- Is Washington Preparing For World War III?
Submitted by Patrick Martin via WSWS.org,
The US military-intelligence complex is engaged in systematic preparations for World War III. As far as the Pentagon is concerned, a military conflict with China and/or Russia is inevitable, and this prospect has become the driving force of its tactical and strategic planning.
Three congressional hearings Tuesday demonstrated this reality. In the morning, the Senate Armed Services Committee held a lengthy hearing on cyberwarfare. In the afternoon, a subcommittee of the House Armed Services Committee discussed the present size and deployment of the US fleet of aircraft carriers, while another subcommittee of the same panel discussed the modernization of US nuclear weapons.
We will provide a more detailed account of these hearings, which were attended by a WSWS reporter. But certain preliminary observations can be made.
None of the hearings discussed the broader implications of the US preparations for war, or what a major war between nuclear-armed powers would mean for the survival of the human race, and even of life on our planet. On the contrary, the hearings were examples of what might be called the routinization of World War III. A US war with China and/or Russia was taken as given, and the testimony of witnesses and questions from senators and representatives, Democrats and Republicans alike, concerned the best methods for prevailing in such a conflict.
The hearings were component parts of an ongoing process. The witnesses referred to their past writings and statements. The senators and representatives referred to previous testimony by other witnesses. In other words, the preparations for world war, using cyber weapons, aircraft carriers, bombers, missiles and the rest of a vast array of weaponry, have been under way for a protracted period of time. They are not a response to recent events, whether in the South China Sea, Ukraine, Syria or anywhere else.
Each of the hearings presumed a major US conflict with another great power (sometimes unnamed, sometimes explicitly designated as China or Russia) within a relatively short time frame, years rather than decades. The danger of terrorism, hyped incessantly for the purposes of stampeding public opinion, was downplayed and to some extent discounted. At one point in the Senate hearing on cyberwarfare, in response to a direct question from Democrat Jeanne Shaheen of New Hampshire, the panel witnesses all declared that their greatest concern was nation-states, not terrorists.
One of the witnesses at that hearing was Dr. Peter W. Singer, listed as a “Strategist and Senior Fellow” for New America, a Washington think tank. He titled his presentation, “The Lessons of World War 3.” He began his prepared statement with the following description of that imagined conflict:
“US and Chinese warships battle at sea, firing everything from cannons to cruise missiles to lasers. Stealthy Russian and American fighter jets dogfight in the air, with robotic drones flying as their wingmen. Hackers in Shanghai and Silicon Valley duel in digital playgrounds. And fights in outer space decide who wins below on Earth. Are these scenes from a novel or what could actually take place in the real world the day after tomorrow? The answer is both.”
None of the hearings saw any debate about either the likelihood of a major war or the necessity of winning that war. No one challenged the assumption that “victory” in a world war between nuclear-armed powers is a meaningful concept. The discussion was entirely devoted to what technologies, assets and human resources were required for the US military to prevail.
This was just as true for the Democratic senators and representatives as for their Republican counterparts. By custom, the two parties are seated on opposite sides of the committee or subcommittee chairmen. Without that arrangement, there would be no way of detecting, from their questions and expressions of opinion, which party they belonged to.
Contrary to the media portrayal of Washington as deeply divided between parties with intransigently opposed political outlooks, there was bipartisan agreement on this most fundamental of issues, the preparation of a new imperialist world war.
The unanimity of the political representatives of big business by no means suggests that there are no obstacles in the path of this drive to war. Each of the hearings grappled, in different ways, with the profound crisis confronting American imperialism. This crisis has two major components: the declining economic power of the United States compared to its major rivals, and the internal contradictions of American society, with the deepening alienation of the working class and particularly the youth.
At the House subcommittee hearing on aircraft carriers, the chairman noted that one of the witnesses, a top Navy admiral, had expressed concern over having “an 11-carrier navy in a 15-carrier world.” There were so many challenges confronting Washington, he continued, that what was really needed was a navy of 21 aircraft carriers—double the present size, and one that would bankrupt even a country with far more resources than the United States.
The Senate hearing on cybersecurity touched briefly on the internal challenge to American militarism. The lead witness, retired Gen. Keith Alexander, former director of the National Security Agency and former head of the Pentagon’s CyberCommand, bemoaned the effect of leaks by NSA contractor Edward Snowden and Army private Chelsea Manning, declaring that “insider attacks” were one of the most serious threats facing the US military.
Democratic Senator Joe Manchin of West Virginia asked him directly, referring to Snowden, “Should we treat him as a traitor?” Alexander responded, “He should be treated as a traitor and tried as such.” Manchin nodded heartily, in evident agreement.
While the witnesses and senators chose to use the names of Snowden and Manning to personify the “enemy within,” they were clearly conscious that the domestic opposition to war is far broader than a few individual whistleblowers.
This is not a matter simply of the deep-seated revulsion among working people in response to 14 years of bloody imperialist interventions in Afghanistan, Iraq, Somalia, Libya, Syria, Yemen and across North Africa, important as that is.
A war between the United States and a major power like China or Russia, even if it were possible to prevent its escalation into an all-out nuclear exchange, would involve a colossal mobilization of the resources of American society, both economic and human. It would mean further dramatic reductions in the living standards of the American people, combined with a huge blood toll that would inevitably fall mainly on the children of the working class.
Ever since the Vietnam War, the US military has operated as an all-volunteer force, avoiding conscription, which provoked widespread opposition and direct defiance in the 1960s and early 1970s. A non-nuclear war with China or Russia would mean the restoration of the draft and bring the human cost of war home to every family in America.
Under those conditions, no matter how great the buildup of police powers and the resort to repressive measures against antiwar sentiments, the stability of American society would be put to the test. The US ruling elite is deeply afraid of the political consequences. And it should be.
- Artist's Impression Of The Obama War Memorial
“We’re sending 50 — count them, 50 — special operations soldiers to Syria, and they will have ‘no combat role,’ the president says,” said Mr. McCain. “Well, what are they being sent there for? To be recreation officers? You’re in a combat zone, and to say they’re not in combat is absurd.”
- Cops Around The Country Quietly Begin Rebelling Against The Drug War
Submitted by Carey Wedler via TheAntiMedia.org,
It is a rare occurrence when police officers in America organize to undermine the very Drug War they vociferously fight for politicians. Police Chief Leonard Campanello of the Gloucester, Massachusetts Police Department, however, did just that earlier this year when he decided to treat — not arrest — heroin addicts who came to his department seeking help. His revolutionary “ANGEL” program has proven successful for addicts and their families in Gloucester, but it has also inspired other departments across the country to adopt similar programs amid growing officer fatigue over the ineffectual arrest and incarceration of addicts.
In May, Campanello announced via Facebook that his department would adopt the new policy of treatment over arrest (note: it does not apply to individuals caught in possession of drugs who do not turn themselves in). The move was met with widespread praise and the new policy was officially enacted in June. Treatment centers and pharmacies have partnered with the police department to ensure addicts receive the care they need.
As the police department’s website explains:
“If an addict comes into the Gloucester Police Department and asks for help, an officer will take them to the Addison Gilbert Hospital, where they will be paired with a volunteer ‘ANGEL’ who will help guide them through the process. We have partnered with more than a dozen additional treatment centers to ensure that our patients receive the care and treatment they deserve — not in days or weeks, but immediately.
“If you have drugs or drug paraphernalia on you, we will dispose of it for you. You will not be arrested. You will not be charged with a crime. You will not be jailed.
“All you have to do is come to the police station and ask for help. We are here to do just that.”
Five months since the program launched, Campanello reports positive results: over 260 addicts have been placed in treatment. This summer, shoplifting, breaking and entering, and larceny dropped 23% from the same period last year. “We are seeing real people get the lives back,” he said. “And if we see a reduction in crime and cost savings that is a great bonus.”
Other police officers are following suit. John Rosenthal is the co-founder of Police Assisted Addiction and Recovery Initiative, a nonprofit that helps police departments around the country adopt programs similar to Gloucester’s. Rosenthal says almost 40 departments in nine states (Connecticut, Ohio, Florida, Illinois, Maine, Missouri, New York, Pennsylvania, and Vermont) have adopted at least some aspects of the program, and 90 more departments want to get involved.
Though the specifics of the programs vary, they all aim to treat addicts. Police are even participating through Veterans Affairs, as opiate addiction is high among veterans.
The program, which Campanello has funded with money seized during drug arrests, has been well-received by departments that implement similar strategies. John Gill, a police officer in Scarborough, Maine, said his local police station saw a “profound” change. He credits Gloucester with the courage to go through with it:
“It was the Gloucester ANGEL project which showed us that a relatively modest-sized police agency could have a real impact. And like Gloucester, we couldn’t afford to wait until the perfect solution came along.”
Opiate addiction has skyrocketed in the United States in recent years. In 2013, 517,000 were abusing heroin — a 150% increase from 2007 — and deaths due to heroin tripled in that same period of time. Addiction has spiked across multiple demographics, though 90% of first-time users are white. Fully 75% of new heroin addicts previously used prescription drugs, implicating the legal drug industry, as well. This epidemic has prompted action by various government entities: from the DEA’s crackdown on pharmaceutical over-prescription to President Obama’s recently announced plan to reduce addiction and improve access to treatment. Though the president commuted the sentences of 46 drug offenders over the summer, 48.4% of the prison population is incarcerated for narcotics offenses — proving the Drug War is still very much in effect.
So far, it appears the most expedient method to reduce drug arrests and improve treatment options comes from officers employing ANGEL-like policies on the ground.
“We’re absolutely, unequivocally thrilled by the reception of this program by law enforcement,” said Rosenthal. “Police chiefs are recognizing we can’t arrest our way out of this, that this is a disease and not a crime and that people suffering from this disease need treatment, not jail.”
- US Taxpayer Set To Bank-Roll Biggest Billionaire Builders
Just days after the potential for more capital injections for Fannie Mae and Freddie Mac (GSEs) are admitted to, we discover another 'scheme' to enrich the 'have-yachts' on the backs of the 'have-nots'.
At the behest of the government, apparently to provide 'affordable' housing for the least creditworthy individuals – just as they did in the not-so-distant past to such cataclysmic ends, GSE's "commitment to providing critical financing for multi-family housing in all markets," has, as Bloomberg reports, enabled billionaires such as Starwood's Barry Sternlicht and Blackstone's Stephen Schwarzmann to cheaply finance two transactions totaling more than $10 billion, implicitly subsidized by the US taxpayer. Even more ironic is that the provision of this 'cheap debt' is helping sustain just the unaffordable surges in rents and prices that are forcing Milennials to live with their parents for longer.
Who do billionaires turn to when they want to buy apartment complexes? The U.S. taxpayer. Bloomberg explains…
Barry Sternlicht’s Starwood Capital Group and Stephen Schwarzman’s Blackstone Group LP are in talks with Freddie Mac to finance two transactions totaling more than $10 billion, according to people with knowledge of the negotiations. Those discussions come after the government-owned mortgage giant already agreed to back Lone Star Funds’ $7.6 billion deal to buy Home Properties Inc. and Brookfield Asset Management Inc.’s $2.5 billion takeover of Associated Estates Realty Corp.
The mortgage guarantor — which along with its larger counterpart Fannie Mae was rescued in a $187.5 billion taxpayer bailout in 2008 — is boosting its multifamily lending as their regulator eases restrictions on that part of their business. Cheap debt from the U.S.-backed companies is helping sustain a five-year surge in values for apartment buildings and fueling some of the biggest real estate deals since the financial crisis.
“They wield a very big stick,” said John Levy, a principal at a real estate investment banking firm in Richmond, Virginia, that bears his name. “It takes more time and it’s going to be more expensive” to get transactions done without the two companies, which can lend at rock-bottom rates because their deals have implicit government backing.
And so there we have it – the GSEs are providing 'cheap' loans to the extremely wealthy (with the US taxpayer's shoulders bearingthe weight of the gap between the underlying risk of the loan and the free money being offered).
Freddie Mac’s deals are getting bigger as its regulator expands the definition of affordable housing, enabling the company to make more loans. Properties that are deemed affordable by the Federal Housing Finance Agency are exempt from a $30 billion cap that limits how much the government-sponsored entities can lend to apartment landlords each year.
“We’re helping to push more capital into this part of multifamily,” said David Brickman, head of multifamily operations at McLean, Virginia-based Freddie Mac. “A very small percentage of what we’re doing is luxury.”
Freddie Mac provided $34.1 billion for multifamily acquisitions and refinancings this year through September, more than double the $14.1 billion for the same period in 2014.
So if you wondered why you could not afford to rent (let alone buy) a home, it's not just the Chinese hot money flows, it's an implicit subsidy by the US government (using US taxpayer funds)
Other than the government-sponsored companies, there aren’t many lenders that have the capacity to fund a purchase as large as Blackstone’s, according to Sam Chandan, president of Chandan Economics, a provider of real estate data and analysis.
“You could argue convincingly that the deal wouldn’t get done in its current form without agency financing in the market,” he said.
Will they never learn?
U.S. multifamily-building prices are 33 percent higher than they were at the prior peak in 2007, according to Moody’s Investors Service and Real Capital Analytics Inc., a jump stoked partly by the abundant financing from Fannie Mae and Freddie Mac.
That’s raised concerns that a bubble is forming that might pop when interest rates rise, according to Levy, the investment banker.
Taxpayers could be on the hook for losses incurred by the mortgage companies if apartment values were to fall sharply.
Detractors argue that providing subsidized loans to deep-pocketed real estate investors isn’t in line with the mandate of the government-sponsored entities.
"If the purpose of the GSEs is to provide liquidity to the secondary mortgage market, in an effort to promote homeownership, a focus on funding multifamily rental properties seems inappropriate,” Josh Rosner, an analyst at research firm Graham Fisher & Co., said in an e-mail. “This approach only serves to deliver a public subsidy to private players.”
Brickman said Freddie Mac doesn’t view its business through the prism of the institutions it lends to.
“Our focus in on supporting middle-income and workforce housing,” he said. “Who owns it is somewhat irrelevant.”
Yeah it's irrelevant who gains from the US taxpayer subsidy, as long as the number of home units is rising…
- These Are The 20 Worst Cities In The US – Spot The Common Theme
A new analysis by WalletHub has compared and classified 1,268 of America’s small cities in the U.S. to find the ones where residents don’t have to give up much by avoiding the “bright lights” and the soaring rent. Its data set include a total of 22 metrics, ranging from housing costs to school-system quality to the number of restaurants per capita.
Why live in a small city? Inevitably, life in a small city demands some tradeoffs such as shorter business hours, a heavier reliance on cars and fewer dating opportunities. It does bring benefits – tighter communities, less competition, shorter commutes and an actual backyard with a white picket fence. And from a purely financial standpoint, living in a small city creates a sense of greater wealth because of cheaper cost of living — one of the main draws for in-movers, especially those seeking to raise a family.
According to the Economic Policy Institute, a two-parent, two-child family would need to earn $49,114 a year “to secure an adequate but modest living standard” in Morristown, Tenn., compared with $106,493 in Washington. So even with a lighter wallet, a family or soloist can enjoy a comparable, or even better, quality of life for much less in a cozy place like Morristown.
What was the full ranking methodology?
To find the best small cities in America, WalletHub’s analysts compared 1,268 cities across four key dimensions: 1) Affordability, 2) Economic Health, 3) Education & Health and 4) Quality of Life. For our sample, we chose cities with a population size between 25,000 and 100,000 residents. “City” refers to city proper and excludes surrounding metro areas. Next, it compiled 22 relevant metrics, which are listed below with their corresponding weights.
To obtain the final rankings, a score between 0 and 100 was attributed to each metric. The weighted sum of the scores was then calculated and used the overall result to rank the cities. Together, the points attributed to the four major dimensions add up to 100 points.
The dimensions are as follows:
Affordability – Total Points: 25
- Housing Costs ((median annual household income divided by median house price) plus (median annual household income divided by median price of rent): Full Weight (~8.33 Points)
- Cost of Living: Full Weight (~8.33 Points)
- Homeownership Rate: Full Weight (~8.33 Points)
Economic Health – Total Points: 25
- Unemployment Rate: Full Weight (~5 Points)
- Median Household Income: Full Weight (~5 Points)
- Percentage of Residents below Poverty Level: Full Weight (~5 Points)
- Population Growth: Full Weight (~5 Points)
- Income Growth: Full Weight (~5 Points)
Education & Health – Total Points: 25
- School-System Quality (WalletHub’s “Best & Worst School Systems” Ranking): Full Weight (~6.25 Points)
- Percentage of Residents with a Bachelor’s Degree or Higher: Full Weight (~6.25 Points)
- Percentage of Population with Health-Insurance Coverage: Full Weight (~6.25 Points)
- Number of Pediatricians per 100,000 Residents: Full Weight (~6.25 Points)
Quality of Life – Total Points: 25
- Average Commute Time: Full Weight (~2.5 Points)
- Percentage of Residents Who Walk to Work: Full Weight (~2.5 Points)
- Mean Hours Worked per Week: Full Weight (~2.5 Points)
- Number of Restaurants per 100,000 Residents: Full Weight (~2.5 Points)
- Number of Bars per 100,000 Residents: Full Weight (~2.5 Points)
- Number of Coffee Shops per 100,000 Residents: Full Weight (~2.5 Points)
- Number of Museums per 100,000 Residents: Full Weight (~2.5 Points)
- Number of Fitness Centers per 100,000 Residents: Full Weight (~2.5 Points)
- Percentage of Millennial Newcomers: Full Weight (~2.5 Points)
- Crime Rate: Full Weight (~2.5 Points)
And now the results. A an interactive breakdown of the cities in the top of the ranking (shown in blue) and at the bottom (in orange) is shown below:
Source: WalletHubAnd while he full list can be found at the following link, here are the two extremes.
First, the 20 best cities:
But more importantly, here are the worst – spot the common theme.
- China's Navy Trolls US Destroyer: "Hope To See You Again"
On Thursday, we brought you Ash Carter and his “big stick” (you’re welcome) which he is busy waving around on the deck of the USS Theodore Roosevelt in the South Pacific.
Ultimately, the Defense Secretary was making the rounds in an effort to prove to Washington’s regional allies that the US is “serious” about deterring Chinese “aggression” in the Spratlys.
We doubt we need to recap the story, so we’ll keep it brief, but Beijing has constructed some 3,000 acres of new “sovereign” territory atop reefs in The South China Sea. The PLA then proceeded to build runways, cement factories, and all manner of other questionable facilities on the new islands, which unnerved America’s South Pacific allies.
Initially, the US tried to contain the situation with a series of brave pronouncements and when that didn’t stop China from continuing to deploy the dredgers, Obama sentt a guided missile destroyer to Subi.
Thankfully – for those who don’t wish to witness World War III – China didn’t fire on or otherwise surround the USS Lassen and thus Beijing took the high road. The “pass-by” was one of the most well documented geopolitical events of the year and now, we have an account of the communication that occurred between the US Navy and the PLA. Here’s Reuters with more on the hilarious exhchange:
As soon as the guided-missile destroyer USS Lassen breached 12-nautical-mile territorial limits around one of China’s man-made islands in the disputed South China Sea last week, a Chinese warship shadowing its movements began demanding answers.
“‘Hey, you are in Chinese waters. What is your intention?’,” it asked, as recounted to reporters on Thursday by Commander Robert Francis, commanding officer of the Lassen.
His crew replied that they were operating in accordance with international law, and intended to transit past the island, carrying out what U.S. officials have called a freedom-of-navigation exercise designed to challenge China’s claims to the strategic waterway.
The response from the Chinese destroyer?
“The same query, over and over,” said Francis, speaking onboard the aircraft carrier USS Theodore Roosevelt as it sailed 150 to 200 nautical miles from the southern tip of the Spratly archipelago, a chain of contested islands where China’s seven artificial outposts have taken shape in barely two years.
The Chinese destroyer shadowed the Lassen for 10 days before and after its Oct. 27 patrol near the artificial islands, said Francis. The Lassen got to within six to seven nautical miles from the nearest Chinese land formation, he added.
But not all U.S.-Chinese naval interactions are tense, especially when things are slow on the high seas.
“A few weeks ago we were talking to one of the ships that was accompanying us, a Chinese vessel … (We) picked up the phone and just talked to him like, ‘Hey, what are you guys doing this Saturday? Oh, we got pizza and wings. What are you guys eating? Oh, we’re doing this. Hey, we’re planning for Halloween as well’.” The intent, Francis said, is “to show them … that we’re normal sailors, just like them, have families, just like them.”
Eventually, the Chinese destroyer that had followed the Lassen on its mission past the artificial islands peeled away.
“They were very cordial the entire time … even before and after the Spratly islands transit,” Francis said.
“When they left us they said, ‘Hey, we’re not going to be with you anymore. Wish you a pleasant voyage. Hope to see you again’.”
We don’t think it’s necessary to comment further on the interactions described above, but we would note that the US is set to conduct these “patrols” twice every three months.
We’ll leave it to readers to extrapolate on the meaning of “hope to see you again,” and on that note, we’ll simply close with the following quote from China’s latest defense white paper:
On the issues concerning China’s territorial sovereignty and maritime rights and interests, some of its offshore neighbors take provocative actions and reinforce their military presence on China’s reefs and islands that they have illegally occupied. Some external countries are also busy meddling in South China Sea affairs; a tiny few maintain constant close-in air and sea surveillance and reconnaissance against China. It is thus a long-standing task for China to safeguard its maritime rights and interests.
- Volkswagen And China: A Perfect Fit
Submitted by Raul Ilargi Meijer via The Automatic Earth blog,
If Angela Merkel wants to get rid of one of her major headaches, we suggest she should tell Volkswagen to move its operations from Wolfsburg to China. It may seem a strange thing to do at first blush, with 750,000 German jobs on the line, but bear with us here, because this could well be the only way to preserve at least some value for VW’s stock- and bondholders.
And several layers of German government, as well as German pension funds, are major investors. In a company that has now lost 40%, over €32 billion, of its market cap, and, according to an estimate by UBS, faces €35 billion or more in costs over the various emissions scandals. Count your losses, German pensioners! And the way things are going, and the way the scandal is widening, this may still be a conservative number.
Here’s the ‘thing’: after the most recent admissions coming from the carmaker and its affiliates it may well have become impossible for -international- lawmakers and lawyers alike to not go after Volkswagen with all they’ve got. First the EPA found a few days ago that defeat devices were installed in larger diesel engines too, those used in Porsche and Audi cars, instead of just the smaller ones whose testing by the University of West Virginia started this whole Teutonic drama.
Now we find that for VW’s petrol engines, too, various emissions have gone severely underreported. Porsche’s official reaction to the new diesel findings was that the company was ‘surprised’. Maybe that has something to do with the fact that the new Volkswagen CEO, Mueller, ran Porsche before being promoted to his present gig?! ‘Surprised’?
Other than that ‘surprise’ comment, both Audi and Porsche have reportedly flatly denied the very existence of the defeat devices in their products, even as the EPA research looks solid. Perhaps they should have been advised by their vast legal staffs that flat denial at this point in the game is a dangerous move.
VW has had ample time to come clean, with the EPA, with German regulators, as well as with a wide range of other regulators across the globe. But it’s abundantly clear they haven’t come clean. Moreover, thus far they’ve mostly been allowed to do their own in-house testing. And yes, that is as crazy as it sounds.
If and when the company is found to not have spoken the truth and nothing but the truth after the initial EPA findings (which, remember, followed a multi-year period of blatant lies, denial and deceit), replacing a CEO or pointing fingers at employees will no longer suffice. Heads will have to roll, and they will have to roll straight into prison cells.
At the same time, the company will be ordered, by regulators, lawmakers and judges, to pay fines so hefty its very existence will be in danger. VW lost 40% of its market cap and stands to lose 40% more in fines. An attractive investment? Only until the next lie gets exposed, one would presume.
This is no longer about the cost of repairs. And it’s no longer about greater fools still buying VW cars either. You can’t keep on lying to disguise your earlier lies and expect to get away with it just because you’re a large corporation.
That may not seem obvious or intuitive in today’s environment, but because attacks on VW will come from a multitude of sources -a dozen countries and ten dozen lawyers from all over the world-, regulators won’t want to be found going easy on VW as -some of- their peers go for the jugular. At some point, it gets to be about credibility.
Credibility of the EPA, and of all the other regulators. South Korea and Japan sales are plummeting, and India of all places is now getting on the bandwagon. This is not just a Merkel headache, it’ll be a migraine attack soon. Move the whole thing to China, Angela! Cut your losses…
Why China? We first thought of the VW-China connection because of this Jen Sorensen comic, but thought right away that it would be even much more applicable to China than it is (and it very much is, of course) to the US. That is, the idea of a political system with a built-in defeat device. China’s defeat device is its ‘official numbers’. The government says it wants X% growth, and that’s what comes out a year later.
What defeat device? Well, for one thing, Chinese President Xi Jinping looks to be starting a new personality culture in the vein of Mao, and presumably to that end last week introduced a new 5-year plan. But let’s be frank, these are things that don’t fit in a 2015 economy that relies on trade with the entire world.
The 2016-20 plan, which spans all corners of nation-building, represents Xi’s best chance to enact his reforms and establish a legacy before party retirement rules compel him to clear the way for a successor in 2022. “It bears Xi Jinping’s fingerprints, as does everything else in the Chinese government now. He is the top man, not first among equals, just first. One-man rule is back in China,” said Stein Ringen, a professor of sociology and social policy at the University of Oxford. “This is Xi saying, ’I am in charge and I will continue to be in charge.’”
That Xi goes down this path anyway shows us that he still seeks total control in the Mao or Deng Xiao Ping tradition, even though that is not remotely possible in an even half-open economic system. In China’s economy today, GDP growth can neither be planned nor fabricated. But the numbers still can! Which is where the defeat device comes in.
Xi Jinping cannot resist the temptations of a personality culture and at the same time demands a minimum 6.5% GDP growth over the next five years. A volatile combination. Question then is: what happens if and when growth is much lower than that? Who is Xi going to blame? And who are the Chinese people going to blame? What are the odds that a sub-6.5% growth rate will lead to mayhem?
But that’s just one side of the tale. There are many western observers, quite a few of them quite knowledgeable, who put Chinese GDP growth already at much less than 6.5 %. Lombard Street, Chris Balding, the Li Keqiang Index, Capital Economics, Danny Gabay, you just Google them, there are far too many critical views to ignore. And they on average put REAL China GDP growth at less than half XI’s 6.5% number.
And so again: what will happen when Mao-wannabe Xi can no longer fudge the numbers enough to make his 1.3 billion people believe? What will happen when the PBoC cannot buy sufficient assets with sufficient printed mullah to keep markets appear steady that haven’t been steady in ages?
The 5-year plan calls for GDP to double from 2010-2010, and for per capita income to do the same. Imagine if the US or EU set such goals. There’s no prediction, whether from the OECD or IMF or one of various central banks that comes even close to being correct after just one year, let alone five.
Xi Jinping’s 5-year plan should be read in the same way that one reads Alice in Wonderland. It is wishful thinking devoid of any sense of reality, and it’s only the inbuilt ‘official number’ defeat device that can provide it with an air of importance.
Apparently, China’s emissions numbers follow the same path, and the link to Volkswagen is again awfully easy to make in that respect too:
China has been consuming as much as 17% more coal each year than reported, according to the new government figures. By some initial estimates, that could translate to almost a billion more tons of carbon dioxide released into the atmosphere annually in recent years, more than all of Germany emits from fossil fuels.
The adjusted data, which appeared recently in an energy statistics yearbook published without fanfare by China’s statistical agency, show that coal consumption has been underestimated since 2000, and particularly in recent years. The revisions were based on a census of the economy in 2013 that exposed gaps in data collection, especially from small companies and factories.
Illustrating the scale of the revision, the new figures add about 600 million tons to China’s coal consumption in 2012 — an amount equivalent to more than 70% of the total coal used annually by the United States.
In other words, the deceit is built-in, it’s a feature not a flaw. That goes for both China’s and Volkswagen’s emissions models, and it goes for Xi Jinping’s 5-year plan. One common element seems to be desperation, the knowledge that certain aspired conditions cannot be met, and the subsequent decision to then fudge and cheat. That decision is made necessary by one thing only: incompetence.
We don’t want to harp this horse to death, the overall idea should be clear by now. But while writing, we do get new ideas popping up. Like those 750,000 Germans who depend on Volkswagen, directly or indirectly, for their jobs, can all move to China, and settle in some of the abundant ghost cities.
Their homes in Wolfsburg et al can then be made available to the 1 million or so refugees that Germany expects to settle in this year. Win win win, everybody happy.
But we remain anxious about what will happen if and when it becomes clear that the Chinese doubling of GDP and incomes is just a weird fantasy of a man who feels omnipotent enough to think he can control global financial markets. China has malinvested to such an extent that major busts are inevitable.
The British steel industry knows exactly what we mean. And predictions are that a year from now, all US aluminum smelters will be closed. China exports deflation. And that is being felt in its domestic economy too. So it looks like either Xi will need to crack down on his people, or they will crack down on him. Neither is an enticing prospect.
But he can’t tell the truth either, because it’s too far removed from the fairy tales he’s been telling. Just like Volkswagen.
- Here Is The Credit Bubble
When in several years, experts will clamor that “nobody could have possibly seen it coming”, we want to make sure that at least our readers “saw it coming” wide and clear from a mile away.
The chart below shows very clearly what is the next bubble, one which has nothing to do with such philosophical concepts as “what is money”, or “net is not gross”, and everything to do with a clear injection of debt with the sole intention of shifting consumer preferences and (mis)allocating capital.
Presenting the total loans owned by the Federal government as disclosed in the Fed’s monthly G.19 statement on consumer credit – from $100 billion in 2008 this number is now almost $1 trillion.
Actually, one explanation: since credit is just a source of funds, there has to be a matched use of funds.
There is.
First, the bulk of US “government-held” has gone into auto loans, which as shown in the chart below, not only have surpassed total credit card (revolving) debt, but as of Sept. 30 just topped the credit card debt held by US consumer at the peak of the last bubble when housing was at all time highs, and consumers “charged it” like there was no tomorrow.
And then, of course, there is the student loan bubble.
And now you’ve “seen it coming.”
- Activists Seek To Impoverish Thai Villagers To Save Monkeys From "Slavery"
Submitted by David Adams via The Mises Institute,
Leave it to NPR to add guilt to your pleasure. That bon-bon hidden behind your two-year-old bottle of Scotch just took on a whole new layer of sin. With child slavery in the production of chocolate and animal cruelty in the harvesting of coconuts, the conflict confection is born.
According to an animal rights group featured in a recent edition of NPR’s The Salt, abused monkeys are a key ingredient in your Panang curry. While the Thai/Malay practice of using monkeys to harvest coconuts dates back hundreds of years, landing in the crosshairs of activist vegans and SJWs (Social Justice Warriors) is a new phenomenon. Anthropologist Leslie Sponsel, quoted briefly in the NPR article, offered a defense of simian symbiosis. I caught up with Dr. Sponsel at his Hawaii home in hopes of learning more about his fieldwork. “Debate on the morality of enslaving monkeys to get a job done is a Western dilemma, not a Thai one,” Sponsel explained.
A lifelong environmentalist and author of Spiritual Ecology: A Quiet Revolution, Sponsel had reservations about watching primate pickers at work. Instead of calling for a nationwide boycott of coconut products as some have done, Sponsel did what every anthropologist worth his salt is trained to do: take pause and observe. He noted that neither his wife — a Thai Buddhist — nor a fellow Thai professor from a local university framed the practice in moral terms. Add a complete lack of compunction from the local Muslim population and Sponsel concluded that monkeys on task are not a cause, but a part of the “isness” of peninsula living.
The British explorer Robert Shelford observed in his 1916 book: A Naturalist in Borneo:
The modus operandi is as follows: — A cord is fastened round the monkey’s waist, and it is led to a coconut palm which it rapidly climbs, it then lays hold of a nut, and if the owner judges the nut to be ripe for plucking he shouts to the monkey, which then twists the nut round and round till the stalk is broken and lets it fall to the ground; if the monkey catches hold of an unripe nut, the owner tugs the cord and the monkey tries another. … [At times] the use of the cord was dispensed with altogether, the monkey being guided by the tones and inflections of his master’s voice.
According to Sponsel, “Working macaques are the difference between a livelihood and abject poverty for many South Thailand farmers. Snake bites, stinging ants, and life-ending falls face whoever or whatever goes up those trees.”
Given the best monkeys harvest coconuts at over twenty times the speed of the most skilled man, the incentive to continue a centuries-old partnership is clear. During his fieldwork, Sponsel never observed or heard of monkey abuse by their handlers. He noted that many were treated similar to the way a Westerner treats a family pet. “For some households,” he observed, “they may even rise even to the level of being a family member.”
For a country that sees its stray dog population driven in crates to Vietnam every Tet New Year to become a side dish, the Thai macaques could have it worse. According to Sponsel, “Young ones are trained and kept on a rope or chain tethered to the handler or to a shelter when not working.” It is this practice that has earned the ire of some activists. Sponsel counters that in our society it is a matter of civility to keep a pet on a leash. And who hasn’t seen the mother who ties a string to her own children on a walk through a busy mall! According to Sponsel, the monkeys he observed were well-fed, groomed and cared for. Indeed, he often saw macaques being pushed in carts by their handlers on the way to the plantation.
“This debate is not new,” Sponsel explained. “Back in 1952, Jean Marcel Brulle’s The Murder of the Missing Link tackled our moral obligation to primates.” In an account of science fiction, a man impregnates a female monkey and then kills the newborn to force a jury to deliberate whether murder extends beyond humankind. Be it a hairy chest, or his way with the ladies (simians included), Burt Reynolds played the lead in Skullduggery — a 1970’s take on Brulle’s dilemma.
As some ramp up calls for a boycott, Sponsel cautions the bandwagon. “They should seriously consider how their campaign may negatively impact the livelihood of poor farmers. Some activists appear to be more worried about non-human animals more so than humans; even though the latter are also animals and have rights too.”
In a perfect world, Thai farmers would have machines and monkeys would have unspoiled wilderness. But, for the world we have — one in which habitat destruction wipes out entire populations — coconuts and farmers in need may be all that keeps the macaques in the trees and off the dinner tables.
- The Most Surprising Thing About Today's Jobs Report
After several months of weak and deteriorating payrolls prints, perhaps the biggest tell today’s job number would surprise massively to the upside came yesterday from Goldman, which as we noted earlier, just yesterday hiked its forecast from 175K to 190K. And while as Brown Brothers said after the reported that it is “difficult to find the cloud in the silver lining” one clear cloud emerges when looking just a little deeper below the surface.
That cloud emerges when looking at the age breakdown of the October job gains as released by the BLS’ Household Survey. What it shows is that while total jobs soared, that was certainly not the case in the most important for wage growth purposes age group, those aged 25-54.
As the chart below shows, in October the age group that accounted for virtually all total job gains was workers aged 55 and over. They added some 378K jobs in the past month, representing virtually the entire increase in payrolls. And more troubling: workers aged 25-54 actually declined by 35,000, with males in this age group tumbling by 119,000!
Little wonder then why there is no wage growth as employers continue hiring mostly those toward the twilight of their careers: the workers who have little leverage to demand wage hikes now and in the future, something employers are well aware of.
The next chart shows the break down the cumulative job gains since December 2007 and while workers aged 55 and older have gained over 7.5 million jobs in the past 8 years, workers aged 55 and under, have lost a cumulative total of 4.6 million jobs.
The same chart as above showing the full breakdown by age group – once again the 25-54 age group sticks out.
But young workers’ loss is old workers’ gain, as the following chart of total jobs held by those aged 55 and over shows. As of October, there was a record 33.8 million workers in the oldest age group tracked by the BLS – the same workers who, as noted above, also have the poorest wage negotiating leverage.
Finally, the most disappointing data point in today’s report is that while overall labor growth was solid, the participation rate for workers 25-54, was 80.7%, far below is peak of just under 85%, and below the 80.8% at the end of 2014.
Time for a rate hike?
- Weekend Reading: Copious Contemplations
Submitted by Lance Roberts via STA Wealth Management,
There are a couple of things that are simply hard to conceive currently. The first is that there are only SEVEN (7) Monday's left until Christmas. The second is that the Federal Reserve is seriously discussing increasing interest rates given the current economic weakness both domestic and global.
While many of more mainstream outlets continue to "hope" that we are on the cusp of economic resurgence, as I penned earlier this week, the EOCI index suggests something quite different.
(Note: The EOCI Index is a combined measure of the Chicago Fed National Activity Index (85 subcomponents), the ISM manufacturing and services index, the Fed regional manufacturing surveys, the Leading Economic Indicators index and the NFIB small business survey. Combined these measures give a broad sense of actual economic activity.)
"Despite hopes of a stronger rates of economic growth, it appears that the domestic economy is weakening considerably as the effects of a global deflationary slowdown wash back onto the U.S. economy."
Of course, while mainstream analysts and writers cling to each comment from the Fed as if it were gospel, it should be remembered that Ms. Yellen and her cohorts can not "tell the whole truth."
Imagine for a moment that Janet Yellen climbed up to the podium and said:
"After many years of ultra-accommodative polices, it is clear that ongoing interventions have failed to boost actual economic growth and only exacerbated the destruction of the middle class. It is clear that employment growth has only been a function of population growth, as witnessed by the ongoing decline in the labor-force participation rates and the surging levels of individuals that have fallen out of the work-force. While we will continue to operate to foster maximum employment and price stability, the reality is that the economy overall remains far to weak to sustain higher interest rates or any tightening of monetary policy."
As soon as those words were uttered, the markets would plunge dramatically which would erode consumer confidence and trigger an almost immediate recessionary environment.
So, if you were Janet Yellen, what message would you deliver to convey much of the same without "freaking" the markets out? How about this from yesterday:
"YELLEN SAYS IF OUTLOOK WORSENED FED MIGHT WEIGH NEGATIVE RATES"
Negative interest rates were "trial ballooned" after the September FOMC meeting and were dismissed by the markets. This is the second "trial" by the Fed to gauge market reaction. Historically, such hints have had a tendency to become future policy actions. It is worth paying attention to what the Fed is "NOT" saying.
I have been extremely busy this week working on a new project, so I am sharing with you the list of articles that I will be catching up on this weekend.
THE LIST
1) Bond Market To Stocks – Last Call by Jesse Felder via Tumblr
“Bond market risk appetites hold the key to the stock market right now. It is normally the case that equity and debt markets are very closely intertwined but today this true more than ever. And the bond market is signaling the party is nearly over.
I say that the relationship between bonds and stocks is more important today than ever because mergers and acquisitions activity and stock buybacks have been a major source of demand for equities over the past few years. And, to a very large degree, these have been financed by debt. So companies' ability to access the credit markets currently has a huge impact on stock prices."
Read Also: Bonds Are Sending Some Ominous Signs by Daniel Kruger via Bloomberg
2) Stocks Are 85% Above Long Term Trends by Doug Short via Advisor Perspectives
“The peak in 2000 marked an unprecedented 144% overshooting of the trend — nearly double the overshoot in 1929. The index had been above trend for two decades, with one exception: it dipped about 14% below trend briefly in March of 2009. But at the beginning of November 2015, it is 85% above trend, at the middle of the 77% to 93% range it has been hovering for the previous thirteen months. In sharp contrast, the major troughs of the past saw declines in excess of 50% below the trend. If the current S&P 500 were sitting squarely on the regression, it would be around the 1086 level.
Incidentally, the standard deviation for prices above and below trend is 40.6%. Here is a close-up of the regression values with the regression itself shown as the zero line. We've highlighted the standard deviations. We can see that the early 20th century real price peaks occurred at around the second deviation. Troughs prior to 2009 have been more than a standard deviation below trend. The peak in 2000 was well north of 3 deviations, and the 2007 peak was above the two deviations."
Read Also: Q4 Dividends Off To A Bad Start by Ironman via Political Calculations
3) The Fed's Communication Breakdown by Ken Rogoff via Project Syndicate
“Nothing describes the United States Federal Reserve's current communication policy better than the old saying that a camel is a horse designed by committee. Various members of the Fed's policy-setting Federal Open Markets Committee (FOMC) have called the decision to keep the base rate unchanged "data-dependent." That sounds helpful until you realize that each of them seems to have a different interpretation of "data-dependent," to the point that its meaning seems to be 'gut personal instinct.'
In other words, the Fed's communication strategy is a mess, and cleaning it up is far more important than the exact timing of the FOMC's decision to exit near-zero interest rates. After all, even after the Fed does finally make the "gigantic" leap from an effective federal funds rate of 0.13% (where it is now) to 0.25% (where is likely headed soon), the market will still want to know what the strategy is after that. And I fear that we will continue to have no idea."
Read Also: China's Economy Is Worse Than You Think by Noah Smith via Bloomberg
But Also Read: I'll Eat My Hat If There Is A Global Recession by Ambrose Evans-Pritchard via The Telegraph
4) The 10-Things I Relearned In October by Doug Kass via TheStreet.com
- Disasters have a way of not happening
- Permabulls (and bears) are attention getters
- Pay attention to investor sentiment at extremes
- Market remains preoccupied with monetary policy
- Quants rule – they move the markets up and down.
- Greed vs Fear
- Tech nearly always leads the markets
- Perception vs Reality
- The hardest trade is the best trade
- Curse of the Billy Goat lives
Read Also: Why The S&P May Already Be in A Bear Market by Shawn Langlois
5) A Good Time To Hold Some Cash by Mohamed El-Erian via Financial Times
"Recent signals from the European Central Bank and the Federal Reserve have reignited talk of divergent monetary policies among the world's two most influential central banks.
The short-term implications for investors include a stronger dollar, greater equity market volatility and a wider trading range for key interest rate differentials. The longer-term consequences are up for grabs. Both suggest investors should revisit conventional wisdom that dismisses cash as a 'wasting asset' in their portfolios."
Read Also: Is The U.S. Entering A Recession by Charlie Bilello via Pension Partners
Other Reading
- Everything You Need To Know About Apples Cash Pile by Matt Phillips via Quartz
- The Coming Middle Class Tax Increase by Robert Samuelson via Real Clear Markets
- Investor Letter – 5 Major Market Fears by Dan Loeb via Third Point
- The Difference Between Real & Academic Investing by Ben Carlson via A Wealth Of Common Sense
- The Absurd Claims Of Keynesian Economics by Scott Sumner via The Money Illusion
- 9 Habits Of Influential People by Travis Bradberry via Forbes
- The Trinity Portfolio by Meb Faber via Faber Research
- Visualizing Where Money Is Made In America by Tyler Durden via ZeroHedge
“Risk taking is necessary for large success, but also necessary for large failure.” – Nasim Taleb
Have a great weekend.
- S&P Ends Red After 2015's Best Jobs Data Sparks Bond & Bullion Breakdown
The best jobs print in 2015 sparked a surge in the dollar and purge on everything else… quickly followed by this from some…
…and this from the mainstream media and their sponsoring talking heads.
* * *
Having dipped and ripped on a huge miss in October, after today's beat, the market couldn't quite pull it off…
WTI Crude was the worst-performer post-Payrolls as stocks desperately ramped to get back to unchanged…
On the day, Small Caps and Trannies were on fire (squeeze) as S&P was unablew to get there…
Despite the massive crush on VIX to get the S&P 500 above 2100 – which failed..
VIX (equity implied business risk) and HY bond spreads (credit implied business risks) remain notably decoupled…
Thanks to yet another big short squeeze…
Small Caps had a massive week… the 2nd biggest week since Oct 2014's Bullard Bounce
As Financials surged…
BABA was bashed (and thus YHOO yanked) after Chanos said he was shorting…
Credit markets did not bounce…
Treasury yields spiked after the jobs data and did not give much back as stocks sank… (notice that on the week 2Y actually outperformed with the belly worst)
We note that 2Y yields spiked to 95bps at their highs (and futures were halted) before fading back (still 6bps higher on the day) – the highest since May 2010…
The USD surged today on the payrolls beat… with AUD crashing and EURUSD
The USD Index hit 7-month hghs today… after biggest 3-week gain since March's peak…
The USD strength weighed heavy on all commodities with Copper managing to modestly outperform as gold, silver, and crude all huddled together down 4.5 to 5% on the week…
Gold is back under $1100, at August lows (down 8 straight days, and 12 of the last 13), and Silver down 7 straiught days to September lows…
Charts: Bloomberg
- Wealthiest Americans Ominously Remind Nation They Could Easily Drop Another $10 Billion On Election
Fact or Fiction…
Calmly stating that they would not even need to think twice about doing so, the nation’s wealthiest individuals ominously reminded the populace during a press conference Wednesday that they could easily drop another $10 billion on the 2016 election.
“We want to make it completely clear to voters that there’s absolutely no reason – none at all – why we couldn’t shell out another $10 billion between now and next November,” said casino magnate Sheldon Adelson on behalf of the top tenth of a percent of income-earners in the U.S., adding that creating dozens of new and extremely well-funded super PACs would mean practically nothing to them.
“Trust me, we’ve got plenty to throw around, so it really wouldn’t be a problem. We could spread it around a bunch of congressional races, or, heck, we could put it all on one presidential candidate—it doesn’t really affect us much either way.
Why don’t we toss in a billion right now just to give you a taste?”
The nation’s wealthiest families then added that they would have no problem repeating the process for the next 30 election cycles before silently walking off the stage.
- Is This The Green Light To Hike Rates?
Today’s euphoric unemployment print of 5.0% was based on a total employment number of 149.120 million, with 7.908 million workers unemployment (and another 94.5 million out of the labor force).
The number was so good, the market is now confident the Fed will hike rates in December.
So how does US employment growth look like in context and is this really the catalyst for the Fed to hike rates signalling a jump of confidence in the economy?
We will let readers decide if the 1.3% increase in total employment, less than half what it was last October, is the answer.
- World's Largest Steelmaker Reports Huge Loss, Suspends Dividend, Blames China
It’s no secret that Beijing has an excess capacity problem.
Indeed, the idea that a yearslong industrial buildup intended to support i) the expansion of the smokestack economy, ii) a real estate boom, and iii) robust worldwide demand ultimately served to create a supply glut in China is one of the key narratives when it comes to analyzing the global macro picture.
That, combined with ZIRP’s uncanny ability to keep uneconomic producers in business, has served to drive down commodity prices the world over, imperiling many an emerging market and driving a bevy of drillers, diggers, and pumpers to the brink of insolvency.
As we noted late last month, if you want to get a read on just how acute the situation truly is, look no further than China’s “ghost cities”…
Here’s the simple, straightforward assessment from the deputy head of the China Iron & Steel Association:
“Production cuts are slower than the contraction in demand, therefore oversupply is worsening. Although China has cut interest rates many times recently, steel mills said their funding costs have actually gone up.”
To which we said, “meet the deflationary commodity cycle in all its glory”:
China’s mills — which produce about half of worldwide output — are battling against oversupply and sinking prices as local consumption shrinks for the first time in a generation amid a property-led slowdown. The fallout from the steelmakers’ struggles is hurting iron ore prices and boosting trade tensions as mills seek to sell their surplus overseas.Shanghai Baosteel Group Corp. forecast last week that China’s steel production may eventually shrink 20 percent, matching the experience seen in the U.S. and elsewhere.
“China’s steel demand evaporated at unprecedented speed as the nation’s economic growth slowed,” Zhu said. “As demand quickly contracted, steel mills are lowering prices in competition to get contracts.”
Right. Well actually there’s that, and the fact that they can’t get loans despite multiple RRR cuts and attempts on Beijing’s part to boost China’s credit impulse. In fact, over half the debtors in China’s commodity space are generating so little cash, they can’t even cover their interest payments.
So, considering all of the above, the obvious implication is that China will simply export its deflation…
Given that, it shouldn’t come as any surprise that on Friday, the world’s biggest steelmaker suspended its dividend and cut its outlook.
Here’s more from Bloomberg:
The world’s biggest steelmaker on Friday cut its full-year profit target and suspended its dividend, putting the blame on the flood of cheap steel from China’s loss-making mills. The market is being overwhelmed with material coming from the nation’s state-owned and state-supported producers, a collection of industry associations said Thursday.
“It is obvious that we are operating in a very challenging market,” Chief Financial Officer Aditya Mittal said on a call with reporters. “This is essentially the result of very low export prices out of China that are impacting prices worldwide.”
The steel industry has been roiled by the slowest economic growth in two decades in China, the biggest consumer.
The flood of cheap exports from the nation has drawn complaints from Europe and the U.S. that the shipments are unfair. Bloomberg Intelligence estimates Chinese steel shipments overseas will exceed 100 million metric tons this year, more than the combined output of Europe’s top four producing countries.
While demand for steel in the company’s largest markets of the U.S. and Europe is recovering, producers’ profits are being hit by slumping prices because China has been pushing excess supply onto the world market as its economy slows.
So again, we’re seeing disinflation (the exact opposite of what DM central bankers intended when they decided to expand their balance sheets into the trillions) as global growth and trade enters a new era, characterized by a systemic slump in demand. Here’s the damage in terms of the Arcelor’s equity:
And here’s more from The New York Times on the impact of Chinese “dumping:
“The Chinese are dumping in our core markets,” Mr. Mittal said. “The question is how long the Chinese will continue to export below their cost.”
The company’s loss for the period compared with a $22 million profit for last year’s third quarter.
ArcelorMittal, which is based in Luxembourg, also sharply cut its projection for 2015 earnings before interest, taxes, depreciation and amortization — the main measure of a steel company’s finances. The new estimate is $5.2 billion to $5.4 billion, down from the previous projection of $6 billion to $7 billion.
On a call with reporters, Aditya Mittal, Mr. Mittal’s son and the company’s chief financial officer, said that a flood of low-price Chinese exports was the biggest challenge for ArcelorMittal in the European and North American markets.
The company estimates that Chinese steel exports this year will reach 110 million metric tons, compared with 94 million tons last year and 63 million tons in 2013. ArcelorMittal produced 93 million metric tons of steel in 2014.
Of course when the standing government policy is to roll over bad debt and avoid SOE defaults at all costs, uneconomic producers can and will continue to produce. This means the deflationary impulse ArcelorMittal cites isn’t likely to dissipate anytime soon, and on that note we close with what we said just a week ago:
The cherry on top is that China itself is now trapped: it simply can’t afford to let anyone default, as one bankruptcy would cascade across the entire bond market and wipe out countless corporations leaving millions of angry Chinese workers unemployed, and is therefore forced to keep bailing out insolvent companies over and over. By doing so, it is adding even more deflationary capacity and even more production into the market, which leads to even lower prices, and even greater bailouts! In short: this is a deflationary toxic spiral.
- Consumer Credit Has Biggest Jump In History, Led By Government-Funded Car And Student Loans
If there was any confusion where all those soaring new car sales are coming from, we now have the definitive answer: moments ago the latest consumer credit data for September was released, and surging by $28.9 billion – a 4.9% jump Y/Y – not only did this smash expectations of a “modest” $18 billion rise, this was the biggest monthly increase ever!
And while revolving credit rose a respectable $2.7 billion to $925 billion, still well below its historic high of $1.02 trillion…
… the monthly swing was all in the non-revolving credit, i.e., the student and car loans: soaring by $22.2 billion, this was the second biggest monthly jump on record.
The source? Drumroll – the US government, which on one hand laments the credit bubble it has created via ZIRP and QE and is eager to raise rates by 25 bps, and on the other is directly funding the biggest student and car debt bubble in history.
Presenting: the government bubble in all its glory.
- Mistress Of Deception – More From The Hillary Chronicles
Submitted by Andrew Napolitano via AntiWar.com,
The self-inflicted wounds of Hillary Rodham Clinton just keep manifesting themselves. She has two serious issues that have arisen in the past week; one is political and the other is legal. Both have deception at their root.
Her political problem is one of credibility. We know from her emails that she informed her daughter Chelsea and the then-prime minister of Egypt within 12 hours of the murder of the U.S. ambassador to Libya, J. Christopher Stevens, that he had been killed in Benghazi by al-Qaida. We know from the public record that the Obama administration’s narrative blamed the killings of the ambassador and his guards on an anonymous crowd’s spontaneous reaction to an anti-Muhammad video.
Over this past weekend we learned that her own embassy staff in Tripoli told her senior staff in Washington the day after the killings that the video was not an issue, and very few Libyans had seen it. We also know from her emails that the CIA informed her within 24 hours of the ambassador’s murder that it had been planned by al-Qaida 12 days before the actual killings.
Nevertheless, she persisted in blaming the video. When she received the bodies of Ambassador Stevens and his three bodyguards at Andrews Air Force base three days after their murders, she told the media and the families of the deceased assembled there that the four Americans had been killed by a spontaneous mob reacting to a cheap 15-minute anti-Muhammad video.
Clinton’s sordid behavior throughout this unhappy affair reveals a cavalier attitude about the truth and a ready willingness to deceive the public for short-term political gain. This might not harm her political aspirations with her base in the Democratic Party; but it will be a serious political problem for her with independent voters, without whose support she simply cannot be elected.
Yet, her name might not appear on any ballot in 2016.
That’s because, each time she addresses these issues – her involvement in Benghazi and her emails – her legal problems get worse. We already know that the FBI has been investigating her for espionage (the failure to secure state secrets), destruction of government property and obstruction of justice (wiping her computer server clean of governmental emails that were and are the property of the federal government), and perjury (lying to a federal judge about whether she returned all governmental emails to the State Department).
Now, she has added new potential perjury and misleading Congress issues because of her deceptive testimony to the House Benghazi committee. In 2011, when President Obama persuaded NATO to enact and enforce a no-fly zone over Libya, he sent American intelligence agents on the ground. Since they were not military and were not shooting at Libyan government forces, he could plausibly argue that he had not put "boots" on the ground. Clinton, however, decided that she could accelerate the departure of the Libyan strongman, Col. Moammar Gadhafi, by arming some of the Libyan rebel groups that were attempting to oppose him and thus helping them to shoot at government forces.
So, in violation of federal law and the U.N. arms embargo on Libya she authorized the shipment of American arms to Qatar, knowing they’d be passed off to Libyan rebels, some of whom were al-Qaida, a few of whom killed Ambassador Stevens using American-made weapons. When asked about this, she said she knew nothing of it. The emails underlying this are in the public domain. Clinton not only knew of the arms-to-Libyan-rebels deal, she authored and authorized it. She lied about this under oath.
After surveying the damage done to his regime and his family by NATO bombings, Col. Kaddafi made known his wish to negotiate a peaceful departure from Libya. When his wish was presented to Clinton, a source in the room with Clinton has revealed that she silently made the "off with his head" hand motion by moving her hand quickly across her neck. She could do that because she knew the rebels were well equipped with American arms with which to kill him. She didn’t care that many of the rebels were al-Qaida or that arming them was a felony. She lied about this under oath.
My Fox News colleagues Catherine Herridge and Pamela Browne have scrutinized Clinton’s testimony with respect to her friend and adviser Sidney Blumenthal. Recall that President Obama vetoed Clinton’s wish to hire him as her State Department senior adviser. So she had the Clinton Foundation pay him a greater salary than the State Department would have, and he became her silent de facto advisor.
They emailed each other hundreds of times during her tenure. He provided intelligence to her, which he obtained from a security company on the ground in Libya in which he had a financial interest. He advised her on how to present herself to the media. He even advocated the parameters of the Libyan no-fly zone and she acted upon his recommendations. Yet she told the committee he was "just a friend." She was highly deceptive and criminally misleading about this under oath.
It is difficult to believe that the federal prosecutors and FBI agents investigating Clinton will not recommend that she be indicted. Inexplicably, she seems to have forgotten that they were monitoring what she said under oath to the Benghazi committee. By lying under oath, and by misleading Congress, she gave that team additional areas to investigate and on which to recommend indictments.
When those recommendations are made known, no ballot will bear her name.
- Tech Bubble Unravelling: Square To Go Public At 30% Discount To Latest Private Round
Two weeks ago, we reported that one of the numerous “unicorns” prancing around Silicon Valley was about to have a very rude wake up call when Dropbox was warned by its investment bankers that it would be unable to go public at a valuation anywhere near close to what its last private round (which had most recently risen to $10 billion from $4 billion a year ago) valued it at.
And while Dropbox’s day of public reckoning approaches, another company realized today just how big the second “private” tech bubble, one we profiled first in January of 2014, truly is. That company is Jack Dorsey’s Square, which earlier today filed a prospectus in which it said that the “initial public offering price per share of Class A common stock will be between $11.00 and $13.00.”
Assuming a mid-point price of $12 and applying the 322.9 million shares outstanding after the offering, it means a valuation of $3.9 billion. The problem is that in its last private fundraising round, Square was valued at about $6 billion according to ReCode.
Needless to say, IPOs are meant to come at a valuation that puts all the prior rounds of private investors “in the money.” Not this time.
What does that mean, especially since as BuzzFeed reported previously, Square’s last round of private financing guaranteed investors at least a 20 percent return on investment.
Well, it means that if Square’s IPO share price was less than $18.55, Square would have to issue these Series E investors shares to make up the difference, or an automatic dilution for everyone else. And since that looks increasingly likely, and if Square ends up pricing its IPO at $12 a share — the midpoint of today’s range — it would have to issue these investors around 5.3 million additional shares, representing around 1.6 percent of all outstanding shares, according to today’s filing.
ReCode concludes what we said nearly two years ago:
Square’s IPO pricing will likely give credence to the growing belief that there are a whole host of private companies valued at $1 billion or more — “unicorns,” in Silicon Valley parlance — that wouldn’t sniff such a high valuation if they decided to go public. Square’s revenue is growing quickly, but the company is still generating large losses.
So the question facing all the other unicorns is simple: will they keep jumping from private round to private round, funding operations while increasing the valuation of the underlying to absolutely ludicrous levels, ones which can never be “cashed out” using a public route and pray for a strategic to swoop it up instead, or will the Valley finally have a rude wake up call, admit the past two years of bubble valuations were driven not by fundamentals but by excess liquidity, and scramble to go public in an attempt to cash out first before everyone else does?
We will know on December 16: if the Fed indeed does launched tightening by hiking 25 bps, watch as a record number of unicorns are downgrade to zerocorns in the nanosecond blink of an algorithmic CCD.
- It's Official: The Baltic Dry Index Has Crashed To Its Lowest November Level In History
2015 has been an 'odd' year. Typically this time of year sees demand picking up amid holiday inventory stacking and measures of global trade such as The Baltic Dry Index rise from mid-summer to Thanksgiving. This year, it has not.
In fact, it has plummeted as the world's economic engines slow and reality under the covers of global stock markets suggests a massive deflationary wave (following a massive mal-investment boom). At a level of 631, this is the lowest cost for Baltic Dry Freight Index for this time of year in history.. and within a small drop of an all-time historical low.
Hard to ignore something that has never happened before as anything but a total disaster for world trade and economic growth.
* * *
As we concluded previously after exposing the collapse in Ships…
Trains…
And Trucks…
We have in the past joked that the only thing that could possibly save the world from what is a trade recession is if the central banks can somehow find a way to "print trade" the way they artificially boost asset prices higher to give the impression of a status quo normalcy. Unfortunately, as this is not a real option, and with both global and US trade in freefall, many wonder just how will the world's central planners mask this most dangerous aspect of the global economic slowdown?
Charts: Bloomberg
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