Submitted by Joseph Carson, former global director of economic research at AllianceBernstein
Jerome Powell, Chairman of the Federal Reserve, has stated that the relationship between unemployment and inflation “was a strong one 50 years ago…. and has gone away”. This relationship, called the Phillips Curve, now has disappeared according to the Fed view.
Contrary to Powell’s assertion, the ”real” Phillips curve is not flat, but the appearance of a “flatter” relationship between prices and wages is largely due to a technical change in the measurement of housing prices, the single most important item in the inflation index.
In 1998, the Bureau of Labor Statistics (BLS) made a technical change in the measurement of owner-occupied housing. Because of an inadequate and declining sample of owner-occupied housing, BLS statisticians felt the process was “time-consuming” and “futile” as it could no longer provide a consistent and accurate reading of housing costs from the owner-occupied units.
So the remedy, according to BLS, was to drop the owner-housing sample. They instead linked the price data from the rental market to owner-occupied market, even though the two markets are fundamentally separate.
At the time, there was little reaction or opposition from the technical change for the simple reason no one knew, perhaps even the statisticians at BLS, what the new measurement would eventually show in real time.
Yet, in hindsight, the impact of the change should have been obvious to all parties since the change involved replacing a house price series that accelerates during economic growth cycles with a rental series that does not. In reality, the technical change had the effect of “flattening” reported consumer price inflation.
Why is this important?
First, before declaring the Phillips curve relationship is gone, it is advisable to look at all of the factors that could be altering the relationship between prices and wages. Comparing inflation-to-inflation readings before and after 1998 is a non-starter due to materially different measures of housing inflation. The removal of the house price signal from reported inflation contributed to the breakdown of the Phillips curve for the simple reason it removed the single largest cyclical driver of consumer price inflation.
Second, companies use reported consumer price inflation, among other things, to help them gauge wage increases, so it’s not surprising that there has been a close affinity between reported inflation and wage increases. To the extent the post-1998 measure of consumer price inflation rises less quickly than the older version, it would follow logically that wage growth would be slower as well, as else being equal. In other words, “flatter” reported inflation results in “flatter” wages so it theoretically takes even lower levels of unemployment to generate wage increases.
Third, reported consumer price inflation has a direct connection to policy rates, even more so since the introduction of an inflation-targeting regime to help guide monetary policy decisions. Policymakers have yet to acknowledge how the 1998 change in reported inflation and the direct link to official rates have impacted the economy and the financial markets in real time.
It’s always difficult to prove causation but since 1998 there have been three asset price cycles – two involving unprecedented increases in equity prices relative to GDP and the other one centered in real estate prices. The occurrence of a single asset price spike could be considered a one-off, but three in a span of 20 years strongly suggests there is a cause and effect from monetary policy.
Policymakers have mistakenly misread the breakdown of the Phillips curve, resulting in prolonged loose monetary policy. The Phillips curve is not dead, but it changed it stripes. The most important price signals nowadays mainly flow through the asset markets, which from operational standpoint shift the focus of monetary policy towards financial/market stability and away from price stability.
Kathleen Curran Aguiar, Chartered Financial Analyst, contributed to this article.
First it was Dennis Gartman shutting down his newsletter after more than three decades, lamenting a market that no longer made any sense (a lament shared by Deutsche Bank’s Aleksanda Kocic), and now the market’s QE4-driven meltup has forced Wall Street’s biggest sellside bear to capitulate on his November call that the market will drop in 2020; instead UBS’ head of US equity strategy, Francois Trahan, has joined the bullish herd hiking his year-end S&P price target from 3,000, where he set the bottom of the year-ahead market forecasts alongside Morgan Stanley’s notorious bear Michael Wilson, to 3,250.
That said, as Bloomberg notes, Trahan’s new forecast is hardly exuberant, as it indicated a market that will close the year virtually unchanged from today’s level of 3,241. Still, he does joins other strategists in turning more optimistic after the S&P 500’s 29% rally in 2019 exceeded almost everyone’s expectations.
In a note to clients, Trahan writes that it will take time for the Fed’s lower borrowing costs to work though the economy and the benefits won’t take hold until 2021. As such, he believes that stocks are likely to pull back in the first half as earnings expectations are at risk of falling, and then recover during the later half in anticipation of a pickup in growth. This, as readers may recall, is the opposite of what BofA’s Michael Hartnett predicted: his forecast is for the S&P to ramp to 3,333 by March 3 after which it will drift lower heading into the political uncertainty of the November elections.
“We see this year as having two distinct phases for equities as markets transition from pricing in slower growth to pricing in an economic recovery,” Trahan wrote. “We expect a V-shaped year for the S&P 500”, he added although it is rather bizarre why the market will ramp into the election, especially if Democrats are gaining traction in the polls and as inflation starts to push higher, leaving the Fed with no opportunity to cut in the coming year.
While Trahan has skewed bearish for the past two years, his capitulation demonstrates a problem that has plagued most Wall Street strategists, whose modest 2019 year-end forecasts caught almost everyone scrambling to catch up to the market’s year-end rally. This skepticism has carried across, and according to Bloomberg’s latest survey, for 2020 sellside strategists provided the least optimistic annual outlook in two decades. As the chart below shows, the average prediction for the S&P 500 to end the year is at 3,318, which is only a 2.7% expected increase from current levels, the smallest for any year in data going back to 1999.
Earlier this week, two more strategists joined the bull parade, raising their own forecasts: Citi’s Tobias Levkovich hiked his price target by 75 points to 3,375 while RBC’s Lori Calvasina also boosted her target to 3,460 from 3,350. As we noted in December, even the market’s so-called permabear, Morgan Stanley’s Wilson, cautioned of the “risk” that the S&P 500 could melt up above his year-end fair projected range of 3,000 to 3,250, and in a Monday note, Wilson said that the index could surge as high as 3,500 in the first half because of central bank support.
“Markets can overshoot fair value in liquidity driven bull market,” Wilson wrote. “Depending on how the economic and earnings data came in during the year will determine if we need to raise our year-end targets or not.”
All I wanted to do this week was work on part 2 of my localism series, but circumstances quickly got the best of me. The assassination of Iran’s top general Qassem Soleimani was an event of such historical significance, I feel obligated to detail my thoughts on what it means and how things unfold from here, especially given how much of a role geopolitics and questions of empire have played in my writings.
First off, we need to understand the U.S. is now at war with Iran. It’s an undeclared, insane and unconstitutional war, but it is war nonetheless. There is no world in which one government intentionally assassinates the top general of another government and that not be warfare. You can argue the U.S. and Iran were already engaged in low-level proxy wars, and that’s a fair assessment, but you can’t say we aren’t currently in far more serious a state of war. We are.
Soleimani was not only a powerful general, he was a popular figure within Iran. Unlike other blows the U.S. and Iran have inflicted upon one another, this cannot be walked back. There’s no deescalation from here, only escalation. Even if you want to pretend this didn’t happen and turn back the clock, it’s impossible. This is a major event of historical proportions and should be seen as such. Everything has been turned up a notch.
Before discussing what happens next and the big picture implications, it’s worth pointing out the incredible number of blatant lies and overall clownishness that emerged from U.S. officials in the assassination’s aftermath. It started with claims from Trump that Soleimani was plotting imminent attacks on Americans and was caught in the act. Mass media did its job and uncritically parroted this line, which was quickly exposed as a complete falsehood.
CNN anchor uncritically repeating government lies.
This is what mass media does to get wars going. https://t.co/QK1JET7TIj
It’s incredibly telling that CNN would swallow this fact-free claim with total credulity within weeks of discovering the extent of the lies told about Syrian chemical attacks and the Afghanistan war. Meanwhile, when a reporter asked a state department official for some clarification on what sorts of attacks were imminent, this is what transpired.
When asked by a reporter for details about what kinds of imminent attacks Soleimani was planning, the State Dept. responds with:
“Jesus, do we have to explain why we do these things?”
Naturally, we learned soon after from the Iraqi PM himself that Soleimani was in Iraq as part of a diplomatic effort to de-escalate tensions. In other words, he was apparently lured to Baghdad under false pretenses so he’d be a sitting duck for a U.S. strike. Never let the truth get in the way of a good story.
Iraqi Prime Minister AbdulMahdi accuses Trump of deceiving him in order to assassinate Suleimani. Trump, according to P.M. lied about wanting a diplomatic solution in order to get Suleimani on a plane to Baghdad in the open, where he was summarily executed. https://t.co/HKjyQqXNqP
As you’d expect, some of the most ridiculous propaganda came from Mike Pompeo, a man who genuinely loves deception and considers it his craft.. For example:
Pompeo on CNN says US has “every expectation” that people “in Iran will view the American action last night as giving them freedom.”
Iran’s Supreme Leader Ayatollah Ali Khamenei and Qassem Soleimani’s daughter Zeinab were among the hundreds of thousands mourning Soleimani in Tehran today. Iranian state TV put the crowd size at ‘millions,’ though that number could not be verified. https://t.co/R6EbKh6Gow
Moving on to the really big question: what does this assassination mean for the future role of the U.S. in the Middle East and American global hegemony generally? A few important things have already occurred. For starters, the Iraqi parliament passed a resolution calling for U.S. troops to leave. Even more important are the comments and actions of Muqtada al-Sadr.
WOW,
Iraqi Shiite leader Muqtada al-Sadr orders the return of “Mahdi Army” in response the American strike that killed Suleimani.
Mahdi Army fought against the US troops during the invasion in 2003. Sadr disbanded the group in 2008.
Unmentioned in the above tweet, but extremely significant, is the fact al-Sadr has been a vocal critic of both the American and Iranian presence in Iraq. He doesn’t want either country meddling in the affairs of Iraqis, but the Soleimani assassination clearly pushed him to focus on the U.S. presence. This is a very big deal and ensures Iraq will be far more dangerous for U.S. troops than it already was.
Going forward, Iran’s response will be influenced to a great degree by what’s already transpired. There are three things worth noting. First, although many Trump supporters are cheering the assassination, Americans are certainly nowhere near united on this, with many including myself viewing it as a gigantic strategic blunder. Second, it ratcheted up anti-American sentiment in Iraq to a huge degree without Iran having to do anything, as highlighted above. Third, hardliners within Iran have been given an enormous gift. With one drone strike, the situation went from grumblings and protests on the ground to a scene where any sort of dissent in the air has been extinguished for the time being.
Exactly right, which is why Iran will go more hardline if anything and more united.
If China admitted to taking out Trump even Maddow wouldn’t cheer. https://t.co/zqaEDIoWH1
Iranian leadership will see these developments as important victories in their own right and will likely craft a response taking stock of this much improved position. This means a total focus on making the experience of American troops in the region untenable, which will be far easier to achieve now.
If that’s right, you can expect less shock and awe in the near-term, and more consolidation of the various parties that were on the fence but have since shifted to a more anti-American stance following Soleimani’s death. Iran will start with the easy pickings, which consists of consolidating its stronger position in Iraq and making dissidents feel shameful at home. That said, Iran will have to publicly respond with some sort of a counterattack, but that event will be carefully considered with Iran’s primary objective in mind — getting U.S. troops out of the region.
This means no attacks on U.S. or European soil, and no attacks targeting civilians either. Such a move would be as strategically counterproductive as Assad gassing Syrian cities after he was winning the war (which is why many of us doubted the narrative) since it would merely inflame American public opinion and give an excuse to attack Iran in Iran. There is no way Iranian leadership is that stupid, so any such attack must be treated with the utmost skepticism.
It’s impossible to know exactly what will happen in the short-term, but in the much bigger picture I have a strong view of what this means. The assassination of Soleimani kicks off the beginning of the final chapter in the decline of U.S. imperial dominance. It will likely play out over the course of the first part of this decade (2020-2025), and by the time it’s over it’ll be undeniable that the U.S. is no longer the global hegemon it once was. The world at that stage will be unmistakably multi-polar.
The signs are everywhere.
Welcome to America’s two political parties:
If you’re a Democrat you must become brain dead about Russia and blame everything bad on it.
If you’re a Republican you must become brain dead about Iran and blame everything bad on it.
Do empires fall because a superior military force beats them in a conventional war, or do they fall due to decades of debt, corruption and military entanglements on the periphery.
Death to America this, Death to America that. The arrogance of the Iranians is astounding. They will never be as good at destroying America as America.
— Starfish Considering Taking Up Day Drinking (@IRHotTakes) January 5, 2020
This is not a time for despair, as there can be a huge silver lining to all of this. A singular focus on imperial hegemony has been terrible for most Americans. It has made us weak, it has destroyed the middle class, and it has entrenched a small subset of sociopaths into positions of total, unaccountable power.
The energy and spirit of the American people have been pushed aside and smothered so a bunch of defense contractors, politicians and finance criminals can play a game of RISK at the public’s expense. The transition is likely to be quite traumatic and fraught with danger, but empire has been a curse and has hollowed out the country. Shaking off empire at least gives us a shot at a revival.
* * *
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Trump Campaign Spends $10 Million On 60-Second Super Bowl Ad
President Trump’s 2020 re-election campaign is starting the New Year with an extremely splashy ad buy: According to Politico, which cited four sources who had been briefed on the plan, the campaign is planning to drop $10 million on a Super Bowl ad.
That massive sum will get Trump just one minute of air time during the Feb. 2 championship game, though it’s unclear whether Trump is planning two 30-second slots, or 1 60-second spot.
The campaign has purchased 60 seconds of commercial time during the Feb. 2 Super Bowl, which is likely to be the most-watched television event of the year. The ad or ads — it’s unclear whether it will be a single 60-second spot or a pair of 30-second commercials — are expected to run early in the game, when viewership is likely to be at its highest.
The Super Bowl is set to take place just one day before the Iowa caucuses, marking the beginning of the primary season for Democrats (and the handful of delusional Republicans who are officially challenging Trump for the Republican nomination). That ought to help Trump hold on to some headline real-estate as the results come in, while also distracting from the inevitable barrage of impeachment headlines.
In addition to the ad blitz, the campaign is also planning to spend millions on outreach to key voting blocs, including Latinos, Blacks and women, during the coming months.
They have also approved plans to spend millions of dollars on outreach to key voting blocs including women, evangelicals, Latinos, and African Americans. Trump campaign recently launched an aggressive effort to woo black voters, taking out ads on African American-owned radio and newspapers.
“The president’s decision to stay aggressive and keep the campaign open after his first election gave us a huge head start on his reelection,” Trump campaign manager Brad Parscale said in a statement, referring to the president’s announcement within days of his 2017 inauguration that he would seek reelection. “Now 300 days out we are throttling up. The president has built an awesome, high-performance, omnichannel machine and it’s time to give it some gas.”
This isn’t the first time Trump’s 2020 campaign has advertised during a major sports game: It also ran commercials during the World Series last year declaring that Trump’s “no Mr. Nice Guy, but sometimes it takes a Donald Trump to change Washington.”
That the Trump 2020 campaign is going all-in on television ads is unsurprising. Twitter recently banned political ads, and Facebook has reportedly floated the idea of limiting political ads during the 2020 cycle, as the company’s refusal to fact-check political ads has infuriated liberals.
The president is also sitting on a campaign war chest that dwarfs the money raised by the leading Democratic candidates. As we noted a few days back, Trump raised $46 million in Q4. In total, his campaign has raised more than $100 million, and together with the RNC, is heading into the spring with more than $200 million on hand.
Of course, Trump isn’t the only candidate dropping big bucks on a Super Bowl ad: The New York Times has already reported that Michael Bloomberg’s self-funded campaign has also spent $10 million on an ad to “take on Trump” during the nation’s biggest sporting event.
But Bloomberg’s wallet is still far bigger than his following. His campaign has already dropped $170 million on television ads, setting records for ad spending by a candidate. But his support is still languishing in the single digits.
Meanwhile, President Trump commands the approval of more than 90% of Republicans, and polls have shown that the Democrats’ impeachment push has done nothing to sway the public to turn on the president.
Nearly 7.5 million people moved from one state to another in 2018, boosting the economies of some states while straining the finances of others.
The winners of the battle for people and their incomes included states like South Carolina, Arizona, Texas and Florida. Those findings are based on a Wirepoints’ analysis of the latest 2018 domestic migration data provided by the Internal Revenue Service.
The stakes are large. A growing population for the winners means an increasing tax base, economic growth and investment. And as baby boomers age and pressure to fund pensions increases, a growing workforce is a windfall.
On the other end of the competition are states that have become perennial losers. Connecticut, New Jersey, Illinois and New York have experienced some of the nation’s biggest drain of people and their money.
According to the latest numbers, Florida is once again the biggest winner of both people and money.
The Sunshine State attracted nearly $32 billion in Adjusted Gross Income (AGI) from people moving into the state in 2018. In contrast, it lost about $15.7 billion in AGI from those who left Florida, leaving the state with a net gain of nearly $16 billion in new taxable income.
That’s a total gain of about 2.8 percent of the state’s total AGI in 2018.
Arizona was the runner up with a net gain of $3.5 billion, followed by Texas with $3.4 billion. North and South Carolina rounded out the top five with gains of $3 billion and $2.5 billion, respectively.
On the losing side, New York suffered the worst outflow of money of any state in 2018. The Empire State lost a net $9.6 billion in income, or more than 1.3 percent of its AGI base.
California was next, losing a net $8 billion, followed by Illinois and a loss of $5.6 billion. New Jersey and Maryland were in 4th and 5th place, with $3.2 and $1.7 billion in losses, respectively.
A full table with each state’s ranking is provided below…
Keep an eye on Illinois
Illinois’ experience with out-migration shows just how damaging being an “exit” state can be. The state’s $5.6 billion AGI loss in 2018 wasn’t just a one-time thing. Wirepoints’ analysis found Illinois has netted annual AGI losses every single year since at least 2000.
The losses have piled on top of each other, year after year, and if you add them all up, Illinois’ AGI losses total $410 billion over the 2000-2018 period. That shrinking tax base has contributed to the state’s deepening fiscal woes. Illinois now has more than $6 billion in unpaid bills, the nation’s largest pension shortfall and is rated just one notch above junk.
Considering the annual losses to Illinois’ tax base, Gov. J.B. Pritzker’s wish to replace the state’s constitutionally protected flat tax with a progressive tax structure that will increase total taxes by over $3 billion is all the more striking. Illinoisans will vote for or against the progressive tax on a ballot initiative in November 2020.
The state has lost a net of more than 1.5 million people to out-migration since 2000, or more than 11 percent of the state’s population.
Florida’s gains and Illinois’ losses are a clear reminder that states are constantly competing for people, businesses and a growing tax base.
The prize for winning is big, but the price for losing may be even bigger.
Read more about Illinois’s financial and out-migration crisis:
CNN Settles $275M Lawsuit With ‘Punchable’ Teenager Nick Sandmann
CNN settled its $250 million lawsuit with Covington High School Student Nicholas Sandmann for an undisclosed sum on Tuesday.
Sandmann was viciously attacked by left-leaning news outlets over a deceptively edited video clip from the January, 2019 March for Life rally at the Lincoln Memorial, in which the teenager, seen wearing a MAGA hat, appeared to be mocking a Native American man beating a drum (a known political grifter who lied about the incident, and stole valor).
Around a day later, a longer version of the video revealed that Sandmann did absolutely nothing wrong – but not until the media had played judge, jury and executioner of Sandmann’s reputation.
That included CNN‘s Reza Aslan, who asked over Twitter “Have you ever seen a more punchable face than this kid’s?”
“Contrary to its ‘Facts First’ public relations ploy, CNN ignored the facts and put its anti-Trump agenda first in waging a 7-day media campaign of false, vicious attacks against Nicholas, a young boy who was guilty of little more than wearing a souvenir Make America Great Again cap,” Sandmann claimed in a 58-page lawsuit filed last May, according to the Washington Times.
Sandmann’s attorney told Fox News last March that “CNN was probably more vicious in its direct attacks on Nicholas than The Washington Post. And CNN goes into millions of individuals’ homes. It’s broadcast into their homes.”
In total, Sandmann has sought $800 million after also suing the Washington Post and NBC Universal.
Sandmann claims that the Post – which helped publicize a now infamous photo that helped trigger an Internet mob that swiftly outed the teen and demanded he be punished – led the hate campaign against Sandmann – and failed to practice proper journalistic due diligence – “because he was the white, Catholic student wearing a red ‘Make America Great Again’ souvenir cap on a school field trip to the January 18 March for Life in Washington, D.C. when he was unexpectedly and suddenly confronted by Nathan Phillips (‘Phillips’), a known Native American activist, who beat a drum and sang loudly within inches of his face (‘the January 18 incident’).”
Trial dates have not yet been set in those cases.
“This case will be tried not one minute earlier or later than when it is ready,” said Sandmann’s attorney, Lin Wood, who says they also plan to sue the owners of The Enquirer, Gannett, within the next 60 days.
Meanwhile, filmmaker and pundit Mike Cernovich compiled a short list of some of CNN‘s more memorable reporting screwups (via Cernovich.com):
Jake Tapper reported that fired FBI director James Comey would testify that he never told Trump he was under investigation. After Comey testified, Tapper’s article was updated to include this disclaimer, “The article and headline have been corrected to reflect that Comey does not directly dispute that Trump was told multiple times he was not under investigation in his prepared testimony released after this story was published.
Jim Acosta claimed Trump did not visit Steve Scalise after the tragic mass shooting committed by a far left wing terrorist.
CNN had to retract a story about Anthony Scaramucci being under investigation after it was revealed to be fake news.
CNN White House Reporter Jeremy Diamond claimed Trump was first President since George H.W. Bush to not take questions at a press conference held in China. Jake Tapper himself RT’ed Diamond. This claim was false.
CNN claimed that Trump committed a faux pas during a fish feeding ceremony held in Japan.
White House reporter Manu Raju claimed Donald Trump Jr. had advanced knowledge of the Wikileaks release of the Podesta emails. This story was confirmed by two sources, and it was fake news. To this day, Raju refuses to burn the sources who fed him a fake story.
We, as Americans, are now living in different realities. The almost completely partisan response to Donald Trump’s decision to assassinate one of Iran’s top leaders proves that once and for all. To listen to Mitch McConnell versus Nancy Pelosi – and just about all their underlings – argue about the execution, is to almost believe each are talking about a different event! It’s surreal. Trump hit Iran, he says, because Iran hit us.
Trump calls Soleimani a “terrorist” mastermind; Iran calls the assassination an “act of terrorism.” Are both right? Who knows…but…who started this whole mess?!?
Truth is, few politicians or commentators on the mainstream left or right bother to ask who started the now open-shooting-conflict between Iran and America. Don’t get me wrong, both sides starkly disagree on whether Trump’s assassination of Major General Qasem Soleimani was strategic, (it wasn’t) or whether the president ought to have sought congressional approval (he should have). Still, both Democrats and Republicans almost unanimously believe that – whether war is the answer or not – Iran is ultimately in the wrong, the villain of the whole sordid tale.
I, on the other hand, sympathies aside, have the luxury of (mostly) intellectual independence. And I’m an historian. Therefore let me address the title question in a rather uncomfortable manner. The answer, I surmise, is complex, but, to trained scholar or regional analyst, unsurprising: the United States of America. This is not to say Iran hasn’t played a nefarious part of its own, or that there was zero blood on Soleimani’s hands, or that there aren’t human rights violations within the Islamic State. My narrow – but profoundly consequential – assertion is simply this: between the two adversaries, it was the United States that “started” the insults and provocations that got-us-hear, so to speak.
So, where is here, exactly? A state of war, of course. The targeted killing of a sovereign nation’s top uniformed military officer is quite obviously tantamount to war. Imagine how the U.S. would have responded if, on December 6th, 1941, the Germans assassinated Army Chief of Staff George Marshall. With a declaration of war, certainly, perhaps against Germany and its ally, Japan – potentially doing so a day before the real-world Pearl Harbor attack of December 7th. Or, in a more modern counterfactual scenario, would America eschew retaliation, at a minimum, or, more likely, open warfare, were Iran to have blown away Generals Petraeus or Mattis, back when they were still in Iraq? Don’t be silly. It’s valuable, remember, to walk a mile in an opponent’s shoes – in this case, to consider the view from Tehran.
Let us agree, then, that – for better or worse – Mr. Trump has started a war. What’s perhaps more troubling is that he has unilaterally done so, committed America to – what Trita Parsi of the Quincy Institute recently called – an “irreversible escalation.” In doing so, he’s left Congress, the US military, and the People, to pick up the pieces. The president’s purpose, or at least his outcome, has been to engender a de-facto state of war, to commit the US to a combat fait accompli.
He’s not the first president to do it. Back in 1846, President James K. Polk – another dark horse candidate – by supporting the annexation of the breakaway Mexican province of Texas, and then ordering an army across the internationally recognized border, unilaterally made the resultant war – the deadliest per capita for US troops in history – all but inevitable. That, we now know, was his purpose. Problem is, whether a Polk or a Trump or some future blowhard is in the White House, that’s decidedly not how the Constitution says its supposed to work!
Nevertheless, it seems it is too late now. What’s done is – absent an unlikely wave of antiwar people’s protests – as they say, done. Trump has changed the paradigm. See, undeclared, proxy (until now) war had long been the name of the game played by the US and Iran. As such, it was waged as a retaliatory cycle, with each side pointing blame-riddled fingers at the other. So, times being as dark as they are, let me indulge the blame-seekers, and do my best to trace the timeline of provocations and retaliations. Only, to keep it interesting – and because I think it more instructive – I’ll do so in reverse.
Since I don’t know when it will happen (perhaps before publication of this piece?), but am certain that it will, I’ll start with what will be Iran’s promised and likely bloody response attack on US personnel somewhere in the world. Americans will, across the spectrum, be shocked – just shocked!
But, Iran only responded to the American assassination of perhaps the second or third most powerful man in Tehran’s government.
Well, an Iranian-backed militias had “attacked” the US embassy in Baghdad – though this was, for the Americans, a bloodless event.
But, the US had killed some two dozen members of the militia in a series of airstrikes.
Well, this was in response to the group’s alleged responsibility for a rocket attack on a US base in Iraq that killed an American contractor.
But, Trump had been funneling extra US troops into Saudi Arabia – Iran’s sworn enemy – and de facto sanctioned numerous, illegal, Israeli airstrikes on Iranian personnel and Iraqi militias in both Syria and Iraq.
Well, in September, Yemeni Houthi rebels – loosely affiliated with Iran – claimed responsibility for a temporarily crippling attack on Saudi oil infrastructure.
But, the U.S.-backed Saudi coalition had been terror bombing Yemeni civilians for four years, causing the world’s worst man-made humanitarian disaster.
Well, in June, Iran shot down an American drone that was allegedly over international airspace.
But the Trump administration’s had labeled the Iranian Revolutionary Guards Corps (IRGC) – which Soleimani commanded – a foreign terrorist organization, for the first time in history. (Iran designated US Central Command – which has responsibility for the entire Middle East – a terrorist organization, in response, days later.)
Well, in May, Trump claimed that Iran was behind attacks on a few Saudi oil tankers.
But, a year earlier, Trump had unilaterally pulled out of a multinational Obama-era nuclear deal, in spite of clear evidence that Iran had followed its strictures. Furthermore, rhetoric in Washington – particularly from John Bolton – had grown increasingly pugnacious and later Bolton reportedly ordered the Pentagon to update plans to send 120,000 additional troops into the Persian Gulf.
Well, Iranian troops and friendly militias had long been “meddling” in Syria to back President Assad (though they were, unlike the US, invited, and partly combated the mutual enemy of ISIS)
But, Iran could (cogently) argue that the US had indirectly backed Al Qaeda elements in Syria and, through its ill-fated invasion of Iraq, set the conditions that created ISIS in the first place.
Well, according to the official Washington line, at least, Iran had backed the militias and provided the technology to kill hundreds of US troops in Iraq. (Though there is much evidence to the contrary, and much talk about the Iranian bogeyman in Iraq may be mythology.)
But, even so, the US had invaded both of Iran’s main neighbors – Afghanistan (2001) and Iraq (2003) – surrounding the country with American military bases. Furthermore, Iran felt genuinely threatened, which was understandable given that Bush administration officials were itching for regime change in Iran. “Everyone wants to go to Baghdad. Real men want to go to Tehran,” was a common trope around neocon circles in Washington. Heck, Bush had even included Iran in the “axis of evil” triumvirate in his speech.
Now, I could stop here, in 2003, and declare America the primary aggressor. That would be fair. But I won’t. Instead, let us take an ever so brief trip further down memory land.
Bush would argue his invasions and rhetoric were justified, since some Iranians had long chanted that the US was “the Great Satan,” and publicly burned the American flag. And, according to a USjudge, at least, Iran had been responsible for the Khobar Towers bombing in 1996 that had killed American servicemen. (There is still much debate on who was actually responsible)
But, during the eight-year Iran-Iraq War, which caused perhaps a million deaths, the US Navy waged an undeclared maritime war in the Persian Gulf. In the “Tanker War,” the US flew the stars and stripes on Kuwaiti vessels to protect them from attack, and, finally, in April 1988, overtly sank the majority of the Iranian Navy in a one-sided sea battle.
Well, during that existential war, Iran had attacked Iraqi and its allies’ tankers; furthermore, its Lebanese partner Hezbollah had taken several Americans hostage.
But, throughout the war (1980-88), which Iraq had started by invading Iran, the US openly backed the Saddam Hussein’s aggressive regime. The US provided key intelligence in the form of satellite photos to the Iraqi Army, and granted Baghdad over $1 billion in economic aid. President Reagan, in absurd twist of irony, sent a special envoy, Donald Rumsfeld, to meet with Saddam. Saddam regularly employed poison gas to attack Iranian formations. It is largely agreed that U.S.-supplied satellite imagery allowed Iraq to better calibrate these illegal, immoral, chemical attacks.
Well, in 1979, during Iran’s Islamic Revolution, dozens of American embassy personnel were taken hostage and held for more than a year.
But here’s the kicker: Back in 1941, though Tehran declared neutrality in the world war, Russia and Britain jointly invaded and occupied the country to secure control of its oil reserves. Then, in 1953, when a democratically elected prime minister – Mohammad Mossadegh – dared nationalize Iranian oil (which had been largely under Western corporate control) the CIA coordinated a coup with MI6 to overthrow the government. The dictatorial Shah was promptly put in power and ruled with an iron fist for the next 26 years. America had armed, funded, and backed this brutal regime for two and a half decades.
And that, folks, an aggressive, illegal, intervention to overthrow an elected government – one of the most intrusive sins in foreign affairs – amounts to checkmate in the blame-game: Uncle Sam started it! You know something else? That still matters…
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Danny Sjursen is a retired US Army officer and regular contributor to Antiwar.com. His work has appeared in the LA Times, The Nation, Huff Post, The Hill, Salon, Truthdig, Tom Dispatch, among other publications. He served combat tours with reconnaissance units in Iraq and Afghanistan and later taught history at his alma mater, West Point. He is the author of a memoir and critical analysis of the Iraq War, Ghostriders of Baghdad: Soldiers, Civilians, and the Myth of the Surge. Follow him on Twitter at @SkepticalVet.
Oil prices suffered their first loss of the year today as war premia were wrung out of WTI – despite the escalating verbal threats between Tehran and Washington.
“It’s difficult for traders to keep buying on the promise of more geopolitical risk” after the Iranian incident, said Michael Loewen, director of commodity strategy at Scotiabank in Toronto.
But, for a few brief minutes tonight, the algos will turn their attention to fundamentals…
API
Crude -5.95mm (-3.6mm exp)
Cushing -1.0mm (-660k exp)
Gasoline +6.70mm (+2.7mm exp)
Distillates +6.4mm (+3.9mm exp)
After the prior week’s huge crude draw and massive distillates build, the last week saw more of the same with a bigger than expected crude draw and bigger than expected product builds…
“While there have been no additional barrels taken offline as a result of the rising conflict between the U.S. and Iran, the situation remains ever fluid,” said Michael Tran, commodity strategist at RBC Capital Markets LLC.
However, after a brief period of confusion, WTI extended gains…
Missile Strike Reportedly Carried Out Against US Base In Iraq
Following four days of increasingly belligerent threats from Iran and its leadership, unconfirmed reports claim 5 missiles have just struck a US base in Iraq.
The base is called Taji camp, and it’s situated north of Baghdad.
If this is an Iranian attack, it’s notable that it’s coming at the end of the four days of mourning for General Qasem Suleimani, who was killed last week in an audacious drone strike ordered by President Trump while Suleimani was attending a meeting in Baghdad.
Ominously, the heavily-followed (though not official) twitter account @Iran, tweeted a threatening message a few hours ago…
Waiting for tonight,
We’ve dreamed of this for so long
Waiting for tonight…#SvereRevenge#Iran
Though the reports are unconfirmed, news of what could be the beginning of Iran’s threatened retaliation for the killing of General Qasem Suilemani inspired a slight pop in crude futures.
Gundlach’s 2020 “Just Markets” Predictions: Live Webcast
Today at 4:15pm ET Doubleline founder Jeff Gundlach will host his traditional year ahead forecast titled “Just Markets” and which can be accessed by clicking on the slide below (or clicking here). While there is no fixed topic, Gundlach is expected to comment on the usual array of topics, from his outlook for the economy and market, to his take on gold and commodities, to his growing concern about the soaring budget deficit. Always a political activist, expect Gundlach to also share his latest view on who will win this year’s U.S. presidential election.
Today’s webcast follows almost exactly one year after Gundlach offered a mostly cautious outlook in January 2019 following what he called “the year no one made money” and which preceded a year in which virtually everyone made money, thanks to central banks.
So as we wait for Gundlach to begin, courtesy of Bloomberg, Here’s what Gundlach predicted a year ago and what happened.
Emerging Markets
What he said: After years of under-performance, this is a good time to invest in emerging market equities “relativistically.”
What happened: The MSCI Emerging Markets Index returned 19% last year, compared with 27% for the MSCI All World Index and 31% for the S&P 500 Index.
Europe
What he said: The stocks are “a value trap.”
What happened: The Euro Stoxx 50 returned 27% in dollar terms, the most since 2013. London’s FTSE 100 added 17% in local currency and 22% in dollar terms.
Dollar
What he said: If the Fed becomes less hawkish, the dollar would probably weaken.
What happened: The dollar hit its lowest point of 2019 on Jan. 9. The Fed went on to cut interest rates three times and the dollar index ended December little changed from where it started 2019.
Oil and Commodities
What he said: There could be a zigzag pattern in energy prices and commodities.
What happened: The Bloomberg commodities index zigzagged to a 5.4% gain in 2019. Oil prices climbed 34%, and they rallied early in 2020 as U.S.-Iran tensions flared.
Credit
What he said: Get out of junk bonds while prices are strong and watch out for potential downgrades of investment-grade debt.
What happened: Junk had its best year since 2016 while investment-grade debt gained the most since 2009, according to Bloomberg Barclays indexes.
Crypto
What he said: Bitcoin, trading at the time for about $4,000, could easily make it to $5,000 though it isn’t for the “faint of heart.”
What happened: Bitcoin reached high of $13,851 in June before bouncing down to almost $7,200 at year-end.
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We will post the slides from today’s presentation as soon as we have them, until then here are some of the charts in his latest presentation.
