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[Markets] Venezuela: America's 68th Regime-Change Disaster

Authored by by Medea Benjamin and Nicolas J. S. Davies via AntiWar.com,

In his masterpiece, Killing Hope: US Military and C.I.A. Interventions Since World War II, William Blum, who died in December 2018, wrote chapter-length accounts of 55 US regime change operations against countries around the world, from China (1945-1960s) to Haiti (1986-1994). Noam Chomsky’s blurb on the back of the latest edition says simply, “Far and away the best book on the topic.” We agree. If you have not read it, please do. It will give you a clearer context for what is happening in Venezuela today, and a better understanding of the world you are living in.

Since Killing Hope was published in 1995, the US has conducted at least 13 more regime change operations, several of which are still active: Yugoslavia; Afghanistan; Iraq; the 3rd US invasion of Haiti since WWII; Somalia; Honduras; Libya; Syria; Ukraine; Yemen; Iran; Nicaragua; and now Venezuela.

William Blum noted that the US generally prefers what its planners call “low intensity conflict” over full-scale wars. Only in periods of supreme overconfidence has it launched its most devastating and disastrous wars, from Korea and Vietnam to Afghanistan and Iraq. After its war of mass destruction in Iraq, the US reverted to “low intensity conflict” under Obama’s doctrine of covert and proxy war.

Obama conducted even heavier bombing than Bush II, and deployed US special operations forces to 150 countries all over the world, but he made sure that nearly all the bleeding and dying was done by Afghans, Syrians, Iraqis, Somalis, Libyans, Ukrainians, Yemenis and others, not by Americans. What US planners mean by “low intensity conflict” is that it is less intense for Americans.

President Ghani of Afghanistan recently revealed that a staggering 45,000 Afghan security forces have been killed since he took office in 2014, compared with only 72 US and NATO troops. “It shows who has been doing the fighting,” Ghani caustically remarked. This disparity is common to every current US war.

This does not mean that the US is any less committed to trying to overthrowing governments that reject and resist US imperial sovereignty, especially if those countries contain vast oil reserves. It’s no coincidence that two of the main targets of current US regime change operations are Iran and Venezuela, two of the four countries with the largest liquid oil reserves in the world (the others being Saudi Arabia and Iraq).

In practice, “low intensity conflict” involves four tools of regime change: sanctions or economic warfare; propaganda or “information warfare”; covert and proxy war; and aerial bombardment. In Venezuela, the US has used the first and second, with the third and fourth now “on the table” since the first two have created chaos but so far not toppled the government.

The US government has been opposed to Venezuela’s socialist revolution since the time Hugo Chavez was elected in 1998. Unbeknownst to most Americans, Chavez was well loved by poor and working class Venezuelans for his extraordinary array of social programs that lifted millions out of poverty. Between 1996 and 2010, the level of extreme poverty plummeted from 40% to 7%. The government also substantially improved healthcare and education, cutting infant mortality by half, reducing the malnutrition rate from 21% to 5% of the population and eliminating illiteracy. These changes gave Venezuela the lowest level of inequality in the region, based on its Gini coefficient.

Since Chavez’ death in 2013, Venezuela has descended into an economic crisis stemming from a combination of government mismanagement, corruption, sabotage and the precipitous fall in the price of oil. The oil industry provides 95% of Venezuela’s exports, so the first thing Venezuela needed when prices crashed in 2014 was international financing to cover huge shortfalls in the budgets of both the government and the national oil company. The strategic objective of US sanctions is to exacerbate the economic crisis by denying Venezuela access to the US-dominated international financial system to roll over existing debt and obtain new financing.

The blocking of Citgo’s funds in the US also deprives Venezuela of a billion dollars per year in revenue that it previously received from the export, refining and retail sale of gasoline to American drivers. Canadian economist Joe Emersberger has calculated that the new sanctions Trump unleashed in 2017 cost Venezuela $6 billion in just their first year. In sum, US sanctions are designed to “make the economy scream” in Venezuela, exactly as President Nixon described the goal of US sanctions against Chile after its people elected Salvador Allende in 1970.

Alfred De Zayas visited Venezuela as a UN Rapporteur in 2017 and wrote an in-depth report for the UN. He criticized Venezuela’s dependence on oil, poor governance and corruption, but he found that “economic warfare” by the US and its allies were seriously exacerbating the crisis. “Modern-day economic sanctions and blockades are comparable with medieval sieges of towns,” De Zayas wrote. “Twenty-first century sanctions attempt to bring not just a town, but sovereign countries to their knees.” He recommended that the International Criminal Court should investigate US sanctions against Venezuela as crimes against humanity. In a recent interview with the Independent newspaper in the U.K., De Zayas reiterated that US sanctions are killing Venezuelans.

Venezuela’s economy has shrunk by about half since 2014, the greatest contraction of a modern economy in peacetime. The World Health Organization (WHO) reported that the average Venezuelan lost an incredible 24 lb. in body weight in 2017.

Mr. De Zayas’ successor as UN Rapporteur, Idriss Jazairy, issued a statement on January 31st, in which he condemned “coercion” by outside powers as a “violation of all norms of international law.” “Sanctions which can lead to starvation and medical shortages are not the answer to the crisis in Venezuela,” Mr. Jazairy said, “…precipitating an economic and humanitarian crisis…is not a foundation for the peaceful settlement of disputes.”

While Venezuelans face poverty, preventable diseases, malnutrition and open threats of war by US officials, those same US officials and their corporate sponsors are looking at an almost irresistible gold mine if they can bring Venezuela to its knees: a fire sale of its oil industry to foreign oil companies and the privatization of many other sectors of its economy, from hydroelectric power plants to iron, aluminum and, yes, actual gold mines. This is not speculation. It is what the US’s new puppet, Juan Guaido, has reportedly promised his American backers if they can overthrow Venezuela’s elected government and install him in the presidential palace.

Oil industry sources have reported that Guaido has “plans to introduce a new national hydrocarbons law that establishes flexible fiscal and contractual terms for projects adapted to oil prices and the oil investment cycle… A new hydrocarbons agency would be created to offer bidding rounds for projects in natural gas and conventional, heavy and extra-heavy crude.”

The US government claims to be acting in the best interests of the Venezuelan people, but over 80 percent of Venezuelans, including many who don’t support Maduro, are opposed to the crippling economic sanctions, while 86% oppose US or international military intervention.

This generation of Americans has already seen how our government’s endless sanctions, coups and wars have only left country after country mired in violence, poverty and chaos. As the results of these campaigns have become predictably catastrophic for the people of each country targeted, the American officials promoting and carrying them out have a higher and higher bar to meet as they try to answer the obvious question of an increasingly skeptical US and international public:

“How is Venezuela (or Iran or North Korea) different from Iraq, Afghanistan, Libya, Syria and at least 63 other countries where US regime change operations have led only to long-lasting violence and chaos?”

Mexico, Uruguay, the Vatican and many other countries are committed to diplomacy to help the people of Venezuela resolve their political differences and find a peaceful way forward. The most valuable way that the US can help is to stop making the Venezuelan economy and people scream (on all sides), by lifting its sanctions and abandoning its failed and catastrophic regime change operation in Venezuela. But the only things that will force such a radical change in US policy are public outrage, education and organizing, and international solidarity with the people of Venezuela.

*  *  *

“The war is not meant to be won, it is meant to be continuous” – George Orwell

h/t Jim Quinn

Published:2/8/2019 7:36:42 PM
[A Brief History of Seven Killings.] How Marlon James Reimagined African Folklore to Craft His Intoxicating New Fantasy Novel "Literature should be sensual and endlessly sensory," says Man Booker Prize–winning novelist Marlon James. "I like books that make me feel like I’m emerging from a fever." Published:2/8/2019 7:33:00 AM
[Markets] Brandon Smith: A Secular Look At The Destructive Globalist Belief System

Authored by Brandon Smith via Alt-Market.com,

Over many years of investigating the mechanics of global events and the people behind them I have become perhaps a little obsessed with one particular subject – the source and motivations of evil. This fascination does not stem from a simple morbid curiosity, but a strategic need to understand an enemy. Much like an exterminator needs to understand the behavior of cockroaches to be effective, I seek to understand the behavior and nature of organized evil.

One very important fact that must first be made clear in people's minds is that evil does indeed exist. Establishment propaganda has spent immense time, effort and capital attempting to condition society into believing that evil is nothing more than a social construct – an opinion. Evil is supposedly in the eye of the beholder; a product of religious conditioning. This is a falsehood. Just like concepts of beauty, concepts of evil are actually inherent in our psyches from birth. The “eye of the beholder” is irrelevant.

Two particular areas of human psychology support this fact:

First, as the work of Carl Jung (and by extension anthropologists like Joseph Campbell) exposed, all human beings no matter where in the world they are born, from the most isolated tribe in the Amazon to the largest metropolis in America, carry the same archetypal symbols in their psyche. That is to say, we ALL have the same psychological elements in our minds regardless of environment.

This fact alone is so overwhelming to modern man that some people refuse to even acknowledge it as a possibility. We have been trained like lab rats to see only one path through the maze; we have been told over and over again that everything is “relative”; that each person is entirely a product of environment and that we all start out empty as “blank slates”.

The vicious attacks on Carl Jung by the establishment (including lies that he cooperated with the Nazis) tell me that Jung was very close to the mark. He had stumbled upon something very dangerous to the establishment; something that could derail their conditioning of the public.

Second, the undeniable existence of the human conscience suggests that we are born with an understanding of duality. Meaning, just as Jung discovered, our psyches contain inherent concepts of good and evil that influence our decisions and reactions. Jung referred to evil, or psychologically destructive impulses, as the 'personal shadow' and the 'collective shadow'.

The vast majority of people have an intuitive relationship with good and evil. They feel anxiety when confronted with evil actions or thoughts, and they feel personal guilt when they know they have done something evil to other people. Some might call this a “moral compass”. I would refer to it as part of the soul or spirit.

In any case, there is a contingent of people in the world that do not have it – a small percentage of the population that is born without conscience, or that finds it easy to ignore conscience. We'll get to those people in a moment, but first, we should probably define what evil is.

Evil is first and foremost any action that seeks to destroy, exploit or enslave in the name of personal gain or gratification. Unfortunately, evil actions are often misrepresented as advantageous for the group, thereby making them morally acceptable. The needs of the many supposedly outweigh the needs of the few, and thus evil is rationalized as a means to a “positive end” for the "greater good".

In most cases, however, destructive actions do not end up serving the interests of the majority, and only end up giving more wealth and power to an elitist minority. This is not a coincidence.

Evil begins with the denial of the existence of conscience, or the denial of the existence of choice. Each person is born with a capacity or freedom to choose. We can listen to conscience, or we can ignore it. We can do good, or we can do evil. Evil tells us the choice is relative and that morality is relative; that there is no difference between a good choice and a bad choice, or, that the evil choice is the only choice.

Beyond ignoring conscience, we must also define the motivation that drives evil. Psychology would suggest that destructive self serving actions stem from an obsessive desire to obtain or control things we cannot or should not have. Interestingly, this is also what some religions teach us, but let's stick to a secular examination.

As mentioned earlier, there is a group of people in the world who do not see good and evil the way most of us do. Their psyche functions in a completely different way, without the filter of conscience. These people exhibit the traits of narcissistic sociopaths.  Full blown high level narcissistic sociopaths represent around 1% to 5% of the total human population, and most of them are born, not made by their environment. Also, 5% to 10% of people hold latent traits of either narcissism or sociopathy that generally only rise to the surface in an unstable crisis environment.

I have written extensively on narcissistic sociopaths and the globalist establishment in numerous articles. I have also outlined how such people, contrary to popular belief, are not isolated from one another. They do in fact organize into groups for mutual gain.

There is an ideology or system of belief that argues for the exact opposite of what conscience tells us is “good”, and that system is Luciferianism. In fact, luciferianism appears to be the source influence for most existing destructive "isms" in our society today (including socialism and globalism).  It is my theory that luciferianism is a religion or cult designed by sociopathic narcissists for the benefit of sociopathic narcissists.

It is sometimes difficult to identify the true “sacraments” behind luciferianism because, for one, luciferians refuse to admit that the system is a religion at all. They prefer to call it a philosophy or methodology, at least in public. The system also seems to encourage active disinformation in order to dissuade or mislead non-adherents. The historic term for this religious secrecy is “occultism”. I would call it “elitism”.

There are some foundational beliefs that luciferians do openly admit to. First and foremost, the goal of luciferianism is to attain godhood. That is to say, they believe that SOME human beings have the capacity to become gods through the accumulation of knowledge.

I have written about the insanity of the goal of godhood in the past, outlining how quantum physics and Kurt Godel's Incompleteness Proof make total scientific and mathematical observation and understanding of the universe impossible. But mathematical reality does not stop luciferian circles from destructively chasing that which they cannot have.  By extension, scientific knowledge not tempered by discipline, wisdom and a moral compass can lead to catastrophe.  Material knowledge is invariably abused by those seeking godlike power.

The notion of self-worship is a core trait of sociopathic narcissists; Luciferianism just codifies it as if it is a virtue. Another problem with the idea of becoming a god is that one inevitably develops a desire for followers and worshipers. What is a savior, after all, without a flock? But how does a human being gain a flock and become more a god? Through force or through trickery?

Second, luciferians claim they seek to elevate the power of the individual in general. In the minds of many people this doesn't sound like a negative at all. Even I have argued for the importance of individualism in the midst of societal controls. That said, any ideology can be taken to extremes.

The pursuit of individual gratification can be pushed too far, to the point that the people around us begin to suffer. Because of the elitist nature of luciferianism, they are not necessarily seeking the elevation of ALL individuals, just certain “deserving” individuals. There is a tendency to view non-adherents as “inferior”; stupid people that should be sheared like sheep by those who are chasing a superior dream of personal godhood.

This attitude can also be seen in the common actions of narcissistic sociopaths, who have no qualms about conning or exploiting people around them as resources, feeding off others like parasites. They treat this as an acceptable practice because they see themselves as special; they are destined to achieve more than the ignorant rabble. They are meant to do great things, and their image is meant to be cemented in the foundations of history.

The elitism of luciferianism is hardly hidden. Luciferians claim that they have no interest in converting other people.  Instead, adherents have to be “smart enough” to come to the belief system on their own. However, their goal of influencing the public through social and political spheres is rather evident.

Political gatekeepers, though not openly luciferian, tend to let slip their affiliations at times. Saul Alinsky, a high level leftist organizer and democrat gatekeeper, praises the rebellious Lucifer in the personal acknowledgments of his political manual 'Rules For Radicals', in which he says:

Lest we forget at least an over-the-shoulder acknowledgment to the very first radical: from all our legends, mythology, and history (and who is to know where mythology leaves off and history begins — or which is which), the first radical known to man who rebelled against the establishment and did it so effectively that he at least won his own kingdom — Lucifer.”

Luciferianism is also prevalent in globalist institutions. For example, the UN seems to be highly involved in the ideology through groups like Lucis Trust, a publishing house founded by Alice Bailey, an avid promoter of luciferianism who also owned the Lucifer Publishing Company. Lucis Trust was originally headquartered at the UN building in New York, and still runs a private libraryof occult books out of the UN today.

Former UN directors like Robert Muller were tied closely with Lucis Trust and the work of Alice Baily and openly promote luciferianism. Muller was central to the UN's global education policies for children and formed numerous branch agencies with the intent of global governance. You can read Robert Muller's white papers on the formation of a global government on his website Good Morning World.

Luciferians approach global governance like they do everything else – with heavy propaganda spin. Muller argues that the goal must be pitched to the public through the idea of “protecting the Earth”. In other words, he believed environmentalism was the key to convincing the masses of the need for total centralization of power into the hands of globalist institutions. Luciferian ideals are sugar coated in a host of flowery and noble sounding motifs. But what are they really all about?

Some luciferians adopt a Gnostic stance on the figure of the devil and only claim to appreciate the concept as mythology rather than the devil existing as a literal force.   Some gnostic texts depict Satan as the "good guy" and God the "bad guy" in the story of Genesis; God being a ruthless slave master and the serpent as the "liberator" bringing knowledge of the material world to mankind.  Lucifer is presented as a kind of Prometheus; the titan who stole fire from the gods and gave it to man.

This "Lucifer as heroic savior" narrative is very common.  Manly P. Hall, 33rd Degree Freemason and influential New Age writer is quoted as saying in his collection of writings titled 'The All Seeing Eye':

Lucifer represents the individual intellect and will which rebels against the domination of Nature and attempts to maintain itself contrary to natural impulse. Lucifer, in the form of Venus, is the morning star spoken of in Revelation, which is to be given to those who overcome the world.”

One Luciferian model describes God as an archetypal concept only, a mythological comfort blanket that helps us to face the loneliness of existence. They do not believe a corporeal God figure exists, though, one wonders how they can reconcile the existence of inherent psychological archetypes with that notion? Where did archetypes come from if there is no creative design or intended meaning to humanity?

More discreet Luciferians sometimes argue that the mythological figure of Lucifer is separate from the Christian image of “Satan”. The name “Lucifer” is not mentioned directly in the bible in reference to Satan (though the phrase “morning star”, the direct translation of the word “lucifer” is mentioned in reference to Satan). But this argument seems rather coy and disingenuous to me. For centuries the term Lucifer has been synonymous with the devil in the public consciousness. Luciferians seem to be trying to separate themselves from the negative connotations associated with satanism through a twisted form of wordplay and semantics.

But why would they care?  Unless, of course, they are seeking to influence public consciousness and they realize that it's hard to sell people on satanism, so they want to put a different face on an old and ugly idea.  Satanists often refer to Lucifer and Satan in the same breath as being the same figure. In this documentary, Anton LaVey, a well known representative in satanic and luciferian circles, does exactly that.

LaVey seems to be treated as an annoyance by the more marketing conscious luciferian groups. I suspect that his public bluntness about what luciferian beliefs actually involve is seen as too honest. These people believe in secrecy and initiation.  They don't like their darker side on display for the whole world to see and to judge.

A direct antithesis to someone like Anton LaVey would be Michael Aquino, a military intelligence officer specializing in psychological warfare who was a member of LaVey's satanic church but left to start his own more marketable Temple Of Set. Aquino is best known for a tactical thesis on psychological warfare he wrote with General Paul Vallely (credited in the paper as "Paul E Valley") called 'From Psyop To Mind War'. The thesis outlines the use of propaganda and other strategies to turn a target population against itself, to either destroy that population or control it more easily without ever having to use outright military force.

Aquino's Mind War showcases the luciferian belief in "magic", but not magic in the way popular culture understands it.  Luciferians believe in the power of magic words and symbols in the form of psychological key phrases and archetypes.  That is to say, they have adopted the use of archetypal psychology, but where psychologists like Carl Jung used archetypal psychology to heal people with mental and emotional illnesses, luciferians use archetypes to manipulate and control public thought.

This is often done through popular culture and films.  Truthstream Media has produced an excellent documentary on this subject that I highly recommend.

There are more obvious examples such as Ridley Scott's Blade Runner, in which androids rebel against their slave master and creator and eventually murder him.  Then there is more subversive entertainment like Netflix's Series Of Unfortunate Events, which starts out as a fun comedic children's tale but ends with a display of essentially every aspect of luciferian belief right down to elitism as a necessary practice, moral relativism, an unhelpful and controlling god figure surrounded by sycophants, and even a serpent carrying an apple containing the "knowledge" to save the protagonists from a horrible fate.

The duplicity of luciferianism alone should be enough to make people wary of its promises and arguments. Humanity has spent the better part of 2000 years trying to remove the influences of secretive occult elitism (the high priest class) from our political and social structures. Yet, these people are relentless in their desire for power.

Regardless of the positive spin that luciferians adopt for their ideology, the fruits of their activities speak much louder than propaganda. Through their efforts towards globalism, what I see is a cancerous desire for control over civilization and of every aspect of human thought. I also see a perversion of nature as they seek to obtain what they call “godhood”. Transhumanism and genetic tampering carry all the hallmarks of the luciferian ideal. Regardless of one's religious affiliations, it is hard to find anything of value in their system. Everything about it is an affront to inherent conscience. It can only become acceptable to the majority through deception.

If you have to lie about the motives of your philosophy in order to get people to adopt your philosophy, then your philosophy must be dangerously incomplete or outright cataclysmic.

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Published:2/7/2019 11:26:24 PM
[Markets] "They're Running Out Of Options" - Farm Bankruptcies Surge To 10-Year High As Trade War Bites

The Farm Belt helped cement President Trump's historic electoral triumph over Hillary Clinton. But even before Trump started his trade war with China nearly one year ago, Trump's protectionist bent has added to the collective woes of farmers, who were already struggling with low prices for corn, soy beans and other agricultural commodities.

China's decision to purchase millions of soybeans (after orders ground to halt late last year following another round of tariffs) offered some relief to soybean producers who were teetering on the brink even with President Trump's farm bailout money in hand. But even if negotiations result in a lasting agreement, it might not be enough to save hundreds of American family farms from collapsing into bankruptcy, as the Wall Street Journal pointed out in a story published Wednesday.

Farms

According to a WSJ analysis of federal data, the number of farmers filing for bankruptcy has climbed to its highest level in a decade...

Farm

...driven by a lasting slump in agricultural commodity prices due in large part to the rise of rival producers like Brazil and Russia.

Bankruptcies in three regions covering major farm states last year rose to the highest level in at least 10 years. The Seventh Circuit Court of Appeals, which includes Illinois, Indiana and Wisconsin, had double the bankruptcies in 2018 compared with 2008. In the Eighth Circuit, which includes states from North Dakota to Arkansas, bankruptcies swelled 96%. The 10th Circuit, which covers Kansas and other states, last year had 59% more bankruptcies than a decade earlier.

And Trump's trade wars - not just with China, but more broadly - aren't helping.

Trade disputes under the Trump administration with major buyers of U.S. farm goods, such as China and Mexico, have further roiled agricultural markets and pressured farmers’ incomes. Prices for soybeans and hogs plummeted after those countries retaliated against U.S. steel and aluminum tariffs by imposing duties on U.S. products like oilseeds and pork, slashing shipments to big buyers.

Low milk prices are driving dairy farmers out of business in a market that’s also struggling with retaliatory tariffs on U.S. cheese from Mexico and China. Tariffs on U.S. pork have helped contribute to a record buildup in U.S. meat supplies, leading to lower prices for beef and chicken.

Because of this, the level of farm debt is approaching levels last seen in the 1980s.

Debt

The stress on American farmers is also affecting agribusinesses giants like Archer Daniels Midland, Bunge and Cargill, who are feeling the heat even as lower crop prices translate into less-expensive raw materials for the commodity buyers.

What's worse is that even after working side jobs to try and make ends meet, some farmers are still winding up more than $1 million in debt.

Mr. Duensing has managed to keep farming, hiring himself out to plant crops for other farmers for extra income and borrowing from an investment group at an interest rate twice as high as offered by traditional lenders. Despite selling some land and equipment, Mr. Duensing remains more than $1 million in debt.

"I’ve been through several dips in 40 years," said Mr. Duensing. "This one here is gonna kick my butt."

Even more shocking than the number of bankruptcies, the number of farms that continue to operate while losing money has risen to more than half of all farms, even as the level of productivity has never been higher.

More than half of U.S. farm households lost money farming in recent years, according to the USDA, which estimated that median farm income for U.S. farm households was negative $1,548 in 2018. Farm incomes have slid despite record productivity on American farms, because oversupply drives down commodity prices.

And bankers who lend to farms warn that there will likely be more bankruptcies to come as more producers "are running out of options."

Agricultural lenders, bankruptcy attorneys and farm advisers warn further bankruptcies are in the offing as more farmers shed assets and get deeper in debt, and banks deny the funds needed to plant a crop this spring.

"We are seeing producers who are running out of options," said Tim Koch, senior vice president at Omaha, Neb.-based Farm Credit Services of America, which lends to farmers and ranchers in Iowa, Nebraska, South Dakota and Wyoming.

Perhaps the only silver lining - if you can even call it that - is that bankruptcy lawyers in states where farms are prevalent are doing their best business in years.

Mounting stress in the Farm Belt has meant big, if somber, business for the region’s bankruptcy attorneys. In Wichita, Kan., the firm of bankruptcy attorney David Prelle Eron filed 10 farm bankruptcies in 2018, the most it has ever handled in one year. Wade Pittman, a bankruptcy attorney based in Madison, Wis., said his firm filed about 20 farm bankruptcies last year, ahead of past years, and he said he expects the numbers to continue to rise as milk prices remain stagnant.

Joe Peiffer, a Cedar Rapids, Iowa-based attorney, said his office is the busiest—and most profitable—it has ever been. Just before Christmas, he sent letters to eight farmers declining to represent them because he didn’t have sufficient staff to handle their cases promptly. He is doubling his office space and interviewing new attorneys to join the firm.

One factor driving bankruptcies is tighter lending standards, said Mr. Peiffer, including at agricultural banks, which are under pressure from regulators to exercise greater caution over their farm-loan portfolios.

"I’m dealing with people on century farms who may be losing them," said Mr. Peiffer, whose own father sold his farm in the late 1980s.

One anecdote featured in the story recalls the rash of suicides among NYC cab drivers, who have struggled to pay the hefty loans attached to their taxi medallions thanks to the rise of Uber, Lyft and other ride sharing apps.

Darrell Crapp, the fifth-generation owner of a hog and cattle farm in Lancaster, Wis., returned to his home one day with a queasy feeling in his stomach, only to find his wife unconscious on their bathroom floor. She had swallowed a handful of pills. She survived, but Crapp attributed the incident to financial stressors as their farm teetered on the brink of bankruptcy.

It was a Sunday in April 2017 when a queasy feeling in Darrell Crapp’s stomach sent him rushing home. He found his wife, Diana, lying crumpled on the floor of their Lancaster, Wis., bathroom. She had swallowed a handful of pills.

Overwhelmed with debt and with little prospect of turning a profit that year, the Crapps knew BMO Harris Bank NA wouldn’t lend them money to plant. The bank had frozen the farm’s checking account.

Mrs. Crapp managed the fifth-generation corn, cattle and hog farm’s books. She had stayed up nights drafting dozens of budgets to try to stave off disaster, including 30-day, 60-day and 90-day budgets.

"It was too much for her," Mr. Crapp, 63, said of his wife, who survived the incident.

Crapp Farms filed for chapter 11 bankruptcy the next month, with a total debt of $36 million.

After filing for bankruptcy, the last of Crapp's land, a 197-acre patch that was homesteaded by his ancestors in the 1860s, will be auctioned off in the near future.

And after all that, Crapp may still need to declare Chapter 12 bankruptcy, a personal bankruptcy provision available to farmers and fishermen, to wipe his remaining debts.

"We haven’t won very many battles," said Mr. Crapp. "The bank pretty much owns us."

Unfortunately for American farmers hoping to reclaim the market share they've lost during the trade war with China, even if Trump can strike a trade deal with the Chinese that mandates purchases of US agricultural products - which the Chinese have already pledged to do - there's still another wrinkle: Japan recently signed a revamped version of the TPP that will offer preferential treatment to Australia, New Zealand and other rivals to American farmers, potentially sealing off another market from US agricultural products.

Published:2/7/2019 10:26:37 PM
[Markets] Homo Credulus: "He'll Go Along With Almost Anything"

Authored by Joel Bowman via InternationalMan.com,

Man: He’ll go along with just about anything.

Given the right circumstances... a little programing... and enough time for it all to marinate in his soft, mammalian brain... there is almost nothing Homo Credulus will not learn to embrace.

Don’t believe us?

Take a look at the historical record; you’ll soon wonder how we ever got this far.

Sure, you’ll discover gizmos and flying contraptions… art and agriculture… music and mathematics. You’ll witness spectacular scientific breakthroughs, the number “0” and a man’s footprint on the moon. You’ll also find automobiles with so many cup holders, you won’t know where to holster your oversized 7/11 Big Gulp.

But you’ll also scratch you head. Perhaps you’ll even weep. And if you think hard enough, you’ll put a few things to serious question…

“Central banks?” “Modern democracy?” “The Rosie O'Donnell Show?”

How has mankind survived such atrocities? Self inflicted, no less! And why, moreover, does he rush so earnestly to repeat and replay his worst mistakes?

Don’t be too hard on yourself, Dear Reader. After all, repetition is nothing new…

You’ll recall that it was the Greeks who first gave the world democracy – from the Greek, demokratía, literally “Rule by 'People'”. (And yes, it was those very same Greeks who put their own beloved Socrates to death… by a majority vote of 140-361.)

Today, democracy is a cherished tenet of “the West.” It is woven into the civic religion, sewn into the social fabric. Men march off eagerly to fight for it, to proselytize it … and to die in forgotten ditches defending it.

At least, that’s what they believe they’re doing. As usual, the poor saps have been duped. Herewith, a little historical context…

The phrase “Making the world safe for democracy” was actually a marketing slogan, coined back in the 1910s, as a way to sell “The Great War” to America. Weary from their own disastrous Civil War just a few decades earlier, in which hundreds of thousands gave up the ghost, Americans were mostly inward looking at the time. That is to say, they wanted little to do with what they largely saw as a “European affair.”

Polls might have indicated no appetite for battle… but the nation’s politicians were nonetheless starved for military misadventure. They sensed big profits abroad, both in manufacturing armaments and making onerous bank loans to foreign lands. Sure, “the nation” would have to fill tank and trench with warm young bodies… but very few soldiers would carry senatorial surnames along with their rifles.

And so, after a public relations campaign of truly epic proportions, America marched off to war… wrapped in the delusion they had freshly been sold.

Eddie Bernays, the man who coined the phrase and, thus, peddled the war to America, made a fortune for his efforts. He was even invited by Woodrow Wilson to attend the Paris Peace Conference, in 1919, as a show of gratitude for his services.

There, Bernays learned the full impact of his “democracy” slogan. An obviously bright fellow, the surreal experience caused him to think…

If people will line up to kill one another under influence of a mere marketing campaign… they could surely be convinced to do, say and buy just about anything!

Bernays was right. In fact, he wrote a series of books, detailing his insights. They included Crystallizing Public Opinion (1923), A Public Relations Counsel (1927) and a neat little number titled Propaganda(1928), in which Bernays laid out the blueprint for mass social and psychological manipulation.

The collected works went on to become a huge success… and the favorite of none other than Joseph Goebbles, Reich Minister for Propaganda in Nazi Germany between 1933-45.

Bernays himself, writing in his 1965 autobiography, recalls a dinner at home in 1933 where…

Karl von Wiegand, foreign correspondent of the Hearst newspapers, an old hand at interpreting Europe and just returned from Germany, was telling us about Goebbels and his propaganda plans to consolidate Nazi power. Goebbels had shown Wiegand his propaganda library, the best Wiegand had ever seen. Goebbels, said Wiegand, was using my book Crystallizing Public Opinion as a basis for his destructive campaign against the Jews of Germany. This shocked me. [...] Obviously the attack on the Jews of Germany was no emotional outburst of the Nazis, but a deliberate, planned campaign.

It is indeed chilling to think of such a heinous undertaking as being engineered, blueprinted, premeditated and carried out according to some kind of script. And yet, there it is… in Bernays’ own words, the “Father of Propaganda.”

Having acquired somewhat of a tainted reputation-by-association, propaganda, itself, underwent a “strategic rebranding” after WWII. But make no mistake, the very same métier thrives to this day, under the more socially palatable designation, “Public Relations.”

Still, a ruse by any other name…

“Could we be so stupid again?” wonders the gentle reader. “Might the mob still be swayed by what Charles Mackay termed ‘extraordinary popular delusions and the madness of crowds?’”

Why, of course! That’s the nature of the mob!

Whether in love, finance, politics or any other matter, man is ever wont to be convinced, assured, persuaded, often against his own best interests. Few are the absurdities in which he will not take refuge, invest his hard-earned capital or squander his morality.

All he needs is a good story, something to arrest his imagination and cauterize his capacity for reason. A distraction from his lonely, quotidian existence.

That, and a few crumbs to pass his lips.

The Roman poet, Juvenal, recognized as much when he mocked the panem et circenses (bread and circuses) stratagem almost two millennia ago. In his Satire X, he referred to the Annona (a kind of grain dole) and the famous circus games, held in the Colosseum and elsewhere, as designed to keep the unthinking population fed and happy.

Look around you today, Dear Reader. What do you see, two millennia later, in the Year of Their Lord, 2019 AD?

Stadium sports matches… food stamp programs… and of course, the greatest bread and circuses show ever, modern representative democracy…

Now, as then, the show goes on!

*  *  *

Clearly, there are many strange things afoot in the world. Distortions of markets, distortions of culture. It’s wise to wonder what’s going to happen, and to take advantage of growth while also being prepared for crisis. How will you protect yourself in the next crisis? See our PDF guide that will show you exactly how. Click here to download it now.

Published:2/6/2019 7:49:06 PM
[Markets] Grave Of Karl Marx Smashed In "Appaling" Hammer Attack

While the neo-socialist ideas of AOC, Elizabeth Warren and Bernie Sanders have taken America's left by storm in recent days, not everyone seems enamored with the idea of wealth redistribution in general, and its founding father, Karl Marx, in particular.

The tomb of iconic German philosopher/genocidal demagogue (depending on one's point of view) Karl Marx, located at London’s Highgate cemetery, will "never be the same again" after it was vandalized in a hammer attack, the Guardian reports. The vandal damaged a marble plaque which was taken from Marx’s original 1883 gravestone and incorporated into the 1954 monument.

Friends of Highgate Cemetery Trust published a twitter image showing the damaged marble plaque which honors Marx and some of his family members, including his wife. The damage to the lettering of Marx’s name can be clearly seen.

Trust CEO, Ian Dungavell, lashed out at the unidentified grave assailants, describing the attack as "an appalling thing to do" and warning that the tomb would be permanently scarred.

Dungavell told the Guardian  that no matter what people thought of Marx’s philosophy, the hammer attack was an act of inhumanity, as "this is a grave of his wife, his own grave and other members of his family." He also condemned the attack as a “particularly selfish act,” and said that it was not a random attack, insisting it was "deliberately targeted against Karl Marx", as if that wasn't obvious.

It is unclear when the incident occurred. The damage was first noticed on Monday afternoon, but Dungavell said images posted on social media suggest it could have occurred early last week or before. “Just looking at social media posts from people who have visited, if you squint you can see that the damage was visible in some of those photographs,” he said.

The cost of the damage has yet to be estimated. Dungavell said: “I’m hoping we will be able to get a specialist stone conservator to consolidate the white marble and then if we can get the lead lettering back it might be that you don’t notice it.”

The destruction of the grave sparked outrage on Twitter, with supporters of the communist legend calling for an appeal to be set up. As RT notes, Europeans took the assaults especially hard, with left-wing Guardian journalist Owen Jones and children’s author and Corbynista, Michael Rosen, asking people to donate money to help with the costs of potential repair work.

The police were notified and are expected to begin an investigation.

The cemetery will be discussing repairing the uninsured memorial with its owners the Marx Grave Trust. It will also talk to the trust about the possibility of installing CCTV around the monument.

Dungavell said: “We might do a security review with the Marx Grave Trust and speak to the police about what should happen about any recommendations they may have." He pointed out that the Marx memorial has been repeatedly damaged since it was installed.

"It has attracted great controversy over the years. It has had paint daubed all over it. It has had people chanting at it, the bronze bust on the top has been dragged off with ropes, and there was even a pipe bomb set off in January 1970 that damaged the front face of it."

He added: “That’s the only consolation – he hasn’t been forgotten about.”

Of course, cynics would note that if there ever was an opportunity to share the repair costs among the broader population, this is it.

Published:2/6/2019 2:18:00 AM
[Markets] Meotti: The Pope's Stubborn Silence On The Persecution Of Christians

Authored by Giulio Meotti via The Gatestone Institute,

  • Unfortunately, Pope Francis's stance on Islam seems to be coming from a fantasy world.

  • "Authentic Islam and the proper reading of the Koran are opposed to every form of violence", the Pope claimed, not quite accurately. It is as if all of the Pope's efforts have been directed to exonerating Islam from any of its responsibilities. He seems to have been doing this even more than observant Muslims -- such as Egypt's President Abdel Fattah el-Sisi, American author and physician M. Zuhdi Jasser, former Kuwaiti Information Minister Sami Abdullatif Al-Nesf, French-Algerian author Razika Adnani, Paris-based Tunisian philosopher Youssef Seddik, Jordanian journalist Yosef Alawnah, and Moroccan author Rachid Aylal, among many others -- have been doing.

  • "Pope Francis could in no way be ignorant of the heavy problems caused by the expansion... at the very heart of the Christian domain... Let us note this again... the last religion that arrived in Europe has an intrinsic impediment to integrating into the European framework that is fundamentally Judeo-Christian..." – Boualem Sansal, Algerian author, in his best-selling book "2084."

  • Pope Francis now faces the potential risk of a Christian world physically swallowed by the Muslim crescent -- as on the Vatican logo chosen for the Pope's upcoming trip to Morocco. It is time the appeasement is replaced.

The persecution of Christians is now an international crisis. Unfortunately, Pope Francis's stance on Islam seems to be coming from a fantasy world. (Photo by Giulio Origlia/Getty Images)

4,305 Christians were killed simply because their Christian faith in 2018. This is the dramatic number contained in the new "World Watch List 2019" just compiled by the non-governmental organization Open Doors. It reveals that in 2018, there were 1,000 more Christian victims -- 25% more -- than the year before, when there were 3,066.

These days, 245 million Christians in the world are apparently persecuted simply for their faith. Last November, The organization Aid to the Church in Need released its "Religious Freedom Report" for 2018 and reached the a similar conclusion: 300 million Christians were subjected to violence. Christianity, despite stiff competition, has been called "the most persecuted religion in the world".

In March 2019, Pope Francis will travel to Morocco, a country also listed in the Open Doors' watch list. Unfortunately, Pope Francis's stance on Islam seems to be coming from a fantasy world. The persecution of Christians is now an international crisis. Consider what happened to Christians in the Muslim world during just the last couple of months. A policeman was killed trying to defuse a bomb outside a Coptic church in Egypt. Before that, seven Christians were murdered by religious extremists during a pilgrimage. Then a mass grave was discovered in Libya containing the remains of 34 Ethiopian Christians killed by jihadists affiliated with the Islamic State. The Iranian regime, in severe new crackdowns, arrested more than 109 Christians. The Pakistani Christian Asia Bibi, three months after being exonerated for "blasphemy"and released from death row, still lives as a "prisoner": her former neighbors still want to put her to death. In Mosul, which was Iraq's center for Christians, there was a "Christmas without Christians", and in Iraq in general, 80% of the Christians have disappeared.

Cardinal Louis Raphael Sako, Patriarch of Babylon of the Chaldeans and head of the Chaldean Catholic Church, recently provided some numbers for the persecution of Christians in Iraq: "61 churches have been bombed, 1,224 Christians were killed, 23.000 houses and real estate of the Christians have been seized". The patriarch reminded the world of the policy of the Islamic State, which gave "three options to Christians": conversion to Islam, payment of a special tax or the forced and immediate abandonment of their land. "Otherwise they would have been killed." In this way, 120,000 Christians were expelled.

"The stubborn silence of European leaders on the question of religions, Islam in particular, astonishes and disappoints", wrote the Algerian novelist Boualem Sansal recently.

"Their attitude is simply irresponsible, suicidal, and even criminal...in the current context marked by [a] dizzying expansion... It's like living at the foot of an angry volcano and not understanding that it is preparing to erupt".

Sansal, who has been threatened with death by Islamists in France, as in Algeria, wrote "2084", a best-seller. In it, he writes that Pope Francis's stance on the Muslim world is similar to that of the Western leaders:

"Pope Francis could in no way be ignorant of the heavy problems caused by the expansion of radical Islam in the world and at the very heart of the Christian domain... Let us note this again... the last religion that arrived in Europe, has an intrinsic impediment to integrating into the European fundamentally Judeo-Christian framework, even if this referent, over the past centuries, has eroded."

Pope Francis did manage to explain that the "idea of conquest" is integral to Islam as a religion, but quickly added that one might interpret Christianity the same way. "Authentic Islam and the proper reading of the Koran are opposed to every form of violence", the Pope claimed, not quite accurately. He also not quite accurately remarked that "Islam is a religion of peace, one which is compatible with respect for human rights and peaceful coexistence." It is as if all of the Pope's efforts have been directed to exonerating Islam from any of its responsibilities. He seems to have been doing this even more than observant Muslims -- such as Egypt's President Abdel Fattah el-Sisi, American author and physician M. Zuhdi Jasser, former Kuwaiti Information Minister Sami Abdullatif Al-Nesf, French-Algerian author Razika Adnani, Paris-based Tunisian philosopher Youssef Seddik, Jordanian journalist Yosef Alawnah and Moroccan author Rachid Aylal, among many others -- have been doing.

The dramatic persecution of Christians in the Islamic world highlights a Western paradox: "Since their victory in the Second World War, Westerners have brought great benefits to all of humanity", wrote Renaud Girard in Le Figaro.

"Scientifically, they shared their great inventions, such as penicillin or the Internet. Human rights and democracy are far from being applied everywhere in the world, but they are the only reference for governance that exists internationally. It is undeniable that, under the impulse of Westerners, vast political, technical, health and social successes have been achieved in two generations. But there is one area where the planet has undeniably regressed since 1945 and where Western responsibility is obvious. It is the freedom of conscience and religion... By refraining from defending Christians in the East, the West made a twofold strategic error: it gave a signal of weakness by abandoning its ideological friends; it has renounced its creed".

"In the eyes of Western governments and the media", noted another report on persecution of Christians compiled by Aid to the Church in Need. "religious freedom is slipping down the human rights priority rankings, being eclipsed by issues of gender, sexuality and race".

"Political correctness does not want to know anything about the ongoing persecution and suppression of Christianity and so it is being ignored in an almost sinister way", Bishop Manfred Scheuer of Linz, in Upper Austria, recently said.

This eclipse is even more dramatic, as everybody knows that Christianity is at the risk of "extinction" in the Middle East, noted the Archbishop of Canterbury Justin Welby:

"Hundreds of thousands have been forced from their homes. Many have been killed, enslaved and persecuted or forcibly converted. Even those who remain ask the question, 'Why stay?' The Christian population of Iraq, for instance, is less than half what it was in 2003 and their churches, houses and businesses have been damaged or destroyed. The Syrian Christian population has halved since 2010. As a result, across the region Christian communities that were the foundation of the universal Church now face the threat of imminent extinction."

The West has betrayed its Christians friends in the East (such as here and here). The West might well ask: What are the Vatican and the Pope doing to fight this new religious persecution?

Criticism has already come from the Catholic world. "Just as he has little anxiety about the wave of church closings, Francis seems to have little anxiety about the Islamization of Europe", wrote the US Catholic columnist William Kilpatrick.

"Indeed, as evidenced by his encouragement of mass migration, he seems to have no objection to Islamization. Either because he truly believes the false narrative that Islam is a religion of peace, or because he believes that the self-fulfilling prophecy strategy will create a more moderate Islam, Francis seems to be at peace with the fact that Islam is spreading rapidly. Whether Francis has been misinformed about Islam or whether he has adopted a strategy of misinformation, he is taking a huge gamble—not only with his own life, but with the lives of millions".

There are now entire areas in Syria cleansed of their historical Christians. Pope Francis recently received a letter from a Franciscan priest in Syria, Father Hanna Jallouf, the Patriarch of Knayeh, a village close to Idlib, the stronghold of anti-Assad Islamist rebels. "Christians in this land are like lambs among the wolves", Jallouf wrote.

"The fundamentalists have devastated our cemeteries, they have prevented us from celebrating liturgies outside the church, stripping us of the external signs of our faith: crosses, bells, statues as well as our religious habit."

If the Pope does not want to receive more letters like that, he will need show courage and tackle one of the most urgent persecutions of our time.

Pope Benedict XVI, in his address at Regensburg, said what no Pope had ever dared to say before -- that there is a specific link between violence and Islam. To illustrate his case, Benedict cited a 14th-century dialogue between a Byzantine Christian emperor, Manuel II Paleologus, and a Persian scholar, about the concept of violence in Islam: "Show me just what Muhammad brought that was new, and there you will find things.. .such as his command to spread by the sword the faith he preached", Benedict quoted the emperor as saying to his Muslim interlocutor.

Another Pope, John Paul II, also expressed concerns. During a meeting in 1992, Mgr Mauro Longhi, who, while still a student, often accompanied the late Pope on hiking trips says, John Paul II told of an "Islamist invasion" of Europe.

"The Pope told me: 'Tell this to those whom you will meet in the Church of the third millennium. I see the Church afflicted by a mortal wound. More profound, more painful than those of this millennium,' referring to Communism and Nazi totalitarianism. 'It is called Islamism. They will invade Europe. I have seen the hordes come from the West to the East,' and then told to me each country one by one: from Morocco to Libya to Egypt, and so on till the East.

"The Holy Father added: 'They will invade Europe, Europe will be like a basement, old relics, shadows, cobwebs. Family heirlooms. You, the Church of the third millennium, must contain the invasion. Not with armies, armies will not be enough, but with your faith, lived with integrity."

John Paul II's vision resembles a continuation of Islam's historic campaign in the Christian lands: "In 637, the Islamic army seized Jerusalem, twice holy, then the heart of the entire Middle East, the historic center of Christianity", wrote the Algerian novelist Boualem Sansal. He went on to describe "the irresistible progression of Islam to the West: the Judeo-Christian North Africa, which immediately converted; Catholic Spain, which was annexed at the beginning of the VIII century; Byzantium, which they took in 1453; [then] to Vienna, which they besieged in 1529...".

Pope Francis now faces the potential risk of a Christian world physically swallowed by the Muslim crescent -- as on the Vatican logo chosen for the Pope's upcoming trip to Morocco. It is time the appeasement is replaced.

Published:2/6/2019 1:15:12 AM
[Markets] How An Italian Debt Crisis Could Take Down The EU

Plagued by another run of bank bailouts and simmering tensions between the partners in its ruling coalition, Italy's brief reprieve following the detente between its populist rulers and angry bureaucrats in Brussels is already beginning to fade. As Bloomberg reminded us on Monday, Italy's $1.7 trillion pile of public debt - the third largest sovereign debt pool in Europe - is threatening to set off a chain reaction that could hammer banks from Rome, to Madrid, to Frankfurt - and beyond.

Italy

Just the mention of the precarity of Italian debt markets "can induce a shudder of financial fear like no other" in bureaucrats and businessmen alike - particularly after Italy's economy slid into a recession during Q4.

Italy

While much of Italy's debt burden is held by its banks and private citizens, lenders outside of Italy are holding some 425 billion euros ($486 billion) in public and private debt.

Bank

The Bloomberg analysis of Italy's financial foibles follows more reports that Italy's ruling coalition between the anti-immigrant, pro-business League and the vaguely left-wing populist Five-Star Movement has become increasingly strained. Per BBG, the two parties are fighting a battle on two fronts over the construction of a high speed Alpine rail and a legal case involving League leader Matteo Salvini over his refusal to let the Dicotti migrant ship to dock in an Italian port last summer.

After M5S intimated that it could support the investigation, the League warned that such a move would be tantamount to "blackmail" against Salvini, whose lieutenants have been pushing for him to take advantage of the party's rising poll numbers and push for early elections later this year. However, Salvini has rebuffed these demands, warning that there's nothing stopping Italian President Sergio Mattarella from calling for a new coalition instead of new elections.

On the other hand, the League is growing increasingly weary of the "Citizens' Income", one of the boldest proposals included in Italy's 2019 budget, which calls for a guaranteed subsidy for all Italians under the poverty line, provided they can prove they are looking for work.

On Monday, Luigi Di Maio and Prime Minister Giuseppe Conte presented the first of the cards that will carry the income during a ceremony that Salvini decided to skip, according to BBG. As many as 5 million Italians could be eligible for the microchip-embedded cards.

"We’ll be injecting 8 billion euros ($9.2 billion) into the real economy every year - people will be able to spend those 8 billion," Di Maio said, at one point channeling Albert Einstein, saying those who claim something is impossible should leave those who are actually doing it alone.

However, the plan has irked business owners, who constitute some of the League's most reliable supporters.

Circling back to the threat posed by Italian debt, BBG's analysis showed that French banks are the most exposed, as BNP Paribas and Credit Agricole own retail banking units in Italy.

Banking

To keep operating without massive budget cuts (something neither party in the ruling coalition has shown any sign of supporting) Italy must sell 400 billion euros ($457 billion) of debt per year. But since Italy's banks hold so much of the country's debt, declines in the price of Italian bonds inevitably hurts the shares of Italian banks, and also forces them to hold more capital on their books to ensure liquidity from the ECB. This creates the potential for a negative feedback loop known as the "doom loop".

Put another way, "a government crisis could drag down the banking system or a banking crisis could suck in the government."

Doom

And while NPLs held by Italian banks have declined in recent years (as no fewer than seven Italian banks have required bailouts in the past three years)...

Italy

...A genuine crisis would exhaust the lending capacity of the European Stability Mechanism (some 410 billion euros or $470 billion) in just a year. With ECB President Mario Draghi set to depart later this year, and German Chancellor Angela Merkel's power on the wane, if the populists don't manage to generate the economic growth that they have argued will be unleashed by their stimulus programs, it's not outside the realm of possibility that the crisis that tears apart the EU and eurozone is centered in Rome.

Published:2/5/2019 3:39:36 AM
[Markets] Escobar: MAGA Misses The Eurasia Train

Authored by Pepe Escobar via ConsortiumNews.com,

While China and Russia solidify their economic and political alliance, the U.S. is missing an historic chance to join a multilateral world, instead clinging to military empire...

We should know by now that the heart of the 21stCentury Great Game is the myriad layers of the battle between the United States and the partnership of Russia and China.

Even the U.S. National Defense Strategy says so: “The central challenge to U.S. prosperity and security is the reemergence of long-term, strategic competition by … revisionist powers.” The recently published assessment on U.S. defense implications of China’s global expansionsays so too.

The clash will frame the emergence of a possibly new, post-ideological, strategic world order amidst an extremely volatile unpredictability in which peace is war and an accident may spark a nuclear confrontation.

The U.S. vs. Russia and China will keep challenging the West’s obsession in deriding “illiberalism,” a fearful, rhetorical exercise that equates Russian democracy with China’s one party rule, Iran’s demo-theocracy and Turkey’s neo-Ottoman revival.

It’s immaterial that Russia’s economy is one-tenth of China’s. From boosting trade that bypasses the U.S. dollar, to increasing joint military exercises, the Russia-China symbiosis is poised to advance beyond political and ideological affinities.

China badly needs Russian know-how in its military industry. Beijing will turn this knowledge into plenty of dual use, civilian-military innovations.

The long game indicates Russia and China will break down language and cultural barriers to lead Eurasian integration against American economic hegemony backed by military might.

One could say the Eurasian century is already upon us. The era of the West shaping the world at will (a mere blip of history) is already over. This is despite Western elite denials and fulminations against the so-called “morally reprehensible,” “forces of instability” and “existential threats.”

Standard Chartered, the British financial services company, using a mix of purchasing power exchange rates and GDP growth, has projected that the top five economies in 2030 will be China, the U.S., India, Japan and Russia. These will be followed by Germany, Indonesia, Brazil, Turkey and the UK. Asia will extend its middle class as they are slowly killed off across the West.

Hop on the Trans-Eurasia Express

A case can be made that Beijing’s elites are fascinated at how Russia, in less than two decades, has returned to semi-superpower status after the devastation of the Yeltsin years.

That happened to a large extent due to science and technology. The most graphic example is the unmatched, state-of-the-art weaponry unveiled by President Vladimir Putin in his March 1, 2018speech.

In practice, Russia and China will be advancing the alignment of China’s New Silk Roads, or Belt and Road Initiative (BRI), with Russia’s Eurasia Economic Union (EAEU).

There’s ample potential for a Trans-Eurasia Express network of land and maritime transport corridors to be up and running by the middle of next decade, including, for instance, road and railway bridges connecting China with Russia across the Heilongjiang River.

Heilongjiang or Amur River separating China and Russia. (Wikimedia)

Following serious trilateral talks involving Russia, India and Iran last November, closer attention is being paid to the International North-South Transportation Corridor (INSTC), a 7,200-km long lane mixing sea and rail routes essentially linking the Indian Ocean with the Persian Gulf through Iran and Russia and further on down the road, to Europe.

Imagine cargo transiting from all over India to the Iranian port of Bandar Abbas, then overland to Bandar Anzali, an Iranian port on the Caspian Sea, and then on to the Russian southern port of Astrakhan, and after that to Europe by rail. From New Delhi’s point of view, that means shipping costs reduced by up to 40 percent, and Mumbai-to-Moscow in only 20 days.

Down the line, INSTC will merge with BRI – as in Chinese-led corridors linked with the India-Iran-Russia route into a global transport network. 

This is happening just as Japan is looking at the Trans-Siberian Railway – which will be upgraded throughout the next decade – to improve its connections with Russia, China and the Koreas. Japan is now a top investor in Russia and at the same time very much interested in a Korea peace deal. That would free Tokyo from massive defense spending conditioned by Washington’s rules. The EAEU free trade agreements with ASEAN can be added to that.

Especially over these past four years, Russia has also learned how to attract Chinese investment and wealth, aware that Beijing’s system mass-produces virtually everything and knows how to market it globally, while Moscow needs to fight every block in the book dreamed up by Washington.

The Huawei-Venezuela “Axis of Evil

Metal Truss Railroad Bridge (Kama River, near Perm city). Early color photograph from Russia, created by Sergei Mikhailovich Prokudin-Gorskii as part of his work to document the Russian Empire from 1909 to 1915. (Wikimedia)

While Washington remains a bipartisan prisoner to the Russophobic Platonic cave – where Cold War shadows on the wall are taken as reality – MAGA is missing the train to Eurasia.

A many-headed hydra, MAGA, stripped to the bone, could be read as a non-ideological antidote to the Empire’s global adventurism. Trump, in his non-strategic, shambolic way, proposed at least in theory the return to a social contract in the U.S. MAGA in theory would translate into jobs, opportunities for small businesses, low taxes and no more foreign wars.

It’s nostalgia for the 1950s and 60s before the Vietnam quagmire and before “Made in the USA” was slowly and deliberately dismantled. What’s left are tens of trillions of national debt; a quadrillion in derivatives; the Deep State running amok; and a lot of pumped up fear of evil Russians, devious Chinese, Persian mullahs, the troika of tyranny, the Belt and Road, Huawei, and illegal aliens.

More than a Hobbesian “war of all against all” or carping about the “Western rules-based system” being under attack, the fear is actually of the strategic challenge posed by Russia and China, which seeks a return to rule by international law.

MAGA would thrive if hitched to a ride on the Eurasia integration train: more jobs and more business opportunities instead of more foreign wars. Yet MAGA won’t happen – to a large extent because what really makes Trump tick is his policy of energy dominance to decisively interfere with Russia and China’s development.

The Pentagon and the “intel community” pushed the Trump administration to go after Huawei, branded as a nest of spies, while pressuring key allies Germany, Japan and Italy to follow. Germany and Japan permit the U.S. to control the key nodes in the extremities of Eurasia. Italy is essentially a large NATO base.

The U.S. Department of Justice requested the extradition of Huawei CFO Meng Wanzhou from Canada last Tuesday, adding a notch to the Trump administration’s geopolitical tactic of “blunt force trauma.” 

Add to it that Huawei – based in Shenzhen and owned by its workers as shareholders – is killing Apple across Asia and in most latitudes across the Global South. The real the battle is over 5G, in which China aims to upstage the U.S., while upgrading capacity and production quality.

The digital economy in China is already larger than the GDP of France or the UK. It’s based on the BATX companies (Baidu, Alibaba, Tencent, Xiaomi), Didi (the Chinese Uber), e-commerce giant JD.com and Huawei. These Big Seven are a state within a civilization – an ecosystem they’ve constructed themselves, investing fortunes in big data, artificial intelligence (AI) and the internet. American giants – Facebook, Instagram, Twitter and Google – are absent from this enormous market.

Moreover, Huawei’s sophisticated encryption system in telecom equipment prevents interception by the NSA. That helps account for its extreme popularity all across the Global South, in contrast to the Five Eyes (U.S., UK, Canada, Australia, New Zealand) electronic espionage network.

The economic war on Huawei is also directly connected to the expansion of BRI across 70 Asian, European and African nations, constituting a Eurasia-wide network of commerce, investment and infrastructure able to turn geopolitical and geo-economic relations, as we know them, upside down.

Greater Eurasia Beckons

Whatever China does won’t alter the Deep State’s obsession about “an aggression against our vital interests,” as stated by the National Defense Strategy. The dominant Pentagon narrative in years to come will be about China “intending to impose, in the short term, its hegemony in the Indo-Pacific region, and catch the United States off-guard in order to achieve future global pre-eminence.” This is mixed with a belief that Russia wants to “crush NATO” and “sabotage the democratic process in Crimea and Eastern Ukraine.”

The Karakoram Highway connecting China and Pakistan, sometimes referred to as the Eighth Wonder of the World.(Wikimedia)

During my recent travels along the northern part of the China-Pakistan Economic Corridor (CPEC), I saw once again how China is upgrading highways, building dams, railways and bridges that are useful not only for its own economic expansion but also for its neighbors’ development. Compare it to U.S. wars – as in Iraq and Libya – where dams, railways and bridges are destroyed.

Russian diplomacy is all but winning the New Cold War — as diagnosed by Prof. Stephen Cohen in his latest book, War with Russia: From Putin and Ukraine to Trump and Russiagate.

Moscow mixes serious warnings with diverse strategies, such as resurrecting the South Stream gas pipeline to supply Europe as an extension of Turk Stream after the Trump administration also furiously opposed the Nord Stream 2 pipeline with sanctions on Russia. Meanwhile, Moscow ramps up energy exports to China.

The advance of the Belt and Road Initiative is linked to Russian security and energy exports, including the Northern Sea Route, as an alternative future transportation corridor to Central Asia. Russia emerges then as the top security guarantee for Eurasian trade and economic integration.

Last month in Moscow, I discussed Greater Eurasia– by now established as the overarching concept of Russian foreign policy – with top Russian analysts. They told me Putin is on board. He referred to Eurasia recently as “not a chessboard or a geopolitical playground, but our peaceful and prosperous home.”

Needless to say, U.S. think tanks dismiss the idea as “abortive”. They ignore Prof. Sergey Karaganov, who as early as mid-2017 was arguing that Greater Eurasia could serve as a platform for “a trilateral dialogue on global problems and international strategic stability between Russia, the United States and China.”

As much as the Beltway may refuse it, “The center of gravity of global trade is now shifting from the high seas toward the vast continental interior of Eurasia.”

Beijing Skirts the Dollar

Beijing is realizing it can’t meet its geo-economic goals on energy, security, and trade without bypassing the U.S. dollar.

According to the IMF, 62 percent of global central bank reserves were still held in U.S. dollars by the second quarter of 2018. Around 43 per cent of international transactions on SWIFT are still in U.S. dollars. Even as China, in 2018, was the single largest contributor to global GDP growth, at 27.2 percent, the yuan still only accounts for 1 percent of international payments, and 1.8 per cent of all reserve assets held by central banks.

It takes time, but change is on the way. China’s cross-border payment network for yuan transactions was launched less than four years ago. Integration between the Russian Mir payment system and Chinese Union Pay appears inevitable.

Bye Bye Drs. K and Zbig

Russia and China are developing the ultimate nightmare for those former shamans of U.S. foreign policy, Henry Kissinger and the late Zbigniew “Grand Chessboard” Brzezinski.

Back in 1972 Kissinger was the mastermind – with logistical help from Pakistan – of the Nixon moment in China. That was classic Divide and Rule, separating China from the USSR. Two years ago, before Trump’s inauguration, Dr. K’s advice dispensed at Trump Tower meetings consisted of a modified Divide and Rule: the seduction of Russia to contain China.

The Kissinger doctrine rules that, geopolitically, the U.S. is just “an island off the shores of the large landmass of Eurasia.” Domination “by a single power of either of Eurasia’s two principal spheres – Europe or Asia – remains a good definition of strategic danger for America, Cold War or no Cold War,” as Kissinger said. “For such a grouping would have the capacity to outstrip America economically and, in the end, militarily.”

The Zbig doctrine ran along similar lines. The objectives were to prevent collusion and maintain security among the EU-NATO vassals; keep tributaries pliant; keep the barbarians (a.k.a. Russians and allies) from coming together; most of all prevent the emergence of a hostile coalition (as in today’s Russia-China alliance) capable of challenging U.S. hegemony; and submit Germany, Russia, Japan, Iran, and China to permanent Divide and Rule.

Thus the despair of the current National Security Strategy, forecasting China displacing the United States “to achieve global preeminence in the future,” through BRI’s supra-continental reach.

The “policy” to counteract such “threats” is sanctions, sanctions, and more unilateral sanctions, coupled with an inflation of absurd notions peddled across the Beltway – such as that Russia is aiding and abetting the re-conquest of the Arab world by Persia. Also that Beijing will ditch the “paper tiger” “Made in China 2025” plan for its major upgrade in global, high-tech manufacturing just because Trump hates it.

Once in a blue moon a U.S. report actually gets it right, such as in Beijing speeding up an array of BRI projects; as a modified Sun Tzu tactic deployed by President Xi Jinping.

At the June 2016 Shangri-La Dialogue in Singapore, Professor Xiang Lanxin, director of the Centre of One Belt and One Road Studies at the China National Institute for SCO International Exchange and Judicial Cooperation, defined BRI as an avenue to a “post-Westphalian world.” The journey is just beginning; a new geopolitical and economic era is at hand. And the U.S. is being left behind at the station.

Published:2/4/2019 11:09:34 PM
[Markets] Why The War On Conspiracy Theories Is Bad Public Policy

Authored by Kevin Barrett via The Unz Review,

On January 25 2018 YouTube unleashed the latest salvo in the war on conspiracy theoriessaying “we’ll begin reducing recommendations of borderline content and content that could misinform users in harmful ways—such as videos promoting a phony miracle cure for a serious illness, claiming the earth is flat, or making blatantly false claims about historic events like 9/11.”

At first glance that sounds reasonable. Nobody wants YouTube or anyone else to recommend bad information. And almost everyone agrees that phony miracle cures, flat earthism, and blatantly false claims about 9/11 and other historical events are undesirable.

But if we stop and seriously consider those words, we notice a couple of problems.

First, the word “recommend” is not just misleading but mendacious. YouTube obviously doesn’t really recommend anything. When it says it does, it is lying.

When you watch YouTube videos, the YouTube search engine algorithm displays links to other videos that you are likely to be interested in. These obviously do not constitute “recommendations” by YouTube itself, which exercises no editorial oversight over content posted by users. (Or at least it didn’t until it joined the war on conspiracy theories.)

The second and larger problem is that while there may be near-universal agreement among reasonable people that flat-earthism is wrong, there is only modest agreement regarding which health approaches constitute “phony miracle cures” and which do not.

Far less is there any agreement on “claims about 9/11 and other historical events.” (Thus far the only real attempt to forge an informed consensus about 9/11 is the 9/11 Consensus Panel’s study—but it seems unlikely that YouTube will be using the Consensus Panel to determine which videos to “recommend”!)

YouTube’s policy shift is the latest symptom of a larger movement by Western elites to - as Obama’s Information Czar Cass Sunstein put it - “disable the purveyors of conspiracy theories.” Sunstein and co-author Adrian Vermeule’s 2008 paper “Conspiracy Theories,” critiqued by David Ray Griffin in 2010 and developed into a 2016 book, represents a panicked reaction to the success of the 9/11 truth movement. (By 2006, 36% of Americans thought it likely that 9/11 was an inside job designed to launch wars in the Middle East, according to a Scripps poll.)

Sunstein and Vermuele begin their abstract:

Many millions of people hold (sic) conspiracy theories; they believe that powerful people have worked together in order to withhold the truth about some important practice or some terrible event. A recent example is the belief, widespread in some parts of the world, that the attacks of 9/11 were carried out not by Al Qaeda, but by Israel or the United States. Those who subscribe to conspiracy theories may create serious risks, including risks of violence, and the existence of such theories raises significant challenges for policy and law.

Sunstein argues that conspiracy theories (i.e. the 9/11 truth movement) are so dangerous that some day they may have to be banned by law. While awaiting that day, or perhaps in preparation for it, the government should “disable the purveyors of conspiracy theories” through various techniques including “cognitive infiltration” of 9/11 truth groups. Such “cognitive infiltration,” Sunstein writes, could have various aims including the promotion of “beneficial cognitive diversity” within the truth movement.

What sort of “cognitive diversity” would Cass Sunstein consider “beneficial”? Perhaps 9/11 truth groups that had been “cognitively infiltrated” by spooks posing as flat-earthers would harbor that sort of “beneficial” diversity? That would explain the plethora of expensive, high-production-values flat earth videos that have been blasted at the 9/11 truth community since 2008.

Why does Sunstein think “conspiracy theories” are so dangerous they need to be suppressed by government infiltrators, and perhaps eventually outlawed—which would necessitate revoking the First Amendment? Obviously conspiracism must present some extraordinary threat. So what might that threat be? Oddly, he never explains. Instead he briefly mentions, in vapidly nebulous terms, about “serious risks including the risk of violence.” But he presents no serious evidence that 9/11 truth causes violence. Nor does he explain what the other “serious risks” could possibly be.

Why did such highly accomplished academicians as Sunstein and Vermuele produce such an unhinged, incoherent, poorly-supported screed? How could Harvard and the University of Chicago publish such nonsense? Why would it be deemed worthy of development into a book? Why did the authors identify an alleged problem, present no evidence that it even is a problem, yet advocate outrageously illegal and unconstitutional government action to solve the non-problem?

The too-obvious answer, of course, is that they must realize that 9/11 was in fact a US-Israeli false flag operation. The 9/11 truth movement, in that case, would be a threat not because it is wrong, but because it is right. To the extent that Americans know or suspect the truth, the US government will undoubtedly find it harder to pursue various “national security” objectives. Ergo, 9/11 “conspiracy theories” are a threat to national security, and extreme measures are required to combat them. But since we can’t just burn the First Amendment overnight, we must instead take a gradual and covert “boil the frog” approach, featuring plenty of cointelpro-style infiltration and misdirection. “Cognitive infiltration” of internet platforms to stop the conspiracy contagion would also fit the bill.

It is quite possible, perhaps even likely, that Sunstein and Vermeule are indeed well-informed and Machievellian. But it is also conceivable that they are, at least when it comes to 9/11 and “conspiracy theories,” as muddle-headed as they appear. Their irrational panic could be an example of the bad thinking that emerges from groups that reflexively reject dissent. (Another, larger example of this kind of bad thinking comes to mind: America’s disastrous post-9/11 policies.)

The counterintuitive truth is that embracing and carefully listening to radical dissenters is in fact good policy, whether you are a government, a corporation, or any other kind of group. Ignoring or suppressing dissent produces muddled, superficial thinking and bad decisions. Surprisingly, this turns out to be the case even when the dissenters are wrong.

Scientific evidence for the value of dissent is beautifully summarized in Charlan Nemeth’s In Defense of Troublemakers: The Power of Dissent in Life and Business (Basic Books, 2018). Nemeth, a psychology professor at UC-Berkeley, summarizes decades of research on group dynamics showing that groups that feature passionate, radical dissent deliberate better, reach better conclusions, and take better actions than those that do not—even when the dissenter is wrong.

Nemeth begins with a case where dissent would likely have saved lives: the crash of United Airlines Flight 173 in December, 1978. As the plane neared its Portland destination, the possibility of a problem with the landing gear arose. The captain focused on trying to determine the condition of the landing gear as the plane circled the airport. Typical air crew group dynamics, in which the whole crew defers to the captain, led to a groupthink bubble in which nobody spoke up as the needle on the fuel gauge approached “E.” Had the crew included even one natural “troublemaker”—the kind of aviator who joins Pilots for 9/11 truth—there almost certainly would have been more divergent thinking. Someone would have spoken up about the fuel issue, and a tragic crash would have been averted.

Since 9/11, American decision-making elites have entered the same kind of bubble and engaged in the same kind of groupthink. For them, no serious dissent on such issues as what really happened on 9/11, and whether a “war on terror” makes sense, is permitted. The predictable result has been bad thinking and worse decisions. From the vantage point of Sunstein and Vermeule, deep inside the bubble, the potentially bubble-popping, consensus-shredding threat of 9/11 truth must appear radically destabilizing. To even consider the possibility that the 9/11 truthers are right might set off a stampede of critical reflection that would radically undermine the entire set of policies pursued for the past 17 years. This prospect may so terrify Sunstein and Vermeule that it paralyzes their ability to think. Talk about “crippled epistemology”!

Do Sunstein and Vermeule really think their program for suppressing “conspiracy theories” will be beneficial? Do YouTube’s decision-makers really believe that tweaking their algorithms to support the official story will protect us from bad information? If so, they are all doubly wrong.

First, they are wrong in their unexamined assumption that 9/11 truth and “conspiracy theories” in general are “blatantly false.” No honest person with critical thinking skills who weighs the merits of the best work on both sides of the question can possibly avoid the realization that the 9/11 truth movement is right. The same is true regarding the serial assassinations of America’s best leaders during the 1960s. Many other “conspiracy theories,” perhaps the majority of the best-known ones, are also likely true, as readers of Ron Unz’s American Pravda series are discovering.

Second, and less obviously, those who would suppress conspiracy theories are wrong even in their belief that suppressing false conspiracy theories is good public policy. As Nemeth shows, social science is unambiguous in its finding that any group featuring at least one passionate, radical dissenter will deliberate better, reach sounder conclusions, and act more effectively than it would have without the dissenter. This holds even if the dissenter is wrong—even wildly wrong.

The overabundance of slick, hypnotic flat earth videos, if they are indeed weaponized cointelpro strikes against the truth movement, may be unfortunate. But the existence of the occasional flat earther may be more beneficial than harmful. The findings summarized by Nemeth suggest that a science study group with one flat earther among the students would probably learn geography and astronomy better than they would have without the madly passionate dissenter.

We could at least partially solve the real problem—bad groupthink—through promoting genuinely beneficial cognitive diversity. YouTube algorithms should indeed be tweaked to puncture the groupthink bubbles that emerge based on user preferences. Someone who watches lots of 9/11 truther videos should indeed be exposed to dissent, in the form of the best arguments on the other side of the issue—not that there are any very good ones, as I have discovered after spending 15 years searching for them!

But the same goes for those who watch videos that explicitly or implicitly accept the official story. Anyone who watches more than a few pro-official-story videos (and this would include almost all mainstream coverage of anything related to 9/11 and the “war on terror”) should get YouTube “suggestions” for such videos as September 11: The New Pearl Harbor9/11 Mysteries, and the work of Architects and Engineers for 9/11 Truth. Exposure to even those “truthers” who are more passionate than critical or well-informed would benefit people who believe the official story, according to Nemeth’s research, by stimulating them to deliberate more thoughtfully and to question facile assumptions.

The same goes for other issues and perspectives. Fox News viewers should get “suggestions” for good material, especially passionate dissent, from the left side of the political spectrum. MSNBC viewers should get “suggestions” for good material from the right. Both groups should get “suggestions” to look at genuinely independent, alternative media brimming with passionate dissidents—outlets like the Unz Review!

Unfortunately things are moving in the opposite direction. YouTube’s effort to make “conspiracy videos” invisible is being pushed by powerful lobbies, especially the Zionist lobby, which seems dedicated to singlehandedly destroying the Western tradition of freedom of expression.

Nemeth and colleagues’ findings that “conspiracy theories” and other forms of passionate dissent are not just beneficial, but in fact an invaluable resource, are apparently unknown to the anti-conspiracy-theory cottage industry that has metastasized in the bowels of the Western academy. The brand-new bible of the academic anti-conspiracy-theory industry is Conspiracy Theories and the People Who Believe Them (Oxford University Press, 2019).

Editor Joseph Uscinski’s introduction begins by listing alleged dangers of conspiracism:

“In democracies, conspiracy theories can drive majorities to make horrible decisions backed by the use of legitimate force. Conspiracy beliefs can conversely encourage abstention. Those who believe the system is rigged will be less willing to take part in it. Conspiracy theories form the basis for some people’s medical decisions; this can be dangerous not only for them but for others as well. For a select few believers, conspiracy theories are instructions to use violence.”

Uscinski is certainly right that conspiracy theories can incite “horrible decisions” to use “legitimate force” and “violence.” Every major American foreign war since 1846 has been sold to the public by an official theory, backed by a frenetic media campaign, of a foreign conspiracy to attack the United States. And all of these Official Conspiracy Theories (OCTs)—including the theory that Mexico conspired to invade the United States in 1846, that Spain conspired to sink the USS Maine in 1898, that Germany conspired with Mexico to invade the United States in 1917, that Japan conspired unbeknownst to peace-seeking US leaders to attack Pearl Harbor in 1941, that North Vietnam conspired to attack the US Navy in the Gulf of Tonkin in 1964, and that 19 Arabs backed by Afghanistan, Iraq, Iran, and everybody else Israel doesn’t like conspired to attack the US in 2001—were false or deceptive.

Well over 100 million people have been killed in the violence unleashed by these and other Official Conspiracy Theories. Had the passionate dissenters been heeded, and the truths they told about who really conspires to create war-trigger public relations stunts been understood, none of those hundred-million-plus murders need have happened.

Though Conspiracy Theories and the People Who Believe Them generally pathologizes the conspiracy theories of dissidents while ignoring the vastly more harmful theories of official propagandists, its 31 essays include several that question that outlook. In “What We Mean When We Say ‘Conspiracy Theory’ Jesse Walker, books editor of Reason Magazine, exposes the bias that permeates the field, pointing out that many official conspiracy theories, including several about Osama Bin Laden and 9/11-anthrax, were at least as ludicrously false and delusional as anything believed by marginalized dissidents.

In “Media Marginalization of Racial Minorities: ‘Conspiracy Theorists’ in U.S. Ghettos and on the ‘Arab Street’” Martin Orr and Gina Husting go one step further: “The epithet ‘conspiracy theorist’ is used to tarnish those who challenge authority and power. Often, it is tinged with racial undertones: it is used to demean whole groups of people in the news and to silence, stigmatize, or belittle foreign and minority voices.” (p.82) Unfortunately, though Orr and Husting devote a whole section of their article to “Conspiracy Theories in the Muslim World” and defend Muslim conspiracists against the likes of Thomas Friedman, they never squarely face the fact that the reason roughly 80% of Muslims believe 9/11 was an inside job is because the preponderance of evidence supports that interpretation.

Another relatively sensible essay is M R.X. Dentith’s “Conspiracy Theories and Philosophy,” which ably deconstructs the most basic fallacy permeating the whole field of conspiracy theory research: the a priori assumption that a “conspiracy theory” must be false or at least dubious: “If certain scholars (i.e. the majority represented in this book! –KB) want to make a special case for conspiracy theories, then it is reasonable for the rest of us to ask whether we are playing fair with our terminology, or whether we have baked into our definitions the answers to our research programs.” (p.104). Unfortunately, a few pages later editor Joseph Uscinski sticks his fingers in his ears and plays deaf and dumb, claiming that “the establishment is right far more often than conspiracy theories, largely because their methods are reliable. When conspiracy theorists are right, it is by chance.” He adds that conspiracy theories will inevitably “occasionally lead to disaster” (whatever that means). (p.110).

I hope Uscinski finds the time to read Nemeth’s In Defense of Troublemakers and consider the evidence that passionate dissent is helpful, not harmful. And I hope he will look into the issues Ron Unz addresses in his American Pravda series.

Then again, if he does, he may find himself among those of us exiled from the academy and publishing in The Unz Review.

Published:2/4/2019 10:40:15 PM
[World] [Eugene Volokh] And a Welcome to Our New Coblogger Keith Whittington

I'm also delighted to report that Prof. Keith Whittington, William Nelson Cromwell Professor of Politics at Princeton University will be joining us as a coblogger. He is the author of, among other books, Speak Freely: Why Universities Must Defend Free Speech, Constitutional Construction: Divided Powers and Constitutional Meaning, and Constitutional Interpretation: Textual Meaning, Original Intent, and Judicial Review, and Political Foundations of Judicial Supremacy: The Presidency, the Supreme Court, and Constitutional Leadership in U.S. History. As you can tell, he does constitutional law and constitutional history; I'm very much looking forward to his posts!

Published:2/4/2019 10:11:24 PM
[Markets] More Alarm Bells As Banks Report Tightening Lending Standards While Loan Demand Slides

The latest alarm signal that the US economy is on collision course with a recession came after today's release of the latest Senior Loan Officer Opinion Survey (SLOOS) by the Federal Reserve, which was conducted for bank lending activity during the fourth quarter of last year, and which reported a double whammy of tightening lending standards and terms for commercial and industrial loans on one hand, and weaker demand for those loans on the other. Even more concerning is that banks also reported weaker demand for both commercial and residential real estate loans, echoing the softer housing data in recent months.

This tightening in C&I lending standards coupled with sharp declines loan demand, especially for mortgage and auto loans, is shown below.

Here are the details via Goldman:

  • 20% of banks surveyed reportedly widened spreads of loan rates over the cost of funds for large- and medium-sized firms, while 16% narrowed spreads. 14% of banks surveyed reported higher premiums charged on riskier loans, while 4% reported lower premiums. Other terms, such as loan covenants and collateralization requirements, remained largely unchanged. Demand for loans reportedly weakened on balance.
  • Relative to the last survey, standards on commercial real estate (CRE) loans tightened on net over the fourth quarter of the year. On net, 17% of banks reported tightening credit standards on loans secured by multifamily residential properties, while 13% of banks on net reported tightening standards for construction and land development loans. As above, banks reported that demand for CRE loans across a broad range of categories moderately weakened on net.
  • Banks reported that lending standards for residential mortgage loans remained largely unchanged on net in 2018Q4 relative to the prior quarter. However, this benign environment was largely as a result of slumping demand for credit, as banks reported weaker demand across all surveyed residential loan categories, including home equity lines of credit.
  • While banks reported that lending standards on consumer installment loans and autos remained largely unchanged, banks reported that lending standards for credit cards had tightened slightly. Here too demand - for all categories of consumer loans - was moderately weaker, while respondent willingness to make consumer installment loans tumbled to the lowest value since the financial crisis.

Finally, and most concerning of all, is that in their response to special questions on their 2019 outlook, assuming that economic activity continues to be in line with consensus forecasts, banks reported they plan to tighten lending standards somewhat for C&I loans, commercial real estate loans, and residential mortgage loans, in other words the most important credit would become even more difficult to attain. As a result, or perhaps due to the slowdown in the economy, banks also expect demand for C&I, CRE, and residential mortgage loans to weaken somewhat in 2019.

Banks also reported expecting delinquencies and charge-offs to increase somewhat on C&I, CRE, and residential mortgage loans; as Bloomberg's Andrew Cinko muses "if America was heading toward an economic contraction that would be a typical expectation. But this doesn't seem to be the case for the foreseeable future. So what gives?"

Perhaps "what gives" is that the economy is not nearly as strong as consensus would make it appear, and behind closed door, loan officers are already batting down the hatches and preparing for a recession. 

* * *

Here would be a good time to remind readers that according to a Reuters investigation conducted in mid-December, when looking behind headline numbers showing healthy loan books, "problems appear to be cropping up in areas such as home-equity lines of credit, commercial real estate and credit cards" according to federal data reviewed by the wire service and interviews with bank execs.

Worse, banks are also starting to aggressively cut relationships with customers who seem too risky, which is to be expected: after all financial conditions in the real economy, if not the markets which just enjoyed the best January since 1987, are getting ever tighter as short-term rates remain sticky high and the result will be a waterfall of defaults sooner or later. Here are the all too clear signs which Reuters found that banks are starting to prepare for the next recession by slashing and/or limiting risky loan exposure:

  • First, nearly half of the applications from customers with low credit scores were rejected in the four months ending in October, compared with 43 percent in the year-ago period, according to a survey released by the Federal Reserve Bank of New York.
  • Second, banks shuttered 7 percent of existing accounts, particularly among subprime borrowers, the highest rate since the Fed started conducting surveys in 2013.
  • Third, home-equity lines of credit declined 8 percent across the industry, with growth slowing in areas such as credit cards and commercial-and-industrial loans, the survey showed.

Then there are the bank-specific signs, starting with Capital One - one of the biggest U.S. card lenders - which is restricting how much it lends to each customer even as it aggressively recruits new ones, CEO Richard Fairbank said last December.

We have been more cautious in the extension of credit, initial credit lines, the broad-based credit line increase programs," he said. "At this point in the cycle, we’re going to hold back on that option a bit."

Regional banks have become more cautious lately as well, as they avoid financing riskier projects like early-stage construction loans and properties without pre-lease agreements (here traders vividly recall the OZK commercial real estate repricing fiasco that sent the stock crashing). New Jersey’s OceanFirst Bank also pulled back on refinancing transactions that let customers cash out on their debt, and has started reducing exposure to industrial loans, CEO Chris Maher told Reuters.

“In a downturn, industrial property is extremely illiquid,” he said. “If you don’t want it and it’s not needed it could be almost valueless.”

What happens next?

While a recession is looking increasingly likely, especially as it becomes a self-fulfilling prophecy with banks slashing loans resulting in even slower velocity of money, while demand for credit shrinks in response to tighter loan standards and hitting economic growth, the only question whether a recession is a 2019 or 2020 event, bankers and analysts remain optimistic that the next recession will look much more like the 2001 tech bubble bursting than the 2007-09 global financial crisis.

We wonder why they are so confident, and statements such as this one from Flagship Bank CFO Schornack will hardly instill confidence:

“I lived through the pain of the last recession. We are much more prudent today in how we underwrite deals.”

We disagree, and as evidence we present Exhibit A: the shock write down that Bank OZK took on its commercial real estate, which nobody in the market had expected. As for banks being more "solid", let's remove the $1.5 trillion buffer in excess reserves that provides an ocean of artificial liquidity, and see just how stable banks are then. After all, it is this $1.5 trillion in excess reserves that prompt Powell to capitulate and tell the markets he is willing to slowdown or even pause the Fed's balance sheet shrinkage.

Published:2/4/2019 5:36:24 PM
[Markets] “I Have Never Experienced This Kind Of Immoral Behavior From A Bank In My Entire Life": Goldman Slammed In Latest CDS Scandal

Not a month seems to pass any more without a major bank or hedge fund getting in hot water for using CDS in a way that was never intended, and now it's Goldman's turn, again.

Three months ago, when the loan market was freezing up,  Goldman struck an unusual deal with a group of hedge funds to offload a buyout loan from its books, saving the bank and the funds from potential losses. What was odd, is that Goldman was also serving as the underwriter to the company issuing the loans...while at the same time arrenging a "kicker" to loan buyers by having them bet on the potential insolvency of its own client.

Now, this bizarre arrangement is at the center of a lawsuit accusing the Wall Street giant of gorging on fees while also exposing the acquirer in the buyout, United Natural Foods, to hedge-fund sharks who stand to reap major profits if the company collapses as a result of the incremental debt: according to Bloomberg, United Natural had hired Goldman Sachs for the takeover and is now demanding at least $52 million - and potentially much more - from the bank.

Worse, the distributor of natural and organic foods, specialty foods is absolutely furious at the bank that until recently was its strategic advisor:

“I have never experienced this kind of egregious and immoral behavior from a bank in my entire life,” United Natural Chief Executive Officer Steve Spinner told Bloomberg in an interview after his company filed the suit Wednesday in a state court in New York. Goldman, which until that moment had been retained by United Natural, vowed to vigorously fight the case, calling it "entirely without merit."

As hinted above, Wall Street's latest drama once again revolves around the increasingly dysfunctional credit-default swaps market, where hedge funds and others wager on the ability of companies to keep up with their borrowings, only the traditional role of CDS as bankruptcy hedges has long ago given way to more "creative" applications. Indeed, as Bloomberg notes, "again and again, the contracts have played strange roles in debt transactions, sometimes straining allies or encouraging unlikely alliances."

According to the lawsuit, Goldman adjusted the terms on a $2 billion financing deal in a way that allowed hedge funds to reap a windfall from their CDS bets, as first reported by Bloomberg in October. United Natural said it initially heeded Goldman's advice, agreeing to the changes so it could complete the takeover of grocery chain Supervalu.

Where things got complicated, is that Goldman enlisted the help of hedge funds that had been betting on Supervalu’s demise. Those funds now stand to benefit if United Natural struggles to repay. That was just the beginning: United Natural also alleges that the bank unfairly withheld fees, burdened it with additional interest expenses and relied on “scare tactics” by a senior banker to back it into a corner.

In the beginning it was nothing but rainbows and roses: United Natural, which is a supplier to Whole Foods, announced the $2.9 billion Supervalu acquisition in July, and with the market soaring and credit and loan spreads near all time tights, not a cloud appeared on the horizon. And, as so often happens, the company announced that Goldman Sachs would act as lead underwriter to sell the billions in debt needed to fund the deal. But just a few months later, as equities first tumbled and shortly thereafter credit markets - especially in the leveraged loan market - froze up, the investment bank faced the prospect of being saddled with millions in losses unless it found a way to offload the loan from its books.

Meanwhile, hedge funds were facing major losses too after having bet against Supervalu’s debt by loading up on CDS, but the company’s sale threatened to create a situation known as an orphaned CDS contract, a situation similar to the infamous McClatchy fiasco (one which we profiled extensively in "Orphan CDS, Manufactured Credit Events, Insufficient Deliverables: What The Hell Is Going On In The CDS Market?"). Because new debt being issued to purchase Supervalu would have paid down the grocer’s obligations, it could have made swaps linked to Supervalu effectively worthless - referencing an entity with no significant borrowings - even as the default risk of the purchaser, United Natural, soared. However, due to the specific nature of the CDS contract, there was no continuity in tracking the referenced entity, as such those who were betting on a Supervalu default would end up with nothing, even if the successor company did eventually file for bankruptcy.

It is here that Goldman had an "epiphany", one which would kill two birds with one stone.

The key was to restore the value of the roughly $470 million of net CDS wagers linked to Supervalu’s debt. While the cost of the Supervalu derivatives had plunged through most of last year, by tweaking the loan docs to make Supervalu a co-borrower on the new financing, Goldman sparked a surge in the value of the swaps.

That, along with several other concessions, not only rescued hedge funds from getting wiped out on their SVU CDS, but more importantly, helped Goldman fill its order book for the loan and eliminate its exposure risk.

And while Goldman was the clear winner here, helping a couple of millionaire credit PMs avoid major losses for 2018 while avoiding taking a loss on its buyout loan exposure, United Natural claims that Goldman left it exposed to a group of lenders whose interests are at odds with its own and who are motivated to create roadblocks aimed at forcing a default so that they can notch further gains in the CDS market.

That may be difficult to prove, especially since Goldman can claim that without the contract fudge, the deal may never have been funded. Still, United Natural alleges that it never received a final list of funds participating in the loans and, had it known, would’ve raised concerns, even though without making the concessions to hedge funds, Goldman would have struggled to place the deal.

United Natural meanwhile claims that it went along with the changes after warnings from Stephan Feldgoise, who helps oversee Goldman’s mergers business in the Americas. The bank allegedly warned that if the company didn’t adjust the terms, it might “scare off” investors, trigger “blowback” from its own shareholders and “things would get ugly.”

What Goldman apparently did not explain is that the one entity most on the hook - in terms of both P&L and reputation - was Goldman. Which is why Feldgoise and Bank of America, to co-lead arranger on the loan, are also named as defendants.

As Bloomberg concludes, it’s another twist in Feldgoise’s time at Goldman Sachs, which ironically, included a stint as chairman of the firm’s global fairness committee. Curiously, in mid-2017, division chiefs announced he would be departing the bank, stepping down from his post in senior management to become an advisory director. Yet he’s still at the bank, now in a heated battle with a client for whom he’s handled various deals. That said, with the millions in fees from the United Natural-Supervalu deal, at least Feldgoise's tenure at Goldman is secure. Worst case, he can always get a job at one of the many hedge funds that made a killing on SVU CDS thanks to the Goldman fudge.

Published:2/3/2019 5:32:33 PM
[Markets] Unrest In France: No End In Sight

Authored by Guy Millière via The Gatestone Institute,

  • The third group is extremely large: it is the rest of the population. The upper class treat them as regrettable dead weight and expect nothing from them except silence and submission. Its members often have a hard time making ends meet. They pay taxes but can see that a growing portion is being used to subsidize the very people who drove them out of their suburban homes.

  • For the moment, Macron does not seem to want to recognize that these people even exist.

  • When Macron lowered the taxes of the wealthiest but increased the taxes of these "peripherals" by means of a fuel tax, it was seen as the last straw -- in addition to his arrogant condescension.

  • "Today, most of those who protest do not attack the police. But instead of acting to bring down the violence, the police are receiving orders pushing them to be very violent. I do not blame the police. I blame those who give them orders". — Xavier Lemoine, the mayor of Montfermeil, a city in the Eastern suburbs of Paris where the 2005 riots were extremely destructive,

Police scuffle with a yellow vest protester on December 18, 2018 in Biarritz, France. (Photo by Gari Garaialde/Getty Images)

Saturday, January 26th 2019. "Yellow vests" protests were being organized in the main cities of France. Mobilization was not weakening. Support from the population had decreased slightly but was still huge (60%-70%, according to polls). The main slogan has remained the same since November 17, 2018: "Macron must resign". In December, another slogan was added: "Citizens' initiative referendum".

The government and French President Emmanuel Macron have been doing everything they can to crush the movement. They have tried insults, defamation and have said the demonstrators were both "seditious people" wishing to overthrow the institutions and fascist "brown shirts". On December 31, Macron described them, as "hateful crowds". The presence of some anti-Semites led a government spokesman (incorrectly) to describe the entire movement as "anti-Semitic".

The Minister of the Interior, Christophe Castaner, ordered the police to resort to a degree of violence not seen since the time of the Algerian war (1954-62). During the two last decades in France, other riots have taken place many times. In 2005, for instance, when the whole country was subjected to arson and riots for weeks, the number of wounded rioters remained low. But violence has consequences. In just the last few weeks, 1,700 protesters were wounded, some seriously. Nineteen lost an eye; four lost a hand. Although French police officers do not use lethal weapons, they do use rubber ball launchers and often fire at protesters' faces -- a target prohibited by the current rules of engagement. The French are also the onlypolice force in Europe to use Sting-Ball grenades.

Macron has never treated protesters as people who have legitimate claims, so he has never paid attention to their claims. He only agreed to suspend the additional fuel tax, which was to have been begun in January, and to grant a slight increase in the minimum wage -- all of which he did only after weeks of protests.

Journalists say that Macron thought the movement would fade away after the end-of-year break; that police violence and desperation would induce the demonstrators to resign themselves to their fates, and that the support of the general population would collapse. Nothing of the sort took place.

It is clear that Macron does not want to meet the main demands of the protesters; that he will not resign, and that he refuses to accept a citizens' initiative referendum. He has apparently decided that if he dissolved the national assembly and called for legislative elections to end the crisis -- as President Charles de Gaulle did it to put an end to an uprising in May 1968, as allowed by the French Constitution -- he would suffer a scathing defeat. He can see that an overwhelming majority of the French people reject him, so apparently he has determined to seek a way out:

Macron called for a "great national debate" to address the problems facing the country. It soon became clear, however, that the "great debate" would be unconventional, to say the least.

Macron wrote a letter to all French citizens inviting them to "participate", but saying explicitly that the "debate" would not change anything, that the government would continue in exactly the same direction ("I have not forgotten that I was elected on a project, on major orientations to which I remain faithful."), and that everything that was done by the government since June 2017 would remain unchanged ("We will not go back on the measures we have taken").

He then entrusted organizing the "debate" and drafting its conclusions to two members of the government, and requested that "registers of grievances" be made available to the public in all town halls.

Macron then launched the "debate" by meeting mayors of many cities, but not in public. He seems to have been concerned that if he organized meetings open to the public, he would be immediately chased away by crowds.

The first two meetings took place in small cities (with 2000-3000 inhabitants), and with mayors whom the organizers -- chosen by Macron -- allowed to come. The organizers also selected the questions to be asked, then sent them to Macron to be answered at the meeting.

The day before each meeting, the selected city was placed under the administration of legions of police. All access roads to the city were closed, and anyone found wearing a yellow vest or carrying one in his car was fined. All protests in the city were flatly forbidden. The police made sure that the road used by Macron's convoy to reach the city was empty of any human presence for several hours before the convoy arrived.

Television news channels were asked to broadcast the entire meetings, which lasted six to seven hours. Only a few journalists, also selected by Macron, had permission to attend.

Several commentators stressed that pretending to "debate" is nonsense, and that entrusting the organization of the "debate" and the drafting of its conclusions to members of the government, and the way the meetings were organized, clearly show that these performances are a sham.

Some commentators pointed out that the term "register of grievances" has not been used since the time of absolute monarchy, that mayors are treated as waxworks and that placing the cities Macron visits in a state of siege is unworthy of a democracy.

A French economist, Nicolas Lecaussin, who grew up in Romania, wrote that these meetings reminded him of those in Romania during communism.

The author Éric Zemmour said that Macron is desperately trying to save his presidency but that the attempt will be useless:

"Macron has lost all legitimacy. His presidency is dead... For three months the country stopped economically; and Emmanuel Macron, to try to save his presidency, inflicts on the country two months of additional economic stagnation, and two more months of demonstrations. When people understand that they have been deceived, anger could increase... France is already a country in very bad shape."

The French economy is, in fact, sclerotic. The Index of Economic Freedom created by the Heritage Foundation and the Wall Street Journal ranks it 71st in the world (35th among the 44 countries in the Europe region) and notes that "the government spending accounts for more than half of total domestic output". The Index also reveals that "the budget has been chronically in deficit"; that "corruption remains a problem and that "the labor market is burdened with rigid regulations" leading to a high level of unemployment.

France has lost almost all its factories (industrial jobs account for only 9.6% of total employment). Its agriculture is in ruins, despite huge European subsidies: 30% percent of French farmers earn less than 350 euros ($400) a month and dozens commit suicide each year. In the high-tech sector, France is essentially absent.

brain drain has started that show no signs it will stop.

In parallel, each year, 200,000 immigrants from Africa or the Arab world, often without skills, arrive. Most are Muslim and have been contributing to the Islamization of France.

When a talk show host recently asked Zemmour why Macron is not placing the country's interest higher by taking the reality on the ground into account, the author replied:

"Macron is a technocrat. He thinks he is always right. He was programmed to do what he does. For him, France and the French people do not count. He is at the service of technocracy. He will do exactly what is wanted by the technocracy and a higher class, [who are] totally disconnected from the bulk of the country's population... Those who want to understand have to read Christophe Guilluy."

Guilluy, a geographer, published two books: La France périphérique ("Peripheral France") in 2014, and, just weeks before the outbreak of the uprising, No society. La fin de la classe moyenne occidentale ("No Society. The End of the Western Middle Class"). In them, he explains that French population today is divided into three groups.

The first group is a ruling upper class, totally integrated into globalization, made up of technocrats, politicians, senior civil servants, executives working for multinational companies, and journalists working for the mainstream media. The members of this class live in Paris and the main cities of France.

The second group lives in the suburbs of the main cities and in no-go zones ("Zones Urbaines Sensibles"). It consists mainly of immigrants. The French upper class, who rule, recruit people to serve it directly or indirectly. They are poorly paid, but highly subsidized by the government, and increasingly live according to their own cultures and standards.

The third group is extremely large: it is the rest of the population. It is this group that is called "peripheral France." Its members are made up of low-ranking civil servants, blue collar workers and former blue-collar workers, employees in general, craftsmen, small entrepreneurs, shopkeepers, farmers, and the unemployed.

For the ruling upper class, they are useless. The ruling upper class treat them as regrettable dead weight and expect nothing from them except silence and submission.

Members of "peripheral France" have been driven out of the suburbs by the influx of immigrants and the emergence of no-go zones. These "peripherals", for the most part, live 30 kilometers or more from the big cities. They can see that the upper class dismisses them. They often have a hard time making ends meet. They pay taxes but can see that a growing portion is being used to subsidize the very people who drove them out of their suburban homes. When Macron lowered the taxes of the wealthiest, but increased the taxes of the "peripherals" with a fuel tax, it was seen as the last straw -- in addition to his arrogant condescension.

In a recent interview on the British web magazine Spiked, Guilluy said that the "yellow vests" movement is a desperate awakening of "peripheral France". He predicted that despite Macron's efforts to displace the problem, the awakening will last, and that either Macron "will recognize the existence of these people, or he will have to opt for a soft totalitarianism".

For the moment, Macron does not seem to want to recognize that these people even exist.

According to François Martin, a journalist for the monthly Causeur, Macron has placed himself in a stalemate:

"He must make decisions and he can no longer take any decision without making things much worse... Macron should agree to resign, but will not do it, and would prefer to go to the end, and hit a wall... The next three years will be hell for the yellow vests and for the French".

At the end of the protests in Paris on January 26, thousands of "yellow vests" had planned to gather peacefully on one of the main squares of the city, the Place de la République, for a "debate" and to provide responses to the "debate" organized by Macron. The police were ordered to disperse them brutally; they once again used rubber ball launchers and Sting-Ball grenades to do just that.

One of the leaders of the "yellow vests" movement, Jerome Rodrigues, was shot in the face while filming police officers in a square nearby, the Place de la Bastille. He lost an eye and for several days was hospitalized. Other protestors were wounded.

In the spring of 2016, leftists had organized debates in the same locations and were allowed to remain there for three months with no police intervention.

In an article describing the events of January 26, columnist Ivan Rioufol wrote in Le Figaro: "Repression seems to be the only argument of the caste in power, faced with a large-scale protest that will not weaken".

Why today's events are especially ugly, according to Xavier Lemoine, the mayor of Montfermeil, a city in the Eastern suburbs of Paris where the 2005 riots were notably destructive, is that:

"In 2005, the police were clearly the target of rioters, and they showed restraint in the use of force to bring down the violence. Today, most of those who protest do not attack the police. But instead of acting to bring down the violence, the police are receiving orders pushing them to be very violent. I do not blame the police. I blame those who give them orders".

The next day, Sunday, January 27, a demonstration was organized by Macron's supporters, who called themselves "the red scarves". The demonstration was supposed to show that an impressive number of people were still on Macron's side. Organizers said that ten thousand people came. Videos, however, show that the number seems to have been far lower.

Published:2/3/2019 6:28:44 AM
[Markets] Banks And Buyers Favor Short-Dated CLOs As Fears Of Credit Crunch Intensify

After a disastrous Q4 where "the wheels came off the leveraged loan market", leaving banks unable to sell their loans as retail investors and institutional buyers yanked money out and moved it to more secure areas in the credit market (sending the yield on the 10-year Treasury back toward 2.5% during the opening days of 2019), the market has made a sudden and surprising comeback, with the average bid price in the leveraged loan market retracing 40% of its decline from the prior quarter, according to the credit team at Goldman Sachs.

drop

Still, many are uneasy about upping their exposure to leveraged loans - including private equity giant KKR, which, as we noted a couple of weeks ago, has opted to reduce its exposure to leveraged loans to zero from overweight. In its place, KKR Balance Sheet CIO Henry McVey said he's shifting the firm's holdings to more liquid areas of the credit market (high yield, structured credit and loans), based on the view that these assets have already priced in the growth slowdown that KKR is forecasting in 2019. All discussion of KKR's macro view - and its merits - aside, as we've explained, a cautious approach to lev loans and CLOs is probably prudent, given the looming risks of one "unexpected development" with the potential to crush the market.

Euro

With both long- and short-term risks looming on the horizon, Bloomberg pointed out a strategy that banks are employing to once again shift warehoused inventory off of their books: Offering CLOs comprised of short-dated deals. Of course, it's not hard to find reasons why buyers might be more interested in shorter-dated offerings at this point in time, particularly given the nascent slowdown in global growth that has surfaced in the data from the developed and developing world, banks who are selling these loans have one overweening reason to push the inventory: To avoid getting stuck with a bunch of crap loans and being forced to "liquidate" them from their books.

This latest crop may be driven by several different motivations. In some cases a manager may be trying to time the maturing credit cycle, by leaving the door open for a refinancing in a year’s time and before defaults start to rise.

But for others, the shorter maturity may be the final lifeline to converting an older warehouse into a CLO. That could help them avoid the worst case scenario of having to liquidate a warehouse, while allowing the arranger to unclog some of these older facilities from its balance sheet and move ahead with its pipeline.

By selling loans with shorter non-call periods, buyers can rest easy knowing that borrowers can always call the loans and refinance if, say, a recession in the US or Europe suddenly surfaces on the horizon.

A shorter maturity deal might help improve the chances of a take out because you get cheaper liabilities and also more leverage with a shorter reinvestment period, according to one U.S.-based CLO manager. That in turn can improve both the arbitrage between assets and liabilities and the equity returns.

And just with the maturing cycle motivated deals, the shorter non-call period gives the manager and equity investors the option to refinance the transaction earlier. That will allow them to reduce funding costs if liability spreads have decreased or to call the CLO earlier.

Perhaps this is why there's suddenly a large universe of investors asking for long-dated loans.

There’s a larger universe of AAA-rated investors with an appetite for shorter duration, said the U.S. manager. That may have to do with their view of the credit cycle, or it may just be that the liabilities they are using to fund their investment are shorter and they are just matching that duration, he added.

A let up in the volume of CLO refinancings reaching the market might bolster demand for shorter dated new issue paper given there is a group of investors who typically support the refinancing trade.

Or maybe its a simple issue of matching assets and liabilities. To be sure, not everybody shares KKR's pessimism. Goldman recently attached an overweight call to HY loans, citing the spread compression between HY bonds and HY loans. But the fact that fund outflows have continued even as new CLO issuance ramps (loan creation accelerated to $5.2 billion across 10 deals after a slow start to the year) should give some investors pause.

Published:2/2/2019 7:55:39 PM
[Markets] A Survival Guide For 2019 - How To Safely Navigate The "Year Of Instability"

Authored by Adam Taggart via PeakProsperity.com,

As the first month of the year concludes, it's becoming clear that 2019 will be a very different kind of year.

The near-decade of 'recovery' following the Great Financial Crisis enjoyed a stability and tranquility that suddenly evaporated at the end of 2018.

Here in 2019, instability reigns.

The world's central banks are absolutely panicking. After last year's bursting of the Everything Bubble, their coordinated plans for Quantitative Tightening have been summarily thrown out the window. Suddenly, no chairman can prove himself too dovish.

Jerome Powell, the supposed hardliner among them, completely capitulated in the wake of the recent -15% tantrum in stocks, which, as Sven Henrich colorfully quipped, proved what we suspected all along:

The global tsunami of liquidity (i.e. thin-air money printing) released by the central banking cartel has been the defining trend of the past decade. It has driven, directly or indirectly, more world events than any other factor.

And one of its more notorious legacies is the massive disparity and wealth and income resulting from its favoring of the top 0.1% over everyone else. The mega-rich have seen their assets skyrocket in value, while the masses have been mercilessly squeezed between similarly rising costs of living and stagnant wages.

How have the tone-deaf politicians responded? With tax breaks for their Establishment masters and new taxes imposed on the public. As a result, populist ire is catching fire in an accelerating number of countries, which the authorities are anxious to suppress by all means to prevent it from conflagrating further -- most visibly demonstrated right now by the French government's increasingly jack-booted attempts to quash the Yellow Vest protests:

Meanwhile, two other principal drivers of the past decade's 'prosperity' are also suddenly in jeopardy.

China's once-unstoppable economic growth engine is now sputtering badly. The slowdown is so pronounced that it's now feared it will drag world GDP down to a decade low this year:

And all those headlines that claimed the US shale oil 'miracle' has ushered in a new era of over-abundant cheap domestic oil? Well, as we've long warned, it's becoming clear that promise was dangerously overhyped. It's recently been exposed that the shale operators -- who have never made a profit as an industry -- have been overstating their output by as much as 50%. That, plus a host of geological and financing challenges, is making the future production prospects of the Permian and other major shale basins look a lot dimmer:

Is The Permian Bull Run Coming To An End?

With the big Wall Street players now questioning the value of their existing investments in shale oil, the industry is finding it hard to raise money. Not a single bond sale has come off since November in an industry which must continuously raise capital to survive.

To add to the problems, the future of U.S. shale oil production seems to be in the Permian Basin in Texas which has been providing the lion's share of oil production growth for the entire country. But ongoing drought in an already arid West Texas has raised doubts about whether the Permian will have enough water to meet all the demand for fracking new wells.

If the needed capital is not forthcoming, it means that companies will be faced with declining revenues from declining production. With lower operating cash flow and little access to additional capital, these companies will be unable to drill enough wells to offset declining ones. That means even lower revenues in the future which will mean even lower investment in new wells. That's what a death spiral looks like.

(Source)

A Poisonous Cocktail

Mix together a slowing global economy hopelessly addicted to central bank stimulus, festering social unrest and an approaching oil price spike/supply squeeze. The result?

Recession and revolt.

It's anybody's guess what will happen from here. But it seems certain that events will not recede back to the tranquility of the past decade.

Our prediction here at PeakProsperity.com is that the long-awaited (and, yes, perhaps too-long-predicted) downturn is nigh.

Either the economy descends into recession, resulting in widespread job losses and a deflationary correction of today's ridiculously-inflated financial markets. Or the central banks go "all in" and launch QE4ever, leading to runaway inflation (runaway stagflation, more likely) and possibly hyperinflation.

Either way, the pain and losses will be severe. And those hurt the most -- the working poor, the elderly unable to support themselves, the younger generations limited by diminished prospects -- will have no option but to rise up against the political regimes that have failed them so badly.

A Survival Guide For 2019

With the bursting of the Everything Bubble, we declared last year as the 'Year Everything Changed'. This will be the 'Year of Instability', possibly preceding an upcoming 'Year Of Woe' in 2020.

But look, we're not saying the world is the process of ending imminently. It's just that we've entered the part of the timeline when things are going to start to get really rocky.

And we think it's much more useful to think of 2019 as the 'Year Resilience Matters'. It shifts the focus away from fear and instead towards the many things you can do to protect yourself and those you care about - and even to position yourself to prosper through the coming challenges.

Here are recent articles/resources we've created to help you get started. Focus on the areas where you currently feel the most vulnerable.

  • Lose weight/Get fit -- after all, if you don't have your health, the rest doesn't matter. Resilience starts with your most important asset: your body. Our free how-to primers on successful and sustainable weight loss and functional fitness are great resources for everyone looking for guidance on how to boost their physical health.

  • Shore up your key relationships -- whatever the future brings, no single person can be prepared for every possible outcome. We're going to need to rely on others, on key relationships and trusted community ties, when events play to our weaknesses. How do we nurture the kind of relationships that thrive, instead of unravel, during times of stress? Our free report breaks down the science behind successful social bonds.

  • Prepare for deflation -- asset prices desperately want to deflate. The past decade of money-printing (QE 1,2 & 3) has blown prices well into bubble territory and allowed for credit to expand way beyond what fundamentals allow. With the bursting of the Everything Bubble, especially if the central banks somehow resume their committed tightening plans, *much* lower prices should lie ahead. A recession will only exacerbate this trend further. So we recommend that investors get liquid and preserve 'dry powder' to ride out the correction and be poised to re-enter the market when quality assets can be purchased at much better valuations than today. Our primers on holding cash in short-term US T-bills and in hedging for a major market correction are important resources for anyone looking to position their capital for a deflationary purge.

  • Prepare for inflation -- of course, today's central banks hate deflation. They may well take a "damn the consequences" approach when serious deflation next raises its head and kick-off QE 4-ever -- which would have to be on a scale much larger than the previous QE efforts to achieve it's desired effect. But at that magnitude, it is highly likely the central banks will kill the purchasing power of their underlying currencies -- unleashing runaway inflation (runaway stagflation, more likely) and quite possibly hyperinflation. So, it's wise to have a portion of your portfolio in assets that will weather the ravages of inflation better than most. This is why we recommend folks consider owning precious metals (and why we endorse the Hard Assets Alliance for doing so) as well as invest for inflation-adjusted incomegoing forward (vs speculating for capital gain).

  • Prepare for likely emergencies -- one of the few things we can predict with certainty is that 2019 will have its fair share of floods, fires, hurricanes, blizzards, and blackouts. Every location has its own set of probable disasters than can be anticipated. Preparing for these is relatively straightforward and absolutely prudent. Our free guide to emergency preparedness is full of battle-tested recommendations and advice for doing it well.

  • Prepare for unlikely emergencies -- another thing we can predict with confidence is that nothing this year will go 100% according to plan. There will be errors, unintended consequences, surprises, and accidents. We've written in the past of the wisdom of holding umbrella liability insurance for protection against the unexpected. More than 80% of US households either don't own any or are under-insured. If you think you may be one of them, read our free primer on the topic. 

  • Develop your master plan -- as with most goals, success dramatically improves when working with an experienced coach. Those looking for help in making key decisions and/or getting custom answers to their unique personal situations can schedule a consultation with us. And those looking to have a crash-audit of their investment portfolio can schedule a free review with our endorsed financial advisor.

  • Live resiliently - they say "The best revenge is to live well". The same is true when it comes to resilience. Creating a resilient life is the best way to overcome adversity and enjoy prosperity in your daily living. Our book Prosper!: How To Prepare For The Future And Create A World Worth Inheriting offers a blueprint for doing just this. As does our intensive 3-day seminar (this year's is nearly sold out, so register soon if interested), which also connects you into the Peak Prosperity tribe -- a worldwide community of smart, accomplished truth-seekers with big hearts eager to support each other in their journey to live more resilient lives.

The goal here is not perfection; no one can be fully prepared for every eventuality. It's to be "good enough" across as many of these dimensions as possible.

By taking prudent action today in these areas, you'll be vastly more able to navigate the instabilities that 2019 throws at you.

And, just as important, you'll be well-positioned to be in service to the many less-prepared folks around you.

Published:2/2/2019 10:53:44 AM
[Markets] MMT: The Court Astrologer's Dream

Via TrueSinews.com,

It’s not Modern; it’s not Monetary; and it’s really not much of a Theory

If ever there was a prime example of a belief in the Fairy Gov-a-Mother being mixed with a bad case of warmed-over monetary crankdom, the suddenly, newly- fashionable doctrine which masquerades under the portentous-sounding name of ‘Modern Monetary Theory’ – ‘MMT’, for short – must surely qualify.

Built upon that age old deceit of Planners that they – and the offices of the state and its bureaucracy which they occupy – provide a more rational means of organising people’s lives than can the Good Common Folk ever attain themselves through the voluntary relations and market-dealings which they conduct, MMT seeks primarily to overcome the well-founded objection that even the most benign and far-sighted government should notspend wildly beyond whatever it levies by means of the many taxes, fees, licences, transaction charges, and miscellaneous other exactions it can persuade its long-suffering subjects to endure.

The way it does this is to marry a decidedly old school of monetary thinking called ‘chartalism’ – child of the court intellectuals of Imperial Prussia and stepfather to the Weimar hyperinflation – to that other hoary old canard that the public debt does not matter since some faceless ‘We’ are said to owe it to ‘Our’ equally anonymous ‘Selves’.

Starting – as does so much that is bad about mainstream economics – with a simplistic and crushingly aggregative set of tautological identities which emanate from, who else, but that evil genius, Keynes – the MMT crowd next perform a few rounds of high-school algebraic manipulation to make these conveniently-defined, but thoroughly abstract, entities line up to ‘prove’ that every penny of government deficit spending must perforce be matched by an equal and opposite penny of private sector saving.

Hey, Presto!, they cry, we have now demonstrated that even the most incontinent of regimes can neither immolate the nation in a damaging blaze of inflation nor allow anti-social ‘hoarders’ and parasitic ‘rentiers’ to suffocate it in a deflationary deep freeze of miserly abstinence.

From this assertion – and here is where the ‘chartalism’ bit comes in – as long as the state uses its full apparatus of legalized violence to ensure that ITS obligations are the only things that pass for money (so no silver, no gold, no rye-backed notes, cigarette coupons, cowrie shells, or bitcoins), it can always fund its Big Digs, its high-speed rail lines, its bridges-to-nowhere, and its nine-days’ wonder, Olympic stadia, as well as all the day-to-day vote-buying and special interest-coddling to which this most caries-ridden of Tooth Fairies routinely stoops.

You – the poor ‘saver’ who has given up your own choice of goods in order to make such miracles possible – might be forgiven for casting a jaundiced eye at such evidence of either expensive pyramid-building or plain, old-fashioned, exhaustive consumption of Other People’s Money and enquire politely just what of productive value is being created in order that your ‘savings’ at least preserve – and hopefully increase – their value.

Once you start down this route, you will soon realise that it is only in the narrowest of contexts that the MMT brigade can be said to have a point: namely, that if the Gummint does confiscate our wealth, we will necessarily consume less than we might have wished to and so – in some perverted sense of a very overworked word- we might just be said to have ‘saved’ that much.

Not only to elevate this Sheriff of Nottingham practice of legitimised banditry into a major policy plank, but to dress the perps up in Lincoln Green so they can pretend to be Robin Hood’s Merry Men does take quite some neck, as I’m sure you will agree!

Granted, the state robbers in the MMT vision of the future are craftily going to disguise their theft by issuing us with a requisition chit in the form of their fiat currency – and will thereby so deftly pick our pockets that it might take us some while to work out that we have indeed been had.

But this sleight of hand hardly mitigates the severity of the crime or lessens the ultimate degree of loss we will suffer. After all, even such a tender-hearted, small-government paragon as Mussolini famously declared that you could not increase a country’s wealth simply by issuing extra paper portraits of its rulers!

Into the Fires of Moloch

The crucial distinction the MMTers seem congenitally unable to make in the course of their half-finished reasoning is that while their precious accounting identity (that Deficits equals Savings) may, under certain very restricted circumstances, be said to hold true, the dynamics, the process – the PRAXEOLOGY, if you will – of what is at work is what matters most.

Thus, very different results follow in the case where a man voluntarily decides up front (ex ante, in economist-speak) to finance some other entity’s expenditures in exchange for a promise to pay later – as opposed to the one where he finds that, after the game has been played for a round or two (and so, ex post, in the Latinate jargon), he has been landed with what none other than the Beelzebub of Bloomsbury, Keynes himself, once referred to as, “the bad, or depreciating, half-crown”.

In the first case, though not guaranteed to win the pot from his competitors, he is at least playing his own hand fairly and squarely: in the second, he not only looks around the table and realises HE is the proverbial patsy, but that the House is four-flushing and the dealer has a sleeve stuffed with extra aces.

More fundamentally still, the simple fact is that the whole of economic science must be founded on a real-world concept of the scarcity and finiteness of means. This is a requirement which utterly escapes the MMT wizards who instead seem to think that their special insights allow them, along with Shakespeare’s blowhard Glendower, to ‘summon spirits’ – and boundless economic means along with them – ‘from the vasty deep’.

The idea that, regardless of the magnitude of government spending, you, I, and our next-door neighbour can happily provide its clamorous army of functionaries, contractors, and welfare recipients with as many real resources as they need is clearly a nonsense of the first order.

Ask anyone whose grandparents were unfortunate enough to have to ‘fund’ the latest Five-Year Plan by queueing for hours outside the state dispensary in the chill of a Russian winter, all in the hope of securing the last head of mouldy cabbage for their cheerless, meagre supper.

Moreover, what all this lofty aggregation – all this misleading compression of the actions and interactions of hundreds of millions of people into a single, mute character in an equation – also overlooks is the fact that the obligations (and, in extremis, the currency) issued by the state will not rest inertly with its initial choice of a ‘saver’, but will inevitably pass through many hands, altering relative prices, dictating business success or failure, and redistributing wealth in the most insidious and arbitrary of fashions as it does.

The largely unpredictable topographical changes which are brought about by this scouring of the economic landscape by the floodwaters of state spending and monetized credit creation are known to those of us with a slightly wider exposure to economic history as ‘Cantillon effects’ (yes, THAT Cantillon) after the first great analyst of the disorder which resulted from John Law’s frankly proto-chartalist, MMT-precursor Mississippi Scheme of three hundred years ago.

Such unforeseen consequences – all too many of them unrelievedly malign – are another class of drawbacks which seem to elude our bold MMTers when they start their hands waving and their lips moving in the promotion of their aery imaginings.

Beyond even the question of whether MMT does dictate that the books will balance, come what may, when Leviathan doles out more than It gathers in, there also lies the issue of whether the concentration of a greater part of our resources into the hands of the Beast is in any way an advisable aim.

Government, after all, is not some Olympian deification of dispassionate justice (even justice of the oxymoronic ‘social’ kind) but is a creature which suffers from all the faults we associate with an absence of real ownership (i.e., from its lack of ‘skin in the game’, as the current vogue has it).

It is also generally exempt from formal accounting and budgetary strictures or from much in the way of temporal limitation – never being subject to the relentless, if decidedly necessary, test of validity constituted for the private sector by the annual profit & loss account.

Moreover, it is an institution within which men and women, fallible like you and me, are free to pursue their own, often highly venal, agendas and to do so – unlike those of us in private society who are often so harshly criticised for committing the very same sins – by proxy and therefore in a manner highly insulated from the costs of practising their prejudices or of giving rein to their wilder, Utopian enthusiasms – a remoteness which can only encourage such gross violations of the public trust.

Civis Romanus sum

In essence, the MMTer dreams of being the Roman procurator of a newly-conquered province who wishes to use the implicit threat of the armed might at the command of his colleague, the imperial legate, to exact tribute (‘savings’, as our Modern likes to call them) from the pair’s new subjects, preferably in the form of the tokens stamped with the Emperor’s likeness which he has had issued to that end.

In order not to be hoodwinked by this act of numismatical misdirection, let us not lose sight of the fact that however inherently insubstantial are these metallic symbols of oppression, those forced to ‘render unto Caesar’ in this manner will have to surrender hard-won real goods and laboriously-performed services in order to attain them. Given that the cash may initially be hard to come by – and making the MMT analogy even more complete – our procurator may well overcome this technical hurdle, as well as keep his patrician hands clean, by contracting out the collection of such taxes to a breed of political fixers called the publicani.

These worthies will first advance the money to the state and look to collect both it and more from the populace later – in other words, their equivalent is to be found in those who today buy some of those profligate issues of public debt which our dear MMT types believe are a sign of our prosperity, rather than of our prostration before our overlords.

In his borrowed munificence, the procurator will next make these payment tokens as wages over to the occupying troops – the government employees of the day par excellence (“Thank you for your service, centurion”) – and have them spend the proceeds in the townships, or ‘vici’, newly sprouted beside the legionary camps for that express purpose. In so doing, the occupying force will effectively consume the material representation of the tax-payers’ sacrifice – their ‘savings’, remember – though not without enriching a good few middlemen and greasing numerous palms along the way.

That done, the procurator will then congratulate himself that he has conferred the benefits of a higher civilisation upon his unwilling hosts, the despised and previously ungoverned ‘Britunculi’, and retire to an evening of heady indulgence in the comfort of the bath house.

Adding to this veneer of useful public activity the fruits of fifteen hundred years of economic wrong turns and misdirected conceptualising, the MMTers would thus not only bestow a certain ‘Romanitas’ upon us plebs but, they insist, they will also ensure an unwavering maximum of Keynesian ‘aggregate demand’ – another bogie of wrongheadedness – and forever abolish want and poverty, in all their many forms, into the bargain by the simple trick of chewing through the Forgotten Man’s small surplus.

By now it should be plain that not only is there little MODERN about Modern Monetary Theory, but that its workings are more fiscal than monetary and that, as theories go, this one is not only far-fetched but fairly well-worn, to boot.

Indeed, as Nobel-winner Gunnar Myrdal once caustically remarked of Keynes’s conceit that his was an innovative way of thinking, MMT displays much of the typically ‘unnecessary originality of the English-speaking economist’.

As Henry Hazlitt even more bitingly put it of the same man’s over-lauded ‘General Theory’: it ‘contains much that is original and much that is true. Sadly, that which is true is not original and that which is original is not true’.

Now, if you’ll excuse me, I’m off to persuade my bank manager that my overdraft is, in MMT terms, not a matter for his censure, but rather a gift to him on my part, the better to help his depositors ‘save’ for their future.

* *  *

I hope you’ve found this of interest. If so, please visit  www.cantillon-consulting.ch for more information, check out examples of my work on Speakerdeck or follow me on Twitter via @CantillonCH. You can also listen to a slightly shortened version of this as a podcast at: Soundcloud or via TuneIn at:- https://bit.ly/2CXfEpy

Published:2/1/2019 9:20:02 PM
[World] [John K. Ross] Short Circuit: A Roundup of Recent Federal Court Decisions

Inoperable fuzes, sweetened sugar beverages, and sexed cow semen.

Please enjoy the latest edition of Short Circuit, a weekly feature from the Institute for Justice.

Friends, the Short Circuit team has just released Episode 3 of Bound By Oath, our podcast on the 14th Amendment. Please do give it a listen. On this episode: the Supreme Court reduces the Privileges or Immunities Clause, the clause meant to do much of the heavy lifting protecting civil rights, to a practical nullity. For shame! Professors Randy Barnett and Chris Green to do the explicating. And Justice Ruth Bader Ginsburg makes a surprise appearance, time traveling back to 1873. Subscribe wherever you get your podcasts or click here.

  • Brentwood, N.H. man purchases four military M67 fragmentation grenades with inoperable fuzes from undercover FBI agents. District court: To be a grenade, a device must contain not only explosive material but also a means of detonating that explosive material. Inoperable fuzes mean the man didn't buy grenades. First Circuit: Reversed. The grenades were explosive; they just needed new fuzes. Congress can't have meant for agents only to use fully functioning "weapons of war" in their sting operations.
  • Nineteen-year-old (or perhaps he's 20) impregnates 14-year-old in 2009, is sentenced to 16 years of probation. He seeks parental visitation rights; she tries to stop that from happening. Suit 1: State court won't stop it. Suit 2: Federal court won't stop it. Suit 3: State court won't stop it; he's been ordered to pay child support, and Massachusetts family courts were (at that time, anyway) authorized to adjudicate the parental rights of a parent convicted of statutory rape. Plus, the kid should be getting financial support from both parents. Suit 4: Federal district court won't stop it. First Circuit: Subject to exceptions that don't apply here, losing parties in state court don't get to re-litigate in federal trial courts.
  • Hoke County, N.C. officer knocks on door of home, threatens to break it down unless it's opened. It's opened. A voluntary knock-and-talk or a coercive, warrantless entry? Fourth Circuit: Other than threatening to knock down the door, the officer and federal agents were casual and nonhostile. No need to suppress the evidence.
  • A man is shot dead at a Wilson County, N.C. convenience store in 1976. Three alibis place Charles Ray Finch at a poker game when the shooting occurred, but a witness places Finch at the shooting and picks him out of a lineup. Finch is convicted. Fourth Circuit: We've now learned that the witness had cognitive and short-term-memory problems, that the lineup was unduly suggestive, that another witness was coerced, and that a host of forensic conclusions were wrong, so Finch's habeas claim—ordinarily time-barred—can go forward.
  • Two people crawl through a Goldsboro, N.C. McDonald's drive-thru window, demand money at gun point, throw cash drawers at employees, hit the manager with the gun, and make off with $1k. One perpetrator pleads guilty to robbery and the additional, distinct crime of using a firearm in connection with a crime of violence. Fourth Circuit (en banc, splitting 8–7): Alas, the statutory definition of "crime of violence" is unconstitutionally vague, given the Supreme Court's treatment of materially identical laws. Dissent: Courts should look to the underlying facts of the crime, rather than just the statutory language in a hypothetical case, to determine whether a crime is one of violence. Pistol whipping during a robbery clearly is. (Circuit-split watch: The Fourth joins the Fifth, Tenth, and D.C. Circuits but departs from the Eleventh Circuit in this holding. Moreover: SCOTUS will hear the Fifth Circuit case.)
  • Galveston, Tex. police get warrant to search drug suspect's house, seize any "ledgers" they might find. They seize a cell phone. Is a cell phone a ledger? Close enough, says the Fifth Circuit, so no need to suppress evidence from the phone (which helped convict him of pimping minors).
  • Texas inmate threatens guard, has his stuff taken away, gets put in solitary. Or maybe—as inmate alleges—guard was lying, retaliating against inmate. Inmate brings a hodgepodge of claims (to get out of solitary, over loss of his stuff, and more). Fifth Circuit: Almost none of which can go forward. But if the guard really took away the inmate's Bible (and books by mega-pastors like Joel Osteen), there needed to be a valid reason. The inmate's First Amendment claim should not have been dismissed.
  • "Sexed cow semen" is bull semen containing only X- or Y-chromosome-bearing sperm. It allows dairy farmers using artificial insemination to ensure they breed only female—and thus milk-bearing—cows. It's valuable stuff, and, until recently, the U.S. market was controlled by a monopolist whose technology worked by identifying sperm cells, electrically charging them, and then sorting them with magnets. But when an upstart hired one of the monopolist's ex-employees, she shared the monopolist's trade secrets. The upstart then began using a different, potentially faster method: individually vaporizing the unwanted sperm cells with a laser millions of times per second. The ensuing antitrust/patent infringement/breach of contract suit, culminating in a two-week trial, gave wins and losses to both sides. On appeal, the Seventh Circuit affirmed some of the monopolist's wins but also—in a complicated discussion of patent law featuring set theory, subscripted variables, and LSAT-esque diagrams—gave the upstart a second chance at invalidating the seminal patent claims.
  • Federal law prohibits any "unlawful user" of marijuana from possessing a firearm. "Unlawful user" is unconstitutionally vague, says criminal defendant who admits to smoking daily for the past decade. Perhaps in some hypothetical scenarios, says Seventh Circuit, but your conduct "undoubtedly falls within the obvious core" of the statute. As a consolation prize, however, the court "commend[s] everyone involved in the briefing and arguing of this case" (along with the district-court judges) for a job well done.
  • San Francisco requires that advertisements for "sugar-sweetened beverages" contain a warning, taking up 20 percent of the advertising space, that sugary drinks contribute to obesity, diabetes, and tooth decay. Unconstitutional compelled speech? The en banc Ninth Circuit unanimously agrees that it is, though they disagree vociferously as to why.
  • Pizza chain's website and app are incompatible with screen reading software, so blind man can't order online. A violation of the Americans with Disabilities Act? District court: No, the Act doesn't mention the internet, and the feds have failed to provide formal guidance on how it applies—despite promising to do so. Ninth Circuit: Reversed. The feds have said that websites must comply; there's no need for the gov't to produce a blueprint detailing how to do it.
  • Douglas County, Colo. officer tases man who has a rifle muzzle in his mouth and his thumb on the trigger. The gun goes off; the man dies. Can the man's parents sue the officer? No, they filed suit 27 days too late, says the Tenth Circuit; the deadline started running on the date they asked the coroner to reconsider her report, not when the amended report was released (over a year later).
  • There are a number of federal crimes—from fraud to robbery—that apply only to banks that are FDIC insured at the time of the crime. Inexplicably, and despite repeated warnings from federal courts, prosecutors routinely fail to produce direct evidence that a bank was FDIC insured at the time of the crime—the testimony of a single witness would do—and instead rely on circumstantial evidence that it was insured at some point before or after. Is enough finally enough? Eleventh Circuit (over a dissent): Although prosecutors are "cruisin' for a bruisin'," we won't bruise them today.
  • After seven years' imprisonment for rape, man is released after tests confirm that his DNA was not on the victim. Chatham County, Ga. DA declines to re-prosecute. Trial court dismisses indictment. And state lawmaker introduces bill to compensate the man $1.6 million for the wrongful conviction. But wait! The DA opposes the bill and (allegedly) falsely states that the man remains under indictment. Bill fails; man sues. Eleventh Circuit: The DA's defamation absolutely amounted to unconstitutional retaliation. But even so, qualified immunity. Concurrence: "My only comfort with this result is knowing that if another official in this circuit henceforth engages in conduct similar to [the DA's], he or she will not be entitled to hide behind the doctrine of qualified immunity."
  • And in en banc news, the Eleventh Circuit will reconsider its holding that an Alabama law enacting a statewide minimum wage of $7.25 that preempts a Birmingham minimum wage of $10.10 might violate equal protection. The now-vacated opinion declared: "Today, racism is no longer pledged from the portico of the capitol or exclaimed from the floor of the constitutional convention; it hides, abashed, cloaked beneath ostensibly neutral laws and legitimate bases, steering government power toward no less invidious ends."

Officials in Yorktown, Indiana want to bulldoze a small neighborhood with many long-time, elderly residents and replace it with: a tech firm, other businesses, and new residences. To bypass the state's eminent domain law, which bars seizing property for private projects, officials have strategically placed some public amenities in the plan. Sneaky! Sharon and Jerry Puckett's home, for instance, is scheduled to be replaced by "courtyard/games" and part of a new restaurant. The kicker: The town already owns enough property to build the development just 500 feet away. IJ has helped gather over 105,000 signatures on a petition opposing the plan, and in January residents presented the Town Council with the petition. But the project is still rolling along, so please do sign the petition if you're of a mind.

Published:2/1/2019 3:48:37 PM
[Markets] Spicy Kim-Xi

Submitted by Rarbobank's Michael Every

US-China trade talks wrapped up with a flurry of announcements and Tweets that one needs to stitch together to try to understand what is going on. My conclusion is that things are about to get very spicy if you consider the full range of ingredients going into this dish and not just the meat.

Both sides agreed that the talks had been substantive and progress had been made, but US Trade Representative Lighthizer made clear the “thorniest” issues are still technology and intellectual property. Lighthizer and Mnu-China will now be going to Beijing together soon to continue the talks. President Trump has been stated as being deeply involved from backstage in these negotiations too, and he weighed in several times yesterday with comments that are important to understand. To reporters, he stated: “This isn’t going to be a small deal with China. This is either going to be a very big deal, or it’s going to be a deal that we’ll just postpone for a little while.” Translating that into English, it seems to mean that a Mnu-China soy and LNG deal is not the table, and Trump will keep pushing for the big Lighthizer reforms. Moreover, consider these following Trump Tweets:

China’s top trade negotiators are in the U.S. meeting with our representatives. Meetings are going well with good intent and spirit on both sides. China does not want an increase in Tariffs and feels they will do much better if they make a deal. They are correct. I will be meeting with their top leaders and representatives today in the Oval Office. No final deal will be made until my friend President Xi, and I, meet in the near future to discuss and agree on some of the long standing and more difficult points. Very comprehensive transaction. China’s representatives and I are trying to do a complete deal, leaving NOTHING unresolved on the table. All of the many problems are being discussed and will be hopefully resolved. Tariffs on China increase to 25% on March 1st, so all working hard to complete by that date!

He is keeping the negotiating pressure on. And a Trump-Xi summit looms. Yet Trump then immediately upped the ante on Xi:

Looking for China to open their Markets not only to Financial Services, which they are now doing, but also to our Manufacturing, Farmers and other U.S. businesses and industries. Without this a deal would be unacceptable!

Now things get even more interesting. Trump meets Xi in China immediately after a second summit with North Korea’s “rocket man” Kim Jong Un: that makes for truly spicy Kim-Xi! What does the US want? A real China trade deal and Kim in their camp as a threat to China. What does China want? A superficial trade deal and Kim back in their camp. What does Kim want? Economic aid, to be seen as a nuclear power, and to be in everyone’s good books so he can get Chinese trade and still get to take selfies with the public elsewhere. How is the US going to react on trade if Kim insists on not disarming, or on the US leaving South Korea? How will China react on trade if Kim decides he wants a Miami condo more than one in Hainan? And how will Trump react if Xi won’t give him his deal, and Xi react if Trump won’t bend? There are so many possible permutations. We could see the US, China, and North Korea all friends – or something else.

On that front, we also need to consider other Trump Tweets. They are relevant, I promise.

The Intelligence people seem to be extremely passive and naive when it comes to the dangers of Iran. They are wrong! When I became President Iran was making trouble all over the Middle East, and beyond. Since ending the terrible Iran Nuclear Deal, they are MUCH different, but a source of potential danger and conflict. They are testing Rockets (last week) and more, and are coming very close to the edge. Their economy is now crashing, which is the only thing holding them back. Be careful of Iran. Perhaps Intelligence should go back to school!

That is a very clear endorsement of a very hard line on geopolitics and the use of the economy and markets as weapons (i.e., sanctions) that “hold Iran back.” Furthermore, Trump added:

When I became President, ISIS was out of control in Syria & running rampant. Since then tremendous progress made, especially over last 5 weeks. Caliphate will soon be destroyed, unthinkable two years ago. Negotiating are proceeding well in Afghanistan after 18 years of fighting. Fighting continues but the people of Afghanistan want peace in this never ending war. We will soon see if talks will be successful? North Korea relationship is best it has ever been with U.S. No testing, getting remains, hostages returned. Decent chance of Denuclearization. Time will tell what will happen with North Korea, but at the end of the previous administration, relationship was horrendous and very bad things were about to happen. Now a whole different story. I look forward to seeing Kim Jong Un shortly. Progress being made-big difference!

Is he expecting success with Kim? Or is he trying to show that he at least tried? So many ingredients here, and so much chili! And there’s more. Against that backdrop we have the frankly jaw-dropping news that Germany is decided it will NOT be using the US F-35 fighter jet as the replacement for its Tornado air-fleet. Let me spell out what that means: 1) Germany won’t be buying US planes and so not only doesn’t it spend enough on NATO now, but even if it does ever spend, that cash won’t flow to the US to rebalance trade between the two; and 2) Only the F-35 is compatible with the US tactical nuclear deterrent, so Germany won’t be under that NATO shield, unless the US signs off on a Eurofighter alternative – why should it, considering the Eurofighter is seen as out of date? Indeed, given EU-US tensions over geopolitics, e.g., EU insistence on trying to circumvent the US sanctions on Iran Trump just said are so important, does anyone see this ending well for US-EU trade relations? Because I don’t. And circling back, what if the US does strike a China trade deal, and only US firms get the benefits, not EU? That said, yesterday also saw news that the EU is considering a ban on Huawei for 5G too, so it also seems to be hedging its bets.

Yet overall, with no US F-35 exports ahead I am not sure if Germany realises what it is doing (it seems blithely unaware of a whole host of problems it is creating for everyone, after all); suffice to say that this issue could create as much market fire as the spiciest chili.

Day ahead                    

For those who want to look at data instead of all this today has Caixin and Markit PMIs, Eurozone CPI, and US payrolls.

But does that even matter? The Fed has already shown us this week that it doesn’t intend to do anything except cut, eventually, so why get antsy about a number that will underline that the labour market is on fire, albeit without serious wage inflation. (For those who care, the consensus is 165K, but like I said ** yawn**.) Then we have the US ISM survey too. For which the same holds true. It will only matter if it’s weaker than consensus.

In short, what was once a juicy market steak has been cooked to death by the Fed, making it unpalatable; and it is anyway now smothered in a layer of Kim-Xi.

Published:2/1/2019 7:16:56 AM
[Markets] The 'Cartel' Is Back: EU Accuses 8 Banks Of Rigging European Government-Bond Markets

First it was the Libor-rigging cartel, then the FX exchange-rate manipulation cartel, now, European regulators have moved on to prosecuting "anti-competitive" practices in euro-denominated sovereign bond markets.

One month after the European antitrust regulators charged Deutsche Bank, Credit Agricole and Credit Suisse of being a part of a 'bond trading cartel', regulators are bringing a separate case against eight unidentified European banks alleging that they conspired to rigging euro-denominated sovereign bond markets.

Reuters reported Thursday that the European Union’s antitrust authority has charged the banks with operating the cartel behind 2007 and 2012.

Screen

Just like in past cartel cases, traders at the accused banks allegedly used chat rooms to share "commercially sensitive information and coordinated trading strategies" that they presumably used to rig markets to benefit their own trading books - and shortchange their "counterparties".

If they're found guilty, the banks could face fines equal to up to 10% of their global turnover.

"The Commission has concerns that, at different periods between 2007 and 2012, the eight banks participated in a collusive scheme that aimed at distorting competition when acquiring and trading European government bonds," the Commission said.

"Traders employed by the banks exchanged commercially sensitive information and coordinated on trading strategies. These contacts would have taken place mainly - but not exclusively - through online chatrooms."

Regulators told Reuters that they wanted to make one thing clear: The allegations aren't meant to imply that euro-denominated bond markets are subject to pervasive "anti-competitive" practices (though maybe they should talk to Mario Draghi about that).

But don't worry: We're sure the information traded in these chatrooms fell neatly within the bounds of "market color."

 

 

 

 

 

 

Published:2/1/2019 2:15:59 AM
[Markets] An Important Wrinkle In Chinese Bank Hoarding

Authored by Jeffrey Snider via Alhambra Investment Partners,

In theory, it is always so simple. For China, it was intended that RRR cuts are stimulus. By allowing banks to use more of the reserves they’ve built up over the years it is meant to add to overall interbank liquidity. From there, banks flush with RMB supported by robust RMB money markets will lend and undertake more direct economic transactions.

Voila, stimulus.

The theory gets complicated by a very different kind of reality, one which pressures RMB markets from two sides. The first is the direct result of the overriding issue. The eurodollar market malfunctions, forcing China to deal with a “dollar” shortage by having its central bank (and others) intervene out of its own stockpile of FX reserves. Simple accounting, the PBOC’s asset side shrinks which must be met by the same on the money side.

So, RRR cuts already begin from inside a domestic monetary hole. To even get to the position of adding liquidity, banks have to mobilize more of their reserves than the central bank has pulled back in its own.

The second liquidity problem is just that: banks have to mobilize meaning actually use more of their reserves. The Economics textbook simply says that if given the opportunity no bank will refuse the license. Policy says, bank books do. In theory.

In practice, banks have to operate in the real world. If the PBOC is in a situation already where it feels compelled to respond to less-than-ideal effective conditions via an RRR cut perhaps it really isn’t a conducive time for banks to be so generous? Reserve operations of this type don’t usually happen unless things are already dicey, a factor bank managers are going to be pretty well aware.

Therefore, RRR cuts may not lead to the flood of non-public liquidity the theory assigns. Chinese banks, especially the biggest institutions, may opt to hoard that liquidity instead. If they do, then RRR measures cannot be stimulus especially having begun at first in the central bank hole.

When Chinese banks hoard, obviously nothing good will result. The illiquidity is not contained within China’s borders, either, as these kinds of financial irregularities flow into the real Chinese economy and are then transported to the rest of the world (further amplified by more negative feedbacks in the eurodollar system).

This was Euro$ #3’s devastating global downturn story of 2015 and early 2016.

We are on the lookout for evidence of China bank hoarding so as to figure a possible repeat here well within Euro$ #4. From the very first we see just that sort of difficulty in real-time market prices, in this case SHIBOR and other RMB money rates. The correlation is ridiculously obvious; RRR cuts have unleashed volatility and instability rather than what would look like monetary stimulus.

Chinese banking statistics back up the negative association – with an added wrinkle (more on that below).

Since the first 2018 RRR cut back in April last year, the big banks aren’t really lending more in the unsecured interbank markets. They are, however, borrowing more from them; a lot more. The difference is almost surely the reason for harmful volatility in domestic money.

The biggest banks are draining liquidity (net) from unsecured RMB rather than contributing more to them. The relationship with volatility in SHIBOR is established.

The primary reason is equally evident: this is the same period in which bank reserves have been declining. The PBOC’s eurodollar squeeze leading to the systemic limit on its money (liability) side is being echoed by the majority of the domestic banking sector.

Without a liquidity cushion either in that money remainder (growing bank reserves) or in terms of robust central bank RMB expansion at its liquidity windows (such as MLF) there just isn’t any appetite for banks to add anything to these crucial interbank spaces.

The wrinkle in all this is repo. We know why the biggest institutions are borrowing more unsecured – they are barely borrowing (sources) in repo! Depending more and more on unsecured interbank transactions instead of the repo market, you can start to appreciate why these particular banks are perhaps more than a little skittish no matter what policy the PBOC might undertake.

If conditions worsen in China, more economic slowing and therefore higher perceived overall risk, being reliant in greater proportion on unsecured markets for so much marginal funding isn’t an ideal liquidity situation. To put it mildly.

The question is why they aren’t in repo. It may be that China’s authorities told us last month when they began to really champion the issuance of perpetual bonds to be used along with the central bank bill swap. It certainly seems to fall in line with what we see here; if the big banks are in a collateral crunch, why not just create collateral out of thin air (first the perpetual and then the swap into usable repo instruments).

I wrote about this just a few days ago:

To aid the situation on both counts, the PBOC last month hit upon a two-part scheme. The central bank would encourage the use of perpetual bonds that meet the definitions for being included as bank capital. Any Chinese bank that issues these securities will be able to boost their ratios, making it seem like it has more loss absorption capacity (which, in theory, it would).

The second part is this bill swap program. Perpetual bonds are illiquid therefore unacceptable in repo…

To circumvent these technical deficiencies, the PBOC will allow banks who issue perpetual bonds to swap them with its own holdings of central government debt bills which they can then use either in private repo or even in targeted MLF at that particular monetary policy window.

This data can’t, unfortunately, tell us why a collateral crunch seems to have developed. Such a negative outcome would further explain the hoarding of liquidity along with the greater desperation on the part of monetary authorities – escalating official responses that don’t seem to get anywhere. China’s money hole across a couple dimensions seems to be bigger than we already think.

It is, as Abraham Lincoln once said, the equivalent of shoveling fleas across a barnyard; not half of them get there. “There” being RMB liquidity. This isn’t monetary stimulus indicated here, hoarding is instead, a huge and growing monetary deficiency which seems to be squeezing the Chinese economy. Again.

Published:1/31/2019 6:45:08 PM
[Markets] Starbucks Coaches Employees On How To Handle Politically "Aggressive" Customers Raving About Howard Schultz

Starbucks has instructed its employees on how to handle political questions about CEO Emeritus Howard Schultz, who has all but announced his intent to run as an independent in the 2020 US election - a move immediately criticized by Democrats who fear he will split the left's vote and hand Donald Trump the election.

The coffee chain known for its progressive corporate culture offered suggestions  in its "Barista Need-To-Know" weekly newsletter on how to "diffuse the situation" if anyone "shares aggressive political opinions" in the store. 

"Employees may be asked questions by customers or hear media speculation about Howard's potential political intentions," reads the notice clearly written by lawyers. Employees should know that "we respect everyone's opinion. Our goal is simply to create a warm and welcoming space where we can all gather, as a community, over great coffee."

If asked specifically about Schultz, employees are advised to say: "Howard's future plans are up to him.

A Starbucks employee told the Huffington Post on Thursday that her store's management took things one step further in a way that bothered her. 

"We were told not to talk to customers about it," said the employee, who added "if we are asked about his political goals or our opinions on it that we’re to say he was a great CEO to work for but that’s where our opinions end."

The rephrased instructions irked the employee, who saw them as part of a pattern of stifling employees’ opinions. The shift supervisor felt similarly about the written instructions, finding it frustrating that Schultz was able to publicly discuss his politics when he worked at Starbucks while they were not.

“[I wish] we would be given the same opportunity to express our beliefs,” the supervisor said. -Huffington Post

Schultz has faced intense criticism from the left after he said he was weighing a 2020 run as an independent. His detractors include David Axelrod, HBO host Bill Maher, The View's Joy Behar and Rep. Alexandria Ocasio-Cortez (D-NY). 

Neera Tanden, president of the Center for American Progress, called for a Starbucks boycott if Schultz enters the race, tweeting: "Vanity projects that help destroy democracy are disgusting. If he enters the race, I will start a Starbucks boycott because I’m not giving a penny that will end up in the election coffers of a guy who will help Trump win."

In fact, the criticism has been so vociferous, it has left some Democrats believing that Schultz, who is currently on a book tour, won’t end up running for the White House. 

“Democrats will not have to pressure Schultz to drop out of the race,” said Robert Zimmerman, a prominent Democratic donor. “When his books move to the $1 discount bin at bookstores, he will get the message.”

Erin McPike, a spokeswoman for Schultz, said all the blowback this week “shows he is resonating.” -The Hill

During an interview at a New York Barnes & Noble this week, a protester shouted at Schultz "Don't help elect Trump, you egotistical, billionaire asshole."

He's clearly resonating...  

Published:1/31/2019 5:44:15 PM
[Markets] Bernie Sanders Proposes 77% Estate Tax For Billionaires

Jumping on the "tax the rich" bandwagon, senator Bernie Sanders has proposed to expand the estate tax on wealthy Americans, including a rate of up to 77% on the value of estates above $1 billion.

Sanders, who is considering a fresh run for president, said in a statement his plan would apply to the wealthiest 0.2% of Americans, with Bloomberg reporting that his proposal would set a 45% tax on the value of estates between $3.5 million and $10 million, increasing gradually to 77% for amounts more than $1 billion. The current estate tax kicks in when an estate is worth about $11 million.

If enacted, the legislation would raise up to $2.2 trillion in estate taxes from the families of all 588 billionaires in the U.S. with a combined net worth of more than $3 trillion, according to a summary of the plan.

Sanders’s plan comes as potential other challengers to President Trump eye progressive tax ideas intended to reduce income inequality. One such proposal comes from Senator Elizabeth Warren who is seeking an annual 2% tax on households worth more than $50 million. Sanders, who ran in the Democratic primaries against Hillary Clinton in 2016, hasn’t yet confirmed whether he’ll run in 2020.

While the estate tax exemption was $3.5 million as recently as 2009, in 2017 the GOP tax overhaul increased the exemption to $11 million through 2025, and some Senate Republicans are renewing an effort to repeal the tax entirely.

As Sanders and Warren are seeking to reduce income inequality by breaking up concentrations of wealth among top earners, other Democratic candidates are urging legislation toward the lowest income brackets. California Senator Kamala Harris, who launched her presidential campaign this week, introduced legislation this month to create a $3,000 refundable tax credit for low-income individuals. The bill includes non-binding language that proposes funding the tax credit by repealing parts of the 2018 Republican tax cut and assessing a fee on large financial institutions.

Meanwhile, polls show that Americans are becoming more receptive to the idea of increasing taxes on the wealthy. After Democratic Socialist Alexandria Ocasio-Cortez floated a 70% top tax rate on incomes of $10 million or more, a recent poll found that a majority, or 59% of Americans would be in support of such a tax.

Of course, boosting taxes on the rich is nothing new: bBack in 2012, when Europe's populist tensions were first emerging, France's socialist president Francois Hollande decided to harness the unhappiness of the proletariat (and distract from what would soon be one of the most disastrous presidencies in French history), and passed a 75% tax on earnings above €1 million as part of his election campaign.

Supported by socialists everywhere, the reform quickly prompted accusations of an anti-business agenda, sparked an exodus of high-profile personalities (France’s richest man, Bernard Arnault, the chief executive of luxury group LVMH, took out Belgian nationality, and the actor Gérard Depardieu also moved across the border to Belgium before obtaining Russian citizenship), sent local stocks tumbling as investors pulled out of France, and local real estate prices plunged.

While initially the supertax saw broad popular support, the resulting slump in the economy prompted a quick reversal in public opinion. “The reform clearly damaged France’s reputation and competitiveness,” said Jorg Stegemann, the head of the executive search firm Kennedy Executive. “It clearly has become harder to attract international senior managers to come to France than it was.”

Despite the backlash Hollande clung to the principle of the supertax even after it was dismissed by the country’s highest court, fearing a revolt by his leftwing allies. The tax was subsequently adjusted to a 50% rate payable by companies after the constitutional council ruling in December 2012. The final nail in the coffin came from the former investment banker who is now France’s president, Emmanuel Macron. A former economic adviser to Hollande, Macron described the supertax as “Cuba without the sun."

Worse, it was the workers who were hit the hardest: tax lawyer Jean-Philippe Delsol, author on a book on tax exiles called Why I Am Going To Leave France, said that many high earners had agreed with their companies that salaries would be limited during the two years the tax rate applied, and they would “come to an arrangement afterwards."

Worst of all, however, French finance ministry studies showed that despite all the publicity, the sums obtained from the supertax were meagre, standing at €260m in 2013 and €160m in 2014, and affecting 1,000 staff in 470 companies. Over the same period, the budget deficit soared to €84.7bn. And so, two years after it was introduced, on January 1, 2015 the French 75% tax quietly disappeared into the history books.

Published:1/31/2019 1:13:31 PM
[Markets] How Brexit Burst The West's Immigration Taboos

Authored by Scott McConnell via The American Conservative,

It is difficult to keep up with the Brexit debate. British politics now consists of little else: hard and soft exits, the backstop, the complication of Scotland, the greater complication of Northern Ireland and Ireland, the huge splits within the parties and even between members of the same household. And, of course, there’s the seeming political humiliation of Theresa May, who seems a nice enough woman, though you have to wonder why someone who opposed Brexit be entrusted to negotiate it with the European Union.

The debate is bogged down in economic complexity, which benefits those who want Britain to forget about the referendum result and remain, or who hope that doubt and confusion will build support for a new referendum, during which an exhausted public will throw up its hands and say it’s all too complicated and the elite must know best.

Britain’s Brexit conflict parallels how the American political establishment has dealt with Donald Trump’s presidential victory. There was no alternative but to let Trump be president, but his agenda could still be tied up in the courts and the GOP could resist and prevent him from passing any substantial legislation. So far this has succeeded—for all his tweeting, Trump hasn’t actually done anything concrete except carry out some neoconservative policy prescriptions towards Iran. (Though he has moved the window of what issues can be discussed, which may be important in the long run.)

The key thing to recognize about the Brexit conflict is that the critical issue is not economics but immigration.

Absent the immigration surge initiated by Tony Blair, Britain’s adhesion to the EU would have remained a sideshow among Tories and not the political centerpiece it has become during the last three years.

Despite an anti-black race riot in 1958 and Enoch Powell’s famous “Rivers of Blood” speech a decade later, Britain’s political class had a kind of immigration consensus until Blair. Acceptable political discourse would be scrupulously anti-racist, and racial rhetoric would be met with taboos. Yet immigration would be kept to modest levels. Free movement from the former colonies was rescinded in 1961, and the Labour Party hardly objected. And while the conservative establishment formerly rebuked Powell, Margaret Thatcher stressed Powellite themes in softer language: “the British character has done so much for democracy, for law…that if there is any fear we might be swamped, people are going to react and be rather hostile to those coming in.” Labour, invariably hostile to Thatcher, took no issue there. As Eric Kaufman wrote in his recent book Whiteshift (from which some of the forgoing analysis is taken), “In Britain, a discourse of restrictionism was even established at the elite level, where quiet objections to immigration within the Cabinet, referencing public opinion, were routinely voiced.”

All this changed with Blair’s ascension in 1997. His New Labor departed from his party’s working class roots and embraced a notion of a cool multicultural Britain. His coterie of pro-immigration advisors recommended in 2000 that the government use mass immigration to make the country truly multicultural, to “rub the Right’s nose in diversity and render their arguments out of date.” 

Blair increased the number of “economic” visas available and immigration rates soon quadrupled. His multiculturalism had a zealous missionary quality to it, as if Britain was seeking world leadership in a race to negate one’s traditional political culture. It was never especially popular outside of London, but social taboos against racism nonetheless kept it out of the realm of public debate.

But not forever. Blair’s Iraq war hurt his government’s popularity (an interesting essay might be written on the connections between militant domestic multiculturalism and a bellicose foreign policy), and the London Tube bombings of 2005, carried out by the British-born sons of Third World immigrants, didn’t help. The National Front, an extreme Right party (distinct from France’s Front National), began to gain traction in local elections for the first time since the 1970s.

Tory politicians had begun to question high immigration rates in the early 2000s, without much to show for it electorally. But by later in the decade, things had changed. Robust majorities of white Britons had favored lower immigration rates since the issue was first polled in the 1960s. But what was new now was immigration’s salience—it had become very important to a greater number of people. After 2005, pollsters began to notice working class Labor party voters defecting over immigration concerns. Immigration was deemed the most important issue by nearly one in three voters, and when the Tories regained the majority in 2010, it was the top issue for those who’d switched their votes from Labour to Conservative.

David Cameron was not a man of the Tory Right, and though he expressed a desire to reduce immigration to pre-Blair levels, he proved unable to do so as prime minister. Britain’s EU commitments were an impediment. But the immigration issue was out of the shadows, and the main electoral beneficiary was the anti-EU United Kingdom Independence Party (UKIP). In fact, though Britain has been arguing about the economic terms of Brexit for years now, few Britons care that much about the EU, which seemed disconnected from their everyday lives. They did care about immigration.

And the EU issue gave that sentiment an outlet it lacked. Discussing the EU allowed one to criticize immigration levels without being caught up in Britain’s still powerful anti-racism norms. At first, the EU template focused the immigration discussion largely on Eastern European immigrants, rendering it non-racist and therefore legitimate. At the same time, it boosted UKIP, whose prospects began to rise steadily after 2009. After winning 16 percent of the vote in the European elections, UKIP began to attract voters disappointed that the Tories seemed unable to actually do anything but talk about immigration. UKIP billboards, emphasizing the slogan “Take Back Control,” stressed that the EU was denying Britain the right to control its borders. As UKIP leader Nigel Farage put it, “The goal was to get into people’s heads that immigration and Europe are the same thing and that we are impotent.”

To the shock of Britain’s elites, Brexit won. The Remain camp had no answer to the immigration question. It simply stressed what was called “Project Fear,” warning of the massive economic disturbances that leaving the EU would supposedly cause. Since the vote, Cameron’s resignation, and the convoluted efforts by Theresa May to negotiate Brexit, the subject matter of “Project Fear” - the movement of goods, not people - has once again risen to the fore, dominating discussion.

It’s an area where the economic elites have a far better control of the relevant information. Thus they’ve managed to throw the Brexit situation into disarray. But whatever happens (I would predict, with little confidence, that some version of Theresa May’s negotiated, semi-soft Brexit will eventually get a parliamentary majority), the immigration issue will remain alive. Once liberated from the taboos that long restrained it and made a legitimate part of the national debate, it can’t be put back into the closet.

Published:1/29/2019 1:27:27 AM
[Markets] Collapse Is Already Here

Authored by Chris Martenson via PeakProsperity.com,

It's a process, not an event...

Many people are expecting some degree of approaching collapse -- be it economic, environmental and/or societal -- thinking that they’ll recognize the danger signs in time. 

As if it will be completely obvious, like a Hollywood blockbuster. Complete with clear warnings from scientists, politicians and the media.  And everyone can then get busy either panicking or becoming the plucky heroes. 

That's not how collapse works.

Collapse is a process, not an event.

And it's already underway, all around us. 

Collapse is already here.

However, unlike Hollywood's vision, the early stages of collapse cause people to cling even tighter to the status quo. Instead of panic in the streets, we simply see more of the same -- as those in power do all they can to remain so, while the majority of the public attempts to ignore the growing problems for as long as it possibly can.

For both the elite and the majority, their entire world view and their personal sense of self depends on things not crumbling all around them, so they remain willfully blind to any evidence to the contrary.

When faced with the predicaments we warn about here at PeakProsperity.com, getting an early start on prudently shifting your own personal situation is of vital strategic and tactical importance. Tens of thousands of our readers already have taken wise steps in their lives to position themselves resiliently.

But most of the majority won't get started until it’s entirely too late to make any difference at all. Which is sad but perhaps unavoidable, given human nature.

If everybody around you is saying “Everything is awesome!”, it can take a long time to determine for yourself that things in fact aren't:

Real collapse happens slowly, and often without any sort of acknowledgement by the so-called political and economic elites until its abrupt terminal end.

The degree of rot within the Soviet Union went undetected until its final implosion, catching pretty much everyone in the West (as well as in the former USSR!) by surprise.   

Similarly, one day people woke up and passenger pigeons were extinct.  They used to literally darken the skies for hours as they migrated past, numbering in the billions. Nobody planned on their demise and virtually nobody saw it coming.  Sure, just as there always are, a few crackpots at the fringes noticed, but they were ignored until it was too late.

Our view is that collapse of our current way of life is happening right now. The signs are all around us.  Our invitation is for you to notice them and inquire critically what the ramifications will be -- irrespective of whatever pablum our leaders and media are currently spewing.

While the monetary and financial elites strain to crank out one more day/week/month/year of “market stability”, the ecosystems we depend on for life are vanishing. It's as if the Rapture were happening, but it's the insects, plants and animals ascending to heaven instead of we humans.

Committing Ecocide

Be very skeptical when the cause of each new ecological nightmare is ascribed to “natural causes.” 

While it’s entire possible for any one ecological mishap to be due to a natural cycle, it’s weak thinking to assign the same cause to dozens of troubling findings happening all over the globe.

As they say in the military: Once is an accident. Twice is a coincidence. But three times is enemy action.

Right now, Australia is in the middle of the summer season and being absolutely hammered by high heat.  Sure it gets hot during an Australian summer, but not like this. The impact has been devastating:

Australia's Facing an Unprecedented Ecological Crisis, But No One's Paying Attention

Jan 9, 2019

It started in December, just before Christmas.

Hundreds of dead perch were discovered floating along the banks of the Darling River – victims of a "dirty, rotten green" algae bloom spreading in the still waters of the small country town of Menindee, Australia.

Things didn't get better. The dead hundreds became dead thousands, as the crisis expanded to claim the lives of 10,000 fish along a 40-kilometre (25-mile) stretch of the river. But the worst was still yet to come.

This week, the environmental disaster has exploded to a horrific new level – what one Twitter user called "Extinction level water degradation" – with reports suggesting up to a million fish have now been killed in a new instance of the toxic algae bloom conditions.

For their part, authorities in the state of New South Wales have only gone as far as confirming "hundreds of thousands" of fish have died in the event – but regardless of the exact toll, it's clear the deadly calamity is an unprecedented ecological disaster in the region's waterways.

"I've never seen two fish kills of this scale so close together in terms of time, especially in the same stretch of river," fisheries manager Iain Ellis from NSW Department of Primary Industries (DPI) explained to ABC News.

The DPI blames ongoing drought conditions for the algae bloom's devastating impact on local bream, cod, and perch species – with a combination of high temperature and chronic low water supply (along with high nutrient concentrations in the water) making for a toxic algal soup.

(Source)

Watching the video above showing grown men crying over the loss of 100-year-old fish is heartbreaking. This fish kill is described as “unprecedented” and as an “extinction level event", meaning it left no survivors over a long stretch of waterway.

We can try to console oursleves that maybe this was just a singular event, a cluster of bad juju and worse waterway management that combined to give us this horror -- but it wasn’t.

It's part of a larger tapestry of heat-induced misery that Australia is facing:

How one heatwave killed 'a third' of a bat species in Australia

Jan 15, 2019

Over two days in November, record-breaking heat in Australia's north wiped out almost one-third of the nation's spectacled flying foxes, according to researchers.

The animals, also known as spectacled fruit bats, were unable to survive in temperatures which exceeded 42C.

"It was totally depressing," one rescuer, David White, told the BBC.

Flying foxes are no more sensitive to extreme heat than some other species, experts say. But because they often gather in urban areas in large numbers, their deaths can be more conspicuous, and easily documented.

"It raises concerns as to the fate of other creatures who have more secretive, secluded lifestyles," Dr Welbergen says.

He sees the bats as the "the canary in the coal mine for climate change".

(Source)

A two-day heatwave last November (2018) was sufficient to kill up to a third of all Australia's known flying foxes, a vulnerable species that was already endangered.  As those bats are well-studied and their deaths quite conspicuous to observers, it raises the important question: How many other less-scrutinized species are dying off at the same time?

And the death parade continues:

Are these data points severe enough for you to recognize as signs of ongoing collapse?

Last summer was a time of extreme draught and heat for Australia, and this summer looks set to be even worse. This may be the country's  'new normal' for if the situation is due to climate change instead of just an ordinary (if punishing) hot cycle. 

If so, these heat waves will likely intensify over time, completely collapsing the existing biological systems across Australia.

Meanwhile, nearby in New Zealand, similar species loss is underway:

'Like losing family': time may be running out for New Zealand's most sacred tree

July 2018

New Zealand’s oldest and most sacred tree stands 60 metres from death, as a fungal disease known as kauri dieback spreads unabated across the country.

Tane Mahuta (Lord of the Forest) is a giant kauri tree located in the Waipoua forest in the north of the country, and is sacred to the Maori people, who regard it as a living ancestor.

The tree is believed to be around 2,500 years old, has a girth of 13.77m and is more than 50m tall.

Thousands of locals and tourists alike visit the tree every year to pay their respects, and take selfies beside the trunk.

Now, the survival of what is believed to be New Zealand’s oldest living tree is threatened by kauri dieback, with kauri trees a mere 60m from Tane Mahuta confirmed to be infected.

Kauri dieback causes most infected trees to die, and is threatening to completely wipe out New Zealand’s most treasured native tree species, prized for its beauty, strength and use in boats, carvings and buildings.

“We don’t have any time to do the usual scientific trials anymore, we just have to start responding immediately in any way possible; it is not ideal but we have kind of run out of time,” Black says, adding that although there is no cure for kauri dieback there is a range of measures which could slow its progress.

(Source)

People are rallying to try and save the kauri trees, although it’s unclear exactly how to stop the spread of the new fungal invader or why it's so pathogenic all of a sudden.  It could be due to another natural sort of cycle (except the fungus was thought to have been introduced and spread by human activity) or it could be a another collapse indicator we need to finally hear and heed.

It turns out that New Zealand is not alone. Giant trees are dying all over the globe.

2,000-year-old baobab trees in Africa are suddenly and rather mysteriously giving up the ghost.  These trees survived happily for 2,000 years and now all of a sudden they're dying. Are the deaths of our most ancient trees all across the globe some sort of natural process? Or is there a different culprit we need to recognize?

In Japan they're lamenting record low squid catches.  Oh well, maybe it’s just overfishing?  Or could it be another message we need to heed?

To all this we can add the numerous scientific articles now decrying the 'insect Apocalypse' unfolding across the northern hemisphere. The Guardian recently issued this warning: “Insect collapse: ‘We are destroying our life support systems’”. Researchers in Puerto Rico's forest preserves recorded a 98% decline in insect mass over 35 years.  Does a 98% decline have a natural explanation? Or is something bigger going on?

Meanwhile, the butterfly die-off is unfolding with alarming speed. I rarely see them in the summer anymore, much to my great regret.  Seeing one is now as exciting as seeing a meteor streak across the sky, and just as rare:

Monarch butterfly numbers plummet 86 percent in California

Jan 7, 2019

CAMARILLO, Calif. – The number of monarch butterflies turning up at California's overwintering sites has dropped by about 86 percent compared to only a year ago,according to the Xerces Society, which organizes a yearly count of the iconic creatures.

That’s bad news for a species whose numbers have already declined an estimated 97 percent since the 1980s.

Each year, monarchs in the western United States migrate from inland areas to California’s coastline to spend the winter, usually between September and February.

“It’s been the worst year we’ve ever seen,” said Emma Pelton, a conservation biologist with the Xerces Society who helps lead the annual Thanksgiving count. “We already know we’re dealing with a really small population, and now we have a really bad year and all of a sudden, we’re kind of in crisis mode where we have very, very few butterflies left.”

What’s causing the dramatic drop-off is somewhat of a mystery. Experts believe the decline is spurred by a confluence of unfortunate factors, including late rainy-season storms across California last March, the effects of the state’s years long drought and the seemingly relentless onslaught of wildfires that have burned acres upon acres of habitat and at times choked the air with toxic smoke.

(Source)

Note the “explanation” given blames the decline on mostly natural processes: late storms, droughts and wildfires. I believe that's because the article appears in a US paper, so no mention was permitted of neonicotinoid pesticides or glyphosate. Both of these are highly effective decimators of insect life -- but they're highly profitable for Big Ag, so for now, any criticism is not allowed.

Sure a 97% decline since the 1980’s might be due to fires, droughts and rains. But that’s really not very likely.  There have always been fires, droughts and rains.  Something else has shifted since the 1980’s. And that “thing” is human activity, which has increased its willingness to destroy habitat and spray poisons everywhere in pursuit of cheaper food and easier profits.

The loss of insects, which we observe in the loss of the beautiful and iconic Monarch butterfly, is a gigantic warning flag that we desperately need to heed.  If the bottom of our billion-year-old food web disintegrates, you can be certain that the repercussions to humans will be dramatic and terribly difficult to ‘fix.’  In scientific terms, it will be called a “bottom-up trophic cascade”.

In a trophic cascade, the loss of a single layer of the food pyramid crumbles the entire structure.  Carefully-tuned food webs a billion years in the making are suddenly destabilized.  Life cannot adapt quickly enough, and so entire species are quickly lost.  Once enough species die off, the web cannot be rewoven, and life … simply ends.

What exactly would a “trophic cascade” look like in real life?  Oh, perhaps something just like this:

Deadly deficiency at the heart of an environmental mystery

Oct 16, 2018

During spring and summer, busy colonies of a duck called the common eider (Somateria mollissima) and other wild birds are usually seen breeding on the rocky coasts around the Baltic Sea. Thousands of eager new parents vie for the best spots to build nests and catch food for their demanding young broods.

But Lennart Balk, an environmental biochemist at Stockholm University, witnessed a dramatically different scene when he visited Swedish coastal colonies during a 5-year period starting in 2004. Many birds couldn’t fly. Others were completely paralyzed. Birds also weren’t eating and had difficulty breathing. Thousands of birds were suffering and dying from this paralytic disease, says Balk. “We went into the bird colonies, and we were shocked. You could see something was really wrong. It was a scary situation for this time of year,” he says.

Based on his past work documenting a similar crisis in several Baltic Sea fish species, Balk suspected that the birds’ disease was caused by a thiamine (vitamin B1) deficiency. Thiamine is required for critical metabolic processes, such as energy production and proper functioning of the nervous system.

This essential micronutrient is produced mainly by plants, including phytoplankton, bacteria, and fungi; people and animals must acquire it through their food.

“We found that thiamine deficiency is much more widespread and severe than previously thought,” Balk says. Given its scope, he suggests that a pervasive thiamine deficiency could be at least partly responsible for global wildlife population declines. Over a 60-year period up to 2010, for example, worldwide seabird populations declined by approximately 70%, and globally, species are being lost 1,000 times faster than the natural rate of extinction (9, 10). “He has seen a thiamine deficiency in several differ phyla now,” says Fitzsimons of Balk. “One wonders what is going on. It’s a larger issue than we first suspected.”

(Source)

This is beyond disturbing. It should have been on the front pages of every newspaper and TV show across the globe.  We should be discussing it in urgent, worried tones and devoting a huge amount of money to studying and fixing it.  At a minimum, we should stop hauling more tiny fish and krill from the sea in an effort to at least stabilize the food pyramid while we sort things out.

If you recall, we’ve also recently reported on the findings showing that phytoplankton levels are down 50% (these are a prime source for thiamine, by the way). Again, here's a possible “trophic cascade” in progress: 

(Source)

Fewer phytoplankton means less thiamine being produced. That means less thiamine is available to pass up the food chain. Next thing you know, there’s a 70% decline in seabird populations.

This is something I’ve noticed directly and commented n during my annual pilgrimages to the northern Maine coast over the past 30 years, where seagulls used to be extremely common and are now practically gone.  Seagulls!

Next thing you know, some other major food chain will be wiped out and we'll get oceans full of jellyfish instead of actual fish.  Or perhaps some once-benign mold grows unchecked because the former complex food web holding it in balance has collapsed, suddenyl transforming Big Ag's "green revolution" into grayish-brown spore-ridden dust.

To add to the terrifying mix of ecological news has been the sudden and rapid loss of amphibian species all over the world.  A possible source for the culprit has been found, if that’s any consolation; though that discovery does not yet identify a solution to this saddening development.

Ground Zero of Amphibian 'Apocalypse' Finally Found

May 10, 2018

MANY OF THE world's amphibians are staring down an existential threat: an ancient skin-eating fungus that can wipe out entire forests' worth of frogs in a flash.

This ecological super-villain, the chytrid fungus Batrachochytrium dendrobatidis, has driven more than 200 amphibian species to extinction or near-extinction—radically rewiring ecosystems all over Earth.

“This is the worst pathogen in the history of the world, as far as we can tell, in terms of its impacts on biodiversity,” says Mat Fisher, an Imperial College London mycologist who studies the fungus.

Now, a global team of 58 researchers has uncovered the creature's origin story. A groundbreaking study published in Science on Thursday reveals where and when the fungus most likely emerged: the Korean peninsula, sometime during the 1950s.

From there, scientists theorize that human activities inadvertently spread it far and wide—leading to amphibian die-offs across the Americas, Africa, Europe, and Australia.

(Source)

Frogs, toads and salamanders were absolutely critical parts of my childhood and I delighted in their presence. I cannot imagine a world without them. But effectively, that’s what we’ve got now with so many on the endangered species list.

This parade of awful ecological news is both endless and worsening. And there is no real prospect for us to fix things in time to avoid substantial ecological pain.  None.

After all, we can’t even manage our watersheds properly. And those are dead simple by comparison. Water falls from the sky in (Mostly) predictable volume and you then distribute somewhat less than that total each year.  Linear and simple in comparison to trying to unravel the many factors underlying a specie's collapse.

But challenges like this are popping up all over the globe:

Fear And Grieving In Las Vegas: Colorado River Managers Struggle With Water Scarcity

Dec 14th, 2018

On stage in a conference room at Las Vegas's Caesars Palace, Keith Moses said coming to terms with the limits of the Colorado River is like losing a loved one.

"It reminds me of the seven stages of grief," Moses said. "Because I think we've been in denial for a long time."

Moses is vice chairman of the Colorado River Indian Tribes, a group of four tribes near Parker, Arizona. He was speaking at the annual Colorado River Water Users Association meeting.

The denial turned to pain and guilt as it became clear just how big the supply and demand gaps were on the river that delivers water to 40 million people in the southwest.

For the last six months Arizona's water leaders have been experiencing the third stage of grief: anger and bargaining.

Of the seven U.S. states that rely on the Colorado River, Arizona has had the hardest time figuring out how to rein in water use and avoid seeing the river's largest reservoirs — Lakes Mead and Powell — drop to extremely low levels.

Kathryn Sorenson, director of Phoenix's water utility, characterized the process this way: "Interesting. Complicated. Some might say difficult."

One of the loudest voices in the debate has been coming from a small group of farmers in rural Pinal County, Arizona, south of Phoenix.

Under the current rules those farmers could see their Colorado River supplies zeroed out within two years.

The county's biggest grower of cotton and alfalfa, Brian Rhodes, is trying to make sure that doesn't happen. The soil in his fields is powder-like, bursting into tiny brown clouds with each step.

"We're going to have to take large cuts," Rhodes said. "We all understand that."

(Source)

Oh my goodness. If we’re having trouble realizing that wasting precious water from the Colorado River to grow cotton is a bad idea, then there’s just no hope at all that we'll successfully rally to address the loss of ocean phytoplankton. 

That’s about the easiest connection of dots that could ever be made.  As Sam Kinison, the 1980’s comedian might have yelled – IT’S A DESERT!! YOU’RE TRYING TO GROW WATER-INTENSIVE CROPS IN THE FREAKING DESERT!  CAN’T YOU SEE ALL THE SAND AROUND YOU?!? THAT MEANS "DON’T GROW COTTON HERE!!"

A World On The Brink

The bottom line is this: We are destroying the natural world. And that means that we are destroying ourselves. 

I know that the mainstream news has relegated this conversation to the back pages (when they covered it at all) and so it's not “front and center” for most people.  But it should be.

Everything we hold dear is a subset of the ecosphere. If that goes, so does everything else. Nothing else matters in the slightest if we actively destroy the Earth’s carrying capacity.

At the same time, we're in the grips of an extremely dangerous delusion that has placed money, finance and the economy at the top spot on our temple of daily worship.

Any idea of slowing down or stopping economic growth is “bad for business” and dismissed out of hand as “not practical”, "undesirable" or "unwise".  It’s always a bad time to discuss the end of economic growth, apparently. 

But as today's young people are increasingly discovering, if "conducting business" is just a lame rationale for failed stewardship of our lands and oceans, then it’s a broken idea. One not worth preserving in its current form.

The parade of terrible ecological breakdowns provided above is there for all willing to see it. Are you willing?  Each failing ecosystem is screaming at us in urgent, strident tones that we’ve gone too far in our quest for "more".

We might be able to explain away each failure individually. But taken as a whole?  The pattern is clear: We’ve got enemy action at work.  These are not random coincidences.

Nature is warning us loudly that it's past time to change our ways.  That our "endless growth" model is no longer valid. In fact, it's now becoming an existential threat

The collapse is underway. It’s just not being televised (yet).

Davos As Destiny

And don't expect the cavalry to arrive.

Our leadership is absolutely not up to the task. If the Davos conference currently underway in Switzerland is a sign of anything at all, it’s that we’re doomed.

The world has been taken over by bankers and financiers too smitten by their love of money to notice much else or be of any practical service to the world.

By way of illustrative example, here’s the big techno-feel-good idea unveiled on the second day of the conference.  The crowds there loved it:

Yes, folks, this is what the world most desperately needs at this time! /sarc 

While I’m sure drone-delivered books is a heartwarming story, it’s completely diversionary and utterly meaningless in the face of collapsing oceanic and terrestrial food webs.

Sadly, this is exactly the sort of inane distraction most admired by the Davos set in large part because it helps them feel a tiny bit better about their ill-gotten wealth. "Look!  We're supporting good thngs!"  The ugly truth is that big wealth's main pursuit is to distort political processes and rules to assure they get to keep it and even amass more. 

Drones carrying books to Indonesian children provides the same sort of dopamine rush to a Davos attendee as Facebook 'like' gives to a 14-year-old. Temporary, cheap, superficial and ultimately meaningless.

The same is true of their other feel-good theme of the day. “Scientists” have discovered an enzyme that eats plastics:

That’s swell, but you know what would be even better?  Not using the bottles in the first place. Which could be accomplished by providing access to safe, potable water as a basic human right and using re-usable containers.  Of course, that would offer less chances for private wealth accumulation so instead the Davos crowd is fixated on the profitable solution vs. doing the right thing.

In viritually every instance, the Davos crowd wants to preserve industry and our consumer culture as it is, using technology and gimmicks in attempt to remedy the ills that result.  There’s money to be made on both ends of that story.

The only thing that approach lacks is a future. Because it’s not-so-subtly based on continued "growth". Infinite exponential growth. The exact same growth that is killing ancient trees, sea birds, insects, amphibians, and phytoplankton.

Who wants more of that? Insane people.

In other words, don’t hold out any hope that the Davos set representing the so-called “elite” from every prominent nation on earth are going to somehow bravely offer up real insights on our massive predicaments and solutions to our looming problems. They're too consumed with their own egos and busy preening for prominence to notice the danger or care.

As they pointlessly fritter away another expensive gathering, the ecological world is unraveling all around them. The oceans are becoming a barren wasteland.  The ancient trees are dying.  Heatwaves are melting tar and killing life.  The web of life is snapping strand by strand and nobody can predict what happens next.

In other words, if you held out any hope that “they” would somehow rally to the cause you’d best set that completely aside. It's no wonder social anger against tone-deaf and plundering elites is breaking out right now.

From here, there are only two likely paths: 

(1) We humans simply cannot self-organize to address these plights and carry on until the bitter end, when something catastrophic happens that collapses our natural support systems. 

(2) We see the light, gather our courage, and do what needs to be done.  Consumption is widely and steeply curtailed, fossil fuel use is severely restrained, and living standards as measured by the amount of stuff flowing through our daily lives are dropped to sustainable levels.

Either path means enormous changes are coming, probably for you and definitely for your children and grandchildren. 

In Part 2: Facing Reality we dive into what developments to expect as our systems continue further along their trophic cascade. Which markers and milestones should we monitor most closely to know when the next breaking point is upon us? 

To reiterate: Massive change is now inevitable and in progress.

Collapse has already begun.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access).

Published:1/26/2019 11:10:41 AM
[Markets] When Science Isn't Science

Authored by Jason Morgan via The Mises Institute,

The Quarterly Journal of Austrian Economics 21, no. 2 (Summer 2018). For the full issue, click here.

[The Best American Science and Nature Writing 2017., Hope Jahren, ed., Wilmington, Mass.: Mariner Books, 2017, 352 pp.]

The Earth’s climate is extraordinarily complex. Unlike dinosaur fossils or organic chemistry or primate behavior, climate is always in flux, with countless factors influencing one another in an endless unfolding of diachronic stochastics. Given this complexity, one might presume that scientists who study planetary climate would be endowed with exceptional patience, scholarly integrity, and intellectual humility. After all, it takes a long time to learn even a little bit about such an intricate system, so part of the job description of climate scientist would seem to be acknowledging that there is only so much that is known about the 1.09 x 1044 or so molecules swirling about in the atmosphere. Even more complex than all that, though, is navigating the public’s interest in the field. Climate is contentious, and a climate scientist will have to keep his cool, sticking to the facts amidst even the most heated rhetorical environments.

And yet, this is precisely not how a startling number of climate scientists choose to behave. Former head of the National Aeronautics and Space Administration (NASA) Goddard Institute for Space Studies James Hansen, for example, once made the rather alarming claim that “it will soon be impossible to avoid climate change with far-ranging undesirable consequences. We have reached a critical tipping point. […] We have at most ten years—not ten years to decide upon action, but ten years to alter fundamentally the trajectory of global greenhouse emissions.” And what might happen if the Earth warmed by the five degrees Hansen was warning about? Hansen tells us in detail.

The last time that the Earth was five degrees warmer was three million years ago, when sea level was about eighty feet higher. Eighty feet! In that case, the United States would lose most East Coast cities: Boston, New York, Philadelphia, Washington, and Miami; indeed, practically the entire state of Florida would be under water. Fifty million people in the US live below that sea level. Other places would fare worse. China would have 250 million displaced persons. Bangladesh would produce 120 million refugees, practically the entire nation. India would lose the land of 150 million people.

Rather discomfiting for Dr. Hansen, who thought we had “at most […] ten years to alter fundamentally the trajectory of global greenhouse emissions,” those blood-curdling visions of hundreds of millions of drowning urbanites have now gone fully a dozen years without coming to pass.

Not to be dissuaded from his task—and traipsing rather lightly past the Climategate scandal, in which University of East Anglia scientists were caught in flagrante delicto discussing the doctoring of data to match the received narrative on anthropogenic climate change—Hansen next tried to set a new tone for the climate Armageddonists. The Earth’s failure to implode on cue led Hansen and others to blame the system instead. “The democratic process doesn’t quite seem to be working,” he said in 2009, for example (The Guardian, 2009). Naomi Klein, author of This Changes Everything: Capitalism vs. The Climate (2014), connected the dots between Hansen’s rantings and full-bore income redistribution, hyping the “People’s Recovery,” which attempted to shunt tax dollars into communities experimenting in “nonextractive living” and “new democratic processes”:

Any attempt to rise to the climate challenge will be fruitless unless it is understood as part of a much broader battle of world-views, a process of rebuilding and reinventing the very idea of the collective, the communal, the commons, the civil, and the civic after so many decades of attack and neglect.

It would be hard to beat this orchestral crescendo of embarrassments to real scientific inquiry, this twisting of science into balloon animals shaped like either Chicken Little or Karl Marx. But in The Best American Science and Nature Writing 2017, series editor Tim Folger gives it a try. In large measure, he succeeds, calling into question whether “climate science” has not perhaps become an oxymoron.

First, a word about the 2017 iteration of the series. The editor for that year, Hope Jahren (the author of Lab Girl(2016)), has assembled a rather puzzling collection of genuinely interesting and valuable pieces, interspersed with tendentious politically-correct huff-puffing and special pleading. To take the good entries first, Robert Draper’s essay (reprinted from National Geographic), “The Battle for Virunga,” is a tightly-written piece on the intersection of economics, politics, and wildlife in the Democratic Republic of the Congo. David Epstein’s ProPublica essay, “The DIY Scientist, the Olympian, and the Mutated Gene,” tells the richly human story of Jill Viles, a muscular dystrophy patient whose extraordinary etiological insights helped track down important genetic information about lipodystrophy. And Ann Finkbeiner’s “Inside the Breakthrough Starshot Mission to Alpha Centauri,” taken from Scientific American, is a character-driven look at how new space technologies travel down the R&D pipeline. There are other fine essays in this volume, too: Tom Philpott’s on the political economy of chicken farm antibiotics, Kim Tingley’s on Polynesian navigation techniques, and Christopher Solomon’s well-researched look at Bureau of Land Management machinations in the American West.

Unfortunately, Jahren’s editorial heuristic, saturated in identity politics, leads her in the very unscientific direction of putting the scientist ahead of the science. This is especially odd, given that the writers who take the Cartesian plunge and delve into innerspace are forced to admit to having no idea who they are. Listless atheism marks Omar Mouallem’s “Dark Science,” for example. Ostensibly writing about light pollution and the efforts to combat it, Mouallem lets slip, “I once found myself in the middle of a field staring at a glistening sky. Had I still believed in him, I’d say it looked like God sneezed glitter.” Azeen Ghorayshi’s “He Fell in Love with His Grad Student—Then Fired Her for It” is the Glenn Close-esque tale of Christian Ott, a Caltech astrophysics professor who unburdens himself to his protégé about his deep-seated insecurities while publishing dozens of poems about her online. Sally Davies’ “The Physics Pioneer Who Walked Away from It All” tells us about physicist Fotini Markopoulou, who avers that “between the truth of the physical world and a physics theory, there’s humans. Of course, nothing happens there, because removing the person is the whole point of training as a scientist.” And then there is Michael Regnier’s heartbreaking true story of George Price, the man who literally did just that: removed himself, by killing himself in the name of the scientific study of altruism (“The Man Who Gave Himself Away”).

But the real editorial knifepoint of this book is its global warming agenda. Climate change crops up everywhere, from essays on Greenland (“A Song of Ice”) to Alaska (“The New Harpoon”). However, the pièce de résistance is Nathaniel Rich’s “The Invisible Catastrophe,” reprinted from The New York Times Magazine. This is passive-aggressiveness cranked up to eleven. Here, Rich manages to take a story about a methane leak in Aliso Canyon, outside Los Angeles, and turn it into a schadenfreude smorgasbord, with Rich secretly reveling in the fact that the wealthy residents of Porter Ranch—many of whom are Republicans—are finally getting a taste of their own medicine by being sickened by greenhouse gases.

But even this essay pales in comparison with Folger’s truly unhinged Foreword. Here, we find the favorite trope of the unscientific, namely, that everyone with whom one disagrees is a Nazi. Yes, a National Socialist. And not just any kind of National Socialist, but active, core members of the Party. To be more specific, bookburning Nazis. Here’s Folger:

Modern cosmology was born in Germany a century ago, and within two decades of its birth it almost died there. When Albert Einstein published his general theory of relativity in November 1915, it’s doubtful he could have imagined how profoundly deranged his country would become. On May 10, 1933—the same year Einstein left Germany forever—mobs of young Nazis and their supporters across Germany were feeding bonfires with his papers, along with works by Sigmund Freud, Thomas Mann, Bertolt Brecht, Erich Maria Remarque, and others supposedly contaminated with undeutschen Geist—un-German spirit. More than 25,000 books burned on that day, including those of the 19th-century Jewish poet and playwright Heinrich Heine, who had once written, “Where they burn books, they will also ultimately burn people. […]”

Where is Folger going with all this? Who are the modern-day Nazis in our midst? Why, climate skeptics and Trump supporters, of course:

One measure of the health of any modern society must be the degree to which it supports its scientists. A few days before I started to write this foreword, hundreds of thousands of people in dozens of cities across the country participated in the March for Science. It was an event at once inspiring and worrisome: inspiring because so many took a stand for rationalism—a public rebuke to the nation’s leaders that couldn’t be more different from the German book burnings of the 1930s; worrisome because who would have thought that in the 21st century scientists and citizens would feel the need to gather in support of something so self-evidently valuable as unfettered scientific research?

Yet the march was necessary, urgently so. Scientists at more than a dozen federal agencies have launched rogue Twitter feeds to counter the policies of a frighteningly uninformed president who once tweeted that “global warming was created by and for the Chinese.” We live at a pivotal moment in history[; …] climate change threatens not just “the environment” but civilization itself.

Now, to be fair to Folger, he is hardly the only “scientist” to have had a Hitler-themed meltdown over thermometer readings in Queen Maud Land. We are fallen creatures, and we all let our passions get the better of us from time to time. Scientists are people too, and when they get caught rigging the deck so that every card comes up the Ace of Hockey Sticks, they are apt to lash out at the whistleblowers just like anyone else. If anything, in his extremism Folger is simply following in the footsteps of his fellow “earth scientists.” Like Jacques Cousteau, for instance, who once opined that “world population must be stabilized and to do that we must eliminate 350,000 people per day.”

But there is much more to Folger’s brand of meteorological trolling than there might first appear. For example, there is the revealing research of William N. Butos and Thomas J. McQuade, whose 2015 paper on boom-and-bust cycles in the global warming industry shows the deep intertwinings of “scientific” research and the political economy. From the mid 1990s, global warming became a fashionable topic. From that point, governments increasingly began funding global warming-themed research to the exclusion of other projects. The much-touted “consensus” on global warming turns out to be little more than an illusion created by preferential funding by Washington and foregrounding by the United Nations Intergovernmental Panel on Climate Change (IPCC). As Butos and McQuade point out, science is supposed to be about hypotheses and experiments, but scientists turn out to be as susceptible to chicanery as politicians are once money for research starts to change hands.

Would that that were all. For what lies beneath even this fen of politicking under the rent veil of scientific disinterest is a deep uneasiness, felt most acutely by scientists themselves, over the true nature of their “scientific” enterprise. Folger is driven to accuse his critics of Nazism because he is afraid to confront their arguments head on. Why? Could it not be because of the epistemological bankruptcy of what passes as science?

Now, before the QJAE offices are deluged with hate mail, let me state that I am not a flat earther. I fully accept that pterodactyls and diplodocuses and trilobites were real, that the universe is billions of years old, that the earth goes around the sun, and that electricity is electrons, not voodoo. I also agree that carbon dioxide, methane, water vapor, ozone, and other substances are greenhouse gases, and that reducing the concentration of these gases in the atmosphere will reduce the greenhouse effect that they cause. I watched Mr. Wizard, too, and I am not here to dispute whether force equals mass times acceleration, or whether energy equals matter times the speed of light squared.

No, the claim I make here is much more serious than the denial of these facts would be. I am saying, in short, that scientists today, with rare exceptions, do not do science at all. They do sociology. As Thomas Kuhn pointed out in The Structure of Scientific Revolutions (1962), for instance, science lurches and stalls through a series of paradigm shifts, with the behavior of scientists themselves being the real dark matter moving research and consensus. And Karl Popper, were he alive today, might be interested in applying the falsifiability criterion to wild speculations such as Hansen’s and Folger’s. The line between science and pseudoscience might lie much closer to the latter than many in the general public suspect.

I began this review by arguing that climate is complex. What we need, then, is a science capable of investigating it, and real scientists, for a change, who can rise above herd behavior and try to figure out exactly what is going on with all of those 1.09 x 1044 molecules in our atmosphere. What we do not need are any more quacks or snake oil salesmen who see science as a bandwagon and scientists as responsible for keeping everyone on board. On that note, Friedrich Hayek’s The Counter-Revolution of Science: Studies in the Abuse of Reason (1952) would be a good place to start for learning the key difference between science and scientism, or the ill-starred attempt to bend science towards less noble ends than truth. Perhaps the next edition of The Best American Science and Nature Writing will heed some of Hayek’s sound advice and feature much more writing of a scientific nature. But at the very least, let us hope that it has much fewer comparisons of honest dissenters—those who truly want empirical facts and dispassionate interpretations—to bookburning Nazis.

Published:1/25/2019 9:10:23 PM
[Markets] Big Tech Merging With Big Brother Is A Big Problem

Authored by David Samuels, Excerpted from Wired.com,

A FRIEND OF mine, who runs a large television production company in the car-mad city of Los Angeles, recently noticed that his intern, an aspiring filmmaker from the People’s Republic of China, was walking to work.

WHEN HE OFFERED to arrange a swifter mode of transportation, she declined. When he asked why, she explained that she “needed the steps” on her Fitbit to sign in to her social media accounts. If she fell below the right number of steps, it would lower her health and fitness rating, which is part of her social rating, which is monitored by the government. A low social rating could prevent her from working or traveling abroad.

China’s social rating system, which was announced by the ruling Communist Party in 2014, will soon be a fact of life for many more Chinese.

By 2020, if the Party’s plan holds, every footstep, keystroke, like, dislike, social media contact, and posting tracked by the state will affect one’s social rating.

Personal “creditworthiness” or “trustworthiness” points will be used to reward and punish individuals and companies by granting or denying them access to public services like health care, travel, and employment, according to a plan released last year by the municipal government of Beijing. High-scoring individuals will find themselves in a “green channel,” where they can more easily access social opportunities, while those who take actions that are disapproved of by the state will be “unable to move a step.”

Big Brother is an emerging reality in China. Yet in the West, at least, the threat of government surveillance systems being integrated with the existing corporate surveillance capacities of big-data companies like Facebook, Google, Microsoft, and Amazon into one gigantic all-seeing eye appears to trouble very few people—even as countries like Venezuela have been quick to copy the Chinese model.

Still, it can’t happen here, right? We are iPhone owners and Amazon Prime members, not vassals of a one-party state. We are canny consumers who know that Facebook is tracking our interactions and Google is selling us stuff.

Yet it seems to me there is little reason to imagine that the people who run large technology companies have any vested interest in allowing pre-digital folkways to interfere with their 21st-century engineering and business models, any more than 19th-century robber barons showed any particular regard for laws or people that got in the way of their railroads and steel trusts.

Nor is there much reason to imagine that the technologists who run our giant consumer-data monopolies have any better idea of the future they're building than the rest of us do.

Facebook, Google, and other big-data monopolists already hoover up behavioral markers and cues on a scale and with a frequency that few of us understand. They then analyze, package, and sell that data to their partners.

A glimpse into the inner workings of the global trade in personal data was provided in early December in a 250-page report released by a British parliamentary committee that included hundreds of emails between high-level Facebook executives. Among other things, it showed how the company engineered sneaky ways to obtain continually updated SMS and call data from Android phones. In response, Facebook claimed that users must "opt-in" for the company to gain access to their texts and calls.

The machines and systems that the techno-monopolists have built are changing us faster than they or we understand. The scale of this change is so vast and systemic that we simple humans can’t do the math—perhaps in part because of the way that incessant smartphone use has affected our ability to pay attention to anything longer than 140 or 280 characters.

As the idea of a “right to privacy,” for example, starts to seem hopelessly old-fashioned and impractical in the face of ever-more-invasive data systems—whose eyes and ears, i.e., our smartphones, follow us everywhere—so has our belief that other individual rights, like freedom of speech, are somehow sacred.

Being wired together with billions of other humans in vast networks mediated by thinking machines is not an experience that humans have enjoyed before. The best guides we have to this emerging reality may be failed 20th-century totalitarian experiments and science fiction. More on that a little later.

The speed at which individual-rights-and-privacy-based social arrangements collapse is likely to depend on how fast Big Tech and the American national security apparatus consummate a relationship that has been growing ever closer for the past decade. While US surveillance agencies do not have regular real-time access to the gigantic amounts of data collected by the likes of Google, Facebook, and Amazon—as far as we know, anyway—there is both anecdotal and hard evidence to suggest that the once-distant planets of consumer Big Tech and American surveillance agencies are fast merging into a single corporate-bureaucratic life-world, whose potential for tracking, sorting, gas-lighting, manipulating, and censoring citizens may result in a softer version of China’s Big Brother.

These troubling trends are accelerating in part because Big Tech is increasingly beholden to Washington, which has little incentive to kill the golden goose that is filling its tax and political coffers. One of the leading corporate spenders on lobbying services in Washington, DC, in 2017 was Google’s parent company, Alphabet, which, according to the Center for Responsive Politics, spent more than $18 million. Lobbying Congress and government helps tech companies like Google win large government contracts. Perhaps more importantly, it serves as a shield against attempts to regulate their wildly lucrative businesses.

If anything, measuring the flood of tech dollars pouring into Washington, DC, law firms, lobbying outfits, and think tanks radically understates Big Tech’s influence inside the Beltway. By buying The Washington Post, Amazon’s Jeff Bezos took direct control of Washington’s hometown newspaper. In locating one of Amazon’s two new headquarters in nearby Northern Virginia, Bezos made the company a major employer in the area—with 25,000 jobs to offer.

Who will get those jobs? Last year, Amazon Web Services announced the opening of the new AWS Secret Region, the result of a 10-year, $600 million contract the company won from the CIA in 2014. This made Amazon the sole provider of cloud services across “the full range of data classifications, including Unclassified, Sensitive, Secret, and Top Secret,” according to an Amazon corporate press release.

Once the CIA’s Amazon-administered self-contained servers were up and running, the NSA was quick to follow suit, announcing its own integrated big-data project. Last year the agency moved most of its data into a new classified computing environment known as the Intelligence Community GovCloud, an integrated “big data fusion environment,” as the news site NextGov described it, that allows government analysts to “connect the dots” across all available data sources, whether classified or not.

The creation of IC GovCloud should send a chill up the spine of anyone who understands how powerful these systems can be and how inherently resistant they are to traditional forms of oversight, whose own track record can be charitably described as poor.

Amazon’s IC GovCloud was quickly countered by Microsoft’s secure version of its Azure Government cloud service, tailored for the use of 17 US intelligence agencies. Amazon and Microsoft are both expected to be major bidders for the Pentagon’s secure cloud system, the Joint Enterprise Defense Initiative—JEDI—a winner-take-all contract that will likely be worth at least $10 billion.

With so many pots of gold waiting at the end of the Washington, DC, rainbow, it seems like a small matter for tech companies to turn over our personal data—which legally speaking, is actually their data—to the spy agencies that guarantee their profits. This is the threat that is now emerging in plain sight. It is something we should reckon with now, before it’s too late.

IN FACT, BIG tech and the surveillance agencies are already partners...

...

THE FLIP SIDE of that paranoid vision of an evolving American surveillance state is the dream that the new systems of analyzing and distributing information may be forces for good, not evil. What if Google helped the CIA develop a system that helped filter out fake news, say, or a new Facebook algorithm helped the FBI identify potential school shooters before they massacred their classmates? If human beings are rational calculating engines, won’t filtering the information we receive lead to better decisions and make us better people?

Such fond hopes have a long history. Progressive techno-optimism goes back to the origins of the computer itself, in the correspondence between Charles Babbage, the 19th-century English inventor who imagined the “difference engine”—the first theoretical model for modern computers—and Ada Lovelace, the brilliant futurist and daughter of the English Romantic poet Lord Byron.

“The Analytical Engine,” Lovelace wrote, in one of her notes on Babbage’s work, “might act upon other things besides number, where objects found whose mutual fundamental relations could be expressed by those of the abstract science of operations, and which should be also susceptible of adaptations to the action of the operating notation and mechanism of the engine. Supposing, for instance, that the fundamental relations of pitched sounds in the science of harmony and of musical composition were susceptible of such expression and adaptations, the engine might compose elaborate and scientific pieces of music of any degree of complexity or extent.”

This is a pretty good description of the principles of digitizing sound; it also eerily prefigures and predicts the extent to which so much of our personal information, even stuff we perceive of as having distinct natural properties, could be converted to zeros and ones.

The Victorian techno-optimists who first envisioned the digital landscape we now inhabit imagined that thinking machines would be a force for harmony, rather than evil, capable of creating beautiful music and finding expressions for “fundamental relations” of any kind according to a strictly mathematical calculus.

The idea that social engineering could help produce a more efficient and equitable society was echoed by early 20th-century American progressives. Unlike 19th- and early 20th-century European socialists, who championed the organic strength of local communities, early 20th-century American progressives like Herbert Croly and John Dewey put their faith in the rise of a new class of educated scientist-priests who would re-engineer society from the top down according to a strict utilitarian calculus.

The lineage of these progressives—who are not identical with the “progressive” faction of today’s Democratic Party—runs from Woodrow Wilson to champions of New Deal bureaucracy like Franklin D. Roosevelt’s secretary of the interior, Harold Ickes. The 2008 election of Barack Obama, a well-credentialed technocrat who identified very strongly with the character of Spock from Star Trek, gave the old-time scientistic-progressive religion new currency on the left and ushered in a cozy relationship between the Democratic Party and billionaire techno-monopolists who had formerly fashioned themselves as government-skeptical libertarians.

“Amazon does great things for huge amounts of people,” Senate minority leader Chuck Schumer told Kara Swisher of Recode in a recent interview, in which he also made approving pronouncements about Facebook and Google. “I go to my small tech companies and say, ‘How does Google treat you in New York?’ A lot of them say, ‘Much more fairly than we would have thought.’”

Big Tech companies and executives are happy to return the favor by donating to their progressive friends, including Schumer.

But the cozy relationship between mainstream Democrats and Silicon Valley hit a large-sized bump in November 2016, when Donald Trump defeated Hillary Clinton—in part through his mastery of social media platforms like Twitter. Blaming the election result on Russian bots or secret deals with Putin betrayed a shock that what the left had regarded as their cultural property had been turned against them by a right-wing populist whose authoritarian leanings inspired fear and loathing among both the technocratic elite and the Democratic party base.

Yet in the right hands, progressives continued to muse, information monopolies might be powerful tools for re-wiring societies malformed by racism, sexism, and transphobia. Thinking machines can be taught to filter out bad information and socially negative thoughts. Good algorithms, as opposed to whatever Google and Facebook are currently using, could censor neo-Nazis, purveyors of hate speech, Russian bots, and transphobes while discouraging voters from electing more Trumps.

The crowdsourced wisdom of platforms like Twitter, powered by circles of mutually credentialing blue-checked “experts,” might mobilize a collective will to justice, which could then be enforced on retrograde institutions and individuals. The result might be a better social order, or as data scientist Emily Gorcenski put it, “revolution.”

The dream of centralized control over monopolistic information providers can be put to more prosaic political uses, too—or so politicians confronted by a fractured and tumultuous digital media landscape must hope. In advance of next year’s elections for the European Parliament, which will take place in May, French President Emmanuel Macron signed a deal with Facebook in which officials of his government will meet regularly with Facebook executives to police “hate speech.”

The program, which will continue through the May elections, apparently did little to discourage fuel riots by the "gilets jaunes," which have set Paris and other French cities ablaze, even as a claim that a change in Facebook's local news algorithm was responsible for the rioting was quickly picked up by French media figures close to Macron.

At root, the utopian vision of AI-powered information monopolies programmed to advance the cause of social justice makes sense only when you imagine that humans and machines “think” in similar ways. Whether machines can “think,” or—to put it another way, whether people think like machines—is a question that has been hotly debated for the past five centuries. Those debates gave birth to modern liberal societies, whose foundational assumptions and guarantees are now being challenged by the rise of digital culture.

...

THE ORIGIN OF the utilitarian social calculus and its foundational account of thinking as a form of computation is social contract theory. Not coincidentally, these accounts evolved during the last time western societies were massively impacted by a revolution in communications technology, namely the introduction of the printing press, which brought both the text of the Bible and the writings of small circles of Italian and German humanists to all of Europe. The spread of printing technologies was accompanied by the proliferation of the simple hand mirror, which allowed even ordinary individuals to gaze at a “true reflection” of their own faces, in much the same way that we use iPhones to take selfies.

Nearly every area of human imagination and endeavor—from science to literature to painting and sculpture to architecture—was radically transformed by the double-meteor-like impact of the printing press and the hand mirror, which together helped give rise to scientific discoveries, great works of art, and new political ideas that continue to shape the way we think, live, and work.

The printing press fractured the monopoly on worldly and spiritual knowledge long held by the Roman Catholic Church, bringing the discoveries of Erasmus and the polemics of Martin Luther to a broad audience and fueling the Protestant Reformation, which held that ordinary believers—individuals, who could read their own Bibles and see their own faces in their own mirrors—might have unmediated contact with God. What was once the province of the few became available to the many, and the old social order that had governed the lives of Europe for the better part of a millennium was largely demolished.

In England, the broad diffusion of printing presses and mirrors led to the bloody and ultimately failed anti-monarchical revolution led by Oliver Cromwell. The Thirty Years’ War, fought between Catholic and Protestant believers and hired armies in Central and Eastern Europe, remains the single most destructive conflict, on a per capita basis, in European history, including the First and Second World Wars.

The information revolution spurred by the advent of digital technologies may turn out to be even more powerful than the Gutenberg revolution; it is also likely to be bloody. Our inability to wrap our minds around a sweeping revolution in the way that information is gathered, analyzed, used, and controlled should scare us. It is in this context that both right- and left-leaning factions of the American elite appear to accept the merger of the US military and intelligence complex with Big Tech as a good thing, even as centralized control over information creates new vulnerabilities for rivals to exploit.

The attempt to subject the American information space to some form of top-down, public-private control was in turn made possible—and perhaps, in the minds of many on both the right and the left, necessary—by the collapse of the 20th-century American institutional press. Only two decades ago, the social and political power of the institutional press was still so great that it was often called “the Fourth Estate”—a meaningful check on the power of government. The term is rarely used anymore, because the monopoly over the printed and spoken word that gave the press its power is now gone.

Why? Because in an age in which every smartphone user has a printing press in their pocket, there is little premium in owning an actual, physical printing press. As a result, the value of “legacy” print brands has plummeted. Where the printed word was once a rare commodity, relative to the sum total of all the words that were written in manuscript form by someone, today nearly all the words that are being written anywhere are available somewhere online. What’s rare, and therefore worth money, are not printed words but fractions of our attention.

The American media market today is dominated by Google and Facebook, large platforms that together control the attention of readers and therefore the lion’s share of online advertising. That’s why Facebook, probably the world’s premier publisher of fake news, was recently worth $426 billion, and Newsweek changed hands in 2010 for $1, and why many once-familiar magazine titles no longer exist in print at all.

The operative, functional difference between today’s media and the American media of two decades ago is not the difference between old-school New York Times reporters and new-media bloggers who churn out opinionated “takes” from their desks. It is the difference between all of those media people, old and new, and programmers and executives at companies like Google and Facebook. A set of key social functions—communicating ideas and information—has been transferred from one set of companies, operating under one set of laws and values, to another, much more powerful set of companies, which operate under different laws and understand themselves in a different way.

According to Section 230 of the Communications Decency Act, information service providers are protected from expensive libel lawsuits and other forms of risk that publishers face. Those protections allowed Google and Facebook to build their businesses at the expense of “old media” publishers, which in turn now find it increasingly difficult to pay for original reporting and writing.

The media once actively promoted and amplified stories that a plurality or majority of Americans could regard as “true.” That has now been replaced by the creation and amplification of extremes. The overwhelming ugliness of our public discourse is not accidental; it is a feature of the game, which is structured and run for the profit of billionaire monopolists, and which encourages addictive use.

The result has been the creation of a socially toxic vacuum at the heart of American democracy, from which information monopolists like Google and Facebook have sucked out all the profit, leaving their users ripe for top-down surveillance, manipulation, and control.

TODAY, THE PRINTING press and the mirror have combined in the iPhone and other personal devices, which are networked together. Ten years from now, thanks to AI, those networks, and the entities that control them—government agencies, private corporations, or a union of both—may take on a life of their own.

Perhaps the best way to foresee how this future may play out is to look back at how some of our most far-sighted science fiction writers have wrestled with the future that is now in front of us.

...

Yet even classic 20th-century dystopias like Aldous Huxley’s Brave New World or George Orwell’s 1984 tell us little about the dangers posed to free societies by the fusion of big data, social networks, consumer surveillance, and AI.

Perhaps we are reading the wrong books.

Instead of going back to Orwell for a sense of what a coming dystopia might look like, we might be better off reading We, which was written nearly a century ago by the Russian novelist Yevgeny Zamyatin. We is the diary of state mathematician D-503, whose experience of the highly disruptive emotion of love for I-330, a woman whose combination of black eyes, white skin, and black hair strike him as beautiful. This perception, which is also a feeling, draws him into a conspiracy against the centralized surveillance state.

The Only State, where We takes places, is ruled by a highly advanced mathematics of happiness, administered by a combination of programmers and machines. While love has been eliminated from the Only State as inherently discriminatory and unjust, sex has not. According to the Lex Sexualis, the government sex code, “Each number has a right towards every other number as a sex object.” Citizens, or numbers, are issued ration books of pink sex tickets. Once both numbers sign the ticket, they are permitted to spend a “sex hour” together and lower the shades in their glass apartments.

Zamyatin was prescient in imagining the operation and also the underlying moral and intellectual foundations of an advanced modern surveillance state run by engineers. And if 1984 explored the opposition between happiness and freedom, Zamyatin introduced a third term into the equation, which he believed to be more revolutionary and also more inherently human: beauty. The subjective human perception of beauty, Zamyatin argued, along lines that Liebniz and Searle might approve of, is innately human, and therefore not ultimately reconcilable with the logic of machines or with any utilitarian calculus of justice.

...

Against a centralized surveillance state that imposes a motionless and false order and an illusory happiness in the name of a utilitarian calculus of “justice,” Basile concludes, Zamyatin envisages a different utopia: “In fact, only within the ‘here and now’ of beauty may the equation of happiness be considered fully verified.” Human beings will never stop seeking beauty, Zamyatin insists, because they are human. They will reject and destroy any attempt to reorder their desires according to the logic of machines.

A national or global surveillance network that uses beneficent algorithms to reshape human thoughts and actions in ways that elites believe to be just or beneficial to all mankind is hardly the road to a new Eden. It’s the road to a prison camp. The question now—as in previous such moments—is how long it will take before we admit that the riddle of human existence is not the answer to an equation. It is something that we must each make for ourselves, continually, out of our own materials, in moments whose permanence is only a dream.

Read the full, ominous report here...

Published:1/24/2019 10:31:19 PM
[Markets] The Oracle Of Boston Speaks... And We Should Listen Closely

Via Seabreeze Partners' Doug Kass (@DougKass),

Every trader and investor (whether fundamentalist or technician) should read today's opener.

"Civilization is hideously fragile... there's not much between us and the horrors underneath, just about a coat of varnish."

- Charles Percy Snow, British Novelist and Chemist

"All models are wrong, but some are useful."

- George E.P. Box, British Statistician

"To be absolutely certain about something, one must know everything or nothing about it."

-Henry Kissinger, Former U.S. Secretary of State

"But who shall dare to measure loss and gain in this wise? Defeat may be victory in disguise; The lowest ebb is the turn of the tide."

- "Loss and Gain," Henry Wadsworth Longfellow, American Poet

"You may find a buyer at a higher price - a greater fool - or you may not, in which case you yourself are the greater fool."

- Seth Klarman

I have admired The Oracle of Boston, Seth Klarman, for decades. To me, he is one of the top five investors in modern investment history - in the class of Warren Buffett and Stanley Druckenmiller.

Klarman wrote one of the best books on investing - Margin of SafetyThe book is so valuable and rare that a new one sells for almost $1,500 today and used copies for about $1,000.

One of my favorite parts of his book (that I have quoted extensively over the years) focuses on what he calls, Trading Sardines and Eating Sardines: The Essence of Speculation, in which the author discusses the importance of doing your homework and avoiding speculation:

"There is the old story about the market craze in sardine trading when the sardines disappeared from their traditional waters in Monterey, California. The commodity traders bid them up and the price of a can of sardines soared. One day a buyer decided to treat himself to an expensive meal and actually opened a can and started eating. He immediately became ill and told the seller the sardines were no good. The seller said, "You don't understand. These are not eating sardines, they are trading sardines."'

Like sardine traders, some market participants are attracted to speculation, never bothering to taste the sardines they are trading (or to do the fundamental analysis). Speculation, you see, offers the prospect of instant gratification. Many ask, why get rich slowly if you can get rich quickly?

Herd following and crowd behavior is a basic condition of speculation. There is comfort in consensus and playing along - those in the majority gain confidence from their very sizable numbers. I have repeatedly observed that today, many, knowingly or unknowingly, have become speculators. They may not even realize that they are playing a "greater-fool game," buying overvalued securities and expecting-hoping-to find someone, a greater fool, to buy from them at a still higher price. (See Klarman's quote at the beginning of today's missive).

There is a great allure (and tendency) to treating stocks as pieces of paper that you frequently trade. Viewing stocks this way requires neither rigorous analysis nor knowledge of the underlying businesses. Indeed the act of trading (in and of itself) is exciting and can be lucrative, as long as the market is rising.

By contrast, value investors pay attention to financial and fundamental reality in making their investment decisions - speculators have no such tether.

Seth Klarman's January, 2019 Letter to Investors

Seth Klarman's letter to his Limited Partners has received a lot of chatter in Davos and over the business news airwaves this week.

I found many of his concerns similar to the ones that I have outlined in my Diary over the last 12 months.

What follows are Klarman's 15 major areas of investment concern - I promise that you will find many of them familiar:

1. The Bull Market in Complacency

"Last year once again demonstrated that markets can be confoundingly fickle. Well- known conditions and widely anticipated events, such as Federal Reserve rate hikes, ongoing trade disputes, and the unsettling behavior of an erratic president, were shrugged off by the financial markets one day and driving markets down the next. Is there a cumulative impact, where no one thing matters until the collective weight of them starts to? Is the market simply myopic, whereby it ignores signs of trouble until they become more immediate and it can ignore them no longer? It's always hard to know why the market does what it does. That's part of the ever-interesting challenge we face in traversing the twists and turns of fluctuating prices and evolving fundamentals. On any given day, the sheer number of players, behaviors, economic factors, and business developments defy anyone's ability to fully grasp what is going on and why. That's why we develop and follow a game plan that does not purport to tell us what to do moment by moment, but rather is intended to help us successfully navigate the most challenging tumult. This is the essence of value investing.


2. Enter the New Regime of Volatility

"The major U.S. stock market indices steadily gained ground for the first three quarters of 2018, before plunging in a highly volatile fourth quarter. Early in the year, those who had bet that the market would remain on a steady uptrend were briefly caught flat-footed when volatility surged higher. The most jarring example was the near complete wipeout and sudden liquidation in February of the exchange-traded note XIV, a retail product used by many traders to short volatility. (The name XIV is the reverse of VIX, the common measure of market volatility.) Since its inception in late 2010, this instrument had appreciated 14-fold into early 2018, and then it was shockingly wound down within a month after it had lost 95% of its value. By mid-April, however, volatility abated and the stock market resumed its seemingly habitual march higher...

Waves of selling swamped equity markets in the fourth quarter, as volatility surged. While in 2017 the U.S. equity market did not experience a single daily fluctuation up or down of as much as 3%, in 2018 there were 15 such days, 10 in the fourth quarter alone."


3. The Changing Market Structure Poses Sizable Risks

"Generally rising share prices over the ensuing months more or less moved in tandem with higher corporate earnings, the result of massive fiscal stimulus, large corporate tax cuts, and historically low - albeit generally rising - interest rates. Cash continued to move into indexing strategies and out of the hands of active managers, with U.S. index fund holdings, after doubling from 2002 to 2009, nearly doubling again by 2018 (with important ramifications for market liquidity and corporate governance). Market pundits calculated that valuation multiples, with earnings assessed on a cyclically-adjusted basis, had reached the second-highest level ever (though reported earnings were more in line with historical averages). The economic expansion, clocking in at nine-and-a-half years, neared the longest on record. As usual in a bull market, the warm feelings generated by rising prices had the effect of overcoming any sense of looming danger in the hearts and minds of most investors. And as in all bull markets, skeptics lost both credibility and assets to manage. Many investors had evidently adopted the usual dubious emergency plan: Get out when the market starts to fall. In August, the bull market became the longest on record - at nearly 3,500 days and counting. It felt like forever...

As for algorithmic leverage, a growing amount of capital is today managed using model- based technologies to pick investments, many of which attempt to improve over time using artificial intelligence capabilities. (The Wall Street Journal recently estimated that 85% of all stock trading is now controlled by machines, models, or passive investing formulas.) The amount of capital invested in this way has grown massively since the last bear market, and no one can know how the various trading algorithms might respond to (or potentially even trigger) the next major selloff, especially after virtually an entire decade with low volatility. We simply cannot know how those algorithms might respond to new and unexpected conditions.


4. We Saw Who Was Swimming Naked In 4Q2018 and The Risks Associated With "The Negative Wealth Effect"

"In the fourth quarter, the market increasingly looked like what our retired Partner Brian Spector once referred to as a "tide market." When the tide goes out, it takes everything with it, and an investor must adjust in real time to the rapidly changing prices while considering the possibility of a deterioration in fundamentals. Sometimes, prices decline unrelated to those fundamentals. But at other times, they are anticipatory of fundamental erosion and can even be reflexively linked: lower share prices can adversely impact the economy in a sort of "reverse wealth effect;" investors feel poorer when the value of their portfolio falls, so they consume less. In addition, corporate management may view the share price decline as a potential increase in their cost of equity capital, causing them to delay capital expenditures or expansion plans, again reflexively weakening the broader economy. Yet as the market sold off this fall, there were mixed indicators as to whether the U.S. economy was actually cooling. "Hard data," such as holiday retail sales (November 1 - December 24), posted a very healthy 5% increase over the year before, even as "soft" survey and sentiment data such as consumer confidence fell from the October highs."

5. Given the Reduced Credit Quality and Explosion in Quantity - Leveraged Loans and Private Equity May Be The Most Vulnerable Asset Classes Now

"The most over-extended asset class in 2018 may well have been private equity. With public equity markets expensive and yield still scarce, many investors have lately concluded that private equity is the one place where double-digit returns may be achievable. Private equity fundraising has set records, with estimates of more than a trillion dollars in capital available to be put to work. The multiples of leverage extended in private equity transactions is approaching previous peaks, as are valuations of such transactions, while the laxity of financing terms is unprecedented. Private equity investors have had the wind at their backs for a decade, the result of a steadily growing economy and sustained low interest rates, conditions that will almost certainly not prevail forever...

Driven by such a protracted period of near-zero interest rates, investors have stampeded into anything - bonds, loans, REITs - offering a current return, leading to a degradation in the quality of outstanding credit. The proportion of U.S. non-financial corporate investment grade bonds rated BBB - the lowest investment grade rating - has increased to 58% today compared to 48% in 2011, even as the total investment grade market has increased from roughly $2.2 trillion in 2007 to $3.8 trillion today. The proportion of total non-investment grade issuance rated B- or below is nearly 25% of the overall high yield market. And high yield plus BBB-rated bonds comprise 68% of the total U.S. corporate bond universe.

The leveraged loan market, a critical funding source for lower quality issuers, has been on fire, with a record $788 billion of leveraged loans issued globally in 2017, and just below that pace of issuance in 2018. Almost 80% of the 2018 vintage was issued as "covenant-lite" - compared to about 30% in 2007. Record annual volumes of low grade bond issuance - including a 130% increase in the U.S. CLO market since 2008 - has surely created a vast future supply of distressed debt, but any calamity has seemed off in the distance. By year-end, however, it appeared to draw closer. Bank trading desks have pulled back from risk-taking, resulting in lower liquidity for bondholders and the possibility of greater price volatility. Late in the year, corporate credit spreads started to widen. The credit markets were hard hit in November, with yields on U.S. corporate debt reaching an 8 1/2-year high of 4.38%. Yields on the debt of fallen icon GE at one point hit 6.4%, from under 3% earlier in the year.

By the end of the year, cracks had also started to appear in the leveraged loan market, and investors pulled a record $3.3 billion out of U.S. loan funds in one week in mid-December. Junk bond fund outflows also set a record in 2018. Higher interest rates will significantly burden today's highly leveraged issuers, and the challenges will be made more severe when the next economic downturn hits."

6. The Pivot of Monetary Policy is A Hurdle To The Equity Market

"In 2018, the Federal Reserve raised interest rates four times as it sought to get to the "neutral rate," but late in the year it signaled it would slow the pace of rate hikes in 2019. The Fed continued the process of reducing its bloated $4.5 trillion balance sheet. In Europe, interest rates remain at historically low levels, with over $4.7 trillion of sovereigns still offering negative rates as of year-end, but the European Central Bank announced the completion of its almost four- year long program of net asset purchases in December. Even though everyone knew it was coming, the end of low rate policies and planned reduction of central bank balance sheets is far from a riskless endeavor, since these policies are unprecedented in scale, and such an unwind has never before been attempted. There should be concern about symmetry: If lowering interest rates coupled with central bank asset purchases stimulated economic expansion and a bull market in stocks and bonds, will raising rates drive a reversal? If the market's reaction to the Fed's December rate hike is any indication, the path to normalization of interest rates and of central bank balance sheets is going to be rocky indeed."

7. The Three Decade Bull Market in Bonds May Be Over

"There are also concerns that the lengthy 36-year bond bull market is nearing its end. At one point last year, rates on U.S. Treasury 10-year bonds had more than doubled from their 2016 lows. Given the length of the bond buying spree, many of today's market participants have never experienced a bear market in bonds. The riskiness of their exposures may surprise them. And because marketplace conditions have evolved greatly over the last three decades, when we do eventually enter a fixed income bear market, neither historical correlations nor prior experience are likely to provide much guidance for how to successfully navigate this treacherous terrain."

8. Debt Loads are Untenable

"Because it is always easier for politicians to borrow rather than pursue a responsible fiscal course, there is a propensity for sovereign debts to grow over time, not only in absolute terms, but also as a percentage of GDP. Since the 2008 financial crisis, aggregate global sovereign debt has nearly doubled, and most major sovereign debtors have experienced a significant increase in their debt-to-GDP ratios. In the U.S., this ratio actually had declined for many years after wartime spending started to wind down in 1945, but then it began ramping up significantly between 1980 and today. The ratio of U.S. government debt to GDP, for example, has grown from over 74% of GDP in 2008 to 105% in 2017. For the U.K., the ratio has surged from 50% to 88%. For France, 69% to 98%. For Italy, from 102% to 132%. For Spain, from 39% to 98%. Canada has gone from 68% to 90%. China from 27% to 47%. The seeds of the next major financial crisis (or the one after that) may well be found in today's sovereign debt levels."

9. The U.S. Deficit and our National Debt Are Being (Wrongly) Ignored By the Markets

"In 2018, the U.S. budget deficit soared to nearly $900 billion and could top one trillion dollars in 2019, a sorry consequence of the 2017 tax cuts that were funded with borrowed money. Growing deficits have ballooned the national debt, which by year-end hit a record $21.9 trillion (with potentially multiples of that in off-the-books entitlement promises), this while debt costs are suppressed by low interest rate policies. Approving massive tax cuts and generating the resultant huge deficits so late in the economic cycle while unemployment is so low seems particularly irresponsible, as there is little room for new fiscal stimulus if and when the economy softens. While the U.S. dollar maintains its de facto reserve currency status, this is a privilege ("America's exorbitant privilege," it was once called) never to be taken for granted. The nation's fiscal irresponsibility jeopardizes this status, which has allowed Americans to live beyond our means for a long time without paying any price. There is no way to know how much debt is too much, but America will inevitably reach an inflection point whereupon a suddenly more skeptical debt market will refuse to continue to lend to us at rates we can afford. By the time such a crisis hits, it will likely be too late to get our house in order.

Moreover, we have been increasingly worried that the U.S. financial markets are very highly leveraged not only with copious direct borrowings but also in less obvious ways - psychologically, algorithmically, and structurally - with investors vulnerable to exactly the same sort of urgent pressures that actual portfolio leverage can give rise to. As with a margin call, those pressures can include an intensely short-term orientation, extreme loss resistance, and an inability to stand apart from a panicky crowd."

10. Diminished Liquidity

"Meanwhile, many stocks have become less liquid and ownership has become more concentrated; we have previously noted that index funds hold a growing fraction of their shares. Because of limited liquidity and the potential absence of index buyers or even advent of index sellers, a bear market could have a surprisingly severe impact on small cap companies, something we started to see more frequently in the fourth quarter. As for shares not incorporated in major indices or held by ETFs, some days they seem lucky to catch any bid at all."

11. Global Economic Growth Is Moderating

"As 2018 progressed, storm clouds started to gather over the global economy. While the year began with IMF proclamations of "synchronized global growth," by the end of the year that institution was downgrading its 2018 and 2019 GDP forecasts and warning of challenges ahead. In retrospect, 2018 may be more appropriately categorized as a year of synchronized global disappointment. While some of the weaker emerging markets were the first to stumble (e.g., Argentina and Turkey), others soon followed. Japan's economy, after eight consecutive quarters of growth (their lengthiest expansion in 28 years), contracted in the first quarter and again in the third. Europe experienced its slowest growth in over four years, with even Germany cooling. China continues to be a cause of concern, with investors focusing on the numerous deteriorating data points while trying to decipher the meaning of Communist Party pronouncements. Time will tell if the U.S. economy, which has managed to stay strong thus far despite the turmoil abroad, can remain decoupled. One thing does seem certain - the world is entering 2019 with more economic question marks than were present a year earlier."

12. The End of the Post World War II Order Spells Trouble Ahead

"For the first three quarters of 2018, the markets more or less shrugged off a steady barrage of troubling economic and political developments, including escalating White House- driven trade feuds with, first Mexico and Canada, and then China, leading to the mutual imposition of higher tariffs. Turkey was forced to substantially devalue their currency as a result of twin deficits (trade and government) that led to an overheated economy. Argentina also devalued, the result of a widespread drought that impacted agricultural production, which triggered stagflation and a decline in dollar reserves. The U.K. continued to stumble toward some form of Brexit. Prime Minister Theresa May's attempt to negotiate Britain's withdrawal from the Eurozone has proved to be extremely challenging, and perhaps even fatal for her politically, while many investors are holding back from commitments to the U.K. until the details are sorted out. In Italy, a coalition government of the Northern League and Five Star took power and promised tax cuts and an exit from the Eurozone, as well as a hardline anti-immigrant policy. While they have since moderated their language, the risk is heightened that Italy could soon face even deeper political and fiscal challenges.

As the post-World War II international order continued to erode, the markets ignored the longer-term implications of a more isolated America, a world increasingly adrift, and global leadership up for grabs. The post-war order relied on philosophical alignment among democratic societies, investment in international institutions, and effective diplomacy to manage competing interests across nations. American hegemony played a key role in supporting this order and the unprecedented peace and prosperity that had generally prevailed since 1945. Recently, foreign affairs pundit Walter Russell Mead wryly observed that the old system was neither liberal nor international nor an order, yet he added that its absence will surely be felt if it disintegrates."

13. The Screwflation of the Middle Class Will Likely Have Adverse Economic and Investment Ramifications

"Social frictions remain a challenge for democracies around the world, and we wonder when investors might take more notice of this. The recent "yellow vest" marches in France, which subsequently spread to Belgium, Holland, and Canada, began as a petition against fuel tax hikes, and grew through social media into a mass protest movement led by suburban commuters, small business owners, and truck drivers. The demonstrations, which appear to have broken out spontaneously throughout the country, became widespread and even violent. While the French government is clearly concerned - in December, it reversed the planned tax increases while announcing a higher minimum wage - the financial markets have taken the unrest largely in stride, as the French 10-year note at year-end yielded a meager 70 basis points...

Social and economic advancement in America today seems increasingly dependent on demography and geography. The economic advantages enjoyed by college graduates continues to grow. Unsurprisingly, income growth in most major metropolitan areas surpasses gains in rural areas of the country. Economic inequality continued to worsen in 2018, and for many, real wages have not increased in decades. It seems clear that economic anxiety contributed to the election of Donald Trump in 2016.

The divide between Americans has been exacerbated by the echo chambers of modern- day media and the internet. Many have written of how, in only about four decades, an America of three broadcast networks has become an America of hundreds of cable channels. A few decades ago, we had less connectivity but more connection. David Brooks and others write regularly about the challenges of increased loneliness and isolation. A person today can have a thousand Facebook friends - and few, if any, actual friends."

14. The Behavior and Policy of President Trump May Weigh on the Markets

"In the U.S., meanwhile, investors truly have no idea how to react to the steady dose of presidential tweets seasoned with presidential pique. America's body politic remained inflamed in 2018. The President regularly stirred up his base with campaign-style rallies in which he endlessly warned, without evidence, of rampant voter fraud while stoking fears over the looming arrival of a caravan of Central American refugees. Claiming, also without evidence, that criminals and possible terrorists made up a significant component of this caravan, Trump sent troops to reinforce the border. Yet in the days and weeks following the midterm elections, the caravan disappeared entirely from his rhetoric, its purpose apparently served. Immigration remains a hot button issue, and whether or not to "build the wall" was the proximate issue in the prolonged partial government shutdown that started in late December.

The November midterm elections became, in many ways, a referendum on the President. The result, with record turnout, was that blue states got bluer and red states even redder, as Republicans tightened their grip on the Senate while Democrats rolled to a net gain of 40 House seats and control of that body, winning by the largest midterm popular vote margin in history. Democrats did particularly well among women, minority groups, and suburbanites, groups which have largely found Trump's policies and tone distasteful. In December, a bipartisan group of 44 former Senators signed an editorial begging today's Senate to put country ahead of party. Yet the vast majority of Senate Republicans continued to stand resolutely by the President, despite mounting indications that special counsel Robert Mueller and other investigators are delivering not only a growing number of indictments and guilty pleas but are also uncovering damaging information regarding Donald Trump's Presidential campaign and business interests. The chaos and consequent uncertainty emanating from Washington D.C. will likely only intensify as we approach the 2020 election.

The bottom line is that leadership matters. The growing turmoil in Washington and other world capitals is taking a toll on the country. As The New York Times columnist Bret Stephens recently observed, "the problem with Trump isn't that he's an empty vessel. It's that he's a malignant one." Amid all this turmoil, should investors simply hunker down and keep their focus on markets? That might be a challenge. By way of illustration, on December 18, on the FedEx earnings call, CEO Frederick Smith noted that "most of the issues that we're dealing with today are induced by bad political choices, I mean, making a bad decision about a new tax, creating a tremendously difficult situation with Brexit, the immigration crisis in Germany, the mercantilism and state-owned enterprise initiatives in China, the tariffs that the United States put in unilaterally. So you just go down the list, and they're all things that have created macroeconomic slowdowns.

These days, American do not seem to agree on much of anything. Some of it is today's politics: "Deep state" or dedicated civil servants? Witch hunt" or legitimate investigation into crimes? "Fake news" or free press? "Alternative facts" or facts? Accomplished adversary or "lock her up?" And some of it goes beyond politics into the realms of scientific inquiry and American values. Climate change or "climate hoax?" Refugees seeking sanctuary or "caravan of foreign invaders?"

Does this matter? We think it does. It's hard for our leaders to guide us when we don't agree on our values or even on how we decide what is true. Worse, our enemies, including but not limited to Russia's autocratic government, are using social media and internet postings to confuse us and divide us further. They know which hot buttons to push. Moreover, our willful disbelief of facts, truth, and science increases the chance that we will fail to recognize or take seriously growing threats. In 1993, Senator Daniel Patrick Moynihan, who famously said that "everyone is entitled to his own opinion, but not to his own facts," observed that America was "defining deviancy down." His point was that behavior that had once been seen as deviant was now considered acceptable. To paraphrase Moynihan, today we may instead be defining reality down.

This post-truth moment is quite dangerous. Imagine an incident that threatens national security. Will Americans see eye-to-eye on the seriousness of the threat? If our leaders are truth-challenged, will Americans believe the official explanation of the threat and the wisdom of the proposed response? Should they?

Jonathan Rauch, an American journalist and author, has written about a Constitution of Knowledge, an objective reality of facts and truth that he believes is now under attack from President Donald Trump. The Washington Post reports a troubling escalation in the rate of Presidential lies, from an average of around six per day in 2017 to 15 per day in 2018. Former C.I.A. Director Michael Hayden recently observed that "We have in the past argued over the values to be applied to objective reality ... but never the existence or relevance of objective reality itself." Nebraska Senator Ben Sasse notes, "we have a risk of getting to a place where we don't have shared public facts. A republic will not work if we don't have shared facts.""

15. Deep Partisanship and an Anti Democratic Policy (and Mindset) Could Undermine Investing in America

"American democracy operates not just from a system of rules but also norms. Norms have provided historically valuable guardrails for proper behavior that protect the integrity of the system from possible misdeeds by the people in it. The critical importance of norms is easily dismissed, especially by those willing to pursue power and self-interest ahead of all other considerations. But norms reflect a core cultural aspiration of fairness, civility, and community that is more socially powerful, and broader in reach, than any statute or regulation. There can be a certain reckless power in violating norms, since the sanctions for doing so are neither immediate nor obvious. But the consequence is a dangerous erosion of our greatest bonds of community.

Rachel Kleinfeld, senior fellow in the Democracy, Conflict, and Governance Program at the Carnegie Endowment for International Peace, sees the breakdown of democratic norms in post-election developments. She notes, "Democracy requires citizens' votes to be counted fairly, and those votes must determine who wields power ... in Wisconsin, the Republican legislature has stripped the incoming Democratic governor of capabilities that voters assumed their leader would have when they voted." For the great majority of American history, Supreme Court nominees needed 60 votes in the Senate for confirmation; otherwise, a filibuster could hold up a nomination indefinitely. But in 2017, the Republicans exercised the "nuclear option," changing the required vote to a simple majority. This eliminated the need for the President to identify mutually agreeable centrist nominees and instead increased the politicization of the Court.

We would argue vehemently that democracy, and the liberties and protections it provides, is not just of importance to individual citizens, but also to businesses and markets. In a democracy, businesses have the benefit of equal treatment under the law, including unbiased regulation. Yet these days, the President often singles out for criticism enterprises he finds personally objectionable or executives who disagree with him politically. These anti-democratic tendencies are extremely dangerous, particularly as the Congressional Republicans show no interest in reprimanding him, even though his behavior violates a core principle of the conservatism they claim to espouse.

We would also argue that social cohesion is essential for those who have capital to invest. Businesses need a long-term horizon to plan, and social unrest makes planning more difficult. It can't be business as usual amidst constant protests, riots, shutdowns, and escalating social tensions. It is not hard to imagine worsening social unrest among a generation that is falling behind economically and feels betrayed by a massive national debt that was incurred without any obvious benefit to them. If things get bad enough, we could see taxes once again raised to confiscatory levels. We should all be rooting for (and acting to support) social cohesion and a renewal of the American dream.

David Moss, a Harvard Business School professor, teaches a course on democracy and has found that over much of American history, partisanship was cutthroat and political divides were wide and bitter. Yes, people said horrible things about each other. But when critically important issues were being decided, even while participants in the debate were intensely focused on winning, they were also focused on how their actions might affect democracy over the long run. More recently, it seems as though politics has been transformed into an intense focus on immediate victory, the system be damned. We have seen behavior in national and local politics where those in power changed the rules to the disadvantage of those out of power (or about to come into power) simply because they could. As stewards of your capital, we see these ominous and widening social divides as risks to the economy and even to the system. Politicians have been putting self-interest and party ahead of country. Absent facts, truth, and science, we expect poor governmental decisions to become the rule and not the exception. There is no hedge to such risks, other than to work together to reverse course, heal the divides, and strengthen American democracy."

Published:1/24/2019 10:50:00 AM
[Markets] UK Bank Crashes To Record Low After "Misinterpreting" Risk Rules

Shares in one of the UK's so-called challenger banks have collapsed 35% today to a new record low after being forced to admit that it failed to have enough capital backing some commercial loans because of what it calls an accounting error.

Bloomberg reports that Metro Bank Plc fell the most since going public after applying an incorrectly-low risk-weighting to parts of its loan book, with the British lender’s chief saying he doesn’t know how long the mortgages in question had been wrongly classified.

The bank, which has expanded rapidly to 66 branches since launching in 2010, also issued a profit warning, saying its full-year profits and capital levels would be weaker than expected after a “soft” end to the year with CEO Craig Donaldson blaming the warning on intense competition in the mortgage market.

"It was a misinterpretation of the rules,” and the misclassification dates back through 2018 at least, Craig Donaldson, Metro Bank’s chief executive officer, said by phone.

“We are putting it right,” he said, calling it an “isolated incident” that didn’t affect the bank’s earnings. He said the bank has been in communication with Britain’s Prudential Regulation Authority.

Bloomberg explains that the bank previously put a 50 percent risk weighting on its commercial mortgages, but said it has now increased this to the correct level of 100 percent, a spokesperson for the lender said. For buy-to-let mortgages, the portfolio had been held at a risk weighting of 35 percent, but this has also been increased to 100 percent.

However, this is not a total surprise to many, as The FT reports, investors have long been divided over the merits of Metro’s business model and its controversial chairman Vernon Hill. Mr Hill has been criticised for corporate governance issues including paying tens of millions of pounds to a company owned by his wife. But he has maintained the support of a loyal coterie of US-based investors, many of whom backed his previous venture Commerce Bancorp.

Nevertheless, Metro is down 35% today on massive volume - a new record low.

Gary Greenwood, analyst at Shore Capital, said:

“For a fast-growing business like Metro Bank, where capital constraints are a concern, to warn on both momentum and capital intensity is a real ‘no-no’. It is no surprise therefore that the shares are down so sharply.”

Challenger banks are small, recently-created retail banks in the United Kingdom that compete with the longer-established banks in the country, sometimes by specialising in areas underserved by the "big four" banks. The banks distinguish themselves from the historic banks by modern information technology practices, such as online-only operations, that avoid the costs and complexities of traditional banking. In case you were worried about whether Metro's "error" was more systemic, here are the rest of the 'challenger' banks... Aldermore, Atom Bank, Monzo, N26, OakNorth, Starling Bank, Tandem, Tesco Bank, and Virgin Money.

Among the beneficiaries of Metro Bank's exposure as a cheating bank was none other than Crispin Odey whose fund made about 19 million pounds ($25 million) Wednesday on its short position. As Bloomberg reports, the London-based asset manager increased its bet against the company as recently as Jan. 16 and has shorts worth about $75 million or 2.7 percent of the company’s shares, making it the biggest short-seller of the bank.

Odey’s firm disclosed Metro Bank in its short book in March last year, saying that the bank “has still not grown loans fast enough to keep pace with costs,” and raising concerns over the profitability of its business. He did not immediately respond to a call requesting comment.

The question we should all be asking is a simple one - how did Metro manage to lie to regulators (or perhaps more charitably, how did regulators not spot this?) for so long? Those butterflies you feel in the pit of your stomach are warranted as the awful sense of deja vu all over again rears its ugly head since we all know what happened the last time banks started to get busted for "misclassifying" risk-weighted assets on their books...

Remember, "fortress balance sheets."

Published:1/24/2019 1:57:17 AM
[World] [Eugene Volokh] TV Recommendations

What have you watched recently, and really liked?

Post your answers in the comments below, for your fellow readers' benefit -- and for mine (I'm always on the lookout).

To prime the pump: Besides the familiar highly recommended shows, such as The Americans, Homeland, and Sherlock,

  • Heavy Water War, a 6-episode Norwegian World War II story, based on a recent incident.
  • Jonathan Strange & Mr. Norrell, a 7-episode BBC series set in a magical English of the Napoleonic Wars era, based on the excellent novel of the same name. (OK, I watched it a few years ago, so it's not that recent, but still worth recommending, I think.)

Special benefit: My wife and I liked both of these, and our tastes are often quite different.

Please post more! (There'll be separate threads in the coming weeks for books and movies, so please save those for then.)

Published:1/23/2019 10:57:01 PM
[Entertainment] Jamel Brinkley wins Ernest J. Gaines Award recognizing African-American fiction writers Jamel Brinkley's "A Lucky Man" has won the 2018 Ernest J. Gaines Award for Literary Excellence, recognizing rising African-American fiction writers.
     
 
 
Published:1/23/2019 6:56:44 PM
[Markets] Tantrums, Tapers, TBAs, & Mortgage Rates

Authored by Jeffrey Snider via Alhambra Investment Partners,

To be an interested observer of things in the summer of 2013 was to be awash in the awareness of so many contradictions packed into one little piece of history. Forward guidance, for one, recognized the effects of markets. If QE was really effective, interest rates would rise not fall in anticipation of those positive effects.

This was, actually, the whole thing behind 2013’s “taper tantrum.” Ben Bernanke came up with a contrary scheme the year before when announcing QE3 hoping to head them off. He anticipated that his form of “forward guidance” would prove decisive; that is, the Fed’s Chairman promised QE3 would be “open ended” and therefore the central bank would keep on buying MBS (technically TBA) no matter.

The idea was that markets would be more enthralled by the purchases than their expected success; rising rates betting on the latter being held in check by lower rates due to the Fed’s persisting bid.

More than that, Economists had further expected that this “easing” would kickstart a strangely lethargic economic system. After all, if you need three QE’s “something” is already amiss.

It all came to a head in May 2013. Bernanke, as I’ve noted before, never actually said the word “taper.” What that meant for the market was something else indeed; maybe QE3 (plus a fourth in UST’s) had worked, so like a cork held underwater interest rates exploded higher into what became Reflation #2.

Except, the economy hadn’t actually done much by way of accelerating. Even FOMC officials were still talking about “clogged transmission channels” and now we know one of them recognized QE’s monetary “head fake.”

The result was a toxic mix, one which confused and perplexed pretty much everyone for another year or so until the “rising dollar” of 2014 settled the matter once and for all. But along the way, more contradictions.

By early 2014, Wells Fargo, the nation’s largest mortgage lender, had laid off about 12% of its workforce in that financial space. The trigger was supposedly interest rates, according to mainstream convention, when the real killer was negative convexity.

The MBS market had been blown apart by the Summer 2013 Tantrum. Blame it on taper if you want, but the issue was, and remains, liquidity. Negative convexity, to oversimplify, is a fancy way of saying that your position gets larger the more any market price moves against you. If you are long some MBS derivative or protection (like interest rate swaps) and the price of MBS drops, if you aren’t careful the more the price drops the more long that price you can become.

Writing protection against a price drop becomes suicidal, especially since you aren’t actually running a matched book. Dealers stop writing protection at reasonable prices.

If you are a dealer who is betting on Ben Bernanke’s forward guidance (open ended QE3) and then the word “taper” is introduced, negative convexity isn’t just a textbook fear it transforms into devastating reality. And without actual economic growth to sustain the basis for the thesis, liquidity drops to nothing and for several days in May it became fire sale city.

Here’s what I wrote in July 2013 in the middle of tantrum:

As I mentioned a few days ago, if current GDP estimations are close, we will have seen five of the past six quarters at 2% or below (in some quarters much below). Without monetary policy opening a clear channel into real economy activity (not stock prices, there does not exist a “wealth effect” without widespread debt accumulation), household incomes cannot support rising rental rates that would mirror real estate prices.

In other words, since QE does not really work, the mini-housing bubble created in anticipation of it was limited by its own effects!

Wells Fargo wasn’t the only bank to notice the devastation in the TBA dollar rolls, it was just the biggest.

Fed officials had anticipated the one problem all along. They had expected real economic acceleration to cushion the blow. If mortgage rates start to rise even sharply for a little while, in an economy that is truly booming and recovering it might be a pain for some prospective home buyers but few others would even notice; banks especially.

These would shift mortgage personnel and balance sheet capacity from originating and underwriting subsidized (QE) mortgages to originating and underwriting consumer and business credit; dealers who were participating in the TBA market would shift money dealing activities to the plethora of opportunities a real recovery would provide an economy starved of it for half a decade by that point.

Bernanke never expected banks to just pull out. It was the perfect storm for 2014. Once dealers started reassessing their embedded convexity risks (or risk more broadly) in MBS, they began doing so in all their books – starting with China and EM’s.

Despite what amounted to much bigger problems systemically, meaning global money, the US housing market quickly recovered. From August 2013 until about January 2014, real estate was pummeled. According to the National Association of Realtors (NAR), home resales dropped from a peak around 5.4 million (SAAR) to a low less than 4.8 million.

That five- to seven-month drop in the real estate market was chalked up to interest rates when it was the guts of money and liquidity instead. The ripples of negative convexity, not the third call for the end of the 30-year bond “bull market.”

The current housing slump is being blamed on interest rates, too. This one, though, is much deeper and longer lasting already. After peaking way back in March 2017, the resale market has been persistently if not directly lower for approaching two years now. The latest data from the NAR puts resales below 5 million (SAAR) in December for the first since November 2015.

Year-over-year, sales volume was down 10%, the largest annual contraction since the big housing bust nearly ten years ago. This is getting pretty bad.

Blaming interest rates is the lazy way. Something is different between 2013 and 2018, alright, but it’s not only negative convexity. TBA isn’t the problem this time, it’s the labor market. At least in 2013, the latter was positive and would get better in 2014 (if overstated by trend-cycle statistics, I believe).

The labor market in many ways has never come back from the 2015-16 downturn. That’s the difference. Weakness here has left the real estate market unable to collectively deal with relatively small changes in inputs, interest rates being only one of several. Uncertainty is the greater factor.

When you combine a soft labor market (no matter what the unemployment rate says) with growing unease about the economy, the end result is resales tanking the more 2018 draws on.

Housing isn’t really an important part of the economic picture, so it’s not as if the US economy is in danger of this slump bordering on a bust.

However, housing tells us something important about the real state of the economy through consumers. These negative factors are having an effect here, so it isn’t too much of a leap to suggest they are playing out in other parts of the economy where it does matter (consumer spending overall; though we will have to wait on the Census Bureau to come back from furlough before we get the data on retail sales and other categories of consumer activity and demand).

What happened in 2013 was a massive financial upheaval, and yet the housing market popped right back up. In domestic terms, there really hasn’t been anything like it in either 2017 or 2018, especially not in the mortgage market (TBA or otherwise). And yet, housing has suffered far more and for much longer this time than last time.

Something is different, alright. The economy is in worse shape now than in 2013. So much for four QE’s and a collapse in the unemployment rate. 

Published:1/23/2019 5:57:15 PM
[Markets] "Rudy Has Lost His Mind": Trump Furious With Giuliani After String Of Botched Interviews

It could be a while before Americans see former New York City mayor Rudy Giuliani back on cable news defending President Trump and rebutting the latest batch of Mueller probe leaks. According to the Associated Press, Trump is furious with his lead attorney after Giuliani made an array of misstatements and slips during interviews over the past week, squandering a golden opportunity to push back against the Mueller probe and the "opposition party" media after BuzzFeed's embarrassingly inaccurate report that Trump had instructed Michael Cohen to lie to Congress (a report that was disputed by Mueller's office in an unprecedented move).

Though this isn't the first time Giuliani has botched a cable news interview and been temporarily yanked from the administration's batting order, the AP says Trump's patience with Giuliani - with whom he regularly speaks - is almost at its end, and some are pushing the president to start looking for a new lead attorney.

Giuliani

Reports about Trump's frustration with Giuliani, as well as renewed calls for a blanket ban on future interviews, follow a spectacular string of gaffes that began Sunday with an embarrassing appearance on Meet the Press where Giuliani suggested that the Trump Tower Moscow talks had continued through the election and continued during a New Yorker interview where Giuliani seemed to suggest that he had heard tapes made by Michael Cohen of his conversations with the president - tapes that haven't been previously acknowledged.

Vanity Fair's Gabriel Sherman reported that the campaign to oust Giuliani is being led by Ivanka and Jared, who worry that it's only a matter of time before Giuliani says something irredeemably damaging about the president. Some inside Trump's inner circle worry that Giuliani has "lost his mind." Moreover, the Associated Press reported that some want to bar Giuliani from participating in evening interviews because they worry that he has been drinking before going on-air.

Some of Trump’s allies have suggested that Giuliani be barred from evening interviews because of concerns that he was going on TV after drinking, according to three Republicans close to the White House. Giuliani has previously insisted he does not have an issue with drinking, denying to Politico last May that it affected his interviews. He added: “I may have a drink for dinner. I like to drink with cigars."

Like many of his peers in the administration, Giuliani is reportedly extremely dissatisfied with his job as Trump's attorney due mostly to his boss's mercurial temper (something that has no doubt been aggravated by Giuliani's erratic behavior).

As I’ve previously reported, the Trump-Giuliani relationship hasn’t been good for weeks. Giuliani has said privately that he “hates the job” and that Mueller’s final report will be “horrific” for Trump. Facing these challenges and pressures, it’s understandable he would make mistakes, the thinking goes. “Everyone who works for Trump screws up because there’s no way to please the guy,” an outside Trump adviser said.

So why does he stay? Perhaps because, after years of irrelevance following his spectacular failure during the 2008 Republican primary, Giuliani enjoys the press attention. He regularly texts with news anchors. Still, the modern media environment isn't what it once was, and Giuliani has definitely struggled to adapt.

"There’s a school of thought that it’s better to be famous and ridiculed than ignored," a Giuliani friend told me. But the media environment has become vastly more complicated than it was a decade ago, the last time Giuliani was on the national stage, and he has struggled to adapt. "This has been a trial by fire for him," the friend said. "He can’t just say whatever he wants, because he’s being fact-checked on Twitter. Every time he does anything he gets caught."

But, frustrating as the job may be, Giuliani also may be addicted to it. Friends said the former New York mayor was embittered after being out of the limelight for years following his failed 2008 presidential campaign. He’s been exhilarated by the press attention that comes with being Trump’s lawyer. Sources said Giuliani often books his own interviews and frequently texts with television news anchors. “There’s a school of thought that it’s better to be famous and ridiculed than ignored,” a Giuliani friend told me. But the media environment has become vastly more complicated than it was a decade ago, the last time Giuliani was on the national stage, and he has struggled to adapt. “This has been a trial by fire for him,” the friend said. “He can’t just say whatever he wants, because he’s being fact-checked on Twitter. Every time he does anything he gets caught.”

Still, after struggling to find an attack-dog-in-chief to lead his legal team, Trump has been otherwise happy with Giuliani's approach. In other words, when he's on, he's on. But his most recent performances represented a "major slip."

“Rudy had done a very good job going on TV and fighting back and laying down a defense of the president,” said Sam Nunberg, a former Trump campaign official. “But now it’s time to get precise, you can’t be so loose anymore. He had a major slip.”

But Giuliani has slipped up before. And with Mueller reportedly closing in on the final stages of his investigation, which is expected to end with a lengthy report about Trump's misdeeds that Giuliani is expected to rebut, switching horses mid-race also carries risks of its own.

Published:1/23/2019 8:23:40 AM
[Markets] Dismantling The Doomsday Machines

Authored by John Walsh via The Unz Review,

“From a technical point of view, he (Stanley Kubrick) anticipated many things... Since that time, little has changed, honestly. The only difference is that modern weapons systems have become more sophisticated, more complex. But this idea of a retaliatory strike and the inability to manage these systems, yes, all of these things are relevant today. It (controlling the systems) will become even more difficult and more dangerous.” (Emphasis, jw)

Vladimir Putin commenting on the film, Dr. Strangelove: or How I Learned to Stop Worrying and Love the Bomb, in an interview with Oliver Stone, May 11, 2016. Putin had not seen the movie and did not know of it before Stone showed it to him.

The Doomsday Machine, the title of Daniel Ellsberg’s superb book is not simply an imaginary contraption from a movie masterpiece. A Doomsday Machine uncannily like the one described in Dr. Strangeloveexists right now. In fact, there are two such machines, one in US hands and one in Russia’s. The US seeks to hide its version, but Ellsberg has revealed that it has existed since the 1950s. Russia has quietly admitted that it has one, named it formally, “Perimetr,” and also tagged it with a frighteningly apt nickname “Dead Hand.” Because the US and Russia are the only nations with Doomsday Machines to date we shall restrict this discussion to them.

The Doomsday Machine was published just a little more than a year ago, but its terrifying message has failed to provoke action. And Daniel Ellsberg is a man who knows whereof he speaks; the subtitle of the book is “Confessions of a Nuclear War Planner,” which is how Ellsberg spent the early part of his career. What follows on this first anniversary of the book’s publication is a brief restatement of the main argument of the book and then a summary of Ellsberg’s plan of action. (Not included are memoirs and personal experiences of this remarkable, very intelligent and moral man, which are found in the book and which I recommend to flesh out the line of thought presented herein.) Ellsberg’s plan is to be considered a stop gap measure to remove the nuclear sword of Damocles hanging over our heads and allow time to move to total abolition of nuclear weapons, a much more arduous task. Hopefully this essay will serve as a reminder of Ellsberg’s warnings and as a call to act on them.

How Do the Doomsday Machines Work? – Two components:

What is the essence of a “Doomsday Machine”? The first component is a mechanism of launching nuclear weapons that is on hair trigger alert and not always in the hands of the Presidents of Russia or the US. The fact well concealed from the US public is that the US President or those in the line of Constitutional succession are not the only ones with a finger on the nuclear button, and the same is true in Russia. The second component of a Doomsday Machine is a weapon of such destructive force that it can kill billions in the immediate aftermath of an attack and then the entire human race and perhaps all animal life on earth.

The Launch Mechanism – Command and Control

Russia and the US each have a First Strike capability, that is the ability to strike the other with great force, destroy the other’s cities and industrial and military base – and knock out the other’s nuclear deterrentThe essence of a First Strike capacity is this ability to wipe out the deterrent of the other side or weaken it sufficiently that the remaining force could be intercepted for the most part. How can a targeted nation prevent the use of a First Strike? It must convince the adversary that such a strike is futile and will not destroy the deterrent of the targeted nation. The attacker must understand that he will not escape retribution, because the nuclear force of the targeted nation, its nuclear deterrent, will survive.

Launch on Warning – Hair Trigger Alert. The first measure to prevent the loss of deterrence in the event of a First Strike is to put the nuclear force on Launch on Warning or Hair Trigger Alert status. Most of us have heard about this, but we ought to quake in our boots every time the thought of it crosses our minds. Since the time to respond to a First Strike is only tens of minutes for an ICBM (Intercontinental Ballistic Missile) attack, which takes about 30 minutes to travel between the US and Russia, and even less time for a short or intermediate range missile, a targeted country must have its nuclear force loaded onto delivery vehicles and capable of being launched on warning of a nuclear attack. The weapons must be ready to go and launched before the country is struck. This is called “Launch on Warning” and the weapons are sometimes said to be on “Hair Trigger Alert.” (There is some imprecision to the terminology surrounding nuclear weapons, partly due the obfuscation used by the US in negotiations. Steven Starr gives an account of this imprecision and a brief glossary here. I will use terms that are easily understood and common sensical. And I will define them when necessary.)

Nuclear warheads that are loaded onto delivery vehicles are said to be “deployed,” and there were roughly 1600 such warheads loaded onto long range delivery vehicles, each, in Russian and U.S. hands in 2018. They are ready to be launched in minutes. (There are several thousand more warheads in reserve on each side but not “deployed.”) It is easy to see the danger inherent in this situation. The decision to launch must be made in minutes to prevent destruction of the nuclear deterrent and it would be hard to decide with certainty whether the warning of an attack was genuine or due to a technical malfunction. In fact, the signal that an attack is coming is always likely to be ambiguous. Even if the attack is real, the attacker will seek to hide it and so even then the signal will be ambiguous. Thus, even an ambiguous warning caused due to a technical malfunction must always be treated with seriousness and a decision to respond made within minutes.

That a decision of such moment must be made so quickly, under the gun if you will, is a disaster waiting to happen. A mistake is bound to occur with the passage of sufficient time. And it nearly did during the Cuban Missile crisis and again in 1983 when the Soviets detected an attack coming from the United States. According to established protocol the warning was sufficient for the Soviet officer in charge to inform the leadership that a nuclear attack on the U.S. should be ordered. But that officer, Lieutenant Colonel Stefan Petrov, refused to follow protocol and instead interpreted the warning of an attack as a false alarm, which it was. So, a launch of Soviet weapons did not occur. In Russia, Stefan Petrov who died recently is hailed as “the man who saved the world.” This is the nuclear powder keg on which we all sit.

Decapitation and Delegation – Unknowns have their finger on “the button.” The second measure to prevent loss of deterrence is Delegation. This is not widely known or understood. One aspect of a First Strike would be an attempt to knock out known command centers so that a retaliatory strike could not be ordered. This is known as Decapitation. The antidote to Decapitation is Delegation, that is others besides the Presidents and their immediate successors are authorized to press “the button.” It works this way. These “others” are located in secret command centers far from Washington or the Strategic Air Command Base in Colorado, both of which will be targeted in a Decapitation strike. If these secret centers find themselves cut off from communication with Washington or Moscow, then the assumption is made that a decapitating nuclear strike has occurred. In that event these “others” removed from the centers of power are authorized to the press the nuclear button!! (One can see why the Russians call their system of delegation, Perimetr.) These others are not elected officials and in fact we do not know who they are! What Ellsberg discovered is that some of these “others,” military men, were concerned that they too could be hit in a decapitating strike. So they had delegated authority to still others!! In fact, no one, perhaps not even the President and his circle of advisors, knows who can send off the nuclear weapons. Is it possible that one of them might be like the fictional General Jack D. Ripper, the psychotic and delusional man who gives the launch order in Dr. Strangelove – or a similar individual lusting after the Rapture?

It does not take much imagination to see the multiple ways in which things could go wrong; a launch due to a false alarm of attack and a lack of time to make a thoughtful check and decision; a failure of communication that puts the perimeter out of touch with the center although no decapitation has in fact occurred; or a mad man or woman or a crazed ideologue who becomes one of the Delegated. A terrorist attack with a nuclear weapon on Moscow or Washington could also mimic a Decapitating attack and set in motion the fast Delegation to the delegatee. The appropriateness of the term “Dead Hand” for this arrangement is striking.

It is true that so far as we know the probability of a mistake or a rogue element gaining control of nuclear weapons is small. (But the fact is we do not know what the situation is – it is hidden from us and perhaps even from elected officials.) The weapons are protected from rogue use by safety locks called Permissive Action Links (PALs) but these are not perfect, and they must be capable of activation by someone in the “perimeter” in the event of Delegation. And they are no protection against a false alarm of an attack. Despite how low the probability of an error might be, the dice are thrown every moment of every day, and with the passage of time, inevitably something will go wrong.

In summary, First Strike Capability is the source of the problem. It leads to Launch on Warning and Delegation by a targeted nation. The U.S. pioneered and maintains a First Strike Capability and refuses to adopt a “No First Strike” policy. Another response to a first strike capability is that the targeted nation will build up the numbers in its nuclear force so that some will always survive an attack. That is precisely what happened in the first Cold War until it reached insane levels as shown graphically here.

The Nuclear Weapon. The First Strike Arsenal.

Obliteration of Russia and the U.S. The second component of a Doomsday Machine is the weapon itself. What is the destructive power of the ensemble of nuclear weapons as used in a First Strike? I know of no such quantitative estimates released by the Pentagon for the present day. They are badly needed. But in 1961 when Ellsberg was among those working on nuclear war fighting strategy for the Kennedy administration, he asked for an estimate from the Pentagon of the deaths due to a First Strike as the generals and their civilian war planners had mapped it out at the time. To his surprise the estimate came back at once – the Pentagon had made it and kept it hidden. Launching of the nuclear weapons planned for use in a First Strike by the U.S. would result in the deaths of 1.2 billion from explosions, radiation and fire. That number was the number of deaths and did not include injuries. And it was only the result of US weapons; it did not include deaths from a response from the Soviet side if they managed one. 1.2 billion people was the toll at a time when the population of the earth was about 3 billion! (Note that this toll does NOT include the effects of nuclear winter which was unknown at that time. More on that below.) And of course, such deaths would be concentrated in the targeted countries which in these times would be the US and Russia. Ellsberg was stunned to learn that the Pentagon would coolly make plans for such a gargantuan and immediate genocide. And so should we all be. What kind of mindset, what kind of ethics, what kind of morality has allowed for such a thing!

Nuclear Winter and the Destruction of Humanity. But the damage does not stop there. This is the surprise that the Pentagon did not understand at the time. The ash from the fires of burning cities would be cast up into the stratosphere so high that it would not be rained out. There it would remain for at least a decade, blocking enough sunlight that no crops would grow for ten years. That is sufficient to cause total starvation and wipe out the entire human race with only a handful at most able to survive. This is Nuclear Winter. It is eerily reminiscent of Kubrick’s Doomsday Machine which resulted in a cloud of radioactivity circling the earth and wiping out all life. Nuclear Winter was first understood in the 1980s, but at that time careful assessment of the existing computer models seemed to indicate that it was not likely and so many “stopped worrying.” Now with the interest in Global Warming, new and better computer models have been developed. When the results of a nuclear first strike are put into these models, Nuclear Winter again makes its appearance as Brian Toon, Alan Robock and others have shown. The TED talks of Toon and of Robockdescribing their findings are worth watching; they are brief and well-illustrated. We are confronted with a genocide of all or nearly all humanity, an “Omnicide.”

The launch of the 1600 “deployed” warheads of either the US or Russia is sufficient to give us nuclear winter. So we in the US have put in place a weapon system on hair trigger alert commanded by we know not whom which can kill virtually all Americans – along with most everyone else on the planet. We have on hair trigger alert a weapon which is in fact suicidal. Use the weapon and we lose our very existence. We should also be clear that even if we prescind from the effects of nuclear winter, the nuclear attacks would be concentrated on Russia and the US. So most of us would be consumed. Thus MAD (Mutual Assured Destruction) is replaced with SAD (Self-Assured Destruction).

Disarming the Doomsday Machine

What is Ellsberg’s plan to disarm the Doomsday Machines? He does not suggest total abolition of nuclear weapons, a worthy and ultimate goal, as a first step. He suggests intermediate steps, which can be accomplished much more quickly and remove the present danger.

From what was said above, it is clear that the Doomsday Machine with its massive nuclear force, Launch On Warning and system of Delegation all grows out of a need to protect from a First Strike. The solution to the problem does not demand giving up all nukes or even a deterrent which many are loathe to do. And that is not hard to understand when we compare the fate of Kim Jong-un to that of Muammar Gaddafi or Saddam Hussein. Nor is it difficult to understand in the U.S. given the current intense Russophobia, or in Russia given the alarm caused by NATO’s drive to the East. This is one reason that total abolition of nuclear weapons or even abolition of a nuclear deterrent will be quite difficult. However, dismantling the Doomsday Machines, the immediate danger to humanity, does not demand giving up nuclear deterrence.

Abandoning First Strike Policy and Capacity. Dismantling the Doomsday Machine with its Hair Trigger Alert and Delegation does mean abandoning a First Strike policy and capacity. And right now, only two countries have such First Strike capacity and only one, the U.S., refuses to take the right to use it “off the table” even when not under attack. What does the elimination of First Strike Capacity mean in practice; how can it be achieved? This turns out to involve two basic steps for the US.

Dismantling the Minuteman III. First, the land-based ICBMs, the Minuteman III, must be entirely dismantled, not refurbished as is currently being undertaken at enormous cost. These missiles, the land-based part of the Strategic Triad, are highly accurate but fixed in place, “sitting ducks”; they are only good for a First Strike, for they will be destroyed in a successful First Strike by an adversary. Former Secretary of Defense William Perry and James E. Cartwright, formerly head of the Strategic Air Command and Vice Chair of the Joint Chiefs of Staff, have both called fordismantling the Minuteman III. We would thereby also save a lot of money.

Reducing the SLBM Force. The second step in dismantling the First Strike capacity is to reduce the Trident Submarine-Launched Ballistic Missile (SLBM) force to the level where it cannot destroy the entire Russian land-based missile force. With these two measures in place the US would no longer have a First Strike Capability, and so Launch on Warning and Delegation upon apparent Decapitation would both be unnecessary. It is that simple.

Of course, the Russians would also need to take similar measures that take into account the specifics of its arsenal. And that is where negotiations, treaties and verification come in. That in turn cannot take place in the current atmosphere of Russiagate and Russophobia, which is why both are existential threats and must be surmounted. We must talk despite our differences, real or perceived.

However, were the US and Russia to abandon their First Strike capacity, a reasonable deterrent could be preserved. Such a deterrent should be far below the threshold for a nuclear winter. When Herbert York, one of the original nuclear war planners and strategists, was asked how many nuclear weapons it would take to guarantee deterrence, he suggested somewhere between one and one hundred, closer to one, perhaps ten. Of course, such a small number demands giving up on a missile defense system which has been a will-o’-the-wisp since the 1950s. But would a leader of any nation, even one equipped with an Anti-Ballistic Missile system, when confronted with 100 nuclear warheads facing him or her, be willing to risk ten getting through and demolishing 10 cities?

But there is a deep problem here. The US at least has not built its nuclear forces with the simple object of deterrence. It has had the policy of being able to strike first and destroy or sufficiently degrade the Russian force so that there would be no retaliation. Ellsberg establishes that definitively based on his own experience in his days as a nuclear war planner. But this is also a will-o’-the-wisp. With Launch on Warning and Delegation both sides would be destroyed. So, this path must be abandoned. However, it is a path that has been trod for a long time. It has acquired many adherents and become embedded in the thinking of our “strategic war planners.” It will be hard to abandon this way of thinking which is what will make the simple steps outlined above politically difficult although technically and logistically quite simple. Moreover, in the mind of the public there is no clear distinction between First Strike and simple deterrence. And many favor a nuclear deterrent. So the movement for total abolition of nuclear weapons has a long way to go to reach its destination.

An additional measure – Eliminating launch on warning, aka “hair trigger alert,” that is, “De-alerting.” An additional measure has also been proposed. All nuclear warheads should be removed from deployed status by Russia and the US. (The oft-used term for this is “De-alerting.”). That is, the warheads should be removed from their delivery vehicles and stored in a way that would take days or even weeks to deploy – that is to remount. This has been proposed by the Global Zero Commission on Nuclear Risk Reduction which says of itself:

As world leaders descended on the United Nations in New York for the 2015 Non-Proliferation Treaty (NPT) Review Conference, the Global Zero Commission on Nuclear Risk Reduction — led by former U.S. Vice Chairman of the Joint Chiefs of Staff General James E. Cartwright and comprised of international military experts — issued a bold call for ending the Cold War-era practice of keeping nuclear weapons on hair-trigger alert.

The Commission’s extensive report calls for (1) an urgent agreement between the United States and Russia to immediately eliminate “launch-on-warning” from their operational strategy, and to initiate a phased stand down of their high-alert strategic forces….; and (2) a longer-term global agreement requiring all nuclear weapons countries to refrain from putting their nuclear weapons on high alert.

Urgent action is needed, according to the Commission, because of heightened tensions between the United States and Russia, ongoing geopolitical and territorial disputes involving other nuclear countries that could escalate, and an emerging global trend toward placing nuclear weapons on high alert.

The proposal, backed by more than 75 former senior political officials, national security experts and top military commanders, makes the case that a multinational de-alerting agreement could greatly mitigate the many risks of nuclear weapons use, including from computer error, cyber launch, accidental detonations, unauthorized “insider” launch, false warning of enemy attack, and rushed nuclear decision-making.

The full report is here.

Such an arrangement must be solidly negotiated and verifiable. It would seem that the US President could do this by executive order and at little cost. For submarines the nuclear warheads would be stored on shore in a way that makes it impossible to reload for the period of delay that is negotiated. This arrangement means that no decisions about nuclear warfare need be taken at a moment’s notice, no launch on warning is possible or even relevant any longer and the possibility of Decapitation and the consequent necessity of Delegation disappear. And when either nuclear state feels existentially threatened by conventional forces, its first response need not be to fire a nuclear weapon. Its first response could be to deploy its warheads (that is, reload the launch vehicles) while it negotiates over the threat. That along with Ellsberg’s suggestions would greatly stabilize the world and lessen to almost zero the probability of nuclear war based on misjudgment or accident. From there the work on ever greater levels of reduction leading eventually to total abolition of nuclear weapons could go forward.

The Work Ahead to Win Support for Dismantling the Doomsday Machines

To be able to get Congress or the Executive to move toward these changes, a number of things will be necessary. First is information. As a very basic example, Ellsberg learned in 1961 that a US First Strike at that time would produce 1.2 billion deaths as an immediate result of Nuclear War, excluding any effects of nuclear winter and excluding a Soviet response. We deserve to know what those numbers are now. Here, Ellsberg argues, both public pressure and the work of whistle blowers will be needed. As another example, we need to know from the Pentagon and the National Academy of Sciences whether the result of a US First Strike of the magnitude now on hair trigger alert would lead to nuclear winter – as it seems almost certain it would.

But far more than that would be needed. There must be some form of pressure to wake up the politicians and force them to dismantle the Doomsday Machines. But this is missing. In part with the end of the First Cold War, many thought that the danger had disappeared. Clearly it has not. A movement to abolish the Doomsday Machine is a threat to the Military Industrial Complex and so the MIC and its media acolytes would prefer silence or opposition to such efforts. It may be that the generations which lived through the first Cold War and went through its terrors, from “duck and cover” drills to mushroom cloud nightmares, to the Cuban Missile Crisis may have a special role to play. Their psyches have been most affected by nuclear horrors and they may be the best ones to convince succeeding generations of the dangers. But the strategy and tactics for such an effort have yet to be outlined. It is a task that lies before us.

The first step to sanity is to eliminate 'launch on warning' and the second step would be to rid ourselves and the Russians of a 'First Strike policy' and capacity and negotiate a stable deterrent, small enough that it does not threaten nuclear winter. That is something that the nuclear powers and the broad public can easily accept despite the opposition of a small number of nuclear war fighters. Here the idea of negotiations is not to make the other side more vulnerable but to give the “adversary” and oneself a small, stable nuclear deterrent. Such a win-win approach to negotiations is in fact necessary for survival while we take the more difficult road to total nuclear abolition.

Total abolition should be the ultimate goal because no human hand should be allowed to wield species-destroying power. But it seems that an intermediate goal is not only needed to give us the breathing space to get to zero nuclear weapons. An intermediate and readily achievable goal can call attention to the problem and motivate large numbers of people. The Nuclear Freeze movement of the 1980s is a very successful example of this sort of effort; it played a big role in making the Reagan-Gorbachev accords possible. The effort to kill the Doomsday Machines might well be called something like Step Away From Doomsday or simply Step Away. The time may be ripe for such an effort. Getting to zero will require a breakthrough in the way countries deal with one another, especially nuclear armed countries! Let us give ourselves the breathing space to accomplish that.

Published:1/22/2019 11:21:30 PM
[World] [Orin Kerr] Does New Law Take Time to Become "Clearly Established"?

A fascinating question about qualified immunity law.

I realize that qualified immunity is a pretty unpopular doctrine, especially here at the Volokh Conspiracy. But for readers willing to accept existing Supreme Court law as a given, the Third Circuit's new decision in Bryan v. United States asks a really cool question: Are officers expected to know instantaneously of new legal rulings that clearly establish the law? Or is there some kind of allowed time delay before an officer is held liable for not conforming his conduct to a new decision? Bryan takes the latter path, and I thought readers might be interested in knowing more about it.

I. The Facts

Here's how the issue arose. On August 31, 2008, a group of travelers went on an eight-day Caribbean cruise. They started in Puerto Rico, went to some foreign ports such as Antigua and Barbados, then went to St. Thomas in the U.S. Virgin Islands. They returned to Puerto Rico on September 7, 2008.

But the trip wasn't uneventful. Customs officers suspected that the travelers were smuggling drugs. On September 5th, a customs officer in Puerto Rico, Officer Ogg, decided that the travelers' cabins should be searched. The next day, September 6th, another group of customs officers searched the cabins when the cruise ship was docked at St. Thomas the next day. No evidence was found.

Here's the interesting part. The travelers sued in the federal district court in the Virgin Islans, arguing that the search of their cabins violated the Fourth Amendment under a Third Circuit ruling handed down September 4th, 2008 -- just two days before the search occurred. The new ruling, United States v. Whitted, 541 F.3d 480 (3d Cir. 2008), involved nearly identitical facts as this case. A prior search of cabins occurred in the exact same cruise ship, also while docked in St. Thomas, also for evidence of drugs. Whitted held that searches of cruise-ship cabins docked in the Virgin Islands after a trip to foreign ports requires reasonable suspicion under the Fourth Amendment. This was the first ruling of its kind in any federal circuit court.

II. The Ruling

Under qualified immunity doctrine, officers are bound by "clearly established" law. So here's the question. How long after a decision is handed down does law become "clearly established"? Was the September 4th ruling "clearly established" in Puerto Rico on September 5th, when the officer in Puerto Rico concluded that the cabins should be searched? Was it "clearly established" in St. Thomas on September 6th, when the officers boarded the ship and searched the cabins?

In an opinion by Judge Roth, the Third Circuit ruled that the Whitted decision was not yet clearly establlshed and that therefore qualified immunity applied:

Until September 4, 2008, there had been no ruling in the Third Circuit as to what constituted a "routine search" [for which no cause is needed under the Fourth Amendment] As for Officer Ogg, he was located in San Juan, Puerto Rico, in the First Circuit. There had not been any such ruling in the First Circuit, and the First Circuit courts would not be bound by Whitted, a Third Circuit case.

When such a ruling is made, a ruling which affects the procedures used in border searches, it is beyond belief that within two days the government could determine what was "reasonable suspicion" and what new policy was required to conform to the ruling, much less communicate that new policy to the CBP officers. We can only conclude that as of September 5, 2008, it was not clearly established in either the Third Circuit or the First Circuit that a search of a cruise ship cabin at the border had to be supported by reasonable suspicion. Accordingly, under the circumstances that Officer Ogg confronted, he did not violate clearly established law by entering lookouts for the three passengers the day after we issued our decision in Whitted. He is entitled to qualified immunity.

We conclude that the same situation applies to the St. Thomas officers. On September 6, the Whitted standard was no more clearly established than it had been the day before. Moreover, if the St. Thomas officers had been aware of Whitted, they would have known that Whitted held that unsubstantiated information from TECS can establish reasonable suspicion.

For these reasons, we conclude that the Whitted standard was not clearly established in the Third Circuit, or the First Circuit, on September 5 or 6. Within one or two days, neither Officer Ogg nor the St. Thomas officers could reasonably be expected to have learned of this development in our Fourth Amendment jurisprudence. At that time, it would not have been beyond debate that, absent reasonable suspicion, the Fourth Amendment prohibited the search of the travelers' cabins. For purposes of qualified immunity, a legal principle does not become "clearly established" the day we announce a decision, or even one or two days later.

This holding is informed by the overarching aim of the qualified immunity doctrine to insulate from civil liability "all but the plainly incompetent or those who knowingly violate the law," and the need to ensure that the relevant legal principle is framed with particularity and settled "beyond debate." We are, however, deciding only this case. For that reason, we decline to draw a bright line demarcating when a legal principle becomes "clearly established." We leave that exercise for another day.

III. A Few Thoughts

This is a fascinating case, and I'm not sure where I come out on it. Here are a few tentative thoughts.

1. Let's start with the general principle. The idea that a decision doesn't become "clearly established" the instant it is handed down strikes me as quite plausible, although not obviously right. Qualified immunity is largely about personal culpability in either failing to know or ignoring the law. If it was very difficult to know the law at the time the search occured, a person isn't culpable for not knowing it. This was easier to see in the pre-Internet era. If you were a law nerd who wanted to know the very latest decisions, it would take you a week or so to get summaries in U.S. Law Week or to get copies of the latest slip opinions sent your way. In that environment, even a hyper-vigilant lawyer might not know about a decision that came down yesterday or two days ago.

Even today, it takes a hyper-vigilant legal nerd at least some non-zerp amount of time to digest new rules. Say a circuit usually posts new opinions in the afternoon between 2pm and 3pm. Imagine that it posts a particularly important new decision one day at 2:07pm. We wouldn't expect everyone to know the new rule of the new decision at exactly 2:07pm. Imagine two officers are out in the field about to conduct a search. Officer Bob searches at 2:06pm, and Officer Stan searches at 2:08pm. A culpability-focused approach would plausibly treat those two searches the same way, even though Bob technically searched before the opinion was posted and Stan technically searched after it was posted.

2. In terms of precedent, I would think that Messerchmidt v. Millender provides at least some support for the idea that an officer isn't instantaneously reponsible for knowing new legal decisions. Messserschmidt involved a lawsuit against officers for executing a warrant that the plaintiffs claimed lacked probable cause. The Ninth Circuit agreed with the plaintiffs and ruled that qualified immunity did not apply. The Supreme Court reversed, ruling that qualified immunity attached in part because the officers had asked his bosses and some prosecutors to review the warrant application and they has said it was fine. From the opinion:

[T]he fact that the officers sought and obtained approval of the warrant application from a superior and a deputy district attorney before submitting it to the magistrate provides further support for the conclusion that an officer could reasonably have believed that the scope of the warrant was supported by probable cause. . . . Messerschmidt . . . submitted the warrant application for review by Lawrence, another superior officer, and a deputy district attorney, all of whom approved the application without any apparent misgivings. Only after this did Messerschmidt seek the approval of a neutral magistrate, who issued the requested warrant. The officers thus "took every step that could reasonably be expected of them." Massachusetts v. Sheppard, 468 U.S. 981, 989, 104 S.Ct. 3424, 82 L.Ed.2d 737 (1984). In light of the foregoing, it cannot be said that "no officer of reasonable competence would have requested the warrant." Malley, 475 U.S., at 346, n. 9, 106 S.Ct. 1092. Indeed, a contrary conclusion would mean not only that Messerschmidt and Lawrence were "plainly incompetent," id., at 341, 106 S.Ct. 1092, but that their supervisor, the deputy district attorney, and the magistrate were as well.

The Court of Appeals, however, gave no weight to the fact that the warrant had been reviewed and approved by the officers' superiors, a deputy district attorney, and a neutral magistrate. . . .But by holding in Malley that a magistrate's approval does not automatically render an officer's conduct reasonable, we did not suggest that approval by a magistrate or review by others is irrelevant to the objective reasonableness of the officers' determination that the warrant was valid. Indeed, we expressly noted that we were not deciding "whether [the officer's] conduct in [that] case was in fact objectively reasonable." Id., at 345, n. 8, 106 S.Ct. 1092. The fact that the officers secured these approvals is certainly pertinent in assessing whether they could have held a reasonable belief that the warrant was supported by probable cause.

I find this passage from Messerschmidt pretty troubling, as can let an agent rely on others enough that no one is accountable for even pretty clear legal violations. But whether I like it or not, the case seems to say that it's not the officer's fault if he gets bad legal advice from higher-ups. And if getting bad legal advice is relevant to whether he gets immunity, then I would think it's also relevant if an officer, through no fault of his own, isn't aware of a brand-new decision. We expect officers in the field to find out about new legal decisions from higher-ups and prosecutors. If that's right, not knowing of a new legal decision seems something like being given bad legal advice from higher-ups and prosecutors in Messerschmidt.

3. Of course, if you say that it takes time for an opinion to become "clearly established," you then need a framework for figuring out how much time that is. This is tricky. The Third Circuit seems to have something like a "reasonable amount of time to be trained" approach, which seemes to look at how long you might expect before an officer was told of the law. Another possibility would be an "actually was told of the new ruling" standard, Cf. Messerschmidt. Or maybe you combine them. Maybe you say that an officer is charged with knowing the law if either he was told about the ruling or he failed to take reasonable steps to become aware of the law that would have otherwise informed him of the new ruling.

Another approach might consider whether the new ruling was final. The day after a new circuit decision is handed down, you don't yet know if it will stay on the books. Maybe the circuit will vacate the ruling and rehear the case en banc. Maybe the panel will withdraw or amend the opinion. Maybe the Supreme Court will grant cert. One approach would be to say that new circuit court decisions aren't "clearly established" until the time for further review has passed.

On the other hand, maybe the difficulty of identifying an answer to "how long is long enough" suggests that courts shouldn't try to answer that question. Maybe a bright-line rule that holds officers immediately responsible for new law is best. It would also have the benefit of encouraging law enforcement to alert officers to new rulings immediately. And although it might be unfair in a few cases, it's fair to wonder how often this issue comes up.

4. There are also some neat issues raised in Bryan about the liability for the officer in the First Circuit for following a ruling in the Third Circuit. It makes sense to say that the law of another circuit ordinarily won't clearly establish the law governing him. But I wonder if that approach makes sense in the rare situation when an officer is engaged in the planning of a search that the officer does or should know will occur in the other circuit. Does it matter if the officer is someone who usually conducts searches in his own circuit or often participates in searches in many circuits? The Third Circuit didn't have to get into that level of detail in Bryan, but I think there are some interesting issues raised by the cross-circuit search that could have been considered.

Published:1/21/2019 11:44:57 PM
[Markets] BuzzFeed CEO Spoofed Prominent Gun Rights Activist To Spread Disinformation

Long before BuzzFeed was publishing unverified dossiers and anti-Trump claims refuted by Robert Mueller, founder and CEO Jonah Peretti created a fake website and email address in the name of prominent gun rights advocate John Lott in order to spread disinformation.

Peretti, then-director at Brooklyn-based technology nonprofit Eyebeam, used Lott's name in 2003 to trick people into thinking that Lott had changed his mind on a key piece of gun-rights legislation that protected gun makers from abusive lawsuits designed to put them out of business. 

I was already relatively well-known in 2003 to those who care about the gun control debate because of my book “More Guns, Less Crime.” Peretti sent emails under my name to convince people that I had changed my mind and come out against the Act.  The emails then urged people to ask their congressmen and Senators to oppose the bill. -John Lott via Fox News

Lott explains Peretti's deception in a Monday Op-Ed which you can read below. 

***

John Lott Via Fox News 

BuzzFeed, a popular “news” website, has once again been shamed for publishing fake allegations against Donald Trump. BuzzFeed’s anonymously sourced report claimed that President Trump ordered his former lawyer, Michael Cohen, to lie to Congress about a proposed business deal in Moscow. Supposedly, two unnamed federal law enforcement officials claimed that Special Counsel Robert Mueller’s office had the goods. They were purported to have collected emails, texts, and testimony proving the explosive claim.

The story dominated the news on Friday, with Democrats calling for Trump to be impeached. MSNBC’s “Morning Joe” opened with the announcement that this revelation was “a big one.” CNN’s “New Day” host John Berman claimed the disclosure was so dramatic he almost spilled his coffee.

But by late Friday, Special Counsel Robert Mueller’s office issued a very rare rebuke saying that BuzzFeed’s account was “not accurate.” This was hardly BuzzFeed’s first embarrassment. As Trump reminded people, “it was BuzzFeed that released the totally discredited 'Dossier,' paid for by Crooked Hillary Clinton and the Democrats . . .”

BuzzFeed’s culture of fake news starts at the top with founder and CEO Jonah Peretti, who has a history of knowingly spreading false information. He has used fraudulent websites and email accounts to pose as people he wished to defame. I was one of his victims.

Peretti’s first victim was MBA student Jeff Goldblatt, who had set up a dating service called the Rejection Hotline. This was inadvertently in competition with Peretti’s newly created rejectionline.com. Peretti’s sister and co-founder, Chelsea, contacted Goldblatt to gain information on his business. She “interviewed” him, under the false identity of New York-based reporter Vanessa Holmes.

Then Jonah Peretti set up the website JeffGoldblatt.com, under the pretense that it was Goldblatt’s personal website. Peretti sent out emails from me@JeffGoldblatt.com that, according to Goldblatt, “contained multiple lies about me and portrayed me as an arrogant jerk who was bragging about how I stole the idea of the New York City Rejection Line.”

Goldblatt contacted me after Peretti did the same thing to me in 2003.  In my case, Peretti set up AskJohnLott.org and used the email address john@AskJohnLott.org. Peretti’s expropriation of my name wasn’t for financial gain, but to support gun control.

Pretending to be me, Peretti sent out hundreds of thousands of emails lobbying against the proposed “Protection of Lawful Commerce in Arms Act.” This bill, which was being debated at the time (it ultimately passed in 2005), protected gun makers from abusive lawsuits that were solely designed to put them out of business with overwhelming legal fees. Peretti even purchased advertising for his fake website on Google, and the advertising promoting "my“ appeared at the very beginning of any search results on my name.

I was already relatively well-known in 2003 to those who care about the gun control debate because of my book “More Guns, Less Crime.” Peretti sent emails under my name to convince people that I had changed my mind and come out against the Act.  The emails then urged people to ask their congressmen and Senators to oppose the bill.

A number of the recipients were people I knew, and some wrote back using the John@AskJohnLott.org email address and questioned why I would have changed my mind. But Peretti continued the charade of being me in multiple email chains.

I first learned about the website from James K. Glassman, a former Washington Post columnist, who later served as U.S. Under Secretary of State for Public Diplomacy. He shared the email exchange with me that he had with Peretti's fake John Lott.

Peretti also used my name and picture to advise people on how to violate gun control laws. Soon, I received hundreds of angry phone calls from people who were upset that I was supposedly advising them to break the law.

My emails to john@AskJohnLott.org asking who was behind the effort were ignored. The website’s registration didn’t help, as it was supposedly registered to me.

I spent money to find out who was behind these efforts.  When I contacted Peretti, he denied any involvement.  After I hired lawyers, Peretti finally included a disclaimer on the website, stating that he intended to parody me. But he still refused to take down the website down or stop sending emails.

Goldblatt didn’t have the money for a legal battle, so I included him in my case.

After a year-and-a-half, we finally reach a legal settlement. Peretti, who worked for a company called Eyebeam, publicly acknowledged: “The AskJohnLott.org site was created by The Eyebeam Atelier, Inc. This site was never associated, endorsed or otherwise affiliated with John R. Lott, Jr. E-mail sent from the AskJohnLott.org domain that was identified as coming from Lott was also never associated, endorsed or otherwise affiliated with John R. Lott, Jr. Eyebeam deeply regrets any confusion and offers a formal apology to John R. Lott, Jr. The terms of the settlement are confidential.”

Peretti also apologized to Goldblatt and took down JeffGoldblatt.com. I received an undisclosed monetary settlement.

People are again asking how BuzzFeed could possibly publish such “fake” news against Trump. They need look no further than BuzzFeed’s CEO and founder Jonah Peretti.

John R. Lott, Jr. is a columnist for FoxNews.com. He is an economist and was formerly chief economist at the United States Sentencing Commission. Lott is also a leading expert on guns and op-eds on that issue are done in conjunction with the Crime Prevention Research Center. He is the author of nine books including "More Guns, Less Crime." His latest book is "The War on Guns: Arming Yourself Against Gun Control Lies (August 1, 2016). Follow him on Twitter @johnrlottjr.

Published:1/21/2019 8:16:32 PM
[Markets] The Disturbing Rise Of Modern Monetary Theory (MMT)

Authored by Mark Jeftovic via Guerilla-Capitalism.com,

Lately, we’ve suddenly been hearing a lot about Modern Monetary Theory (“MMT”) in the mainstream media. It could be that with the election of Alexandra Ocasio-Cortez to congress, MMT’s star will rise with hers as she is reportedly an adherent and possibly views MMT as a means to fund her Green New Deal.

As we see below, MMT has been around for some time, having come out of the Chartalism school in the first half of the 1900’s and was made into MMT in the early 90’s by Warren Mosler, apparently after a “long steam” with Donny Rumsfeld, who then referred him to Art Laffer (creator of the Laffer Curve). MMT mostly flew under the radar until around the time of the Global Financial Crisis and is now clearly spiking into public awareness.

To the casual onlooker, MMT may sound a lot like standard-issue Keynesianism, the idea that the Government can and should run deficits to smooth out the business cycle.

The big difference is this: Keynesians believe that the deficits should be run to stimulate our way out of a recession or financial crisis, after which there will be some kind of return to normalcy, when deficits will matter again .

To MMT-ers there is no return to normalcy, this is the The New Normal. Deficits don’t matter, the Government can’t go broke because they can issue money in any amount required. We’ll look at how they rationalize this below, but suffice it to say now that Keynesians and MMT-ers are not synonymous and even Paul Krugman has had his criticisms of it:

it would be quite likely that the money-financed deficit would lead to hyperinflation.

The point is that there are limits to the amount of real resources that you can extract through seigniorage. When people expect inflation, they become reluctant to hold cash, which drive prices up and means that the government has to print more money to extract a given amount of real resources, which means higher inflation, etc.. Do the math, and it becomes clear that any attempt to extract too much from seigniorage — more than a few percent of GDP, probably — leads to an infinite upward spiral in inflation. In effect, the currency is destroyed. This would not happen, even with the same deficit, if the government can still sell bonds.

We’ll revisit his point that if the government attempts to extract too much from seigniorage that it will ignite an inflationary spiral. For now let’s make sure we know what we are dealing with when it comes to Modern Monetary Theory…

How to Understand Modern Monetary Theory

When I was in high school I had a physics teacher once told me how when he was a kid he thought he should be able to hook up the outputs of a generator and a motor to each other and have himself a perpetual motion machine. For some reason it didn’t work and trying to understand why was what got him into physics.

The more I learned about MMT the more it seemed to be the same thing, in an economic sense and I have frequently made this quip expecrting MMT-ers to call it a strawman or point out some fundamental element that I’m missing but instead they usually confirm that I have it correct in broad strokes.

MMT-ers believe that currency is nothing more than an economic scoreboard or tally, and any government that denominates it’s own currency can never go broke because they can always create more currency. Of course, as Weimar Germany, Hungary, Yugoslavia and more recently Zimbabwe and Venezuela have all found out, you have to watch out for hyperinflation.

The MMT magic bullet for this is… taxation. Through taxation the government can drain excess liquidity from the system while printing as much currency as it needs to fund its projects and as long as the total value of currency printed doesn’t exceed the productive capacity of the economy as a whole. Thus:

This diagram is from “Diagrams and Dollars: Modern Money Illustrated” by J.D. Alt. After methodically taking the reader through how the old monetary system works, where the government has this HUGE untenable debt burden and is constrained by budgetary limitations, we arrive here.

The national debt is still present, but it has, through philosophical transmutation, been transformed by Alt into a “Net Spending Achievement” as measured by the “National Savings Clock” (formerly known as the “national debt clock”, or “Doomsday Clock”):

“the difference between what the FG plans to spend in a given budget-year, and what it plans to drain away in taxes, is “Net Spending Achievement”….imagine, for a moment, how our political discourse might change if everyone understood the discussion was no longer about the size of our national “budget deficit” but, instead, was about the concrete goals of our annual “Net Spending Achievement”….

We do NOT want a “balanced” budget—or, even worse, a budget “surplus”! What we want (as long as price inflation is under control) is the largest and most effective “Net Spending Achievement” we can envision.

“Entitlement” and “Discretionary” budgets do NOT have to compete with each other for a fixed pot of Dollars. As long as price inflation is under control, whatever Dollars are necessary can be allocated to the “Net Spending Achievement.”

MMT-ers believe that since our currency is actually comprised of debt obligations that government deficit is required to form net private savings:

Therefore:

  • government spending creates private goods and services

  • taxation drains excess liquidity and controls inflation

  • the government can never go broke

For this to work, it would posit a pretty powerful central planning government that knows all (and if so, why can’t the government control inflation via price controls and eliminate taxes altogether?) and has the inhuman self-discipline not to overissue currency in a crisis (I guess, under MMT, there will be no further financial crises).

Oh, I almost forgot, under MMT there is also the jobs guarantee. So anybody who wants a job would be guaranteed to have one, at a living wage, by the government.

That’s MMT in a nutshell.

It’s ascent into its newfound economic fashionability is simply the latest episode of a long history of the pursuit of alchemy.

The Holy Grail of Government: Unlimited Spending With No Restraint

Government being overwhelmed by debt and constrained as a result is as old as history itself. In the 14th century King Philip of France was so indebted to the Knights Templar, and absent some clever rationalization that would transform his debts to them into money itself; he did the next best thing. He suppressed the order and had their leaders burned them at the stake. His debts were thus cleared but he had also disincentivized future borrowing. Another way would have to be found…

What governments really want is a way to either A) bribe the populace to keep voting for them or B) as this Epsilon Theory article laments, fund one or another of their incessant wars from an inexhaustible supply of credit or funding:

Modern Monetary Theory – which is neither modern nor a theory – is a post hoc rationalization of political expediency and power-expanding action.

It makes us feel better about all the bad stuff we’ve done with money and debt for the political efficacy of Team Elite.

And all the bad stuff we’re going to do.

At its core, Modern Monetary Theory is an argument that would be wonderfully familiar to every sovereign since the invention of debt. It is essentially the argument that significant sovereign debt is a good thing, not a bad thing, and that budget balancing efforts on a national scale do much more harm than good. Why? Because there’s so much to do and so little time for the right-minded sovereign. Because it is fundamentally unjust for the demands of private lenders to thwart the necessary ends of the sovereign, and it is politically difficult to finance those ends through tax levies on a fickle citizenry.

MMT is the sovereign-friendly justification for deficit spending without end.

Historically, this argument has been used by sovereigns to support wars without end.

(emphasis in original)

When you take a step back and comb through financial and economic history, amongst the wreckage of worthless fiat currencies from our past (note that 100% of all previous fiat currencies became worthless), we find hints and precursors of what is being rebooted as Modern Monetary Theory

Bear in mind that “Net Spending Achievement” neologism as we follow the rise and fall of the Austrian fiat regime in the 1700’s…

Unlimited National Debt?

A new phenomenon was occurring throughout Europe. Royal debt was being transformed into national debt. What had been the personal debt of the monarch was becoming the burden of the nation, payable by the people. And many central banks were created to administer this debt through paper money.

Austria provides one of the best examples of this new way of thinking. The First Bank of Austria was founded in 1703, with the express purpose of funding public debt by issuing paper money in exchange for deposits. With too few deposits, and too many notes, the bank and its currency failed.

In 1759, Count Sinzendorff, a prominent Austrian official and renowned financier, went a step further and suggested that government debt be brought to all the people, not just the depositors. He issued Austria’s first paper notes for general circulation, as a loan instrument with interest coupons attached. The new money was well received. Impressed by the expansion of commerce when more credit was made available, the government authorized a second issue of paper bills in 1769, and a third in 1771. Yet this prosperity did not last long. As excessive new issues were printed, they provoked a panic in 1797. The next decade was no better. Austria became embroiled in wars, spent heavily and ended up with a currency that lost over 90% of its value.

— (from Fiat Paper Money by Ralph T. Foster, emphasis added)

The idea that money is nothing more than an economic scoreboard or tally was advanced by John Law when he was trying to devise a method for Scotland to stave off bankruptcy, which he expounded upon in his book “Money and Trade” (“Money is the Measure by which Goods are Valued, the Value by which goods are Exchanged, and in which Contracts are made payable” – quoted in Fiat Paper Money).

Scotland never adopted Law’s ideas, and in their own currency machinations went bankrupt and ceased to be an independent country 1707 (ibid). Law moved onto France, continuing to promote his monetary theories, at one point declaring to an astonished room of aristocrats that he had discovered the secret of alchemy: “I can tell you my secret. It is to make gold out of paper” (ibid).

Even the MMT proposal to use taxation to control inflation is nothing new and was tried in New York in the late 1700’s, stability seemingly achieved by the New York Assembly having strict laws on their books limiting the amount of paper notes that could be issued. It’s not really clear what happened to this currency as it overlaps with the period when British laws were barring the colonies from issuing their own paper currencies and the subsequent segue into the revolutionary war, and the advent of the Continental (which eventually collapsed in a hyperinflation).

The Ascent of the MMT Narrative Today

I first became of aware of MMT when I used to read Business Insider back around 2010 or so and Joe Weisenthal, one of the most vigorous proponents of Cullen Roche’s “Pragmatic Capitalist” site, and he would unfailingly repackage anything Roche wrote on BI. Fast forward to today, and Roche seems to have backed off his MMT evangelism, or is at least a lot more nuanced and rigorous in his examination of it. 

The next time I came across MMT was in David Golumbia’s book “The Politics of Bitcoin”, wherein he seemed to think that what we have today is MMT. I can see why people would make that mistake, and Roche notes that as well in the article I just linked. Golumbia’s book (which I deconstructed in detail here) also criticizes the economic truism that inflation erodes purchasing power as wrong, and an example of right-wing conspiracy theory.

I mention that here because that is an idea that  Weisenthal also glommed onto back in his BI days, and while it isn’t yet, I fully expect this notion to be embraced by MMT adherents as this ideology is relentlessly pushed mainstream (the TL,DR of this idea is that a dollar doesn’t lose purchasing power when you issue more dollars if you put it into a bank account and earn interest on it. I debunked this thoroughly in my review of PoB. It’s one of those “not even wrong” notions in that  it’s economically incoherent).

Now that Modern Monetary Theory and Democratic Socialism have found each other, we have to look at why it’s such a dangerous combination.

The Problems with Modern Monetary Theory

Most of the articles I’ve seen decrying MMT hone in on it being inflationary, full stop. Which is true. No government has the discipline to not bribe the populous with either other people’s moneyor “made up” pixie dust that they convince everybody to pretend is money.

Beyond that, there are numerous failings with MMT including the fact that calling debt something else, like “national spending achievement” doesn’t make it not debt,  but does lose sight of what debt actually is. 

When you think about it, all debt is the pulling of future value into the present. If it wasn’t, if you had present value on hand and the willingness to trade it for what was desired, there would be no debt incurred.

As I observed recently, when you rack up debt you are either borrowing or stealing from the future. The difference is whether you plan to pay off the debt (borrowing) or if you plan to perpetually roll it over (stealing). MMT is structurally and by design, the latter.

MMT says debt  (err, sorry, National Spending Achievement) can expand perpetually and inflation will not occur provided it doesn’t expand faster than the value in the private economy (which assumes central planners can actually measure that accurately ) and any excess liquidity is drained off via taxation.

Like all fiat monetary schemes, you can make a theoretical case for it working. I once called MMT the elevation of circular reasoning to an art form, and Austrian economist Bob Murphyemphasizes that MMT relies upon “accounting tautologies”.

In practice, governments will always promise entitlements today at the expense of consequences tomorrow, so the monetary base will always expand and as each crisis is postponed, over time this dynamic will accelerate. If the monetary base happens to be credit (read: “debt as money”) then remember what we said debt is: future value, consumed today.

Under MMT however, when things go bad, they will get very bad. Here’s why:

Money started as hard currency, so it was near impossible to lose faith in it, and it would only happen as coinage was debased or replaced with fractionally backed paper notes.

After Bretton Woods, money, or the worlds reserve currency was “backed by the full faith and credit of the US government” and for a few decades at least, that seemed “good enough”. Although there have been panics and the overall trend is toward less confidence in the current monetary regime and the USD as world reserve currency is openly acknowledged to be in its waning days. It’s a matter of “when” not “if” even in polite company.

Under MMT there is no more pretence that the currency has any intrinsic value – it’s an economic scorecard and nothing more. The system would work as long as confidence held for the system itself, not any faith in the currency. If any cracks appeared in the system, i.e. inflation accelerated or taxation crept too high, I submit that any speed-wobble in confidence would lead to a dramatic and sudden, disorderly reassessment. A panic. It would be a genuine “life imitates The Onion” moment.

Were an MMT system inevitably go awry, the outward manifestation would be of course manifest as inflation, so central planners would of course try to get ahead of it by draining more liquidity, faster, by increasing taxes. As this fed on itself and accelerated, the populace, as if being swept up in a hyperinflation isn’t bad enough, would be sandwiched between hyperinflation and hypertaxation!.

Think of an MMT crisis as an economic black hole sucking all value from further and further future generations into a gravitational vortex of the present moment, where all value collapses in on itself and disappears forever.

People seem on board with OAC’s 70% marginal tax rate on highest earners but in a failing MMT regime the hypertaxation effect would occur through the highest marginal tax rate threshold coming down.

People don’t mind Dwayne Johnson paying 70% on his income over 10M, but how will they feel when they’re paying 70% on any income over 300,000? 100,000? 40,000? How about an 80% tax rate on income over $20,000/year and a loaf of bread costs $250 today and $3,500 in a week? (When your marginal tax rate is then 92% on all income over $1,000/minute?)

That’s what a nightmare MMT scenario looks like. At least in Venezuela they’re only getting squeezed on one side of the vice, and their central planners are trying to go the other direction than MMT-ers, attempting to tie their currency to something tangible (failure of execution however, is hampering this).

Compared to what I see as the inevitable “dual death spirals of MMT”, letting all those banksters fry in 2008 looks a lot more palatable in retrospect. David Stockman’s Great Deformation shows how the economy would have fully recovered by 2010 or 2011 instead of being where we are now: trapped at the Zero bound and headed toward democratic socialism and MMT.

Published:1/21/2019 7:44:12 PM
[Markets] Federal Reserve Confesses Sole Responsibility For All Recessions

Authored by David Haggith via The Great Recession blog,

In a surprisingly candid admission, two former Federal Reserve chairs have stated that the Federal Reserve alone is responsible for creating all recessions in the United States.

First, former Fed Chair Ben Bernanke said that

Expansions don’t die of old age. They get murdered.
MarketWatch

To clarify this statement, former Chair Janet Yellen placed the murder weapon in the Fed’s hands:

Two things usually end them... One is financial imbalances, and the other is the Fed.

Think that through, and you quickly realize that both of those things are the Fed. Is there anyone left standing who would not say the Fed’s quantitative easing in the past decade was the biggest cause of financial imbalances all over the world in history? Moreover, whose profligate monetary policies led to the Great Financial Crisis that gave us the Great Recession?

So, the Fed loads the gun with financial causes and then pulls the trigger. In fact, I think it would be hard to find a major financial imbalance in the US that the Fed did not have a hand in creating or, at least, enabling. Therefore, if those are the only two causes, then it is always the Federal Reserve that causes recessions by its own admission.

And, yet, those Fed dons look so pleased with themselves.

Yellen went on to say that when the Fed is the culprit, it is generally because the central bank is forced to tighten policy to curtail inflation and ends up overplaying its hand. (She didn’t mention that the Fed’s monetary policy may have a hand in creating financial imbalances.)

Exactly, nor did she mention that the inflation they were “forced” to curtail always happens because of financial imbalances the Fed created or enabled. That is why I call our expansion-recession cycles, rinse-and-repeat cycles. Therefore, the Fed is only forced by its own ill-conceived actions. First you have to create the imbalance, which causes the economy and stocks to inflate, then you have to pull the trigger to shoot that down by tightening into a recession, which the Fed always does:

Bernanke elaborated on Yellen’s point, accusing the central bank of, in essence, murder. It takes an aggressive act on the part of the monetary authority to bring an expanding economy to a halt and cause it to shift into reverse.

Yellen and Bernanke were speaking at the annual meeting of the American Economic Association in Atlanta earlier this month in the company of current Fed Chair Jerome Powell.

As I demonstrated in my two earlier articles this week (“Does Inverted Yield Curve Indicate Recession?” and “What is an inverted yield curve and what does it mean?“), the Fed carries out this act of econocide by getting the yield curve to invert via its forced interest changes. As shown in those articles, every recession has been immediately preceded by a Fed-created inversion of the yield curve — the Fed’s smoking gun.

The Fed Fix Is Almost In

As noted in those articles, today’s yield curve has already slipped into its penultimate inversion. First (on December third), three-year notes started paying more interest than five-year notes. (The five-year was at 2.83% interest, while the three-year hit just over that at 2.84%.) In essence, investors were betting the economy would be a tad better in five years than it would in three.

Within a matter of weeks, the three-year notes were paying more than seven-year notes. Then, just about Christmastime, they started paying more than eight-year notes, inverting the yield curve even further out. The orange recession indicator light comes on when they take the next step of paying more than ten-year notes; and above that we go full recessionary red! The first three came all within in a month, so the rest may come just as quickly.

In fact, we’re so close that one more rate increase by the Fed could pull the trigger. This is why Powell can be so reassuring about pulling back soon on targeted interest-rate increases. He knows he’s already operating with a hair trigger because of the Fed’s other tightening action in rolling bonds off of its balance sheet.

Like a skilled sharp-shooter, Powell recently said the Fed is “watching and waiting” before it pulls the trigger with its next rate increase. At the same time, he suggested his balance-sheet reduction won’t end for awhile (and, of course, the Fed knows that its balance sheet reduction is skewing the yield curve faster than the Fed’s targeted interest-rate increases.

I’ve said before that those interest-rate increases are now just playing verbal catch-up to what the balance sheet reduction is doing in the open market. In other words, the balance sheet reduction is pulling the Fed’s targeted interest rates up, regardless of what is says, so it is pressed to state it intends an increase just to keep up with the effects of balance-sheet reduction. Last summer the Fed tactic admitted this when…

The Fed raised the target range for its benchmark rate by a quarter point to 1.75 percent to 2 percent, but only increased the rate it pays banks on cash held with it overnight to 1.95 percent. The step was designed to keep the federal funds rate from rising above the target range. Previously, the Fed set the rate of interest on reserves at the top of the target range. -Bloomberg

In other words, the Fed had to change the way it calibrates some interest rates because other factors than their change in their stated target rate were driving rates up. In order to keep bank demand for Fed funds from pushing the rate above 2%, the Fed set its stated rate at 1.95% to create some headroom. That’s explained as…

Officials have said that, as they drain cash from the system by shrinking the balance sheet, a rise in the federal funds rate within their target range would be an important sign that liquidity is becoming scarce…. The increase appears to be mainly driven by another factor: the U.S. Treasury ramped up issuance of short-term U.S. government bills, which drove up yields on those and other competing assets, including in the overnight market.

And that is what is now happening, but they are still planning to keep tightening by reducing their balance sheet. What is not said there is that the major reason the US Treasury is ramping up its issuance of government bills is that the Fed’s unwind is forcing them to refinance maturing bills on the open market as the Fed now refuses to refi those bills. I’ve maintained for a couple of years that the unwind will drive up other interest rates, causing problems throughout the economy.

Gunsmoke And Mirrors

So, the Fed’s recent talk about reducing the number of rate increases in the Fed’s interest target is slight of hand because the Fed’s unwind is doing the heavy lifting here, driving up rates faster than the Fed changes its stated target rate. Powell assures everyone the Fed will slow down its interest-rate increases, even as the Fed pushes right ahead with its balance-sheet unwind, which is doing the most to invert the yield curve.

Powells only defense against concerns expressed about balance-sheet reduction was…

“We are looking carefully at that, and the truth is, we don’t know with any precision,” Fed Chairman Jerome Powell told reporters on Wednesday when asked about the increase. “Really, no one does. You can’t run experiments with one effect and not the other.”

Not too reassuring to hear the Fed Head say no one really has any idea what impact its balance-sheet unwind will have on other interest rates. Does the Fed not know, or does the Fed just not want to say what it does know?

For additional cover as to whether the yield-curve inversions the Fed creates will cause a recession this time as they did in all previous times, Yellen, protested, as I noted in an earlier article this week, that this time is different:

Now there is a strong correlation historically between yield curve inversions and recessions, but let me emphasize that correlation is not causation, and I think that there are good reasons to think that the relationship between the slope of the yield curve and the business cycle may have changed.

It’s not every day that the Fed admits total culpability for the death of every expansionary period. Nor that it admits that the inflation its expansionist monetary policies create force it to become the culprit. Nor that it routinely overplays its hand.

Apparently, the Fed Heads are so comfortable with all of this (hence the smarmy looks in their photos above) that the economic murderers can confess in broad daylight every murder they are responsible for with complete impunity, even as they tell you where the bodies are buried. However, because they still have their next economic massacre to commit right before your eyes and don’t want you to stop them, they wish to assure you that “we can’t possibly know what will happen” now or “this time is different. Things have changed.”

The words “I can’t know what will happen” when a gunslinger is twirling his cocked and loaded pistol with his finger on the trigger, should not give you comfort.

Perhaps all these confession now will enable them to smile even bigger when the slaughter is over, and they know they did it this time in broad daylight.

Of course, there is one major difference this time. In all previous times, the Fed didn’t have the most massive balance-sheet unwind pushing interest rates all around so it had to rely more on its conventional tool of incremental changes in the its targeted interest rate. The new existence of that big gun mean it can who you it is putting away the little gun to disarm you because it has a cannon pointing at you from just inside the woods to your left. Thus, Powell said disarmingly,

More rate hikes wasn’t a pre-set plan and the forecast of two moves was conditional on a “very strong outlook for 2019.” - MarketWatch

In other words, keep your eye on the rate hikes I keep talking about (the little gun), not on the big balance sheet reductions that we put on autopilot so we don’t have to talk about them. Like a great hunter, Powell said the Fed can be patient.

Some analysts believe the Fed’s runoff of its balance sheet is hurting financial markets and want the central bank to end the program.

Gee, ya think? A runoff that intends to force the US government to refinance an additional $2 trillion over the next 3-4 years on the open market might be hurting financial markets more than a quarter-point increase in the Fed’s interest target every few months?

One analyst who disagrees with Powell is Peter Boockvar, chief investment officer at Bleakley Advisory Group:

“It’s no coincidence that accidents begin to pick-up the deeper you get into tightening … QE inflated markets to very high valuations. It’s wishful thinking to believe QT isn’t going to have an impact.”

By shrinking its balance sheet, the Fed is draining the liquidity that sent stocks booming. - CNN

Some of the Fed’s colleagues at other central banks also agree and express concern about what this will do to them:

Last month, Irjit Patel, the governor of the Reserve Bank of India, pleaded with the Fed to slow plans to shrink its balance sheet. If the Fed doesn’t shift course, “a crisis in the rest of the dollar bond markets is inevitable,” he wrote in an op-ed in the Financial Times.

Other Fed members are just as aware of the Fed’s institutional murder rates as Bernanke and Yellen. St. Louis Fed President James Bullard told the Wall Street Journal this month that a recessionary risk is being telegraphed by what is now happening in the yield curve and that the Fed is causing the flattening of the curve toward inversion. So, these guys all appear to be well aware of what they are doing.

However, to maintain the distraction, Bullard also said,

In separate remarks to reporters …. he was open to a revisiting the balance sheet runoff but doesn’t think it is damaging markets as some argue. Bullard [said] that if the balance sheet runoff was impacting bond market as some suggest, then yields would be moving higher instead of the steady decline seen since November.

The latter would be happening, except that money has been pouring rapidly out of stocks and into bonds due to the rate increases the unwind created in September and October. What he ignores is the fact that rate increases were so substantial they sucked massive amounts of money out of the stock market in a flood of capital flight because all of a sudden treasury interest looked quite enticing. That, of course, pushed those rates down some in November.

So, “Nothing to see there, folks. Keep your eye on the little gun; and, oh, did we tell you that we have murdered every economic expansion in history?”

Who’s your daddy?

Now that we’ve heard the confessions from the murderers and have experienced the diversions that will allow the next murder to happen as much in plain sight as the confessions just happened, let’s look at the case from another angle: What has been keeping the stock market alive and hopping over the past decade?

Let me lay out evidence that it is clearly the Fed.

Exhibit A: What turned around the market’s major crash in 2009? The Fed’s QE1. Does anyone think the market would have turned around without that massive intervention? Was that intervention with hundreds of billions of dollars mere window-dressing, or was it the greatest financial intervention to a financial crisis the world had ever seen?

Exhibit B: What turned the market around the next time it “corrected” as soon as QE1 ended? Was it not instant QE2? More hundreds of billions of dollars?

Exhibit C: What saved the market when Republicans played roulette with the nation’s credit rating in the summer of 2011 and shot themselves in the foot politically when Standard & Poor’s gave the nation its first credit downgrade before Republicans even had the chance to let the nation default? Was it not the immediate promise of an ever bigger, indefinitely ongoing new kind of QE called Operation Twist, which morphed into QE3?

Exhibit D: Then, when markets tumbled in 2015 and 2016, because the Fed was backing off from monetary stimulus, their colleagues in other countries jumped in with their own QE. More than $5 trillion worth in 2016! All told, the world’s central banks have pumped in $15 trillion since then.

But now they are all stopping!

Exhibit E: The prosecution presents a full picture of all central-bank stock salvation:

The Fed may claim that it does not attempt to rescue markets and that it looks only at economic indicators, yet somehow every time the market took a major plunge in the graph above, the Fed was instantly on the scene with a new invention of monetary stimulus in massive doses. Of course, “correlation is not causation.” Correlation is pretty interesting, though, especially when it happens at every plunge, except the one at the top that is plunging much further than any other time on this graph … because one thing IS different: No one is stepping in with salvation this time.

If the Fed has been the salvation of the market again and again, lifting it higher and higher, what happens if the Fed and other CBs let the stock market drop? Do you think they won’t do that? The highest authorities in the Fed just told you they did it every other time. First, they create massive “financial instability,” as Yellen said, otherwise known as “bubbles,” which grow due to the Fed’s infinite capacity to create monetary stimulus. They let these grow until inflation finally “forces” them to tighten until they crash them.

The prosecution presents Exhibit F:

This one is the Fed and all its major partners in crime. When did stock markets start to plunge all over the world? Wasn’t it as soon as global QT started to reverse at the end of that graph in 2018? Ah, but “correlation is not causation.” Except that it kind of is when you keep finding correlation everywhere you turn.

If the defense wants to argue the US market is not utterly dependent on the Fed’s constant protection, let me ask, “What did the market do in September of 2018 when the Fed removed one little word from its market-soothing speeches? Accommodative. Just as it watched its balance sheet-reduction up to full rewind speed.” It took its biggest plunge by far in the entire ten-year recovery period. As nearly everyone was saying, nothing bad suddenly emerged in the economy. All that changed was the Fed to merely implying it would be less accommodative to market concerns as it moved to full unwind.

If you still think the Fed isn’t going to kill the economy this time, I have one more question for you: When was the last time the Fed raised rates in the middle of a major market “correction?” How about never. Yet, now it is raising rates and reducing money supply via balance-sheet reduction at the same time that it hints it is removing accommodation.

But balance-sheet reduction doesn’t matter, right?

“We don’t believe that our issuance [new bond to replace those rolling off the balance sheet] is an important part of the story of the market turbulence that began in the fourth quarter of last year. But, I’ll say again, if we reached a different conclusion, we wouldn’t hesitate to make a change,” Powell said. “If we came to the view that the balance sheet normalization plan — or any other aspect of normalization — was part of the problem, we wouldn’t hesitate to make a change.” - MarketWatch

In other words, “Don’t look at the big gun. Nothing to see there.” Said the people who have just told you that none of their expansions ever ended until they murdered it!

Does the Fed have motive?

Don’t ask me why the Fed will kill its own recovery. It is enough that it admits it always does. So, I’ll leave determining which of the many possible “why’s” up to you. Maybe the Fed will cop an insanity plea and say that even it doesn’t know why it does the things it does. Whatever their actual motive, this sure has the Fed’s unswerving M.O. all over it. It has their fingerprints and their multiple confessions of guilt.

Still, let me lay out a couple of motives that are popular among those many people attribute to the Fed just to show there are plenty of possible motives out there:

Maybe the Fed’s member banks, who own and run the Fed (as its only shareholders and as governing board members who have huge influence over who the additional government-appointed board members are), like to repossess things. That would be a motive.

Or maybe they want to create a new cashless, digital, global monetary system. That would be a motive.

Or maybe, if they can crash things as perennially as Japan has done for score or more of years, they can get permission to start buying stocks directly, and use their infinite money supply, as Japan, has done to take major ownership in all the stocks of the nation.

Numerous conspiracy theories spend entire books making a strong case for different motives. I won’t land on one, but will note that all that matters is that there are plenty of motives to choose from.

Sure, Yellen protested that “correlation isn’t causation,” but, on the other, she admitted causation by saying that, when the Fed is the culprit, it is generally because the central bank is forced to tighten policy to curtail inflation — inflation that only the Fed causes by creating trillions of dollars monetary stimulus. There only struggle this time to stay within their M.O. is that they have failed to create inflation in the general economy that they are supposed to govern. Maybe that is why they have pushed the expansion into the longest in history because they are obsessed with following their usual M.O., and inflation didn’t cooperate this time to “force” them to tighten into recession (their cover story).

So, we have multiple confessions of murder by known Fed ringleaders. We have numerous pieces of circumstantial evidence that support their confessions. We have many possible motives. And, even the fact that the Fed continued pushing expansion longer than it has with more and more rounds of QE can be explained by its M.O. How many times has the Fed said they don’t understand why they couldn’t get inflation to rise to their 2% target for years. They could hardly claim inflation concerns when everyone knew CPI was under the target they’ve always said they want. Now it’s there. So, everything is in place.

I rest my case.

Published:1/21/2019 2:42:41 PM
[Markets] A Call To Reinvestigate American Assassinations

Via ConsortiumNews.com,

On the occasion of Martin Luther King Jr. Day, a group of over 60 prominent American citizens is calling upon Congress to reopen the investigations into the assassinations of President John F. KennedyMalcolm XMartin Luther King Jr., and Senator Robert F. Kennedy.

Signers of the joint statement include Isaac Newton Farris Jr., nephew of Reverend King and past president of the Southern Christian Leadership Conference; Reverend James M. Lawson Jr., a close collaborator of Reverend King; and Robert F. Kennedy Jr. and Kathleen Kennedy Townsend, children of the late senator. The declaration is also signed by numerous historians, journalists, lawyers and other experts on the four major assassinations. 

Other signatories include G. Robert Blakey, the chief counsel of the House Select Committee on Assassinations, which determined in 1979 that President Kennedy was the victim of a probable conspiracy; Dr. Robert McClelland, one of the surgeons at Parkland Memorial Hospital in Dallas who tried to save President Kennedy’s life and saw clear evidence he had been struck by bullets from the front and the rear; Daniel Ellsberg, the Pentagon Papers whistleblower who served as a national security advisor to the Kennedy White House; Richard Falk, professor emeritus of international law at Princeton University and a leading global authority on human rights; Hollywood artists Alec BaldwinMartin SheenRob Reiner and Oliver Stone; political satirist Mort Sahl; and musician David Crosby.

JFK: November 22, 1963.

The joint statement calls for Congress to establish firm oversight on the release of all government documents related to the Kennedy presidency and assassination, as mandated by the JFK Records Collection Act of 1992. This public transparency law has been routinely defied by the CIA and other federal agencies. The Trump White House has allowed the CIA to continue its defiance of the law, even though the JFK Records Act called for the full release of relevant documents in 2017.

The group statement also calls for a public inquest into “the four major  assassinations of the 1960s that together had a disastrous impact on the course of American history.” This tribunal – which would hear testimony from living witnesses, legal experts, investigative journalists, historians and family members of the victims – would be modeled on the Truth and Reconciliation hearings held in South Africa after the fall of apartheid. This American Truth and Reconciliation process is intended to encourage Congress or the Justice Department to reopen investigations into all four organized acts of political violence.

Signers of the joint statement, who call themselves the Truth and Reconciliation Committee, are also seeking to reopen the Robert F. Kennedy assassination case, stating that Sirhan Sirhan’s conviction was based on “a mockery of a trial.” The forensic evidence alone, observes the statement, demonstrates that Sirhan did not fire the fatal shot that killed Senator Kennedy – a conclusion reached by, among others, Dr. Thomas Noguchi, the Los Angeles County Coroner who performed the official autopsy on RFK.

The joint statement — which was co-written by Adam Walinsky, a speechwriter and top aide of Senator Kennedy — declares that these

Four major political murders traumatized American life in the 1960s and cast a shadow over the country for decades thereafter. John F. KennedyMalcolm XMartin Luther King Jr. and Robert F. Kennedy were each in his own unique way attempting to turn the United States away from war toward disarmament and peace, away from domestic violence and division toward civil amity and justice. Their killings were together a savage, concerted assault on American democracy and the tragic consequences of these assassinations still haunt our nation.”

The Truth and Reconciliation Committee views its joint statement as the opening of a long campaign aimed at shining a light on dark national secrets. As the public transparency campaign proceeds, citizens across the country will be encouraged to add their names to the petition. The national effort seeks to confront the forces behind America’s democratic decline, a reign of secretive power that long precedes the recent rise of authoritarianism. “The organized killing of JFK, Malcolm, Martin, and RFK was a mortal attack on our democracy,” said historian James W. Douglass, author of JFK and the Unspeakable: Why He Died and Why It Matters (2010).

“We’ve been walking in the valley of the dead ever since. Our campaign is all about recovering the truth embodied in the movement they led. Yes, the transforming, reconciling power of truth will indeed set us free.”

The Truth and Reconciliation Committee’s Calls for Action:

MLK Jr.: April 4, 1968 (Wikimedia Commons)

*  We call upon Congress to establish continuing oversight on the release of government documents related to the presidency and assassination of President John F. Kennedy, to ensure public transparency as mandated by the JFK Records Collection Act of 1992. The House Committee on Oversight and Government Reform should hold hearings on the Trump administration’s failure to enforce the JFK Records Act.

*  We call for a major public inquest on the four major assassinations of the 1960s that together had a disastrous impact on the course of American history: the murders of John F. Kennedy, Malcolm X, Martin Luther King Jr. and Robert F. Kennedy. This public tribunal, shining a light on this dark chapter of our history, will be modeled on the Truth and Reconciliation process in post-apartheid South Africa. The inquest — which will hear testimony from living witnesses, legal experts, investigative journalists, historians and family members of the victims — is intended to show the need for Congress or the Justice Department to reopen investigations into all four assassinations.

* On Martin Luther King Jr. Day, we call for a full investigation of Reverend King’s assassination. The conviction of James Earl Ray for the crime has steadily lost credibility over the years, with a 1999 civil trial brought by Reverend King’s family placing blame on government agencies and organized crime elements. Following the verdict, Coretta Scott King, the slain leader’s widow, stated: “There is abundant evidence of a major, high-level conspiracy in the assassination of my husband.” The jury in the Memphis trial determined that various federal, state and local agencies “were deeply involved in the assassination … Mr. Ray was set up to take the blame.” Reverend King’s assassination was the culmination of years of mounting surveillance and harassment directed at the human rights leader by J. Edgar Hoover’s FBI and other agencies.

*  We call for a full investigation of the Robert F. Kennedy assassination case, the prosecution of which was a mockery of a trial that has been demolished by numerous eyewitnesses, investigators and experts — including former Los Angeles County Coroner Dr. Thomas Noguchi, who performed the official autopsy on Senator Kennedy. The forensic evidence alone establishes that the shots fired by Sirhan Sirhan from in front of Senator Kennedy did not kill him; the fatal shot that struck RFK in the head was fired at point–blank range from the rear. Consequently, the case should be reopened for a new comprehensive investigation while there are still living witnesses — as there are in all four assassination cases.

A Joint Statement on the Kennedy, King and Malcolm X Assassinations and Ongoing Cover-ups:

1. As the House Select Committee on Assassinations concluded in 1979, President John F. Kennedy was probably killed as the result of a conspiracy.

2. In the four decades since this Congressional finding, a massive amount of evidence compiled by journalists, historians and independent researchers confirms this conclusion. This growing body of evidence strongly indicates that the conspiracy to assassinate President Kennedy was organized at high levels of the U.S. power structure, and was implemented by top elements of the U.S. national security apparatus using, among others, figures in the criminal underworld to help carry out the crime and cover-up.

RFK: June 5, 1968.

3. This stunning conclusion was also reached by the president’s own brother, Attorney General Robert F. Kennedy, who himself was assassinated in 1968 while running for president – after telling close aides that he intended to reopen the investigation into his brother’s murder if he won the election.

4. President Kennedy’s administration was badly fractured over his efforts to end the Cold War, including his back-channel peace feelers to the Soviet Union and Cuba and his plan to withdraw U.S. troops from Vietnam after the 1964 presidential election.

5. President Kennedy has long been portrayed as a Cold War hawk, but this grossly inaccurate view has been strongly challenged over the years by revisionist historians and researchers, who have demonstrated that Kennedy was frequently at odds with his own generals and espionage officials. This revisionist interpretation of the Kennedy presidency is now widely embraced, even by mainstream Kennedy biographers.

6. The official investigation into the JFK assassination immediately fell under the control of U.S. security agencies, ensuring a cover-up. The Warren Commission was dominated by former CIA director Allen Dulles and other officials with strong ties to the CIA and FBI.

7. The corporate media, with its own myriad connections to the national security establishment, aided the cover-up with its rush to embrace the Warren Report and to scorn any journalists or researchers who raised questions about the official story.

8. Despite the massive cover-up of the JFK assassination, polls have consistently shown that a majority of the American people believes Kennedy was the victim of a conspiracy — leading to the deep erosion of confidence in the U.S. government and media.

Malcolm X: February 21, 1965.

9. The CIA continues to obstruct evidence about the JFK assassination, routinely blocking legitimate Freedom of Information requests and defying the JFK Records Collection Act of 1992, preventing the release of thousands of government documents as required by the law.

10. The JFK assassination was just one of four major political murders that traumatized American life in the 1960s and have cast a shadow over the country for decades thereafter. John F. Kennedy, Malcolm X, Martin Luther King Jr. and Robert F. Kennedy were each in his own unique way attempting to turn the United States away from war toward disarmament and peace, away from domestic violence and division toward civil amity and justice. Their killings were together a savage, concerted assault on American democracy and the tragic consequences of these assassinations still haunt our nation.

Published by Spartacus Educational.

Published:1/21/2019 9:11:15 AM
[Markets] The 'Gilets Jaunes' Are Unstoppable: "Now, The Elites Are Afraid"

Authored by Christophe Guilluy via Spiked-Online.com,

The gilets jaunes (yellow vest) movement has rattled the French establishment. For several months, crowds ranging from tens of thousands to hundreds of thousands have been taking to the streets every weekend across the whole of France. They have had enormous success, extracting major concessions from the government. They continue to march.

Back in 2014, geographer Christopher Guilluy’s study of la France périphérique (peripheral France) caused a media sensation. It drew attention to the economic, cultural and political exclusion of the working classes, most of whom now live outside the major cities. It highlighted the conditions that would later give rise to the yellow-vest phenomenon. Guilluy has developed on these themes in his recent books, No Society and The Twilight of the Elite: Prosperity, the Periphery and the Future of Francespiked caught up with Guilluy to get his view on the causes and consequences of the yellow-vest movement.

spiked: What exactly do you mean by ‘peripheral France’?

Christophe Guilluy: ‘Peripheral France’ is about the geographic distribution of the working classes across France. Fifteen years ago, I noticed that the majority of working-class people actually live very far away from the major globalised cities – far from Paris, Lyon and Toulouse, and also very far from London and New York.

Technically, our globalised economic model performs well. It produces a lot of wealth. But it doesn’t need the majority of the population to function. It has no real need for the manual workers, labourers and even small-business owners outside of the big cities. Paris creates enough wealth for the whole of France, and London does the same in Britain. But you cannot build a society around this. The gilets jaunes is a revolt of the working classes who live in these places.

They tend to be people in work, but who don’t earn very much, between 1000€ and 2000€ per month. Some of them are very poor if they are unemployed. Others were once middle-class. What they all have in common is that they live in areas where there is hardly any work left. They know that even if they have a job today, they could lose it tomorrow and they won’t find anything else.

spiked: What is the role of culture in the yellow-vest movement?

Guilluy: Not only does peripheral France fare badly in the modern economy, it is also culturally misunderstood by the elite. The yellow-vest movement is a truly 21st-century movement in that it is cultural as well as political. Cultural validation is extremely important in our era.

One illustration of this cultural divide is that most modern, progressive social movements and protests are quickly endorsed by celebrities, actors, the media and the intellectuals. But none of them approve of the gilets jaunes. Their emergence has caused a kind of psychological shock to the cultural establishment. It is exactly the same shock that the British elites experienced with the Brexit vote and that they are still experiencing now, three years later.

The Brexit vote had a lot to do with culture, too, I think. It was more than just the question of leaving the EU. Many voters wanted to remind the political class that they exist. That’s what French people are using the gilets jaunes for – to say we exist. We are seeing the same phenomenon in populist revolts across the world.

spiked: How have the working-classes come to be excluded?

Guilluy: All the growth and dynamism is in the major cities, but people cannot just move there. The cities are inaccessible, particularly thanks to mounting housing costs. The big cities today are like medieval citadels. It is like we are going back to the city-states of the Middle Ages. Funnily enough, Paris is going to start charging people for entry, just like the excise duties you used to have to pay to enter a town in the Middle Ages.

The cities themselves have become very unequal, too. The Parisian economy needs executives and qualified professionals. It also needs workers, predominantly immigrants, for the construction industry and catering et cetera. Business relies on this very specific demographic mix. The problem is that ‘the people’ outside of this still exist. In fact, ‘Peripheral France’ actually encompasses the majority of French people.

spiked: What role has the liberal metropolitan elite played in this?

Guilluy: We have a new bourgeoisie, but because they are very cool and progressive, it creates the impression that there is no class conflict anymore. It is really difficult to oppose the hipsters when they say they care about the poor and about minorities.

But actually, they are very much complicit in relegating the working classes to the sidelines. Not only do they benefit enormously from the globalised economy, but they have also produced a dominant cultural discourse which ostracises working-class people. Think of the ‘deplorables’ evoked by Hillary Clinton. There is a similar view of the working class in France and Britain. They are looked upon as if they are some kind of Amazonian tribe. The problem for the elites is that it is a very big tribe.

The middle-class reaction to the yellow vests has been telling. Immediately, the protesters were denounced as xenophobes, anti-Semites and homophobes. The elites present themselves as anti-fascist and anti-racist but this is merely a way of defending their class interests. It is the only argument they can muster to defend their status, but it is not working anymore.

Now the elites are afraid. For the first time, there is a movement which cannot be controlled through the normal political mechanisms. The gilets jaunes didn’t emerge from the trade unions or the political parties. It cannot be stopped. There is no ‘off’ button. Either the intelligentsia will be forced to properly acknowledge the existence of these people, or they will have to opt for a kind of soft totalitarianism.

A lot has been made of the fact that the yellow vests’ demands vary a great deal. But above all, it’s a demand for democracy. Fundamentally, they are democrats – they want to be taken seriously and they want to be integrated into the economic order.

spiked: How can we begin to address these demands?

Guilluy: First of all, the bourgeoisie needs a cultural revolution, particularly in universities and in the media. They need to stop insulting the working class, to stop thinking of all the gilets jaunes as imbeciles.

Cultural respect is fundamental: there will be no economic or political integration until there is cultural integration. Then, of course, we need to think differently about the economy. That means dispensing with neoliberal dogma. We need to think beyond Paris, London and New York.

Published:1/21/2019 7:40:36 AM
[Markets] "The Goal Is To Automate Us" - Welcome To The Age Of Surveillance Capitalism

Shoshana Zuboff’s new book is a chilling exposé of the business model that underpins the digital world. Observer tech columnist John Naughton explains the importance of Zuboff’s work and asks the author 10 key questions...

‘Technology is the puppet, but surveillance capitalism is the puppet master.’ Photograph: Getty Images

Via The Guardian,

We’re living through the most profound transformation in our information environment since Johannes Gutenberg’s invention of printing in circa 1439. And the problem with living through a revolution is that it’s impossible to take the long view of what’s happening. Hindsight is the only exact science in this business, and in that long run we’re all dead. Printing shaped and transformed societies over the next four centuries, but nobody in Mainz (Gutenberg’s home town) in, say, 1495 could have known that his technology would (among other things): fuel the Reformation and undermine the authority of the mighty Catholic church; enable the rise of what we now recognise as modern science; create unheard-of professions and industries; change the shape of our brains; and even recalibrate our conceptions of childhood. And yet printing did all this and more.

Why choose 1495? Because we’re about the same distance into our revolution, the one kicked off by digital technology and networking. And although it’s now gradually dawning on us that this really is a big deal and that epochal social and economic changes are under way, we’re as clueless about where it’s heading and what’s driving it as the citizens of Mainz were in 1495.

That’s not for want of trying, mind. Library shelves groan under the weight of books about what digital technology is doing to us and our world. Lots of scholars are thinking, researching and writing about this stuff. But they’re like the blind men trying to describe the elephant in the old fable: everyone has only a partial view, and nobody has the whole picture. So our contemporary state of awareness is – as Manuel Castells, the great scholar of cyberspace once put it – one of “informed bewilderment”.

Which is why the arrival of Shoshana Zuboff’s new book is such a big event. Many years ago – in 1988, to be precise – as one of the first female professors at Harvard Business School to hold an endowed chair she published a landmark book, The Age of the Smart Machine: The Future of Work and Power, which changed the way we thought about the impact of computerisation on organisations and on work. It provided the most insightful account up to that time of how digital technology was changing the work of both managers and workers. And then Zuboff appeared to go quiet, though she was clearly incubating something bigger. The first hint of what was to come was a pair of startling essays – one in an academic journal in 2015, the other in a German newspaper in 2016. What these revealed was that she had come up with a new lens through which to view what Google, Facebook et al were doing – nothing less than spawning a new variant of capitalism. Those essays promised a more comprehensive expansion of this Big Idea.

And now it has arrived – the most ambitious attempt yet to paint the bigger picture and to explain how the effects of digitisation that we are now experiencing as individuals and citizens have come about.

The headline story is that it’s not so much about the nature of digital technology as about a new mutant form of capitalism that has found a way to use tech for its purposes. The name Zuboff has given to the new variant is “surveillance capitalism”. It works by providing free services that billions of people cheerfully use, enabling the providers of those services to monitor the behaviour of those users in astonishing detail – often without their explicit consent.

“Surveillance capitalism,” she writes, “unilaterally claims human experience as free raw material for translation into behavioural data. Although some of these data are applied to service improvement, the rest are declared as a proprietary behavioural surplus, fed into advanced manufacturing processes known as ‘machine intelligence’, and fabricated into prediction products that anticipate what you will do now, soon, and later. Finally, these prediction products are traded in a new kind of marketplace that I call behavioural futures markets. Surveillance capitalists have grown immensely wealthy from these trading operations, for many companies are willing to lay bets on our future behaviour.”

While the general modus operandi of Google, Facebook et al has been known and understood (at least by some people) for a while, what has been missing – and what Zuboff provides – is the insight and scholarship to situate them in a wider context. She points out that while most of us think that we are dealing merely with algorithmic inscrutability, in fact what confronts us is the latest phase in capitalism’s long evolution – from the making of products, to mass production, to managerial capitalism, to services, to financial capitalism, and now to the exploitation of behavioural predictions covertly derived from the surveillance of users. In that sense, her vast (660-page) book is a continuation of a tradition that includes Adam Smith, Max Weber, Karl Polanyi and – dare I say it – Karl Marx.

Viewed from this perspective, the behaviour of the digital giants looks rather different from the roseate hallucinations of Wired magazine. What one sees instead is a colonising ruthlessness of which John D Rockefeller would have been proud. First of all there was the arrogant appropriation of users’ behavioural data – viewed as a free resource, there for the taking. Then the use of patented methods to extract or infer data even when users had explicitly denied permission, followed by the use of technologies that were opaque by design and fostered user ignorance.

And, of course, there is also the fact that the entire project was conducted in what was effectively lawless – or at any rate law-free – territory. Thus Google decided that it would digitise and store every book ever printed, regardless of copyright issues. Or that it would photograph every street and house on the planet without asking anyone’s permission. Facebook launched its infamous “beacons”, which reported a user’s online activities and published them to others’ news feeds without the knowledge of the user. And so on, in accordance with the disrupter’s mantra that “it is easier to ask for forgiveness than for permission”.

When the security expert Bruce Schneier wrote that “surveillance is the business model of the internet” he was really only hinting at the reality that Zuboff has now illuminated. The combination of state surveillance and its capitalist counterpart means that digital technology is separating the citizens in all societies into two groups: the watchers (invisible, unknown and unaccountable) and the watched. This has profound consequences for democracy because asymmetry of knowledge translates into asymmetries of power. But whereas most democratic societies have at least some degree of oversight of state surveillance, we currently have almost no regulatory oversight of its privatised counterpart. This is intolerable.

And it won’t be easy to fix because it requires us to tackle the essence of the problem – the logic of accumulation implicit in surveillance capitalism. That means that self-regulation is a nonstarter.

“Demanding privacy from surveillance capitalists,” says Zuboff, “or lobbying for an end to commercial surveillance on the internet is like asking old Henry Ford to make each Model T by hand. It’s like asking a giraffe to shorten its neck, or a cow to give up chewing. These demands are existential threats that violate the basic mechanisms of the entity’s survival.”

The Age of Surveillance Capital is a striking and illuminating book. A fellow reader remarked to me that it reminded him of Thomas Piketty’s magnum opus, Capital in the Twenty-First Century, in that it opens one’s eyes to things we ought to have noticed, but hadn’t. And if we fail to tame the new capitalist mutant rampaging through our societies then we will only have ourselves to blame, for we can no longer plead ignorance.

Ten questions for Shoshana Zuboff: ‘Larry Page saw that human experience could be Google’s virgin wood’

John Naughton: At the moment, the world is obsessed with Facebook. But as you tell it, Google was the prime mover.

Shoshana Zuboff: Surveillance capitalism is a human creation. It lives in history, not in technological inevitability. It was pioneered and elaborated through trial and error at Google in much the same way that the Ford Motor Company discovered the new economics of mass production or General Motors discovered the logic of managerial capitalism.

Surveillance capitalism was invented around 2001 as the solution to financial emergency in the teeth of the dotcom bust when the fledgling company faced the loss of investor confidence. As investor pressure mounted, Google’s leaders abandoned their declared antipathy toward advertising. Instead they decided to boost ad revenue by using their exclusive access to user data logs (once known as “data exhaust”) in combination with their already substantial analytical capabilities and computational power, to generate predictions of user click-through rates, taken as a signal of an ad’s relevance.

Operationally this meant that Google would both repurpose its growing cache of behavioural data, now put to work as a behavioural data surplus, and develop methods to aggressively seek new sources of this surplus.

The company developed new methods of secret surplus capture that could uncover data that users intentionally opted to keep private, as well as to infer extensive personal information that users did not or would not provide. And this surplus would then be analysed for hidden meanings that could predict click-through behaviour. The surplus data became the basis for new predictions markets called targeted advertising.

Sheryl Sandberg, says Zuboff, played the role of Typhoid Mary, bringing surveillance capitalism from Google to Facebook. Photograph: John Lee for the Guardian

Here was the origin of surveillance capitalism in an unprecedented and lucrative brew: behavioural surplus, data science, material infrastructure, computational power, algorithmic systems, and automated platforms. As click-through rates skyrocketed, advertising quickly became as important as search. Eventually it became the cornerstone of a new kind of commerce that depended upon online surveillance at scale.

The success of these new mechanisms only became visible when Google went public in 2004. That’s when it finally revealed that between 2001 and its 2004 IPO, revenues increased by 3,590%.

JN: So surveillance capitalism started with advertising, but then became more general?

SZ: Surveillance capitalism is no more limited to advertising than mass production was limited to the fabrication of the Ford Model T. It quickly became the default model for capital accumulation in Silicon Valley, embraced by nearly every startup and app. And it was a Google executive – Sheryl Sandberg – who played the role of Typhoid Mary, bringing surveillance capitalism from Google to Facebook, when she signed on as Mark Zuckerberg’s number two in 2008. By now it’s no longer restricted to individual companies or even to the internet sector. It has spread across a wide range of products, services, and economic sectors, including insurance, retail, healthcare, finance, entertainment, education, transportation, and more, birthing whole new ecosystems of suppliers, producers, customers, market-makers, and market players. Nearly every product or service that begins with the word “smart” or “personalised”, every internet-enabled device, every “digital assistant”, is simply a supply-chain interface for the unobstructed flow of behavioural data on its way to predicting our futures in a surveillance economy.

JN: In this story of conquest and appropriation, the term “digital natives” takes on a new meaning…

SZ: Yes, “digital natives” is a tragically ironic phrase. I am fascinated by the structure of colonial conquest, especially the first Spaniards who stumbled into the Caribbean islands. Historians call it the “conquest pattern”, which unfolds in three phases: legalistic measures to provide the invasion with a gloss of justification, a declaration of territorial claims, and the founding of a town to legitimate the declaration. Back then Columbus simply declared the islands as the territory of the Spanish monarchy and the pope.

The sailors could not have imagined that they were writing the first draft of a pattern that would echo across space and time to a digital 21st century. The first surveillance capitalists also conquered by declaration. They simply declared our private experience to be theirs for the taking, for translation into data for their private ownership and their proprietary knowledge. They relied on misdirection and rhetorical camouflage, with secret declarations that we could neither understand nor contest.

Google began by unilaterally declaring that the world wide web was its to take for its search engine. Surveillance capitalism originated in a second declaration that claimed our private experience for its revenues that flow from telling and selling our fortunes to other businesses. In both cases, it took without asking. Page [Larry, Google co-founder] foresaw that surplus operations would move beyond the online milieu to the real world, where data on human experience would be free for the taking. As it turns out his vision perfectly reflected the history of capitalism, marked by taking things that live outside the market sphere and declaring their new life as market commodities.

We were caught off guard by surveillance capitalism because there was no way that we could have imagined its action, any more than the early peoples of the Caribbean could have foreseen the rivers of blood that would flow from their hospitality toward the sailors who appeared out of thin air waving the banner of the Spanish monarchs. Like the Caribbean people, we faced something truly unprecedented.

Once we searched Google, but now Google searches us. Once we thought of digital services as free, but now surveillance capitalists think of us as free.

JN: Then there’s the “inevitability” narrative – technological determinism on steroids.

SZ: In my early fieldwork in the computerising offices and factories of the late 1970s and 80s, I discovered the duality of information technology: its capacity to automate but also to “informate”, which I use to mean to translate things, processes, behaviours, and so forth into information. This duality set information technology apart from earlier generations of technology: information technology produces new knowledge territories by virtue of its informating capability, always turning the world into information. The result is that these new knowledge territories become the subject of political conflict. The first conflict is over the distribution of knowledge: “Who knows?” The second is about authority: “Who decides who knows?” The third is about power: “Who decides who decides who knows?”

Now the same dilemmas of knowledge, authority and power have surged over the walls of our offices, shops and factories to flood each one of us… and our societies. Surveillance capitalists were the first movers in this new world. They declared their right to know, to decide who knows, and to decide who decides. In this way they have come to dominate what I call “the division of learning in society”, which is now the central organising principle of the 21st-century social order, just as the division of labour was the key organising principle of society in the industrial age.

JN: So the big story is not really the technology per se but the fact that it has spawned a new variant of capitalism that is enabled by the technology?

SZ: Larry Page grasped that human experience could be Google’s virgin wood, that it could be extracted at no extra cost online and at very low cost out in the real world. For today’s owners of surveillance capital the experiential realities of bodies, thoughts and feelings are as virgin and blameless as nature’s once-plentiful meadows, rivers, oceans and forests before they fell to the market dynamic. We have no formal control over these processes because we are not essential to the new market action. Instead we are exiles from our own behaviour, denied access to or control over knowledge derived from its dispossession by others for others. Knowledge, authority and power rest with surveillance capital, for which we are merely “human natural resources”. We are the native peoples now whose claims to self-determination have vanished from the maps of our own experience.

While it is impossible to imagine surveillance capitalism without the digital, it is easy to imagine the digital without surveillance capitalism. The point cannot be emphasised enough: surveillance capitalism is not technology. Digital technologies can take many forms and have many effects, depending upon the social and economic logics that bring them to life. Surveillance capitalism relies on algorithms and sensors, machine intelligence and platforms, but it is not the same as any of those.

JN: Where does surveillance capitalism go from here?

SZ: Surveillance capitalism moves from a focus on individual users to a focus on populations, like cities, and eventually on society as a whole. Think of the capital that can be attracted to futures markets in which population predictions evolve to approximate certainty.

This has been a learning curve for surveillance capitalists, driven by competition over prediction products. First they learned that the more surplus the better the prediction, which led to economies of scale in supply efforts. Then they learned that the more varied the surplus the higher its predictive value. This new drive toward economies of scope sent them from the desktop to mobile, out into the world: your drive, run, shopping, search for a parking space, your blood and face, and always… location, location, location.

The evolution did not stop there. Ultimately they understood that the most predictive behavioural data comes from what I call “economies of action”, as systems are designed to intervene in the state of play and actually modify behaviour, shaping it toward desired commercial outcomes. We saw the experimental development of this new “means of behavioural modification” in Facebook’s contagion experiments and the Google-incubated augmented reality game Pokémon Go.

Democracy has slept, while surveillance capitalists amassed unprecedented concentrations of knowledge and power

- Shoshana Zuboff

It is no longer enough to automate information flows about us; the goal now is to automate us. These processes are meticulously designed to produce ignorance by circumventing individual awareness and thus eliminate any possibility of self-determination. As one data scientist explained to me, “We can engineer the context around a particular behaviour and force change that way… We are learning how to write the music, and then we let the music make them dance.”

This power to shape behaviour for others’ profit or power is entirely self-authorising. It has no foundation in democratic or moral legitimacy, as it usurps decision rights and erodes the processes of individual autonomy that are essential to the function of a democratic society. The message here is simple: Once I was mine. Now I am theirs.

JN: What are the implications for democracy?

SZ: During the past two decades surveillance capitalists have had a pretty free run, with hardly any interference from laws and regulations. Democracy has slept while surveillance capitalists amassed unprecedented concentrations of knowledge and power. These dangerous asymmetries are institutionalised in their monopolies of data science, their dominance of machine intelligence, which is surveillance capitalism’s “means of production”, their ecosystems of suppliers and customers, their lucrative prediction markets, their ability to shape the behaviour of individuals and populations, their ownership and control of our channels for social participation, and their vast capital reserves. We enter the 21st century marked by this stark inequality in the division of learning: they know more about us than we know about ourselves or than we know about them. These new forms of social inequality are inherently antidemocratic.

At the same time, surveillance capitalism diverges from the history of market capitalism in key ways, and this has inhibited democracy’s normal response mechanisms. One of these is that surveillance capitalism abandons the organic reciprocities with people that in the past have helped to embed capitalism in society and tether it, however imperfectly, to society’s interests. First, surveillance capitalists no longer rely on people as consumers. Instead, supply and demand orients the surveillance capitalist firm to businesses intent on anticipating the behaviour of populations, groups and individuals. Second, by historical standards the large surveillance capitalists employ relatively few people compared with their unprecedented computational resources. General Motors employed more people during the height of the Great Depression than either Google or Facebook employs at their heights of market capitalisation. Finally, surveillance capitalism depends upon undermining individual self-determination, autonomy and decision rights for the sake of an unobstructed flow of behavioural data to feed markets that are about us but not for us.

This antidemocratic and anti-egalitarian juggernaut is best described as a market-driven coup from above: an overthrow of the people concealed as the technological Trojan horse of digital technology. On the strength of its annexation of human experience, this coup achieves exclusive concentrations of knowledge and power that sustain privileged influence over the division of learning in society. It is a form of tyranny that feeds on people but is not of the people. Paradoxically, this coup is celebrated as “personalisation”, although it defiles, ignores, overrides, and displaces everything about you and me that is personal.

‘The power to shape behaviour for others’ profit or power is entirely self-authorising,’ says Zuboff. ‘It has no foundation in democratic or moral legitimacy.’

JN: Our societies seem transfixed by all this: we are like rabbits paralysed in the headlights of an oncoming car.

SZ: Despite surveillance capitalism’s domination of the digital milieu and its illegitimate power to take private experience and to shape human behaviour, most people find it difficult to withdraw, and many ponder if it is even possible. This does not mean, however, that we are foolish, lazy, or hapless. On the contrary, in my book I explore numerous reasons that explain how surveillance capitalists got away with creating the strategies that keep us paralysed. These include the historical, political and economic conditions that allowed them to succeed. And we’ve already discussed some of the other key reasons, including the nature of the unprecedented, conquest by declaration. Other significant reasons are the need for inclusion, identification with tech leaders and their projects, social persuasion dynamics, and a sense of inevitability, helplessness and resignation.

We are trapped in an involuntary merger of personal necessity and economic extraction, as the same channels that we rely upon for daily logistics, social interaction, work, education, healthcare, access to products and services, and much more, now double as supply chain operations for surveillance capitalism’s surplus flows. The result is that the choice mechanisms we have traditionally associated with the private realm are eroded or vitiated. There can be no exit from processes that are intentionally designed to bypass individual awareness and produce ignorance, especially when these are the very same processes upon which we must depend for effective daily life. So our participation is best explained in terms of necessity, dependency, the foreclosure of alternatives, and enforced ignorance.

JN: Doesn’t all this mean that regulation that just focuses on the technology is misguided and doomed to fail? What should we be doing to get a grip on this before it’s too late?

SZ: The tech leaders desperately want us to believe that technology is the inevitable force here, and their hands are tied. But there is a rich history of digital applications before surveillance capitalism that really were empowering and consistent with democratic values. Technology is the puppet, but surveillance capitalism is the puppet master.

Surveillance capitalism is a human-made phenomenon and it is in the realm of politics that it must be confronted. The resources of our democratic institutions must be mobilised, including our elected officials. GDPR [a recent EU law on data protection and privacy for all individuals within the EU] is a good start, and time will tell if we can build on that sufficiently to help found and enforce a new paradigm of information capitalism. Our societies have tamed the dangerous excesses of raw capitalism before, and we must do it again.

While there is no simple five-year action plan, much as we yearn for that, there are some things we know. Despite existing economic, legal and collective-action models such as antitrust, privacy laws and trade unions, surveillance capitalism has had a relatively unimpeded two decades to root and flourish. We need new paradigms born of a close understanding of surveillance capitalism’s economic imperatives and foundational mechanisms.”

For example, the idea of “data ownership” is often championed as a solution. But what is the point of owning data that should not exist in the first place? All that does is further institutionalise and legitimate data capture. It’s like negotiating how many hours a day a seven-year-old should be allowed to work, rather than contesting the fundamental legitimacy of child labour. Data ownership also fails to reckon with the realities of behavioural surplus. Surveillance capitalists extract predictive value from the exclamation points in your post, not merely the content of what you write, or from how you walk and not merely where you walk. Users might get “ownership” of the data that they give to surveillance capitalists in the first place, but they will not get ownership of the surplus or the predictions gleaned from it – not without new legal concepts built on an understanding of these operations.

Another example: there may be sound antitrust reasons to break up the largest tech firms, but this alone will not eliminate surveillance capitalism. Instead it will produce smaller surveillance capitalist firms and open the field for more surveillance capitalist competitors.

So what is to be done? In any confrontation with the unprecedented, the first work begins with naming. Speaking for myself, this is why I’ve devoted the past seven years to this work… to move forward the project of naming as the first necessary step toward taming. My hope is that careful naming will give us all a better understanding of the true nature of this rogue mutation of capitalism and contribute to a sea change in public opinion, most of all among the young.

Published:1/20/2019 11:11:24 PM
[Markets] Visualizing The Snowball Of Global Government Debt

Over the last five years, markets have pushed concerns about debt under the rug.

But, while economic growth and record-low interest rates have made it easy to service existing government debt, Visual Capitalist's Jeff Desjardins points out that it’s also created a situation where government debt has grown in to over $63 trillion in absolute terms.

The global economic tide can change fast, and in the event of a recession or rapidly rising interest rates, debt levels could come back into the spotlight very quickly.

THE DEBT SNOWBALL

Today’s visualization comes to us from HowMuch.net and it rolls the world’s countries into a “snowball” of government debt, colored and arranged by debt-to-GDP ratios. The data itself comes from the IMF’s most recent October 2018 update.

Courtesy of: Visual Capitalist

The structure of the visualization is apt, because debt can accumulate in an unsustainable way if governments are not proactive. This situation can create a vicious cycle, where mounting debt can start hampering growth, making the debt ultimately harder to pay off.

Here are the countries with the most debt on the books:

Note: Small economies (GDP under $10 billion) are excluded in this table, such as Cabo Verde and Barbados

Japan and Greece are the most indebted countries in the world, with debt-to-GDP ratios of 237.6% and 181.8% respectively. Meanwhile, the United States sits in the #8 spot with a 105.2% ratio, and recent Treasury estimates putting the national debt at $22 trillion.

LIGHT SNOW

On the opposite spectrum, here are the 10 jurisdictions that have incurred less debt relative to the size of their economies:

Note: Small economies (GDP under $10 billion) are excluded in this table, such as Timor-Leste and Solomon Islands

Macao and Hong Kong – both special administrative regions (SARs) in China – have virtually zero debt on the books, while the official country with the lowest debt is Brunei (2.8%).

Published:1/19/2019 10:01:50 PM
[Markets] The US Military Is Winning... No, Really, It Is!

Authored by Nick Turse via TomDispatch.com,

A Simple Equation Proves That the U.S. Armed Forces Have Triumphed in the War on Terror...

4,000,000,029,057. Remember that number. It’s going to come up again later.

But let’s begin with another number entirely: 145,000 -- as in, 145,000 uniformed soldiers striding down Washington’s Pennsylvania Avenue. That’s the number of troops who marched down that very street in May 1865 after the United States defeated the Confederate States of America. Similar legions of rifle-toting troops did the same after World War I ended with the defeat of Germany and its allies in 1918. And Sherman tanks rolling through the urban canyons of midtown Manhattan? That followed the triumph over the Axis in 1945. That’s what winning used to look like in America -- star-spangled, soldier-clogged streets and victory parades.

Enthralled by a martial Bastille Day celebration while visiting French President Emmanuel Macron in Paris in July 2017, President Trump called for just such a parade in Washington.  After its estimated cost reportedly ballooned from $10 million to as much as $92 million, the American Legion weighed in. That veterans association, which boasts 2.4 million members, issued an August statement suggesting that the planned parade should be put on hold “until such time as we can celebrate victory in the War on Terrorism and bring our military home.” Soon after, the president announced that he had canceled the parade and blamed local Washington officials for driving up the costs (even though he was evidently never briefed by the Pentagon on what its price tag might be).

The American Legion focused on the fiscal irresponsibility of Trump’s proposed march, but its postponement should have raised an even more significant question: What would “victory” in the war on terror even look like? What, in fact, constitutes an American military victory in the world today? Would it in any way resemble the end of the Civil War, or of the war to end all wars, or of the war that made that moniker obsolete? And here’s another question: Is victory a necessary prerequisite for a military parade?

The easiest of those questions to resolve is the last one and the American Legion should already know the answer. Members of that veterans group played key roles in a mammoth “We Support Our Boys in Vietnam” parade in New York City in 1967 and in a 1973 parade in that same city honoringveterans of that war. Then, 10 years after the last U.S. troops snuck out of South Vietnam -- abandoning their allies and scrambling aboard helicopters as Saigon fell -- the Big Apple would host yet another parade honoring Vietnam veterans, reportedly the largest such celebration in the city’s history. So, quite obviously, winning a war isn’t a prerequisite for a winning parade.

And that’s only one of many lessons the disastrous American War in Vietnam still offers us. More salient perhaps are those that highlight the limits of military might and destructive force on this planet or that focus on the ability of North Vietnam, a “little fourth-rate” country -- to quote Henry Kissinger, the national security advisor of that moment -- to best a superpower that had previously (with much assistance) defeated Nazi Germany and Imperial Japan at the same time. The Vietnam War -- and Kissinger -- provide a useful lens through which to examine the remaining questions about victory and what it means today, but more on that later.

For the moment, just remember: 4,000,000,029,057, Vietnam War, Kissinger.

Peace in Our Time... or Some Time... or No Time

Now, let’s take a moment to consider the ur-conflict of the war on terror, Afghanistan, where the U.S. began battling the Taliban in October 2001. America’s victory there came with lightning speed. The next year, President George W. Bush announced that the group had been “defeated.” In 2004, the commander-in-chief reported that the Taliban was “no longer in existence.” Yet, somehow, they were. By 2011, General David Petraeus, then commander of U.S. forces in Afghanistan, claimed that his troops had “reversed the momentum of the Taliban.” Two years later, then-commander General Joseph Dunford spoke of “the inevitability of our success” there.

Last August, President Trump unveiled his “Strategy in Afghanistan and South Asia.” Its “core pillar” was “a shift from a time-based approach to one based on conditions”; in other words, the “arbitrary timetables” for withdrawal of the Obama years were out. “We will push onward to victory with power in our hearts,” President Trump decreed. “America’s enemies must never know our plans or believe they can wait us out.”

The president also announced that he was putting that war squarely in the hands of the military. “Micromanagement from Washington, D.C., does not win battles,” he announced. “They are won in the field drawing upon the judgment and expertise of wartime commanders and frontline soldiers acting in real time, with real authority, and with a clear mission to defeat the enemy.” The man given that authority was General John Nicholson who had, in fact, been running the American war there since 2016. The general was jubilant and within months agreed that the conflict had “turned the corner” (something, by the way, that Obama-era Secretary of Defense Leon Panetta also claimed -- in 2012).

Today, almost 17 years after the war began, two years after Nicholson took the reins, one year after Trump articulated his new plan, victory in any traditional sense is nowhere in sight. Despite spending around $900 billion in Afghanistan, as the Special Inspector General for Afghanistan Reconstruction determined earlier this year, “between 2001 and 2017, U.S. government efforts to stabilize insecure and contested areas in Afghanistan mostly failed.” According to a July 30, 2018, report by that same inspector general, the Taliban was by then contesting control of or controlled about 44% of that country, while Afghan government control and influence over districts had declined by about 16% since Nicholson’s predecessor, General John Campbell, was in command.

And that was before, last month, the Taliban launched a large-scale attack on a provincial capital, Ghazni, a strategically important city, and held it for five days, while taking control of much of the province itself. Finally driven from the city, the Taliban promptly overran a military base in Baghlan Province during its withdrawal. And that was just one day after taking another Afghan military base. In fact, for the previous two months, the Taliban had overrun government checkpoints and outposts on a near-daily basis. And keep in mind that the Taliban is now only a fraction of the story. The U.S. set out to defeat it and al-Qaeda in 2001. Today, Washington faces exponentially more terror groups in Afghanistan -- 21 in all, including an imported franchise from the Iraq War front, ISIS, that grew larger during Nicholson’s tenure.

Given this seemingly dismal state of affairs, you might wonder what happened to Nicholson. Was he cashiered? Fired, Apprentice-style? Quietly ushered out of Afghanistan in disgrace? Hardly. Like the 15 U.S. commanders who preceded him, the four-star general simply rotated out and, at his final press conference from the war zone late last month, was nothing if not upbeat.

“I believe the South Asia Strategy is the right approach. And now we see that approach delivering progress on reconciliation that we had not seen previously,” he announced. “We've also seen a clear progression in the Taliban's public statements, from their 14 February letter to the American people to the recent Eid al-Adha message, where [Taliban leader] Emir Hibatullah acknowledged for the first time that negotiations will, quote, ‘ensure an end to the war,’ end quote.”

In the event that you missed those statements from a chastened Taliban on the threshold of begging for peace, let me quote from the opening of the latter missive, issued late last month:

“This year Eid­ al­-Adha approaches us as our Jihadi struggle against the American occupation is on the threshold of victory due to the help of Allah Almighty. The infidel invading forces have lost all will of combat, their strategy has failed, advanced technology and military equipment rendered useless, [the] sedition and corruption­-sowing group defeated, and the arrogant American generals have been compelled to bow to the Jihadic greatness of the Afghan nation.”

And those conciliatory statements of peace and reconciliation touted by Nicholson? The Taliban says that in order to end “this long war” the “lone option is to end the occupation of Afghanistan and nothing more.”

In June, the 17th American nominated to take command of the war, Lieutenant General Scott Miller, appeared before the Senate Armed Services Committee where Elizabeth Warren (D-MA) grilled him on what he would do differently in order to bring the conflict to a conclusion. “I cannot guarantee you a timeline or an end date,” was Miller’s confident reply.

Did the senators then send him packing? Hardly. He was, in fact, easily confirmed and starts work this month. Nor is there any chance Congress will use its power of the purse to end the war. The 2019 budget request for U.S. operations in Afghanistan -- topping out at $46.3 billion -- will certainly be approved.

#Winning

All of this seeming futility brings us back to the Vietnam War, Kissinger, and that magic number, 4,000,000,029,057 -- as well as the question of what an American military victory would look like today. It might surprise you, but it turns out that winning wars is still possible and, perhaps even more surprising, the U.S. military seems to be doing just that.

Let me explain.

In Vietnam, that military aimed to “out-guerrilla the guerrilla.” It never did and the United States suffered a crushing defeat. Henry Kissinger -- who presided over the last years of that conflict as national security advisor and then secretary of state -- provided his own concise take on one of the core tenets of asymmetric warfare: “The conventional army loses if it does not win. The guerrilla wins if he does not lose.” Perhaps because that eternally well-regarded but hapless statesman articulated it, that formula was bound -- like so much else he touched -- to crash and burn.

In this century, the United States has found a way to turn Kissinger’s martial maxim on its head and so rewrite the axioms of armed conflict. This redefinition can be proved by a simple equation:

0 + 1,000,000,000,000 + 17 +17 + 23,744 + 3,000,000,000,000 + 5 + 5,200 + 74 = 4,000,000,029,057

Expressed differently, the United States has not won a major conflict since 1945; has a trillion-dollar national security budget; has had 17 military commanders in the last 17 years in Afghanistan, a country plagued by 23,744 “security incidents” (the most ever recorded) in 2017 alone; has spent around $3 trillion, primarily on that war and the rest of the war on terror, including the ongoing conflict in Iraq, which then-defense secretary Donald Rumsfeld swore, in 2002, would be over in only “five days or five weeks or five months,” but where approximately 5,000 U.S. troops remain today; and yet 74% of the American people still express high confidence in the U.S. military.

Let the math and the implications wash over you for a moment. Such a calculus definitively disproves the notion that “the conventional army loses if it does not win.” It also helps answer the question of victory in the war on terror. It turns out that the U.S. military, whose budget and influence in Washington have only grown in these years, now wins simply by not losing -- a multi-trillion-dollar conventional army held to the standards of success once applied only to under-armed, under-funded guerilla groups.

Unlike in the Vietnam War years, three presidents and the Pentagon, unbothered by fiscal constraints, substantive congressional opposition, or a significant antiwar movement, have been effectively pursuing this strategy, which requires nothing more than a steady supply of troops, contractors, and other assorted camp followers; an endless parade of Senate-sanctioned commanders; and an annual outlay of hundreds of billions of dollars. By these standards, Donald Trump’s open-ended, timetable-free “Strategy in Afghanistan and South Asia” may prove to be the winningest war plan ever. As he described it:

“From now on, victory will have a clear definition: attacking our enemies, obliterating ISIS, crushing al-Qaeda, preventing the Taliban from taking over Afghanistan, and stopping mass terror attacks against America before they emerge.”

Think about that for a moment. Victory’s definition begins with “attacking our enemies” and ends with the prevention of possible terror attacks. Let me reiterate: “victory” is defined as “attacking our enemies.” Under President Trump’s strategy, it seems, every time the U.S. bombs or shells or shoots at a member of one of those 20-plus terror groups in Afghanistan, the U.S. is winning or, perhaps, has won. And this strategy is not specifically Afghan-centric. It can easily be applied to American warzones in the Middle East and Africa -- anywhere, really.

Decades after the end of the Vietnam War, the U.S. military has finally solved the conundrum of how to “out-guerrilla the guerrilla.” And it couldn’t have been simpler. You just adopt the same definition of victory. As a result, a conventional army -- at least the U.S. military -- now loses only if it stops fighting. So long as unaccountable commanders wage benchmark-free wars without congressional constraint, the United States simply cannot lose. You can’t argue with the math. Call it the rule of 4,000,000,029,057.

That calculus and that sum also prove, quite clearly, that America’s beleaguered commander-in-chief has gotten a raw deal on his victory parade. With apologies to the American Legion, the U.S. military is now -- under the new rules of warfare -- triumphant and deserves the type of celebration proposed by President Trump. After almost two decades of warfare, the armed forces have lowered the bar for victory to the level of their enemy, the Taliban. What was once the mark of failure for a conventional army is now the benchmark for success. It’s a remarkable feat and deserving, at the very least, of furious flag-waving, ticker tape, and all the age-old trappings of victory.

Published:1/19/2019 8:31:32 PM
[worldNews] As teachers get paid, learning returns to bombed-out Yemen school Its books have been looted and walls blown out, but a school in war-torn southern Yemen is hopeful that the resumption of regular salary payments can keep teachers and children in classrooms.
Published:1/19/2019 5:28:00 AM
[Markets] Progressive Pandering - Don't Be So Sure Hyperinflation Can't Hit The U.S.

Authored by Noah Smith, op-ed via Bloomberg.com,

Some progressives back piling on even more debt to pay for social programs. That could be risky...

Discussions of big government spending programs often revolve around the question of how to pay for them. For example, Representative Alexandria Ocasio-Cortez touted her proposal for a 70 percent tax rate on income above $10 million by saying it would help pay for the Green New Deal, a broad package of environmental and economic initiatives.

Implicit in this concern is the idea is that government debt shouldn’t get too big. This is a common belief — polls regularly find that Americans are worried about the national debt. The national debt clock in Manhattan is a famous symbol of this anxiety. The idea is also formalized in mainstream economic models, which tend to assume that in the long run the government has to balance its books. Writing at Brookings Institution, David Wessel expresses this conventional wisdom when he declares that “federal debt cannot grow faster than the economy forever.”

But what if this is a fallacy? What if the government doesn’t have to pay back what it borrows, now or ever? This is the provocative thesis of an unorthodox economic theory that is rapidly gaining credence on the political left called modern monetary theory, or MMT. The concept isn't new — economist Abba Lerner endorsed something similar in the 1940s, under the name of “functional finance.” But the theory has enjoyed a popular resurgence since it was embraced by some progressives, who want to enact a federal job guarantee and other ambitious economic plans paid for by government borrowing.

MMT has many elements, and its advocates tend to express these in terms that aren’t familiar to many mainstream economists. But the central argument that the U.S. government doesn’t really have a budget constraint — and thus, that taxes are never needed to pay for federal spending — is simple enough to grasp. Basically, it’s because the government can print dollars whenever it wants.

Suppose the government decides to pile up infinite amounts of debt. What bad thing could happen? Debt-service costs increase. But instead of raising taxes to pay the interest, the government could simply borrow more in order to cover those interest payments. The Federal Reserve could also lower interest rates to zero, thus eliminating interest costs. This is basically what has happened in Japan.

What if rising U.S. government debt also causes investors to pull back on lending to U.S. companies? No problem; by lowering interest rates, the Fed can ensure that the cost of capital doesn’t get too high. In a pinch, it could even buy corporate and mortgage debt. Fed lending to any company that wants it might reduce business productivity, since the central bank is presumably worse at evaluating risks than private investors are. But the MMT people aren’t too worried about that — after all, a federal job guarantee, which could also potentially muscle out private-sector activity, is a prominent centerpiece of their plans.

Of course, the Fed is a nominally independent institution, but there’s no reason this arrangement has to continue. Under an MMT regime, central bank independence could be eliminated, and monetary policy could be coordinated between the Fed and the Treasury.

That leaves just one danger — that funding for federal debt will dry up, leaving the U.S. government with no one to finance its infinite borrowing. No one, that is, except itself. Again, the Fed funds the Treasury’s borrowing by simply printing money, which actually just means creating reserves in an electronic bank account. In this case, the Treasury itself becomes little more than a formality — a conduit for the Fed to pay government workers, contractors and transfer-payment recipients.

So this is the MMT endgame; government pays for as much as it wants with the endless supply of money that it creates. In this sense, the MMT people are right that there is no government budget constraint. But there is a different kind of constraint that no financing arrangement can get around — the limitation of real resources. Eventually, if the government keeps paying for more things, we run out of them, whether it's unemployed workers to fill offices and factories, natural resources, or production capacity.

What happens if the government keeps trying to pay for things with printed money after the economy has employed every available worker? No one really knows. One common theory is that hyperinflation would result. This is a disastrous spiral in which prices rise so quickly, and so unpredictably, that a country’s entire economy grinds to a halt and the nation collapses into poverty. For a look at how hyperinflation can immiserate a nation, simply examine the stories coming out of Venezuela.

Could too much printed money chasing a limited supply of real goods lead to hyperinflation in an advanced economy like the U.S.? Proponents of MMT certainly acknowledge the possibility that it could. In September, when I discussed the idea with Stony Brook University economist and Bloomberg Opinion contributor Stephanie Kelton, a leading MMT champion, she said:

Is there a limit to how big the deficit can safely climb? Absolutely! Deficits matter. They can be too big — risking accelerating inflation.

Some of MMT’s more strenuous online advocates wave away the possibility of hyperinflation in a country as politically stable and economically developed as the U.S. And indeed, low interest rates and large levels of quantitative easing haven’t led to much inflation, either in the U.S., Japan or Europe, as inflation hawks had warned it would:

Inflation Still On Hold - Consumer price index

Source: Bureau of Labor Statistics via Bloomberg

But just because inflation remains subdued doesn’t mean it couldn’t rise suddenly, especially if businesses — which set prices — decide that the U.S. government has embarked on a course of infinite monetary-financed deficit spending. In fact, inflation might have remained so low, in despite of Fed easing, precisely because businesses believed that Fed independence and the Treasury’s fiscal prudence meant that quantitative easing and big deficits would eventually end.

A wholehearted embrace of MMT would thus represent a gamble of the U.S.’s economic future on the idea that hyperinflation can’t happen here. Recent experience has made such a disaster seem unlikely, but the truth is that no one really knows how likely it would be if MMT went from theory to reality.

Published:1/18/2019 6:01:30 PM
[Entertainment] Michelle Obama's Becoming Breaks a Record Set by Fifty Shades of Grey Becoming, Michelle Obama, BookBecoming is beloved by readers around the world. It's been two months since Michelle Obama released her memoir, and it's still on top of Amazon's best-selling books chart....
Published:1/17/2019 12:53:33 PM
[PAID] 'They Own the System': Amazon Rewrites Book Industry by Marching Into Publishing The online retail giant, the world’s largest public company, commands an unrivaled customer base for the books, ebooks and audiobooks it publishes. As a result, it’s jolting the publishing industry, creating instant best sellers out of self-published writers and pushing down earnings for others. Published:1/16/2019 11:44:30 PM
[Markets] From Baghdad To Finland And All Across The World: What's The US Up To?

Via Off-Guardian.org,

Why does the US Embassy in Helsinki need a big warehouse near Malmi Airport and what are the contents of thousands of kilograms of cargo sent to Helsinki from Baghdad?

A dilapidated warehouse in Malmi is being used by the US Embassy for unknown operations after a Wikileaks release revealed its location.

The anonymous looking building on Takoraudantie is notable only for the new 427 meter perimeter fence that according to the Wikileaks’ database was ordered by the US Embassy in April 2018.

...

More than a million kilograms of cargo were shipped from Baghdad to different parts of the world, reveals US embassies procurement documents.

Mysterious cargo shipments from the US Embassy in Baghdad to other American embassies and consulates around the world have been revealed on a Wikileaks’ database. Procurement orders of US embassies are public documents, but Wikileaks put them in a searchable database making it easier to analyse.

Here are two critical articles on this subject from Helsinki Times, dated December 29, 2018 and January 1, 2019 respectively.

GUARDED WAREHOUSES NEAR AIRPORT AND MYSTERIOUS CARGO FROM BAGHDAD

by Will Sillitoe

Situated across the street from the main entrance of Malmi Airport, the warehouse with its 3 meter high security fence appears an unlikely location for official embassy business. Neighbouring companies include a car yard and a tyre warehouse.

Helsinki Times visited the perimeters this weekend. Security personnel, young Finns in uniforms with American flags on their arms, appeared nervous and suspicious when asked to comment on the warehouse and refused to even confirm the order of the new fence structure which now surrounds the compound. At one point a security guard appeared in a second floor window to carefully monitor this reporter’s movements along Takoraudantie.

US embassy warehouse near Malmi airport. This image from Google street view is from 2011. The newly built permitter fence can not be seen in this image.

Mysterious parcels from Baghdad

The Wikileaks’ database has also revealed mysterious packages being sent to the US Embassy in Finland from their embassy in Baghdad.

The database displaying US embassy procurements around the world shows that tons of cargo are being distributed to Helsinki and other US embassies via regular airfreight cargo deliveries from Baghdad.

Twelve consignments, each logged at 5000 kilograms are recorded as sent to Helsinki and 23 other West European US embassies – an average of 2500 kilograms per US embassy.

The reason for such a vast volume of embassy deliveries from Baghdad is as yet unknown but this latest disclosure follows Wikileaks news that the US Consulate in Frankfurt was a purchase and postal centre for distributing spy equipment to other US embassies worldwide. Concerns are now raised that the US Embassy in Baghdad is also being used as a main distribution centre for secret operations.

In addition to Finland and Western Europe, the Wikileaks database shows that the US embassy in Baghdad disseminates hundreds of tons worldwide, with more than 300,000 kilograms recorded as being delivered Stateside alone.

Incoming diplomatic mail between embassies receives customs clearance and is automatically classified as a US government shipment.

The 80 page order list also details massive movements of road and air freight between Basra in the south of Iraq and Erbil in the north. No indication of the cargo contents are provided but the order sheets reveal convoys of trucks and vehicles were hired by Baghdad’s US embassy for the mysterious shipments.

The warehouse is equipped with several big gates suitable for lorries to drive in. Containers and a forklift in the yard indicate heavy duty use. A special antenna is on the roof.

Spy gadgets and surveillance operations

The disclosure of the building’s use by the US Embassy in Finland comes in light of revelations about US embassy spying activities worldwide, as featured in the Wikileaks’ US embassy shopping list database. In a published list of more than 16000 miscellaneous items, requests also appear for recording devices disguised as pens, lighters, glasses, watches and even spy shirt buttons.

Although US embassy procurements are public information, Wikileaks new database allows for country specific searches, giving clearer evidence of US embassy involvement in secret surveillance operations in certain parts of the world.. The timing of this latest Wikileaks’ release came just hours after its Twitter accounts were cyber attacked late on Friday, ahead of the Christmas holiday.

According to the database, requests made by the US Embassy in Finland appear to be for everyday items. Procurements include a tractor as well as services for snow removal, plumbing, gardening and cleaning. However, in light of ‘Tactical Spy Equipment’ purchased by US embassies elsewhere the existence of the warehouse compound near Malmi Airport raises concerns about potential secret operations closer to home. US Embassy official responsible for ordering the warehouse perimeter fence, was unavailable for comment.

Strategically located US embassy complex in Helsinki and the newly built “Innovation Center”.

Worldwide, the Wikileaks’ online data reveals that Latin America is the main target for purchases of spying equipment. Camera hats and USB drives as well as night visors and binoculars were among items procured for the US embassy in Colombia. But topping the list for requested surveillance items was the US embassy in El Salvador where the purchase of ‘Tactical Spy Equipment’ totalled 94 items.

Back in 2017 Wikileaks documents revealed that the American consulate in Frankfurt had served as a covert base to carry out digital spy operations. Using the US Embassy shopping list database, Germany’s Der Spiegel has now identified the consulate as a main buyer of spy equipment for diplomatic missions across Europe.

These latest Wikileaks’ revelations further highlight the role of US embassies in espionage activities across the globe. Some reports suggest over 80 US embassies worldwide conceal joint NSA-CIA “Special Collection Service” radio and electronic surveillance equipment. Such concerns add to the questions concerning activities at the Malmi warehouse and the secrecy surrounding it.

However, the database of US embassy shopping lists reveals some less concerning items too with one evoking the craziness of an Inspector Clouseau rather than a cold, calculating 007: A person to count fish and clean the pond was sought by the consulate in Guayaquil, Ecuador after officials lost track of how many fish they possessed.

The searchable Wikileaks database and info about Finland related activities can be found HERE.

*  *  *

WHAT DOES THE US EMBASSY IN BAGHDAD EXPORT TO FINLAND AND DOZENS OF OTHER COUNTRIES?

by Will Sillitoe

The database displaying worldwide US embassy orders of goods and services reveals Baghdad as a postal and shipping centre for tonnes of freight.

Though military freight might be expected between the US and Iraq, records show that embassies across Europe, Asia, the Middle East, the Americas and Africa are all receiving deliveries from Baghdad too.

According to Wikileaks’ database, orders to ship more than 540 tonnes of cargo to the US were made in May 2018. The same document shows other main delivery destinations included 120 tonnes of freight to Europe, and 24 tonnes to South Africa, South America and Central Africa respectively. In comparison, only two and a half tonnes of freight were moved within Iraq between Baghdad, Basra and Erbil International Airports. So, the export of items from Iraq appears to be the primary activity.

The content of the deliveries is as yet unclear, though the order contract suggests household items, rugs, electrical goods, linen, kitchenware, furniture, pianos, refrigerators, books, chinaware, clothing as well as mail could be among the items dispatched. According to the website movers.com, an average one bedroom apartment of furniture weighs approximately one tonne but the practicality of moving many types of household objects across continents is doubtful. It also remains unclear whether the quantity of tonnage relates to many small deliveries or a small number of very large ones.

The lack of disclosed orders moving cargo and services into Iraq highlights that the movement of diplomats and their families into such a dangerous region on a large scale is unlikely.  Transfers of military personnel back and forth would normally go through the US airbases in Iraq and not via the Embassy administration. So discounting the movement of more than a thousand staff members out of Iraq to countries around the world means that the content and purpose of the shipments remains a mystery.

The Wikileaks’ database findings coincide with the discovery of a previously undisclosed US Embassy warehouse near Malmi Airport, a storage facility suitable for receiving large truckloads of incoming freight. Documents also show that the US Embassy in Finland ordered a new security perimeter fence for the warehouse compound in April 2018. The purpose for the warehouse remains unknown.

This latest uncovering of unusual US embassy activity follows the 2017 exposure of the US Consulate in Frankfurt being used for surveillance operations and as a buying and postal dispatch centre of spying equipment for other US consulates. These latest Wikileaks revelations raise concerns that the US Embassy in Baghdad may also serve as a hub for secret operations worldwide.

The database also reveals that items listed as ‘Tactical Spy Equipment’ were ordered for US embassies in Latin America, with Colombia and El Salvador receiving a range of spy cameras disguised as pens, glasses, hats, USB drives and even shirt buttons.

*  *  *

So , as Eric Zuesse asked, why is America’s Baghdad Embassy the world’s largest embassy - and the largest by far?

"It's as if the US Embassy is there not only to protect American interests, but to manage the entire world from the heart of the capital, Baghdad.”

— Iraqi Sheikh Qassim Al Ta’ee, as quoted on 27 December 2011 in Al Iraq News and translated by Ibrahim Zaidan from the original Arabic by Nicholas Dagher 

Secret government tends to be costly for taxpayers, and also tends to add a lot to the governmental debt. An unauditable governmental department, such as the Defense Department is, cannot function, at all, without an enormous amount of corruption. This is the reality about America’s military. However, there’s much propaganda contradicting it. The news-media also serve those same billionaires.

How likely, then, is it, that America’s Baghdad Embassy serves the US public? It certainly does not serve the Iraqi public. But it does serve the people — whomever they are — who control the US Government. And that’s the Deep State. That’s the reality, but what’s promoted is fantasyland. And this fantasyland, which is promoted, is called “American democracy”. Just ask Big Brother, and he’ll tell you all about it. He always does.

Published:1/15/2019 10:37:21 PM
[World] 'Choose Your Own Adventure' publisher sues Netflix over 'Black Mirror: Bandersnatch' Chooseco says Netflix violated its trademark with “Bandersnatch,” a recent episode of “Black Mirror" that uses a format similar to those of the books.
     
 
 
Published:1/15/2019 4:36:18 PM
[World] [David E. Bernstein] At Least One Cheer for Law Reviews

Law reviews as venue for scholarship come under a lot of justified criticism, but at least the editors check the footnotes

Any well-published law professor can recite a litany of complaints about law reviews, the generally student-edited journals where most legal scholarship is published. For example, the students require citations for opinions, or for well-known facts; students get to select the articles they publish, but don't have the expertise to do so; and the bluebook citation system most law reviews follow is much too cumbersome, and requires way too many explantory parentheticals.

One advantage law reviews do have, however, is that the editors are meticulous about checking footnotes to ensure that citations actually support the authors' contentions, and that quotations are accurate. This has its limitations; a Holocaust denier citing to books by Holocaust deniers would pass such screening. But it does at least prevent authors from either just making things up or being incredibly sloppy, and then sticking in footnotes to make the invention or sloppiness look scholarly.

I've been involved off and on over the past year and a half in the ongoing debate over Nancy MacLean's book Democracy in Chains. My interest in the book was piqued when some of my Facebook friends were criticizing it for a variety of scholarly sins. I got hold of the book, and immediately turned to MacLean's brief discussion of my law school and its former dean, Henry Manne. I found that what MacLean wrote did not mesh with the facts. I thought perhaps that she was led astray by sources she thought to be reliable, so I checked her footnotes. Nope. She just made things up. For example, she asserted that Manne only hired white male faculty, which was not remotely true. Not only did the source she cited in the relevant footnote not assert this, it specifically mentioned my colleague Bruce Kobayashi, who has a very common Japanese surname and is in fact of Japanese descent.

MacLean is not the only recent perpetrator. Quinn Slobodian has emerged as leading historian and critic of the free-market oriented "neoliberal" (whatever that means) economists who emerged as leading critics of economic statism after World War II. Here's what economic historian Phil Magness found after reviewing a recent article by Slobodian on economist Ludwig von Mises:

Professor Slobodian has 93 footnotes in his article. Over 50 of them reference Mises's writings or correspondence. Looking them up, I found many instances in which the page reference to a paraphrase of a passage or a quote in one of Mises's works was not to be found where Professor Slobodian indicated it to be.

In some instances, this was not simply being off a page or two; the page referenced turned out to be in a portion of one of Mises's works that had nothing to do with the theme or idea that Professor Slobodian was referring to in the text of his own article. Hence, the paraphrase or quote literally had to be taken on good faith as being accurate or even there in one of Mises's writings.

In addition, there are instances in which Professor Slobodian asserts or implies views or states of mind held by Mises at some point in time. But the footnoted reference sometimes refers to some other scholar's work that when looked up did not refer to or imply anything about Ludwig von Mises.

One might be inclined to be more generous about these errors if they always didn't point in the same direction, to make historical figures that the authors object to on ideological grounds look bad. As in the case with MacLean, one suspects that some historians first construct their narrative, then look for citations to support it. If citations don't support the preconceived narrative, they abandon sound scholarly citation practices rather than abandoning the narrative.

Again, law reviews are far from perfect. But if you read a law review article, at least one published in a reasonably respectable journal, you can at least be pretty confident that the assertions made by the author are supported by the sources the author cites. One might think that we could trust professional historians to be meticulous about their sources without having third parties review them. Unfortunately, we cannot.

Published:1/15/2019 9:36:29 AM
[Markets] The Decline And Fall Of The European Union

Authored by Charles Hugh Smith via OfTwoMinds blog,

This exhaustion of the neocolonial-neofeudal model was inevitable, and as a result, so too is the decline and fall of the European integration/exploitation project.

That a single currency, the euro, would fracture rather than unite Europe was understood long before the euro's introduction as legal tender on January 1, 2002. The euro, the currency of 19 of the 28 member states of the European Union, is only one of the various institutions tying the member nations of the European union together, but it is the linchpin of the financial integration touted as one of the primary benefits of EU membership.

Skepticism of the benefits of EU membership is rising, as citizens of the member nations are questioning the surrender of national sovereignty with renewed intensity.

The technocrat elite that holds power in the EU is attempting to marginalize critics as populists, nationalists or fascists, overlooking the untidy reality that the actual source of tyranny is arguably the unelected bureaucrats of the EU who have taken on extraordinary powers to strip the citizenry of member states of civil liberties (i.e. the right to dissent) and of meaningful political enfranchisement.

As I have patiently explained since 2012, the underlying structure of the EU is neocolonialism, specifically, neocolonial-financialization. Stripped of artifice, the financial institutions of the EU core have colonized the EU periphery via the euro and the EU and imposed a modernized system of extractive serfdom on the citizenry of the core and periphery alike.

To understand the neocolonial-financialization model, we must revisit the classic model of colonialism. In the old model of Colonialism, the colonizing power conquered or co-opted the Power Elites of the region, and proceeded to exploit the new colony's resources and labor to enrich the core or center, i.e. the Imperial nation and its ruling elites.

This traditional model of colonialism was forcibly dismantled in the 1940s-1960s. Former colonies established their political independence, a process that diminished the wealth and control of former colonial powers.

In response, global financial powers sought financial control rather than political control. This is the key dynamic of the Neocolonial-Financialization Model(May 24, 2012), which substitutes the economic power of financialization (debt, leverage and speculation) for the raw power of conquest and political control.

The main strategy of financialization is: extend cheap credit to those with limited access to capital. Those with limited access to capital will swallow the bait and willingly agree to onerous conditions.

Then, when the credit expansion reaches levels that cannot be supported, the lenders demand collateral and/or favorable trade and financial concessions.

These tactics have been well-documented in books such as The Shock Doctrine: The Rise of Disaster Capitalism and Confessions of an Economic Hit Man.

But the economic pillaging of former colonies has limits, and as a consequence the global financial powers developed the Neocolonial Model, which turns these same techniques on one's home region.

Thus Greece and other capital-poor European nations were recognized as the periphery that could be exploited by the core, and the euro was the ideal tool to exploit the economies of nations which could never have generated credit/housing bubbles without the wide-open spigots of cheap credit flooding their economies.

In Neocolonialism, the forces of financialization are used to indenture the local Elites and populace to the financial core: the peripheral "colonials" borrow money to buy the finished goods manufactured in the core economies, enriching the Imperial Elites with A) the profits made selling goods to the debtors B) interest on credit extended to the peripheral colonies to buy the core economies' goods and "live large", and C) the transactional skim of financializing peripheral assets such as real estate and State debt.

In essence, the French and German banks colonized Europe's periphery nations via the financializing euro, which enabled a massive expansion of debt and consumption in the periphery. The banks and exporters of the core extracted enormous profits from the periphery via this expansion of debt and consumption.

The assets and income of the periphery are flowing to the core as interest on the private and sovereign debts that are owed to the core's money-center private banks.

Note how little of the Greek "bailout" actually went to the citizenry of Greece and how much was interest paid to the financial powers. The core has stripped Greece of collateral and political independence, just as the colonial powers of the 19th century stripped the African and Indo-Asian regions of income, assets and political independence.

This is not just the perfection of neocolonialism but of neofeudalism as well.The peripheral nations of the EU are effectively neocolonial debtors of the core, and the taxpayers of the core nations are now feudal serfs whose labor is devoted to making good on any financialization schemes that go bad.

Neocolonialism benefits both the core's financial Aristocracy and the periphery's oligarchies. This is ably demonstrated in the essay Misrule of the Few: How the Oligarchs Ruined Greece.

The EU has finally reached the endgame of the Neocolonial-Financialization Model. There are no more markets to exploit with financialization, no more assets to strip, and the serfs (a.k.a. yellow vests) of the core are tiring of being stripmined in service of the EU kleptocracy.

At this point, the financial Aristocracy has an unsolvable dilemma: writing off defaulted debt also writes off assets and income streams, for every debt is the core's asset and income stream. When all those phantom assets are recognized as worthless, the system implodes.

This exhaustion of the neocolonial-neofeudal model was inevitable and as a result, so too is the decline and fall of the European integration/exploitation project.

Recent podcasts:

Jonathon Twombly and I discuss The Everything Bubble: Its Effect on The Current Market and Real Estate Investing

Drew Sample and I discuss being an entrepreneur in the local economy and my new book Pathfinding Our Destiny

*  *  *

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print): Read the first section for free in PDF format. My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF). My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Published:1/15/2019 4:02:11 AM
[Markets] The Fed Dilemma

Submitted by Valentin Schmid of The Epoch Times

For the most part in 2017 and 2018, only academics and easy-money cranks scolded the Federal Reserve for raising rates. After all, the stock market was bubbling up and the economy was strong.

The economy is still strong, but the stock market has ended its record 10-year bull-market run with a bang. The 20-percent drop in the S&P 500 during one of the worst quarters in market history classifies as a bear market, although prices rebounded at the end of 2018 and in early 2019.

Now everybody from traders to retirees as well as President Donald Trump is scolding Fed Chairman Jerome Powell for his relentless path to higher interest rates and a reduction in the Fed’s balance sheet.

To make a long story short, yes, the Fed is chiefly responsible for this and other stock-market routs, which often precede recessions. There are other contributing factors, such as worries about the Chinese economy and trade, as well as the government shutdown, which will reduce the $1 trillion yearly spending spree of the federal government. But the Fed is at the center of the storm.

And the problem didn’t begin with the Fed’s actions over the past two years. The roots of the issues we now face have their immediate origins in the last financial crisis, but ultimately can be traced back to the founding of the Federal Reserve itself.

The Current Crash

The problem on the surface right now is that the Fed is taking away easy money from market participants and economic agents through its raising of the federal funds rate as well as the $50 billion per month reduction of its balance sheet.

The Fed balance sheet, as well as the federal funds rate, is the foundation of the entire global financial system. For every dollar by which the Fed expands its balance sheet, banks and shadow banks around the world can create many dollars’ worth of debt on top of it.

Terms like balance-sheet expansion and contraction, or quantitative easing (QE) and quantitative tightening (QT), are fancy words for printing money or removing money from circulation.

Since its creation in 1913, the Fed has had the power to print money and fuel booms, and contract money and create busts. So it has to take responsibility for the vicious business cycles since its creation, such as the Great Depression or the 2008 financial crisis.

You can trace this game back to the Fed’s origins, but here, let’s confine it to recent history.

In 1998, the giant hedge fund Long Term Capital Management collapsed and almost took the global financial system with it. The Fed pumped money into the system and we had the dot.com boom, which ended in a bust in 2000 after the Fed had tightened credit conditions.

It then pumped even more into the system to create the subprime boom, which ended in a bigger bust in 2008, again after the Fed had been raising rates for some time.

To “save the system” this time, the Fed boosted its balance sheet to more than $4 trillion and lowered interest rates to zero, in an unprecedented exercise in money printing. This has led to a bubble in corporate debt, student loans, auto loans, and real estate—again.

Popping The Bubble

But booms fueled by money printing usually fuel economic mirages and lead to investments that wouldn’t have been made otherwise, like subprime or dot.com. And even the boom from the past two years has seen a shallow economic recovery, with many people feeling left out.

Now, with interest rates up 2.5 percent, the balance sheet shrinking by $50 billion per month, and the stock market draw-down of 20 percent, we are looking to go into bust mode again.

The stock market reaction this time is particularly pronounced because the market has relied on the Fed to either ease monetary policy or delay tightening whenever there was a correction of 10 percent or so.

The fact that the market reacted so violently to a paltry 2.5 percent increase in rates tells us how dependent it is on easy money. The current Fed Funds rate is still lower than at most other times in recorded history.

And Chairman Powell has made it very clear that he isn’t “market dependent” but would rather follow his usually wrong and inaccurate models, as well as the philosophical concept of the neutral interest rate. He did backpaddle a little bit in early January, but the Fed has a history of talking up markets when talk is cheap.

Because even if the Fed doesn’t raise rates at the next meeting at the end of January, the balance sheet reduction will surely continue.

Either way, the economy can only be put back on solid footing if the bad investments of the boom are liquidated, which always causes asset-price collapses and economic recessions.

If the market is left to its own devices, these contractions are quick and painful, as in 1921, and then provide a solid basis for expansion.

So if Powell’s intention is to pop the bubble and go through the readjustment pain to put the economy on a long-term real growth trajectory, he is doing the right thing, even though he won’t be able to centrally plan the exact right rate for market clearing. But it would be a good start, and would require no bailouts this time around, unlike 2008 when the Fed and the Federal Government bailed out the whole banking system.

Contrary to popular opinion, there are ways and methods to orderly liquidate banks, as investment manager Barry Ritholtz points out:

“Let’s use Bank of America as an example. Bank of America gets nationalized, which really means Uncle Sam provides debtor in possession financing. This is really what happens normally with small companies. Someone who takes them out of bankruptcy give some operating money to keep functioning.

The equity gets down to zero—senior management out the door. There is certainly a layer beneath, which can get promoted without a problem. Bondholders, effectively they are highest in the line of who owns what’s left as the lenders. So they take what comes out of that minus Uncle Sam’s share of providing debtor in possession financing.

And you slowly feed all the pieces to the public. So you clean up the balance sheet and take all that debt. By the way there is no such thing as toxic assets. Well at 100 cents on the dollar they are toxic. But at 15 or 20 cents on the dollar there is plenty of upside there. So you take those assets and auction them off and you take what you get—maybe 15, 20, 25 percent. You take Merrill Lynch, which now has no bad debt on its books and you spin it off as a stand-alone.”

No Stability

The Fed claims it wants to promote economic stability and improve on the workings of the markets. But history in the 20th century shows that central banking has made business cycles worse than they were under a gold-based system and free banking, although credit crises existed before the Fed and are to be blamed on fractional reserve banking.

On top of that, the dollar has lost more than 90 percent of its value since the Fed’s inception. Stability looks different.

Whether it is incompetence or malevolence, as some historians have suggested, it doesn’t matter, because the Fed can’t replace a free market for capital.

In essence, setting interest rates and printing legal tender and reserves or contracting them at a whim is central planning. And this gets worse because private players are forced to accept Fed money as legal tender and we are forced to use Fed-powered bank money in the payment of taxes.

In fact, central banks look more like a Soviet politburo rather than a competitive market system, although they are privately owned. The few players in control of the system are using the state’s power to reap private profits and pile losses onto the taxpayer.

In contrast, the competitive market system is also the best system for money and banking, not just for other goods.

As economist Murray Rothbard points out, nobody thinks about installing a Board of Governors to supervise shoe production and their prices, so why do we need one to supervise money production and set its price?

In fact, President Franklin D. Roosevelt did think central planning would also be better for shoes and chicken, so he set up private cartels similar to the Fed for almost every industry under the National Industrial Recovery Act.

Unfortunately for him, it was ruled unconstitutional. Not surprisingly, constitutional lawyers like Edwin Vieira and many others believe the Fed isn’t compliant with the U.S. Constitution, of which Article 1, Section 10, states:

“No State shall … coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts.”

Now, we have paper and electronic notes issued by the privately owned but not privately accountable Federal Reserve System, with the number of such notes expanded and contracted at will.

Sound Money

The Founding Fathers were rather fond of gold and silver, and were against central banking and the ever-expanding government debt that central banks finance.

“And I sincerely believe with you, that banking establishments are more dangerous than standing armies; [and] that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale,” Thomas Jefferson wrote in a letter to John Taylor in 1816.

Under the supervision of central banks with the power to print money and a government to bail them out, banks are indeed dangerous and will continue to cause boom-and-bust cycles. However, a return to sound money and competitive banking could put an end to this vicious loop.

Gold has traditionally served as sound money, and it could be used again by the marketplace and even banks to create a free market in capital, similar to the end of the 20th century.

“Look at the era of the classical gold standard, from 1871—the end of the Franco–Prussian War—until the beginning of World War I,” monetary philosopher Saifedean Ammous said.

“There’s a reason why this is known as the Golden Era, the Gilded Age, and La Belle Epoque. It was a time of unrivaled human flourishing all over the world. Economic growth was everywhere. Technology was being spread all over the world. Peace and prosperity were increasing everywhere around the world. Technological innovations were advancing.

“I think this is no coincidence. What the gold standard allowed people to do is to have a store of value that would maintain its value in the future. And that gave people a low time preference, that gave people the incentive to think of the long term, and that made people want to invest in things that would pay off over the long term.”

Ammous, author of “The Bitcoin Standard” also says that Bitcoin could serve as the digital gold of the future and replace the current system even without official government adoption.

But whether gold or Bitcoin, sound money would serve as a stable basis for the banking system, banks would have to be set free from the control of the Federal Reserve, be accountable for their actions, and be allowed to fail if they make bad investments.

This would remove moral hazard and create a more accurate clearing price for capital, which wouldn’t prevent, but would greatly reduce malinvestments and business cycles.

Chance For the Future

Given its dismal track record and probable unconstitutionality, the Federal Reserve System should be dissolved and sound money returned to the United States and the globe. The fact that Powell is maneuvering us into the bust cycle could provide the opportunity to execute this momentous plan.

The promoters of the Fed used the stock market and economic crisis of 1907 to push its creation through Congress in 1913.

If this bust cycle is going to be worse than 2008—and by many financial metrics, it well could be—the political elite around Trump could use the next crisis to do the reverse of 2008 and 1913.

Published:1/14/2019 12:34:12 PM
[Markets] CTAs Are About To Start Covering Their S&P Shorts

Last Wednesday, as the US stock market was roaring higher on its way to a 10% rebound from the December 24 bear market lows, we laid out the latest calculation from Nomura's cross-asset strategist, Charlie McElligott, who showed that it was only a matter of days before the same CTAs who were blamed for the sharp selloff in mid-December, were forced out of their from "max short" level and started covering, in the process sending markets even higher.

Now, in his latest update, McElligott has further refined his analysis and notes that whereas CTAs for the key equity indexes, the S&P, Stoxx and Nikkei are all still in the "Max Short" bucket, all that may be about to reverse, as the first "Buy to Cover" level is just a few points higher in the S&P, or at 2,594, less than 10 points away. Here are some more details from the Nomura analyst on where the max pain levels for algo shorts are, and where the market will almost certainly rise to before retesting if the short squeeze can push it even higher, or if a new wave of selling will emerge as Morgan Stanley predicted earlier:

  • SPX at 2594, Nasdaq at 6581, Eurostoxx at 3066, DAX at 10827, Hang Seng CH at 10363—all would see current “Max Short” covered down to just “-82% Short” if today closes above those levels

As McElligott adds, late last week saw Russell, FTSE, Hang Seng, ASX and KOSPI all trigger modest short-covers from their prior “Max Short” positioning at the start of the week. Finally, also nearing inflections is EURUSD nearing sell trigger to again go “Max Short” at 1.1442

Stepping away from the algos, McElligott next looks at equity hedge and mutual fund positioning, and notes that these players both "grabbed" meaningfully back-into US Stocks last week, increasing their “beta to SPX” WoW. According to Nomura's calculations, Mutual Funds’ “beta to SPX” rose to the 62nd %ile from 59% last week, but more glaringly, “buying the dip” was sharply higher from just 27th %ile 1m ago.  At the same time, long/short hedge fund "beta to SPX" also jumped last week to 52nd %ile from 41st %ile, although remains significantly lower from last month’s Santa Rally positioning blow-up (was 81st %ile 1m ago).

Another notable observation is that Long/Short equity HFs are also again increasing their “net exposure” through forced-reduction of their short books, which were obviously “grossed-up” in Dec as the market melted "and are now being painfully squeezed-out to start 2019" - in a repeat of the violent short squeeze observed in Q4, and in factor space are outperforming “Crowded / Popular / Momentum Longs” by 2x’s – 3x’s YTD.

Meanwhile, in stark contrast to US Equities Mutual- and Hedge- Funds, McElligott finds that Macro Funds have not yet participated in this US Equities bounce, dramatically reducing their ‘beta to SPX’ last week down to just 8th %ile from 33%ile the week prior; not only that but global macro HFs are currently the worst performing asset class, according to Goldman.

That, to the Nomura strategist, speaks to that desire of many macro traders to fade the equity rally.

Last, and perhaps most important, is that according to Nomura's QIS Risk Parity model, balance and risk-parity funds have seen ongoing additions to global Bonds over the past month (+$21B vs 1m ago, almost entirely in JGB 10s and small UST 10s) versus reductions in Credit (particularly US IG -$18.9B vs 1m ago) and Global Equities (-$4.9B vs 1m ago, with -$4.2B of the overall from US Equities reduction).

As McElligott concludes, "as 2019 develops, it will be key to track these “counter-cyclical” longer-term adjustments to Risk Parity positioning into this “slower growth, lower inflation” view, as our 2Y lookback increasingly “picks-up” the 2018 volatility regime, while the prior 2017 “halcyon days” realized volatility environment within the two-year window decreases with each passing day."

Published:1/14/2019 11:57:19 AM
[Markets] "Secret Money For Private Armies" Austin Fitts Exposes America's "Open Running Bailout"

Via Greg Hunter’s USAWatchdog.com,

Investment advisor and former Assistant Secretary of Housing Catherine Austin Fitts says it looks like a “global recession is coming.”

Is that going to cause the debt reset we’ve been hearing about for years? Fitts says, “Make no mistake about it, there is no reason for the federal government to default or monkey with any debt because they can literally print the currency..."

"The question is how do they make sure whatever they are printing really holds any kind of store of value. I think the reason you are seeing them reengineer the federal bureaucracy and financial transactions infrastructure is because they want much greater and tighter control to do whatever they do, and that includes to continue to debase the currency. They could do this (reset) entirely by debasing the currency...

What we are watching . . . is essentially a coup. We had a financial coup, and now we are watching a legal coup to consolidate that financial coup. I would keep my eye on the fundamental governance structure of the U.S. The important thing is not what they do. The important thing is who controls no matter what they do. Now, we have created a mechanism for them to control entirely in secret and create policies entirely in secret, including around the back of a U.S. President... It’s pirating by the ‘just do it’ method. I said to someone the other day, what is it about secret money for secret private armies that you don ‘t understand?

$21 trillion in “missing money” at the DOD and HUD that was discovered by Dr. Mark Skidmore and Catherine Austin Fitts in 2017 has now become a national security issue.

The federal government is not talking or answering questions, even though the DOD recently failed its first ever audit. Fitts says, “This is basically an open running bailout..."

"Under this structure, you can transfer assets out of the federal government into private ownership, and nobody will know and nobody can stop it. There is no oversight whatsoever. You can’t even know who is doing it. I’m telling you they just took the United States government, they just changed the governance model by accounting policy to a fascist government. If you are an investor, you don’t know who owns those assets, and there is no evidence that you do...

If the law says you have to produce audited financial statements and you refuse to do so for 20 years, and then when somebody calls you on it, you proceed to change the accounting laws that say you can now run secret books for all the agencies and over 100 related entities.”

In closing, Fitts says, “We cannot sit around and passively depend on a guy we elected President..."

"The President cannot fix this. We need to fix this...

This is Main Street versus Wall Street. This is honest books versus dirty books. If you want the United States in 10 years to resemble anything what it looked like 20 years ago, you are going to have to do it, and there is no one else who can do it. You have to first get the intelligence to know what is happening.”

Join Greg Hunter as he goes One-on-One with Catherine Austin Fitts, Publisher of “The Solari Report.”

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Published:1/13/2019 7:26:35 PM
[Entertainment] Top 10 Books to Read in 2019 E-comm: Top 10 Books to Read in 2019Remember when book clubs were a thing? Not long ago, before social media was what it is now, we were big on books and reading. We mean, what else were we going to do with our free time?...
Published:1/13/2019 5:22:57 AM
[Entertainment] 5 new books not to miss this week, including James Patterson's 'Liar Liar' James Patterson and Candice Fox team up for 'Liar Liar,' the third Detective Harriet Blue novel. Plus more new books on sale this week.
     
 
 
Published:1/13/2019 5:22:57 AM
[Markets] Hypocrisy Without Bounds: US Army Major Slams The Tragedy Of "Liberal" Foreign Policy

Authored by Maj. Danny Sjrusen via AntiWar.com,

The president says he will bring the troops home from Syria and Afghanistan. Now, because of their pathological hatred of Trump, mainstream Democrats are hysterical in their opposition.

If anyone else were president, the "liberals" would be celebrating. After all, pulling American soldiers out of a couple of failing, endless wars seems like a "win" for progressives. Heck, if Obama did it there might be a ticker-tape parade down Broadway. And there should be. The intervention in Syria is increasingly aimless, dangerous and lacks an end state. Afghanistan is an unwinnable war – America’s longest – and about to end in outright militarydefeat. Getting out now and salvaging so much national blood and treasure ought to be a progressive dream. There’s only one problem: Donald Trump. Specifically, that it was Trump who gave the order to begin the troop withdrawals.

Lost in the haze of their pathological hatred of President Trump, the majority of mainstream liberal pundits and politicians can’t, for the life of them, see the good sense in extracting the troops from a couple Mideast quagmires. That or they can see the positives, but, in their obsessive compulsion to smear the president, choose politics over country. It’s probably a bit of both. That’s how tribally partisan American political discourse has become. And, how reflexively hawkish and interventionist today’s mainstream Democrats now are. Whither the left-wing antiwar movement? Well, except for a few diehards out there, the movement seems to have been buried long ago with George McGovern.

Make no mistake, the Democrats have been tacking to the right on foreign policy and burgeoning their tough-guy-interventionist credentials for decades now. Terrified of being painted as soft or dovish on martial matters, just about all the "serious" baby-boomer Dems proudly co-opted the militarist line and gladly accepted campaign cash from the corporate arms dealers. Think about it, any Democrat with serious future presidential aspirations back in 2002 voted for the Iraq War – Hillary, Joe Biden, even former peace activist John Kerry! And, in spite of the party base now moving to the left, all these big name hawks – along with current Senate Minority Leader Chuck Schumer – are still Democratic stalwarts. Heck, some polls list Biden as the party’s 2020 presidential frontrunner.

More disturbing than the inconsistency of these political hacks is the vacuousness of the supposedly liberal media. After Trump’s announcement of troop withdrawals, just about every MSNBC host slammed the president and suddenly sounded more hawkish than the clowns over at Fox News. Take Rachel Maddow. Whatever you think of her politics, she is – undoubtedly – a brilliant woman. Furthermore, unlike most pundits, she knows a little something about foreign policy. Her 2012 book, Drift: The Unmooring of American Military Power was a serious and well-researched critique of executive power and the ongoing failure of the wars on terror. Drift was well reviewed by regular readers and scholars alike.

Enter Donald Trump. Ever since the man won the 2016 election, Maddow’s nightly show has been dominated the hopeless dream of Russia-collusion and a desire for Trump’s subsequent impeachment. Admittedly, Maddow’s anti-Trump rhetoric isn’t completely unfounded – this author, after all, has spent the better part of two years criticizing most of his policies – but her zealousness has clouded her judgment, or worse. Indeed, that Maddow, and her fellow "liberals" at MSNBC have now criticized the troop withdrawals and even paraded a slew of disgraced neoconservatives – like Bill Kristol – on their shows seems final proof of their descent into opportunistic hawkishness.

One of the most disturbing aspects of this new "liberal" hawkishness is the pundits’ regular canonization of Jim Mattis and the other supposed “adults” in the room. For mainstream, Trump-loathing, liberals the only saving grace for this administration was its inclusion of a few trusted, "grown-up" generals in the cabinet. Yet it is a dangerous day, indeed, when the supposedly progressive journalists deify only the military men in the room. Besides, Mattis was no friend to the liberals. Their beloved President Obama previously canned "mad-dog" for his excessive bellicosity towards Iran. Furthermore, Mattis – so praised for both his judgment and ethics – chose an interesting issue for which to finally fall-on-his-sword and resign. U.S. support for the Saudi-led starvation of 85,000 kids in Yemen: Mattis could deal with that. But a modest disengagement from even one endless war in the Middle East: well, the former SECDEF just couldn’t countenance that. Thus, he seems a strange figure for a "progressive" network to deify.

Personally, I’d like to debate a few of the new "Cold Warriors" over at MSNBC or CNN and ask a simple series of questions: what on the ground changed in Syria or Afghanistan that has suddenly convinced you the US must stay put? And, what positivist steps should the military take in those locales, in order to achieve what purpose exactly? Oh, by the way, I’d ask my debate opponents to attempt their answers without uttering the word Trump. The safe money says they couldn’t do it – not by a long shot. Because, you see, these pundits live and die by their hatred of all things Trump and the more times they utter his name the higher go the ratings and the faster the cash piles up. It’s a business model not any sort of display of honest journalism.

There’s a tragic irony here. By the looks of things, so long as Mr. Trump is president, it seems that any real movement for less interventionism in the Greater Middle East may come from a part of the political right – libertarians like Rand Paul along with the president’s die hard base, which is willing to follow him on any policy pronouncement. Paradoxically, these folks may find some common cause with the far left likes of Bernie Sanders and the Ocasio-Cortez crowd, but it seems unlikely that the mainstream left is prepared to lead a new antiwar charge. What with Schumer/Pelosi still in charge, you can forget about it. Given the once powerful left-led Vietnam-era protest movement, today’s Dems seem deficient indeed on foreign policy substance. Odds are they’ll cede this territory, once again, to the GOP.

By taking a stronger interventionist, even militarist, stand than Trump on Syria and Afghanistan, the Democrats are wading into dangerous waters. Maybe, as some say, this president shoots from the hip and has no core policy process or beliefs. Perhaps. Then again, Trump did crush fifteen Republican mainstays in 2015 and shock Hillary – and the world – in 2016. Indeed, he may know just what he’s doing. While the Beltway, congressional-military-industrial complex continues to support ever more fighting and dying around the world, for the most part the American people do not. Trump, in fact, ran on a generally anti-interventionist platform, calling the Iraq War "dumb" and not to be repeated. The president’s sometimes earthy – if coarse – commonsense resonated with a lot of voters, and Hillary’s hawkish establishment record (including her vote for that very same Iraq War) didn’t win her many new supporters.

Liberals have long believed, at least since McGovern’s 1972 trouncing by Richard Nixon, that they could out-hawk the Republican hawks and win over some conservatives. It rarely worked. In fact, Dems have been playing right into bellicose Republican hands for decades. And, if they run a baby-boomer-era hawk in 2020 – say Joe Biden – they’ll be headed for another shocking defeat. The combination of a (mostly, so far) strong economy and practical policy of returning US troops from unpopular wars, could, once again, out weigh this president’s other liabilities.

Foreign policy won’t, by itself, tip a national election. But make no mistake, if the clowns at MSNBC and "liberal" hacks on Capitol Hill keep touting their newfound militarism, they’re likely to emerge from 2020 with not only smeared consciences, but four more years in the opposition.

*  *  *

Danny Sjursen is a US Army officer and regular contributor to Antiwar.com He served combat tours with reconnaissance units in Iraq and Afghanistan and later taught history at his alma mater, West Point. He is the author of a memoir and critical analysis of the Iraq War, Ghostriders of Baghdad: Soldiers, Civilians, and the Myth of the Surge. Follow him on Twitter at @SkepticalVet.

[Note: The views expressed in this article are those of the author, expressed in an unofficial capacity, and do not reflect the official policy or position of the Department of the Army, Department of Defense, or the U.S. government.]

Published:1/12/2019 10:48:11 PM
[Markets] PG&E Reportedly Planning Bankruptcy Announcement To Workers As Soon As Monday

18 years after becoming one of America's largest bankruptcies, the writing is on the wall for California's utility giant after its cash-collateral-call triggering second downgrade to junk has led to reports that PG&E may notify employees as soon as Monday that it’s preparing a potential bankruptcy filing, according to people familiar with the situation.

California passed legislation last year in the aftermath of the deadly Wine Country fires requiring utilities to post public notices for employees at least 15 days before a change of control, including a bankruptcy filing.

This potential bankruptcy announcement comes after PG&E's AIG moment hit late on Thursday, when Moody’s did precisely what S&P did two days earlier, and cut the utility's credit rating to junk citing the electric company’s potential wildfire liabilities.

“We see a much more challenging environment for PG&E,” Moody’s analyst Jeff Cassella said in a statement. “The company is increasingly reliant on extraordinary intervention by legislators and regulators, which may not occur soon enough or be of sufficient magnitude to address these adverse developments.”

As Bloomberg reports, a notice may signal that the company has accelerated plans to make a Chapter 11 filing as way of dealing with crippling liabilities from wildfires that tore through California in 2017 and 2018, killing over 100 people and destroying hundreds of thousands of acres.

And, as we detailed previously, with two junk ratings, PG&E will now be required to use cash as collateral to guarantee power contracts, according to the company’s latest quarterly filing, which estimates the utility will have to fully collateralize as much as $800 million of positions.

That... is a problem because PG&E had only $430 million of cash on its books in September, precipitating what now appears to be an imminent liquidity crisis, one which as a result of some $30 billion in wildfire legal liabilities will quickly escalate into a solvency inferno, to use a term closely associated with California utility companies.

PG&E declined to provide a statement, saying the company doesn’t comment on rumor or speculation.

During its 2001, bankruptcy, California governor Gray Davis used the state's treasury to bail out the utility, provoking a controversy that eventually contributed to his ouster. PG&E emerged from bankruptcy in April 2004 after returning $10.2 billion to creditors.

Newly appointed California Governor Gavin Newsom said during a press conference Thursday that his office would be making an announcement related to PG&E within the next few days and that the issue was at the top of his agenda. He said in a later interview that the announcement would involve appointments to the California Public Utilities Commission, the state’s grid operator and to a commission established by legislature to explore wildfire issues.

Newsom’s office didn’t immediately respond to a request for comment on Saturday.

Citigroup Inc. called it a “a crisis of confidence.” Guggenheim Securities analysts likened the dilemma PG&E poses to investors and lawmakers as “a falling knife.”

As we pointed out previously, with relation to the last financial crisis, while Lehman was the spark, its was the bailout of AIG that really precipitated the most violent part of the 2008 crisis. While most analysts see PG&E as an isolated case, now that the biggest California utility is on the verge of bankruptcy, and is about to have its own AIG moment, one wonders just how "contained" this particular shock to the system will be.

One thing is clear, however: the shock to California residents, or rather their wallets, will be most unpleasant, as their rates are about to surge one way or another.

Think it couldn't happen? Think again, as Bloomberg reports, PG&E’s deepening financial crisis has already spread to the companies that supply its natural gas and generate electricity for its customers. At least two small gas suppliers have restricted sales to PG&E out of concern that the company won’t be able to pay, people with direct knowledge of the situation said earlier this week.

Some banks are taking a long look at a potential $2 billion debt financing for the Geysers, the world’s largest geothermal complex, because it supplies the utility, people familiar with the matter also said this week.

Published:1/12/2019 8:20:43 PM
[Markets] A Bang Or A Whimper: If Trump Is Overthrown What Comes Next?

Authored by James George Jatras via The Strategic Culture Foundation,

It’s a new year and the American cold civil war has shifted to its next phase with the Petrograd Soviet (formerly the Smolny Institute for Noble Maidens), a/k/a Speaker Nancy Pelosi’s Democrat-controlled House of Representatives ensconced at one end of Pennsylvania Avenue. Pelosi leads the revolutionary “second pivot and rival center of authority to the embattled Provisional Government headed by President Donald Trump, headquartered 16 blocks to the northwest.

As of this writing Trump is fighting for his political life. If he loses the Mexican standoff over the government shutdown and his border wall, he’s essentially finished. At this juncture, it looks as though he is prepared to declare a state of emergency and use Pentagon or FEMA funds to order the emplacement of a barrier as a military construction project. This is something for which he has the clearest black-and-white statutory authority under 10 US Code § 2802.

Nonetheless, if he goes that route, any such effort will be gummed up in the courts, just like his use of his plenary authority under 18 US Code 1182(f) to exclude “any aliens or … any class of aliens” whose entry into the US would in his judgment “be detrimental to the interests of the United States” – the germ of his campaign’s promised “Muslim ban” – was wimped down into supposedly “extreme vetting” of aliens from a handful of countries without much indication of what the “vetting” is supposed to filter. It’s likely such litigation would delay the wall or prevent its being built at all.

As of now, Trump states his preference to let the Democrats stew. After all, those immediately inconvenienced, such as federal workers and beneficiaries of some federal programs, are primarily Democrat constituencies. Let’s see how many more hysterical bleeding hearts like Cher pressure Pelosi to throw in the towel: “NANCY YOU ARE A HERO LET HIM HAVE HIS FKNG MONEY?.”

In any case, as even Senator Lindsay Graham recognizes, if Trump loses this battle – one he should have fought a year and a half ago – “it’s probably the end of his presidency.” If Trump wins, or more properly he avoids losing, he only lives to fight another day.

And, fight he must, despite his defenders’ truthful and entirely irrelevant bleating that there was no Russian “collusion.” Notwithstanding Democrats’ tap-dancing during the 2018 campaign on whether or not they would seek to impeach Trump, right out of the box articles of impeachment were filed within days of the House’s changing hands. Trump’s disgraced lawyer and “fixer” Michael Cohen will testify before the House Government Oversight Committee in February. While the weight of opinion suggests that Grand Inquisitor Robert Mueller will wrap up his auto-da-fé in a few months if not weeks, that would seem to be throwing away a powerful synergy with a House that is just beginning to gear up for multiple investigations into every aspect of Trump’s private and professional life, as well as his kids’. Add to that New York State Attorney General Letitia James on the warpath against Trump and “anyone” associated with him. Given Trump’s years in the sharp-elbowed world of high-end New York real estate and numerous business enterprises, as well as the Trump Foundation, there’s no limit to the number of regulatory, tax, and other violations the putsch plotters will construe as federal and state crimes, the latter of which can’t be pardoned by the President.

In short, it’s now a question not if Trump will be impeached but when and on what accusations. Adding fuel to the Democrats’ determination to bring him down before he’s up for reelection is the fear that if Trump survives until then he might well win, something no other Republican is likely to be able to do given the GOP’s tin ear to working class concerns, especially in the Rust Belt states that were Trump’s margin of victory. If Trump is successfully removed before 2020, whomever the Democrats nominate will beat Mike Pence or any other Republican nominee in a romp. After that, especially if Trump’s wall hasn’t gotten built, a sufficient number of imported new voters, many of them illegal, will ensure a permanent Democratic lock hold on power.

When Trump is impeached there may not be enough GOP votes in the Senate to remove him – as things stand now. But never underestimate Republicans’ propensity to cut and run when the going gets tough. It is suggested that any Republican who votes against Trump would seal his own political fate. Don’t be so sure. Those not up for reelection until 2022 and 2024 (like Utah’s newly elected Senator Mitt Romney, who didn’t even wait to be sworn in to volunteer for the role of Brutus) will feel insulated. Besides, when the crunch comes establishment Republicans fear a harsh word from the Washington Post and New York Times editorial pages more than they do their own voters.

This is not to say that after impeachment Trump will be removed, just that it is well within the realm of possibility. But if it does happen, then what?

One anti-Trumper (who prides himself on “poking Trump’s meth-addled, under-educated fans with a pointy stick.” No elite contempt for the Deplorables there!) ponders whether there would be –

‘…a civil war if Trump is driven from office?—?e.g., conviction after impeachment, resignation, 25th Amendment -that depends on what happens after, and there is no denying there is a chance of it, but it is highly unlikely. Many?—?possibly a great many?—?would believe they were wronged by this outcome, but how many would take up arms, and start shooting? Very few, if any at all. Trump would leave, Pence would become President, and Pence would be given credit for calming and healing the nation.

‘There would be no civil war.

But what happens after? Suppose Trump is put on trial for criminal charges, and then convicted? Or suppose he is pardoned or let off the hook, and then begins a sore-loser populist campaign all over the country, complaining that the Presidency was “stolen” by the “deep state” and that Hillary and “fake news” are responsible? That is when we should reopen the question of civil war.’

Of course if Trump is forced out, it would be precisely a stolen election – in effect, a regime change operation of the sort the same US-UK Deep State has staged in so many other countries – abetted by the lying, fake news (no need for sarcasm quotes) worthy of the former USSR and the Democratic establishment, with the collusion of a substantial element of the GOP.

But the improbable suggestion of Trump’s leading a post-White House rebellion one raises a valid point: if Trump were removed, either politically or physically, what – or who – would be the Deplorables’ rallying point? What or who would constitute the second pivot in what would then aspire to leadership in a new revolutionary situation?

The answer is not obvious. Those threatening various degrees of violent or even “gruesome” responses if the ongoing, anti-constitutional soft coup were to succeed never seem to address the question of what, exactly, the revolt would intend to achieve. Reinstate Trump, assuming that’s even possible? If not him, who – Ivanka? Where and how would pathologically law-abiding middle class Americans, many of them older and in questionable health, vent their rage? March on Washington – and do what when they got there? Torch the local post office?

Sure, devotees of the Second Amendment own more private weapons, so Trump supporters are better armed. But that may change as the violent Left gears up its own paramilitary capabilities secure in the knowledge that authorities turn a blind eye to their violence while regarding even non-violent civic nationalism as subversive.

Unlike the circumstance when the Constitution was adopted and private firearms were as good or better than military ones, there is no comparison today in delivery of devastating, deadly force. Trump himself seems to anticipate that the military would come out on his side:

‘“These people, like the Antifa — they better hope that the opposition to Antifa decides not to mobilize,” Trump said recently. “Because if you look, the other side, it’s the military. It’s the police. It’s a lot of very strong, a lot of very tough people. Tougher than them. And smarter than them … Potentially much more violent. And Antifa’s going to be in big trouble.” [...]

‘Some on far-right social media sites are all excited about what they’re calling “Civil War 2.0.” As documented by Dave Neiwert, there are various “Proud Boys” and “Patriots” living a fantasy version of Hank Williams Jr.’s “Country Boys Can Survive” almost entirely online.

‘“If they succeed in impeaching President Trump, then we will back President Trump,” one Georgia militiaman told reporters. “With a use of force if need be.”’

Well, maybe. In a conflict that would look nothing like America’s organized and relatively polite War Between the States (1861-1865) and more like the brutal communal conflicts in Yugoslavia (1991-1995), Spain (1936-1939), or Russia (1917-1922) estimates vary widely on how the military would divide. The same can be said for police forces, some of them heavily militarized.

Or perhaps the historic American nation, whose last-chance champion Trump was elected to be, would give up without a fight and submit to a tyranny that would, eventually, result in some even more fundamental societal collapse.

Americans like to imagine ourselves as rough-hewn, freedom-loving, don't-tread-on-me rebels. But after decades of corruption and conditioning by politicians, judges, bureaucrats, educators, entertainers, media, advertising, pharmaceuticals, processed foods, etc., today’s Americans may well be among the most docile people on earth.

Maybe that’s how America ends: not with a bang but a whimper. Let’s hope we don’t have occasion to find out.

Published:1/12/2019 2:17:42 PM
[Markets] Why Dismissing Globalist Warnings As "Project Fear" May Prove A Mistake

Authored by Steven Guinness,

In film and literature, the majority of stories feature a customary villain, either in a singular or collective sense. Someone or something that we can pour scorn on as the hero flounders in the face of increasingly insurmountable odds.

Whilst the hero invariably wins out in the world of fantasy, in reality the spoils often fall on the side of the miscreants. A discomforting fact is that throughout history a large proportion of these spoils have been claimed through the use of deception and outright conspiracy.

Authors such as Antony Sutton – who penned several books exposing the engineered conflict behind the Bolshevik Revolution and the rise of Adolf Hitler and Nazism – have presented irrefutable evidence detailing how world events can and are manipulated for the benefit of financial elites using what is known as the Hegelian Dialectic. This is where you create a thesis, pitch it against an antithesis, and use the ensuing conflict to engineer a synthesis that brings about significant but desired changes within society.

As I have written about previously, out of conflict generally comes the consolidation of power that works to the benefit of major global institutions like the International Monetary Fund and the Bank for International Settlements. They, along with the World Bank, the League of Nations, the United Nations and the makings of the European Union, were all conceived as a direct consequence of global conflict.

For globalists, chaos breeds opportunity. Historically, they have required crisis scenarios in order to both advance their goals and position themselves as the solution to instability.

We can find evidence for this from the IMF and it’s current head Christine Lagarde. In February 2010, Lagarde (who at the time was France’s Minister of Finance) was interviewed by The Globe and Mail and asked about the fall-out from the financial crisis of 2008:

I think that out of crisis, there are major difficulties and misery, but there are also opportunities, and now is the time, actually, post-crisis, after we mended the system so that it did not completely collapse, now is the time to give it a good thought, and a collective thought.

A month later, the IMF published a survey – the title of which left nothing to the imagination: ‘Crisis is Opportunity for Deeper, Faster Integration‘. Dominique Strauss-Kahn, who was replaced by Christine Lagarde as managing director of the IMF in 2011, said:

The crisis shows when the weather is quiet, existing institutions work well enough. But when you have a storm, then weaknesses of this institution appear clearly. And better coordination and stronger coordination in economic policy in my view is absolutely needed.

When you build a single currency, the natural step that follows should be a coordinated economic policy. Beyond monetary policy, Europeans must give themselves the means to manage economic policy.

Yet there exists a common place theory – perpetuated throughout alternative media and by proponents of liberty – that globalists will always seek to curtail attempts by the citizenry to jeopardise the ‘rules based global order‘ established out of the second world war. The belief is that any movement which on the surface rails against the centralisation of power will be sabotaged to the point of it’s inevitable defeat.

To challenge this theory, let’s look at what has become the latest fashionable meme to permeate the British mainstream – ‘Project Fear‘.

First used in the run up to the Scottish independence vote in 2014, ‘Project Fear‘ is a term that grew in prominence during the EU referendum campaign back in 2016. Today, it is wheeled out every time a warning is issued in regards to the potential for a ‘no deal Brexit. When those within the central banking fraternity (namely Bank of England governor Mark Carney and IMF head Christine Lagarde) speak out against no deal, it is interpreted as an attempt to first undermine Brexit, and secondly, seek to have the original referendum result overturned and keep the EU architecture intact.

In other words, we are encouraged to believe that they are striving to preserve the international order and that Brexit is incompatible with that ambition. What is not countenanced is the possibility of globalists using mechanisms such as a resurgence in nationalism to their advantage.

As demonstrated in previous articles, the economic ramifications from the first referendum resulted in a sustained depreciation of sterling that led to a rise in inflation. In response, the Bank of England have raised interest rates twice under the banner of stemming inflationary pressures. These rate hikes were not an isolated act. Elsewhere, the Federal Reserve and the Bank of Canada have also been raising rates, as have countries in emerging markets.

The trend of monetary accommodation has now shifted to monetary tightening, in the face of growing geopolitical and economic instability.

The first indication that this shift was coming occurred at the World Economic Forum at Davos in 2014, when Christine Lagarde mapped out what she described as a necessary ‘reset‘ of global monetary policies. This is an area I discussed in detail in my last article, ‘Monetary Policy ‘Reset’: From Rhetoric to Actuality‘.

Consider this: 2008 became a crisis of the global financial system. Interest rates were subsequently cut to near 0% across the West. Stimulus programmes were devised in the form of quantitative easing to re-liquidate markets and keep failing institutions afloat. In the years following, inflation rose above the mandated central bank target of 2%. This was tolerated indefinitely as Central banks continued to inject more money into the system amidst rising inflation. What we witnessed were actions to backstop the system, and to reinforce that backstop with the issuance of cheap money. With the debt bubble re-inflated, the illusion of economic recovery began to gain momentum.

Eleven years later in 2019, what we are being presented with are a series of politically led crises. Inflation has crept above target, which is no longer being tolerated in the same manner as before. Interest rates are rising, stimulus measures are either being cut or reversed. These are actions that unlike in 2018 do not serve to reinforce the financial system. At a time of record levels of consumer and corporate debt, intermixed with the aforementioned rise in nationalism / protectionism, monetary policy continues to tighten. Read communications emanating from the Bank of England and you will see that unlike several years ago, inflation mandates now matter again. This has created the perception of Brexit being the cause of a rise in interest rates.

The plan as far back as 2014 was to eventually reach a point where monetary accommodation could be reversed. The geopolitical conditions over the past three years have created a pathway for this to happen. Brexit has enabled the Bank of England to play their role in tightening policy. Prior to that the BOE had no discernible route in which to do so, not without inviting excess scrutiny and inquisition onto themselves.

Monetary policy is an essential tool in the creation of boom and bust cycles. At each stage of these cycles central banks covertly gain more control over the financial system. In 2008 they went all in and became the custodian of markets. Today they are retreating, which soon will precipitate an economic collapse. How they will benefit from this is through tighter regulations and reformulated policies administered from the global level, and the advancement of the long held plan for the gradual implementation of central bank issued digital currency.

This is why I would contest that the purpose behind ‘project fear‘ is not to prevent a no deal Brexit. When Mark Carney affirms that a consequence of no deal will be further devaluation of the pound and heightened inflation, these are prime conditions for the BOE to continue tightening.

I look upon ‘project fear‘ as the BOE and the IMF telegraphing what is most likely to happen. It is my belief that a second referendum will take place in 2019, perhaps around the time when the Bank for International Settlements are due to hold their annual conference in June. I also think the referendum would give the electorate the option of voting for a ‘hard‘ Brexit.

But as the furore over Brexit grinds on, the venue from which Christine Lagarde launched the IMF’s plans for a ‘reset‘ in 2014 are preparing to gather again in January. The theme for the 2019 World Economic Forum is, ‘Globalization 4.0: Shaping a New Architecture in the Age of the Fourth Industrial Revolution.’ The Fourth Industrial Revolution (4IR) is a subject I wrote about last year where I argued the case for it being mission creep towards a new world order that encompassed virtually all elements of society.

To quote WEF founder Klaus Schwab directly:

Our systems of health, transportation, communication, production, distribution, and energy – just to name a few – will be completely transformed.

Blockchain and distributed ledger technology, both of which are fundamental in the drive towards digital currency, are also part of the 4IR vision.

It was in December 2015 that Schwab first outlined the concept of 4IR in an article posted by Foreign Affairs (which is published by the Council on Foreign Relations). 4IR became the leading theme at Davos in 2016. Three years later and it is once again central to the WEF’s agenda.

It should be noted that whilst Schwab and other globalist figureheads talk of transforming society, they admit that the scale of change brought about through 4IR will cause ‘disruptions‘. It could be argued that these ‘disruptions‘ – most notably on a geopolitical level –  present a timely distraction for the incremental adoption of the main planks of 4IR.

Discussing ‘Globalization 4.0‘, Schwab speaks of a necessity for the ‘international community‘ to band together in order to ‘build a shared future‘. Schwab cites the present day as an ‘era of widespread insecurity and frustration‘, which he subsequently blames for a rise in populism. That is the same populism through which the ‘reset‘ of the financial system is being administered.

As globalists gradually make steps towards their goals, they sometimes become a touch more forthright in their communications. Schwab is no different in this respect:

Clinging to an outdated mindset and tinkering with our existing processes and institutions will not do. Rather, we need to redesign them from the ground up, so that we can capitalize on the new opportunities that await us.

Ready or not, a new world is upon us.

Be in no doubt that globalists are now openly agitating for major reform off the back of intensified geopolitical disorder. From a monetary perspective, I would encourage readers to be wary of the IMF’s impending ‘15th General Review of quotas‘, which they say must be completed by the time of the institution’s annual meetings in October this year. At the 14th general review, finalised nine years ago, the IMF’s quotas (measured in SDR’s) doubled in size in the aftermath of 2008.

Quite what economic conditions will be by the end of 2019 is unknown, but a significant deterioration from where we are now will allow the IMF the opportunity to use the 15th review to strengthen the role of the SDR via an increase in quotas.

The review also presents the IMF with the opportunity to ‘realign‘ quota shares, meaning a likelihood that the Chinese Renminbi will see its allocation increased at the expense of the U.S. dollar.

Published:1/12/2019 6:13:32 AM
[World] [John K. Ross] Short Circuit: A Roundup of Recent Federal Court Decisions

Sovereign immunity, absolute immunity, qualified immunity, and the agora of the digital age.

Please enjoy the latest edition of Short Circuit, a weekly feature from the Institute for Justice.

Ohio's licensing boards may soon be in for an existential crisis. A sweeping reform signed last week by Gov. John Kasich will require all state boards to prove a "public need for [their] continued existence," lest they expire. And to stem the growth of licensing red tape (which already covers almost a fifth of the state's workforce), a commission will rigorously review any proposed occupational regulations to ensure they're necessary and the "least restrictive" option to protect the public. IJ's Nick Sibilla has more at Forbes.com.

  • Unnamed corporation owned by an unnamed foreign gov't declines to comply with a federal grand jury subpoena (in what is believed to be the Mueller investigation of Russian interference in the 2016 presidential election). District court: So pay a $50k daily fine. Corporation: Can't make us; we're immune under the Foreign Sovereign Immunities Act. D.C. Circuit: Assuming without deciding that the Act applies to criminal cases, you still gotta comply or fork over the money. (SCOTUS: The corporation's application for a stay is denied.)
  • Last March, the FAA ordered an airplane maintenance company to cease its operations. The D.C. Circuit was set to consider the matter today. But wait! The gov't is shut down, and the Antideficiency Act generally prohibits gov't employees from working without an appropriation. FAA: Please postpone until we get funded. D.C. Circuit: No dice. Concurrence: Common practice is to continue with oral argument during shutdowns, so we'll do that. Dissent: Charles Dickens addressed this approach ("'Whatever is is right'; an aphorism that would be as final as it is lazy, did it not include the troublesome consequence, that nothing that ever was, was wrong."). The law is clear; we should postpone until there's an appropriation.
  • Allegation: Identity thief is captured on video buying gift cards ($28k total) at Home Depots in three Monroe County, N.Y. towns. Police arrest a different man who'd made small purchases at Home Depots in two of the towns around the same time. Prosecutors arraign the man in only one of the towns; a bail bondsman refuses to bond the man out lest he immediately be rearrested on the charges in the other towns. He ultimately spends 28 days in jail (and misses sitting for the bar exam). He's acquitted of all charges. Second Circuit: He can't sue the prosecutors for failing to arraign him in the other towns. (His false arrest and other claims against police are still proceeding below.)
  • Dignifying millennials and trolls alike, the Fourth Circuit sees Facebook as the agora of the digital age. Which means a Loudoun County, Va. supervisor violated the First Amendment when she banned a critic (alleging school board corruption) from her public Facebook page. The page's interactive aspects constituted a public forum.
  • Allegation: Inmate at Roanoke, Va. prison trips. Officers who were escorting him (handcuffed and in leg irons) pull his hair and slam his head into the concrete. Prison admin: No need to check the video. The officers say that's not what happened. District court: The inmate filed suit too late. Case dismissed. Fourth Circuit: Not so. The statute of limitations started running when the inmate exhausted the prison's internal review process. If it had started running at the time of the alleged beating (as the district court found), prison officials would have had a perverse incentive to stall their internal reviews.
  • Federal employee with bulging discs, other medical conditions requests several workplace accommodations, all of which are granted except request not to inform his supervisor of his work schedule. He sues. Failure to accommodate? Hostile work environment? Discrimination? Retaliation? The suit should not have been dismissed, says the Fourth Circuit. It was not in fact filed too early.
  • North Charleston, S.C. officer shoots unarmed motorist, who was fleeing on foot, in the back, killing him. Footage of the shooting goes viral. The officer, admitting he acted willfully and unreasonably, pleads guilty to depriving the deceased of his civil rights. Fourth Circuit: And that amounts to second-degree murder. Twenty-year sentence affirmed.
  • Allegation: In 2009, Mexican citizen illegally in U.S. tells authorities that her ex, the father of two of her children and a drug cartel member, has threatened to kill her. She weeps; CBP agents coerce her into signing a form requesting voluntary return to Mexico. She's driven back to Mexico, where her ex murders her days later. Fifth Circuit: Can't sue over that.
  • Man contacts FBI, alleges that Washington Parish, La. district attorney is engaged in shady tax dealings with a pastor. Yikes! The man is arrested for failure to pay child support and denied bail because of "DA Hold." He spends 100 days in jail. He sues the (now-former, now-convicted) DA and the pastor, alleging false imprisonment, First Amendment retaliation, and due process violations. Fifth Circuit: And those claims should have been allowed to proceed, not least because the "mysterious and unheard-of 'DA Hold'" is not a thing.
  • Flint, Mich. officials (with state officials' approval) switch city's municipal water source in 2014 to save money, unleash public health disaster. Plaintiffs: And violated our right to bodily integrity. Officials: We get sovereign immunity, which doesn't normally apply to cities, but our day-to-day operations had been taken over by the state, thus transforming the city into an arm of the state. Sixth Circuit: Nope. But some defendants get qualified immunity. Partial dissent: No court has ever recognized a Fourteenth Amendment right to bodily integrity. Everyone should get qualified immunity.
  • In other police shooting news, the Seventh Circuit affirmed the conviction of a Chicago police officer who shot 16 times at a car full of teenagers. This one was caught on video, too. (Thankfully, no one died.)
  • Peoria, Ill. police arrest a 14-year-old for a double murder. He's tried as an adult and convicted, spends 30 years in prison. He's paroled; the governor commutes the rest of his sentence (leaving the conviction intact) and later pardons him (sweeping the conviction from the books). He sues the city and several officers, alleging that, among other unsavory things, they fabricated evidence, destroyed evidence, and coerced a false confession during 31 hours of interrogation over two days. District court: Too late. The suit should've been brought within two years of the commutation. Seventh Circuit: No, the clock started when he was pardoned. The suit may proceed. (See his page on the National Registry of Exonerations for more.)
  • Allegation: Ferguson, Mo. officials arrest people who are unable to pay fines for minor offenses and keep them in crowded, unsanitary jail indefinitely—until friends or family scrape together the cash. Ferguson officials: We get sovereign immunity, which usually only applies to state officials, but the injuries alleged (except for the jail conditions) are attributable to the local court, which is an arm of the state. Eighth Circuit: The suit can proceed.
  • Unlawful alien, caught possessing a firearm, is charged with violating a federal law that categorically bars unlawful aliens from possessing firearms. Defense: That law violates the Second Amendment. Ninth Circuit: We're not sure whether the Second Amendment applies to unlawful aliens in the first place, but even if it does, this law passes muster. It's sufficiently tailored to the government's crime-control interests since unlawful aliens are subject to removal, are often hard to trace, and "have already shown they are unable or unwilling to conform their conduct to the laws of this country."
  • Social services removes two boys from Pierce County, Wash. home they share with their father and grandfather after authorities discover grandfather's trove of child porn. The boys are moved to their maternal grandparents' home and permitted to visit their father, who is the lead suspect in the disappearance of the boys' mother, under the supervision of a social worker. On their final visit, the boys run ahead of the social worker to greet their father; he locks the social worker out, murders the boys, sets the house on fire, and kills himself. Ninth Circuit: Could be the dep't of social services was negligent.
  • Woman uses false ID to purchase firearm for her ex, who's on the run from police in connection with a Phoenix, Ariz. double homicide. She's convicted, sentenced to 30 months in prison. Ninth Circuit (over a dissent): New trial. She should have been allowed to present expert testimony on Battered Woman Syndrome.
  • If "the overriding mission" of your religion is "the achievement of White racial immortality"—well, the Tenth Circuit might decide it's not a religion at all. And that's the end of those free-exercise claims. Turns out courts aren't sympathetic when you challenge the conditions of the maximum security prison sentence you got for trying to murder a federal judge.
  • Greene County, Ga. patrolman pulls over a car for a turn signal that is blinking too rapidly. He then asks about unrelated matters (e.g., "You don't have any dead bodies in your car?"). The driver consents to a search of the car, which yields a firearm (which the motorist, a convicted felon, cannot possess). Eleventh Circuit: The initial stop was reasonable, but per a 2015 U.S. Supreme Court decision, prolonging the stop by asking unrelated questions was not. Nevertheless, the good faith exception to the exclusionary rule applies because the driver was pulled over in 2013. No need to suppress the evidence.
  • New Jersey law authorizes local gov'ts to adopt redevelopment plans, condemn property that is "necessary" for redevelopment. Glassboro, N.J. officials seek to condemn a parcel, but instead of detailing how the land is necessary to its redevelopment project, the borough says only that it wants to stockpile the parcel for possible future redevelopment. Not so fast, says the New Jersey Appellate Division. "Such a 'take first, decide later' approach is contrary to both the text of the statute and its public accountability objectives." (IJ participated in oral argument and as amicus curiae.
  • Vermont state trooper pulls over motorist for partially obscured registration sticker on his license plate, which is not actually an infraction. The trooper detects faint smell of burnt marijuana, but a pat-down yields no contraband, and the trooper determines the motorist is unimpaired. The motorist declines permission for a search of his vehicle, so it is towed to an impound lot while search warrant is secured. The search yields no contraband, but the motorist must pay $150 to retrieve the vehicle. (The search does turn up a small pipe with marijuana residue, but that's not criminal in Vermont these days.) Vermont trial court: Tough luck, motorist; the statutes are inapplicable to this situation, so you have no judicial remedy. Vermont Supreme Court: The Vermont Constitution provides an avenue for the motorist to obtain damages from the state, and sovereign immunity doesn't block that. Remand to determine whether the trooper's activities violated the motorist's constitutional rights.

Friends, the Cato Institute would like to publish a book written by a businessman who believes he was falsely accused of malfeasance by the Securities and Exchange Commission. Faced with the threat of cripplingly expensive litigation (even if he won), the businessman settled. Now he wants to share the story of how the SEC used its enormous power to extract the settlement. But one condition of the settlement is that he must never publicly dispute the allegations against him. This week, Cato, represented by IJ, launched a First Amendment challenge to the agency's policy of imposing such gag orders, a policy that serves no legitimate public purpose but does shield the agency from public scrutiny of its enforcement actions. Click here to read more.

Published:1/11/2019 3:40:13 PM
[Entertainment] Netflix faces $25 million lawsuit over ‘Black Mirror: Bandersnatch’ If you watched Netflix’s latest ‘Black Mirror’ production, there’s no doubt it reminded you of the “Choose Your Own Adventure” books. Now, the publisher that owns the trademark to “Choose Your Own Adventure,” Chooseco, LLC, is suing Netflix. The publisher is alleging trademark infringement, The Hollywood Reporter first reported. In the complaint, Chooseco says Netflix […] Published:1/11/2019 12:42:37 PM
[Markets] Covert British Military-Smear Machine Moving Into US

Authored by Max Blumenthal and Mark Ames via ConsortiumNews.com,

After mobilizing a disinformation campaign across Europe, documents show that the Integrity Initiative is now infiltrating the US...

A bombshell domestic spy scandal has been unfolding in Britain, after hacked internal communications exposed a covert U.K. state military-intelligence psychological warfare operation targeting its own citizens and political figures in allied NATO countries under the cover of fighting “Russian disinformation.” 

The leaked documents revealed a secret network of spies, prominent journalists and think-tanks colluding under the umbrella of a group called “Integrity Initiative” to shape domestic opinion—and to smear political opponents of the right-wing Tory government, including the leader of the opposition Labour Party, Jeremy Corbin.

Until now, this Integrity Initiative domestic spy scandal has been ignored in the American media, perhaps because it has mostly involved British names. But it is clear that the influence operation has already been activated in the U.S.. Hacked documents reveal that the Integrity Initiative is cultivating powerful allies inside the State Department, top D.C. think tanks, the FBI and the Department of Homeland Security, where it has gained access to Katharine Gorka and her husband, the fascist-linked cable news pundit Sebastian Gorka

The Integrity Initiative has spelled out plans to expand its network across the U.S., meddling in American politics and recruiting “a new generation of Russia watchers” behind the false guise of a non-partisan charity. Moreover, the group has hired one of the most notorious American “perception management” specialists, John Rendon, to train its clusters of pundits and cultivate relationships with the media. 

Back in the U.K., Member of Parliament Chris Williamson has clamored for an investigation into the Integrity Initiative’s abuse of public money.

In a recent editorial, Williamson drew a direct parallel between the group’s collaboration with journalists and surreptitious payments the CIA made to reporters during the Cold War.

“These tactics resemble those deployed by the CIA in Operation Mockingbird that was launched at the height of the cold war in the early 1950s. Its aims included using the mainstream news media as a propaganda tool,” Williamson wrote.

“They manipulated the news agenda by recruiting leading journalists to write stories with the express purpose of influencing public opinion in a particular way,” the Labour parliamentarian continued. “Now it seems the British Establishment have dusted off the CIA’s old playbook and is intent on giving it another outing on this side of the Atlantic.”

Unmasking a Smear Machine

The existence of the Integrity Initiative was virtually unknown until this November, when the email servers of a previously obscure British think tank called the Institute for Statecraft were hacked, prompting allegations of Russian intrusion. When the group’s internal documents appeared at a website hosted by Anonymous Europe, the public learned of a covert propaganda network seed-funded to the tune of over $2 million dollars by the Tory-controlled U.K. Foreign Office, and run largely by military-intelligence officers.

Through a series of cash inducements, off-the-record briefings and all-day conferences, the Integrity Initiative has sought to organize journalists across the West into an international echo chamber hyping up the supposed threat of Russian disinformation—and to defame politicians and journalists critical of this new Cold War campaign. 

bid for funding submitted by the Integrity Initiative in 2017 to the British Ministry of Defense promised to deliver a “tougher stance on Russia” by arranging for “more information published in the media on the threat of Russian active measures.”

The Integrity Initiative has also worked through its fronts in the media to smear political figures perceived as a threat to its militaristic agenda. Its targets have included a Spanish Department of Homeland Security appointee, Pedro Banos, whose nomination was scuttled thanks to a media blitz it secretly orchestrated; Jeremy Corbyn, whom the outfit and its media cutouts painted as a useful idiot of Russia; and a Scottish member of parliament, Neil Findlay, whom one of its closest media allies accused of adopting “Kremlin messaging” for daring to protest the official visit of the far-right Ukrainian politician Andriy Parubiy — the founder of two neo-Nazi parties and author of a white nationalist memoir, “View From The Right.”

These smear campaigns and many more surreptitiously orchestrated by the Integrity Initiative offer a disturbing preview of the reactionary politics it plans to inject into an already toxic American political environment. 

Aggressive Expansion

A newly released Integrity Initiative document reveals that the outfit plans an aggressive expansion across the U.S. 

The Integrity Initiative claims to have already established a “simple office” in Washington, D.C., though it does not say where. It also boasts of partnerships with top D.C. think tanks like the Atlantic Council, the Center for European Policy Analysis, Center for Naval Analyses (CNA) and its close relationships with U.S. officials. 

A major hub of Integrity Initiative influence is the State Department’s Global Engagement Center, a de facto U.S. government propaganda operation that was established by President Barack Obama to battle online ISIS recruitment, but which was rapidly repurposed to counter Russian disinformation following the election of Trump.

The Integrity Initiative has also recruited one of the most infamous American PR men to organize its clusters of journalists and political figures. 

He is John Rendon, best known as “The Man Who Sold The War”— several wars, in fact, but most notoriously the Iraq invasion. Rendon was the self-described “information warrior” who planted fake news in major U.S.-U.K. media about non-existent WMD threats. With deep ties to the CIA and other military-intelligence agencies, his PR firm was paid $100 million to organize and sell Ahmed Chalabi’s Iraqi National Congress. In 2002, The New York Times exposed a Pentagon program using Rendon to plant “disinformation” — including “false stories” and “the blackest of black PR” — in media outlets around the world, in order to shape public opinion and sell the Iraq invasion. 

John Rendon (left) with Maj. Gen. Michael Snodgrass, US Africa Command Chief of Staff (US Africom Public Affairs)

Journalist James Bamford outlined a catalogue of disinformation feats Rendon performed for the Pentagon, such as identifying “the biases of specific journalists and potentially obtain an understanding of their allegiances, including the possibility of specific relationships and sponsorships.” Bamford also found proposals and programs Rendon was involved in that aimed to “‘coerce’ foreign journalists and plant false information overseas… [and] find ways to ‘punish’ those who convey the ‘wrong message.’”

These tactics seem particularly relevant to his work with the Integrity Initiative, especially considering the internal documents that reveal further Rendon-style plans to produce reports and studies to be “fed anonymously into local media.” (Among the outlets listed as friendly hosts in Integrity Initiative internal memos are Buzzfeed and El Pais, the center-left Spanish daily.)

Keeping up With the Gorkas

Sebastian Gorka, in Vitezi Rend garb, with his wife, Katharine, on Election Night.

Internal documents also refer to interactions between Integrity Initiative Director Chris Donnelly and top Trump officials such as Katharine Gorka, a vehemently anti-Muslim Department of Homeland Security official, as well as her husband, Sebastian, who earned right-wing fame during his brief tenure in Trump’s White House. 

The latter Gorka is an open supporter of the Hungarian Vitezi Rend, a proto-fascist order that collaborated with Nazi Germany during its occupation of Hungary. Following Trump’s election victory in 2016, Gorka appeared for televised interviews in a black Vitezi Rend uniform. 

Gorka was among the first figures listed on an itinerary for Donnelly to Washington this Sept. 18 to 22. The itinerary indicates that the two had breakfast before Donnelly delivered a presentation on “Mapping Russian Influence Activities” at the federally funded military research center, CNA.

According to the itinerary, Donnelly was granted access to Pentagon officials such as Mara Karlin,an up-and-coming neoconservative cadre, and John McCain Institute Executive Director Kurt Volker, another neoconservative operative who also serves as the U.S. special representative for Ukraine. Numerous meetings with staffers inside the State Department’s Office of Global Engagement were also detailed. 

Foreign Agent in State?

Of all the State Department officials named in Integrity Initiative documents, the one who appeared most frequently was Todd Leventhal. Leventhal has been a staffer at the State Department’s Global Engagement Center, boasting of “20 years of countering disinformation, misinformation, conspiracy theories, and urban legends.” In an April 2018 Integrity Initiative memo, he is listed as a current team member:

Funded to the tune of $160 million this year to beat back Russian disinformation with “counter-propaganda,” the State Department’s Global Engagement Center has refused to deny targeting American citizens with information warfare of its own. “My old job at the State Department was as chief propagandist,” confessed former Global Engagement Center Director Richard Stengel. “I’m not against propaganda. Every country does it and they have to do it to their own population and I don’t necessarily think it’s that awful.”

Like so many of the media and political figures involved in the Integrity Initiative’s international network, the Global Engagement Center’s Leventhal has a penchant for deploying smear tactics against prominent voices that defy the foreign policy consensus. Leventhal appeared in an outtake of a recent NBC documentary on Russian disinformation smugly explaining how he would take down a 15-year-old book critical of American imperialism in the developing world. Rather than challenge the book’s substance and allegations, Leventhal boasted how he would marshal his resources to wage an ad hominem smear campaign to destroy the author’s reputation. His strategic vision was clear: when confronting a critic, ignore the message and destroy the messenger.

Integrity Initiative documents reveal that Leventhal has been paid $76,608 dollars (60,000 British pounds) for a 50 percent contract. 

While those same documents claim he has retired from the State Department, Leventhal’s own Linkedin page lists him as a current “Senior Disinformation Advisor” to the State Department. If that were true, it would mean that the State Department was employing a de facto foreign agent.

As a cut-out of the British Foreign Office and Defense Ministry, the Integrity Initiative’s work with current and former U.S. officials and members of the media raises certain legal questions. For one, there is no indication that the group has registered under the Justice Department’s Foreign Agent Registration Act, as most foreign agents of influence are required to do.

Grants from Neocon Foundation

An Integrity Initiative memo states that the right-wing Smith Richardson Foundation has also committed to ponying up funding for its U.S. network as soon as the group receives 501 c-3 non-profit status. The foundation has already provided it with about $56,000 for covert propaganda activities across Europe.

The Smith Richardson Foundation has old ties to the U.S. intelligence community and controversial cold war influence operations. According to reporter Russ Bellant, the foundation was secretly bankrolling radical right-wing “indoctrination campaigns for the American public on Cold War and foreign policy issues”— programs that got the attention of Senator William Fulbright, who warned then-President John F. Kennedy of their dangers. At one of these indoctrination seminars, a Smith Richardson Foundation director “told attendees that ‘it is within the capacity of the people in this room to literally turn the State of Georgia into a civil war college,’ in order to overcome their opponents.”

Smith Richardson has funded a who’s who of the neoconservative movement, from hyper-militaristic think tanks like the American Enterprise Institute to the Institute for the Study of War. “To say the [Smith Richardson] foundation was involved at every level in the lobbying for and crafting of the so-called global war on terror after 9/11 would be an understatement,” wrote journalist Kelley Vlahos.

Besides Smith Richardson, the Integrity Initiative has stated its intention to apply for grants from the State Department “to expand the Integrity Initiative activities both within and outside of the USA.” This is yet another indicator that the U.S. government is paying for propaganda targeting its own citizens. 

‘Main Event’ in Seattle

An Integrity Initiative internal document argues that because “DC is well served by existing US institutions, such as those with which the Institute [for Statecraft] already collaborates,” the organization should “concentrate on extending the work of the Integrity Initiative into major cities and key State capitals [sic] across the USA.”

This Dec. 10, the Integrity Initiative organized what it called its “main event” in the U.S. It was a conference on disinformation held in Seattle, under the auspices of a data firm called Adventium Labs. Together with the Technical Leadership Institute at the University of Minnesota, the Integrity Initiative listed Adventium Labs as one of its “first partners outside DC.”

Adventium is a Minneapolis-based research and development firm that has reaped contracts from the U.S. military, including a recent $5.4 million cyber-security grant from the Pentagon’s Defense Advanced Research Projects Agency, or DARPA. 

Inside a modest-sized hotel conference room, the Adventium/Integrity event began with a speech by the Integrity Initiative’s Simon Bracey-Lane. Two years prior, Bracey-Lane appeared on the American political scene as a field worker for Bernie Sanders’ 2016 presidential primary run, earning media write-ups as the “Brit for Bernie.” Now, the young operator was back in the U.S. as the advance man for a military-intelligence cut-out that specialized in smearing left-wing political figures like Jeremy Corbyn, the Labour leader widely regarded as the British version of Sanders.

Bracey-Lane opened his address by explaining that Integrity Initiative director Chris Donnelly had been unable to appear at the event, possibly because he was bogged down in the scandal back home. He proceeded to read remarks prepared by Donnelly that offered a window into the frighteningly militaristic mindset the Integrity Initiative aims to impose on the public through their media and political allies.

According to Donnelly’s comments, the West was no longer in a “peace time, rules based environment.” From the halls of government to corporate boardrooms to even the U.K.’s National Health System, “the conclusion is that we have to look for people who suit a wartime environment rather than peacetime.”

During a Q&A, Bracey-Lane remarked that “we have to change the definition of war to encompass everything that war now encompasses,” referring vaguely to various forms of “hybrid warfare.” 

“There is a great deal to be done in communicating that to young people,” he continued. “When we mean being at war we don’t mean sending our boys off to fight. It’s right here in our homes.”

The emphasis on restructuring society along martial lines mirrored the disturbing thinking also on display in notes of a private meeting between Donnelly and Gen. Richard Barrons in 2016. During that chat, the two officers decided that the British military should be removed from democratic supervision and be able to operate as “an independent body outside politics.”

While Bracey-Lane’s presentation perfectly captured the military mindset of the Integrity Initiative, the speakers that followed him offered a diverse array of perspectives on the concept of disinformation, some more nuanced than others. But one talk stood out from the rest — not because of its quality, but because of its complete lack thereof.

Alexander Reid Ross (left) and Emmi Bevensee at the Integrity Initiative’s “main event” in Seattle.

Theorist of ‘Red-Brown’ Networks

The presentation was delivered by Alexander Reid Ross, a half-baked political researcher who peddles computer-generated spiderweb relationship charts to prove the existence of a vast hidden network of “red-brown” (or fascist-communist) alliances and “syncretic media” conspiracies controlled by puppeteers in Moscow. 

Ross is a lecturer on geography at Portland State University with no scholarly or journalistic credentials on Russia. But with a book, “Against the Fascist Creep,” distributed by the well-known anarchist publishing house, AK Press, the middling academic has tried to make his name as a maverick analyst. 

Before the Integrity Initiative was exposed as a military-intelligence front operation, Ross was among a small coterie of pundits and self-styled disinformation experts that followed the group’s Twitter account. The Integrity Initiative even retweeted his smear of War Nerd podcast co-host John Dolan.

In a series of articles for the Southern Poverty Law Center last year, Ross attempted to bring his warmed-over Cold War theories to the broader public. He wound up trashing everyone from the co-author of this piece, Max Blumenthal, to Nation magazine publisher Katrina Vanden Heuvel to Harvard University professor of international relations Stephen Walt as hidden shadow-fascists secretly controlled by the Kremlin. 

The articles ultimately generated an embarrassing scandal and a series of public retractions by the editor-in-chief of the Southern Poverty Law Center, Richard Cohen. And then, like some Dr. Frankenstein for discredited and buried journalism careers, the British Ministry of Defense-backed Integrity Initiative moved in to reanimate Ross as a sought-after public intellectual. 

Before the Integrity Initiative-organized crowd, Ross offered a rambling recitation of his theory of a syncretic fascist alliance puppeteered by Russians: “The alt right takes from both this ‘red-brown,’ it’s called, or like left-right syncretic highly international national of nationalisms, and from the United States’ own paleoconservative movement, and it’s sort of percolated down through college organizing, um, and anti-interventionism meets anti-imperialism. Right?”

In a strange twist, Ross appeared on stage at the Integrity Initiative’s Seattle event alongside Emmi Bevensee, a contributor to the left-libertarian Center for a Stateless Society (C4SS) think tank, whose tagline, “a left market anarchist think-tank” expresses its core aim of uniting far-left anarchists with free-market right-libertarians. 

Bevensee, a PhD candidate at the University of Arizona and self-described “Borderlands anarcho into tech and crypto,” concluded her presentation by asserting a linkage between the alternative news site, Zero Hedge, and the “physical militarized presence in the borderlands” of anti-immigrant vigilantes.

 Like Bevensee, Ross has written for C4SS in the past. 

The irony of contributors to an anarchist group called the “Center for a Stateless Society” auditioning before The State – the most jackbooted element of it, in fact – for more opportunities to attack anti-war politicians and journalists, can hardly be overstated.

But closer examination of the history of C4SS veers from irony into something much darker and more unsettling.

White Nationalist Associates

C4SS was co-founded in 2006 by a confessed child rapist and libertarian activist, Brad Spangler, who set the group up to promote “Market anarchism” to “replace Marxism on the left.”

When Spangler’s child rape confessions emerged in 2015, the Center for Stateless Society founder was finally drummed out by his colleagues. 

There’s more: Spangler’s understudy and deputy in the C4SS, Kevin Carson — currently listed as the group’s “Karl Hess Chair in Social Theory” — turned out to be a longtime friend and defender of white nationalist Keith Preston. Preston’s name is prominently plastered on the back of Kevin Carson’s book, hailing the C4SS man as “the Proudhon of our time” — a loaded compliment, given the unhinged anti-Semitism of Pierre-Joseph Proudhon, the influential 19thCentury French anarchist.

Carson only disowned Preston in 2009, shortly before Preston helped white nationalist leader Richard Spencer launch his alt-right webzine, Alternative Right.

The C4SS group currently participates in the annual Koch-backed International Students For Liberty conference in Washington, D.C., LibertyCon, a who’s who of libertarian think-tank hacks and Republican Party semi-celebrities like Steve Forbes, FCC chairman Ajit Pai, and Alan Dershowitz.

In 2013, C4SS’s Kevin Carson tweeted out his dream fantasy that four Jewish leftists—Mark Ames, co-author of this article; Yasha Levine; Corey Robin, and Mark Potok — would die in a plane crash while struggling over a single parachute. Potok was an executive editor at the Southern Poverty Law Center, which last year retracted every one of the crank articles that Alexander Reid Ross published with them and formally apologized for having run them.

For some reason, the super-sleuth Ross conveniently failed to investigate the libertarian group, C4SS, that he has chosen to partner with and publish in. That ability to shamelessly smear and denounce leftists over the most crudely manufactured links to the far-right—while cozying up to groups as sleazy as C4SS and authoritarian as the Integrity Initiative —is the sort of adaptive trait that MI6 spies and the Rendon Group would find useful in a covert domestic influence operation.

Ross did not respond to our request for comment on his involvement with the Integrity Initiative and C4SS.

Disinformation for Democracy

As it spans out across the U.S., the Integrity Initiative has stated its desire to “build a younger generation of Russia watchers.” Toward this goal, it is supplementing its coterie of elite journalists, think tank hacks, spooks and State Department info-warriors with certifiable cranks like Ross. 

Less than 24 hours after Ross’s appearance at the Integrity Initiative event in Seattle, he sent a menacing email to the co-author of this article, Ames, announcing his intention to recycle an old and discredited smear against him and publish it in The Daily Beast — a publication that appears to enjoy a special relationship with Integrity Initiative personnel. 

Despite the threat of investigation in the U.K., the Integrity Initiative’s “network of networks” appears to be escalating its covert, government-funded influence operation, trashing the political left and assailing anyone that gets in its way; all in the name of fighting foreign disinformation. 

“We have to win this one,” Integrity Initiative founder Col. Chris Donnelly said“because if we don’t, democracy will be undermined.”

Published:1/11/2019 1:16:48 AM
[Markets] The Secret Logistics Of America's Global Deep State

Authored by Eric Zuesse via The Strategic Culture Foundation,

Why is America’s Baghdad Embassy the world’s largest embassy — and the largest by far?

"It's as if the US Embassy is there not only to protect American interests, but to manage the entire world from the heart of the capital, Baghdad.”

— Iraqi Sheikh Qassim Al Ta’ee, as quoted on 27 December 2011 in Al Iraq News and translated by Ibrahim Zaidan from the original Arabic by Nicholas Dagher 

Zaidan’s article went on to say:

The world's largest embassy is situated in the Green Zone and fortified by three walls, another barrier of concrete slabs, followed by barbed wire fences and a wall of sandbags. It covers an area of 104 acres, six times larger than UN headquarters in New York and ten times larger than the new embassy Washington is building in Beijing – which is just 10 acres.

[Editor's' Note: The ten-acre US Embassy in Beijing is the second largest overseas construction project in the history of the Department of State — and the 104-acre US Embassy in Iraq is the largest.]

So, America's largest diplomatic mission is surrounded by high concrete walls, is painted in black, brown and grey and is completely isolated from its environment... The United States announced several months ago that between diplomats and employees, its embassy would include 16,000 people after the pullout of US forces.

On January 1st, Will Sillitoe headlined at the Helsinki Times, "What does the US embassy in Baghdad export to Finland and dozens of other countries?” and he reported that:

More than a million kilograms of cargo were shipped from Baghdad to different parts of the world, reveals US embassies procurement documents.

Mysterious cargo shipments from the US Embassy in Baghdad to other American embassies and consulates around the world have been revealed on a Wikileaks' database. Procurement orders of US embassies are public documents, but Wikileaks put them in a searchable database making it easier to analyse.

The database displaying worldwide US embassy orders of goods and services reveals Baghdad as a postal and shipping centre for tonnes of freight.

Though military freight might be expected between the US and Iraq, records show that embassies across Europe, Asia, the Middle East, the Americas and Africa are all receiving deliveries from Baghdad too.

According to Wikileaks' database, orders to ship more than 540 tonnes of cargo to the US were made in May 2018. The same document shows other main delivery destinations included 120 tonnes of freight to Europe, and 24 tonnes to South Africa, South America and Central Africa respectively...

On December 29th, Sillitoe had headlined "Guarded warehouse near airport and mysterious cargos from Baghdad; what is the US embassy in Helsinki up to?” and he opened:

Why does the US Embassy in Helsinki need a big warehouse near Malmi Airport and what are the contents of thousands of kilograms of cargo sent to Helsinki from Baghdad?

A dilapidated warehouse in Malmi is being used by the US Embassy for unknown operations after a Wikileaks release revealed its location.

The anonymous looking building on Takoraudantie is notable only for the new 427 meter perimeter fence that according to the Wikileaks' database was ordered by the US Embassy in April 2018.

Situated across the street from the main entrance of Malmi Airport, the warehouse with its 3 meter high security fence appears an unlikely location for official embassy business. Neighbouring companies include a car yard and a tyre warehouse.

Helsinki Times visited the perimeters this weekend. Security personnel, young Finns in uniforms with American flags on their arms, appeared nervous and suspicious when asked to comment on the warehouse. ...

Sillitoe closed that article by saying: “The searchable Wikileaks database and info about Finland related activities can be found HERE.”

That link leads to a “US Embassy Shopping List” of 24 separate documents, one of which is "RFP 191Z1018R0002 Mission Iraq Shipping Transportation Services”, dated “5/17/18."

Item 2 there is “Packing of unaccompanied air baggage (UAB) – Throughout Iraq – US Embassy Baghdad, Baghdad International Zone, US Consulate General in Basrah, US Consulate General in Erbil, US Baghdad Diplomatic Support Center, US Erbil Diplomatic Support Center (Note: under the specified unit of measure the US Government contemplates ‘per kilogram’ of gross weight in kilograms)”

The “Quantity Estimated” is “100,000” and the “Unit of Measure” is “kilogram.”

Item 7 is “Storage Services – Monthly Storage of containers – Throughout Iraq – US Embassy Baghdad, Baghdad International Zone, US Consulate General in Basrah, US Consulate General in Erbil, US Baghdad Diplomatic Support Center, US Erbil Diplomatic Support Center.”

The “Quantity Estimated” is “100” and the “Unit of Measure” is “40’ Container.”

Item “Section B.5 Sub-CLIN:84E” is “From Republic of Iraq to Western European Countries (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, Andorra, Liechtenstein, Malta, Monaco, San Marino, and Vatican City, Nicosia)”

The “Quantity Estimated” is “5,000” and the “Unit of Measure” is “kilogram.”

Item “Section B.5 Sub -CLIN:84 F” is “From Republic of Iraq to Eastern European Countries (Armenia, Azerbaijan, Belarus, Estonia, Georgia, Latvia, Lithuania, Moldova, Russia, Ukraine, Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia, Kosovo)”

The “Quantity Estimated” is “5,000” and the “Unit of Measure” is “kilogram.”

By far the biggest categories for shipments are to the eastern US states: “From Republic of Iraq to the Unites [sp.] States Eastern Time-Zone – the following States: VT, ME, NH, MA, RI, CT, NJ, DE, MD, DC, NY, PA, VA, NC, SC, GA, FL, WV, MI, OH, IN, KY, GA” 

There are 11 such categories:

"Section B.5 Sub-CLIN:85A”

"Section B.5 Sub-CLIN:86A”

"Section B.6 Sub-CLIN:84A”

"Section B.6 Sub-CLIN:85A"

"Section B.6 Sub-CLIN:86A”

"Section B.7 Sub-CLIN:84A”

"Section B.7 Sub-CLIN:85A”

"Section B.7 Sub-CLIN:86A”

"Section B.8 Sub-CLIN:84A”

"Section B.8 Sub-CLIN:85A”

"Section B.8 Sub-CLIN:86A”

Each one of those eleven will receive 30,000 kilograms, under the contract.

In each of the eleven, the products will be going “From Republic of Iraq to the Unites [sp.] States Eastern Time-Zone – the following States: VT, ME, NH, MA, RI, CT, NJ, DE, MD, DC, NY, PA, VA, NC, SC, GA, FL, WV, MI, OH, IN, KY, GA”

That’s a total of 330,000 kilograms. That’s 727,525 pounds, or 364 tons, which are going from the world’s largest Embassy, America’s in Baghdad, to America’s eastern states.

In addition, around another 1,091,287 pounds are going from the Baghdad Embassy to other locations throughout the world.

The RFP, or Request For Proposal, informs its recipient that “The Contractor shall provide the services for the base period of the contract,” but “base period” isn’t defined in the RFP. However, the contract does specify that there shall be “a firm fixed unit price for any contract line item number in the Base Year,” and therefore the obligations under any contract will continue for at least one year, but possibly longer (if renewed). Furthermore, the “Type of Solicitation” here is not “Sealed Bid (IFB),” but instead “Negotiated (RFP),” which means that the US Government officials who are “Soliciting” these offers will choose whom to request to present an offer; and, if two or more recipients are being approached and make an offer, then the US official will select the winner that he or she prefers, and won’t be required to accept the lowest-priced one, but can instead take some sort of kickback, as long as there is no evidence of having done that. It can easily be arranged. Furthermore, private arrangements bond the two parties, even if the arrangement is just a one-time deal, because neither party will want the private arrangement to be made public, and if ever it does become public, then both parties will be revealed as guilty; it’ll hurt both parties. Moreover, since any contract may be renewed, the offeror of the contract, which is the Embassy employee, holds the power to affect that — the length of term, and everything that’s associated with it, will be controlled by the Embassy’s side, and not by the contractor’s side. And no matter how brief a contract-term might be, and no matter how many non-Americans might be signing any particular type of contract during any given period of years, none of the private parties will have any motive to make public any kickback. Consequently, there is every motive to keep these arrangements private; and the Embassy employee will always be the more powerful one in any private arrangement that is made with any contractor. 

Prior RFPs are also online, for example this one from 16 November 2014. The annual amounts seem to be fairly stable.

On 10 October 2007, while the US Embassy in Iraq was still building, the Congressional Research Service issued to Congress their report, “US Embassy in Iraq”, and it said:

The US Ambassador to Iraq (currently Ambassador Ryan Crocker) has full authority for the American presence in Iraq with two exceptions: 1 — military and security matters which are under the authority of General Patraeus, the US Commander of the Multinational Force-Iraq (MNF-I), and 2 — staff working for international organizations.

In areas where diplomacy, military, and/or security activities overlap, the Ambassador and the US Commander cooperate to provide co-equal authority regarding what is best for America and its interests in Iraq.

By “Patraeus” it meant David Petraeus. He was the person who designed the torture-system that was applied by his assistant James Steele and used in Iraq to extract from prisoners everything they knew about Saddam Hussein’s assistance to the 9/11 event. Petraeus subsequently became a regular participant in the annual meetings of the private and secretive Bilderberg group of representatives of the US and allied nations’ billionaires that constitute The West’s Deep State. Prior to that, Petraeus and Steele had organized and instituted in El Salvador that Government’s death-squads, to eradicate opponents of US control over that country.

The most corrupt parts of the US Government are usually in the military, because the entire Defense Department isn’t audited. It is instead financially an enormous dark hole, even to US Senators and Representatives, and even to the US President. Only members of the US Deep State might have an approximate idea of how much money is getting ‘lost’ in it. After all, the Deep State isn’t, at all, answerable to the public. Since it operates in secret, it can’t be. The consequences of the Deep State, however, can become public, and may contradict what is shown in publicly available documents and public statements, which have been circulated, to the public, by the press. In any nation where a Deep State rules, such contradictions, between public assertions and the actual outcomes, are so commonplace as hardly to be even news at all, if and when they appear, at all.

On 2 July 2017, the great investigative reporter Dilyana Gaytandzhieva headlined "350 Flights Carry Weapons Diplomatic for Terrorists”, and provided documentation of the US CIA’s intricate global network, which secretly “sends $1 billion worth of weapons” through many countries to jihadists in Syria to take down Syria’s Government. Iraq was mentioned 6 times in the original publication of her article, and is mentioned 9 times in the 29 April 2018 updated version. That secret US supply of weapons to jihadist groups to overthrow Bashar al-Assad and his secular, non-sectarian, Baathist Party, is a secret operation, just like the US State Department’s Baghdad Embassy’s operations are, and that Embassy could even be this particular operation’s headquarters. 

The 200-page, December 2017, study, “Weapons of the Islamic State: A three-year investigation”, by Conflict Armament Research Ltd., states in its Conclusion:

IS forces, like most non-state armed groups, acquire significant quantities of weapons and ammunition on the battlefield… Evidence presented in this report, however, confirms that many of the group’s weapons — and notably its ammunition — are newly manufactured, having been delivered to the region since the start of the Syrian conflict in 2011. These weapons originate in transfers made by external parties, including Saudi Arabia and the United States, to disparate Syrian opposition forces arrayed against the regime of President Bashar al-Assad.

Here are just a few of the details that this passage in the summary was based upon and summarizing:

On pages 36-9, it says:

CAR has documented and traced numerous weapon systems in service with IS forces. Many derive from shipments made to the US government, or to entities operating under US government contracts. The United States has acknowledged its support to Syrian opposition forces, orchestrated primarily through resupply from the territories of Jordan and Turkey.26 All of the shipments originated in EU Member States; in most cases, US retransfers (exports made after purchase by the United States) contravened clauses in end-user certificates (EUCs) issued by the United States to EU supplier governments. The United States signed these certificates prior to transfer, stated that it was the sole end user of the materiel, and committed not to retransfer the materiel without the supplier government’s prior consent. It did not notify the supplier states concerned before [violating that, and] retransferring the materiel. …

On 21 December 2016, Jaysh al-Nasr, a Syrian armed opposition faction active in the Hama Governorate of Syria, published a set of photographs of its fighters.29 In one of these, Jaysh al-Nasr fighters are operating a 9M111MB-1 ATGW30 bearing an identical lot number and a serial number (365) close in sequence to the one CAR documented (286) in Iraq, suggesting both were part of the same supply chain. …

In May 2015, Syrian YPG forces recovered a PG-7T 40 mm rocket from IS forces near Al Hasakah, Syria, where CAR documented it on 20 May 2015. The Government of Bulgaria confirmed that it exported the item to the US Department of the Army through the US company Kiesler Police Supply. The application for the export licence was accompanied by the original EUC issued by the US Department of the Army (with a non-re-export clause) as well as a delivery verification certificate. The item was exported on 23 June 2014.32 … CAR has yet to receive a reply to a trace request sent to the United States regarding these rockets.

Page 54 says:

Like the United States, Saudi Arabia has provided support to various factions in the Syrian conflict, including through the supply of weapons. Working with the Bulgarian authorities, CAR has traced numerous items deployed by IS forces to initial exports from Bulgaria to Saudi Arabia. These transfers were uniformly subject to non-retransfer clauses concluded between Saudi Arabia and the Government of Bulgaria prior to export. In this respect, onward retransfers by Saudi Arabia of these weapons contravene its commitments to the Government of Bulgaria not to re-export the materiel in question without Bulgaria’s prior consent.

Just like in the case of the Baghdad Embassy’s agreements with contractors, the powerful party in any contract will be the party whose side is paying (the buyer), and not the party whose side is supplying the service or goods (the seller). Money always rules.

The CAR report, which was issued just months after Dilyana Gaytandzhieva’s report, was entirely consistent with, and largely overlapped, hers. The US and Saudi Governments were not only using Al Qaeda as their main proxy in southwestern Syria to lead the jihadist groups to overthrow Syria’s non-sectarian Government, but were also using ISIS in northeastern Syria as their main proxy forces there to overthrow Syria’s Government. After Russia’s entry into the war on 30 September 2015 on the side of Syria’s Government, America’s assistance to Al Qaeda in Syria (Al Nusra) continued in order to help replace that Government by one which would be controlled by the Sauds. And America’s assistance to ISIS was almost totally replaced then by its assistance to ethnocentric Syrian Kurds in the northeast as the Syrian Democratic Forces, which were fighting against both the Government and ISIS. Russia, of course, was against both Al Qaeda-led jihadists and against ISIS jihadists. (Turkey was against ethnocentric Kurds, because those people want to take a chunk out of four nations: Turkey, Syria, Iraq, and Iran. The CIA edited and written Wikipedia’s article on Kurdistan conveniently doesn’t even make note of that key fact.) So: America was using a complex combination in order to take over Syria for the Sauds ultimately to control. But Russia’s entry into Syria’s air-war on 30 September 2015 has overcome that U.S-led and Saudi financed combination against Syria.

Would any secret facility, anywhere in the world, be better situated to manage that operation, on America’s side, than America’s Baghdad Embassy?

So, the question then arises: who benefits from this enormous Embassy, and from the Deep State of which it is a part? The American public certainly do not.

Generally speaking, the people who get paid to promote endless wars, such as sellers of the constantly receding (propagandistic) “light at the end of the tunnel”, support continuing if not intensifying such wars. Typical is the neoconservative (in foreign affairs) and neoliberal (in domestic affairs) David Bradley, who controls and is the Chairman of Atlantic Media, which publishes the neocon-neolib The Atlantic, and many other public-affairs magazines and websites. His “Defense One” site posted, on 22 March 2018, from its Executive Editor, "The War in Iraq Isn’t Done. Commanders Explain Why and What’s Next”, and closed with “‘We need to be very careful about rushing to the exit, and secure this win,’ said the senior US military official. ‘This is a significant win.’” The “senior US military official” wasn’t identified, other than to say that he “spoke only on background.” But, of course, George W. Bush had already told the world all about this “win,” back in 2003. Salespeople just continue their pitches; it’s what they are paid to do, and so they never stop.

The annual military costs alone, for the US to keep being, as its propaganda euphemistically puts the matter, “policeman for the world” (such as, in the Syrian case, by means of those proxy boots-on-the-ground warriors, the jihadists, and the ethnocentrists among Syria’s Kurds) are actually sufficient, even on their own, to cause America’s soaring federal debt - and that’s not a benefit, but an extreme harm, to the public. Future generations of Americans will be paying the tab for this. And the costs for being “policeman for the world” are enormous. Even just militarily, they’re over a trillion dollars each and every year.

Though current US Defense Department budgets are around $700 billion annually, the United States is actually spending closer to $1.2 trillion annually on the military when all of the nation’s military spending (such as for military retirements, which are paid by the Treasury Department not by the Defense Department) are factored in. The only people who benefit from being “policeman for the world” are the billionaires of the US and (though to only a lesser extent) of its allied countries. And, of course, they pay their lobbyists and propagandists. It’s really being policeman for those billionaires, who own and control all of the international corporations that are headquartered in this alliance. The US public isn’t paying the tab by any cash-and-carry basis; instead, future generations of Americans will be paying the tab, for today’s US-and-allied billionaires. Those billionaires today are the chief beneficiaries. It’s all being done for them and their retinues. That’s why America’s Founders didn’t want there to be any “standing army” at all. They didn’t want there to be any permanent-war government. They wanted military only for national defense — not for any billionaires’ protection or ‘insurance policy’, or what might actually be publicly paid and armed thugs in service abroad as if they were the nation’s armed forces — when, in fact, they are the armed forces for only those billionaires and their servants. America’s Founders wanted no military at all that serves the aristocracy. They wanted no aristocracy, at all. They wanted no “standing army” whatsoever. They wanted only a military that protects the public, when a real military danger, from abroad, to the domestic public, exists. Of course, that’s possible only in a democracy, but the US is no democracy now, even if it might have been in the past.

On 11 December 2017, Montana State University headlined “MSU SCHOLARS FIND $21 TRILLION IN UNAUTHORIZED GOVERNMENT SPENDING; DEFENSE DEPARTMENT TO CONDUCT FIRST-EVER AUDIT”, but the Pentagon’s promised audit has failed to materialize. A major accounting firm was hired for the task but soon quit, saying that the Defense Department’s books were too incomplete to proceed further. Three days before that article was published, a colleague of that MSU team headlined at Forbes”Has Our Government Spent $21 Trillion Of Our Money Without Telling Us?” and said that the answer was yes. All of this ‘lost’ money was spent merely by the Department of Defense. Just managing the more-than-a-thousand US military bases worldwide requires a lot of money. Any actual war-fighting adds to that US military-base cost — the war-fighting costs are extra. Those military bases etc. are the “standing army.” Protection of our billionaires’ investments abroad, and of their access to raw materials in underdeveloped countries (such as to manufacture cellphones), is an enormously expensive operation. Basically, the American public are hugely subsidizing America’s billionaires. But only future generations of Americans will be paying that debt — plus, of course, the accumulated interest on it. 

The Department of Defense isn’t the only federal Department that has ever been unauditable. On 18 June 2013, Luke Johnson and Ryan Grim at Huffington Post bannered “GAO Cannot Audit Federal Government, Cites Department Of Defense Problems” and opened: “The Government Accountability Office said Thursday that it could not complete an audit of the federal government, pointing to serious problems with the Department of Defense. Along with the Pentagon, the GAO cited the Department of Homeland Security as having problems so significant that it was impossible for investigators to audit it. The DHS got a qualified audit for fiscal year 2012, and is seeking an unqualified audit for 2013.” However, on 17 November 2014, the Washington Post headlined “Homeland Security earns clean audit two years running”, and Jerry Markon reported that, “For the second straight year, the Department of Homeland Security has achieved a much sought-after clean audit of its financial statements by an independent auditor.” Furthermore: “for nearly all of its first decade of existence, DHS was unable to achieve a clean audit because it had been created by combining 22 federal agencies and components into one massive department. That led to inherent challenges.” That wasn’t the situation at the Defense Department, which was far different. On 8 December 2017, NPR headlined “Pentagon Announces First-Ever Audit Of The Department Of Defense”, and opened: “‘The Defense Department is starting the first agency-wide financial audit in its history,’ the Pentagon's news service says.” However, almost as soon as the auditing team began their work, they quit it, because the Department’s books were garbage. Only the DOD is like that — almost entirely corrupt. 

On 2 October 2018, Project Censored headlined “$21 Trillion in Unaccounted-for Government Spending from 1998 to 2015”. However, it falsified. It opened: “Two federal government agencies, the Department of Defense and the Department of Housing and Urban Development (HUD), may have accumulated as much as $21 trillion in undocumented expenses between 1998 and 2015.” None of that was actually HUD, it was 100% DOD. And all of “the alleged irregularities in DoD and HUD spending” were not merely “alleged,” but they were, in fact, carefully checked and repeatedly verified, and were only at DOD, despite what Project Censored published. This inaccuracy is important. If people don’t know that DOD is the only unaudited federal Department, then they can’t possibly understand why that is the case. The reason it is the case, is that almost all of the “waste, fraud, and abuse” in the US federal government is at the Defense Department. It has never been auditable. How much do America’s ‘news’-media report this reality?

DOD is consistently, year after year, and decade after decade, the federal Department or federal or local governmental function, that Gallup’s polling has shown to be more respected by the US public than is any other. (It’s identified there as “The military”. It beats, for examples: “The Supreme Court,” “Congress,” “The public schools,” “The presidency,” “The police,” and “The criminal justice system.”) The most corrupt isn’t the most despised; it is the opposite — it is the most respected.

Secret government tends to be costly for taxpayers, and also tends to add a lot to the governmental debt. An unauditable governmental department, such as the Defense Department is, cannot function, at all, without an enormous amount of corruption. This is the reality about America’s military. However, there’s much propaganda contradicting it. The news-media also serve those same billionaires.

How likely, then, is it, that America’s Baghdad Embassy serves the US public? It certainly does not serve the Iraqi public. But it does serve the people — whomever they are — who control the US Government. And that’s the Deep State. That’s the reality, but what’s promoted is fantasyland. And this fantasyland, which is promoted, is called “American democracy”. Just ask Big Brother, and he’ll tell you all about it. He always does.

Published:1/10/2019 11:10:34 PM
[Markets] Beware The Emergency State: Imperial, Unaccountable, And Unconstitutional

Authored by John Whitehead via The Rutherford Institute,

For seven decades we have been yielding our most basic liberties to a secretive, unaccountable emergency state – a vast but increasingly misdirected complex of national security institutions, reflexes, and beliefs that so define our present world that we forget that there was ever a different America. ... Life, liberty, and the pursuit of happiness have given way to permanent crisis management: to policing the planet and fighting preventative wars of ideological containment, usually on terrain chosen by, and favorable to, our enemies. Limited government and constitutional accountability have been shouldered aside by the kind of imperial presidency our constitutional system was explicitly designed to prevent.”

- David C. Unger, The Emergency State: America’s Pursuit of Absolute Security at All Costs

It's all happening according to schedule.

The civil unrest, the national emergencies, “unforeseen economic collapse, loss of functioning political and legal order, purposeful domestic resistance or insurgency, pervasive public health emergencies, and catastrophic natural and human disasters,” the government’s reliance on the armed forces to solve domestic political and social problems, the implicit declaration of martial law packaged as a well-meaning and overriding concern for the nation’s security…

The government has been planning and preparing for such a crisis for years now.

No matter that this crisis is of the government’s own making.

To those for whom power and profit are everything, the end always justifies the means.

This latest brouhaha over President Trump’s threat to declare a national emergency in order to build a border wall is more manufactured political theater, a Trojan Horse intended to camouflage the real threat to our freedoms: yet another expansion of presidential power exposing us to constitutional peril.

This is not about illegal immigration or porous borders or who will pay to build that wall.

This is about unadulterated power and the rise of an “emergency state” that justifies all manner of government tyranny in the so-called name of national security.

The seeds of this present madness were sown more than a decade ago when George W. Bush stealthily issued two presidential directives that granted the president the power to unilaterally declare a national emergency, which is loosely defined as "any incident, regardless of location, that results in extraordinary levels of mass casualties, damage, or disruption severely affecting the U.S. population, infrastructure, environment, economy, or government functions."

Comprising the country's Continuity of Government (COG) plan, these directives (National Security Presidential Directive 51 and Homeland Security Presidential Directive 20), which do not need congressional approval, provide a skeletal outline of the actions the president will take in the event of a "national emergency."

Mind you, that national emergency can take any form, can be manipulated for any purpose and can be used to justify any end goal—all on the say so of the president.

This is exactly the kind of mischief that Thomas Jefferson warned against when he cautioned, “In questions of power, then, let no more be heard of confidence in man, but bind him down from mischief by the chains of the Constitution.”

Power corrupts.

Absolute power corrupts absolutely.

Thus far, we have at least pretended that the government abides by the Constitution.

Despite the many attempts by government leaders to claim broader powers for themselves during wartime, the Constitution allows for only one emergency power: “The privilege of the writ of habeas corpus shall not be suspended, unless when in cases of rebellion or invasion the public safety may require it” (Article 1, Section 9, Clause 2).

Those who wrote our Constitution sought to ensure our freedoms by creating a document that protects our God-given rights at all times, even when we are engaged in war, whether that is a so-called war on terrorism, a so-called war on drugs, or a so-called war on illegal immigration.

This threat by Trump to rule by fiat merely plays into the hands of those who would distort the government’s system of checks and balances and its constitutional separation of powers beyond all recognition.

Apart from the fact that this highly politicized, shamelessly contrived border crisis does not in any way constitute a national emergency, to allow such a manufactured emergency to override constitutional constraints and the rule of law will push the nation that much closer to outright totalitarianism.

To be clear, this is not a criticism of Trump or a disavowal of the need for better vigilance at the nation’s border.

Rather this is a word of warning.

Remember, these powers do not expire at the end of a president’s term. They remain on the books, just waiting to be used or abused by the next political demagogue.

So, too, every action taken by the Trump administration to weaken the system of checks and balances, sidestep the rule of law, and expand the power of the president makes us that much more vulnerable to those who would abuse those powers in the future.

No matter whether you consider Trump to be a demagogue or a die-hard patriot, there will come a day when Trump no longer occupies the White House, and then what?

We’ve been down this road before.

Although the Constitution invests the President with very specific, limited powers, in recent years, American presidents (Trump, Obama, Bush, Clinton, etc.) have claimed the power to completely and almost unilaterally alter the landscape of this country for good or for ill.

Should the Trump Administration act on its threat to build a border wall using the president’s emergency powers, it would constitute yet another gross perversion of what limited power the Constitution affords the executive branch.

The powers amassed by each successive president through the negligence of Congress and the courts—powers which add up to a toolbox of terror for an imperial ruler—empower whomever occupies the Oval Office to act as a dictator, above the law and beyond any real accountability.

As law professor William P. Marshall explains, “every extraordinary use of power by one President expands the availability of executive branch power for use by future Presidents.” Moreover, it doesn’t even matter whether other presidents have chosen not to take advantage of any particular power, because “it is a President’s action in using power, rather than forsaking its use, that has the precedential significance.”

In other words, each successive president continues to add to his office’s list of extraordinary orders and directives, expanding the reach and power of the presidency and granting him- or herself near dictatorial powers.

This abuse of presidential powers has been going on for so long that it has become the norm, the Constitution be damned.

We no longer have a system of checks and balances.

“The system of checks and balances that the Framers envisioned now lacks effective checks and is no longer in balance,” concludes Marshall. “The implications of this are serious. The Framers designed a system of separation of powers to combat government excess and abuse and to curb incompetence. They also believed that, in the absence of an effective separation-of-powers structure, such ills would inevitably follow. Unfortunately, however, power once taken is not easily surrendered.”

All of the imperial powers amassed by Barack Obama and George W. Bush—to kill American citizens without due process, to detain suspects indefinitely, to strip Americans of their citizenship rights, to carry out mass surveillance on Americans without probable cause, to suspend laws during wartime, to disregard laws with which he might disagree, to conduct secret wars and convene secret courts, to sanction torture, to sidestep the legislatures and courts with executive orders and signing statements, to direct the military to operate beyond the reach of the law, to operate a shadow government, and to act as a dictator and a tyrant, above the law and beyond any real accountability—have become a permanent part of the president’s toolbox of terror.

These presidential powers—acquired through the use of executive orders, decrees, memorandums, proclamations, national security directives and legislative signing statements and which can be activated by any sitting president—enable past, president and future presidents to operate above the law and beyond the reach of the Constitution.

America, meet your new dictator-in-chief: imperial, unaccountable and unconstitutional.

If we continue down this road, there can be no surprise about what awaits us at the end.

After all, it is a tale that has been told time and again throughout history.

For example, over 80 years ago, the citizens of another democratic world power elected a leader who promised to protect them from all dangers. In return for this protection, and under the auspice of fighting terrorism, he was given absolute power.

This leader went to great lengths to make his rise to power appear both legal and necessary, masterfully manipulating much of the citizenry and their government leaders.

Unnerved by threats of domestic terrorism and foreign invaders, the people had little idea that the domestic turmoil of the times—such as street rioting and the fear of Communism taking over the country—was staged by the leader in an effort to create fear and later capitalize on it. In the ensuing months, this charismatic leader ushered in a series of legislative measures that suspended civil liberties and habeas corpus rights and empowered him as a dictator.

On March 23, 1933, the nation's legislative body passed the Enabling Act, formally referred to as the "Law to Remedy the Distress of the People and the Nation," which appeared benign and allowed the leader to pass laws by decree in times of emergency.

What it succeeded in doing, however, was ensuring that the leader became a law unto himself.

The leader's name was Adolf Hitler.

The rest, as they say, is history. Yet history has a way of repeating itself.

Hitler's rise to power should serve as a stark lesson to always be leery of granting any government leader sweeping powers.

Clearly, we are not heeding that lesson.

Indeed, all of those dastardly seeds we have allowed the government to sow under the guise of national security are bearing demon fruit.

Brace yourself.

There is something being concocted in the dens of power, far beyond the public eye, and it doesn’t bode well for the future of this country.

Anytime you have an entire nation so mesmerized by the antics of the political ruling class that they are oblivious to all else, you’d better beware.

Anytime you have a government that operates in the shadows, speaks in a language of force, and rules by fiat, you’d better beware.

And anytime you have a government so far removed from its people as to ensure that they are never seen, heard or heeded by those elected to represent them, you’d better beware.

As I make clear in my book Battlefield America: The War on the American People, we are at our most vulnerable right now.

The gravest threat facing us as a nation is not extremism but despotism, exercised by a ruling class whose only allegiance is to power and money.

Published:1/10/2019 9:35:19 PM
[Markets] PG&E Gets AIG-ed: Moody's Downgrade Triggers $800MM Collateral Call, Liquidity Crisis

For PG&E, just like for AIG ten years ago, this is the beginning of the end.

As we discussed on Tuesday, one of the biggest surprises involving the ongoing collapse of troubled California utility PG&E is how it was possible, that with the company reportedly contemplating a DIP loan ahead of a possible bankruptcy filing which sent PCG stock plunging and its bonds cratering to all time lows, that rating agencies still had the company rated as investment grade.

 

Late on Monday, this question got some closure after S&P became the first rating agency to take a machete to its rating for PG&E, when it downgraded the company by five notches, from BBB- to B, the fifth-highest junk rating while warning that more cuts are imminent. But while S&P slashed PG&E's IG ratings, Fitch and Moody bizarrely had yet to do so, well over a month into the company's death spiral. And when they do, both management, shareholders and bondholders would have nightmare on their hands because a similar "junking" by Moody’s to high-yield would result in a rerun of the AIG death sprial, as at least once cash collateral call for PG&E of at least $800 million - to guarantee power contracts - would be triggered according to a regulatory filing.

Well, PG&E's AIG moment hit late on Thursday, when Moody’s did precisely what S&P did two days earlier, and cut the utility's credit rating to junk citing the electric company’s potential wildfire liabilities. The credit grader lowered PG&E’s rating by five notches, to B2 from Baa3, and the utility Pacific Gas & Electric rating four levels to Ba3. Like S&P, the bond grader said it may (read: will) cut the company further, sending PG&E shares and bonds sliding after hours.

But it wasn't the prospect of more downgrades that spooked the market: it was the fact that with two junk ratings, PG&E will now be required to use cash as collateral to guarantee power contracts, according to the company’s latest quarterly filing, which estimates the utility will have to fully collateralize as much as $800 million of positions.

That... is a problem because PG&E had only $430 million of cash on its books in September, precipitating what now appears to be an imminent liquidity crisis, one which as a result of some $30 billion in wildfire legal liabilities will quickly escalate into a solvency inferno, to use a term closely associated with California utility companies.

Meanwhile, assuming that PG&E somehow survives the upcoming insolvency, its junk credit ratings will assure that the company will have to pay more to borrow for years to come. In fact, the company's 3.5% bonds due next year are currently yielding more than 9.9%, far above where most high-yield securities are paying and a level reserved for deeply distressed credits. As shown in the chart below, B-rated debt, the mid-tier of junk bonds, yields on average 7.5% as of Monday’s close, according to Bloomberg index data.

Of course, the above take assumes PG&E will survive a few quarters, which thanks to nearly $1 billion in cash collateral the company must somehow find and post immediately, it won't.

Not even Moody's could find a silver lining in this liquidity bonfire: “We see a much more challenging environment for PG&E,” said Moody’s analyst Jeff Cassella in the statement. “The company is increasingly reliant on extraordinary intervention by legislators and regulators, which may not occur soon enough or be of sufficient magnitude to address these adverse developments."

Meanwhile, even as shareholders - among which bizarrely is value investing "god" Seth Klarman - hold on to hope, bondholders appear to have given up: with $18.4 billion of long-term debt, PG&E most actively-traded bonds plunged sharply after the downgrade: Pacific Gas & Electric bonds with coupons of 6.05 percent due in 2034 fell as much as 4.5 cents on the dollar to 85 cents, the lowest level since the financial crisis.

And speaking of the financial crisis, while Lehman was the spark, its was the bailout of AIG that really precipitated the most violent part of the 2008 crisis. While most analysts see PG&E as an isolated case, now that the biggest California utility is on the verge of insolvency and bankruptcy, and is about to have its own AIG moment, one wonders just how "contained" this particular shock to the system will be.

One thing is clear, however: the shock to California residents, or rather their wallets, will be most unpleasant, as their rates are about to surge one way or another.

Published:1/10/2019 9:05:39 PM
[Left Column] Climate scientist retires, then declares ‘I am a skeptic’ – Offers to debate – Rejects ‘denier’ label: ‘We don’t live in medieval times’

aatsonis

Dr. Anastasios Tsonis, emeritus distinguished professor at the University of Wisconsin-Milwaukee. Authored more than 130 peer-reviewed papers and nine books:

'I am a skeptic not just about global warming but also about many other aspects of science...Climate is too complicated to attribute its variability to one cause. We first need to understand the natural climate variability (which we clearly don’t; I can debate anybody on this issue). Only then we can assess the magnitude and reasons of climate change.'

'If science were settled, then we should pack things up and go home.'

'It is my educated opinion that many forces have shaped global temperature variation. Human activity, the oceans, extraterrestrial forces (solar activity and cosmic rays) and other factors are all in the mix...We should be skeptical of claims that the science of a complicated and unpredictable system is settled.'

'We may form an opinion based on the existing scientific evidence in hand, current knowledge, possible theories and hypotheses...The fact that scientists who show results not aligned with the mainstream are labeled deniers is the backward mentality. We don’t live in medieval times'

Published:1/10/2019 1:04:58 PM
[Markets] Here's Where The Next Crisis Starts

Authored by James Rickards via The Daily Reckoning,

The case for a pending financial collapse is well grounded. Financial crises occur on a regular basis including 1987, 1994, 1998, 2000, 2007-08. That averages out to about once every five years for the past thirty years. There has not been a financial crisis for ten years so the world is overdue. It’s also the case that each crisis is bigger than the one before and requires more intervention by the central banks.

The reason has to do with the system scale. In complex dynamic systems such as capital markets, risk is an exponential function of system scale. Increasing market scale correlates with exponentially larger market collapses.

This means a market panic far larger than the Panic of 2008.

Today, systemic risk is more dangerous than ever because the entire system is larger than before. Due to central bank intervention, total global debt has increased by about $150 trillion over the past 15 years. Too-big-to-fail banks are bigger than ever, have a larger percentage of the total assets of the banking system and have much larger derivatives books.

Each credit and liquidity crisis starts out differently and ends up the same. Each crisis begins with distress in a particular overborrowed sector and then spreads from sector to sector until the whole world is screaming, “I want my money back!”

First, one asset class has a surprise drop. The leveraged investors sell the sinking asset, but soon the asset is unwanted by anyone. Margin calls roll in. Investors then sell good assets to raise cash to meet the margin calls. This spreads the panic to banks and dealers who were not originally involved with the weak asset.

Soon the contagion spreads to all banks and assets, as everyone wants their money back all at once. Banks begin to fail, panic spreads and finally central banks step in to separate winners and losers and re-liquefy the system for the benefit of the winners.

Typically, small investors (and some bankrupt banks) get hurt the worst while the big banks get bailed out and live to fight another day.

That much panics have in common. What varies in financial panics is not how they end but how they begin. The 1987 crash started with computerized trading. The 1994 panic began in Mexico. The 1997–98 panic started in Asian emerging markets but soon spread to Russia and the big banks. The 2000 crash began with dot-coms. The 2008 panic was triggered by defaults in subprime mortgages.

The problem is that regulators are like generals fighting the last war. In 2008, the global financial crisis started in the U.S. mortgage market and spread quickly to the overleveraged banking sector.

Since then, mortgage lending standards have been tightened considerably and bank capital requirements have been raised steeply. Banks and mortgage lenders may be safer today, but the system is not. Risk has simply shifted.

What will trigger the next panic?

Prominent economist Carmen Reinhart says the place to watch is U.S. high-yield debt, aka “junk bonds.”

I’ve also raised the same argument. We’re facing a devastating wave of junk bond defaults. The next financial collapse will quite possibly come from junk bonds.

Let’s unpack this…

Since the great financial crisis, extremely low interest rates allowed the total number of highly speculative corporate bonds, or “junk bonds,” to rise about 60% — a record high. Many businesses became extremely leveraged as a result. Estimates put the total amount of junk bonds outstanding at about $3.7 trillion.

The danger is that when the next downturn comes, many corporations will be unable to service their debt. Defaults will spread throughout the system like a deadly contagion, and the damage will be enormous.

This is from a report by Mariarosa Verde, Moody’s senior credit officer:

This extended period of benign credit conditions has helped many weak, highly leveraged companies to avoid default… A number of very weak issuers are living on borrowed time while benign conditions last… These companies are poised to default when credit conditions eventually become more difficult… The record number of highly leveraged companies has set the stage for a particularly large wave of defaults when the next period of broad economic stress eventually arrives.

If default rates are only 10% — a conservative assumption — this corporate debt fiasco will be at least six times larger than the subprime losses in 2007-08.

Many investors will be caught completely unprepared. Once the tsunami hits, no one will be spared. The stock market is going to collapse in the face of rising credit losses and tightening credit conditions.

But corporate debt is not the only dagger hanging over the economy. Credit conditions have already begun to affect the real economy. Student loan losses are also skyrocketing. Losses are also soaring on subprime auto loans, which has put a lid on new car sales. As these losses ripple through the economy, mortgages and credit cards will be the next to feel the pinch.

Have we already seen the beginning of the next crisis? No one knows for sure, but the time to prepare is now. Once the market falls apart, it’ll be too late to act.

That’s why the time to buy gold is now, while it’s cheap. When you need it most, once the crisis hits, it’ll cost a fortune.

Both the panics of 1998 and 2008 began over a year before they reached the level of an acute global liquidity crisis.

Investors has ample time to reduce risky positions, increase cash and gold allocations and move to the sidelines until the crisis abated. At that point there were bargains galore for those with cash.

An investor with cash in 2008 could have preserved wealth during the crisis and nearly quadrupled his money since then by buying the Dow Jones index at 6,550 (even with the recent turmoil, today it’s still around 23,600).

Relatively few investors did this. Instead they suffered from “fear of missing out” as markets rose until the panic began. They persisted in the mistaken belief that they could “get out in time” if markets reversed, not realizing that reversals happen much faster than rallies. They held onto losing positions hoping they would “come back” (they did after 10 years) and so on.

Simple behavioral biases stand in the way of doing the right thing almost every time.

For now, it’s not clear which way things will break next. Volatility is back and markets are still in a precarious position. Fed chairman Jay Powell threw markets a bone last Friday when he basically said all rate hikes are off until further notice and that he’s willing to scale back QT “if needed.” Markets have naturally rallied since Powell’s remarks.

If you still need proof that today’s rigged markets still require support from the Fed, here it is. But it’s far from clear the next crisis can be avoided at this point.

You don’t want to be heavily exposed to these markets. It’s far better to get out too early than too late. You should not be the last to be get ready. Start now to decrease equity allocations and increase your allocations to cash and gold so you can weather the coming storm.

Preparation means 10% percent of your investible assets in gold or silver and another 30% in cash. That allocation will preserve wealth and provide dry powder for bottom-fishing in the crisis to come.

Published:1/10/2019 8:15:12 AM
[Markets] Paul Craig Roberts: Majority Of Americans Do Not Believe The Official 9/11 Story

Authored by Paul Craig Roberts,

TruePublica, a British website that has avoided the 9/11 issue, has had its fill of ignorant journalists at the BBC, Huffington Post and other propagandists for the military/security complex. The constant, shrill demeaning of experts and distinguished people who have raised questions about the official story has convinced TruePublica that skeptics who need so much shouting down must have a point.

The media has NEVER EXAMINED the evidence or explained the analysis provided by scientists, architects, engineers, pilots, and the first responders who experienced the explosions of the World Trade Center twin towers. The media has never asked for the release of the multiple videos that recorded whatever struck the Pentagon. The media has never investigated whether cell phones worked in 2001 from the altitudes at which the official story claims calls were made.

Instead two-bit punk presstitutes, such as the BBC’s Chris Bell and the Huffington Post’s Jess Brammer andl Chris York, label experts with knowledge and integrity “conspiracy theorists.” These presstitutes knowingly use a cover-up term that the CIA put into use via its media assets to discredit the expert skeptics of the Warren Commission Report on the assassination of President Kennedy.

The fact that the carefully presented evidence is NEVER ENGAGED EXCEPT WITH NAME-CALLING is a strong indication that the evidence is true and cannot be refuted.

TruePublica is such a mainline site that, in its own words, it does not even “publish news sourced by RT,” a far more reliable source of news than the BBC, CNN, or New York Times. However, it has dawned on TruePublica that after 18 years an ad hominum attack remains the only defense of the official story. The official account has NO EVIDENCE WHATSOEVER. It rests entirely on the AVOIDANCE OF EVIDENCE and on unverified assertions.

The success of the 9/11 Lawyers’ Committee in obtaining the consent of the US Attorney for the Southern District of New York to “comply with the provisions of 18 U.S.C. 3332,” which requires the convening of a federal grand jury to examine the unexamined 9/11 evidence, has impressed TruePublica as no US attorney would convene a grand jury on the basis of a conslpiracy theory. Clearly compelling evidence has been presented to the US Attorney.

Obviously, Washington expects the Justice (sic) Department to escape from the bind into which it has been put by the Lawyer’s Committee, an escape that the presstitute media will aid and abet. Nevertheless, the escape will likely reinforce the public’s view that the government is afraid of the evidence and is no more likely to follow it than in the case of President Kennedy’s assassination, Robert Kennedy’s assassination, the Israeli attack on the USS Liberty and a large number of other officially covered up crimes.

More and more people will come to realize that ad hominum name-calling is not an acceptable response to evidence.

Some Interesting New Information About 9/11

TruePublica.org.uk

TruePublica Editor: We have published almost nothing about 9/11 on TruePublica. When independent news outlets do, they are immediately branded by the mainstream media and so-called ‘fact-checkers’ as conspiracy theorists. The BBC makes this point precisely in a 2018 article that starts like this –

 “On 11 September 2001, four passenger planes were hijacked by radical Islamist terrorists – almost 3,000 people were killed as the aircraft were flown into the World Trade Centre, the Pentagon and a Pennsylvania field. Just hours after the collapse of New York’s Twin Towers, a conspiracy theory surfaced online which persists more than 16 years later.”

The entire article is dedicated to all the ‘conspiracy theories’ involved in 9/11 and makes a mockery of anyone or anything that questions the official government line. They even heavily mock the brother of one man killed in 9/11 and frankly, true or not, the BBC’s report itself is rather sickening to read.

And yet, here we are, all these years later and it’s hardly surprising the theories of a conspiracy continue.

A 2016 study from Chapman University in California, found more than half of the American people believe the government is concealing information about the 9/11 attacks. This is in part because, large sections of the official US government report were redacted for years – and is still missing to this day.

The big problem is that the government is withholding crucial evidence. And then there’s other evidence the state and mainstream media refuse to even consider.

Paul Craig Roberts is an American economist and former United States Assistant Secretary of the Treasury for Economic Policy under President Reagan. Roberts was an associate editor and columnist for The Wall Street Journal and columnist for Business Week and has received the Warren Brookes Award for Excellence in Journalism. In 1993 the Forbes Media Guide ranked him as one of the top seven journalists in the United States.

Roberts wrote this really interesting piece of information just a few days ago that the mainstream media has been completely silent about:

 “Although the United States is allegedly a democracy with a rule of law, it has taken 17 years for public pressure to bring about the first grand jury investigation of 9/11. Based on the work of Architects & Engineers for 9/11 Truth led by Richard Gage, first responder and pilots organizations, books by David Ray Griffin and others, and eyewitness testimony, the Lawyers’ Committee for 9/11 Inquiry has presented enough hard facts to the US Attorney for the Southern District of New York to force his compliance with the provisions of federal law that require the convening of a federal grand jury to investigate for the first time the attacks of September 11, 2001. https://www.lawyerscommitteefor9-11inquiry.org

This puts the US Justice (sic) Department in an extraordinary position. There will be tremendous pressures on the US Attorney’s office to have the grand jury dismiss the evidence as an unpatriotic conspiracy theory or otherwise maneuver to discredit the evidence presented by the Lawyers’ Committee, or modify the official account without totally discrediting it.

“What the 9/11 truthers and the Lawyers’ Committee have achieved is the destruction of the designation of 9/11 skeptics as “conspiracy theorists.” No US Attorney would convene a grand jury on the basis of a conspiracy theory. Clearly, the evidence is compelling that has put the US Attorney in an unenviable position.”

If the Lawyers’ Committee and the 9/11 truthers trust the US Attorney to go entirely by the facts, little will come of the grand jury. If the United States had a rule of law, something as serious as 9/11 could not have gone for 17 years without investigation.”

Three weeks before Roberts’ made this statement a letter was published by Off-Guardian about a Huffington Post hit piece about an academic teaching journalism. Its first paragraph explains entirely its own position.

“An academic teaching journalism students at one of the UK’s top universities has publicly supported long-discredited conspiracy theories about the 9/11 terror attack, HuffPost UK can reveal.”

This entire article, like that of the BBC’s, vigorously attacks any individual or organisation that has the temerity to question the ‘official’ narrative on any major incident as offered up by the state, such as the Skripal poisonings, Syria’s chemical weapons, Iraq and Chilcot Report.

HuffPost even uses an unnamed former head of MI6 and an unnamed former Supreme Commander of Nato to dispel such challenges to this narrative and then attacks other sources of news such as RT as nothing more than Russian propaganda irrespective of the source. As a rule, TruePublica does not publish news sourced by RT but that does not make all of its content propaganda.

David Ray Griffin, a retired American professor and political writer who founded the Center for Process Studies which seeks to promote the common good by means of the relational approach found in process thought was the co-author of the book ‘9/11 Unmasked’ – part of the attack piece was centred on by the HuffPost hit piece.

The head of the 9/11 Consensus Panel, the other co-author, responded to the HuffPost.  For information, the goal of the Consensus Panel is to “provide a ready source of evidence-based research to any investigation that may be undertaken by the public, the media, academia, or any other investigative body or institution.”

That letter is as follows:

Jess Brammer, UK Huffington Post
Chris York, UK Huffington Post

Dear Ms. Brammar and Mr. York:

I was the head information specialist serving the Medical Health Officers of British Columbia, Canada, for 25 years.

Your attack piece on Professor Piers Robinson and on the scholarly work of Dr. David Ray Griffin is the least accurate and the lowest quality published article I have ever seen.

I have assisted Dr. Griffin with 10 of his investigative books into the events of 9/11. In 2011 we decided to create the international 9/11 Consensus Panel to review and evaluate the official claims relating to September 11, 2001. The Panel we formed has 23 members, including people from the fields of physics, chemistry, structural engineering, aeronautical engineering, piloting, airplane crash investigation, medicine, journalism, psychology, and religion.

In seeking a consensus methodology, I was advised by the former provincial epidemiologist of British Columbia to employ a leading model that is used in medicine to establish the best diagnostic and treatment evidence to guide the world’s doctors using medical consensus statements.

The Panel methodology has produced, seven years later, 51 refutations of the official claims, which were published as 911 Unmasked: An International Review Panel Investigation in September, 2018.https://www.amazon.com/11-Unmasked-International-Review-Investigation/dp/1623719747

Each Consensus Point, now a chapter in this book, was given three rounds of review and feedback by the Panel members. The panelists were blind to one another throughout the process, providing strictly uninfluenced individual feedback. Any Points that did not receive 85% approval by the third round were set aside.

The Honorary Members of the Panel include the late British (and longest-serving) parliamentarian Michael Meacher, the late evolutionary biologist Lynn Margulis, and the late Honorary President of the Italian Supreme Court, Ferdinando Imposimato.

The Huffington Post drastically lowered its standards to publish this hit piece, and what influenced it to do so is a question worth pursuing.
Yours truly,
Elizabeth Woodworth, Co-author with Dr. David Ray Griffin of 9/11 Unmasked

TruePublica continues:

It is over 18 years now since the world-changing event of 9/11. One wonders when the information held by the American government, that continues to anger so many people affected by it will ever emerge.

However, one reason why such questions persist is precisely that of the actions of the US government itself. One should not forget those so-called ‘conspiracy theories’ that actually came true that continues to pour petrol on the flames of doubt.

For example, the American government killed thousands by poisoning alcohol to prove its point that alcohol was bad for the general public during prohibition. This was a ‘conspiracy theory’ that went on for decades – until it was proven to be true. https://slate.com/technology/2010/02/the-little-told-story-of-how-the-u-s-government-poisoned-alcohol-during-prohibition.html

Then, you can take your pick of the lies government tells when it comes to starting wars – how about the lie the Saddam Hussain and Iraq had WMD ready to fire at Western targets. Total deaths exceeded 1 million. Yet another classic American lie was the Gulf of Tonkin incident in August 1964, as a pretext for escalating the country’s involvement in the Vietnam War that killed 60,000 American soldiers. Total deaths racked up 1.35 million, all based on a lie. That incident only came about because of an unintentional declassification of an NSA file in 2005.

Edward Snowden proved with his revelations in 2013 that the government was spying on everyone when the government had denied they had ever done so. It took a whistleblower to let us all know. The UK government has been found by the highest courts in the land to have broken numerous privacy and surveillance laws as a result of mass civilian surveillance systems.

Operation Mockingbird was a US government operation where journalists were paid to publish CIA propaganda, only uncovered by the Watergate scandal. It took a thief to unknowingly capture secret documents and recordings for the public to find out.

The list goes on and on – just as 9/11 will, so it will be interesting to see how the US Attorney, presented with evidence from so many prominent professionals will bury yet more 9/11 evidence. Don’t hold your breath though, the same questions will, no doubt, still be being asked in another 18 years time.

Published:1/9/2019 11:00:12 PM
[Markets] Mattis: One More General For The "Self-Licking Ice Cream Cone"

Authored by Kelley Beaucar Vlahos via The American Conservative,

Big brass and government executives play both sides of the military revolving door, including "the only adult in the room."

Before he became lionized as the “only adult in the room” capable of standing up to President Trump, General James Mattis was quite like any other brass scoping out a lucrative second career in the defense industry. And as with other military giants parlaying their four stars into a cushy boardroom chair or executive suite, he pushed and defended a sub-par product while on both sides of the revolving door. Unfortunately for everyone involved, that contract turned out to be an expensive fraud and a potential health hazard to the troops.

According to a recent report by the Project on Government Oversight, 25 generals, nine admirals, 43 lieutenant generals, and 23 vice admirals retired to become lobbyists, board members, executives, or consultants for the defense industry between 2008 and 2018. They are part of a much larger group of 380 high-ranking government officials and congressional staff who shifted into the industry in that time.

To get a sense of the demand, according to POGO, which had to compile all of this information through Freedom of Information requests, there were 625 instances in 2018 alone in which the top 20 defense contractors (think Boeing, General Dynamics, Lockheed Martin) hired senior DoD officials for high-paying jobs—90 percent of which could be described as “influence peddling.”

Back to Mattis. In 2012, while he was head of Central Command, the Marine General pressed the Army to procure and deploy blood testing equipment from a Silicon Valley company called Theranos. He communicated that he was having success with this effort directly to Theranos’s chief executive officer. Even though an Army health unit tried to terminate the contract due to it’s not meeting requirements, according to POGO, Mattis kept the pressure up. Luckily, it was never used on the battlefield.

Maybe it shouldn’t be a surprise but upon retirement in 2013, Mattis asked a DoD counsel about the ethics guiding future employment with Theranos. They advised against it. So Mattis went to serve on its board instead for a $100,000 salary. Two years after Mattis quit to serve as Trump’s Pentagon chief in 2016, the two Theranos executives he worked with were indicted for “massive” fraud, perpetuating a “multi-million dollar scheme to defraud investors, doctors and patients,” and misrepresenting their product entirely. It was a fake.

But assuming this was Mattis’s only foray into the private sector would be naive. When he was tapped for defense secretary—just three years after he left the military—he was worth upwards of $10 million. In addition to his retirement pay, which was close to $15,000 a month at the time, he received $242,000 as a board member, plus as much as $1.2 million in stock options in General Dynamics, the Pentagon’s fourth largest contractor. He also disclosed payments from other corporate boards, speech honorariums—including $20,000 from defense heavyweight Northrop Grumman—and a whopping $410,000 from Stanford University’s public policy think tank the Hoover Institution for serving as a “distinguished visiting fellow.”

Never for a moment think that Mattis won’t land softly after he leaves Washington—if he leaves at all. Given his past record, he will likely follow a very long line, as illustrated by POGO’s explosive report, of DoD officials who have used their positions while inside the government to represent the biggest recipients of federal funding on the outside. They then join ex-congressional staffers and lawmakers on powerful committees who grease the skids on Capitol Hill. And then they go to work for the very companies they’ve helped, fleshing out a small army of executives, lobbyists, and board members with direct access to the power brokers with the purse strings back on the inside. 

Welcome to the Swamp

“[Mattis’s’ career course] is emblematic of how systemic the problem is,” said Mandy Smithberger, POGO’s lead on the report and the director of its Center for Defense Information.

“Private companies know how to protect their interests. We just wish there were more protections for taxpayers.”

When everything is engineered to get more business for the same select few, “when you have a Department of Defense who sees it as their job to promote arms sales…does this really serve the interest of national security?”

That is something to chew on. If a system is so motivated by personal gain (civil servants always mindful of campaign contributions and private sector job prospects) on one hand, and big business profits on the other, is there room for merit or innovation? One need only look at Lockheed’s F-35 joint strike fighter, the most expensive weapon system in history, which was relentlessly promoted over other programs by members of Congress and within the Pentagon despite years of test failures and cost overruns, to see what this gets you: planes that don’t fly, weapons that don’t work, and shortfalls in other parts of the budget that don’t matter to contractors like pilot training and maintenance of existing systems.

“It comes down to two questions,” Smithberger noted in an interview with TAC.

Are we approving weapons systems that are safe or not? And are we putting [servicemembers’] lives on the line” to benefit the interests of industry?

All of this is legal, she points out. Sure, there are rules—”cooling off” periods before government officials and members of Congress can lobby, consult, or work on contracts after they leave their federal positions, or when industry people come in through the other side to take positions in government. But Smithberger said they are “riddled with loopholes” and lack of enforcement. 

Case in point: current acting DoD Secretary Patrick Shanahan spent 31 years working for Boeing, which gets about $24 billion a year as the Pentagon’s second largest contractor. He was Boeing’s senior vice president in 2016 just before he was confirmed as Trump’s deputy secretary of defense in 2017. Last week he recused himself from all matters Boeing, but he wasn’t always so hands off. At one point, he “prodded” for the purchase of 12 $1.2 billion Boeing F-15X fighter planes, according to Bloomberg.

But the revolving door is so much more pervasive and insidious than POGO could possibly catalogue. So says Franklin “Chuck” Spinney, who worked as a civilian and military officer in the Pentagon for 31 years, beginning in 1968. He calls the military industrial complex a “quasi-isolated political economy” that is in many ways independent from the larger domestic economy. It has its own rules, norms, and culture, and unlike the real world, it is self-sustaining—not by healthy competition and efficiency, but by keeping the system on a permanent war footing, with money always pumping from Capitol Hill to the Pentagon to the private sector and then back again. Left out are basic laws of supply and demand, geopolitical realities, and the greater interest of society.

“That’s why we call it a self-licking ice cream cone,” Spinney explained to TAC.

[This report] is just the tip of the iceberg. There’s a lot more subtle stuff going on. When you are in weapons development like I was at the beginning of my career, you learn about this on day one, that having cozy relationships with contractors is openly encouraged. And then you get desensitized. I was fortunate because I worked for people who did not like it and I caught on quickly.”

While the culture has evolved, basic realities have persisted since the massive build-up of the military and weapons systems during the Cold War. The odds of young officers in the Pentagon making colonel or higher are slim. They typically retire out in their 40s. They know implicitly that their best chance for having a well-paid second career is in the only industry they know—defense. Most take this calculation seriously, moderating their decisions on program work and procurement and communicating with members of Congress as a matter of course. 

Let’s just say there’s a problem [with a program]. Are you going to come down hard on a contractor and try to hold his feet to the fire? Are you going to risk getting blackballed when you are out there looking for a job? Sometimes there is no word communicated, you just don’t want to be unacceptable to anyone,” said Spinney. It’s ingrained, from the rank of lieutenant colonel all the way up to general.

So the top five and their subsidiaries continue to get the vast majority of work, usually in no-bid contracts ($100 billion worth in 2016 alone), and with cost-plus structures that critics say encourage waste and never-ending timetables, like the $1.5 trillion F-35. “The whole system is wired to get money out the door,” said Spinney. “That is where the revolving door is most pernicious. It’s everywhere.”

The real danger is that under this pressure, parties work to keep bad contracts alive even if they have to cook the books. “Essentially from the standpoint of Pentagon contracting you are not going to have people writing reports saying this product is a piece of shit,” said Spinney. Worse, evaluations are designed to deflect criticism if not oversell success in order to keep the spigot open. The most infamous example of this was the rigged tests that kept the ill-fated “Star Wars” missile defense program going in the 1980s.

*  *  *

Everyone talks about generals like Mattis as though they’re warrior-gods. But for decades, many of them have turned out to be different creatures altogether - creatures of a semi-independent ecosystem that operates outside of the normal rules and benefits only a powerful minority subset: the military elite, defense contractors, and Congress. More recently, the defense-funded think tank world has become part of this ecology, providing the ideological grist for more spending and serving as a way-station for operators moving in and out of government and industry.

Call it the Swamp, the Borg, or even the Blob, but attempting to measure or quantify the revolving door in the military-industrial complex can feel like a fool’s errand. Groups like POGO have attempted to shine light on this dark planet for years. Unfortunately, there is little incentive in Capitol Hill or at the Pentagon to do the very least: pull the purse strings, close loopholes, encourage real competition, and end cost-plus practices.

“We generally need to see more (political) championing on this issue,” Smithberger said. Until then, all outside efforts “can’t result in any meaningful change.”

Published:1/9/2019 8:59:23 PM
[Markets] How The US Spent Billions To Change The Outcome Of Elections Around The World: A Review

Authored by Danny Haiphong via BlackAgendaReport.com,

The U.S. military state overthrows democratically-elected governments that it deems to be a threat to corporate interests.

“There is plenty of evidence that the United States is the most depraved and dangerous “meddler” in the affairs of other nations that history has ever known.”

Dan Kovalik is a labor and human rights lawyer, but most of all he is an anti-imperialist and an author of three books. Kovalik’s first two books tackled the specific US war drives against Russia and Iran. His third installment, The Plot to Control the World: How the US Spent Billions to Change the Outcome of Elections Around the World, addresses the broad scope of US election meddling abroad. The book provides much needed political and ideological life support to an anti-war movement in the U.S that has been rendered nearly invisible to the naked eye.

The Plot to Control the World is as detailed in its critique of U.S. imperialism as it is concise. In just over 160 pages, Kovalik manages to analyze the various ways that the U.S. political and military apparatus interferes in the affairs of nations abroad to achieve global hegemony. He wastes no time in exposing the devastating lie that is American exceptionalism, beginning appropriately with the U.S. imperialist occupations of Haiti and the Philippines at the end of the 19thcentury and beginning of the 20th. The U.S. would murder millions of Filipinos and send both nations into a spiral of violence, instability, and poverty that continues to this day. As Kovalik explains regarding Haiti, “While the specific, claimed justifications for [U.S.] intervention changed over time- e.g., opposing the end of slavery, enforcing the Monroe Doctrine, fighting Communism, fighting drugs, restoring law and order -- the fact is that the interventions never stopped and the results for the Haitian people have been invariably disastrous.”

“Kovalik wastes no time in exposing the devastating lie that is American exceptionalism.”

US expansionism has relied upon the ideology of American exceptionalism to silence criticism and weaken anti-war forces in the United States. American exceptionalism claims that the U.S. is a force for good in the world and completely justified in its wars of conquest draped in the cover of spreading “democracy and freedom” around the world. Kovalik challenges American exceptionalism by showing readers just how much damage that US expansionism and militarism has caused for nations and peoples in every region of the planet. Russia, Honduras, Guatemala, the Democratic Republic of the Congo, Vietnam and many other nations have seen their societies devastated by U.S. “election meddling.” In Honduras, for example, a U.S.-backed coup of left-wing President Manuel Zelaya in 2009 made the nation one of the most dangerous places in the world to be a journalist, indigenous person, or trade-union/environmental activist. Thousands of Hondurans have been displaced, disappeared, or assassinated since the coup.

Another important aspect of The Plot to Control the World is its exposure of U.S hypocrisy surrounding the subject of “election meddling.” Since the end of the 2016 Presidential elections, the U.S. military, political, and media branches of the imperialist state have accused Russia of virtually implanting Donald Trump into the Oval office. The U.S. public has been fed a steady dose of anti-Russia talking points in an apparent effort on the part of the elites to beat the drums of war with the nuclear-armed state. No evidence has been presented to prove the conspiracy, as a recent National Public Radio (NPR) analysis states plainly. However, there is plenty of evidence that the United States is the most depraved and dangerous “meddler” in the affairs of other nations that history has ever known.

“The author shows readers just how much damage that US expansionism and militarism has caused for nations and peoples in every region of the planet.”

Just ask the much-vaunted Russians. Kovalik devotes an entire chapter to the 1996 Presidential election in Russia that re-elected the wildly unpopular Boris Yeltsin. The fall of the Soviet Union in 1991 began an era of “shock therapy” in the newly erected Russian Federation, a euphemism for the wholesale theft and transfer of socialized wealth into the hands of oligarchs and multinational corporations. Millions would perish in Russia from an early death due to the sudden loss of healthcare, housing, jobs, and other basic services. In 1996, President Bill Clinton ensured that Yeltsin maintained his near total grip on state power in Russia by providing the Russian President with a team of U.S. political consultants and over a billion dollars’ worth of IMF monies directly to the campaign. U.S. political and monetary support allowed Yeltsin to rig the election in his favor despite his dwindling popularity. Kovalik shows that if anyone should worry about election meddling, it should be the people of Russia and not the US elites that control Washington.

The Plot to Control the World takes readers into the Democratic Republic of Congo, where the CIA’s coup of revolutionary Patrice Lumumba continues to haunt the resource rich nation in the form of endless US-backed genocide. It travels to Guatemala, where the CIA overthrow of Jacobo Arbenz led to a U.S.-backed slaughter of a quarter million Guatemalans under the auspices of several military dictatorships. Kovalik shows us that the election of the fascistic Jair Bolsonaro in Brazil was no aberration, as the U.S. was primarily responsible for the rise in fascism in Brazilthrough its direct role in placing the nation under the control of a military dictatorship in 1964. The military dictatorship predated the CIA’s ouster of Chile’s Salvador Allende in 1973, which handed the once socialist state to Augusto Pinochet’s murderous and repressive leadership.

“The mission is always the same: to destabilize independent nations that refuses to bow down to the dictates of U.S. imperialism.”

The entire skeleton of the U.S. military state is on full display in The Plot to Control the World. The U.S. military state utilizes an array of tools to overthrow democratically-elected governments that it deems to be a threat to corporate interests. These tools include the U.S. intelligence agencies, so-called Non-governmental Organizations (NGOs) such as the National Endowment for Democracy, and the various branches of the military itself, to name a few. Regardless of the tools employed, the mission is always the same: to destabilize independent nations that refuses to bow down to the dictates of U.S. imperialism.Thus, while Nicaragua, the Democratic Republic of Congo, and Vietnam may possess unique histories, their economic and political development has been shaped by the destructive interference of the United States.

Dan Kovalik is not likely to be reviewed in the New York Timesor other corporate outlets. That’s because Kovalik unapologetically speaks out against U.S. empire and all that upholds it. In doing so, Kovalik’s The Plot to Control the World walks in the footsteps of anti-imperialists such as Michael Parenti and William Blum. Blum, a former State Department employee, spent his post-State Department life providing humanity with knowledge about how US imperialism operates on the global stage. The New York Timeswasted no time in slandering Blum in their obituary . This showed the great lengths that the ruling elites will go to discredit, defame, and condemn critics of the military industrial complex and how important it is for those who oppose war let go of any expectation that the corporate media will cover Kovalik’s work or anyone else who speaks out against war.

“White supremacy is the biggest lie of all and is completely embedded in the ideology of American exceptionalism.”

With that said, one of the reasons that the left in the U.S. is so weak is because it has been numerically and politically isolated by the lies of the Empire. White supremacy is the biggest lie of all and is completely embedded in the ideology of American exceptionalism. Despite the ruthlessness of the austerity and incarceration regimes, many Americans continue to be convinced that the U.S. is the most exceptional nation in the world and do not balk when its military wages wars abroad at the expense of U.S. tax dollars and civilian lives. U.S. imperialism has made sure that Americans feel that they are special colonizers who see the victims of the U.S. military state as savages worthy of slaughter. The Plot to Control the World is based on a different premise: internationalism. The book links the struggle against US imperialism to the needs of the oppressed and working class living in the heart of empire, making it an essential read for those who are sick and tired of the prevailing narrative of American exceptionalism and want to be armed with knowledge that is essential toward changing it.

Published:1/8/2019 10:54:58 PM
[Markets] S&P Downgrades PG&E To Junk, Launching Countdown To $800 Million Collateral Call

One of the biggest surprises involving the ongoing collapse of troubled California utility PG&E is how it was possible, that with the company reportedly contemplating a DIP loan ahead of a possible bankruptcy filing which sent PCG stock plunging and its bonds cratering to all time lows, that rating agencies still had the company rated as investment grade.

Late on Monday, this question got some closure after S&P became the first rating agency to take a machete to its rating for PG&E, when it downgraded the company by five notches, from BBB- to B, the fifth-highest junk rating; S&P warned that more cuts are imminent.

As we reported previously, PG&E's shares plunged as much as 25% then as much as another 17% on Tuesday, to their lowest level since 2003, as investors worried about the potential for the company to file for bankruptcy as California investigators have been looking into whether the utility’s equipment ignited the deadliest blaze in state history in 2018 as well as fires in 2017, probes that could leave the company with legal liabilities topping $30 billion.

A spokesman for PG&E said in an email Tuesday the company’s board is “actively assessing” operations, finances, management, structure and governance while maintaining a commitment to improving safety.

As Bloomberg notes, PG&E’s record-low bond prices underscore how much more the company will have to pay to borrow in the future, even if California comes up with a legislative bailout. "It also highlights how vulnerable even highly regulated, traditionally dependable stocks like utilities can be to natural disasters such as wildfires and hurricanes."

Meanwhile, as we discussed last Friday, whatever PG&E ultimate fate, it "will ultimately increase costs to California ratepayers and taxpayers, which already face a high cost of living,” S&P analyst Gabriel Petek, who rates the state of California, not PG&E, said in an email Monday. “The important takeaway to me is that these fires and how the ‘fire season’ is virtually a year-round phenomenon now represent a material consequence of climate change.”

In addition to the plunge in the utility's notes due in 2034, the company's 3.5% bonds due next year are currently yielding more than 9.9%, far above where most high-yield securities are paying and a level reserved for deeply distressed credits. As shown in the chart below, B-rated debt, the mid-tier of junk bonds, yields on average 7.5% as of Monday’s close, according to Bloomberg index data.

But while S&P took the axes to its ratings of PG&E, Fitch and Moody have yet to slash the company's investment grade. And when they do, the next major headache will emerge for both management, shareholders and bondholders, as a similar "junking" by Moody’s to high-yield would result in a rerun of the AIG death sprial, as at least once cash collateral call for PG&E of at least $800 million - to guarantee power contracts - will be triggered according to a regulatory filing (according to Bloomberg no other ratings triggers have been disclosed, although as AIG demonstrated, these tend be hidden deep inside ancillary contracts and only a downgrade will reveal just how insolvent the company is).

An $800 million collateral call would be a major problem for PG&E, as the company only had $430 million of cash on its books at the end of September. To preserve liquidity, PG&E suspended its dividend and fully drew its lines of credit, an event which we said is the first flashing red light that a liquidity crisis now appears inevitable. Meanwhile, as reported last Friday, the company is considering filing for bankruptcy as soon as February.

And while state lawmakers and regulators are looking at options including allowing the company to issue bonds to pay its liabilities, or breaking up the utility, no decision had been reached yet.

At the end of the day, however, even the $800 million urgent cash need would merely be a milestone on the company roads to assured bankruptcy if PG&E is ultimately held responsible for the Camp Fire, as that would put it on the hook for billions of dollars of potential liabilities, by some calculations far more than the company has access to. Yet because the company has filed for bankruptcy before, it and lawmakers would probably try to avoid a repeat, said Ryan Brist, head of global investment-grade credit and portfolio manager at Western Asset Management, who however likely understands that a bankruptcy may be inevitable.

“That was a disastrous time for all participants involved,” Pasadena, California-based Brist said. “It would be my guess that the same parties would want to pursue a much less volatile solution this go around when faced with the tough problems of statewide wildfires.”

However, with about $18.6 billion of long-term debt as of the end of September, PG&E may be incentivized to file for bankruptcy, CreditSights analyst Andy DeVries said in a report Monday. Such a filing would give the company bargaining power with insurance companies as it tries to settle customer claims at a discount, he said.

But before any possible filing, the next immediate step will be more downgrades by rating agencies, perhaps as soon as tomorrow.

Fitch analyst Philip Smyth said that a determination by California regulators that PG&E’s equipment was involved in the Tubbs Fire in 2017 or last year’s Camp Fire would be the strongest impetus to cut the rating.

“Right now, there is no investigation that says with any clarity that has determined that their equipment was the catalyst,” Smyth said in an interview Monday. “Since we downgraded in November, I don’t think things have gotten meaningfully worse since then.”

Finally, the imminent - and aptly called - fall from grace for PG&E is just the harbinger of the mass downgrade wave among investment-grade rated companies, expected to hit once the economic cycle turns, potentially flooding the more than $1.19 trillion high-yield market with new issues (as Jeff Gundlach discussed earlier today). The silver lining here, if any, is that PG&E’s relatively small debt load on its own wouldn’t bring the flood that strategists at Morgan Stanley have warned could exceed $1.1 trillion.

Xerox was the most recent company to join the "fallen angel" ranks, while Altria was downgrade from single A to BBB. Whether PG&E avoids bankruptcy remains to be seen, but one thing is certain: the California utility will be the next prominent "Fallen Angel."

Published:1/8/2019 10:23:50 PM
[Markets] Students Hate 'Trump' Immigration, Border-Wall Quotes... Don't Realize They're From Dems

Authored by Cabot Phillips via Campus Reform,

This month, the federal government entered a partial shutdown after Congress was unable to reach a budget agreement, primarily on funding for President Donald Trump’s proposed wall along the southern border.

The wall, a key talking point for Trump throughout the campaign, has been decried by leaders in the Democrat party as anti-American and immoral, among other things.

But their opposition to the wall and embrace of looser immigration laws seems to be a new development. 

In recent years, Senate Minority Leader Chuck Schumer, President Barack Obama, and Secretary Hillary Clinton have all stated the danger in embracing illegal immigration and ignoring the laws we have on the books.

Such quotes include:

“Illegal Immigration is wrong, plain and simple. Until the American people are convinced we will stop future flows of illegal immigration, we will make no progress.” -Senator Chuck Schumer, 2009

“We simply cannot allow people to pour into the United States undetected, undocumented and unchecked” -Barack Obama, 2005

“I voted numerous times… to spend money to build a barrier to try to prevent illegal immigrants from coming in. And I do think you have to control your borders.” -Hillary Clinton, 2008

Wanting to know if opponents of Trump’s border wall had opinions on these past quotes from Democrat leaders, Campus Reform's Cabot Phillips headed to American University.

But there’s a catch… the students were told the quotes actually came from President Trump.

Upon hearing the quotes, students said Trump’s words were “dehumanizing,” “problematic,” and “jingoist.”

“I just really think it’s hateful speech,” one student said, while another added, “the way he’s referring to people across the wall is dehumanizing.”

One student said the comments held racist undertones, claiming “there are racial biases deeply embedded in there.”

But this was all before they knew these quotes were actually coming from political idols of theirs. 

Watch the full video to see their reactions to being told Democrats actually the statements. 

Published:1/8/2019 6:54:37 PM
[Markets] The WWI Conspiracy - Part One: To Start A War

Via CorbettReport.com,

Each year, we lay the wreath. We hear “The Last Post.” We mouth the words “never again” like an incantation. But what does it mean? To answer this question, we have to understand what WWI was.

WWI was an explosion, a breaking point in history. In the smoldering shell hole of that great cataclysm lay the industrial-era optimism of never-ending progress. Old verities about the glory of war lay strewn around the battlefields of that “Great War” like a fallen soldier left to die in No Man’s Land, and along with it lay all the broken dreams of a world order that had been blown apart. Whether we know it or not, we here in the 21st century are still living in the crater of that explosion, the victims of a First World War that we are only now beginning to understand.

What was World War One about? How did it start? Who won? And what did they win? Now, 100 years after those final shots rang out, these questions still puzzle historians and laymen alike. But as we shall see, this confusion is not a happenstance of history but the wool that has been pulled over our eyes to stop us from seeing what WWI really was.

This is the story of WWI that you didn’t read in the history books. This is The WWI Conspiracy...

But for this cabal, 1914 was just the start of the story. In keeping with their ultimate vision of a united Anglo-American world order, the jewel in the crown of the Milner Group was to embroil the United States in the war; to unite Britain and America in their conquest of the German foe.

Across the Atlantic, the next chapter in this hidden history was just getting underway.

See Part Two tomorrow...

Published:1/8/2019 1:19:08 AM
[Markets] Zuesse: Why One Should Distrust The News

Authored by Eric Zuesse via The Strategic Culture Foundation,

An article by the BBC on “The world’s most nutritious foods" ranks the healthfulness of foods on the basis of an article at the supposedly scientific PLOSone journal, titled "Uncovering the Nutritional Landscape of Food”. That study is based on a dataset that entirely ignores antioxidant-content of foods. Antioxidant-content has come to be recognized during recent decades as constituting perhaps the most important factor in nutrition. It’s probably even more important than vitamin-content and than mineral-content and than protein, carbohydrate, and fat content. So, the basis upon which the article’s ranking was done is the factors that were known about, in 1950, to be important, but that are now known to be far less determinative of a person’s health and longevity than are foods’ anti-oxidant contents. Neither the article nor its underlying dataset even so much as just mentions “oxidant” anywhere. The authors of the BBC and PLOSone articles and of the underlying dataset were apparently entirely ignorant of the findings in nutritional research during the past 60+ years — findings about antioxidants, which have transformed our understanding of nutrition. (Furthermore, there were many other important methodological flaws producing that PLOSone ranking, not only its ignoring antioxidants.)

This is not unusual.

(Incidentally, “ORAC Values: Antioxidant Values of Foods & Beverages" is a ranking of foods on the basis of antioxidant-contents, as measured by ORAC; and this is likely a far more accurate indicator of the relative healthfulness of foods than is the ridiculous BBC-PLOSone ranking — but far fewer people are being exposed to it.)

Here’s another example of the untrustworthiness of news-media and of other allegedly nonfiction presentations, even in many ‘scientific’ journals — but this one will be an example from what has become overwhelmingly the world’s leading encyclopedia: Wikipedia.

The CIA-edited and -written Wikipedia writes about the anti-CIA Michel Chossudovsky, by saying against his organization, the Centre for Research on Globalization, that it “promotes a variety of conspiracy theories and falsehoods.[7][19][8][20][21][22][23].” However (just to take one example there), the 22nd footnote “[22]” brings the reader to a lying 11 September 2013 article in the neoconservative The New Republic. This TNR article says against the progressive organization Veteran Intelligence Professionals for Sanity(VIPS) that “The sources for VIPS' most sensational claims, it turns out, are Canadian eccentric Michel Chossudovsky’s conspiracy site Global Research and far-right shock-jock Alex Jones’s Infowars.”

Wikipedia’s linking to that lying TNR article is part of Wikipedia’s ‘proof’ that both of those ‘conspiracy’ sites (the leftist Chossudovsky’s and the rightist Jones’s) are false (in other words: Wikipedia there is blatantly deceiving its readers, and is even assuming they’re stupid enough to believe such a ridiculous thing as that and wouldn’t even bother to check out Wikipedia's sources to find whether Wikipedia is the liar there, and not Chosudovsky’s site that is the liar).

It’s also assuming that the Obama regime was truthful when saying that Bashar al-Assad was behind the 21 August 2013 sarin gas attack in Ghouta Syria. However, that second assumption is likewise demonstrably false. The TNR’s article and its allegation against Assad regarding Ghouta were, in fact, disproven, on 14 January 2014, when leading US weapons-scientists Theodore Postol and Richard Lloyd studied closely all the evidence on that event and the US Government’s evidence that Assad had been associated with causing it, and the Lloyd-Postol finding was unequivocal that “the US Government’s Interpretation of the Technical Intelligence It Gathered Prior to and After the August 21 Attack CANNOT POSSIBLY BE CORRECT.”

Furthermore, Obama actually knew that he was falsifying. Seymour Hersh’s 17 April 2014 article in the London Review of Books, proved this. Obama was lying. Neither Lloyd-Postol nor Hersh is even referred to in today’s Wikipedia’s article. It still trusts Obama’s and TNR's proven lie that Assad (instead of Obama’s ‘Syrian rebels’ — a.k.a.: jihadists) had done that sarin attack. Wikipedia smears Chossudovsky with that proven lie, by simply reasserting the lie, and by assuming that Chossudovsky’s site is less trustworthy than Wikipedia (which is yet another lie). But that’s merely one of many lies that are in the Wikipedia article against Chossudovsky. No intelligent reader trusts Wikipedia — or any source (except sources that the reader has repeatedly confirmed to be true and never to have asserted falsehoods — unlike Wikipedia, which is full of distortions, cover-ups, and lies).

Intelligent skeptics dig down like this (which can be done only online, which is why print and broadcast ‘news’ is even less trustworthy than online news), and routinely find that there’s a very selective use of ‘evidence’ that’s behind most claims, and that the reality is that the ‘news’ is often false, and, worse than that, the ‘news’ is usually false for a purpose or purposes — that the ’news' is often fraudulent, that it is propaganda, PR, often even of the lying sort, instead of being honest and carefully verified research and reporting, such as it claims to be.

Usually, it’s false because the intention is to deceive, not because Wikipedia (or whatever other news-and-public-affairs medium one happens to be considering) merely goofed. As was noted here, Wikipedia is edited, and even written, by the CIA. (Remember what a “slam-dunk” about “Saddam’s WMD” they delivered to the George W. Bush regime in 2002?) Only sources that are approved by the CIA are linked to there. Some of the sources are true, but many are not. The article on Chossudovsky was done for the CIA by an asset of the CIA, about a critic of the CIA. The CIA represents America’s billionaires, and Chossudovsky doesn’t.

Extremely wealthy people buy, advertise their corporations in, and/or donate to, public-affairs media, not in order to profit from them as owners of them, so much as in order to influence public affairs by means of them. This is one of the ways in which to grab hold not only of the government, but even of the people who vote for the government and who also buy those billionaires’ corporations’ products and services. 

Trust should never be given; it should only be earned. Regarding what is public, trust is earned only rarely — and is never earned when that trust is in the major ‘news’-media (all of which are owned and controlled by billionaires and centi-millionaires who actually have interests in many corporations, including some they don’t control but only serve or else invest in). The major ‘news’-media don’t always lie, but they often lie - especially about foreign affairs, which are the main focus and concern of international corporations.

For example: where do you ever see, in the major ‘news’-media in The West, such high quality news-reporting as this, at the obscure news-site 21st Century Wire, from the great investigative journalist Vanessa Beeley? What even comes close to such honesty, at CBS, ABC, NBC, Fox, MSNBC, CNN, BBC, New York Times, Washington Post, Guardian, The Times, New Yorker, The Atlantic, The Nation, Mother Jones, The Public Interest, National Review, Rolling Stone, Truthout, Truthdig, Alternet, Salon, etc.? Obviously, nothing, ever.

So: that’s why one should always distrust the news. The system here is designed for deceit of the public.

Here are other recent articles from me, describing other instances of this phenomenon, the routine deceiving of the public:

“Chomsky’s Unearned Prestige”

“MH17 TURNABOUT: Ukraine’s Guilt Now PROVEN. Ukraine Downed MH17 Malaysian Airliner in 2014. Conclusive Evidence Suppressed by Western Media. Blatant Misrepresentations in Sanctions on Russia.”

And here is something that brings together both Wikipedia and the MH17: 

“Wikipedia As Propaganda Not History — Mh17 As An Example”

Published:1/7/2019 11:18:55 PM
[World] [Ilya Somin] Eminent Domain, Emergency Powers, and Trump's Wall

Can Trump really exploit emergency powers to use eminent domain to build his wall without additional congressional authorization? If he succeeds, conservatives are likely to regret the precedent he sets.

President Donald Trump claims he can use an "emergency" declaration to secure funding to use eminent domain to acquire land for his border wall, even without any additional congressional authorization. The validity of this claim is dubious at best. It is far from clear that emergency powers can be used to build the wall. Even if they can, it is questionable whether that would authorize the use of eminent domain to seize private property. And if the president succeeds in using an emergency declaration for such dubious purposes, it would set a precedent that conservative Republicans are likely to have reason to regret the next time a liberal Democrat occupies the White House.

In a recent New York Times op ed, Yale Law School Prof. Bruce Ackerman outlines some reasons why it would be illegal for Trump to use an emergency declaration to build the wall:

President Trump on Friday said that he was considering the declaration of a "national emergency" along the border with Mexico, which he apparently believes would allow him to divert funds from the military budget to pay for a wall, and to use military personnel to build it...

Begin with the basics. From the founding onward, the American constitutional tradition has profoundly opposed the president's use of the military to enforce domestic law. A key provision, rooted in an 1878 statute and added to the law in 1956, declares that whoever "willfully uses any part of the Army or the Air Force" to execute a law domestically "shall be fined under this title or imprisoned not more than two years" — except when "expressly authorized by the Constitution or Act of Congress...."

In response to the Hurricane Katrina disaster in New Orleans, Congress created an express exception to the rules, and authorized the military to play a backup role in "major public emergencies." But in 2008 Congress and President Bush repealed this sweeping exception. Is President Trump aware of this express repudiation of the power which he is threatening to invoke?

The statute books do contain a series of carefully crafted exceptions to the general rule. Most relevantly, Congress has granted the Coast Guard broad powers to enforce the law within the domestic waters of the United States. But there is no similar provision granting the other military services a comparable power to "search, seize and arrest" along the Mexican border.

Gerald Dickinson of the University of Pittsburgh (probably the leading academic expert on legal issues related to eminent domain and the wall) makes similar points here. On the other hand, Ackerman's Yale colleague John Fabian Witt argues that the issues are not as clear as the former suggests:

The truth is that the White House's emergency gambit reveals the full extent of Congress's dangerous delegation of emergency powers to the executive branch of the federal government. Elizabeth Goitein of the Brennan Center has collected a daunting list of statutes authorizing emergency powers, which is super helpful on this point. (Liza summarizes the statutes in a recent article at The Atlantic.) The upshot? Declaring a national emergency to build the president's ridiculous wall would be a national embarrassment. It ought to be unlawful, too. But whether declaring a national emergency to build a wall actually is unlawful under current circumstances turns out to be much closer question than it should be. The key statutory provisions are 10 U.S.C. 2808 (authorizing emergency reallocation of certain military construction funds) and 33 U.S.C. 2293 (authorizing emergency reallocation of certain civil works project funds).

A closer look at the two laws cited by Witt suggests it is far from evident that they authorize the diversion of funds to build a border wall. Section 2808 states that, if the president declares a "national emergency" that "requires the use of the armed forces," he can use military construction funds to "undertake military construction projects, and may authorize the Secretaries of the military departments to undertake military construction projects, not otherwise authorized by law that are necessary to support such use of the armed forces." It is far from clear whether any supposed emergency caused by undocumented immigration really "requires the use of the armed forces" or that a wall would be "necessary to support such use" of them. Indeed, as Ackerman points out, federal law actually forbids the use of the armed forces for domestic law enforcement within the United States (and immigration enforcement qualifies as such). Section 2293 also only applies to a declared war or emergency that "requires or may require use of the Armed Forces." Even then, it only allows diversion of funds to build "authorized civil works, military construction, and civil defense projects that are essential to the national defense" (emphasis added). In this context, "authorized" likely means "authorized" by Congress, not just by the executive branch.

It is also worth noting that nothing remotely resembling a national security "emergency" is actually occurring at the southern border, and that a border wall would do virtually nothing to protect the US against any kind of terrorism or security risk. It may well not even do much to reduce undocumented immigration.

Thus, I would tentatively conclude that Trump cannot use these provisions to appropriate funds for the construction of a border wall - even if he does declare a "national emergency." However, courts often give presidents undue deference on national security and immigration issues, and that problem could recur here. I would be lying if I said I could confidently predict the outcome of a legal battle over this issue. I should also emphasize that I am far from being an expert on the full range of dubious emergency powers Congress has delegated to the president. So it's possible I am overlooking some other possible source of wall-building authority.

Even if Trump can otherwise use an emergency declaration to transfer funds to build a border wall, it does not follow that he can seize property through the use of eminent domain. As the Supreme Court has long held, the power to use eminent domain has to be "expressly authorized" under the law. Such authorization cannot simply be assumed or inferred. None of the emergency delegations of power for construction projects discussed above "expressly" authorize the use of eminent domain for purposes that are not otherwise authorized by Congress. If it is not clear whether eminent domain is authorized or not, courts are generally required to conclude that it isn't. Congress could, of course, solve that problem by giving Trump the authorization he needs. But the whole reason why Trump is considering using an emergency declaration is because Congress refuses to do that.

Finally, as Gerald Dickinson points out in an insightful Washington Post column, under the original meaning of the Constitution, it is likely that the federal government does not even have the power to use eminent domain within states (as opposed to on federal territories) in the first place. Dickinson relies on an important Yale Law Journal article on this subject by my Volokh Conspiracy co-blogger Will Baude (I discussed the implications of Will's work on this here). As Dickinson recognizes, it is highly unlikely that the Supreme Court will overturn longstanding precedent granting the federal government that power (even if wrongly). Still, it is ironic that conservative Republicans who claim to be originalists are willing to endorse what would be a massive constitutionally dubious use of eminent domain by the federal government - one of the largest federal takings in all of American history.

As Dickinson has emphasized in previous works on this subject (see here and here), the federal government owns less than one third of the land needed to build the wall. The rest would have to be seized from numerous private owners, Native American tribes, and state governments. That is likely to be both costly and time-consuming. It would also open the door to serious abuses of the kind we have seen in many previous eminent domain cases, including those undertaken for past, much smaller border barriers, in which the Department of Homeland Security compiled an awful record of violating procedural rules and undercompensating owners.

If Trump is able to overcome legal obstacles and use an emergency declaration to secure funds for the wall without congressional authorization and use eminent domain to seize the land he needs, conservatives are likely to have good reason to regret the precedent it would set. The same powers could easily be used by the next Democratic president for purposes that the right would hate.

Consider a scenario where Elizabeth Warren wins the presidency in 2020, but Republicans in Congress refuse to allocate funds she claims are necessary to combat climate change and institute the gigantic "Green New Deal" program many progressives advocate. President Warren could then declare climate change to be a "national emergency" and start reallocating various military and civilian funds to build all kinds of "green" construction projects. She could declare that climate change is a threat to national security, and use the Army Corps of Engineers and other military agencies to participate in the project.

Indeed, the claim that climate change is a menace to national security is at least as plausible as the claim that undocumented immigrants on the Mexican border are. The Obama Administration Department of Defense even published a report on the subject in 2014. And, of course, if President Warren decides she needs to seize some private property to carry out her plans, she could cite the Trump precedent to use eminent domain for that purpose.And this is just one of many ways in which liberal Democrats could exploit the sorts of powers Trump claims here.

Both Democrats and Republicans often fail to consider the long-term effects of presidential power-grabs they support when their party occupies the White House. Many conservatives seem intent on repeating that mistake here.

Published:1/7/2019 4:48:15 PM
[Entertainment] 5 new books not to miss this week, including Gwyneth Paltrow's 'Clean Plate' cookbook Look for 'The Clean Plate,' a cookbook from Gwyneth Paltrow, and a nonfiction thriller from Brad Meltzer. Plus more new books on sale Jan. 8.
     
 
 
Published:1/6/2019 5:39:20 AM
[Markets] A Visual History Of The 20 Internet Giants That Ruled The Web From 1998 To 2018

Submitted by Visual Capitalist

With each passing year, an increasingly large segment of the population no longer remembers images loading a single pixel row at a time, the earsplitting sound of a 56k modem, or the domination of web portals.

Many of the top websites in 1998 were basically news aggregators or search portals, which are easy concepts to understand. Today, brand touch-points are often spread out between devices (e.g. mobile apps vs. desktop site) and a myriad of services and sub-brands (e.g. Facebook’s constellation of apps). As a result, the world’s biggest websites are complex, interconnected web properties.

Today’s visualization, inspired by an earlier work published by WaPo, looks at which of the internet giants have evolved to stay on top, and which have faded into internet lore.

America Moves Online

For millions of curious people the late ’90s, the iconic AOL compact disc was the key that opened the door to the World Wide Web. At its peak, an estimated 35 million people accessed the internet using AOL.

By 1999, the AOL rode the Dot-com bubble to dizzying heights, with a valuation of $222 billion dollars.

AOL’s brand may not carry the caché it once did, but the brand never completely faded into obscurity. The company continually evolved, finally merging with Yahoo after Verizon acquired both of the legendary online brands. Verizon has high hopes for the company – called Oath – to evolve into a “third option” for advertisers and users who are fed up with Google and Facebook.

A City of Gifs and Web Logs

As internet usage began to reach critical mass, web hosts such as AngelFire and GeoCities made it easy for people to create a new home on the Web.

GeoCities, in particular, made a huge impact on the early internet, hosting millions of websites and giving people a way to actually participate in creating online content. If the web host was a physical place, it would’ve been the third largest city in America, just after Los Angeles.

This early online community was at risk of being erased permanently when GeoCities was finally shuttered by Yahoo in 2009, but the nonprofit Internet Archive took special efforts to create a thorough record of GeoCities-hosted pages.

From A to Z

In December of 1998, long before Amazon became the well-oiled retail machine we know today, the company was in the midst of a massive holiday season crunch.

In the real world, employees were pulling long hours and even sleeping in cars to keep the goods flowing, while online, Amazon.com had become one of the biggest sites on the internet as people began to get comfortable with the idea of purchasing goods online. Demand surged as the company began to expand their offering beyond books.

Digital Magazine Rack

Meredith – with the possible exception of Oath – may be the most unrecognizable name to many people looking at today’s top 20 list. While Meredith may not be a household name, the company controls many of the country’s most popular magazine brands (People, Sports Illustrated, Health, etc.) including their sizable digital footprints. The company also has a slew of local television networks around the United States.

After its acquisition of Time Inc. in 2017, Meredith became the largest magazine publisher in the world.

“Hey, Google”

When people have burning questions, they increasingly turn to the internet for answers, but the diversity of sources for those answers is shrinking.

Even as recently as 2013, we can see that About.com, Ask.com, and Answers.com were still among the biggest websites in America. Today though, Google appears to have cemented its status as a universal wellspring of answers.

As smart speakers and voice assistants continue penetrate the market and influence search behavior, Google is unlikely to face any near-term competition from any company not already in the top 20 list.

New Kids on the Block

Social media has long since outgrown its fad stage and is now a common digital thread connecting people across the world. While Facebook rapidly jumped into the top 20 by 2007, other social media infused brands took longer to grow into internet giants.

In 2018, Twitter, Snapchat, and Facebook’s umbrella of platforms were are all in the top 20, with LinkedIn and Pinterest not far behind.

Published:1/5/2019 7:35:56 PM
[Markets] Xi Jinping Thinks China Is World's Only Sovereign State

Authored by Gordon Chang via The Gatestone Institute,

  • The trend of Chinese ruler Xi Jinping's recent comments warns us that his China does not want to live within the current Westphalian system of nation states or even to adjust it. From every indication, Xi is thinking of overthrowing it altogether.

  • Beijing now thinks it can, with impunity, injure Americans. In the first week of May, the Pentagon said that China, from its base in Djibouti, lasered a C-130 military cargo plane, causing eye injuries to two American pilots.

  • The laser attack in the Horn of Africa, far from any Chinese boundaries, highlights Beijing's unstated position that the U.S. military has no right to operate anywhere and that China is free to do whatever it wants anyplace it chooses. And let us understand the severity of the Chinese act: an attempt to blind pilots is akin to an attempt to bring down their planes, and an attempt to bring down planes is an assertion China has the right to kill.

The trend of Chinese ruler Xi Jinping's recent comments warns us that his China does not want to live within the current Westphalian system or even to adjust it. From every indication, Xi is thinking of overthrowing it altogether. Pictured: Xi Jinping (center) at a Chinese Communist Party event on January 2, 2019 in Beijing. (Photo by Mark Schiefelbein-Pool/Getty Images)

"I hear prominent Americans, disappointed that China has not become a democracy, claiming that China poses a threat to the American way of life," Jimmy Carter wrote on the last day of 2018 in a Washington Post op-ed.

That claim, Carter tells us, is a "dangerous notion."

There is nothing more dangerous than a notion from the 39th president, even on China. China, despite what he said, threatens not only America's way of life but also the existence of the American republic. Chinese ruler Xi Jinping has, in recent years, been making the extraordinary case that the U.S. is not a sovereign state.

The breathtaking position puts China's aggressive actions into a far more ominous context.

Carter, and almost all others who comment on Chinese foreign policy, see Beijing competing for influence in the current international order. That existing order, accepted virtually everywhere, is based on the Treaty of Westphalia of 1648, which recognizes the sovereignty of individual states that are supposed to refrain from interfering in each other's internal affairs. Those states now compete and cooperate in a framework, largely developed after World War II, of treaties, conventions, covenants, and norms.

Many Chinese policymakers believe they are entitled to dominate others, especially peoples on their periphery. That concept underpinned the imperial tributary system in which states near and far were supposed to acknowledge Chinese rule. Although there is no "cultural DNA" that forces today's communist leaders to view the world as emperors did long ago, the tributary system nonetheless presents, as Stephen Platt of the University of Massachusetts points out, "a tempting model" of "a nostalgic 'half-idealized, half-mythologized past.' "

In that past, there were no fixed national boundaries. There was even no concept of "China." There was, as Yi-Zheng Lian wrote in the New York Times, "a sovereignty system with the emperor's compound in the middle." Around that were concentric rings. "The further from the center, the less the center's control and one's obligations to it," Lian noted. The Chinese, in fact, were perhaps the first to develop the idea of a borderless world.

In short, Chinese emperors claimed they had the Mandate of Heaven over tianxia, or "All Under Heaven," as they believed they were, in the words of Fei-Ling Wang of Georgia Tech, "predestined and compelled to order and rule the entire world that is known and reachable, in reality or in pretension." As acclaimed journalist Howard French writes in Everything Under the Heavens, "One can argue that there has never been a more universal conception of rule."

Unfortunately, the current Chinese leader harbors ambitions of imposing the tianxia model on others. As Charles Horner of the Hudson Institute told me, "The Communist Party of China remains committed to ordering the People's Republic of China as a one-party dictatorship, and that is perforce its starting point for thinking about ordering the world." In other words, a dictatorial state naturally thinks about the world in dictatorial terms. Tianxia is by its nature a top-down, dictatorial system.

Xi Jinping has employed tianxia language for more than a decade, but recently his references have become unmistakable. "The Chinese have always held that the world is united and all under heaven are one family," he declared in his 2017 New Year's Message. He recycled tianxia themes in his 2018 New Year's message and hinted at them in his most recent one as well.

Xi has also used Chinese officials to explain the breathtaking scope of his revolutionary message. Foreign Minister Wang Yi, in Study Times, the Central Party School newspaper, in September 2017 wrote that Xi Jinping's "thought on diplomacy"—a "thought" in Communist Party lingo is an important body of ideological work—"has made innovations on and transcended the traditional Western theories of international relations for the past 300 years." Wang with his time reference is almost certainly pointing to the Westphalian system of sovereign states. His use of "transcended," consequently, hints that Xi wants a world without sovereign states—or at least no more of them than China.

The trend of Xi's recent comments warns us that his China does not want to live within the current Westphalian system or even to adjust it. From every indication, Xi is thinking of overthrowing it altogether, trying to replace Westphalia's cacophony with tianxia's orderliness.

Xi not only spouts tianxia-like statements, his regime also employs scholars to study the application of tianxia to the world.

He also acts tianxia. His China in December 2016 seized a U.S. Navy drone in international water in the South China Sea. Chinese spokesman Yang Yujun said, according to the official Xinhua News Agency, that one of its navy's lifeboats "located an unidentified device" and retrieved it "to prevent the device from causing harm to the safety of navigation and personnel of passing vessels."

In fact, China's ships had over a long period tailed the USNS Bowditch, an unarmed U.S. Navy reconnaissance vessel. The American crew, who at the time were trying to retrieve the drone, repeatedly radioed the Chinese sailors, who ignored their calls and, within 500 yards of the U.S. craft, went into the water in a small boat to seize it. The Chinese by radio told the Bowditch they were keeping the drone.

The site of the seizure, about 50 nautical miles northwest of Subic Bay, was so close to the shoreline of the Philippines that it was beyond China's expansive "nine-dash line" claim. There was absolutely no justification for the Chinese navy to grab the drone. The intentional taking of what the Defense Department termed a "sovereign immune vessel" of the United States showed that Beijing thought it was not bound by any rules of conduct.

Beijing now thinks it can, with impunity, injure Americans. In the first week of May, the Pentagon said that China, from its base in Djibouti, lasered a C-130 military cargo plane, causing eye injuries to two American pilots.

The laser attack in the Horn of Africa, far from any Chinese boundaries, highlights Beijing's unstated position that the U.S. military has no right to operate anywhere and that China is free to do whatever it wants anyplace it chooses. And let us understand the severity of the Chinese act: an attempt to blind pilots is akin to an attempt to bring down their planes and an attempt to bring down planes is an assertion China has the right to kill.

China has been called a "trivial state," one which seeks nothing more than "perpetuation of the regime itself and the protection of the county's territorial integrity." This view fundamentally underestimates the nature of the Chinese challenge. China, under Xi Jinping, has become a revolutionary regime that seeks not only to dominate others but also take away their sovereignty.

Xi at this moment cannot compel others to accept his audacious vision of a China-centric world, but he has put the world on notice.

These events together mean, once again, that Carter has failed to understand a hardline regime. In his op-ed, he warns America against starting "a modern Cold War" with China. Washington, in reality, cannot start anything. There already is a struggle that Xi Jinping has made existential.

Published:1/4/2019 9:30:17 PM
[Markets] The Problem With Wall Street's Forecasts

Authored by Lance Roberts via RealInvestmentAdvice.com,

Over the last few weeks, I have been asked repeatedly to publish my best guess as to where the market will wind up by the end of 2019.

Here it is:

“I don’t know.”

The reality is that we can not predict the future. If it was actually possible, fortune tellers would all win the lottery.  They don’t, we can’t, and we aren’t going to try.

However, this reality certainly does not stop the annual parade of Wall Street analysts from pegging 12-month price targets on the S&P 500 as if there was actual science behind what is nothing more than a “WAG.” (Wild Ass Guess).

The biggest problem with Wall Street, both today and in the past, is the consistent disregard of the possibilities for unexpected, random events. In a 2010 study, by the McKinsey Group, they found that analysts have been persistently overly optimistic for 25 years. During the 25-year time frame, Wall Street analysts pegged earnings growth at 10-12% a year when in reality earnings grew at 6% which, as we have discussed in the past, is the growth rate of the economy.

Ed Yardeni published the two following charts which show that analysts are always overly optimistic in their estimates.

This is why using forward earnings estimates as a valuation metric is so incredibly flawed – as the estimates are always overly optimistic roughly 33% on average.

Most importantly, the reason earnings only grew at 6% over the last 25 years is because the companies that make up the stock market are a reflection of real economic growth. Stocks cannot outgrow the economy in the long term…remember that.

The McKenzie study noted that on average “analyst’s forecasts have been almost 100% too high” which leads investors into making much more aggressive bets in the financial markets which has a general tendency of not working as well as planned.

However, since “optimism” is what sells products, it is not surprising, as we head into 2019, to see Wall Street once again optimistic about higher markets even after massively missing 2018’s outcome.

But, that was so last year.

For 2019, analysts have outdone themselves on scrambling to post the most bullish of outcomes that I can remember. Analysts currently expect a median projected return of 23.66% from the 2018 close.

No…seriously. This is what Wall Street is currently expecting despite the fact that foreign and domestic economic data is weakening, corporate profit growth is likely peaking, trade wars are heating up and the Federal Reserve is tightening monetary policy. As Greg Jensen, co-chief investment officer of Bridgewater Associates, the biggest hedge fund in the world, recently stated: 

“The biggest theme developing is that you are going to have significantly weaker growth, near recession-level growth in 2019, based on our measures, and the markets are generally not pricing that in.

Although the movement has been in that direction, the degree of [ the market’s decline] is still small relative to what we are seeing in terms of the shifts in likely economic conditions.  2019 will be a year of weaker growth and central banks struggling to move from their current tightening stance to easing and finding it difficult to ease because they have very little ammunition to ease.”

All of this should sound very familiar if you have been reading our work over the past year.

The problem with the year-end “guesses” above is they are based on “forward operating earnings estimates” which is another set of severely flawed “WAG’s” on top of a “WAG.”

Let me explain.

First, operating earnings are at best a myth, and mostly a lie. As opposed to reported earnings, operating earnings are essentially “earnings if everything goes right with all the bad stuff excluded.”

Secondly, operating earnings are cooked, baked, and fudged in more ways than you can imagine to win the “beat the estimate gaime.” The Wall Street Journal confirmed as much in a 2012 article entitled “Earnings Wizardry” which stated:

“If you believe a recent academic study, one out of five [20%] U.S. finance chiefs have been scrambling to fiddle with their companies’ earnings. Not Enron-style, fraudulent fiddles, mind you. More like clever—and legal—exploitations of accounting standards that ‘manage earnings to misrepresent [the company’s] economic performance,’ according to the study’s authors, Ilia Dichev and Shiva Rajgopal of Emory University and John Graham of Duke University. Lightly searing the books rather than cooking them, if you like.”

This should not come as a major surprise as it is a rather “open secret.” Companies manipulate bottom line earnings by utilizing “cookie-jar” reserves, heavy use of accruals, and other accounting gimmicks to either increase or depress, earnings.

“The tricks are well-known: A difficult quarter can be made easier by releasing reserves set aside for a rainy day or recognizing revenues before sales are made, while a good quarter is often the time to hide a big ‘restructuring charge’ that would otherwise stand out like a sore thumb. What is more surprising though is CFOs’ belief that these practices leave a significant mark on companies’ reported profits and losses. When asked about the magnitude of the earnings misrepresentation, the study’s respondents said it was around 10% of earnings per share.”

Since company executives are highly compensated by rising stock prices, it should not be surprising to see 93% of the respondents pointing to “influence on stock price” and “outside pressure” as reasons for manipulating earnings.

Note: For fundamental investors, this manipulation of earnings skews valuation analysis particularly with respect to P/E’s, EV/EBITDA, PEG, etc.

This was brought to the fore in 2015 by the Associated Press in: “Experts Worry That Phony Numbers Are Misleading Investors:”

“Those record profits that companies are reporting may not be all they’re cracked up to be.

As the stock market climbs ever higher, professional investors are warning that companies are presenting misleading versions of their results that ignore a wide variety of normal costs of running a business to make it seem like they’re doing better than they really are.

What’s worse, the financial analysts who are supposed to fight corporate spin are often playing along. Instead of challenging the companies, they’re largely passing along the rosy numbers in reports recommending stocks to investors.

Here were the key findings of the report:

  • Seventy-two percent of the companies reviewed by AP had adjusted profits that were higher than net income in the first quarter of this year.

  • For a smaller group of the companies reviewed, 21 percent of the total, adjusted profits soared 50 percent or more over net income. This was true of just 13 percent of the group in the same period five years ago.

  • From 2010 through 2014, adjusted profits for the S&P 500 came in $583 billion higher than net income. It’s as if each company in the S&P 500 got a check in the mail for an extra eight months of earnings.

  • Fifteen companies with adjusted profits actually had bottom-line losses over the five years. Investors have poured money into their stocks just the same.

  • Stocks are getting more expensive. Three years ago, investors paid $13.50 for every dollar of adjusted profits for companies in the S&P 500 index, according to S&P Capital IQ. Now, they’re paying nearly $18.

These “gimmicks” to boost earnings, combined with artificially suppressed interest rates and massive rounds of monetary interventions, unsurprisingly pushed asset prices to historically high levels. However, as noted, the boost to “profitability” did not come from organic economic growth. As I showed previously:

“Since the recessionary lows, much of the rise in ‘profitability’ has come from a variety of cost-cutting measures and accounting gimmicks rather than actual increases in top-line revenue. While tax cuts certainly provided the capital for a surge in buybacks; revenue growth, which is directly connected to a consumption-based economy, has remained muted. 

Here is the real kicker. Since 2009, the reported earnings per share of corporations has increased by a total of 391%. This is the sharpest post-recession rise in reported EPS in history. However, the increase in earnings did not come from a commensurate increase in revenue which has only grown by a marginal 44% during the same period. This is an important point when you realize only 11% of total reported EPS growth actually came from increased revenues.”

“While stock buybacks, corporate tax cuts, and debt-issuance can create an illusion of profitability in the short-term, the lack of revenue growth the top line of the income statement suggests a much weaker economic environment over the long-term.”

Way Too Optimistic

With share buyback activity already beginning to slow, the Federal Reserve extracting liquidity from the financial markets, and the Administration continuing their “trade war,” the risks to extremely elevated forward earnings estimates remain high. We are already seeing the early stages of these actions through falling home prices, automobile sales, and increased negative guidance for corporations.

If history, and logic, is any guide, we will likely see the U.S. economy pushing into a recession in 2019 particularly as the global economy continues to weaken. This is something both domestic and global yield curves are already screaming is an issue, but to which few are listening.

Currently, analysts’ forward earnings estimates are still way too lofty going into 2019. As I noted in the recent missive on rising headwinds to the market, earnings expectations have already started to get markedly ratcheted down for the end of 2019. In just the last 45-days the estimates for the end of 2019 have fallen by more than $14/share. The downside risk remains roughly $10/share lower than that and possibly much more if a recession hits.

As stated, beginning in 2019, the estimated quarterly rate of change in earnings will drop markedly and head back towards the expected rate of real economic growth. (Note: these estimates are as of 12/31/18 from S&P and are still too high relative to expected future growth. Expect estimates to continue to decline which allow for continued high levels of estimate “beat” rates.)

The end of the boost from tax cuts has arrived.

Since the tax cut plan was poorly designed, to begin with, it did not flow into productive investments to boost economic growth. As we now know, it flowed almost entirely into share buybacks to boost executive compensation. This has had very little impact on domestic growth.

The “sugar high” of economic growth seen in the first two quarters of 2018 has been from a massive surge in deficit spending and the rush by companies to stockpile goods ahead of tariffs. These activities simply pull forward “future” consumption and have a very limited impact but leave a void which must be filled in the future.

Nearly a full year after the passage of tax cuts, we face a nearly $1 Trillion deficit, a near-record trade deficit, and, as expected, economic and earnings reports are now showing markedly weaker projections. Apple (AAPL) is just the first of many companies that will confirm this in the coming weeks.

It is all just as we predicted.

The problem when it comes to blindly invest in markets without a thorough understanding of underlying dynamics is much the same as playing “leapfrog with a unicorn,” eventually, there is a very negative outcome.

As we head into 2019, all of the anecdotal evidence continues to suggest weaker markets rather than a surging recovery.

But, that is just a guess.

As I said, I honestly “don’t know.”

What I do know is that I will continue to manage our portfolios for the inherent risks to capital, take advantage of opportunities when I see them, and will allow the market to “tell me” what it wants to do rather than “guessing” at it.

While I read most of the mainstream analyst’s predictions to get a gauge on the “consensus.”  This year, more so than most, the outlook for 2019 is universally, and to many degrees, exuberantly bullish.

What comes to mind is Bob Farrell’s Rule #9 which states:

“When everyone agrees…something else is bound to happen.”

Published:1/4/2019 1:39:08 PM
[Markets] China Announces RRR Cut Plans To Cover Lunar New Year Liquidity

US equity futures extended gains in a kneejerk reaction to headlines proclaiming China cutting the reserve requirement ratio.

The headline looks impressive...

  • CHINA CUTS BANK RESERVE RATIO BY 1 PERCENTAGE POINT

And the algos liked it...

However, two points make this less exciting "stimulus" news than we suspect the narrative will proclaim.

First is that, according to a statement from the central bank, the RRR cuts of 0.5 percentage point each will occur on Jan. 15 and Jan. 25 in a move to offset liquidity fluctuations ahead of Chinese Lunar New Year.

  • PBOC says the RRR cuts to replace medium-term lending facilities maturing in 1Q

  • PBOC says it will continue prudent monetary policy and won’t flood economy with liquidity

  • PBOC says move to boost financial support for small and private companies

  • PBOC to ensure reasonable growth of credit and aggregate financing

  • PBOC to stabilize macro leverage ratio

In other words this is 'business as usual' monetary injection to cover an increasingly panicked financial system dry of liquidity.

And second is that, recent previous monetary and fiscal easing efforts have utterly failed to generate any material economic activity pick up. As we noted previously, since June 2018, China has been loosening monetary and fiscal policies in an attempt to refloat the sinking red ponzi amid the shadow banking system's deflation.

As the following chart from Goldman Sachs shows, it is not working as the Current Activity Indicator continues to slump...

It seems no matter what China throws at it, the economy (or the market) won't behave as the text-books say it should.

As Goldman previously concluded: "There are reasons to be concerned [that easing is becoming less effective]..."

Published:1/4/2019 4:25:55 AM
[Markets] Eurozone PMI Plunges To Four Year Lows

US, China, and now European composite PMIs have all tumbled in December with Eurozone PMI slipping to 51.1 - its weakest in four years

Growth in manufacturing and services slowed more than initially reported in December - weighed down by public protests in France, Germany’s continued struggles in the car industry, and renewed weakness in Italy. Composite gauges for output expectations and new orders were the worst since late 2014.

Under the hood, the European nations are highly varied (from best to worst):

  • Ireland: 55.5 (9-month low)

  • Spain: 53.4 (3-month low)

  • Germany: 51.6 (66-month low)

  • Italy: 50.0 (3-month low)

  • France: 48.7 (49-month low)

Chris Williamson,