- America Has REPEATEDLY Committed War Crimes By Bombing Civilians
The U.S. criticized Russia for killing civilians in Syria.
But just last week, the U.S. intentionally bombed one of the only hospitals in Northeastern Afghanistan (run by Nobel prize-winner Doctors Without Borders), killing hundreds. This occurred 3 months after U.S.-backed Afghani special forces raided and threatened the hospital, and after the hospital had repeatedly given its gps coordinates to the U.S. military … and repeatedly called saying they were under attack.
And the Washington Post notes that incendiary bombs may have been used:
The AC-130U plane, circling above in the dark, raked the medical compound with bursts of cannon fire, potentially even using high explosive incendiary munitions, for more than an hour. The assault left at least 22 people dead, some of them burned to death.
It’s a war crime to bomb a hospital without giving adequate warning so patients can leave:
This is not the first time the U.S. has bombed civilian targets:
- In 1969 and 1970, the U.S. bombed several hospitals and a Red Cross facility in Cambodia
- On February 13, 1991, the U.S. purposefully targeted an air raid shelter near the Baghdad airport with two 2,000-pound laser-guided bombs, which punched through 10 feet of concrete and killed at least 408 Iraqi civilians.
- On April 23, 1999, NATO intentionally bombed a Serbian television station, killing 16. President Clinton said of the bombing: “Our military leaders at NATO believe … that the Serb television is an essential instrument of Mr. Milosevic’s command and control. … It is not, in a conventional sense, therefore, a media outlet. That was a decision they made, and I did not reverse it.” U.S. envoy Richard Holbrooke said right after the attack that it was “an enormously important and, I think, positive development.” Amnesty International noted it was “a deliberate attack on a civilian object and as such constitutes a war crime.”
- On October 16, 2001, the U.S. attacked the complex housing the International Committee of the Red Cross in Kabul, Afghanistan. After detailed discussions between the U.S. and the Red Cross about the location of all of its installations in the country, the U.S. bombed the same complex again two weeks later. The second attack destroyed warehouses clearly marked with the Red Cross emblem containing tons of food and supplies for hungry refugees
- On November 13, 2001, the U.S. bombed the Al Jazeera television bureau in Kabul.
- On April 8, 2003, the U.S. bombed the Al Jazeera bureau in Baghdad, killing a reporter. The British home secretary at the time subsequently revealed that – a few weeks before the attack – he had urged Prime Minister Tony Blair to bomb Al Jazeera’s transmitter in Baghdad.
- Also on April 8, 2003, a U.S. tank fired a shell at the 15th floor of the Palestine Hotel, where most foreign journalists were then staying. Two reporters were killed. The Committee to Protect Journalists found that the attack “was avoidable”
The U.S. has also carried out numerous war crimes by killing civilians with drone strikes. This includes “double tap” strikes which target rescuers attempting to save those injured by drone strikes, and “signature strikes” that kill people whose identities aren’t even known, based on metadata on their phones or their proximity to war zones.
And the U.S. has committed a slew of other war crimes, including:
- Carrying out terrorism … literally
- The use of depleted uranium, which can cause cancer and birth defects for decades (see this, this, this, this, this and this)
- The Pentagon sent one of the main US creators of the death squads in El Salvador into Iraq to set up paramilitary death squads and torture centers
None of this is intended to excuse any civilian casualties inflicted by Russia. But America should not throw stones in glass houses …
- The Menace Of Egalitarianism
Submitted by Llewellyn H. Rockwell Jr, via The Mises Institute,
This talk was delivered at the Dallas-Ft. Worth Mises Circle, “Against PC,” on October 3, 2015.
A sharp Martian visiting Earth would make two observations about the United States — one true, the other only superficially so.
On the basis of its ceaseless exercises in self-congratulation, the US appears to him to be a place where free thought is encouraged, and in which man makes war against all the fetters on his mind that reactionary forces had once placed there. That is the superficial truth.
The real truth, which our Martian would discover after watching how Americans actually behave, is that the range of opinions that citizens may entertain is rather more narrow than it at first appears. There are, he will soon discover, certain ideas and positions all Americans are supposed to believe in and salute. Near the top of the list is equality, an idea for which we are never given a precise definition, but to which everyone is expected to genuflect.
A libertarian is perfectly at peace with the universal phenomenon of human difference. He does not wish it away, he does not shake his fist at it, he does not pretend not to notice it. It affords him another opportunity to marvel at a miracle of the market: its ability to incorporate just about anyone into the division of labor.
Indeed the division of labor is based on human difference. Each of us finds that niche that suits our natural talents best, and by specializing in that particular thing we can most effectively serve our fellow man. Our fellow man, likewise, specializes in what he is best suited for, and we in turn benefit from the fruits of his specialized knowledge and skill.
And according to Ricardo’s law of comparative advantage, which Mises generalized into his law of association, even if one person is better than another at absolutely everything, the less able person can still flourish in a free market. For instance, even if the greatest, most successful entrepreneur you can think of is a better office cleaner than anyone else in town, and is likewise a better secretary than all the other secretaries in town, it would make no sense for him to clean his own office or type all of his own correspondence. His time is so much better spent in the market niche in which he excels that it would be preposterous for him to waste his time on these things. In fact, anyone looking to hire him as an office cleaner would have to pay him millions of dollars to compensate for drawing him away from the extremely remunerative work he would otherwise be doing. So even an average office cleaner is vastly more competitive in the office cleaning market than our fictional entrepreneur, since the average office cleaner can charge, say, $15 per hour instead of the $15,000 our entrepreneur, mindful of opportunity cost, would have to charge.
So there is a place for everyone in the market economy. And what’s more, since the market economy rewards those who are able to produce goods at affordable prices for a mass market, it is precisely the average person to whom captains of industry are all but forced to cater. This is an arrangement to celebrate, not deplore.
This is not how the egalitarians see it, of course, and here I turn to the work of that great anti-egalitarian, Murray N. Rothbard. Murray dealt with the subject of equality in part in his great essay “Freedom, Inequality, Primitivism, and the Division of Labor,” but really took it head on in “Egalitarianism as a Revolt Against Nature,” which serves as the title chapter of his wonderful book. It is from Murray that my own comments today take their inspiration.
The current devotion to equality is not of ancient provenance, as Murray pointed out:
The current veneration of equality is, indeed, a very recent notion in the history of human thought. Among philosophers or prominent thinkers the idea scarcely existed before the mid-eighteenth century; if mentioned, it was only as the object of horror or ridicule. The profoundly anti-human and violently coercive nature of egalitarianism was made clear in the influential classical myth of Procrustes, who “forced passing travellers to lie down on a bed, and if they were too long for the bed he lopped off those parts of their bodies which protruded, while racking out the legs of the ones who were too short.”
What are we to understand by the word equality? The answer is, we don’t really know. Its proponents make precious little effort to disclose to us precisely what they have in mind. All we know is that we’d better believe it.
It is precisely this lack of clarity that makes the idea of equality so advantageous for the state. No one is entirely sure what the principle of equality commits him to. And keeping up with its ever-changing demands is more difficult still. What were two obviously different things yesterday can become precisely equal today, and you’d better believe they are equal if you don’t want your reputation destroyed and your career ruined.
This was the heart of the celebrated dispute between the neoconservative Harry Jaffa and the paleoconservative M.E. Bradford, carried out in the pages of Modern Age in the 1970s. Equality is a concept that cannot and will not be kept restrained or nailed down. Bradford tried in vain to make Jaffa understand that Equality with a capital E was a recipe for permanent revolution.
Now, do egalitarians mean we are committed to the proposition that anyone is potentially an astrophysicist, as long as he is raised in the proper environment? Maybe, maybe not. Some of them certainly do believe such a thing, though. In 1930, the Encyclopaedia of the Social Sciences claimed that “at birth human infants, regardless of their heredity, are as equal as Fords.” Ludwig von Mises, by contrast, held that “the fact that men are born unequal in regard to physical and mental capabilities cannot be argued away. Some surpass their fellow men in health and vigor, in brain and aptitudes, in energy and resolution and are therefore better fitted for the pursuit of earthly affairs than the rest of mankind.” Did Mises commit a hate crime there, by the standards of the egalitarians? Again, we don’t really know.
Then there’s “equality of opportunity,” but even this common conservative slogan is fraught with problems. The obvious retort is that in order to have true equality of opportunity, sweeping government intervention is necessary. For how can someone in a poor household with indifferent parents seriously be said to have “equality of opportunity” with the children of wealthy parents who are deeply engaged in their lives?
Then there is equality in a cultural sense, whereby everyone is expected to ratify everyone else’s personal choices. The cultural egalitarians don’t really mean that, of course: none of them demand that people who dislike Christians sit down and learn Scholastic theology in order to understand them better. And here we discover something important about the whole egalitarian program: it’s not really about equality. It’s about some people exercising power over others.
At the University of Tennessee this fall, the Office for Diversity and Inclusion explained that traditional English pronouns, being oppressive to people who do not identify with the gender they were “assigned at birth,” ought to be replaced with something new. The diversity office recommends, as replacements for she, her, hers, and he, him, his, the following: ze [pronounced zhee], hir [here], hirs [heres]; ze [zhee], zir [zhere], zirs [zheres]; and xe [zhee], xem [zhem], xyr [zhere]. When approaching people for the first time, students were told, we should say something like, “Nice to meet you. What pronouns should I use?”
When the whole world burst out laughing at this proposal, the university was at pains to assure everyone that these were just suggestions. Of course, what are not suggestions are the thoughts all right-thinking people are expected to have about moral questions that have been decided for us by our media and political classes.
Another aspect of equality that’s been in the news in recent years is, of course, income inequality. We are told how terrible it is that some people should have so much more than others, but rarely if ever are we told how much (if any) extra wealth the egalitarian society would allow the better-off to have, or the non-arbitrary basis on which such a judgment could be rendered.
John Rawls was possibly the most influential political philosopher of the twentieth century, and he advanced a famous defense of egalitarianism in his book A Theory of Justice that attempted to answer this question (among others). If I may summarize his argument in brief, he claimed that we would choose an egalitarian society if, as we contemplated the rules of society we’d want to live under, we had no idea what our own position in that society would be. If we didn’t know if we would be male or female, rich or poor, or talented or untalented, we would hedge our bets by advocating a society in which everyone was as equal as possible. That way, should we be unlucky and enter the world without talents, or a member of a despised minority, or saddled with any other disability, we could still be assured that of a comfortable if not luxurious existence.
Rawls was willing to allow some degree of inequality, but only if its effect was to help the poor. In other words, doctors could be allowed to earn more money than other people if that financial incentive made them more likely to become doctors in the first place. If incomes were equalized, people would be less likely to go to the trouble of becoming doctors, and the poor would be deprived of medical care. So inequality could be allowed, but only on egalitarian grounds, not because people have the right to acquire and enjoy property without fear of expropriation.
Since no one in his right mind accepts full-blown egalitarianism, Rawls was bound to run into trouble. That trouble came in the form of his attempts to deal with equality between countries. Even the most dedicated egalitarian living in the First World doesn’t seriously favor an equalization of wealth between countries. College professors who teach the moral superiority of egalitarianism during the day want their wine and cheese parties at night.
So Rawls came up with a strained and unpersuasive argument that although inequality between persons was outrageous and could be justified only on the basis of whether it helped the poorest, inequality between countries was quite all right. He then proceeded to give reasons that inequality between countries was quite all right, even though these were the exact reasons he had said inequality between individuals was unacceptable.
Even if egalitarianism could be defended philosophically, there is the small matter of implementing it in the real world. Just one reason the egalitarian dream cannot be realized involves what Robert Nozick called the Wilt Chamberlain problem; James Otteson has called something like it the “day two problem.” In Chamberlain’s heyday, everyone enjoyed watching him play basketball. People gladly paid to watch him play. But suppose we begin with an equal distribution of wealth, and then everyone rushes out to watch Chamberlain play basketball. Many thousands of people willingly hand over a portion of their money to Chamberlain, who now becomes much wealthier than everyone else.
In other words, the pattern of wealth distribution is disturbed as soon as anyone engages in any exchange at all. Are we to cancel the results of all these exchanges and return everyone’s money to the original owners? Is Chamberlain to be deprived of the money people freely chose to gave him in exchange for the entertainment he provided?
But the reason the state holds up equality as a moral ideal is precisely that it is unattainable. We may forever strive for it, but we can never reach it. What ideology could be better, from the state’s point of view? The state can portray itself as the indispensable agent of justice, while at the same time drawing ever more power and resources to itself — over education, employment, wealth redistribution, and practically any area of social life or the economy you can name — in the course of pursuing the unattainable egalitarian program. “Equality cannot be imagined outside of tyranny,” said Montalembert. It was, he said, “nothing but the canonization of envy, [and it] was never anything but a mask which could not become reality without the abolition of all merit and virtue.”
In the course of working toward equality, the state expands its power at the expense of other forms of human association, including the family itself. The family has always been the primary obstacle to the egalitarian program. The very fact that parents differ in their knowledge, skill levels, and devotion to their offspring means that children in no two households can ever be raised “equally.”
Robert Nisbet, the Columbia University sociologist, openly wondered if Rawls would be honest enough to admit that his system, if followed to its logical conclusion, had to lead to the abolition of the family. “I have always found treatment of the family to be an excellent indicator of the degree of zeal and authoritarianism, overt or latent, in a moral philosopher or political theorist,” Nisbet said. He identified two traditions of thought in Western history. One he traced from Plato to Rousseau, that identified the family as a wicked barrier to the realization of true virtue and justice. The other, which viewed the family as a central ingredient in both liberty and order, he followed from Aristotle through Burke and Tocqueville.
Rawls himself appeared to admit that the logic of his argument tended in the direction of the Plato/Rousseau strain of thought, though he ultimately — and unpersuasively — drew back. Here are Rawls’s own words:
It seems that when fair opportunity (as it has been defined) is satisfied, the family will lead to unequal chances between individuals. Is the family to be abolished then? Taken by itself and given a certain primacy, the idea of equal opportunity inclines in this direction. But within the context of the theory of justice as a whole there is much less urgency to take this course.
Nisbet took little comfort in Rawls’s pathetic assurances. Can Rawls, he wondered,
long neglect the family, given its demonstrable relation to inequality? Rousseau was bold and consistent where Rawls is diffident. If the young are to be brought up in the bosom of equality, “early accustomed to regard their own individuality only in its relation to the body of the State, to be aware, so to speak, of their own existence merely as part of that of the State,” then they must be saved from what Rousseau refers to as “the intelligence and prejudices of fathers.”
The obsession with equality, in short, undermines every indicator of health we might look for in a civilization. It involves a madness so complete that although it flirts with the destruction of the family, it never stops to consider whether this conclusion might mean the whole line of thought may have been deranged to begin with. It leads to the destruction of standards — scholarly, cultural, and behavioral. It is based on assertion rather than evidence, and it attempts to gain ground not through rational argument but by intimidating opponents into silence. There is nothing honorable or admirable about any aspect of the egalitarian program.
Murray noted that pointing out the lunacy of egalitarianism was a good start, but not nearly enough. We need to show that the so-called struggle for equality is in fact all about state power, not helping the downtrodden. He wrote:
To mount an effective response to the reigning egalitarianism of our age, therefore, it is necessary but scarcely sufficient to demonstrate the absurdity, the anti-scientific nature, the self-contradictory nature, of the egalitarian doctrine, as well as the disastrous consequences of the egalitarian program. All this is well and good. But it misses the essential nature of, as well as the most effective rebuttal to, the egalitarian program: to expose it as a mask for the drive to power of the now ruling left-liberal intellectual and media elites. Since these elites are also the hitherto unchallenged opinion-molding class in society, their rule cannot be dislodged until the oppressed public, instinctively but inchoately opposed to these elites, are shown the true nature of the increasingly hated forces who are ruling over them. To use the phrases of the New Left of the late 1960s, the ruling elite must be “demystified,” “delegitimated,” and “desanctified.” Nothing can advance their desanctification more than the public realization of the true nature of their egalitarian slogans.
The only Rothbardian word missing from that stirring conclusion is one of Murray’s favorites: “de-bamboozle.” It is that, above all, that needs to be done. The Mises Institute has accomplished many things over the years: advancing scholarship through our academic conferences and scholarly journals, educating students in the economics of the Austrian school, and reaching out to the public to give them a free education worth vastly more than what many people spend six figures for. But put it all together, and it amounts to perhaps the greatest de-bamboozling effort of all time. Once you understand the economics of the Austrian school and the philosophy of liberty in the tradition of Rothbard, you never look at anything — not the state, the media, the central bank, the political class, nothing — the same way again.
Help us carry on our great de-bamboozling mission, as we devise more and more programs and outreach to the public, and provide a new generation of brilliant young scholars with the tools they need to resist and defy a regime that would intimidate us into silence. Their way is violence, envy, and destruction. Ours is peace, liberty, and creation. With your help, we can tear down the state’s benign facade, which has bamboozled so many, and reveal for all to see that the only winner in the state’s crusades is the state itself.
- Obama Defends The Failure Of His Syria Policy Before A Beligerent 60 Minutes
Yesterday, in a comprehensive takedown of Obama’s handling of the second Syrian proxy war in three years (which is not over yet), we summarized events as follows: “The Tragic Ending To Obama’s Bay Of Pigs: CIA Hands Over Syria To Russia.”
The facts, which are largely undisputed, confirm this: having achieved no progress “against ISIS”, the stated goal of US intervention in Syria, and no progress in kicking Assad out of office and starting the Qatar has pipeline to Europe, the real goal of US intervention in Syria, the top democrat on the House Intelligence Committee, Adam Schiff, said that Obama “is debating the merits of taking further action or whether they are better off letting Putin hang himself.”
By “hanging himself”, the democrat meant handing Syria over to the Kremlin on a silver platter aafter just a few short weeks of Russian military intervention in Syria which has crushed US supply routes to ISIS and other CIA-sponsored rebel groups, and once again – just like in 2013 – put a premature end to US attempts to overthrow yet another head of state.
Fast forward to today when in what may have been the most awkward 60 Minutes interview for Obama before the US nation, Steve Kroft asked Obama about Trump, about Hillary, but it was Obama’s take on the US loss in (and of) Syria and the Russian gains there, and everywhere else, that demonstrated two things.
The first is just how marginalized the US has suddenly become in the global arena, with an impotent and insolvent Europe behind its back for moral if no other support, opposing a suddenly ascendant Russian axis in the middle-east, one which has China’s backing, especially in the aftermath of the quite demonstrative US implementation of the TPP which is meant first and foremost to offset China’s rising trade influence in the region.
The second is the extent of Obama’s delusion, or perhaps it was merely his spin relying on the naivete of the US public when it comes to foreign affairs, about the abovementioned snubbing of a superpower that until recently nobody dared to challenge unilaterally in the global arena.
The full exchange is presented below. We still can’t decide if Kroft’s at times near-aggressive belligerence toward the president was actually genuine, or as revealed previously especially in the case of the 2011 60 Minutes interview of Julian Assange, the host was directly instructed by the administration on how to approach the topics at hand, and to make Obama squirm on purpose, so as to make the loss more palatable to the people of America.
* * *
Steve Kroft: The last time we talked was this time last year, and the situation in Syria and Iraq had begun to worsen vis-à-vis ISIS. You had just unveiled a plan to provide air support for troops in Iraq, and also some air strikes in Syria, and the training and equipping of a moderate Syrian force. You said that this would degrade and eventually destroy ISIS.
President Barack Obama: Over time.
Steve Kroft: Over time. It’s been a year, and–
President Barack Obama: I didn’t say it was going to be done in a year.
Steve Kroft: No. But you said…
President Barack Obama: There’s a question in here somewhere.
Steve Kroft: There’s a question in here. I mean, if you look at the situation and you’re looking for progress, it’s not easy to find. You could make the argument that the only thing that’s changed really is the death toll, which has continued to escalate, and the number of refugees fleeing Syria into Europe.
President Barack Obama: Syria has been a difficult problem for the entire world community and, obviously, most importantly, for the people of Syria themselves that have been devastated by this civil war, caught between a brutal dictator who drops barrel bombs on his own population, and thinks that him clinging to power is more important than the fate of his country. And a barbaric, ruthless organization in ISIL and some of the al Qaeda affiliates that are operating inside of Syria. And what we’ve been able to do is to stall ISIL’s momentum to take away some of the key land that they were holding, to push back, particularly in Iraq against some population centers that they threatened. And, in Syria, we’ve been able to disrupt a number of their operations. But what we have not been able to do so far, and I’m the first to acknowledge this, is to change the dynamic inside of Syria and the goal here has been to find a way in which we can help moderate opposition on the ground, but we’ve never been under any illusion that militarily we ourselves can solve the problem inside of Syria.
Steve Kroft: I want us to take some of these things one by one. You mentioned an awful lot of things. One, the situation with ISIS, you’ve managed to achieve a stalemate. So what’s going to happen to ISIS?
President Barack Obama: Well, over time–
Steve Kroft: I mean, they have to be– somebody has to take them on. I mean, what’s going on right now is not working. I mean, they are still occupying big chunks of Iraq. They’re still occupying a good chunk of Syria. Who’s going to get rid of them?
President Barack Obama: Over time, the community of nations will all get rid of them, and we will be leading getting rid of them. But we are not going to be able to get rid of them unless there is an environment inside of Syria and in portions of Iraq in which local populations, local Sunni populations, are working in a concerted way with us to get rid of them.
Steve Kroft: You have been talking about the moderate opposition in Syria. It seems very hard to identify. And you talked about the frustrations of trying to find some and train them. You got a half a billion dollars from Congress to train and equip 5,000, and at the end, according to the commander CENTCOM, you got 50 people, most of whom are dead or deserted. He said four or five left?
President Barack Obama: Steve, this is why I’ve been skeptical from the get go about the notion that we were going to effectively create this proxy army inside of Syria. My goal has been to try to test the proposition, can we be able to train and equip a moderate opposition that’s willing to fight ISIL? And what we’ve learned is that as long as Assad remains in power, it is very difficult to get those folks to focus their attention on ISIL.
Steve Kroft: If you were skeptical of the program to find and identify, train and equip moderate Syrians, why did you go through the program?
President Barack Obama: Well, because part of what we have to do here, Steve, is to try different things. Because we also have partners on the ground that are invested and interested in seeing some sort of resolution to this problem. And–
Steve Kroft: And they wanted you to do it.
President Barack Obama: Well, no. That’s not what I said. I think it is important for us to make sure that we explore all the various options that are available.
Steve Kroft: I know you don’t want to talk about this.
President Barack Obama: No, I’m happy to talk about it.
Steve Kroft: I want to talk about the– this program, because it would seem to show, I mean, if you expect 5,000 and you get five, it shows that somebody someplace along the line did not– made– you know, some sort of a serious miscalculation.
President Barack Obama: You know, the– the– Steve, let me just say this.
Steve Kroft: It’s an embarrassment.
President Barack Obama: Look, there’s no doubt that it did not work. And, one of the challenges that I’ve had throughout this heartbreaking situation inside of Syria is, is that– you’ll have people insist that, you know, all you have to do is send in a few– you know, truckloads full of arms and people are ready to fight. And then, when you start a train-and-equip program and it doesn’t work, then people say, “Well, why didn’t it work?” Or, “If it had just started three months earlier it would’ve worked.”
Steve Kroft: But you said yourself you never believed in this.
President Barack Obama: Well– but Steve, what I have also said is, is that surprisingly enough it turns out that in a situation that is as volatile and with as many players as there are inside of Syria, there aren’t any silver bullets. And this is precisely why I’ve been very clear that America’s priorities has to be number one, keeping the American people safe. Number two, we are prepared to work both diplomatically and where we can to support moderate opposition that can help convince the Russians and Iranians to put pressure on Assad for a transition. But that what we are not going to do is to try to reinsert ourselves in a military campaign inside of Syria. Let’s take the situation in Afghanistan, which I suspect you’ll ask about. But I wanted to use this as an example.
Steve Kroft: All right. I feel like I’m being filibustered, Mr. President.
President Barack Obama: No, no, no, no, no. Steve, I think if you want to roll back the tape, you’ve been giving me long questions and statements, and now I’m responding to ’em. So let’s– so– if you ask me big, open-ended questions, expect big, open-ended answers. Let’s take the example of Afghanistan. We’ve been there 13 years now close to 13 years. And it’s still hard in Afghanistan. Today, after all the investments we have there, and we still have thousands of troops there. So the notion that after a year in Syria, a country where the existing government hasn’t invited us in, but is actively keeping us out, that somehow we would be able to solve this quickly– is–
Steve Kroft: We didn’t say quickly.
President Barack Obama: –is– is– is an illusion. And– and–
Steve Kroft: Nobody’s expecting that, Mr. President.
President Barack Obama: Well, the– no, I understand, but what I’m– the simple point I’m making, Steve, is that the solution that we’re going to have inside of Syria is ultimately going to depend not on the United States putting in a bunch of troops there, resolving the underlying crisis is going to be something that requires ultimately the key players there to recognize that there has to be a transition to new government. And, in the absence of that, it’s not going to work.
Steve Kroft: One of the key players now is Russia.
President Barack Obama: Yeah.
Steve Kroft: A year ago when we did this interview, there was some saber-rattling between the United States and Russia on the Ukrainian border. Now it’s also going on in Syria. You said a year ago that the United States– America leads. We’re the indispensible nation. Mr. Putin seems to be challenging that leadership.
President Barack Obama: In what way? Let– let’s think about this– let– let–
Steve Kroft: Well, he’s moved troops into Syria, for one. He’s got people on the ground. Two, the Russians are conducting military operations in the Middle East for the first time since World War II–
President Barack Obama: So that’s–
Steve Kroft: —bombing the people– that we are supporting.
President Barack Obama: So that’s leading, Steve? Let me ask you this question. When I came into office, Ukraine was governed by a corrupt ruler who was a stooge of Mr. Putin. Syria was Russia’s only ally in the region. And today, rather than being able to count on their support and maintain the base they had in Syria, which they’ve had for a long time, Mr. Putin now is devoting his own troops, his own military, just to barely hold together by a thread his sole ally. And in Ukraine–
Steve Kroft: He’s challenging your leadership, Mr. President. He’s challenging your leadership–
President Barack Obama: Well Steve, I got to tell you, if you think that running your economy into the ground and having to send troops in in order to prop up your only ally is leadership, then we’ve got a different definition of leadership. My definition of leadership would be leading on climate change, an international accord that potentially we’ll get in Paris. My definition of leadership is mobilizing the entire world community to make sure that Iran doesn’t get a nuclear weapon. And with respect to the Middle East, we’ve got a 60-country coalition that isn’t suddenly lining up around Russia’s strategy. To the contrary, they are arguing that, in fact, that strategy will not work.
Steve Kroft: My point is– was not that he was leading, my point is that he was challenging your leadership. And he has very much involved himself in the situation. Can you imagine anything happening in Syria of any significance at all without the Russians now being involved in it and having a part of it?
President Barack Obama: But that was true before. Keep in mind that for the last five years, the Russians have provided arms, provided financing, as have the Iranians, as has Hezbollah.
Steve Kroft: But they haven’t been bombing and they haven’t had troops on the ground–
President Barack Obama: And the fact that they had to do this is not an indication of strength, it’s an indication that their strategy did not work.
Steve Kroft: You don’t think–
President Barack Obama: You don’t think that Mr. Putin would’ve preferred having Mr. Assad be able to solve this problem without him having to send a bunch of pilots and money that they don’t have?
Steve Kroft: Did you know he was going to do all this when you met with him in New York?
President Barack Obama: Well, we had seen– we had pretty good intelligence. We watch–
Steve Kroft: So you knew he was planning to do it.
President Barack Obama: We knew that he was planning to provide the military assistance that Assad was needing because they were nervous about a potential imminent collapse of the regime.
Steve Kroft: You say he’s doing this out of weakness. There is a perception in the Middle East among our adversaries, certainly and even among some of our allies that the United States is in retreat, that we pulled our troops out of Iraq and ISIS has moved in and taken over much of that territory. The situation in Afghanistan is very precarious and the Taliban is on the march again. And ISIS controls a large part of Syria.
President Barack Obama: I think it’s fair to say, Steve, that if–
Steve Kroft: It’s– they– let me just finish the thought. They say your–
President Barack Obama: You’re–
Steve Kroft: —they say you’re projecting a weakness, not a strength–
President Barack Obama: –you’re saying “they,” but you’re not citing too many folks. But here–
Steve Kroft: No, I’ll cite– I’ll cite if you want me, too.
President Barack Obama: –here– yes. Here–
Steve Kroft: I’d say the Saudis. I’d say the Israelis. I’d say a lot of our friends in the Middle East. I’d say everybody in the Republican party. Well, you want me to keep going?
President Barack Obama: Yeah. The– the– if you are– if you’re citing the Republican party, I think it’s fair to say that there is nothing I’ve done right over the last seven and a half years. And I think that’s right. It– and– I also think what is true is that these are the same folks who were making an argument for us to go into Iraq and who, in some cases, still have difficulty acknowledging that it was a mistake. And Steve, I guarantee you that there are factions inside of the Middle East, and I guess factions inside the Republican party who think that we should send endless numbers of troops into the Middle East, that the only measure of strength is us sending back several hundred thousand troops, that we are going to impose a peace, police the region, and– that the fact that we might have more deaths of U.S. troops, thousands of troops killed, thousands of troops injured, spend another trillion dollars, they would have no problem with that. There are people who would like to see us do that. And unless we do that, they’ll suggest we’re in retreat.
Steve Kroft: They’ll say you’re throwing in the towel–
President Barack Obama: No. Steve, we have an enormous presence in the Middle East. We have bases and we have aircraft carriers. And our pilots are flying through those skies. And we are currently supporting Iraq as it tries to continue to build up its forces. But the problem that I think a lot of these critics never answered is what’s in the interest of the United States of America and at what point do we say that, “Here are the things we can do well to protect America. But here are the things that we also have to do in order to make sure that America leads and America is strong and stays number one.” And if in fact the only measure is for us to send another 100,000 or 200,000 troops into Syria or back into Iraq, or perhaps into Libya, or perhaps into Yemen, and our goal somehow is that we are now going to be, not just the police, but the governors of this region. That would be a bad strategy Steve. And I think that if we make that mistake again, then shame on us.
* * *
And just like that the US foray in Syria is unofficially over.
The sad thing is that for all the fake posturing by both Kroft and Obama, the US may still very well make this mistake and send 100,000 or 200,000 troops under the leadership of the Nobel Peace Prize winner, especially if our assessment of what the US withdrawal from the middle-east means for the upcoming dramatic shift in the regional balance of power.
* * *
The rest of the interview is primarily focused on domestic affairs, i.e., Trump, Hillary’s emails and Biden’s latest presidential run, which for the purpose of this post or the opinions coming from a lame duck president, are irrelevant.
At the end of the interview, Kroft asks Obama if he’s glad he can’t run for president again. Obama says he feels a mixture of satisfaction at what he’s accomplished and a desire to still do more.
Kroft then asks him: “Do you think if you ran again, could run again, and did run again, you would be elected?”
“Yes,” says Obama, without missing a beat.
Judging by the “changing” IQ landscape in the US over the past eight years, the golfer-in-chief well be right.
Because just as the Obama was saying this, the following tweet hit the tape:
After nearly 5 hours at Torrey Pines in La Jolla, CA., Pres Obama has departed the golf course.
— Mark Knoller (@markknoller) October 12, 2015
Somewhere Putin is laughing.
- Ruble, Lira, & Ringgit Tumble On USD, Yuan Gains As PBOC States "China Correction Nearly Over"
After surging stronger for 2 weeks, EM FX is starting to lose ground in early Asia trading following Fischer's comments Friday. The biggest losers so far are Turkish Lira, Russian Ruble, and Malaysian Ringgit which has dropped over 1% in early Asia trading – its biggest drop in a month. China expanded its regulatory crackdown to 11 more firms for "illegal stock operations" – i.e. selling – bringing the total to 41 firms. The PBOC Deputy Governor tells anyone who will listen that "China's market correction is nearly over," following the IMF annual meetings – "China's economy is basically stable" – and Chinese stocks are modestly higher in the pre-open (with Dow futures -40pts). Yuan at 2mo highs after strengthening 7 days in a row.
After a couple of weeks of serious strength, EM FX is leaking back lower against the USD…
With Lira, Ruble, and Ringgit the biggest losers for now…
- *RINGGIT FALLS 1.1% TO 4.1795 PER DOLLAR
- The dollar reasserted itself, snapping an eight-day rally in Australia’s currency after Federal Reserve Vice Chairman Stanley Fischer joined the chorus touting a potential U.S. interest-rate hike by year end. Australian stocks fell with U.S. index futures following the best week for global equities since 2011.
* * *
Exceited by comments on China "managing:" to avoid a hard landing dureing discussions at The IMF's annual meeting
The Chinese regulatory crackdown begins again…
CHINA CSRC HOLDS HEARING FOR ILLEGAL STOCK OPERATIONS: XINHUA
China Securities Regulatory Commission (CSRC) has held a two-day hearing for 11 illegal cases of reducing share holding.
It was the first time that the CSRC dealt with cases involving such amount of illegal share-holding reductions in one hearing.
The regulator asked big shareholders of public companies not to sell shares in an effort to keep the market stable in the past months.
Altogether 41 such cases had been investigated, and the 11 cases at the hearing on Friday and Saturday were suspected of similar operations, the commission said.
All the persons concerned admitted the facts at the hearing, but requested less punishment, claiming their operations tended to lower financial cost and made no impacts to the stock market, while they had carried out timely remedial measures.
Margin debt rises again…
- *SHANGHAI MARGIN DEBT BALANCE REBOUNDS FOR SECOND DAY
And stocks are modestly bid in the pre-open…
- *FTSE CHINA A50 OCTOBER FUTURES RISE 1% IN SINGAPORE
- PBoC Dep Gov: China’s Market Correction Nearly Over — RTRS
- *NDRC OFFICIAL LIU HE SAYS CHINA ECONOMY BASICALLY STABLE
And with the Yuan at 2-month highs, PBOC fixes the Yuan stronger for the 7th day in a row….
- *CHINA SETS YUAN REFERENCE RATE AT 6.3406 AGAINST U.S. DOLLAR
A top Chinese central banker said a “persistent” weakening of the yuan would be inconsistent with the fundamentals of the world’s second-biggest economy, and the country is committed to making its currency regime more flexible and market based.
“As wide-ranging structural reforms are being carried out, the Chinese economy will become more balanced and sustainable,” People’s Bank of China Deputy Governor Yi Gang said Friday in a statement at the IMF annual meetings in Lima. Reforms to make the yuan more market-determined will make its exchange rate more flexible, “floating around the equilibrium level in both directions.”
* * *Charts: Bloomberg
- Moscow Demands Britain Explain "Green Light To Shoot Down Russian Jets"
The chances of escalation from a proxy war to outright war just went to 11 on the Spinal Tap amplifier of sabre-rattling. A day after British and NATO pilots were reportedly given the green light to take drastic action against Russian fighter jets if they come under threat during missions over Iraq, Interfax reports that the Russian Defense Ministry has demanded clarification. Senior defence sources say it is just a matter of time before our fighters are involved in a deadly confrontation with Russian jets.
The Chinese, it appears, are wholeheartedly behind Putin's efforts, judging by the following puff-piece from Xinhua (unofficially China's government mouthpiece)…
Russia's recent military intervention in the Syrian war in the form of airstrikes and missile attacks aimed both at supporting the government of President Bashar Al-Assad in combatting the Islamic State (IS) has reaped initial gains.
Russia's bombing campaign in Syria, which began on Sept. 30, has strengthened the Syrian government, laying the foundation for a dialogue with all countries concerned to come up with solutions that could drag Syria out of the internal conflict that has lasted for more than four years.
According to Russia Today, Russia started its bombing campaign in Syria with a goal to provide air support to the government troops in fighting various terrorist groups, primarily the IS.
Russian air strikes hit 55 Islamic State group targets in Syria in the past 24 hours, the defense ministry said Saturday, as Moscow ramped up its military campaign in the war-torn country.
Russia's air force has attacked a total of 112 targets since the start of the military actions.
On Thursday, Syrian government troops launched large-scale ground offensives under the cover of Russia's repeated air strikes. At the same time, Russia launched 26 cruise missiles from the Caspian Sea and destroyed 11 IS targets.
Syrian political analyst Osama Dannura said Russia's involvement in the Syrian conflict has upset the initial planning of Western powers that have their minds bent on toppling the Assad government.
The West's strategic shortcomings were demonstrated by the disastrous 500 million-U.S.-dollar program to train and arm moderate rebels, which generated only a handful of fighters, many of whom surrendered or were captured almost immediately. The scheme was finally scrapped on Friday.
The reason why the U.S.-coalition has failed to deal a blow to the IS, according to Syrian political analyst Maher Ihsan, is a lack of offensives by ground troops. Besides, while attacking the IS, the United States is also offering the opposition rebels assistance including weapons, most of which end up into the hands of IS fighters.
In an interview with Iranian television broadcast on Sunday, al-Assad said a campaign of Western and Arab airstrikes against IS targets in Iraq and Syria has been counterproductive and terrorism has spread in terms of both territory and new recruits.
Around 40 percent of the IS infrastructure in Syria has been destroyed in just one week, Syria's Ambassador to Russia Riad Haddad said on Wednesday.
British and Nato pilots have been told to take the drastic action if they are fired on by Vladimir Putin's air force during missions over Iraq.
The move comes after British ministers warned Russia had made the situation in the Middle East "much more dangerous".
Senior defence sources say it is just a matter of time before our fighters are involved in a deadly confrontation with Russian jets.
One source said: "We need to protect our pilots but at the same time we're taking a step closer to war. It will only take one plane to be shot down in an air-to-air battle and the whole landscape will change. "
RAF pilots have been told to avoid contact with Russian jets at all costs and both US and British mission control teams will do their best to keep them apart.
But the pilots have been warned they must be prepared to fire on Russian jets if their lives depend on it.
One source said: "No one knows what the Russians will do next. We do not know how they will respond if they come into contact with a Western jet.
"When planes are flying at supersonic speeds the airspace gets crowded very quickly. There could be a collision or a Russian pilot might be mistakenly shot down. "
Russia has asked the British defense attache in Moscow to clarify media reports that British pilots had been given permission to attack Russian jets if they are fired on whilst flying sorties over Iraq, Interfax news agency reported on Sunday.
The British attache said he would submit an official response in the near future, RIA news agency reported.
* * *
One wonders just how far US, NATO "leadership" are willing to go to 'expose' Putin's evil intent? Especially in light of China's official mouthpiece (Xinhua News) reporting the following…
"The Russians have shown a naval capacity that was not expected," said Thomas Gomart, head of the French Institute for Foreign Relations, adding that Russia is "challenging the West's aerial supremacy."
Moscow offered on Tuesday to resume talks with Washington to avoid any misunderstanding concerning its airstrike operation, as well as to discuss ways to avoid conflicts between the United States and Russian warplanes over Syria.
Washington also said on Saturday that it would resume talks with Moscow to avoid accidents in the skies over the war-torn country.
- "Maybe It's Not The Guns… Maybe It's The People Holding The Guns"
Submitted by Mac Slavo via SHTFPlan.com,
If the only gun violence statistics you see are disseminated by the mainstream media or left-wing anti-Second Amendment groups, then in all likelihood you are horrified by America’s murder culture.
But what if what we’re being sold as truth is merely a means to achieve an agenda focused on seeing the American people totally disarmed?
In the following must-see video report from Truth Revolt, host Bill Whittle shows the reality of America’s per capita murder rates.
Though we understand that a cranial rectal inversion may be their immediate response for fear of admitting the truth, we strongly encourage you to share this with those who may not have the full picture:
“Maybe It’s Not the Guns… Maybe It’s the People Holding the Guns”
In a recent article Dr. Ignatius Piazza from the Front Sight Firearms Training Institute examines the reasons behind the push against personal firearm ownership in America and why anti-gun proponents like President Barack Obama refuse to address other deadly issues that cause far more deaths than guns:
Guns are not responsible for the 10 deaths at Umpqua College yesterday any more than cars are responsible for the 395 deaths over Labor Day weekend. That’s right, 395 men, women and children were killed over Labor Day in car accidents.
Why didn’t Obama hold a press conference the day after Labor Day, expressing, his grief and anger over the senseless killing of nearly 400 people on our highways during Labor Day Weekend?
Why didn’t Obama ask the American people to do something by pressuring their elected representatives to change our laws?
Why didn’t Obama take a swipe at the car manufacturers and car dealers for building and selling cars to the American people knowing full well that EVERY YEAR, over 32,000 people are killed in car accidents? Yes, 32,000 EVERY YEAR.
Why didn’t Obama plead with the American people to make a change and pressure Congress to pass laws that forbid the sale and consumption of alcohol, recreational drugs, and pharmaceutical drugs, all of which dramatically contribute to 87 highway deaths PER DAY?
Why didn’t Obama sign an Executive Order forever banning Labor Day. After all it would save nearly 400 people EVERY YEAR.
WHY? Because banning the manufacture and sale of automobiles, or alcohol, or recreational and pharmaceutical drugs, or getting rid of all the national holidays, does not fit in his Socialist agenda to disarm the American public so he doesn’t give a shit about the 32,000 innocent lives that are lost EVERY YEAR on our highways.
Full Report: Show your anti-gun neighbor this… #1 With a Bullet
It should be obvious that guns are not the problem. As Ignatius Piazza and Bill Whittle note, it’s the people holding the guns that are the problem.
Banning firearms or imposing unreasonable restrictions not only goes against the spirit and letter of Constitutional Law, but increases the odds that innocent Americans will become targets of violent criminals like we have seen in “gun-free” cities such as Detroit and Chicago.
We realize that if you are a left-leaning gun grabber you could argue that we are merely throwing out Republican and Libertarian talking points, so don’t take our word for it.
Maybe the warnings from this little known author and Statesman will convince you:
“Laws that forbid the carrying of arms…disarm only those who are neither inclined nor determined to commit crimes. Such laws make things worse for the assaulted and better for the assailants; they serve rather to encourage than prevent homicides, for an unarmed man may be attacked with greater confidence than an armed one.”
Thomas Jefferson
We’ll be happy to give up our guns… just as soon as former New York’ Mayor Michael Bloomberg, Chicago Mayor Rahm Emanuel and President Barack Obama remove their ARMED security details.*
Lead by example, right?
(*Note: This statement was made in jest. We don’t plan on giving up our guns even if the President and aforementioned Mayors were to give up their armed security details.)
- What The "Real F**king News" Would Look Like
Tired of the same old government-directed, politically-correct mainstream media diatribe of ‘everything is awesome’, good-guy-bad-guy, “this is what to think” news? Well this angry ‘reporter’ exposes what the real news would sound like.
Note: Jonathan Pie is a satirist
- Fed Quietly Revises Total US Debt From 330% To 350% Of GDP, After "Discovering" Another $2.7 Trillion In Debt
Everyone has seen the chart of “Total Credit Market Instruments“, which as of its most recent update on March 31, 2015, was just over $59 trillion, or 330% of US GDP.
For those who have not seen it, as well as for those who are familiar with this chart, take a long look, because this is the last update of this particular data series, pulled straight from the Fed’s Z.1 Flow of Funds (section L.1), you will ever see.
So did the Fed spontaneously terminate the reporting of what until the second quarter’s update of the Flow of Funds, was the most comprehensive official summary of Household, Financial, Corporate and Government debt in existence? And if so why?
Many Fed watchers assumed that this is precisely what happened, and indeed, searching high and low for the infamous L.1 Section revealed nothing.
We can only assume that the vocal outcry that emerged in the aftermath of the Fed’s release of its Q2 Flow of Funds statement missing this most critical of data sets on September 18, was so loud that three weeks later, this past Friday on October 9, the Fed released an official follow up explanation what exactly happened.
Here is what happened to the missing so very critical data series, straight from the horse’s mouth:
Q: In the September 18, 2015 release of the Z.1 Financial Accounts of the United States, some tables in the summary section on credit market instruments seem to have disappeared. What happened to these tables and where can I find the equivalent data series?
With the September 18, 2015 Z.1 release, the classic presentation of the instrument category “credit market instruments” has been discontinued and replaced with two new instrument categories, “debt securities” and “loans”. Reporting debt securities and loans separately brings the Financial Accounts more in line with the international standards for national accounts. The debt securities instrument includes open market paper, Treasury securities, agency- and GSE-backed securities, municipal securities, and corporate and foreign bonds. The new loans instrument includes depository loans not elsewhere classified, other loans and advances, mortgages, and consumer credit. Together, debt securities plus loans include all of the financial assets or liabilities previously included in credit market instruments. While the underlying instrument categories that make up the sum of debt securities and loans are the same as those in old “credit market instruments” concept, changes to a few of these categories make the new sum of debt securities and loans larger than in previous publications.
This change has had three major impacts on the table structure of the publication: (1) summary tables focusing on “credit market instruments” have been eliminated; (2) remaining summary tables have been renumbered; and (3) new instrument tables for debt securities (tables F.208 and L.208) and loans (tables F.214 and L.214) have been created.
That’s the “what”, as for the why, note what the Fed said above: “the new sum of debt securities and loans larger than in previous publications.” Which means that not only did the Fed stop reporting a consolidated total debt series, it admits that the actual debt was higher. Some $2.7 trillion higher.
Oops.
Here is the Fed’s mea culpa on that particular topic:
Q: Why is the level of total debt outstanding in the September 18, 2015 release of the Z.1 Financial Accounts of the United States so much higher than it was in the previous Z.1 release?
Total debt outstanding was revised upwards due to methodology changes to both Treasury securities and security credit. Total debt outstanding is now the sum of two new instrument categories: debt securities (table L.208) and loans (table L.214). The aggregate of these instrument categories was previously called credit market instruments.
Treasury securities, part of the debt securities instrument category, now include nonmarketable Treasury securities held by federal government defined benefit retirement plans (FL343061145). The inclusion of federal government defined benefit retirement plans resulted in an upward revision to the level of federal government debt of about $1.408 trillion for 2014:Q4. See the published FEDS Note “Federal Government Defined Benefit Retirement Plans” for more details http://www.federalreserve.gov/econresdata/notes/feds-notes/2015/federal-….
In the domestic financial sector, borrowing previously classified as security credit liabilities (see release highlights) are now included as part of loans for the securities brokers and dealers sector. These are: (1) U.S.-chartered depository institutions loans for purchasing or carrying securities (FL763067003); (2) foreign banking offices in the U.S. loans for purchasing or carrying securities (FL753067003); and (3) Households and nonprofit organizations cash accounts at brokers and dealers (FL153067005). The revision to broker dealer debt for 2014:Q4 was roughly $962 billion.
Similarly, borrowing previously classified as security credit liabilities of the household sector are now classified as loan liabilities. Margin accounts at brokers and dealers (FL663067003) are now included in the household sector’s other loans and advances instrument category. This change resulted in an upward revision of $370 billion to the outstanding amount of household sector loans for 2014:Q4.
The bottom line:
The total revision to the level of debt outstanding (debt securities plus loans) due to these methodology changes is approximately $2.74 trillion 2014:Q4.
And so the Fed has managed to kill two birds with one stone: it no longer provides a simple, one-stop-shop way to reconcile the total US credit stock, and it quietly boosted total US consolidated credit by $2.7 trillion to $62.1 trillion as of June 30, 2015.
Luckily, for those who still care about such trivial memorandum items as “data” – made up as it may be – and would like to keep track of total US credit exposure, now better known as total debt and total loans, they can simply add up the two line items, with debt (found here) and loans (found here).
This is how the old and new data look like: as noted, the consolidated total has risen by $2.7 trillion as of March 31, the last time the Fed reported the “old” series, and is currently a total of $62.1 trillion.
Not surprisingly, with GDP not revised higher, it means that the two most important data sets for the US economy, total debt (or credit) however defined, and total GDP, now look as follows:
The end result is that the ratio of Consolidated Credit to GDP, has quietly risen from 330% to 350%, without anyone in the broader public saying a word and without any of the official institutions, so seemingly concerned about the total stock of global debt, even noticing. And why should they: the S&P500 is back over 2000 so all is well.
- Japanese Firms Admit Abenomics Failed, Government Now "Left Trying To Redistribute Wealth"
Do not believe in official statistics, Japanese retailers seem to be saying, as they cut earnings forecasts and warn of lackluster consumer spending, a key growth engine for Japan at a time when exports and factory output are stalling. Despite government statistics claining a 2.9% rise in household spending, Reuters reports Japanese retailers exclaimed "Consumer spending has ground to a halt," as Japan heads for a quintuple dip recession. Amid falling wages and higher costs, on apparel maker warned "shoppers are tightening their purse strings."
Abenomics is not working…
"Consumer spending has ground to a halt," said Noritoshi Murata, president of Seven & i Holdings (3382.T). "There are a lot of concerns about the global economy and not many positives for consumption. Weak spending could continue into the second half of the fiscal year."
Seven & i, which operates Japan's ubiquitous 7-Eleven convenience stores, on Oct. 8 trimmed its full-year profit forecast by 1.6 percent to 367 billion yen ($3.05 billion) and cut its revenue forecast by 3.9 percent to 6.15 trillion yen, triggering a fall in its shares in Tokyo.
As Reuters reports, shortly after Abe took office late in 2012, the wealthy cashed in on a stock rally and went shopping. Unions got the pay increases they asked for, and companies started raising retail prices.
Since then, the monetary and fiscal measures taken by Abe to rekindle Japan's economy have delivered uneven results.
A sales tax hike last year to 8 percent from 5 percent helped tip the economy into a brief recession.
Now, the world's third-largest economy is at risk of falling into its fourth recession in the past five years as exports, factory output and consumer spending stumble.
Abe had a bold agenda of ending deflation and knocking down the barriers to growth, but many economists say the requisite policies never really materialized.
Some economists worry consumer spending is now stuck in a prolonged period of very low growth.
The main problem is wages are not rising fast enough to keep pace with rising food prices, and consumers are starting to cut back on other goods…
Real wages, adjusted for inflation, rose 0.5 percent in July from a year earlier. That was the first gain in 27 months. But wage growth subsequently slowed to 0.2 percent in August, and summer bonuses fell from last year, government data shows.
Another problem is more and more workers are getting stuck in jobs with low pay. Part-time and irregular workers comprised a record 37.4 percent of the workforce last year, according to the National Tax Bureau. Irregular workers earn on average less than half of what regular full-time workers earn, tax data show.
The third problem is the government plans to raise the nationwide sales tax again, to 10 percent in 2017 from 8 percent, and households are already changing their behavior.
And now the retail sector is adapting to a return to more subdued household spending.
"Some companies are starting to realize they've actually driven away some customers by raising retail prices," said Norio Miyagawa, senior economist at Mizuho Securities.
"The government's initial growth strategy did not really expand the pie. Now the government is simply left trying to redistribute wealth."
As we noted previously, the cultish fervor remains though among the mainstream media…
From all that you might ask yourself why would the BoJ need more QQE when its own argument put forth suggests exactly the opposite. Such contradictions are scarcely the exceptions, as the entire idea is itself at odds with itself. Apparently the only true economic danger in Japan, as elsewhere, is not the actual economy (which is always terrific or just about to be) but the evil, dreaded “deflationary mindsight.” So the BoJ upped its ante in case Japanese people start thinking unhappily about what QQE might not be able to do with, apparently, no real basis for them to actually think that way. Thus is the treasure of monetarism as it applies “forward guidance” and the Krugman version of “credibly promise to be irresponsible” as if nobody should notice anything but the intended happy ending. It really is the monetary equivalent of “the beatings will continue until morale improves.”
- The Mindless Stupidity Of Negative Interest Rates
Submitted by Lee Adler via The Wall Street Examiner,
Here we are in the midst of The Great Stagnation Middle Class Elimination and some central bankers and mainstream economists are promoting negative interest rates. One economist was quoted in a Marketwatch piece by Greg Robb as saying,
“…pushing rates into negative territory works in many ways just like a regular decline in interest rates that we’re all used to.”
OK. That’s false. We know exactly what negative interest rates do since Europe has made a fine case study of it. They don’t work just like a “regular decline in interest rates.” I mean not that a “regular decline in interest rates,” does what economists think it does, but that’s another story. The issue here is how negative interest rates work.
Negative interest rate proponents ignore the basic tenets of double entry accounting.
Because there are two sides to a bank balance sheet, negative interest rates are the mirror image of positive rates. The move to negative rates imposes new costs on the banks, unlike low positive rates or ZIRP which reduce bank costs.
The greater the negative interest rate, the higher the cost imposed, which is the same as a central bank raising interest rates when they are positive. When the Fed lowers a positive interest rate, it lowers the bank’s cost. But when there are trillions in excess reserves held by the banks as deposits at the Fed and the Fed lowers the interest rate to below zero, that becomes a cost to the banking system which it cannot avoid, except by using those cash assets to pay down debt.
So the banks in Europe did exactly what I said they would do in mid 2014 when the ECB announced negative deposit rates. It’s exactly what any person with common sense would do, and therefore knew the banks would do. Those with the ability to do so pay off loans, which extinguishes deposits, thereby getting rid of the added cost. As opposed to stimulating growth, the European banking system shrinks. As opposed to encouraging borrowing and spending and economic growth, the policy encouraged deleveraging.
We know that it is categorically false the negative rates are working in Europe. But facts have a way of eluding mainstream economists and central bankers.
I wrote about this and also did a video on it in mid 2014 when the ECB went to the negative deposit rate. I showed that it would result in shrinkage of the ECB balance sheet because it would be an incentive for the banks to pay off their existing loans from the ECB in order to extinguish the offsetting reserve deposit. That is exactly what happened, both when the policy was first known immediately before it took effect, and ever since.
So the ECB was forced to institute outright QE to reverse that shrinkage. I then predicted that the banks would use part of the QE not to stimulate lending, but to continue to pay off outstanding ECB credit. That is exactly what has occurred. This is not rocket science. It’s just common sense and paying attention to facts instead of ridiculous economic myths.
The European banks have been steadily paying down LTRO credit and MRO credit, month in and month out. That cancels out a portion of the growth that would otherwise accrue to the ECB balance sheet from QE. Not that that QE does an iota of good for the European economy—but that’s tangential.
So what has happened to European bank deposits since the ECB instituted negative rates? They have shrunken. Has one single mainstream economist or proponent of negative rates mentioned that, ever? I suspect not. Because they either don’t know, don’t want to know, or do not understand that if you raise the costs of holding deposits then the deposit holders will get rid of them. And the only way the system as a whole accomplishes that is to pay off loans, using the existing deposits to do so. Sooner or later the hot potato of the negative interest bearing deposit lands in the lap of someone who will do just that–use a deposit to pay off a loan and extinguish the deposit.
But would it work differently in the US where the banking system cannot escape paying that cost because the Fed issued permanent reserves? Much of the ECB’s balance sheet was in the form of loans that could be voluntarily repaid. Not so with the Fed. It bought assets with newly issued money that instantly became cash assets of the banks, held as reserve accounts at the Fed. The amount of cash in the system is fixed until the Fed decides it isn’t. The cash can move from the reserve account of one bank to that of another. But the Fed’s balance sheet is like the Hotel California. You can never leave.
The banks can unload their cash on other banks by buying long term assets from them. That gets rid of their reserve deposit at the Fed, but the cash just ends up in the reserve account of the bank that sold the asset. So maybe this starts a buying frenzy that pushes long term rates to zero because the banks will all want to exchange cash assets (reserves) for long term assets. That’s apparently what happened in Europe as the system there shrank. But in the US some banks always end up holding the hot potato–the reserve deposit on which they must pay the cost.
Then what? Then you, Mr. or Ms. Banker try to recoup the cost. So you charge your depositors to hold deposits. What do they do? Rather than pay the interest on deposits, some pay off loans, extinguishing their deposits. They pay off their credit cards, their auto loans, even their mortgages, because there’s an incentive not to hold deposits. The banks start to shrink, just like today in Europe. As their balance sheets shrink, their cash assets grow as a percentage of assets and the cost of the negative deposit rate on reserves at the Fed grows as a drag on earnings.
How can anything positive come from this?
Seriously, has anyone thought this through?
Can anyone show a clear example connecting the dots to show where negative interest rates have stimulated an economy? Can anyone clearly explain how charging an institution or business to hold deposits is in any way stimulative… not net stimulative, but stimulative AT ALL?
It defies common sense.
- There Will Be Blood – Part IV
By Chris at www.CapitalistExploits.at
In today’s penultimate piece on shale oil (you can catch up on the previous letters here:Part I, Part II, and Part III), Harris talks about the role of central bankers of the world in the current energy bloodbath. Enjoy!
——————————
Date: 20 January 2015
Subject: There Will Be Blood – Part IV
Modern central bankers are from the school of thought where there is always an eloquent academic model to approach each crisis with. Naturally, volatility is their enemy – in a highly leveraged world, volatility usually leads to dislocation and crisis. Central bankers obviously know that the halving of oil’s price in a few short months adds unnecessary volatility to their carefully orchestrated worlds. What they want to do is corner the price of oil within a narrow range, suppress volatility and allow complex derivatives to be built up around it so that they can use financial means to manipulate it.
Unfortunately, oil doesn’t behave like an interest rate derivative. When there is too much supply, the only way to solve the problem is to destroy supply. When there is too much demand, it is impossible to create supply – or not within the timelines demanded by central bankers. Have the central bankers finally met the first crisis that they cannot solve?
Ever since the great crash of 2008, central banks have learned that the solution to any instability is to print money and lower interest rates. This approach has been used repeatedly, because every crisis has stemmed from either a solvency issue caused by a lack of equity capital or a near-term liquidity constraint at some financial institution. As the oil crisis asserts itself, the central banks may have finally found a crisis that will not respond to their magic elixir of QE. In fact, lending more money to insolvent shale producers will only serve to increase oil supply. To the central banker with a hammer, every problem looks like a nail. This will be one well-oiled nail.
Over the past six years, investors have been treated to a false sense of security regarding the financial markets – one where they’ve learned to trust that the central banks are there to bail them out. The violence of the move in EUR/CHF shows what happens when everyone expects a central banker to support things, but the support isn’t there. I think this oil crisis will be the first one to really test the central bankers globally. Too much money was lent to too many oil companies and oil producing nations – most of which cannot service this debt, much less pay it off at $45 oil. For once, the central banks have no way to save the situation – it may actually be out of their hands. When investors realize that the central bankers aren’t there…
Get ready for the carnage.
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Next week we’ll have the final piece for you as well as a special subscriber-only report on specific ways to capitalize on the oil and gas carnage. Make sure you’re subscribed here to receive this.
– Chris
“I’m calling a top in the Narrative of Central Bank Omnipotence because it has, in fact, reached its asymptotic limit of influence and belief.” – Ben Hunt, Chief Risk Officer of Salient Partners
- Viral Video Claims To Prove US Support Of ISIS In Iraq
While Russian warplanes over Syria have been systematically eradicating – and providing supporting video evidence – countless ISIS outposts and command centers over the past two weeks in Islamic State-held territories (even if in the process they may have taken on some of the CIA-supposrted “moderate rebels” whose only purpose was to remove Assad and are now left without US support), many have been wondering just what the US airforce, which over the past year has been engaged in “supporting missions” over the same region, has been doing? After all, shouldn’t US warplanes have been doing for the past year what Putin’s air force has been busy with in the past 14 days?
One answer, and a rather provocative one as it goes counter to everything that US has publicly claimed, comes courtesy of Hayder al-Khoei, an associate fellow at Chatham House, who notes that “another ‘U.S. supports ISIS’ video is going viral in Iraq.” In the video US “parachutes & supply crates” are seen in the area of Iraq’s Baiji refinery, a site of recurring ISIS incursions and battles. He adds that “Vids like this & others of helos flying above Hashd/ISF positions towards ISIS-held areas reinforce narrative that US supports ISIS in #Iraq.”
While the videos are clearly unconfirmed, the bigger question is with the US now ending its official support of Syria’s “moderate rebels” in Syria – those who were tasked to “fight ISIS” but were in fact merely arming it while failing in their given task to toppled Assad – will the Pentagon also cease support for its clandestine op, the one which has the US supporting both al Qaeda and ISIS in their pursuit to topple the Syrian leader who has steadfastly refused to allow passage to a Qatari gas pipeline.
We should know the answer in the coming weeks, because if ISIS – under the constant bombardment of Russia – is suddenly in full retreat from the region and disappears as fast as it has appeared, then the biggest post-mortem question should be: how is it that Russia succeeded in eradicating a terrorist threat which the US was supposedly fighting for over a year, and whether instead of fighting ISIS the Pentagon, and the CIA (which as most know by now created ISIS) weren’t unofficially supporting it?
The final question: why did Al Qaeda not issue proclamations such as the one below issued hours ago, during the “coalition”-led campaign to eradicate the region of alleged terrorists, and instead had to wait until the Russians showed up before calling in sheer panic for a united front against the aggressor?
Al-Qaeda commander calls on all #Syria rebels to unify & counter-attack, future bleak if rebels lose initiative to Assad & the Russians. #pt
— Hayder al-Khoei (@Hayder_alKhoei) October 11, 2015
- PuTiN OF NeoCoN DiSTuRBia…
- Saudi Arabia Warns "Rumor-Mongers" On Facebook And Twitter Risk Execution
Submitted by SM Gibson via TheAntiMedia.org,
A specific moment from the biopic film, The Doors – starring Val Kilmer – took up residence in my subconscious years ago. In actuality, it’s two lines of slurred dialogue that randomly and subtly float into my thoughts as if they are propelled by hot air into the atmosphere. The scene depicts an inebriated Jim Morrison taunting an audience of unsuspecting concert-goers from a stage in Miami, Florida in 1969. With the sincerity that only a vainglorious sot could conjure, Morrison towers and growls over the crowd of mostly teenagers and bellows out: “Adolf Hitler is alive and well and living in Miami! I f***ed her last night,” and with the following alcohol-fueled breath he concluded the thought: “You’d all eat sh*t, wouldn’t you?”
Because the plebeians choose to eternally dine at the media’s trough of propaganda, the ramblings of a bloated drunkard are all that make sense after the frustration takes hold. People will believe anything. One man’s lies are another man’s facts.
The overwhelming rush of bewilderment clouds any intellectual discourse I could bring to the topic of Saudi Arabia. I have exasperated myself on the subject to a manipulated mass of deafened sycophants. Just because the veil is lifted doesn’t mean anyone will look.
So I will leave you with strictly the facts.
According to state-run Makkah Newspaper in Saudi Arabia, the wealthy Gulf-nation is threatening its citizens with the death penalty for spreading rumors about the government on social media.
An anonymous source within the Ministry of Justice stated only the worst “rumour-mongers” will be sentenced to death, while lesser offenders of the new policy will be disciplined with flogging, imprisonment, travel bans, house arrest, fines and social media bans.
Although the source is not mentioned by name, it should not be assumed that details of the column are any less credible. Human rights organization Reprieve reports that Makkah’s allegiance to the Saudi government is such that the claims should be considered legitimate.
“Although the report does not use a named source, the nature of state-censorship in the Kingdom makes it unlikely that such claims would be made without the consent of the authorities. In addition, the Makkah Newspaper appears to enjoy government support – according to local news reports, it was launched last year by the Governor of Mecca, in the presence of the Minister for Culture and Information,” according to Reprieve.
The inside source went on to state that social media websites “cause confusion in societies.”
Maya Foa, director of Reprieve’s death penalty team, said “This looks like yet another heavy-handed attempt to crush dissent in Saudi Arabia, especially among the young.”
Saudi Arabia, which was recently chosen to head the U.N. Human Rights Council, has already been the subject of staunch criticism by human rights groups around the globe in recent months for various vile rulings and barbaric acts.
Last month, the oil-rich nation and strong ally of the United States denied the final appeal for 20-year-old Ali Mohammed al-Nimr, who was arrested at age 17 for alleged involvement in anti-government protests. He faces beheading and crucifixion at the hands of the regime, which could be carried out any day.
UNICEF has also recently reported that a Saudi-led military campaign resulted in the deaths of over 2,300 civilians – including over 500 children – since March 26th of this year.
The same Saudi government that has inked arms deals with the United States totaling over $95 billion over the past five years is also responsible for at least 134 executions in 2015.
If free speech in the modern era includes the phrase ‘Give us Tweets or give us death,’ the Saudi royal family is more than content to administer the latter.
How does the United States still align itself with a kingdom that is a clear perpetrator of countless human rights abuses while at the same time militarily intervening in numerous other countries under the guise of promoting human rights? Even stranger, why have the American people still not acknowledged the blatant hypocrisy of their government?
- The Tragic Ending To Obama's Bay Of Pigs: CIA Hands Over Syria To Russia
One week ago, when summarizing the current state of play in Syria, we said that for Obama, “this is shaping up to be the most spectacular US foreign policy debacle since Vietnam.” Yesterday, in tacit confirmation of this assessment, the Obama administration threw in the towel on one of the most contentious programs it has implemented in “fighting ISIS”, when the Defense Department announced it was abandoning the goal of a U.S.-trained Syrian force.
But this, so far, partial admission of failure only takes care of one part of Obama’s problem: there is the question of the “other” rebels supported by the US, those who are not part of the officially-disclosed public program with the fake goal of fighting ISIS; we are talking, of course, about the nearly 10,000 CIA-supported “other rebels”, or technically mercenaries, whose only task is to take down Assad.
The same “rebels” whose fate the AP profiles today when it writes that the CIA began a covert operation in 2013 to arm, fund and train a moderate opposition to Assad. Over that time, the CIA has trained an estimated 10,000 fighters, although the number still fighting with so-called moderate forces is unclear.
The effort was separate from the one run by the military, which trained militants willing to promise to take on IS exclusively. That program was widely considered a failure, and on Friday, the Defense Department announced it was abandoning the goal of a U.S.-trained Syrian force, instead opting to equip established groups to fight IS.
It is this effort, too, that in the span of just one month Vladimir Putin has managed to render utterly useless, as it is officially “off the books” and thus the US can’t formally support these thousands of “rebel-fighters” whose only real task was to repeat the “success” of Ukraine and overthrow Syria’s legitimate president: something which runs counter to the US image of a dignified democracy not still resorting to 1960s tactics of government overthrow. That, and coupled with Russia and Iran set to take strategic control of Syria in the coming months, the US simply has no toehold any more in the critical mid-eastern nation.
And so another sad chapter in the CIA’s book of failed government overthrows comes to a close, leaving the “rebels” that the CIA had supported for years, to fend for themselves.
CIA-backed rebels in Syria, who had begun to put serious pressure on President Bashar Assad’s forces, are now under Russian bombardment with little prospect of rescue by their American patrons, U.S. officials say.
Over the past week, Russia has directed parts of its air campaign against U.S.-funded groups and other moderate opposition in a concerted effort to weaken them, the officials say. The Obama administration has few options to defend those it had secretly armed and trained.
The Russians “know their targets, and they have a sophisticated capacity to understand the battlefield situation,” said Rep. Mike Pompeo, R-Kan., who serves on the House Intelligence Committee and was careful not to confirm a classified program. “They are bombing in locations that are not connected to the Islamic State” group.
With the US now in damage control mode, the finger pointing begins.
First, it is only natural that finger will point at Putin – after all he is an easy target:
U.S. intelligence officials see many factors motivating Russia’s intervention: Moscow’s reasserting its primacy as a great power, propping up Assad and wanting to deal a blow to the United States, which has insisted that Assad must go to end Syria’s civil war.
Russia is also interested in containing IS, an organization that includes thousands of Chechen fighters who may pose a threat to Russia, officials say.
But in the short term, “my conclusion is that the timing of their intervention was driven by Assad really going critical,” said Rep. Jim Himes, D-Conn., also a House Intelligence Committee member.
Alas, blaming Putin only underscores his latest victory over the US state department, leaving the US diplomatic corps no choice but to blame its own. This is imminent, and many heads will – or should – roll.
The administration is scrambling to come up with a response to Russia’s moves, but few believe the U.S. can protect its secret rebel allies. The administration has all but ruled out providing CIA-backed groups with surface-to-air missiles that can down aircraft, fearing such weapons would end up in the wrong hands, officials say.
Rep. Adam Schiff, the top Democrat on the committee, says the U.S. should consider establishing a no-fly zone that allows rebels a safe place from which to operate, and shooting down Syrian helicopters that are bombing civilians. He said the U.S. also should provide arms to the Ukrainian government fighting Russian-backed separatists.
A no-fly zone would require the U.S. military to be ready to engage in air battles with the Syrian government, something it is not prepared to do.
Why? Because it is not the Syrian government that is flying those sorties above Syria, it is Putin, and despite all the posturing, Obama is unwilling to risk World War III just to stop a Qatar gas pipeline to Europe.
Which means Obama now has just one option: admitting that his latest gamble to overthrow Assad, one which started in 2013 with the fake YouTube clips of “chemical attacks”, and the resultant naval escalation, coupled with the CIA’s training of thousands of local rebels mercenaries, and which escalated with the “appearance” of ISIS in the summer of 2014, is about to end with Obama admitting yet another major political defeat.
The administration “is debating the merits of taking further action or whether they are better off letting Putin hang himself,” he said, referring to Russian President Vladimir Putin.
Because somehow handing over control of the Middle East to the Russian-controlled axis – incidentally the topic of another article yesterday in the WSJ “America’s Fading Footprint in the Middle East” – is now spun as a defeat for Putin.
“Our options are much narrower than they were two weeks ago,” said Sen. Angus King, I-Maine, who serves on the Intelligence and Armed Services committees. “I don’t think there is any simple answer. … Further air involvement has become very problematic because of the Russian engagement.”
* * *
And so Putin has once again “won”, or as the administration would prefer to spin it, “has hung himself.”
Incidentally, this is just the beginning. Now that the U.S. has begun its pivot out of the middle-east, handing it over to Putin as Russia’s latest sphere of influence on a silver platter, there will be staggering consequences for middle-east geopolitics. In out preview of things to come last week, we concluded by laying these out; we will do the same again:
The US, in conjunction with Saudi Arabia and Qatar, attempted to train and support Sunni extremists to overthrow the Assad regime. Some of those Sunni extremists ended up going crazy and declaring a Medeival caliphate putting the Pentagon and Langley in the hilarious position of being forced to classify al-Qaeda as “moderate.” The situation spun out of control leading to hundreds of thousands of civilian deaths and when Washington finally decided to try and find real “moderates” to help contain the Frankenstein monster the CIA had created in ISIS (there were of course numerous other CIA efforts to arm and train anti-Assad fighters, see below for the fate of the most “successful” of those groups), the effort ended up being a complete embarrassment that culminated with the admission that only “four or five” remained and just days after that admission, those “four or five” were car jacked by al-Qaeda in what was perhaps the most under-reported piece of foreign policy comedy in history.
Meanwhile, Iran sensed an epic opportunity to capitalize on Washington’s incompetence. Tehran then sent its most powerful general to Russia where a pitch was made to upend the Mid-East balance of power. The Kremlin loved the idea because after all, Moscow is stinging from Western economic sanctions and Vladimir Putin is keen on showing the West that, in the wake of the controversy surrounding the annexation of Crimea and the conflict in eastern Ukraine, Russia isn’t set to back down. Thanks to the fact that the US chose extremists as its weapon of choice in Syria, Russia gets to frame its involvement as a “war on terror” and thanks to Russia’s involvement, Iran gets to safely broadcast its military support for Assad just weeks after the nuclear deal was struck. Now, Russian airstrikes have debilitated the only group of CIA-backed fighters that had actually proven to be somewhat effective and Iran and Hezbollah are preparing a massive ground invasion under cover of Russian air support. Worse still, the entire on-the-ground effort is being coordinated by the Iranian general who is public enemy number one in Western intelligence circles and he’s effectively operating at the behest of Putin, the man that Western media paints as the most dangerous person on the planet.
As incompetent as the US has proven to be throughout the entire debacle, it’s still difficult to imagine that Washington, Riyadh, London, Doha, and Jerusalem are going to take this laying down and on that note, we close with our assessment from Thursday: “If Russia ends up bolstering Iran’s position in Syria (by expanding Hezbollah’s influence and capabilities) and if the Russian air force effectively takes control of Iraq thus allowing Iran to exert a greater influence over the government in Baghdad, the fragile balance of power that has existed in the region will be turned on its head and in the event this plays out, one should not expect Washington, Riyadh, Jerusalem, and London to simply go gentle into that good night.”
Which is not to say that the latest US failure to overthrow a mid-east government was a total failure. As Joshua Landis, a Syria expert at the University of Oklahoma says “probably 60 to 80 percent of the arms that America shoveled in have gone to al-Qaida and its affiliates.”
Which is at least great news for the military-industrial complex. It means more “terrorist attacks” on U.S. “friends and allies”, and perhaps even on U.S. soil – all courtesy of the US government supplying the weapons – are imminent.
- The G-30 Group Of Central Bankers Warn They Can "No Longer Save The World"
In a detailed report by the Group of Thirty, central bankers warned that ZIRP and money printing were not sufficient to revive economic growth and risked becoming semi-permanent measures. As Reuters reports, the flow of easy money has inflated asset prices like stocks and housing in many countries but have failed to stimulate economic growth; and with growth estimates trending lower and easy money increasing company leverage, the specter of a debt trap is now haunting advanced economies. "Central banks have described their actions as 'buying time' for governments to finally resolve the crisis… But time is wearing on," sending a message of "you're on your own" to governments around the world.
The G30 begins their report rather pointedly…
Central banks worked alongside governments to address the unfolding crises during 2007–09, and their actions were a necessary and appropriate crisis management response. But central bank policies alone should not be expected to deliver sustainable economic growth. Such policies must be complemented by other policy measures implemented by governments.
At present, much remains to be done by governments, parliaments, public authorities, and the private sector to tackle policy, economic, and structural weaknesses that originate outside the control or influence of central banks. In order to contribute to sustainable economic growth, the report presumes that all other actors fulfill their responsibilities.
Roughly translated… central bankers are saying "you are now on your own."
Central banks alone cannot be relied upon to deliver all the policies necessary to achieve macroeconomic goals. Governments must also act and use the policy-making space provided by conventional and unconventional monetary policy measures. Failure to do so would be a serious error and would risk setting the stage for further economic disturbances and imbalances in the future.
And the "need to exit" appears to be front and center for The G30 bankers…
There seems to be an almost unanimous view that monetary policy in the major AMEs will have to be normalized at some point. However, even if views differ about what precisely normal might mean, presumed dates for exit also differ due to different countries being at different points in the business cycle. There is also agreement that a danger exists of exiting too soon, thus aborting a nascent recovery, and also of exiting too late, thus encouraging some combination of higher inflation and other imbalances that could also weigh on recovery.
However, where serious disagreement arises is when it comes to discussing which danger is the greater. Those worried about too early an exit point to the example of the Federal Reserve in 1937. In contrast, those worried about too late an exit point to the inflation that followed the Fed-Treasury Accord in the late 1940s and to the inflationary surge in the early part of the 1970s.
In recent years, distortions in financial markets and the effects on EMEs have also moved much higher up the list of concerns of this latter group.
While reasonable people can disagree on such objective issues, a number of political economy factors seem to make exiting too late the more likely outcome.
First, there is great uncertainty concerning the consequences of tightening.
Second, in some cases it will in fact be clear that tightening will reveal some debts as being unserviceable, and some financial institutions as undercapitalized. Central banks will then be asked to wait until these other sectors have become more robust, which could well take a long time. The danger is that debt levels will rise with the passage of time, strengthening the arguments for still more forbearance—the debt trap discussed above.
Third, debtors will obviously resist the tightening of policy. Since governments are struggling to manage record-high sovereign debt levels, they too will be tempted to put pressure on their central banks to push back tightening as far as possible.
But delaying an 'exit' has costs…
Wicksell, Hayek, Koo, Minsky, and others have, over many decades, identified a variety of theoretical concerns arising from the excessive expansion of money and credit during booms. Rising inflation, investment misallocations, balance sheet overhangs, banking sector instability, and volatile international capital flows were all highlighted as threats to future economic stability. Moreover, by 2007 it was evident that these were matters of practical concern as well.
The policies followed by the major central banks since 2008, while contributing to stability in the short run and conceivably avoiding a second great depression, might also have aggravated threats to future stability. These policies have had undesirable macroeconomic side effects both in the AMEs themselves and in EMEs. Admittedly, in the latter case, the policy responses of the EMEs themselves to inflows of foreign capital have also played a contributing role.
"Capital losses would affect many investors, including banks, and the process of extend and pretend for poor loans would have to come to a stop," the G30 report said.
With the consequences of an exit from easy money so unpredictable, the G30 said the risk was of exiting too late for fear of sparking another crisis.
And so, while 'exit' is seen as urgent, it is unlikely…
"Faced with uncertainty, the natural default position is the status quo," the G30 said.
In other words more of the same… and while The G30 are careful to note the glass-half-full persepctive of the future, their "endgame" scenario of continuing weak (or even weaker) growth is troubling…
Should the global economy stay weak, or indeed should it weaken again as financial markets overshoot, we could face the possibility of debt deflation. The almost 40 percent decline in commodity prices since mid-2014 could be a precursor of such a slowdown. In this environment, risk-free rates would stay very low and there would be no exit for monetary policy.
Nevertheless, the current prices of many other financial assets would be revealed as excessive. Capital losses would affect many investors, including banks, and the process of extend and pretend for poor loans would have to come to a stop. In this scenario, for all the political economy arguments presented above, attempts might nevertheless be made to rely on monetary policy to restore demand. However, just as past efforts have failed to gain traction, renewed efforts would likely have a similar outcome. This would be particularly likely if the overhang of debt had worsened in the interval as has indeed happened over the last few years.
In such circumstances, governments would also be faced with chronic revenue shortfalls. This could lead to a worst-case situation where deflation would actually sow the seeds for an uncontrolled inflationary outcome. Governments with both large deficits and large debts must borrow to survive, but worries about debt accumulation might imply an increasing reluctance on the part of the private sector to lend to them at sustainable rates. In that case, recourse to the central bank is inevitable, and hyperinflation often the final result.
And the side effects of central bank policies during the crisis is still more worrying…
Central banks see their actions as buying time for governments to address problems that are essentially real, not monetary. However, governments have thus far not reacted as necessary. Recognizing the political difficulties of addressing these underlying problems, they prefer to believe that central bank actions will be sufficient to restore strong, stable, and balanced growth. Thus, they are strongly tempted to forebear in the pursuit of policies that might be more effective. The longer this standoff persists, the more dangerous it becomes as the undesirable side effects of current central bank policies continue to cumulate.
Which is exactly what Macquarie hinted at… the academics will be the first to note that policy escalation may be required (helicopter money).. and then policy-makers have the ivory tower to lean on when they unleash it.
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Finally, The G30 admits – it's all an illusion…Central bank policies since the outbreak of the crisis have made a crucial contribution to restoring the appearance of financial stability.
Nevertheless, for this appearance to become a reality, underlying problems rooted in very high debt levels must be resolved if global growth is to be more sustainably restored.
So, the bottom line, reading between the lines of this 80-page report, is that
Central Bankers know their policies have done (and will do) nothing to promote real economic improvements, are puttingh pressure on governments to do something (anything), admit that is unlikely (because the central bankers have always saved them before), expect extreme policy measures to become the status quo (despite admitting their failure) for fear of any asset weakness, and suggest more measures might be needed (which have led to hyperinflation in the past).
But apart from that – everything is awesome!!
* * *
Full G30 Report below…
- The Failure To Act Responsibly Will Be The Addendum To Bernanke's Memoirs
There was a time not all that long ago if someone asked who was The Chair of The Federal Reserve more than likely you’d get a blank stare or, just a shrug. Today, not only can people (people is a relative term as in; people at least trying to pay attention) name the current Chair, they can also name more than two or three current members. e.g. Fisher, Bullard, Evans, and so on.
This change whether by design or, by happenstance is inconsequential. Either way, what it has done is changed the very fabric, as well as understanding, of how not only the economy is fostered in the U.S. But also – who controls it.
Long gone is the illusion of: an elected body by the citizenry. Today, it’s become demonstrably self-evident the economy is run by an elected body – by the elected. And the consequences of this change is only now beginning to openly reverberate both in amplitude and frequency with every passing day.
Currently as I type this former Fed. Chair Ben Bernanke has just wrapped up a week-long tour of financial media frenzy to promote his book, The Courage To Act: A memoir of a crisis and its aftermath (2015 W.W. Norton & Company). Personally I watched a few. Yet, I could only bear the burden so far. So inspired by the title I myself acted, with courage – and changed the channel.
Listening to the answers to many of the “soft ball” style questions was one thing. Listening to the near sycophantic, vapid, lack of understanding or depth concerning the economy and its relationship as expressed via the capital markets and more by the many that hold themselves out to be “experts?” I just couldn’t take it for more than a few minutes. It was painfully monotonous.
One point that Mr. Bernanke kept referring to, that for me, in many respects was the underlying issue that demonstrates exactly how far beyond the Fed’s mandate as well as its scope not only within the economy, but (and it’s a very big but) how this insertion has adulterated the capitalistic dynamic known as free markets (i.e., printed money via QE and its other programs as to bolster the financial markets) was this…
His assertion, as well as his stated defense for such policy actions was (I’m paraphrasing) “He was disappointed with the lack of policy responses from Washington which left the bulk of the heavy lifting solely on the shoulders of the Fed.”
Well Duh – imagine that. Washington shifting the burden (or setting up the ability to shift blame) to another body or person rather than take the lead themselves. Oh, say it isn’t so!
I mean truly – are you kidding me? What form of academic genius does it take to realize if the Fed. is willingly inserting itself into the economic structure along with remaining at the Zero bound and a willingness, as well as obligingly printing and injecting TRILLIONS of dollars for years into the very fabric of the financial markets propping them up. Washington doesn’t need (nor probably will) to do a single thing? Even if this “propping up” has more in common with a Potemkin Village analogy than any real example resembling a true recovery. Washington is going to say “Hey, stop propping things up making our lives easier. That’s our territory?” Please spare me.
Capital formation has now been replaced with nothing more than front-running schemes. And this has only been made possible not by the courage to act – but rather – the failure to act responsibly.
For years now it’s been clear to anyone who wasn’t some next in rotation “economics expert” in financial media that this juiced up HFT Frankenstein inspired monstrosity borne only to a punch-bowl made available, refilled, and spiked with the monetary equivalent of amphetamines and energy drinks would inevitably turn on its masters. Yet we’re told (now near daily) “They’ve got this!” Sure they do. All this coming from those that couldn’t even see (or anticipate) the obvious responses they would get from Washington.
Who needs a budget when the Fed. is printing and buying? Who needs to cut costs when the Fed. is (repeat former line here)? Who needs to worry about tax legislation when (again cut and paste last line here)? Who needs to argue if your spending too much on this program or that program if (you guessed, rinse repeat). And you could fill a book let alone an article with far too many more.
The issue I take with Mr. Bernanke’s stance is one I take with the whole Ivory Tower cabal. It would seem economics is a profession based solely on “The chicken or the egg” quandary. Everything first and foremost must be presented, formulated, and articulated through this prism. There’s never anything such as 1+1=2.
Here’s a clue to any and all within the Ivory Tower or Ivy League academia using 1+1=2 math.
When you replace the economic policy stewardship of the body politic with actions that can both mask the health of that economy, as well as benefit its donor class, while simultaneously allowing that body politic to defend and deflect criticism stating “It’s not us – it’s them!” Not only are you not going to get any help, you’re going to get something you thought was only meant to be voiced at the schleps, not the Ivory Ivy class.
For proof as well as leaving no room for doubt what Mr. Bernanke was allowing the Fed. to morph into. It was here during the following exchange where “courage” turned into something else in my opinion. For it was stated both clearly, publicly, and forcefully in 2012 exactly what was being expected (as well as insinuated to be continued) from Washington. And it seems today Mr. Bernanke is a little mystified, befuddled or, possibly upset with Washington’s lack of response? Please, it couldn’t have been stated any clearer. They demanded – you acted. Period end of story. No several hundred paged book to explain. No chicken or egg quandary. No Einstein inspired formulations with Rube Goldberg styled flow chart needed to explain. It was all done in elementary fashion: They dictated, The Fed. acquiesced, the results are self-evident: A mess. Again, period. End of story.
As I’ve stated far too many times to count, it’s a purely legitimate argument on both sides with completely reasonable assertions on whether or not the Fed. should have intervened in the ways that it did during the original financial panic and crisis of 2008. Again, there are justifiable reasoning’s on both sides that will (as well as should) be debated for years to come. However, it’s what was allowed as well as fostered and promoted after the original crisis that is not only controversial, but rather – a catastrophe of monetary policy.
When I think of the courage to act when it comes to monetary policy my mind seems to hearken back to times in history when former Chair holders such as Paul Volker raised interest rates in the face of staggering opposition from Washington. He stayed his course and brought inflation back under control. I also think of William Martin Jr. who like very few others understood the hardest job of the Fed. was to not only remind Wall Street, but to articulate those necessities that a responsible Fed’s primary function also included (I’m paraphrasing) “to take away the punch-bowl just as the party gets going” Again, all to Washington’s chagrin. This is not what we have today.
All I’ll use as an example to illustrate how the Fed. has captured itself with a seemingly never-ending resolution more in concert with “The Sorcerer’s Apprentice” (Fantasia/Disney) rather than the “Wizard of Oz” (L. Frank Baum/Geo-M.Hill Co.) is the following:
When the “Great financial crisis” hit the S&P 500™ was bouncing within the 1500 range. After the now referred to “generational low” during the crisis of 666-ish one could as I’ve iterated earlier argue both for, as well as against, the Fed’s insertion with its transfiguration of monetary policy to stabilize the then fragile markets. Again, this debate will go on for decades.
However; exactly what “courage” took place after that? In other words: once the markets regained within 100 odd points of its previous all time highs. What enabled or emboldened the decision to not only leave the “punch-bowl” out, but rather – to continually refill it to surpass those previous highs just shy of an additional 1000 points?! (i.e., 1400’s in April 2012 to 2100’s Nov. 2014) Let it not be lost this happened in 2012 at precisely the same time period of Mr. Bernanke’s appearance before Congress mentioned above.
Today this “failure to act responsibly” has led us to witnessing a failed communication strategy initiated by the then former Chair. An economy that is faltering at every level of unadulterated measurement. A political class that is still enabled as well as emboldened to deflect and deter any criticism, as well as responsibility for their own inaction. An ever-growing Emerging Market crisis fostered by years of ZIRP policy, combined with credit markets, as well as money markets beginning to not only show stress, but beginning to buckle with withdrawal symptoms from the “free money” equivalent only to those experienced by a junkie going cold turkey and a whole lot more.
You can also add to this in the wake of Mr. Bernanke’s exit we now have a Fed. so confused, scared, or reluctant to make the slightest of monetary changes; considerations of international developments, as well as Wall Street unease must now openly be stated. Along with an open admission for the first time in Fed. history (via their Dot Plot) negative interest rates are on the table of discussion. It’s an absolute mess pure and simple. And it’s going to get a whole lot worse – not better in the coming future.
All one needs for proof between “courage” and “failure” is to look back just a mere 30-ish days ago when it appeared as if the markets were once again going to free-fall if the Fed. dared try to move toward the slightest adjustment in relation to normalizing monetary policy. Once again the markets did a spin-on-a-dime and reversed rallying back towards all time highs not on “economic stability” but rather the realization that the Fed. was not only painted into a corner by its own hands, but also boxed, locked, and handcuffed. The continuation of “free money” as well as the resurgence of QE are once again back on the agenda. You just can’t make this stuff up. It’s maddening.
The only brilliant move that appears as more of an act of self-preservation as opposed to anything resembling courage or monetary policy was his decision to get the heck out of Dodge and leave the oncoming disaster to anyone foolish enough to accept it.
After all – you can’t rewrite history as well as reform one’s image if you’re the one that has to clean up the resulting mess in one’s wake. It seems to be working for his own predecessor, he was smart to follow. The ones who may not be so lucky is not only the current Chair, but rather – all of us.
- Pentagon Will Pay "Condolence" Blood Money To Afghan Hospital Bombing Victims
Following last weekend’s horrific killing of 22 innocent civilians in an Afghanistan hospital, of whom a majority were physicians belonging to the Doctors Without Borders (MSF) group, at first first the Pentagon denied responsibility for the attack calling the dead “collateral damage” and accusing the Taliban of fighting from the hospital; then after the global media refused to quickly turn the other way, the US blamed Afghans for calling in the strike while a desperate for distractions Pentagon was raging about “civilian casualties” in Syria at the hands of Russian warplanes; then, when this too gambit failed and when the MSF screamed bloody murder, literally, and accused Nobel Peace Prize winner Barack Obama of engaging in a war crime, the US finally admitted it did it.
And while Obama did apologize to the MSF, and demanded a deeper investigation to “get to the bottom of things” like any alleged peace prize holding war criminal, it is what he did yesterday that showed just how alleged “war criminals” treat collateral damage aka human casualties: as goods whose ultimate value can be expressed in dollar (or rather loans, since as we noted the US has 3.5x more debt than it has GDP).
According to the WSJ, the Pentagon is offering “condolence payments” to the civilians injured and the families of those killed by a U.S. airstrike that destroyed a hospital near Kunduz, Afghanistan. Because, the thinking probably goes, human lives are like any other commodity and can be measured in reserve notes. However, what is more disturbing is that since the US prints the world’s reserve currency, should Obama proceed to exterminate countless other “collaterally damaged” civilians, all that the US will need to do is print a few more million to wash its – and that of the “free and democratic world” – conscience, and all shall be well in all future cases.
We say “millions” loosely: in reality we don’t know what the agreed upon payment will be – if any – because the Pentagon didn’t say how much it would pay: it could well be much less. We do wonder, however, just what the actuarial calculation involved is when the US determines the value of a human life, both in Afghanistan and elsewhere, because surely to the Pentagon one Afghanistani life has a vastly different value than the life of civilians in other nations.
Perhaps the Obama administration should disclose the assumptions used in its death-for-pay.xls model?
Less controversial was the Pentagon’s announcement on said Saturday that it would also provide funds for repairing the hospital, which has been abandoned, as well as the payments. It is unclear just why it would do this: it is not as if anyone will work in a hospital that the US has declared a bomb zone and which can explode at any given moment for no reason at all aside from some AC-130 gunnery sergeant got an order to shoot it and so he did.
The WSJ adds that the compensation will be handled through the existing Commanders’ Emergency Response Program in Afghanistan, and if necessary additional authority will be sought from Congress, Pentagon press secretary Peter Cook said in a statement issued Saturday.
“The Department of Defense believes it is important to address the consequences of the tragic incident that the Doctors Without Borders hospital,” Mr. Cook said.
By which he now know he meant to spend “blood money” to silence the families of the dead.
Elsewhere, Doctors Without Borders has called for an independent probe of the incident by the Swiss-based International Humanitarian Fact-Finding Commission, which is made up of diplomats, legal experts, doctors and some former military officials from nine European countries, including Britain and Russia. It was created after the Gulf War in 1991 and has never deployed a fact-finding mission.
It was unclear just how much the Pentagon would have to spend here to, mostly in the form of bribes, to assure the found “facts” are in line with a narrative that is least damaging to the US war machine.
- How 'ObamaTrade' Will Drive Up The Cost Of Medicine Worldwide
Authored by Julia Belluz, originally posted at Vox.com,
After nearly eight years of negotiations, the United States and 11 other countries have finally reached consensus on the Trans-Pacific Partnership, one of the largest trade deals in a generation that'll involve nearly half the world's GDP.
The sprawling deal would affect a variety of issues, including tariffs, labor rights, and international investment. But the deal's most controversial provisions are the ones limiting competition in the pharmaceutical industry. According to Doctors Without Borders, "The TPP will still go down in history as the worst trade agreement for access to medicines in developing countries."
Though the final text of the agreement won't be available for at least another month, here's what we know so far.
The TPP will drive up costs for some of the most expensive drugs on the market in the poorest countries
One of the biggest sticking points in the negotiations had to do with data protection for biologic drugs.
Biologics are treatments made from biological sources, including vaccines, anti-toxins, proteins, and monoclonal antibodies for everything from Ebola to cancer. As the Brookings Institution explains, biologics are much more structurally complex than regular "small-molecule drugs" and are therefore more difficult and expensive to make, costing on average 22 times more than nonbiologic drugs.
Because of the high prices of these drugs, companies are very interested in developing "biosimilars" – cheaper copies of the original drugs, similar to generic versions of pharmaceuticals. The reason these biosimilars are so cheap is that manufacturers can usually just rely on data from clinical trials submitted by the maker of the original biologic. But, of course, the maker of the original drug doesn't want everyone using its data and making cheap knockoffs.
So in the United States, there are really protective rules around this: Any maker of a biologic gets 12 years of data exclusivity. The FDA can't approve a similar drug that relies on the original data during this time. (Theoretically, other companies could conduct their own trials to create a biosimilar, but because this is so expensive, it defeats the point.) By contrast, in other countries, there are looser rules – or no rules – around such data exclusivity. Japan offers eight years, for instance. Brunei offers zero.
As part of the TPP, the United States (and the pharmaceutical lobby) had been pushing to get every country to agree on 12 years of data protection for biologics. The final agreement falls somewhere in between, with a period of data exclusivity from at least five to eight years, according to the New York Times.
This means the agreement will prevent more affordable biosimilars from entering the market for a longer period of time in places that previously had no bar to entry. And the burden of this provision will be felt by the world's poorest countries, according to Judit Rius Sanjuan, the legal policy adviser for Doctors Without Borders.
"Peru, Vietnam, Malaysia, and Mexico – they had zero monopoly protection on data for biologics," she said. Now they'll have to wait at least five years before allowing cheaper biosimilars onto the market. "It's a loss for people in developing countries. They'll face higher prices for longer periods of time, and there are many products we need that are biologics."
The TPP could also delay cheaper, generic versions of drugs
Meanwhile, every country has systems for granting patents and legal privileges to the first company to invent a drug – a reward for innovation. After these expire, other companies can apply to get their cheaper "generic" copies of these drugs on the market.
At the moment, it's up to countries to decide whether things like a small change in a drug molecule should warrant a patent extension. But the final TPP creates patent-related obligations in countries that never had them before, explained Rius Sanjuan. To put it simply, this would directly target a country's ability to define its own patent law and put a higher standard on when generics can become available.
Critics believe these provisions will likely to limit the availability of cheaper generics. "We know from experience that more expansive patent laws end up reducing the availability of generic medicines," said Yale law professor and global health researcher Amy Kapczynski, who wrote about the deal's health impact in the New England Journal of Medicine. "When you start mucking around in the precise ways countries can define your patent laws," she said, "you limit everyone’s policy flexibility."
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