Month: December 2019

Authored by Caitlin Johnstone via Medium.com,

It’s been a bad last 24 hours for the war propagandists.

WikiLeaks has published multiple documents providing further details on the coverup within the Organisation for the Prohibition of Chemical Weapons (OPCW) of its own investigators’ findings which contradicted the official story we were all given about an alleged chlorine gas attack in Douma, Syria last year. The alleged chemical weapons incident was blamed on the Syrian government by the US and its allies, who launched airstrikes against Syria several days later. Subsequent evidence indicating that there was insufficient reason to conclude the chlorine gas attack ever happened was repressed by the OPCW, reportedly at the urging of US government officials.

The new publications by WikiLeaks add new detail to this still-unfolding scandal, providing more evidence to further invalidate attempts by establishment Syria narrative managers to spin it all as an empty conspiracy theory. The OPCW has no business hiding any information from the public which casts doubt on the official narrative about an incident which was used to justify an act of war on a sovereign nation.

RELEASE: Third batch of documents showing doctoring of facts in released version of OPCW chemical weapons report on Syria. Including a memo stating 20 inspectors feel released version “did not reflect the views of the team members that deployed to [Syria]”https://t.co/ndK4sRikNk

— WikiLeaks (@wikileaks) December 15, 2019

The following are hyperlinks to the individual OPCW documents WikiLeaks published, with some highlights found therein:

A first draft of the OPCW’s July 2018 Interim Report on the team’s findings in Douma.

Contains crucial information that was not included in either the final draft of the July 2018 Interim Report or the March 2019 Final Report, including (emphasis mine):

1. The symptoms of the alleged victims of the supposed chemical incident were inconsistent with chlorine gas poisoning.

“Some of the signs and symptoms described by witnesses and noted in photos and video recordings taken by witnesses, of the alleged victims are not consistent with exposure to chlorine-containing choking or blood agents such as chlorine gas, phosgene or cyanogen chloride,” we learn in the unredacted first draft. “Specifically, the rapid onset of heavy buccal and nasal frothing in many victims, as well as the colour of the secretions, is not indicative of intoxication from such chemicals.”

“The large number of decedents in the one location (allegedly 40 to 45), most of whom were seen in videos and photos strewn on the floor of the apartments away from open windows, and within a few meters of an escape to un-poisoned or less toxic air, is at odds with intoxication by chlorine-based choking or blood agents, even at high concentrations,” the unredacted draft says.

This important information was omitted from the Interim Report and completely contradicted by the Final Report, which said that the investigation had found “reasonable grounds that the use of a toxic chemical as a weapon took place. This toxic chemical contained reactive chlorine. The toxic chemical was likely molecular chlorine.”

2. OPCW inspectors couldn’t find any explanation for why the gas cylinders supposedly dropped from Syrian aircraft were so undamaged by the fall.

“The FFM [Fact-Finding Mission] team is unable to provide satisfactory explanations for the relatively moderate damage to the cylinders allegedly dropped from an unknown height, compared to the destruction caused to the rebar-reinforced concrete roofs,” reads the leaked first draft. “In the case of Location 4, how the cylinder ended up on the bed, given the point at which it allegedly penetrated the room, remains unclear. The team considers that further studies by specialists in metallurgy and structural engineering or mechanics are required to provide an authoritative assessment of the team’s observations.”

We now know that a specialist was subsequently recruited to find an answer to this mystery. A leaked document dated February 2019 and published by the Working Group On Syria, Propaganda and Media in May 2019 was signed by a longtime OPCW inspector named Ian Henderson. Henderson, a South African ballistics expert, ran some experiments and determined that “The dimensions, characteristics and appearance of the cylinders, and the surrounding scene of the incidents, were inconsistent with what would have been expected in the case of either cylinder being delivered from an aircraft,” writing instead that the cylinders being “manually placed” (i.e. staged) in the locations where investigators found them is “the only plausible explanation for observations at the scene.”

More on Ian Henderson in a moment.

3. The team concluded that either the victims were poisoned with some unknown gas which wasn’t chlorine, or there was no chemical weapon at all.

“The inconsistency between the presence of a putative chlorine-containing toxic chocking or blood agent on the one hand and the testimonies of alleged witnesses and symptoms observed from video footage and photographs, on the other, cannot be rationalised,” the unredacted first draft reads. “The team considered two possible explanations for the incongruity:
a. The victims were exposed to another highly toxic chemical agent that gave rise to the symptoms observed and has so far gone undetected.
b. The fatalities resulted from a non-chemical-related incident.”

Again, none of this information made it into any of the OPCW’s public reports on the Douma incident. The difference between the information we were given (that a chlorine gas attack took place and the strong suggestion that it was dropped by Syrian aircraft) and the report the inspectors were initially trying to put together (literally the exact opposite) is staggering. For more insider information on the deliberation between OPCW inspectors who wanted their actual findings to be reported and the organisation officials who conspired to omit those findings, read this November report by journalist Jonathan Steele.

A memo from a member of the OPCW’s Fact-Finding Mission (FFM) in Douma to the OPCW Director General Fernando Arais.

It’s worth noting that this memo is dated two weeks after the OPCW published its Final Report on the Douma incident in March 2019, because it further invalidates the bogus argument made by narrative management firms like Bellingcat claiming that the grievances of the dissenting OPCW inspectors had been satisfactorily addressed by the time the Final Report was published.

Clearly the concerns were not addressed, because the memo consists entirely of complaints, and according to its author “there are about 20 inspectors who have expressed their concern over the current situation.”

The memo’s author complains that the FFM report was made almost exclusively by team members who never even went to Douma, doing their research instead solely in “Country X”, which WikiLeaks speculates may be Turkey.

“The FFM report does not reflect the views of all the teams that deployed to Douma,” the memo says. “Only one team member (a paramedic) of the so-called ‘FFM core team’ was in Douma. The FFM report was written by this core team, thus by people who had only operated in Country X.”

“After the exclusion of all team members other than a small cadre of members who had deployed (and deployed again in October 2018) to Country X, the conclusion seems to have turned completely in the opposite direction. The FFM team members find this confusing, and are concerned to know how this occurred.”

The memo’s author is unnamed in the WikiLeaks document, but claims to have been “assigned the task of analysis and assessment of the ballistics of the two cylinders,” indicating that it was likely the aforementioned Ian Henderson. A concurrent publication by Peter Hitchens in the Daily Mail appears to confirm this. Hitchens reports that when Henderson lodged his Engineering Assessment in the OPCW’s secure registry after failing to get traction for his report, which the memo’s author also reports to have done, an unpopular unnamed OPCW official nicknamed “Voldemort” ordered that every trace of the report be removed.

“Mr Henderson tried to get his research included in the final report, but when it became clear it would be excluded, he lodged a copy in a secure registry, known as the Documents Registry Archive (DRA),” Hitchens reported. “This is normal practice for such confidential material, but when ‘Voldemort’ heard about it, he sent an email to subordinates saying: ‘Please get this document out of DRA … And please remove all traces, if any, of its delivery/storage/whatever in DRA’.”

So to recap, the OPCW enlisted a longtime ballistics expert with an extensive history of work with the organisation to run some experiments and produce an Engineering Assessment to explain how the alleged chlorine cylinders could have been found in the condition they were found in, and when he came to conclusions which were exculpatory for the Syrian government, his boss ordered every sign of it purged from the registry.

Again, not a whisper of any of this was breathed in the OPCW’s public reports on the Douma incident, despite somewhere around 20 inspectors having objections. The OPCW had no business hiding this from the public.

An internal email from May 2019 voicing further concerns.

The usual regime change fanatics helped provoke more OPCW leaks by flagrantly lying about a whistleblower. Read the whole thread here. https://t.co/fyrfBnoxM2

— Max Blumenthal (@MaxBlumenthal) December 15, 2019

This interesting email, sent to the OPCW’s Office of Strategy and Planning Director Veronika Stromsikova, defended Ian Henderson and objected to the mistreatment of a principled and respected team member.

“A member of the FFM team has been suspended from his post and escorted from the OPCW building in a less than dignified manner,” the email’s author complains. “After more than 12 years, I believe, serving the OPCW with dedication and professionalism, Ian Henderson’s personal and professional integrity have taken a knock in the most public of fora, the internet. A falsehood issued by the OPCW, that Ian did not take part in the Douma FFM team, has been pivotal in discrediting him and his work.”

Indeed, as soon as Henderson’s Engineering Assessment was leaked this past May, Syria narrative managers like Idrees Ahmad, Brian Whitaker, and Bellingcat founder Eliot Higgins immediately set to work trying to spin him as merely a lone “disgruntled employee” who was “not a part of the Fact-Finding Mission”.

“The denial is patently untrue,” the email’s author writes. “Ian Henderson WAS part of the FFM and there is an abundance of official documentation, as well as other supporting proof, that testifies to that.”

But I don’t suppose we can expect to see any apologies or corrections from the usual suspects in light of this new information.

“We are not insisting on being right in our assertions, but we are demanding to be heard,” the email’s author writes. “We have desperately tried to limit expression of concerns to within the Organisation and will continue to do so. However, we have been stonewalled throughout by obfuscation, exclusion, and even thuggish and bullying behavior.”

The author wraps things up by explaining why they’re pushing so hard to be heard with a quote from Edmund Burke: “All that is required for evil to triumph is for good men to do nothing.”

Email communications between FFM members and their team leader Sami Barrek.

New leak: “It’s because the stakes are so high that we have a responsibility to guard against misrepresentation, by both sides.”
https://t.co/5U9OWbQEez
#Douma #wikileaks #syria #opcw

— Dr. Roy Schestowitz (罗伊) (@schestowitz) December 15, 2019

This July 2018 correspondence is significant mainly because it brings in hard evidence for the exchange described by the OPCW whistleblower “Alex” in the aforementioned Jonathan Steele report, which was described as follows:

“This request was rejected but Sami Barrek, the team leader, was put in charge of replacing the doctored version with what turned out to be a toned-down but still misleading report. During the editing four of the Douma inspectors, including Ian Henderson, the engineering expert, had managed to get Barrek to agree that the low levels of COCs [Chlorinated Organic Chemicals] should be mentioned. On the day before the new publication date, July 6, they found that the levels were again being omitted.”

The back-and-forth exchanges feature one or more anonymous team members arguing with Barrek that more information needs to be included in the Interim Report so that people won’t jump to conclusions that the team had found evidence it hadn’t. And sure enough, Moon of Alabama documented multiple mass media headlines which falsely claimed the Interim Report had asserted chlorine gas was used (that invalid claim wasn’t made until the Final Report in March 2019).

Here’s a sample exchange where one inspector tries to persuade Barrek to change the language in the report so readers will understand that the information they had about chlorinated organic chemical concentrations at the time hadn’t reached any “damning conclusion”, with Barrek throwing up inertia and saying he can unilaterally overrule them if he wants to:

Again, none of the findings which were inconsistent with the US narrative were included in either the final draft of the Interim Report or in the Final Report. Nothing about the low levels of chlorinated organic chemicals, nothing about the inconsistencies in symptoms with chlorine gas poisoning, nothing about the lack of damage to the cylinders, nothing about Ian Henderson’s findings. Nothing. The OPCW had no business withholding that information.

Eight weeks ago a whistleblower claimed to have documents showing “irregularities” in the OPCW’s investigation of a suspected chemical attack in Syria. Since then, only one document has surfaced. Where are the others? https://t.co/hacK3PeId1

— Brian Whitaker (@Brian_Whit) December 11, 2019

These new leaks take care of the latest spin jobs by establishment narrative managers, who were just the other day beginning to argue that the fact that there hadn’t been any more OPCW leaks in a while indicated that the whole OPCW scandal was bogus. Sorry to disappoint you, fellas.

My full account of what took place at Newsweek.

Despite a number of offers, I decided to publish on my website because I take full responsibility for what’s reported

It’s a long piece so I recommend reading at a time when you can digest and on a computerhttps://t.co/obpcSgaa1A

— Tareq Haddad (@Tareq_Haddad) December 14, 2019

The WikiLeaks documents and Hitchens’ Daily Mail article came out the same day as ex-Newsweek reporter Tareq Haddad shared emails sent to him by his editors forbidding him to publish information on the OPCW scandal, an important slice of information on the way mass media outlets stifle commentary on important stories that are inconvenient for US imperialism.

Newsweek’s foreign affairs editor Dimi Reider (who Haddad notes has Council on Foreign Relations ties) shot down Haddad’s pitch for a story about the OPCW scandal last month by falsely claiming that Bellingcat had “published a thorough refutation” of the story Haddad wanted to report on. In fact, as I documented at the time, Bellingcat had published an unbelievably pathetic spin job in which it tried to paint the whole OPCW scandal as a big misunderstanding.

Bellingcat argued that the concerns voiced in the leaked email published by WikiLeaks last month about the developing Interim Report in July 2018 had been fully addressed by the time the Final Report was published in March 2019, citing as evidence the fact that some slight adjustments had been made in the wording, like changing “likely” to “possible” and changing “reactive chlorine containing chemical” to “chemical containing reactive chlorine.” In focusing on this ridiculous, pedantic nonsense, Bellingcat tries to weave the narrative that because the whistleblower’s concerns were addressed with this pedantry, there was therefore no OPCW coverup. Never mind the fact that the multiple OPCW whistleblowers were still plainly so incensed by the organisation’s publishing that they felt the need to leak internal documents. Never mind that Bellingcat made no attempt whatsoever to address the aforementioned actual grievances by the OPCW whistleblowers like the low levels of chlorinated organic chemicals on the scene, the inconsistencies in symptoms and testimony with chlorine poisoning, or the Ian Henderson report.

But that’s what happens when mass media outlets like The New York Times and The Guardian publish swooning puff piece after swooning puff piece about Bellingcat; they grant a US government-funded narrative management firm so much unearned legitimacy that even a transparently bogus argument like the one they made about the OPCW scandal gets passed around newsrooms by credulous editors assuring each other that it’s a “thorough refutation” of facts and reality. Mass media outlets help puff up Bellingcat’s legitimacy, and in turn Bellingcat rewards them with an excuse to not have to ever challenge establishment narratives.

Reider also argued that Haddad’s report on the OPCW couldn’t be published because “not a single respected media outlet — many of whom boast far greater regional expertise, resources on the ground and in newsroom than Newsweek does — have taken the leak remotely seriously.”

That’s a great self-reinforcing system, isn’t it? MSM outlets validate US government-funded narrative managers like Bellingcat so they can tell them with authority why an unauthorised story shouldn’t be published, and each outlet sees the absence of other outlets reporting on it as evidence that it shouldn’t be reported on. And we wonder why no one’s reporting on the OPCW scandal.

Fake News By Omission — The Mass Media’s Cowardly Distortion Tool

“The exceptional silence on the OPCW scandal from imperial news media discredits them completely, but people won’t know about it unless they are told. Spread the word.” #OPCW #Syriahttps://t.co/MSrSh2vgP7

— Caitlin Johnstone ⏳ (@caitoz) December 6, 2019

And Newsweek’s Digital Director Laura Davis gave Haddad the same answer, regurgitating the absolutely bogus Bellingcat line that the leaked email wasn’t newsworthy because “it predates the final report” and because no one else has written about it. It’s a system fully locked down against any oppositional reporting, and we can surmise that this is the norm for newsrooms throughout the English-speaking world.

Haddad also published a similar email he’d received from International Business Times then-editor-in-chief Julian Kossoff, who rejected a pitch he’d made for an opinion piece he’d written about the Khan Sheikhun incident in April 2017.

“Thanks for the suggested opinion piece,” Kossoff wrote. “However, I do not think we will be able to use it. Its narrative is highly controversial and likely to offend and only a writer or expert of repute (e.g Noam Chomsky) could get away with such an incendiary thesis.”

And what was this “incendiary thesis”? Well, Haddad published it with CounterPunch, so you can see for yourself. He simply argued what in my opinion should be a completely uncontroversial position: that there wasn’t yet enough evidence to be certain Assad was behind the attacks, and the US has a known history of entering into military entanglements based on lies, so the warmongers demanding Assad’s overthrow shouldn’t be listened to.

This insight into the dynamics behind the mass media’s lies by omission are very valuable, and they help us paint a better picture about the reason we’re not seeing more discussion of these OPCW leaks.

*  *  *

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“As part of your rehabilitation, it’s crucial that you admit you have a problem – you are hijacking the Intelligence Committee for political purposes while excusing and covering up intelligence agency abuses.” -Devin Nunes to Adam Schiff

Rep. Devin Nunes (R-CA) has written perhaps the most brutal ‘I told ya so’ letter in recent memory to Adam Schiff, his Democratic rival and chairman of the House Intelligence Committee. 

After last week’s Inspector General report on FBI FISA abuse revealed Schiff was peddling lies to the American public in a February, 2018 ‘counter-memo’ to Nunes’s now-proven claims, Schiff passed the buck – telling Fox News host Chris Wallace on Sunday that he was ‘unaware’ of certain things unccovered by the IG – while failing to admit he’s been dead wrong on an ongoing basis about a number of things.

Nunes isn’t letting this go. In a Sunday letter, he reminded Schiff that “The IG’s findings of pervasive, major abuses by the FBI dramatically contradict the assertions of your memo released on February 24, 2018, in which you claimed, “FBI and DOJ officials did not ‘abuse’ the Foreign Intelligence Surveillance Act (FISA) process, omit material information, or subvert this vital tool to spy on the Trump Campaign.“

Schiff is in clear “need of rehabilitiation,” continues Nunes, adding “I hope this letter will serve as the first step in that vital process.“

“Outlining every false claim from your memo would require an extremely long letter,” Nunes continues, who then lists several key claims made by Schiff which ‘the IG report has exposed as false.’ 

• FBI and DOJ officials did not omit material information from the FISA warrant.

• The DOJ “made only narrow use of information from [Christopher] Steele’s sources about Page’s specific activities in 2016.”

• In subsequent FISA renewals, DOJ provided additional information that corroborated Steele’s reporting.

• The Page FISA warrant allowed the FBI to collect “valuable intelligence.”

• “Far from “omitting’ material facts about Steele, as the Majority claims. DOJ repeatedly informed the Court about Steele’s background, credibility, and potential bias.”

• The FI31 conducted a “rigorous process” to vet Steele’s allegations, and the Page FISA application explained the FBI’s reasonable basis for finding Steele credible.

• Steele’s prior reporting was used in criminal proceedings.

Nunes goes on to dismantle Schiff’s bullshit point by point using findings from the IG report, which include: 

• Information provided by Christopher Steele played a “central and essential role” in the decision to seek a FISA warrant on Carter Page.

• There were seventeen “significant errors or omissions” in the FISA application and renewals, and the IG did not get satisfactory explanations for them.

• The Crossfire Hurricane team failed to inform the DOJ of “significant information”, and “much of that information was inconsistent with, or undercut” assertions in the FISA applications.

• The FBI relied solely on Steele information for its assertions about Page’s alleged coordination with Russians to hack the 2016 elections.

(See entire list below)

Nunes then calls out Schiff for defending former UK spy Christopher Steele, whose discredited dossier funed by the Clinton campaign was peddled to the media six weeks before the 2016 US election. 

“As you know, your misguided validation of the FISA warrant was part of a years-long pattern in which you touted Christopher Steele’s credentials and reliability,” writes Nunes.

“For example, during this committee’s March 20, 2017 open hearing, you claimed Steele “is reportedly held in high regard by U.S. Intelligence.” and proceeded to read into the congressional record numerous conspiracy theories proffered by Steele, all of which are false.” 

Next, Nunes accused Schiff of participating in a coverup: 

As is clear from the 16 report, Carter Page was the victim of a smear campaign that was funded by the Democratic National Committee and the Hillary Clinton campaign and was implemented by Christopher Steele and Fusion GPS. The FBI used these false allegations to obtain a warrant to spy on Page, a gross violation of an American citizen’s civil liberties. Your direct participation in the smear campaign against Page is extremely concerning. considering you are chairman of the committee responsible for uncovering precisely these sorts of abuses by the Intelligence Community. Instead of joining committee Republicans in exposing these abuses, however, you excused them. And by supporting the agencies’ stonewalling of our attempts to gather information on this affair, you helped cover up this misconduct.

Because of Schiff’s misdeeds, and his blind faith in the US intelligence communities which the House Intelligence Committee is supposed to monitor, Nunes says “This makes it clear your rehabilitation will be a long, arduous process.” 

“this committee is responsible for overseeing the Intelligence Community and exposing abuses. Yet when the IG identified gross abuses in our jurisdiction, you expressed full faith in the agencies we’re supposed to be vigilantly monitoring. and you rejected any oversight whatsoever of their supposed clean-up efforts,” writes Nunes. 

Read the entire letter below:

***

Dear Chairman Schiff:

As you are aware, on December 9, 2019, U.S. Department of Justice Inspector General (IG) Michael Horowitz published the results of his investigation of the FISA warrant and renewals obtained by the Federal Bureau of Investigations (FBI) and the Department of Justice (DOJ) to spy on Trump campaign associate Carter Page. The IG’s findings of pervasive, major abuses by the FBI dramatically contradict the assertions of your memo released on February 24, 2018, in which you claimed, “FBI and DOJ officials did not ‘abuse’ the Foreign Intelligence Surveillance Act (FISA) process, omit material information, or subvert this vital tool to spy on the Trump Campaign.”

After publishing false conclusions of such enormity on a topic directly within this committee’s oversight responsibilities, it is clear you are in need of rehabilitation, and I hope this letter will serve as the first step in that vital process.

Outlining every false claim from your memo would require an extremely long letter, so I will limit my summary to a few highlights. In your memo you made the following assertions:

• FBI and DOJ officials did not omit material information from the FISA warrant.

• The DOJ “made only narrow use of information from [Christopher] Steele’s sources about Page’s specific activities in 2016.”

• In subsequent FISA renewals, DOJ provided additional information that corroborated Steele’s reporting.

• The Page FISA warrant allowed the FBI to collect “valuable intelligence.”

• “Far from “omitting’ material facts about Steele, as the Majority claims. DOJ repeatedly informed the Court about Steele’s background, credibility, and potential bias.”

• The FI31 conducted a “rigorous process” to vet Steele’s allegations, and the Page FISA application explained the FBI’s reasonable basis for finding Steele credible.

• Steele’s prior reporting was used in criminal proceedings.

The IG report has exposed all these declarations as false. Despite your denial of any problems with the FISA warrant, the 16 found:

• Information provided by Christopher Steele played a “central and essential role” in the decision to seek a FISA warrant on Carter Page.

• There were seventeen “significant errors or omissions” in the FISA application and renewals, and the IG did not get satisfactory explanations for them.

• The Crossfire Hurricane team failed to inform the DOJ of “significant information”, and “much of that information was inconsistent with, or undercut” assertions in the FISA applications.

• The FBI relied solely on Steele information for its assertions about Page’s alleged coordination with Russians to hack the 2016 elections.

• The applications omitted information provided to the FBI about Page’s operational contact with another U.S. government agency and the agency’s positive assessment of him. In fact, an FBI official altered an email stating that Page was a source for another government agency in order to have it read the opposite—that he was “not a source.”

• FBI Director James Conley and Deputy Director Andy McCabe sought to include Steele’s reporting in the Intelligence Community Assessment even though the CIA dismissed the Steele information as `Internet rumor.”

• In FBI interviews, Steele’s own sources contradicted information from Steele that was used in the FISA applications.

• The significance of Steele’s prior reporting was ‘-overstated.”

• None of the Steele reporting on Caner Page used in the FISA applications could be corroborated, and some of it contradicted other information in the FBI’s possession.

• The FBI omitted information about Steele’s bias provided by DOJ official Bruce Ohr.

• The applications omitted exculpatory statements by Page and others.

• The FBI failed to reveal in the applications that the Democratic National Committee and the Hillary’ Clinton campaign were receiving and/or funding Steele’s work through Fusion UPS.

Overall, the Inspector General found, “That so many basic and fundamental errors were made by three separate, hand-picked teams on one of the most sensitive FBI investigations that was briefed to the highest levels within the FBI, and that FBI officials expected would eventually be subjected to close scrutiny, raised significant questions regarding the FBI chain of command’s management and supervision of the FISA process… In our view, this was a failure of not only the operational team, but also of the managers and supervisors, including senior officials, in the chain of command.” Indeed, the problems are so severe that the Inspector General has initiated an audit to further investigate FBI’s compliance with Woods Procedures in FISA applications.

As you know, your misguided validation of the FISA warrant was part of a years-long pattern in which you touted Christopher Steele’s credentials and reliability. For example, during this committee’s March 20, 2017 open hearing, you claimed Steele “is reportedly held in high regard by U.S. Intelligence.” and proceeded to read into the congressional record numerous conspiracy theories proffered by Steele, all of which are false. These included:

• Carter Page had a secret meeting with Rosneft CEO Igor Sechin.

• Sechin offered Page a brokerage fee involving the sale of 19 percent of Rosneft.

• Russians offered the Trump campaign dirt on Hillary Clinton in exchange for the Trump administration adopting policies favorable to Russia

• Paul Manafort chose Page to act as a go-between for the Trump campaign and Russia.

As is clear from the 16 report, Carter Page was the victim of a smear campaign that was funded by the Democratic National Committee and the Hillary Clinton campaign and was implemented by Christopher Steele and Fusion GPS. The FBI used these false allegations to obtain a warrant to spy on Page, a gross violation of an American citizen’s civil liberties. Your direct participation in the smear campaign against Page is extremely concerning. considering you are chairman of the committee responsible for uncovering precisely these sorts of abuses by the Intelligence Community. Instead of joining committee Republicans in exposing these abuses, however, you excused them. And by supporting the agencies’ stonewalling of our attempts to gather information on this affair, you helped cover up this misconduct.

I am particularly concerned by the press release you issued after the release of the IG report. I applaud you for acknowledging that the report identified “issues and errors” and “potential misconduct” connected to the FISA warrant. This acknowledgement, though dramatically downplaying the scale of the abuse the IG uncovered, could be a valuable first step – a baby step, but a step nonetheless – in your rehabilitation. Nevertheless, in your statement you expressed full faith in FBI Director Christopher Wray’s promise to address the problem: demanded that the implementation of reforms be confined to “career officials, away from the political arena;” and denounced Attorney General Bill Barr and U.S. Attorney John Durham for expressing concerns about these matters.

This makes it clear your rehabilitation will be a long, arduous process. As previously noted, this committee is responsible for overseeing the Intelligence Community and exposing abuses. Yet when the IG identified gross abuses in our jurisdiction, you expressed full faith in the agencies we’re supposed to be vigilantly monitoring. and you rejected any oversight whatsoever of their supposed clean-up efforts. If agencies with a documented, severe abuse problem should be trusted to police themselves, then it’s fair to ask why this committee even exists and what we’re supposed to be doing, if anything, aside from being exploited by you as a launching pad to impeach the president for issues that have no intelligence component at all.

As part of your rehabilitation, it’s crucial that you admit you have a problem – you are hijacking the Intelligence Committee for political purposes while excusing and covering up intelligence agency abuses. The next step will be to convene a hearing with IG Horowitz, as the Senate Judiciary Committee has done and the Senate Homeland Security Committee will do next week.

I understand taking action on this issue will be difficult for you, as it will be an implicit acknowledgment that you were wrong to deny these abuses and that you were complicit in the violation of an American’s civil liberties. I also understand such an acknowledgement is made even more difficult by the fact that you’ve already been discredited by your years-long false claim that the Trump campaign colluded with Russia to hack the 2016 presidential election.

Nevertheless, I refuse to believe you are beyond redemption. I invite you to work closely with me on your rehabilitation program, and look forward to your scheduling a committee hearing with IG Horowitz at the nearest opportunity.

Thanks to the DOJ Inspector General report on FBI surveillance abuses, we now know that the agency didn’t just lie about former Trump campaign aide Carter Page – they fabricated evidence to obtain a surveillance warrant, excluding the fact that he had worked with the CIA.

But wait, there’s more!

Thanks to a deep dive into the IG report, the Mueller report, and interviews with Trump campaign officials, RealClearInvestigations‘ Paul Sperry has found another fraud on the American public perpetrated by James Comey’s FBI: The agency, as well as Special Counsel Robert Mueller, knew full well that Page wasn’t “an agent of Russia,” and that he had no role in gutting a pro-Russia / anti-Ukraine GOP platform plank at the 2016 convention.

Strap in, Sperry goes deep on this one.

***

Authored by Paul Sperry via RealClearInvestigations  (emphasis ours)

The FBI and Special Counsel Robert Mueller repeatedly kept alive a damning narrative that investigators knew to be false: namely, that a junior Trump campaign aide as a favor to the Kremlin had “gutted” an anti-Russia and pro-Ukraine plank in the Republican Party platform at the GOP’s 2016 convention. 

Federal authorities used this claim to help secure spy warrants on the aide in question, Carter Page, suggesting to the court that he was “an agent of Russia” – even though investigators knew that Page was working for U.S., not Russian, intelligence, and that they had learned from witnesses, emails and other evidence that Page had no role in drafting the Ukraine platform plank.

The revelation is buried in the Justice Department watchdog’s just-released report on FISA surveillance abuses. RealClearInvestigations fleshed out this unreported story with footnotes from the Mueller report and exclusive interviews with Trump campaign officials who worked on the convention platform.

Of all the Trump-Russia rumors, insinuations and falsehoods – from secret payments for shadowy hackers, to videotaped prostitutes with active bladders, to a clandestine rendezvous with Kremlin figures in Prague – the supposedly pro-Russia Ukraine platform alteration stands out. It seemed to offer early, public, concrete evidence of an actual bending of prospective U.S. policy to suit Moscow. The false narrative is also significant because it was initially pushed not by Democrats, but by associates of Republican Sen. John McCain and other so-called Never Trumpers. As a bipartisan red flag, it helped build momentum around a narrative of Trump treachery with, then as now, Ukraine playing a central role. It also shows how the Russia and Ukraine controversies were linked from the beginning by Trump’s foes.

This episode loomed so large that the first person Mueller’s team interviewed after taking over the Russia investigation in May 2017 was Rachel Hoff, who was serving as McCain’s policy adviser on the Senate Armed Services Committee. Like her boss, Hoff was no fan of President Trump. Agents sought to confirm with her reports that the Trump campaign had “gutted” the GOP’s platform plank on Ukraine to favor Russia during the party’s convention in Cleveland in early July 2016. 

As a disgruntled convention delegate, Hoff got the story started by putting Washington Post columnist Josh Rogin in touch with another Never Trump delegate, Diana Denman, who had lost her bid to amend the GOP plank to call for providing “lethal” weapons to Ukraine to help fend off Russian incursions, according to people with direct knowledge of the matter. Instead, the platform called for “appropriate assistance to the armed forces of Ukraine.”

Denman was overruled because heavily arming Ukraine was out of step with the GOP consensus at the time – to say nothing of the Obama administration’s policy, which refused to arm the Ukrainians. And it was at odds with Trump’s stated position, which sought to avoid military escalation in the region, while encouraging the European Union to take a larger peacekeeping role.

On July 18, 2016, the Post ran Rogin’s sensational story under the misleading headline, “Trump Campaign Guts GOP’s Anti-Russia Stance on Ukraine.” Pushing the narrative that Trump was doing the Kremlin’s bidding, it quoted Hoff warning that Trump “would be dangerous for America and the world.” The story left out the key part of the final Trump-approved plank pledging aid “to the armed forces of Ukraine.” Reached by phone, Rogin declined comment. 

This story was quickly amplified in the Steele dossier, the series of now-debunked opposition research memos alleging Trump-Russia collusion. Compiled by ex-British intelligence officer Christopher Steele for the Clinton campaign, those memos became a foundation for the FBI and Mueller probes even though – as this week’s IG report established – bureau agents knew that the material in them included demonstrably false assertions and exaggerated gossip dismissed as nonsense by Steele’s own purported source.

Steele also embellished the GOP convention story by claiming that Carter Page had played a key role in drafting the Ukraine plank as part of a commitment he had allegedly made to his Kremlin handlers “to sideline Russian intervention in Ukraine as a campaign issue.” 

None of this was true. And the FBI — and Mueller — knew it, the Justice inspector general reveals in his report.

Still, the FBI presented the Steele dossier’s smear, cataloged as “Steele Report 95,” as key evidence in all four of its warrant applications to obtain wiretaps to eavesdrop on Page, according to the IG report.

To keep renewing the spy warrants, the FBI had to produce fresh evidence for FISA judges to support suspicions Page was “an agent of Russia.” Just a few weeks before the FISA warrant was set to expire in June 2017, Mueller had his investigators interview Hoff, as his first witness, followed by Denman, hoping they could provide fresh details to keep building an espionage case against Page and the Trump campaign.

But Mueller struck out. 

According to agents’ notes documenting their June 2017 interview, as revealed in the IG report, Denham told the FBI that Page was not involved in the drafting of the Ukraine plank. But Mueller’s team did not update its fourth and final FISA warrant application on Page with this exculpatory information. Instead, it recited the same baseless claim that he had shaped the Ukraine policy with guidance from Russia. And the court renewed the warrant that June to electronically monitor Page, allowing the government to continue vacuuming up all of his emails, phone calls, text messages and other communications for another 90 days.

 “Although the FBI did not develop any information that Carter Page was involved in the Republican Platform Committee’s change, the FBI did not alter its assessment of Page’s involvement in the FISA applications,” Justice Department Inspector General Michael Horowitz noted in his 476-page report released Monday.

Added Horowitz: “We found that, other than this information from Report 95 [of the Steele dossier], the FBI’s investigation did not reveal any information to demonstrate that Page had any involvement with the Republican Platform Committee.” Yet, “all four FISA applications relied upon information in the Steele reporting” alleging Page’s role in drafting the Republican plank on Ukraine and Russia.

A former U.S. Navy lieutenant, Page was never charged with espionage or any crime. He told RealClearInvestigations that he has received “numerous death threats that directly resulted from the false allegations” that he was a traitor.

The FBI and Mueller failed to correct the record about Page in their FISA warrant applications even after they identified the Trump campaign officials who actually had a hand in influencing the GOP plank, J.D. Gordon and Matt Miller. A July 14, 2016, email from Gordon confirmed what Page had personally told the FBI in an interview — that he had not taken part in the decision. The FBI knew about the email since at least March 2017, when agents sat down with Page. (Gordon and Page were chatting by email about the convention, and it’s clear from Page’s responses he had no idea what Gordon had done in the Ukraine-Russia platform drafting sessions. IG Horowitz published the relevant excerpt in his report and noted the FBI had the email in its possession.)

Still, Horowitz found, “The FBI never altered the assessment.”

Horowitz further concluded that the FBI should not have included the dossier’s rumor even in its original October 2016 application for a FISA warrant targeting Page, let alone its three renewals, because a confidential source the FBI assigned to spy on Page at the time found no basis for it. In the IG report, Horowitz noted that during that same month of October 2016, the FBI informant met with Page and tape-recorded him denying he was involved in the drafting of the Ukraine plank. Page told the informant, Stefan Halper, that he “stayed clear of that.”

Horowitz’s investigators established that the informant’s recorded statements were sent to the FBI agent assigned at the time to Page’s case, and were copied to a supporting team of other agents, supervisors and analysts. Yet the FBI also withheld that critical exculpatory evidence from the FISA court in the initial application for a warrant on Page (and then continued to deny the court the information in subsequent requests to monitor Page).

The lead case agent, unnamed in the report, told investigators the FBI was operating on a “belief” that Page was involved in the Ukraine and Russia platform, and that he and the FISA team were “hoping to find evidence of that” from the wiretaps. Despite all the snooping on Page, the FBI never collected the hoped-for proof.

The lead supervisor, also unidentified, told investigators “he did not recall why Page’s denial was not included.”

Horowitz reports that the exculpatory documents were also sent to a Justice Department attorney before the warrant was renewed for the first time in January 2017, “[y]et, the information remained unchanged in the renewal applications.”

Added Horowitz: “The attorney told us that he did not recall the circumstances surrounding this, but he acknowledged that he should have updated the descriptions in the renewal applications to include Page’s denials.”

The FBI also failed to inform surveillance court judges that Page was an “operational contact” for the CIA for several years, according to the Horowitz report. In 2013, Page also volunteered as a cooperating witness in an FBI espionage case, and helped put away a real Russian agent in 2016. This was additional exculpatory evidence the FBI kept from the FISA court, as RealClearInvestigations first reported last year.

Peter Strzok, then the FBI’s top counterintelligence official, rode herd on the Page wiretap requests and reported back to FBI attorney Lisa Page (no relation to Carter), who in turn, updated then-Deputy FBI Director Andrew McCabe.

Text messages previously uncovered by Horowitz and shared with Mueller revealed that Strzok and Page, who were having an affair, rooted for Hillary Clinton during the 2016 campaign and held Trump in complete contempt. In one exchange, they discussed the need to “stop” Trump from winning the election. And the two of them had also huddled with McCabe in his office to devise an “insurance policy” in the “unlikely event” Trump ended up winning.

The inspector general’s report points out that it was McCabe who urged investigators to look at the Clinton-funded dossier. The previous year, his Democratic politician wife, Jill, received hundreds of thousands of dollars in donations arranged by Clinton ally and Virginia’s governor at the time, Terry McAuliffe.

Strzok remained central to the investigation well into 2017 – until Mueller was forced to kick him off his team when the anti-Trump bias was revealed. The bureau fired him in 2018, the same year Lisa Page resigned from the FBI. In spite of their anti-Trump political bias, Horowitz said he found “no evidence” their bias influenced their investigative decisions.

Lawyers for Strzok and McCabe did not respond to requests for comment. The FBI and a spokesman for Mueller declined comment.

Putting Carter Page under surveillance starting in October 2016 effectively let the FBI spy on the Trump campaign since its beginnings, because it allowed the bureau to scoop up all of Page’s prior communications. Former Trump officials who have reviewed Horowitz’s new findings confirmed their view that the bureau was trying to make it look like Page and the Trump campaign were doing something sinister to help Russia.

“Page actually had no role in the platform, whatsoever,” Gordon, the Trump campaign’s director of national security, told RCI. “Failing to include the exculpatory information in the FISA application is horrifying.” 

While it’s true that Trump sought better relations with Russia, Gordon said, there was nothing nefarious about the drafting of the Ukraine platform. He said the FBI simply assumed it was watered down as a favor to Russia based on a false narrative driven by liberal media outlets like the Post and Never Trumpers such as Rachel Hoff. He said the FBI, under the direction of McCabe, Mueller and former FBI Director James Comey, also wanted to believe the worst about Trump, whom they simply did not like.

Gordon noted that, except for the two Never Trump delegates, nobody in the platform drafting sessions raised a fuss about the Ukraine plank — not even the press.

“The media was present in the room, yet not one person wrote about the Ukraine issue,” he said — until, that is, the Never Trumpers went to the Washington Post that July and helped launch the Trump-Russia “collusion” myth.

Moreover, the narrative was untrue even on its own terms – without the spurious inclusion of Carter Page. Internal platform committee documents show the Ukraine plank could not have been weakened as claimed, because the “lethal” weapons language was never part of the GOP platform in the first place. The final language actually strengthened the platform by pledging direct assistance not just to the country of Ukraine, but to its military in its struggle against Russian-backed forces.

Far from “gutting” assistance, the Trump administration approved the transfer of tank-busting Javelin missiles to Kiev — something the Obama administration refused to do. More than 200 of those weapons have been sold to Ukraine since Trump took office. And the sale and delivery of Javelins never stopped even during this year’s temporary suspension of military aid to Ukraine that is now the subject of the Democrats’ impeachment proceedings.

The final draft of the Ukraine plank also branded Russia a menace, and pledged to stand against “any territorial change imposed by force in Ukraine.” Yet Mueller and his prosecuting staff of mostly Democratic donors still suspected collusion, and they dispatched FBI agents to grill Gordon about the drafting of the platform three times between 2017 and 2019. They also got a grand jury to subpoena his phone records.

In the end, the Mueller report found no Russian influence in the platform.

But the false narrative – that the Ukraine plank stood as early proof of the “extensive conspiracy” between the Trump campaign and Moscow that Steele alleged in his now-debunked dossier – has persisted. 

Earlier this year, House Judiciary Committee Chairman Jerry Nadler demanded Gordon provide additional documents, and he has complied. Nadler is now marking up articles of impeachment against Trump over a request he lodged with Ukraine’s new president this summer to help investigate the former Clinton-friendly regime’s attempts to “sabotage” Trump’s election bid in 2016. Trump also asked Kiev to look into possible corruption involving former Vice President Joe Biden’s son Hunter and a Ukrainian energy oligarch.

Meanwhile, Nadler’s impeachment partner, House Intelligence Committee Chairman Adam Schiff, continues to insist that the Trump team “softened” the GOP platform to accommodate “Putin’s invasion of Ukraine.” 

A retired Navy commander and former Pentagon spokesman, Gordon said he has run up a five-figure legal bill defending against what he calls a “hoax” perpetrated by Never Trumpers, the media, Comey, Mueller, and now congressional Democrats. 

“In the vicious frenzy to destroy President Trump and his associates at all costs, they attempted to turn a routine foreign policy debate in conjunction with the four-year renewal of the GOP platform into a crime scene,” Gordon said in an interview with RCI.

 “Incredibly,” he added, “the GOP platform change hoax [later] became the very first order of business in Mueller’s nearly two-year investigation.”

Trump’s “Phase One” deal left pretty much everyone disappointed: from experts who were expecting a realistic compromise between the two superpowers instead of the ludicrous and completely undoable Beijing promise to quadruple US agricultural purchases to $50 billion (a detailed explanation why this is impossible can be read in the following thread by the former USDA Chief Economist and USTR ag negotiator, Joe Glauber)…

1. So here is why I am skeptical about the size of the Phase 1 deal. US ag exports to China in FY 2017 were about $21.8 billion. Soybean exports accounted for $14.6 billion. pic.twitter.com/5LXRiZtjcU

— JoeGlauber–IFPRI (@JoeGlauber1) December 15, 2019

… to media pundits, to Trump’s political enemies (Schumer said the president “sold out” in phase one deal), to Wall Street banks (Goldman said  “The Tariff Reduction Is Only Half What We Expected”).

Not unironically, the only party that appears to be happy with the outcome of the “Phase One” deal in addition to Trump of course, is China: as the Chinese foreign minister Wang Yi said on Saturday, the China-U.S. trade deal “ serves as bullish news for both countries and the rest of the world.”

Here alarms should be going off, because if indeed both Trump and China are happy with the deal outcome, by definition that means that the US is reverting back to the old “non zero-sum” world where US politicians catered to China in the context of a globalized world. In other words, Trump’s effort to keep China’s superpower ascent in check appears to have taken a back seat to the president’s desire to keep markets supporter and avoid the shock of a fresh re-escalation of the trade war.

But is that feasible?

Before, we answer that question, here is a recap of what the Trump admin announced on Friday as part of the “Phase One” trade deal:

• List 4B (December 15) tariffs suspended: This was in line with our expectations and media reports in recent days.
• List 4a (September 1) tariff ratereduced to 7.5% from 15%: This falls short of expectations influenced in recent days by the media reports, where WSJ suggested broader and deeper tariff reductions were possible.
• List 1-3 tariffs remain unchanged: This too fell short of what the broader tariff rollbacks hinted by the media in recent days.

The first complication is that while Trump explicitly agreed to roll back some tariffs, substantial ambiguity on agriculture: While both sides agreed on increased agricultural and other US commodity purchases by China, it’s unclear what level such purchases will reach and how this will be enforceable. Given the US’s focus on this issue, experts remain concerned (and confident) that disappointment on this point as negotiations continue would be a potential catalyst for re-escalation of tariffs.

Yet even assuming no major re-escalation in the context of Phase One, which is in the history books, what happens next?

Well, as Morgan Stanley’s policy strategist Michael Zezas writes, with the easy stuff, i.e., the generally hollow and/or impossible promises that make up the bulk of Phase 1, agreed upon, it is only the difficult stuff that has to be resolved, or as MS puts it, “key execution risks remain as the US/China relationship moves forward.“

Specifically, the end of Phase 1 and commencement of Phase 2 negotiations will materially strain goodwill: recall, “Phase 2” negotiations are, per the US, to commence immediately. And given that ‘Phase 1’ focused on the “easy” topics that were ‘low-hanging fruit’, Zezas warns that “Phase 2 negotiations could be more challenging, problematic, and potentially subject to stalls, as both sides debate the far more difficult issues of industrial policy.”

In other words, Trump may have taken what wasn’t broken, namely the tried and true strategy of ramping the market higher on daily speculation and “trade deal optimism”, i.e., leaks, rumors and innuendo that an easy to achieve Phase 1 deal was imminent, and “fixed it”, in the process replacing the easy Phase 1 outcome with the vastly more complex Phase 2 process, where an agreement between the two superpowers and a successful outcome is next to impossible.

Hence, Morgan Stanley argues the dynamic has shifted from ‘uncertain pause’ to ‘uncertain progress’, with the following key takeaways for investors:

• No game-changer for the tariff burden: About $380bn of imports remain under tariff. While phase 1 reportedly includes an agreement in principle to reduce all remaining tariffs over time as progress is made on phase 2, it is unlikely that such progress can be made quickly, if at all, given the relatively intractable nature of industrial policy issues.
• No game-changer for corporate confidence: While this deal is certainly more durable than another simple swap of agricultural purchases for a pause in tariffs, the experience of this trade conflict has created a high hurdle for what corporate executives would judge to be confidence-inspiring. And as Morgan Stanley has noted in the past, companies in the US and China have already put plans in motion to protect themselves from changes in the US/China dynamic. It also means that they are unlikely to revert back to baseline as a result of Friday’s (non) deal.

In other words, as Morgan Stanley concludes, “given the execution risks going forward that we cited earlier and the lack of clarity on important details, we don’t yet have the conviction that this deal can be a catalyst to a meaningful uptick in business confidence.”

As for markets, the outcome could be even more dire for one simple reason: over the past year, the interminably recurring catalyst that pushed stocks ever higher, was “optimism” that a deal was imminent. Well the Phase One is “now in the books”, and not even the most gullible traders – or algos – will believe that a Phase 2 deal can be done before the elections, or frankly, ever. As such, the most important crutch behind the market climbing the trade war Wall of Worry for the past year is now gone.

Worse, by removing the risk of trade war, the Fed’s monetary policy will no longer be constrained on the downside by the risk of a potential trade war re-escalation. This is critical because as we explained in August, it was the Fed itself that was underwriting Trump’s trade war.

That said, there is a silver lining: the Fed’s “NOT QE” bailout of the repo market remains, and as long as Powell continues to inject hundreds of billions (just to stabilize a handful of banks and push markets higher), the risk of market bloodbath remains remote. However, if and when this process too begins to taper some time in Q2 2020, that may be the time to watch out below. Worst of all for Trump – this will take place just a few months before the November election. What he plans to do to full the void left by both “Trade Deal” optimism and “NOT QE4” remains unclear.

Authored by Alasdair Macleod via GoldMoney.com

So that we can understand the financial and banking challenges ahead of us, this article provides an historical and technical background. But we must first get an important definition right, and that is the cause of the periodic cycle of boom and bust. The cycle of economic activity is not a trade or business cycle, but a credit cycle. It is caused by fractional reserve banking and by banks loaning money into existence. The effect on business is then observed but is not the underlying cause.

Modern banking has its roots in England’s Bank Charter Act of 1844, which led to the practice of loaning money into existence, commonly described as fractional reserve banking. Fractional reserve banking is defined as making loans and taking in customer deposits in quantities that are multiples of the bank’s own capital. Case law in the wake of the 1844 act, having more regard for the status quo as established precedent than for the fundamentals of property law, ruled that irregular deposits (deposits for safekeeping) were no different from a loan. Judge Lord Cottenham’s ruling in Foley v. Hill (1848) 2 HLC 28 is a judicial decision relating to the fundamental nature of a bank which held in effect that

The money placed in the custody of the banker is to all intents and purposes, the money of the banker, to do with it as he pleases. He is guilty of no breach of trust in employing it. He is not answerable to the principal if he puts it into jeopardy, if he engages in haphazardous speculation.

This was undoubtedly the most important ruling of the last two centuries on money. Today, we know of nothing else other than legally confirmed fractional reserve banking. However, sound or honest banking, with banks acting as custodians, had existed in the centuries before the 1844 act and any corruption of the custody status was regarded as fraudulent.

This decision has shaped global banking to this day. It created a fundamental flaw in the gold-backed sound-money system, whereby the Bank of England, as a prototype central bank, could only issue extra sterling backed entirely by gold while a commercial bank could loan money into existence, the drawdown of which created deposit balances. The creation of these deposits on a systemwide basis meant that any excesses and deficiencies between banks were easily reconciled through interbank lending.

Bankers’ Groupthink and the Credit Cycle

While an individual bank could expand its balance sheet, the implications of all banks doing the same may have escaped the early banking pioneers operating under the 1844 act. Thus, when their balance sheets expanded to a multiple of the bank’s own capital, there was little cause for concern. After all, so long as a bank paid attention to its reputation it would always have access to the informal interbank market. And so long as it could call in its loans at short notice, the duration mismatch between funding by cash deposits and its loan book would be minimized.

Since the Bank Charter Act, experience has shown that the expansion of bank credit leads to a cycle of credit expansion, overexpansion, and then sudden contraction. The scale of bank lending was determined by its management, with lenders tending to be as much influenced by their own crowd psychology as by a holistic view of risk. Of course, the expansion of bank credit inflates economic activity, spreading a warm feeling of improving economic prospects and feeding back into increasing the bankers’ confidence even further. It then appears safe and reasonable to take on yet more lending business without increasing the bank’s capital.

With profits rapidly increasing due to lending being a multiple of the bank’s own capital, confident bankers begin to think strategically. They reduce their lending margins to attract business they believe to be important to their bank’s long-term future, knowing they can expand credit further against a background of improving economic conditions to compensate for lower margins. They begin to protect margins by borrowing short from depositors and offering businesses term loans, reaping the benefits of a rising slope in the yield curve.

The availability of cheap finance encourages businesses to enhance their profits in turn by increasing the ratio of debt to equity and by funding expansion through debt. By this point, a bank is likely to be raking in net interest on loan business amounting to eight or ten times its own capital. This means that an interest margin of a net two percent is a 20 percent return to the bank’s shareholders.

There is nothing like profitable success to boost confidence, and the line between it and overconfidence is naturally fuzzed by hubris. The crowd psychology fueled by a successful banking business leads to an availability of credit too great for decent borrowers to avail themselves of, so inevitably credit expansion becomes a financing opportunity for poorly thought out loan propositions.

Having oversupplied the market with credit, banks begin to expand their interests in other directions. They finance businesses abroad, oblivious to the fact that they have less control over collateral and legal redress generally. They expand by entering other lines of banking-related business, assuming that their skills as bankers can be extended into those other business lines profitably. A near contemporary example was Deutsche Bank’s failed expansion into global investment banking and principal trading in foreign securities and commodities. And who can forget Royal Bank of Scotland’s bid for ABN-Amro just as the credit cycle peaked before the last credit crisis.

At the time when their balance sheets have expanded to many multiples of their own capital, the banking crowd finds itself with lending margins too low to compensate for risk. Bad debts arising from their more aggressive lending decisions begin to materialize. One bank beginning to draw in its horns as it perceives it is out on a limb can probably be weathered by the system. But other bankers will stop and think about their own risks, bearing in mind that operational gearing works two ways.

Operational gearing may be marked by an unexpected event, or just an apparent loss of bullish momentum. With bad debts beginning to have an impact, groupthink quickly takes bankers from being greedy for more business to fearful of it. Initially, banks stop offering circulating credit, the overdraft facility that lubricates business activity. But when the credit tap is turned off former lending decisions begin to be exposed as bad, and investments in foreign lands begin to reflect their true risks. Lending in the interbank market dries up for the banks with poor or marginal reputations, and banks begin to report losses. Greed turns rapidly to fear.

The cycle of bank credit expansion then descends into a lending crisis, with increasing numbers of banks exposed as having taken on bad loans and becoming insolvent. A slump in business activity ensues. With frightening rapidity, all the hope and hype created by monetary expansion is destroyed by its contraction.

Before central banking evolved into acting as the representative and regulator for licensed banks, the credit cycle described above threw up some classic examples. Overend, Gurney and Company was the largest discount house in the world, trading in bills of exchange before it made long-term investments and became illiquid. When the railway boom faltered in 1866 it collapsed. The bank rate rose to 10 percent and there were widespread failures. Then there was the Baring crisis in 1890. Poor investments in Argentina led to the bank’s near bankruptcy. The Argentine economy slumped, as did the Brazilian one, which had been experiencing its own credit bubble. This time, a consortium of other banks rescued Barings. Nathan Rothschild remarked that if Barings hadn’t been rescued the entire banking system in London would have collapsed.

Out of Barings came the precedent of a central bank acting as lender of last resort, famously foreseen and promoted by Walter Bagehot.

In the nineteenth century it became clear that crowd psychology in the banks, the balance of greed and fear over lending, drove a repeating cycle of credit boom and slump. With the passage of time, bankers recovering their poise from the previous slump forgot its lessons and rhymed the same mistakes all over again. Analysts promoting theories of stock market cycles and cycles of economic activity need look no further for the underlying cause.

In the absence of credit expansion, businesses would come and go in random fashion. The coordinated expansion of credit changed that, with businesses being bunched into being created at the same time and then all failing at the same time. The process of creative destruction went from unnoticed market evolution to becoming a periodic violent event. Monetary institutions still ignore the benefits of events being random. Instead they double down, coordinating their interventions on a global scale with the inevitable consequence of making the credit cycle even more pronounced.

It is a huge mistake to call this repeating cycle a business cycle. The name implies that it comes down to the failure of free markets, of capitalism, when in fact it is entirely due to monetary and credit inflation licensed and promoted by governments and central banks.

The Rise of Central Banking

Following the Barings crisis of 1890, the concept of a lender of last resort was widely seen to be a solution to the alleged extremes of free markets. Initially, this meant that the bank nominated by the government to represent it in financial markets and to oversee the supply of bank notes took on a role of coordinating the rescue of a bank in difficulty in order to prevent a full-blown financial crisis. When the gold standard applied, however, it comprised the practical limitation of a central bank.

This was the general situation before the First World War. But, in fact, even under the gold standard there was significant inflation of base money occurring in the background. Between 1850 and 1914, aboveground gold stocks increased from about five thousand tons to nearly twenty-four thousand tons. Not all of it became monetary gold, but the amount that did was decided by the economic actors that used money, not the monetary planners as is the case today.

It was against this background that the US Federal Reserve Bank was founded in December 1913. Following World War I, the Federal Reserve became a powerful institution under the leadership of Benjamin Strong. Those early postwar years were turbulent: due to wartime inflationary financing, wholesale prices doubled in the US between 1914 and 1920 while the UK’s trebled. This was followed by a postwar slump, and by mid-1921 unemployment in the UK had soared to 25 percent. In the US, the Fordney-McCumber tariffs of 1922 restricted European debtors from trading with America, which was necessary to pay down their dollar debts. A number of countries descended into hyperinflation, and the Dawes Plan, designed to bail out the Europeans, followed in 1924.

Although America remained on a gold standard, Britain had suspended it, only going back to it in 1925. While the politicians decided overall policy, it was left to central bankers such as Strong at the Fed and Montague Norman at the Bank of England to manage the fallout. Their relationship was the most tangible evidence of central banks beginning to collaborate in the interests of mutual financial stability.

With the backing of ample gold reserves, Strong advocated for price targeting through the management of the money supply, particularly following the 1920–21 slump. His inflationary policies assisted in the management of the dollar-sterling exchange rate, supporting sterling, which at that time was not backed by gold. Strong also made attempts to develop a discount market in the US, which inflated credit markets further. One way and another, with the Fed following expansionary money policies and commercial bankers becoming more confident in lending prospects, monetary inflation fueled what came to be known as the Roaring Twenties.

That came to a sharp halt in October 1929, when the credit cycle turned, and the stock market crashed. Top to bottom, that month saw the Dow fall 35 percent. The trigger was Congress agreeing to the Smoot-Hawley Tariff Act on October 30, widely recognized at the time as a suicide note for the economy and markets, since it raised trade tariffs to an average of 60 percent from the Fordney-McCumber average of 38 percent. President Hoover signed it into law the following June, and by mid-1932 Wall Street had fallen 89 percent.

With such a clear signal to the bankers, it is not surprising that they drew in their horns, contracting credit and indiscriminatingly bankrupting their customers. All the expansion of bank credit since 1920 was reversed by 1934. Small banks went bankrupt in the thousands, overwhelmed by bad debts, particularly in the agricultural sector, as well as through loss of confidence among their depositors.

The depression of the 1930s overshadowed politics in the capitalist economies for the next forty years. Instead of learning the lessons of the destruction wrought through cycles of bank credit, economists doubled down, arguing that more monetary and credit inflation was the solution. To help economic sentiment recover, Keynes favored deficit spending by governments to take up the slack. He recommended a move away from savers being the suppliers of capital for investment in favor of the state taking a more active role in managing the economy through deficit spending and monetary inflation.

The printing of money, particularly dollars, continued under the guise of gold convertibility with the postwar Bretton Woods system. America accumulated enormous gold reserves; by 1957 they amounted to over twenty thousand tons — one-third of estimated aboveground gold stocks at that time. It felt secure in financing first the Korean and then the Vietnam War by printing dollars for export. Unsurprisingly, this led to the failure of the London gold pool in the late 1960s and to President Nixon suspending the fig leaf of dollar convertibility into gold in August 1971.

Once the dollar was freed from the discipline of gold, the repeating cycle of bank credit was augmented by the unfettered inflation of base money, a process that has continued to this day.

Last week’s apocalyptic report by repo market guru Zoltan Pozsar, which for those who missed it predicted that an imminent market crash and loss of control of overnight rates by the Fed would spark nothing short of QE4, sparked an unprecedented panic at the Federal Reserve, which just two days later unveiled a historic liquidity injection, in which the Fed promised to inject no less than $500 billion in the next 4 weeks to avert a catastrophic freeze in the repo market as we approach the year end “turn”, which would consist not only of a continuation of the Fed’s T-Bill POMO, but also a massive injection of nearly $500 billion in overnight and term repos in the coming days.

In other words, instead of a reactive QE4 – as predicted by Pozsar – the Fed will flood the repo market with a proactive firehose of liquidity.

There’s more: add in the incremental liquidity from the expanded overnight repo of about $50 billion and another $60 billion in T-Bill purchases, and the Fed will inject a total of just shy of $500 billion in the next 30 days. This also means that by Jan 14, the Fed’s balance sheet would have grown by a cumulative $365BN in “temporary” repos, and together with the expanded overnight repos, and the $60BN in monthly TBill purchases, and by mid-January, the Fed’s balance sheet, currently at $4.066 trillion, will surpass its all time high of $4.5 trillion!

The question then is whether this will be sufficient to refute the repo Doomsday predicted by Pozsar, one which was supposed to launch QE4, or will the Fed’s gargantuan liquidity injection still not be enough and lead to a collapse in the repo market.

Well, since the next key catalyst in the potential repo market turmoil is imminent, we may know as soon as tomorrow, when there is another large December corporate tax payment date (with as much as $78BN being remitted to the TSY) and another $54 billion in US Treasury settlements.

Recall, that as we explained last week, the mid-December funding dynamics looks very similar to mid-Sep except for the outsized role of the Fed. On Monday, Dec 16, Bank of America anticipates that $54Bn of UST coupon settlements coupled with what has historically been $30-50BN of corporate tax payments to UST. This could result in a UST cash balance inflow – or a liquidity drain – of up to $80-$100bn in just one day.

Also recall, every dollar of UST cash balance increase represents a similar USD reserve drain from the banking system, and a similar liquidity drain in mid-September culminated with the now historic explosion in overnight repo rates.

So should traders panic? Well, if the Fed’s gargantuan liquidity injection is anything to go by, the answer is no, and as BofA’s Mark Cabana writes, “despite the similarities we do not anticipate a material spike in funding due to the Fed’s ongoing reserve management operations.”

The main reason we do not anticipate considerable funding stress is due to the outsized presence of the Fed now vs mid-Sep. In mid-Sep the Fed was still under the impression it could drain reserves from the banking system without a material impact on funding levels. Since mid-Sept the Fed has learned the banking system has reached reserve scarcity and the Fed it is now adding reserves via repo operations and outright bill purchases to stabilize funding markets. The Fed will ensure it adds enough reserves to offset any Treasury cash balance drain in Dec.

Consider that as of last week, the Fed has provided $340bn in funding through their existing repo and bill purchase operations:

Furthermore, as revealed on Friday, in anticipation of the Monday liquidity drain, the Fed announced that it would expand the Monday term repo up to $50 billion, and extend the maturity date to January 17, allowing dealers to lock in excess liquidity well beyond the “turn”. However, contrary to Cabana’s expectation that “the Fed will increase O/N repo operation limits to around $200bn in the days surrounding Dec 16” there is some risk the Fed has misjudged how much net liquidity will be soaked up as a result of Monday’s drain.

As a result, Cabana notes that even with this operational change, funding could still be volatile as bank portfolios and money fund deposits get pared back amidst corporate outflows, while dealer intermediation of Fed repos may also be challenged with year-end regulatory reporting dynamics limiting how smoothly this funding gets passed along, something Pozsar discussed extensively last week.

In any case, the adjustment to Fed repo operations is the latest of measures undertaken to ensure repo remains relatively stable at year end, and although overnight repo markets will likely be volatile around year-end BofA’s concern around the turn has moderated in recent weeks and certainly after Friday’s announcement of a gargantuan liquidity backstop.

As a result, Cabana now “thinks the Fed has provided enough liquidity and dealers have adjusted their businesses around GSIB to ensure funding markets remain relatively stable leading into year end.” Ironically, the BofA strategist now sees risks that “funding trades too soft early in 2020 vs the Fed’s policy target range. This will likely result in one or two 5bps technical IOER increases to ensure fed funds does not fall below the Fed’s target range in 1H ’20” as the overall funding situation shifts from too little reserves, to too many, potentially forcing dealers to shift from the repo facility to the reverse repo facility!

Incidentally that observation was echoed by another repo market experts, Curvature’s Scott Skyrm, who on Friday penned the following year-end repo market prediction:

Soft December Funding

With the Fed committed to dumping $500 billion in liquidity into the market over year-end, there WILL be an abundance of cash overall. More cash will be added than will actually leave the market. However, the Fed is adding much of this cash via term RP operations over the next two weeks, whereas most of the cash is only needed for the Turn itself. I predict, by the last week in December, overnight GC rates will trade very soft. Perhaps opening at 1.50% each day – though GC will have a hard time dropping below the 1.45% RRP rate.

Soft Year-End Funding

I believe the Turn rate will close soft on year-end. Probably below 1.00%. What will be even more interesting is that Money Market Funds will be “crowded out” by the Fed cash entering the market. When Primary Dealer banks take billions of dollars of cash from the Fed, they will give all of their collateral to the Fed. That will leave little collateral for banks to give to Money Market Funds on the day of quarter-end – forcing the MMFs to go to the Fed’s RRP window. The Fed will effectively both loan cash into the market and borrow cash from the market.

Bottom line: after Pozsar’s apocalyptic forecast prompted the Fed to unleash a liquidity tsunami, fears about an imminent seizure in the repo market have faded, with BofA’s Cabana now writing that “overall, the Fed’s guiding hand should make market participants comfortable not to fear material repo stress around the mid-Dec corporate tax date and to believe any year-end funding pressures should be relatively short lived.”

Still, as Skyrm cautions, “there is still one major phantom year-end risk looming around the market. If the Fed’s term RP operations fully fund the Primary Dealer bank balance sheets and the banks cannot increase their balance sheets further, the last few Fed operations of the month might not have any takers. There is a chance there will be little Primary Dealer bank balance sheet left by year-end.”

In any case, when looking at tomorrow’s massive $100 billion liquidity drain, the repo market should be able to digest it without a spike in the G/C repo rate now that the Fed has effectively backstopped any and all year-end liquidity needs. If, however, the first repo prints come in elevated: at 2% or higher, it will mean that not even the Fed’s half a trillion dollar liquidity injection was enough, and that Pozsar’s fire and brimstone forecast is starting to come true.

Authored by Brett Tingley via TheDrive.com,

Recently retired U.S. Air Force Lieutenant General Steven L. Kwast gave a lecture last month that seems to further signal that the next major battlefield will be outer space. While military leadership rattling the space sabers is nothing new, Kwast’s lecture included comments that heavily hint at the possibility that the United States military and its industry partners may have already developed next-generation technologies that have the potential to drastically change the aerospace field, and human civilization, forever. Is this mere posturing or could we actually be on the verge of making science fiction a reality?

Who Is Steven Kwast?

According to his official USAF biography, Lt. Gen. Kwast graduated from the United States Air Force Academy with a degree in astronautical engineering, and also holds a master’s degree in public policy from Harvard’s Kennedy School of Government. Kwast previously served as Commander of the 47th Operations Group at Laughlin Air Force Base and the 4th Fighter Wing at Seymour Johnson AFB. Kwast boasts more than 3,300 flight hours in the F-15E, T-6, T-37, and T-38 and over 650 combat hours.  

Lt. Gen. Kwast most recently served as Commander of the Air Education and Training Command (AETC) at Joint Base San Antonio (JBSA), but retired in August. According to some reports, Kwast was prematurely relieved of his duties at JBSA and blacklisted for promotion after speaking out on space-related issues despite a service-wide gag order. Kwast declined to comment on the reports and retired on September 1, 2019.

Despite the controversy surrounding his removal from his post at AETC, some defense analysts and Lt. Gen. Kwast’s own supporters within the Armed Forces were suggesting prior to his retirement that he should be appointed as Commander of the Pentagon’s budding Space Force. Kwast has published several op-eds in recent years pushing for the U.S. military to take on a greater role in space in order to ensure American economic dominance and what he sees as the continued proliferation of American values. 

Gaining The High Ground In Space

Kwast delivered a lecture at Hillsdale College in Washington, D.C. on November 20, 2019, titled “The Urgent Need for a U.S. Space Force.” Kwast’s wide-ranging speech described the power of new technologies to revolutionize humankind, referencing the competitive advantage the discovery of fire offered to early humans and the strategic value that nuclear weapons offered 20th-century superpowers. When it comes to current revolutionary technologies, Kwast says the “the power of space will change world power forever” and that it’s up to the United States military to leverage that power: 

“As a historian, reflecting on the fact that throughout the history of mankind… technology has always changed world power. But the story of rejecting the new and holding and clinging to the paradigms of the past is why no civilization has ever lasted forever, and values are trumped by other values when another civilization figures out a way of finding a competitive advantage. The nature of power, you either have it and your values rule or you do not have it and you must submit. We see that play out again and again in history and it’s playing out now.”

As has been common as of late, Lt. Gen Kwast cites rapidly growing Chinese military and technological advances as the reason why the United States must invest heavily in new space-based technologies. “We can say today we are dominant in space but the trend lines are what you have to look at and they will pass us in the next few years if we do not do something. They will win this race and then they will put roadblocks up to space,” Kwast argues, “because once you get the high ground, that strategic high ground, it’s curtains for anybody trying to get to that high ground behind them.”

Kwast claims China is already building a “Navy in space” complete with the space-based equivalents of “battleships and destroyers” which are “able to maneuver and kill and communicate with dominance, and we [the United States] are not.” Kwast’s speech centers on the thesis that the United States needs a Space Force in order to counter Chinese advances and win the competition over the economy of the future and, as an extension, who sets the values of the future: 

“Space is the Navy for the 21st century economy, a networked economy that will dominate any linear terrestrial economy in the four engines of growth and dominance that change world power: transportation, information, energy, and manufacturing. […] Whoever gets to the new market sets the values for that market. And we could either have the market with the values of our Constitution […] or we could have the values we see manifest in China.”

As we’ve reported previously, there have been hints of radical new technologies under development by the military and, just as in Kwast’s speech, Chinese advances have been cited as the reason why these technologies are needed. China has been rapidly expanding its presence in space in recent years, placing a lander on the far side of the moon in late 2018 in what some say was a push to scout natural resources with which to develop a permanent lunar manufacturing center. China has also been developing “mothership” aircraft from which to rapidly and unpredictably launch spaceplanes and other payloads into space. The country has also launched several eyebrow-raising satellites in recent years which some analysts claim could be used in anti-satellite warfare. Beyond all this, they have been investing heavily in a traditional space program that includes many facets of manned and unmanned space technologies that rivals, and in some ways, exceeds our own. 

Setting the Stage for 21st Century Warfare

Kwast argues that the scientists, engineers, historians, and strategists of today have been pushing the U.S. Congress to more heavily and more rapidly fund the Space Force and associated technologies, but there is still some pushback and confusion as to why these are presently needed. Kwast ultimately makes the case that the United States must be able to bring kinetic power, non-kinetic power, and informational power to the battlefield cheaper and faster than its adversaries in order to ensure strategic advantage in space.

Around the 12:00 mark in the speech, Kwast makes the somewhat bizarre claim that the U.S. currently possesses revolutionary technologies that could render current aerospace capabilities obsolete:

“The technology is on the engineering benches today. But most Americans and most members of Congress have not had time to really look deeply at what is going on here. But I’ve had the benefit of 33 years of studying and becoming friends with these scientists. This technology can be built today with technology that is not developmental to deliver any human being from any place on planet Earth to any other place in less than an hour.“

Kwast’s comment is only one of several curious comments made by military leadership lately and they do seem to claim that we could be on the precipice of a great leap in transportation technology. We also don’t know exactly where he is coming from on all this as it is not necessarily the direct wheelhouse of someone who was running the Air Force’s training portfolio, although it does have overlaps. Whether or not the revolutionary aerospace technologies Kwast mentions have actually been developed is one thing, but Kwast’s lecture, his recent op-eds, and his supporters make it clear that there are many within the U.S. military and analyst community who have felt that there is a great need to boost investment in American space technologies and the U.S. military’s presence in space. That vision is certainly taking root across the Defense Department.

Is all this setting the stage for a new space race that will benefit mankind by furthering scientific and technological development, or is it ushering in the conditions for the first great space war? Only time will tell, but according to Kwast, the technologies needed to win that war may be more science fact than fiction.

No matter what the Democrats do to try and juice up some public hysteria about the impeachment process – from delaying votes to ‘prime-time’ to conjuring images of Trump holding Zelensky’s daughter hostage in the basement of The White House – it appears both public interest, and more importantly public support, for the impeachment of President Trump is slumping.

In the latest sign that Democrats are losing the public’s interest, Axios reports that The level of readers’ engagement on stories about impeachment has steeply declined since September, according to data from NewsWhip.

Source: NewsWhip

A trend that so vividly exposes the fact that while plenty of attention is being paid to the impeachment saga, it doesn’t draw the same level of emotion and enthusiasm that we saw in September.

Specifically, Axios notes that public interest hit its apex when the case against Trump was building and news cycles were driven by new revelations about Trump, Ukraine and the characters involved; but, after two weeks of public testimony in mid-November, the national conversation shifted from the accumulation of evidence to debate over whether that evidence was sufficient for impeachment and conviction.

And so as “interest” fades, so does “support” which, regardless of political affiliation, peaked in October.

For a brief glistening moment on The Hill, public support (based on the polls), topped 50% (on October 14th), but since then it has slid lower…

Source: FiveThirtyEight

As one would imagine, the support is split dramatically between Democrats (84.6%) and Republicans (10.0%) in favor of impeachment, but as the chart below shows, those whose mind remains “independent” – should those unicorns actually exist in the real life – have seen a dramatic slide in support.

Source: FiveThirtyEight

Finally, we note that, in addition to public interest (news report engagement) and public support (polls), the betting markets are also going “the wrong way” as PredictIt shows the odds of Trump serving out his first term are soaring back to pre-impeachment-process highs…

Source: PredictIt/Bloomberg

Simply put, no one trusts the news to get to the facts and when it is as boring, partisan, and predictable as this has been, who can blame them.

And don’t forget, Democrats have been planning this ‘coup’ since before the midterms, but according to the New York Times, Pelosi says she’s not going to push moderate Democrats to support the impeachment, saying she has “no message to them” and that “we’re not whipping this legislation.”

None of this appears to bother Rep. Eric Swalwell, who farted on live TV last week,

“I’m not focused on the polls, I know my colleagues aren’t either… this president used his great vast power to ask a foreign government to help him cheat an election.”

Sadly, Mr. Swalwell, with members of your own party mutinying, perhaps it is time to listen to “we, the people” after all.

And despite all the evidence above, House Intelligence Committee Chairman Adam Schiff insisted “it isn’t a failure” during an ABC News interview on Sunday.

“No, it isn’t a failure, at least it’s not a failure in the sense of our constitutional duty in the House,” he said.

Nine months ago, Schiff said that the “only thing worse than putting the country through the trauma of an impeachment is putting the country through the trauma of a failed impeachment.”

Rep. Jerrold Nadler, the House Judiciary Committee chairman whose panel drafted two articles of impeachment, also believes the impeachment push wouldn’t be a failure if not passed in the Senate.

During an interview on Sunday, Nadler was reminded that he previously stated that “before you impeach somebody, you have to persuade the American public that it ought to happen,” including “Trump voters.”

We suspect Pelosi and the core of the Democratic Party base would disagree on whether this whole process has been a “failure” or not.