Less than a year ago, President Trump dropped his first MOAB in the war of words with 35-year-old North Korean leader Kim Jong Un – warning him “best not make any more threats to the United States,” or North Korea “will be met with fire and fury like the world has never seen.”
.@POTUS: “North Korea best not make any more threats to the U.S. They will be met with fire and fury like the world has never seen.” pic.twitter.com/nUjWck9aGk
Two days later, Kim threatened a “simultaneous strike” which would rain down “historic enveloping fire at Guam” within weeks.
Weeks later, Trump told the U.N. that America would “totally destroy” North Korea and it’s leader, “Rocket Man” Kim Jong Un – a nickname he would continue to use over the ensuing weeks and months.
I spoke with President Moon of South Korea last night. Asked him how Rocket Man is doing. Long gas lines forming in North Korea. Too bad!
Hitting back a few days after Trump’s speech, Kim threatened to “tame the mentally deranged U.S. dotard with fire” :
“I am now thinking hard about what response he could have expected when he allowed such eccentric words to trip off his tongue. Whatever Trump might have expected, he will face results beyond his expectation. I will surely and definitely tame the mentally deranged U. S. dotard with fire.”
*drops mic*
Now, President Trump credits his tough-talk with Kim as a major factor in yesterday’s successful summit – telling Fox News “without the rhetoric we wouldn’t have been here.”
“So I think the rhetoric, I hated to do it, sometimes I felt foolish doing it, but we had no choice,” he said.
.@POTUS: “Without the rhetoric we wouldn’t have been here.”
In the late 1990s, the U.S. government under Clinton began pushing home affordability with an upgrade to the 1977 Community Reinvestment Act. The law was originally “designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.” In 1994, compliance with CRA laws became a prerequisite for mergers and interstate expansion.
This became explicit in 1999 as part of the Glass-Steagal repeal effort: “any bank holding institution wishing to be re-designated as a financial holding institution by the Board of Governors of the Federal Reserve System would also have to follow Community Reinvestment Act compliance guidelines before any merger or expansion could take effect.”
Countrywide Home Loans Inc. has extended its minority and low-income lending goal by $400 billion to $1 trillion over the next five years. The company says its “We House America” initiative has been overwhelmingly successful since its 1992 launch and initial goal of $1.25 billion in loans, prompting the lender in 2001 to set a new bar of $600 billion in loans by 2010. However, Mary Duron, senior vice president of fair lending and the “We House America” lending program, says Countrywide had reached the $300 billion mark by the end of last year and decided to strive for even more minority and low-income lending. Angelo Mozilo, chairman and CEO of Countrywide Financial, says the program has helped put 2.4 million families in homes, and the number is expected to nearly triple over the next five years.
Countrywide went down the tubes and almost took down Bank of America after it acquired Countrywide in early 2008.
Besides a government-encouraged expansion of subprime lending and very willing participation by banks and financial institutions, Wall Street was looking for mortgages to bundle into MBS and CMOs. As demand for these products surged, Wall Street replaced homebuyers as a source of demand for new loans. Crooked mortgage brokers force fed low-quality loans to borrowers including to people with no way of paying the mortgage (dubbed NINJAs loans because the borrower had no income, no job). The result was a perfect storm that blew up spectacularly in 2008.
History is rhyming in China.
The government is forcing large banks to lend trillions of yuan for rental housing, at below market rates, to borrowers who can’t afford it, and banks are trying to pass of the risk by bundling these loans into asset-backed securities.
As property prices rocket across China, Beijing has appealed to the country’s banks and insurers to help accelerate the development of rental markets as a way of making homes more affordable – and rein in speculative sale markets.
The big state banks have responded by pledging more than 3 trillion yuan ($467 billion) in rental housing financing, including for real estate developers, leasing firms and tenants, according to Reuters calculations. The total value of the rental market was 1.3 trillion yuan last year.
China Construction Bank Corp (CCB)(0939.HK) (601939.SS), the second-largest lender, is the most visible example of this trend, giving loans to renters at ultra-low interest rates with long repayment periods.
These loans are popular in pricey Shenzhen.
Liu Feng, a 28-year-old product manager, was one of the first to take out a rental loan from CCB for his 90 square meter (970 square feet) three-room apartment in Shenzhen.
He said his monthly payments under the plan – including interest – came to about 6,000 yuan, less than if he paid for it himself, meaning the bank was effectively subsidizing his rent.
“The property developer leased the apartment to CCB, and CCB leased it to me,” said Liu.
In the U.S., the subprime borrower could not afford the home. The bank “subsidized” their mortgage (rent) rent because adjustable rate mortgages offered very low teaser rates for the first few years. As those rates reset in 2006, 2007 and 2008 the homeowners defaulted on their homes. Wall Street made billions selling mortgage debt that was effectively long-term loans made to short-term renters, and banks ended up owning the property.
In China, there won’t be a similar “reset” situation that blows up the market. That said, the uneconomic arrangement is no different. Lending at below market rates is a recipe for disaster because it distorts the market and accrues losses that eventually have to be made up.
Also last year Industrial and Commercial Bank of China Ltd (1398.HK)(601398.SS) launched a similar product in Guangzhou and Bank of China Ltd (601988.SS)(3988.HK) issued its first loan to renters in Xiamen. Both of the southern cities have been chosen by the central government to test real estate sector reforms.
\So far, only large state banks are offering the loans. Multiple sources at mid-sized and small lenders said they were daunted by default risks, high costs and low returns.
Losses are likely, the sources said, as the loans have to be priced below market rates due to the pressure on banks to show support for developing the rental market.
Even large listed banks are not participating because they don’t have the PBoC put:
A retail loan officer at one of China’s 12 joint-stock banks said his bank had decided not to offer the product.
“After CCB launched the products we looked into it closely, but only to find that was not something we could afford – interest rates were just too low to cover the cost of funding,” the officer said, declining to be named. “Only deep-pocketed large state banks can bear the cost.”
More shades of subprime:
“The products have low bars for loan applicants, so risk control is really the key,” said Yang Xianling, chief economist at Ke Research Institute. “A credit-based mechanism needs to be introduced to carefully prevent speculators.”
The final piece of the puzzle:
To mitigate risks, banks are considering packaging rental-related loans into asset-backed securities and real estate investment trusts and transferring risk to other investors, the sources said.
And the fuse that could set off the time bomb: the Foshan model.
“We have examined more than 100 projects of all kinds, but their returns are super low,” said Cai Yu, general manager at Foshan Jianxin. “Frankly we could have earned more if the money were deposited at a bank.”
Foshan Jianxin has been ordered by local authorities to issue loans at below market price to cultivate the rental housing market and lure tenants, Cai said.
What happens as losses pile up? Eventually, these companies will start selling properties to recoup capital.
Therefore, even with the capital infusion from CCB’s subsidiary and others, the company may still have to sell houses in a few years to cover losses, Cai said.
Despite that, CCB said this “Foshan model” has been copied in 18 other cities in Guangdong province, and it could be extended to other smaller cities nationwide.
Housing affordability push by government? Check.
Banks pressured to make riskier loans? Check.
Banks offering below market rates? Check.
Short-term borrowers (renters) taking out long-term loans? Check.
Loans packaged into ABS? Check.
Potential time bomb? Check.
Being China, there won’t be a replay of 2008 because the process of taking losses is very different. There will be losses though, lots of them, and eventually it will end up on the government’s balance sheet or more likely, the PBoC. This is unsustainable credit creation that will have to be monetized down the road, driving the future exchange value of the renminbi even lower.
And while this is all going on, developers that lack government backing are starting to chase expensive overseas financing.
Chinese property companies are increasingly tapping expensive mezzanine loans as they seek out higher returns, a trend that could undermine government efforts to cool the country’s booming real estate sector and rein in debt.
Many developers are turning to offshore mezzanine loans as government measures to tighten credit and clamp down on shadow banking in China are increasingly felt, according to lenders.
Others are taking out the loans for M&A activities or to raise working capital that would allow them to prolong construction periods in hopes that the government will lift price caps on new projects, the lenders say.
…InfraRed is now talking to two smaller cap developers listed in Hong Kong for loans for a residential project in Guangzhou and an eastern city of Yangzhou at interest rates of 15 percent to 18 percent. He declined to name the borrowers as the deals are not closed yet.
Almost two months since ZTE was halted on news that the US government had dealt the firm a “death sentence” banning the tech giant from buying US parts (due to breaking Iran sanctions – and spying allegations), the telecoms company has resumed trading in Hong Kong – down 37.5% at the open…
The White House announced the initial ban on ZTE buying parts from US firms in April, after the company was found to have violated a settlement originally imposed over ZTE’s sales to Iran in defiance of US sanctions. As part of the original settlement, ZTE had agreed to fire certain senior managers and withhold bonuses from others. But the company didn’t follow through with either promise.
Then last Thursday shortly after Commerce Secretary Wilbur Ross announced the administration had worked out a deal to save ZTEwhich meant the company would pay a penalty of $1.3 billion (plus place another $400 million in escrow to be seized should the company again fail to hold up its end of the bargain). The company would also be forced to accept – and pay for – a team of compliance officers that will be led by a “special independent compliance coordinator” who will report jointly to ZTE’s CEO, its board and the Commerce Department. The company will be forced to pay for the monitors for ten years. The company will also be required replace its entire board of directors and senior leadership team. In exchange, ZTE will resume buying products from US firms.
And today the share start trading again…
Furthermore, in Shenzhen, ZTE is limit-down 10% (China’s post-crisis rules) – halted for the rest of the day.
h/t @YuanTalks
However, as we detailed earlier, we wouldn’t be holding our breath as a group of senators have successfully attached an amendment that would effectively kill the Trump administration’s deal with Chinese telecoms firm ZTE to a “must-pass” defense authorization bill, according to Axios– the latest sign that the movement to kill the deal is gaining momentum, even among Republicans who rarely oppose the president… and would reimpose the White House’s original ban on ZTE buying components from US firms (what some have described as a “death sentence” for the company).
On Wednesday at 2pm ET, the FOMC will publish its rate decision and economic projections with Chair Powell’s press conference scheduled for 230pm ET. There will be no surprises: both consensus and the market expect (with 100% certainty) a 25bps hike to 1.75%-2.00%; where the market still has questions is about the shape of the “dots” to see if the FOMC pencils in a fourth 2018 hike: all that needs to happen is for one net dot to rise. Analysts will also watch whether the IOER will rise by only 20bps instead of 25 bps, as the last FOMC minutes discussed, any discussions on the neutral rate and whether, as per the WSJ rumor, Powell will make every meeting “live” in a hawkish switch where a press conference will follow every FOMC meeting.
Here’s what else to look forward to in tomorrow’s Fed fiesta, courtesy of RanSquawk
TRAJECTORY: The Fed has pencilled in three hikes in 2018, three in 2019, and two in 2020; the question is whether it sees a fourth hike this year. Money markets price an 88% chance of three hikes this year, and around 44% chance of four 2018 hikes. Fed’s Bostic (voter), Kaplan (non-voter) and Harker (non-voter) have all endorsed three rate rises in 2018, while Williams (voter) and Mester (voter) are in the ‘three/four’ hikes camp, depending on data. Goldman Sachs and BofA see the FOMC projecting a fourth rate rise this year, citing hawkish comments from FOMC officials in recent weeks, and Goldman also expects the 2019 median dot to rise by a quarter point, consistent with three hikes in that year (and one more in 2020). “This 4-3-1 baseline for 2018-20 compares to the March projected pace of 3-3-2, and in our view would be a natural response to mounting evidence of a larger employment overshoot.”
NEUTRAL RATE: In the press conference, Fed chair Powell may be quizzed about the neutral rate, a subject that has featured heavily in recent Fedspeak; specifically, what level does the FOMC see the neutral rate, and how far is it prepared to overshoot it in this hiking cycle is the key area of debate. The May meeting minutes stated that “a few” officials “observed that the neutral level of the federal funds rate might currently be lower than their estimates of its longer-run level.” That estimate naturally varies among Fed officials: Bostic (voter) sees it between 2.25%-2.75%, Kaplan (non-voter) sees it between 2.50%-2.75%, Harker (non-voter) sees it between 2.75%-3.00%.
IOER: Analysts will be keeping an eye on whether the Fed raises the Interest on Excess Reserves by only 20bps not the full 25bps, as hinted at in the FOMC’s recent meeting minutes, given the Fed Funds Rate target have been creeping towards the rate of Interest on Excess Reserves (IOER), which is set towards the top-end of the target range: “The Fed has never thought the IOER rate and the top of the target range have to be coterminous, and a prospective tweak should be seen as technical,” writes UBS, “this change should be seen in the context of a longer-running debate inside the Fed about the daily operating framework for monetary policy,” and adds that “the minutes did note that the adjustment could take place at a meeting with or without a target rate change. Nevertheless, the June meeting seems like an opportune time for the Board to make this adjustment.” The rate is currently at 1.75%.
FOMC MARCH SEP VS. MARKET EXPECTATIONS
What Goldman expects the projections will look like:
And finally, this is how the economy has changed over the past 3 months:
PRESS CONFERENCES: There is a chance that the FOMC will decide to hold a press conference after every policy meeting, as opposed to quarterly press-conferences that take place in March/June/September/December, when forecasts are updated. Analysts say this would allow the Fed a degree of flexibility to adjust rates at non-SEP meetings (as has been the case in this hiking cycle), which would have the consequence of making every meeting ‘live’. Analysts at Oxford Economics believe this would be a good step, but note however that “Chair Powell says he is concerned that a press conference after each meeting would incite market participants to assume more rate hikes than currently expected. Communicating such a change clearly to the markets would be paramount.”
DOTS HEADING HIGHER: In order to reflect the upbeat growth picture and the labor market overshoot, Goldman expects hawkish changes to the dot plot. Recent public remarks by several Fed officials continued to evolve in a hawkish direction during the spring—including by previously dovish members such as Governor Brainard and influential centrists such as San Francisco Fed President John Williams. In fact, several committee members have explicitly addressed the possibility of a faster pace of hikes this year. With the exception of Williams’ June 1 remarks, all of the below quotations preceded the release of the high-flying May employment report (which brought the jobless rate to a 48-year low and may incite additional hawkish changes).
This hawkishness will manifest itself in a gradual increase in the median dot for 2018, which according to Goldman will show a total of four interest rate hikes, up from the three projected at the March meeting. What is notable is that only one member would have to boost his or her 2018 projection above the March median for next week’s SEP to show a four-hike baseline this year, an increase which is certainly likely tomorrow. Goldman also expects the 2019 median dot to rise by a quarter point, consistent with three hikes in that year and one additional hike in 2020. This 4-3-1 baseline for 2018-19-20 compares to the March projected pace of 3-3-2.
In the event that the 2018 median does not increase, Goldman still sees scope for the 2019 medians to show 7 hikes cumulatively over those two years (vs. 6 hikes in the March SEP). Said otherwise, fewer projected hikes in 2018 would increase the scope for additional ones the following year.
* * *
STATEMENT: A number of officials, notably Williams (voter) and Brainard (voter), have argued that forward guidance may need to be changed as the neutral rate approaches, and as such, the FOMC will likely review its language around ‘accommodative policy’. The line in the statement in focus will be that rates will remain “for some time, below the levels that are expected to prevail in the longer run.”
Goldman Sachs expects the statement to retain an upbeat tone, with a constructive view on household spending, an acknowledgement of lower unemployment, and a hawkish rewording of the forward guidance. “On the negative side, with Italian sovereign spreads returning to levels last seen in the European debt crisis, we think the statement will probably include a subtle reference to heightened uncertainty abroad, echoing recent comments from Governor Brainard.” (see projected redline below).
In terms of the other key sentences, Goldman is looking for the following:
In response to upward pressure on the effective fed funds rate, n we expect a policy directive in the statement’s implementation note that will adjust the interest on excess reserves rate (IOER). Such a change (for example, “to a level 5 basis points below the top of the target range”) was strongly suggested by the May minutes.
We do not expect a direct reference to recently enacted tariffs nor to the prospect of additional trade restrictions. We do, however, expect these issues to come up during the press conference.
We think Fed governor nominees Richard Clarida and Michelle Bowman will not attend next week’s meeting. Given that the Senate Financial Services Committee vote is currently scheduled for Tuesday the 12th, the odds of scheduling and holding a floor vote to confirm them in time for the meeting are very low.
We do not expect any dissents, matching the unanimity of the March tightening action. The December dissenters (Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans) are non-voters this year, and we expect that even the more dovish voters on the Committee will be persuaded to support a second hike in 2018
Finally, here is Goldman’s proposal for the June FOMC statement redlined vs the May statement.
This has been a uniquely boring stretch for gold and silver – especially considering all the things going on in the world that ought to light a fire under precious metals. In just the past few weeks, the US started a global trade war, Italy elected a populist government, emerging markets descended into yet another crisis, and inflation has risen from the dead – all of which would be expected to spook normal financial markets and send capital pouring into safe havens. But not this time, which leaves precious metals under the control of seasonal factors that have over the years generated the “sell in May and go away” rule-of-thumb.
So when do the summer doldrums end? Based on recent history, December is a pretty good bet. The arrows on the following chart mark the beginning of each year since 2014. Note how gold’s price frequently starts moving up either then or a few weeks before, in early December. This seasonal strength is due to Asian buying in anticipation of weddings and harvests, and though you’d think traders would anticipate – and therefore cancel – the cycle’s impact, it still seems to operate.
Prior to 2014 the pattern was slightly different. Here’s a chart from Casey Researchshowing gold’s average performance for each month between 1975 and 2013. September was by far the best month to buy, with January the second best, implying a eight-month window beginning in July in which buying was rewarded with at least short-term gains.
If the second pattern re-emerges, then we really don’t have long to wait at all. Maybe one more month and at most three, and gold bugs can start having fun again.
As always, though, deciding when to buy precious metals is just the first in a series of challenges. Choosing the right dealer is paramount (see here for a list of reputable ones), followed by whether to take delivery and store the metal at home or seek secure vault storage for gold and silver.
And then there’s the bullion vs mining stock question. The former is money which will hold its value over long periods of time (thus preserving your purchasing power) while the latter are investments that can rise by multiples of their original cost or disappear without a trace. Jay Taylor’s newsletter is a good source for intelligence on the explorers, the riskiest and potentially most profitable segment of the mining market.
Many Trump supporters, and even some on the left, like to talk about the “Deep State” secretly having complete control of our government, thus rendering our elected leaders to be nothing more than meaningless figureheads. Let’s investigate.
Long before the term ‘Deep State’ became popular, the term “Military Industrial Complex” was coined by President Dwight Eisenhower.
He gave his now famous Military Industrial Complex (MIC) speech on Jan 17, 1961.
During his ominous farewell, Ike mentioned that the US was only just past the halfway point of the century and we had already seen 4 major wars. He then went on to talk about how the MIC was now a major sector of the economy. Eisenhower then went on to warn Americans about the “undue influence” the MIC has on our government. He warned that the MIC has massive lobbying power and the ability to press for unnecessary wars and armaments we would not really need, all just to funnel money to their coffers.
Jump to Ike’s warning about the “unwarranted influence… by the Military-Industrial Complex” at 8:41
His warning though proven correct, was sadly not heeded. Within a few years JFK was assassinated shortly after giving his “Secret government speech” warning the American people about “secret governments and secret organizations that sought to have undue control of the government.
JFK was in his grave for less than 9-months before Gulf of Tonkin incident which was a series of outlandish lies about a fictitious attack on a US naval ship that never happened, which caused the US to enter the Vietnam war.
President Johnson lied his way into a war with North Vietnam and within less than a year would joke that “maybe the attack never happened”. By the time the war ended in 1973, Johnson’s bundle of lies had killed 2.45 million people.
The MIC however, saw the Vietnam war as a great victory and a template for the future success to their objectives. Ever since the Vietnam War, the MIC has urged the government to enter into as many ambiguous and unwinnable wars as possible, since unwinnable wars are also never-ending. Never-ending wars equate to never-ending revenue streams for the war industry.
Eisenhower warned us about the concept of one particular industry taking control of our government, but sadly his predictions fell of deaf ears.
Since Eisenhower’s time several other over “Industrial Complexes” have followed the MIC example and taken control of our government to suit their needs as well. Their objective is to buy out politicians in order to control the purse strings of Congress and they have been highly successful.
The list of these ÏC industries includes, but is not limited to the companies below:
1. The Drug Industrial Complex. (DIC)
The prescription drug industry has massive control of our government and our health care system. A recent Mayo Clinic study concluded that 70% of Americans are on at least one prescription drug.
The most tragic example is opioids, though similar arguments can also be made in reference to the anti-depressant epidemic, obesity, heart disease and diabetes.
The sicker America is, the better it is for the DIC.
The drug lobby is 8x larger than the gun lobby and is indirectly responsible for the deaths of between 59.000 and 65,000 people in 2016 alone, but if we dig deeper, that number could easily be 2 or 3 times higher, Since deaths related to opioids from infection related to opioid related infections are extremely common Anti-depressants are being prescribed 400% more than they were in the 1990’s. They are commonly prescribed to adolescent women and we live up to the name “Prozac Nation” when we realize that 1 in 5 women between the ages of 40 and 59 are taking antidepressants. The list of other prescription medicines to enhance the DIC revenue streams is extensive.
There are two primary industrial complex rules when it comes to prescription drug centric treatment:
Firstly, no curing is allowed, ever. Treatment of conditions with temporary benefits is allowed, but healing is not permissible, since it interrupts revenue streams.
And second, any and all “natural” or homeopathic treatment whether it be related to diet, supplements vitamins, anti-oxidants or physical exercise/meditation should all be relegated to “quackery.” Doctors who do not adhere to the prescription drug method of treating patients should also be referred to as adherents to “quackery” and should be reprimanded, fined and in extreme cases have their medical licenses revoked.
2. Real Estate Industrial Complex. (RIC)
Goal: Keep housing prices rising as much as possible, year after year after year.
How this is implemented: Endorse the borrowing of money to entice people into buying excessively large homes in order to promote the “dream” of home ownership. Once people buy into this scheme, they are then saddled with massive home taxes to their city and the burden of the taxes utilities that go along with owning an excessively large home. Stigmatize anyone who is over the age of 25 and lives in the same domicile as a parent or grandparent.
Make sure all media channels repeat over and over incessantly that high real estate prices are “signs of a great economy,” while ignoring the crippling effect high home prices have on working class families who can barely pay their mortgage.
3. College Industrial Complex (CIC)
The average tuition in 1971-1972 was $1832.00 and now it is officially over $31,000.00.
There are over 60 colleges and universities where the tuition has already exceeded $60,000.00 per/year.
A college education used to be something that people saved and paid cash for, but now there has been a cultural shift where students are expected to take out loans that are often in the hundreds of thousands of dollars to obtain a college degree.
Why is this all so expensive? When we look at our universities and colleges, we see an obsession with elaborate new buildings and sports stadiums, more than actual learning.
There are several emerging/innovative ideas to make a college education better, faster and far more affordable. Such concepts probably won’t take hold until the inevitable collapse of the entire educational system takes place.
4. Health Insurance Industrial Complex (HIC)
Much of the US healthcare system is now governed by the “Healthcare Affordability Act” passed by the Obama administration in 2010.
The HIC proved how powerful they were when Congress was not allowed to read the legislation before voting for it, publicly displaying that the HIC who wrote the bill behind closed doors is more powerful than Congress itself.
What transparent public committees were behind this important legislation?
In reality, there was no transparency at all, this is stated clear as day by Healthcare Affordability Act primary architect Jonathan Gruber stated: “Lack of transparency is a huge political advantage, Call it the stupidity of the American voter or whatever, but basically, that was really, really critical for the thing to pass.”
The Speaker of the House at the time was Nancy Pelosi, who famously said from the leadership podium as House Speaker: “We have to pass the bill so that you can find out what is in it.’
Our elected officials were not allowed to read the most important legislation of the past 30 years before voting for or against it. There is no greater testimony to the level of dysfunction in Congress than the Healthcare Affordability Act, formed by secret committees and then not allowing Congress to read it before voting.
* * *
Let’s think back to 1961 when Eisenhower warned us about what would become the Vietnam War. The American people’s ignoring his warning caused arms manufacturers and big business to assume nearly complete control of US government.
If we had listened to Ike, millions of people would not have died in the wars of the last 57 years and we would have trillions of dollars less in debt. Perhaps we still have time to heed his warning before our entire country collapses under the weight of corruption, crippling debt and never-ending wars, let’s hope so.
* * *
Kevin Paul is the founder of Alternativemediahub.com, which refers to itself as “The megaphone of independent journalism.” Born in MA, he came within 2% of winning the R party nomination to oppose Ted Kennedy in 2006 and holds degrees in business and political science.
Deputy Attorney General Rod Rosenstein threatened to “subpoena” GOP members of the House Intelligence Committee during a tense January meeting involving committee members and senior DOJ/FBI officials, according to emails seen by Fox Newsdocumenting the encounter described by aides as a “personal attack.”
That said, Rosenstein was responding to a threat to hold him in contempt of Congress – and the “threat” to subpoena GOP records was ostensibly in order for him to be able to defend himself.
Rosenstein allegedly threatened to “turn the tables” on the committee’s aggressive document requests, according to Fox.
“The DAG [Deputy Attorney General Rosenstein] criticized the Committee for sending our requests in writing and was further critical of the Committee’s request to have DOJ/FBI do the same when responding,” the committee’s then-senior counsel for counterterrorism Kash Patel wrote to the House Office of General Counsel. “Going so far as to say that if the Committee likes being litigators, then ‘we [DOJ] too [are] litigators, and we will subpoena your records and your emails,’ referring to HPSCI [House Permanent Select Committee on Intelligence] and Congress overall.”
A second House committee staffer at the meeting backed up Patel’s account, writing: “Let me just add that watching the Deputy Attorney General launch a sustained personal attack against a congressional staffer in retaliation for vigorous oversight was astonishing and disheartening. … Also, having the nation’s #1 (for these matters) law enforcement officer threaten to ‘subpoena your calls and emails’ was downright chilling.” –Fox News
The committee staffer suggested that Rosenstein’s comment could be interpreted to mean that the DOJ would “vigorously defend a contempt action” — which might be expected. But the staffer continued, “I also read it as a not-so-veiled threat to unleash the full prosecutorial power of the state against us.“
But really – Rosenstein appears to have been warning the GOP Committee members that he would aggressively defend himself.
G-Men Hit Back
A DOJ official said that Rosenstein “never threatened anyone in the room with a criminal investigation,” telling Fox that the department and bureau officials in the room “are all quite clear that the characterization of events laid out here is false,” and that Rosenstein was merely responding to a threat of contempt.
The FBI, meanwhile, said that they disagree with “a number of characterizations of the meeting as described in the excerpts of a staffer’s emails provided to us by Fox News.“
“The Deputy Attorney General was making the point—after being threatened with contempt — that as an American citizen charged with the offense of contempt of Congress, he would have the right to defend himself, including requesting production of relevant emails and text messages and calling them as witnesses to demonstrate that their allegations are false,” the official said. “That is why he put them on notice to retain relevant emails and text messages, and he hopes they did so. (We have no process to obtain such records without congressional approval.)”
Details of the encounter began to trickle out in early February, as Fox News’ Greg Jarrett tweeted: “A 2nd source has now confirmed to me that, in a meeting on January 10, Deputy A-G Rosenstein used the power of his office to threaten to subpoena the calls & texts of the Intel Committee to get it to stop it’s investigation of DOJ and FBI. Likely an Abuse of Power & Obstruction.”
A 2nd source has now confirmed to me that, in a meeting on January 10, Deputy A-G Rosenstein used the power of his office to threaten to subpoena the calls & texts of the Intel Committee to get it to stop it’s investigation of DOJ and FBI. Likely an Abuse of Power & Obstruction.
Fox says that the emails they reviewed provide additional evidence of the encounter – while a former DOJ official said that the exchange may shed light on how the relationship between the agency and the Republican-led House committee has broken down in subsequent months.
“This is much worse than a deteriorating relationship – this is a massive breakdown in the system. A deputy attorney general does not make subpoena threats lightly. This is not the norm to say the least,” said Tom Dupree, former principal deputy assistant attorney general for the George W. Bush administration. “It’s hard to tell whether [Rosenstein] was sending a message to back off, or whether he was just trying to illustrate how invasive he considered the demands from Congress. But either way, it is a clear signal that the relationship is fractured, and it’s not clear how things will get repaired.”
The fight between the DOJ and Congressional investigators over the boundaries of Congressional oversight vs. the DOJ’s apparent concern for protecting sources and methods (and evidence of potential crimes) has set the tone for a sustained dispute over records, and has set in motion the latest round of confrontations between Chairman Devin Nunes and Rosenstein – who has requested records related to the FBI’s use of a confidential informant to spy on the Trump campaign.
Asked about the January meeting, Nunes provided a statement to Fox News noting they referred the incident to House Speaker Paul Ryan’s office: “The Intelligence Committee considers staff concerns at the most serious level, especially those involving interactions with the executive branch. Based on the justified concerns expressed by our lead staff investigators, we referred this matter to the Speaker’s Office.” –Fox News
A source on the House Intelligence Committee told Fox that “going to the DOJ IG [Inspector General] is one of several steps under consideration” by the panel. Meanwhile, Dupree noted that current tension between the DOJ and Congress go well beyond traditional oversight wrangling.
“Rarely, if ever, has it deteriorated to this point where you have what appears to be threats going back and forth between the two sides,” he said.
The United States of America is beginning to lose its reserve currency dominance.
Countries around the world are working to find ways to circumvent the US dollar when it comes to trade and settlement. In addition to that, nations are requesting for their gold holdings stored overseas to return home.
Turkey has been the latest country to request their gold as they pulled 220 tons of gold out of the US Federal Reserve system on April 19, 2018. The countries 220 tons of gold is valued at $25.3 billion. Turkey has followed countries such as:
Turkey’s President Tayyip Erdogan decision to withdraw their gold was an act of trying to prioritize his nation’s currency. He recently urged the international monetary fund to pay loans in gold instead of US dollars.
These debts should be in gold. Because at this point the karat of gold is unlike anything else. The world is continually putting us under currency pressure with the dollar. We need to save states and nations from this currency pressure.
Even though Turkey has drawn lots of attention with regards to pulling its gold from the United States Federal Reserve System, as mentioned above they are not the only nation currently wanting to bring their gold home.
But why are these countries rushing to get their Gold back?
It’s not a secret that there is a lack of confidence with regards to the U.S. Treasury’s claim that it currently holds 261,000,000 ounces of gold in Fort Knox and other locations. On top of that, the official gold reserves have never gone through a thorough independent audit.
Which you would think makes lots of countries feel quite uneasy with regards to their gold holdings.
So instead of putting their complete faith in the words of the US government, countries feel that it’s safer to bring their gold home.
On top of countries requesting their gold back, nations around the world are trying to avoid the US dollar especially in a time of looming trade wars and hefty tariffs initiated by the United States.
Countries such as Russia and China constantly accumulate gold with the rumored plan to create a gold backed currency with the ambition to dethrone the United States as the reserve currency. Another country such as Iranhas recently issued a statement that it will also be moving away from the dollar and start using the euro as its official reporting currency.
Clearly, the lack of trust in the federal reserve system is not just with the libertarian crowd anymore, a growing number of countries continue to pull their gold holdings from U.S vaults and attempt to avoid the dollar. The big question is, is the United States reserve currency status soon to be in jeopardy?
About 240 years and numerous industrial revolutions from the first, America could be on the verge of a new age of automation, one controlled by Silicon Valley robots and artificial intelligence.
In fact, automation could destroy as many as 73 million U.S. low skilled, low wage laborers by 2030, a recent report by McKinsey Global Institute stated.
The dire prediction that robots could take a bulk of the middle-class jobs — has led many of macro strategists to believe that significant economic disruptions are coming to America.
Harris started the conference by telling John Mauldin, who hosted the conference, “the combination of a demographically shrinking workforce plus increasingly cost-effective automation will aggravate inequality, constrain demand, and put a cap on economic growth.”
Harris also warned, “this will have all sorts of unpleasant effects in the next decade.”
Last week, Axios Editor Steve LeVine told CBSN that U.S. lawmakers and businesses are not prepared to help low skilled, low wage laborers navigate the changing tides of the economy and adapt to new skills and survive the coming “economic tsunami” via automation.
“The biggest takeaway is that the future is now,” LeVine said in an interview on Friday. “We’re not prepared at all,” he said, for the “jobs apocalypse” resulting from automation.
Some of the difficulties ahead relate to lawmakers, who are not actively moving quick enough to repair America’s broken education system to provide new laborers the skills needed to be productive in the modern economy while automation replaces bottom-tier jobs.
“You see scores of companies complaining they can’t find enough skilled labor…they are not prepared to train new workers. And as a country we have not even started talking about, ‘How do we retrain our workforce?’” LeVine said.
Automation is coming after jobs, from fast food burger flippers to accountants. CBSN examined which jobs are the most at risk:
Some of the jobs on the cutting block include “fast casual cooks” — think McDonald’s and Shake Shack low skilled, low wage employees.
Not too long ago, we reported on one burger chain in California that hired “Flippy”, a robotic kitchen assistant, to cook burgers.
CBSN believes movers, warehouse workers and retail workers including cashiers are also about to get axed because of the introduction of automation. There is also a significant risk that autonomous cars and trucks could disrupt the transportation industry.
To get a glimpse of the coming economic disruption headed to America via the automation tsunami. Deutsche Bank provides a series of visuals (below) indicating the shifting winds created by robots and artificial intelligence.
World robot shipments forecasts by region (DB estimates)
(Source: IFR, Deutsche Securities estimates)
Labour force of More Developed World (MDW) and China (in mln)
(Source: IFR, Deutsche Securities estimates)
Major industrial users of robots
(Source: IFR, Deutsche Securities estimates)
Trade balances in related machinery
(Source: IFR, Deutsche Securities estimates)
And lastly, Deutsche Bank offers a counter-narrative to President Trump’s “Make America Great Again” narrative in the revival of America’s manufacturing industry.
For instance, the bank’s research desk focuses on Nike and other apparel companies that have limited plans on re-shoring their manufacturing facilities in the United States. It is more than likely that these companies will focus on low-wage outsourcing and the introduction of automation, indicating overseas factories will stay put. In a rare case, Adidas recently opened a manufacturing facility in Atlanta, Georgia, however, most of the factory was automated.
“Nike and other apparel companies employ similar types of robotic setups in their factories. Of course, the pursuit of lower manufacturing costs has been a crucial part of textile and footwear manufacturing since at least the industrial revolution.
The nature of cost reduction is changing, though. In the past decade, most cost optimization took the form of geographic relocation as firms moved production to China and then Vietnam as they sought lower-wage workers. But despite the rise in labor costs in these countries, a migration to new lower-wage nations is unlikely.
It is true that a lot of noise has been made about re-shoring to developed countries, particularly the US. Adidas has opened a partially automated factory in Atlanta, while Under Armour has discussed plans to open a manufacturing center in Baltimore.
So far, though, the large apparel groups have not done this en masse. True, Adidas has said it wishes to increase the output of its Speedfactories in Ansbach and Atlanta to 1m pairs of shoes each year by 2020. But this is equivalent to just one day’s requirement.
The ‘real’ investment by Adidas in its Speedfactory programme has already taken place in Vietnam. The world’s largest shoe contract manufacturers have invested over $200m each year recently to automate production lines that produce over 50m pairs of shoes each year. Rival Nike has completed a similar plan with its manufacturing partners. Its automation investment in China and Vietnam has been very fruitful for the company.”
To sum up, the coming jobs apocalypse driven by debt, demographics, and automation could displace tens of millions of bottom-tier jobs. In return, this transition could trigger significant economic disruptions, which could only accelerate into the 2020s. The magnitude of today’s workforce shift is expected to match that of the automation of agriculture from 1900 to 1940. The automation of farming transformed America’s economy and severely disrupted labor markets, ultimately climaxing into the Great Depression and subsequent world war.
