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Authored by James George Jatras via The Strategic Culture Foundation,

On July 22 US Secretary of State Mike Pompeo delivered a bizarre speech on Iran. Delivered from the Ronald Reagan Presidential Library in Simi Valley, California, and ostensibly addressed to the Iranian-American community, the speech’s staging clearly sought to evoke the fall of communism, casting the Ayatollahs in the role of Leonid Brezhnev and company.

Iranian “regime change” is not the publicly stated goal of the Trump Administration’s policy. But it is hard to see how US demands on Tehran don’t amount to exactly that, with Pompeo comparing the Iranian “regime” (a term used dozens of times to imply illegitimacy) to a “mafia.” He asserted that Iran’s behavior is “at root in the revolutionary nature of the regime itself.” What can change its “root” or “nature” without ceasing to be itself?

Pompeo demanded not just a total change in policy from Tehran but a different mode of governance amounting to Iran’s ceasing to be an independent regional power. The Reagan venue’s analogy to the collapse of communism in the USSR and Eastern Europe echoed in the Secretary’s heavy emphasis on “a new 24/7 Farsi-language TV channel” spanning “not only television, but radio, digital, and social media format, so that the ordinary Iranians inside of Iran and around the globe can know that America stands with them.”

The US position on Iran is that it is solely a question of removing a layer of malign governance, after which democracy, tolerance, peace, and general niceness will spontaneously break forth, and justice will roll down like water and righteousness like a mighty stream. Just like happened in Iraq after 2003. Just like in Libya.

Never mind that Iran isn’t North America or Europe. Never mind that American and European ideas of social and personal liberty would be anathema to an unknown but significant percentage of Iran’s population. Never mind that the replacement for the Ayatollahs envisioned by many Administration big shots, the cultish People’s Mojahedin Organization of Iran (Mojahedin-e Khalq, MEK), may not be particularly democratic or popular with Iranians. Don’t bother us with details – the neo-Bolshevik myth of a spontaneous uprising by the oppressed masses (with a little help from outside, like the Kaiser’s generals were kind enough to provide Lenin) is alive and well in Washington.

One is reminded of “true believer” Condoleezza Rice in 2006 denouncing as – you guessed it! – racist any objections to militant democracy promotion in the Middle East, specifically in Iraq:

‘“Well, growing up in the South and having people underestimate you because one of the reasons for segregation, one of the reasons for the separation of the races was supposedly, the inferiority of one race to the other,” she explains. “And so when I look around the world and I hear people say, ‘Well, you know, they’re just not ready for democracy,’ it really does resonate. I hear echoes of, well, you know, blacks are kind of childlike. They really can’t handle the vote. Or they really can’t take care of themselves. It really does roil me. It makes me so angry because I think there are those echoes of what people once thought about black Americans.”’

Pompeo heavily emphasized Iran’s internal problems, such as political repression, corruption, economic distress, many of which are no doubt are quite real. Still, it was hard to listen to the Secretary without mentally comparing how the identical litany of abuses would apply to Washington’s perennial darling of the Islamic world, Saudi Arabia, which in every particular is far, far worse than Iran. But nobody is talking about what amounts to regime change in Riyadh or even any sanctions against them. Accusations of Iranian state support for terrorism would be risible if arming myriad Sunni jihadist groups by the US and our various partners, the Saudis chief among them, were a laughing matter.

Pompeo’s speech triggered a rebuke by Iranian President Hassan Rouhani that “peace with Iran is the mother of all peace, and war with Iran is the mother of all wars” – an unfortunate choice of words given how Saddam Hussein’s “mother of all battles” turned out. Trump immediately shot back with a tweet threatening that Iran could “SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE.” Predictably, Trump’s ubiquitous critics focused as much on the all capital letters as on the substance of the exchange.

No one knows where any of this is leading. The memory immediately triggered was that of harsh verbal exchanges between North Korea’s “Little Rocket man” Kim Jong-un and the “mentally deranged US dotard” Trump prior to their love fest in Singapore. Justin Raimondo of Antiwar.com was succinct in his optimism: “This means he’ll be scheduling a Rouhani summit in a few months.”

On the other hand, instead of Singapore 2018 we could be seeing a repeat of the lead-up to Iraq 2003. So many of the same people who were beating the drums for the war with Iraq under President George W. Bush are playing the same tune now with respect to Iran. It is significant that whereas with respect to North Korea our foremost regional partner, South Korea, is pushing hardest for a peaceful outcome, Israel and Saudi Arabia, the two foreign states that exercise almost total control over the political class in Washington, are itching for the US to take care of their Iran problem for them. The hare-brained “Arab NATO” idea has been revived.

Defense Secretary James “Mad Dog” Mattis has denied a report that the US was identifying targets in Iran to be struck as early as next month and disowned regime change. For what it is worth (probably not much) a recent poll shows that Americans are against war with Iran by a better than two-to-one margin. But, as Raimondo observes,

“there are plenty of warmongers in Washington who just can’t wait for the shooting to start in the Middle East again, and they have targeted Iran as their next victim. … [S]uch a war would destroy Trump’s presidency precisely because his base would oppose it. And yet, … despite the fact that the President’s advisors are pushing war with Iran, Trump routinely ignores them and does exactly as he pleases: that’s why we had the Singapore summit and the Helsinki meeting with Putin.”

We can hope that Trump will decide on his next steps with regard to Iran based on much broader international considerations that impact his domestic goals. Taken most optimistically, that could mean a concept that some of us have been suggesting for almost two years: a new “Big Three” understanding among Trump, Putin, and Chinese President Xi Jinping. Indeed, Professor Michael T. Klare, writing in TomDispatch.com, claims this is Trump’s conscious intention:

‘An examination of his campaign speeches and his actions since entering the Oval Office — including his appearance with Putin — reflect his adherence to a core strategic concept: the urge to establish a tripolar world order, one that was, curiously enough, first envisioned by Russian and Chinese leaders in 1997 and one that they have relentlessly pursued ever since.

‘Such a tripolar order — in which Russia, China, and the U.S. would each assume responsibility for maintaining stability within their own respective spheres of influence while cooperating to resolve disputes wherever those spheres overlap — breaks radically with the end-of-the-Cold-War paradigm. During those heady years, the United States was the dominant world power and lorded it over most of the rest of the planet with the aid of its loyal NATO allies.

‘For Russian and Chinese leaders, such a “unipolar” system was considered anathema. After all, it granted the United States a hegemonic role in world affairs while denying them what they considered their rightful place as America’s equals. Not surprisingly, destroying such a system and replacing it with a tripolar one has been their strategic objective since the late 1990s — and now an American president has zealously embraced that disruptive project as his own. [ . . . ]

‘The big question in all this, of course, is: Why? Why would an American president seek to demolish a global order in which the United States was the dominant player and enjoyed the support of so many loyal and wealthy allies? Why would he want to replace it with one in which it would be but one of three regional heavyweights? [ . . . ]

‘In the Trumpian mindset, this country had become weak and overextended because of its uncritical adherence to the governing precepts of the liberal international order, which called for the U.S. to assume the task of policing the world while granting its allies economic and trade advantages in return for their loyalty. Such an assessment, whether accurate or not, certainly jibes well with the narrative of victimization that so transfixed his core constituency in rustbelt areas of Middle America. It also suggests that an inherited burden could now be discarded, allowing for the emergence of a less-encumbered, stronger America — much as a stronger Russia has emerged in this century from the wreckage of the Soviet Union and a stronger China from the wreckage of Maoism. This reinvigorated country would still, of course, have to compete with those other two powers, but from a far stronger position, being able to devote all its resources to economic growth and self-protection without the obligation of defending half of the rest of the world.

‘Listen to Trump’s speeches, read through his interviews, and you’ll find just this proposition lurking behind virtually everything he has to say on foreign policy and national security. “You know… there is going to be a point at which we just can’t do this anymore,” he told Haberman and Sanger in 2016, speaking of America’s commitments to allies. “You know, when we did those deals, we were a rich country… We were a rich country with a very strong military and tremendous capability in so many ways. We’re not anymore.”

‘The only acceptable response, he made clear, was to jettison such overseas commitments and focus instead on “restoring” the country’s self-defense capabilities through a massive buildup of its combat forces. (The fact that the United States already possesses far more capable weaponry than any of its rivals and outspends them by a significant margin when it comes to the acquisition of additional munitions doesn’t seem to have any impact on Trump’s calculations.)’

If such is indeed Trump’s calculation, his likelihood of attacking Iran is very low.

Conversely, the forces benefitting from the status quo Trump would dismantle cannot be expected to accept such a future with equanimity: the Pentagon and NATO military establishments, the intelligence community, the hordes of contractors and think tank denizens, and others. Perhaps even worse, Trump’s domestic critics face the terrifying prospect that he could emerge as the greatest peacemaker in modern history, as well as restorer of America’s economic might.

We can thus expect an added zeal born of desperation from former “CIA director John Brennan, FBI director James Comey, Robert Mueller, James Clapper, Andrew McCabe, Peter Strzok, Deputy Attorney General Rod Rosenstein, and the Democratic National Committee,” who, Paul Craig Roberts aptly says, are “engaged in high treason against the American people and the President of the United States and are actively engaged in a plot to overthrow the President of the United States.” Just in recent weeks the intensity of this campaign prevented Trump from agreeing to anything of substance with Putin in Helsinki, forced him to tap-dance around what he did or didn’t say at the post-summit press conference, and postpone according to Grand Inquisitor Mueller’s convenience a follow-up US-Russia summit (no doubt to the delight of his own appointees no less than to his enemies’).

We can expect that between now the November 2018 Congressional elections Mueller will come out with several indictments against Trump associates with the hope of tipping the House of Representatives to the Democrats. If that happens, despite an anticipated GOP retention of the Senate, Trump will be removed or forced to resign in 2019, with a substantial percentage of Republicans ready to jump at the prospect of putting Mike Pence into the Oval Office, with current UN Ambassador Nikki Haley a virtual shoo-in as Vice President.

Such a development would prompt an anguished but futile outburst from Trump’s base. But with l’ancien régime back in power, the guardians of the neoliberal, unipolar order the interloper had imperiled will move quickly to repudiate any understandings he might have had with Moscow and Beijing. The slide toward a catastrophe of literally unimaginable proportions, which Trump had sought to arrest, will become for all intents and purposes irreversible.

At that point Iran will be the least of our worries.

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Authored by Toni Airaksinen via Campus Reform,

Eugene Lang College, part of The New School in Lower Manhattan, will offer a course next semester for students who wish to fight “heterosexist” explanations of animals and nature.

Taught by Heather Davis, “Queer Ecologies” is a four-credit course offered by the school’s Culture and Media department for students who wish to “disrupt prevailing heterosexist discursive and institutional articulations of sexuality and nature.”

According to the professor, these “heterosexist” explanations of sexuality and nature often involve referring to male/female animals.

According to the course description, students will be taught to “reimagine evolutionary processes, ecological interactions, and environmental politics in light of queer theory” by drawing from research in fields such as feminist science studies and environmental justice. 

Students will also “draw important connections between the material and cultural dimensions of environmental issues, and examine the ways in which sex and nature are understood in light of multiple trajectories of power and matter,” the description adds. 

During an interview with Campus Reform, Davis explained that queer ecologies is an “interdisciplinary field that examines the relationship between sexuality and nature, thinking beyond the boundaries of assuming that heterosexuality is the norm or standard.”

The field “inquires into the sexual lives of animals, plants, and bacteria—lives that are often much more strange, adaptable, and queer than anything humans do,” she elaborated. “It also seeks to critique how heterosexuality is presumed as natural.”

While it is not immediately apparent why the school’s Culture and Media department is offering the class, Davis explained that the course takes aim at how institutions like media outlets and schools often perpetuate myths about sex, gender, and the environment. 

Such institutions, Davis said, often promote the idea that “mammals only use sex for reproduction, and that this is always heterosexual sex,” for example. 

“We can see this in how queerness is often said to be ‘unnatural’…rather than thinking about how queer sex might actually be helpful to the survival of species,” Davis noted.

One example of this, Davis asserted, is how scientists often characterize plants using gender-specific language.

“We still tend to characterize plants that reproduce sexually in heterosexual terms where a male and female plant need to transfer gametes. Although this understanding of plant reproduction is not un-true, it misses the point that in order for these plants to fertilize they also rely on other species, such as bees and wasps,” she argued.

“In other words, reproduction here is about cross-species interaction, even pleasure, and reducing this description to purely an exchange of genes misses the opportunity to inquire into these relationships,” Davis elaborated. “Queer theory helps to broaden the picture, understanding the behaviours and companionships that exist in these ecologies.” 

Other upcoming classes offered by the New School Media and Culture department include “Foucault and His Legacy,” “Feminist, Queer Theory and The Arts,” and “How to Overthrow the U.S Government, Legally.”

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A new Ipsos MORI survey of more than 23,000 adults across 28 countries has gauged international feelings on a range of healthcare topics such as quality of care, access to medical professionals and waiting times.

Statista’s Niall McCarthy also notes that respondents were also asked whether they agree with the statement “In case of sudden death, I would allow my organs to be removed to help others”.

The following infographic shows responses in 15 selected countries with 74 percent of people in India agreeing that they would donate their organs if they suddenly died.

You will find more infographics at Statista

Turkey and Spain both followed closely with 72 percent each.

The share of people willing to donate is much lower in other countries however, and it only amounted to 33 percent in Japan and 30 percent in Russia.

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Authored by Jacob Hornberger via The Future of Freedom Foundation,

The dust-up over NATO confirms, once again, that President Trump, unfortunately, has been absorbed by the same deep state whose existence he sometimes laments. After questioning here in the United States the usefulness of NATO, Trump traveled to a NATO meeting in Europe, where he flipped and declared his firm commitment to this Cold War anachronism, declaring publicly, “I believe in NATO” and publicly expressing his sentiment that NATO is “very unified, very strong, no problem.”

Let’s face the discomforting truth: Trump’s administration is just another four years of Bush-Obama.

Afghanistan? U.S. troops are still there, killing and dying. Like Presidents George W. Bush and Barack Obama, Trump keeps them there.

Iraq? U.S. troops are still there, killing and dying. Like Bush and Obama, Trump keeps them there.

Syria? U.S. troops are still there, killing and dying. Like Bush and Obama, Trump keeps them there. In fact, when Trump expressed a desire to withdraw U.S. troops from Syria, he immediately flipped when he learned that the Pentagon disapproved of that action.

North Korea? U.S. troops are still there, almost 70 years after the deep state butted into the conflict by ignoring the constitutionally required congressional declaration of war. Like Bush and Obama, Trump keeps them there and, until recently, has even threatened to rain nuclear fire and fury on North Koreans through U.S. nuclear bombers.

War on terrorism? U.S. forces continue assassinating people. Like Bush and Obama, Trump keeps them assassinating.

The U.S. embargo on Cuba? Like Bush and Obama, Trump keeps it in existence.

U.S. military bases in foreign countries? Like Bush and Obama, Trump keeps them there.

The U.S. military-industrial complex? Like Bush and Obama, Trump keeps it there and expands it.

Why, Trump even flipped when the CIA put pressure on him to extend the time for secrecy with respect to the CIA’s 55-year-old records relating to the JFK assassination. Although Trump had announced all the way up to the day before the October deadline set by law that he intended to release the records, he buckled on the day of deadline, acceding to what the CIA wanted.

And NATO? What has Trump accomplished in Europe? All that he has done is pressure NATO members to plunder and loot their citizens through higher taxation to help pay for NATO’s exorbitant expenses. Big deal. How is that helpful? Does anyone really think that that is going to result in a reduction of expenditures for the Pentagon, the CIA, and the NSA? If so, I’ve got a nice bridge in Brooklyn I’d like to sell you.

What is going on here?

It all confirms what Tuft University law professor Michael Glennon sets forth in his book National Security and Double Government. The ones who are in charge are the Pentagon, the CIA, and the NSA — i.e., the national-security establishment, or what people are now calling the “deep state.” The national-security branch of the federal government permits the other three branches to maintain the veneer of being in control but it’s only a veneer. When it comes to critical points of policy, like the continued existence of NATO, the other three branches, including the executive branch, are expected to defer to the national-security branch, and they do.

Consider NATO, the organization that the U.S. deep state brought into existence to fight it’s Cold War against the U.S. government’s World War II partner and ally, the Soviet Union. From the very beginning, its Cold War mission was to protect Europe from a Soviet invasion.

But the Cold War ended more than 25 years ago. So, why did this Cold War dinosaur remain in existence? It remained in existence because the U.S. deep state decreed that it would remain in existence.

In fact, let’s not forget that as the Cold War was ending, U.S. officials promised the Soviets that in return for the Soviet Union’s dismantling of its Cold War-era Warsaw Pact, the United States would reciprocate by dismantling NATO.

It was not to be. That’s because the U.S. deep state — i.e., the Pentagon, the CIA, and the NSA — decided that keeping NATO was more important than keeping a promise made to the communists of the former Soviet Union.

Even as Soviet forces were withdrawing from Germany, Eastern Europe, and the Baltics, the U.S. deep state had NATO moving east, absorbing the former members of the Warsaw Pact and, consequently, moving U.S. missiles, bases, and forces closer and closer to Russia, all the while acting innocent and playing like they were oblivious to the response that would inevitably come from Russia.

When U.S. officials incited a coup in Ukraine, it was with the aim of installing a pro-U.S. regime into power and absorbing Ukraine into NATO, which would then enable the U.S. government, through NATO, to come into the country and install bases and missiles on the Ukraine-Russia border. And it would all be “legal.” Equally important, so would be the Ukraine regime’s decision to evict Russia from its longtime military base at Sevastopol in Crimea.

U.S. officials knew that Russia would never permit that to happen. After all, what would be the response of the U.S. government if suddenly Mexico decided to take over San Diego, California, citing the undeniable fact that the U.S. government intentionally provoked the Mexican War in order to steal the northern half of Mexico? We all know what the response would be. The U.S. government would never permit that to happen, come hell or high water.

The real issue is that U.S. officials knew that NATO’s threat to absorb Ukraine would cause Russia to take over Crimea, come hell or high water, even if illegal, to ensure continued control over its longtime military base.

NATO’s move was cunningly brilliant. Once Russia reacted in the predictable way, it was portrayed, once again, as it was during the Cold War, as an international aggressor that was hell-bent on conquering Europe, the United States, and the world. The only difference was that during the Cold War it was the “godless Soviet communists” who were coming to get us. This time it was the “Putin’s autocratic Russia” coming to get us. A distinction without a difference.

But here’s the thing: the renewed Cold War environment ensured that the deep state — i.e., the Pentagon, the CIA, and the NSA — would continue to remain in high cotton notwithstanding the end of the Cold War, with ever-increasing budgets for them and their ever-growing army of contractors, subcontractors, and military bureaucrats.

It’s worth mentioning, as an aside, that it was the Cold War itself that was used to justify the conversion of the U.S. government from a limited-government republic to a national-security state. At the time of the conversion, U.S. officials said that if the Cold War ever ended, we could have our limited-government republic back. But when the Cold War ended, they didn’t give us our republic back. The deep state would not permit that to happen.

Unfortunately, that wasn’t all that the U.S. deep state had NATO doing. Expanding on its post-Cold War policy of U.S. interventionism in the Middle East, the deep state had NATO perform a regime-change operation in Libya, which, along with the U.S. deep state’s invasion of Iraq and Syria, helped inflame the death, destruction, and chaos in the Middle East even more. All that, of course, ensured an ongoing threat of terrorist retaliation, which deep state officials have used to further guarantee ever-increasing budgets, power, and destruction of liberty and privacy among the American people.

When the U.S. Constitution called the federal government into existence, the idea was that the president could not wage war without a congressional declaration of war. Yet notice how the deep state has circumvented that constitutional provision with NATO. All they have to do is admit new members into NATO, such as Montenegro and Latvia, and they are able to automatically guarantee U.S. entry into a war to defend that nation, the Constitution be damned.

Our American ancestors warned us against the power of big, permanent military establishments. So did Presidents Eisenhower, Kennedy, and Truman. Unfortunately, their warnings were ignored, and the United States is now saddled with the most powerful and destructive military-intelligence establishments in history. The deep state’s absorption of Donald Trump is just one more confirmation of what our ancestors and Eisenhower, Kennedy, and Truman were warning us against.

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China is close to a “late July or early August” test firing of a new Russian missile defence system reportedly capable of taking down an F-35 stealth fighter, according to SCMP, citing a Kremlin military source.

“It is planned that in late July or early August the unit of the Chinese People’s Liberation Army (PLA) that underwent training in Russia will carry out a test firing against a simulated ballistic target at a Chinese firing ground,” the person said.

With a range of 2,400km (1,500 miles), the S-400 can engage up to 36 targets simultaneously with as many as 72 missiles at altitudes of between 5 metres (16 feet) and 30km (19 miles).

Beijing-based military expert Li Jie said that the sale of the S-400 to China would help Russia to promote its air defence missile technology on the international market, which has been dominated by the United States’ patriot system.

“The S-400 missile will further consolidate Beijing and Moscow’s strategic partnership in diplomatic, political, economic and military cooperation,” he said. –SCMP

Hong Kong-based military expert Song Zhongping told SCMP that it was very likely Beijing would test the S-400 right after taking delivery, while China’s Rocket Force is already familiar with the system’s predecessor, the S-300. 

“The PLA has been using the S-300 since the 1990s, so it will be easier for them to pick up the new S-400 than it will be for other countries, like India and Turkey, which are also planning to buy the new defence system,” said Zhongping.

In late June, Turkey openly defied Trump’s threat of sanctions if they were tocomplete the purchase of S-400 systems. Ankara said said the acquisition of was “a done deal and Turkey will not turn back from its decision.”

India, meanwhile, announced in early July a $5.7 billion deal to purchase S-400s despite the threat of US retaliation. 

The Times of India noted that in October 2015, India had planned to procure the S-400s – which can detect, track and destroy supersonic bombers, drones, fifth-generation fighters, spy planes, and supersonic missiles at a range of up to 400km and altitude of 30km – in what many Indian officials have praised as a game-changing military acquisition.

Beijing agreed to buy the S-400 Triumph system in 2014, while also ordering 24 Russian Su-35 fighter jets – as upgrades to the Su-27. 14 had been delivered as of the end of 2017. 

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Submitted by Nick Colas of DataTrek Research

We will confess to some real trepidation as we say goodbye to July and hello to August. So much so that we’re pulling forward our usual month-ahead review to get several topics in front of you.

Here’s the problem: August has shifted from its traditional period of rest and relaxation to one where US equity market volatility tends to peak for the year.

Consider the following data points, all post-2010:

• In 2011, the CBOE VIX Index peaked for the year on August 8th, with a close at 48.0.
• In 2015, the VIX peaked for the year on August 24th, at 40.7.
• In 2017, the VIX peaked for the year on August 10th, at 16.0.

The closing high in the VIX for 2018-to-date was 37.3 on February 5th, the result of a meltdown in a volatility-related inverse VIX ETF. Even with today’s Facebook-driven tech wreck, the VIX is only at 12.1. Any pop in that measure that exceeds the February highs would be a real shock. Also worth noting: February has only seen an annual high on the VIX once since 1990, in 2016 (at 28.1).

Why has August become so much more volatile? Prior to 2010, it only saw the annual highs for the VIX twice back to 1990 (which is mathematically pretty close to what one would expect if volatility were evenly distributed throughout the year). A few ideas on the reasons for this shift:

• Trading volumes have been in decline since 2010, and August is typically a low water mark here within a given year. Combine these two factors and perhaps they create a notably less liquid US equity market in August where headline risk takes an unusual toll on stock prices.
• Some countries (China, for example) don’t take an August holiday the way western ones do. In an ever more global economy, market-moving news flow can come any time. Including in August.
• US equity market structure has changed substantially in the last decade. It is more automated and has less human intervention than in the 1990s – early/mid 2000s. Layer that fact on to the early points, and perhaps August is predestined to show more price volatility from now on.

What could cause a pickup in volatility in August 2018? First of all, a move in the VIX to +37 (new 2018 high territory) is not likely to come from just one event/headline unless it is something large, unexpected, and geopolitical in nature. Those risks are easy to list but impossible to predict with any precision.

Therefore, a useful catalog of catalysts works as an ensemble package; get enough of them in play, and outsized volatility will be the result. Here are our ideas on this count:

#1. Trade/tariff disputes. US equity markets have thus far taken trade negotiations in their stride, which is more than you can say for the rest of the world. The S&P 500 is up 6.1% on a price basis in 2018; the MSCI All-World ex-US Index is lower by 3.0%.

The Teflon coating around US equities is due to one thing: the market’s belief that the American economy is in far better shape than any other region to withstand the uncertainties of global trade tensions. Q2’s stellar economic and corporate earnings performances both support that idea. But to keep animal spirits fed and watered will require similar strength in the second half.

#2. Interest rates. The unsung hero in US equity markets YTD is the persistently low yield on 10-Year Treasury notes, which never really held above 3% despite much chatter on this point earlier in 2018. Higher 2-Year yields, now 2.69% and up from 1.89% at the end of 2017, haven’t mattered one bit despite offering a notional alternative to stocks.

Going into August, the market’s narrative on where 10-Year yields should be could well change. Inflation expectations (based on TIPS yields) have been remarkably constant over the last 6 months at 2.05 – 2.18% and centered on 2.1%. If US economic growth remains robust in Q3/Q4, inflation expectations will have to rise. And with that, 10-Year yields that consistently begin with a “3” rather than a “2”.

#3. Fed policy. “Inflation is a little bit below target, and it’s kind of a mystery.” That was now-Fed Chair Powell at last year’s Jackson Hole meeting. He cited low inflation as a reason to remain patient on rate increases.

This year’s Jackson Hole conference will come right at the end of August, but markets are already dialing in an expected hawkish tone for all the pre-meeting commentary:

• Fed Funds Futures give 63% odds the Fed will move twice more in 2018.
• The December 2019 Fed Funds Futures contracts made a new low just today, and now expect the central bank to raise rates at least twice more in 2019 and possibly three times (25 bp apiece).

Add all three ingredients together – more trade war concerns, higher rates and an ever-more aggressive Fed – and you get the makings of a wild August ride. In principle, they should work to offset each other (rising trade tensions create worries about a slowing economy pushing rates lower, for example). In practice, things don’t always work that way (i.e. higher tariffs mean more inflation and higher rates).

We’ll sum up where we started: August has become an oddly choppy month, and forewarned is forearmed. Absent the clear historical data, we wouldn’t even be bothering to scare the horses with our scenario analysis today. But the seasonal patterns are clear enough, so better to prepare for the worst than just hope for the best

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President Trump has declared a state of emergency in California after deadly wildfires have ripped through over 102,028 acres across the state this week, according to the governor’s Office of Emergency Services. 

According to the White House, Trump has authorized FEMA (the Federal Emergency Management Agency) to assist California firefighters who are battling tinder-fueled infernos thanks to nearly half-a-decade of drought. 

The worst of the blazes has devastated Shasta County, as the Carr Fire has claimed the lives of two first responders, forced thousands to evacuate and burned 48,312 acres – around half the total affected area across the state. The fire was 5% contained as of Friday night according to officials, while Fire Inspector Jeremy Stoke was killed along with a bulldozer operator as they battled the blaze.

Redding Chief of Police Roger Moore told the press that so many residents were fleeing the fire that they were creating “gridlock” on the city’s roads, as temperatures reached 110 degrees in some spots and created their own weather described by Can official as “a tornado over the fire.” 

“Fire was whipped up into a whirlwind of activity,” said California’s top fire official, Cal Fire Chief Ken Pimlott, adding that it was “uprooting trees, moving vehicles, moving parts of roadways.” Pimlott said that dry brush was to blame for the wildfires. 

Shadrac Herrera of Redding, 34, said he witnessed the upheaval. “I saw a tornado of fire,” he said. “I could hear it whistling and sucking up air and at the same time it was growing. Incredibly scary.” –NBC News

Tops of the Pyrocumulus cloud over the #CarrFire in California are now up to 32,000’! This fire is creating its own weather! pic.twitter.com/dxaVsmEYZD

— Trishcuit (@Trishcuit) July 28, 2018

Aerial View of the Redding Fire 😥 #redding #california #reddingcalifornia #calfire @calfire @ktvu2 @kron4tv @kpixtv @sfgate @sfchronicle @krcrnews @buzzfeednews @buzzfeed https://t.co/dze3bTBIgt pic.twitter.com/EC5ugrkKjH

— Daytodayphotography (@dtdphotographer) July 28, 2018

On Thursday, Governor Jerry Brown declared a state of emergency for Shasta County while formally requesting federal emergency aid from the White House late Friday, according to NBC News.

Massive California fire jumps over river and threatens city of 95,000 people https://t.co/mLiaLiRvto pic.twitter.com/qQb4umkKbV

— jhon (@qihavytyrux) July 27, 2018

“Evacuate, evacuate, evacuate,” he said. “Pay very close attention to social media, websites, local television and radio broadcasts.”

So many fires had broken out across the Golden State that Pimlott said first responders were hoping to mount vicious initial attacks to keep them in check. “Our first priority always is the initial attack of new fires,” he said.

Brig. Gen. Matthew Beevers of the California National Guard said 800 of his troops were either at the Carr Fire or were headed that way. The guard has also deployed multiple aircraft, including at least one military drone that is allowing firefighters to monitor the behavior of the blaze, he said. –NBC News

Over 3,400 firefighters from as far away as San Diego have been battling the the Shasta County inferno, which was dealing with its own 240-acre brushfire on Friday near the town of Ramona. 

Other fires across the state include the Ferguson fire in Mariposa which has burned 46,675 acres and is around 30% contained, and the 12,300 acre Cranston fire in Riverside county which Cal Fire reports as 17% contained. 

While the Northern California Carr fire was reportedly sparked by the “mechanical failure of a vehicle,” a Temecula, CA man was charged on Friday with over a dozen felony accounts related to nine different fires in Riverside County, reports the Temecula Patch. 

Brandon McGlover, 32, faces a potential life sentence if convicted as charged, the Riverside County District Attorney’s office said.

McGlover is accused of setting nine separate fires on Wednesday, one of which exploded into the 11,500-acre Cranston Fire burning near Idyllwild. The fires were all allegedly set in the Idyllwild, Anza and Sage areas. –Temecula Patch

Over 6,000 residents have evacuated due to the Cranston Fire, which threatens 5,000 structures and has already destroyed five homes. 

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Authored by Darryn Pollock via CoinTelegraph.com,

The G20, after it was called upon by France’s finance minister Bruno Le Maire to have a public debate about cryptocurrencies at the G20 Summit in Buenos Aires, made strides towards a global front for regulation of digital currencies.

image courtesy of CoinTelegraph

Those strides could however be only considered baby steps as, at the conclusion of a meeting of the finance ministers in March it was decided that July would be the deadline for “very specific recommendations.”

The recommendations were not about what to regulate, but rather, what data is needed.

Now, with the July deadline come and gone, the G20 has reiterated its March commitments, but has also decided to move to a new deadline of October where it will await the Financial Action Task Force (FATF) clarification on how its standards apply to what it calls crypto-assets.

The path to taking crypto seriously

The speculation and hyper growth that saw Bitcoin easily smash through the $10,000 barrierthrough November 2017 certainly caught the eye of investors, but it also brought the decentralized and anonymous digital currency into the spotlight of global regulators.

The French finance minister’s suggestion that cryptocurrencies be part of the G20 talks in Argentina coincided with the peak of Bitcoin’s price high.

When commenting on the G20 nations taking up the topic of Bitcoin, Bruno Le Maire indicated a certain nervous attitude toward the skyrocketing asset.

“I am going to propose to the next G20 president, Argentina, that at the G20 summit in April we have a discussion all together on the question of Bitcoin. There is evidently a risk of speculation. We need to consider and examine this and see how with all the other G20 members, we can regulate Bitcoin.”

However, even before the Bitcoin boom, there were attempts by cryptocurrency groups to try to catch the attention of important governmental summits, and to be part of important global economic discussions.

For example, in November 2014, the Australian Digital Currency Association (ADCCA) purposefully scheduled their own event to overlap with the G20 in Brisbane Australia.

Ron Tucker, ADCCA Chairman, explained the reason behind the move in 2014:

“With Australia chairing the G20 this year, there is no better time to engage with relevant stakeholders to make sure the digital currency industry can continue to grow and prosper at home and globally.”

While it is hard to track the effectiveness of this move, it could have helped the ADCCA create a partnership with Deloitte in 2015. Australia now could be regarded as a strongly, but fairly, regulated cryptocurrency continent.

Blockchain benefits

Before the G20 were gearing up to discuss the potential risks and dangers of Bitcoin to global financial stability, they were already looking into the potential benefits of the underlying technology.

In March 2017, a statement from Julie Maupin of the Centre for International Governance Innovation detailed the need for a joint effort to “fight to restore the public’s faith in cross-border economic cooperation.” This included a decisive look at blockchain technology as a potential solution.

At this stage, though, there were merely whispers and suggestions about the potential of blockchain technology; there were no concrete plans to work with such disruptive fintech. In fact, a Deloitte report from around the same time suggested that world governments were not ready.

No longer ignored, no longer a threat

After Bitcoin was tabled as a topic of discussion for the finance ministers, the cryptocurrency world watched which direction the leaders of such powerful nations would go in relation to the new financial technology.

The first indications the discussions may be positive for cryptocurrencies came as Bank of England governor and head of the Financial Stability Board (FSB) Mark Carney told G20 members that crypto assets “do not pose risks” to the world’s economy. This saw Bitcoin’s price jump $1,000.

“Whether you call it crypto assets, crypto tokens – definitely not cryptocurrencies – let that be clear a message as far as I’m concerned.”

This definition from Klaas Knot, president of De Nederlandsche Bank NV, who also chairs the FSB standard committee on the assessment of vulnerabilities, positioned Bitcoin in a way in which it would not be as harshly regulated if it was considered money.

Gathering data before making a regulatory move

The conclusion on the March meeting for the G20 financial leaders saw them decided to give it some time before instituting anything specific.

The announcement, on March 19, came from Argentina Central Bank chair Federico Sturzenegger:

“In July we have to offer very concrete, very specific recommendations on not ‘what do we regulate?’ but ‘what is the data we need?’”

So, with July being the decided upon deadline by the G20 to offer specific recommendations on what data is needed for the regulation of cryptocurrencies they looked to commissions and committees to supply information.

Thus, they called upon a number of different bodies, as the Financial Stability Board (FSB), the Committee on Payments and Market Infrastructures (CPMI), International Organisation of Securities Commissions (IOSCO), Basel Committee on Banking Supervision (BCBS) and the Financial Action Task Force (FATF), to report back.

July’s report

In July the FATF came back with a report, but the G20 decided to set a new October deadline. According to a communiqué, the G20 waited to see how the FATF can apply its standards to cryptocurrencies.

Meanwhile, a report from the FSB was also received outlining the work it had done with the other standard-setting bodies. Different commissions and committees provided a deeper explanation how crypto assets would impact the global economy.

IOSCO’s work was focused on addressing the regulatory risks of initial coin offerings and crypto-asset platforms.

The BCBS was involved in monitoring crypto-asset developments from the perspective of strengthening the regulation, supervision and practices of banks: “quantifying the materiality of banks’ direct and indirect exposures to crypto-assets; clarifying the prudential treatment of such exposures; and monitoring developments related to crypto-assets and FinTech for banks and supervisors.”

Finally, the CPMI was monitoring the development of digital currencies and distributed ledger technology from the perspective of the safety and efficiency of payments and settlements, cautioning banks which are thinking of launching their own central bank digital currency (CBDC).

Meanwhile, the FSB itself was involved in conducting an initial assessment of the risks posed to financial stability by the growth of crypto-assets.

Financial stability concerns

At first, the FSB stated that the rise of cryptocurrencies posed a low financial stability risk. However, in light of the rapid developments in the cryptocurrency market, the FSB and the CPMI were requested to collaborate and develop a framework to support the monitoring and identification of emerging financial stability risks.

“The objective of the framework is to identify any emerging financial stability concerns in a timely manner. To this end, it includes risk metrics that are most likely to highlight such risks, using data from public sources where available.

“The FSB selected metrics for the monitoring framework based upon several criteria, including comparability over time and across jurisdictions, ease of access and repeatability, degree to which the metric is anchored in data, and analytical effort to compute.”

Essentially, the FSB has been monitoring the closing price and market capitalization, the price volatility and the monthly average of daily transactions. These can be seen as graphs within the report.

Source: Financial Stability Board

Classification of crypto-assets and exchanges

The IOSCO’s work on monitoring ICOs and exchanges has brought up the following:

“First, issues like whether a traded crypto-asset is a security, commodity, or some other financial product, or the manner in which such platforms operate, are threshold questions in the context of financial regulation.

“Second, so-called ’crypto-exchanges’ may be exchanges that are failing to comply with the laws applicable to exchanges. In some cases, they may be classified as intermediaries and may also be failing to comply with applicable laws.

“Finally, existing regulatory models may rely on access through a regulated entity to support many investor protection and other regulatory objectives, such as surveillance, but access to crypto-asset platforms currently may not involve such regulated entities.”

Also the Securities and Exchange Commission (SEC) in the USA is forging forward with its definition of what a security is, painting many ICOs as securities.

Additionally, the way in which exchanges are being run is a point of high contention, especially in places like Japan and South Korea. The former has taken it upon itself to issue business improvement orders to a number of exchanges, while the latter has classed them as legal entitieswhich fall under banking legislation.

FATF’s standards implementation

The FATF, with its mandate from the G20 to develop a program to implement standards preventing money laundering and terrorist financing through crypto-assets, has released its working programwhich will come into force from July 1, 2018 until June 30, 2019.

“Under the US presidency, FATF will prioritise work on preventing the financing of the proliferation of weapons of mass destruction; expand the current emphasis on combating terrorist financing and foster improvements in the regulation and supervision of virtual currencies/crypto-assets.”

The FATF also looked into the different G20 nations and their regulatory needs and approaches.

“Some countries have prohibited the use of all virtual currencies/crypto assets, or have prohibited financial institutions from dealing in virtual currencies/crypto-assets.

“Several countries apply anti-money laundering/countering the financing of terrorism regulations to virtual currency/crypto-assets. Some countries do not specifically regulate virtual currencies/crypto-assets or exchanges dealing in them, but have broad-based requirements to report suspicious transactions. Many countries are in the process of establishing law or regulations.”

Regulation and deadlines

With October being set as the next point in which the G20 will come together to take further steps toward global cryptocurrency regulation, it is interesting to see how much the cryptocurrency space will have evolved in this time.

The wording of the document announcing this decision gives an impression of a balanced approach to cryptocurrencies as they currently stand:

“Technological innovations, including those underlying crypto-assets, can deliver significant benefits to the financial system and the broader economy.”

However, there is a caveat suggesting other concerns surrounding crypto’s use for tax evasion and money laundering which will hopefully be further addressed and explored with the FATFs program.

“Crypto-assets do, however, raise issues with respect to consumer and investor protection, market integrity, tax evasion, money laundering and terrorist funding.”

It signed off by stating:

“We reiterate our March commitments related to the implementation of the FATF standards and we ask the FATF to clarify in October how its standards apply to crypto-assets.”

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Before the shit really hit the fan this week as Techs wrecked and Yuan crashed, CFTC data (reported as of Tuesday close) showed speculators piling increasingly into the most-crowded trades as if nothing will ever change.

The two most extreme positioning situations are in Gold and US Treasuries as there has never been more hedge fund shorts in the precious metal – and it is accelerating dramatically…

And never been more aggregate speculative short positions across the Treasury complex in history…

Specifically, 10Y Treasury shorts are exploding higher…

Additionally, as China’s offshore Yuan collapses, traders are adding to their net long USDollar positions – but for now, the dollar refuses to follow their positioning…

And finally, specs added further to their renewed belief in the old ‘sell vol’ trade being back…

As if February never happened.

Despite the fact that we are heading into the market’s most seasonally volatile time of year…

All of this positioning occurred before things went a little pear-shaped in global markets towards the latter end of the week, and as Bloomberg notes, this year even more so as for many, unpredictable markets could mar dreams of a lazy summer at the beach. Event risk could derail plans as trade tensions linger and China’s sliding currency recalls August 2015’s devaluation. And lest you forget: President Donald Trump has a Twitter account.

“It’s the winter in the markets — not the summer,” Louis Gargour, the chief investment officer of London-based LNG Capital, an alternative investment-management firm, said in an interview. He’s been reducing exposure to risk and increasing shorts in credit.

“China’s a big story, the second-order effects of trade wars are a much bigger factor that could pressure global markets.”

Additionally, Goldman has warned that depleted liquidity makes the market prone to crises.

“You have a lot of geopolitical events that could happen this summer,” said Barbara Reinhard, head of asset allocation at the $227 billion AUM Voya Asset Management.

“August ones are particularly alarming — that’s when volumes are thin and people are on vacation.”

Risk-off sentiment could rapidly snowball alongside the specter of higher borrowing costs. Investors may struggle to offload positions, from corporate bonds to emerging-market assets, in the second-lowest equity volume month of the year, as Reinhard concluded:

“Let’s put it this way, everyone taking a vacation: they can’t be without their devices.”

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