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China has been stepping up its maritime combat readiness, according to analysts responding to official reports that the People’s Liberation Army (PLA) had staged at least three naval drills over the past week. 

On Monday, the Southern Theatre Command acknowledged over social media that a frigate fleet had recently performed drills – including simulated anti-submarine attacks and live-fire exercises, aimed at putting PLA forces through increasingly complex and realistic training scenarios. 

The command, which is one of five such units established by President Xi Jinping to represent China’s five strategic locations, did not disclose the locations of the exercises, but its area of responsibility encompasses the disputed South China Sea.

The images published online appeared to show at least five frigates and two helicopters taking part in the drills. –SCMP

Xinhua news reported on Saturday that over 10 warships from three theatre commands participated in a large-scale missile and air defense exercise in the East China Sea. Anti-air attack missiles were fired from two corvettes – the Meizhou and the Tongren, to intercept simulated “enemy” targets, while serving under the command of guided missile frigate Jingzhou – which observed and gathered data. 

The third drill took place in the Yellow Sea between Friday and Monday, according to China’s Maritime Safety Administration – which did not release any more data than the location. 

Some observers have speculated that the exercise may have included China’s first domestically produced aircraft carrier – the Type 001A, due to the drill’s proximity to Quingdao – the ship’s home port in the eastern China province of Shandong. 

The exercises come amid a growing trade war between Washington and Beijing – as well as China’s turbulent relations with Taiwan. On Sunday, Taiwan President Stai Ing-wen embarked on a nine-day trip to Belize and Paraguay – two of just 18 nations which still maintain diplomatic ties with the island nation. 

Military experts said that the PLA drills were intended as a show of strength to both the United States and pro-independence forces in Taiwan, which Beijing regards as a breakaway province. –SCMP

“The anti-air and anti-missile exercises in the East China Sea are intended to ensure a safe environment for China’s aircraft carriers, which means an aircraft combat group is preparing to go further out to sea,” said military observer Song Zhongping, who added “It sends a very clear signal to Taiwan’s independence forces and deters any intervention into Taiwan affairs by the US or Japan.”

Meanwhile, military commenter Li Jie said that in the event off armed conflict between Beijing and Taipei, the East China Sea would be a primary battleground. Jie said that Beijing would not sit idly if it thought it was being provoked in the region. 

“Although Sino-Japanese relations have warmed recently, China is still very suspicious of Japan’s military development and needs to prepare,” he said.

Japan’s defence ministry is reported to have requested US$160 million to pay for new long-range missiles in response to the growing military threat in East Asia. –SCMP

Beijing military expert Zhou Chenming added that the three drills were designed to test China’s naval capabilities following a sweeping program of military restructuring and modernization. 

“Through the drills that replicate war scenarios, military authorities can better understand whether the navy needs more equipment, and also test the compatibility of its old and new weapons,” he said, adding “Most importantly, it can see whether the [navy’s] combat capability has been strengthened or not.”

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Authored by Andrew Korybko via Oriental Review,

The head of the Russian Armed Forces General Staff Valery Gerasimov asked his closest American counterpart Joseph Dunford to assist his country in jointly stabilizing Syria.

Gen. Joe Dunford (left) and Gen. Valery Gerasimov (right), Helsinki, Finland, June 8, 2018

Reuters reported that the proposal to cooperate on the repatriation of refugees and reconstruction projects in the Arab Republic was met with an “icy reception” by US decision makers, though this could have been expected considering that Washington had previously said that any assistance that it might provide to the government-controlled areas of Syria would be tied to the implementation of UNSC 2254’s constitutional reform and new elections.

Furthermore, President Assad declared in late June that his government wouldn’t accept reconstruction funds from the same countries that contributed to destroying his own, though if the leaked details of Gerasimov’s message to Dunford are to be believed, then Russia’s assessment is that Damascus “lacks the equipment, fuel, other material, and funding needed to rebuild the country in order to accept refugee returns”, hence the reason for reaching out to the US.

While there were high hopes that Presidents Putin and Trump might have reached an understanding on Syria during last month’s Helsinki Summit, it appears as though expectations might be dashed after this latest setback.

The US veritably has an interest in focusing its reconstruction efforts and post-war development projects on the Kurdish-controlled proxy state in the northeastern agriculturally and energy-rich corner of the country that it’s already deployed roughly two thousand troops to, so there’s a certain logic to rebuffing the latest Russian offer. Even though the Kurds and Damascus have reportedly entered into talks with one another, this is unlikely to lead to the dissolution of the US’ protectorate and will probably find a way to “formalize” it through mutually acceptable “compromises” that figure into the ongoing constitutional reform process.

Although the leaking of Gerasimov’s proposal to Dunford was probably done by Trump’s “deep state” enemies in a desperate attempt to undermine what they may have feared was the President’s “secret deal” with Putin, it inadvertently harms the US’ soft power standing because it confirms that America doesn’t really care about the welfare of the Syrian people or the return of refugees from the region and beyond in spite of its repeated statements to the contrary over the years.

Making humanitarian and developmental assistance conditional on political factors is Machiavellian to the core but unsurprising to those who have a solid understanding of the cynicism behind American strategic planning. It’s also proof that the US is indirectly weaponizing refugees and developmental assistance in order to advance its objectives, something that its supporters have always denied but which is now undebatable.

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When the history books are written after the robot uprising, should we survive, a sad chapter will be devoted to the day humans were bested at yet another simple feat by one of our silicon overlords; finding Waldo.

According to The Verge, creative agency Redpepper has created There’s Waldo – robotic metal arm made by Ufactory with a Vision Camera Kit and a floppy prosthetic hand attached to it, all powered by a tiny Raspberry Pi computer.

The camera takes a photo of the page, which then uses OpenCV to find the possible Waldo faces in the photo. The faces are then sent to be analyzed by Google’s AutoML Vision service, which has been trained on photos of Waldo. If the robot determines a match with 95 percent confidence or higher, it’ll point to all the Waldos it can find on the page. –The Verge

Google’s Cloud AutoML, available since January, allows users to train their own AI tools without prior coding knowledge using a drag-and-drop tool for image recognition purposes. The tool can be trained for a variety of cases, such as categorizing photos. 

Redpepper creative technologist Matt Reed told The Verge via email: “I got all of the Waldo training images from Google Image Search; 62 distinct Waldo heads and 45 Waldo heads plus body. I thought that wouldn’t be enough data to build a strong model but it gives surprisingly good predictions on Waldos that weren’t in the original training set.”

Reed was inspired by Amazon Rekognition’s ability to recognize celebrities, and wanted to experiment on a similar system which supported cartoons. He had no prior experience with AutoML, and it took him about a week to code the robot in Python. –The Verge

 What will robots take the fun out of next? 

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Authored by Charles Hugh Smith via OfTwoMinds blog,

Technocrats rule the world, East and West alike.

We are in a very peculiar ideological and political place in which Democracy (oh sainted Democracy) is a very good thing, unless the voters reject the technocrat class’s leadership. Then the velvet gloves come off. From the perspective of the elites and their technocrat apparatchiks, elections have only one purpose: to rubberstamp their leadership.

As a general rule, this is easily managed by spending hundreds of millions of dollars on advertising and bribes to the cartels and insider fiefdoms who pony up most of the cash.

This is why incumbents win the vast majority of elections. Once in power, they issue the bribes and payoffs needed to guarantee funding next election cycle.

The occasional incumbent who is voted out of office made one of two mistakes:

1. He/she showed a very troubling bit of independence from the technocrat status quo, so a more orthodox candidate is selected to eliminate him/her.

2. The incumbent forgot to put on a charade of “listening to my constituency” etc.

If restive voters can’t be bamboozled into passively supporting the technocrat status quo with the usual propaganda, divide and conquer is the preferred strategy. Only voting for the technocrat class (of any party, it doesn’t really matter) will save us from the evil Other: Deplorables, socialists, commies, fascists, etc.

In extreme cases where the masses confound the status quo by voting against the technocrat class (i.e. against globalization, financialization, Empire), then the elites/technocrats will punish them with austerity or a managed recession.The technocrat’s core ideology boils down to this:

1. The masses are dangerously incapable of making wise decisions about anything, so we have to persuade them to do our bidding. Any dissent will be punished, marginalized, censored or shut down under some pretext of “protecting the public” or violation of some open-ended statute.

2. To insure this happy outcome, we must use all the powers of propaganda, up to and including rigged statistics, bogus “facts” (official fake news can’t be fake news, etc.), divide and conquer, fear-mongering, misdirection and so on.

3. We must relentlessly centralize all power, wealth and authority so the masses have no escape or independence left to threaten us. We must control everything, for their own good of course.

4. Globalization must be presented not as a gargantuan fraud that has stripmined the planet and its inhabitants, but as the sole wellspring of endless, permanent prosperity.

5. If the masses refuse to rubberstamp our leadership, they will be punished and told the source of their punishment is their rejection of globalization, financialization and Empire.

Technocrats rule the world, East and West alike. My two favorite charts of the outcome of technocrats running things to suit their elite masters are:

The state-cartel-crony-capitalist version: the top .1% skim the vast majority of the gains in income and wealth. Globalization, financialization and Empire sure do rack up impressive gains. Too bad they’re concentrated in the top 1.%.

The state-crony-socialist version: the currency is destroyed, impoverishing everyone but the top .1% who transferred their wealth to Miami, London and Zurich long ago. Hmm, do you discern a pattern here in the elite-technocrat regime?

Ideology is just a cover you slip over the machine to mask what’s really going on.

*  *  *

My new book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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The FBI is warning of an “imminent” global cyberattack on ATM machines that could result in millions of dollars withdrawn from bank accounts far and wide, in a similar “cash-out” attack to one in 2009 which hit ATMs worldwide to the tune of $9 million. 

“The FBI has obtained unspecified reporting indicating cyber criminals are planning to conduct a global Automated Teller Machine (ATM) cash-out scheme in the coming days, likely associated with an unknown card issuer breach and commonly referred to as an ‘unlimited operation’,” according to an FBI alert to banks that was obtained by noted cybersecurity expert Brian Krebs. 

Krebs describes it as a “highly choreographed, global fraud scheme known as an “ATM cash-out,” in which crooks hack a bank or payment card processor and use cloned cards at cash machines around the world to fraudulently withdraw millions of dollars in just a few hours.” 

“Historic compromises have included small-to-medium size financial institutions, likely due to less robust implementation of cyber security controls, budgets, or third-party vendor vulnerabilities. The FBI expects the ubiquity of this activity to continue or possibly increase in the near future,” the FBI statement reads. 

In other words, financial institutions which haven’t upgraded to the latest and greatest in security measures are vulnerable to attack. And since banks will likely reimburse anyone affected by the breach, the FBI’s warning should particularly interest small-to-mid sized banks using outdated technology. 

In July, two similar “unlimited operation” attacks resulted in losses of $2.4 million from the National Bank of Blacksburg according to Krebs, who broke the story. 

In both cases, the attackers managed to phish someone working at the Blacksburg, Virginia-based small bank. From there, the intruders compromised systems the bank used to manage credits and debits to customer accounts.

The 2016 unlimited operation against National Bank began Saturday, May 28, 2016 and continued through the following Monday. That particular Monday was Memorial Day, a federal holiday in the United States, meaning bank branches were closed for more than two days after the heist began. All told, the attackers managed to siphon almost $570,000 in the 2016 attack.

The Blacksburg bank hackers struck again on Saturday, January 7, and by Monday Jan 9 had succeeded in withdrawing almost $2 million in another unlimited ATM cashout operation. –Krebs On Security

Meanwhile, the FBI is advising banks on best security practices, such as two-factor authentication using physical or digital tokens, as well as beefed up password requirements. 

The FBI issued a similar alert in 2009, after a “wave of thieves fanned out across the globe nearly simultaneously. With cloned or stolen debit cards in hand—and the PINs to go with them—they hit more than 2,100 money machines in at least 280 cities on three continents, in such countries as the U.S., Canada, Italy, Hong Kong, Japan, Estonia, Russia, and the Ukraine.”

When it was all over—incredibly within 12 hours—the thieves walked off with a total of more than $9 million in cash. And that figure would’ve been more had the targeted ATMs not been drained of all their money.

The alleged masterminds of this slick scheme—prosecutors charged earlier this month following an extensive FBI investigation assisted by other federal agencies and our partners around the globe—were three 20-something Eastern Europeans and an unnamed person called simply “Hacker 3.” –FBI (via archive.is)

We’re sure the establishment’s cashless society will fix all these annoying vulnerabilities. 

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Authored by Neels Heyneke and Mehul Daya via Nedbank,

It’s not just Turkey, the dollar liquidity storm is ahead of us – buckle up.

Bottom line: Should Global $-Liquidity and Global financial conditions fail to improve or even contract further we can expect a deflationary environment to materialise. In this environment we prefer to maintain defensive investment portfolios i.e. Cash over bond over equities.

We cannot stress enough the importance of the 95 level on the US Dollar index. A confirmed break above this level will mark the beginning of the next risk-off phase. More importantly, it is not the value of the US Dollar Index per se that matters, but rather what it represents – i.e. expansion/contraction in the pool of money.

Astonishingly for us, there is a high correlation with causality in our opinion between every financial market cycle (VIX) and with the story count in which the world “DOLLAR LIQUIDITY” appears. This is another example of how the availability of US Dollars has a profound effect on financial markets.

Probably the most defining photo in decades to come…

• The political consequences of this photo gets a lot of coverage, we however would like the point out the importance of this photo with regards to the current USD-based monetary system that the world so heavily relies upon.

• Trump and his “bring back my money” home will suck-up all the USD from the rest of the world – the next crisis will be centred around the shortage of USD’s which the world heavily relies on.

A symbiotic economic relationship grew post the fall of the Berlin wall between the developed and developing economies with the rise of globalization. The US was a major consumer of the world’s production and the consequence was a $11 trillion cumulative trade deficit with the rest of the world – during this period the world’s USD monetary base grew from 4 to 16% of global GDP.

A consequence of globalisation was disinflation which allowed central banks to cut policy rates (discount factors). This helped stimulate economic growth and fuel asset prices. The destructive inflationary episode of the 1970’s meant monetary policy became focused on consumer inflation targeting.

This caused investors to became obsessed with the monetary policy cycle. The market did not appear to pay attention to the extraordinary growth in the USD monetary base instead focussing on measuring the price of money (CPI) and not the quantum. This is still the case today. What resulted was all asset classes out-performed GDP as the rising tide of $-liquidity lifted all ships.

Now that the USD monetary base or ‘tide of liquidity’ has started to recede central banks are starting to play an active role in controlling the quantum (viaQE), and not just the price of the monetary base (via policy rates).

We believe that with this shrinking USD monetary base it becomes as important to understand liquidity, global flows and the role the dollar plays as the reserve currency in order to identify the right investment destination.

The challenge for investment manager will be for investors to identify the optimal asset class (beta) in a receding ‘tide of liquidity environment’.

On top of the ballooning monetary base we mentioned above, the debt creation process went through a major evolutionary process of its own and gearing in the system grew dramatically. The fractional banking system has been around for 600 years and banks traditionally lend out the same money 14 times. Just before the 2008 GFC global banks lent out the same money in excess of 40 times!

The reason being, on top of the regulated banking sector there was the shadow banking sector that regulators failed to monitor. There was also the Eurodollar system – the dollar banking system outside the US, that no regulator monitored. All in all, there was more money and credit in the system than regulators, economists and analysts were aware of because it did not show up in consumer inflation. The important question is where is this excess money/debt. The answer lies in asset inflation and how asset prices managed to out-perform the real economyfor30-years.

It is not just the global real economy that cannot afford a shrinking base of the money pyramid. The indebted balance sheets of the world cannot afford the asset deflation that will go hand in hand with shrinking money supply.

In a volatile world where the growing US dollar monetary base of the last 30-years is changing, we believe investors should pay more attention to the source of money.

Oops – USD debt outside the US is massive and is systemic.

Post WWII global trade took off and the importance of the dollar grew, this accelerated in the late 1980s. Today 60% of the world’s countries are linked to the dollar. The US GDP share of the world economy has however declined from 27 to 18% over the same period – remember the US is the only provider of USD base money.

Should global growth become less synchronized the US deficit will shrink. This will provide less USD into the global financial system resulting in a shortage of dollars. Tighter monetary policy from the Fed, a higher Fed funds rate and shrinking of the Fed’s balance sheet, will further slowdown USD creation.

The shrinking dollar monetary base will slow down the credit creation process because the economy is so highly geared. This shrinking pool of dollars will cause the dollar to rise. The strengthening USD means higher offshore USD funding, this will hurt USD indebted nations/corporations.

In this environment i.e. tighter global financial conditions, the infamous carry-trade will come under pressure and the misallocation of credit will be revealed. EMs will be at the centre of the misallocation of credit.

As the US trade deficit fuelled the global monetary base from 4 to 16% of global GDP, and the process of Financialisation began – the gap between the real economy and financial markets accelerated from the late 1980’s accelerating up out of an 80-year old band.

The tail is wagging the dog. Next crisis will be in the financial markets and not the real economy – as has been the case for many decades now.

A slowdown in debt creation will not bode well for financial assets.

Market view:

• We conclude the world needs an injection of Global $-Liquidity soon to improve global financial conditions. If the cavalry fails to arrive (QE4, material uptick in global growth) we can expect global financial conditions to contract and the USD to appreciate.  In this scenario, a stronger USD and rising offshore USD funding costs will lead to a risk-off phase. Dollar indebted countries, corporations and the carry-trades will be most impacted.

• The US Dollar index is going up – because the Eurodollar system is stalling.

The monetary base as percentage of global trade (see above) started to roll over post the 2008 GFC. The dollar started to rally as the total pool of dollars started to shrink driven by the financial system deleveraging.

With global interest rates at historical low levels, covered interest parity – the prominent driver of currencies – also started to break down.

It is a meaningful technical analysis signal that the dollar index failed to break back into the bear trend at 88 that has been in place since the 1985 Plaza Accord.

The US dollar index has now reached our first target level at 95 and we expect a consolidation phase over the next few weeks. A sustained break above this level will project a move to above the 2017 high at 103.80.

 

The most important chart for EM / DM asset allocation is centred on changes in USD liquidity.

EM’s are on the verge of another 1998.

Since the 1980’s there has been major cycles of money flow moving in and out of emerging markets. We believe dollar liquidity played a major role in these cycles stemming from commodities being traded in dollars.

It was not just the Fed that bailed out the markets in 2009. The big rally in EMs post the GFC was on the back of the commodity run which was fuelled by the Chinese ‘bail-out’. The rising commodity prices (and petro-dollar balances) added many dollars to the financial system. Commodity prices peaked in 2011 and fell until the end of 2015 and EM’s started to under-perform. The rising liquidity that triggered the risk-on phase of 2016-2017 came from the rising oil price ($28 to 78) and the ECB flooding the system. This however came to an end in February 2018.

This relative chart warned in 1994 already that emerging markets were slowing down although the crisis only materialised in 1997/8. In 1998 EM’s especially SE Asia had fixed exchange rates and their currencies could not buffer them against capital out-flows. Most of these countries now have floating currencies and reserves, but post 2008 they have taken on substantial USD debt putting them in the same situation as in 1998.

Hence our concern, if global liquidity does not improve soon EMs will be very vulnerable to major outflows again.

Lastly – if the pool of USD is going to shrink, then the price of USD must rise – i.e. term–premium higher offshore funding will be dreadful for leveraged carry-traders who will de-risk. It is the funding currency that will be forcing them out and not the fundamentals of where the money was invested – exactly what happened during 1H18.

We often face the question, “but where will the money go?” – The answer is nowhere, because most of the funds was never true savings, it was a loan created against some collateral. When the money returns to the source the loaned gets repaid.

Lastly – Get ready for higher funding costs as the pool USD shrinks, the price of USD money will rise too.

With the Fed continuing with interest rate hikes and shrinking of its balance sheet, the US Treasury issuing more debt, absorbing USD flows, China slowing down (dollar creation via commodity cycle), other central banks slowing down QE (roc matters) and a Trump with his “bring back my dollars, jobs home” – the world and financial markets better be prepared for a dollar shortage.

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After a  fifth straight month of contraction in the shadow banking system…

…and the amid the ongoing collapse of its currency, a deluge of major Chinese macro data disappointed notably tonight.

• Retail Sales missed expectations – rising just 8.8% YoY (against +9.1% exp), slowing from 9.0% in June.

• Industrial Production also disappointed, rising just 6.0% against expectations of a 6.3% rise.

• Fixed Assets Investment rose just 5.5% – its lowest on record and well below expectations of a 6.0% rise.

It seems China is going to have get that credit impulse ramping back up again…

Offshore Yuan is fading back towards last week’s cycle lows.

 

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The myth surrounding “highly sophisticated” ‘Russian’ hackers “meddling” with US elections continues to be pushed by the mainstream media, promulgated by such luminaries of fear as Senator Mark Warner who will seemingly not be satisfied until a) Democrats run it all, and b) all Russians are locked up.

However, as will surprise few, a competition in Las Vegas shows that when it comes to interfering with a US election, even a child can do it.

Hosted by technology non-profit R00tz Asylum, the competition was held on the sidelines of the annual Def Con hacking conference in Las Vegas, where RT reports that children between the ages of 8 and 17 were tasked with hacking into replica election office websites in key “battleground” states where the upcoming US midterm elections in November are expected to be tight.

Of the 39 contestants who entered, 35 were successful in breaking into the sites with the fastest being 11-year old Audrey Jones.

She cracked the site’s code in just 10 minutes.

While R00tz Asylum’s mantra is “hacking for good,” it exposes glaring vulnerabilities to the cyber security of the US election system despite a whopping $380 million approved by Congress to improve cyber-security for elections in 2018 alone.

But blaming Hillary’s loss on an 11-year-old American girl doesn’t have quite the same impact as the nefarious-sounding Russian hacking empire…

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Authored by Paul Craig Roberts,

The Russian and Chinese governments are puzzling. They hold all the cards in the sanction wars and sit there with no wits whatsoever as to how to play them.

The Russians won’t get any help from the Western media which obscures the issue by stressing that the Russian government doesn’t want to deprive its citizens of consumer goods from the West, which is precisely what Washington’s sanctions intend to do.

The Russian and Chinese governments are in Washington’s hands because Russia and China, thinking that capitalism had won, quickly adopted American neoliberal economics, which is a propaganda device that serves only American interests.

For years NASA has been unable to function without Russian rocket engines. Despite all the sanctions, insults, military provocations, the Russian government still sends NASA the engines. Why? Because the Russian economists tell the government that foreign exchange is essential to Russia’s development.

Europe is dependent on Russian energy to run its factories and to keep warm in winter. But Russia does not turn off the energy in response to Europe’s participation in Washington’s sanctions, because the Russian economists tell the government that foreign exchange is essential to Russia’s development.

As Michael Hudson and I explained on a number of occasions, this is nonsense. Russia’s development is dependent in no way on the acquisition of foreign currencies.

The Russians are also convinced that they need foreign investment, which serves only to drain profits out of their economy.

The Russians are also convinced that they should freely trade their currency, thereby subjecting the ruble to manipulation on foreign exchange markets. If Washington wants to bring a currency crisis to Russia, all the Federal Reserve, its vassal Japanese, EU, and UK central banks have to do is to short the ruble. Hedge funds and speculators join in for the profits.

Neoliberal economics is a hoax, and the Russians have fallen for it.

So have the Chinese

Suppose that when all these accusations against Russia began – take the alleged attack on the Skirpals for example – Putin had stood up and said:

“The British government is lying through its teeth and so is every government including that of Washington that echoes this lie. Russia regards this lie as highly provocative and as a part of a propaganda campaign to prepare Western peoples for military attack on Russia. The constant stream of gratuitous lies and military exercises on our border have convinced Russia that the West intends war. The consequence will be the total destruction of the United States and its puppets.”

That would have been the end of the gratuitous provocations, military exercises, and sanctions.

Instead, we heard about “misunderstandings” with out “American partners,” which encouraged more lies and more provocations.

Or, for a more mild response, Putin could have announced: “As Washington and its servile European puppets have sanctioned us, we are turning off the rocket engines, all energy to Europe, titanium to US aircraft companies, banning overflights of US cargo and passenger aircraft, and putting in place punitive measures against all US firms operating in Russia.”

One reason, perhaps, that Russia does not do this in addition to Russia’s mistaken belief that it needs Western money and good will is that Russia mistakenly thinks that Washington will steal their European energy market and ship natural gas to Europe. No such infrastructure exists. It would take several years to develop the infrastructure. By then Europe would have mass unemployment and would have frozen in several winters.

What about China?

China hosts a large number of major US corporations, including Apple, the largest capitalized corporation in the world. China can simply nationalize without compensation, as South Africa is doing to white South African farmers without any Western protest, all global corporations operating in China. Washington would be overwhelmed with global corporations demanding removal of every sanction on China and complete subservience of Washington to the Chinese government.

Or, or in addition, China could dump all $1.2 trillion of its US Treasuries. The Federal Reserve would quickly print the money to buy the bonds so that the price did not collapse. China could then dump the dollars that the Fed printed in order to redeem the bonds. The Fed cannot print the foreign curriences with which to purchase the dollars. The dollar would plummet and not be worth a Venezuelan bolivar unless Washington could order its pupper foreign central banks in Japan, UK, and EU to print their currencies in order to purchase the dollars. This, even if complied with, would cause a great deal of stress in what is called “the Western alliance,” but what is really Washington’s Empire.

Why don’t the Russian and Chinese play their winning hands? The reason is that neither government has any advisers who are not brainwashed by neoliberalism. The brainwashing that Americans gave Russia during the Yeltsin years has been institutionalized in Russian institutions. Trapped in this box, Russia is a sitting duck for Washington.

Turkey is a perfect opportunity for Russia and China to step forward and remove Turkey from NATO. The two countries could offer Turkey membership in BRICS, trade deals, and mutual security treaties. China could easily buy up the Turkish currency off foreign exchange markets. The same could be done for Iran. Yet neither Russia nor China appear capable of decisive action. The two countries, both under attack as Turkey is from Washington, sit there sucking their thumbs. 

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Ford Motor Credit Company LLC (“Ford Credit”) filed court documents with the Northern District of Texas last week, as part of a lawsuit against Reagor-Dykes Motors, LP claiming the dealerships and other related Debtors entities ran “the largest floor-plan-financing frauds in the history of the United States.”

The documents said Reagor-Dykes Auto Group hid a “massive breach” from Ford Credit by fraudulently misrepresenting sales-reporting data to Ford Credit. The company believed Reagor-Dykes was timely paying off cars it sold to the public, however, Ford Credit said the company was selling vehicles on average of 55 days before reporting it to Ford Credit.

Ford Credit is asking Bankruptcy Court to appoint a trustee to manage the Chapter 11 filing, claiming Reagor-Dykes committed “multiple acts of fraud and gross mismanagement.” The auto giant’s financing unit alleges that Reagor-Dykes stole over $41 million previously advanced by Ford Credit. On July 31, Ford Credit sued numerous companies related to Reagor-Dykes Motors, LP. Shortly after that, those businesses filed for Chapter 11 bankruptcy.

The documents said:

“(Reagor-Dykes) may have caused one of the largest floor-plan-financing defaults in the history of the United States. And while the size of the default is certainly significant, the fact that it occurred during the years of unprecedented car-sale growth is just as telling. Since its (lowest point) in 2009, the automotive market for new and used cars has exploded. Annual U.S. car and truck sales topped 17 million for the third straight year in 2017. But despite the sustained market growth, (Reagor-Dykes’) business has cratered. Indeed the current management has run (Reagor-Dykes’) operations into the ground, causing a $41 million default. Simply put, a trustee is necessary to take over (Reagor-Dykes’) operations and turnaround the business.”

Ford Credit claimed that Reagor-Dykes engaged in fraud known as “check kiting”.

This is how it worked: vehicles financed by Ford Credit were sold to customers, and Reagor-Dykes would keep the money without reporting the sale to Ford. By not immediately reporting the transaction, the fraudulent company would not have to reimburse Ford immediately. In a July audit, Ford lawyers discovered “an average discrepancy of 55 days” on about 150 vehicle sales. Ford’s policy is only seven days. The documents also said, “Ford Credit has also determined that Debtors [Reagor-Dykes] double-floored at least 85 vehicles.”

“Double-floored means that one dealership took possession of a new vehicle and requested financing from Ford Credit. Then, having received financing from Ford, the same vehicle was transferred to another dealership. The second dealership would then apply for financing on the same vehicle,” said NBC Amarillo.

In another bankruptcy document, Ford Credit said it has $46 million in uncollateralized obligations with the dealership;  the total debt was reported to be around $116 million.

Bankruptcy documents relating to Reagor-Dykes indicated that an external investigation “in the name of transparency” is welcomed.  The dealership said even its owners, Bart Reagor and Rick Dykes, should be subject to investigation. Ford Credit states the contract breach is loan fraud, and if proven in court, could be punishable by years in prison.

Ford Credit requested the motion for a bankruptcy trustee to be heard on an expedited basis in conjunction with the hearing on the use of cash collateral scheduled for August 16, 2018.

While fraud is usually minimized or concealed during an economic boom cycle, it seems as Bart Reagor and Rick Dykes could not continue their fraudulent scheme of check kiting and double-flooring, as it has become apparent the auto industry is heading into a slowdown. At the end of an economic expansion, that is when fraud usually comes out of the woodwork.  Which leaves a question: how many other dealerships around the country are committing similar frauds?

via RSS https://ift.tt/2waHVpg Tyler Durden