Today’s News October 3, 2015

• A Mosaic Of Facts – Media Weapons Of Mass Delusion

  Can you tell truth from lies in mass media? RT’s Miguel Francis-Santiago delves deep to try to understand the intricacies of information war. He meets media experts and puts together the Mosaic of Facts, showing how public opinion is manipulated, not just over the Ukrainian Crisis but throughout the world.

   

  Trailer…

   

  Full Documentary…

   

  Hopefully it will get more people in the mainstream to wake up to the extremely dangerous situation which has developed in the mainstream media, which more than any single factor is leading the world to war.

  

  

  

  

• "It's Revolting" French School Probed After Marking Non-Pork-Eaters With Yellow Tags

  Amid the migrant crisis in Europe, and the Czechs pulling people off trains and writing on their arms, a French municipality launched a probe into an Auxerre elementary school’s use of yellow tags to identify students who do not eat pork. "It's revolting. It brings back memories of dark times," noted one member of the Auxerre town council, but the mayor’s office said it was "an isolated, clumsy and unfortunate initiative."

  As Haaretz reports,

  The city of Auxerre, located 105 miles southeast of Paris, opened the investigation on Friday after parents complained to local media about the school’s initiative, in which neck strings bearing red and yellow plastic discs were placed on pupils ahead of lunchtime at the school cafeteria.

   

  The pupils wore the tags for one day before the faculty was instructed to stop using them.

   

  Malika Ounes, a conservative member of the Auxerre city council, told the news website Creusot-Infos.com: “It’s revolting. It brings back memories of dark times,” in reference to the requirement in Nazi-occupied France that Jews wear yellow stars on their clothes.

   

  Among the pupils instructed to wear the tags were Muslims and vegetarians. Reports in French media did not mention any Jewish pupils.

  Some parents also complained about the tags, whose use Mayor Guy Perez of the Socialist Party termed “unfortunate.”

  But other parents said they were the result of good intentions.

  One Muslim mother of two boys attending the school, identified by the RTL broadcaster only as Sonia, said: “The yellow tag doesn’t even correspond with the yellow star. I don’t think there’s a scandal here, just an error that doesn’t require all this rebuke.”

   

  Christian Sautier, director of communications in the mayor’s office, said it was “an isolated, clumsy and unfortunate initiative” that lasted only one day. He stressed the decision to use these tags was taken by canteen staff without informing local authorities, who ended it immediately.

  *  *  *

  The debate on the availability in public schools of pork-free dishes is a divisive issue in France, where rightist parties and other politicians advocating strict separation between religion and state see it as proof of a creeping influence on the public sphere, mostly by Muslims immigrants.

  

  

  

  

  

• Australia Is "Going Down Under": "The Bubble Is About To Burst", RBS Warns

  Thanks to a variety of idiosyncratic political crises and country-specific stumbling blocks, Brazil, Turkey, Malaysia, and to a lesser extent Russia, have received the lion’s share of coverage when it comes to assessing the EM damage wrought by the comically bad combination of slumping commodities prices, depressed Chinese demand, slowing global trade, and a “surprise” yuan devaluation. 

  Put simply, the intractable political stalemate in Brazil, the civil war in Turkey, the 1MDB scandal in Malaysia (and the fact that the country was at the center of the 1998 meltdown), and the hit Russia has taken from depressed crude prices mean that if you want to pen a story about emerging market chaos, those four countries have plenty to offer in terms of going beyond the generic “falling commodities + a decelerating China = bad news for EM” narrative. 

  But just because other vulnerable countries aren’t beset with ethnic violence and/or street protests doesn’t mean they too aren’t facing crises due to falling commodity prices and the slowdown of the Chinese growth machine. 

  One such country is Australia, which in some respects is an emerging market dressed up like a developed economy, and which of course has suffered mightily from the commodities carnage and China’s transition away from an investment-led growth model. 

  Out with a fresh look at the risks facing Australia is RBS’ Alberto Gallo. Notable excerpts are presented below.

  *  *  *

  From RBS

  Australia has become a commodity focused economy, with an increasing exposure to China. For the past decades, Australia has been buoyed by the rapid Chinese expansion, which outpaced the rest of the world. Australia benefited from China’s strong demand for commodities given its investment-led growth model. China is Australia’s top export destination and 59% of those exports are in iron-ore. But as China struggles to manage its ongoing credit crunch and continues its shift to consumption-led growth Australia’s economy is likely to be hurt by lower demand for commodities. 

  

  The economy is slowing due to external headwinds. Last quarter, Australian GDP grew at just 0.2% QoQ, its lowest level in the last three years (and below the market consensus of 0.4%). According to the Australian Bureau of Statistics (ABS) the growth rate was driven by higher domestic demand, while lower exports and a declining mining industry continue to present headwinds. Mining’s gross value-added to GDP fell by – 0.3% QoQ in Q2. Despite Reserve Bank of Australia (RBA) governor, Glenn Stevens, citing lower growth as potentially a “feature of the post financial crisis world” meaning that “potential growth is a bit lower”, Australia’s slowing economy is more than just a victim of the post financial crisis world, in our view. Rising unemployment coupled with soaring house prices and vulnerabilities in the commodity and construction sectors are all cause for concern. 

  Unemployment is rising, and could increase further, given the high proportion of employment in the vulnerable mining and construction sectors. Unemployment is at 6.2%, just shy of the ten year high of 6.3%. Although the number itself is not worryingly high, unemployment has been rising for the last three years, and is likely to continue in our view. Mining and commodity sectors employ 4.5% of the workforce. With lower demand for commodities from China, unemployment in these sectors could rise. Also, unemployment may rise in the construction sector (8.9% of workforce) given vulnerabilities in the housing market, as we explain below.

  

  There are domestic headwinds, too. The housing market is vulnerable, with overvalued properties and over-levered households. House prices in Australia have risen by 22% in the last three years (according to the Australian Residential Property Price Index), with property prices in Sydney overtaking those in London. House prices have risen faster than both disposable income and inflation in recent years, with the gap between growth in house prices and household income closing by over 40% in the last three years.

  

  If unemployment continues to rise, due to losses in mining and construction, the house price bubble could pop. Rising unemployment in the mining industry, due to its exposure to a slowing China, will create risks in the property market; house prices are likely to fall as the newly unemployed could be forced to sell.

  The RBA has less dry powder now. The central bank has cut rates twice this year, from 2.25% in March to 2% now. As the domestic economy slows, accommodative policy is needed to encourage investment, particularly in non-mining sectors, to boost growth and create jobs. However, with rates already at 2%, there is much less headroom for monetary easing to offset a downturn in Australia.

  The worst is yet to come, in our view.

  *  *  *

  So summarizing in the simplest possible terms: slowing demand for commodities leads to rising unemployment which means trouble for overleveraged households and that’s bad news for the country’s housing bubble. Meanwhile, the RBA is running out of ammo. 

  If ever there were a bearish narrative that’s easy to grasp, surely that’s it.

  Of course thanks to the ascension of Malcolm Turnbull, Australia may have a secret weapon…

  

  

  

  

  

  

• Central Banks' Secrecy & Silence On Gold Storage Arrangements

  Submitted by Ronan Manly via BullionStar.com,

  Whereas some central banks have become more forthcoming on where they claim their official gold reserves are stored (see my recent blog post ‘Central bank gold at the Bank of England‘), many of the world’s central banks remain secretive in this regard, with some central bank staff saying that they are not allowed to provide this information, and some central banks just ignoring the question when asked.

  In the ‘Central bank gold at the Bank of England’ article, I said that “A number of central banks refuse to confirm the location of their gold reserves. I will document this in a future posting.” As promised, this blog post explains what I meant by the above statement.

  Some of those central banks may have made it into the Bank of England storage list if they had been more transparent in providing gold storage information. However, since they weren’t transparent, these banks make it into the alternative ‘non-cooperative’ list. One subset of this list is central banks, which to be fair to them, did actually respond and said that they cannot divulge gold storage information. The other subset is central banks which didn’t reply at all when I asked them about their official gold storage location details.

  The below list, although not complete, highlights 7 central banks and 1 official sector financial institution (the BIS), which, when asked where do they store their gold reserves, responded with various similar phrases saying that they could not provide this information. Between them, these 7 central banks claim to hold 1,500 tonnes of gold. Adding in the BIS which represents another 900 tonnes, in total that’s 2,400 tonnes of gold where the central banks in charge of that gold will not provide any information as to its whereabouts. Much of this 2,400 tonnes is no doubt stored (at least in name) at the FRBNY and the Bank of England, with some stored in the home countries of some of the central banks.

  I have included the 8 responses below, but have deleted any references to individuals’ names or email addresses:

  Bank of Japan: 765.2 tonnes of gold

  

   

  Bank for International Settlements (BIS): > 900 tonnes of gold

  • BIS manages 443 tonnes of gold under custody for central banks
  • BIS owns 108 tonnes of gold itself
  • BIS manages 356 tonnes of gold deposits from central banks
  • BIS has 47 tonnes of gold swaps outstanding

  

   

   

  Spain: 281.6 tonnes of gold

  

   

   

  South Africa: 125.2 tonnes of gold

  

   

   

  Thailand: 152.4 tonnes of gold

  

   

   

  Singapore: 127.4 tonnes of gold

  

   

   

  Malaysia: 37.9 tonnes of gold

  

   

   

  Paraguay: 8.2 tonnes of gold

  

  …which translates into English as …..”That information is classified and cannot be disclosed. I hope you understand“.

   

  ‘No Answer’ central banks

  I also emailed some central banks which didn’t respond to the question, ‘where are your gold reserves stored?’. They may not have responded for various reasons, including the emails may not have reached the relevant people who would normally be responsible for such matters. These banks account for another 500+ tonnes of gold reserves. Again, some of this gold is probably at the Bank of England, such as, some of Jordan’s and Kuwait’s gold, due to historical ties with the Bank of England.

  • Banque du Liban (Lebanon): 286.8 tonnes  (said to be in Lebanon and FRB New York)
  • National Bank of Kazakhstan: 208.1 tonnes
  • Central Bank of Kuwait: 79 tonnes
  • Central Bank of Jordan: 34.2 tonnes
  • Bank Al-Maghrib (Morocco): 22.1 tonnes
  • National Bank of Cambodia: 12.4 tonnes

  BIS – Transparency in name only

  The following slide, from a 2007 Bank for International Settlements presentation, shows how ridiculous the claims of central banks are when they use the meme that they are transparent and accountable, when in fact, they are nothing of the sort.

  The BIS’ response above on the gold storage question, i.e. “the information that you have requested is not made publicly available” makes a mockery of its own claims in the below slide that central banks are required to be transparent and accountable.

  The only ‘gold’ that the BIS is willing to discuss is its pie-in-the-sky corporate-speak ‘Golden Triangle’ of central bank Autonomy complimented by Transparency and Accountability when it states:

   – TRANSPARENCY – important for holding central bank to account

  – ACCOUNTABILITY – crucial counterpart of autonomy in an open society, makes transparency more credible

   (I added the 2 red arrows to the slide to highlight these points)

  

   

  Conclusion: Finland’s change of heart

  The fact that staff of some central banks won’t discuss that bank’s gold storage arrangements is no doubt an internal rule, or a storage depository rule, or some such nonsense. The nonsensical nature of their non-cooperation and evasion is highlighted by the below about-turn from the Bank of Finland, when in January 2013 it childishly told me that “We are not allowed to tell the exact depository, town or country“, and then 9 months later in October 2013, the powers-that-be at the gold depositories gave the go-ahead, for the Bank of Finland then spilled the beans, squealing that its gold was stored at a cornucopia of the usual suspects, namely, the Bank of England, the Federal Reserve Bank of New York, the Swiss National Bank, and smaller amounts at the Swedish Riksbank and the Bank of Finland.

  Given that the Bank of England, the Federal Reserve Bank of New York, and the Swiss National Bank all agreed to the Bank of Finland’s request in 2013 to publish the individual storage locations of its gold, and given that the vaults of these 3 banks store the vast majority of internationally stored central bank gold, therefore it also makes a mockery of central banks which persists in claiming that they cannot divulge information on the storage of their own gold, which in most cases is supposedly spread between the very same 3 sets of vaults.

  And after the Bank of Finland press release, which most Finns and most of the world probably didn’t even see, Helsinki and the world continued about its business as before. The point being that the storage locations of central banks’ gold reserves is not that big of a deal. Its only the central banks that make it into a big deal with their secrecy….unless of course, they are hiding something bigger, and the gold is not even where its supposed to be.

  Bank of Finland – 31 January 2013

  

   

  Bank of Finland – 25 October 2013

  

  

  

  

  

  

• Why The US Running Out Of Cash In 4 Weeks Is Good News

  Over the past several weeks, Americans (not to mention the market) were forced to grapple with the latest example of congressional infighting and outright legislative gridlock as US lawmakers narrowly averted a government shutdown in the wake of House Speaker John Boehner’s surprise resignation.

  Now, the debt ceiling battle looms ahead of Boehner’s October 30 exit and according to Treasury Secretary Jack Lew, the US will run out of money to pay its bills far sooner than originally expected – November 5, to be exact. Here’s WSJ:

  The government will run out of money to pay its bills sooner than previously thought, forcing Republican lawmakers who are already scrambling to elect new leaders to immediately confront a series of unpopular fiscal deadlines.

   

  Treasury Secretary Jacob Lew said the government would be left with just $30 billion cash on or around Nov. 5. Government outlays can be twice that level on certain weekdays, underscoring the need to raise the federal borrowing limit, Mr. Lew said in a letter late Thursday to House Speaker John Boehner (R., Ohio).

   

  “Without sufficient cash, it would be impossible for the United States of America to meet all of its obligations for the first time in our history,” Mr. Lew said in the letter.

   

  The new debt-ceiling deadline falls less than a week after Mr. Boehner will leave Congress, putting pressure on him—and an incoming Republican leadership team—to pass legislation raising the limit before that transition. Some congressional estimates had indicated the government could get by without action until December. Traders and Wall Street analysts are watching the timeline closely due to the turbulence that hits financial markets as debt-limit deadlines approach.

  And so, the stage is once again set for GOP lawmakers to use the debt ceiling as a negotiating tool in an effort to extract concessions from the White House while the rest of the world looks on incredulous at the spectacle the US creates when its lawmakers effectively blackmail themselves by threatening to force the nation into default in order to secure a bit more bargaining power.

  Of course this never ends well and only serves to i) undermine Washington’s credibility with the rest of the world, ii) increase market volatility as investors can never completely rule out the possibility that this time around, someone might actually make good on their threats, triggering a technical default somewhere, and iii) further destroy the government’s credibility in the eyes of voters to whom the entire thing appears completely absurd. Note that the latter point there speaks to why Donald Trump is polling so well in the GOP primaries – the electorate is simply fed up with lawmakers’ inability to do what they were elected to do (i.e. legislate). 

  In the end, the result will likely be the same as it always is. Some last minute can kick will ensure that the US doesn’t default and the debt limit will be raised to a number that’s even more meaningless than it is now, ensuring that America remains on track to eventually compete with Japan for world’s worst debt-to-central government revenue ratio.

  And as if the whole thing weren’t ridiculous enough as it is, consider this bit of counterintuitive silliness: the fact that the timetable for an unprecedented US default has just been moved up by a month is actually good news this time around because it means that the negotiations will likely be presided over by Boehner as opposed to his successor and because Boehner will be out the door at the end of October anyway, he’ll be free to negotiate in good faith. 

  In any event, we suppose it’s best to just give the last word to Goldman since they’re probably the ones who will end up making the final decision anyway.

  From Goldman

  USA:  Earlier Debt Limit Deadline Might Lower Risk of Disruptions

  BOTTOM LINE: Treasury Secretary Lew has notified Congress that the debt limit will need to be raised by November 5, earlier than expected. This increases the probability that it will be voted on before Speaker Boehner leaves office on October 30, which would reduce the risk of a disruptive last-minute increase in the limit.

  MAIN POINTS:

  1. In a letter to congressional leaders, Treasury Secretary Lew has indicated that the debt limit will need to be raised by November 5. This is slightly earlier than the mid-November deadline that we had recently estimated and is due, according to the Treasury, to a combination of slightly weaker-than-expected estimated taxes in September and higher-than-expected obligations associated with certain trust funds.

  2. This earlier deadline raises the probability that the House will vote to raise the debt limit prior to the time Speaker Boehner steps down on October 30. If so, this would reduce the risk of a disruptive debate on the issue, because Speaker Boehner is more likely than his successor, in our view, to allow a “clean” debt limit increase without the debate over extraneous issues that have delayed enactment until shortly before the deadline in the past.

  3. By contrast, this reduces the probability that the debt limit would be dealt with as part of a broader fiscal negotiation that also includes the extension of spending authority past the current December 11 expiration. Such a scenario would presumably involve negotiations over spending levels and other matters that could create significant uncertainty in the period leading up to the deadline, similar to the experience in the summer of 2011.

  4. That said, the path forward for increasing the debt limit is still uncertain. There has been no indication yet from congressional leaders on how they plan to proceed with increasing the debt limit in light of the new deadline. However, we recently noted the possibility that legislation to extend the Highway Bill, which expires October 29, could be a vehicle for other items, including the debt limit, and today’s announcement makes that a bit more likely, in our view.

  

  

  

  

  

• The Mind Of Mr. Putin (America's Non-Interventionist Foreign Policy Tradition Exposed)

  Submitted by Patrick Buchanan via LewRockwell.com,

  So Vladimir Putin in his U.N. address summarized his indictment of a U.S. foreign policy that has produced a series of disasters in the Middle East (that we did not need the Russian leader to describe for us).

  Fourteen years after we invaded Afghanistan, Afghan troops are once again fighting Taliban forces for control of Kunduz. Only 10,000 U.S. troops still in that ravaged country prevent the Taliban’s triumphal return to power.

  A dozen years after George W. Bush invaded Iraq, ISIS occupies its second city, Mosul, controls its largest province, Anbar, and holds Anbar’s capital, Ramadi, as Baghdad turns away from us — to Tehran.

  The cost to Iraqis of their “liberation”? A hundred thousand dead, half a million widows and fatherless children, millions gone from the country and, still, unending war.

  How has Libya fared since we “liberated” that land? A failed state, it is torn apart by a civil war between an Islamist “Libya Dawn” in Tripoli and a Tobruk regime backed by Egypt’s dictator.

  Then there is Yemen. Since March, when Houthi rebels chased a Saudi sock puppet from power, Riyadh, backed by U.S. ordinance and intel, has been bombing that poorest of nations in the Arab world.

  Five thousand are dead and 25,000 wounded since March. And as the 25 million Yemeni depend on imports for food, which have been largely cut off, what is happening is described by one U.N. official as a “humanitarian catastrophe.”

  “Yemen after five months looks like Syria after five years,” said the international head of the Red Cross on his return.

  On Monday, the wedding party of a Houthi fighter was struck by air-launched missiles with 130 guests dead. Did we help to produce that?

  What does Putin see as the ideological root of these disasters?

  “After the end of the Cold War, a single center of domination emerged in the world, and then those who found themselves at the top of the pyramid were tempted to think they were strong and exceptional, they knew better.”

  Then, adopting policies “based on self-conceit and belief in one’s exceptionality and impunity,” this “single center of domination,” the United States, began to export “so-called democratic” revolutions.

  How did it all turn out? Says Putin:

  “An aggressive foreign interference has resulted in a brazen destruction of national institutions. … Instead of the triumph of democracy and progress, we got violence, poverty and social disaster.

   

  Nobody cares a bit about human rights, including the right to life.”

  Is Putin wrong in his depiction of what happened to the Middle East after we plunged in? Or does his summary of what American interventions have wrought echo the warnings made against them for years by American dissenters?

  Putin concept of “state sovereignty” is this: “We are all different, and we should respect that. No one has to conform to a single development model that someone has once and for all recognized as the right one.”

  The Soviet Union tried that way, said Putin, and failed. Now the Americans are trying the same thing, and they will reach the same end.

  Unlike most U.N. speeches, Putin’s merits study. For he not only identifies the U.S. mindset that helped to produce the new world disorder, he identifies a primary cause of the emerging second Cold War.

  To Putin, the West’s exploitation of its Cold War victory to move NATO onto Russia’s doorstep caused the visceral Russian recoil. The U.S.-backed coup in Ukraine that overthrew the elected pro-Russian government led straight to the violent reaction in the pro-Russian Donbas.

  What Putin seems to be saying to us is this:

  If America’s elites continue to assert their right to intervene in the internal affairs of nations, to make them conform to a U.S. ideal of what is a good society and legitimate government, then we are headed for endless conflict. And, one day, this will inevitably result in war, as more and more nations resist America’s moral imperialism.

  Nations have a right to be themselves, Putin is saying.

  They have the right to reflect in their institutions their own histories, beliefs, values and traditions, even if that results in what Americans regard as illiberal democracies or authoritarian capitalism or even Muslim theocracies.

  There was a time, not so long ago, when Americans had no problem with this, when Americans accepted a diversity of regimes abroad. Indeed, a belief in nonintervention abroad was once the very cornerstone of American foreign policy.

  Wednesday and Thursday, Putin’s forces in Syria bombed the camps of U.S.-backed rebels seeking to overthrow Assad. Putin is sending a signal: Russia is willing to ride the escalator up to a collision with the United States to prevent us and our Sunni Arab and Turkish allies from dumping over Assad, which could bring ISIS to power in Damascus.

  Perhaps it is time to climb down off our ideological high horse and start respecting the vital interests of other sovereign nations, even as we protect and defend our own.

  

  

  

  

  

• Meet Seth Carpenter – Janet Yellen's Choice Of "Fed Leak" Scapegoat

  With the "above the law" Federal Reserve coming under increasing pressure to answer a Senate investigation's questions about the 2012 "leak", it appears the proximity of the probe to Janet Yellen, has forced The Fed to 'fess up and throw someone under the bus. Meet Seth Carpenter, a nominee for assistant Treasury secretary for financial markets…

  As The Wall Street Journal reports, probes into the 2012 leak of sensitive Federal Reserve policy information are widening further, with a Senate committee scrutinizing a former Fed official nominated for a position in the Obama administration.

  The Senate Finance Committee has been looking into whether the official, a Treasury Department nominee who worked as a top Fed economist at the time of the leak, relayed market-sensitive information from the Fed to policy research firm Medley Global Advisors, which in turn shared the details with its Wall Street clients, according to people familiar with the matter.

   

  …

   

  The Senate committee is looking into whether Seth Carpenter, a nominee for assistant Treasury secretary for financial markets, played a role in the 2012 leak. The panel is charged with approving nominees to senior-level positions at the Treasury Department.

   

  

   

  A person familiar with the matter said Thursday Mr. Carpenter has told the Treasury Department he never had any contact with anyone at Medley. The person added that even before the nomination, both the Treasury and the White House looked into whether Mr. Carpenter was involved, including reviewing the findings of the Fed’s inspector general, and found no evidence linking him to the leak.

   

  Mr. Carpenter didn’t respond to a request for comment on Thursday. Spokesmen for the Fed and White House declined to comment on the Senate inquiry.

  The Fed conducted its own investigation in late 2012 and early 2013 that found a “few” Fed staffers had contact with Medley, according to a memo summarizing the investigation, but it didn’t identify the people. The Fed has said it was unable to determine who provided information to Medley. Mr. Carpenter hasn't been accused of being the source of the leak.

  The spokeswoman wouldn’t say if the committee’s review of the leak has stalled Mr. Carpenter’s nomination. It has been more than a year since Mr. Obama tapped Mr. Carpenter for the position, and the committee has yet to schedule a hearing on the nomination.

   

  Mr. Carpenter “is going through the same bipartisan nomination process as every nominee referred to the Finance Committee,” said spokeswoman Julia Lawless.

  *  *  *

  Whether or not Mr Carpenter is guilty, we wish him luck.

  What better scapegoat… Republicans get to claim the scalp of an Obama nominee; and The Fed gets to point to lower level staff – not Janet – as the problem and will, we are sure, begin to firm up internal controls over sensitive information.

  

  

  

  

  

• Meet Oregon School Shooter Chris Harper-Mercer: "You're Going To See God In Just About One Second"

  Sadly, the post-mass-shooting killer profile has become something of a media tradition in the US of late as a string of violence that includes the execution of nine African American churchgoers in Charleston and the on-air murder of a TV reporter has delivered a shock to the collective psyche of Americans and served notice that tragedies like those that occurred at Columbine, Virginia Tech, and Sandy Hook may well become commonplace going forward. 

  The latest “incident” in the mass shooting tradition came on Thursday when someone described only as “a 20-year-old man” went on a rampage at Umpqua Community College in Oregon. According to some eyewitness accounts, the shooter demanded that victims “stand up and state their religion” before summarily executing them. 

  On Friday, the first details are beginning to emerge about the identity of the shooter. Here’s Reuters with more:

  The man killed by police on Thursday after he fatally shot nine people at a community college in southern Oregon was a nervy 26-year-old who lived close to the campus and described himself as shy, according to neighbors, media and online reports.

   

  A law enforcement source said multiple agencies had identified the shooter as Chris Harper-Mercer. Online directories list a man of that name as having lived in Torrance, California, before moving to Winchester, Oregon.

   

  The killer used four guns, including a type of assault rifle, in the classroom attack, CNN said. Seven people were also wounded at the Umpqua Community College in Roseburg, a timber town of about 20,000 people that adjoins Winchester.

   

  A photo posted on a MySpace profile belonging to someone named Chris Harper-Mercer, from Torrance, showed a young man with a shaved head, dark-rimmed glasses and a serious expression. He was holding a long-barreled gun.

   

  A neighbor next door to the Winchester building said Thursday night he recognized online photos of Harper-Mercer as being his neighbor.

   

  In an Internet posting on the Spiritual Passions dating and social networking site, a user posted a picture that appears to be Harper-Mercer under the user name IRONCROSS45, a handle Harper-Mercer used as his email.

   

  He described himself on the site as a 26-year-old, mixed-race “man looking for a woman.” He said he was “not religious, but spiritual,” and was a “teetotaler” living with his parents and a conservative Republican. Socially, he said, he was “shy at first” and “better in small groups.” He described himself as “always dieting” and looking for “the yin to my yang.”

  And here’s further color from The New York Times:

  Chris Harper Mercer, the man identified as the gunman in the deadly rampage at Umpqua Community College in Roseburg, Ore., on Thursday, was a withdrawn young man who neighbors said wore the same outfit every day — combat boots, green Army pants and a white T-shirt — and was close to his mother, who fiercely protected him.

  Neighbors in Winchester, Ore., and Torrance, Calif., where Mr. Mercer, 26, lived with his mother, Laurel Harper, remember a reclusive and seemingly fragile young man with a shaved head and dark glasses who seemed to recoil from social interaction.

   

  “He always seemed anxious,” said Rosario Lucumi, 51, who rode the same bus in Torrance as Mr. Mercer when she went to work. She said she believed he took it to El Camino College. “He always had earphones in, listening to music.”

   

  “He and his mother were really close,” said Ms. Lucumi, who estimated that Mr. Mercer and his mother, who shared a small one-bedroom apartment in Torrance, lived there for less than a year. “They were always together.”

   

  Bryan Clay, 18, said he once asked Mr. Mercer why he wore “a military get-up” every day.

   

  “He kind of just didn’t want of talk about it” and changed the subject, Mr. Clay said.

   

  “He didn’t say anything about himself,” he added.

   

  Mr. Mercer appeared to have sought community on the Internet. A picture of him holding a rifle appeared on a MySpace page with a post expressing a deep interest in the Irish Republican Army. It included footage from the conflict in Northern Ireland set to “The Men Behind the Wire,” an Irish republican song, and several pictures of gunmen in black balaclavas. Another picture showed the front page of An Phoblacht, the party newspaper of Sinn Fein, the former political wing of the I.R.A.

  
  

   

  A picture of Mr. Mercer also appeared on a long-dormant dating website profile registered in Los Angeles. On it, he described himself as an “introvert” with a dislike for “organized religion.”

  Here are the images from Mercer’s MySpace page…

  

  …here is the above mentioned “Spiritual Passions” profile…

  

  …and here is a review penned by someone with the same username (IRONCROSS45) after purchasing Nazi attire:

  

  According to reports, Mercer’s professed “dislike for organized religion” led him to “target” Christians, although the chilling details presented below may simply indicate that Mercer was attempting to terrorize his victims before killing them. Via CNN:

  The gunman who opened fire at Oregon’s Umpqua Community College singled out Christians, according to the father of a wounded student.

   

  Before going into spinal surgery, Anastasia Boylan told her father the gunman entered her classroom firing.

   

  “I’ve been waiting to do this for years,” the gunman told the professor teaching the class. He shot him point blank, Boylan recounted.

   

  Others were hit too, she told her family.

   

  Everyone in the classroom dropped to the ground.

   

  The gunman, while reloading his handgun, ordered the students to stand up and asked if they were Christians, Boylan told her family.

   

  “And they would stand up and he said, ‘Good, because you’re a Christian, you’re going to see God in just about one second,'” Boylan’s father, Stacy, told CNN, relaying her account.

   

  “And then he shot and killed them.”

  Mercer’s blog posts, which were penned under the name “lithium_love” have apparently been removed (see here) but here are some excerpts via CNN and via another blogger who copied the entries before they were taken down. The first two paragraphs reference Virginia shooter Vester Flanagan:

  I have noticed that so many people like him are all alone and unknown, yet when they spill a little blood, the whole world knows who they are. A man who was known by no one, is now known by everyone. His face splashed across every screen, his name across the lips of every person on the planet, all in the course of one day. Seems the more people you kill, the more you’re in the limelight.

   

  And I have to say, anyone who knew him could have seen this coming. People like him have nothing left to live for, and the only thing left to do is lash out at a society that has abandoned them.

   

  I just read about the houston cop shooting. Figured I’d post this since the response to my previous blog post on vester flanagan was so interesting. On the houston shooting it was reported that the suspect was influenced by black lives matter protests/movement. Although I don’t know if thats true, with all the issues about police and blacks/protestors in the news the past couple of years, it certainly seems like someone would be inspired to take action. With the constant chants of anti police rhetoric this was bound to happen. I don’t disagree that police brutality and excessive use of force is a problem, but killing an officer that never did anything to you is not the answer.

   

  This whole event seems similar to the one in new york earlier this year where that guy killed those two cops sitting in a parked car. The inflammatory rhetoric on both sides, whether warranted or not will only continue to agitate the situation and events such as these will happen more and more. These are just my thoughts on the matter. Will continue to post more blogs on related subjects, as well any interesting thoughts I may have.

  We’ll leave it to readers to draw their own conclusions as to what this says about race relations in America, religion, the copy cat effect, and the outright disintegration of society. We close by noting that sadly, we doubt this is the last time we’ll find ourselves profiling someone who carries out a mass shooting and we leave you with the following rather unnerving bit from The New York Times piece excerpted above:

  In the offline world, Mr. Mercer’s mother sought to protect him from all manner of neighborhood annoyances, former neighbors in Torrance said, from loud children and barking dogs to household pests. Once, neighbors said, she went door-to-door with a petition to get the landlord to exterminate cockroaches in her apartment, saying they bothered her son.

   

  “She said, ‘My son is dealing with some mental issues, and the roaches are really irritating him,’ ” Julia Winstead, 55, said. 

  

  

  

  

• The Reality Behind The Numbers In China's Boom-Bust Economy

  Submitted by Yonathan Amselem via The Mises Institute,

  Last year, the world was stunned by an IMF report which found the Chinese economy larger and more productive than that of the United States, both in terms of raw GDP and purchasing power parity (PPP). The Chinese people created more goods and had more purchasing power with which to obtain them — a classic sign of prosperity. At the same time, the Shanghai Stock Exchange Composite more than doubled in value since October of 2014. This explosion in growth was accompanied by a post-recession construction boom that rivals anything the world has ever seen. In fact, in the three years from 2011 – 2013, the Chinese economy consumed more cement than the United States had in the entire twentieth century. Across the political spectrum, the narrative for the last fifteen years has been that of a rising Chinese hyperpower to rival American economic and cultural influence around the globe. China’s state-led “red capitalism” was a model to be admired and even emulated.

  Yet, here we sit in 2015 watching the Chinese stock market fall apart despite the Chinese central bank’s desperate efforts to create liquidity through government-backed loans and bonds. Since mid-June, Chinese equities have fallen by more than 30 percent despite massive state purchases of small and mid-sized company shares by China’s Security Finance Corporation.

  But this series of events should have surprised nobody. China’s colossal stock market boom was not the result of any increase in the real value or productivity of the underlying assets. Rather, the boom was fueled primarily by a cascade of debt pouring out of the Chinese central bank.

  China’s Real Estate Bubble

  Like the soaring Chinese stock exchange, the unprecedented construction boom was financed largely by artificially cheap credit offered by the Chinese central bank. New apartment buildings, roads, suburbs, irrigation and sewage systems, parks, and commercial centers were built not by private creditors and entrepreneurs marshaling limited resources in order to satisfy consumer demands. They were built by a cozy network of central bank officials, politicians, and well-connected private corporations.

  Nearly seventy million luxury apartments remain empty. These projects created an epidemic of “ghost cities” in which cities built for millions are inhabited by a few thousand. At the turn of the century, the Chinese economy had outstanding debt of $1 trillion. Only fifteen years and several ghost cities later that debt has ballooned to an unbelievable $25 trillion. What we’re experiencing in the Chinese markets are the death throes of an economy that capital markets have realized is simply not productive enough to service that kind of debt.

  GDP and Other Crude Economic Metrics are Misleading

  GDP is meant to represent the collective value of all transactions within a certain boundary. This metric provides very little useful or accurate information about the actual quality of life in a country. GDP is artificially inflated by imputations such as the added “value” of a house owner not having to pay rent. GDP also includes government spending — such as when a government department purchases new computers. This transaction merely redirected labor and raw materials that would have otherwise been used to directly satisfy consumer demands with better or additional products. Government spending is not just “neutral,” it is actively destructive. Government purchases and sales do not operate with the same rules that other actors in the market are subject to. Thus when we look at GDP numbers from a country drunk on spending newly printed money on projects completely devoid of market signals, we should not place too much faith in them.

  The IMF report and those who took it seriously relied heavily on GDP calculations when arriving at their astounding conclusions about China’s growth. To compare the Chinese and American economies using a crude metric like GDP is like trying to gauge the athleticism of an individual by how much sweat comes out of his pores. When one economy can produce companies like Google, Boeing, Costco, and General Electric while another builds empty homes, what meaningful information could an unsophisticated metric like GDP tell us? Much to the chagrin of Keynesians, not all spending is created equal.

  Not long ago, we were haunted, not by the specter of this “red capitalism,” but by the communism of the Soviet Union. Some fifty years ago, mainstream economists blabbered tirelessly about the rising Soviet powerhouse. According to popular wisdom, the managed Soviet economy did not have the inefficiency and economic drag inherent in the “random” and “chaotic” American capitalist economy that sent some into mansions and others into bankruptcy. The widely-read Economics: An Introductory Analysis by Nobel-prize winning economist, Paul Samuelson predicted that Soviet GDP was nearly half that of the United States, but by 1984 (and surely by 1997), the strength of the Soviet economy would surpass that of the United States.

  The Soviet Union crumbled. When experts rely on crude metrics we should not be surprised when experts are wrong.

  The US Federal Reserve orchestrated an artificial boom from 2001 to 2007 through artificially low interest rates and has resumed doing so once again. Entrepreneurs operating under faulty market signals created by the Federal Reserve malinvested hundreds of billions of dollars into capital intensive projects primarily in the housing sector. We paid for our boom with millions of destroyed jobs, wasted labor, and wasted resources. The Chinese Central Bank learned nothing from the Fed’s catastrophic experiment. They will reap the same rewards.

   

  

  

  

  

  

• Presenting A First-Hand Look Inside Russia's Forward Operating Base In Syria

  When the first reports began to trickle in regarding a possible Russian military buildup at Bashar al-Assad’s seaside stronghold at Latakia, the scramble to “prove” that forces from Moscow had indeed arrived in Syria led directly to a string of conflicting reports and grainy satellite images purporting to detail the scope of Russia’s involvement. 

  As the weeks went by, and as rumors of a Russian presence were confirmed by The Kremlin, the world became even more fascinated by the idea that Moscow has officially launched an air war in a foreign country. Indeed, Russia’s overt involvement on behalf of the Assad regime marks a change of strategy for Putin, who has been careful to dispel accusations that his forces are directly involved in the fighting in eastern Ukraine. 

  Now that Russia has officially commenced combat operations, Moscow is wasting no time showing off its new staging ground. For those curious to know what a Russian forward operating base in a Middle Eastern warzone looks like, we present the following clip from RT:

  

  

  

  

  

• Foreign Policy In 140 Characters Or Less: US Ambassador Tweets Warning To Russia

  For anyone who might still be confused as to what the official position of the US and its allies is with regard to Russian military operations in Syria, you’re in luck because Washington – in conjunction with Berlin, Paris, London, Doha, Ankara, and of course Riyadh – is now tweeting out foreign policy. 

  We present the following from the US ambassador to the UN with no further comment other than to note that we are glad to see that countries who most certainly are not currently conducting any kind of overt or covert military operations in Syria are standing tall in the face of Russian “aggression”…

  We call on #Russia to immediately cease attacks on Syrian oppo & civilians & to focus on ISIL pic.twitter.com/61zw3h9qd7

  — Samantha Power (@AmbassadorPower) October 2, 2015

  

  

  

  

  

• The Farce Is Complete: Stocks Soar Most In 4 Years As US Job Market Disintegrates

  We suspect more than a few traders will need this tonight…

  First things first, we have this…

  Chinese stocks (trading in US) rose 6.5% today – the biggest day since May 2010:

  

   

  And this  -Today saw an epic squeeze of shorts – "most shorted" surged 5% off the opening lows which is the largest swing we could find on record

  

   

  And finally this: Today was the biggest intraday reversal higher in The Dow since 2011

  

   

  Thanks to this…

  spoofer in eMini using a order size of 584 $ES_F $SPY

  — Eric Scott Hunsader (@nanexllc) October 2, 2015

  With cash indices all ramped into green for the day:

  

   

  But there was only one thing driving US equities today… USDJPY, which got the momo going:

  

   

  So 120 will be used to launch the 3:30pm ramp

  — zerohedge (@zerohedge) October 2, 2015

  SPX would already be above 2000 if payrolls were negative

  — zerohedge (@zerohedge) October 2, 2015

  And a collapse in VIX finished it off:

  

   

  And US equities (except Small Caps) were ramped all the way into the green for the week, even Trannies

  

   

  But credit was not buying it at the end:

  

   

  Away from the silliness in stocks, everything else was 'silly' too:

  Treasuries soared at the payrolls print with yields collapsing and flattening across the curve… before Europe closed and the Treasury selling was unleashed…

  

   

  But remained lower on the week:

  

   

  The USD was crushed lower after payrolls but bid back to the moon alice after Europe closed:

  

   

  Commodities were very mixed on the week but industrials soared later in the day after precious metals exploded on payrolls data:

  

   

  But Silver (up 6%) was the big winner from Payrolls:

  

   

  And here is crude on the week… testing and failing at the week's close…ramping today onthe rig count dcline after tumbling after payrolls

  

   

  The bottom line – The Pure-Play QE Trade is back on… but be careful what you wish for because of reflexivity…

  Rate Hike Odds vs. What Determines Rate Hike Odds pic.twitter.com/qjOsJoJMx3

  — Not Jim Cramer (@Not_Jim_Cramer) October 2, 2015

  Charts: Bloomberg

   

  

  

  

  

• Chinese Cash Flow Shocker: More Than Half Of Commodity Companies Can't Pay The Interest On Their Debt

  Earlier today, Macquarie released a must-read report titled “Further deterioration in China’s corporate debt coverage”, in which the Australian bank looks at the Chinese corporate debt bubble (a topic familiar to our readers since 2012) however not in terms of net leverage, or debt/free cash flow, but bottom-up, in terms of corporate interest coverage, or rather the inverse: the ratio of interest expense to operating profit. With good reason, Macquarie focuses on the number of companies with “uncovered debt”, or those which can’t even cover a full year of interest expense with profit.

  The report’s centerprice chart is impressive. It looks at the bond prospectuses of 780 companies and finds that there is about CNY5 trillion in total debt, mostly spread among Mining, Smelting & Material and Infrastructure companies, which belongs to companies that have a Interest/EBIT ratio > 100%, or as western credit analysts would write it, have an EBIT/Interest < 1.0x.

  As Macquarie notes, looking at the entire universe of CNY22 trillion in corporate debt, the “percentage of EBIT-uncovered debt went up from 19.9% in 2013 to 23.6% last year, and the percentage of EBITDA-uncovered debt up from 5.3% to 7%. Therefore, there has been a further deterioration in financial soundness among our sample.”

  

  To be sure, both the size (the gargantuan CNY22 trillion) and the deteriorating quality (the surge in “uncovered debt” companies) of cash flows, was generally known.

  What wasn’t known were the specifics of just how severe this bubble deterioration was for the most critical for China, in the current deflationary bust, commodity sector.

  We now know, and the answer is truly terrifying.

  Macquarie lays it out in just three charts.

  First, it shows the “debt-coverage” curve for commodity companies as of 2007. One will note that not only is there virtually no commodity sector debt to discuss, at not even CNY1 trillion in debt, but virtually every company could comfortably cover their interest expense with existing cash flow: only 4 companies – all in the cement sector – had “uncovered debt” 8 years ago.

  

  Fast forward to 2013 when things get bad, as about a third of all corporations are now unable to cover their annual interest expense, even as the total addressable corporate debt has soared to CNY4 trillion for just the commodity sector.

  

  And then in 2014, everything just falls apart. Quote Macquarie, “more than half of the cumulative debt in this sector was EBIT-uncovered in 2014, and all sub-sectors have their share in the uncovered part, particularly for base metals (the big gray bar on the right stands for Chalco), coal, and steel.”

  Compared with the situation in 2013, while almost all sub-sectors did worse in 2014, but things appear to have worsened faster for coal companies as more red bars have moved beyond the 100% critical level for EBIT-coverage.

  It means that last year about CNY2 trillion in debt was in danger of imminent default.

  

  The situation since than has dramatically deteriorated.

  So are we now? Macquarie again: “Given the slumps in metal and coal prices so far this year, it’s quite likely the curve will have deteriorated further for commodity firms this year, with total debt getting better in the meantime.“

  In other words, it is safe to assume that up to two-third of Chinese commodity companies are now at imminent danger of default, as they can’t even generate the cash to pay down the interest on their debt, let alone fund repayments.

  We fully expect this to be the source of the next market freakout: when the punditry turns its attention away from macro China, which has more than enough problems to begin with, and starts to focus on the cash flow devastation in China at the micro, or corporate, level.

  

  

  

  

• Weekend Reading: Capacious Cognitions

  Submitted by Lance Roberts via STA Wealth Management,

  This past week saw the markets retest its lows. So far, those lows have held for now but the deterioration in market internals suggests that the danger is not over as of yet. As I stated earlier this week:

  "As you will notice, the reflexive rally, and subsequent failure, have tracked the original predictions very closely up to the point.

   

  With the market once again very oversold on a short-term basis, it is likely that the markets could manage a weak rally attempt over the next few days. The good news is that such an attempt will provide individuals another opportunity to reduce portfolio risk accordingly."

  

  "While the mainstream analysis remains quite bullish on the underpinnings of the market, the ongoing deterioration of market internals and fundamentals suggests something more pervasive. The chart below shows the previous post-financial crisis corrections following the end of Central Bank interventions."

  

  "As you will note, each correction was contained within a Fibonacci correction band of either 38.2% or 61.8%. It was at these correction points that the Federal Reserve responded with some form of monetary intervention or support."

  With the Federal Reserve still hinting at raising interest rates, but trapped by weak economic growth, will the next big move by the Fed be another form of monetary accommodation instead? Or, are the underlying dynamics of the economy and market really strong enough to shake off the recent weakness and continue its bullish ascent? 

  This weekend's reading list covers a variety of views on the markets and other related issues to stimulate your thinking processes. What is critically important is to have a logical and disciplined game plan for dealing with your investments. "Hoping to get back to even" has never been a successful investment strategy. 

  ---

  THE LIST

  1) Is 1700 For The SPX Still On Target by Avi Gilbert via MarketWatch

  “I also want to address the 2011 correction, to which I see many referring as the "copy" of what we are forming right now. First, the 2011 correction wave was a 2nd wave, and this is a 4th wave. The theory of alternation suggests that they should take different forms, so I am not going to expect that we will be working from the same playbook as 2011.

   

  Second, it seems as though many market participants have been referring to this market fractal as to what will happen in our current market scenario. Well, when a large segment of the market maintains the same perspective, it is quite rare to see that perspective play out. So, for that reason, I think that the market is either going to break down sooner than I expect, which is not called for in the 2011 fractal, or, more in line with my primary perspective, we go back over the high made on the day of the Fed announcement before we drop to lower lows, which is also not in line with the 2011 fractal.”

  Read Also: Ending The Markets' Short-Term Obsession by Mohammed El-Erian via Bloomberg View

   

  2) Investors Haven't Been This Bearish In 15 Years by Mark Hulbert via MarketWatch

  “Bearishness has reached an extreme not seen at least since the top of the Internet bubble in early 2000.

   

  Yet this is a bullish omen, according to the inverse logic of contrarian analysis: Extreme levels of bearishness indicate that there is a very robust "wall of worry" for the market to climb.”

   

  Read Also: 5 Things To Do BEFORE Your Portfolio Crumbles by Peter Hodson via Financial Post

  But Also Read: What Could Stop This Bear Market by Anthony Mirhaydari via The Fiscal Times

   

  3) This Is When Bonds Go Boom! by Wolf Richter via Naked Capitalism

  “This chart from LCD HY Weekly shows the distress ratio of leveraged loans as measured by S&P Capital IQ LCD (blue line) and of junk bonds as measured by BofA Merrill Lynch (red line) which depicts reality in an even harsher light than Standard and Poor's. Leveraged loans are generally secured and hold up better in a bankruptcy than bonds. But distress levels of both have recently begun to spike.

   

  These yields that are rising to distressed levels drive up the spread between corporate bond yields and US Treasury yields. The spread is a measure of perceived risk. It had dropped to ludicrously low levels. This wasn't a function of risk somehow disappearing from Planet Earth. It was a function of the Fed's beating investors into submission with its zero-interest-rate policy so that they would eliminate risk as a factor being priced into their calculus. Now risk is re-inserting itself into the calculus.”

  

  Read Also: Are Credit Markets Signaling More Pain? by Fil Zucchi via See It Market

   

  4) Carl Ichan: Market Is Way Overpriced by Carl Icahn via Zero Hedge

   

  "God knows where this is going. It's very dangerous and could be disastrous," said Icahn, who has been a consistent critic of the Fed for keeping its benchmark interest rate close to zero since late 2008.

   

  Icahn said he felt compelled to raise red flags about the state of the financial markets because he believes if more big investors had warned about subprime mortgage market in 2007, the United States might have avoided the crisis that strangled the economy the following year.

   

  In a video entitled "Danger Ahead" and released on Tuesday, Icahn said the Fed's rate policy had enabled U.S. chief executives – many of whom he describes as "nice but mediocre guys" – to pursue "financial engineering" that he said has exacerbated an already wide gap between rich and poor in America."

  Read Also: Today's Market Looks A Lot Like 2000 and 2007 by Alex Rosenberg via CNBC

   

  5) New Sign Of A Market Bubble? by Michael Hiltzik via LA Times

  "At a press briefing last week, Mike Wilson, an executive of Morgan Stanley's wealth management arm, cautioned that 'Consumers are feeling pretty good, and they are starting to spend money again, and they're starting to do dumb things. They're starting to borrow money, they're starting to maybe buy that house they shouldn't or that car they shouldn't.'

   

  That's amusing, because Morgan Stanley has been aggressively hawking non-purpose loans: its total securities-based loans totaled $38 billion at the end of 2014, a 70% increase over two years earlier according to an analysis by Paul Meyer of the Securities Litigation and Consulting Group.

   

  The firm's pitch to clients is entitled 'Invest in Your Dreams.' Among those dreams it puts in its clients' heads: 'The restaurant you've always wanted to open. That advanced degree you finally have time for. The perfect house that won't be on the market long. A 1963 Ferrari GTO, just because.'"

  (Note: Morgan Stanley is pitching "margin loans" at a time when margin debt is still near record highs. We saw similar behavior at the peak of the last two bull markets.)

  

  Read Also: Goldman Sachs Cuts Outlook For Market by Sam Ro via Business Insider

  ---

  Other Reading

  • The Buffet Valuation Indicator Levitates by Doug Short via Advisor Perspectives
  • Valuations Tend To Mean-Invert by John Hussman via Hussman Funds
  • Thoughts On Negative Rates via Philosophical Economics
  • Selling Is The Easy Part by Ben Carlson via Wealth Of Common Sense
  • Say Goodbye To The 4% Rule For Retirement by Roger Nusbaum via Advisor Perspectives
  • Slumping Manufacturing Doesn't Matter? by Jeffrey Snider via Alhambra Partners
  • S&P Predicts ECB Will Boost QE By 120% by Tyler Durden via Zerohedge

  ---

  “Risk taking is necessary for large success, it is also necessary for failure.” – Nasim Taleb

  Have a great weekend.

  

  

  

  

  

• Meet Your "Independent" Media, America

  All you need to know about the “independent”, “objective” and “impartial” US media.

  

  h/t @LibertyBlitz

  

  

  

  

• "They're Hopping Mad In The US And Saudi Arabia": Russian Strikes In Syria Spark Epic Western Media Propaganda Blitz

  We are now two days into Russia’s air campaign against anti-regime forces in Syria and both Moscow and the West are rushing to spin the narrative.

  The frantic attempt from both sides to shape public opinion has been truly amazing to behold and the sheer amount of coverage speaks to what we said on Thursday about just how important the conflict really is for the Mid-East balance of power.

  For the US, portraying Russian airstrikes as supportive of a murderous regime and as an imminent threat to civilians is key, as it allows Washington to explain away the fact that the US and its allies haven’t coordinated their efforts with Moscow. Take the following from CNN for instance, who reports that Russia has made a “strategic blunder” and that by opening an air campaign, Russia risks raising the spectre of the Soviet-Afghan war in the minds of potential jihadists who will supposedly rush into Syria to join the fight:

  There is no ambiguity now about Russia’s current tactics in Syria — they are seeking to take over the airspace in the region and be the agenda-setting force on the ground, several senior administration officials told CNN.

   

  “Yesterday’s demarche to the U.S. by Russian officials in Baghdad was clear in its intent,” one senior administration official said. “Make sure you don’t have anyone around ISIS targets and get out of the air.”

   

  And while U.S. officials have no plans to cede Russia any ground, they also said it appears that Russian President Vladimir Putin made a dramatic chess move that the Russians have not thought through — one official even called it a “strategic blunder.”

   

  Had the Russians been clear that they are providing support in Syria to prevent Syrian President Bashar al-Assad regime’s collapse — a scenario that would benefit ISIS — they might have gotten some credit on the world stage.

   

  But their very first strikes in the region hit CIA-backed anti-Assad rebel forces, Arizona Republican John McCain, chairman of the Senate Armed Services Committee, said Thursday on CNN’s “New Day.”

   

  And U.S. officials note that every bomb against a non-ISIS Sunni target puts them more in bed with Iran and Hezbollah, which are Shiite. U.S. allies in the Persian Gulf warn that this could set off a huge sectarian conflict and that the deeper the Russians get into this, the harder officials believe it will be to get a diplomatic process with the Saudis and others restarted.

   

  “It is going to be hugely tempting for the Saudis to start financing their guys again,” another senior administration official said. “Syria will be a magnet for every jihadi, who will rush to fight the Russians, just like they did in Afghanistan. The problem is while this will cause problems for the Russians, it will also mean trouble for the Gulf, when the jihadists come home.”

   

  “The Russians can’t be stupid,” another senior administration official said. “This is going to be wildly expensive. And they can’t hold out long. They know in the end there is no future for the guy (Assad) because the whole reason they had to come in is because Assad and his forces were extremely vulnerable. So we are hoping they will come to their senses, stabilize the situation and then we can agree on the Assad piece.”

  Now obviously, there are too many absurd statements there to count, but note (again) that Russia has never hid its support for Assad. When Charlie Rose told Putin on national US television that some people believe Russia is in Syria to help Assad, Putin said, quote, “well, you’re right.” On top of that, it’s glaringly obvious to anyone who knows anything about the global balance of power that Russia is there to support Assad and it’s ridiculous for anyone to suggest that Putin isn’t aware of the fact that by supporting the regime, Russia falls squarely on the side of Iran and Hezbollah. It’s also glaringly obvious that ISIS isn’t the only extremist group fighting for control of the country and the notion that the US has now finally managed to identify the “good guys” in Syria after failing to get it right for four years and that now evil Russia is deliberately targeting those good guys simply because they’re the good guys is laughable to the point that one wonders if CNN and others pushed back on being compelled to spin it that way. Additionally, it’s a little late for the US to be concerned about someone inadvertently creating a theatre that in the minds of jihadis will serve as the stage for humanity’s final battle. If Washington was worried about that they might have avoided getting involved in Syria in the first place and they definitely would have avoided training the soldiers who would go on to join the very group that’s perpetuating that idea.

  And then here’s WSJ:

  The White House challenged Russia’s claim that the airstrikes were targeting Islamic State militants, saying Thursday that Moscow was carrying out “indiscriminate military operations” in areas where the group isn’t operating. A White House official also dismissed the possibility that Russia had inadvertently bombed non-Islamic State areas. U.S. officials say the Russian military bombed one area primarily held by rebels backed by the Central Intelligence Agency and allied spy services.

   

  Contrary to claims by the Russian Ministry of Defense, none of the areas that were hit have a known Islamic State presence. At least two of the rebel factions attacked by the Russians—Tajamu Al-Ezzeh and the Central Division—have received weapons including advanced antitank missiles and funding from the U.S. and its allies, according to rebel leaders.

   

  The arc that the Russian airstrikes followed begins around the town of Jisr al-Shughour in northern Idlib province near the Turkish border and adjacent to an agricultural area known as the Ghab Plain. It cuts through the central Syrian cities of Hama and Homs and ends at the Lebanese border.

   

  

  
  

  Alawites—the regime’s base of support—are concentrated west of the arc in an area that includes Latakia province.

   

  Everything east is dominated by the country’s Sunni majority, to which most of those fighting the regime belong.

   

  A series of tit-for-tat massacres during the more than four-year conflict have solidified this sectarian fault line.

  Yes, the “sectarian fault line” has been solidified and that is a hallmark of Western intervention in the Mid-East. Syria is no different. 

  And BBC:

  Members of the US-led coalition against Islamic State have called on Russia to cease air strikes they say are hitting the Syrian opposition and civilians.

   

  In a joint statement on Friday, the US, UK, Turkey and other coalition members said Russian strikes would “only fuel more extremism”.

  And best of all there’s Al-Jazeera (which is of course owned by Qatar), who takes it up another notch by suggesting that Russia is now intentionally killing civilians:

  Russia accused of striking civilian targets in Syria

   

  Activists say warplanes are targeting civilians in areas under control of Western-backed rebels, a claim Russia denies.

  For their part, Bloomberg did the American public a favor by laying out the real story, albeit in an article that carries the title “US, Allies Demand Russia Stop Attacks On Syrian Opposition“:

  Russian forces are targeting only Islamic State, al-Qaeda affiliated Nusra Front and other terrorist groups, Foreign Minister Sergei Lavrov said Thursday in New York. The Free Syrian Army, a U.S-backed rebel group, was not among the targets and it should have a role in the political process in Syria, he added.

   

  “The goal is terrorism,” he said. “And we are not supporting anyone against their own people.”

  Assad’s government has been fighting alongside Iranian reinforcements to secure a corridor from the coastal province of Latakia, home to Assad’s Alawite minority, stretching to the capital Damascus, according to Reva Bhalla, vice president for analysis at Stratfor, a geopolitical intelligence and advisory firm based in Austin, Texas. The government has accused Qatar and Saudi Arabia of backing “terror groups,” and dismissed the criticism.

   

  “They’re hopping mad in Saudi Arabia, the U.S. And Qatar because of their defeat and the victory of Russia and Syria and the unraveling of the fact that the U.S. and its allies are not serious about fighting” Islamic State, Syrian lawmaker Sharif Shehadeh said by phone from Damascus. “Those who claim to be concerned about the Syrian people are the ones slaughtering the Syrian people through the terrorists.”

  There you go. That last passage pretty much says it all. 

  Meanwhile, the Russian propaganda machine is also in high gear as The Kremlin is jumping at the opportunity to portray Putin as the man who saved the world when no one else was willing to. Here’s Bloomberg again:

  Vladimir Putin may have caught the U.S. and its allies off guard by striking Syria, but his propaganda machine was ready.

   

  “A hundred dead terrorists,” a news presenter on Russia’s No. 2 network announced early Thursday, just hours after the bombing of what Putin has called “evil-doers” began. She then cut to a correspondent in Syria who lauded the precision of the strikes as aerial footage of the attacks supplied by the Defense Ministry aired.

   

  Over on Channel 1, the most-watched station, a parade of politicians, analysts and religious leaders — both Christian and Muslim — rolled by justifying the use of force on both legal and moral grounds. 

   

  “This is more than just military strikes against Islamic State,” said the editor of National Defense magazine, Igor Korotchenko, after parliament unanimously authorized the use of force. “We are protecting the values of humanity and taking a stand against the most extreme forms of obscurantism and terror.”

  What’s amusing there is that as overstated as it is, that narrative is actually closer to the truth than what’s being fed to the public by the Western media. 

  In any event, the important thing here is to cut through all of this and extract the bits that help to tell the story of what’s actually taking place in Syria. As we detailed on Thursday, this is effectively a Mid-East coup by Russia and Iran wherein Tehran will replace Riyadh as the regional power broker and Moscow will supplant Washington as the superpower puppet master. And on that note, we close with another excerpt from the WSJ piece cited above:

  Iran’s Foreign Ministry welcomed Russia’s military intervention in Syria on Thursday, saying it was the right step to fight terrorism and a move toward bringing stability to the region.

   

  “Fighting terrorism effectively requires a strong and serious will and has to be based on cooperation with the governments of Iraq and Syria,” Marzieh Afkham, spokeswoman for the ministry, said according to Iranian media reports.

   

  Ibrahim al-Amin, a Lebanese commentator and newspaper editor close to Hezbollah and Iran, said Moscow essentially provided a green light for a counteroffensive against rebels across the political spectrum.

   

  “From our side, we can no longer ignore the decision of the axis of resistance, backed by Russia, to not only prevent Assad’s fall but to also weaken all his foes. All his foes without any distinction,” wrote Mr. Amin in the Lebanese daily Al-Akhbar on Thursday.

   

  “We must benefit from Russian support to launch tough and decisive battles in several places in Syria,” he added.

   

  Before the latest Russian intervention, Iran played a pivotal role propping-up pro-regime militias made up largely of Alawites and Shiites. It has orchestrated thousands of Shiite fighters mainly from Lebanon and Iraq with Hezbollah being in the lead.

   

  But thousands of rebels regrouped in several enclaves north of Homs, in towns like al-Rastan and Talbiseh. Russian jets hit both civilian and military targets in these two towns and five surrounding villages, said Rashid al-Hourani, a Syrian army officer from the area who defected to the rebels in 2012.

   

  He said the airstrikes were followed with a barrage of artillery fire from several nearby positions where pro-regime Alawite and Shiite militias, including an Iran-backed group known as the Ridha Brigade, have been massing over the past few days.

  

  

  

  

  

• The Slippery Slope Of Denial

  Submitted by Jeffrey Snider via Alhambra Investment Partners,

  The ISM Manufacturing PMI was “unexpectedly” weak yet again in September. Continuing the theme spelled out by the regional manufacturing surveys (the Fed’s and the Chicago BBI), economic momentum has clearly stalled right where the “dollar” said it would. The pattern is blindingly obvious, with a huge slowdown to start the year (coincident to the first “dollar” disruptions including crude oil prices), a pause around May/June (with the “dollar” much quieter after the March FOMC) and then a pickup in August and now more dramatic deceleration in September (after the July start to the latest “run”).

  At just 50.2, the headline ISM estimate was the lowest since May 2013. New orders fell sharply from 51.7 in August (which was a multi-year low) to just 50.1. While most fixate on the assumed 50 level as an actual dividing line between growth and contraction, these sentiment surveys aren’t nearly that precise and at most offer relative interpretations about the economic direction, trends and the perhaps even the strength of those directions and trends.

  

  With such ugly numbers everywhere, the mainstream is rushing to reassure:

  The September numbers are the latest in a string of mixed reports for U.S. factories. The ISM index shows manufacturing activity has expanded for 33 straight months, though the pace has slowed markedly from last summer when it touched 58.1.

   

  Other gauges have been weaker, with the Federal Reserve’s measure of manufacturing output down in August and a recent Commerce Department report showing a drop in exports of autos and consumer goods.

  There was absolutely nothing “mixed” about factory reports in September unless you succumb to the allure of the false precision; everything is trending down and more importantly being rather quick about it. But even that is not purportedly anything to be concerned about because economists are certain that the problem lies only elsewhere:

  The figures showed export demand matched the weakest since July 2012 as economies from China to the euro area struggle to improve. While resilient spending by U.S. consumers is helping underpin manufacturing, the stronger dollar is making it more expensive for foreign buyers to purchase made-in-America merchandise.

  As if taken directly from Janet Yellen’s September press conference, particularly where she made a point of emphasizing the “strong” US economy (before reciting all the evidence that denies any such qualification), we are led to believe if not for that dollar the economy, manufacturing with it, would be booming.

  By all actual counts, if there is a resiliency being shown by US consumers and the consumer economy it has a particularly peculiar way of hiding itself. If the word “strong” was applicable beyond the simple fact it is repeated over and over by economists, consumer spending would show it somewhere. Instead, examining the catalog of consumer indications demonstrates quite the opposite. Starting with retail sales, where August counted still among the worst of the entire series, there is far, far more recession than resilience. Worse, retail sales figures across-the-board in August were more of the early-2015 variety of weakness than the less alarm of the middle of the year, following, too, the “dollar’s” path.

  

  The mainstream “strong” narrative really falls apart, however, exactly where economists and the media suggest it shouldn’t. If the dollar were truly the sole animating factor in the shocking manufacturing decline, meaning overseas weakness exclusively, then how are we supposed to reconcile imports? In other words, if this was simply the dollar making US exports “more expensive”, as is repeated blindly, and overseas economies alone in their distress, why isn’t the “strong” US consumer buying anything and everything from foreign producers? If the dollar makes exports difficult, the opposite is presumably true for imports where US consumers are flush with at least the unemployment rate.

  The export figures for July (the latest update) do follow that exchange rate suggestion. Exports collapsed yet again, down a stunning 7% for the second time in the last three months of the release. Export declines didn’t reach that level in the Great Recession until December 2008, but whereas that was a singular impulse, in 2015 exports so far have contracted steadily at or near that rate.

  

  So if the dollar exchange is the problem, combined with foreign economic deficiencies, then imports are surely surging or at the very least growing at a “strong” and steady rate.

  

  Imports from both Europe and China were flat in July, while imports from Japan, where the yen had been “devalued” a second time, dropped 6% after falling 5.5% in June. US demand seems to be shrinking at the same exact time foreign economies are stalling and plunging. That may just be a damned statistical oddity, or, more simply, the global economy is uniformly dropping with the US as a full part of that decline (“dollar”, after all).

  

  In fact, by count of even the seasonally-adjusted figures, imports are following exports a little too closely to believe that the looming (or formed) global recession is portionable or discretely separated.  The harmony between them strongly suggests instead a uniformity that can only be caused by a singular (financial) force.

  

  US consumer demand is strong, except everywhere you look to actually find it. Instead, what I think those who actually believe the mainstream narrative mean to proclaim is that there should be strong consumer demand given derivative assumptions about the Establishment Survey and unemployment rate. That is why we have been handed this cascading progression of downplaying each stage. Therefore, the only significance of these diminishing expectations is that they are clearly diminishing; and the acceleration of that deterioration might be extrapolated from the increasing intensity and quality of the nonsense meant to deny it.

  As noted yesterday, this is already well-descended the slippery slope of denial, plus one more rung:

  1. Dollar doesn’t matter, indicates strong economy relative to the world
  2. Dollar matters for oil, but lower oil prices mean stronger consumer
  3. Manufacturing slump doesn’t matter, only temporary
  4. Manufacturing declines are consumer spending, but only a small part
  5. Manufacturing declines are becoming serious, but only from overseas
  6. …

  

  

  

  

• "They Just Don't Want A Job" – The Fed's Grotesque "Explanation" Why 94.6 Million Are Out Of The Labor Force

  In a note seeking to “explain” why the US labor participation rate just crashed to a nearly 40 year low earlier today as another half a million Americans decided to exit the labor force bringing the total to 94.6 million people…

  

  

  … this is what the Atlanta Fed has to say about the most dramatic aberration to the US labor force in history: “Generally speaking, people in the 25–54 age group are the most likely to participate in the labor market. These so-called prime-age individuals are less likely to be making retirement decisions than older individuals and less likely to be enrolled in schooling or training than younger individuals.”

  This is actually spot on; it is also the only thing the Atlanta Fed does get right in its entire taxpayer-funded “analysis.”

  However, as the chart below shows, when it comes to participation rates within the age cohort, while the 25-54 group should be stable and/or rising to indicate economic strength while the 55-69 participation rate dropping due to so-called accelerated retirement of baby booners, we see precisely the opposite. The Fed, to its credit, admits this: “participation among the prime-age group declined considerably between 2008 and 2013.”

  

   

  And this is where the wheels fall off the Atlanta Fed narative. Because the regional Fed’s very next sentence shows why the world is doomed when you task economists to centrally-plan it:

  The decrease in labor force participation among prime-age individuals has been driven mostly by the share who say they currently don’t want a job. As of December 2014, prime-age labor force participation was 2.4 percentage points below its prerecession average. Of that, 0.5 percentage point is accounted for by a higher share who indicate they currently want a job; 2 percentage points can be attributed to a higher share who say they currently don’t want a job.

  And there you have it: there are nearly 100 million working-age Americans who could be in the labor force, but are not “mostly” because they don’t want a job.

  Nothing about the lack of job demand as mega corporations continue to lay workers off in droves instead of hiring, instead using every last dollar of free cash flow to buyback their own stock to boost executive compensation instead of growing their company and hire more workers.

  Nothing about the collapse in small business formation – that driver of 80% of US employment – as firm exit rates are now greater than firm entry rates

  Nothing about the inability to get a job in a world in which the rest of
  the global is lapping the US in educational and labor skills.

  Nothing about the US economy never having left the post-2008 depression where $4.5 trillion in Fed credit was created just to boost the S&P to all time highs and never making it to the actual economy (until the helicopters finally start paradropping of course)

  Nothing about millions of aging, 55 and over, Americans refusing to retire or quit their job simply because they have no return on their savings to fall back on thank to the Fed’s ZIRP, thus keeping the labor pipeline clogged and preventing younger Americans from getting promoted and achieving better paying jobs.

  Nothing about a Millennial generation encumbered with $1 trillion in debt, that is so terrified of its job prospects and having to pay down its debt, it choose instead to keep rolling and piling on to this debt by remaining in college indefinitely

  Nothing about the perverted incentive structure of a welfare state that makes it more attractive to collect generous government handouts which end up punishing hard work.

  None of that.

  You see, it is because Americans “mostly don’t want a job.”

  

  And these are the pompous academic “intellectuals” who are supposed to micromanage the US economy. But how can they fix the biggest problem facing the US economy when they fail to even accurately diagnose what the problem is?

  Which, incidentally, is why the same old Fed tools will be used and abused in hopes of kicking the can down a few more months at at time, be it QE 4, 5, 100, or ever more negative rates, both of which are coming.

  How long will this continue? Now that is a very simple question: it will continue until the dollar loses its reserve status, just like the pound before it, and the livre before that, and the guilder before that, and so on.

  

  

  

  

  

  

• US Foreign Policy Explained (In 1 Cartoon)

  Presented without comment…

   

  

   

  Source: Townhall.com

  

  

  

  

  

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