- Syria: “Not a Proxy War. It’s One Step Closer”
Russia started bombing jihadi bases in Syria today.
Given that the the U.S. and its allies are largely responsible for creating ISIS, and that U.S., Turkey and Israel have all been acting as ISIS’ air force – they are not taking too kindly to Russia’s actions.
This Wall Street Journal headline sums up the absurdity of the situation: “Russian Airstrike in Syria Targeted CIA-Backed Rebels, U.S. Officials Say.”
We noted years ago that a proxy war is raging in Syria … but things are getting even more over-heated.
Political risk expert Ian Bremmer sums up the situation:
Russian forces will be striking Assad enemies, some of whom are directly supported by the US and its allies. That’s not a proxy war. It’s one step closer.
- ONe PaiN IN THe ISIS…
- State Makes It Legal To Shoot Cops In Self-Defense If They Violate Your Rights
Submitted by M. David via TheAntiMedia.org,
Is it ever legal to shoot cops? A growing number of states are passing laws that say that yes, in fact, sometimes it is well within a citizen’s rights to shoot a police officer.
Other states have already ruled in favor of citizens shooting police officers in self-defense, (even hip-hop legend Tupac walked after shooting two cops in self-defense) now, in the state of Indiana, if a police officer initiates aggression without cause in someone’s home, violence can be used against them in self-defense – including using lethal force.
The new law was drafted to “recognize the unique character of a citizen’s home and to ensure that a citizen feels secure in his or her own home against unlawful intrusion by another individual or a public servant.”
This should hardly be seen as profound. In the past, self-defense was viewed as a human right. The Bill of Rights does not grant rights to the citizenry of the United States, it recognizes natural rights. One of those rights — a veritable law of Nature — is the right to resist.
No matter what one does, or takes from you, nothing can stop the innate right to follow our natural impulses of resistance. That does not mean all will exercise that right. But the right itself is natural, primordial, inborn.
The new amendment in Indian recognizes this. It makes it clear that badges do not grant special rights to break into someone’s house and commit acts of violent aggression. If they do, the resident has the right to resist those illegal actions and defend themselves.
The Free Thought Project notes that many police officers “have already begun to fear monger the passage of this bill,” saying “If I pull over a car and I walk up to it and the guy shoots me, he’s going to say, ‘Well, he was trying to illegally enter my property.’”
This fear mongering comes from Joseph Hubbard, 40, the president of Jeffersonville Fraternal Order of Police Lodge 100, who asserts “somebody is going get away with killing a cop because of this law.”
In spite of these statements, here’s what the law actually states:
(i) A person is justified in using reasonable force against a public servant if the person reasonably believes the force is necessary to:
- (1) protect the person or a third person from what the person reasonably believes to be the imminent use of unlawful force;
- (2) prevent or terminate the public servant’s unlawful entry of or attack on the person’s dwelling, curtilage, or occupied motor vehicle; or
- (3) prevent or terminate the public servant’s unlawful trespass on or criminal interference with property lawfully in the person’s possession, lawfully in possession of a member of the person’s immediate family, or belonging to a person whose property the person has authority to protect
What do you think about this law? Would you like to see more states adopt laws like this, or is this a recipe for disaster?
- Futures Soar After Chinese Composite PMI Drops To Lowest On Record
Chinese markets may be closed for the next week due to a national holiday but China’s goalseeked manufacturing survey(s), which were the most anticipated data points of the evening, came right on schedule (or rather, were leaked just ahead of schedule). And they certainly did not disappoint in their disappointment.
First, it was the official NBS September PMI, which at 49.8 was the smallest possible fraction above both the previous and expected, both of which were 49.7. The number was leaked about 6 minutes before the official statement, and while the leaked print which all humans were aware of well before the official release time at 9pm Eastern, had no impact on markets, it was the flashing red headline which confirmed the leak and which was read by machine-reading algos everywhere, that sent the E-mini spasming higher.
But while the official “data” was bad, and confirmed the economy remains in contraction, the Caixin – aka the new HSBC – Markit PMIs were absolutely atrocious.
We bring you… the HSBC Manufacturing print, which dropped from 47.3 to 47.2, and which according to Caixin was the lowest print since March 2009.
From the report:
A key factor weighing on the headline index was a sharper contraction of manufacturing output in September. According to panellists,
worsening business conditions and subdued client demand had led firms to cut their production schedules. Weaker customer demand was highlighted by a further fall in total new orders placed at Chinese goods producers in September. Furthermore, the rate of reduction was the steepest seen for just over three years. Data suggested that the faster decline in total new business partly stemmed from a sharper fall in new export work. The latest survey showed new orders from abroad declined at the quickest rate since March 2009.The job market continued to be a disaster:
Reflective of lower workloads, manufacturing companies cut their staff numbers again in September. Moreover, the latest reduction in employment was the fastest seen in 80 months. Meanwhile, reduced production capacity led to an increased amount of unfinished work, though the pace of backlog accumulation was only slight.
And then there’s deflation:
Manufacturing companies noted a further steep decline in average cost burdens during September. Furthermore, the rate of deflation was the sharpest seen since April. Reports from panellists mentioned that lower raw material prices, particularly for oil-related products, had cut overall input costs. Increased competition for new work led manufacturing companies to generally pass on their savings to clients, as highlighted by a solid decline in output charges.
Summarizing the finding: Production cut at quickest rate since March 2009; Total new orders contract at sharper rate amid steeper downturn in new export business; Worst deflation since April; job shedding accelerates to 80-month record, and so on.
At the same time, the Service PMI was also released which at 50.5, was a drop of 1 point from the 51.5 in August, and was the lowest since July 2014, with the prices charged index in full deflationary collapse, tumbling from 51.4 to 48.5, the lowest since June 2012, with the outstanding business index was the lowest since last November. In short: another disaster.
And it was the combination of the two indices that told the full story: at 48.0, the Caixin Composite index dropped from 48.8, down from 52.3 a year ago and was the lowest print on record.
So with another month of atrocious manufacturing and service survey data released what do futures do? Why they soar of course, with the ES now up nearly 20 points from its overnight lows, and touching on 1920.
Why? Who knows – futs would have likely soared if the data was good, but wild guess here, because the Chinese economy is in such a dire state of uncontrollable freefall, someone, somewhere has to print more and make the rich even richer.
- New Patch for U.S. Troops Fighting ISIS… Looks Like ISIS Logo
Submitted by Mac Slavo of SHTFplan.com
New Patch for U.S. Troops Fighting ISIS… Looks Like ISIS Logo
Believe it or not, American soldiers fighting against ISIS in Syria and Iraq will actually be wearing the emblem of ISIS – the infamous crossed-swords logo. Well, almost.
Controversy has stirred because many think the patch looks too much like our boys are fighting for the enemy… just another sign of confusion about the counterproductive Obama-led war against the notorious and shamefully exploitative jihadist army.
The Military Times noted that:
“A combat patch worn by U.S. soldiers who served in Iraq on the mission against Islamic State is drawing flak from service members and veterans who say the patch — with its palm wreath, stars and crossed scimitars — looks like something the enemy would wear.”
Site like JihadWatch are arguing that the:
“new U.S. Army patch for fight against the Islamic State closely resembles Muslim Brotherhood logo.”
While the Islamic State is using barbaric tactics to remake the Middle East closer to its own vision of a Caliphate, the United States and its allies also seek to remake the Middle East, and use the specter of terrorism to aid in regime change in Syria and elsewhere.
The triangulation and cross-purposes are both confusing and aggravating to many Americans.
According to USA Today:
Soldiers in Iraq will soon have a new shoulder sleeve patch to signify their service in the fight against the Islamic State.
All told, there are about 3,335 troops in the region training Iraqi troops, providing security and conducing bombing missions on Islamic State targets in Iraq and neighboring Syria.
The Army’s patch features crossed scimitars, a palm wreath and stars. The scimitars, short swords with curved blades, are meant to symbolize the twin goals of the U.S.-led coalition: to defeat the Islamic State, also referred to as ISIL, and to restore stability in the region, according to Army documents.
Arguably the “twin goals” of Operation Inherent Resolve – better known as the fight against ISIS / ISIL – is fitting with the War on Terrorism in general which always, like a double sword, cut both ways. Symbolically, the double sword cuts both ways, and plays of opposite goals, and embraces conflict, which creates chaos, and begs for a savior and a solution.
But the U.S. has, in fact, created and breathed life into the TV villain known as ISIS. From. the. beginning.
The naked hypocrisy of the U.S. effort to fight ISIS is that the West has been building up and unleashing terrorism upon the Middle East region in order to facilitate chaos and regime change – and give the United States a pretext for stationing troops there, funding budget and spewing rhetoric across the media.
President Bashar al-Assad himself recently called out the United States and other Western allies for actually fostering terrorism – and providing arms, funding, training and soldiers for ISIS and other groups. Assad stated bluntly:
But as for Western cooperation with the al-Nusra Front, this is reality, because we know that Turkey supports al-Nusra and ISIS by providing them with arms, money and terrorist volunteers. And it is well-known that Turkey has close relations with the West. Erdogan and Davutoglu cannot make a single move without coordinating first with the United States and other Western countries.
Al-Nusra and ISIS operate with such a force in the region under Western cover, because Western states have always believed that terrorism is a card they can pull from their pocket and use from time to time. Now, they want to use al-Nusra just against ISIS, maybe because ISIS is out of control one way or another. But that doesn’t mean they want to eradicate ISIS. Had they wanted to do so, they would have been able to do that.
Meanwhile, Putin put in a “call” at the global poker table, vowing to take on ISIS and defend Assad with its own fighter jets, tanks and military equipment.
In a taunting and vexing spin on the United States’ own mission in the Middle East, Putin invited the West to join hands and eradicate ISIS once and for all, as SHTF recently reported.
Moscow, realizing that instead of undertaking an earnest effort to fight terror in Syria, the US had simply adopted a containment strategy for ISIS while holding the group up to the public as the boogeyman par excellence, publicly invited Washington to join Russia in a once-and-for-all push to wipe Islamic State from the face of the earth.
Of course The Kremlin knew the US wanted no such thing until Assad was gone, but by extending the invitation, Putin had literally called Washington’s bluff, forcing The White House to either admit that this isn’t about ISIS at all, or else join Russia in fighting them. The genius of that move is that if Washington does indeed coordinate its efforts to fight ISIS with Moscow, the US will be fighting to stabilize the very regime it sought to oust.
But Putin won’t be holding his breath. Neither should we.
Should we view the patch as a U.S. “resolve” to stop ISIS, or as part of the “inherent” contradiction that serves the larger purpose of terrorism and U.S. foreign policy at the expense of U.S. troops, U.S. taxpayer money and U.S. sovereignty?
And is WWIII near when the U.S. and Russia lock heads so pointedly as they are right now? And who is the real enemy?
- Overheard At The Pentagon: "Right Now, We Are Putin's Prison Bitch"
Those who frequent these pages are well aware of what’s happened to Washington’s strategy in Syria over the past several weeks. Russia’s dramatic move to enter the fray has left the US trapped, as the West attempts to hang on to a narrative that’s no longer convincing even to a largely ignorant public.
Now, the only thing left to do is either stand down and let Moscow do as it pleases in support of the Assad regime, or else get on board and acquiesce to the inevitable.
Or, summed up in simpler terms…
Overheard at the Pentagon: “Right now, we are Putin’s prison bitch.”
— Nancy Youssef, ????? (@nancyayoussef) September 30, 2015
- A Desperate China Caps Card Withdrawals In Frantic Attempt To Stem Outflows
Earlier this month we documented Beijing’s mad dash to tighten up capital controls in China in order to stem outflows in the wake of the PBoC’s move to transition towards a new FX regime.
Put simply, expectations that a (much) deeper devaluation is on the horizon coupled with China’s efforts to manage the fallout from those expectations by liquidating hundreds of billions in FX reserves to support the onshore and offshore spots have understandably put authorities on edge, leading directly to efforts to stop the bleeding.
As we put it a few weeks ago, “while China may succeed in maintaining an orderly pace of FX depreciation, if the local population is concerned it will lose substantial purchasing power in the coming months and years, it will accelerate the capital flight from the country, forcing even greater reserve liquidation as the government finds itself defending not only the capital but also the current account, not to mention the sheer capital flight panic resulting from the crashing stock market.”
Of course one of the more straightforward ways of circumventing China’s official capital controls has been by “abusing” UnionPay cards. Roughly speaking, the process works like this (via Reuters):
Growing numbers of Chinese are using the country’s state-backed bankcards to illegally spirit billions of dollars abroad, a Reuters examination has found.
This underground money is flowing across the border into the gambling hub of Macau, a former Portuguese colony that like Hong Kong is an autonomous region of China. And the conduit for the cash is the Chinese government-supported payment card network, China UnionPay.
In a warren of gritty streets around Macau’s ritzy casino resorts, hundreds of neon-lit jewellery, watch and pawn shops are doing a brisk business giving mainland Chinese customers cash by allowing them to use UnionPay cards to make fake purchases – a way of evading China’s strict currency-export controls.
On a recent day at the Choi Seng Jewellery and Watches company, a middle-aged woman strode to the counter past dusty shelves of watches. She handed the clerk her UnionPay card and received HK$300,000 ($50,000) in cash. She signed a credit card receipt describing the transaction as a “general sale”, stuffed the cash into her handbag and strolled over to the Ponte 16 casino next door.
The withdrawal far exceeded the daily limit of 20,000 yuan, or $3,200, in cash that individual Chinese can legally move out of the mainland. “Don’t worry,” said a store clerk when asked about the legality of the transaction. “Everyone does this.”
Yes, “everyone does this,” but not for long because now that the yuan deval debacle has served to accelerate the capital outflows, Beijing is set to double down on efforts to curb the degree to which capital controls are openly subverted and as WSJ reports, China is has now “put a new annual cap on overseas cash withdrawals using UnionPay.” Here’s more:
China has capped the amount of money Chinese holders of bank and credit cards can withdraw outside the country, in its latest effort to discourage people from moving badly needed capital offshore.
China’s foreign-exchange regulator put a new annual cap on overseas cash withdrawals using China UnionPay Co. bank cards, a UnionPay official said on Tuesday. Under the new rules, UnionPay cardholders can withdraw up to 50,000 yuan ($7,854) overseas during the last three months of this year, and the amount will be capped at 100,000 yuan for all of next year, the official said.
State-run UnionPay has a virtual monopoly on processing card transactions in China, meaning the limits extend to nearly all Chinese bank- and credit-card holders. It wasn’t clear when the new cap was issued.
The new cap is in addition to an existing 10,000 yuan daily withdrawal limit, part of China’s curbs on how much money can flow across its borders.
The move by China’s State Administration of Foreign Exchange is the latest by Beijing to scrutinize capital outflows.
The People’s Bank of China, the country’s central bank, said earlier this month that its foreign-exchange reserves fell by $93.9 billion, the biggest monthly drop ever, after it surprised the market on Aug. 11 with its decision to devalue the yuan by around 2%.
Will this help to reverse the momentum? No, probably not.
The problem here – and this is something that quite a few people are still struggling to understand – is that Beijing has telegraphed a much larger devaluation, which means the pressure on the yuan will likely continue.
So yes, as difficult as this is to come to terms with, this is a scenario where China played the deval card and is looking to ever-so-gradually move from a 3% deval to an export-boosting double-digit deval, but in the meantime, Beijing must manage the pace, which means supporting the yuan via direct interventions. The trick, however, is going to be pulling this off without triggering a disastrous outflow of capital, and we’ll leave it to readers to determine if the measures outlined above are likely to do anything meaningful to stem the flow.
- Is This The Scariest Chart In America This Week?
Either, a) BLS payrolls data is entirely ‘made-up’, or b) US jobs are being created in some other regions than the six major Fed surveys. Either way, this chart will strike fear into the heart of Janet Yellen as she ‘hopes” for some cover for her rate-hike… before the whole house of cards collapses…
Are we about to see the negative payroll print that confirms a) No Fed rate-hike, and b) No Recovery?
h/t @Not_Jim_Cramer
- This Is What £500 In Rent Gets You In London
While it is painfully obvious that London property prices (and now rents) are in an atmospheric bubble, it appears the policy-makers choose to ignore the reality for the average Brit in favor of 'wealth' creation for the few.
As @Alex_Lomax tweets… "I have literally just been shown a bed under the stairs for £500 a month… F You London!"
The ad was posted on site London2let and reads:
One single furnished room available.
We are looking for a friendly, open-minded and outgoing person to join our houseshare in a great period house in Clapham.
We're a good bunch and like to chill out a lot together – not really looking for somebody that just wants to stay in their room. Room comes with a bed.
Bills to be shared – approx £60 per month each. Easy access to local tube stations.
As Alex explains, the room lacked any utilities, but did come with a carton of Daz on the floor and coats hanging from hooks.
I didn't even stay long enough to check if there was a mattress, and the landlord seemed absolutely serious.
I asked him if he was joking and he seemed shocked I'd even asked.
I took the pics secretly when he was making himself a cup of coffee, the cupboard was right next to the kitchen.
I expected a normal single room, definitely not this. I left as quickly as I could.
- This Is How Russia Handles Terrorists: Moscow Releases Video Of Syria Strikes
Now that Russia has officially begun conducting airstrikes on anti-regime forces operating in Syria, commentators, pundits, and analysts around the world will be keen to compare and contrast the results of Moscow’s efforts with the year-old US-led air campaign against ISIS targets in Syria and Iraq.
Clearly, Russia has a very real incentive to ensure that its airstrikes are effective.
Preserving the global balance of power means preserving the Assad regime and, by extension, ensuring that Iran maintains its regional influence.
On the other hand, the US and its regional allies actually have an incentive to ensure that their airstrikes are minimally effective. That is, for the US, Saudi Arabia, and Qatar, the idea is not to kill Frankenstein, but rather to ensure that he doesn’t escape the lab.
As we documented earlier today, Russia wasted no time launching strikes against anti-regime targets once the country’s lawmakers gave the official go-ahead and the West wasted no time accusing Russia of breaking protocol by targeting “modetrate” Syrian rebels (like al-Qeada) that aren’t aligned with ISIS.
It’s against that backdrop that we present the following footage released by the Russain Ministry of Defense which depicts the opening salvo in The Kremlin’s battle against terrorism in the Middle East (note the vehicle traveling towards the compound at a particularly inopportune time towards the end).
And predictably, Western media reports regarding civilian casualties and Russia’s alleged targeting of “moderate” rebels (as opposed to ISIS) were countered by Moscow’s sharp-tongued spokeswoman and US foreign policy critic extraordinaire Maria Zakharova.
Via RT:
Russia has struck eight Islamic State (ISIS/ISIL) targets in Syria, the country’s Defense Ministry said, adding that “civilian infrastructure” was avoided during the operations.
“Today, Russian aerospace force jets delivered pinpoint strikes on eight ISIS terror group targets in Syria. In total, 20 flights were made,” spokesperson for the Russian Defense Ministry, Igor Konashenkov, said.
“As a result, arms and fuel depots and military equipment were hit. ISIS coordination centers in the mountains were totally destroyed,” he added.
Konashenkov said that all the flights took place after air surveillance and careful verification of the data provided by the Syrian military. He stressed that Russian jets did not target any civilian infrastructure and avoided these territories.
“Russian jets did not use weapons on civilian infrastructure or in its vicinity,” he said.
Reuters reported that Russia targeted opposition rebel groups in Homs province instead of Islamic State forces. The agency cited Syrian opposition chief Khaled Khoja, who put the death toll of the bombardment at 36 civilians.
“Russia is intending not to fight ISIL [Islamic State], but to prolong the life of [Syrian President Bashar] Assad,” Khoja said.
Similar claims were made by the BBC, Fox News, Al Jazeera and numerous other news outlets.
Moscow harshly criticized the reports, labeling them an information war.
“Russia didn’t even begin its operation against Islamic State… Russia’s Foreign Minister Sergey Lavrov didn’t even utter his first words at the UN Security Council, but numerous reports already emerged in the media that civilians are dying as a result of the Russian operation and that it’s aimed at democratic forces in the country (Syria),” Maria Zakharova, Foreign Ministry spokeswoman, told media.
“It’s all an information attack, a war, of which we’ve heard so many times,” she added.
Zakharova also said that she was amazed by the scale and speed of what she called “info injections” into social networks such as “photos of alleged victims” that appeared on the web as soon as the Russian operation began.
“What can I say? We all know perfectly how such pictures are made,” she said, remembering a Hollywood flick ‘Wag the Dog,’ which described the US media reporting on a fake war in Albania.
For those who missed it, see here for our assessment of the Western media’s take on the first round of Russian airstrikes (and by the way we, like Maria, were surprised at how quickly the propaganda machine kicked into high gear). Here is the bottom line:
The bottom line going forward is that the US and its regional and European allies are going to have to decide whether they want to be on the right side of history here or not, and as we’ve been careful to explain, no one is arguing that Bashar al-Assad is the most benevolent leader in the history of statecraft but it has now gotten to the point where Western media outlets are describing al-Qaeda as “moderate” in a last ditch effort to explain away Washington’s unwillingness to join Russia in stabilizing Syria. This is a foreign policy mistake of epic proportions on the part of the US and the sooner the West concedes that and moves to correct it by admitting that none of the groups the CIA, the Pentagon, and Washington’s Mid-East allies have trained and supported represent a viable alternative to the Assad regime, the sooner Syria will cease to be the chessboard du jour for a global proxy war that’s left hundreds of thousands of innocent people dead.
- The Coming Corporate "Crime Wave"
Submitted by William L Anderson via The Mises Institute,
In a recent appearance before Congress, Deputy Attorney General Sally Quillian Yates declared that the US Department of Justice is going to ratchet up its prosecution of individuals employed in corporations as part of a larger push against “white collar crime.” There is no doubt that such prosecutions will be very popular to a large section of voters, given that presidential candidates like Bernie Sanders, Hillary Clinton, and Martin O’Malley, along with Massachusetts Senator Elizabeth Warren pretty much have declared that nearly all American businesses are part of a massive criminal conspiracy that must be brought down by federal authorities.
Within the next year, we should expect to see mid-level business and finance executives doing “perp walks” in front of the news media, as federal prosecutors will charge them with various “economic crimes” in hopes that they will implicate their superiors. All of us by now know the drill and in a time of anemic economic growth complete with business failures, it won’t be hard to find scapegoats.
Everyone Is “Guilty”
When famed civil liberties attorney Harvey Silverglate published his now-famous book, Three Felonies a Day, it caused quite a stir. Going through a number of very disturbing cases, Silverglate made clear that if federal prosecutors want to target an individual, it is very easy to fashion criminal charges against them.
To prove his point, he noted how the federal prosecutors in New York when Rudy Giuliani was US Attorney for the Southern District of New York regularly played a game in which they would see if various celebrities and others, including Mother Theresa, had broken federal criminal law. The result, unfortunately, was that for each person no matter how good his or her public character, a federal statue existed that would place them in prison.
Being that Giuliani’s prosecutors — and Giuliani himself — regularly committed felonies by selectively leaking grand jury information to favored journalists in order to damage the ability of accused people to defend themselves. He also did it to stoke the fires of the anti-business mobs, and these prosecutors were quite familiar with how to fashion the ever-malleable federal statutes to turn ordinary acts into crimes. During the 1980s, when Giuliani was at DOJ, the New York office engaged in a massive show of force against Wall Street firms and other business enterprises in large part to enhance the coming political careers of Giuliani and others who worked under him, and to appease the anti-business Democrats and Republicans who were anxious to declare to roll back what they called the “Decade of Greed.”
Is a New Wave of Crackdowns Coming?
Federal prosecution of business figures tend to come in waves. During the Great Depression, prosecutors tried to claim criminal behavior by businessmen was responsible for the lengthy economic downturn. During the 1980s, Wall Street rivals of Michael Milken and others who challenged the established financial firms were the quiet-but-effective engine of prosecution, combining their political connections with Giuliani’s ambition to nearly destroy the alternative capital funding machine that was overturning the corporate status quo with new startups and shakeups of existing firms.
Because Milken had become wealthy through his financial dealings, he became the symbol of “greed” by the Democratic Left, which at that time was facing a loss of influence during the Ronald Reagan years and was desperate to regain its former status of America’s “conscience.” Going after Milken mollified both the Left and the Republican establishment on Wall Street, as the “old money” firms were happy to see Giuliani eliminate the competition.
After the spectacular failure of Enron and other firms that depended upon Alan Greenspan’s Federal Reserve System policies of easy money, policies that ended in the Tech Bubble meltdown in 2000 and 2001, the George W. Bush administration went after people like Ken Lay and Jeffrey Skilling of Enron and others who had high-profile CEO jobs. In the lynch-mob atmosphere that inevitably follows the bust cycle of Fed-induced business cycles, it was not hard to convince Americans that the corporate bankruptcies and the subsequent recession were the handiwork of criminal executives.
I have written about federal criminal law and its abuses for more than a decade and have not changed my viewpoint. No matter how often writers and activists expose the consequences of expanding federal criminal law, the law expands anyway. People are elected to Congress on platforms of “being tough on crime,” and large crowds heartily approve when Bernie Sanders and Elizabeth Warren call for more business executives to be thrown into prison for unspecified “crimes.” (They demand the Beria approach. Beria, who was the head of the original KGB, famously stated: “You bring me the man, I'll find you the crime.”)
A Winning Political Strategy
The current public mood is ugly, and perhaps for good reason. Although the official rates of unemployment are relatively low, statistics clearly show that huge numbers of potentially-employable people have left the job market altogether because they know that finding meaningful employment is highly unlikely. We know that in percentage terms, labor participation in the workplace is at near-record lows. We also know that, economically speaking, the economy is stagnating and that individuals continue to be squeezed as real pay fails to keep up with creeping-but-real inflation. In short, people are angry, and they want someone to pay.
Many angry people have found a political home with candidates like Sanders and Donald Trump, both of whom speak to voter frustrations and who also find perfect scapegoats for vengeful Americans. Bernie Sanders blames businesses and entrepreneurs for “greed,” while Trump blames immigrants. Economically speaking, neither Sanders nor Trump is correct, but it doesn’t matter; angry voters don’t want facts, they want scalps.
Ever since sociologist Edwin Sutherland during the 1930s came up with the term, “white collar crime,” politicians and the media have claimed that businesses often are little more than criminal enterprises. Certainly the current political climate reflects that sentiment and more. Furthermore, politicians are appealing to voters with proposals that would destroy capital formation, criminalize much of entrepreneurship, and make it much more difficult for business firms to engage in normal activities.
In a recent campaign speech, Democratic hopeful Hillary Clinton declared, “We’re going to go back to enforcing labor laws. I’m going to make sure that some employers go to jail for wage theft and all the other abuses that they engage in.” Few candidates of either party are willing to stand up for businesses and entrepreneurs, and as the campaign rhetoric becomes more inflammatory, federal prosecutors are going to find it increasingly easier to charge business owners and employers for law “violations” that might be called “criminal” even if they never were intentional, according to law professor John Baker.
Selective and Politically-Motivated Prosecution
Because there are so many business owners and executives, and because federal prosecutors cannot go after everyone, it will be a crapshoot as to whom prosecutors select for “the treatment.” For the most part, those targeted will not have political connections (such as many Wall Street executives), nor will they be people involved in “green energy” ventures, such as those businesses tied to people like Al Gore.
When people think of so-called business crimes, they think of embezzlement, firms falsifying information, tax evasion, or to engage in fraud while performing services under contract with the government. For example, say that Ajax Company is supposed to build tanks for the US Army and is paid on a cost-plus basis. The company then bills the army for a number of tanks it did not build or for phantom services, with the company CEO and his mistress putting the fraudulently-obtained money in a Swiss bank account.
This certainly would fall under anyone’s fraud statute, and if the government were to prosecute just those kinds of cases, few people would object. However, government fraud statutes are incredibly malleable and can apply to conduct that would seem to be legal. In an article I wrote for Regulation six years ago, I point out Enron’s practice of placing “non-earning assets” into “special purpose entities” was legal and also was made known to Enron stockholders, yet federal prosecutors decided to include those actions under the umbrella of “Honest Services Fraud.”
Prosecutors wanted jurors to believe that even though Enron’s activities met federal laws and regulations, nonetheless the company undertook those actions in order to present the company to stockholders and others in a false light, making the company’s financial condition seem better than it really was. Thus, it was left to the jurors to determine whether or not this action truly was a violation of the law, even though the original act did fall within the letter of federal statutes and regulations.
One can see immediately where there is a problem. Under most state laws governing crime, there often is no doubt that an actual crime was committed. The question is not whether someone broke the law, but rather who broke it, the defendant or someone else.
Federal Law Is Ambiguous Enough to Allow Prosecution of Nearly Anyone
In the federal system, however, jurors often are asked to decide whether or not someone actually broke the law and, thus, broke federal statutes. Jurors, who usually have no legal training, then are asked to determine whether or not a highly-complex deed that they may not understand was a legal violation, and more often than not, if jurors don’t understand it, or if they deem the defendants to be less-than-savory, they will vote guilty as a default position.
Furthermore, federal prosecutors have such leeway that they are able to pile on numerous charges that might be based from a single endeavor, thus creating a situation for defendants in which they either can chance going to prison for decades (and federal prosecutors almost always win at trial) or plead guilty. (I have a well-known friend who was charged with “Honest Services Fraud,” because the US attorney believed that the fees he negotiated with his clients were higher than they should have been. The prosecutor did not allege that he had defrauded his clients per se, since he charged the clients the fees upon which both parties agreed, but that because the fees were higher than fees other lobbyists charged their clients, then they simply had to be illegal. So, according to federal prosecutors, one can negotiate fees in daylight with all parties agreeing and still be breaking the law.)
Federal prosecutors also are notorious for appealing to the prejudices of juries. When the late Ken Lay and Jeffrey Skilling were on trial in Houston, Texas, prosecutors appealed to the fact that when Enron collapsed, a lot of people lost money. (That Skilling and Lay also lost most of their income and wealth in the same collapse apparently was irrelevant, and prosecutors claimed that any act of Lay and Skilling diversifying their own personal financial portfolios — although both men held most of their wealth in Enron stock — was an attempt to knowingly bail out of a sinking ship.) Because the trial judge also was openly hostile to the defendants, prosecutors pretty much were able to do and say what they wanted without fear of legal repercussions.
Rudy Giuliani once noted with amusement that people charged with “white-collar crime” were more likely to “roll over” than were hardened criminals. Part of the reason is that most people, and especially business owners and executives who do try to obey the law, are horrified at the prospect of being charged criminally and going to prison. Because federal prosecutors can easily fashion charges that often defy defense, it is not hard to understand why business people plead guilty.
If Barack Obama and US Attorney Loretta Lynch decide to target business people, prosecutors will find plenty of targets. Because violation of regulations can be rolled into the “fraud” and “conspiracy” statutes — even if the violations were unintentional or the “targets” were unaware of their existence — it is not hard to find subjects to prosecute. Being charged in such conditions is more like “winning” an “unlucky lottery” than engaging in actual criminal behavior.
That turning the business community into a wreckage of criminal charges will have long-term effects on the willingness of entrepreneurs to risk their own assets will be no deterrent to people like Obama and Lynch. Neither of them have a minute of business experience, and they truly believe that businesses themselves probably at best are unethical entities or at worst caverns of criminality, so they most likely believe they are doing Americans a favor by throwing more people into prison. One only can feel sympathy for people and their families who at the present time have no idea that someone from the US Department of Justice is planning to wreck their lives over at worst what might be a legal technicality.
- Oct 1 – Fed's Dudley: Will Make Sure QE Withdrawal Won't Roil Markets
Follow The Market Madness with Voice and Text on FinancialJuice
EMOTION MOVING MARKETS NOW: 24/100 EXTREME FEAR
PREVIOUS CLOSE: 12/100 EXTREME FEAR
ONE WEEK AGO: 31/100 FEAR
ONE MONTH AGO: 14/100 EXTREME FEAR
ONE YEAR AGO: 12/100 EXTREME FEAR
Put and Call Options: EXTREME FEAR During the last five trading days, volume in put options has lagged volume in call options by 14.57% as investors make bullish bets in their portfolios. However, this is still among the highest levels of put buying seen during the last two years, indicating extreme fear on the part of investors.
Market Volatility: NEUTRAL The CBOE Volatility Index (VIX) is at 24.50. This is a neutral reading and indicates that market risks appear low.
Stock Price Strength: FEAR The number of stocks hitting 52-week lows exceeds the number hitting highs and is at the lower end of its range, indicating fear.
PIVOT POINTS
EURUSD | GBPUSD | USDJPY | USDCAD | AUDUSD | EURJPY | EURCHF | EURGBP| GBPJPY | NZDUSD | USDCHF | EURAUD | AUDJPY
S&P 500 (ES) | NASDAQ 100 (NQ) | DOW 30 (YM) | RUSSELL 2000 (TF) | Euro (6E) |Pound (6B)
EUROSTOXX 50 (FESX) | DAX 30 (FDAX) | BOBL (FGBM) | SCHATZ (FGBS) | BUND (FGBL)
CRUDE OIL (CL) | GOLD (GC) | 10 YR T NOTE | 2 YR T NOTE | 5 YR T NOTE | 30 YR TREASURY BOND| SOYBEANS | CORN
MEME OF THE DAY – BEIJING AFTER VOLKSWAGEN
UNUSUAL ACTIVITY
APPS Director purchase 127K @ 1.57
JOY Director purchase 12,200 A $ 14.77 , 4,346 A $ 14.8 , 2,854 A $ 14.81 , 2,265 A $ 14.82 , 2,435 A $ 14.83
Z NOV 30 Puts @ 4.70 on the offer 1600 contracts
MU Jan 5 Put Activity @ 0.18 on the offer
BDSI NOV 6 Calls on the offer @ 0.80 1800+
HEADLINES
Senate passes bill that would keep government open
IMF’s Lagarde: Global growth likely weak this year
Fed’s Dudley: Will make sure QE withdrawal won’t roil markets
S&P sees ECB doubling QE
China Reports First Official FX Reserve Data to IMF
US DOE US Crude Inventory (WoW) Sep-25: 3955K
EIA: US Crude Oil Production Rose 94,000bpd In July
China’s gold reserves rise to 54.45m fine troy oz
US Corn, Soybean Prices Drop as Domestic Stockpiles Rise
Jack Dorsey to Be Named Permanent Twitter CEO
China Premier Li: Economy Remains In Reasonable Range
Russia launches air strikes in Syria
GOVERNMENTS/CENTRAL BANKS
Senate passes bill that would keep government open –~MW
IMF’s Lagarde: Global growth likely weak this year, modest acceleration in 2016 –CNBC
IMF cuts Australia growth projections for 2015 and 2016 to 2.4% and 2.9% respectively – IMF
Fed’s Dudley: Will make sure QE withdrawal won’t roil markets – ForexLive
Fed’s Dudley: Open to adjusting bond market rules to improve liquidity – CNBC
ECB’s Weidmann: EU should have clear rules for sovereign debt — ForexLive
ECB’s Hansson sees ‘moderate’ inflation in Eurozone – ForexLive
S&P sees ECB doubling QE – Rtrs
Brexit risk ‘not priced in’ Morgan Stanley warns – FT
BOJ announces October bond purchase programme – Forex Live
Japanese public pension fund likely saw July-September loss –Nikkei
Riksbank’s Skingsley: Riksbank Has No Target For The Krona – BBG
FIXED INCOME
Treasury Investors See Quarterly Gains as Risk-Off Wagers Reign – BBG
Southern European bond yields fall as election risks fade – Rtrs
BoE’s GBP1.41 Bln 7-15 Year Gilt Buy-Back Receives Offer/Cover Ratio Of 2.12 (Pre 2.36)
Glencore bonds still trade as junk despite bounce – FT
FX
USD: Dollar Strengthens Over Third Quarter – WSJ
USD: Dollar remains broadly higher – Investing.com
EUR: Euro lower as Eurozone falls back into deflation – Investing.com
GBP: Cable Steady at 5-Mth Low as Fed Leads Hike Race – WBP
JPY: Buck Dwells Around Break-Even – WBP
China Reports First Official FX Reserve Data to IMF – BBG
HKMA intervenes again to sell HK$ 12bln to maintain trading band –ForexLive
ENERGY/COMMODITIES
Brent oil up on Syria worry; U.S. crude down on supply build – Rtrs
Oil finishes the quarter with a 24% loss – MktWatch
Gold falls 1.5% on month, loses 4.8% on quarter – MktWatch
Copper Prices Surge on Supply Disruptions in Chile, Peru – WSJ
US DOE US Crude Inventory (WoW) Sep-25: 3955K (est. -250K, prev. -1925K)
US DOE US Distillate Inventory (WoW) Sep-25: -267K (est. -900K, prev. -2088K)
US DOE Cushing Inventory (WoW) Sep-25: -1068K (est. -350K, prev. -462K)
US DOE US Gasoline Inventory (WoW) Sep-25: 3254K (est. -750K, prev. 1369K)
EIA: US Crude Oil Production Rose 94,000bpd In July To 9.358mln bpd – FastFT
World Bank: Oil prices likely to stay volatile – FXstreet
China’s gold reserves rise to 54.45m fine troy oz vs 53.93m prev – ForexLive
Steel prices sink to 11.5-year lows – FT
Australian Govt: Iron ore price has bottomed –ForexLive
US Corn, Soybean Prices Drop as Domestic Stockpiles Rise – WSJ
EQUITIES
U.S. Stocks Advance, Shaving Worst Quarterly Rout in Four Years – BBG
Torrid quarter ends with broad rebound for European stocks – FT
FTSE 100 rebounds as Sainsbury’s lifts profit outlook – BBC
Carl Icahn says ‘joyride’ for stock market is over – MktWatch
AUTOS: Volkswagen may avoid environmental criminal charges – MktWatch
AUTOS: German prosecutors consider Audi probe – FT
M&A: Axel Springer purchases Thrillist Media Group stake – DL
M&A: Rio Tinto Agrees to Sell Coal Mine Stake for $606 Million –NYT
M&A: M&T Bank Gets Fed Nod to Buy Hudson City – WSJ
INDUSTRIALS: Airbus A320neo test aircraft suffers engine damage – MktWatch
TECH: Sources: Jack Dorsey to Be Named Permanent Twitter CEO – Re/Code
TECH: China’s Tsinghua to buy Western Digital stake in U.S. tech push – Rtrs
TECH: Synaptics Said to Shun $110-a-Share Bid From China Investor – BBG
EMERGING MARKETS
China Premier Li: Economy Remains In Reasonable Range – CCTV
China Premier Li: Main Econ. Targets Can Be Achieved – CCTV
Russia launches air strikes in Syria – FT
World Bank Downgrades Russia’s Economic Outlook – WSJ
RBI’s Rajan says India is ready for a Fed rate hike sooner rather than later – Forex Live
Fitch: Emerging Market Vulnerability Weighing on Global Growth Outlook
- Propaganda War Begins: Russia's Syria Strikes Targeted US-Backed "Moderate" Rebels, West Says
With the US having officially lost control of the narrative in Syria now that The Kremlin has called Washington’s bluff on the battle to eradicate ISIS and eliminate the Sunni extremist elements that threaten to wrest control of Syria from President Bashar al-Assad, the only remaining question after Russian lawmakers officially cleared the way for airstrikes was how long it would be before the Western media began shouting about Russian warplanes bombing targets that aren’t affiliated with ISIS.
As we reported earlier today, Moscow wasted no time in launching its first round of air raids.
In turn, the West wasted no time in contending that Russia is targeting areas that aren’t known to be strategically significant for ISIS. Here’s a look at two headlines which do a nice job of summarizing all of the rhetoric which you’re about to hear emanating ceaselessly from every corner of the Western world in the coming days and weeks:
- U.S. IS CONCERNED RUSSIA’S INTENT IS PROTECTING ASSAD: KERRY
- U.S. HAS ‘GRAVE CONCERNS’ IF RUSSIA STRIKES OUTSIDE ISIL AREAS
And here’s WSJ with a sneak peek at the new narrative which Washington will be working hard to refine:
Russian President Vladimir Putin inserted his country directly into Syria’s war Wednesday, as Russian forces launched their first airstrikes against what Moscow said were Islamic State targets in the Middle Eastern nation.
But Western leaders raised doubts about whether Russia really intended to take the fight to Islamic State, or merely broaden the Syrian regime’s offensive against a wide range of other opponents.
For the U.S., the Russian strikes add new questions about the role of Russian forces in Syria. “While we would welcome a constructive role by Russia in this effort, today’s [meeting in Baghdad] hardly seems indicative of that sort of role and will in no way alter our operations,” a U.S. official said.
Warplanes targeted Islamic State military hardware and weapons stores, a spokesman for Russia’s Ministry of Defense told official news agencies hours after Russian lawmakers approved a request by Mr. Putin to allow the use of force abroad.
Framing the attacks as part of a fight against terrorism, Mr. Putin said that Russia will support the Syrian army from the air, without any ground operations, for the duration of the Syrian offensive.
“The only real way to fight international terrorism…is to act pre-emptively. and not wait till they [terrorists] come to our home,” Mr. Putin said in televised comments. He called for antiterror cooperation with other states through the Russian coordination center in Baghdad.
The official Syrian Arab News Agency reported Wednesday that Russian airstrikes hit areas under Islamic State control in Homs and Hama provinces, including the cities of Al Rastan and Talbiseh, near the town of Salamiyah, and the villages of al-Za’faran, al-Humr Hills, Eidoun, Salamiyah and Deir Fol. The strikes had successfully targeted Islamic State, SANA said, without elaborating.
But with the exception of the area east of the town of Salamiyah in Hama province, none of the areas listed by the Syrian regime have a known presence of Islamic State fighters. They are largely dominated by relatively moderate rebel factions and Islamist groups like Ahrar al-Sham and the al Qaeda affiliate the Nusra Front.
Yes, “relatively moderate rebel factions like al-Qaeda” (check the above, WSJ actually said that) which in July kidnapped the commander and deputy commander of the Pentagon’s ragtag group of US-trained rebels that was supposed to number in the thousands by now but has been reduced to just “four or five” men and which was humiliated last Friday when the remaining fighters were forced to surrender their pickup trucks and ammo to al-Nusra in order to “secure safe passage” to who knows where.
Considering that, and considering the “solid” relationship the US has always maintained with al-Qaeda, it sure would be a shame if a few al-Nusra operatives wound up as collateral damage in Russia’s air campaign.
Then there’s The Telegraph with an epic attempt to spin the news with a single headline: “Putin defies West as Russia bomb ‘Syrian rebel targets instead of Isil‘”.
Meanwhile, France – who recently went full-propaganda by using “self defense” to justify its newly launched Syrian bombing campaign – is out expressing its consternation about which groups Russia is bombing. Via Reuters:
France said it was “curious” that Russian air strikes in Syria on Wednesday had not targeted Islamic State militants and a diplomatic source added that Moscow’s action appeared aimed at supporting President Bashar al-Assad against other opposition groups in the country’s civil war.
The diplomatic source said it was in line with Russia’s stance since 2012 that until there was a viable alternative to Assad, Moscow would not drop its support for him in the war that began in 2011 after a government crackdown on anti-Assad protests.
“Russian forces struck Syria and curiously didn’t hit Islamic State,” Defence Minister Jean-Yves Le Drian told lawmakers.
A French diplomatic source said the strikes, which seemed to have been carried out near Homs, an area crucial to Assad’s control of western Syria.
“It is not Daesh (Islamic State) that they are targeting, but probably opposition groups, which confirms that they are more in support of Bashar’s regime than in fighting Daesh,” the source said, speaking on condition of anonymity.
“We shall see what they do with their other strikes,” the source said.
And then Germany (which, much to Moscow’s chagrin, recently announced it’s set to receive a shipment of new US nukes) jumped on the bandwagon. Via Bloomberg:
German Foreign Minister Frank-Walter Steinmeier says Russia needs to explain its aims in carrying out airstrikes in Syria.
“In this highly charged situation in Syria there’s a big risk that there will be further misunderstandings between the partners, all of whom are needed to calm the situation”
“I hope that this isn’t slamming shut all the doors that were laboriously opened in recent days, including in talks between President Obama and President Putin”
“Only coordinated action can lead to a solution. Military action along won’t help us overcome the Syrian crisis. We have to get into a political process. We need the neighbors, Russia, the U.S., and we in Europe can be helpful, too.”
There are two things to note here. First, there isn’t anything “curious” about this and Vladimir Putin has made no secret of his intent to keep the Assad regime from falling. Indeed, it’s not clear what else Putin could do besides invite Charlie Rose for a two hour interview and explain three separate times that Moscow intends to support Assad. Second, Germany’s suggestion that Russia is “slamming shut all the doors to cooperation” is ridiculous to the point of absurdity. As the events that have unfolded over the past several weeks have made abundantly clear, it is the West that has slammed the door shut on Russia when it comes to cooperating to fight ISIS and the reason for Washington’s trepidation stems directly from i) wanting to oust Assad at all costs even if it means allowing the extremists operating in Syria to remain active until the regime falls, and ii) the fact that no matter what line The White House trots out to the public, the US views the Russia-Iran “nexus” as far more dangerous to America’s geopolitical ambitions than ISIS and therefore, allying with Washington’s two fiercest foreign policy critics simply isn’t an option even if such an alliance would swiftly eradicate Islamic State.
And of course the narrative wouldn’t be complete without some on-the-ground Skype “intelligence”. Here’s Reuters:
Russian air strikes in northwest Syria which Moscow said targeted Islamic State fighters hit a rebel group supported by Western opponents of President Bashar al-Assad on Wednesday, wounding eight, the group’s commander said.
He said the fighters were hit in the countryside of Hama province, where the group has a headquarters.
“The northern countryside of Hama has no presence of ISIS at all and is under the control of the Free Syrian Army,” Major Jamil al-Saleh, who defected from the Syrian army in 2012, told Reuters via Skype.
Saleh said his group had been supplied with advanced anti-tank missiles by foreign powers opposed to Assad.
The Homs area is crucial to President Bashar al-Assad’s control of western Syria. Insurgent control of that area would bisect the Assad-held west, separating Damascus from the coastal cities of Latakia and Tartous, where Russia operates a naval facility.
“In the early morning this aircraft conducted air strikes in Latamneh city. One targeted a civilian area, and the other targeted al-Izza,” Saleh said, referring to his group which he said were set up around two years ago and has 1,500 fighters.
He declined to give further details on the exact location of the strike but said the bombs hit a cave which the group used as a headquarters and was near the front line with the regime in northern Hama countryside.
“Each strike had 8-10 missiles and there were two strikes so there is no way it was an accident,” he added.
No, it probably was not an accident, but what the Western powers want you to believe is that because they steadfastly refuse to acknowledge what’s going on even when it is patiently explained to them by The Kremlin, then anything that happens is thereby a mystery.
The bottom line going forward is that the US and its regional and European allies are going to have to decide whether they want to be on the right side of history here or not, and as we’ve been careful to explain, no one is arguing that Bashar al-Assad is the most benevolent leader in the history of statecraft but it has now gotten to the point where Western media outlets are describing al-Qaeda as “moderate” in a last ditch effort to explain away Washington’s unwillingness to join Russia in stabilizing Syria. This is a foreign policy mistake of epic proportions on the part of the US and the sooner the West concedes that and moves to correct it by admitting that none of the groups the CIA, the Pentagon, and Washington’s Mid-East allies have trained and supported represent a viable alternative to the Assad regime, the sooner Syria will cease to be the chessboard du jour for a global proxy war that’s left hundreds of thousands of innocent people dead.
- Becoming China: From Shale Malinvestment Boom To "We Are Overbuilt" Bust
Nothing highlighted a malinvestment-driven "if we build it they will come" boom (and subsequence complete bust) better than China's so-called "ghost cities." But now, thanks to The Fed's "lower for longer" enabling of every and any zombie company in the world, many previous oil-boomtowns across Texas and North Dakota are facing a real-estate crisis. As Bloomberg reports, the former bustling "man-camps" of towns like Williston, ND are now desolate with hundreds of skeletons or wood & cement as predictions that fracking would sustain production and a robust tax base for decades have failed completely.
Chain saws and staple guns echo across a $40 million residential complex under construction in Williston, North Dakota, a few miles from almost-empty camps once filled with oil workers. As Bloomberg reports, after struggling to house thousands of migrant roughnecks during the boom, the state faces a new real-estate crisis: The frenzied drilling that made it No. 1 in personal-income growth and job creation for five consecutive years hasn’t lasted long enough to support the oil-fueled building explosion.
Civic leaders and developers say many new units were already in the pipeline, and they anticipate another influx of workers when oil prices rise again. But for now, hundreds of dwellings approved during the heady days are rising, skeletons of wood and cement surrounded by rolling grasslands, with too few residents who can afford them.
“We are overbuilt,” said Dan Kalil, a commissioner in Williams County in the heart of the Bakken, a 360-million-year-old shale bed, during a break from cutting flax on his farm. “I am concerned about having hundreds of $200-a-month apartments in the future.”
The surge began in 2006, when rising oil prices made widespread hydraulic fracturing economically feasible. The process forces water, sand and chemicals down a well to crack rock and release the crude. Predictions were that fracking would sustain production and a robust tax base for decades.
Laborers descended on the state, many landing in temporary settlements of recreational vehicles, shacks and even chicken coops. Energy companies put up some workers in so-called man camps. In 2011, Williams County commissioners approved 12,000 beds, says Michael Sizemore, the county building official.
Everyone levered up on this "no-brainer"…
The camps were supposed to be an interim solution until subdivision and apartment complexes could be built.
Civic leaders across the Bakken charged into overdrive, processing hundreds of permits and borrowing tens of millions of dollars to pay for new water and sewer systems. Williston has issued $226 million of debt since January 2011; about $144 million is outstanding. Watford City issued $2.34 million of debt; about $2.1 million is outstanding.
and many remain delusional…
"We didn’t build temporary housing on purpose because we viewed North Dakota as a long-term play," said Israel Weinberger, a principal at Coltown Properties, which invests in multi-family real-estate developments.
"We think the local production of oil is here to stay. Yes, prices have dropped, but it’s a commodity and commodities fluctuate. There is always a risk."
Fracking’s success has created another glut…
As the migrant workers leave, their castoffs pile up in scrap yards such as TJ’s Autobody & Salvage outside Alexander, about 25 miles (40 kilometers) south of Williston. More than 400 discarded vehicles crowd its lot, including souped-up pickup trucks and an RV with rotting potatoes and a dead mouse in the sink.
“I wake up and RVs are in my driveway,” said owner Tom Novak. “It’s insane; there are empty campers everywhere.”
But they are still building…
With the region’s drilling-rig count at a six-year low of 74 and roughnecks coping with cuts in overtime and per-diem pay, the vacancy rates in Williams County man camps are as high as 70 percent. Meanwhile the average occupancy rate of new units in Williston was 65 percent in August, even as 1,347 apartments are under construction or have been approved there.
Officials in Watford City about 45 miles away have issued 1,824 permits for apartments, duplexes and homes in the past 18 months after only three houses were built between 1980 and 2000. They are in limbo, worried about filling the units.
“This lag time is driving me nuts,” said Brent Sanford, Watford City’s mayor, during a recent tour of construction sites with names such as Emerald Ridge Estates and Pheasant Ridge. “I’m now hearing words like, ‘This isn’t sustainable.”’
Hope remains that the oil workers will stay and wait it out… but reality is showing that is false hope…
Housing experts say this goal may be illusory because oil roughnecks typically return to their home state when a boom is over.
“People who think they can convince these workers to live in apartments or suburban households are not understanding the nature of this economy,” said Bill Caraher, an associate professor at the University of North Dakota in Grand Forks who has studied housing in the oil patch.
That’s true for Daniel Krohn, who pays $650 a month for a space in the Rakken Arrow RV Park. A plywood lean-to that blocks the north wind is cobbled onto his mobile home, the only one with a mailbox in the 86-space lot, which is half empty.
Krohn, who installed piping on gravel pads where oil and gas is processed, came to Watford City in 2012 from Wisconsin with his wife, Angela; they had a daughter after the move. Now he’s unemployed and considering moving back home to a house with a $450 monthly mortgage.
“I can’t afford $1,000 or more for a one-bedroom and still feed my family,” he said. “I’m ready to go.”
* * *
To The Fed – Well done… your tinkering has once again crushed the American Dream for another generation and enabled yet another inevitable bust after an entirely unsustainable boom where 'wealth' creation was nothing but transitory.
- Want To Hear A Joke?
- It's Time To Get Your Gold Out Of The U.S.
Submitted by Ted Baumann via TheSovereignInvestor.com,
Most of us remember cowboy movies in which a lonesome desperado acquires a sack of gold coins that everyone else wants. It’s a thankless task that typically doesn’t end well.
I vividly recall the final scene from Sergio Leone’s The Good, the Bad and the Ugly, in which a long rifle shot from Blondie (Clint Eastwood) severs the hangman’s noose holding Tuco (Eli Wallach), sending him face-first into a pile of gold coins. It’s still memorable even after I learned it was filmed in the Spanish plateau region of Burgos, not the U.S. Southwest.
Besides reminding us that gold has always been a much sought-after commodity, The Good, the Bad and the Ugly’s multinational production process illustrates another key principle of the modern economy: People move around a lot when they’re making money.
And that creates the perfect opportunity for governments to get their greedy hands on your gold.
Traveling With Gold
Let’s start with a review of U.S. rules regarding the importation and exportation of gold bullion, whether in bar or coin form:
There is no duty on gold coins, medals or bullion but these items must be declared to a Customs and Border Protection (CBP) Officer. Please note a FinCEN 105 form must be completed at the time of entry for monetary instruments over $10,000. This includes currency, i.e. gold coins, valued over $10,000. The FinCEN definition of currency: The coin and paper money of the United States or any other country that is (1) designated as legal tender and that (2) circulates and (3) is customarily accepted as a medium of exchange in the country of issuance.
Note the specific definition of “currency” here. These rules only apply to gold coins that can be used as currency. Taking collectible (numismatic) coins out of the U.S. requires that you submit Electronic Export Information (EEI) to the Census Bureau, ostensibly to help compile U.S. export and trade statistics. This form is actually required for any exported commodity, including gold, with a value exceeding $2,500. There are similar rules regarding jewelry.
Global Gold Crackdown?
Most foreign countries have similar regulations concerning the import and export of gold bullion and collectible coins. These regulations tend to track U.S. rules closely, and generally, as long as people follow them, there isn’t much friction over international travel with precious metals.
Recently, however, I’ve been hearing reports that some foreign countries are starting to ask more questions, and require more searches, when someone declares that they are transporting gold or other precious-metal coins. For example, some countries in Latin America — including financial basket-case Argentina — are reportedly quite interested in any unusual coins you’re carrying — even if they’re under the limits and therefore not declarable. Seeing them in an X-ray of your bag may be enough to trigger a search and interrogation.
Then there are increasing reports that many banks around the world are beginning to amend their contracts to prevent clients from storing currency and precious metals in safe-deposit boxes, or stating that they will not be responsible for them if they are kept there. For example, Chase Bank recently started a pilot program to this effect in Cleveland, prior to rolling it out nationally.
What’s going on? My guess is that the U.S. and other governments are starting to put in place the elements of a capital controls system. We already know that the Foreign Account Tax Compliance Act (FATCA) is building the infrastructure for capital controls in banking. That leaves cash and precious metals as the two remaining methods to transport value physically. Transporting large amounts of cash is already heavily regulated, leaving one more — gold and other precious metals. It’s not paranoid at all to think that the U.S. government is quietly working with other customs agencies to increase “awareness” of the gold-movement “problem.”
The Only Problem Is Government
Of course, traveling with gold is a “problem” made by governments. If they behaved responsibly, let economic processes take their course instead of propping up big banks, and treated their citizens with respect, there would be no problem at all.
If you plan to carry any gold or silver currency or collectible coins out of the U.S. — why bring them back in? — my advice is to contact the nearest office of the U.S. Customs and Border Protection Agency and explain what you plan to do. Ask them to explain in writing how you can conform to the law. You can show the written response if questioned by CBP agents, who may not know the rules. Also keep handy any customs paperwork from other countries, as well as a proof of purchase or bill of sale.
Remember, traveling with gold isn’t illegal. There’s no reason to end up like Tuco, who just wanted to get away with his gold.
- 80% Of All New Home Buyers In Irvine Are Chinese
When RealtyTrac released its latest home sales report, “which shows single family home and condo sales through August were on pace for an eight-year high nationwide and in 110 out of 204” it was something else that caught our eye. According to RealtyTrac president Daren Blomquist, “the continued strength in sales volume across a wide spectrum of markets in August indicates that shockwaves from recent global stock market instability have not weakened the housing recovery and in fact there is evidence that the instability has fueled more demand for U.S. real estate.”
Which was to be expected: as we have said for the past 4 years, one of the three pillars supporting US housing, or at least the very high end, is the money laundering of offshore hot money in the US, where courtesy of the NAR’s exemption from anti-money laundering provisions, wealthy foreigners can park any amount of cash in US housing without any questions asked. In August this was particularly acute because as Blomquist adds, “cash sales share was more pronounced in markets that have traditionally been magnets for foreign cash buyers, including Boston, Las Vegas, San Francisco, Seattle and New York.”
And here was the stunner in question: “We are seeing more globalization as Southern California has become a destination for international buyers,” said Mark Hughes, chief operating officer with First Team Real Estate, covering the Southern California market. “Eighty percent of new construction in Irvine last year was sold to Chinese buyers. International buyers are driving home prices up and sometimes out of reach for many local residents.“
You read that right, a whopping 80% of all new housing in Irvine was bought by Chinese.
Which prompted some follow up reading. This is what we found:
- California is the most popular U.S. destination for Chinese real estate buyers, according to Juwai.com, a Hong Kong-based property search engine.
- Chinese bought 32% of homes sold to foreign buyers in California, double the share sold to Canadians, according to an April 2014 survey by the California Association of Realtors. About 70 percent of international buyers pay cash, the survey showed.
- Buyers from Greater China, including people from Hong Kong and Taiwan, spent $22 billion on U.S. homes in the first quarter of 2014, up 72 percent from the same period in 2013 and more than any other nationality, the National Association of Realtors said yesterday in its annual report on foreign home purchases. That’s 24 cents of every dollar spent by international homebuyers, according to the survey of 3,547 real estate agents.
- “A lot of people are trying to hedge against a generally bearish outlook for the Chinese economy,” Hanemann said in a telephone interview. “Buying real estate overseas has been in the past limited to a relatively small group of wealthy individuals and sometimes government officials. But it’s become a much bigger trend, involving affluent middle-class people.”
- Affluent being the key word: Chinese buyers paid a median of $523,148 per transaction, compared with a U.S. median price of $199,575 for existing-home sales. While Canadians bought more houses than the Chinese, they spent less — a median of $212,500 per residence, for a total of $13.8 billion.
To be sure, the Chinese influx was felt particularly during 2014 when the first reverberations of the burst Chinese housing bubble were felt, and forced many to look to the US for parking capital for safety: “The uncertainties in China’s domestic market are contributing to a higher rate of growth in Chinese interest in U.S. property,” Andrew Taylor, co-chief executive officer of Juwai.com, said in an e-mail. “That interest began accelerating in the second quarter of 2014, in part because of China’s property slowdown.”
It remains to be seen if the recent modest uptick in Chinese housing transactions, if not prices, will lead to a capital reallocation by Chinese buyers out of California and back into China. But in the meantime, Chinese buyers have made numerous domestic housing markets inaccessible to average Amercians:
- Buyers from China are driving up prices and fueling new construction in Southern California areas such as Arcadia, a city of about 57,500 people with top-rated schools, a large Chinese immigrant community and an array of Chinese restaurants and markets.
The median home price in Arcadia’s 91006 ZIP code was $1.28 million in mid-2014, up 18.5 percent from a year earlier, according to research firm DataQuick.
- “About 90 percent of my buyers are from China,” said Peggy Fong Chen, a broker with Re/Max Holdings Inc., who sold 80 homes in Arcadia last year. “They want new construction. They want two levels. In China, it is considered a mansion if it has two levels.”
- More than three out of four buyers pay cash, said Chen, a native of Hong Kong who’s been selling real estate for 10 years. At least 20 percent are absentee owners who don’t have long-term visas yet. Many purchase houses for their children to attend high school or college, she said.
- Buyers from China and Asian-Americans purchased about 80 percent of the 47 houses sold at Tri Pointe Homes Inc.’s Arcadia at Stonegate community in Irvine, about 40 miles southeast of Los Angeles, according to Tom Mitchell, president of the Irvine-based builder.
- Almost half of the buyers paid cash for houses in the development, at prices starting at $1.16 million, he said. The company has been surprised by how word travels among overseas buyers. “A Chinese national bought one of our houses at Arcadia in Irvine after reading about it on a blog,” Tri Pointe CEO Doug Bauer said in a telephone interview. “It was a Chinese blog. We couldn’t even read it.”
Which brings us to the key issue: uncontrolled Chinese money laundering which is the primary reason for this capital exodus, and billions in Chinese “hot money” bidding up luxury US real estate into the stratosphere. We have discussed it extensively before, and here is bloomberg:
Some wealthy Chinese have come up with ways to evade the yearly $50,000 per-person limit on taking money out of the country so they can buy U.S. real estate, Yu said. Methods include laundering money through Macau casinos and cooking the books of import-export companies, he said.
“A lot of people over-invoice export proceeds, so they can park some money outside,” Ha Jiming, chief investment strategist for Goldman Sachs Group Inc.’s China investment management division, said at a Los Angeles conference in April.
Putting a bottom line on the capital outflows, according to the NAR, sales of U.S. houses to long-term foreign residents and non-resident buyers accounted for about 7 percent of the $1.2 trillion of existing-home transactions in just the first quarter of 2014.
So realistically, call it 10%, which means that mostly all cash foreign buyers are responsible for about $500 billion in US real estate all cash investment every year, of which anywhere between a third and a half is Chinese.
And there is your massive Chinese capital outflows in a nutshell, which incidentally is also the biggest threat facing China’s economy now that it has begun devaluing its currency and yet is desperate to avoid the capital flight from its economy.
Which makes us wonder: if asked what presidents Xi and Obama really discussed in private last week, a safe bet is it wasn’t computer hacking, nor artificial islands in the South China Sea, but how the US plans to curb the outflow of hot Chinese money into US real estate.
Which is a problem for the US, because thanks to Chinese capital flows, it means half a trillion dollars in capital flow right into the US economy via real estate every year. Call it 3% of GDP, roughly what the US growth rate should be. Xi is angry that this capital is leaving his economy; Obama is delighted.
How will this very critical issue be resolved remains to be seen but as we will note in a follow up post, China is already taking very aggressive steps to finally limit and halt altogether the epic money laundering that is sucking China’s economy dry and is leading to such dramatic outcomes as 80% of all buyers in a major US metro-area being Chinese.
- Saudi Arabia Seizes Iranian Ship "Laden With Missile Launchers, Anti-Tank Weapons"
With Syria making national headlines on a daily basis, it’s easy to forget about the Middle East’s other proxy war raging in Yemen.
For months, a Saudi-led coalition has been battling Iran-backed militants for control of the country which was effectively wrested from Mansour Hadi earlier this year when the Sauid-backed President was forced to flee to Riyadh as the Houthis advanced on Aden.
Sadly, Yemen has since descended into chaos, an embarrassment for the Obama administration which just a little over a year ago held the country up as an example of Washington’s successful counterterrorism efforts (no mention was made of the alleged covert cooperation between the government of Hadi’s predecessor Ali Abdullah Saleh and AQAP).
Between the Saudis, the UAE, and Qatar, the coalition has managed to push the Houthis back, but the human and cultural toll has been high. Riyadh and the Houthis routinely play headline hockey in an effort to play up or play down the number of civilian casualties that result from Saudi bombing runs and Sana’a, a UNESCO world heritage site, is gradually being decimated as coalition forces fight to take back the city. Last Thursday, a shoe bomber and an accomplice detonated themselves in a Shia mosque where the Houthis go to pray. The attack was claimed by Islamic State which is of course notable because this is the very same Islamic State that is fighting to destabilize Bashar al-Assad who, like the Houthis, is backed by Tehran. Iran-backed Shiite militias are also fighting ISIS in Iraq, an effort which is now set to benefit from cooperation with the Russian and Syrian armies.
The takeaway here is that Yemen, like Syria and Iraq, is a theatre for the regional and global proxy wars that have pitted the US, Saudi Arabia, Qatar, and to a lesser extent Washington’s European allies against a “nexus” comprised of Russia, Iran, Syria, and China with the latter having thus far only asserted itself via its Security Council veto.
What’s particularly interesting about this is the extent to which the traditional Western conception of who the “good guys” are and who the “bad guys” are has been turned on its head of late.
That is, Russia’s willingness to confront ISIS in a straightforward way (as opposed to through the use of various proxy armies who in many cases end up defecting and becoming extremists themselves) as well as the realization that the man once billed as the world’s number one state sponsor of terror, Qasem Soleimani, is seemingly far more interested in preserving the Mid-East BOP by using Iran’s Quds Force to combat Sunni extremism in Syria and Iraq than he is in facilitating attacks on the US and its allies, have left the world to question whether it is in fact the West that’s been the proximate cause of the turmoil in the region.
It’s with all of this in mind that we bring you the following story from WSJ who reports that on Saturday, the Saudis stopped an Iranian boat bound for Yemen that was “laden with missile launchers and anti-tank weapons, including firing guiding systems.” Here’s more:
A Saudi Arabia-led military coalition that has been fighting Iran-supported rebels in Yemen said Wednesday that it had stopped an Iranian boat carrying arms to the war-torn country.
The boat carried 14 Iranians and was laden with missile launchers and anti-tank weapons, the coalition said in a statement, including firing guiding systems.
It was seized around 1pm local time Saturday, Sept. 26 in the Arabian Sea, about 150 miles southeast of the Omani port of Salalah. Oman shares a border with Yemen.
The coalition said the boat is registered under the name Jan Mohammed Hut, an Iranian citizen. The vessel had a license from Iranian authorities to fish in those waters, the coalition said.
Saudi Arabia has been fighting Iran-supported Shiite Houthi rebels in Yemen since March, in a bid to restore exiled President AbedRabbo Mansour Hadi to power.
Politically Iran supports the Houthis, but denies supplying them with weapons.
There was no immediate response on Wednesday from Iran.
Saturday’s incident is the latest seizure of boats allegedly carrying Iranian arms bound for Yemen.
The U.S. Navy and Yemeni coast guard detained a vessel called the Jihan as it sailed from Iran into Yemeni territorial waters in 2013, according to a United Nations report. The boat was loaded with rockets, plastic explosives and other munitions a U.N. panel traced back to Iran.
It was unclear whether the arms were bound for Yemen or for the Houthis, although the ship’s crew was Yemeni and the shipment was arranged by a Yemeni businessman, the U.N. panel said.
The reason this is important is that it helps to provide context for the various conflicts unfolding throughout the Middle East.
The key thing to understand here is that the fighting in Yemen, Syria, and Iraq is all related and it all comes back to the existing balance of power as delineated above.
Russia’s official arrival on the scene in Syria means that Moscow is now prepared to defend this balance of power overtly, marking a step up from the dynamic that existed previously wherein, as exemplified by the story excerpted above, the powers that oppose the West were content with the “covert” support they could provide to their various proxy armies.
In short, now that Moscow has let the genie out of the bottle, it may not be long before both sides ditch the charade altogether, leading directly to a scenario that sees three proxy wars metamorphose into one outright armed conflict between the West and the Russia-Iran “nexus.”
- The Model X Debut
Early in 2013, I did a laudatory review of the Tesla Model S (at which time, if I had any sense, I would have loaded up on the then-$40 stock), and I continue to believe it is the best car I’ve ever had. Around the same time, I put $5,000 down to reserve my spot for the Tesla X SUV. This product has been delayed for a long, long time, but Elon Musk promised it would start shipping in “Q3 2015”. I cynically predicted he’d probably roll out one vehicle on September 30th, and I wasn’t too far off: he rolled it out the day before. That is, last night.
I got an invitation to the event, which was held at the Tesla Factory. It’s been many, many years since I’ve been to anything resembling a product intro, so I decided to go. I drove over the Dumbarton Bridge to Fremont, and I joined a fairly large crowd of other people who had also received invitations.
So we waited……….and waited………..and it got dark……
Then they finally let us in and, happily, there were unlimited free cocktails. I could get used to this!
And then, once again, we waited………and waited……….and it was obvious that, as with the Model X, things were “delayed.”
The event was supposed to start at 7;30, and it was getting close to 9. I was alone, but listening to other conversations, it was apparent to me people were running out of things to say to one another.
At long last, they let us into the room where the big event would be. At about 9 p.m., the loudspeaker announced “Mr. Elon Musk”, and he strolled on stage. I’ve got to tell you, he’s not the most fluid speaker on the planet, which surprised me. It seems I’m not the only one with this opinion.
He walked the audience through the car’s safety features, its rapid acceleration, its automatically-opening doors, and the air control. He proudly stated that the air filtration was so good, measurement equipment literally could not detect any pollen, bacteria, or viruses inside the vehicle. It is literally as clean as a hospital operating room, and in “Bio Weapon Defense System” mode (yes, I’m serious), you could literally just hop in your car and survive a terrorist attack.
The lengthy delay for the speech was somewhat irksome (although the free drinks helped pass the time), but some luminaries were pretty peeved.
Here’s a (not great quality) video I made for Musk demonstrating the car’s gimmicky gull-wings when parked between two other vehicles.
There’s no doubt that the Model X will be selling swiftly for a while, since there are already tens of thousands of people committed to doing so. The one and only topic Musk didn’t mention in his presentation was price (and no one bothered asking, since I guess this was a solidly upper-middle-class-or-above crowd) but there’s a finite number of people willing to spend six figures on a vehicle which, while spiffy, isn’t exactly gorgeous aesthetically, and it isn’t particularly large, either (I think the “SUV” moniker is stretching it a bit; it’s more like a somewhat bloated Model S).
I think Tesla’s product delays and high product prices are going to catch up with it, so I put on a small short position today. I’m looking forward to getting my X when it finally ships in a few months, but I don’t think this is the game-changer that the Model S was in 2012.
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