. ‘We prevailed, they didn’t.’… In April, Bush spelled out this thinking in a confidential telegram to French President François Mitterrand… Bush was making it clear to Mitterrand that the dominant security organization in a post–Cold War Europe had to remain NATO.
The puppetmaster, Bush, sprung upon Kohl and Mitterrand the instruction for them to just keep up the lie, but that it would be a lie. They had believed what they had said when they said it, but were now instructed not to fulfill on it. What they had said would be a lie; they were instructed about this, only after they had said what they had believed to be true. From that point on, the anti-Russia thrust of the U.S. aristocracy, which controls the aristocracies (such as Europe’s) that are its allies, was clear; and the only way to disobey would be to become blackballed and trashed. Their careers would have been destroyed if they had disobeyed Bush.
Both in my own article there, and in the Spiegel one, the ancillary questions, such as why this promise had never been made in writing (though Gorbachev wanted it to be), are also discussed. However, something should be pointed out here regarding the Spiegel article, namely that Gorbachev’s Foreign Minister Shevardnadze was also shown there to be lying to Spiegel’s reporters, and not noted there to have been lying to them. Shevardnadze, «speaking in the Georgian capital Tbilisi, says that there were no such assurances from the West». In other words: he told, to Spiegel, a thing that was contradicting what Spiegel found in their own examination of Genscher’s papers from the period of the negotiations. Genscher had been negotiating then with Shevardnadze, and according to Genscher’s papers, Shevardnadze had indeed been informed by Genscher that NATO wouldn’t expand, at all. What Shevardnadze’s motive was for this, is not known, and Spiegel’s reporters didn’t even bring up to Shevardnadze the fact that what he was telling them was in direct contradiction of the written record. (Perhaps Shevardnadze, now retired after having become Georgia’s President, was hoping in 2009 to be favorably viewed by aristocrats in the West. Keeping up the lie would have fit for that purpose. But, even if he had been asked, he wouldn’t have given that explanation.)
* * *
George Herbert Walker’s having instructed his agents to lie and to avoid any signed treaty on this crucial historical matter, was the West’s Original Sin.
Europe’s remaining allied with the U.S. and participating in NATO, especially after having been instructed by America to lie, and to have deceived Gorbachev, who behaved honorably throughout and afterward, is Europe’s great shame.
And truth is Russia’s great case.
The U.S. is, in fact, Europe’s enemy – not merely Russia’s enemy. Not merely the truth’s enemy. Not merely democracy’s enemy.
* * *
Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity
- Spot The Odd Asset Class Out This Year
Amid the carnage in commodities, frenzy in FX, and breakdowns in bonds, one asset class in one region of the world stands among the majors… The Nasdaq 100 Index.
(click image for large legible version)
This chart from Macquarie puts the year in perspective for commodity investors. It covers various asset classes including equities, FX markets, bonds, and commodity prices, and charts them YTD in terms of US dollars and expressed as a percentage.
For a simple chart, there is a lot of information here to consider.
For starters, on the far right is the prime culprit in stymying commodity markets: the Dollar Index. The US dollar, which commodities are priced in, has had a big year with close to a 10% return YTD. While the US economy is still suspect at best, it has served as a safe haven for investors this year over markets such as Europe, China, and Japan. As a result, the USD has had the best performance of all of these asset classes listed on the chart.
The other market on the right worth noting is the Nasdaq, home to many of the tech stocks that have kept the US economy chugging along. While some are skeptical of the true value of some of the companies in Silicon Valley, it cannot be denied that the Googles, Facebooks, and Amazons of the world are the key to keeping US growth intact in any capacity.
Of course – you should not worry about US equities being expensive or mispriced…
* * *
To the left of the zero mark, things get dire fast.
Precious metals such as gold and silver are down, but this can be mostly attributed to the strength of the dollar. Energy and industrial metals, on the other hand, have been thoroughly routed due to a combination of dollar strength and slowing Chinese growth. Many agricommodities have struggled as well.
The biggest losers of the bunch include rhodium, nickel, iron ore, and lean hogs, all which are down more than 30% YTD.
- Sitting Ducks In China's Bathtub – An Overture To World War III?
Submitted by Doug Casey via InternationalMan.com,
It’s always been true, as Bourne said, that “war is the health of the State.” But it’s especially true when economic times get tough. That’s because governments like to blame their problems on outsiders; even an imagined foreign threat tends to unify opinions around those of the leaders. Since economies around the world are all weakening, and political leaders are all similar in essential mindset, there’s good reason to believe the trend towards World War III is accelerating.
Many politicians and pundits in the U.S. blame “those damn Chinese” for taking “our jobs” by filling Walmart with tons of cheap goods, and the swarthy ragheads for making the price of oil too high (usually, but now too low).
The Russians, the Iranians, the Taliban (who will soon reconquer Afghanistan) and ISIS (which is carving out a new nation-state from the ruins of Syria and Iraq) are permanent members on the list of Bad Boys.
But now, since the Obama regime has decided to “pivot to the East,” you can underline China’s name on that list.
The “pivot” being the U.S. government’s new focus on meddling in Asia, as opposed to meddling in the Middle East and Europe. U.S. Defense Secretary Ash Carter says the U.S. will be the principal security power in the Pacific “for decades to come.” I’m sure the locals, including the Chinese, were thrilled to hear that.
It’s said that the U.S. government has combat troops (or advisors, as highly trained special ops guys are usually euphemistically termed) in about 100 countries. It’s hard to keep track of their latest “intervention”…although “interference” is a better word. Note that I said “they,” not “us,” in reference to Washington. The city has a life of its own and its interests are not necessarily those of the country it rules.
Let’s see…sending arms to a puppet government in Kiev to help put down a secession in Donetsk and Lugansk. Sending jets, and now ground troops, to Syria, which will quite possibly create an incident with the Russians. 150 soldiers to Uganda to fight the Lord’s Resistance Army and 300 to Cameroon to fight Boko Haram. And more troops to Iraq and Afghanistan to help out our “allies.” For the moment, they’re the best allies money can buy.
It’s hard to keep track of them all, with something new almost every week. But, on the bright side, war is nature’s way of teaching Americans geography.
So, with that in mind, we now have to learn where the Spratly Islands are. Let’s start with a map.
Map of the South China Sea Region (Photo: John Bretschneider)
You’ll note the red line. In 2012 China decided that the entire area, right up to the shorelines of Vietnam, Taiwan, the Philippines, Malaysia, and Brunei, was part of its economic zone. The governments of all those countries also have claims to parts of the South China Sea, and the Spratlys in particular. You’ll also note the Paracels, another zone of contention, between China and Vietnam.
Believe it or not, from 1956 to 1972 (when he was jailed for his efforts) a Filipino businessman, one Tomás Cloma, also attempted to claim part of the Spratlys, and make it an independent country, Freedomland. This caught my attention, in that I was (very marginally) involved in three other island independence movements in the ‘70s: Nagriamel, Abaco, and Minerva. Those, however, are stories (all a mixture of tragedy, comedy, and pathos) for another day.
Until very recent times, the Spratlys were best known as a hazard to navigation, with about 750 islets, reefs, and sandbars, total land area about 1.5 square miles, spread over about 160,000 square miles of the South China Sea.
I’ve never been to the Spratlys. But their potential value is clear. It’s said up to 30% of the world’s fish catch comes from the South China Sea. And, almost needless to say, it’s conjectured that the area contains a lot of oil.
So, you’re probably asking yourself, “What is that to me?” The answer should logically be “Nothing, really, unless it’s a question on a quiz show.”
But the U.S. government, although it, as usual, has no dog in the fight, has decided to get involved. The catalyst for it acting now is that China is in the process of transforming at least seven reefs into usably large artificial islands, several with long airstrips.
I’ve looked at the history of who has used, and claimed ownership, of the islands over the centuries. All the adjacent countries have somewhat reasonable-sounding claims. And the Taiwanese, Filipinos, Malaysians and Vietnamese each have a military presence on one or more of the Spratlys. But only the recent Chinese efforts have drawn the U.S. government’s attention. Recently, they sent a guided missile destroyer, the USS Lassen, within the 12-mile limit of Subi Reef, which the Chinese are currently expanding. Reports are conflicting whether the ship was just innocently passing through, or trying to create a precedent.
I’d like to ask, how do you, I mean you personally, feel about that? I’d like to know. Scores of millions of Asian locals, who’d previously never even heard of the islands, and certainly can’t find them on a map, are getting worked up because their governments told them the islands were “theirs.” And now the U.S. is further complicating the matter. But here’s my take.
The Chinese seem quite out of line claiming the whole South China Sea as their economic zone. Shame on them. But how is that the problem of the U.S.? It’s the problem of the locals. Should the Chinese be able to build artificial islands? That’s a somewhat different question. I’d say, why not? Disputed or unclaimed land belongs to the person who uses it.
One thing is for sure: the U.S. government is asking for trouble flying military aircraft off the coast of China and sailing warships into waters they claim. How would the U.S. react if Chinese planes and warships were often seen off the West coast? Or if the Santa Catalina or San Juan islands developed independence movements that the Chinese backed?
The U.S. government feels pretty bold about its intrusion into the South China Sea, since no other government has a naval force even remotely comparable to its 12 aircraft carrier groups. But that boldness is foolish and unjustified. I’ve said for many years that those carriers are exactly analogous to battleships before World War II, or cavalry before World War I. They’re essentially sitting ducks, highly vulnerable to all manner of cheap, accurate missiles, both cruise and ballistic, that could swarm them en masse.
It will be a huge embarrassment to Americans (but a treat to divers a couple generations hence) when they’re sunk, and sprouting barnacles like the Japanese fleet in Truk Lagoon.
The U.S. knows that it’s China’s backyard, and they could sink any U.S. taskforce if they choose to. But they probably won’t. Why start a war when your enemy has a superior military, but you are growing your economy several times faster than he is? It makes more sense to wait…so it’s likely to remain a Mexican standoff, as opposed to an overture to World War III. But these things have a way of escalating unpredictably. In any event, it makes no sense to go to the other side of the globe just to provoke someone.
In the meantime, the U.S. carrier groups are prestigious, and great for sticking the U.S. government’s nose into far-off places where it’s not welcome. But they’re hugely expensive, at about $6 billion a ship, plus another billion or two per copy for its half-dozen escorts, plus another $200 million for each of the 50 or so F-35 fighters they’ll soon carry. Plus a few billion a year to keep each group operational. Not to worry on that score; the Chinese will surely lend the U.S. government more money to enable that.
There’s plenty of reason to be concerned about the roughly $1 trillion a year the U.S. spends on the military and “security.” Even though it’s more than the next 28 countries combined, it’s apparently not enough to keep America safe. In fact, it’s actually making the country less safe, by provoking and threatening other powers.
And if it doesn’t start a war in the short run, it’s going to guarantee a U.S. bankruptcy in the slightly longer run. All the “hawks” running for president this year (which is to say, almost every candidate) seem oblivious to the fact that, in anything but the briefest conflict, economic power completely trumps military hardware.
In conclusion, whenever you see a mention of the U.S. Navy and the Spratlys in the same paragraph, you’re seeing a reminder of an open vein helping to bleed America dry. And that’s the best case.
- What The Fed Hath Wrought – Bonds/Stock Positioning Most Extreme Since The End Of QE1
Having recently explained how "The Fed has done everything it can to avoid surprising the market," vice-chair Stan Fischer better be right about what happens next. With all the double-edged FedSpeak and CONfidence reiteration – in the face of tsunami-like global deflationary forces only made reflexively worse by a soaring US Dollar – speculators are at extremely short bonds and short VIX (bullish stocks). The last time this happened was the end of QE1…
Aggregating across the entire Treasury future complex, speculators are the most next short since the end of QE1…
And now speculators have turned net short VIX once again…
The last time the combined levels of short bonds and short VIX were this extreme was as QE1 ended in 2010… This happened next…
Charts: Bloomberg
- "It's All A Lie" – Eric Sprott Slams Massive Monetary Metals Manipulation
Submitted by Mac Slavo via SHTFPlan.com,
If the government’s official statistics are to be believed the U.S. economy is moving full steam ahead. Consumer are spending, the job market is expanding, real estate has recovered, stocks are soaring and the U.S. dollar is stronger than it has been in a decade.
But if you have yet to realize it, it’s all a lie. So says billionaire investor Eric Sprott of Sprott Global, which manages hundreds of millions of dollars in contrarian investment funds for clients all over the world. Well known for his long-term bullishness on the resource sector, specifically precious metals, Sprott joined First Mining Finance chairman Keith Neumeyer in a must-see interview where the pair discuss everything from the state of the global economy and trade to gold market manipulation and the inevitable breakdown of highly leveraged paper trading exchanges.
Neumeyer recently sent a very public letter to the Commodity Futures Trading Commission highlighting rampant price suppression, noting that neither real producers or real consumers are being represented by the manipulative practices of a small concentration of players. Echoing those concerns Sprott suggests that for every 5 tons of real gold there are some 1500 tons worth of claims. The inevitable outcome should claimants ever want to take delivery of physical inventory will be an unprecedented explosion in price:
To be brutally honest, I mean, that’s what I dream of… I think we’re almost at that point where we might very well have a shortage of gold and silver by a product of this last raid here, so much so that we’ll take those 5 tons from the COMEX because we have lots of people buying silver and gold.
The manipulation of precious metals, coupled with the supply and demand fundamentals which Sprott says will lead to shortages over the next few years as mining companies reduce output or close up shop, will leave many investors who think their gold holdings are easily convertible to physical assets with nothing more than depreciating Yellen Bucks at exactly the moment they’ll need precious metals in their possession.
Everything says to me that the demand for gold is in excess of the supply. And, of course, you wonder why the price would go down, but people look at the COMEX which stays manipulated, which is so obvious to me what’s going on. We have 5 tons of physical gold. We have something like 1500 tons of claims against that 5 tons. So to be quite direct about your question, yes, I kind of wonder any day, is somebody going to snatch those 5 tons of gold, and we end up with some kind of cash settlement. But then you have to think, if we would have a cash settlement, having taken gold from 1900 down to 1100, all under the threat of a rate increase for the last 5 years, which has never happened and may not ever happen, and then all of a sudden they’re like “well, really there is no gold here, we’ll just cash settle it at $1,100.” Meanwhile, we’ve lost $800 on a false claim. And perhaps maybe people in the know know about this, they keep the price of precious metals suppressed because they are the canary in the coal mines.
A canary in the coal mine, indeed:
There’s no way we should have a strong dollar here. We haven’t even begun to deal with the issues that are facing the U.S. public, i.e., Social Security, Medicare, everything so far is a lie.
I mean, I can’t believe inflation’s 2% when pretty well every individual in the U.S. just on their healthcare policy, just on that policy alone, their cost went up 2% a year. On everything. Just on healthcare, because it’s probably 20% in healthcare, you get a 10% increase, that’s a 2% increase. So whether or not anything else goes up, there’s a 2% increase. And they don’t throw in grants and education and all those other things that are going up. Inflation numbers are massively understated, everything’s a lie.
I don’t believe the jobs report from last Friday, the ADP number, it’s all a lie. And I sort of ask why do they have to lie about everything? Well, you know why they have to lie about everything… Because we don’t have an economic recovery happening, and they’ve got to pretend there is one. And so when you get these funny numbers that come out that suggest we have strength when deep down you know there’s no strength. Look at the truckloads, the rail car load increase, the cost of chartering a ship, the Baltic rate, they’re all going to new lows here.
Knowing full well that we’re dealing with a lie so big that its eventual consequence will lead to bewilderment and widespread panic among the general global public once it becomes common knowledge, one should be asking: what do I do now?
Keith Neumeyer, whose company has been rapidly acquiring distressed assets in the precious metals mining space, provides an insightful and actionable answer given what we know about what’s coming:
As Eric said, the valuations now are quite laughable. As well as many people know, I’ve been in this market for a while. I’m not sure if Eric has seen these valuations before but in my 32 years of being in it, I don’t recall ever being able to buy a drilled ounce of gold in the ground for less than $10 an ounce.
…
Not one of these transactions could have occurred in a normal market — the costs would have been just much, much higher and just unaffordable.
And then on a personal note, as I’ve said a couple of times to some good friends, I’ve just recently sold my last piece real estate and I’m putting all that money into this sector. I’m going all-in, I think this is “back up the truck” time, this is a once-in-a-decade opportunity, and I’m putting my money where my mouth is.
Though the market price has yet to reflect it, Eric Sprott and Keith Neumeyer are being joined by scores of billionaires and investment funds that are positioning themselves in the gold and silver markets.
They know what’s coming. Unfortunately for the majority of the populace, it’ll be too late by the time they realize it too.
- "Winter Is Coming" – Wall Street Economists At Work
It’s that time of year again…
When angry mobs of Americans trample one another for the very last Victoria’s Secret thong, when the world over-indulges, over-consumes, and over-stimulates… And of course…
It’s the time of year when Wall Street’s best paid and brightest are forced to admit their utter cluelessness…
As Reuters shows, the last two years have been extremely embarrassing for the so-called professionals…
Of course, blame-mongery will be rife:
- Weather was so 2014 (although El Nino is bound to crop up in more than a few memes this year)
- Port Strikes were “the new black” in 2015
So, what will the excuse be this year – since there is no way anyone could blame The Fed?
Charts: Bloomberg
- Gold Mini Flash-Crashes At Asian Open
Someone decided that the exact opening of Gold futures trading on a Sunday night – ahead of a holiday week in the US – was the perfect time to liquidate over $161 million notional of ‘paper’ precious metals contracts… Currencies were unmoved, stocks are leaking higher and bonds lower.
Admittedly the flush was modest in size (around a 0.5% drop and pop) but we are sure whover this gold-seller’s fiduciary duty is owed to will not mind at all…
1500 or so contracts liquidated instantly… makes perfect sense.
- So Who's Really Sponsoring ISIS?
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
Mass surveillance at home and endless military projection abroad are the twin sides of the same coin of national security, which must simply be maximized as much as possible.
Conspicuously missing from President Hollande’s decisive declaration of war however, was any mention of the biggest elephant in the room: state-sponsorship.
A senior Western official familiar with a large cache of intelligence obtained this summer told the Guardian that “direct dealings between Turkish officials and ranking ISIS members was now ‘undeniable.’”
ISIS, in other words, is state-sponsored?—?indeed, sponsored by purportedly Western-friendly regimes in the Muslim world, who are integral to the anti-ISIS coalition. Which then begs the question as to why Hollande and other Western leaders expressing their determination to “destroy” ISIS using all means necessary, would prefer to avoid the most significant factor of all: the material infrastructure of ISIS’ emergence in the context of ongoing Gulf and Turkish state support for Islamist militancy in the region.
There are many explanations, but one perhaps stands out: the West’s abject dependence on terror-toting Muslim regimes, largely to maintain access to Middle East, Mediterranean and Central Asian oil and gas resources.
– From the excellent Nafeez Ahmed article: NATO is Harbouring the Islamic State
With the way the French government’s cracking down on the civil liberties of its own citizens, you’d think the general public was supporting and funding ISIS as opposed to the French government allies who actually are.
As an example, we learn the following from ArsTechica:
In the wake of last Friday’s attacks in Paris, France is bringing in new legislation extending the country’s temporary state of emergency to three months. The new laws also grant the authorities new powers to carry out searches of seized devices and to block websites.
Under the legislation, police searches of digital equipment are no longer limited to the device itself. Instead, they may also extend to include any data that is “accessible from the initial system or available for the initial system,” as the French digital rights site La Quadrature du Net explains. In practice this means police may use seized devices in order to search for “any type of information on any type of electronic device of any French resident and especially any information available via usernames, passwords collected during a police search, any content stored online.”
Finally, La Quadrature du Net points out a worrying vagueness in a section of the new law dealing with powers to dissolve groups or associations that “take part in committing acts that seriously endanger the public order or whose activities facilitate or encourage committing such acts.” For example, this could include “many associations promoting the use of encryption technologies, which are indeed used by criminals but also mainly by many innocent citizens.”
The fear is that by rushing through this legislation while emotions are understandably running high, the French government will pass measures with unforeseen and harmful consequences.
Well of course, but that’s the point isn’t it?
The reality is, Turkey and the West’s “Gulf allies” are the real players behind ISIS, not that you’d ever hear a word about it on the nightly news. So if you want to know the real story, the person I turn to time and time again is Dr. Nafeez Ahmed.
Here are some excerpts from his latest, must read piece:
President Hollande wants European Union leaders to suspend the Schengen Agreement on open borders to allow dramatic restrictions on freedom of movement across Europe. He also demands the EU-wide adoption of the Passenger Name Records (PNR) system allowing intelligence services to meticulously track the travel patterns of Europeans, along with an extension of the state of emergency to at least three months.
Under the extension, French police can now block any website, put people under house arrest without trial, search homes without a warrant, and prevent suspects from meeting others deemed a threat.
Mass surveillance at home and endless military projection abroad are the twin sides of the same coin of national security, which must simply be maximized as much as possible.
Conspicuously missing from President Hollande’s decisive declaration of war however, was any mention of the biggest elephant in the room: state-sponsorship.
Syrian passports discovered near the bodies of two of the suspected Paris attackers, according to police sources, were fake, and likely forged in Turkey.
Earlier this year, the Turkish daily Today’s Zaman reported that “more than 100,000 fake Turkish passports” had been given to ISIS. Erdogan’s government, the newspaper added, “has been accused of supporting the terrorist organization by turning a blind eye to its militants crossing the border and even buying its oil… Based on a 2014 report, Sezgin Tanr?kulu, deputy chairman of the main opposition Republican People’s Party (CHP) said that ISIL terrorists fighting in Syria have also been claimed to have been treated in hospitals in Turkey.”
This barely scratches the surface. A senior Western official familiar with a large cache of intelligence obtained this summer told the Guardian that “direct dealings between Turkish officials and ranking ISIS members was now ‘undeniable.’”
The same official confirmed that Turkey, a longstanding member of NATO, is not just supporting ISIS, but also other jihadist groups, including Ahrar al-Sham and Jabhat al-Nusra, al-Qaeda’s affiliate in Syria. “The distinctions they draw [with other opposition groups] are thin indeed,” said the official. “There is no doubt at all that they militarily cooperate with both.”
In a rare insight into this brazen state-sponsorship of ISIS, a year ago Newsweek reported the testimony of a former ISIS communications technician, who had travelled to Syria to fight the regime of Bashir al-Assad.
The former ISIS fighter told Newsweek that Turkey was allowing ISIS trucks from Raqqa to cross the “border, through Turkey and then back across the border to attack Syrian Kurds in the city of Serekaniye in northern Syria in February.” ISIS militants would freely travel “through Turkey in a convoy of trucks,” and stop “at safehouses along the way.”
The former ISIS communication technician also admitted that he would routinely “connect ISIS field captains and commanders from Syria with people in Turkey on innumerable occasions,” adding that “the people they talked to were Turkish officials… ISIS commanders told us to fear nothing at all because there was full cooperation with the Turks.”
In January, authenticated official documents of the Turkish military were leaked online, showing that Turkey’s intelligence services had been caught in Adana by military officers transporting missiles, mortars and anti-aircraft ammunition via truck “to the al-Qaeda terror organisation” in Syria.
There is no “self-sustaining economy” for ISIS, contrary to the fantasies of the Washington Post and Financial Times in their recent faux investigations, according to Martin Chulov of the Guardian. As a senior ISIS member recently revealed to him: “They need the Turks. I know of a lot of cooperation and it scares me. I don’t see how Turkey can attack the organization too hard. There are shared interests.”
Meanwhile, NATO leaders feign outrage and learned liberal pundits continue to scratch their heads in bewilderment as to ISIS’ extraordinary resilience and inexorable expansion.
Some officials have spoken up about the paradox, but to no avail. Last year, Claudia Roth, deputy speaker of the German parliament, expressed shock that NATO is allowing Turkey to harbour an ISIS camp in Istanbul, facilitate weapons transfers to Islamist militants through its borders, and tacitly support IS oil sales.
Nothing happened.
Instead, Turkey has been amply rewarded for its alliance with the very same terror-state that wrought the Paris massacre on 13th November 2015. Just a month earlier, German Chancellor Angela Merkel offered to fast-track Turkey’s bid to join the EU, permitting visa-free travel to Europe for Turks.
In his testimony before the Senate Armed Services Committee in September 2014, General Martin Dempsey, then chairman of the US Joint Chiefs of Staff, was asked by Senator Lindsay Graham whether he knew of “any major Arab ally that embraces ISIL”?
General Dempsey replied:
“I know major Arab allies who fund them.”
In other words, the most senior US military official at the time had confirmed that ISIS was being funded by the very same “major Arab allies” that had just joined the US-led anti-ISIS coalition.
These allies include Saudi Arabia, Qatar, the UAE, and Kuwait in particular?—?which for the last four years at least have funneled billions of dollars largely to extremist rebels in Syria. No wonder that their anti-ISIS airstrikes, already miniscule, have now reduced almost to zero as they focus instead on bombing Shi’a Houthis in Yemen, which, incidentally, is paving the way for the rise of ISIS there.
ISIS, in other words, is state-sponsored?—?indeed, sponsored by purportedly Western-friendly regimes in the Muslim world, who are integral to the anti-ISIS coalition.
Which then begs the question as to why Hollande and other Western leaders expressing their determination to “destroy” ISIS using all means necessary, would prefer to avoid the most significant factor of all: the material infrastructure of ISIS’ emergence in the context of ongoing Gulf and Turkish state support for Islamist militancy in the region.
There are many explanations, but one perhaps stands out: the West’s abject dependence on terror-toting Muslim regimes, largely to maintain access to Middle East, Mediterranean and Central Asian oil and gas resources.
Much of the strategy currently at play was candidly described in a 2008 US Army-funded RAND report, Unfolding the Future of the Long War (pdf). The report noted that “the economies of the industrialized states will continue to rely heavily on oil, thus making it a strategically important resource.” As most oil will be produced in the Middle East, the US has “motive for maintaining stability in and good relations with Middle Eastern states.” It just so happens that those states support Islamist terrorism…
Assad’s brutality and illegitimacy is beyond question?—?but until he had demonstrated his unwillingness to break with Russia and Iran, especially over their proposed pipeline project, US policy toward Assad had been ambivalent.
We must not ask unpatriotic questions about Western foreign policy, or NATO for that matter.
We must not wonder about the pointless spectacle of airstrikes and Stazi-like police powers, given our shameless affair with Erdogan’s terror-regime, which funds and arms our very own enemy.
We must not question the motives of our elected leaders, who despite sitting on this information for years, still lie to us, flagrantly, even now, before the blood of 129 French citizens has even dried, pretending that they intend to “destroy” a band of psychopathic murdering scum, armed and funded from within the heart of NATO.
No, no, no. Life goes on. Business-as-usual must continue. Citizens must keep faith in the wisdom of The Security State.
Very well said.
- What CNBC Didn't Tell You About The Market's "Best Week Of The Year"
"Everything is awesome," rang out as anchor after anchor explained how the stock market's "best week of the year" – after mass murder in Paris and as hawkish a Fed as most traders have known was unleashed – was just the start… and Santa Claus was on his way. However, there are a few things they forgot to mention…
The explosive week's gains – no matter what – perfectly roundtripped stocks to the "better-than expected, good news is bad news" cliff-edge of October's payrolls…
It was an OPEX week… which has typically been followed by less exuberance…
It was an almost perfect echo of the exuberant Bullard Bounce from last October…
But there was something very different about this bounce…
Breadth collapsed as unlike last time, participation in the rip was minimal…
And Insiders weren't buying it…
So what happens next?
Charts: NorthmanTrader.com and Bloomberg
- ISIS Explained (For Millennials)
- Mike Maloney: The Rollercoaster Crash
Submitted by Adam Taggart via PeakProsperity.com,
Precious metals sank to 5-year lows during this past week. The long painful price decline that began at the end of 2011 still continues unabated. Holders of gold & silver are understandably wondering if their faith in precious metals has been misplaced.
In this week's podcast, we invite Mike Maloney back on the podcast. Mike is the owner of one of the largest bullion dealers in the US, GoldSilver.com, and one of the top minds we know of on monetary history. In this wide-ranging interview — which announces the release of a new educational video, The Rollercoaster Crash, which kicks off Season 2 of GoldSilver's excellent video series Hidden Secrets of Money — Mike lays out the rationale for an approaching global reset of the existing fiat currency regimes, and why asset-backed currencies are highly likely to return in our lifetime:
History shows that whenever there is a problem with the currency, whether it is big inflation, hyperinflation, or deflation, people go back to safe haven assets. And we should be going into a deflationary episode that is overreacted to that causes big inflation or hyperinflation, which causes a breakdown of the current global monetary system, the global dollar standard that is now the longest-lived of these artificial monetary systems and has developed a bunch of stress cracks and is in the process of imploding right now. There is going to be before the end of this decade, most likely, another emergency meeting of a bunch of finance ministers and economists to try and hash out another world monetary system. It is just history repeating, and it is a natural consequence of a man-made, artificial manipulation of the free market.
But if this debt-based currency system has to evolve, switchover to some sort of asset-based currency system or currency system that is a free market thing, I am fine if the free market selects Bitcoin or if it selects gold or silver again like it has for the past 2500 years — it keeps on selecting gold and silver as the optimum money. I am fine with whatever the free market picks. And I believe it will lead to greater prosperity. But we are in for some short-term pain. The good news is that for somebody that is properly positioned, it can be the best thing that ever happened to you because of this enormous wealth transfer. If currency a fails, its price measured in gold goes to infinity.
Today, there is about $200 worth of gold, investment-grade gold, per person. And there is about $40,000 worth of other liquid financial assets that compete in storing purchasing power. And so those liquid financial assets such as cash, stocks, and bonds, the problem with them is that their purchasing power can evaporate. It is something that is just based on trust. And if just 10% of those liquid financial assets come chasing gold, gold’s purchasing power has to rise 20-fold.
Click the play button below to listen to Chris' interview with Mike Maloney (78m:22s)
- Here Is The Complete Scenario In Which The Fed Hikes Rates, Starts A Recession, And Launches QE4
Seven years after the Fed unleashed ZIRP and QE to “fix the economy”, it has finally admitted that ZIRP and QE failed to do that (although they certainly succeeded in blowing the biggest asset bubble ever), and for the past 6 months the Fed has engaged in what may be the most ridiculous case of revisionist history, as the narrative has been flipped on its head, and now the all too wise career economists of the Fed (with the help of a few good ex-Goldman bankers) are pitching the first rate hike in nearly a decade as the solution to all the economy’s problems.
For now the equity market has played along with this grotesque flip-flop in monetary policy, first by rising two months ago on terrible job numbers which made the December rate hike less realistic, and then rising some more in the aftermath of the October “hawkish” Fed announcement and minutes, which in no uncertain terms warned a December rate hike is coming after all, poor economic data be damned.
To be sure, while stocks as usual remain stuck in their imaginary ivory tower where good news is great, and bad news is even greater, other assets have been far less enthusiastic. In fact, as we have shown repeatedly, the dramatic flattening of the yield curve (via the 2s30s) is now screaming policy error.
Yet if bonds foresee a major monetary policy “error” why do stocks remain oblivious? One attempt at an answer was provided by Goldman late last week when the firm suggested that the natural rate of the economy (to which the Fed will hike rates before re-easing) has declined and will remain lower for longer: in other words, the Fed’s experiment has weakened the economy so much, its potential growth rate has been cut in half in the past decade.
To Goldman this was, as can be expected, bullish for stocks and bearish for bonds (ironically even as another part of Goldman is saying that the “Bernanke put” is now gone and has been replaced with the “Yellen call“, which is why Goldman’s 2016 year end target is an unchanged market).
Another, far more credible interpretation, comes from Deutsche Bank’s Dominic Konstam.
According to the DB strategist, what the Fed is likely ignoring is that after decades of bubbles, the monetary excess aftermath of the great financial crisis has still not cleared, and that not only is the equilibrium real rate “lower for longer”, it is in fact negative.
What this means is that the Fed, in its reflexive attempt to boost confidence in the economy – and the logic goes as follows: “look, we are raising rates, and we wouldn’t be raising rates unless we thought the economy could handle it” (just please ignore the whole “subprime is contained” thing) – is not only engaging in massive policy error, but is about to unleash a recession which will promptly force it to cut rates again (to negative) and start another episode of QE.
Here is Deutsche, first laying out what the Fed economists think:
The real case for policy error – equilibrium short real rates may be below zero
There are two interpretations of the macroeconomic data that have vastly different implications for the effect of imminent rate hikes. The first is the “conventional” view, which the Fed subscribes to. This view posits that the short-term real equilibrium rate is around zero. Since the nominal Funds rate is at the zero lower bound, policy is accommodative, and this is why the labor market has improved rapidly. Inflation has not picked up because it as a lagging indicator. However, some form of a Phillips Curve relationship does exist, and so inflation will eventually reach the Fed’s 2 percent target. As per this view, if inflation rises and nominal growth also rises then the equilibrium nominal rate will rise. Even if the equilibrium real rate does not change, the Fed might at least be able to get to the market’s view of the terminal rate – slightly below 2 ½ percent – without inflicting serious damage on the economy. If the equilibrium real rate does rise, all the better – the markets would move to the Fed’s dots, and the terminal rate would be around the Fed’s target of 3 ½ percent.
How to determine if the equilibrium rate is negative? Just look at the debt, stupid:
The alternative view is more worrying. In this view, the equilibrium nominal rate is at present much lower than the Fed thinks and the equilibrium real rate is meaningfully negative. Policy at present is not very accommodative, and to the extent that it is, inflation is actually running above its equilibrium level, which is close to 1 percent. One might argue for low “implied” equilibrium short rates via debt ratios. For example, if nominal growth is 3 percent and the debt GDP ratio is 300 percent, the implied equilibrium nominal rates is around 1 percent. This is because at 1% rates, 100% of GDP growth is necessary to service interest costs.
Which goes back to our fundamental thesis from day 1: there is simply too much debt, and while unconventional policy merely increases the debt, the interest rate shock from a rate hike will crash the economy: hence, the Fed is trapped.
In this case, real growth would slow in response to rate hikes because productivity would stay weak at full employment and companies would be profit/price constrained around paying higher wages. Moreover, nominal growth would then slow even more than real growth does because inflation would fall to 1 percent or below.
But… a 25 bps rate hike is tiny: surely the economy can handle it? Actually, if the equilibrium rate is negative, it can’t.
This is the important policy error scenario because even a very shallow path of rate hikes might drive the real Funds rate well above the short-term equilibrium real rate, further depressing demand. It is then plausible that the economy would be driven into recession, and the Fed would quickly be forced to abort the hiking cycle. As an aside, such a policy error could reinforce itself by causing structural damage that puts additional downward pressure on the equilibrium real rate. In this case the yield curve would flatten meaningfully, at least until the Fed actually reversed course by cutting rates.
Finally, this is critical because just like Japan in 2000, and all other central banks during the New Normal, who raised rates only to lower them immediately after, the Fed is about to unleash not only a policy mistake, but to do precisely the one thing that will force it to not only cut rates, perhaps to negative, while doing even more QE.
This scenario is also bullish for rates because the Fed would, at the very least, stop rolling down its SOMA portfolio. More likely it would restart asset purchases in an attempt to stimulate the economy once more, pushing yields further down. We have argued in the past that unconventional forms of monetary accommodation are here to stay. The minutes of the October meeting confirm this view, noting that some policymakers felt it would be “prudent to have additional policy tools” because a lower long-run equilibrium real rate makes it more likely that reductions in the Funds rate alone would not be sufficient to stimulate the economy in the event of a downturn in the future.
Whether this error will crush what little credibility the Fed has and be its final error, either policy or communication, will be revealed in the very near future.
Good luck Janet.
- The "Cold Reality" Of The Post-Paris World: The "Freedom-Promotion Agenda" Has Failed
Einsteinian insanity is a defining characteristic of US foreign policy – and that goes double when we’re talking about the Middle East.
You see, America loves democracy so damn much, that the US is fully prepared to impose it upon recalcitrant countries by force. Sure, that may seem oxymoronic, but it’s really just well meaning paternalism. After all, what better way to endear the local population to an occupying force and sow the seeds for the establishment of democratic institutions than to come in shooting after you’ve leveled a couple of cities with cruise missiles and airstrikes?
Of course not all autocratic regimes are subject to America’s “democracy at gunpoint”. The Saudis, for instance, get to promote Wahhabism and push the same brand of orthodox Sunni Islam that ISIS and al-Qaeda espouse free from US meddling because, well, because they’re an “ally”, because they’ve got all the oil, and because they’ve helped the US perpetuate decades of dollar dominance. As long as they can afford to provide subsidies to the masses in an effort to effectively bribe the public out of staging a popular uprising, everything will presumably be fine.
Other countries haven’t been so lucky and the results have been a disaster.
America’s effort to rid Iraq of Saddam ended up transforming the country into an unstable Iranian colony plagued by sectarian violence.
Libya is a lawless wasteland in the wake of Gaddafi’s death.
Egypt has completely roundtripped and is now run by a former intelligence chief for Hosni Mubarak meaning that i) the entire “democratic” interlude touched off by protests during the Arab Spring was completely pointless, and ii) the loss of life in the countercoup which ousted Mohamed Morsi was entirely avoidable. In other words, if we were just going to end up with a Mubarak disciple, then why did we bother? Morsi has since been sentenced to death.
Now, Washington, Riyadh, Ankara, and Doha have helped turn Syria into what UN Secretary General Ban Ki-moon recently called “the worst circle of hell” and were it not from Russia and Iran’s interevention, Damascus might have already fallen.
What do all of these things have in common? They all represent failed attempts on the part of Washington to engineer democracies and influence the political future of sovereign states either by coercion or outright military force.
Put simply: that approach never works. Ever. And this fairy tale you’ll hear (see here for instance) about how things would be fine if the US would just send in 30,000 troops to subdue ISIS and back down the Russians on the way to holding “internationally recognized democratic elections” is the worst kind of nonsense. First, it completely overlooks the fact that the Iranians will fight before they’ll stand aside and let Assad be “voted” out, second, you can’t hold democratic elections in a warzone, and third, it’s not entirely clear that the US has completely thrown in the towel on the idea that if the Saudis and Qatar can just keep the various Sunni extremist groups battling the regime in the fight for long enough, there might still be hope that the Russians get bogged down and eventually lose.
Here’s what Congresswoman Tulsi Gabbard – who on Friday tabled legislation designed to force the CIA into giving up the “illegal” effort to overthrow Assad – said last week when asked about whether the US should attempt to intervene when an autocratic government is oppressing its people:
“People said the very same thing about Saddam (Hussein), the very same thing about (Moammar) Gadhafi, the results of those two failed efforts of regime change and the following nation-building have been absolute, not only have they been failures, but they’ve actually worked to strengthen our enemy.”
It’s with all of the above in mind that we bring you excerpts from “The Cold Realism of the Post-Paris War on Terror,” an article by Emile Simpson originally published in Foreign Policy. As Simpson convincingly argues, “the time for supporting democratic regime change across the Muslim world is over. It’s accept Assad and his like, or embrace the chaos.”
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From “The Cold Realism of the Post-Paris War on Terror”
While the Paris attack provides a fresh impetus for the West to defeat the scourge of radical Islamic terrorism, it also shows how profoundly the post-9/11 war on terror has failed. After all, haven’t jihadi networks massively proliferated since 2001, leaving Western capitals and cities across the Muslim world perpetually on edge, poised for the next fresh carnage? Post-Paris, the war on terror won’t be part of a neoconservative project to remake the world in our own image, but a Burkean conservative posture that accepts the devils we know.
The Paris attacks will impose a cold strategic clarity. Whatever the objective threat, the West cannot tolerate the humiliation of terrorist attacks from an enemy that, so far, it has merely sought (and failed) to contain. For all the self-congratulatory talk of “historic” progress at the recent diplomatic talks in Vienna, a “political solution” cannot fix the problem of ISIS and hard-line Islamists — for neither Washington nor Moscow would ever accept a negotiated peace with them. The territory they hold must be cleared and held by infantry. But whose infantry? The Kurds can retake only so much ground, given their limited resources and lack of desire to expand substantially beyond ethnically Kurdish areas. Non-Kurdish rebels are small in number and fragmented. And in many cases their “moderate” credentials are dubious, at best.
That leaves the West, Russia, or the Assad regime and its Iranian proxies.
There’s no chance the United States, France, or NATO wants to hold ground on its own, or back Assad. So scratch the first option from that shortlist. Handing the moral and military quagmire over to the Russians — who will, in turn, back the Syrian Army — begins to seem like the only option.
Assad’s fate is a weathervane for the future of the wider war on terror. Syria has, in three respects, turned into the graveyard of the post-9/11 phase of this conflict.
For one thing, U.S. policy towards Syria begins to dispel the notion that the war on terror is part of a broader freedom-promotion agenda. In hisaddress to Congress on Sept. 20, 2001, then-President Bush defined the war on terror as a moralizing revolutionary project. The refrain was still alive six years later. “This war is more than a clash of arms — it is a decisive ideological struggle,” Bush said in his 2007 State of the Union address. “The great question of our day is whether America will help men and women in the Middle East to build free societies and share in the rights of all humanity.”
And what is Washington’s bipartisan answer to this “great question of our day,” from the perspective of 2015? A decisive “no,” unless you think that the Abdel Fattah al-Sisi regime in Cairo, which holds up to 40,000 politicalprisoners in its torture-ridden jails, is allowing Egyptians to share in the “rights of all humanity.” Or, perhaps, that our trusted ally Saudi Arabia doesn’t actually have a rancid human rights record after all.
Syria makes plain that we don’t, actually, have an alternative to Assad. Yes, the Syrian strongman himself may well ultimately be “transitioned” out of power, but his repressive regime will stay intact. Whatever Assad’s personal fate, dissolving his regime means removing any vestige of state order that remains in Syria, and replacing it with even more chaos. And surely we’ve learned by now that things can always get worse. Syria merely confirms the lesson the West should have learned from Iraq: that the freedom agenda in the Muslim world is dead.
Second, we now know that the notion that regime change leads to a better democratic or a humanitarian outcome is decidedly false. From Iraq, where the West tried a heavy footprint strategy, to Libya, where it opted for a light one, the idea that Europe or the United States can actually execute democratic change by force has been exposed as a fallacy. In Iraq, $2trillion dollars, over 4,000 dead Americans, and over 200,000 dead Iraqis created a country run by an Iranian puppet who turned out to be a vicious sectarian maniac. In Libya, we simply have chaos, with much of the state run by hard-line Islamists.
Those who say the United States should have intervened in 2011 to topple Assad are left having to explain either how they could have rallied U.S. public support for an Iraq-like occupation and rebuilding of Syria, or, in the absence of that, how Syria would have avoided Libya’s fate.
- It's "Red Or Black" For Those Still Foolish Enough To Play
There’s an old adage among veteran stock traders that goes something like his, “If I told you the news before it were made public – it’s still a 50/50 bet you would guess the market’s reaction correctly.” That was when the markets had some resemblance of normalcy.
Today, normalcy has been replaced with sheer lunacy as to the speculation and interpretations for where these markets go from here. And the dangerous nature of just how cutting a blow to one’s financial future was laid bare in the story that went viral showing some wannabe “trader” wiping out his (and subsequently his wife’s and more) retirement savings. Then, opening up some form of a donation (begging) page to help him cover his now 6 figure margin call to his online broker because he was now broke. His story will far from be the last – for the clues are everywhere.
One of the main points I’ve tried to point out since I first began articulating my thoughts about these “markets” is the inherent dangers contained within where even veterans have found themselves on the wrong side of “would never happen.”
There’s no better example of this than the MF Global™ debacle just a few years ago. Where veteran traders went home at the end of the day with money in their account only to arrive the next morning to find “it’s gone.” The resulting chaos put many a veteran floor trader out of work, out of money, and for some – out of options. The lingering taste of distrust this one-act caused should not be lost. For it’s one thing when a client gets screwed – it’s quite another when you screw your own. This is today’s Wall Street.
JBTFD (just buy the dip) Bulls were once again rewarded this past week with: the best weekly rally for the S&P 500™ in all of 2015, rising some 3.3%.
Reread that last sentence two or three times with only one slight change. As you do add this short sentence: As terrorism struck throughout Paris killing over 130 innocents with open gunfire, explosives, and hostage execution at a restaurant, soccer match, and concert.
And let me point out for those thinking “Well that was Europe not the U.S.” So too did Europe’s market push higher in the wake. Again, why the need for any market concerns to heinous events when the central bankers of today have made it clear they’ll do “whatever it takes.”
The initial knee jerk reaction where the markets spiked down on initial reports were met with a horns over hooves buying frenzy. Why? Well, as callous as it may sound the only thing that truly mattered to the markets was this weeks options expiry cycle close. This is the last chance to closeout the books, and/or re-position on a high note before two very important issues: Year end, and, the Fed’s perceived imminent rate hike.
Market breath (volume and other qualitative analysis) showed the buying of 2015’s “best weekly rally” was anemic at best, and dangerous at worst. There’s no better example as to demonstrate this than what has today come to garner the Wall St. moniker known as “FANG.” (e.g., Facebook™, Amazon™, Netflix™, Google™)
David Stockman recently published an in-depth breakdown of this latest moniker-ed phenom that’s worth reading as to comprehend just how precarious things truly are. I’ll also add; once Wall St. assigns monikers? That’s when you should become very nervous indeed. Remember when the “BRICS” (e.g., Brazil, Russia, India, China, South Africa) were going to save the global economy? Now one wonders if they’ll be able to save their own. How’s Brazil doing for one? But I digress.
So now here we are going into an abbreviated holiday session in the U.S. following an expiry fueled rally. “What could possibly go wrong?” After all, with what we’ve seen transpire within the capital markets over these past few weeks; is the need for concern just more “Chicken Little” cackling? After all: The next in-rotation market Bull, as well as economist to be paraded out across the financial media will stampede over you in getting to the camera, microphone, or keyboard first to spout just how “resilient” these markets have become. And to prove their point (as always) they’ll just point to the current levels as if that tells the whole (or only) story.
Once again I would like to remind many who are currently following the “financial advice” laid out in many of today’s “best sellers” that caution and safety is paramount above all else. The consequences of assumptions are far too grave.
JBTFD has worked of late with a near offensive accuracy. (i.e., terrorism supplies a dip) However, the next dip (if there is one) might just not react in the same fashion. Why? Well, the Fed. has now mused in more ways than humanly possible to decipher that they will indeed hike rates at December’s meeting. Unless they don’t. And don’t forget negative interest rates are still a consideration.
Confused? Don’t be. They could always launch more QE if needed, since they’ve stopped it, stating the markets no longer need it. Sorry, that doesn’t clarify does it? Oh well, that’s what goes for “clarity” by today’s Fed. standards. Think I’m off base? Here, see for yourself. Below is a few lines from the Fed’s vice-chair Stanley Fischer speaking at a recent event in San Francisco:
While we continue to scrutinize incoming data, and no final decisions have been made, we have done everything we can to avoid surprising the markets and governments when we move, to the extent that several emerging market (and other) central bankers have, for some time, been telling the Fed to “just do it.”
Fed meetings are now ‘getting interesting’ as possible rate hike discussed.
In the relatively near future probably some major central banks will begin gradually moving away from near-zero interest rates.
Huh?
Let’s put a little perspective on that first line: “avoid surprising” is used in a passage that holds both “no final decisions” because of continued “incoming data?” Which is exactly what determined the last surprise. (e.g., no rate hike.) All while we’re supposed to infer “emerging markets,” many of which are collapsing due to currency fluctuations are telling the Fed. to “just do it.?” Really?
Second: Fed. meetings are “getting interesting?” Is that the term to fit what must have taken place at September’s policy decision of inaction over action? I think that phrase is an interesting choice from my perspective. Especially since that decision was predicated on the “international developments” of a near China market meltdown precipitated by a reaction of “emerging market” upheaval in margin fueled carry trades funded in relation to today’s zero bound policy. Interesting indeed is all I’ll say.
Third: As “other major central banks” will begin to move away from near-zero policies? This, as Mario Draghi announces near simultaneously another round of “what ever it takes?” You can’t make this nonsensical double speak up. The only thing more preposterous would be if the Fed. Chair herself had recently reiterated that “negative interest rates” were indeed a tool currently contemplated. Oh wait, I forgot, she did just that at her latest testimony before congress. As the late (great) Gilda Radner would say, “Never mind.”
So with all this in mind what happens next is anyone’s guess. For I’ll contend not only does Wall Street not know – neither does the Fed. itself. For what happens to all this surety of assumptions (yep, that’s how farcical it’s become) if the markets now re-position just like they did in August and sell off their exposure to the increased carry cost exposure they most certainly will have. After all, 25 basis points sounds so minuscule. Unless, you see it as what it really has the potential for in today’s search for yield (any yield no matter how small) market.
In a margin levered carry trade – a 25 basis point increase could result in a 25% loss of profit, or increased cost. That “minuscule” 25 carries a lot of obligation cost or profit with it. So much so – it could blow up trades that would have trading desks begging to have the problems the a fore-mentioned “day trader” experienced. Small numbers have big impacts, and create inconceivable profits almost nowhere else as they do on Wall Street. After all, HFT (high frequency trading) make Billions upon Billions – a fraction of a cent at a time.
From my perspective there’s only one conclusion: a guess. Red or Black for those still foolish to play. For that’s what today’s markets have become. Nothing more than a wagered guess as to which way the market will go. Welcome once again to the casino. And as they like to say: “Everybody, please…Place your bets!” What you won’t hear at a casino yet have to contemplate today on Wall Street is – the hope they’ll be someone their to buy your chips when you want to cash out.
For that also is – a gamble.
- The Rational Reaction To A 'Government Unable To Protect Its Citizens'
Following the attacks in Paris, gun sales are booming across the United States, not only from those who were already armed, but first time gun owners as well. “We were busy right out of the box,” Russell Durling, owner of Last Resort Guns in Madison County, Alabama, told local station WAFF. “The truth of it is, when America is scared, America buys guns.”
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We can only imagine what the situation is like in Austria now… after selling out of long-guns even before the Paris attacks!!
- How You Were Tricked Into 'Supporting' The Syrian War
Submitted by Justin King via The Fifth Column,
Those who don’t understand history are doomed to repeat it, those that do understand are doomed to watch in horror while everyone else repeats it. The run up to overthrowing President Assad of Syria was occurring before The Fifth Column existed. I covered it when I wrote daily for The Anti-Media, and even before then when I wrote for a Canadian outlet called Digital Journal. It began long before that though.
It started in 2006 when the US decided it wanted to oust Syrian President Assad and started laying the ground work. This was proven by leaked Saudi Arabian intelligence cables hosted on Wikileaks. Julian Assange said of the leaks:
“That plan was to use a number of different factors to create paranoia within the Syrian government; to push it to overreact, to make it fear there’s a coup…so in theory it says ‘We have a problem with Islamic extremists crossing over the border with Iraq, and we’re taking actions against them to take this information and make the Syrian government look weak, the fact that it is dealing with Islamic extremists at all.”
The same year, the Islamic State was just a half-baked insurgent group in Iraq. The group would then migrate to Syria, where it was reinforced by battalions of defecting Free Syrian Army troops who were trained by the United States. Many of those claimed to have ties to the Central Intelligence Agency. The Islamic State truly became a child of the United States.
In 2009, the United States began secretly funding opposition groups within Syria and even provided $6 million to Barada TV, a UK-based TV channel, to produce propaganda to support “regime change” inside Syria.
Slowly but surely, the US and its allies put this plan into effect until in March of 2011 spontaneous demonstrations popped up in Syria demanding Assad step down. Of course, Huffington Post UK would later point out that these demonstrations weren’t spontaneous at all. They were orchestrated by the Central Intelligence Agency.
In October of 2013, the US was bombarded by television pundits who advocated airstrikes in Syria. Viewers were engrossed. The television stations that aired these pundits never told their viewers that the people advocating the airstrikes were employed by the companies that made the missiles that were to be used. This was the straw the broke the camel’s back, and activist began pressuring DC to deescalate.
In September of 2014, President Obama openly admitted the plan was for regime change. He boldly stated:
“We are not going to stabilize Syria under the rule of Assad.”
Throughout this time the West has tried various methods of justifying an invasion. There were claims of chemical weapon attacks perpetrated by Assad, but the only proof offered was the analysis that the weapons might have originated from the Syrian military’s storerooms. The average American was smart enough to realize that it’s a civil war and that the weapons of all sides came from the Syrian military, except of those “accidentally” dropped to Islamic State forces by the United States. The chemical weapons claim disappeared when the Kurds were hit by chemical weapons. The Kurds were fighting the Islamic State, not Assad. There were scores of unsuccessful airstrikes launched by the West. They accomplished nothing, and the Islamic State continued to destabilize Assad. NATO allies openly attacked those fighting the Islamic State. The plan was working and in June of 2015 the Brookings Institute published its paper on how to reorganize Syria.
Then suddenly, everything went wrong for the West. Russia announced it was going to begin providing air cover for Assad’s forces, and their airstrikes were just a tad more accurate. The Kurds in Iraq had massive successes against the Islamic State and bottled them up in two major cities. This offensive made thousands of Iraqi Kurds available for the fight against the Islamic State in Syria. Everything looked grim. It seemed that almost a decade of work was going to fly out of the window and Assad would remain in power.
Then a miracle occurred. Islamic State terrorists murdered more than 150 in Paris. The propaganda machine took over. Facebook asked if you wanted to change your profile photo to show solidarity with Paris. It created a social media frenzy and a propagandist’s dream. Suddenly, everybody wanted to get even with the Islamic State. Where is the Islamic State? Syria. The West now has its pretext to overthrow Assad. It will happen as a result of fighting the Islamic State in Syria. The average American is simply too stupid to understand that the Islamic State is Assad’s enemy. The West has successfully sold people on the idea that removing Assad is somehow benefiting the fight against the Islamic State. And people cheer.
That sounds crazy? A day after the attack, the US State Department released the statement of the International Syria Support Group. It reads in part:
“In this respect they affirmed their support for a ceasefire as described above and for a Syrian-led process that will, within a target of six months, establish credible, inclusive and non-sectarian governance, and set a schedule and process for drafting a new constitution. Free and fair elections would be held pursuant to the new constitution within 18 months. These elections must be administered under UN supervision to the satisfaction of the governance and to the highest international standards of transparency and accountability, with all Syrians, including the diaspora, eligible to participate.”
That’s right. Assad isn’t even out of power yet, but the new US-puppet constitution will be ready within 18 months.
Recap: The United States planted the seeds of revolt through propaganda, led the demonstrations against Assad, helped arm and train the Islamic State, repeatedly pushed a false narrative to gain a pretext to invade, denied proper air support to those fighting the Islamic State, and will now capitalize on the murders committed by the Islamic State to achieve its goal of ousting Assad. They’re so confident of success this time, there’s a timeline for the new constitution.
During all of this, over 300,000 people died and 6 million more were displaced. There will be more death and destruction. Unless, of course, Assad voluntarily steps down and allows Syria to become another US colony, which is highly unlikely.
The horrible part of this is that despite warnings, the American people did nothing. We’ve been had, but we’re the lucky ones. We’re still alive.
- Inside Vladimir Putin's Multi-Billion Dollar, Triple-Decker War Room
If you were one of the unlucky moviegoers who spent $15 on a ticket for the latest Steven Spielberg, Tom Hanks extravaganza “Bridge of Spies” (a Cohen brothers-assisted screenplay corrupted by a smorgasbord of Hollywood cliches), you know that the tradition of using American cinema to whip the public into a Russophobic frenzy is alive and well.
In Spielberg’s East Germany it’s always dark, it’s always snowing, the KGB agents at the Russian embassy in Berlin are laughably cartoonish stereotypes, and the backdrop is gray and monocrhromatic except for bright red Soviet flags.
But it’s a well placed piece of propaganda designed to convince Americans that Vladimir Putin’s Russia threatens to plunge the world back into Cold War diplomacy on the way to resurrecting the type of nuclear brinksmanship that could make a $17,500,000 nuclear fallout shelter look like a prudent investment.
Of course you can count on Kremlin grandstanding to perpetuate the stereotype and in the wake of Moscow’s confirmation that it was indeed a bomb that brought down a Russian passenger jet over the Sinai Peninsula earlier this month, we got a look at Putin’s new multi-billion, National Control Defense Center which is so … how shall we put this… so “Soviet”, that you’d imagine Sean Connery might be creeping around the compound in a suit carrying a silenced pistol.
Here’s The Washington Post:
“Gentlemen. You can’t fight in here. This is the war room!”
It could have been a scene straight out of “Dr. Strangelove” when President Vladimir V. Putin stepped into the Russian Ministry of Defense’s brand new, three-tiered, multibillion-dollar control center this week, for a war briefing that had its fair share of movie-like pageantry.
The fortified National Control Defense Center was Putin’s first stop after officials confirmed that the Russian charter jet crash that claimed 224 lives last month was the result of an act of terror.
On movie-theater-size screens, live broadcasts showed long-range strategic bombers taking off from Russian air bases to fly sorties over Syria. Putin instructed commanders in Syria to “make contact with the French and work with them as allies” as Russia seeks a central role in a proposed anti-terrorist coalition.
But the real star of the show may have been the building itself, which is designed to be a new nerve center for the Russian military that will coordinate military action around the world, including ballistic missile launches and strategic nuclear deployments.
The facility became operation last December, and as Sputnik said at the time, it’s “been designed to satisfy Russia’s defense needs for at least 20 years, synchronizing the decision making process of the military command and the Russian government [and has a] data-processing center calculating capacity that exceeds that of a similar Pentagon facility threefold.” The facility has a helicopter pad for Russia’s Mi-8 transport choppers and, as WaPo goes on to note, “it would be be the country’s premier communications center in case of war, [with] one Russian commander comparing it to the military headquarters of the Soviet Union during World War II.”
Here are the visuals courtesy of Sputnik, RT, FoxTrotAlpha and WaPo:
Whether you really need all of this in order to conduct a war is probably questionable (it kind of looks like a Soviet edition of The Death Star), but we would say this: it’s no wonder Moscow decided to intervene in Syria – no one could resist taking this place for a test drive.
- Trump Tops Clinton As Cruz Crushes Crashing "Clueless" Carson
The latest poll following the attacks in Paris, by Fox News, shows Donald Trump moving ahead of Democrat-front-runner Hillary Clinton (in a head-to-head match up if the election were held today), but it is the turmoiling below the surface of the GOP nominations that is garnering most headlines. After a week or two of hope for GOP leadership, as Ben Carson appeared to catch up to Trump, the retired neurosurgon's lies and weakness on foreign policy ("he clearly has no idea what he's talking about," as one Iowa GOP insider noted), have sent his poll numbers reeling… and Cruz surging.
But Cruz catches a bid as Carson collapses… (as The Right Scoop reports)
NBC News has a new nationwide surveymonkey poll out today, with a very large sample size of over 2400 that are Republican or who lean Republican, that shows Ted Cruz surging 8 points to second place into a tie with Ben Carson with 18%. Trump is of course still in first place with 28%.
The interesting thing about this poll is that we can see the history all the way back to April of this year, and in this new polling Cruz is higher than he’s ever been, especially as of late:
Also Carson was tied with Trump the last time this poll took place in late October, however he has fallen a significant amount to 18%. It looks like Trump has increased in the last 15 days or so a few points.Rubio has increased, but only by a couple of points since the last poll.
Here are a couple of charts that show how the candidates are doing in a few subcategories:
* * *The broader tracking index of RealClearPolitics also shows Carson's demise, but Cruz resurgence is less obvious…
As Politico reports, the emergence of foreign policy as a central issue in the presidential campaign poses the greatest threat to Ben Carson — no other GOP candidate has as much vulnerability on the issue.
Last week’s terror attacks in Paris — combined with a number of missteps on international issues — imperil Carson’s status as a leading candidate, according to the insiders, who said the retired pediatric neurosurgeon has failed to articulate coherent foreign policy or shown command of the issues. A resounding 71 percent of Republicans said Carson was the most vulnerable among the 14 GOP hopefuls on foreign policy — far more than any other candidate.
“He clearly has no idea what he’s talking about,” said one South Carolina Republican.
“Ben Carson's complete ineptitude makes you long for the days of ‘Uz-beki-beki-stan-stan,’” added an Iowa Republican, referring to a disastrous Herman Cain interview four years ago.
Foreign affairs were never Carson’s strength but the issue took on new resonance after the terror attacks in Paris last week. Since then, Carson has faltered in interviews, and a New York Times story earlier this week quoted an 83-year-old Carson adviser who described the candidate as needing intense coaching “to make him smart.”
“Carson is so clueless,” said an Iowa GOP insider. “He thinks the Kurds are a special kind of Wisconsin cheese.”
On a lighter note, perhaps, as The Oinion so eloquently noted, despite public outcry against his incendiary comments on women and minorities, Donald Trump is still the leading Republican candidate…
Here are some reasons Trump stays so popular with his supporters:
- Highly relatable lack of qualifications for holding government office
- Americans’ appreciation for classic underdog story of man who started with only several hundred million dollars and went on to make several billion dollars
- Only candidate to publicly state willingness to make America great again
- Exploits other Republican candidates’ weaknesses by allowing them to open their mouths and speak on issues
- Very, very handsome
- Voters eager to see presidential library with three infinity pools and rooftop driving range
- Bolstered by impassioned endorsement from Donald Trump
- Eccentric, megalomaniac billionaire still more relatable to average American than anyone willing to dedicate life to politics
- Appeals to widespread desire to see nation implode sooner rather than later
- Equities vs 'Everything Else' – Deutsche Bank Warns "One Of These Sides Has To Be Wrong"
Deutsche Bank's Oleg Melentyev is worried…
"This is quite an unprecedented set of circumstances to have a very strong market move tighter that is not led by its higher-beta components. It also gives us a sense of a low level of conviction prevailing among market participants: I don’t want to miss out on the rally and yet I don’t want to touch the high-octane stuff, even ex-energy, as my confidence in issuer fundamentals and persistent lowdefaults is diminished. "
In fact, three things are on his mind that warrant some very serious attention…
Figure 1 shows how CCCs are now underperforming BBs on a trailing 12-month total return basis, by 700bps all-in and 460bp ex-Energy. There are only three instances of underperformance this deep, two of them coinciding with developing credit cycles in early 2000 and early 2008, and one false positive in late 2011. We have previously addressed the latter case in our Evolution of the Default Cycle piece a few weeks ago, pointing at its differentiating features such as early cycle stage (only 2 years out of the previous recession) and easing policy stance (the Fed expanding on its QEs, not rolling them back or hiking rates).
Another interesting and unusual development is taking place on a high-level across asset classes, where US HY is now underperforming all major related markets, Including loans (-1.2%), IG (-0.5%), equities (-2.1%), Treasuries (-6%), EU HY (-3.7%) and even external EM sovereigns (-4.3%). The most intriguing detail here, in our view, is that HY is underperforming both IG and equities at the same time. Think about how unusual this is for a moment. If HY is an asset class that sits somewhere in the middle on a risk scale between high quality bonds and equities, then normally we would expect it to be underperforming one and not the other, as they would normally move in opposite directions. Figure 2 confirms this intuition – plotted here are the trailing 12mo differentials between HY and IG (blue line) and HY and equities (red line), and most of the time these two lines are on the opposite sides of the x-axis. In fact, the only two times we had both of them being negative were, again, early 2000 and late 2007. Even 2011 did not create an exception here. The graph looks indistinguishable if we were to plot all three asset classes ex-energy over the past year.
Recent disappointing results announced by retailers ranging from Walmart to Macy’s to Nordstrom to Best Buy has also caught our attention as an odd development. Somehow, we were under the impression that these were supposed to be the best of times for the US consumer: employment trends are strong (as evidenced by nonfarm, claims, and unemployment rate), wages are going higher (21 states raised their minimum wages in 2015, as well as some major private employers such as Walmart, McDonalds), gasoline prices are at 10 year lows as are home heating bills, equities are at cyclical highs, and home values have recovered. So if consumers are cutting on their discretionary spending with all these tailwinds in place, there must be something else going on.
Part of it is the “Amazon” effect, where any retail sector graph is a mirror image of itself whether you include Amazon in the sample or not. But we should also keep in mind that while AMZN growth is impressive, its annualized revenues are at around $90bn compared to almost a $1trln for all other US retailers. And its net income is still basically zero, compared to $30bn earned by its bricks-and-mortar competitors. The graph in Figure 3 is showing the total return relative performance of US consumer staples equities 1 and consumer discretionary stocks2, and it shows the latter underperforming to the tune of 16% from the highs reached in March of this year. Four-fifths of that underperformance materialized in the last two months alone. The only two times have seen this pair moving to similar or greater extents over the past twenty years were in Mar-Nov 2000 and May-Nov 2007.
These three indicators require our continued monitoring going forward given their track records and present day levels.
The hardest questions we are trying to reconcile here are how is that possible to see all these signs of weakness under the surface – including weak commodities, tightening credit, retrenching consumer spending – being balanced by very strong equity markets and upbeat employment picture.
One of these sides has to be wrong in its assessment of the current macro environment, and seeing both of them extending well into the future appears unlikely to us.
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