• Peter Schiff’s Father Dies In Prison, Shackled To A Hospital Bed

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  Most of you will be quite familiar with Peter Schiff. Fewer of you will know much about his father, Irwin Schiff, who was posthumously referred to as the “grandfather of the contemporary tax protest movement” in Forbes.

  Irwin was treated very poorly by his own country, particularly toward the end of his life when, despite being legally blind and dying of cancer, he was not permitted to die in peace amongst family members.

  His son Peter wrote the following as a tribute:

  My father Irwin A. Schiff was born Feb. 23rd 1928, the 8th child and only son of Jewish immigrants, who had crossed the Atlantic twenty years earlier in search of freedom. As a result of their hope and courage my father was fortunate to have been born into the freest nation in the history of the world.  But when he passed away on Oct. 16th, 2015 at the age of 87, a political prisoner of that same nation, legally blind and shackled to a hospital bed in a guarded room in intensive care, the free nation he was born into had itself died years earlier.

   

  My father had a life-long love affair with our nation’s founding principals and proudly served his country during the Korean War, for a while even having the less then honorable distinction of being the lowest ranking American soldier in Europe.  While in college he became exposed to the principles of Austrian economics through the writings of Henry Hazlitt and Frederick Hayek. He first became active in politics during Barry Goldwater’s failed 1964 presidential bid. His activism intensified during the Vietnam Era when he led local grass root efforts to resist Yale University’s plans to conduct aid shipments to North Vietnam at a time when that nation was actively fighting U.S. forces in the south. Later in life he staged an unsuccessful write in campaign for governor of Connecticut, then eventually lost the Libertarian Party’s presidential nomination to Harry Brown in 1996.

   

  In 1976 his beliefs in free market economics, limited government, and strict interpretation of the Constitution led him to write his first book The Biggest Con: How the Government is Fleecing You, a blistering indictment of the post New Deal expansion of government in the United States. The book achieved accolades in the mainstream conservative world, receiving a stellar review in the Wall Street Journal, among other mainstream publications.

   

  But my father was most known for his staunch opposition to the Federal Income Tax, for which the Federal Government labeled him a “tax protester.”  But he had no objection to lawful, reasonable taxation.  He was not an anarchist and believed that the state had an important, but limited role to play in market based economy.  He opposed the Federal Government’s illegal and unconstitutional enforcement and collection of the income tax.   His first book on this topic (he authored six books in total) How Anyone Can Stop Paying Income Taxes, published in 1982 became a New York Times best seller.  His last, The Federal Mafia; How the Government Illegally Imposes and Unlawfully collects Income Taxes, the first of three editions published in 1992, became the only non-fiction, and second and last book to be banned in America.  The only other book being Fanny Hill; Memoirs of a Woman of Pleasure, banned for obscenity in 1821 and 1963.

   

  His crusade to force the government to obey the law earned him three prison sentences, the final one being a fourteen-year sentence that he began serving ten years ago, at the age of 77.   That sentence turned into a life sentence, as my father failed to survive until his planned 2017 release date. However in actuality the life sentence amounted to a death sentence.  My father died from skin cancer that went undiagnosed and untreated while he was in federal custody.  The skin cancer then led to a virulent outbreak of lung cancer that took his life just more than two months after his initial diagnosis.

   

  The unnecessarily cruel twist in his final years occurred seven years ago when he reached his 80th birthday. At that point the government moved him from an extremely low security federal prison camp in New York State where he was within easy driving distance from family and friends, to a federal correctional institute, first in Indiana and then in Texas.  This was done specially to give him access to better medical care.  The trade off was that my father was forced to live isolated from those who loved him.  Given that visiting him required long flights, car rentals, and hotel stays, his visits were few and far between.   Yet while at these supposed superior medical facilities, my father received virtually no medical care at all, not even for the cataracts that left him legally blind, until the skin cancer on his head had spread to just about every organ in his body.

   

  At the time of his diagnosis in early August of this year, he was given four to six mouths to live.  We tried to get him out of prison on compassionate release so that he could live out the final months of his life with his family, spending some precious moments with the grandchildren he had barely known.  But he did not live long enough for the bureaucratic process to be completed.  Two months after the process began, despite the combined help of a sitting Democratic U.S. congresswoman and a Republican U.S. senator, his petition was still sitting on someone’s desk waiting for yet another signature, even though everyone at the prison actually wanted him released.   Even as my father lay dying in intensive care, a phone call came in from a lawyer and the Bureau of Prisons in Washington asking the prison medical representatives for more proof of the serious nature of my father’s condition.

   

  As the cancer consumed him his voice changed, and the prison phone system no longer recognized it, so he could not even talk with family members on the phone during his finale month of life.  When his condition deteriorated to the point where he needed to be hospitalized, government employees blindly following orders kept him shackled to his bed.   This despite the fact that escape was impossible for an 87 year old terminally ill, legally blind patient who could barley breathe, let alone walk.

   

  Whether or not you agree with my father’s views on the Federal Income Tax, or the manner by which it is collected, it’s hard to condone the way he was treated by our government.   He held his convictions so sincerely and so passionately that he continued to espouse them until his dying breath.  Like William Wallace in the final scene of Braveheart, an oppressive government may have succeeded in killing him, but they did not break his spirit.    And that spirit will live on in his books, his videos, and in his children and grandchildren.   Hopefully his legacy will one day help restore the lost freedoms he died trying to protect, finally allowing him to rest in peace.

  I’d like to end this post on a lighter note, by sharing one of my favorite clips of Irwin, a man unappreciated by his country and left to die and elderly man, shackled to a cold hospital bed.

   

  RIP Irwin Schiff.

  

  

  

  

  

• THaR SHe BLoWS: WHaT THe BaNK'S GoT…

  

  

  

  

  

• Syrian Showdown: Russia, Iran Rally Forces, US Rearms Rebels As "Promised" Battle For Aleppo Begins

  On Friday, we previewed the battle for Aleppo, Syria’s largest city prior to the war. 

  It’s now run by a hodgepodge of rebels and militants including al-Qaeda, the Free Syrian Army, and ISIS and for the Assad regime, regaining control of the city is absolutely critical. As Reuters noted last week, “the assault means the army is now pressing insurgents on several fronts near Syria’s main cities in the west, control of which would secure President Bashar al-Assad’s hold on power even if the east of the country is still held by Islamic State.” 

  In other words, if Assad can secure Aleppo, Iran and Russia will have successfully restored his grip on the country for all intents and purposes. 

  Here’s a look a map showing where Aleppo is in relation to Russia’s base at Latakia, along with the before and after images we highlighted last week which depict nighttime light emissions on the way to vividly demonstrating the effect the war has had on the city.

  

  For reference, this is one of Syria’s most war-torn areas. To give you an idea of what’s taken place there since the war began, we present the following stark visuals from in and around the city ca. 2012 (as you might imagine, it’s only gotten worse since):

  

  

  

  

  And here’s a short audio clip from NPR which explains why Aleppo matters (it’s largely objective and thus worth the three minutes):

  The offensive is also notable for the scale of Iran’s involvement.

  Between Hezbollah and Iranian forces, the battle for Aleppo is shaping up to be the largest ground operation orchestrated by Tehran to date. Underscoring how deeply involved Iran truly is, Quds Commander Qasem Soleimani (who we profiled here) showed up near the frontlines late last week to rally the troops. Here’s GOP mouthpiece Fox News (who are most assuredly not Soleimani fans): 

  Iran’s shadowy top military commander has been spotted in Syria addressing Iranian military officers and members of the Lebanese terror group Hezbollah, according to photos that emerged Thursday on social media.

   

  Maj. Gen. Qassem Soleimani — the commander of Iran’s Islamic Revolutionary Guards Corps or Qods Force — was pictured rallying Iranian military and Hezbollah members in western Syria in photos that appeared on Twitter.

   

  On Thursday, Reuters confirmed Soleimani’s presence in the western province of Latakia in Syria. The news agency said Soleimani was seen addressing Iranian officers and Hezbollah fighters with a microphone while clad in dark-colored clothes.

  Here are the images Fox references:

  

  

  As WaPo, goes on to point out, some of the fighters called to Syria by Soleimani are from Iraq’s Shiite militias, supporting our contention that as soon as Syria is “secure” (whatever that means in this context), Russia and Iran will take the fight across the border, where militiamen loyal to Tehran are already battling Sunni extremists:

  Maj. Gen. Qasem Soleimani, the leader of Iran’s elite Quds forces and the public face of Iran’s military intervention in the region, has ordered thousands of Shiite militiamen into Syria for an operation to recapture Aleppo, according to officials from three Iraqi militias. The militiamen are to join Iranian troops and forces from Hezbollah, the Iranian-backed Lebanese Shiite militia, the officials said. The Iraqi Shiite militia Kitaeb Hezbollah has sent around 1,000 fighters from Iraq, one said.

   

  The new arrivals shore up the position of Syrian President Bashar al-Assad, whose beleaguered forces had been losing ground before Russia began launching airstrikes three weeks ago. Pro-government forces have claimed victory in a string of villages around the Aleppo in recent days, in a conflict that Shiite militias frame as a single regional struggle between Shiites and Sunni extremists from the Islamic State.

   

  “It makes no difference whether we’re in Iraq or Syria, we consider it the same front line because we are fighting the same enemy,” said Bashar al-Saidi, a spokesman for Harakat al-Hezbollah al-Nujaba, an Iraqi Shiite militia that says it has fighters around Aleppo. “We are all the followers of Khamenei and will go and fight to defend the holy sites and Shiites everywhere,” he said, referring to Iran’s supreme leader, Ayatollah Ali Khamenei.

   

  The Lebanese group Hezbollah and the Quds Force, which is part of the Iranian Revolutionary Guard Corps, have also sent reinforcements, he said. Last week, a U.S. defense official said hundreds of Iranian troops were near the city in preparation for an offensive.

  
  

  “It’s not a secret. We are all fighting against the same enemy,” said Saidi.

  
  

  His militia released a photo of Soleimani, the Quds Force commander, with its fighters near Aleppo on one of its social media accounts last week.

   

  “The operation is an extension for our operations in Iraq because it’s the same enemy, and when we hit them there it means that it will get results in Iraqi lands,” the Kitaeb official said. Soleimani “specifically requested they go there for the launch of the operation for Aleppo,” he said.

  And here’s a look at an airstrike map which delineates bombing runs by date, thus giving you an idea of the extent to which the Russians targeted Aleppo last week to soften up the rebels ahead of the offensive:

  

  Meanwhile, as Russia revved up the Sukhois and the shadow commander rallied the ground forces, the US rearmed the rebels. Here’s Reuters:

  Rebels battling the Syrian army and its allies south of Aleppo say they have received new supplies of U.S.-made anti-tank missiles from states that oppose President Bashar al-Assad since a major government offensive began there on Friday.

   

  Rebels from three Free Syrian Army-affiliated groups contacted by Reuters said new supplies had arrived since the start of the attack by the army backed by Iranian fighters and Lebanon’s Hezbollah.

   

  A number of rebel groups vetted by states opposed to Assad have been supplied with weapons via Turkey, part of a program supported by the United States and which has in some cases included military training by the Central Intelligence Agency.

  And so, with the proxy war lines clearly drawn, the battle has begun. Via WSJ:

  Syrian pro-regime forces backed by Russian airstrikes have expanded their ground offensive to the strategic city of Aleppo, one of the clearest signs yet of how Russia’s recent military intervention has emboldened President Bashar al-Assad and his loyalists.

   

  In the bitterly fought multi-sided war, Aleppo is among the most coveted prizes. Losing partial control of the city, which was once Syria’s largest and its commercial capital, was an embarrassment to the regime. But with the backing of Russian warplanes, Iranian forces and the Lebanese militia Hezbollah, Mr. Assad’s forces could now be in position to regain large parts of the city and the surrounding countryside.

   

  “I suspect Assad always wanted to take back Aleppo because it is such an important city and retaking it has such strategic and symbolic importance,” said Emile Hokayem, a Middle East analyst at the International Institute for Strategic Studies, a London-based military and security think tank. “And it would deny the rebels a foothold in any major city.”

   

  Since Friday, the regime has netted a number of villages on the southern outskirts of the city and thousands of civilians are fleeing fighting in the area. On Sunday, the regime captured one additional village and U.S.-backed rebels destroyed two regime tanks using American-supplied weapons as they tried to stem the regime’s progress.

   

  The regime appears to be advancing westward toward the strategic highway linking Aleppo with the capital Damascus, rebels said.

   

  In a rare move, the offensive is being led by regime-allied Iranian fighters, according to Ahmad al-Ahmad, a spokesman for the moderate Islamist rebel group Faylaq al-Sham, which is involved in the battles.

   

  The city of Aleppo is now divided in two, with an array of rebel factions controlling the eastern half and the regime holding the western half.

   

  The regime’s ground offensives over the past two weeks have been led by fighters and military advisers from Iran and forces from Hezbollah, supplemented by Syrian security forces.

   

  So far the battles in Aleppo are concentrated in the southern countryside on multiple fronts pushing toward the crucial highway that links the city with the coastal province of Latakia and the central provinces such as Hama, rebels said.

   

  One of the goals of the offensive could be to prevent rebel reinforcements from Aleppo being sent to help fighters along other fronts. Rebels also report an amassing of pro-regime forces elsewhere in Aleppo province that could be aimed at cutting off the rebel supply route from Turkey.

   

  Such moves could severely weaken the array of rebel forces in Aleppo, which include Islamist groups such as Ahrar al-Sham and al Qaeda affiliate Nusra Front as well as U.S.-backed rebels.

  Note how shockingly close this is to an actual shooting war between the US/NATO and the Iran-Russia “nexus.”

  CIA-trained rebels are now using weapons supplied by the US to kill Iranian soldiers backed by Russian airstrikes. The fact that the ground invasion is now clearly run by Iran and Hezbollah means that one side of the “rebels vs. SAA” proxy label has been removed. This is now “rebels vs. Iran and Russia“, meaning there’s literally but one degree of separation from an outright NATO vs. Russia-Iran armed conflict. And don’t forget: the nation through which the US is suppliying the rebels at Aleppo (i.e. Turkey) just shot down a Russian drone. 

  And so, as we wait to see whether the US will finally step in on behalf of its proxy armies before they are routed in the most critical battle yet in the war for Syria, we leave you with a few still shots taken over the weekend in Aleppo.

  

  

  

  

  

  

  

  

  

• Collapse Of The Western Financial System Looms As A "Strategic" Russian Default Is Possible

  Authored by Pepe Escobar, originally posted Op-Ed at RT.com,

  History may eventually decide the ‘New World Order’ started on September 28, when Russian President Vladimir Putin and US President Barack Obama had a 90-minute face off at the UN in New York.

  Irrespective of spin – “productive” according to the White House, “tense” according to a source close to the Kremlin – facts on the ground accumulated almost immediately.

  Putin did press Obama for the US to join Russia in a real grand coalition bent on smashing ISIS/ISIL/Daesh. The Obama administration, once again, relented. I detailed here what happened next: an earth-shattering game-changer in the ‘New Great Game’ in Eurasia, straight out of the Caspian Sea, that caught the acronym fest of US intelligence – not to mention the Pentagon – completely off-guard.

  So this was Putin’s first message to Washington, and the Pentagon/NATO combo in particular; your fancy ideas of stationing tactical nuclear weapons or expanding missile defense to Eastern Europe, or even Asia-Pacific, are just a mirage. Our cruise missiles are capable of wreaking real effective havoc; and soon, as this piece argues, there will be more hypersonic, high-precision long-range missiles added to the mix.

  Old habits don’t die hard – they remain in a coma forever. The Pentagon’s response to the facts launched from the Caspian Sea was to conduct an airdrop of light weapons to “a select group of vetted leaders and their units,” as in those famously non-existent Syrian “moderate rebels.” The weapons will inevitably be captured by assorted Salafi-jihadi goon outfits in no time.

  Then the British government was forced to deny a Murdoch-controlled Sunday Times “report” that British Tornadoes in Syria are now armed with air-to-air missiles to counter potential Russian aerial “attacks.”

  And to top it off, the proverbial “military experts” infesting US corporate media started spinning that we are only 30 seconds from World War III.

  The Glazyev nuclear plan

  A still apoplectic Pentagon will take time to absorb the new military facts on the Syrian ground – and skies. That will add to the utter desperation displayed by the ‘Masters of the Universe’ in the Washington/Wall Street axis – itching to break the China-Russia strategic partnership by all means necessary. Quite a feat when the Pentagon is still fighting World War II, with its weapons, ships and monster aircraft carriers displayed as sitting ducks against Russia’s new batch of missiles.

  But then there’s also Putin’s second – silent – message to Washington, which didn’t even have to be delivered in person to Obama. US intel though may have a hint about it, as they closely follow Russian media.

  It’s about Sergey Glazyev’s (presidential aide) plan for Russia’s immediate economic future here is a summary of the plan, in Russian. The plan was formally proposed to Russia’s Security Council. Here is a very good summary on how Russia’s Security Council works.

  There are at least three absolutely key points in Glazyev’s plan. We may summarize them like this:

  1. If the emerging trend of freezing private assets of Russian legal entities and individuals continues, Russia should consider full or a partial moratorium on the servicing of loans and investment from the countries involved in the freezing.
  2. The amount of foreign currency assets of the Russian Federation located in the jurisdiction of NATO countries accounts to more than $1.2 trillion, including short-term debt of about $800 billion. Their freeze may be partially offset by retaliation against NATO assets in Russia, which amounts to $1.1 trillion, including over $400 billion long-term. So this threat would be neutralized if Russian monetary authorities organized a timely withdrawal of Russian short-term assets in the US and the EU.
  3. Glazyev is adamant that the Russian Central Bank continues to serve the interests of foreign capital – as in the financial powers in London and New York. He contends that the high interest rates practiced by the Russian Central Bank led Russian oligarchs to borrow more cheaply from the West, making the Russian economy dependent, a debt trap which the West used to slowly squeeze Russia. Then the rigged Western oil and ruble collapse increased the pressure as debt service in ruble cost and interest doubled.

  

  Sergei Glazyev, Presidential Advisor for Regional Economic Integration © Ramil Sitdikov / RIA Novosti

  So what Glazyev proposes, essentially, is that Moscow must gain total control of its Central Bank, preventing speculators to move their credit around for non-productive purposes; Moscow should also establish currency controls; and must create a central organization of technological research to replace the loss of Western technology, imitating the US methodology of rolling out from its centralized military research those technologies that can be commercialized for the consumer market.

  The fact is Russia has lost access to Western credit and cannot roll over its debt with the creditors. So Russia will have to pay the principle and the interest as it comes due. That is a trillion dollars plus interest. Russia also cannot import anything from the West without paying double for it.  So arguably the country may be now in the very position it will be if Moscow opts for default. Thus, Russia would have nothing to lose by a default – as the damage is already done.

  A shock to the system

  Essentially, once again, a Russian default on a $1 trillion-plus debt to private Western parties remains a possible scenario discussed at the highest level – assuming Washington will persist in its anti-Russia demonization campaign.

  It’s clear the squeeze Russia is feeling has less to do with sanctions than the grip maintained by Western financial powers over the Russian Central Bank. The Russian Central Bank did create a debt trap by maintaining high interest rates in Russia while the West was lending at low interest rates.

  Needless to add, such a default, if it ever happened, would collapse the entire Western financial system.

  One should never forget the Big Picture; the Syria/Ukraine/sanctions saga runs in parallel to Russia-China and closer BRICS integration shifting the balance of geopolitical power. For the ‘Masters of the Universe’, this is beyond anathema. Enter, for instance, the use of cash settlement through their Wall Street proxies to raise the A shares of China to hysterical highs and then try to crash their entire stock market by a reverse cash settlement rig as in 1987.

  China is moving toward their own SWIFT payment system, not to mention a whole new Chinese-led set of international institutions independent of US control. Russia, for its part, recently passed a bill that would allow the seizing of foreign assets if Russian assets in the West are seized. As Glazyev pointed out, investment in Russia by the West are more or less equivalent to investments of Russia in the West.

  The ‘Masters of the Universe’ may keep insisting on using financial weapons of mass destruction. Russia, silently and with a few key facts in the Caspian Sea, is letting them know it’s ready for whatever scenario they can come up with.

  A less apocalyptic ending may be healthy. So here’s a popular joke in Moscow nowadays, as told by William Engdahl…

  Putin is back in the Kremlin after his meeting with Obama in New York. He tells an aide he invited Obama for a game of chess. And then he tells it how it works: “It’s like playing with a pigeon. First it knocks over all the pieces, then it shits on the board and finally struts around like it won.”

   

  

  

  

  

  

• Chinese Economists Have No Faith In 7% Growth "Target"

  Earlier today in “The Truth Behind China’s GDP Mirage: Economic Growth Slows To 1999 Levels”, we pointed out that Beijing may be habitually understating inflation for domestic output, which has the effect of making “real” GDP less “real” than nominal GDP.

  This is what we’ve called the “deficient deflator math” problem and it raises questions about whether China is netting out import prices when they calculate the deflator. If they’re not, then the NBS is likely overstating GDP during periods of rapidly declining commodities prices. 

  If Beijing is indeed understating the deflator it’s not entirely clear that it’s their fault, as robust statistical systems take time to implement, especially across an economy the size of China’s. That said, there are plenty of commentators who believe that the practice of overstating GDP is policy and exists with or without an understated deflator. Put simply: quite a few people think China is simply lying about its economic output.

  To be sure, there’s ample evidence to suggest that Beijing’s critics are right.

  After all, the Li Keqiang index doesn’t appear to be consistent with the numbers coming out of the NBS and the degree to which the data tracks the Communist party’s “target” is rather suspicious (and that’s putting it nicely). 

  

  In effect, everyone is perpetually in an awkward scenario when it comes to Chinese GDP data. Economists are forced to “predict” a number that they know is gamed and while that’s pretty much always the case across economies (just see “double adjusted” US GDP data for evidence), with China it’s arguably more blatant than it is anywhere else, and one could run up a pretty impressive track record simply by betting with Beijing’s “target.” For China, the NBS is tasked with consistently reporting data that may bear no resemblance what so ever to the truth.

  Of course the more the fundamentals deteriorate, the more ridiculous the headline print looks and that will likely continue to be the case as the country attempts to mark a tough transition from an investment-led, smokestack economy, to a model driven by consumption and services.

  For all of the reasons delineated above, Chinese economists are calling for the target to be lowered to 6.5% going forward.

  Here’s China Daily:

  A further cut in GDP growth is being advised by economists for China’s 13th Five-Year Plan (2016-2020) to pave the way for more reforms and the switch to a consumption-driven economy.

   

  They propose that the annual GDP growth target should be cut from about 7 percent to 6.5 percent. Some economists even see short periods of 6 percent growth as tolerable.

   

  The ideas are being floated ahead of a top leaders’ meeting later this month.

   

  In March, the government lowered the national GDP growth target of 7.5 percent last year to “around 7 percent” this year to allow the country to shed unwanted manufacturing capacity and for its transition from an export-led growth model to a consumption-driven one.

  Of course these economists were careful to justify and qualify their recommendations so as to avoid incurring the wrath of the Party:

  Slower GDP growth does not mean a weaker economy, said Yu Bin, an economist with the State Council Development Research Center, a government think tank. It is only natural because the service industry is comprising an increasing share of the economy.

   

  “The service industry generally has a lower demand for capital investment than manufacturing industry, and inevitably when translated in terms of GDP growth, you get a smaller figure,” Yu said.

  Yes, it’s only natural. What these economists aren’t saying is that while part of the “problem” is certainly related to a move away from China’s “old” model of economic growth, the real problem may be that worldwide growth is grinding to a halt as the world enters a new era in which sluggish global trade is set to become structural and endemic rather than transitory and cyclical. That’s bad news for an export-led economy and indeed, there’s a bit of reflexivity involved here. That is, the decelerating Chinese growth machine is itself a cause for the very dynamics that are causing the deceleration. 

  It’s with all of this in mind that we bring you the following clip from University of Peking economist Michael Pettis, whose outlook is apparently far more dour than his compatriots:

  

  

  

  

  

• Chinese Officials Say "Unnecessary To Be Anxious" About Economy As Margin Debt Rises Most Since June Bubble Peak

  As everyone opined on China's 'goldilocks' GDP data all day long, perhaps the biggest news this evening was US Treasury's softer stance towards China's currency 'manipulation', as we noted earlier, saying Yuan is merely "below appropriate medium-term valuation," and sure enough offshore Yuan has strengthened since the report. China's 'official' mouthpiece Xinhua told the people it is "unnecessary to be anxious about China's economic growth." And finally, for the 8th straight day, Chinese margin debt rose today to its highest in over a month. This is the longest stretch of releveraging in 4 months – since the peak of the bubble. "Will they never learn?"

  He's back…

  • GEITHNER: YUAN CAN BE SIGNIFICANT RESERVE CURRENCY IN LONG TERM
  • *GEITHNER: CHINA CAN TRANSITION ITS ECONOMY WITHOUT CRISIS

  Offshore Yuan is strengthening since US Treasuries Yuan Report…

  

   

  But PBOC weakened the Yuan fix for the 3rd day in a row…

  • *CHINA SETS YUAN REFERENCE RATE AT 6.3614 AGAINST U.S. DOLLAR

  

  Another day, another liquidaty injection…

  • *PBOC TO INJECT 25B YUAN WITH 7-DAY REVERSE REPOS: TRADER

  And then the China propaganda flowed:

  It is unnecessary to be anxious as China’s economic growth in the first 9 mos. was within expectations and adjustment directions, the official Xinhua News Agency says in a commentary on website.

   

  Chinese economy has enormous growth flexibility, market space and leeway

  And ironically, given the worst GDP print in over 6 years (and a 10 year low in Industrial Production)… Officials aid economic fundamentals are unchanged…

  Positive economic signs are increasing and economy has momentum, Xinhua reports, citing a meeting by the National Committee of the Chinese People’s Political Consultative Conference.

  Equity markets are lower (modestly)

  • *FTSE CHINA A50 INDEX FUTURES FALL 0.2% IN SINGAPORE

  Shanghai Composite has retraced 50% of the post-Devaluation plunge…

  

   

  As US Futures drift on the back if IBM's collapse… (Dow -50 points)

  

   

  Weak China GDP sparked weakness in Aussie miners overnight and that is extending in today's market (following Glencore's tumble)…

  

   

  And finally, it appears another crash is needed to remind the Chinese of the perils of levering up in a bubble…

  • *SHANGHAI MARGIN DEBT RISE HITS LONGEST STRETCH IN FOUR MONTHS

  

   

   "Will they never learn?"

  Charts: Bloomberg

  

  

  

  

  

• Deutsche Bank Junior Trader Mistakenly Paid Hedge Fund Client $6 Billion In "Fat Finger" Error

  Just a day after flailing, scandal-ridden Deutsche Bank shocked investors with the latest corporate restructuring, one which saw its investment bank split in two and which saw the termination of its IB-head Colin Fan, the FT reports of another epic snafu involving the German megabank (with over $60 trillion in derivatives), which this past summer mistakenly paid a hedge fund client $6 billion in a wire transfer “fat finger” (just shy of the $7 billion Q3 loss the bank preannounced two weeks ago).

  According to the FT, the bank bank recovered the money from the US hedge fund the next day but, as it also notes, “the incident in its London-based forex team was an embarrassing blow for the bank, which is already under intense scrutiny from regulators.”

  The reason for the fat finger: some intern did not know the difference between net and gross:

  The $6bn trade was processed by a junior member of the bank’s forex sales team in June while his boss was on holiday, according to two people familiar with the matter. Instead of processing a net value, the person processed a gross figure. This meant the trade had “too many zeroes”, said one of the people.

  “Too many zeroes”, as everyone knows, is the technical term for you royally fucked up.

  The logical question is how not a single alarm went off before the “fat fingered” wire transfer was concluded: “the $6bn error raises questions about why it was not spotted under the bank’s “four eyes principle”, requiring every trade to be reviewed by another person before being processed.”

  The answer is that there simply is no supervision and no safeguards when it comes to such gargantuan sums of money flowing around.

  The bank reported the incident to the US Federal Reserve, the European Central Bank and the UK Financial Conduct Authority. Two people familiar with the trade said such mistakes were surprisingly common, but ones of that size were rare. Deutsche declined to comment.

  In other words, with one fell swoop, a “junior banker” could singlehandedly have pushed the bank into insolvency had he dealt with a hedge fund that was not quite as willing to part with the outsized “gain.”

  The news explains why after surging yesterday on the latest round of disappointing restructuring news, which for DB are now an anual event…

  

   

  … DB’s stock promptly plunged in what some may say was another “fat finger” but was clearly exasperated sellers saying goodbye to a bank which clearly has no internal controls.

  

   

  The good news is that while “fat fingers” like that are “surprisingly common”, DB’s tens of trillions in gross derivatives are in sure hands.

  

  

  

  

  

  

• Moving Toward A One World Government, A One World Economy And A One World Religion

  Submitted by Michael Snyder via The Economic Collapse blog,

  The global elite have never been closer to their goal of a united world.  Thanks to a series of interlocking treaties and international agreements, the governance of this planet is increasingly becoming globalized and centralized, but most people don’t seem alarmed by this at all.  In the past 30 days, we have seen some of the biggest steps toward a one world government, a one world economy and a one world religion that we have ever witnessed, but these events have sparked very little public discussion or debate.  So please share this article with as many people as you can.  We need to wake people up about this before it is too late.

  From September 25th to September 27th, the United Nations launched a “new universal agenda” for humanity.  Those are not my words, they actually come directly out of the core document for this new agenda.  The Pope traveled to New York City to give the address that kicked off this conference, thus giving his considerable endorsement to this new plan.  Virtually every nation on the entire planet willingly signed up for the 17 goals that are included in this plan, but this stunning turn of events made very few international headlines.

  The United Nations is promising that if we all work together that we can turn our planet into some kind of “utopia”, but the truth is that all of this talk about “unity” masks a very insidious agenda.  The following comes from a recent piece by Paul McGuire, the author of a groundbreaking new book entitled “The Babylon Code”…

  The UN is not asking permission, but issuing a command that the entire planet will commit to 17 sustainable development goals and 169 sustainable development targets designed to radically transform our world by 2030. The UN 2030 plan promoted by the Pope will advance Agenda 21 on steroids.

   

  Through a controlled media the mass populations will be told that this is all about saving the environment and “ending poverty.” But that is not the true agenda of Agenda 21. The true agenda of Agenda 21 is to establish a global government, global economic system, and global religion. When UN Secretary General Ban Ki-Moon spoke of “a dream of a world of peace and dignity for all” this is no different than when the Communists promised the people a “workers paradise.”

  For the general population, “the 2030 Agenda” has been rebranded as “the global goals”.  On September 26th, some of the biggest names in the music world (including Beyonce) promoted these new “global goals” at the “Global Citizen Festival” that was held in Central Park.  And you can watch a YouTube video where some of the most famous names on the entire planet urge all of us to get behind these new “global goals” right here.

  None of this is by accident.  We are being trained to think of ourselves as “global citizens” that belong to a “global community”.  Decades ago, most Americans would have been up in arms over something like this.  But now most people just seem to accept these changes passively.  Very powerful secret societies and international organizations have been moving us in this direction for a very long time, and most Americans simply have no idea what is happening.  Here is more from Paul McGuire…

  The United Nations is a de facto global government and does not rule by the “consent of the governed.” The United Nations is a global government to which American politicians of both parties have surrendered our Constitutional rights. If you look at the Republican Presidential debates you see the vast majority of those running are “bought men and women.” They are there to do the bidding of their true masters, the international banking families and their interlocking secret societies. If a candidate has a different set of beliefs than the “Orwellian group think” which constitutes domestic and foreign policy, he is allowed to go only so far.

   

  Who are these powerful elite groups and the secret societies that run them? As we extensively document in our new book, The Babylon Code, co-authored by this author and Troy Anderson, a Pulitzer Prize-nominated investigative journalist, there exists a very real network of semi-secretive and secret groups. Groups like The Council on Foreign Relations, The Trilateral Commission, Royal Institute of International Affairs, United Nations, Club of Rome, The Bilderberg Group, and others control presidents, prime ministers, media networks, politicians, CEO’s, and entire nations. You will almost never hear any substantive analysis by the media, which is controlled by these groups nor of attempts at holding them accountable by governments around the world.

  Another way that our planet is being “united” is through the use of international trade agreements.

  The ultimate goal is for the entire world to become a “single market” with uniform laws, rules and regulations.  But as we merge our economy with the rest of the globe, the United States has been losing tens of thousands of businesses and millions of jobs as the monolithic corporations that now dominate our economy shift production to areas where labor is much cheaper.  This is absolutely destroying the middle class, but very few people seem to care.

  Negotiations for one of the biggest international trade treaties that the world has ever seen recently concluded.  The Trans-Pacific Partnership, also known as “Obamatrade”, would represent a giant step toward a truly unified global economy.  The following is an excerpt from one of my previous articles…

  We have just witnessed one of the most significant steps toward a one world economic system that we have ever seen.  Negotiations for the Trans-Pacific Partnership have been completed, and if approved it will create the largest trading bloc on the planet.  But this is not just a trade agreement.  In this treaty, Barack Obama has thrown in all sorts of things that he never would have been able to get through Congress otherwise.  And once this treaty is approved, it will be exceedingly difficult to ever make changes to it.  So essentially what is happening is that the Obama agenda is being permanently locked in for 40 percent of the global economy.

   

  The United States, Canada, Japan, Mexico, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam all intend to sign on to this insidious plan.  Collectively, these nations have a total population of about 800 million people and a combined GDP of approximately 28 trillion dollars.

  And do you want to know who pushed really hard to give Obama fast track negotiating authority so that these negotiations could be brought to a successful conclusion?

  It was the traitorous Republican leadership in Congress.  They did everything that they could to pave the way for Obamatrade.

  We are also seeing some stunning moves in the direction of a one world religion.

  In recent years, you may have noticed that it has become very trendy to say that all religions are just different paths to the same God.  In fact, many prominent religious leaders are now openly proclaiming that the two biggest faiths on the entire planet, Christianity and Islam, worship the exact same deity.

  For example, just consider what the Pope is saying publicly on this matter.  The following is an extended excerpt from one of my recent articles on End of the American Dream…

  *****

  What Pope Francis had to say at St. Patrick’s Cathedral in Manhattan has received very little coverage by the mainstream media, but it was exceedingly significant.  The following is how he began his address…

  I would like to express two sentiments for my Muslim brothers and sisters: Firstly, my greetings as they celebrate the feast of sacrifice. I would have wished my greeting to be warmer. My sentiments of closeness, my sentiments of closeness in the face of tragedy. The tragedy that they suffered in Mecca.

  In this moment, I give assurances of my prayers. I unite myself with you all. A prayer to almighty god, all merciful.

  He did not choose those words by accident.  In Islam, Allah is known as “the all-merciful one”.  If you doubt this, just do a Google search.

  And this is not the first time Pope Francis has used such language.  For instance, the following comes from remarks that he made during his very first ecumenical meeting as Pope…

  I then greet and cordially thank you all, dear friends belonging to other religious traditions; first of all the Muslims, who worship the one God, living and merciful, and call upon Him in prayer, and all of you. I really appreciate your presence: in it I see a tangible sign of the will to grow in mutual esteem and cooperation for the common good of humanity.

   

  The Catholic Church is aware of the importance of promoting friendship and respect between men and women of different religious traditions – I wish to repeat this: promoting friendship and respect between men and women of different religious traditions – it also attests the valuable work that the Pontifical Council for interreligious dialogue performs.

  Pope Francis clearly believes that Christians and Muslims worship the exact same God.  And so that helps to explain why he authorized “Islamic prayers and readings from the Quran” at the Vatican for the first time ever back in 2014.

  *****

  What is happening is undeniable.

  We are steamrolling toward a one world government, a one world economy and a one world religion.

  Of course we will not get there overnight.  It is going to take some time, and there are going to be quite a few bumps along the way.  In fact, I believe that our planet will experience an extreme amount of chaos before we actually get there.

  But every major crisis will be used as an excuse to advance this agenda.  Virtually every solution that the elite offer us will involve more globalization and more centralization.  We will be told that all of our problems will be solved if humanity will just come together in unity.

  For some, the goal of a “united planet” where we are all working together to eradicate things like poverty, war and disease makes all the sense in the world.

  For others, a one world government, a one world economy and a one world religion would simply mean setting the stage for “one world tyranny”.

  

  

  

  

  

• Confused About The War In Syria? Here Are Your Western Media-Sponsored Conflict Diagrams

  We’d like to think we do an admirable job of helping to shed light not only on who’s fighting who and why in Syria, but also of helping those interested get to the bottom of the ulterior motives that are ultimately driving the conflict. 

  At its most basic level, Syria’s civil war is about power politics and energy. The Western media will tell you that this is all the result of Bashar al-Assad resisting a “popular uprising.” Not to put too fine a point on it, but that’s fairly close to being an outright lie. As a leaked diplomatic cable from 2006 shows, the US has sought to destabilize the regime in Damascus by fomenting sectarian discord for the better part of a decade, a familiar strategy for the West when it comes to replacing governments Washington deems to be recalcitrant. Saudi Arabia, Qatar, and Turkey have assisted in the effort.

  Because it’s in Tehran’s pocket, Damascus is a perpetual thorn in the side of the Saudis and removing Assad would not only pave the way for potential energy partnerships, but would also deal a serious blow to Iran’s sphere of influence in the Mid-East and cut off Tehran’s supply line to Hezbollah. 

  Of course the Kurds are also involved in the fight against the Sunni extremists angling for Assad’s ouster which complicates matters significantly given the tension between Ankara and the PKK. That dynamic is itself complicated by the fact that it isn’t entirely clear what Erdogan’s stance on ISIS actually is.

  As one Pentagon official put it a few months back, “it’s a friggin’ mess.” 

  That it is, and one that is largely of Washington’s own making because, as we’ve noted in the past, even if Bashar al-Assad isn’t the most benevolent leader in the history of statecraft (and he certainly is not), virtually anything would be better than what’s going on in Syria today. 

  Now that Russia is on the ground (or perhaps “in the air” is the better way to put it), the stakes have been raised and because the conflict is quickly becoming the biggest story in the world, we thought it an opportune time to present the following graphics from The New York Times which illustrate the various alliances and relationships among all of the parties involved.

  

  

  

  And because we wouldn’t leave you without a bit of humor, here’s the American media describing the US as ISIS’ “main adversary” while Russia (the country whose jets are killing ISIS fighters every day) is relegated to “secondary” status:

  

  

  

  

  

• Step Aside Human: World's Second Biggest Mining Company Unveils Robot Trucks

  One week ago we were shocked to learn that while all other commodity miners, first and foremost Glencore, were copycatting US shale producers and scrapping capital spending as well as production across virtually every commodity class, one company would buck the trend when the world’s second largest miner Rio Tinto said it would not cut copper production, adding that it would be “illogical to hold back output and leave space in the market for higher-cost rivals.”

  “Why should I make cuts?” asked Rio Copper & Coal Chief Executive Officer Jean-Sébastien Jacques rhetorically.

  The logical answer to that question is that being constrained by the same labor costs as all his peers, Rio Tinto would have no choice but to limit the cash outflow.

  Logical, that is, assuming we had all the necessary information. We did not.

  Thanks to Xinhua, we have now learned something fascinating – in its attempt to evade the shackles of conventional fixed and variable costs, Rio Tinto has decided to begin eliminating humans from its “workforce” altogether.

  According to the Chinese state media, Rio Tinto has started using automated, driverless trucks to move iron ore in its Pilbara mines, controlled from an operations center 1,200 kilometers away in Perth. 

  Xinhua reports that “the world’s first commercial implementation of the technology removes high risk, repetitive roles which expose employees to fatigue while also reducing significant operating costs and maintaining consistency, said Rio Tinto Yandicoogina operations manager Josh Bennett.”

  “One of the biggest costs we have got it maintaining mobile assets, so we spend a lot of time on our operator training, education,” Bennett told the national broadcaster ABC.

   

  Rio Tinto now has 69 driverless trucks operating 24 hours per day, 365 days per year, estimating a saving of 500 work hours per truck per year.

   

  “So, there is obvious capital savings, in terms of setting up camps, flying people to site, there is less people so there is less operating costs, but there are some costs that come into running the system and maintenance of the system as well,” Bennett said.

  It’s not just well-paid drivers that suddenly became obsolete: the resources giant is also trialling unmanned trains and robot drills, aiming for a roll out of the machines to as many mine sites as possible in the next year.

  And where Rio Tinto is boldly going, all of its competitors are sure to follow: rivals BHP Billiton and local middleweight Fortescue Metals are also in on the act, trialling similar technology at their mines.

  While we were surprised at this development, others said this was a logical evolution in the displacement of humans with unpaid robotic replacement.

  Local market analysts have said the shift to autonomous vehicles was to be expected if Australian miners wanted to remain competitive through the cycle following “unrealistic” wage increases and increased scrutiny of safety concerns. Though the resource sector is developing driverless technology in a commercial closed circuit enterprise, it is in fact the automotive industry that is leading the technological advances.

  “Obviously it’s not public because there is a lot of money… and it’s a very competitive industry with different automotive manufacturers, therefore they keep it behind closed doors,” University of New South Wales associate professor of industrial automation and engineering, Jay Katupitiya, told Xinhua on Monday.

  So if thousands of commercial drivers find themselves without a job in the coming months and years, thanks the likes of Tesla, Apple and Google, who are “streamlining” even more costs, and creating massive “synergies” for shareholders.

  Global automotive manufacturers have recently created a new battleground in the technology market against the likes of Google and Apple, snapping up software experts in the race to develop a self-driving car for the consumer market.

   

  U.S. Secretary of Transportation Anthony Foxx, on the sidelines of the Frankfurt Auto Show in September, said he expected driverless cars to be widespread operation throughout the world within 10 years.

   

  High-end electric automotive manufacturer Tesla has taken the realization of that expectation a step further by releasing a software upgrade for the Model S four-door saloon’s autopilot system, to be released in European and Asian markets this week. The upgrade allows its cars to automatically change lanes by the touch of the indicator, managing speed and even hit the breaks.

  There are two clear outcomes of this technological innovation, one which we previewed back in 2012 with “I, Not Robot: Why The Rise Of SkyNet Leads To Automatic Unemployment For The People.”

  • The first is that the commodity mining space is about to see an unprecedented wave of layoffs, crushing the personal income of millions of households and leading to yet another surge in unemployment.
  • The second, is that the deflationary wave in the commodity sector is not only here to stay, but is about to get even worse as several layers in overhead costs are about to be eliminated, in the process lowering the breaking extraction costs for all commodity classes substantially lower.

  The bottom line is that any company that does not follow in Rio Tinto’s footsteps is doomed to a slow, miserable, cash-burning death, even if it means another major deflationary wave is about to be unleashed across the commodity sector, and “forcing” central banks around the globe to engage in far more easing in the years ahead as one after another central-planner desperately looks for the source of global deflation when it is right there, in front of their eyes.

  

  

  

  

  

• "The Fed's Days Are Numbered" Ron Paul On The Crucial Issue "They" Don't Want To Talk About

  Via SovereignMan.com's Simon Black,

  Just had a great weekend in Dallas, where I had the pleasure of spending some time with Dr. Ron Paul.

  After our event on Saturday we sat down to record a quick podcast that I’m eager to share with you.

  In this quick audio session we covered his views on the biggest issues surrounding the Fed right now:

  • Why the Fed is not going to raise interest rates
  • How they’ve lost the power to manipulate markets
  • How they rig half of every transaction you make
  • The crucial issue that they don’t want people talking about
  • And how they’ve made us poorer

  You’ll definitely want to hear this.

  "All The Fed has is credibility" and, as Ron Paul expounds, by folding on a 25bps rate hike, it tells you how fragile this system is… built on a foundation of sand."

   

  Indeed, if stocks weren't held up, that would be another 'signal' of the fragility… "and that is why they created The Plunge Protection Team."

   

  By "manipulating the most important price in markets," Paul concludes, "we are at the climactic end of the 'system' that started in August 1971."

  Click image below for link to brief must-listen interview…

  

  

  

  

  

  

• Fill In The Blank: Jamie Dimon Says "Banks Got _______ In The Financial Crisis"

  During an appearance on Bloomberg TV this afternoon, everyone’s favorite banker (and no that is not cockney rhyming slang) JPMorgan’s Jamie Dimon, explains to Stepahnie Ruhle that banks “got tarnished” during the financial crisis. 

  

   

  We thought an alternative word (or two) was more appropriate…

  The correct phrase is “got bailed out” https://t.co/jBCVBR1ysD

  — zerohedge (@zerohedge) October 19, 2015

  

  

  

  

• Oct 20 – Fed's Williams: Decision on October will be taken at the meeting

   

  EMOTION MOVING MARKETS NOW: 48/100 NEUTRAL

  PREVIOUS CLOSE: 47/100 NEUTRAL

  ONE WEEK AGO: 44/100 FEAR 
  ONE MONTH AGO: 16/100 EXTREME FEAR

  ONE YEAR AGO: 7/100 EXTREME FEAR 

  Put and Call Options: FEAR During the last five trading days, volume in put options has lagged volume in call options by 26.68% as investors make bullish bets in their portfolios. However, this is still among the highest levels of put buying seen during the last two years, indicating fear on the part of investors.

  Market Volatility:  NEUTRAL The CBOE Volatility Index (VIX) is at 14.98. This is a neutral reading and indicates that market risks appear low.

  Stock Price Strength: FEAR The CBOE Volatility Index (VIX) is at 18.03. This is a neutral reading and indicates that market risks appear low.

   

  PIVOT POINTS

  EURUSD | GBPUSD | USDJPY | USDCAD | AUDUSD | EURJPY | EURCHF | EURGBP| GBPJPY | NZDUSD | USDCHF | EURAUD | AUDJPY 
   

  S&P 500 (ES) | NASDAQ 100 (NQ) | DOW 30 (YM) | RUSSELL 2000 (TF) | Euro (6E) |Pound (6B) 

  EUROSTOXX 50 (FESX) | DAX 30 (FDAX) | BOBL (FGBM) | SCHATZ (FGBS) | BUND (FGBL) 

  CRUDE OIL (CL) | GOLD (GC) | 10 YR T NOTE | 2 YR T  NOTE | 5 YR T NOTE | 30 YR TREASURY BOND | SOYBEANS | CORN 

   

  MEME OF THE DAY – IT’S THE JERKS 

   

  UNUSUAL ACTIVITY

  CELG OCT WEEKLY4 CALL Activity 3k+ @$.35

  SNDK continued CALL Activity .. NOV 77.5 CALLS Active

  JAKK NOV 10 PUT Activity 1100+ @$1.55 on offer

  SCHW Director P    7,100  A  $ 28.5693

  CTRP.. SC13D/A Filed by Priceline .. 12.63%

  More Unusual Activity…

  HEADLINES

   

  Fed’s Williams: Decision on October will be taken at the meeting –BBG

  Italian newspaper says Fed’s Dudley doubts Fed can hike rates this year

  Richmond Fed’s Lacker cancels speech due to illness – Rtrs

  Fed’s Brainard urges easing regulatory burden for small banks – Rtrs

  US Tsy Sec. Lew: Worries There Could Be A ‘Terrible Debt Limit Accident’ – CNBC

  ECB’s Noyer: ECB’s QE program is working; running at the proper pace –Yahoo

  Treasury-Bill Rate Hits Seven-Month High as Debt Ceiling Looms –BBG

  Moody’s lowers oil price assumptions on oversupply and weakening demand

  Iran Official: Nuclear deal to be implemented this year – Rtrs

  Weight Watchers shares soar after Oprah investment –Rtrs

  Morgan Stanley shares sink after ugly earnings miss – CNBC

   

  GOVERNMENTS/CENTRAL BANKS

  Fed’s Williams: Decision on October will be taken at the meeting –BBG

  Italian newspaper says Fed’s Dudley doubts Fed can hike rates this year –MktWatch

  Richmond Fed’s Lacker cancels speech due to illness – Rtrs

  Fed’s Brainard urges easing regulatory burden for small banks – Rtrs

  US Tsy Sec. Lew: Worries There Could Be A ‘Terrible Debt Limit Accident’ – CNBC

  ECB’s Noyer: ECB’s QE program is working; running at the proper pace –Yahoo

  ECB won’t take decision on QE program this week –Rtrs Poll

  Bundesbank’s Nagel: Don’t Expect Dramatic Slowdown In China – Fidelity

  FIXED INCOME

  Treasury-Bill Rate Hits Seven-Month High as Debt Ceiling Looms –BBG

  American Demand for Its Own Debt Skyrockets –BBG

  ECB ABSPP: +EUR1.071Bn To EUR14.465Bn (Prev +EUR244Mn)

  ECB CBPP: +EUR1.474Bn To EUR126.101Bn (Prev +EUR1.824Bn)

  ECB PSPP: +EUR12.042Bn To EUR370.816Bn (Prev +EUR12.624Bn)

  CURRENCIES

  Euro slides ahead of ECB meeting this week; dollar rises -Rtrs

  USD/JPY: Pair Fluctuates in Tight Range, Buck Faces Technical Hurdle –WBP

  USD/CHF: Buck Prolongs Rebound as Traders Stay Calm on China –WBP

  COMMODITIES

  Oil down 3 percent; tumbling gasoline adds to China, Iran worries – Rtrs

  WTI futures settle at $45.89, down 2.9%

  NOC: Libya producing 440,000 bpd of crude oil – Yahoo

  Moody’s lowers oil price assumptions on oversupply and weakening demand

  Iran Official: Nuclear deal to be implemented this year – Rtrs

  Natural Gas Rises on Cold Weather –WSJ

  Gold Down on Dollar Strength, U.S. Interest-Rate Worries –Nasdaq

  Copper Falls on Weaker Chinese Growth Data –WSJ

  EQUITIES

  INDICES: U.S. stocks decline as energy selloff weighs on indexes

  INDICES: DAX Manages to Close in Green on Deutsche Bank’s Restructuring –WBP

  EARNINGS: Morgan Stanley shares sink after ugly earnings miss – CNBC

  EARNINGS: Hasbro Beats Earnings Mark in Latest Quarter – WSJ

  EARNINGS: Halliburton Posts Loss on North America Weakness – WSJ

  EARNINGS: Valeant raises full-year forecast after Q3 report – MktWatch

  EARNINGS: Genuine Parts profit and revenue hit by dollar – MktWatch

  BANKS: UK Bank Ring-Fence Unlikely to Cause Material Rating Gaps – Fitch

  CONS.DIS: Weight Watchers shares soar after Oprah investment –Rtrs

  TECH: China gives conditional approval to Nokia-Alcatel deal -Rtrs

  INDUSTRIALS: PWC looking for buyers for steel firm Caparo –Sky

  BANKS: Deutsche Bank in $6bn ‘fat finger’ slip-up –FT

  EMERGING MARKETS

  S&P Affirms India’s ‘BBB-‘ Rating, Outlook Stable – NDTV

  Brazil yet to decide on new fiscal target, minister says –Rtrs

  Saudi Arabia Seen Raising $32 Billion in 2016, Saudi Fransi Says –BBG

  Russian recovery hopes dashed as retail sales plunge –Rtrs

  S&P upgrade Ukraine to B- from CCC+; outlook stable from negative

   

  

   

  

  

  

  

• Deflation = Debt + Demographics + Disruption… But Mostly Debt

  One week ago, we showed a quick and simple primer by Bank of America explaining why the pervasive global deflationary wave (in the monetary sense, not in the soaring rent and unprecedented tuition and drug costs – remember, those are simply hedonically adjusted away by the CPI to where they cease to exist) blanketing the world can be explained by the three Ds: debt, demographics and disruption.

  This is what BofA said:

  • Disruption: Technological innovation and disruption are driving many goods & service sector prices lower (rent & health care are two important exceptions); extending human life and the propensity to save; fostering wage and job insecurity.
  • Demographics: The size of the working population of the developed world peaked in 2011 and will fall from 833 million to 799 million by 2025, putting downward pressure on potential growth and inflation (Chart 3). And by 2050, the world’s “Silver Generation” will increase by 885 million people, many of whom will save more in anticipation of old age.
  • Debt: Minimal deleveraging since the GFC and a large debt overhang remain impediments to nominal growth; global debt as a % of GDP actually rose from 162% in 2001 to 211% in 2013, an all-time high.

  Today, a quick follow up is in order because as CLSA’s Chris Wood points out, by far the most important of these three “D’s” is debt.  Debt, which ironically, has been unleashed by the very central banks whose stated intention is to push core inflation to a stable 2% annual increase, and instead they have blanketed the world with an insurmountable cover of leverage which no longer can be “grown into” and thus can either be defaulted away or simply hyperinflated.

  Here is Chris Wood:

  A question raised by an investor in Canada this week makes it clear to GREED & fear that a point of clarification is due. This is that quanto easing is not the core reason that velocity has continued to decline. Rather the core reason is the excessive amount of debt in the system, an amount that has continued to grow since the financial crisis in 2008 as highlighted in a McKinsey report which attracted a lot of publicity when published earlier this year (see McKinsey Global Institute report “Debt and (not much) deleveraging”, February 2015). For the record, McKinsey estimated that aggregate global debt has grown by US$57tn from US$142tn in 2007 to US$199tn at the end of 2Q14, raising the ratio of global debt to GDP by 17 percentage points to 286% (see Figure 15).

   

  

   

  If the growing level of aggregate debt is the core reason for velocity’s decline, GREED & fear’s point is that the introduction of quanto easing has failed to combat the continuing decline of velocity but has in fact further contributed to it, as outlined in the manner discussed here last week. Meanwhile, the only way to get velocity to pick up in a benign way is to write off the debt by a meaningful amount. That would have helped in the 2008 global financial crisis if more losses had been imposed on creditors. There then would have been a V-shaped rebound in velocity similar to what happened in the Asian Crisis….

   

  

   

  …. But that obviously did not happen in 2008 as the policymakers demonstrated that they did not believe in capitalism. Otherwise, the only other way velocity picks up is by an unhealthy hyperinflationary surge reflecting a loss of confidence in central banks, an outcome that becomes more plausible the more extreme the resort to quantitative easing.

  This, in a few very simple sentences, explains what we have said all along: the longer the Fed and its peer banks engage in QE, ZIRP, NIRP, and other zero cost of debt-enabling policies, the longer the deflationary period will last, and the more violent the hyperinflationary endgame, as the inevitable helicopter money is finally unleashed, will be.

  

  

  

  

  

• "Shadow Convexity" Means The Death Of Modern Portfolio Theory

  Excerpted from Artemis Capital Management letter to investors,

  Do not call upon spirits you are not capable of controlling… risk in risk parity

  

  The story of the sorcerer’s apprentice is a tale about the dangers of non-linearity and ‘shadow’ convexity. In the story, the apprentice became massively short “broom” convexity resulting in a dangerous overflow of liquidity. In fixed income terminology, the word ‘convexity’ describes the degree to which a bond is negatively exposed to rising interest rates in a non-linear fashion. Central banks and regulators have decided to invoke their own sorcery by buying bonds through quantitative easing and requiring stringent capital requirements for ‘too big to fail’ banks. The unintended consequence is that systemically important institutions are now warehousing massive amounts of convexity risk in assets with negative real returns. What would happen if rates increased 300 basis points in a year the way they did between 1979 and 1980? The result would be a -20% mark-to-market loss on a portfolio of supposedly “safe haven” securities!

  Now imagine if that crash in ‘safe haven’ bonds occurs simultaneously with a decline in equity prices…
  …all of a sudden we have a big global problem.

  Modern portfolio theory ignores massive ‘shadow’ convexity from a potential correlation breakdown in the relationship between stocks and bonds. Let us assume I have a little money to invest and I go to a qualified financial advisor for advice on investing for retirement. The adviser would likely tell me to diversify those assets according to a 60/40 split between stocks and bonds. The theory is that when times are good stocks go up but bonds underperform and vice versa.

  Therefore, I put my money in a 60/40 split, supposedly, because there is anti-correlation between stocks and bonds. Now let us assume I run an institution with hundreds of millions to invest and I can afford a more expensive financial advisor. The expensive financial advisor agrees with the general principal of a 60/40 stock and bond split but feels that we can do much better by leveraging the bonds so they match the stock portfolio weighted by their respective volatilities. The theory is that bonds outperform stocks on riskadjusted basis while exhibiting strong anticorrelation. The financial advisor calls this “risk parity” and shows me an incredible 20-year record of returns including gains in 2008.

  

  The entire global financial system is leveraged to the theory that stocks and bonds are always anti-correlated. Risk parity funds currently manage approximately $1.4 trillion of institutional assets globally based on this theory.  It is impossible to estimate how many trillions of dollars are managed according to the simple 60/40 mantra… but let us just assume something north of $1.4 trillion and something south of “more money than God”.

  Given the unfathomable amount of assets leveraged to this simple relationship, I decided to test the anti-correlation between equity and fixed income, or positive correlation between yields and stock prices, based on over 132 years of price data. The truth about the historical relationship between stocks and bonds is scary.

  Between 1883 and 2015 stocks and bonds spent more time moving in tandem (30% of the time) than they spent moving opposite one another (11% of the time). It is only during the last two decades of falling rates, accommodative monetary policy, and globalization that we have seen an extraordinary period of anti-correlation emerge between stocks and bonds unmatched by any other regime in history. Not only are stocks and bonds positively correlated most of the time but also there is a precedent for multi-year periods whereby both have declined.

  In the event stocks and bonds simultaneously lose value, the classic 60/40 portfolio will become a 100% loser and volatility will be the only asset class that is capable of protecting your portfolio.

  

  Risk parity strategies are viewed as defensive in nature by the institutional investor community due to their outperformance during the 2008 financial crisis. While the strategy can be very effective the thirty year track record hides significant risks. Risk parity derives alpha through a form of ‘shadow’ short convexity that includes leveraged exposure to:

  1. Short correlation between equity and fixed income;
  2. Short portfolio gamma through volatility rebalancing.

  To understand this risk we looked backward by estimating the performance of a classic 60/40 and a simple risk-parity portfolio across 100+ years of financial data. Risk parity faces significant tail risk 1 out of every 50 years. In the 20th and 21st century simultaneous positive returns occurred 63% of the time with negative stock and bond returns occurring in 2% of the years. The danger scenario whereby stocks and bonds decline in tandem (see lower left quadrant) occurred in the 1970s, late 1950s, 1940s, and between 1906 and 1909.

  

  Although simultaneous negative returns in both equities and fixed income is rare, the impact on the classic 60/40 and risk parity portfolios is potentially devastating. The chart below shows the worst rolling years for each portfolio since 1800. We only include periods when stocks and bonds fell simultaneously.

  

  The nightmare period for negative correlation occurred between 1906 and 1909 when the 60/40 portfolio experienced a -67% peak-to-trough drawdown and a simple risk parity strategy would have gone bankrupt. This analysis is not taking into account the harder to measure second ‘shadow’ convexity exposure of risk parity described herein as portfolio gamma. What is portfolio gamma? During periods of rising volatility risk parity portfolios are forced to deleverage. If $1.4 trillion of risk parity assets are deleveraging at the same time during a period of sustained stress in bonds and then stocks we would likely face a self-reflexive spiral of selling. The portfolio gamma is the hard to measure cost of reducing your risk exposure when everyone else is doing the exact same thing. Risk parity, like portfolio insurance in 1987, is self-reinforcing when widely adopted and arguably introduces fragility to markets. The size of the risk parity market questions whether the product may pose a systemic risk during a sustained period of negative stock and bond returns like 1906 to 1909, the late 1940s, or late 1970s. 

  The $1.4 trillion dollar question is…
  what would cause the relationship between stocks and bonds to completely melt down?

  The volatility of inflation appears to be a core driver of higher correlation between stocks and bonds. When inflation, as gauged by the consumer price index, is more volatile we tend to experience higher levels of stock and bond correlation as evidenced by data from 1885 to 2015. The early part of the 20th century, which experienced the most debilitating periods of stock and bond underperformance, was a period of wild fluctuations between inflation and deflation. The last three decades of extraordinary anti-correlation has been an era of falling rates, globalization, accommodative monetary policy, and very low volatility of CPI. The global economy is now at the zero bound whereby the effectiveness of competitive devaluations is coming into question.

  It is not hard to imagine a regime whereby central banks lose credibility or are not capable of moderating swings in inflation in a way consistent with the past three decades. Any period of sustained correlation failure will result in rising  volatility and selling pressure across bonds and stocks in a self-reflexive cycle.
   

  

   

  Modern portfolio theory relying on diversification and volatility targeting for alpha generation provides an illusion of safety but is simply exposing investors to alternative risks.  In exchange for price risk, investors are exposed to short correlation risk.  In exchange for lower portfolio volatility, investors are exposed negatively to portfolio gamma. Pure long convexity exposure is your only solution to this problem.

  There can be significant risk in risk parity… many providers are established and smart investors and hopefully are aware of these risks. There is nothing wrong with owning a risk parity portfolio, which has performed admirably over the past two decades, but based on any longer view of financial history you are an irresponsible fiduciary if you are not hedging it with some form of long convexity exposure.

  

  

  

  

  

• Swedish Nazi Creates "Accommodation Centers" For Refugees As Turkey Insists "We're Not A Concentration Camp"

  There’s something tragically ironic about the fact that many of the refugees fleeing war-torn Syria have to make their way through Turkey in order to access the (increasingly arduous) Balkan route to the German “promised land.” 

  After all, it’s not exactly like Ankara has done much to help when it comes to promoting stability in Syria. Turkey, like the US, Saudi Arabia, and Qatar, wants Bashar al-Assad gone and the Erdogan government has been variously accused of aiding and abetting ISIS for some time now. In fact, the PKK and HDP (with the latter using more politically correct language) has suggested that Ankara may be using ISIS to carry out suicide attacks against Turkish citizens in order to scare voters ahead of elections next month. 

  So, Syrian asylum seekers are effectively forced to traverse the country whose government has contributed mightily to their suffering. 

  Of course the borders in Eastern Europe are bursting with migrants and now that Hungary has closed her borders with both Serbia and Croatia, the people flow has been diverted and Slovenia has now become the choke point on the route north to Germany.

  

  And speaking of Germany, there’s a growing domestic backlash against the flow of asylum seekers into the country. The Iron Chancellor has of course made it abundantly clear that Germany will not be closing her doors to those fleeing the Mid-East, a position which has made Merkel something of a celebrity among Syrian refugees. At home however, Merkel’s approval rating dropped to a four year low this month suggesting that Berlin is testing voters’ patience with its stance on the migrant flows. 

  In an effort to ameliorate the “problem,” Merkel visited Turkey over the weekend and although there was progress on a plan that essentially calls for cash bribes from Brussels along with visa free travel for Turks in the Schengen, PM Ahmet Davutoglu (otherwise known as “that guy who Erdogan sends when it’s not really important“) has assured the world that despite the deal with the EU, Turkey is “not a concentration camp.” Here’s more from AFP: 

  Turkish Prime Minister Ahmet Davutoglu said on Monday his country was “not a concentration camp” and would not host migrants permanently to appease the EU, which wants Turkey to stop the flow of people to Europe.

   

  “We cannot accept an understanding like ‘give us the money and they stay in Turkey’. Turkey is not a concentration camp,” Davutoglu said in a live television interview a day after talks with Germany’s Angela Merkel on the migrant crisis.

   

  “I said this to Merkel too. No one should expect Turkey to turn into a concentration camp where all the refugees stay in,” he said.

   

  The talks had however resulted in a “positive response” to the government’s request for visa liberalisation, he said.

   

  And in exchange Davutoglu agreed that “illegal immigration should be properly kept under control, therefore we will set up joint mechanisms” to contain the historic flow of Syrians and others escaping conflict, persecution and poverty who use Turkey as a gateway to Europe.

   

  “We spoke of three billion euros ($3.4 billion) as ‘fresh money’ but it is not a fixed sum. Our (financial) needs may increase,” he said.

   

  Davutoglu insisted the European Union would have to implement its side of the deal before Turkey would play ball.

   

  “In the past, the EU got what it wanted, but didn’t keep its promises. The visa liberalisation has to take force,” he said referring to Turkey’s request for visa-free access for Turks to the EU’s Schengen zone.

   

  “We demanded the abolishment of the Schengen visa (for Turks) and got a positive response. It will happen in July 2016, negotiations are continuing. Things will become clear at the start of the 2016,” he said.

   

  His comments came as the migrant crisis intensified in Europe, with thousands of people streaming Monday into the Balkans, where tighter border controls caused bottlenecks and forced people to sleep in freezing temperatures.

  Ok, so Turkey is “not a concentration camp,” and that being the case, some good hearted Europeans are going to have to step up. 

  Fortunately, Sweden has lots of citizens who are willing to chip in – even Nazis. Here’s The Local:

  A man from northern Sweden who has praised Adolf Hitler on Facebook and participated in Nazi demonstrations has answered a call from Sweden’s Migration Agency for volunteers willing to offer accommodation to refugees.

   

  With Sweden currently taking in record numbers of refugees and even setting up a tent camp to deal with some of the new arrivals, Sweden’s Migration Agency (Migrationsverket) recently sent out a nationwide appeal for businesses and residents who may be able to provide shelter as the winter draws in.

   

  But according to an investigation by Swedish current affairs publication Expo and local newspaper Västerbotten-kuriren, the government agency has been given an offer by a surprising candidate, who has previously attended pro-Nazi protests and praised Adolf Hitler on social media.

   

  The two media have not named the applicant, but describe him as “in his 50s” and write that he has offered to start three different accommodation centres for refugees in Västerbotten in northern Sweden, in which is understood to be his home town.

   

  The man, who is understood to run his own business in the area told Expo that he had come round to the idea after being approached by the local officials and discovering that he could profit from the initiative.

  So, Turkey wants the world to know that it most certainly is not going to act as a concentration camp for migrants, and Serbia has made similar comments over the past two months.

  But in Sweden, there’s apparently at least one Nazi who is willing to set up as many as three “accommodation centers” for refugees. 

  We’ll close by simply saying that there are too many possible punchlines there to pick one winner, but on a more serious note, we would warn (again) about the potential for xenophobia and scapegoating here because it’s becoming more clear by the day that there is simply no way that Europe is going to be able to accommodate these people flows without something snapping somewhere.

  On the bright side for Sweden, perhaps they, like Germany, will have to issue more debt to accommodate the asylum seekers, giving the Riksbank a convenient way out of the current dilemma whereby the stock of government bonds isn’t large enough to allow for more QE without the market breaking. 

  

  

  

  

  

• The 10 Jobs That Attract The Most Psychopaths

  Presented with no comment…(and no surprise)

   

  

   

  Source: Statista via The Burning Platform

  

  

  

  

  

• Trump Extends Lead Over Jeb & The GOP Field, But Carson Looms

  The Donald, crushing the hopes of the status quo, has extended his lead among GOP Primary voters with 25% of the support (up from 21% in September). However, the latest WSJ/NBC poll finds Ben Carson coming on strong with 22% support. Aside from Rubio (13%, up from 11%), this leaves “the rest” of the crowd lagging horribly with Chris Christie, Rand Paul, Mike Huckabee, and John Kasich looking to go the way of ‘the Walker’.

   

  

   

  As The Wall Street Journal reports,

  Donald Trump and Ben Carson continue to broaden their appeal among Republican primary voters and have widened their lead over Florida Gov. Jeb Bush and many other more-experienced candidates, a new Wall Street Journal/NBC News poll finds.

   

  Mr. Bush, once considered the GOP’s likely nominee, is also lagging behind his onetime protege, Florida Sen. Marco Rubio, who is emerging as the leading contender to rally the party’s establishment wing against the rise of insurgent outsiders such as Messrs. Trump and Carson.

   

  The new poll, conducted Oct. 15-18, underscores the durability—even the gathering strength—of anti-Washington candidates who had long been viewed as likely to be flash-in-the-pan political phenomena.

   

  …

   

  Mr. Trump, the reality-television celebrity and businessman, was the first choice of GOP primary voters, with 25% support, up from 21% in a late September Journal/NBC News poll.

   

  Mr. Carson, the retired neurosurgeon, placed second in the new survey, with 22% support, a slight rise over last month despite controversy over statements he made that an observant Muslim shouldn’t be U.S. president.

   

  Behind them was Mr. Rubio, who rose to 13% in the poll from 11% last month. He was the only other GOP candidate to draw double-digit support.

   

  Mr. Bush, who led the field as recently as June, when he was first choice of 22% of GOP primary voters, drew 8% in the latest poll.

  We leave it to one Californian construction worker to sum it all up…

  “The circle [of people] that runs around staying in politics, they become so involved that they are not doing what they came to office to do anymore,” said Mr. Montagnoli, who said he couldn’t support Mr. Bush. “I think fresh people and nonpolitical people would do a lot better.”

  

  

  

  

  

• Martin Armstrong Rages Against Socialism: "Government Has Replaced God"

  Submitted by Martin Armstrong via ArmstrongEconomics.com,

   

  Socialism v Capitalism

   

  The debate for socialism is simply that they regard it as unfair when anyone has more than another does.

  

   

  The solution is always to rob someone else to improve your own life. If you take this philosophy as your own, then you rob others because they have more, which is no different than robbing someone on the street or breaking into their home (a crime resulting in you living tax-free in prison). However, if you vote for politicians to degree the very same act as law, it somehow makes robbing other people legal. If they complain or assert rights, then they are greedy capitalists who worship their money more than your desire to rob them in claims of fairness.

  

  Socialism violates the Ten Commandments which prohibits anyone from coveting what their neighbor has. Well, God must have had a bad day for he does not understand what is fair. If someone is smarter than others are, that is OK and God’s Will, but he should not have more material things. God obviously cannot be all knowing since Marx must be right. God clearly can’t understand what is fair. It was Julius Caesar who said man will believe only what he wants to believe. There is no changing his mind.

  Europe has a death wish. Since World War II, they have been infected with socialism that is reflected in the unemployment.

  

  The highest unemployment is confined to nations with the highest degree of socialism. If you attack investments, you do not create jobs, and the end result is rather bleak. People are not getting married because they cannot find employment or earn enough to fund a family.

  

  When will we wake up to this hatred of the so-called 1% and realize it is an excuse to keep politicians rich in tax revenues?

  So why do we put up with taxes anymore when they are only necessary at the local level and not federally? It is time for a major readjustment in this plague that has torn the world apart at the seams ever since Marx created the Progressive Era that manifested in Socialism and then Communism. I suppose it is like killing someone. If a cop does it, it’s OK. If you do it, it becomes a crime. Government clearly has replaced God. That’s the only explanation.

  

  

  

  

  

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