Today’s News September 23, 2015

• The Crisis Of The Now: Distracted & Diverted From The Ever-Encroaching Police State

  Submitted by John Whitehead via The Rutherford Institute,

  “When a population becomes distracted by trivia, when cultural life is redefined as a perpetual round of entertainments, when serious public conversation becomes a form of baby talk, when, in short, a people become an audience and their public business a vaudeville act, then a nation finds itself at risk: culture-death is a clear possibility.”—Author Neil Postman

  Caught up in the spectacle of the forthcoming 2016 presidential elections, Americans (never very good when it comes to long-term memory) have not only largely forgotten last year’s hullabaloo over militarized police, police shootings of unarmed citizens, asset forfeiture schemes, and government surveillance but are also generally foggy about everything that has happened since.

  Then again, so much is happening on a daily basis that it’s understandable if the average American has a hard time keeping up with and remembering all of the “events,” manufactured or otherwise, which occur like clockwork and keep us distracted, deluded, amused, and insulated from reality while the government continues to amass more power and authority over the citizenry.

  In fact, when we’re being bombarded with wall-to-wall news coverage and news cycles that change every few days, it’s difficult to stay focused on one thing—namely, holding the government accountable to abiding by the rule of law—and the powers-that-be understand this. As investigative journalist Mike Adams points out:

  This psychological bombardment is waged primarily via the mainstream media which assaults the viewer by the hour with images of violence, war, emotions and conflict.

   

  Because the human nervous system is hard wired to focus on immediate threats accompanied by depictions of violence, mainstream media viewers have their attention and mental resources funneled into the never-ending ‘crisis of the NOW’ from which they can never have the mental breathing room to apply logic, reason or historical context.

  Consider if you will the regularly scheduled trivia and/or distractions in the past year alone that have kept us tuned into the various breaking news headlines and entertainment spectacles and tuned out to the government’s steady encroachments on our freedoms:

  Americans were riveted when the Republican presidential contenders went head-to-head for the second time in a three-hour debate that put Carly Fiorina in a favored position behind Donald Trump; Hillary Clinton presented the softer side of her campaign image during an appearance on The Tonight Show with Jimmy Fallon; scientists announced the discovery of what they believed to be a new pre-human species, Homo naledi, that existed 2.8 million years ago; an 8.3 magnitude earthquake hit Chile; massive wildfires burned through 73,000 acres in California; a district court judge reversed NFL player Tom Brady’s four-game suspension; tennis superstar Serena Williams lost her chance at a calendar grand slam; and President Obama and Facebook mogul Mark Zuckerberg tweeted their support for a Texas student arrested for bringing a homemade clock to school.

  That was preceded by the first round of the Republican presidential debates; an immigration crisis in Europe; the relaxing of Cuba-U.S. relations; the first two women soldiers graduating from Army Ranger course; and three Americans being hailed as heroes for thwarting a train attack in France. Before that, there was the removal of the Confederate flag from the South Carolina statehouse; shootings at a military recruiting center in Tennessee and a movie theater in Louisiana; the Boy Scouts’ decision to end its ban on gay adult leaders; the first images sent by the New Horizons spacecraft of Pluto; and the victory over Japan of the U.S. in the Women’s World Cup soccer finals.

  No less traumatic and distracting were the preceding months’ newsworthy events, which included a shooting at a Charleston, S.C., church; the trial and sentencing of Boston Marathon bomber suspect Dzhokhar Tsarnaev; the U.S. Supreme Court’s affirmation of same-sex marriage, Obamacare, lethal injection drugs and government censorship of Confederate flag license plates; and an Amtrak train crash in Philadelphia that left more than 200 injured and eight dead.

  Also included in the mix of distressing news coverage was the death of 25-year-old Freddie Gray while in police custody and the subsequent riots in Baltimore and city-wide lockdown; the damning report by the Dept. of Justice into discriminatory and abusive practices by the Ferguson police department; the ongoing saga of Hillary Clinton’s use of a private email account while serving as secretary of state; the apparently deliberate crash by a copilot of a German jetliner in the French Alps, killing all 150 passengers and crew; the New England Patriots’ fourth Super Bowl win; a measles outbreak in Disneyland; the escalating tensions between New York police and Mayor Bill de Blasio over his seeming support for anti-police protesters; and a terror attack at the Paris office of satire magazine Charlie Hebdo.

  Rounding out the year’s worth of headline-worthy new stories were protests over grand jury refusals to charge police for the deaths of Eric Garner and Michael Brown; the disappearance of an AirAsia flight over the Java Sea; an Ebola outbreak that results in several victims being transported to the U.S. for treatment; reports of domestic violence among NFL players; a security breach at the White House in which a man managed to jump the fence, cross the lawn and enter the main residence; and the reported beheading of American journalist Steven Sotloff by ISIS.

  That doesn’t even begin to touch on the spate of entertainment news that tends to win the battle for Americans’ attention: Bruce Jenner’s transgender transformation to Caitlyn Jenner; the death of Whitney Houston’s daughter Bobbi Kristina Brown; Kim Kardashian’s “break the internet” nude derriere photo; sexual assault allegations against Bill Cosby; the suicide of Robin Williams; the cancellation of the comedy The Interview in movie theaters after alleged terror hack threats; the wedding of George Clooney to Amal Alamuddin; the wedding of Angelina Jolie and Brad Pitt; the ALS ice bucket challenge; and the birth of a baby girl to Prince William and Kate.

  As I point out in my book Battlefield America: The War on the American People, these sleight-of-hand distractions, diversions and news spectacles are how the corporate elite controls a population by entrapping them in the “crisis of the NOW,” either inadvertently or intentionally, advancing their agenda without much opposition from the citizenry.

  Professor Jacques Ellul studied this phenomenon of overwhelming news, short memories and the use of propaganda to advance hidden agendas. “One thought drives away another; old facts are chased by new ones,” wrote Ellul.

  “Under these conditions there can be no thought. And, in fact, modern man does not think about current problems; he feels them. He reacts, but he does not understand them any more than he takes responsibility for them. He is even less capable of spotting any inconsistency between successive facts; man’s capacity to forget is unlimited. This is one of the most important and useful points for the propagandists, who can always be sure that a particular propaganda theme, statement, or event will be forgotten within a few weeks.”

  But what exactly has the government (aided and abetted by the mainstream media) been doing while we’ve been so cooperatively fixated on whatever current sensation happens to be monopolizing the so-called “news” shows?

  If properly disclosed, consistently reported on and properly digested by the citizenry, the sheer volume of the government’s activities, which undermine the Constitution and in many instances are outright illegal, would inevitably give rise to a sea change in how business is conducted in our seats of power.

  Surely Americans would be concerned about the Obama administration’s plans to use behavioral science tactics to “nudge” citizens to comply with the government’s public policy and program initiatives? There would be no end to the uproar if Americans understood the ramifications of the government’s plan to train non-medical personnel—teachers, counselors and other lay people—in “mental first aid” in order to train them to screen, identify and report individuals suspected of suffering from mental illness. The problem, of course, arises when these very same mental health screeners misdiagnose opinions or behavior involving lawful First Amendment activities as a mental illness, resulting in involuntary detentions in psychiatric wards for the unfortunate victims.

  Parents would be livid if they had any inkling about the school-to-prison pipeline, namely, how the public schools are being transformed from institutions of learning to prison-like factories, complete with armed police and surveillance cameras, aimed at churning out compliant test-takers rather than independent-minded citizens. And once those same young people reach college, they will be indoctrinated into believing that they have a “right” to be free from acts and expressions of intolerance with which they might disagree.

  Concerned citizens should be up in arms over the government’s end-run tactics to avoid abiding by the rule of law, whether by outsourcing illegal surveillance activities to defense contractors, outsourcing inhumane torture to foreign countries, causing American citizens to disappear into secret interrogation facilities, or establishing policies that would allow the military to indefinitely detain any citizen—including journalists—considered a belligerent or enemy.

  And one would hope American citizens would be incensed about being treated like prisoners in an electronic concentration camp, their every movement monitored, tracked and recorded by a growing government surveillance network that runs the gamut from traffic cameras and police body cameras to facial recognition software. Or outraged that we will be forced to fund a $93 billion drone industry that will be used to spy on our movements and activities, not to mention the fact that private prisons are getting rich (on our taxpayer dollars) by locking up infants, toddlers, children and pregnant women?

  Unfortunately, while 71% of American voters are “dissatisfied” with the way things are going in the United States, that discontent has yet to bring about any significant changes in the government, nor has it caused the citizenry to get any more involved in their government beyond the ritualistic election day vote.

  Professor Morris Berman suggests that the problems plaguing us as a nation—particularly as they relate to the government—have less to do with our inattention to corruption than our sanctioning, tacit or not, of such activities. “It seems to me,” writes Berman, “that the people do get the government they deserve, and even beyond that, the government who they are, so to speak.”

  In other words, if we end up with a militarized police state, it will largely be because we welcomed it with open arms. In fact, according to a recent poll, almost a third of Americans would support a military coup “to take control from a civilian government which is beginning to violate the constitution.”

  So where does that leave us?

  As legendary television journalist Edward R. Murrow warned, “Unless we get up off our fat surpluses and recognize that television in the main is being used to distract, delude, amuse, and insulate us, then television and those who finance it, those who look at it, and those who work at it, may see a totally different picture too late.”

   

  

  

  

  

  

• "Keep Reporting On Bright Economic Future" – China Ministry Of Truth Demands Media "Properly Interpret" Data

  The following censorship instructions, issued to the media by government authorities, have been leaked and distributed online. As China Digital Times reports, propaganda directives issued by the Xinhua News Agency and the Central Propaganda Department show that Chinese media are being instructed to "properly interpret economic data," and "promote discourse on China’s bright economic future."

  As China Digital Time reports, two leaked images of propaganda directives issued by the Xinhua News Agency and the Central Propaganda Department show that Chinese media are being instructed to report positively on the economy. CDT has translated both.

  The first below is the Xinhua notice, which asks its various departments to draft plans for “promoting the discourse on China’s bright economic future.”

  

  Office of the Xinhua News Agency Editor-in-Chief

  Notice

  To the departments of Domestic News (Central Government Procurement Center), International News, Domestic News for Overseas Service, Photography, Reference News, and Audio-Video; the CNC [China Xinhua News Network Corporation], Xinhua Online, the New Media Center; all media reporting platforms; and the Editorial Department:

   

  In keeping with the spirit of notifications from superior authorities and Agency leadership requirements, the focus for the month of September will be strengthening economic propaganda and guiding public opinion (the related notification is in the attachment that follows). This includes taking the next step in promoting the discourse on China’s bright economic future and the superiority of China’s system, as well as stabilizing expectations and inspiring confidence. We request that your departments take immediate action to plan related reporting; identify individuals to take responsibility; and confirm reporting topics, individuals responsible for those topics, and publication dates.

   

  Please plan related reporting. After the responsible parties within the relevant department have signed off on the plan, send it to the Creative Planning Center at the editor-in-chief’s office through 0A prior to 5 p.m. on September 9, and fax the leadership signature page to 63071200.

  The topic formatting should be as follows:

  1. Topic (Responsible Party: Department Name, Individual’s Name; Publication Date: Month, Day)

  Contact: Wang Xiaoshun [Office:] 51366 [Cell:] 13661390548

  Office of the Editor-in-Chief

  September 7, 2015 [Chinese]

  *  *  *

  The second is the first page of a document issued by the Central Propaganda Department, marked as notice number 320 for the year 2015, asking state media and outlets affiliated with the state to “properly interpret economic data.”

  

  Communist Party of China Central Propaganda Department

  Notice 2015 #320

  Notice Regarding Increased Economic Propaganda and Guidance in the Near Term

   

  To the People’s Daily, Xinhua News Agency, Guangming Daily, Economic Daily, China Daily, China National Radio, China Central Television, China Radio International, China News Service, and subordinate emerging media outlets:

   

  According to instructions from central leadership comrades, all news media outlets must continue to deepen their study and transmission of the spirit of Secretary-General Xi Jinping’s series of important speeches, revolving around the strategic positioning of the “Four Comprehensives,” combined with deep concern for public opinion. The focus for the month of September will be strengthening economic propaganda and guiding public opinion, as well as overall planning for domestic- and foreign-facing propaganda and Internet propaganda, in order to take the next step in promoting the discourse on China’s bright economic future and the superiority of China’s system, as well as stabilizing expectations and inspiring confidence.

  1. Properly interpret economic data. In September, the National Bureau of Statistics will successively release for circulation important information on changes in means of production and market prices and the monthly reports on the consumer price index, industry production price index, above-scale industry production, and total value of retail sales for consumer goods. In the near future, listed banks will also successively announce their annual reports for the first half of the year. Every news media outlet must interview representatives and experts from the National Bureau of Statistics of China, the China Banking Regulatory Commission, and other relevant organizations; properly interpret economic data; and correctly report on new changes in economic market conditions and relevant industry management.

  1. Strengthen propaganda related to economic highlights and their effects. Closely follow economic market conditions, and diligently… [Chinese]

  Both state and independent media have been pressured to keep economic reporting upbeat and to downplay the stock market crash last month as well as slumps earlier in the summer.

  Detained Caijing reporter Wang Xiaolu confessed on CCTV to “causing panic and disorder” with a negative story, while almost 200 others have been taken into custody for “spreading rumors” about stories including the stock market turmoil.

  A directive from August 25 requires that Chinese websites delete specific essays about the crash, while in June the State Administration of Press, Publication, Radio, Film, and Television instructed TV and radio stations to “rationally lead market expectations to prevent inappropriate reports from causing the market to spike or crash.”

  

  

  

  

  

• ADB Joins OECD, WTO In Dismal Assessment Of Global Growth

  Exactly a week ago, we highlighted a WSJ piece which quoted WTO chief economist Robert Koopman as saying the following about the outlook for global growth: “We have seen this burst of globalization, and now we’re at a point of consolidation, maybe retrenchment. It’s almost like the timing belt on the global growth engine is a bit off or the cylinders are not firing as they should.” 

  Explaining further, The Journal noted that “for the third year in a row, the rate of growth in global trade is set to trail the already sluggish expansion of the world economy.” 

  In no uncertain terms: global growth and trade are grinding to a halt, something we’ve been keen to drive home this year using a variety of data points not the least of which are freight rates which, as Goldman noted back in May are likely to remain depressed until 2020, dead cat bounces in the Baltic Dry notwithstanding (for more on this, see here). 

  All of the above was confirmed last Wednesday by the OECD which cut their forecast for global growth to 3% in 2015 and 3.6% in 2016. 

  

  Of course one of the main problems is decreased demand from China, where sharply decelerating economic growth threatens to plunge the entire emerging world into crisis as the country’s previously insatiable appetite for raw materials suddenly disappeared leaving countries like Brazil out in the cold. Also hard hit is emerging Asia, where the turmoil in China combined with the threat of an imminent Fed hike has created conditions that may ultimately usher in the return of the 1997/98 Asian Currency Crisis (indeed, Malaysia’s central bank governor Zeti Akhtar Aziz has been at pains to reassure the market that the country isn’t set to return to capital controls to shore up the plunging ringgit). 

  Against this backdrop it shouldn’t come as a surprise that the ADB slashed its growth outlook for the region on Tuesday citing a laundry list of factors, most of which are outlined above. Here’s more:

  Softer growth prospects for the People’s Republic of China (PRC) and India, and a slow recovery in the major industrial economies, will combine to push growth in developing Asia for 2015 and 2016 below previous projections.

   

  ADB now sees gross domestic product (GDP) growth for the region coming in at 5.8% in 2015 and 6.0% in 2016—below the March forecasts of 6.3% for both years.

   

  
  

   

  “Developing Asia is expected to continue to be the largest contributing region to global growth despite the moderation, but there are a number of headwinds in play such as currency pressures, and worries about capital outflows,” said ADB Chief Economist Shang-Jin Wei. “In order to be resilient to international interest rate fluctuations and other financial shocks, it is important to implement macroprudential regulations that, for some countries, may entail some capital flow management such as limiting reliance on foreign currency borrowing.” 

   

  The PRC—the world’s second largest economy—has seen growth moderate due to a slowdown in investment and weak exports in the first 8 months of 2015. Growth is now seen at 6.8% in 2015, down from 7.2% projected earlier, and below the 7.3% posted in 2014. 

   

  External demand weakness and a slower-than-expected pace of enacting key reforms are holding back India’s growth acceleration, with the pace in 2015 now seen at 7.4%, down from 7.8% forecast earlier. 

  Southeast Asia meanwhile is bearing the brunt of the slowdown in the PRC—one of its key markets—as well as subdued demand from industrial countries, with growth in 2015 now seen at 4.4%, before bouncing back to 4.9% in 2016. 

   

  Soft global commodity prices, including oil and food, are keeping price pressures low with regional inflation projected to decline to 2.3% in 2015, from 3.0% in 2014, although a pickup is expected in 2016. Net capital outflows from developing Asian markets which gained pace in the first part of 2015, exceeding $125 billion in the first quarter, remain a concern as investors anticipated a near term US interest rate hike. As a consequence the region has seen rising risk premiums and weakening exchange rates which could further impede growth momentum, the report said. 

   

  A strengthening US dollar poses a threat to Asian companies with large foreign currency exposure, with data showing that the share of foreign currency debt among firms in Viet Nam, Sri Lanka, and Indonesia exceeds 65%. In addition, a declining appetite by the PRC for energy, metals and other commodities, and soft global prices, is a worry for a number of developing Asian commodity-focused export economies, including Mongolia, Indonesia, Azerbaijan, and Kazakhstan. 

  As that pretty much speaks for itself, we’ll close with what we said last week in the wake of the OECD’s most recent report:  

  The big picture takeaway is that slowly but surely, all of the very “serious” people are coming to the same conclusion. Namely that the outlook for global growth and trade is grim, especially by historical standards, and that – although OECD doesn’t say this – should serve as a damning indictment of the idea that economic outcomes can be engineered from on high by central planners. The sad reality however, is that far from admitting that the coordinated Keynesian response to the crisis has failed and perhaps even exacerbated the slowdown in growth and trade by perpetuating a global deflationary supply glut, slowing growth will instead be trotted out as an excuse to double down on the very same policies that aren’t working.

  

  

  

  

  

• US Equity Futures, Yuan Plunge After China Manufacturing PMI Collapses To March 2009 Lows

  US equity futures plunged (Dow -140)

  

  *  *  *

  Following Xi's earlier speech reassuring Yellen that the "Chinese economy is stable," and the Yuan tumbled 0.25% against the USD ahead of the data. China's Flash Manufacturing PMI printed a disastrous 47.0 (against expectations of a slight rise to 47.5 from August's 47.3). This is the lowest print since March 2009.

  The Yuan was tumbling heading into the data…

  • *OFFSHORE YUAN DROPS 0.25% VS DOLLAR BEFORE CHINA CAIXIN PMI

  

  Then the data hit..

  • *CHINA CAIXIN FLASH MANUFACTURING PMI AT LOWEST SINCE MARCH 2009
  • *CHINA SEPT. CAIXIN FLASH MANUFACTURING PMI AT 47; EST. 47.5

  

   

  With across the board weakness…

  

   

  Commenting on the Flash China General Manufacturing PMI™ data, Dr. He Fan, Chief Economist at Caixin Insight Group said:

  “The Caixin Flash China General Manufacturing PMI for September is 47.0, down from 47.3 in August. The decline indicates the nation’s manufacturing industry has reached a crucial stage in the structural transformation process. Overall, the fundamentals are good. The principle reason for the weakening of manufacturing is tied to previous changes in factors related to external demand and prices. Fiscal expenditures surged in August, pointing to stronger government efforts on the fiscal policy front. Patience may be needed for policies designed to promote stabilization to demonstrate their effectiveness.”

   

  Maybe if only the Fed hiked just a little the global economy wouldn't be headed for recession

  — zerohedge (@zerohedge) September 23, 2015

   

  Charts: Bloomberg

  

  

  

  

  

• In New York City, Workers With Full Time Jobs Are Living In Homeless Shelters

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  Puleo added he has “never seen” the homeless situation this bad.

   

  Dilcy Benn, president of the union’s Local 1505, said more than 100 of the 1,000 parks workers she represents are living in shelters and at least another four, including Torres, are living on the streets on Staten Island and The Bronx.

   

  – From the Market Watch article: Hundreds of Full-Time New York City Workers are Homeless

  One of the main data points that pundits and politicians who claim there is an “economy recovery” point to is jobs created. Please tell me, what good is a job if it can’t earn you a roof over your head?

  Welcome to the Oligarch Recovery.

  

   

  From Market Watch:

  Angelo Torres punches in to work at 5 a.m. each weekday and spends the next eight hours cleaning up debris on Staten Island’s Midland Beach.

   

  It’s a grueling job, says the veteran Parks Department maintenance worker, but also a welcome escape from the uncertainty of living on the streets as one of the city’s more than 300 full-time workers who are homeless.

  “I cry every night thinking this isn’t really happening, but it is,” Torres, 45, told The Post.

   

  Torres earns $33,662 a year but says it’s not enough to find four walls and a roof to call his own in a city where, according to StreetEasy, the median rent is $2,690 a month. 

   

  So he has spent the past four months living out of his beat-up 2001 Chevy Blazer with tinted windows. He has two small bags of belongings to his name.

   

  “Everyone’s like, ‘Take a shower and wash your clothes!’ They don’t know what is going on. It hurts a lot. I work for the city. I never thought this would happen to me,” he said.

   

  “A city job was always the gateway out of poverty,” said Joseph Puleo, president of Local 983 of District Council 37, which represents 3,000 blue-collar city workers.

   

  “You knew you had a pension, a good job and didn’t have to worry, but those days are gone,” he said.

   

  Puleo added he has “never seen” the homeless situation this bad.

   

  Some full-time workers in DC 37 — whose locals represent a total of 121,000 city workers — earn just $24,000 a year.

   

  Dilcy Benn, president of the union’s Local 1505, said more than 100 of the 1,000 parks workers she represents are living in shelters and at least another four, including Torres, are living on the streets on Staten Island and The Bronx.

   

  It was unclear how many members were homeless before they began working for the city. The city’s Department of Homeless Services refused to comment.

   

  Sokunbi Olufemi, of Communications Workers of America Local 1182, which represents 1,800 city traffic and sanitation enforcement agents, places much of the blame on de Blasio.

   

  “Our mayor is traveling all over the world and most states in America talking about payment equality, but he hasn’t fixed the roof in his own house,” Olufemi said. “His roof is leaking, and he refuses to fix it.”

  That’s how city employees are treated in the one place that benefited more than any other from the taxpayer bailout of Wall Street. At least financial service industry bonuses were saved.

  

  

  

  

  

• Oliver Stone: Forget ISIS, America Is The Real Threat To The World

  Submitted by Jake Anderson via TheAntiMedia.org,

  Many people thought Oliver Stone’s days of rankling the establishment were over. Many people were wrong. His 2012 book and TV series, The Untold History of the United States, suggests the iconic filmmaker is renewing efforts to challenge the mainstream narrative regarding American exceptionalism, economic imperialism, and our government’s “nefarious involvement” in the Middle East.

  To complete the 10-part documentary series and 750 page book, Stone collaborated with World War 2 scholar Peter Kuznick. The controversial filmmaker says that in assessing American history since the 1930s, it’s our involvement in the Middle East that really grabbed his attention.

  “We’ve destabilized the entire region, created chaos. And then we blame ISIS for the chaos we have created,” Stone said.

  According to Stone, the U.S. government’s destabilizing role actually goes back much further than ISIS. His new series pinpoints moments of American intrusion in the region as far back as the 1930s and follows it all the way to the CIA-backed Iranian coup in 1953, support for Afghanistan-based, anti-Soviet Union militants in the 1980s, George H.W. Bush’s Iraq invasion of 1990, and present-day efforts in Iran, Syria, and other countries.

  Stone etched his way into the hearts and minds of the American public in the mid-to-late 1980s with two films depicting powerful experiences from the Vietnam War. Platoon and Born on the 4th of July represent Stone’s confusion over his own service in the war, for which he earned a Bronze Star and a Purple Heart.

  Stone’s JFK famously questioned the mainstream narrative of the assassination of President John F. Kennedy, endearing the filmmaker to conspiracy theory circles for decades with a fictional account of a lawyer bringing the U.S. government to trial for its role in the assassination.

  In recent years, Oliver Stone has received less acclaim for films like World Trade Center, which failed to question the mainstream narrative of 9/11, and W., which gave relatively gentle treatment to George W. Bush’s presidency.

  Stone’s 2012 series, The Untold History of the United States, is a return to the intellectual form of one of his earliest successes, Salvador, which was strongly critical of the U.S.-supported right wing military of the Salvadoran Civil War. The last episode in the series is called Bush & Obama: Age of Terror. It covers the following subjects:

  • The Project For A New American Century, a neoconservative think tank that called for a Pearl Harbor-type event to catalyze military action in the Middle East
  • The tyranny of neoconservatives who pushed us to war with Iraq using faulty intelligence
  • The rushing through of the Patriot Act, which stripped Americans of a wide variety of civil liberties while bestowing legal precedent to the new surveillance state
  • The national brainwashing and fear-mongering of the War on Terror
  • Invading Afghanistan to defeat some of the same terrorists the U.S. armed and trained two decades earlier
  • Unconstitutional torture and interrogation tactics at Guantanamo Bay
  • The mainstream media’s facilitation of war through propaganda and corporate collusion
  • Obama selling out to J.P. Morgan Chase, Goldman Sachs, Citigroup, General Electric, and Big Pharma
  • The $700 billion financial bailout paid for by workers, pensioners, homeowners, small businessmen, and students with loans
  • The rise of CEO compensation amid the collapse of the middle class
  • Obama’s failure to deliver hope, change, or transparency, his prosecution of government whistleblowers, his fortification of Bush’s national security state (though he repudiated the unilateralism of Bush, he doubled down on troops and, according to Stone, “lacked the courage of a John F. Kennedy”)
  • Obama’s targeted drone strikes on Afghanistan, Iraq, Pakistan, Yemen, Libya, and Somalia (includes a breathtaking clip of his remark to troops: “Unlike the old empires, we don’t make these sacrifices for territory or for resources….We do it because it’s right.”

  Stone says his documentary series is an alternative approach to American history, one he hopes will fight the“educational crime” of exposing today’s schoolchildren to the propaganda of standard textbooks and television programs.

  On this note, Stone doesn’t mince words:

  “American exceptionalism has to be driven out of our curriculums. We’re not under threat. We are the threat.”

  

  

  

  

  

• PBOC Devalues Yuan For 3rd Day As President Xi Reminds The Fed "China's Economy Is Stable" – Live Feed

  Following last night's ADB China growth downgrade, and warnings from The IMF's Lagarde that a "China slowdown is a major risk to the global economy," the weakness seen in Europe and US is continuing across AsiaPac tonight ahead of China's much-watched PMI data (though we are not sure why – since no "bad news" excuse is needed to enable super-easy policy). With Xi in the US, one would imagine a 'beat' for PMI will be engineered, although industrial metals are extending their losses. Credit markets area nxious with Malaysia CDS at 2011 highs, Philippines highest since 2014, and China back on the rise. Xi begins his speech tonight reminding The Fed that China "is the biggest developing nation in the world," and its economy "is stable" despite Yellen's fears.

  President Xi live from Seattle…

  • *XI SAYS CHINA DREAM IS THE PEOPLE'S DREAM
  • *XI SAYS CHINA IS BIGGEST DEVELOPING NATION IN THE WORLD
  • *CHINA HAS 200M PEOPLE THAT LIVE IN POVERTY, XI SAYS
  • *XI SAYS CHINA HAS 300M MIDDLE-INCOME EARNERS
  • *XI SAYS MORE THAN 85 MILLION CHINESE LIVE WITH DISABILITIES
  • *DEVELOPMENT IS TOP PRIORITY FOR CHINA, XI SAYS
  • *CHINA ECONOMY WILL MAINTAIN STABLE, RELATIVE FAST GROWTH: XI
  • *CHINA'S ECONOMY IS IN REASONABLE RANGE, XI SAYS
  • *CHINA TO MAINTAIN MEDIUM TO HIGH GROWTH RATE: XI
  • *XI SAYS CHINA TO AVOID PANIC ON STOCK MARKET
  • *XI SAYS CHINA'S STOCK MARKET HAS REACHED PHASE OF SELF-RECOVERY
  • *CHINA OPPOSED TO CURRENCY WARS: XI
  • *YUAN RATE DOESN'T HAVE FOUNDATION FOR CONTINUOUS FALL, XI SAYS
  • *CHINA WON'T DEVALUE TO BOOST EXPORTS: XI
  • *CHINA'S DEVELOPMENT MUST RELY ON REFORM, XI SAYS
  • *XI SAYS CHINA WILL NEVER CLOSE ITS OPEN DOOR TO OUTSIDE WORLD
  • *CHINA WON'T CHANGE POLICY FOR OVERSEAS INVESTMENT, XI SAYS
  • *CHINA WELCOMES COOPERATION WITH MULTINATIONAL COS., XI SAYS
  • *CHINA IS A STAUNCH DEFENDER OF CYBER SECURITY, XI SAYS
  • *XI SAYS CHINA READY TO SET UP CYBERCRIME MECHANISM WITH U.S.
  • *CHINA TO SET UP DIALOGUE WITH U.S. ON FIGHTING CYBER CRIME: XI
  • *CHINA TO CONTINUE FIGHT AGAINST CORRUPTION, XI SAYS
  • *CHINA STICKS TO PEACEFUL DEVELOPMENT PATH, XI JINPING SAYS
  • *CHINA WON'T SEEK POWER EXPANSION, XI SAYS
  • *XI WELCOMES U.S. TO JOIN ASIAN INFRASTRUCTURE INVESTMENT BANK
  • *DISAGREEMENT BETWEEN CHINA, U.S. IS UNAVOIDABLE, XI SAYS

  And then this!!

  • *XI SAYS CHINA WILL TREAT ALL MARKET PLAYERS FAIRLY

  Apart from short-sellers, right?

  *  *  *

  First, for your viewing pleasure, here is USDJPY ripping higher on the Japanese open… despite Japan being closed…

  

   

  Because Kuroda never takes a day off!!!

  And then the propaganda began…

  • *CHINA 7% OF ECONOMIC GROWTH IS CREDIBLE: NDRC

  And so was The Fed to most people until last Thursday.

  *  *  *

  The IMF stuck its beek in again…

  • *LAGARDE SAYS GLOBAL PRODUCTIVITY SLOWDOWN IS TROUBLING
  • *LAGARDE SAYS CHINA SLOWDOWN IS MAJOR RISK FOR GLOBAL ECONOMY

  China also announced new initiatives to ponzi-up the finance system…

  • *CHINA CITY BANKS TO PROVIDE LIQUIDITY TO EACH OTHER: CHINA NEWS

  Or "pass the hot potato collateral chain of counterparty risk" as some in The West might call it.

  Industrial metals continue to tumble…

  Metals extended losses in London ahead of a Chinese factory gauge expected to show the country’s manufacturing sector in contraction for a seventh month. Zinc traded near the lowest level since 2010.

   

  Aluminum fell 0.3 percent, adding to a 1.7 percent decline on Tuesday and continuing a sell-off across metals amid concerns about China’s demand. Copper slid 0.2 percent after posting its biggest loss since July.

   

  

   

  Credit markets are showing some strains…

  • Five-year credit-protection costs for Malaysia rose 19 bps yesterday, most since Jan. 6, to 206.5 bps, highest close since Oct. 2011, according to CMA New York data.

  

  • Philippines 5-year CDS rose 9 bps, most since Dec. 12, to 128.5 bps, highest daily close since Aug. 24
  • China’s 5-year CDS rose 5 bps to 121 bps, highest close since Sept. 1

  Marginb debt rose for the second day in a row…

  • *SHANGHAI MARGIN DEBT BALANCE CLIMBS FOR SECOND DAY

  And China stocks are extending losses…

  • *FTSE CHINA A50 INDEX FUTURES FALL 1.3% IN SINGAPORE
  • *CHINA'S CSI 300 STOCK-INDEX FUTURES FALL 0.7% TO 3,218.8

  

  And The PBOC devalued the Yuan fix for the 3rd day in a row…

  • *CHINA SETS YUAN REFERENCE RATE AT 6.3773 AGAINST U.S. DOLLAR
  • *CHINA SETS YUAN REFERENCE RATE AT WEAKEST LEVEL SINCE AUG. 31

  

   

  We leave it to Jim Chanos to sum it all up – from Xi's speech-of-pure-comedic-genius to devlauing the Yuan most in a month while explainin that they are not…

  Chanos on Shanghai:“It’s just a highly speculative market “It’s like a pig on LSD. You don’t know which way it’s going to run.”

  Charts: Bloomberg

  

  

  

  

  

• The Clock Is Ticking On The U.S. Dollar As World's Reserve Currency

  Submitted by Henry Hewitt via OilPrice.com,

  The View From Hubbert’s Peak

  In 1971, the American President put an end to a 2,500 year trend; the Wall Street Journal called it “Nixon’s Worst Weekend.” Considering the old boy had some really bad ones, this must have been something special. In August of that year (on Friday the 13th) it was decided that the U.S. would no longer pay out gold for its paper dollars. OPEC Ministers took note, and in September they met, deciding it would be necessary to collect more paper dollars, if possible, since gold was no longer on offer and oil was the only asset they had to sell.

  It would take another two years for those decisions to matter (during the October 1973 embargo in the wake of another Arab-Israeli war). The Oil Embargo marked the end of ‘free’ energy, and kicked off a massive rise in the price of oil because the U.S., the world’s swing producer since Colonel Drake’s Pennsylvania strike in 1859, had finally reached peak production at around 10 million barrels per day in 1970. This moment is the original Hubbert’s Peak, the beginning of decline for the U.S. oil industry, at least until recently. The surge in U.S. production since 2010 has stalled out around 9.5 mb/d and, due to the Saudi decision to give the American tight oil producers ‘a good sweating,’ that rate has begun to fall in the last few months.

  It is certainly possible that U.S. production will surpass the 1970 peak, but with low prices it is hard to say when that will be; it is also hard to say how long that will last as tight oil wells have a devilishly high rate of decline. It is worth noting, as Arthur Berman has recently done in his fine article, that even the best producers are losing money now, and lots more are being lost by those who are not the best. Making it up on volume is a dog that does not hunt for $45.

  The Wizard of Oz

  The ultimate irony for this generation of investors is that, despite the occasional obligatory chant about ‘free markets’ and the wonders of capitalism, most of the day is spent obsessing about what the world’s most important central planner will do next. By Supreme Central Planner, I mean, the Fed.

  

  “Pay no attention to that man behind the curtain”

  The ‘Man’ behind the curtain is now a woman, but the power of the Fed is not in doubt; it still illuminates the Emerald City and all who look to it for guidance and more free money, which can be printed instantaneously and in any amount. At some point, the value of ‘free money’ will fall out of the sky, like Dorothy’s house onto the ruby slippers. Are we anywhere near that point?

  On September 17, the mighty Fed decided to do nothing, continuing a 9-year inning without a rate increase. (Did the markets breathe a sigh of relief? On the first full day of trading after the announcement the S&P fell by 1.6 percent and the Dow Industrials fell nearly 300 points; so, no, they didn’t.) This Bloomberg article suggests the Fed kept its powder dry because of China. “China affects the world more than ever before, and its influence over global markets will only increase as it approaches the U.S. economy in size.”

  Gold isn’t doing much to suggest that paper money is on the ropes but you may still be forgiven for thinking gold is a crouching tiger and it is only a matter of time. Oz is the abbreviation for an ounce of gold – “Follow the yellow brick road”; that is the path of hard money. Nobody is on that path anymore, so currency wars, i.e. who can devalue the right amount at the right time to gain a competitive advantage for their nation’s trade, are to be expected.

  The Fed failed its first test in the 1930s, and the question must be asked, now that China is well on its way to becoming the world’s most important financial player, will they make the same mistake? Will they tighten the money supply to the point that disaster follows? Deutsche Bank thinks the tightening has begun, though they do not predict disaster. At this moment in the great game, turbulence in markets is not particularly reassuring. Liquidity is evaporating, in pockets, and that generally ends badly.

  It is important for non-mathematicians to understand a dilemma which is not much discussed, if realized at all. When rates are low, even small increases make a significant difference. Raising rates from 1 to 2 percent, a ‘mere’ one point rise, has the same effect on the cost of the money you borrowed as raising rates from 5 to 10 percent – it is a doubling of the cost. It took a long time to crawl out from under extremely low rates in the 1930s (as it did after the 1893 crash before the Fed came along), which included a world at war. The liquidation process did not end until the rubble bounced in Germany and buildings were vaporized in Japan.

  Central Planners have not yet figured out a way to end the problem without a liquidation event; the problems of 2008 were not allowed to run their course. In other words, there is no precedent for a rate recovery from such an enduring trend without first undergoing a massive deflation. What is different this time is that gold is no longer seen as an official backstop, though central banks still own plenty of it (for some reason). As terrifying as deflation is, hyper-inflation is worse. Consider what happened in France after 1790 and Germany after 1923.

  

  The Next Suez Moment

  1971 was symbolically pivotal in another way. The Royal Navy, symbol of British power from the time of Trafalgar on, pulled up its anchors and sailed away from Singapore (Churchill’s ‘Gibraltar of the East’), having left Aden (in Yemen) a few years before, where it kept watch over the Indian Ocean and its most prized possession, i.e. India itself, for 128 years. The liquidation of the British Empire did not happen overnight. The 30-year running gun battle with Germany leading up to the Bretton Wood’s coronation of the U.S. dollar as the world’s supreme currency was not quite the bitter end. It took another 12 years before the British ruling class learned that the sun had already set upon their power.

  On July 26, 1956, Egyptian President Gamal Abdul Nasser nationalized the Suez Canal. The British and the French, who had financed and built it along with the Egyptians, were outraged. On October 29, Israel invaded the Sinai. On November 5, British and French paratroopers landed and defeated Egyptian troops along the Suez Canal. On the following day, Ike won an overwhelming electoral victory over Adlai Stevenson and, at the height of his (and America’s) powers, he told the British and French leaders to back down. America held their notes. The world held its breath. Prime Minister Anthony Eden resigned during the crisis and events effectively marked the end of heavily indebted Britain’s time as one of the world’s great powers.

  The $64 trillion question now facing the current world’s economic superpowers, by which I mean the U.S. and China, is not whether the Fed will raise rates any time soon, but when will the Yuan replace the Greenback as the world’s reserve currency? Whether or not paper money turns to dust generally is a separate question. The U.S. is now the world’s leading debtor nation, owing something on the order of $18 trillion. This is by far the most money that has ever been owed at any time in history. Does anyone really believe that it will ever be paid back?

  Inflation (printing money) and default are the usual suspects, but the unwinding of American debt will not necessarily happen in an orderly fashion. China’s Yuan becoming the world’s reserve currency would not be a Black Swan event; it may be a Gray Swan, but we have seen this sort of thing play out many times before, and not just to Britain.

   

  

  It has been a constant throughout history that both the Operations & Maintenance (O&M) and capital costs of running an empire at some point exceed the benefits or gains obtained from having that empire. Prestige does not pay the bills. Hadrian’s Wall, a high-water mark of Roman expansion, is in a pretty bad state (like a lot of American bridges that are crumbling on the home front).

  If it were otherwise, this article would be written in Latin; Facilis descensus Averno. (Loosely translated: The descent to hell is easy. Coming back up is the hard part: Hoc opus hic labor est.) The oft-quoted phrase: “Rome wasn’t built in a day,” misses a more important point, i.e. that it took centuries for the place to fall apart. About 150 years before so-called barbarians put the Eternal City out of its misery, Constantine moved the capital to what is now Istanbul. The Bezant, a gold coin, was the western world’s supreme currency for about 800 years after that, until the Venetians ruined the city during one of the Crusades.

  The Venetians (the Ducat), Florence (the Florin), Spain (thanks to American gold and silver), and the Dutch (whose Guilder was garnished with an occasional tulip), all had their turn in the catbird seat – the supreme privilege of minting the reserve currency (and running up debts without anyone calling them in). Britannia ruled the waves and the financial system after finally beating Napoleon in 1815 and their turn did not end until 1944, after decades of war first ignited in 1914 by Victoria’s grandchildren.

  The New Face of Money 

  

  Nobody plans to give way as keeper of the supreme currency, so there is no schedule to follow and no way to know when the torch will be passed from the dollar to the Yuan. Central planners and economists, who all drink from the same cup, may acknowledge that such a thing could happen decades from now (after all, Rome didn’t fall apart in a day), but will vigorously dispute the conclusions in this article. However, history has shown that the shift comes suddenly, usually in the heat or aftermath of war.

  American troops have now been involved in the Middle East for 25 years (nearly as long as the face-off between British and German troops and navies in the 20th century) and the U.S. Navy’s Fifth Fleet is stationed in Bahrain, having filled the void left when the Royal Navy departed. The U.S. Navy is the world’s single largest consumer of oil and aircraft carriers don't come cheap. Clearly, the ‘price’ of oil is greater than we think it is, and someday this will probably be recognized as the principal cause of the dollar’s fall from grace. The temporary rise in the dollar against most other currencies is partly the result of being the best looking leper in the colony. Furthermore, an expected rise in dollar rates makes the currency seem relatively more attractive, though this is a double-edged sword.

  It should be clear now that the reserve currency status is neither a birthright nor a privilege that stays forever in one place, which means it isn’t a question of if China will replace the U.S. as title holder but when. Imagine that a Republican president in January 2017 decides to act upon a campaign pledge to tear up any agreement between the U.S. and Iran. Imagine further that an air strike is aimed at Tehran. Regardless of Iran, or who is president, what if something happened in Pakistan that brought about a large scale American military response? What would China do?

  That country has an insatiable and rising need for Btus from the Middle East and its development of a port at Gwadar is highly significant. “Beijing says it wants to use Gwadar as the hub of an energy corridor to its western province of Xinjiang. But at the same time, Beijing has secured a string of port facilities in the Indian Ocean that increasingly allow it to project its own naval power westward.”

  With a population four times that of the U.S., and a per capita car ownership rate roughly one-tenth that of the U.S., even an elementary school math student can figure that over the next decade or so, there will be a lot more cars drinking a lot more oil filling Chinese streets (even if most vehicles eventually run on electricity – a switch that will take a long time).

  A military misadventure in that part of the world would be considered a direct threat to Chinese strategic interests. As Ike said ‘no’ in 1956, Xi Jinping may well say ‘no’ this time around. What would happen if China decided, or even threatened, to sell a substantial fraction of its trillion dollar U.S. Treasury horde? This may seem unthinkable, but even if they did not, after 35 years of falling and now zero rates, the direction is only up for the cost of money, as is the cost to service debt, along with the burden to those who are most indebted (i.e. the U.S.).

  What should no longer be unthinkable is that the clock is ticking on America’s status as the holder of the reserve currency. If you still doubt this proposition, consider that China is in the process of setting up a third benchmark for oil, along with Brent and West Texas Intermediate, for trading oil futures contracts. And unlike the existing contracts, these will be traded in Renminbi. Who needs the dollar?

  

  Alexander Hamilton’s face is on the ten dollar bill for a reason; he devised the system that made the U.S. the world’s supreme financial power. (Pretty good work for a penniless orphan from the Caribbean. He was also one of the few founders who did not ever own slaves.) If he goes off the $10 bill it would be a very bad omen. Susan B. Anthony would be a good choice for the $20 bill; she is already on the roster. Andrew Jackson does not deserve to be there anyway, as he was no champion of liberty even before he betrayed the native allies who helped him defeat the British. ( In 1814 we took a little trip, along with Colonel Jackson down the mighty Mississipi . . . )

  

  https://en.wikipedia.org/wiki/Susan_B._Anthony_dollar

  Speaking of Liberty, she graced U.S. silver dollars and gold coins for a long time. In hoc signo vinces.

  

  

  

  

  

• "You're Welcome" – More Unintended Humor From The Economists At The St. Louis Fed

  Back in November 2014, when the Fed had not yet admitted its third and fourth mandates were keeping the stock market as levitated as possible and responding to economic volatility and market turbulence in China (as it did last week) we made what we thought at the time was a sarcastic tweet, yet one which captured the gist of the September FOMC statement, when we said:

  BULLARD: FED TO RAISE RATES IN 2015, TIMING DETERMINED BY DATA. Determined by DJIA he means

  — zerohedge (@zerohedge) November 14, 2014

  While the accuracy of this tweet has since been confirmed by the Fed itself, one person took offense at the contents: the person – St. Louis Fed “vice president” David Andolfatto. This was his reply, before promptly deleting his tweet:

  @zerohedge Ha ha, you are such a dickhead … it’s wonderful!

  — David Andolfatto (@dandolfa) November 14, 2014

  To be sure, Andolfatto promptly apologized after our post led to a bemused public outcry at the Fed’s own dickheadery, which unlike ours, has resulted in a record wealth transfer from the middle class to the uber wealthy, the lack of any wage growth in 7 years, a bond and stock market that flash crashes almost on a monthly basis and an economy which can not even survive a 25 basis point hike.

  We bring it up because the same vice-presidential Economist Ph.D. was the source of some unintentional humor when he sparred with none other than our friend “Rudy von Havenstein“, the patron saint of money-printing central banks (which these days means all of them) everywhere.

  The full twitter exchange, captured in images so it can’t be deleted after the fact, is as follows. It needs to commentary.

  

  

  

  

  

  

  

• China's Man-Made Military Island Outposts, The Dramatic Before And After Photos

  There’s been no shortage of coverage both in these pages and elsewhere of China’s unprecedented land reclamation efforts in the Spratlys. 

  While China isn’t the first country to create new territory in the disputed waters of the South China Sea, the scope of Beijing’s development (some 3,000 acres) sets it apart and the construction of air strips and ports (not to mention the alleged stationing of artillery) has some of Washington’s regional allies especially concerned.

  The prospect of China declaring a no-fly zone over its new islands and the idea that the PLA may attempt to curtail the movement of the US navy in and around the Spratly archipelago has only served to exacerbate the situation and now, Fiery Cross Reef has become something of a symbol for China’s maritime ambitions. 

  While we’ve presented plenty of images depicting China’s progress in turning reefs into sovereign territory, we’ve yet to show the before/after contrast and so, without further ado, here are the images which show the extent to which Beijing is literally redrawing maritime boundaries in disputed waters.

  Subi:

  

  

  Fiery Cross:

  

  

  Mischief: 

  

  

  Gaven:

  

  

  Hughes:

  

  

  Johnson South:

  

  

  Cuarteron:

  

  

  Source

  

  

  

  

• Following Public Fury, Jim Cramer-Trained CEO Who Raised Price Of Drug By 5000%, Agrees To Lower The Price

  It took just a few days, and becoming America’s most hated man in the process, for Turing Pharma CEO Martin Shkreli to fold.

  The 32 year old “hedge fund manager”, who started his career on Wall Street working under Jim Cramer, and who subsequently ended up owing now-defunct Lehman Brothers $2.3 million for a Put option gone bad (only to see Lehman collapse before the now defunct bank could collect), was the object of nationwide scorn, derision and outrage after a NYT profile of his decision to boost the price of a drug by over 5000%. Even Hillary Clinton got involved in the public outrage, first tweeting and then making it a matter of her public policy how as a result of his actions she would implement a $250 price cap on drugs to prevent such price gouging.  Earlier today, the Taiwanese Animators took “Big Pharma Douchebag” Shkreli to task with the following clip:

   

  Not surprisingly, following the biggest plunge in biotech stocks in 2015 – many have speculated that the real goal of Shkreli’s actions was to profit by shorting the biotech sector ahead of the selling which his action would have unleashed – and an epic public outcry against the diminutive “hedge fund” manager (his prior company Retrophin recently filed a federal lawsuit against Shkreli alleging that he created the biotech and took it public solely to provide stock to MSMB investors when his hedge fund became insolvent; the suit seeks $65 million in damages) NBC reported moments ago that “the pharmaceutical company boss under fire for increasing the price of the drug Daraprim by more than 5,000 percent said Tuesday he will lower the cost of the life-saving medication.”

  Martin Shkreli did not say what the new price would be, but expected a determination to be made over the next few weeks.

   

  He told NBC News that the decision to lower the price was a reaction to outrage over the increase in the price of the drug from $13.50 to $750 per pill.

   

  Turing Pharmaceuticals of New York bought the drug from Impax Laboratories in August for $55 million and raised the price. Shkreli said Tuesday the price would be lowered to allow the company to break even or make a smaller profit.

  He added that his action was “absolutely a reaction — there were mistakes made with respect to helping people understand why we took this action, I think that it makes sense to lower the price in response to the anger that was felt by people.” One would not have gotten that impression from reading his tweets over the past 4 days.

  In a phone interview with NBC Shkreli said the money from the increase would be used to develop better treatment for toxoplasmosis that have fewer side effects. “It’s very easy to see a large drug price increase and say ‘Gosh, those people must be gouging.’ But when you find out that the company is not really making any money, what does that mean?”

  Well, it means it is like 90% of “eyeball” and “biotech” companies out there, that’s what it means.

  His conclusion: “I think in the society we live in today it’s easy to want to villainize people, and obviously we’re in an election cycle where this is very, very tough topic for people and it’s very sensitive. And I understand the outrage,” Shkreli said.

  It’s even easier to villainize those who deserve it.

  But now that Shkreli’s 15 minutes of fame are over and his Twitter profile is now in “private” mode (we doubt the SEC will investigate his shorting activity of biotech indices – we are confident the young “hedge funder” will have bigger headaches to deal with soon enough) the attention should shift to the real villains – those truly big pharma companies, who do what Shkreli did but on a far vaster and grander, if less obvious, scale taking advantage of the price cushioning effects that Obamacare provides.

  We also are curious to see how Hillary’s populist outrage at Shkreli will be explained when the public realizes that it is only thanks to the benefits of socialized insurance programs such as Obamacare, of which Hillary is a staunch supporter, that such price gouging was possible in the first place.

  

  

  

  

  

• Guest Post: Is The Pope's Dream Our Totalitarian Nightmare?

  Submitted by Susan Warner via Gatestone Institute,

  • Some high-profile commentators think they smell a Marxist clothed in white papal robes, who dreams of redistributing the world's wealth. Pope Francis insists that he has little interest in Marxism and that his political advocacy against materialism, capitalism, greed and idolatry are largely religious in nature. However, the flavor of some of his statements might suggest otherwise.

  • The Pope also knows that the UN is poised to strong-arm member nations to sign on to an impossible globalist agenda that will require a total shift of the world's wealth, and a restructuring of international politics and economics with a one-world government and a universal religion at the steering wheel.

  • Even to the Pope's admirers, that sounds a less like peace and love and more like a utopian totalitarian nightmare.

  The world press is in high gear for Pope Francis's visit to Cuba and the United States this week. Recently, the Pope has stirred up a stew mixing world poverty, the evils of capitalism and global warming into an elaborate narrative that is likely to keep journalists awake for weeks to come.

  Pope Francis visits former Cuban dictator Fidel Castro at Castro's home in Havana, Cuba, on September 20, 2015. (Image source: BBC video screenshot)

  As the first ever Pope to address a joint session of Congress, he is expected to take some shots at the structural evils of free market capitalism and the unequal distribution of wealth. As early as 2013, when he penned his Apostolic Exhortation, in which he laid out his broad vision for the Catholic Church, Pope Francis has been clarifying his positions on these topics.

  With the subsequent release of his controversial encyclical on global warming in June, he established two pressing themes that will likely monopolize his coming visit.

  Climate change is expected to be the focus of his address to the UN General Assembly on September 25, as he kicks off the 2015 UN Summit on Sustainable Development and its seventeen-point utopian agenda for the entire planet, packaged in a thinly disguised reboot of Agenda 21. According to IPS news:

  "Judging by his recent public pronouncements – including on reproductive health, biodiversity, the creation of a Palestinian state, the political legitimacy of Cuba and now climate change – Pope Francis may upstage more than 150 world leaders when he addresses the United Nations, come September… The Pope will most likely be the headline-grabber, particularly if he continues to be as outspoken as he has been so far."

  Along the way, he has managed to stun even many Catholics with pronouncements about issues that they think should be none of his business.

  When the Pope's recent encyclical on global warming was first leaked to the press in June, it stirred protests that the Pope should confine his expertise to religious matters:

  "Former US senator and Republican presidential hopeful Rick Santorum, for instance, is a devout Catholic who has said he loves the pope, but has also called global warming a "hoax" and the research underlying findings of climate change 'junk science'.

   

  "In a recent interview, Santorum advised Francis to 'leave science to the scientists' and focus instead on theology and morality. The suggestion was that the pontiff, who studied chemistry as a student, has no business pronouncing on something that exceeds his competence."

  As the Pope declared war on global warming, he emphasized his continuing opposition to capitalism, materialism, selfishness and other "human factors," which he asserts are the foundational causes of the imminent destruction of the planet's ecosystem.

  Writing in the Apostolic Exhortation and the Encyclical on Global Warming, the Pope justified his view that the temperature of the planet is economic and political, and it also undergirds religious concerns — especially since the results of global warming are likely to affect the poor disproportionately.

  His public denunciations of free market capitalism started in earnest with the recent papal visit to South America, where, to cheering crowds, he made some passionate statements about poverty and economics.

  Speaking to grassroots organizers, Pope Francis declared his own personal war on capitalism, imperialism, colonialism, greed and materialism. According to CNN:

  Pope Francis delivered a fiery denunciation of modern capitalism on Thursday night, calling the "unfettered pursuit of money" the "dung of the devil" and accusing world leaders of "cowardice" for refusing to defend the earth from exploitation.

   

  Speaking to grassroots organizers in Bolivia, the Pope urged the poor and disenfranchised to rise up against "new colonialism," including corporations, loan agencies, free trade treaties, austerity measures, and "the monopolizing of the communications media.

  Fox News reported that in one of his South American speeches, the Pope admonished business, government and trade union leaders, charging them with "idolatrous" and materialistic ways. CNN quotes him at one gathering saying to a group of business leaders, politicians, labor union leaders and other civil society groups on a Saturday evening: "I ask them not to yield to an economic model which is idolatrous, which needs to sacrifice human lives on the altar of money and profit."

  Some high-profile commentators such as Rush Limbaugh think they smell a Marxist clothed in white papal robes, who dreams of redistributing the world's wealth.

  Pope Francis insists that he has little interest in Marxism and that his political advocacy against materialism, capitalism, greed and idolatry are largely religious in nature. However, the flavor of some of his statements might suggest otherwise.

  To understand how the Pope thinks, it is helpful to glimpse at some of his closest counselors on these topics.

  One advisor on his August global warming encyclical is the controversial professed atheist, Professor John Schnellnhuber, who was appointed to the Pontifical Academy of Science, and has been accused of advocating population control.

  In an interview in June with Breitbart, Lord Christopher Monckton, chief policy advisor to the Science and Public Policy Institute, and a leader in the fight against the science of climate change, questioned Schnellnhuber's role in the encyclical:

  Monckton further explained that Francis is influenced by extremist Professor John Schnellnhuber, founding director of the Potsdam Institute for Climate Impact Research, who said in 2009 at a climate conference in Copenhagen that if we let global warming continue, six billion of the seven billion people on earth will be killed by it.

   

  Monckton said that Schnellnhuber will be standing by the side of Pope Francis when they announce the encyclical next week. "The fact that Schnellnhuber is going to be there is an extremely bad sign," he declared.

   

  The fact that he will be there next to the pope suggests to Monckton that Francis is thanking him for having written the climate portion of the encyclical.

  Another of the Pope's closest advisors is Cardinal Oscar Rodriguez Maradiaga, sometimes considered "the Vice Pope" because of his charisma and influence.

  On April 13, 2013, Pope Francis appointed Maradiaga as a coordinator of the group of cardinals established to advise him in the governance of the universal church and to study a plan for revising the Apostolic Constitution on the Roman Curia. Maradiaga is apparently also considered a leading progressive voice in Catholicism.

  According to a NewsMax report from last year:

  Cardinal Oscar Rodriguez Maradiaga, a close advisor to Pope Francis, criticized the free market as "a new idol" that increases inequality and excludes the poor in a keynote speech in Washington on Tuesday. … This economy kills," he told the gathered crowd. "The hungry or sick child of the poor cannot wait."

  The "elimination of the structural causes of poverty" is another concept taken from the "Apostolic Exhortation" handbook; some suggest it sounds like a call for a revolution.

  Pope Francis undoubtedly knows that some of these ideas are not likely to go over as well in the United States as they did in Latin America. According to the New York Times,

  "As his papal jetliner was returning to Rome (from his recent visit to South America), Francis signaled that he knew his economic message was already facing criticism in the United States and pledged to study it. Some critics blame him for rebuking capitalism with an unduly broad brush. Others say he ignores that globalization has lifted hundreds of millions of people out of poverty."

  The Pope also knows, however, that the UN is poised to strong-arm member nations to sign on to an impossible globalist agenda that will require a total shift of the world's wealth, and a restructuring of international politics and economics with a one-world government and a universal religion at the steering wheel.

  Even to the Pope's admirers, that sounds a less like peace and love and more like a utopian totalitarian nightmare.

  

  

  

  

  

• Exodus 8:2

  We may be through with the past, but the past isn’t through with us.

  I’m a big fan of history, and although I’m not a trained historian, I wrote a book about history through the lens of financial markets called Panic, Prosperity, and Progress (which has 22 reviews on Amazon, averaging 4.9 out of 5 stars………..so it can’t be that terrible). As part of this, I enjoy thinking of the arcs of history, particularly financial history, and anticipating where we might be going. This post is just such an exercise.

  I will say at the outset it is hazardous to get too caught up in narratives. The one offered by our friends in Gainesville in 2009 was along the lines of “the market will fight its way back to about 950 on the S&P 500……..1,000 at the most…….and then begin its final descent to its low of 400.” I don’t have to tell you things didn’t pan out quite that way. However, my musings here aren’t based on Elliott Wave, indicators, or anything except my own vague projections about where we are heading financially and politically.

  

  I think between now and the end of next year, we’re going to see something along these lines:

  Beat the Crash: sometime before the end of October, we’re going to take out the so-called “crash” lows of August 24th. How low this is remains to be seen, although I’ll be satisfied if it’s even modestly lower. I did this post on the 20th of this month projecting what these lows might be, and most folks thought I wasn’t being bearish enough. They may be right. In fact, as I’m sitting here right now looking at that post, it would make a lot more sense to have a serious breach of the August 24 lows, considering the “next step” I’m going to lay out. Let’s just agree that the drop would be serious enough to become persistent headline news and, dare I say it, cause Gartman to declare an all-out bear market.

  Yellen’s Last Hurrah: at this point, Janet “the antichrist” Yellen will have license to do Whatever The Hell She Wants to “fix” things. This will be her last free pass to do so. None of us can know what form this salvation will take (negative interest rates? QE4? the threat of a nude Yellen sex tape unless the market rallies?) but, whatever the form, it will, in fact, cause the markets to rally more strongly and firmly then they did between the August 24 crash and the September 17 FOMC top.

  The Stall: while it will seem that Yellen’s latest gambit has worked (but we know better, right?) the equity markets will cease their ascent. My guess is that this stall will be at the approximate price levels of the August 24 lows. Let me say that again: even after another ridiculous government program, I think the best equity prices are going to muster are going to be not much different than the “panic lows” of August 24th. Once equity prices stop obeying Yellen’s desire for them to go higher, people are going to start to worry. And then……..

  All Holy Hell Breaks Loose (during a big election year, no less): this is where the real fun begins. What’s particularly interesting about this phase is that it will be right in the thick of the U.S. Presidential Election Cycle which should make things, errr, interesting.

  A Surprising Choice: November 8th, 2016 is the big day, and I put it to you that the person elected president is going to be a surprise (at least to those speculating about it right now). The tumult of 2016 is going to compel people to want, yet again, “change”, and that could come in the form of Bernie Sanders (in case the nation’s mood wants to punish the rich) or Donald Trump (in case the nation’s mood instead actually buys the notion he can make the country “great” again). It won’t be boring-as-milquetoast Joe Biden or the-only-thing-special-is-that-she-lacks-a-penis Hillary Clinton. The status quo is going to be very “out” in the world of political fashion.

  So there we have it: my wild-ass guess for the next 14 months. Let’s see how it goes.

  

  

  

  

• Top UK Hedge Fund Manager Admits: "Central Banks Made The Rich Richer"

  With each passing day, the lies and fictions we have been exposing since 2009 – from HFT, to the truth about QE, to the ultimate downfall of central banks through their own actions – are being debunked ever faster, called out and/or confirmed by increasingly more “serious” people, those who have benefited and been protected by the lie itself.

  Case in point, an Op-Ed by Paul Marshall, CIO of Marshall Wace, one of the London’s and Europe’s largest hedge funds, with an AUM of $22 billion (so he probably knows what he is talking about) which is a tour de force of slamming the countless lies shoved down the population’s throat every single day just so the rich can get richer.

  From “Central banks have made the rich richer”, first posted in the FT:

  Labour’s new shadow chancellor has got at least one thing right. Amid the brickbats thrown at John McDonnell, there is a nagging failure to acknowledge the validity of one part of his critique of the money-creation programmes of the four leading central banks. Quantitative easing, as this policy is known, has bailed out bonus-happy banks and made the rich richer. 

   

  It is a surprise that the UK opposition party and other leftwingers have not made more of this. Maybe they thought it was too complicated. It isn’t really, and it might appeal to voters’ sense of justice far more effectively than threats to raise the top rate of income tax or to introduce a financial transactions tax (which Mr McDonnell also supports).

   

  Public pronouncements about the objectives of QE are deliberately shrouded in central bank speak. Depreciation of the yen is quite obviously an indirect effect of large-scale Japanese money printing — but it would not do for Shinzo Abe, the Japanese prime minister, or Haruhiko Kuroda, the Bank of Japan governor, to say so plainly. That would be politically toxic in the American heartlands. Nor would Mario Draghi, president of the European Central Bank, acknowledge that he is artificially distorting the bond markets so that the debt-ridden governments of peripheral Europe can continue to enjoy a low cost of capital (the eurozone’s very own Ponzi scheme). But that is what he is doing.

  Instead, central bankers talk about two main objectives of QE. The first is to maintain the supply of money to the banking system, to prevent a contraction in credit from leading to a seizure of 1930s proportions.

  The second is to stimulate what they call the “portfolio channel” via the purchase of sovereign bonds. Government bonds provide the risk-free rate for financial markets, off which everything else is priced. If you suppress the risk-free rate by buying debt, you boost the price of all other assets, from credit to equities to property.

   

  Banks have been the biggest beneficiaries, with their 20- or 30-times leveraged balance sheets. Asset managers and hedge funds have benefited, too. Owners of property have made out like bandits. In fact, anyone with assets has grown much richer. All of us who work in financial markets owe a debt to QE.

  But wait, it gets better, because the inevitable next step, helicopter money, direct Treasury monetization and absolute currency debasement, is just around the corner once demands for “QE for the masses” become the next big thing (as Macquarie predicted last week).

  It is no surprise that the left is angry about this, nor that they are looking for other versions of QE that do not so directly benefit bankers and the rich. Instead of increasing the money supply by buying sovereign bonds from banks, central banks could spread the love evenly by depositing extra money in every person’s bank account. In the UK, QE increased the money supply by £375bn, or about £5,800 per person. If this money had been distributed evenly it might have been frittered away on consumption rather than making a few rich people richer and bailing out the banks. But it might have been fairer.

   

  Mr McDonnell and Jeremy Corbyn, the new Labour leader, advocate a second approach: targeting QE at infrastructure projects. The central bank would buy bonds direct from the Treasury on the understanding that the funds would be used to improve housing and transport infrastructure. The timing is flawed; the Bank of England deems further QE unnecessary, and any large money creation now would risk stoking inflation. But if the idea were kept as something to implement the next time the country faces a financial crisis, it would carry quite a lot of respectability.

   

  Some object that creating money to spend on infrastructure would undermine the central bank’s independence by forcing it to buy direct from the Treasury. Yet monetary policy has already extended well beyond its technocratic bounds into the realms of wealth distribution. QE had clear wealth effects, which could have been offset by fiscal measures. All political parties should acknowledge this. So should those of us who want free markets to retain their legitimacy.

  Coming to every “New Normal” banana republic near you…

  

  

  

  

  

• TSA Agent Caught Stealing From Passenger's Wallet At NYC Airport Checkpoint

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  TSA agents don’t get enough credit. They aren’t just experts at sexually molesting airport passengers, although they are very good at that. They have also become well known for outright theft.

  Here’s the latest from the New York Post:

  A TSA agent at JFK Airport was busted when he was caught stealing money out of a passenger’s wallet at a security checkpoint, authorities said.

   

  Joe Bangay, 37, was processing passengers at Terminal 1 around 10:30 p.m. Saturday when he swiped $61 in cash out of the passenger’s wallet, according to police.

   

  PAPD officers reviewed security footage and watched as the victim placed the wallet in a basket and laid it on the conveyor belt of the X-ray machine.

   

  The cops then witnessed Bangay allegedly pick up the wallet and pocket the money.

   

  The theft comes on the heels of several other crimes involving TSA agents.

   

  Agent Margo Lauree-Grant was arrested earlier this month for allegedly stealing a Canadian passenger’s diamond-encrusted watch at JFK.

  Don’t worry, they’re just keeping us safe.

  *  *  *

  For related criminality courtesy of the TSA, see:

  TSA Agent Arrested for Sexually Molesting South Korean Woman at NYC’s LaGuardia Airport

  TSA Agents Caught Gaming System so Male Screener Could Grope Attractive Passengers; No Criminal Charges Filed

  TSA Air Marshal Arrested for Taking Photos Up Passengers’ Skirts

  Big Brother Idiocy – TSA Spent $160 Million on Naked Body Scanners that Fail 96% of the Time

  Judicial Watch Obtains Documents Proving Systemic Sexual Abuse by TSA Workers at Airports Nationwide

  

  

  

  

  

• A Currency War That Few Economists And Analysts Notice, Much Less Understand

  Submitted by Jesse via Jesse's Cafe Americain,

  "The enormous gap between what US leaders do in the world and what Americans think their leaders are doing is one of the great propaganda accomplishments of the dominant political mythology."

  Michael Parenti

  Most economists and financial analysts think that 'currency war' merely refers to the competitive devaluations that nations sometimes engage in to help boost their domestic economies, as they had done in the 1930's for example.

   

  

   

  This time the currency war is a much more profound confrontation of differing agendas revolving around the historically unusual role of the US dollar, based on nothing more than the will of the Federal Reserve and the 'full faith and credit' of the US, as the reserve currency for global central banks and international trade.

  When a single nation begins to wield such an 'exorbitant privilege' to underwrite the speculative excesses of a crony capitalist banking system, and perhaps even more importantly, as an instrument in support of their international policy, one ought not be surprised that the rest of the world will begin to resist it.

  A currency must be policy neutral, without regard to any party if it is to be a true medium of exchange.  Can this still be said of the US Dollar as it has been managed, especially since 1990?

  As Alan Greenspan once correctly pointed out, but certainly did not heed when he was at the Fed, if a fiat dollar is managed by monetary policy such that it emulates gold, then it will be perceived as fair, and will certainly be above the particular domestic issues or international policy biases of a single nation that de facto wields the reserve currency status.

  "And so it is an odd situation where all the central bankers — while none of them are advocating a return to the gold standard — nonetheless try to replicate the various types of interest rate policies that the gold standard would have created. And it is an interesting question whether you call that regulation, or basically functioning of a central bank in stabilizing the economy."

   

  Greenspan: Role of Central Bankers Is To Emulate the Gold Standard

  It might help one to understand this if they were to imagine a world in which Russia, for example, in a quirk of history had established the ruble as the benchmark currency for the world.  The ruble was recommended for use by all nations as the means of paying for oil,  and for settling international trade even when Russia is not involved in the transaction.  Each country was thereby compelled to hold a substantial portion of its international reserves in rubles.

  And how would one be likely to react if the Russian Central Bank started using the ruble as an instrument of their international policy and extension of their quest for imperial power?  What if they began creating more rubles to underwrite the domestic bubbles which were created in their own corrupted financial system to bail out their banks and oligarchs?

  And let's be serious and think 'like the other guys' for a moment.  What if some other nation that held the enormous power of the world's reserve currency was exhibiting a crop of candidates for their leader like the current choices for the US Presidency?   I would expect that some of the rhetoric being tossed about in these debates would send a chill to the very bottom of our toes.  Who could place their confident trust in their good and selflessly wise judgement to do the right things for other nations around the world, even if it might not favor the powerful special interests that give them so many millions in campaign donations?

  Would you be content if your own government went quietly along with this abusive sort of monetary system?  Is this not indeed taxation without representation when the money supply is expanded and handed over directly to the hands of a few Bankers?

  The intransigence of the Anglo-American financial establishment to recognize the legitimate issues of the rest of the world with regards to the manner in which they have conducted their control of the IMF, the World Bank, and the international reserve currency has ignited a currency war that is now becoming increasing visible, to just about everyone it seems except for those sequestered in their ivory towers at the heart of the Empire.  Or perhaps they think it too dangerous to even acknowledge that it exists, because then they might be compelled to render an opinion on it.

  This is a 'big event' and it is all the more remarkable because the policy makers in the US act as though it is not even happening, or is not happening for any of the reasons for which it is.  They prefer to view it as a challenge to their authority, and to react uncompromisingly and with force.

  I think that historians will find the start of the currency war in the Asian currency crises and the fall of the Russian ruble in the 1990's, with the roots of it in the closing of the gold window by Nixon in 1971.    But from the following essay it seems that China and a few astute Western observers have marked it as being visible from March 2015.

  But whatever the date of its commencement, this dispute over the international monetary regime is the basis for the ongoing currency war that seeks to rebalance the terms of international trade and finance.

  It is the old story of the very powerful resisting change that benefits the few of them inordinately. And as in so many wars of the past, those few who benefit from it do not include the bottom 90% of their own people at the least.

  Most economists and analysts are ignoring this, or are unaware of it.  When they do finally wake up they will likely get busy finding ways to justify it, or dismiss it as an issue, and 'prove' that there is nothing wrong with it.  And very few will acknowledge the price of it in terms of economic stagnation and human misery.  All is well.

  Here is an excerpt of a recent article that was published in Chinese and then translated into English in the journal of the International Monetary Institute in Beijing.

  Has the US Lost its Role as the Underwriter of the Economic System?
  By Willem Middlekoop

   

  The recent news that Britain aspires to become one of the founding members of the new Asian Infrastructure Investment Bank (AIIB), has shocked many. Larry Summers, who served as a Secretary of the US Treasury between 1999 and 2001, immediately understood the significance of these developments, and wrote in an op-ed for the Washington Post:   'March 2015 may be remembered as the moment the United States lost its role as the underwriter of the global economic system. I can think of no event since Bretton Woods comparable to the combination of China's effort to establish a major new institution and the failure of the United States to persuade dozens of its traditional allies, starting with Britain, to stay out.‘

   

  This British announcement was highly criticized by the US. The Financial Times quoted an unnamed US official:  'We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power. This decision was taken after no consultation with the US.‘

   

  Summers was also highly critical of the US‘ strategy toward the newly founded AIIB: 'The U.S. misjudged the situation tremendously, put pressure on allies and developing countries to under no circumstances be part of AIIB. Largely because of resistance from the right (neo-conservatives more precisely), the United States stands alone in the world in failing to approve International Monetary Fund governance reforms that Washington itself pushed for in 2009. By supplementing IMF resources, this change would have bolstered confidence in the global economy. More important, it would come closer to giving countries such as China and India a share of IMF votes commensurate with their increased economic heft.‘

   

  With Britain and many more major European countries signing up as founding members of the AIIB, the US economic hegemony has been dealt an enormous blow. For the first time since the end of the Second World War, the US is not in the driving seat during the foundation of a highly significant global institution. Of course, this will not change the world economic system overnight, but when we look back in five, ten or even fifteen years‘ time, March 2015 may be remembered as a turning point in economic history…

   

  Another criticism is that the US move to more neoliberalism and global capitalism since the 1980‘s, has led to a change in the functions of the IMF. Critics claim allies of the US receive 'bigger loans with fewer conditions‘. Foreign governments who are non-allies have to sacrifice their political autonomy in exchange for IMF-funds and often have to sell assets crucial for their economy to foreign (often US) companies.

   

  The former Tanzanian President Julius Nyerere, who was angered that debt-ridden African states were forced to hand over their sovereignty to the IMF (and World Bank), once asked:  'Who elected the IMF to be the ministry of finance for every country in the world?‘ And now the Chinese have openly asked for a 'new world wide central bank‘.

   

  Joseph Stiglitz, a former chief economist at the World Bank, has also agreed that the IMF 'was reflecting the interests and ideology of the Western financial community‘. The 'helpful hand‘ by the IMF and World Bank towards military dictatorships friendly to the West‘ has been criticized as well.

   

  It might be remembered as the start of an openly Chinese confrontation with the US over the world‘s economic leadership. As Summers points out, all of this has taken place because the Chinese leadership has had to wait a full five years for a change in the IMF-voting structure…

   

  Willem Middlekoop, International Monetary Review, International Monetary Institute, Beijing July 2015, page 32

  

  

  

  

  

• Who's Really In Charge Of Interest Rates? A Graphic Novel

  Inspired by Eugene Fama's paper, "Does the Fed Control Interest Rates?," forthcoming in the Review of Asset Pricing Studies, Chicago Booth's Capital ideas magazine exposes the awful truth of who is in charge… and it's not The Fed.

   

  

  

  

  

   

  Source: Chicago Booth Magazine

  

  

  

  

• Why Volkswagen Is Systematically Important For Germany And Europe

  It is no secret that with the rest of the US economy, and especially housing, sputtering the one bright spot for US production and manufacturing has been the automotive sector. Whether the recent strength has been a function of money-losing leases, extremely generous terms on auto loans including a new rise in subprime debt issuance is up for debate, but whatever the reason carmakers have had a few years of relative stability (with China rolling over this won’t last, but that’s a different topic).

  But if in the US automakers have been the solitary silver lining to an economy that is once again rolling over (as the Fed lack of a rate hike just confirmed), in Europe carmakers are absolutely critical, while for export powerhouse Germany, one can say the local auto industry is nothing short of systemic.

  Here are the latest facts on Germany’s automotive industry from GTAI.de

  • German automobile manufacturers produced almost 13 million vehicles in 2013 – equivalent to more than 17 percent of total global production.  Twenty-one of the world’s 100 top automotive suppliers are German companies.
  • The automotive industry is the largest industry sector in Germany. In 2014, the auto sector listed a turnover of EUR 384 billion, around 20 percent of total German industry revenue. Source: VDA 2015
  • The auto industry is the largest industrial sector in Germany, contributing about 2.7% to gross domestic product.
  • Some 20% of Germany’s exports are made up of vehicles and parts.
  • Germany is Europe’s number one automotive market; accounting for over 30 percent of all passenger cars manufactured (5.6 million) and almost 20 percent of all new car registrations (3.04 million). Source: ACEA 2015
  • Germany is home to 43 automobile assembly and engine production plants with a capacity of over one third of total automobile production in Europe. Source: ACEA 2015
  • One in every five cars worldwide carries a German brand. Source: VDA 2015
  • In 2014, automotive industry R&D expenditure reached EUR 17.6 billion, equivalent to one third of Germany’s total R&D expenditure. Source: VDA 2015
  • 21 of the world’s top 100 automotive suppliers are German companies. Source: PWC 2013
  • Around 77 percent of cars produced in Germany in 2014 were ultimately destined for international markets – a new record. Source: VDA 2015
  • R&D personnel within the German automobile industry reached a level of just over 93,000 in 2014. Around 775,000 are employed in the industry as a whole. Source: VDA 2015

  Then there is the value-chain, i.e., the suppliers and the providers of R&D for Germany’s automotive industry.

  • Germany boasts 21 of the world’s top 100 automotive OEM suppliers. Of these 21 companies, 18 belong to the top 50 automotive suppliers in Europe. Breaking the figures down further still, six belong to the top 25 global suppliers by size.
  • Exports account for almost 37 percent of 2013 revenue generated by German OEM suppliers

  

  As for why Volkswagen is the benchmark? Because not only is the Volkswagen Group the largest automaker in Germany, it is also the largest German company by revenue according to Forbes (Daimler is #3, BMW is #7). Some other facts:

  • The Volkswagen group accounts for roughly one in 10 vehicles sold globally.
  • Most German auto sales came from the Volkswagen group, which reported just over 202 billion euros in revenue in 2014.
  • Roughly 70% of Volkswagen vehicles are sold outside German borders.
  • Volkswagen employs nearly 600,000 people around the world, and more than a third of the 775,000 people who work in the auto industry in Germany.

  In short, while banking may be the most important sector to the hyper-financialized US economy, for the export-driven German economy – whose exports account for over 40% of GDP – it is all about the car companies and their massive supply chains.

  So what happened over the past 48 hours to Volkswagen, which has lost over a third of its market cap, or more than the market cap of Tesla, is nothing short of an earthshattering cataclysm to an economy where all the cogs and gears and running in a smooth, undisturbed ensemble… until everything changed overnight.

  What happens next to Volkswagen is unknown: as noted earlier a Credit Suisse laid out what may be the worst case scenario: “the balance sheet is at significant risk to deteriorate beyond the impact of the €6.5bn provision the company has announced so far. With group free cash flow generation largely dependent on China (we estimate 94% of industrial free cash flow – 78% dividend from JV), there could be increasingly risk to dividend payments.”

  But it is not so much concerns about Volkswagen as fears the entire German auto industry may be at risk.

  The best case scenario: “Even a heavy drop in diesel car production and exports would probably not subtract more than 0.2% from German GDP,” said Berenberg economist Holger Schmieding. “Demand for non-diesel cars may rise and partly offset the drop in demand for diesel-powered cars.”

  The worst? Quote Theo Vermaelen, a finance professor at INSEAD: “If nobody else has done it, the damage would be limited. If it looks like it’s more companies, not just Volkswagen, it would be a major problem for the German car industry, and the German economy overall.”

  And that’s the question German investors are wrestling with: was it just one cockroach. If it was more, the ultimate outcome will (not may) be more QE from the ECB because with Europe tentative recovery also sputtering after 6 months of ECB QE, a steak through the heart of Germany’s most important industry, will be just the black swan that sends Europe into a recession.

  So the question becomes: will Mario Draghi wait to see the fallout of the rapidly escalating Volkwsagen scandal, or will he preempt and ratchet up the bondbuying even more? Find out in the next few weeks.

  * * *

  Finally for those curious to learn more, we present what may be the winner of the “worst named corporate presentation” award for 2015 – Volkswagen’s “Stability in Volatile Times” released earlier today.

  

  

  

  

  

• VIX Spikes As Stocks Suffer Biggest Annual Loss Since 2009 On Passat Purge

  The message from the markets…

   

  Year-over-year, The Dow is down almost 5%, its biggest such decline since 2009… not that once the YoY trend turns negative, it tends to persist… (Dow is unchanged since Dec 2013)

  

   

  Futures show the pain really began when VW hit the tape early in the European session…

  

   

  On a side note, DAX is now down 17% since Draghi began Q€…

  

   

  But then again… maybe it's just EURJPY carry once again running the entire risk-on/risk-off show…

  

   

  Stocks tanked on the day… with some Papal Panic Buying the close…

  

   

  Dragged into the red for the week…

  

   

  Since Yellen lost all The Fed's credibility…

  

   

  And the year… It appeasrs everyone was desperate to keep the Nasdaq green in 2015 dream alive…

  

   

  VIX jumped over 17% today – its biggest move since Black Monday

  

   

  With an epic fat finger at the close…

  

   

  High Yield credit cointinues to flash red.. and stocks are slowly figuring it out…

  

   

  Tressury yields collapsed even more than they spiked yesterday…

  

   

  The Dollar gained ground amid EUR and AUD weakness…biggst 3-day USD Index rise in a month Once again the pattern is clear – USD selling pressure during Asia, USD buying (EUR selling) during Europe…

  

   

  Commodities slipped on dollar strength and china growth fears (after ADB)…

  

   

  But crude's utterly insane melt-up intop NYMEX Close (not unusual) is just becoming farcical…

  

   

  Charts: Bloomberg

  Bonus Chart: Beware The Papal Visit Omen…

  

   

  Bonus Bonus Chart: This one made us think maybe it's Time for Gold/Dow again… perfect roundtrip from Lehman to End QE3…

  

   

  Bonus Bonus Bonus Chart: Thinking out loud – but something broke in "currencies" when China devalued…

  

   

  Bonus Bonus Bonus Bonus Chart: Still climbing?

  I think they got this idea from me pic.twitter.com/1BVfXSpxNR

  — StockCats (@StockCats) September 22, 2015

  

  

  

  

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