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Turkey Sink Deeper Into Junk After Moody’s Downgrades To B1, Warns Of Government Default Risk

When it rains, it pours for Turkey, which already saw its currency slump earlier in the day when its foreign minister, Murat Cavuosglu, said that Ankara is ready to retaliate to any US sanctions imposed upon the NATO member state by the US over Turkey’s purchase of a Russian S-400 missile system. And then, with markets set to close for the day and today’s pounding of the Turkish lira put in the history book, Warren Buffett’s favorite rating agency, Moody’s, delivered what tomorrow will surely be called an act of aggression and prompt Erdogan to expel any Moody’s employees from Turkey and confiscate any office they may have in the country, namely a downgrade of Turkey deeper into junk territory, cutting its credit rating by one notch from Ba3 to B1, outlook negative.

As Moody’s explained “today’s downgrade reflects the view that the risk of a balance of payments crisis continues to rise, and with it the risk of a government default.” Pretty self-explanatory.

The news spiked the lira – which continues to be inexplicably bid after every incremental piece of bad news by “unknown” traders – as much as 300 pips lower, before the loss was cut in half, and the USDTRY closed the day at 5.8951. Of course, now that not only is Turkey’s sale of sovereign debt going to be that much more expensive, but once Trump does in fact hike tariffs on Turkey, there will be the usual bevy of “traders” angrily asking how they failed to sell the lira at the current extremely generous levels when they could. And if they don’t, we will remind them.

Moody’s full note is below.

Moody’s Investors Service (“Moody’s”) has today downgraded the Government of Turkey’s long-term issuer ratings to B1 from Ba3 and has maintained the negative outlook. The senior unsecured bond ratings and senior unsecured shelf ratings have also been downgraded to B1 and (P)B1 respectively from Ba3/(P)Ba3.

Concurrently, Moody’s has downgraded to B1 from Ba3 the backed senior unsecured bond ratings of Hazine Mustesarligi Varlik Kiralama A.S., a special purpose vehicle wholly owned by the Republic of Turkey from which the Turkish Treasury issues sukuk lease certificates, and has maintained the negative outlook.

Today’s downgrade reflects Moody’s view that the risk of a balance of payments crisis continues to rise, and with it the risk of a government default. The B1 rating balances these risks against the country’s fundamental credit strengths, particularly its large, diversified economy and still-moderate levels of government indebtedness.

In a related decision, Moody’s lowered Turkey’s long-term country ceilings: the foreign currency bond ceiling to B1 from Ba2; its foreign currency deposit ceiling to B3 from B2; and its local currency bond and deposit ceilings to Ba2 from Ba1.

The short-term foreign currency bond ceiling and short-term foreign currency deposit ceiling remain at Not Prime (NP). Ceilings generally act as the maximum ratings that can be assigned to a domestic issuer in Turkey, including structured finance securities backed by Turkish receivables. The decision to align the foreign currency bond ceiling and the government bond ratings reflects Moody’s view that exposure to a single, common threat — loss of external confidence and capital — means that the fortunes of public and private sector entities in Turkey are, from a credit perspective, increasingly intertwined.

RATINGS RATIONALE

The impact of the continued erosion in institutional strength and policy effectiveness on investor confidence is increasingly outweighing Turkey’s traditional credit strengths including its large, diverse economy and the low level of government debt. Turkey is structurally highly reliant on external capital flows, and Moody’s confidence in its ability to continue to attract the large sums needed each year to repay debt and sustain growth is waning. It remains highly vulnerable to a further prolonged period of acute economic and financial volatility. Foreign exchange reserve buffers are weak and Moody’s expects them to weaken further over the next two years relative to economy-wide short-term liabilities. While policy announcements have been made, the political authorities have yet to implement a plan that would allow the economy to adjust to a new, more sustainable equilibrium due to the negative short-term economic impact that this adjustment would entail.

The government’s willingness or ability to implement policies that will sustain external investor confidence in the economy and financial system by addressing underlying weaknesses remains uncertain. Since mid-2018, the government has announced a number of economic reform packages. Ultimately, these announcements have been either reactive to particular pressures on the economy or a restatement of measures that would be credit positive if implemented, but have been discussed for years, and where little concrete has been done to execute on these policy aspirations. Most government measures, including those targeting the banking system, continue to be focused on the near-term priority of propping up economic activity at the expense of eroding the underlying resilience of the economy and its banking system to external shocks, in part by increasing its fragility to shifts in market sentiment.

The longer that remains the case, the more the weakness implied by Turkey’s very high reliance on external capital across all sectors of the economy comes to dominate Moody’s analysis; and the greater the risk of further externally-sourced shocks involving further capital outflows, loss of reserves, weakening in the exchange rate, rises in inflation and severe damage to medium-term growth. As a result, Moody’s believes that the country’s vulnerability to an acute and highly disruptive balance of payment crisis that ultimately would significantly constrain the capacity and perhaps the willingness of the government to service its debt is now more aligned to a single B rating, despite its still moderate debt burden relative to similarly-rated peers.

Turkey is indeed once again facing intermittent currency crises after a period of relative calm that lasted from late September 2018 through February 2019. In consequence, both gross and net reserves have fallen since February, with the decline in net reserves being particularly pronounced. Gross and net reserve levels have been structurally weak for many years, but this decline contributes to a significant increase in external vulnerability for the country. In 2019, Moody’s expects that short-term external debt repayments, currently maturing long-term external debt, and total non-resident deposits will total more than 2.6 times the level of FX reserves. Moreover, funding costs have risen rapidly, with yields up by around 400 basis points since February.

The fall in FX reserves seems contrary to the central bank’s longstanding policy to allow the exchange rate to float freely, and raises further concerns about the transparency and independence of the central bank and, by extension, Turkey’s broader institutional framework.
External pressures are exacerbated by the ongoing disagreement between Turkey and the United States, this time relating to Turkey’s purchase of the S-400 missile system from Russia. The sanctions which the US Congress will consider if the purchase goes ahead, while largely undefined to date, cast a further shadow over Turkey’s economy and financial system.
RATIONALE FOR THE NEGATIVE OUTLOOK
The balance of risk is firmly tilted to the downside. The risk of an acute balance of payments crisis remains relatively low in the very near term, consistent for now with the highest rating level in the single-B rating category. However, weakening external buffers point to this being an unstable equilibrium, and the more time passes the more the government’s ability to steer the economy away from a more credit-negative path of a balance of payments crisis is diminished. This, in turn, increases the probability of more credit negative outcomes involving the need for capital controls, restrictions on access to foreign currency and (sanctions permitting) external support.
There are a number of possible near-term drivers for further instability. In Moody’s view, the re-run of the Istanbul mayoral election on 23 June 2019 creates potential for political unrest that could trigger a further material decline in the value of the lira and a further depletion of FX reserves. The imposition of sanctions on Turkey could also lead to a further, highly credit negative, market reaction. Moreover, depending on the sanctions imposed, it could also raise doubts over Turkey’s ability to access an IMF programme, should one be needed in the future to avoid an escalation of a balance of payments and economic crisis. Even if Moody’s does not currently expect that to be needed, the potential tension between sanctions and external support could in itself further undermine investor confidence in the credit.
WHAT COULD CHANGE THE RATING DOWN/UP
Moody’s would likely downgrade Turkey’s rating if it were to become clear that avoiding a more credit-negative path was becoming increasingly unlikely, perhaps because of the currency crisis deepening further. Any indication that capital controls were becoming more likely or that Turkey’s fiscal strength was deteriorating in a significant way would be credit negative. A material deterioration in relations with the US in the form of sanctions would also put downward pressure on the rating due to the implications that might have for receiving IMF assistance.
Given the negative outlook, upward rating movement is unlikely. However, the rating could be stabilised if the authorities were able to present and, crucially, implement a credible and broad-based programme for addressing external pressures and engineering a rebalancing of the economy. Significant external financial support, and the policy agenda that would likely accompany it, would also be supportive for the rating.
NATIONAL SCALE RATINGS
Moody’s will shortly publish an update to its National Scale Rating (NSR) map for Turkey to reflect the downgrade of the government’s long-term issuer rating. Moody’s NSRs are ordinal rankings of creditworthiness relative to other credits within a given country, which offer enhanced credit differentiation among local credits. NSRs are generated from Global Scale Ratings (GSRs) through correspondences, or maps, specific to each country. However, unlike GSRs, Moody’s NSRs are not intended to rank credits across multiple countries. Instead, they provide a measure of relative creditworthiness within a single country. The full maps can be accessed through the “Index of Current and Superseded Compendia of National Scale Rating Maps by Country”.

via ZeroHedge News http://bit.ly/2MNBfIZ Tyler Durden

Curveball Corners The Fed – Powell Better Choose His Battles Wisely

Authored by Sven Henrich via NorthmanTrader.com,

If you went panic chasing into stocks following Jay Powell’s ‘ready to act’ speech on June 4 on the expectation for imminent rate cuts you just got thrown a curveball: Economic data just printed than better expected results. Retail sales and industrial production data rebounded from the previous months’ dismal readings. 0.5% for retail sales and 0.4% for industrial production for May.

The Atlanta Fed reacted quickly and updated their Q2 GDP model north of 2%:

That smacking sound you’re hearing is the sound of any immediate rate cuts being kissing goodbye, certainly for June and perhaps now even July.

Remember, the Fed is coming from the lowest bound ever to commence a new rate cut cycle. 225 basis points. Compared to the last 2 cycles they have less than half of available ammunition available. They’d be nuts to cut here, but with this crew who knows. After all they jump as soon as the market so much as sneezes.

But that’s the problem for the Fed here, the market is not sneezing, it’s jammed near all time highs on the expectation of rate cuts.

But it’s the Fed’s now fault, the constant proactive interventions have created the expectation game.

It was not always so. Todd Harrison sent me a note this week he published in 2007 and back then he already rightfully lamented the change in the Fed’s role:

“The Federal Reserve is supposed to act as a buffer when times are tough, a beacon in the light if you will, the lender of last resort. Over the course of time, they have become entirely more proactive. They stopped acting in response to crisis and began targeting financial assets in a series of events that unintentionally created one.”

Boy, how far we’ve come. All is gaming the Fed these days, every time:

So next week will be an expectations gaming exercise and the Fed’s main task will be the same as always: Carefully craft its language to not disappoint markets. ‘Yea we may not cut right away, but don’t worry, anything goes wrong we’ll be right there to save you’. I suppose if they want to throw a dovish bone to not disappoint they may just as well announce ending QT right away. It’s become a joke anyways compared to the expectations of autopilot outlined in 2018.

Despite the economic beats today the bond market is not buying it.

10 year versus $SPX:

And perhaps that’s all the excuse the Fed needs to throw the dovish bone and coax markets to new all time highs.

After all that’s what markets want and are expecting. Here’s BAML telling people to go all in.

Protection? Who needs that? Sell that. Buy everything else. The Fed has our back.

3,000 may well happen first, we’re not that far away. But there’s a longer term technical target out there:

Now there’s a reason for the Fed to cut rates. So if you’re buying stocks near all time highs anticipating rates cuts…be careful what you wish for.

If the Fed had a ton of ammunition a precautionary cut may make sense, but they don’t. They’re approaching this fight with the clip less than half full.

Better choose your battles very carefully, but don’t disappoint rate cut hungry markets. Best of luck with that.

*  *  *

More this weekend in the Weekly Market Brief. For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.

via ZeroHedge News http://bit.ly/2ZtFX05 Tyler Durden

Trump ‘Clarifies’ Foreign Intel Remarks; “Of Course You Give It To The FBI” 

President Trump on Friday engaged in a bit of damage control after telling ABC News that he wouldn’t notify the FBI if a foreign government offered negative information on a political opponent. 

Clarifying his remarks, Trump said that he would look at the information first, and if it was “bad” he would notify authorities. 

“Of course you give it to the FBI or report it to the attorney general or somebody like that,” Trump said in a wide-ranging interview with Fox & Friends. 

“First of all, I don’t think anyone would present me with anything bad because they know how much I love this country,” said Trump. “Number two, if I was, and of course you have to look at it because if you don’t look at it, you’re not going to know if it’s bad. How are you going to know it is bad?”

“I thought it was made clear. In fact, I actually said at the beginning that I’d do both,” said Trump 

Trump initially said on Wednesday that it would be absurd to call the FBI instead of taking the foreign-sourced information, then later in the same interview said “I think maybe you do both,” adding “I think you might want to listen, there isn’t anything wrong with listening.”

“Someone comes up and says, ‘Hey, I have information on your opponent.’ You call the FBI? Give me a break. Life doesn’t work like that,” said Trump. 

via ZeroHedge News http://bit.ly/2MM8qwA Tyler Durden

A Judge Called His Mandatory Sentence ‘Excessive’ and ‘Wrong.’ Less Than a Year Later He Died In Federal Prison

Less than a year after being sentenced to prison for 40 years under a mandatory minimum sentence that the judge declared “excessive” and “wrong,” Frederick Turner, 38, was found dead in his cell at a high-security federal lockup in Colorado on Wednesday, according to a criminal justice advocacy group.

FAMM, an organization that works to repeal mandatory minimum sentences, announced Turner’s death yesterday and said his family had been working to get Turner, who had no prior criminal convictions, transferred to a different prison for his safety.

“The thing that’s so frustrating is this was entirely foreseeable,” says FAMM president Kevin Ring. “You were sending this gentle, nonviolent offender into a hell hole run by gangs.”

Ring says that Turner was sent to the U.S. penitentiary in Florence, Colorado. The prison has a reputation for violence, and Turner feared for his life after he refused to join a white supremacist gang.

The circumstances of Turner’s death are not yet known. The Bureau of Prisons did not immediately respond to a request for comment, but its online inmate locator confirms he died on Thursday.

Last July, U.S. District Judge T.S. Ellis III sentenced Turner to 40 years in federal prison after Turner was convicted of dealing methamphetamines for another man, Bassam Ramadan, as part of a larger drug trafficking prosecution in Northern Virginia.

According to his defense attorney and family, Turner struggled with addiction and depression, and he relapsed after the death of his close nephew in 2016. Around that time, Ramadan recruited Turner to sell meth after meeting him on the dating app Grindr.

Turner received a 10-year sentence for the drug crimes and an additional 30 years for gun crimes—five years for the first gun charge, and 25 years for the second gun charge. The “stacking” of gun charges in this way is one of the crueler features of federal sentencing law. (See also: the case of Weldon Angelos, who was sentenced to 55 years in federal prison under stacking firearm enhancements for selling marijuana to an undercover officer while possessing a gun.) And in Turner’s case, as in so many others, the gun penalty was based on offenses that would have not been considered criminal had Turner not also been selling meth.

According to prosecutors, Turner visited Ramadan’s house, where he knew there was a firearm, and on one occasion he retrieved a gun from Ramadan’s car that Ramadan later sold, along with meth, to an undercover officer.

The prosecutors could have chosen not to charge Turner with the firearm enhancements, as Ellis noted, but like many federal defendants who turn down plea deals, he was hammered with what criminal justice advocates and defense attorneys call the “trial penalty.” According to the Washington Post, all of the other defendants pleaded guilty and testified against Turner. All of them, including some linked to deadly shootings, received lower sentences. Ramadan, for example, was sentenced to 16 years in prison.

“I think that’s excessive,” Judge T.S. Ellis III said after imposing Turner’s sentence, The Washington Post reported. “The only thing I can do is express my displeasure. . . . I chafe a bit at that, but I follow the law.”

Ring says FAMM became aware of Turner’s case after his sentencing, and the question ever since has been why he was sent to a high-security prison with a reputation for violence.

“That’s what we want to know because nobody who looked at his case and his personal profile would have sent him to a place like that because he’s never exhibited any violence,” Ring says. “He was scared for his life right from the get-go, and the prison knew that.”

Several months after Turner was sentenced, Congress passed the FIRST STEP Act, which reduced the mandatory minimum sentences for Turner’s crime. He would have only received a 20-year sentence instead. However, Congress did not make those provisions retroactive, meaning Turner could not benefit from them.

A Pew Research Center report released this week found that in 2018, only 2 percent of federal criminal cases went to trial. Massive mandatory minimum sentences give prosecutors so much leverage over defendants that turning down a plea deal and exercising one’s constitutional right to trial becomes an irrationally risky choice.

Last month at a FAMM conference, Turner’s sister, Mandy Richards, gave an emotional speech about Turner’s case. “In that prison you either join a gang or you fear for your life,” she said. “This is a brother who has never hurt a soul besides himself.”

from Latest – Reason.com http://bit.ly/2MRKrvW
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If Trump Doesn’t Want a War With Iran, He Should Stop Pushing Iran Towards War

Four tankers off the Emirati coast were damaged last month by what investigators concluded were explosives attached to the ships’ hulls. The Trump administration immediately pointed to Iran or Iranian-directed proxies as the perpetrators of the attacks. Yesterday, two more ships were attacked near the Strait of Hormuz. And for the second time, Trump administration officials blamed Tehran for the incident, citing a grainy, black-and-white video of an Iranian vessel purportedly approaching one of the ships to remove an unexploded mine hours after the attack happened.

While the circumstances remain murky, we should not be surprised if investigators prove that Iran’s Islamic Revolutionary Guard Corps conducted or ordered these strikes. Why? Because U.S. economic sanctions against Iran are crushing an already cash-poor economy, and retaliation was inevitable. If the Trump administration continues its policy toward Iran, we could very well find ourselves in a war nobody wants.

To a wide cross-section of the Washington foreign policy establishment, Iran is the source of all mischief in the Middle East. Iran sponsors terrorism, leverages proxies around the region to keep its opponents on the defensive, threatens to use crude oil as a weapon, and continues to develop the region’s largest ballistic missile arsenal. Foreign policy pundits frequently talk about Iran as if it’s building another Persian Empire, or is just a whisker away from becoming a regional hegemon.

While those are impossible ambitions considering Iran’s limited economic, political, and military power, the Trump administration’s “maximum pressure policy” is rooted in these beliefs. In an attempt to force a significant change in Iran’s behavior, the White House has wielded the stick almost exclusively through an increasingly complicated sanctions architecture, an increase in military assets to the Persian Gulf, and threats of military action. If President Trump does call for dialogue with Iran, it’s prefaced on the Iranian government capitulating to every American demand.

The problem with this approach, however, is that Iran was never going to throw up the white flag. No Iranian leader worth his salt would even consider surrendering to a country hellbent on toppling the Islamic Republic. From the Iranian perspective, the U.S. is not to be trusted in any way, shape, or form; indeed, to do so would be reckless and irresponsible.

Any realist could have predicted how Iran’s government in Tehran would respond to Washington’s sanctions campaign. Throughout its 40-year history, the Islamic Republic has known mostly war and rivalry with stronger and wealthier adversaries; these experiences have given the country’s leaders a virtually unlimited supply of paranoia. Add to that picture Washington’s withdrawal from the Iranian nuclear deal, and it’s no wonder Tehran has concluded that cooperation invites more aggression.

Instead of coming back to the negotiating table in a weakened position, as Washington assumed, Iran is lashing out and sending a message to the United States—if you continue the economic and military pressure, expect more incidents like what happened this week in the waters of the Persian Gulf.

The question now is what the administration should do. Trump has dug into a hole he must find a way to get out of. He can continue digging, piling on even more sanctions in the hope that Iran’s current regime will collapse or give up. Or, he can put down the shovel and offer Iran a diplomatic exit-ramp before the situation gets irreparably worse.  

President Trump claims he doesn’t want a war with Iran, but rather a negotiation. This is a welcoming and promising goal. But if the president actually wishes to put this goal into practice, he needs to ignore his more hawkish national security advisers.

It’s time to stop the war games and start talking. War with Iran would make Washington’s years-long war in Iraq look like a walk in the park.

from Latest – Reason.com http://bit.ly/2XebC8a
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A Judge Called His Mandatory Sentence ‘Excessive’ and ‘Wrong.’ Less Than a Year Later He Died In Federal Prison

Less than a year after being sentenced to prison for 40 years under a mandatory minimum sentence that the judge declared “excessive” and “wrong,” Frederick Turner, 38, was found dead in his cell at a high-security federal lockup in Colorado on Wednesday, according to a criminal justice advocacy group.

FAMM, an organization that works to repeal mandatory minimum sentences, announced Turner’s death yesterday and said his family had been working to get Turner, who had no prior criminal convictions, transferred to a different prison for his safety.

“The thing that’s so frustrating is this was entirely foreseeable,” says FAMM president Kevin Ring. “You were sending this gentle, nonviolent offender into a hell hole run by gangs.”

Ring says that Turner was sent to the U.S. penitentiary in Florence, Colorado. The prison has a reputation for violence, and Turner feared for his life after he refused to join a white supremacist gang.

The circumstances of Turner’s death are not yet known. The Bureau of Prisons did not immediately respond to a request for comment, but its online inmate locator confirms he died on Thursday.

Last July, U.S. District Judge T.S. Ellis III sentenced Turner to 40 years in federal prison after Turner was convicted of dealing methamphetamines for another man, Bassam Ramadan, as part of a larger drug trafficking prosecution in Northern Virginia.

According to his defense attorney and family, Turner struggled with addiction and depression, and he relapsed after the death of his close nephew in 2016. Around that time, Ramadan recruited Turner to sell meth after meeting him on the dating app Grindr.

Turner received a 10-year sentence for the drug crimes and an additional 30 years for gun crimes—five years for the first gun charge, and 25 years for the second gun charge. The “stacking” of gun charges in this way is one of the crueler features of federal sentencing law. (See also: the case of Weldon Angelos, who was sentenced to 55 years in federal prison under stacking firearm enhancements for selling marijuana to an undercover officer while possessing a gun.) And in Turner’s case, as in so many others, the gun penalty was based on offenses that would have not been considered criminal had Turner not also been selling meth.

According to prosecutors, Turner visited Ramadan’s house, where he knew there was a firearm, and on one occasion he retrieved a gun from Ramadan’s car that Ramadan later sold, along with meth, to an undercover officer.

The prosecutors could have chosen not to charge Turner with the firearm enhancements, as Ellis noted, but like many federal defendants who turn down plea deals, he was hammered with what criminal justice advocates and defense attorneys call the “trial penalty.” According to the Washington Post, all of the other defendants pleaded guilty and testified against Turner. All of them, including some linked to deadly shootings, received lower sentences. Ramadan, for example, was sentenced to 16 years in prison.

“I think that’s excessive,” Judge T.S. Ellis III said after imposing Turner’s sentence, The Washington Post reported. “The only thing I can do is express my displeasure. . . . I chafe a bit at that, but I follow the law.”

Ring says FAMM became aware of Turner’s case after his sentencing, and the question ever since has been why he was sent to a high-security prison with a reputation for violence.

“That’s what we want to know because nobody who looked at his case and his personal profile would have sent him to a place like that because he’s never exhibited any violence,” Ring says. “He was scared for his life right from the get-go, and the prison knew that.”

Several months after Turner was sentenced, Congress passed the FIRST STEP Act, which reduced the mandatory minimum sentences for Turner’s crime. He would have only received a 20-year sentence instead. However, Congress did not make those provisions retroactive, meaning Turner could not benefit from them.

A Pew Research Center report released this week found that in 2018, only 2 percent of federal criminal cases went to trial. Massive mandatory minimum sentences give prosecutors so much leverage over defendants that turning down a plea deal and exercising one’s constitutional right to trial becomes an irrationally risky choice.

Last month at a FAMM conference, Turner’s sister, Mandy Richards, gave an emotional speech about Turner’s case. “In that prison you either join a gang or you fear for your life,” she said. “This is a brother who has never hurt a soul besides himself.”

from Latest – Reason.com http://bit.ly/2MRKrvW
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Seven Reasons To Be Highly Skeptical Of The Gulf Of Oman Incident

Authored by Caitlin Johnstone via Medium.com,

In a move that surprised exactly zero people, Secretary of State Mike Pompeo has wasted no time scrambling to blame Iran for damage done to two sea vessels in the Gulf of Oman on Thursday, citing exactly zero evidence.

“This assessment is based on intelligence, the weapons used, the level of expertise needed to execute the operation, recent similar Iranian attacks on shipping, and the fact that no proxy group operating in the area has the resources and proficiency to act with such a high-degree of sophistication,” Pompeo told the press in a statement.

“The United States will defend its forces, interests, and stand with our partners and allies to safeguard global commerce and regional stability. And we call upon all nations threatened by Iran’s provocative acts to join us in that endeavor,” Pompeo concluded before hastily shambling off, taking exactly zero questions.

Here are seven reasons to be extremely skeptical of everything Pompeo said:

1. Pompeo is a known liar, especially when it comes to Iran.

Pompeo has a well-established history of circulating blatant lies about Iran and the behavior of the Iranian government, and he recently told an audienceat Texas A&M University that when he was leading the CIA, “We lied, we cheated, we stole. We had entire training courses.”

2. The US empire is known to use lies and false flags to start wars.

The US-centralized power alliance has an extensive and well-documented history of advancing preexisting military agendas using lies, false flags and psyops to make targeted governments appear to be the aggressors. This is such a well-established pattern that “Gulf of Tonkin” briefly trended on Twitter after the Gulf of Oman incident. Any number of government agencies could have been involved from any number of the nations in this alliance, including the US, the UK, the KSA, the UAE, or Israel.

3. John Bolton has openly endorsed lying to advance military agendas.

I wrote an article about this last month because the Trump administration had already begun rapidly escalating against Iran in ways that happen to align perfectly with the longtime agendas of Trump’s psychopathic Iran hawk National Security Advisor. At that time people were so aware of the possibility that Bolton might involve himself in staging yet another Middle Eastern war based on lies that The Onion was already spoofing it.

On a December 2010 episode of Fox News’ Freedom Watch, Bolton and the show’s host Andrew Napolitano were debating about recent WikiLeaks publications, and naturally the subject of government secrecy came up.

“Now I want to make the case for secrecy in government when it comes to the conduct of national security affairs, and possibly for deception where that’s appropriate,” Bolton said. “You know Winston Churchill said during World War Two that in wartime truth is so important it should be surrounded by a bodyguard of lies.”

“Do you really believe that?” asked an incredulous Napolitano.

“Absolutely,” Bolton replied.

“You would lie in order to preserve the truth?”

“If I had to say something I knew was false to protect American national security, I would do it,” Bolton answered.

This would be the same John Bolton who has been paid exorbitant speaking fees by the pro-regime change MEK terror cult, promising the cult in a 2017 speech that they’d be celebrating regime change in Tehran together before 2019. This would also be the same John Bolton who once threatened to murder an OPCW official’s children if he didn’t stop getting in the way of his Iraq war agenda.

4. Using false flags to start a war with Iran is already an established idea in the DC swamp.

Back in 2012 at a forum for the Washington Institute Of Near East Policy think tank, the group’s Director of Research Patrick Clawson openly talked about the possibility of using a false flag to provoke a war with Iran, citing the various ways the US has done exactly that with its previous wars.

“I frankly think that crisis initiation is really tough, and it’s very hard for me to see how the United States president can get us to war with Iran,” Clawson began.

“Which leads me to conclude that if in fact compromise is not coming, that the traditional way that America gets to war is what would be best for US interests,” Clawson added. “Some people might think that Mr. Roosevelt wanted to get us into the war… you may recall we had to wait for Pearl Harbor. Some people might think that Mr. Wilson wanted to get us into World War One; you may recall we had to wait for the Lusitania episode. Some people might think that Mr. Johnson wanted to get us into Vietnam; you may recall we had to wait for the Gulf of Tonkin episode. We didn’t go to war with Spain until the USS Maine exploded. And may I point out that Mr. Lincoln did not feel that he could call out the Army until Fort Sumter was attacked, which is why he ordered the commander at Fort Sumter to do exactly that thing which the South Carolinians said would cause an attack.”

“So if, in fact, the Iranians aren’t going to compromise, it would be best if somebody else started the war,” Clawson continued. “One can combine other means of pressure with sanctions. I mentioned that explosion on August 17th. We could step up the pressure. I mean look people, Iranian submarines periodically go down. Some day, one of them might not come up. Who would know why? [Smattering of sociopathic laughter from the crowd.] We can do a variety of things, if we wish to increase the pressure (I’m not advocating that) but I’m just suggesting that this is not an either/or proposition — just sanctions have to succeed or other things. We are in the game of using covert means against the Iranians. We could get nastier at that.”

5. The US State Department has already been running psyops to manipulate the public Iran narrative.

State Department officials admitted to Congressional staff at a closed-door meeting on Monday that a $1.5 million troll farm had gone “beyond the scope of its mandate” by aggressively smearing American critics of the Trump administration’s Iran policy as propagandists for the Iranian government, according to a new report from The Independent. That “mandate” had reportedly consisted of “countering propaganda from Iran”, also known as conducting anti-Iran propaganda.

“Critics in Washington have gone further, saying that the programme resembled the type of troll farms used by autocratic regimes abroad,” says The Independent.

“One woman behind the harassment campaign, a longtime Iranian-American activist, has received hundreds of thousands of dollars from the State Department over the years to promote ‘freedom of expression and free access to information,’” the report reads.

6. The Gulf of Oman narrative makes no sense.

One of the ships damaged in the attacks was Japanese-owned, and the other was bound for Japan. This happened just as Japanese Prime Minister Shinzo Abe was in Tehran attempting to negotiate a de-escalation between the US and Iran with Trump’s blessing , and just after Iran had released a prisoneraccused of conducting espionage for the US in what many took to be a gesture of good faith.

Iran has been conducting itself with remarkable restraint in the face of relentless sanctions and provocations from the US and its allies; it wouldn’t make much sense for it to suddenly abandon that restraint with attacks on sea vessels, then rescue their crew, then deny perpetrating the attacks, during a time of diplomatic exchanges and while trying to preserve the nuclear dealwith Europe. If Tehran did perpetrate the attacks in order to send a strong message to the Americans, it would have been a very mixed message sent in a very weird way with very odd timing.

7. Even if Iran did perpetrate the attack, Pompeo would still be lying.

Pompeo’s statement uses the words “unprovoked” twice and “Iran’s provocative acts” once, explicitly claiming that the US empire was just minding its own business leaving Iran alone when it was attacked out of the blue by a violent aggressor. Sometimes the things put out by the US State Department feel like they’re conducting experiments on us, just to test the limits of our stupidity.

As noted in this article by Moon of Alabama and this discussion on the Ron Paul Liberty Report, the US has been provoking Iran with extremely aggressive and steadily tightening sanctions, which means that even if Tehran is behind the attacks, it would not be the aggressor and the attacks would most certainly not have been “unprovoked”. Economic sanctions are an act of war; if China were to do to America’s economy what America is doing to Iran’s, the US would be in a hot war with China immediately. It could technically be possible that Iran is pushing back on US aggressions and provocations, albeit in a strange and neoconservatively convenient fashion.

Either way, we have seen exactly zero evidence supporting Pompeo’s claims, so anyone you see hastening to blame Iran for the Gulf of Oman incident is either a war whore or a slobbering moron, or both. Knowing what we know about the US-centralized empire and its pre-existing regime change agenda against Iran, there is no reason to believe Pompeo and many reasons not to.

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If Trump Doesn’t Want a War With Iran, He Should Stop Pushing Iran Towards War

Four tankers off the Emirati coast were damaged last month by what investigators concluded were explosives attached to the ships’ hulls. The Trump administration immediately pointed to Iran or Iranian-directed proxies as the perpetrators of the attacks. Yesterday, two more ships were attacked near the Strait of Hormuz. And for the second time, Trump administration officials blamed Tehran for the incident, citing a grainy, black-and-white video of an Iranian vessel purportedly approaching one of the ships to remove an unexploded mine hours after the attack happened.

While the circumstances remain murky, we should not be surprised if investigators prove that Iran’s Islamic Revolutionary Guard Corps conducted or ordered these strikes. Why? Because U.S. economic sanctions against Iran are crushing an already cash-poor economy, and retaliation was inevitable. If the Trump administration continues its policy toward Iran, we could very well find ourselves in a war nobody wants.

To a wide cross-section of the Washington foreign policy establishment, Iran is the source of all mischief in the Middle East. Iran sponsors terrorism, leverages proxies around the region to keep its opponents on the defensive, threatens to use crude oil as a weapon, and continues to develop the region’s largest ballistic missile arsenal. Foreign policy pundits frequently talk about Iran as if it’s building another Persian Empire, or is just a whisker away from becoming a regional hegemon.

While those are impossible ambitions considering Iran’s limited economic, political, and military power, the Trump administration’s “maximum pressure policy” is rooted in these beliefs. In an attempt to force a significant change in Iran’s behavior, the White House has wielded the stick almost exclusively through an increasingly complicated sanctions architecture, an increase in military assets to the Persian Gulf, and threats of military action. If President Trump does call for dialogue with Iran, it’s prefaced on the Iranian government capitulating to every American demand.

The problem with this approach, however, is that Iran was never going to throw up the white flag. No Iranian leader worth his salt would even consider surrendering to a country hellbent on toppling the Islamic Republic. From the Iranian perspective, the U.S. is not to be trusted in any way, shape, or form; indeed, to do so would be reckless and irresponsible.

Any realist could have predicted how Iran’s government in Tehran would respond to Washington’s sanctions campaign. Throughout its 40-year history, the Islamic Republic has known mostly war and rivalry with stronger and wealthier adversaries; these experiences have given the country’s leaders a virtually unlimited supply of paranoia. Add to that picture Washington’s withdrawal from the Iranian nuclear deal, and it’s no wonder Tehran has concluded that cooperation invites more aggression.

Instead of coming back to the negotiating table in a weakened position, as Washington assumed, Iran is lashing out and sending a message to the United States—if you continue the economic and military pressure, expect more incidents like what happened this week in the waters of the Persian Gulf.

The question now is what the administration should do. Trump has dug into a hole he must find a way to get out of. He can continue digging, piling on even more sanctions in the hope that Iran’s current regime will collapse or give up. Or, he can put down the shovel and offer Iran a diplomatic exit-ramp before the situation gets irreparably worse.  

President Trump claims he doesn’t want a war with Iran, but rather a negotiation. This is a welcoming and promising goal. But if the president actually wishes to put this goal into practice, he needs to ignore his more hawkish national security advisers.

It’s time to stop the war games and start talking. War with Iran would make Washington’s years-long war in Iraq look like a walk in the park.

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His Father Was Murdered. He Helped End the Death Penalty Anyway.

In May, the death penalty died in New England. A bipartisan legislative majority in New Hampshire, the final state in the region to enforce capital punishment, voted to override Gov. Chris Sununu’s (R) veto of a bill abolishing the death penalty. At the time of his veto, Sununu urged those legislators to consider the “victims of violent crime across this state.”

While it is often assumed that victims of violent crime tend to support capital punishment, one of New Hampshire’s most outspoken death penalty critics lost his own father to an act of violence.

“I wanted to be more than somebody who is the son of a murder victim,” says Renny Cushing, a Democrat who represents the Rockingham district and serves as the chair of the state’s House Criminal Justice and Public Safety Committee. In 1988, Cushing’s father was shot and killed before his mother’s eyes. Similar tragedy struck his family again in 2011 when his brother-in-law was shot and killed in Tennessee.

His father’s death taught him that nothing “prepares one to be the survivor of a homicide victim.” When a family friend approached Cushing in a grocery store to express the hope that the state would “fry the bastard,” Cushing says he didn’t initially know how to respond.

His Irish Catholic upbringing called for him to stand by a consistent life ethic, he explains, which promotes the sanctity of life “from womb to tomb.” This influenced his opposition to the death penalty before he lost his father. Yet that family friend had assumed that his father’s murder would cause Cushing to change his position.

“As I thought about that over a couple of weeks, I realized that if I had done that, if I changed my position on the death penalty because my father was murdered, that would, in some ways, kind of be a compounding of the loss,” he says. Not only would he have lost his father, but he would have lost the values he held dear.

Confronting such assumptions was the beginning of Cushing’s anti-death penalty advocacy. In 1998, he presented his first death penalty repeal bill to the state legislature.

Twenty one years later, the repeal effort long championed by Cushing and others has finally paid off.

Bipartisan support was a major factor. “Ending New Hampshire’s death penalty would not have been possible without significant Republican support,” says Hannah Cox, national manager of Conservatives Concerned About the Death Penalty. “Increasing numbers of GOP state lawmakers believe capital punishment does not align with their conservative values of limited government, fiscal responsibility, and valuing life.”

The Republican side also had its own figure who was able to speak from the victim’s point of view. Sen. Ruth Ward’s (R–Stoddard) father was taken from her family by violence when she was only seven years old. While announcing her support for repealing the death penalty, she said, “My mother forgave whoever it was, and I will vote in favor of this bill.”

Another factor contributing to the repeal law’s success, says Cushing, is the general political attitude of the state’s people. “New Hampshire has a really incredibly strong libertarian streak,” Cushing points out. “In a state where we don’t trust the government to collect taxes or plow snow, certainly a lot of people don’t want to give the government the power to have a public employee kill incapacitated prisoners.”

Cushing has faith that the remaining 29 states that still use capital punishment will eventually change their laws too.

“I know as a state legislator and as someone who’s traveled around, who works on a national level on criminal justice policy with other legislators, that the trend is rapidly [going] away from the death penalty,” Cushing says. “And I think that you’ll see that increase in the coming few years.”

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Markets Stuck In Limbo As Traders Brace For Next Week’s Fireworks

Heading into today’s session, the mood had already soured on chip names after Broadcom’s dismal guidance cut, which slammed tech names in Asia and Europe, and which pressured the Semiconductor sector lower all day, and also prevented the Nasdaq from turning green all day.

The latest econ data from China did not help, with Industrial Production missing the lowest estimate, and printing at a 17 year low in the latest confirmation that Beijing’s attempt to reflate the local economy is failing, even as retail sales staged a modest rebound from last month’s disastrous print.

However, while traders were absolutely certain that next week the Fed had no choice but to telegraph a rate cut cycle was imminent, that conviction was dented a bit when the US reported strong retail sales and, more importantly, solid upward revisions to last month’s data…

… although even so, the odds of a July rate cut barely shifted, remaining solidly above 80%.

As such, with no new information about either next week’s Fed cut, or the outcome of the critical G-20 meeting where the fate of the US trade war may be decided (but won’t be) the market meandered, and went nowhere, with Construction and Banks outperforming, while Tech, Energy, and the Russell all underperformed.

Meanwhile as stocks drifted, so did Tsy yields, with the 10Y yielding 2.09%, after sliding below 2.06% earlier in the session, before rebounding to unchanged, even as the recent trend is clearly lower, and a 1 handle is distinctly possible next week if the Fed does in fact surprise dovishly.

Things were more dramatic in Europe, where the 10Y Bund hit a new negative record of -0.27%…

… as European 5Y5Y inflation swaps also hit a new all time low as central bank credibility is rapidly evaporating.

Worse, as BofA showed earlier, the yield on all global debt ex the US is now at an all time record low as deflation is once again becoming the norm, while the amount of negative yielding debt is back to all time highs.

Well, deflation for everyone but the US perhaps, because in FX, the dollar once again reigned supreme, with the yen, euro and cable all sliding, while the DXY – having rebounded perfectly off the 200DMA – was rising toward its next big resistance level around 98, while the BBDXY emerged back over 1200 offsetting much of the market’s recent fears of a Fed rate cut. It does beg the question: what if anything can bring the dollar lower?

Perhaps the most interesting asset of the day was gold, which increasingly more investing legends are backing into what will be the Fed’s next easing cycle, and which after briefly attempting to breakout above a 2 year resistance, was smacked down, sliding $20 from intraday highs, suggesting that another attempt at a breakout will have to be attempted again next week.

And so, as we enter the most important week of the year, equity traders remain surprisingly calm, even as rate vol continues to soar and commodity volatility is not too far behind.

Still, as we noted earlier, next week could result in turmoil in rates vol, where one or more dealers is said to be nursing a major, $100MM+ loss, and should the Fed turn even more dovish, said turmoil could well and finally migrate to the equity space as well.

And after what was a largely wasted day, we look toward next week’s fireworks, where BofA laid out a matrix of what to expect between the two key events: the G-20 meeting and the FOMC, and where the range of outcomes could send the S&P from below 2,650 to above 3,000.

 

In short, brace for a violent return in volatility.

 

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