Nov 30

Today’s News November 30, 2015

  • Paul Craig Roberts Rages At The "Arrogance, Hubris, & Stupidity" Of The US Government

    On the heels of the Chinese stock market plunging 5.5%, continued turmoil in the Middle East and the price of gold hitting 5 year lows, former U.S. Treasury official, Dr. Paul Craig Roberts told Eric King of King World News that Putin and the Russians are now dominating in Syria and the Middle East as the West destroys itself.

    Dr. Paul Craig Roberts:  “It could well be that this is going to work out so much in Russia’s favor that Putin will send a letter of thanks to the Turkish President and say, ‘Thank you very much.  You’ve done us a huge favor. (Laughter).  We lost a pilot and a naval marine but we sure have gained a lot.  That was only two deaths for winning a war.”…

     

    “So that looks to me like the most likely outcome.  The unintended consequence of this are so positive for Russia that it’s got Washington quaking and Europe wondering about the idiocy of being in NATO.”

     

    Eric King:  “What I’m hearing from you Russia is dominating in Syria.  The Russians have completely taken over and there’s really nothing Washington can do.”

     

    Paul Craig Roberts:  “No, except make a fool of itself by supporting ISIS.  We brought ISIS in there (to Syria) — everybody knows that.  Just the other day the former head the Pentagon’s Defense Intelligence Agency said on television that ‘Yes, we created ISIS and we used them as henchmen to overthrow governments.’ (Laughter).

     

    And the polls in Europe show that the people are on Russia’s side regarding the shooting down of their aircraft.  They don’t believe (the West’s) story at all.  So I think what you are seeing here is the arrogance, hubris, and stupidity of the United States government.  They are just handing every possible advantage over to the Russians.

     

    This American government is the most incompetent government that has ever walked the earth.  Those people don’t have any sense at all.  Just look at what they’ve done.  In 14 years they’ve destroyed 7 countries, killed millions of people, and displaced millions of people.  And where are those displaced people?  They are overrunning Europe.

     

    This is all because those Europeans were stupid enough to enable our wars.  Now the political parties in Europe are under tremendous pressure from these refugees and the populations who object to them, and from the rising dissident parties who are saying, ‘Look at what these people who you trusted have done.  They’ve changed your country.  It’s not Germany anymore — it’s Syria.’ (Laughter). 

     

    This is a disaster.  Only the stupid Americans could have produced such a disaster.  Does Putin need to do anything?  We’re doing it all for him.  So he doesn’t need to do anything.  He’s not going to attack anybody.  What does he need to attack anybody for?  The idiot Americans are destroying themselves and their allies.  This is an amazing fiasco.”

    And On Gold… Massive Government Corruption

    Eric King:  “Dr. Roberts, people are worried about World War III breaking out and yet we have the price of gold today hitting 5 1/2 year lows.  So I guess even though Washington has lost control in the Middle East, they still feel like they have to keep up appearances.”

     

    Paul Craig Roberts:  “Gold didn’t hit a low, it was artificially driven down by the bullion banks, who are agents of the Federal Reserve and acting on the Fed’s orders.  This is the way the Fed protects the dollar from losing value.  This has been going on in earnest since the fall of 2011.  We see the appearance at the most odd times of day and night, for no reason whatsoever, of massive short sale of paper contracts that cause the price of gold to move straight down.”

     

    Eric King:  “We saw that today in the gold market with roughly $2 billion of paper gold being sold into the market almost instantaneously.”

     

    Paul Craig Roberts:  “But it doesn’t mean anything about the value of gold.  It simply means that the Federal Reserve and the bullion banks have manipulated the market.  So that’s what’s going on.  This is the worst kind of criminality and the worst kind of corruption.  I, myself, wrote to the Commodity Futures Trading  Commission and asked them why they permitted this?  This is a violation of the law.  But nothing can be done because it’s the government that’s doing it and the government is not going to prosecute itself.

     

    So never say gold hit a new low because it didn’t.  It got driven down artificially by a corrupt government…"

    Read more here and listen to the full interview…

  • Argentines Stumped By Mystery Trucks Loaded With $130 Million In "High Denomination" Bills

    Apparently taking a page out of the Spanish government's playbook, Argentines in the Santa Cruz region were surprised yesterday afternoon when at least five bright yellow armored trucks accompanied by heavily armed police paraded through the city. Just weeks after Kirchner's Peroniost government lost the election, and coming after five office fires (destroying banking and economic files from the current regime), local press reports the trucks loaded up with $130 million of banknotes at the airport and driven to banks in the region where outgoing President Kirchner's sister-in-law is governor. Amid comments by the central bank that there are no reserves left, and ongoing discussions of larger banknote denominations and (implied 50% devaluations), one could only speculate where the officially "business-as-usual" transfer of $100s of millions of banknotes will end up.

     

    As local press reported (via Google Translate)…

    The passage of these trucks through the city, road banks and other unspecified places, attracted wide attention of ordinary citizens who quickly settled in social networks, in the mystery of what was happening…

    This time, however, the situation is more complex and has other more politically tinged.

     

     

    As The Bubble's Bianca Fernet reports,

    the money was intended for Santa Cruz’s new governor and outgoing President Cristina Fernández de Kirchner’s sister-in-law, Alicia Kirchner, as well as her Tierra del Fuego counterpart Rosana Bernton.

     

    The reason? The local informant alleges that it is to allow Alicia Kirchner’s government to pay salaries and end-of-year bonuses so as not to draw local attention to additional public spending. The province allegedly runs a massive deficit, and this cash from the outgoing national government would buy enough time to negotiate with the new government down the road.

     

    This is speculation. However, five armored vehicles suddenly driving from airports to banks warrants a better explanation than, “This is something routine we always do, you’ve just all somehow managed to never notice it 15 days before a government changeover.”

    This is one of the reasons why the national government refuses to make the transition before Decmber 10th, according to sources close to a national official, if these movements are not made ??now, then they will be blocked.

    OPI Santa Cruz concluded,

    This "means that the machine does not stop," – referring to the printing of banknotes, which in turn feeds the vicious circle of devaluation and inflation, since by injecting more current without support, the currency depreciates.

    And of course the corruption continues.

    Perhaps this explains why President-elect Macri has this succinct statement last week…

    • ARGENTINA’S MACRI SAYS NO DOLLARS LEFT IN CENTRAL BANK

    As hyperinflation begins to run rampant, and as we detailed previously contrary to government figures, the Massachusetts Institute of Technology’s Billion Prices Project found that the price of essential foods has increased six-fold in the South American nation since 2008.

    Source: InflacioVerdara

    The Cristina Kirchner administration has ignored repeated requests by economists, banks, and other financial institutions to issue larger-denomination bills. Some 42 percent of Argentineans deemed it necessary in a 2014 survey by Argentina-based pollsters Poliarquía.

    However, President Kirchner chose to redesign existing notes instead. Earlier this year, the government introduced a new AR$50 bill depicting the Falkland Islands, an archipelago in the South Atlantic ocean subject to a lingering territorial dispute between Argentina and the United Kingdom.

     

    In 2012, Kirchner launched a AR$100 bill with the face of Eva Perón, the wife of former President Juan Perón and an iconic figure for Peronists. Most recently, the government updated the AR$10 note, adding security improvements and revamping the image of founding father and creator of the Argentinean flag Manuel Belgrano.

    The new designs, however, have done nothing for Argentineans’ increasingly bulky wallets.

    “Printing money out of control generates inflation, and that renders larger denomination bills necessary,” Iván Carrino, an economic analyst for IG and author of Cleptocracia, tells the PanAm Post. “Trading large sums has become an inconvenience.”

     

    In a country where real-estate transactions are normally done in cash, even buying a new car can be burdensome and potentially dangerous. Since a new vehicle costs no less than AR$100,000, buyers need to carry at least 1,000 bills, Carrino explains. “You need to take a bag with you.”

     

    According to the Central Bank of Argentina, two-thirds of the notes in circulation are AR$100 bills. ATMs quickly run out of smaller denomination notes as withdrawal rates increase. “Today, you go to an ATM, and they don’t have AR$50 or AR$20 notes anymore,” Carrino says.

     

    The Argentinean National Mint has been unable to cope with the public’s demand for cash, and the government has outsourced the printing of bills several times. This year, the government has contracted Chilean and Brazilian mints to print additional cash ahead of the holiday season, according to local media reports.

     

    Between January and August 15, 2015, the Central Bank printed 519.4 million AR$100 bills — 52 kilometers worth, if the bills were placed side by side.

     

    Argentineans know inflation all too well. Since the creation of the Central Bank in 1935, the country has only experienced five years of inflation between 0 and 2 percent, according to Nicolás Cachanosky, Denver Metropolitan State University assistant professor of economics.

    “Inflation is a consequence of money printing, and this leads to the necessity of larger denomination bills,” Carrino concludes.

  • Chinese Stocks Tumble As Offshore Yuan Surges Most In 2 Months After Apparent PBOC Intervention

    Update – Chinese stocks continue to plunge…

     

    Aside from 3 very small adjustments, The PBOC has fixed the Yuan weaker for the last 20 days, driving the mid-line to 6.3962 – the weakest since August 28th.

     

    Which was followed bya massive intervention sending Offshore Yuan 0.35% higher and crushing the Onshore-Offshore spread…

     

     

    As Offshore Yuan strengtnens most in 2 months…

     

    After Chinese stocks collapsed on Friday, they are holding the losses for now as the biggest question remains just what the weighting will be for Yuan inclusion in The IMF's SDR basket (which looks set to be announced tomorrow – US time).

     

    Although none of this is likely to end well unless China unleashes something big…

     

    And metals continue to collapse…

    • *SGX ASIACLEAR IRON ORE FUTURES DROP 3.7% TO $39.29/TON

    And brokerages…

    • Haitong Securities -9.2% after being suspended Friday amid CSRC probe; Citic Securities -1.7%

    But the biggest question surrounds The IMF’s decision today (tomorrow) over yuan inclusion in SDR basket (and the actual currency weighting).

    IMF’s calculation, based on value of exports of goods & services, suggested a 14%-16% weighting in the $280 bln basket. The yuan fell to a three-month low on Nov. 27 on concern it may have only 10% share of the SDR as formula expected to change, analysts said.

     

    A 10% or less weighting will lead to selling, says RBC strategist Sue Trinh. Yuan fell 2.95% ytd, the biggest decline since 1994, as economy slowed and PBOC devalued the currency in Aug. PBOC could widen trading band to 3% or 4% after SDR entry, says Xu Yuehong, analyst at Bank of Communications.

    Market expectations:

    Eddie Cheung, Hong Kong-based FX strategist at Standard Chartered:

    5% of world FX reserves will be in RMB by 2020, with 1% allocated annually to the currency, or $85b of inflows each year; may support Chinese bonds

     

    USD/CNY at 6.50 by end-2015; 6.55 in 1Q 2016; 6.42 end-2016

     

    Likely weighting of 10% in SDR basket based on expectation IMF will change formula and cut export focus

    Khoon Goh, Singapore-based senior FX strategist at ANZ:

    As currency isn’t fully convertible, weight could be 10%

     

    Capital inflow to increase $230b over next 3-5 yrs, with allocation of yuan in global reserves rising to 4.0% from 1.1%

     

    China needs to make bond market and assets more accessible for foreign funds, which would also improve liquidity

     

    PBOC likely to intervene less frequently in 2016 compared to this year

     

    NOTE: Net capital outflow reached $731bln in the 10 mths to Oct.

    Xu Yuehong, Shanghai-based analyst at Bank of Communications:

    PBOC could widen yuan trading band to 3% or 4% after SDR entry

     

    Any near-term boost to yuan from SDR entry likely offset by strengthening dollar on bets Fed will raise rates

     

    PBOC will probably want to avoid sizable and sudden capital flows, so any loosening of controls, expansion of QFII quotas, will be very gradual

    Fiona Lim, Singapore-based senior FX analyst at MayBank:

    Yuan weighting in SDR basket is estimated at 13-14% according to 2010 calculation method

     

    After SDR entry, yuan may have moderate depreciation as PBOC eases with slowing economy, with the central bank intervening intermittently to smooth out volatility

     

    IMF may want China to further liberalize capital account, which would be negative for CNY given macroeconomic conditions
    Inflows will be gradual as the new basket will only take effect in Oct. 2016

    And finally, before everyone gets too excited – The history of yen internationalization offers a cautionary tale on hopes for the yuan.

    Japan’s experience suggests that a floating exchange rate, free cross-border flows and stable economic growth are all necessary for successful internationalization. The challenge for China will be hitting all three of those criteria.

     

     

    Currency internationalization comes in three stages. The first is use in trade settlement and financial transactions. Second is providing a safe asset for investment by non-residents. Third is to serve as an anchor for the regional and — ultimately — global market. In the 1980s and 1990s, the yen made rapid progress from stage one to stage two. Since then, it has stalled and even started to retrace its steps in some respects.

    Finally, why Chinese stocks may be persuaded to stay weaker for longer…

    To scare The Fed off again.

  • It's Official: Chinese Buyers Have Left The U.S. Housing Market

    Overnight the NYT wrote a gargantuan, 3,800-word piece titled “Chinese Cash Floods U.S. Real Estate Market” discussing the impact of Chinese buyers on the US housing market. There are just two problems with the NYT’s herculean effort: i) it is 5 years late in covering a topic this website has discussed extensively since 2010, and ii) it is wrong.

    Recall that as we forecast in our take on a post-devaluation China in early September, with Beijing now actively cracking down on hot money outflows and instituting draconian capital controls, two things would happen: bitcoin – as China’s most recent preferred mechanism of circumventing capital controls – would surge (it did), and Chinese investment in offshore real estate would tumble.

    It has.

    Because while the NYT was writing an article titled “Chinese Cash Floods U.S. Real Estate Market” that should have been published in 2010, the WSJ came out with a far more accurate piece, titled the opposite of the NYT piece, i.e., “Chinese Pull Back From U.S. Property Investments” about how Chinese buyers are no longer the marginal buyer of high end US real estate.

    Here, just as we predicted, is a summary of the state of the US housing market and the one key support pillar which is no longer there.

    Capping a five-year real-estate binge, Chinese nationals surpassed Canadian snowbirds as the top foreign buyers of U.S. homes for the year that ended in March—the most recent annual data—scooping up everything from $500,000 condos in New Jersey to $3 million vacation homes in California to $13 million Manhattan condos.

     

     

    But in recent weeks, some Chinese buyers have started to pull back, scared off by China’s stock-market selloff, slowing economic growth, currency devaluation and tightened restrictions on capital outflows. On Friday, China’s benchmark stock index fell by 5.5%, its biggest daily slide since August, as Beijing authorities stepped up a crackdown on the securities industry.

     

    * * *

     

    Yang Bin, a 38-year-old businessman from Beijing, said the economic slowdown has stoked his desire to purchase a home in Silicon Valley. “I see many problems with Chinese universities, and the environment and air quality here aren’t very satisfying,” Mr. Yang said. With a budget of about $1 million, he said he wanted to buy a home that his now-8-year-old child would one day occupy. 

     

    For now, Mr. Yang is caught in the dilemma prompted by China’s economy, which, he said, “has increased my desire to buy a house in the U.S., but also requires me to wait and watch more carefully.”

    Winter is coming.

    “We are ready to embrace a winter for Chinese buyers in the next one year, two years,” said Daniel Chang, a New York City-based broker at Sotheby’s International Realty. Mr. Chang, who sells properties in the $2 million-to-$10 million range, said about half of the clients served by his team are Chinese.

    It also means the end of obnoxious, scripted “realty TV” shows about millionaire real estate agents .

    Christina Shaw, a Realtor with Re/Max Fine Homes in Newport Beach, Calif., said one client who gave her a budget of $10 million to buy two houses in the area was now looking to reduce his budget by about one-third.

    A butterfly flaps its wings in the Shanghai Composite and luxury home sales in the US tumble:

    Interest from Chinese buyers “went dark” for several weeks after stocks becan their sharp fall, said Tom Mitchell, president and chief operating officer of Tri Pointe Group, a home builder in Irvine, Calif. China’s main stock index, the Shanghai Composite Index, is down 38% since its June peak.

    If it seems like it was only two months ago when we wrote that “80% Of All New Home Buyers In Irvine Are Chinese“, it’s because that is the case. However, the Chinese buying frenzy is no longer present. “Foreign Chinese buyers make up about 30% of customers in a handful of the company’s developments in Orange County and the San Francisco area. Price increases there, he said, have prompted clients to “pause and think.””

    Chinese buyers are now officially spooked: Zhang Xin, chief executive of SOHO China Ltd., a real-estate developer, said last month she wouldn’t buy overseas real estate today because many cities abroad are too pricey.

    Some are hoping the lull in Chinese buying will be short-lived: “real estate consultants and brokers say the pullback likely is temporary. Many Chinese view U.S. real estate as not only a good investment but as a haven for savings. Some Chinese buyers also figure a U.S. address would make it easier for their children to enroll in an American college.”

    “In the very short term there will be some impact for people who don’t have a foreign income stream or who don’t have a bank account or funds in overseas banks,” said Frank Chen, executive director and head of research at property consultancy CBRE China. “But the outbound real-estate investment trend is likely to remain quite strong.”

    Perhaps. For now, however, the US luxury market is about to enter freefall, as the marginal buyer enters hibernation.

    Even a temporary pullback could hurt markets where Chinese buyers target some of the priciest American homes, often paying in cash. The average purchase price of existing homes in the U.S. by foreign home buyers in the year ended in March was nearly $500,000, nearly double the price for all buyers, according to the National Association of Realtors. One-third of Chinese purchases were concentrated in California for the year ended in March, according to the National Association of Realtors, trailed by Washington, D.C., with 8% of purchases, and New York, at 7%.

    Many are eager to spin this as good news:

    Some builders also could feel the effects. The chief executive of Walnut, Calif.-based Shea Homes, Bert Selva, told investors this month that the company has seen a “significant slowdown” in Chinese buyers in Orange County.

     

    “That buyer is really drying up. To be honest, I don’t think that’s a bad thing, because I think there was a lot of frenzy driven by that, pushing up prices a bit,” he said in a conference call.

    We doubt Bert will share the same sentiment about the collapse in his company’s revenues.

    Going back to the NYT being woefully inaccurate with its report, here is why they are, as we said, about 5 years late.

    Chinese residents began buying American homes in large numbers about five years ago, driven largely by growing wealth and a desire to safeguard savings against political instability, brokers and economists said.

     

    American homes looked like a bargain after the real-estate crash, drawing busloads of Chinese buyers to see properties in California and Manhattan. To many, it seemed “a gold mine everywhere,” said Calvin Lo, a real-estate agent at Berkshire Hathaway HomeServices in Southern California.

    Better make that bitcoin mine, because unless the Chinese find a way to smuggle billions using the only method left available, the luxury US housing market is looking at what may be unprecedented freefall.

    Chinese individuals are limited to annual overseas investments equal to about $50,000. For years, Chinese have surpassed that limit, in part, by funneling money through relatives and employees. In recent months, the government has made it tougher to transfer money abroad, said real-estate brokers in both countries.

     

    “It’s like barbarians at the gate,” said John Chang, a real-estate broker with Re/Max in New York City. Chinese families want to buy, he said, “but they just can’t get the money out.”

    Of course, those betting on a return to the US luxury market may be better off just buying the medium which the Chinese will use to funnel the required funds to the US – bitcoin, which a quick check shows has resumed its climb and has again jumped by about 20% in the past week alone.

    Finally, our condolences to the Fed: as Chinese buyers exit US luxury housing double time, watch as the bottom falls off the top in housing, and slowly at first then very fast drags the rest of the market lower, forcing the Fed to undo whatever tightening in monetary conditions it may have launched, or is contemplating.

  • Newly-Completed Fukushima 'Containment' Wall Already "Slightly Leaning"

    Just weeks after re-starting the building of a giant ice-wall to contain groundwater leaking from the Fukushima nuclear plant, TEPCO has been forced to admit that a 780-meter protective wall built alongside the crippled power station (completed only last month and designed to prevent contaminated groundwater from seeping into the sea)  is already "slightly leaning." While this sounds a lot like being half-pregnant, TEPCO remains 'optimistic' that the wall will hold. But you can't say the government is not trying – in an effort to 'calm' the public, scientists have developed a special scanner to accurately measure the amount of radioactive material inside the bodies of young children… which is odd given just how "contained" Abe said it was.

    The 780-meter coastal wall along the damaged reactor of the Fukushima No. 1 nuclear power plant was built to stifle the flow of tainted water into the sea from 400 tons to 10 tons a day.

    The “impermeable” barrier has an underground section that reaches 30 meters deep. TEPCO officials have claimed that such a structure should reduce the amount of radioactive cesium and strontium flowing into the sea to one fortieth of previous levels, while the tritium levels should be reduced to one-fifteenth.

    But, as RT reports, the "impermeable sea wall" is leaning already…

    Completed only last month and designed to prevent contaminated groundwater from seeping into the sea, the wall is already “slightly leaning,” plant operator TEPCO has announced.

     

    TEPCO however remains optimistic and has said that the slight lean does not affect the wall’s ability to block radioactive water.

     

    The operator is now reinforcing the wall with steel pillars.

     

    Inspection into the construction was completed in late October and also discovered cracks along the perimeter of the wall in the embankment’s pavement.

     

    Officials have blamed rising groundwater levels for the cracks – and keep repairing them to make sure that rain does not increase the groundwater levels even further.

    And then there's this, as The BBC reports,

    It's nearly five years since the Japanese earthquake and tsunami that led to the Fukushima nuclear disaster but concerns about possible health problems – especially in children – are still high in many parents' minds.

     

    To reassure the public, scientists have developed a special scanner to accurately measure the amount of radioactive material inside the bodies of young children.

     

    Now the results of over 2,500 scans have just been released.

    So that's reassuring then.

  • Turkey's Trump Card: Erdogan Can Cut Russia's Syrian Supply Line By Closing Bosphorus

    On Saturday, Russia unveiled a raft of economic sanctions against Turkey in retaliation for Ankara’s brazen move to shoot down an Su-24 warplane near the Syrian border. Charter flights to Turkey are now banned, Turkish imports will be curbed, visa-free travel is no more, Russian tourism companies are forbidden from selling travel packages that include a stay in Turkey, and Turkish firms will face restrictions on their economic activity. 

    “It’s not just Turkey that has economic interests, Russia too has economic interests in relation to Turkey,” Turkish PM Ahmet Davutoglu said on Saturday, adding that he hoped Putin would act in a “cool-headed” manner. 

    Russia does indeed have economic interests in Turkey. Ankara paid Gazprom some $10 billion last year and Turkey accounts for nearly a third of the company’s nat gas exports:

    But this is most assuredly a two way street. As we noted on Saturday, Turkey is heavily dependent on Russia for energy and souring relations will put a non-trivial dent in Ankara’s tourism revenues:

    As we discussed on Wednesday, the idea that Turkey can easily replace Russian gas may be a pipe dream (no pun intended) despite Erdogan’s grandstanding. Here’s how we explained the situation facing Ankara: 

    What analysts (and Erdogan) seem to be discounting here is that ties between Russia and Iran have strengthened materially over the past six months and Russia’s intervention in Syria will not be forgotten in Tehran. Throw in the fact that Russia and Iran are already in talks on a number of energy projects and it seems reasonable to suspect that if Iran believes Turkey is becoming too much of an impediment to the campaign in Syria, Tehran may just decide to drive a harder bargain when it comes to gas supplies. In short: if you’re Turkey, you don’t really want to put yourself in a position where your fallback plan in the event you anger your biggest energy supplier is to try and negotiate for more trade with that supplier’s closest geopolitical ally, especially when you are actively seeking to subvert both of their goals in a strategically important country. As WSJ put it on Wednesday, “diverting the energy trade wouldn’t be easy.”


    No, it most certainly would not “be easy”, and the big question going forward is this: is it realistic to believe, given what’s going on in Syria, that Iran will be willing to make it any easier? 

    Ultimately, it’s diffiult to say who has the stronger hand. Russia and Turkey – despite an otherwise tenuous relationship set against a history of confrontation (see The Czar vs. the Sultan from Foreign Policy) – have developed a lucrative trade partnership that neither side is particularly keen on scrapping. That said, the stakes are high and now that Moscow has hit back with sanctions, the ball is in Ankara’s court. 

    Despite bombastic rhetoric from Erdogan (whose tone has softened at bit over the last 48 or so hours), Turkey cannot shoot down another Russian warplane. If they do, they risk an outright military confrontation with Russia. So unless Erdogan intends to plunge NATO into an armed conflict with the Russians, he’ll need to find other ways to retailiate and refusing to buy from Gazprom probably isn’t the the first, best option from a practical point of view. 

    What Turkey could do, however, is close the the Bosphorus Strait which would effectively cut Russia’s supply line to Latakia.

    Here’s Sputnik:

    Tensions between Russia and Turkey over the downing of a Russian Su-24 bomber in Syria may challenge freedom of navigation through the Bosphorus Strait, a major pathway for Russian ships. However, a Turkish unilateral ban on the passage of Russian ships is unlikely since it would violate international law.


    In recent months, Russia’s heavy military equipment has been delivered to Syria mostly by sea, with the shortest route coming through the Bosphorus Strait and the Dardanelles.

     

    A sharp rise in tensions between Moscow and Ankara may challenge the delivery of Russian weapons and troops through the straits. If passage is prohibited for Russia there is still the way through the Gibraltar (which takes 13-14 days rather than four days through the Bosphorus) or by air.

    In peacetime, Turkey is obligated to allow naval warships safe passage regardless of what flag they fly. As Sputnik goes on to note however, “in times of war, the passage of warships shall be left entirely to the discretion of the Turkish government.” Although one Russian lawyer who spoke to RBK claims the Turks have no legal ground to block passage, it’s not difficult to imagine a scenario whereby Erdogan decides to push the issue. 

    Indeed, if Ankara can disrupt Moscow’s supply route to its forces in Syria, well then all the better for the FSA and all of the other proxy armies battling to hold onto territory near Aleppo in the face of the Russian and Iranian assault. 

    Of course such a move would raise serious questions regarding Turkey’s adherence to the 1936 Montreux Convention and would only serve to inflame tensions between Moscow and Ankara. We’ll be watching closely in the days and weeks ahead for evidence that Erdogan is impeding the progress of Russian vessels through the strait and in the meantime we’d remind you that Bilal Erodgan, the President’s son and patron saint of Islamic State’s multi-hundred million dollar oil enterprise, has a bird’s eye view of the drama (from Today’s Zaman, earlier this year): 

    President Recep Tayyip Erdo?an’s son Bilal Erdo?an has moved his shipping company’s office to a newly built four-story building with a Bosporus view in ?stanbul’s Beylerbeyi neighborhood.

     

    The Sözcü daily reported on Sunday that Bilal Erdo?an, a co-partner of a shipping company, has moved his office from Üsküdar to Beylerbeyi.

     

    According to the claims in the report, Bilal Erdo?an purchased three plots of land on Yal?boyu Street in Beylerbeyi and constructed a four-storey company office on it. The cost of the building is estimated to be TL 340 million. The new office has a view of the Bosporus. It also has a parking lot and a courtyard.

  • "You Are Here"… And It Is A Scary Place

    Technically, the third quarter earnings season is not exactly over: 2% of companies are still left to report. Untechnically, it is, and with 98% of S&P500 companies now in the history books, 74% of the companies in the index have reported earnings above the mean estimate but 45%
    of the companies have reported sales above the mean estimate.

    But while gaming analyst estimates is the oldest trick in the book (and even so more than half of companies are failing to beat on sales), a truly dire picture is revealed when one steps back and looks at the data in historical basis.

    That is precisely what Ellington Management did recently in their note looking at the last stretch of the junk bubble. This is what they said.

    Corporations are now running out of steam in terms of their ability to generate earnings. As of Q2 2015, the year-over-year change in annual corporate earnings dropped to -$8.21 per share for the S&P 500 and to -$4.79 per share for the Russell 2000. The previous three times this metric fell that far into negative territory on the S&P 500 were Q1 1990, Q1 2001, and Q4 2007, coinciding with the start of each of the last three high yield default cycles. According to a recent article in The Economist, in the most recent quarter less than half of S&P 500 companies recorded increasing profit year-over-year.

    And here is Ellington’s chart showing where “You” are right now.

    And since it is not where you “are” that matters but where you “are headed”, the place is very scary indeed.

     

  • Two Reasons The 'War On Terror' Will Always Fail

    Submitted by Justin Pavoni via The Ron Paul Institute for Peace & Prosperity,

    If we want to get to a world where terrorism isn’t such a regular tragedy, governments need to start recognizing the fact that the so-called “War on Terror” is a self-fulfilling prophecy destined to foment one thing and one thing only: more terrorism.

    The Big Picture: The problem arising in the wake of the recent mass-murder event in Paris and the subsequent French bombing of the Islamic State (also a mass-murder event) is that the two acts (and hundreds like them) serve as justification for more of the same from the other side. They provide fuel for each other’s fire and the situation, not surprisingly, continues to metastasize.

    The great paradox at play is that as the West continues to attack the Islamic State, the organization’s appeal continues to grow among those who view the West as an adversary. Nobody knows exactly what causes radicalization but my best guess is that its appeal will continue to increase as the West continues to respond to violent events with exponentially more violence in turn. Such has been the trend thus far.

    Why Terrorism? Terrorism is likely to spawn from a number of things, such as a bankrupt ideology, a sense of injustice, and disenfranchisement with the status quo. Regardless of the exact origins in any particular case, there are two primary reasons that the “war on terror” will continue to fail (assuming the goal is to reduce the number of terrorist attacks and the rampant increase in radicalization). Reason #1: Western violence (the principal prescription for fighting terrorism) is also the primary motivation behind successful terrorist recruiting efforts. Reason #2: Western attempts to overthrow heads of state under the guise of fighting terrorism provide an incredible opportunity for terrorist organizations to take root in a more institutional fashion. Let’s discuss these two phenomena in more depth.

    Reason #1: Regardless of their origins, where terrorist movements gain the most strength is from the fact that they can point to objective injustices perpetrated by western nations (whether well intentioned or not). Violence begets more violence and Middle East bombing campaigns by Western countries are used to rally otherwise moderate people to nefarious causes. This is also one of the reasons terrorist movements are able to grow beyond an extremely small and fractured group of individuals.

    Bombing campaigns are a major contributing factor to radicalization, and the principal motivation Western democracies should be concerned about…because it is one of the few factors they have legitimate control over. The moment a bomb kills a single innocent person – man, woman, or child – it facilitates ten more terrorist sympathizers. What’s more is that even if the bomb kills actual terrorists, it’s still providing rampant material support against the cause of “fighting terrorism.” How many bombs has the United States dropped in the last fifteen years? Millions. In how many countries? Iraq, Afghanistan, Pakistan, Libya, Yemen, Somalia, Syria and probably a great number more that are largely classified operations.

    Seen in this light, is it really hard to understand why terrorist movements are growing and becoming more unified? It’s much easier for a terrorist to convince the average person to hate foreigners when foreigners are actively bombing their country, either through boots-on-the-ground invasions, drone warfare, or manned bombing campaigns.

    Reason #2: The second thing that facilitates terrorism is the active attempt to overthrow established governments with force. Despite the fact that Sadaam Hussein was a tyrant, Iraq was not a terrorist haven while he was in charge. He was certainly a criminal dictator, but he didn’t put up with terrorists. Compare this to the emerging reality in present day Iraq now that he’s gone. Or consider Libya. Muammar Qaddafi was also a tyrant, and now that he’s been removed (courtesy of a Western air campaign), his former country is a jihadist wonderland.

    The UN resolution designed strictly to “protect civilians” was used as an excuse to act as the rebels' Air Force. Should it surprise us that “good” rebels might be fighting alongside “bad” rebels? The entire campaign did little more than make a bad situation much worse.

    Next, consider Syria. Western governments, led by the United States, have been actively supporting militia groups trying to overthrow yet another head of state, Bashar Al-Assad. The hypocritical reality is that the militia groups in Syria are fighting in common caucus with the Islamic State against Assad (who somewhat legitimately calls them all “terrorists”) while simultaneously fighting against the Islamic State (and thus on the same team as Bashar Al-Assad himself). Is it really a mystery why the region is such an overwhelming disaster? The narrative of fighting terrorism is completely undermined by the obvious reality of ulterior geopolitical motivations.

    Conclusion: The truth is that the political war hawks in the United States aren’t solely interested in combatting terrorism (an otherwise legitimate concern). They’re also interested in forcefully removing those from power whom they don’t like (whether it means an aggressive war or not). If the two interests align: great. If not, they do their best to brainwash the public in hopes that the blatant hypocrisy of their position doesn’t outshine the international “villain” of choice.

    At present, the foe-du-jour is Bashar Al-Assad. Now Assad is clearly not a benevolent dictator, but what happens when he’s gone? Will the replacement be that much better?

    Do we have any right to choose a replacement to govern other people? Can you imagine if a foreign country was doing that in the United States? You may or may not like former President Bush and you may or may not like President Obama, but do you think it preferable to have a foreign country (e.g. Russia or China) undermine them with force? That’s absurd. And it would rally a whole bunch of Americans to fight against the common invader. Would it be legitimate if Russia or China subsequently labeled such people as terrorists? Of course not. It is no less absurd for America to behave in such a way. Contrary to the theoretically possible idea of actually fighting terrorists (which is largely impractical in reality due to the nature of terrorist ideology), overthrowing foreign governments is a completely illegitimate and imperial motivation. Until we accept this reality and get back to the legitimate defense of our own country, terrorism will continue to gain momentum.

  • "Friend & Ally" Or "Barbaric Death Cult" – You Decide

    With a record 151 beheadings this year (and 55 more looming for sedition, poetry, and 'terrorist crimes') arguably "under the guise of counter-terrorism to settle political scores" US' friend and ally Saudi Arabia bears a striking resemblence to another Sharia law-abiding 'state'. As Liberty Blitzkrieg's Mike Krieger explains, while ISIS has actively sought exposure for their brutal punishments, Saudi Arabia has worked to keep evidence of their actions within the conservative kingdom.

    Just yesterday, we published an article highlighting the latest deranged idea floated by Saudi Arabia’s monarchs to sue Twitter users comparing the barbaric kingdom to ISIS.

     

    Today, we present to you a power graphic courtesy of Middle East Eye, which demonstrates precisely why the Saudis are so sensitive about the topic. Namely, because the accusations are true.

    From Middle East Eye:

    The Islamic State (IS) and Saudi Arabia prescribe near-identical punishments for a host of crimes, according to documents circulated by the militant group.

     

    IS published a list of crimes and their punishments on 16 December 2014 to serve “as an explanation and as a warning” to those living in territory under their control in large parts of Iraq and Syria.

     

    The document lists hadd crimes, which are considered to be “against the rights of God,” and includes fixed punishments for theft, adultery, slander and banditry.

     

    Crimes deemed hadd and their punishments are derived from the Quran and the hadith, the collected teachings and sayings of the Prophet Muhammad. However, with the exception of Saudi Arabia, and IS-controlled areas, they are rarely applied.

    Screen Shot 2015-11-29 at 10.18.16 AM

    Any questions?

    *  *  *

    Finally, as MiddleEastEye concludes, rather ironically…

    the West could – at some point in the future – have diplomatic relations with IS “simply because they [IS] are sitting on oil and are happy to sell it”.

     

    “It might happen given the pragmatism of the West and how willing it is to compromise on human rights,” she added.

  • Half A Million Square Kilometers Of Heavy Smog Force Beijing To Issue "Orange Alert", Close Factories

    On Sunday, Beijing issued its highest smog alert of the year, upgrading it from the yellow of the past two days to orange, second only to red. According to local CCTV, heavy smog covered an area of half a million square kilometers around Beijing-Tianjin-Hebei region, as heavy air pollution hits 31 cities.

    Xinhua reports that the municipal weather center said humidity and a lack of wind would mean the smog will linger for another two days, before a cold front arrives on Wednesday.

    On Sunday, the reading for PM2.5, airborne particles smaller than 2.5 microns in diameter, hit 274 micrograms per cubic meter in most parts of the capital. Indicatively, the World Health Organization (WHO) considers only 25 micrograms to be a safe level.

    Beijing has recommended that residents minimize outdoor activities and urged people with respiratory diseases as well as the elderly to stay at home.

    It wasn’t just Beijing: moments ago Shanghai joined China’s capital in issuing an orange fog alert. The local government asked for heightened management of airports, highways and ferry terminals as heavy fog covered western and southern parts of the city, according to a website run by the Shanghai Meteorological Service said. Visibility is limiting visibility to 200 meters in Minhang, Songjiang, Qingpu, Baoshan, Jiading and Chongming areas, the website said. Orange is the 2nd-highest of 4-alert levels

    In March, four types of pollution alerts – blue, yellow, orange and red – were introduced by Beijing’s Environmental Protection Bureau. All factories are to be shut down during orange alerts. Heavy vehicles, such as construction trucks, are also completely banned during orange and red alerts. Furthermore, construction sites should stop the transportation of materials and waste while heavy-duty trucks are banned from the roads.

    In other words, the local economy shuts down.

    This is good and bad news: the bad news is that upcoming Chinese data will continue to be weak, which however will be blamed on the industrial shut down due to the surge in smog, and permabullish pundits will “excuse” the upcoming bout of weak data as being weather related, something the US meteoreconomists have become all too adept at. The good news, is that as every Pavlovian dog-cum-central bank experts knows by now, more economic weakness means more bets for central bank intervention, means higher stock prices.

    The municipal environment watchdogs have reinforced checks of discharge from coal-fired plants, outdoor barbecues and burning.

    And this is what China’s capital looked like this morning.

  • How Refugees Are Admitted Into The U.S.

    The United States’ effort to accept Syrian refugees seeking asylum has been the subject of much controversy over security concerns and the rigor of the vetting process. Here are the (satirical) steps involved in a refugee’s arrival in America…

    Step 1: Filled-out refugee application materials thrown onto large, unorganized pile of folders on desk at United States immigration headquarters

     

    Step 2: Applicants shown pictures of various U.S. landmarks and asked how violent they make them feel

     

    Step 3: Nonrefundable $45 credit check fee

     

    Step 4: Find safe place to wait out gunfire for next two years while application is processed

     

    Step 5: Tracking chips inserted into refugees’ forearms

     

    Step 6: Cry softly

     

    Step 7: Often regarded as the most arduous step of the process, refugees must successfully elicit some level of sympathy from the American populace

     

    Step 8: Age another year

     

    Step 9: Legally accepted refugees inserted onto list to receive government benefits, directly ahead of all of nation’s veterans

     

    Step 10: Accept grim but very real possibility of life in Billings, MT

     

    Step 11: Refugees given list of mosques under government watch they are allowed to attend

     

    Step 12: Enjoy full rights and privileges of something called “Adjust Status”

     

    Step 13: Fully assimilate by denying sanctuary to future waves of refugees from another part of the world

    Satire or Status Quo?

     

    Source: The Onion

  • Iran's Ayatollah Pens Letter To Western Youth: "You Should Know That Terror Has Been Supported By Certain Great Powers"

    For those of a cynical persuasion, it’s difficult to ignore the similarities between Islamic State’s brand of puritanical Islam and Saudi Arabia’s propagation of Wahhabism. Put simply, indoctrinating the masses with an ultra orthodox ideal that breeds intolerance sows the seeds of extremism and on that score, Riyadh and Raqqa are really no different. Indeed, Kamel Daoud, a columnist for Quotidien d’Oran, and the author of “The Meursault Investigation” recently described the Saudis as “an ISIS that made it.” 

    Still, the US (and the international community in general) turns a blind eye to the problem and Washington counts Riyadh as one of its closest geopolitical allies. Indeed, The Pentagon and the CIA are now part of a Saudi-led effort to arm and fund Sunni extremists operating in Syria. In short, Washington and its regional allies (which include Qatar) are engaged in the perpetuation of the same type of terrorism that just this month left 130 people dead in France, killed dozens of innocent civilians in Beirut, and led to the explosion that brought down a Russian passenger plane over the Sinai Peninsula killing all 224 people on board. Now, those incidents will be trotted out as an excuse to demonize Muslims residing in Western countries when it was Western governments that created the problem in the first place by supporting Sunni extremists and using radicalized Muslims as a tool to effect regime change across the Mid-East. 

    Meanwhile, Shiite Iran is branded a pariah state by the US and is considered to be evil incarnate by Washington’s ally in Jerusalem. True, the Ayatollah doesn’t help matters by habitually whipping the populace into an anti-America frenzy, but at the end of the day, one would be hard pressed to make a convincing case that the US is on the right side when it comes to picking allies in the Mid-East.

    Indeed, it’s Tehran that’s proven to be the most effective (with the possible exception of the Kurds) at battling Islamic State and although it now appears that Iran may be funneling guns and money to the Taliban (a rather unlikely alliance made necessary by the rise of ISIS), it would behoove Washington to reassess its position in the region because as it stands, America is on the wrong side.

    It’s with that in mind that we bring you the following open letter from Ayatollah Khamenei addressed to the youth in Western countries. It’s presented without further comment.

    *  *  *

    To the Youth in Western Countries,

    The bitter events brought about by blind terrorism in France have once again, moved me to speak to you young people.  For me, it is unfortunate that such incidents would have to create the framework for a conversation, however the truth is that if painful matters do not create the grounds for finding solutions and mutual consultation, then the damage caused will be multiplied.

    The pain of any human being anywhere in the world causes sorrow for a fellow human being.  The sight of a child losing his life in the presence of his loved ones, a mother whose joy for her family turns into mourning, a husband who is rushing the lifeless body of his spouse to some place and the spectator who does not know whether he will be seeing the final scene of life- these are scenes that rouse the emotions and feelings of any human being.  Anyone who has benefited from affection and humanity is affected and disturbed by witnessing these scenes- whether it occurs in France or in Palestine or Iraq or Lebanon or Syria. 

    Without a doubt, the one-and-a-half billion Muslims also have these feelings and abhor and are revolted by the perpetrators and those responsible for these calamities. The issue, however, is that if today’s pain is not used to build a better and safer future, then it will just turn into bitter and fruitless memories. I genuinely believe that it is only you youth who by learning the lessons of today’s hardship, have the power to discover new means for building the future and who can be barriers in the misguided path that has brought the west to its current impasse.  

    Anyone who has benefited from affection and humanity is affected and disturbed by witnessing these scenes- whether it occurs in France or in Palestine or Iraq or Lebanon or Syria.  

    It is correct that today terrorism is our common worry.  However it is necessary for you to know that the insecurity and strain that you experienced during the recent events, differs from the pain that the people of Iraq, Yemen, Syria and Afghanistan have been experiencing for many years, in two significant ways.  First, the Islamic world has been the victim of terror and brutality to a larger extent territorially, to greater amount quantitatively and for a longer period in terms of time. Second, that unfortunately this violence has been supported by certain great powers through various methods and effective means. 

    Today, there are very few people who are uninformed about the role of the United States of America in creating, nurturing and arming al-Qaeda, the Taliban and their inauspicious successors.  Besides this direct support, the overt and well-known supporters of takfiri terrorism- despite having the most backward political systems- are standing arrayed as allies of the west while the most pioneering, brightest and most dynamic democrats in the region are suppressed mercilessly. The prejudiced response of the west to the awakening movement in the Islamic world is an illustrative example of the contradictory western policies.

    I genuinely believe that it is only you youth who by learning the lessons of today’s hardship can be barriers in the misguided path that has brought the west to its current impasse.  

    The other side of these contradictory policies is seen in supporting the state terrorism of Israel.  The oppressed people of Palestine have experienced the worst kind of terrorism for the last sixty years.  If the people of Europe have now taken refuge in their homes for a few days and refrain from being present in busy places- it is decades that a Palestinian family is not secure even in its own home from the Zionist regime’s death and destruction machinery. What kind of atrocious violence today is comparable to that of the settlement constructions of the Zionists regime?

    This regime- without ever being seriously and significantly censured by its influential allies or even by the so-called independent international organizations- everyday demolishes the homes of Palestinians and destroys their orchards and farms.  This is done without even giving them time to gather their belongings or agricultural products and usually it is done in front of the terrified and tear-filled eyes of women and children who witness the brutal beatings of their family members who in some cases are being dragged away to gruesome torture chambers.  In today’s world, do we know of any other violence on this scale and scope and for such an extended period of time?

    Shooting down a woman in the middle of the street for the crime of protesting against a soldier who is armed to the teeth- if this is not terrorism, what is? This barbarism, because it is being done by the armed forces of an occupying government, should not be called extremism? Or maybe only because these scenes have been seen repeatedly on television screens for sixty years, they should no longer stir our consciences.

    The military invasions of the Islamic world in recent years- with countless victims- are another example of the contradictory logic of the west. The assaulted countries, in addition to the human damage caused, have lost their economic and industrial infrastructure, their movement towards growth and development has been stopped or delayed and in some cases, has been thrown back decades.  Despite all this, they are rudely being asked not to see themselves as oppressed.  How can a country be turned into ruins, have its cities and towns covered in dust and then be told that it should please not view itself as oppressed? Instead of enticements to not understand and to not mention disasters, would not an honest apology be better?  The pain that the Islamic world has suffered in these years from the hypocrisy and duplicity of the invaders is not less than the pain from the material damage.

    Dear youth! I have the hope that you- now or in the future- can change this mentality corrupted by duplicity, a mentality whose highest skill is hiding long-term goals and adorning malevolent objectives.  In my opinion, the first step in creating security and peace is reforming this violence-breeding mentality.  Until double-standards dominate western policies, until terrorism- in the view of its powerful supporters- is divided into “good” and “bad” types, and until governmental interests are given precedence over human values and ethics, the roots of violence should not be searched for in other places.

    Unfortunately, these roots have taken hold in the depths of western political culture over the course of many years and they have caused a soft and silent invasion.  Many countries of the world take pride in their local and national cultures, cultures which through development and regeneration have soundly nurtured human societies for centuries.  The Islamic world is not an exception to this.  However in the current era, the western world with the use of advanced tools is insisting on the cloning and replication of its culture on a global scale.  I consider the imposition of western culture upon other peoples and the trivialization of independent cultures as a form of silent violence and extreme harmfulness. 

    Humiliating rich cultures and insulting the most honored parts of these, is occurring while the alternative culture being offered in no way has any qualification for being a replacement.  For example, the two elements of “aggression” and “moral promiscuity” which unfortunately have become the main elements of western culture, has even degraded the position and acceptability of its source region.      

    So now the question is: are we “sinners” for not wanting an aggressive, vulgar and fatuous culture? Are we to be blamed for blocking the flood of impropriety that is directed towards our youth in the shape of various forms of quasi-art?  I do not deny the importance and value of cultural interaction.  Whenever these interactions are conducted in natural circumstances and with respect for the receiving culture, they result in growth, development and richness.  On the contrary, inharmonious interactions have been unsuccessful and harmful impositions.

    We have to state with full regret that vile groups such as DAESH are the spawn of such ill-fated pairings with imported cultures.  If the matter was simply theological, we would have had to witness such phenomena before the colonialist era, yet history shows the contrary.  Authoritative historical records clearly show how colonialist confluence of extremist and rejected thoughts in the heart of a Bedouin tribe, planted the seed of extremism in this region.  How then is it possible that such garbage as DAESH comes out of one of the most ethical and humane religious schools who as part of its inner core, includes the notion that taking the life of one human being is equivalent to killing the whole humanity?

    One has to ask why people who are born in Europe and who have been intellectually and mentally nurtured in that environment are attracted to such groups?  Can we really believe that people with only one or two trips to war zones, suddenly become so extreme that they can riddle the bodies of their compatriots with bullets?  On this matter, we certainly cannot forget about the effects of a life nurtured in a pathologic culture in a corrupt environment borne out of violence.  On this matter, we need complete analyses, analyses that see the hidden and apparent corruptions.  Maybe a deep hate- planted in the years of economic and industrial growth and borne out of inequality and possibly legal and structural prejudice- created ideas that every few years appear in a sickening manner. 

    Any rushed and emotional reaction which would isolate, intimidate and create more anxiety for the Muslim communities living in Europe and America not only will not solve the problem but will increase the chasms and resentments.

    In any case, you are the ones that have to uncover the apparent layers of your own society and untie and disentangle the knots and resentments. Fissures have to be sealed, not deepened. Hasty reactions is a major mistake when fighting terrorism which only widens the chasms. Any rushed and emotional reaction which would isolate, intimidate and create more anxiety for the Muslim communities living in Europe and America- which are comprised of millions of active and responsible human beings- and which would deprive them of their basic rights more than has already happened and which would drive them away from society- not only will not solve the problem but will increase the chasms and resentments.

    Superficial measures and reactions, especially if they take legal forms, will do nothing but increase the current polarizations, open the way for future crises and will result in nothing else.   According to reports received, some countries in Europe have issued guidelines encouraging citizens to spy on Muslims.  This behavior is unjust and we all know that pursuing injustice has the characteristic of unwanted reversibility.  Besides, the Muslims do not deserve such ill-treatment.  For centuries, the western world has known Muslims well- the day that westerners were guests in Islamic lands and were attracted to the riches of their hosts and on another day when they were hosts and benefitted from the efforts and thoughts of Muslims- they generally experienced nothing but kindness and forbearance.

    Therefore I want you youth to lay the foundations for a correct and honorable interaction with the Islamic world based on correct understanding, deep insight and lessons learned from horrible experiences.  In such a case and in the not too distant future, you will witness the edifice built on these firm foundations which creates a shade of confidence and trust which cools the crown of its architect, a warmth of security and peace that it bequests on them and a blaze of hope in a bright future which illuminates the canvass of the earth.

    Sayyid Ali Khamenei

    8th of Azar, 1394 – 29th of Nov, 2015

  • Fourth Turning – Politicians Driving The World Towards War

    Submitted by Jim Quinn via The Burning Platform blog,

    In Part 1 of this article I discussed the catalyst spark which ignited this Fourth Turning and the seemingly delayed regeneracy. In Part 2 I pondered possible Grey Champion prophet generation leaders who could arise during the regeneracy. In Part 3 I focused on the economic channel of distress which is likely to be the primary driving force in the next phase of this Crisis. In Part 4 I assessed the social and cultural channels of distress dividing the nation. In Part 5 I’ll examine the technological, ecological, political, and military channels of distress likely to burst forth with the molten ingredients of this Fourth Turning, and finally in Part 6 our rendezvous with destiny, with potential climaxes to this Winter of our discontent.

     

    Technological & Ecological Distress

    “Technological progress has merely provided us with more efficient means for going backwards.” – Aldous Huxley – Ends and Means

    The level of distress being produced by technology was probably underestimated by Strauss & Howe when they wrote their book in 1997. The internet, cell phones and e-commerce were still in their infancy, while cyber security was an unknown concept. Huxley would be shocked by how backwards we have “progressed” through the efficient distribution of iGadgets, creating millions of distracted, non-thinking, passive, easily pliable, willfully ignorant sheep who adore their technological servitude.

    A vast swath of the populace never reads a book and can’t go more than a few minutes without checking their iGadget to view the latest funny cat video, the latest update on Kim Kardashian’s ass, Bruce/Caitlyn Jenner’s courage, or Lamar Odom’s latest whorehouse escapade. Our country is drowning in a sea of irrelevance as our infinite craving for diversions and triviality overwhelms any thoughts of confronting our oppressors. The adoration of technology has degraded our ability to think and allowed the Deep State to control the masses by amusing them to death.

    The totalitarian Orwellian utilization of technology was exposed by a millennial with courage, intelligence, and love of his country – Edward Snowden. His revelations were very distressful to the felonious government apparatchiks who blatantly flaunt their disregard for the Fourth Amendment to the Constitution. The criminals at the NSA, fully supported by Obama and Congress, have made Big Brother look like an amateur, as they siphon up every phone call, text, email, and facebook entry made by each person in this country and for good measure the political leaders of our allies and enemies.

    The failure of Americans to be outraged at this traitorous offense against their right to privacy and ludicrous belief that Snowden is a criminal is distressful to the principles of liberty and freedom upon which this country was founded. Sacrificing freedom for security is a false trade-off, as we become less free, less secure, and less responsible for our own lives. The implications of allowing an all-powerful surveillance state to use your private communications against you are far reaching and a dire moment for humanity. The one method left for citizens to communicate without the government able to decipher their messages is encryption. The government is now attempting to gain a backdoor to encryption with the recent terrorist attacks in Paris as their rationale. Every real or imagined threat is used to grow the Deep State.

    They have failed thus far in controlling the internet, as it remains the only remaining avenue of free speech and truth, but they will stop at nothing in using the threat of terrorists to capture complete control over all communication outlets. Blaming Snowden for the complete and utter failure of the trillion dollar surveillance state to stop a bunch of amateur terrorists, living in France and using open cell phone communications, from killing 130 people divulges the desperate flailing of spineless incompetent government apparatchiks who are exceedingly good at taking away freedoms and astonishingly awful at ensuring safety and security .

    The sophistication and complexity of computers, code, and networks is only exceeded by the brilliance of hackers working on their own, for groups like Anonymous, or on behalf of governmental entities. Cyber-crime, cyber-attacks, cyber-warfare, and cyber-terrorism could be game breakers during this Fourth Turning. The trillions spent on high tech military hardware, aircraft carriers, missile systems, spy satellites, and computer systems could all be for naught if cyber warriors are able to disable these systems with computer code.

    Commerce at major retailers has already been disrupted by cyber criminals who have stolen millions of credit card holders’ data. The next world war could be determined by which side can successfully disable satellites and key missile systems of their foes. The hypocrisy of an outraged U.S. government when hackers from China, Russia and Iran hack into government computer systems is comical, as they opened Pandora’s Box by releasing the Stuxnet virus into the Iranian governmental computer systems. You live by the sword and you die by the sword, or in this case the computer virus.

    One of the most hyped channels of distress, and the one which humans have the least amount of control due to its complexity, is ecological distress. The extreme rhetoric surrounding the issue of global warming is deafening, and as with many issues during a Fourth Turning, there is no middle ground. The climatologists and scientists who depend upon the government for research grants allow their financial interests to dictate their findings. Whenever someone declares an issue as settled science, you know they are lying and pushing an agenda. Science is never settled. It requires constant questioning and exploration of new data.

    When terminology like global warming is proven to be false and scientists are caught faking their data, they just change the terminology to climate change and start over again. No one can argue the climate doesn’t change. It changes every day. Does the burning of fossil fuels impact the environment? I’m sure it does. So does cow flatulence and my breathing. So do the trees outside my window. So does solar activity. So does volcanic activity. The variables affecting our environment are limitless and no computer model can accurately predict the future with any reasonable degree of certainty. If computer models can’t accurately predict the path and intensity of storms within a 48 hour window, how could anyone believe forecasts a decade or two in the future?

    The facts do not stop the ideologues like Al Gore and nanny state government drones from declaring their position in-contestable. Anyone who dares challenge their facts, story-line or motivation is declared an ignorant right wing climate change denier. The vehement vitriolic fervor of the venomous environmental justice warriors is reminiscent of the angry pomposity of the bitter social justice warriors with their black lives matter, safe spaces, and feminazi agenda. They believe the louder and angrier they appear, the more likely the passive sheep will quiver and let them have their way.

    The goal is always more control, more taxes siphoned from the remaining productive few, and less free and honest debate about the issues. The critical thinking, rational, courageous few who refuse to cower from the malicious meanderings of these climate sociopaths are the last barrier to allowing some world organization to tax and regulate us to death. The absurdity of believing a carbon tax levied on Americans will save the planet is laughable, as China, India, South America, Africa and the rest of the developing world ignore global environmental mandates. The technocrats controlling the developed world need more money to keep their power and dominion over the masses, and climate taxation is their last remaining method.

    The planet has enough land mass to easily support the 7 billion existing people. The problem is the people are clustered into urban areas and the existing water and food sources are not distributed evenly among the population groupings. The hatred of free market capitalism in much of the world results in mis-allocation of resources and economic development, leaving large swaths of the planet living in abject poverty and starvation. Extreme poverty and hopelessness leads to the rise of dictators, extremist criminal groups, war and anarchy. Poverty is a driving force, along with Islamic religious extremism for the chaos in the Middle East, exacerbated by U.S. interventionism. As this Fourth Turning intensifies, the poverty, starvation, war and extremism will grow, adding fuel to the global wars.

    Just like there is no avoiding the harsh winter gales of a Fourth Turning, there is nothing that can be done to bypass the consequences floods, droughts, water shortages, pandemics, seismic events, tsunamis, solar flares, or other unanticipated ecological events. The climate will change. If a solar flare does significant damage to satellite systems and the electrical grid the pandemonium and helplessness of our energy dependent civilization would be laid bare immediately. A devastating earthquake in California would have far reaching economic consequences to an already bankrupt nation.

    The fear during the recent Ebola scare revealed how irrational the masses can act. Imagine the panic which would occur during a real pandemic. The Dust Bowl droughts during the 1930’s exacerbated the already terrible economic conditions. A worsening of the recent droughts in California and Pacific Southwest could have far reaching impacts on food and water supplies. No matter what ecological distress is experienced, the answer from politicians will be more government control, further straining the relationship between the people and their rulers. The people of this country are so divided, there is little chance for compromise solutions. Will this division result in our desolation?

    “Every kingdom divided against itself is brought to desolation; and every city or house divided against itself shall not stand.” – Matthew 12:25

     

    Political Distress

    “The average man will permit the oligarch, whether economic or political, to hide his real purposes from the scrutiny of his fellows and to withdraw his activities from effective control. Since it is impossible to count on enough moral goodwill among those who possess irresponsible power to sacrifice it for the good of the whole, it must be destroyed by coercive methods and these will always run the peril of introducing new forms of injustice in place of those abolished.” – Reinhold Niebuhr

    The channel encompassing the maximum level of distress at this stage in the Fourth Turning is the political arena. The initial trigger was the 2008 financial collapse, but the political actions prior to and since 2008 have been the driving force behind this ongoing Crisis. Politicians of both parties were bought off by financial interests to repeal the Glass Steagall Act, unleashing Wall Street to go on a ravenous greed driven bacchanal over the next decade, creating the worldwide financial implosion.

    The revolving door between Washington DC and Wall Street is self-evident, with Goldman Sachs providing Treasury Secretaries (Rubin, Paulson, Summers), Fed Presidents (Dudley, Harker, Kaplan, Kashkari), and hundreds of other White House and regulatory agency operatives, as they have engineered an infiltration, subversion and silent coup of the Federal government. Goldman was the single largest contributor to Obama’s campaign and is likewise, the largest contributor to Hillary Clinton. They buy off key Congressmen of both parties (McConnell, Schumer). That may explain why not one criminal banker was jailed after the crime of the century in 2008.

    The oligarchy controlling the levers of power behind the scenes of our political, economic, and financial systems use their immense wealth, control over the propaganda media outlets, dominion over the regulatory and judicial structures, and legislative authority to siphon off the wealth of the masses, while leaving a withering dying carcass in their wake. The political process has been bastardized as candidates, hand-picked by the vested interests, are sold to an increasingly uninformed and uninterested populace like a bar of soap. They are bought and paid for by special interests before they ever reach Washington. It’s a pay to play system, and the public aren’t playing. The traitorous actions taken by politicians and their banker co-conspirators at the start of this Fourth Turning divulges their true constituency. And it’s not you.

    Ben Bernanke and his Goldman cohort Paulson proceeded to save their Wall Street benefactors and throw grandma and the rest of Main Street USA under the bus. They poured trillions of taxpayer funds into the coffers of criminal banks who took excessive risks, committed massive mortgage fraud, and used derivatives of mass destruction to screw clients, pension plans, little old ladies and the country. When public outrage resulted in 90% of Americans coming out against TARP, Congress initially voted it down.

    Then Wall Street threw a hissy fit, Bernanke and Paulson lied to the country about the problem and threatened the spineless weasels slithering around the halls of Congress. Congress did as they were told (including presidential candidates Obama and McCain) by their real bosses and passed TARP. Paulson then used it in the opposite manner from which he sold it to the public. ZIRP, QE1, QE2, and QE3 have badly hurt senior citizens, savers, and middle class working families who have seen their real household income fall since 2007.

    The congressional approval rating of 11%, down from 40% in 2009, and presidential approval rating of 44%, down from 67% in 2009, reveal the disgust Americans currently have for their politician “leaders”. When the economy is doing well or when confronted with an attack from a foreign threat, the approval ratings of politicians jumps higher. The nonstop decline since 2009 exposes the much touted economic recovery to be a fraud. Average Americans know their standard of living continues to decline, despite the propaganda laden highly manipulated economic data shoveled by the government on a monthly basis. You would have to be brain dead or an Ivy League educated economist to believe the true unemployment rate in this country is 5.1%.

    The reason only 25% of Americans think the country is headed in the right direction is because its current economic trajectory is collapse. The Fed can print fiat and enrich their owners, and politicians can promise free shit to voters until the cows come home, but someone will have to pay the bill – and it’s a doozy. With an $18.7 trillion national debt, $200 trillion of unfunded welfare promises, $600 billion to $1 trillion deficits for as far as the eye can see, and no politician with the courage to tell the truth, Americans know deep down in their bones this farce can’t continue. With a rapidly aging population, there is no mathematical possibility those bills can be paid by the younger generations.

    The next financial earthquake will be far worse than the initial tremor in 2008, as bubbles in stocks, bonds, and real estate simultaneously pop, and the Fed already zero bound on interest rates. The retribution sought by the masses against those guilty of crimes against the nation could be bloody and swift. Our relatively peaceful society could go off the rails quickly.

    With less than a year until the next presidential election, we have the front runners on the Democrat side running on promises of more free shit to their constituents in the form of free college, a $15 minimum wage, equalization of pay for women, free healthcare, and a bevy of other goodies. We’ve got the front runners on the Republican side promising tax cuts, building walls after kicking 10 million illegal immigrants out of the country, repealing Obamacare without offering an alternative, and expanding the war on terrorism.

    All the major candidates are itching for war with Russia and China, while promising more spending on the military. All the major candidates will again be on the take from Wall Street. Not one major candidate has any intention of cutting spending or balancing the budget. They know voters will not elect anyone who promises them discomfort, pain, or shared sacrifice. One year from now we are likely to have either a lying, corrupt, criminal, socialist president or a bombastic, pompous blowhard reality TV president. In either case, they will reside in the White House during the most intense and likely bloody phase of the Fourth Turning.

     

    Military Distress

    Doomsday-Clock-Announcement-Death-Destruction-553614.jpg

    “History offers even more sobering warnings: Armed confrontation usually occurs around the climax of Crisis. If there is confrontation, it is likely to lead to war. This could be any kind of war – class war, sectional war, war against global anarchists or terrorists, or superpower war. If there is war, it is likely to culminate in total war, fought until the losing side has been rendered nil – its will broken, territory taken, and leaders captured.” – Strauss & Howe – The Fourth Turning

    As we’ve witnessed throughout history, when the ruling class loses control of their domestic situation, economic turmoil ensues, they begin losing the support of the masses, and attempt to retain control by producing a foreign conflict to rally the people around the flag. War serves three vital purposes for the establishment. The politicians in power gain support, as the masses decide it would be unpatriotic to throw the bums out in the midst of a conflict. Secondly, the military industrial complex increases its power, generating obscene profits for its constituent arms dealers. Thirdly, the Wall Street cabal finances the conflicts, reaping more riches, and compensating the politicians waging the wars.

    The best wars from a government’s standpoint are wars against concepts – like terror or poverty. They can’t be won, so they go on forever. The government is free to invade or bomb any country they say are housing terrorists. The government can restrict all liberties, freedoms and Constitutional rights in the name of keeping us safe from terrorists. The concept can be utilized any time for any reason, without any proof required by the ruling class. The true terrorists are in Washington DC. They wear suits, hold hearings, give speeches, and accept bribes. These charlatans are terrorizing the world and the citizens of this country with their neo-con ambitions to rule the world.

    Linear thinkers expecting technology and human ingenuity to keep our country and the world on a path of progress are badly mistaken. They ignore the obvious escalation of global distress, as history suddenly hurls us towards some cosmic chaos that defies all rational predictive models. To those not blinded by ideology or captured by the vested interests, it is plainly evident the world has become more chaotic and dangerous in the last two years. The initial economic chaos created the atmosphere and political conditions which are now leading inevitably toward global war.

    American foreign policy, dictated by neo-cons of both parties, has purposely destabilized the Middle East and the Ukraine in an effort to keep the petro-dollar king and to ensure no regime in the Middle East could challenge Israel. As with most diabolically immoral plans, the unintended consequences will be far worse than the initial outcome. By overthrowing Hussein, Gaddafi, Mubarak, and attempting to overthrow Assad, the U.S. has unleashed thousands of Islamic fanatics and disaffected soldiers from the overthrown regimes to wreak havoc throughout the Middle East and now in Europe. Creating anarchy and chaos in countries previously living in peace under strongmen is blowing up in our faces.

    The provocation of Russia by overthrowing the democratically elected president of the Ukraine, and friend of Russia, began the war phase of this Fourth Turning. Putin then annexed Crimea and civil war waged in eastern Ukraine and an airliner was shot down by the Ukrainian government in an effort to blame Putin. The U.S. armed any Muslim willing to fight Assad, in their effort to overthrow his regime and allow Saudi Arabia and Qatar to build a gas pipeline to Europe, further weakening Russia.

    The latest terrorist threat to the world – ISIS – was created, funded, and armed by the U.S. The coordinated oversupply of oil had its purpose to destroy the economies of Russia, Iran, Argentina and Venezuela. The unanticipated deepening global recession has produced the unanticipated consequences of damaging the economy of Saudi Arabia, crushing the oil sands industry in Canada – pushing their economy into recession, and revealing the U.S. shale industry to be a debt enabled fraud – now in a slow motion collapse.

    The ongoing saber rattling between the U.S. and Russia over Syria and the Ukraine, along with the increasingly provocative actions taken by the U.S., Japan and China over the contested islands in the South China Sea, are setting the stage for a showdown no one anticipates or actually wants. But, psychopathic politicians feel driven to prove their manhood by using their military assets to bully opponents they know cannot fight back. The U.S. and their feeble minded NATO allies were sure they could overthrow Assad, just as they had done with Hussein and Gaddafi, because they have far more firepower and unlimited funds printed by their central bankers.

    Putin put a stop to those illusions, as he refused to let his only Mediterranean port fall under U.S. control. When Putin stepped into the Syrian conflict it immediately became apparent the U.S., Turkey, and the rest of NATO had no intention of defeating ISIS, as they allowed them to run refineries, ship oil to Turkey in thousands of tanker trucks and arm themselves with U.S. provided weapons. Continuous never ending conflict is good for American business.

    Even though the latest American created evil terrorist threat – ISIS – has been wreaking havoc throughout the Middle East, they were fighting Assad, so we weren’t going to eradicate them. Putin immediately began obliterating their command infrastructure, refineries, oil tankers, bridges, and other essentials an enemy uses to sustain them. This real war embarrassed the U.S., Turkey and NATO, while infuriating a desperate ISIS leadership.

    Now we’ve reached a tipping point, as the swirl of accusations, rhetoric, provocations, miscalculations, egos, hubris, and luck will combine to produce a combustible mixture which could erupt at any time. The Islamic radicals (ISIS, the supposed moderates, Turks, Iraqis, Egyptians, French, Belgians and Muslims across the world) have lashed out in response to their betrayal by the U.S. in allowing Putin to actually fight them, by blowing up a Russian airliner, slaughtering 130 people in France, killing dozens in Mali and Tunisia, while threatening similar attacks in the U.S.

    Hollande has thrown the French Constitution in the trash bin in his pathetic attempt to appear tough on terrorism so he doesn’t get ousted in the next election. Nothing like a bomb going off in Rockefeller Center or the Mall of America to get an already fearful American public in the Christmas spirit and deepening the recession the 99% are already experiencing. In this tense global atmosphere all that would be needed to set off a conflagration would be for someone to do something stupid. And Turkey just obliged.

    The shooting down of a Russian bomber over Syrian territory by Turkish F-16s, provided by U.S. arms dealers, and then the shooting down of a Russian rescue helicopter with a U.S. provided TOW missile by “moderate” Syrian rebels will have far reaching consequences. This was a deliberate unprovoked attack by Turkey as either retaliation for their cheap oil supplies being cut-off, a frantic attempt by Erdogen to boost his popularity before elections, or as instructed by those calling the shots in Washington D.C.

    Putin is unlikely to do anything rash, but this event has solidified the fact Russia is considered the true enemy of the West, not Islamic radicals or Syria. The next decade or so will see Russia, China and some lesser developing countries confront the West economically, through currency wars, commodity wars, and militarily through proxy wars in the Middle East and Eastern Europe, with all sides armed with nuclear weapons of mass destruction.

    This phase of the Fourth Turning seems surreal. History seems to be moving in slow motion. It reminds me of the eight months between Hitler’s invasion of Poland and his invasion of Belgium and France in May of 1940, referred to as the Phoney War. The Western allies had declared war on Germany, but no one did anything. Parisians and Londoners went about their business, eating at restaurants, going to plays, enjoying the spring sunshine, and blissfully unaware of the tragedy, bloodshed, and horror which was gathering like a swirling tempest just over the horizon.

    Americans today are blissfully distracted by their iGadgets, plotting out their holiday shopping strategies, leasing new cars, eating out, and buying advance tickets to the new Star Wars movie. They don’t see the wicked winter squalls ahead which will try their souls. We are experiencing the lull before the storms, but the storms are surely coming. The potential for catastrophe is high and burying our heads in the sand is not a strategy.

    “The risk of catastrophe will be very high. The nation could erupt into insurrection or civil violence, crack up geographically, or succumb to authoritarian rule. If there is a war, it is likely to be one of maximum risk and effort – in other words, a total war. Every Fourth Turning has registered an upward ratchet in the technology of destruction, and in mankind’s willingness to use it.” – Strauss & Howe – The Fourth Turning

        

  • Obama Signs Defense Bill Authorizing $500 Million More In Aid To "Moderate" Syrian Rebels

    Earlier this year, The Pentagon had a plan. Apparently, someone in Centcom decided that there weren’t enough proxy armies battling for control of Syria and so, what the US needed to do was spend $500 million on a new “train and equip” program which, if all went according to plan, would result in the recruitment of more than 5,000 fearsome warriors by the end of 2015. 

    Of course the CIA and The Pentagon had already spent years arming, funding, and training Syrian rebels but as it turns out, most of them either proved to be wholly ineffective or else became terrorists. Although the CIA program was still operational, the Obama administration thought it would be advantageous to have (another) parallel program in place wherein “properly vetted” fighters would receive a steady stream of logistical support, training, and weapons. 

    What exactly this new crack squad was supposed to do is still largely unclear. The official line – of course – was that they would fight ISIS and presumably al-Nusra. That would be amusing enough if it were true. That is, the US is widely suspected of providing support to ISIS early on in the fight and the FSA (which is explicitly backed by the US and its regional allies) formed an alliance with al-Nusra long ago. In short, if the US really was training soldiers to fight ISIS and al-Nusra, the program represented an attempt on Washington’s part to clean up a mess of America’s own making by doing the exact same thing (i.e. arming insurgents) that created the mess in the first place. 

    Of course it’s unlikely that the program’s real goal was to fight Islamic State. After all, the US needs ISIS to continue the fight against Assad and indeed, at the time of the program’s inception, Russia wasn’t in Syria yet meaning there was still a very real possibility that Islamic State would eventually march on Damascus. It seems far more plausible that the new group of recruits were simply the latest effort on Washington’s part to field a reliable anti-Assad army that could be counted upon to continue to destabilize the regime and perpetuate American interests. 

    Well, not to put too fine a point on it, but the effort was a miserable failure. By the time summer rolled around, the US had only managed to recruit around a dozen or so fighters. The group’s commander and deputy commander were kidnapped by al-Nusra in late July and in September, Centcom chief Gen. Lloyd Austin told congress that only around “four or five” soldiers were still on the ground. “Let’s not kid ourselves, that’s a joke. This is just a total failure,” Sen. Kelly Ayotte (R-N.H.) and Sen. Jeff Sessions (R-Ala.) told Austin and Christine Wormuth, Undersecretary of Defense for Policy.

    Things only got worse a week later when The Pentagon admitted that the “four or five” fighters still operating under the program were forced to hand over six “pickup trucks” and an ammo cache to al-Qaeda in order to secure safe passage to who knows where. 

    Mercifully, the program was scrapped in early October.

    But that experience did not deter the US from providing weapons to groups deemed “moderate” by The Pentagon and CIA. In fact, after Russia and Iran ramped up their efforts to support Assad’s depleted forces, the US, Turkey, Saudi Arabia, and Qatar stepped up the weapons shipments to the FSA and other militants operating in Syria. The US, for instance, air dropped 50 tons of weapons into the middle of desert last month. The stash was supposedly intended for the brand new “Syrian Arab Coalition” which, as we outlined in side-splitting detail, is a largely fictional group the US made up in order to hide the fact that the weapons and ammo really went to the Kurdish YPG, an outcome that would be decisively unpalatable to Washington’s allies in Ankara. 

    Finally, in the latest example of what can go wrong when you provide weapons to militants, the FSA’s 1st Coastal Brigade used a US-supplied TOW to destroy a Russian search rescue helicopter last Tuesday in the wake of Turkey’s move to down a Russian Su-24 near the Syrian border.

    Obviously, all of these programs have been remarkably successful which is probably why President Obama has decided to approve some $800 million in additional aid to Syrian “moderates” and to the government in Kiev as part of the annual defense policy bill. Here’s RT:

    President Barack Obama has signed the Pentagon funding bill giving $800 million in aid to both “moderate rebels” in Syria and the Kiev regime. Obama also vowed to work around provisions blocking the closure of the Guantanamo Bay detention camp.

     

    Obama signed the National Defense Authorization Act (NDAA) of 2015 on the eve of Thanksgiving. He previously vetoed the $612 billion bill in a well-publicized ceremony in October, arguing that the lawmakers dodged the spending limits by shifting money into the warfighting slush fund.

     

    Although Congress then trimmed the bill down to $607 billion, the cuts did not affect the $300 million aid to the Ukrainian government, or the “zombie” surveillance blimp program that has cost nearly $3 billion so far. It also left almost $500 million dedicated to arming and training “moderate rebels” in Syria – a program the Pentagon had already abandoned.

    Amusingly, “the NDAA specifically prohibits any US aid going to the Islamic State of Iraq and Syria (ISIS), the Jabhat Al-Nusra Front, Al-Qaeda, the Khorasan Group, or any other violent extremist organization.” Obviously that’s a sick joke. As we saw last Monday, US-made TOWs make their way quickly to al-Nusra and what seems clear from the language in the bill is that Washington fully intends to continue to funnel arms to the FSA which is not only allied with al-Qaeda and who knows who else, but which is also now in the business of executing Russian pilots and blowing up search and rescue planes. 

    Meanwhile, the Pentagon can now send “anti-armor weapon systems, mortars, crew-served weapons and ammunition, grenade launchers and ammunition, and small arms and ammunition” to Ukraine to aid in the fight against Russian-backed separatists. 

    So there you have it America, your tax dollars hard at work funding proxy armies in Syria and a puppet government in Ukraine, as Washington struggles to preserve the last vestiges of US hegemony and Moscow fights to return the world to bipolarity. 

    *  *  *

    From the NDAA

    SEC. 1225. MATTERS RELATING TO SUPPORT FOR THE VETTED SYRIAN OPPOSITION.

    (a) REPORT ON POTENTIAL SUPPORT REQUIRED.— (1) IN GENERAL.—Not later than 90 days after the date of the enactment of this Act, the Secretary of Defense shall submit to the appropriate congressional committees a report setting forth a description of the military support the Secretary considers necessary to provide to recipients of assistance under section 1209 of the Carl Levin and Howard P. ‘‘Buck’’ McKeon

    National Defense Authorization Act for Fiscal Year 2015 (Public Law 113–291; 128 Stat. 3541) upon their return to Syria to ensure their ability to meet the intended purposes of such assistance.

    (2) COVERED POTENTIAL SUPPORT.—The support the Secretary may consider necessary to provide for purposes of the report required by paragraph (1) is the following:

    (A) Logistical support.

    (B) Defensive supportive fire.

    (C) Intelligence.

    (D) Medical support.

    (E) Any other support the Secretary considers appropriate for purposes of the report.

    (3) ELEMENTS.—The report required by paragraph (1) shall include the following:

    (A) For each type of support the Secretary considers necessary to provide as described in paragraph (1), a description of the actions to be taken by the Secretary to ensure that such support would not benefit any of the following:

    (i) The Islamic State of Iraq and Syria (ISIS), the Jabhat Al-Nusra Front, al-Qaeda, the Khorasan Group, or any other violent extremist organization

    (ii) The Syrian Arab Army or any group or organization supporting President Bashir Assad.

    (B) An estimate of the cost of providing such support.

    (b) STRATEGY FOR SYRIA.—

    (1) IN GENERAL.—Not later than 90 days after the date of the enactment of this Act, the Secretary of Defense shall, in coordination with the Secretary of State, submit to the appropriate congressional committees a strategy for Syria.

    (2) ELEMENTS.—The strategy required by paragraph (1) shall include the following:

    (A) A description of the means by which assistance provided to appropriately vetted elements of the Syrian opposition and other appropriately vetted Syrian groups and individuals will achieve the purposes set forth in section

    1209(a) of the Carl Levin and Howard P. ‘‘Buck’’McKeon National Defense Authorization Act for Fiscal Year 2015.

    (B) A description of the political and military objectives and end states for Syria.

    (C) A description of means by which the assistance will support the political and military objectives and end states for Syria.

    (D) An explanation of the manner in which the military campaign in Syria and Iraq is integrated.

    (c) APPROPRIATE CONGRESSIONAL COMMITTEES DEFINED.—In subsections (a) and (b), the term ‘‘appropriate congressional committees’’ has the meaning given that term in section 1209(e)(2) of the Carl Levin and Howard P. ‘‘Buck’’ McKeon National Defense

    Authorization Act for Fiscal Year 2015.

    (d) ADDITIONAL MATTERS FOR QUARTERLY PROGRESS REPORTS ON ASSISTANCE TO THE VETTED OPPOSITION.—

    (1) ADDITIONAL MATTERS.—Subsection (d) of section 1209 of the Carl Levin and Howard P. ‘‘Buck’’ McKeon National Defense Authorization Act for Fiscal Year 2015 is amended—

    (A) in paragraph (10), by striking ‘‘and’’ at the end;

    (B) in paragraph (11) by striking the period at the end and inserting a semicolon; and

    (C) by adding at the end the following new paragraphs:

    ‘‘(12) a description of support, if any, provided to appropriately vetted recipients pursuant to subsection (a) while those forces are located in Syria, including—

    ‘‘(A) logistics support;

    ‘‘(B) defense supporting fire;

    ‘‘(C) intelligence; and

    ‘‘(D) medical support; and

    ‘‘(13) a description of the number of appropriately vetted recipients located in Syria, the approximate locations in which they are operating, and the number of known casualties among such recipients.’’.

    (2) EFFECTIVE DATE.—The amendments made by paragraph

    (1) shall take effect on the date of the enactment of this Act, and shall apply with respect to quarterly reports submitted under subsection (d) of section 1209 of the Carl Levin and Howard P. ‘‘Buck’’ McKeon National Defense Authorization Act for Fiscal Year 2015 after that date.

    (e) INFORMATION ACCOMPANYING REPROGRAMMING REQUESTS.—

    Subsection (f) of such section is amended—

    (1) by striking ‘‘The Secretary of Defense’’ and inserting the following:

    ‘‘(1) IN GENERAL.—The Secretary of Defense’’; and (2) by adding at the end the following new paragraph:

    ‘‘(2) INFORMATION ACCOMPANYING REPROGRAMMING REQUESTS.—Each request under paragraph (1) shall include the following:

    ‘‘(A) The amount, type, and purpose of assistance to be funded pursuant to such request.

    ‘‘(B) The budget, implementation timeline with milestones, and anticipated delivery schedule for such assistance.’’

  • Bush Vs. Obama – The Cartoon

    Speak softly and carry a big stick?

     

     

    Source: Townhall.com

  • 14,000 Refugees Due For Deportation From Sweden Have Vanished: "We Simply Do Not Know Where They Are"

    As part of the just concluded “cash for refugees” deal between the EU Turkey, the FT adds that not only will migrants whose asylum applications are rejected be sent back to Turkey but that this “crackdown on irregular migration would be complemented by a parallel programme offering a legal route to Europe, resettling up to 500,000 Syrian refugees directly from Turkey, Lebanon or Jordan.”

    The FT adds that, as expected, “if such an EU-wide scheme were made mandatory it would be flatly opposed by many eastern European countries. To avoid the proposals being blocked, Brussels and Berlin are exploring a “voluntary” scheme with 10 countries willing to take refugees. It is unclear whether other Schengen members would be asked to contribute to the costs of resettlement.”

    But before crossing that particular bridge, which will sow even further anger, mistrust and antagonism spread among the member countries of the European “Union”, a bigger question is just how will Europe track down and sequester those refugees that pose the biggest threat in the eyes of authorities, those who are already slated for deportation.

    As the following case study from Sweden proves, having once entered Europe, Europe may have problems trying to track down the hundreds of thousands of refugees having already found their way to the continent.

    As Sweden’s Afton Bladet reports, over half of all the illegal migrants slated for deportation in Sweden have mysteriously disappeared. 

    The National Border Police Section reports that of the 21,748 individuals due to be sent home after their asylum applications were turned down, a whopping 14,140 have simply vanished off the police radar. Around a third, or the remaining 7,608, still live and are accounted for in the Swedish Migration Board’s premises or have indicated an address for their own homes. It is not clear if anyone has actually tried following up on said home address to see how many have simply made one up.

    Based on a translation of the Swedish report by Breitbart, some are expected to have left the country secretly, “but the majority are thought to still be in Sweden, having fallen through the cracks of the comprehensive welfare state.“

    The local cops is brutally honest: “We simply do not know where they are”, said Patrik Engstrom, a spokesman for the local police.

    This is not the first time refugees have vanished from official supervision: one month ago we reported that roughly 4,000 asylum-seekers who had initially been accomodated by the German state of Lower Saxony had “mysteriously disappeared.” To our knowledge they have still not been found.

    Ever the egalitarian paradise, Sweden was as concerned about labor abuse as the current whereabouts of the refugees, and Afton Bladet noted that a number of unscrupulous employers in the country have taken advantage of the invisible migrants, using them as cheap labour off the books, with no wages tax to pay or minimum wage to heed.

    The reported goes on to note that while at the start of 2015 the migration bureau was responsible for deporting migrants who failed to gain a visa, the rising tide of migration created new challenges and the job was transferred to the Police in October. The task of deportations was handed over to police because the migration board considered that as the situation deteriorated, “coercion would be necessary” to get migrants to leave. Yet through a severe lack of manpower, resources, and political mandate to take proper action the police have proven unable to handle the job.

    Now, even the police is proving helpless at managing the process: “a police spokesman said they simply did not have enough officers, having been ordered this month to become border police as well, enacting government policy to check passports and papers.”

    “We have failed because too much of our resources go to reintroduce border controls at internal borders” Patrik Engstrom adds.

    Hamstrung by government policy, the border checks have also been a failure, making no significant reduction in the number of migrants crossing into the country daily. Officers were only permitted to make spot checks at the border, and were forbidden to profile individuals on the basis of their ethnicity, language spoken, or skin colour, making effective control impossible.

    Finally, even in cases where the police manage to find illegals and send them home, nations such as Afghanistan, Iran, Somalia, Eritrea, Lebanon, Morocco and Libya don’t accept their own people back in many cases.

    In other words, Europe has unleashed the refugee genie without much thought for the consequences. And now that the “consequences” have arrived and Europe is scrambling to put the genie back into the bottle, to its amazement it has realized that the genie has mostly vanished.

  • Black Friday Total Sales Crash 10% (Despite Rise In Online Spend)

    We can hear the mainstream media now – "Great News Everyone!! The American consumer is back" – online sales on Black Friday rose 10% to $1.7 billion which ComScore says shows "strong spending." The only problem is – which we suspect will be oddly missing from the mainstream narrative, as ShopperTrak reports total sales on Black Friday crashed 10% to $10.4 billion. While blame has been placed on early opening on Thanksgiving, that is false too since spending on that day also plunged 10%. So, the sales news is unequivocally bad – which is hardly surprising given the collapse in consumer confidence.

     

    So to clarify… (via The Guardian)

    Total sales in the US on Black Friday fell 10% to $10.4bn this year, down from $11.6bn in 2014, according to research firm ShopperTrak.  

    The decline in sales on the traditional busiest shopping day of the year has been blamed on shops opening the day before. But this year, sales on Thanksgiving also dropped, and by the same percentage, to $1.8bn.

     

    A big reason for the decline is increased online shopping, as Americans hunt down deals on their smartphones, tablets and computers.

    So, fewer customers ventured out for the traditional busiest shopping day of the year, while online retailers saw sales jump… (via Comscore)

    Black Friday (November 27) followed with an even stronger spending day with $1.66 billion in desktop online sales, up 10 percent from Black Friday 2014.

     

    “While the holiday season opened a little softer than anticipated, Thanksgiving and Black Friday both posted strong online spending totals that surpassed $1 billion on desktop computers and grew at the rate we had expected,” said comScore chairman emeritus Gian Fulgoni. “This is also the second straight year that Thanksgiving has established itself as one of the more important online buying days, while Black Friday continues to gain in importance online with each passing year. Looking ahead to Cyber Monday, we expect to see upwards of $2.5 billion in desktop spending as people return to their work computers after Thanksgiving weekend and use some of their down time to continue their holiday gift buying, but without other family members looking over their shoulders.”

    So to clarify total sales collapsed by $1.2 billion (even as online sales rose by $150 million)… but everything will be awesome once Americans get back to work and start using their work computers to buy buy buy….

    *  *  *

    So, for those with difficulty with reading and math…

     

    The National Retail Federation just held their post-Black Friday conference call to clarify evewrything…

    • *NRF: MANY NUMBERS THIS YEAR CAN'T BE COMPARED WITH PAST YEARS (unless the numbers are better in which case they're awesome)
    • *NRF: METHODOLOGY OF THIS YEAR'S SURVEY CHANGED DRAMATICALLY (so we should ignore it?)
    • *NRF CHIEF ECONOMIST: THERE ARE SOME `SPEED BUMPS' IN ECONOMY (weather?)
    • *RETAILERS STARTED PROMOTING HEAVILY DAY AFTER HALLOWEEN: NRF (bye bye margins)
    • *NATL RETAIL FEDERATION SAYS CONSUMER FUNDAMENTALS VERY STRONG (but you just said "speed bumps")
    • *NRF: SLOWER JOB GROWTH DURING SUMMER COULD IMPACT SPENDING (but you just said fundamentals were very strong?)

  • Inside The ISIS Propaganda Machine: An Up-Close Look At A Militant Media Strategy

    “I’ve grown used to IS ultraviolence, but this video was different. Different because, at my office desk, the place where I conduct all my research, I have a photograph of myself with my now-wife, dad and step-mum taken at that very same Palmyran theatre almost five years ago.”

    That’s a quote from Charlie Winter, Senior Researcher at the Quilliam Foundation, which describes itself as “the world’s first counter-extremism think tank, set up to address the unique challenges of citizenship, identity, and belonging in a globalized world.”

    The reference is to a video ISIS released over the summer depicting a mass execution at Palmyra’s Roman Theatre. The most chilling thing about this particular Islamic State murder montage: the executioners are all children. 

    The clip represented yet another attempt on the group’s part to one-up itself on the way to creating a vast catalogue of ultra-violent propaganda videos that have both shocked and captivated the Western public.

    “Jihadi John” introduced the world to Islamic State’s brand of barbarism by beheading Westerners on camera with a bowie knife. The brutality quickly escalated and before long, the group released footage of a Jordanian pilot being burned alive in a cage. After that, ISIS proceeded to bombard social media with a steady stream of increasingly cartoonish execution videos including one clip that depicts four men being packed into a Toyota Corolla which is then destroyed at close range with an RPG, and a particularly gruesome effort involving three gasoline-doused captives being hung upside down from a swingset before being set alight.

    But Islamic State’s media arm doesn’t confine itself to producing real-life Quentin Tarantino clips. As we documented in “Austrian Economics Is Now Equivalent To Terrorism Thanks To Latest Islamic State ‘Gold Standard’ Propaganda Clip,” the group’s videos run the gamut from history lessons to proselytizing to recruitment drives. Indeed, Islamic State is exceptionally media savvy and the group’s ability to attract fighters from all corners of the globe owes much to the propaganda arm. Just last week for instance, ISIS released an exceptionally well executed clip wherein the narrator touches on everything from geography, to racism, to veteran suicide rates before denouncing secularism and telling the US, Russia, and everyone else to “bring it on.”

    There are of course serious questions as to who exactly is responsible for the Hollywood specials that emanate from the Al Hayat media arm, and although he didn’t discover any evidence that John McCain has a director’s chair on ISIS sets or that the desert landscapes in the Jihadi John clips are in fact rendered on a green screen, Charlie Winter (quoted above) did manage to collect quite a bit of useful information about Islamic State propaganda in the course of conducting extensive research on how the group crafts its message.  

    *  *  *

    From Fishing and Ultraviolence, by Charlie Winter, as originally published by BBC

    We know that ideologically driven supporters of IS are attracted and gratified by its militaristic and ultraviolent propaganda, but what about the rest?

    What about the thousands of civilian men, women and girls that leave their homes for the so-called IS caliphate?

    for the entire 30 days of the month of Shawwal – which, according to IS’s own calendar, began on 17 July and finished on 15 August – I spent two hours a day going through its Arabic-language support network on Twitter with a fine-tooth comb, navigating between its various forms of propaganda, using combinations of the group’s countless designated hashtags as keys.

    What I found was shocking, but not because of its brutality.

    In just 30 days, IS’s official propagandists created and disseminated 1,146 separate units of propaganda.

    Photo essays, videos, audio statements, radio bulletins, text round-ups, magazines, posters, pamphlets, theological treatises – the list goes on.

    Radio bulletins and text round-ups were released in six languages – Russian, Turkish, Arabic, Kurdish, French and English. After grouping the different language versions of the same item together there were 892 units in total.

    All of it was uniformly presented and incredibly well-executed, down to the finest details.

    [..]

    More often than not, it was the idea of utopia that was being stressed – social justice, economy, religious “purity” and the constant expansion of the “caliphate”.

    Aside from these broad, superficial observations, the content was so voluminous and subject to change that there were no easy characterisations.

    For example, on a relatively normal day, the 23rd of Shawwal, there was a total of 50 distinct pieces of propaganda.

    […]

    Thirty two of the 50 showed off civilian activities – a plastering workshop in Mosul, newspapers being distributed in Fallujah, pavements laid in Tal’afar, telephone lines fixed in Qayara, cigarettes confiscated and burned in Sharqat, and even camels being herded in Bir al-Qasab.

    From the offset, the lack of brutality was striking. I knew from past research that IS’s brand went much further than shedding the blood of its enemies, but there was a complete absence of it in the first few days of Shawwal.

    In retrospect, this makes sense.

    Coming immediately after the holy month of Ramadan, Shawwal begins with a day of celebration, Eid al-Fitr.

    Predictably, IS wanted to show this off.

    The propagandists made great play of the alms-distribution among the needy in Syria and Libya, and spent a huge amount of time documenting celebratory prayers and the general “ambiences” of the festivities.

    Kids played on fairground rides, toys and sweets were handed out among orphans, fighters at the front lines sang, drank tea and laughed together.

    At one point, a programme was even produced by IS’s official radio station, al-Bayan, in which “random” passers-by were quizzed about their Eid experiences (which were, of course, invariably euphoric).

    Photo essays depicting melon agriculture, handicrafts and industry, wildlife, cigarette confiscations and street cleaning were disseminated on an almost like-for-like basis alongside sets of images showing balaclava-wearing IS fighters firing mortars into the distance, defiling large piles of dead “enemies” and gloating over booty.

    Contrary to the countless reports that had emerged in July claiming that IS was toning down its brutality, the spectre of ultraviolence was never far off.

    Only five days into Shawwal a video was released in which an pro-Assad soldier was shot in the back and cast off a cliff in Syria’s Hama province.

    Four days later footage emerged depicting the consecutive beheading of three “spies” in Iraq. And, shortly after that, a video showed a group of “enemies” of IS in Afghanistan being tied up and murdered – killed by the buried explosives they had been forced to sit on.

    The further the month progressed, the clearer the motivations behind IS’s killing became.

    A warning was being sent out, but not to the international community. The intended target audience for these videos were the potential dissenters living in IS-held territories.

    They were being told that they face a zero-sum game – stay on side, and enjoy the IS utopia, or assist the enemy and die in awful cruelty.

    Not a single day passed without the immense cogs of the IS propaganda machine churning out another batch of releases. Consistently, the constituent parts of each batch meant little when taken in isolation.

    However, taken together, they presented a comprehensive snapshot of life under the group with something for everyone.

    *  *  *

    Yes, “something for everyone.” Like grapes? Join the harvest in Raqqa. Enjoy a nice dip in the pool on days when the desert sun and sweltering heat are unbearable? Go for a swim with friends and family in Mosul. Are your kids bored? ISIS has bouncy castles for that. Need to blow off some steam? Just throw on your all black executioner garb, head up to a fog-covered mountain side on your matching horse, and execute some “spies.”

    There’s much more in the full BBC article (linked above) but for those who want a still more granular look, Winter’s research is the basis for a longer paper entitled “Documenting The Virtual ‘Caliphate’.” These are Winter’s ten conclusions: 

    1. The volume of output produced by Islamic State far exceeds most estimates, which have been, until now, necessarily conservative. Disseminating an average of 38.2 unique propaganda events a day from all corners of the Islamic State ‘caliphate’, this is an exceptionally sophisticated information operation campaign, the success of which lies in the twin pillars of quantity and quality. Given this scale and dedication, negative measures like censorship are bound to fail.
    2. While there is broad consistency in the Islamic State narrative, it changes on a day-to-day basis according to on-the-ground prioritiesfor the group. Composed of 6 non-discrete parts – mercy, belonging, brutality, victimhood, war and utopia – the ‘caliphate’ brand is constantly shifting. 
    3. Constituting just 3.48% of the Shawwal dataset, the themes of mercy, belonging and brutality are dwarfed by the latter three narratives in terms of prominence. This is a marked shift from past propaganda norms and is indicative of changes in tactical outreach for Islamic State. 
    4. Over half of all the propaganda was focused on depicting civilian life in Islamic State-held territories. The spectre of ultraviolence was ever-present, but the preponderant focus on the ‘caliphate’ utopia demonstrates the priorities of the group’s media strategists. 
    5. Economic activity, social events, abundant wildlife, unwavering law and order, and pro-active, pristine ‘religious’ fervour form the foundations of Islamic State’s civilian appeal. In this way, the group attracts supporters based on ideological and political appeal.
    6. Besides civilian life, the propagandists go to great lengths to portray their military, variously depicting it in stasis or during offensives. There are few occasions upon which its defensive war is documented, something that makes sense given the need to perpetuate the aura of supremacy and momentum. 
    7. A large proportion of military-themed events is devoted to showing Islamic State’s war of attrition, with mortars and rockets being fired towards an unseen enemy. Given the locations from which many of these reports emerge, as well as the fact that the aftermath of such strikes is rarely, if ever documented, it is conceivable that these low-risk attacks are falsely choreographed to perpetuate a sense of Islamic State’s constantly being ‘on the offensive’.
    8. Islamic State still markets itself with brutality. However, the intended audiences for its ultraviolence are decidedly more regional than they have been in days gone by. Indeed, it seems that fostering international infamy is now secondary to intimidating its population, in order to discourage rebellion and dissent. Of course, this is very much subject to change. 
    9. The quantity, quality and variation of Islamic State propaganda in just one month far outweighs the quantity, quality and variation of any attempts, state or non-state, to challenge the group. All current efforts must be scaled up to achieve meaningful progress in this war. 
    10. The global desire to find a panacea counter-narrative to undermine the Islamic State brand is misplaced. Categorically, there is no such thing. Those engaged in the information war on the ‘caliphate’ must take a leaf out of the group’s own media strategy book and prioritise quantity, quality, variation, adaptability and differentiation. Most importantly, though, it must be based upon an alternative, not counter, narrative

    Here’s a look at some of the more granular data which breaks the propaganda output down by topic and medium: 

    And here’s a breakdown that shows which offices are the most prolific among what is apparently a sprawling network operating across the caliphate:

     

    Before you ask, there were no statistics for the Langley office. 

    Finally, here’s Winter’s effort to develop an org chart for the entire ISIS media production complex which he says spans at least a dozen countries:  

    So for those looking to make sense of the myriad logos that appear at the beginning of the videos, the main production units are the al-Furqan, al-I’tisam and Ajnad Foundations and the al-Hayat Media Center. Al-Hayat produced last week’s special effects-laden, four-minute extravaganza (mentioned above). 

    Needless to say, it would be almost impossible to track who all is involved in the funding and dissemination of ISIS propaganda given the dizzying array of discrete production units shown above. We have little doubt that an investigation into each of the individual entities shown in the org chart would reveal some very interesting connections to state sponsors across the Sunni world.

    Ultimately, we would agree with Winter that Islamic State’s propaganda machine is probably more dangerous for its ability to paint a pleasant picture of life in the “caliphate” than for its capacity to shock the Western public with wanton displays of brutality.

    That said, perhaps the larger question here is this: how is it that a movement with only 30,000 estimated fighters who have supposedly been the target of intense US airstrikes and counter-terrorism ops for 14 months is able to control and govern cities with populations that number in the millions virtually unimpeded? Remember, Saddam had around 400,000 troops and his army held up for about three weeks in the face of a “serious” effort by the US.

  • Paris Is Prologue

    Submitted by Worth Wray via EvergreenGavekal.com,

    “Europe only succeeds if we work together.”
    ~ Angela Merkel, Chancellor of Germany since 2005

    SUMMARY

    • The recent attacks in Paris evoke strong emotions for many people, but investors need to look through those feelings to the short, medium, and long-term implications. I believe Paris may mark an important turning point for Europe and the global business cycle… but for different reasons than you may think.
    • The immediate impact on France’s economy will be minor and short-lived as long as it proves to be an isolated incident. There are significant downside risks to economic growth if terror attacks in Europe become the new normal.
    • Europe’s Muslim population faces an unemployment rate around 50% compared to the EU average of 10% and xenophobia is rising after the Paris attacks. From that perspective, Europe is becoming a breeding ground for radical Islam.
    • As refugees flock to Europe from Middle East, the foundations of modern Europe are breaking down. Walls, fences, and security checkpoints are going up all over the continent and countries are becoming more isolated from one another.
    • While Angela Merkel’s leadership has proven invaluable in preserving the Euro Area over the last decade, her position on accepting refugees is incredibly unpopular in Germany and across Europe. Her political weakness in the wake of the Paris attacks now puts the European establishment at greater risk just as anti-establishment parties are on the rise and a number of political crises are emerging in Spain, Portugal, and Greece.
    • With no politically palatable option for restoring stability in Syria and Iraq, there is no end in sight for Europe’s refugee crisis. And if there is no end in sight for Europe’s refugee crisis, the xenophobic shift toward anti-establishment parties can only escalate from this point forward.
    • The European Central Bank has no choice but to extend and expand quantitative easing. This will weigh on the euro (likely bringing EUR/USD from $1.06 today to well below $0.90) at the same time the Federal Reserve is driving the US dollar higher.
    • The main investment takeaway here is that more policy divergence is on the way between the United States and the rest of the world, meaning a stronger US dollar, lower commodity prices (although energy prices could spike on Middle East instability), and another wave of panic for emerging markets. It also means more pressure on Japan to follow suit in an escalating currency war and on China to allow a market-driven fall in its currency.
    • There is a chance that the slow disintegration of Europe will drive more capital onto US shores, boosting valuations and fueling a blow-off top in the US equity market; but beware global shocks and take any rally as a chance to get defensive.

    FOR WHAT IT’S WORTH –  PARIS IS PROLOGUE

    In the aftermath of the Paris attacks, most of the comments I’ve seen from journalists, politicians, and economists have been extremely emotional – and for good reason.

    130 people are dead, more than 350 are wounded, and roughly 50 are still fighting for their lives after the worst terrorist attack in French history.

    The tragedy in Paris brings back memories of the Charlie Hebdo murders in January 2015, the Mumbai attacks in 2008, the Madrid train bombing in 2004, and the attacks on New York and Washing-ton DC in 2001. These horrible, traumatic events still evoke sadness, fear, anger, and defiance among free people who refuse to bow to extremists like the Islamic State.

    flag

    At a time like this, it’s natural to get caught up in the moment… and yet, as an economist and an investment strategist, it’s my job to help you look past such emotions to start making sense of the chaos.

    I can’t offer you any special insight into the mind of Islamist fanatics or explain why bad things happen to good people. But I can help you start thinking about what these tragic events mean for the world economy and for your portfolio in the coming weeks, months, and years.

    For what it’s worth, I believe that we may look back on Paris as a major turning point for Europe and the global business cycle as a whole… but for different reasons than you may think.

    not afraid

    THE IMMEDIATE IMPACT ON FRANCE’S ECONOMY WILL BE MINOR AND SHORT-LIVED…

    As Bloomberg’s Simon Kennedy explained last week, advanced economies often experience temporary slowdowns in the wake of terror attacks, but they tend to bounce back pretty quickly. In fact, studies have shown that the relationship between economic growth and isolated terrorist attacks is almost statistically insignificant in economies as large and diversified as France.

    Parisians will likely spend less for a while, opting for quiet dinners at home rather than raucous nights out on the Champs-Élysées. Tourists will cancel or delay their travel plans. Business people will opt for teleconferences over in-person meetings. Investment will slump and trade will stall as France tightens its border security, but probably not enough to alter the overall trend in economic growth.

    tower

    … UNLESS THESE KINDS OF TERROR ATTACKS CONTINUE

    The one caveat is that the November 13 attack must prove to be an isolated incident. While advanced economies tend to bounce back relatively quickly from one-time terror events, research from the International Monetary Fund and Moody’s Investor Service shows that persistent violence can drag significantly on business and consumer sentiment while raising government borrowing costs.

    From that perspective, a clash of cultures and ideologies is the last thing that France – or the rest of Europe – needs as economic growth continues to stagnate and deflation looms large.

    And yet, further attacks are more than possible.

    Not only do Europe’s Muslim communities account for a significant share of the population in key countries like France (7.5%), the Netherlands (6.0%), Belgium (5.9%), Germany (5.8%), Austria (5.4%), Greece (5.3%), and Italy (3.7%), they also account for a disproportionate share of the economic hardship with unemployment rates well above 50%. [By comparison, Muslims account for just 2.1% of the population in the United States.]

    Muslims in EU countries  size of muslim pop

    With no meaningful economic improvement in sight, the spike in xenophobic sentiment that we are seeing in the wake of the Paris attacks is creating the ideal conditions for ISIS to engage angry, disenfranchised young people who feel like outsiders in their own societies… and that’s before we even consider the massive influx of Syrian and Iraqi refugees.

    misc

    EUROPEAN UNITY IS DISINTEGRATING AS GOVERNMENTS REASSERT THEIR NATIONAL BORDERS

    As geopolitical expert Ian Bremmer warned just days before the Paris attacks, Europe’s escalating refugee crisis is one of the greatest threats to global economic stability today.

    Out of roughly five million Syrian and Iraqi refugees, only 6% have arrived thus far. “A lot more are coming and the ability of the Europeans to integrate these people is virtually nil.” The risk, as Ian outlined it, is that it would be impossible to distinguish between people fleeing from terror and the terrorists themselves.

    syria refugee

    In the likely event of another “Charlie Hebdo type incident,” Ian worried that a severe backlash against Germany’s call for countries across Europe to accept their share of incoming refugees would jeopardize “the one thing that the markets have been able to completely count on [since the 2008 financial crisis]… Angela Merkel’s leadership.”

    merkel1  merkel2

    Now he says “the social fabric of what it means to be [European] is unraveling in front of our eyes.”

    european migrant

    Over the past year, calls for tighter border security have been getting louder as Arab asylum seekers poured into continental Europe. Even before the Paris attacks, countries like Poland, Hungary, Slovenia, Slovakia, the Netherlands, Austria, and Germany (which despite enforcing its borders is accepting 800,000 refugees a year) started to install precautionary walls, fences, and/or border checks in an attempt to stem (or at least regulate) the tide of Arab asylum-seekers.

    Heightened national security may not seem like a big deal to onlookers in America, but this marks a major breakdown in the 26 country “Schengen Area.” Aside from crippling the concept of European unity, it threatens to start re-imposing economic costs which had been painstakingly reduced over decades of continental integration. Just imagine what would happen to interstate trade if truck drivers and commuters had to pass through time-intensive security checks at every state line.

    schengen

    After Paris, these fears of territorial disintegration are becoming even more real. Instead of allowing people and goods to move freely across Europe’s “internal borders,” passport and security checks are going up all over the continent. As we are now seeing in France, the odds of emergency border controls becoming permanent are uncomfortably high considering that the EU still has no way of securing its external borders.

    As Open Europe’s Raoul Ruparel notes, it’s an enormous blow to the European political establishment that could soon prompt voters to question the benefits of remaining in the Eurozone and/or the European Union at all.

    What’s more, Angela Merkel’s popularity is rapidly eroding – both in Germany and across Europe – which leaves the entire European experiment at great risk just as Marine Le Pen (France’s self-described Madame Frexit) and others like her are surging in the polls.

    woman and flags

    UNTIL STABILITY IS RESTORED IN SYRIA & IRAQ, EUROPE’S REFUGEE CRISIS WILL ONLY GET WORSE

    The problem is that there can be no end in sight for Europe’s refugee crisis until ISIS is eliminated – along with Syria’s war criminal president, Bashar al-Assad – and some kind of stability is restored to the region.

    That’s a remarkably tall order for the economically weak and politically fragile European Union that cannot even manage to secure its continental borders… especially when pan-European public support is mixed on a bombing campaign, opposed to putting boots on the ground, and absolutely against a decades long effort to rebuild an Arab country while Eurozone countries are still crumbling.

    While it’s possible that Russia will supply a portion of the necessary ground troops, we also have to think that Mr. Putin’s goals in the region starkly contrast with those of his prospective European allies.

    With Russia now in a position where it needs to stir up geopolitical risk to support its energy sector at virtually any cost, Putin’s gain would likely be Europe’s loss on multiple fronts (i.e. higher energy prices and continued Middle East instability) instead of resolving the refugee crisis. Moreover, since ISIS controls the resource poor portion of Iraq, it’s unlikely that a specifically ISIS-targeted mission will lead to a spike in oil prices… suggesting that Russia’s entry into an anti-ISIS mission may just be an excuse to start a larger ground campaign in the Middle East alongside its main regional ally, Iran.

    [As I am editing this paper ahead of the Thanksgiving holiday, news has just broken that Turkey has shot down a Russian warplane. There’s no time to get into the details here, but you have to wonder if NATO (of which Turkey is a member) is about to be tested. I can only hope, but am not completely confident, that the longstanding alliance between North American and European governments will hold up better than Schengen (which, if you, recall is the agreement under which people have moved freely across Europe’s internal borders for the past thirty years.]

    Unfortunately, there really isn’t a silver lining here for Europe. France, Russia, and the European Union can try to stamp out ISIS, but can’t subdue Islamic extremism without first restoring stability to the Middle East. Europe can accept more refugees, but at the cost of even higher unemployment among the unassimilated Muslim population and elevated risks of more jihadis radicalized from local and immigrant populations.

    The implications here are obvious, although uncomfortable to admit. With no politically palatable option for restoring stability to Syria and Iraq, there is no end in sight for Europe’s refugee crisis. And if there is no end in sight for Europe’s refugee crisis, the xenophobic shift within Europe toward anti-establishment parties can only escalate from this point forward.

    A united Europe has very little hope of addressing these challenges. A fragmented Europe has almost no chance. Both scenarios likely lead to crisis.

    THE EUROPEAN CENTRAL BANK HAS NO CHOICE BUT TO EXTEND & EXPAND QUANTITATIVE EASING

    As you may have already realized, Paris is something of a worst case scenario for the fragile 19 member Euro-area.

    Though Mario Draghi and his colleagues at the European Central Bank have held financial risks at bay since 2012 with theatrical commitments, negative interest rates, and monthly asset purchases, the politics of separation have continued to mature in countries with inadequate growth, high unemployment, and creditor-imposed fiscal austerity.

    men

    Now, with inflation expectations at risk of breaking down, QE potentially set to expire in September 2016, credit risks starting to creep back into longer-dated government borrowing costs, and a series of potentially toxic political crises emerging in Spain, Portugal, and Greece, the central bank has no choice but to extend and expand its ongoing QE program.

    This will weigh heavily on the euro (likely bringing the EUR/USD from $1.06 today to well below $0.90) at the same time the Federal Reserve is driving the US dollar higher.

    The main investment takeaway here is that more policy divergence is on the way, meaning a stronger US dollar, lower commodity prices (although energy prices could spike on Middle East instability), and another wave of panic for emerging markets that are now collectively large enough to drag the global economy into recession. It also means more pressure on Japan to follow suit and on China to allow a market-driven fall in its currency.

    There is a chance that the slow disintegration of Europe will drive more capital onto US shores, boosting valuations and fueling a blow-off top in the US equity market; but beware global shocks and take any rally as a chance to get defensive.

    With Europe’s troubles escalating to not just one, but a series of potentially unmanageable crisis points in the next several years, the ECB will have to do “whatever it takes” and hope it can preserve the single currency area long enough for cooler heads to prevail.

    european

    Perversely, that means we can expect a bit of a pick-up in European economic activity in the coming quarters – particularly in Germany which will benefit from a dramatically weaker euro – but don’t get too comfortable.

    Paris is just a prologue to the real European crisis.

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