Category: zerohedge

Authored by Richard Haass via Foreign Affairs,

A stable world order is a rare thing. When one does arise, it tends to come after a great convulsion that creates both the conditions and the desire for something new. It requires a stable distribution of power and broad acceptance of the rules that govern the conduct of international relations. It also needs skillful statecraft, since an order is made, not born. And no matter how ripe the starting conditions or strong the initial desire, maintaining it demands creative diplomacy, functioning institutions, and effective action to adjust it when circumstances change and buttress it when challenges come.

Eventually, inevitably, even the best-managed order comes to an end. The balance of power underpinning it becomes imbalanced. The institutions supporting it fail to adapt to new conditions. Some countries fall, and others rise, the result of changing capacities, faltering wills, and growing ambitions. Those responsible for upholding the order make mistakes both in what they choose to do and in what they choose not to do.

But if the end of every order is inevitable, the timing and the manner of its ending are not. Nor is what comes in its wake. Orders tend to expire in a prolonged deterioration rather than a sudden collapse. And just as maintaining the order depends on effective statecraft and effective action, good policy and proactive diplomacy can help determine how that deterioration unfolds and what it brings. Yet for that to happen, something else must come first: recognition that the old order is never coming back and that efforts to resurrect it will be in vain. As with any ending, acceptance must come before one can move on. 

In the search for parallels to today’s world, scholars and practitioners have looked as far afield as ancient Greece, where the rise of a new power resulted in war between Athens and Sparta, and the period after World War I, when an isolationist United States and much of Europe sat on their hands as Germany and Japan ignored agreements and invaded their neighbors. But the more illuminating parallel to the present is the Concert of Europe in the nineteenth century, the most important and successful effort to build and sustain world order until our own time. From 1815 until the outbreak of World War I a century later, the order established at the Congress of Vienna defined many international relationships and set (even if it often failed to enforce) basic rules for international conduct. It provides a model of how to collectively manage security in a multipolar world.

That order’s demise and what followed offer instructive lessons for today – and an urgent warning. Just because an order is in irreversible decline does not mean that chaos or calamity is inevitable. But if the deterioration is managed poorly, catastrophe could well follow.

OUT OF THE ASHES

The global order of the second half of the twentieth century and the first part of the twenty-first grew out of the wreckage of two world wars. The nineteenth-century order followed an earlier international convulsion: the Napoleonic Wars, which, after the French Revolution and the rise of Napoleon Bonaparte, ravaged Europe for more than a decade. After defeating Napoleon and his armies, the victorious allies—Austria, Prussia, Russia, and the United Kingdom, the great powers of their day—came together in Vienna in 1814 and 1815. At the Congress of Vienna, they set out to ensure that France’s military never again threatened their states and that revolutionary movements never again threatened their monarchies. The victorious powers also made the wise choice to integrate a defeated France, a course very different from the one taken with Germany following World War I and somewhat different from the one chosen with Russia in the wake of the Cold War.

The congress yielded a system known as the Concert of Europe. Although centered in Europe, it constituted the international order of its day given the dominant position of Europe and Europeans in the world. There was a set of shared understandings about relations between states, above all an agreement to rule out invasion of another country or involvement in the internal affairs of another without its permission. A rough military balance dissuaded any state tempted to overthrow the order from trying in the first place (and prevented any state that did try from succeeding). Foreign ministers met (at what came to be called “congresses”) whenever a major issue arose. The concert was conservative in every sense of the word. The Treaty of Vienna had made numerous territorial adjustments and then locked Europe’s borders into place, allowing changes only if all signatories agreed. It also did what it could to back monarchies and encourage others to come to their aid (as France did in Spain in 1823) when they were threatened by popular revolt.

An engraving of the Congress of Vienna, 1814.

The concert worked not because there was complete agreement among the great powers on every point but because each state had its own reasons for supporting the overall system. Austria was most concerned with resisting the forces of liberalism, which threatened the ruling monarchy. The United Kingdom was focused on staving off a renewed challenge from France while also guarding against a potential threat from Russia (which meant not weakening France so much that it couldn’t help offset the threat from Russia). But there was enough overlap in interests and consensus on first-order questions that the concert prevented war between the major powers of the day.

The concert technically lasted a century, until the eve of World War I. But it had ceased to play a meaningful role long before then. The revolutionary waves that swept Europe in 1830 and 1848 revealed the limits of what members would do to maintain the existing order within states in the face of public pressure. Then, more consequentially, came the Crimean War. Ostensibly fought over the fate of Christians living within the Ottoman Empire, in actuality it was much more about who would control territory as that empire decayed. The conflict pitted France, the United Kingdom, and the Ottoman Empire against Russia. It lasted two and a half years, from 1853 to 1856. It was a costly war that highlighted the limits of the concert’s ability to prevent great-power war; the great-power comity that had made the concert possible no longer existed. Subsequent wars between Austria and Prussia and Prussia and France demonstrated that major-power conflict had returned to the heart of Europe after a long hiatus. Matters seemed to stabilize for a time after that, but this was an illusion. Beneath the surface, German power was rising and empires were rotting. The combination set the stage for World War I and the end of what had been the concert. 

WHAT AILS THE ORDER?

What lessons can be drawn from this history? As much as anything else, the rise and fall of major powers determines the viability of the prevailing order, since changes in economic strength, political cohesion, and military power shape what states can and are willing to do beyond their borders. Over the second half of the nineteenth century and the start of the twentieth, a powerful, unified Germany and a modern Japan rose, the Ottoman Empire and tsarist Russia declined, and France and the United Kingdom grew stronger but not strong enough. Those changes upended the balance of power that had been the concert’s foundation; Germany, in particular, came to view the status quo as inconsistent with its interests.

Changes in the technological and political context also affected that underlying balance. Under the concert, popular demands for democratic participation and surges of nationalism threatened the status quo within countries, while new forms of transportation, communication, and armaments transformed politics, economics, and warfare. The conditions that helped give rise to the concert were gradually undone.

Yet it would be overly deterministic to attribute history to underlying conditions alone. Statecraft still matters. That the concert came into existence and lasted as long as it did underscores that people make a difference. The diplomats who crafted it—Metternich of Austria, Talleyrand of France, Castlereagh of the United Kingdom—were exceptional. The fact that the concert preserved peace despite the gap between two relatively liberal countries, France and the United Kingdom, and their more conservative partners shows that countries with different political systems and preferences can work together to maintain international order. Little that turns out to be good or bad in history is inevitable. The Crimean War might well have been avoided if more capable and careful leaders had been on the scene. It is far from clear that Russian actions warranted a military response by France and the United Kingdom of the nature and on the scale that took place. That the countries did what they did also underscores the power and dangers of nationalism. World War I broke out in no small part because the successors to German Chancellor Otto von Bismarck were unable to discipline the power of the modern German state he did so much to bring about.

Two other lessons stand out. First, it is not just core issues that can cause an order to deteriorate. The concert’s great-power comity ended not because of disagreements over the social and political order within Europe but because of competition on the periphery. And second, because orders tend to end with a whimper rather than a bang, the process of deterioration is often not evident to decision-makers until it has advanced considerably. By the outbreak of World War I, when it became obvious that the Concert of Europe no longer held, it was far too late to save it—or even to manage its dissolution.

A TALE OF TWO ORDERS

The global order built in the aftermath of World War II consisted of two parallel orders for most of its history.

One grew out of the Cold War between the United States and the Soviet Union. At its core was a rough balance of military strength in Europe and Asia, backed up by nuclear deterrence. The two sides showed a degree of restraint in their rivalry. “Rollback”—Cold War parlance for what today is called “regime change”—was rejected as both infeasible and reckless. Both sides followed informal rules of the road that included a healthy respect for each other’s backyards and allies. Ultimately, they reached an understanding over the political order within Europe, the principal arena of Cold War competition, and in 1975 codified that mutual understanding in the Helsinki Accords. Even in a divided world, the two power centers agreed on how the competition would be waged; theirs was an order based on means rather than ends. That there were only two power centers made reaching such an agreement easier. 

The other post–World War II order was the liberal order that operated alongside the Cold War order. Democracies were the main participants in this effort, which used aid and trade to strengthen ties and fostered respect for the rule of law both within and between countries. The economic dimension of this order was designed to bring about a world (or, more accurately, the non-communist half of it) defined by trade, development, and well-functioning monetary operations. Free trade would be an engine of economic growth and bind countries together so that war would be deemed too costly to wage; the dollar was accepted as the de facto global currency.

The diplomatic dimension of the order gave prominence to the UN. The idea was that a standing global forum could prevent or resolve international disputes. The UN Security Council, with five great-power permanent members and additional seats for a rotating membership, would orchestrate international relations. Yet the order depended just as much on the willingness of the noncommunist world (and U.S. allies in particular) to accept American primacy. As it turns out, they were prepared to do this, as the United States was more often than not viewed as a relatively benign hegemon, one admired as much for what it was at home as for what it did abroad. 

Both of these orders served the interests of the United States. The core peace was maintained in both Europe and Asia at a price that a growing U.S. economy could easily afford. Increased international trade and opportunities for investment contributed to U.S. economic growth. Over time, more countries joined the ranks of the democracies. Neither order reflected a perfect consensus; rather, each offered enough agreement so that it was not directly challenged. Where U.S. foreign policy got into trouble—such as in Vietnam and Iraq—it was not because of alliance commitments or considerations of order but because of ill-advised decisions to prosecute costly wars of choice. 

SIGNS OF DECAY

Today, both orders have deteriorated. Although the Cold War itself ended long ago, the order it created came apart in a more piecemeal fashion—in part because Western efforts to integrate Russia into the liberal world order achieved little. One sign of the Cold War order’s deterioration was Saddam Hussein’s 1990 invasion of Kuwait, something Moscow likely would have prevented in previous years on the grounds that it was too risky. Although nuclear deterrence still holds, some of the arms control agreements buttressing it have been broken, and others are fraying. 

Although Russia has avoided any direct military challenge to NATO, it has nonetheless shown a growing willingness to disrupt the status quo: through its use of force in Georgia in 2008 and Ukraine since 2014, its often indiscriminate military intervention in Syria, and its aggressive use of cyberwarfare to attempt to affect political outcomes in the United States and Europe. All of these represent a rejection of the principal constraints associated with the old order. From a Russian perspective, the same might be said of NATO enlargement, an initiative clearly at odds with Winston Churchill’s dictum “In victory, magnanimity.” Russia also judged the 2003 Iraq war and the 2011 NATO military intervention in Libya, which was undertaken in the name of humanitarianism but quickly evolved into regime change, as acts of bad faith and illegality inconsistent with notions of world order as it understood them. 

The liberal order is exhibiting its own signs of deterioration. Authoritarianism is on the rise not just in the obvious places, such as China and Russia, but also in the Philippines, Turkey, and eastern Europe. Global trade has grown, but recent rounds of trade talks have ended without agreement, and the World Trade Organization (WTO) has proved unable to deal with today’s most pressing challenges, including nontariff barriers and the theft of intellectual property. Resentment over the United States’ exploitation of the dollar to impose sanctions is growing, as is concern over the country’s accumulation of debt. 

The UN Security Council is of little relevance to most of the world’s conflicts, and international arrangements have failed more broadly to contend with the challenges associated with globalization. The composition of the Security Council bears less and less resemblance to the real distribution of power. The world has put itself on the record as against genocide and has asserted a right to intervene when governments fail to live up to the “responsibility to protect” their citizens, but the talk has not translated into action. The Nuclear Nonproliferation Treaty allows only five states to have nuclear weapons, but there are now nine that do (and many others that could follow suit if they chose to). The EU, by far the most significant regional arrangement, is struggling with Brexit and disputes over migration and sovereignty. And around the world, countries are increasingly resisting U.S. primacy.

Russian soldiers in military armored personnel carriers on a road near Sevastopol, Crimea, March 2014.

POWER SHIFTS

Why is all this happening? It is instructive to look back to the gradual demise of the Concert of Europe. Today’s world order has struggled to cope with power shifts: China’s rise, the appearance of several medium powers (Iran and North Korea, in particular) that reject important aspects of the order, and the emergence of nonstate actors (from drug cartels to terrorist networks) that can pose a serious threat to order within and between states. 

The technological and political context has changed in important ways, too. Globalization has had destabilizing effects, ranging from climate change to the spread of technology into far more hands than ever before, including a range of groups and people intent on disrupting the order. Nationalism and populism have surged—the result of greater inequality within countries, the dislocation associated with the 2008 financial crisis, job losses caused by trade and technology, increased flows of migrants and refugees, and the power of social media to spread hate. 

Meanwhile, effective statecraft is conspicuously lacking. Institutions have failed to adapt. No one today would design a UN Security Council that looked like the current one; yet real reform is impossible, since those who would lose influence block any changes. Efforts to build effective frameworks to deal with the challenges of globalization, including climate change and cyberattacks, have come up short. Mistakes within the EU—namely, the decisions to establish a common currency without creating a common fiscal policy or a banking union and to permit nearly unlimited immigration to Germany—have created a powerful backlash against existing governments, open borders, and the EU itself.

The United States, for its part, has committed costly overreach in trying to remake Afghanistan, invading Iraq, and pursuing regime change in Libya. But it has also taken a step back from maintaining global order and in certain cases has been guilty of costly underreach. In most instances, U.S. reluctance to act has come not over core issues but over peripheral ones that leaders wrote off as not worth the costs involved, such as the strife in Syria, where the United States failed to respond meaningfully when Syria first used chemical weapons or to do more to help anti-regime groups. This reluctance has increased others’ propensity to disregard U.S. concerns and act independently. The Saudi-led military intervention in Yemen is a case in point. Russian actions in Syria and Ukraine should also be seen in this light; it is interesting that Crimea marked the effective end of the Concert of Europe and signaled a dramatic setback in the current order. Doubts about U.S. reliability have multiplied under the Trump administration, thanks to its withdrawal from numerous international pacts and its conditional approach to once inviolable U.S. alliance commitments in Europe and Asia. 

MANAGING THE DETERIORATION

Given these changes, resurrecting the old order will be impossible. It would also be insufficient, thanks to the emergence of new challenges. Once this is acknowledged, the long deterioration of the Concert of Europe should serve as a lesson and a warning. 

For the United States to heed that warning would mean strengthening certain aspects of the old order and supplementing them with measures that account for changing power dynamics and new global problems. The United States would have to shore up arms control and nonproliferation agreements; strengthen its alliances in Europe and Asia; bolster weak states that cannot contend with terrorists, cartels, and gangs; and counter authoritarian powers’ interference in the democratic process. Yet it should not give up trying to integrate China and Russia into regional and global aspects of the order. Such efforts will necessarily involve a mix of compromise, incentives, and pushback. The judgment that attempts to integrate China and Russia have mostly failed should not be grounds for rejecting future efforts, as the course of the twenty-first century will in no small part reflect how those efforts fare.

The United States also needs to reach out to others to address problems of globalization, especially climate change, trade, and cyber-operations. These will require not resurrecting the old order but building a new one. Efforts to limit, and adapt to, climate change need to be more ambitious. The WTO must be amended to address the sorts of issues raised by China’s appropriation of technology, provision of subsidies to domestic firms, and use of nontariff barriers to trade. Rules of the road are needed to regulate cyberspace. Together, this is tantamount to a call for a modern-day concert. Such a call is ambitious but necessary.

The United States must show restraint and recapture a degree of respect in order to regain its reputation as a benign actor. This will require some sharp departures from the way U.S. foreign policy has been practiced in recent years: to start, no longer carelessly invading other countries and no longer weaponizing U.S. economic policy through the overuse of sanctions and tariffs. But more than anything else, the current reflexive opposition to multilateralism needs to be rethought. It is one thing for a world order to unravel slowly; it is quite another for the country that had a large hand in building it to take the lead in dismantling it. 

All of this also requires that the United States get its own house in order – reducing government debt, rebuilding infrastructure, improving public education, investing more in the social safety net, adopting a smart immigration system that allows talented foreigners to come and stay, tackling political dysfunction by making it less difficult to vote, and undoing gerrymandering. The United States cannot effectively promote order abroad if it is divided at home, distracted by domestic problems, and lacking in resources.

The major alternatives to a modernized world order supported by the United States appear unlikely, unappealing, or both. A Chinese-led order, for example, would be an illiberal one, characterized by authoritarian domestic political systems and statist economies that place a premium on maintaining domestic stability. There would be a return to spheres of influence, with China attempting to dominate its region, likely resulting in clashes with other regional powers, such as India, Japan, and Vietnam, which would probably build up their conventional or even nuclear forces.

A new democratic, rules-based order fashioned and led by medium powers in Europe and Asia, as well as Canada, however attractive a concept, would simply lack the military capacity and domestic political will to get very far. A more likely alternative is a world with little order—a world of deeper disarray. Protectionism, nationalism, and populism would gain, and democracy would lose. Conflict within and across borders would become more common, and rivalry between great powers would increase. Cooperation on global challenges would be all but precluded. If this picture sounds familiar, that is because it increasingly corresponds to the world of today. 

The deterioration of a world order can set in motion trends that spell catastrophe. World War I broke out some 60 years after the Concert of Europe had for all intents and purposes broken down in Crimea. What we are seeing today resembles the mid-nineteenth century in important ways: the post–World War II, post–Cold War order cannot be restored, but the world is not yet on the edge of a systemic crisis. Now is the time to make sure one never materializes, be it from a breakdown in U.S.-Chinese relations, a clash with Russia, a conflagration in the Middle East, or the cumulative effects of climate change. The good news is that it is far from inevitable that the world will eventually arrive at a catastrophe; the bad news is that it is far from certain that it will not.

via RSS http://bit.ly/2Sljcbk Tyler Durden

On Christmas Eve the White House announced in a statement that President Trump is open to a “potential meeting in the future” with Turkish President Recep Tayyip Erdogan. The statement noted Turkey’s president had formally invited Trump to meet in 2019, though nothing specific or definite has been planned. 

This comes after it was revealed that in a Dec. 14 phone call between the two leaders Trump said the US was “done” with Syria. Quickly on the heels of last week’s announced decision for a “full” and “immediate” pullout of the some 2000+ American military personnel training and advising Kurdish-Arab SDF forces in north-east Syria. Trump’s senior aides noted the decision was made after the phone call, and curiously the U.S. State Department approved the sale of $3.5 billion in patriots missiles the day after.

According to a senior administration official who spoke to CNN, Trump told Erdogan, “OK, it’s all yours. We are done,” in reference to Syria. The president sought assurances from Erdogan that Turkey would finish off remnant ISIS cells in eastern Syria, per the CNN report:

A senior White House official said Erdogan gave Trump his “word” that Turkey would finish off ISIS.

“In the call on Friday, Erdogan said to the President, ‘In fact, as your friend, I give you my word in this,’” the senior White House official said.

While giving a speech last Friday Erdogan revealed some of the details of the call, saying, “During a conversation I had with Mr. Trump — he said ‘ISIS, can you clear ISIS from this area?'” Erdogan recalled further: “We did it before, and we can again as long as we have logistic support from you… And so they began pulling out.” Erdogan added: “Within the framework of the phone call we had with Mr. Trump, we have started preparing plans for operations to clear the ISIS elements still within Syria.”

Trump, for his part, subsequently confirmed in a weekend tweet: “I just had a long and productive call with President Erdogan of Turkey. We discussed ISIS, our mutual involvement in Syria, & the slow & highly coordinated pullout of U.S. troops from the area. After many years they are coming home. We also discussed heavily expanded Trade.”

Meanwhile a major Turkish Army and Turkish-backed rebel assault on the key Syrian Kurdish stronghold of Manbij is imminent. Turkey has been reported over the past days to be mustering large forces, including hundreds of vehicles and troops surrounding the northwestern Syrian town, around Manbij. 

Turkey has long demanded US advisers to withdraw and to clear the town of armed Syrian Kurdish groups, specifically the YPG, which forms the core of the US-backed SDF but which Ankara sees as an extension of the outlawed terror group, the PKK.

Bloomberg described the military build-up, filmed by Turkish state media, as follows:

The convoy of around 200 vehicles, including howitzers, armored personnel carriers and artillery, advanced to reinforce the military’s presence in areas close to Manbij, TRT said on Sunday. They were joined by forces of the Free Syrian Army, which has backed Turkish offensives against Syrian Kurdish militants, state-run Anadolu Agency said Monday.

However, as a potential bloodbath is set to ensue, on Tuesday morning Turkey’s foreign minister announced the United States has agreed to complete to a “roadmap” for the removal of all Kurdish militia fighters from the Northern Syrian town before American forces clear out.

Though the US side has yet to confirm Turkey’s latest claims, it appears the handover of Manbij to Turkey has begun following prior threats from Erdogan to “cleanse” the region of all Kurdish resistance. 

via RSS http://bit.ly/2EMQLQx Tyler Durden

Nunchuck-wielding New Yorkers are free to injure themselves in the testicles after a federal judge ruled last week that the state’s 45-year ban on the simple but deadly weapon is unconstitutional and protected by the Second Amendment. 

The ruling, reported by Guns.com, was based on a 15-year-old case brought by New York attorney, college professor and amateur martial artist James Maloney – who created his own martial arts style revolving around the use of nunchucks.

Maloney filed the suit to overturn New York’s ban, as he wanted to train his children in the art as well as possess the weapons legally at home. 

Judge Pamela K. Chen found in favor of James M. Maloney in her 32-page ruling on Friday, arguing that the sale, use, and possession of nunchaku or chuka sticks — a simple weapon consisting of two sticks connected by a length of chain or rope — is protected by the Second Amendment. As such, New York’s ban on such weapons, enacted in 1974 after their popularity in martial arts films of the time, went too far and is an unconstitutional restriction. 

…

As part of his case, witnesses for Maloney advised that at least 64,890 factory-produced metal and wood nunchakus were sold to individuals in the U.S. since 1995. 

…

In an effort to preserve the law, the Nassau County District Attorney, where Maloney lives, argued there were 56 anecdotal nunchaku-related incidents in the country since 1974, to which Chen, a 2013 appointment by President Obama, said, “Even if Defendant had offered evidence of these 56 incidents at trial, they do not constitute clear and convincing evidence, or a preponderance of evidence, that nunchakus are not commonly used by law-abiding citizens for lawful purposes.” –Guns.com

Nunchucks are still banned in California, Massachusetts and Arizona with limited exceptions such as martial arts schools. 

This is all Bruce Lee’s fault… 

Read the decision below:

via RSS http://bit.ly/2V8Vd0X Tyler Durden

Authored by Matt Taibbi via RollingStone.com,

Nothing unites our political class like the threat of ending our never-ending war …

So we’re withdrawing troops from the Middle East.

GOOD!

What’s the War on Terror death count by now, a half-million? How much have we spent, $5 trillion? Five-and-a-half?

For that cost, we’ve destabilized the region to the point of abject chaos, inspired millions of Muslims to hate us, and torn up the Geneva Convention and half the Constitution in pursuit of policies like torture, kidnapping, assassination-by-robot and warrantless detention.

It will be difficult for each of us to even begin to part with our share of honor in those achievements. This must be why all those talking heads on TV are going crazy.

Unless Donald Trump decides to reverse his decision to begin withdrawals from Syria and Afghanistan, cable news for the next few weeks is going to be one long Scanners marathon of exploding heads.

“Today’s decision would cheer Moscow, ISIS, and Iran!” yelped Nicole Wallace, former George W. Bush communications director.

“Maybe Trump will bring Republicans and Democrats together,” said Bill Kristol, on MSNBC, that “liberal” channel that somehow seems to be populated round the clock by ex-neocons and Pentagon dropouts.

Kristol, who has rarely ever been in the ballpark of right about anything — he once told us Iraq was going to be a “two month war” — might actually be correct.

Trump’s decisions on Syria and Afghanistan will lay bare the real distinctions in American politics. Political power in this country is not divided between right and left, and not even between rich and poor.

The real line is between a war party, and everyone else.

This is why Kristol is probably right. The Democrats’ plan until now was probably to impeach Trump in the House using at minimum some material from the Michael Cohen case involving campaign-finance violations.

That plan never had a chance to succeed in the Senate, but now, who knows? Troop withdrawals may push a collection of hawkish Republicans like Lindsey Graham, Marco Rubio, Ben Sasse and maybe even Mitch McConnell into another camp.

The departure of Defense Secretary Jim Mattis — a standard-issue Pentagon toady who’s never met an unending failure of a military engagement he didn’t like and whose resignation letter is now being celebrated as inspirational literature on the order of the Gettysburg Address or a lost epic by Auden or Eliot — sounded an emergency bell for all these clowns. The letter by Mattis, Rubio said:

“Makes it abundantly clear we are headed towards a series of grave policy errors which will endanger our nation, damage our alliances & empower our adversaries.”

Talk like this is designed to give political cover to Republican fence-sitters on Trump. That wry smile on Kristol’s face is, I’d guess, connected to the knowledge that Trump put the Senate in play by even threatening to pull the plug on our Middle Eastern misadventures.

You’ll hear all sorts of arguments today about why the withdrawals are bad.

You’ll hear Trump has no plan, which is true. He never does, at least not on policy.

But we don’t exactly have a plan for staying in the Middle East, either, beyond installing a permanent garrison in a dozen countries, spending assloads of money and making ourselves permanently despised in the region as civilian deaths pile up through drone-bombings and other “surgical” actions.

You’ll hear we’re abandoning allies and inviting massacres by the likes of Turkish dictator Recep Tayyip Erdogan. If there was any evidence that our presence there would do anything but screw up the situation even more, I might consider that a real argument. At any rate, there are other solutions beyond committing American lives. We could take in more refugees, kick Turkey out of NATO, impose sanctions, etc.

As to the argument that we’re abandoning Syria to Russians — anyone who is interested in reducing Russian power should be cheering. If there’s any country in the world that equals us in its ability to botch an occupation and get run out on a bloody rail after squandering piles of treasure, it’s Russia. They may even be better at it than us. We can ask the Afghans about that on our way out of there.

The Afghan conflict became the longest military engagement in American history eight years ago. Despite myths to the contrary, Barack Obama did not enter office gung-ho to leave Afghanistan. He felt he needed to win there first, which, as anyone who’s read The Great Game knows, proved impossible. So we ended up staying throughout his presidency.

We were going to continue to stay there, and in other places, forever, because our occupations do not work, as everyone outside of Washington seems to understand.

TV talking heads will be unanimous on this subject, but the population, not so much. What polls we have suggest voters want out of the region in increasing numbers.

A Morning Consult/Politico poll from last year showed a plurality favored a troop decrease in Afghanistan, while only 5 percent wanted increases. Polls consistently show the public thinks our presence in Afghanistan has been a failure.

There’s less about how the public feels about Syria, but even there, the data doesn’t show overwhelming desire to put boots on the ground.

When Trump first ordered airstrikes in Syria over Assad’s use of chemical weapons, 70 percent favored sanctions according to Politico, while 39 percent favored sending troops. A CBS poll around that time found 45 percent wanted either no involvement period, or airstrikes and no ground troops, versus 18 percent who wanted full military involvement.

Trump is a madman, a far-right extremist and an embarrassment, but that’s not why most people in Washington hate him. It’s his foreign-policy attitudes, particularly toward NATO, that have always most offended DC burghers.

You could see the Beltway beginning to lose its mind back in the Republican primary race, when then-candidate Trump belittled America’s commitment to Middle Eastern oil states.

“Every time there’s a little ruckus, we send those ships and those planes,” he said, early in his campaign. “We get nothing. Why? They’re making a billion a day. We get nothing.”

As he got closer to the nomination, he went after neoconservative theology more explicitly.

“I don’t think we should be nation-building anymore,” he said, in March of 2016. He went on: “I watched as we built schools in Iraq and they’re blown up. We build another one, we get blown up.”

Trump was wrong about a thousand other things, but this was true. I had done a story about how military contractors spent $72 million on what was supposed to be an Iraqi police academy and delivered a pile of rubble so unusable, pedestrians made it into a toilet.

The Special Inspector General for Iraqi Reconstruction noted, “We witnessed a light fixture so full of diluted urine and feces that it would not operate.”

SIGIR found we spent over $60 billion on Iraqi reconstruction and did not significantly improvelife for Iraqis. The parallel body covering Afghanistan, the Special Inspector General for Afghan Reconstruction, concluded last year that at least $15.5 billion had been wasted in that country between 2008 and 2017, and this was likely only a “fraction” of financial leakage.

Trump, after sealing the nomination, upped the ante. In the summer of 2016 he said he wasn’t sure he’d send troops to defend NATO members that didn’t pay their bills. NATO members are supposed to kick in 2 percent of GDP for their own defense. At the time, only four NATO members(Estonia, Poland, the U.K. and the U.S.) were in compliance.

Politicians went insane. How dare he ask countries to pay for their own defense! Republican House member Adam Kinzinger, a popular guest in the last 24 hours, said in July 2016 that Trump’s comments were “utterly disastrous.”

“There’s no precedent,” said Thomas Wright, a “Europe scholar” from the Brookings Institute.

When the news came after Trump’s election that he’d only read his intelligence briefings once a week instead of every day as previous presidents had dutifully done, that was it. The gloves were off at that point.

“The open disdain Trump has shown for the agencies is unprecedented,” said Patrick Skinner, a former CIA official for both George W. Bush and Obama.

All that followed, through today, has to be understood through this prism.

Trump dumped on basically every segment of the political establishment en route to Washington, running on a classic authoritarian strategy — bash the elites, pose as a populist.

However fake he was, there were portions of the political establishment that deserved abuse, the Pentagon most of all.

The Department of Defense has been a money pit for decades. It has trillions in expenditures it can’t account for, refused an audit for nearly 30 years and then failed this year (as in failed completely, zero-point-zero, not producing any coherent numbers) when one was finally funded.

We have brave and able soldiers, but their leaders are utter tools who’ve left a legacy of massacres and botched interventions around the world.

NATO? That’s an organization whose mission stopped making sense the moment the Soviet Union collapsed. We should long ago have repurposed our defense plan to focus on terrorism, cyber-crime and cyber-attacks, commercial espionage, financial security, and other threats.

Instead, we continued after the Soviet collapse to maintain a global military alliance fattened with increasingly useless carriers and fighter jets, designed to fight archaic forms of war.

NATO persisted mainly as a PR mechanism for a) justifying continued obscene defense spending levels and b) giving a patina of internationalism to America’s essentially unilateral military adventures.

We’d go into a place like Afghanistan with no real plan for leaving, and a few member nations like Estonia and France and Turkey would send troops to get shot at with us. But it was always basically Team America: World Police with supporting actors. No wonder so few of the member countries paid their dues.

Incidentally, this isn’t exactly a secret. Long before Trump, this is what Barney Frank was saying in 2010: “I think the time has come to reexamine NATO. NATO has become an excuse for other people to get America to do things.”

This has all been a giant, bloody, expensive farce, and it’s long since time we ended it.

We’ll see a lot of hand-wringing today from people who called themselves anti-war in 2002 and 2003, but now pray that the “adults in the room” keep “boots on the ground” to preserve “credibility.”

Part of this is because it’s Trump, but a bigger part is that we’ve successfully brainwashed big chunks of the population into thinking it’s normal for a country to exist in a state of permanent war, fighting in seven countries at once, spending half of all discretionary funding on defense.

It’s not. It’s insane. And we’ll never be a healthy society, or truly respected abroad, until we stop accepting it as normal.

Incidentally, I doubt Trump really follows through on this withdrawal plan. But until he changes (what passes for) his mind, watch what happens in Washington.

We’re about to have a very graphic demonstration of the near-total uniformity of the political class when it comes to the military and its role. The war party is ready for a coming-out party.

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In the run-up to Christmas, some upsetting news has emerged regarding wild populations of reindeer and caribou in the Arctic. Over the past two decades, their numbers have fallen from nearly five million to just 2.1 million animals, according to the latest Arctic Report Card released by the National Oceanic and Atmospheric Administration.

As Statista’s Niall McCarthy notes, that represents a decline of 56 percent since the mid-1990s.

You will find more infographics at Statista

Some herds are faring better than others and researchers have found that in some cases, several herds have crashed by more than 90 percent. The drastic decline is due to a complex mix of factors such as hunting, disease, a lack of food and climate change. Even though the Arctic is getting warmer which results in more vegetation for the animals, increasing levels of drought, flies and parasites are taking a toll on them.

Reindeer and caribou are the same species – Rangifer tarandus – but there are notable differences between them. Caribou are larger elk-like animals that have never been domesticated while reindeer are smaller and were domesticated in northern Eurasia about 20,000 years ago. The grim findings of the report hardly come as a surprise given that the WWF released a global assessment of the health of animal populations all over the world earlier this year, finding that average vertebrate (bird, fish, mammals, amphibians) population has shrunk 60 percent since 1970.

Of course, there is another reason…

Robot Reindeer Pulling Santa
Boston Dynamics pic.twitter.com/gm5ENOCXek

— 41 Strange (@41Strange) December 8, 2018

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Authored by John Whitehead via The Rutherford Institute,

The Christmas season is unquestionably the most festive time of the year for Americans, celebrated across the nation by persons of all walks of life and political beliefs.  Even those without strong religious beliefs join in the festivities of a season dedicated to sharing, helping the less fortunate and striving for peace in the world.

However, the goodwill of the Christmas season has been squelched in many public schools, where uninformed administrators are turned into Grinches by misguided  fears  that the law requires anything religious be banned from public schools. Over the years, The Rutherford Institute has been contacted by parents and teachers alike concerned about schools changing their Christmas concerts to “winter holiday programs” and renaming Christmas “winter festival” or cancelling holiday celebrations altogether to avoid offending those who do not celebrate the various holidays.

Examples of the purging of Christmas from our schools abound:

• A Minnesota charter school banned the display of a poster prepared to promote the school’s yearbook as a holiday gift because the poster included the word “Christmas”;

• Traditional Christmas songs, such as “Joy to the World” and “Silent Night” have been banned from holiday concerts by a New Jersey school district.  The district justifies the ban as needed to avoid violating the “separation of church and state,” even though it is clear that religious music can be performed in public schools;

• A teacher in Texas who decorated her door with a scene from “A Charlie Brown Christmas”, including a scrawny tree and Linus, was forced to take it down.  She was told by her principal that some students might be offended or feel uncomfortable.

Students asked to send seasonal cards to military troops have been told to make them “holiday cards” and instructed not to use the words “Merry Christmas” on their cards. Similarly, Christmas trees, wreaths, candy canes and even the colors red and green have been banned as part of the effort to avoid any reference to Christmas, Christ or God.

Hoping to clear up the legal misunderstanding over the do’s and don’ts of celebrating Christmas, the following Constitutional Q&A on the “Twelve Rules of Christmas” provides basic guidelines for lawfully celebrating Christmas in schools, workplaces and elsewhere.

Q:  May public school students speak about Christmas at school?

A:  Public school students’ written or spoken personal expressions concerning the religious significance of Christmas (e.g., T-shirts with the slogan, “Jesus Is the Reason for the Season”) may not be censored by school officials absent evidence that the speech would cause a substantial disruption of the orderly operation of the school.

Q:  Are public school teachers forbidden from celebrating the holiday at work?

A:  So long as teachers are generally permitted to wear clothing or jewelry or have personal items expressing their views about the holidays, teachers may not be prohibited from similarly expressing their views by wearing Christmas-related clothing or jewelry or carrying Christmas-related personal items.

Q:  May students be taught about Christmas?

A:  Public schools may teach students about the Christmas holiday, including its religious significance, so long as it is taught objectively for secular purposes such as its historical or cultural importance, and not for the purpose of promoting Christianity.

Q:  Are teachers allowed to send holiday cards or gifts to their students or their students’ families?

A:  Public school teachers may send Christmas cards and gifts to the families of their students so long as they do so on their own time, outside of school hours.

Q:  Is Christmas music prohibited in schools?

A:  Public schools may include Christmas music, including those with religious themes, in their choral programs if the songs are included for a secular purpose such as their musical quality or cultural value or if the songs are part of an overall performance including other holiday songs relating to Chanukah, Kwanzaa, or other similar holidays.

Q:  What if a student does not believe in or celebrate Christmas?

A:  Public schools may not require students to sing Christmas songs whose messages conflict with the students’ own religious or nonreligious beliefs.

Q:  May students give out Christmas cards at school?

A:  Public school students may not be prohibited from distributing literature to fellow students concerning the Christmas holiday or invitations to church Christmas events on the same terms that they would be allowed to distribute other literature that is not related to schoolwork.

Q:  Are people allowed to put up Christmas displays in parks?

A:  Private citizens or groups may display crèches or other Christmas symbols in public parks subject to the same reasonable time, place, and manner restrictions that would apply to other similar displays.

Q:  Is a city or town prohibited from sponsoring a holiday display?

A:  Government entities may erect and maintain celebrations of the Christmas holiday, such as Christmas trees and Christmas light displays, and may include crèches in their displays at least so long as the purpose for including the crèche is not to promote its religious content and it is placed in context with other symbols of the Holiday season as part of an effort to celebrate the public Christmas holiday through its traditional symbols.

Q:  Can my employer prohibit me from celebrating Christmas while on the job?

A:  Neither public nor private employers may prevent employees from decorating their offices for Christmas, playing Christmas music, or wearing clothing related to Christmas merely because of their religious content so long as these activities are not used to harass or intimidate other employees.

Q:  Can my employer require me to work on Christmas?

A:  Public or private employees whose sincerely held religious beliefs require that they not work on Christmas must be reasonably accommodated by their employers unless granting the accommodation would impose an undue hardship on the employer.

Q:  If the Constitution requires a “separation of church and state,” why is Christmas a national holiday?

A:  Courts have routinely held that government recognition of Christmas as a public holiday and granting government employees a paid holiday for Christmas does not violate the Establishment Clause of the First Amendment. The government has a valid secular interest in providing a day of rest to citizens and may accommodate the religious beliefs of citizens in doing so.

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A new CNBC Millionaire Survey reveals that 34% of US millionaires, and only 62% of wealthy conservatives, would  pledge support for President Trump if the election was held today. About 36% of the overall vote was spread across ten different Democratic nominees, while 22% went to other Republicans. The polling data outlines some troubling signs for President Trump, including declining support from both wealthy Democrats and Republicans.

The semiannual CNBC Millionaire Survey, conducted Nov. 07 through Nov. 19 by Spectrum Group, examines the investment behaviors of 750 investors with $1 million or more of investible assets. In the survey, 40% of the 750 respondents classify as Republicans, 32% are Independents, and 26% are Democrats.

Twenty percent of respondents, including 18% of well-to-do Republicans, believe President Trump will not win the Republican nominee in 2020. About 8% think Ohio Governor John Kasich will be the nominee, while 7% believe it will be Vice President Mike Pence.

This means an rising number of Republicans think President Trump will lose in 2020, or that he would likely step down from office.

On the Democratic side, 38% of respondents believe former Vice President Joe Biden will have a decent shot at winning the party’s nomination. CNBC noted that Republicans and Independents were more likely than Democrats to vote for Biden, though he is a favorite among his party. Overall, 22% responded “other,” while 10% say Senator Elizabeth Warren will be the nominee.

Wealthy Americans are a politically active group. Twenty percent of Republican millionaires and 36% of Democrat millionaires say they have funded local, state, or national political campaign in the last several years.

“Eighty-eight percent of those who have donated to political campaigns believe the money was well spent, an indication that wealthy donors are prepared to open their wallets again in 2020,” said CNBC.

The data showed 18% of Republican millionaires say policies including, taxes and deficits, will be considered the most when they select the next president in 2020. That is followed by immigration reform (17%) and the economy (16%).

Right now, 54% of Democrat millionaires and 28% of Independents, say “voting President Trump out of office” is their number one priority. However, they do not have a suitable candidate for the job.

As for the next survey expected to be completed in late spring 2019, President Trump could see a further exodus of wealthy Republicans and Democrats due to the incoming recession and crashing stock market.

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Authored by Raul Ilargi Meijer via The Automatic Earth blog,

There are not many things that I’m allergic to. But there are some. Here’s a good example: bigotry.

Behold, in the article quoted below, the danger of political correctness in all its glory. A 30-year old Christmas song, Fairytale of New York, it is claimed, must be censored or banned. For a reason I’ll explain, such things always make me think of Rembrandt’s painting “Bathsheba at her Bath” (the painting below), which hangs in the Louvre.

No doubt there are those who are offended by her nakedness. But as John Berger put it in the video below, the master painted it with the utmost love and devotion. I first saw the video many years ago in art school, and it’s always stayed with me. Berger was a British art critic (he died last year) who wrote many books and made lots of TV shows on his view of what makes art – and its viewers- tick, together. Berger loved Rembrandt as much as Rembrandt loved Bathsheba. And so do I.

Back to the song, Fairytale of New York: There are people who think/feel/proclaim that the perhaps most popular Christmas song of the modern age contains one word they do not like, and must therefore be changed. It hurts their safe space, or something. It’s not politically correct. You can’t say ‘faggot’, even after it’s thoroughly explained to you that it means something else entirely in older Irish vocabulary. This is a very dark road towards a very dark future; don’t go there.

We can censor and ban a large part of art -and rock- history if we go by 2018 PC standards, but we should never give in to the vapid illusion that we know better now than the artists in the days and places when and where they produced the paintings, the sculptures or the songs. That is profoundly stupid, arrogant and conceited. None of us are any better than the Greek and Roman sculptors who carved their genius marbles of naked splendor. None of us are better people than Rembrandt or Michelangelo or the ancient Greek sculptors just because we live later in time then them. So we have no right to correct them.

And none of us have the right to demand a correction of a 30-year old song. Don’t even try to take our art away from us. It’s the best thing handed to us through the ages. Art is where man excels, much more than technology or anything like that. Art. And Fairytale of New York is Art. So don’t you dare touch it.

Calls To Censor ‘Fairytale Of New York’ Lyrics

A student newspaper editor has called for the word “faggot” to be censored from The Pogues’ popular song “Fairytale of New York” over claims it is offensive. Tom Haynes, the assistant editor of The Tab, shared his opinion about the classic Christmas song in an article titled: “Dear straight people, stop singing the word ‘faggot’ in ‘Fairytale of New York’” – which has since divided people on social media.

According to Haynes, the line in question, sung by Kirsty MacColl, “you scumbag, you maggot, you cheap lousy faggot,” is homophobic – but despite being censored on some stations, including the BBC and MTV channels, continues to be sung by “straight people” when it comes on. “Only when you take a step back does something seem off with that picture in 2018,” Haynes wrote.

He also points out that, despite being repurposed by the gay community, the slur can “evoke very specific memories of being bullied either online or in real life” and is comparable to the n-word. Haynes concludes by suggesting that people simply skip the word when singing the 1987 song – which has faced lyrical controversy numerous times in the years since it was released. “That’s all – one word, two syllables. Not too much of a stretch, right?” he wrote. The response to Haynes critique of the beloved Christmas song has been varied – with some disagreeing and labelling the editor a “snowflake” millennial, and others recognising that he has a point.

According to some people on social media, who have defended the use of the word in the song, faggot has a different meaning in old Irish slang. “I won’t be refraining from singing the lyric ‘cheap, lousy faggot’ in ‘Fairytale of New York’ because it’s not in reference to any homophobic intent – in old Irish faggot simply means a lazy person,” one person wrote. Another said: “Snowflakes left right and centre saying ‘Fairytale of New York’ is homophobic when in reality the cheap lousy faggot line is in reference to laziness.”

Update: as I was writing this, and looking for info, I stumbled upon singer Shane McGowan of the Pogues actually defending the lyrics . Sort of. And saying the band are not going to change a thing. But really, he should tell ’em all to stick it to the dark side of the moon.

“The word was used by the character because it fitted with the way she would speak and with her character. She is not supposed to be a nice person, or even a wholesome person. She is a woman of a certain generation at a certain time in history and she is down on her luck and desperate.

“Her dialogue is as accurate as I could make it but she is not intended to offend. She is just supposed to be an authentic character and not all characters in songs and stories are angels or even decent and respectable, sometimes characters in songs and stories have to be evil or nasty in order to tell the story effectively.

That’s enough of that safe space blubber. It’s endless. One person wants just two syllables changed, the next one another two, and before you know it Bathsheba is fully clothed and Rembrandt lost his interest, and so therefore have we all. It’s not up to us to decide what an artist paints or sings or writes. Period.

Let’s move on to how and why this is relevant to anyone who’s not a snowflake.

John Berger years ago described with how much love Rembrandt painted Bathsheba’s belly:

..”there isn’t another belly in European art painted with a fraction of this devotion..”

Start at 6.30 min into the video for that. The whole video is very much worth watching, it’s brilliant even. Rembrandt discovered light itself in painting, and how to get from two dimensions to three. He saw that what the human eye sees from up close is very different from what she sees at 2 meters, or 4, or 10. His was an unmitigated genius.

However, yes, Bathsheba is naked. And plenty people today will find that offensive. What about the kids!? (gee, I don’t know, where they born fully dressed?) But Rembrandt painted Bathsheba in 1654. And nobody has any business today being offended by what people did or said 350 years ago.

Or, better yet, if you want to be insulted about something from that era, why not protest any and all signs of slavery and warfare, rape and pillage, of Europeans massacring Africans and Native Americans, and leave art alone once and for all, stay away from a genius painter putting what love he can muster into the depiction of a biblical character.

I post a lot of art works at the Automatic Earth, a new glorious picture every day, and only once have I had a complaint about it. That was for a photograph whose artist the thought police apparently wasn’t familiar with. Not even full frontal nudity, but people seen from behind diving into the water. But there was a complaint alright. The acne-ridden social media overlords deemed it inappropriate. They wouldn’t dare with Rembrandt, but that’s beside the point.

Also, as you may know, I’ve spent a lot of time in Athens lately. And if you walk through the Parthenon, or its museum, or any of the other archeological sites in the city, there’s no way you can bring enough stickers or fig leaves to hide what nudity offends you. Probably all the Americans who visit the city think it’s far enough removed from them in time that they can watch the naked men and women without being offended (aroused, I’m not so sure).

But even if they do, they are the same people who use terms like ‘the F word’ and ‘the N word’ on a daily basis. Something as bigoted as protesting a word such as ‘faggots’, or a sculpture or painting that’s 100s or 1000s years old. Maybe if you let everyone say ‘fuck’ to their heart’s desire, they’ll stop saying it. And even if they don’t, so what? Why ban words when everybody uses them, why ban nudity when everybody’s naked under their clothes, why ban or censor art when it’s the best thing our forefathers have ever left us?

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The White House had already easily met its Christmas controversy quota by shuttering the government, pulling out of Syria and browbeating the chairman of the Federal Reserve during the runup to the holiday. But amid all of the outrage and virtue-signaling backlash to his latest string of policy decisions, President Trump apparently committed an unforgivable violation in the eyes of many liberals on Christmas Eve: Telling a child that Santa isn’t real.

During what has become a White House tradition, President Trump and the First Lady joined NORAD in its tradition of tracking Santa Claus on Christmas Eve. The president even took calls from children who were hoping to speak with Santa directly. In response to a request from a seven-year-old boy named Coleman, Trump asked whether the boy was “still a believer” in Santa “because at seven it’s marginal, right?”

Donald Trump, answering phone call from 7-year-old on Christmas Eve: “Are you still a believer in Santa? Because at seven it’s marginal, right?” pic.twitter.com/VHexvFSbQ1

— The Daily Beast (@thedailybeast) December 25, 2018

Though the news broke late on Christmas Eve, it swiftly stirred up outrage on Twitter. After reading the pool report, one Washington Post columnist was rendered incredulous by the audacity displayed by the president to dare joke with a young child about such a serious subject.

Did Trump just tell a 7-year-old that Santa isn’t real pic.twitter.com/oI3rSN2C2w

— Catherine Rampell (@crampell) December 25, 2018

Some laughed off the comment as just another example of Trump being Trump…

Trump just now talking to a child who called Norad Santa :

“Oh that’s very good, you just have a good time. Are you still a believer in Santa? Because at seven it’s marginal right? Well you just enjoy yourself”

I love this guy. He’s the best. Really is.

— Snake Plissken (@MrWyattEarpLA) December 25, 2018

…At least one person on twitter accused the president of “ruining Christmas” and demanded he resign.

What the actual f*** were you thinking, Mr. Trump? Resign!

As if it wasn’t bad enough that you ruined Christmas for federal employees & their families, you just had to go & ruin a child’s belief in Santa, too?#TrumpChristmasShutdown #25thAdmendment #ImpeachAndRemoveTrumpNow pic.twitter.com/3jreeJJGE9

— Lea Conner (@leaconner) December 25, 2018

For what it’s worth, Trump and Melania tweeted that helping children track Santa had become one of their favorite traditions.

Helping children across the country track #Santa is becoming one of my favorite traditions! @Potus and I enjoyed working with @NORADSanta – #ChristmasEve pic.twitter.com/CYNkARbFaI

— Melania Trump (@FLOTUS) December 25, 2018

But angry liberals should be able to find a silver lining in all of this: At least Trump didn’t insist that Santa was white and/or a man.

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Via Goldman Sachs,

As we head into year-end, Goldman’s Allison Nathan continues the firm’s tradition of taking stock of the big themes in a crossword.

On the heels of a 2017 characterized by low volatility, robust growth, and strong performance across risky assets, 2018 has (unfortunately) delivered the reverse. Political, economic and technical factors contributed to some eye-popping spikes in volatility, from the equity sell-offs in Q1 and Q4 to the blowout of Italian sovereign bond spreads in June and the recent moves in oil prices. Episodes like these have raised questions about market liquidity and fragility, and have only intensified the deterioration of risk sentiment going into year-end. Indeed, 2018 is closing on a pessimistic note, with most major asset classes posting negative returns for the year. (For those who missed it, even the optimism over cryptocurrencies has faded, with bitcoin down a whopping 73% year-to-date.)

While far from being the only driver, trade tensions have undoubtedly contributed to market anxiety. President Trump’s trade agenda gained steam throughout the year, with productand commodity-specific actions followed by several rounds of US-China tariffs and the US threat of measures on foreign autos. Despite the current pause in US-China tensions, trade risk remains in the cards next year. We see further escalation as slightly more likely than not before Washington and Beijing reach a long-term deal. And while auto tariffs are not our base case, we expect other measures such as quotas or export restraints in 2019 (but, on a more positive note, we also expect NAFTA’s replacement to become law).

Nowhere has trade uncertainty been more important than China, especially amid further signs of slowing growth. But with targeted stimulus now kicking into gear, we think growth will recover somewhat by mid-2019, taking risky assets in the region (and China-exposed commodities) with it. That said, trade will continue to pose headline risk, particularly for the yuan, which would likely breach 7.0 vs. the US dollar if talks collapse (but should remain below 7.0 while they’re ongoing).

The other major investor concern has been the growth slowdown, which has extended well past China, raising fears around recession risk. Indeed, our global CAI has declined to about 3.5% so far in December from nearly 5% at the start of the year. That, in turn, has driven the ongoing sell-off in equities (leading to a substantial tightening of financial conditions—a growth headwind in and of itself). As a result, markets have reduced their expectations for Fed hikes next year to just half a hike (vs. about two earlier this fall); and, amid the drop in oil prices, the bond bear market that characterized much of 2018 has reversed course, with 10-year Treasury yields down ~45bp from their October peak.

We too have adjusted our Fed view, and now expect a pause in March. However, we maintain that further tightening remains necessary to avoid labor-market overheating. On a probability-weighted basis, we forecast 1.6 net hikes next year, slowing growth to roughly our estimate of potential—1.75%—by the end of the year. But with financial imbalances broadly in check and no obvious catalyst in sight, we believe the risk of a US recession in 2019 remains low (10%).

We also don’t see major risks resulting from US midterm elections, which yielded the expected outcome of a divided Congress. We expect the overall direction of policy to remain intact, with little in the way of change on taxes or infrastructure. But investors should still keep an eye on healthcare, as Democrats will probably pursue legislation on drug pricing and other issues. In addition, concerns about data privacy could prompt new action on tech regulation. Also key to watch: the deadline for raising the debt limit—most likely in August 2019—which could prove disruptive, and perhaps even more so as the federal budget deficit tops $1tn in FY2019.

But as contentious as the US fiscal situation might become, Europe has arguably already won the prize for fiscal concerns. After months of tense negotiations, Italy has reached a deal over its budget with Brussels. But we’d take the news with a grain of salt; until Italy’s government officially scales back key policy promises or confirms spending cuts elsewhere, we remain cautious on the country’s outlook. In the meantime, investors are also watching France’s promises of fiscal easing in response to the populist “yellow vest” movement. Indeed, between President Emmanuel Macron’s weak approval ratings, the possibility of snap elections across the continent, and Angela Merkel’s decision to step down as German Chancellor in 2021, political risk in Europe shows no sign of abating.

On that note, let’s not forget Brexit, where UK politics have left all options—an orderly Brexit, a disorderly Brexit, or no Brexit at all—still on the table. Given the lack of a unifying alternative, our base case remains the first of these; but the weeks leading up to the UK Parliament vote on the deal (now set for mid-January) will prove decisive… stay tuned.

So where does all this leave our asset views heading into 2019? In the near term, growth concerns and market pessimism may well persist. But over the medium term, we believe slower but still solid global growth will drive equity upside across the major indices, higher bond yields in the G10, commodity strength, and US dollar weakness. We also see a narrow path to performance for Emerging Markets (EM) after a difficult year.

That said, we expect higher volatility, growing macro headwinds, and increasing tail risks. We therefore recommend positioning for a potentially bumpy ride: shifting up in quality, utilizing hedges, and keeping an overweight in cash.

*  *  *

Across:

4. A major sticking point surrounding Brexit is the Irish ____ (Issue 70).

7. Some market participants argue that increased ____ of trading in US equities has made the markets more fragile (Issue 68).

10. EM assets outperformed in 2004-2006 despite ____ consecutive rate hikes by the Fed (Issue 69).

12. US economic strength has historically coincided with ____ tightening, which makes this year’s loosening so unusual. (Issue 71).

14. Historically, the painful “trio” for Emerging Markets (EM) has been higher US ____, rising oil prices, and a stronger US dollar (Issue 69).

15. The sector that is likely to be most impacted by the Democrats gaining control of the House in the US midterm elections. (Issue 73).

18. During the June sell-off in Italian sovereign bonds, ____ seemed to exacerbate market moves, much like during the “flash crash” in US equities in 2010 (Issue 68).

19. Today, ____ balance sheets look healthier than corporate balance sheets, which is the reverse of what we saw heading into the Global Financial Crisis (Issue 72).

22. Many bond bears cite increased Treasury ____ to fund the US’s growing budget deficit as a reason to expect higher Treasury yields in coming years (Issue 65).

23. Some of President Trump’s actions on trade fall under US trade provisions that conflict with ____ rules (Issue 66).

24. European data privacy regulation that came into force on May 25, 2018, and can levy a fine as high as 4% of a company’s annual turnover (Issue 67).

27. According to Mohamed El-Erian, Chief Economic Advisor at Allianz, the fact that “____” investors outnumber “local” investors means capital outflows from EM will continue (Issue 69).

28. A cryptocurrency platform that allows for the creation of “smart contracts” (Issue 64).

29. A lower threshold for proving ____, the European equivalent of monopoly power, is one reason why Europe has generally been more active on tech regulation than the United States (Issue 67).

30. GS research shows that fiscal expansion in highly indebted countries like Italy does little to boost ____ (Issue 71).

Down:

1. Unlike most commodities, bitcoin requires little physical storage. Even a 3½ inch floppy disk can hold almost 30K private ____ (Issue 64).

2. Deliberate financial sector de-risking in China has slowed the flow of credit to the private sector, leading to a rise in ____ (Issue 74).

3. Observers cite the ____ of cryptocurrencies as an impediment to their broader adoption for use as a currency (Issue 64).

5. In the US, ____ has jurisdiction over foreign commerce, but has delegated much of its authority on trade to the president over the years (Issue 66).

6. The abbreviation for a market-making firm that typically posts orders to buy and sell in very quick succession (Issue 68).

8. Labor market ____ could be a trigger of recession (Issue 72).

9. Raising the debt ____ in 2019 could prove as contentious as in 2011 and 2013, when government/Congress was also divided (Issue 73).

11. Competition between the US and China in this sector is very likely to increase (Issue 74).

13. President Trump’s tweets this year turned the spotlight on this company’s postal rates and tax practices (Issue 67).

16. UK political expert Anand Menon has argued that a second ____ would only further complicate the situation around Brexit (Issue 70).

17. Paul Tudor Jones, co-chairman and CIO of Tudor Investment Corp., is not convinced that technological disruption will continue to bring ____ (Issue 65).

20. Policies intended to curb ____ banking contributed to the growth slowdown in China this year (Issue 74).

21. Substantial growth in the ____ debt market has sparked concern from regulators worried about systemic risk (Issue 72).

25. A “no deal” ____ of the UK from the EU might be a possibility if the UK parliament fails to pass the Withdrawal Agreement negotiated between UK PM May and Brussels (Issue 70).

26. Harvard Kennedy School Professor Carmen M. Reinhart argues that high ____ levels have historically been associated with lower economic growth (Issue 71).

Solution below (don’t cheat)

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We hope you didn’t cheat…

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