Obama “Deeply Disappointed” By Supreme Court Decision To Limit His Power

Today’s SCOTUS decision is encouraging for all who believe in the checks and balances enshrined in our nation’s constitution,” is Darrell Issa’s message following the Supreme Court’s unanimous (9-0) decision cutting back the power of the White House to temporarily fill senior government posts when facing partisan opposition in Congress. The White House spokesman said President Obama was “deeply disappointed” and is ‘reviewing’ the decision. Simply put, President Obama used the recess appointment power to make an end run around a Senate that refused to confirm controversial nominees – thanks to this unanimous SCOTUS decision, that use of the power is all but dead.

 

As NBC News reports,

The US Supreme Court today limited a president’s power to make recess appointments when the White House and the Senate are controlled by opposite parties, scaling back a presidential authority as old as the republic.

 

The case arose from a political dispute between President Obama and Senate Republicans, who claimed he had no authority to put three people on the National Labor Relations Board in January 2012 when the Senate was out of town.

 

He used a president’s power, granted by the Constitution, to “fill up all vacancies that may happen during the recess of the Senate.” But the Republicans said the Senate was not in recess at the time the appointments were made, because every three days a senator went into the chamber, gaveled it to order, and then immediately called a recess.

Both sides have had their comments (via Reuters),

Senate Majority Leader Harry Reid, a Democrat from Nevada, said the ruling “underscores the importance” of the Senate rule change last year.

 

“Without that reform and with today’s ruling, a small but vocal minority would have more power than ever to block qualified nominees from getting a simple up-or-down vote,” he said.

 

Kentucky Republican Mitch McConnell, the Senate minority leader, said: “All Americans should be grateful for the court’s rebuke of the administration.” Republican senators had filed court papers urging the court to rule against the administration.

SCOTUS explains…

Breyer wrote that the recess appointment power is only triggered once the Senate has been in recess for 10 days. He rejected the Obama administration’s argument that the appointment power needed to be expansive to overcome political differences between branches of government that prevent nominees from being confirmed.

 

The recess appointments clause “is not designed to overcome serious institutional friction,” he wrote. The majority was hesitant to issue a broader ruling because it would have brought into question hundreds of appointments made over the years, Breyer added.

 

Reading from the bench, Scalia was insistent that the court should have gone further, saying that presidents have over the years treated the need to have nominees confirmed by the Senate as an “unreasonable burden.”

 

Scalia would have favored ruling that the president could only make recess appointments in formal recesses between Senate sessions when the vacancies in question arose during that recess.

 

In Thursday’s ruling, the majority “sweeps away the most important limitations the Constitution places on the president’s recess appointment power,” Scalia said.

But we leave it to Darrell Issa to sum it up…

 





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‘Complete Control’: Notorious Surveillance Contractor Tech Uncovered

Hacking Team, a company which has been described
as an “enemy
of the Internet
,” provides law enforcement and intelligence
agencies with legal “offensive technology” to infiltrate and
remotely control people’s phones and other digital devices. The
extent of this company’s capabilities remain murky, but two groups
of Internet security experts say they have just exposed some of
their surveillance firepower and the fact that Hacking Team has
more servers spitting out malware based in the U.S. than any other
country.  

“Our latest research has identified mobile modules that work on
all well-known mobile platforms, including as Android and iOS” as
well as Windows Mobile and BlackBerry,
announced
the Russian-based Kaspersky Lab on Tuesday. “These
modules … translate into complete control over the environment in
and near a victim’s computer.” Indeed, the governments who use
Hacking Team technology can turn on a cellphone’s microphone,
camera, and GPS unnoticed. They can also access people’s email,
call history, chats, browsing history, among many other potentially
incriminating data. 

“It’s long been known that law enforcement and intelligence
agencies worldwide use Hacking Team’s tools to spy on computer and
mobile phone users—including, in some countries, to spy on
political dissidents, journalists and human rights advocates,”

explains
Wired. “This is the first time, however, that
the modules used to spy on mobile phone users have been uncovered
in the wild and reverse-engineered.”

One of the biggest doozies of the
Kaspersky Lab report is that the U.S., by far, houses the most
Hacking Team servers, which are part of a “huge infrastructure that
is used to control the [remote control system] malware implants.”
There are 64 known servers here, compared to 49 in Kazakhstan, 35
in Ecuador, 32 in the United Kingdom. Most of the other 40
countries that the lab traced Hacking Team malware back to have
only one or two servers.

The lab cautions, “we can’t be sure that the servers in a
certain country are used by that specific country’s LEAs [law
enforcement agencies]; however, it would make sense for LEAs to put
their [command and control servers] in their own countries in order
to avoid cross-border legal problems and the seizure of servers.”
Likewise, it’s no secret that the company has
aggressively marketed
itself to American government
officials.

Hacking Team spokesman Eric Rabe quick to downplay the findings
as “old news,”
according
to the Associated Press. “We believe the software we
provide is essential for law enforcement and for the safety of all
in an age when terrorists, drug dealers and sex traffickers and
other criminals routinely use the Internet and mobile
communications to carry out their crimes,” he assured.

However, Citizen Lab at the University of Toronto, which
produced a report alongside Kaspersky Lab’s and has long kept an
eye on Hacking Team,
reitereates
 that the company’s products have a history of
being used to target journalists and activists around the
world.

“This in many ways is the police surveillance of the now and the
future,”
cautions
Morgan Marquis-Boire, a lead author on the report and
a security researcher with Citizen Lab. “What we need to actually
decide how we’re comfortable with it being used and under what
circumstances.”

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The Chaos In Iraq Is By DESIGN

Neoconservatives like Paul Wolfowitz planned regime change in Iraq more than 20 years ago … in 1991.

But the goal wasn’t just regime change (or oil).  The goal was to break up the country, and to do away with the sovereignty of Iraq as a separate nation.

The Guardian noted in 2003:

President Hosni Mubarak of Egypt predicted devastating consequences for the Middle East if Iraq is attacked. “We fear a state of disorder and chaos may prevail in the region,” he said.

 

***

 

They are probably still splitting their sides with laughter in the Pentagon. But Mr Mubarak and the [Pentagon] hawks do agree on one thing: war with Iraq could spell disaster for several regimes in the Middle East. Mr Mubarak believes that would be bad. The hawks, though, believe it would be good.

 

For the hawks, disorder and chaos sweeping through the region would not be an unfortunate side-effect of war with Iraq, but a sign that everything is going according to plan.

 

***

 

The “skittles theory” of the Middle East – that one ball aimed at Iraq can knock down several regimes – has been around for some time on the wilder fringes of politics but has come to the fore in the United States on the back of the “war against terrorism”.

 

Its roots can be traced, at least in part, to a paper published in 1996 by an Israeli thinktank, the Institute for Advanced Strategic and Political Studies. Entitled “A clean break: a new strategy for securing the realm”, it was intended as a political blueprint for the incoming government of Binyamin Netanyahu. As the title indicates, it advised the right-wing Mr Netanyahu to make a complete break with the past by adopting a strategy “based on an entirely new intellectual foundation, one that restores strategic initiative and provides the nation the room to engage every possible energy on rebuilding Zionism …”

 

***

 

The paper set out a plan by which Israel would “shape its strategic environment”, beginning with the removal of Saddam Hussein and the installation of a Hashemite monarchy in Baghdad.

 

With Saddam out of the way and Iraq thus brought under Jordanian Hashemite influence, Jordan and Turkey would form an axis along with Israel to weaken and “roll back” Syria. Jordan, it suggested, could also sort out Lebanon by “weaning” the Shia Muslim population away from Syria and Iran, and re-establishing their former ties with the Shia in the new Hashemite kingdom of Iraq. “Israel will not only contain its foes; it will transcend them”, the paper concluded.

 

***

 

The leader of the “prominent opinion makers” who wrote it was Richard Perle – now chairman of the Defence Policy Board at the Pentagon.

 

Also among the eight-person team was Douglas Feith, a neo-conservative lawyer, who now holds one of the top four posts at the Pentagon as under-secretary of policy.

 

***

 

Two other opinion-makers in the team were David Wurmser and his wife, Meyrav (see US thinktanks give lessons in foreign policy, August 19). Mrs Wurmser was co-founder of Memri, a Washington-based charity that distributes articles translated from Arabic newspapers portraying Arabs in a bad light. After working with Mr Perle at the American Enterprise Institute, David Wurmser is now at the State Department, as a special assistant to John Bolton, the under-secretary for arms control and international security.

 

A fifth member of the team was James Colbert, of the Washington-based Jewish Institute for National Security Affairs (Jinsa) – a bastion of neo-conservative hawkery whose advisory board was previously graced by Dick Cheney (now US vice-president), John Bolton and Douglas Feith.

 

***

 

With several of the “Clean Break” paper’s authors now holding key positions in Washington, the plan for Israel to “transcend” its foes by reshaping the Middle East looks a good deal more achievable today than it did in 1996. Americans may even be persuaded to give up their lives to achieve it.

(Before assuming prominent roles in the Bush administration, many of the same people – including Richard Perle, Paul Wolfowitz, Dick Cheney, John Bolton and others – advocated their imperial views during the Clinton administration via their American think tank, the “Project for a New American Century”.)

Thomas Harrington – professor of Iberian Studies at Trinity College in Hartford, Connecticut – writes:

[While there are some good articles on the chaos in Iraq, none of them] consider whether the chaos now enveloping the region might, in fact, be the desired aim of policy planners in Washington and Tel Aviv.

 

***

 

One of the prime goals of every empire is to foment ongoing internecine conflict in the territories whose resources and/or strategic outposts they covet.

 

***

 

The most efficient way of sparking such open-ended internecine conflict is to brutally smash the target country’s social matrix and physical infrastructure.

 

***

 

Ongoing unrest has the additional perk of justifying the maintenance and expansion of the military machine that feeds the financial and political fortunes of the metropolitan elite.

 

In short … divide and rule is about as close as it gets to a universal recourse the imperial game and that it is, therefore, as important to bear it in mind today as it was in the times of Alexander the Great, Julius Caesar, the Spanish Conquistadors and the British Raj.

 

To those—and I suspect there are still many out there—for whom all this seems too neat or too conspiratorial, I would suggest a careful side-by side reading of:

 

a) the “Clean Break” manifesto generated by the Jerusalem-based Institute for Advanced Strategic and Political Studies (IASPS) in 1996

 

and

 

b) the “Rebuilding America’s Defenses” paper generated by The Project for a New American Century (PNAC) in 2000, a US group with deep personal and institutional links to the aforementioned Israeli think tank, and with the ascension of  George Bush Junior to the White House, to the most exclusive  sanctums of the US foreign policy apparatus.

 

To read the cold-blooded imperial reasoning in both of these documents—which speak, in the first case, quite openly of the need to destabilize the region so as to reshape Israel’s “strategic environment” and, in the second of the need to dramatically increase the number of US “forward bases” in the region ….

 

To do so now, after the US’s systematic destruction of Iraq and Libya—two notably oil-rich countries whose delicate ethnic and religious balances were well known to anyone in or out of government with more than passing interest in history—, and after the its carefully calibrated efforts to generate and maintain murderous and civilization-destroying stalemates in Syria and Egypt (something that is easily substantiated despite our media’s deafening silence on the subject), is downright blood-curdling.

 

And yet, it seems that for even very well-informed analysts, it is beyond the pale to raise the possibility that foreign policy elites in the US and Israel, like all virtually all the ambitious hegemons before them on the world stage, might have quite coldly and consciously fomented open-ended chaos in order to achieve their overlapping strategic objectives in this part of the world.

Antiwar’s Justin Raimondo notes:

Iraq’s fate was sealed from the moment we invaded: it has no future as a unitary state. As I pointed out again and again in the early days of the conflict, Iraq is fated to split apart into at least three separate states: the Shi’ite areas around Baghdad and to the south, the Sunni regions to the northwest, and the Kurdish enclave which was itching for independence since well before the US invasion. This was the War Party’s real if unexpressed goal from the very beginning: the atomization of Iraq, and indeed the entire Middle East. Their goal, in short, was chaos – and that is precisely what we are seeing today.

 

***

 

As I put it years ago:

 

“[T]he actual purpose was to blow the country to smithereens: to atomize it, and crush it, so that it would never rise again.

 

“When we invaded and occupied Iraq, we didn’t just militarily defeat Iraq’s armed forces – we dismantled their army, and their police force, along with all the other institutions that held the country together. The educational system was destroyed, and not reconstituted. The infrastructure was pulverized, and never restored. Even the physical hallmarks of a civilized society – roads, bridges, electrical plants, water facilities, museums, schools – were bombed out of existence or else left to fall into disrepair. Along with that, the spiritual and psychological infrastructure that enables a society to function – the bonds of trust, allegiance, and custom – was dissolved, leaving Iraqis to fend for themselves in a war of all against all.

 

“… What we are witnessing in post-Saddam Iraq is the erasure of an entire country. We can say, with confidence: We came, we saw, we atomized.”

 

Why? This is the question that inevitably arises in the wake of such an analysis: why deliberately destroy an entire country whose people were civilized while our European ancestors were living in trees?

 

The people who planned, agitated for, and executed this war are the very same people who have advanced Israeli interests – at America’s expense – at every opportunity. In “A Clean Break: A New Strategy for Securing the Realm,” a 1996 document prepared by a gaggle of neocons – Perle, Douglas Feith, James Colbert, Charles Fairbanks, Jr., Robert Loewenberg, David Wurmser, and Meyrav Wurmser – Israeli Prime Minister Benjamin Netanyahu was urged to “break out” of Israel’s alleged stagnation and undertake a campaign of “regime change” across the Middle East, targeting Lebanon, Libya, Syria, Iraq, and eventually Iran. With the exception of Iran – and that one’s still cooking on the back burner – this is precisely what has occurred. In 2003, in the immediate wake of our Pyrrhic “victory” in Iraq, then Prime Minister Ariel Sharon declared to a visiting delegation of American members of Congress that these “rogue states” – Iran, Libya, and Syria – would have to be next on the War Party’s target list.

(Indeed.)

And Michel Chossudovsky points out:

The division of Iraq along sectarian-ethnic lines has been on the drawing board of the Pentagon for more than 10 years.

 

What is envisaged by Washington is the outright suppression of the Baghdad regime and the institutions of the central government, leading to a process of political fracturing and the elimination of Iraq as a country.

 

This process of political fracturing in Iraq along sectarian lines will inevitably have an impact on Syria, where the US-NATO sponsored terrorists have in large part been defeated.

 

Destabilization and political fragmentation in Syria is also contemplated: Washington’s intent is no longer to pursue the narrow objective of “regime change” in Damascus. What is contemplated is the break up of both Iraq and Syria along sectarian-ethnic lines.

 

The formation of the caliphate may be the first step towards a broader conflict in the Middle East, bearing in mind that Iran is supportive of the al-Maliki government and the US ploy may indeed be to encourage the intervention of Iran.

 

The proposed re-division of both Iraq and Syria is broadly modeled on that of the Federation of Yugoslavia which was split up into seven “independent states” (Serbia, Croatia, Bosnia-Herzegovina, Macedonia (FYRM), Slovenia, Montenegro, Kosovo).

 

According to Mahdi Darius Nazemroaya, the re division of Iraq into three separate states is part of a broader process of redrawing the Map of the Middle East.



The above map was prepared by Lieutenant-Colonel Ralph Peters. It was published in the Armed Forces Journal in June 2006, Peters is a retired colonel of the U.S. National War Academy. (Map Copyright Lieutenant-Colonel Ralph Peters 2006).

 

Although the map does not officially reflect Pentagon doctrine, it has been used in a training program at NATO’s Defense College for senior military officers”. (See Plans for Redrawing the Middle East: The Project for a “New Middle East” By Mahdi Darius Nazemroaya, Global Research, November 2006)

Notes: While a senior Bush adviser said that the Iraq war was launched to protect Israel, that is too simplistic an explanation. The architects of foreign policy in both the U.S. and Israel are either literally one and the same – e.g. Richard Perle – or see things identically.

And if you think things are different under the Obama administration, please note that not only are the Neocons back, they never actually left.




via Zero Hedge http://ift.tt/1o77vRB George Washington

Belly-Buster: Primary Dealers Come To Rescue Of Tailing 7 Year Auction

Perhaps the reason why the just concluded 7 Year auction priced quite sloppy, if not outright ugly, is because it came at a time when virtually nobody was paying attention, or otherwise bidding. Moments ago the Treasury sold $29 billion in 7 Year paper, which priced at 2.152, a notable 1.2 bps tail to the 2.140% When Issued, indicating not all was well with the internals. Sure enough, the Bid to Cover of 2.435 was well below the TTM average of 2.56, and was the lowest since November. Direct Bidders were not too excited with the paper, and as a result took down only 16.66% of the final allottment, the lowest also since November. And with Indirect taking down a tame 40.62%, this mean Dealers were forced to step up and buy 42.72% of the issue – the highest Dealer allocation since, you guessed it, November. Perhaps the only thing the auction had going is that at 2.15%, the closing yield remains decidedly low (having peaked recently at 2.32 in April), if rising modestly from the 2.01% in May which happened to be the lowest since October.

Overall, a sloppy, unexciting auction, and the result was some modest weakness across the curve.




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Singapore official discusses ‘uneasy calm’, tells banks to prepare for financial collapase

shutterstock 140628544 Singapore official discusses uneasy calm, tells banks to prepare for financial collapase

June 25, 2014
Yangon, Myanmar

Well, at least someone gets it.

While just about every other central bank on the planet is giving everyone two thumbs up on the economy, the deputy chair of the Monetary Authority of Singapore (Lim Hng Kiang) said last night at a dinner that “an uneasy calm seems to have settled in markets” and that “we remain in uncharted waters.”

It was pretty amazing, really, to see such pointed language from a central banking official.

Mr. Lim jabbed at the “obvious” risks and said there would be “bumps on the road” ahead. That’s putting it mildly.

Warren Buffet once said that ‘only when the tide goes out do you discover who’s been swimming naked.’ (In my mind he says it like ‘nekked’ but I seriously doubt he pronounces it that way…)

That’s exactly what happens in severe financial crises. You find out which banks have been playing it safe… and which have so mind-numbingly stupid it’s a miracle they’re still around.

There are a number of ways to judge how safe a bank is. One way is by looking at its liquidity; my preferred metric is to calculate how much cash a bank has on hand as a percentage of customer deposits.

Note- this doesn’t mean physical currency, as in bricks of paper cash stacked up in a vault. Those days went away long ago. I’m talking about electronic currency– typically deposits with central banks.

The more cash a bank has on hand, the safer it is. Because in a financial crisis, people tend to panic (hence the crisis) and want to withdraw their money.

Banks bleed cash. And if they don’t have enough of it on hand, the bleeding turns into a sucking chest wound.

It’s at this point that they’ve been caught red handed swimming naked, and they need to go raise cash from somewhere, anywhere else.

So they start selling assets– loans, securities, and even shares of the bank itself.

But this is not an orderly liquidation in a well-functioning market. It’s a distress sale brought on by a full blown crisis. Asset prices are collapsing, fear has taken hold, and it’s difficult to find a buyer.

You never get full price in a crisis (unless you’re Goldman Sachs and can call up your BFF the Treasury Secretary). So in the process of raising cash, banks end up taking heavy losses on their balance sheets.

Now, banks that have healthy balance sheets will be able to withstand these losses.

But banks with razor thin capital ratios (i.e. a bank’s net equity as a percentage of total assets) will fold. Or go to the taxpayer with their hats in their hand claiming to be too big to fail.

This is precisely what happened to the US financial system back in 2009. Lehman Brothers. Wachovia. Washington Mutual. Etc. They were all swimming naked, with very little liquidity and miniscule capital levels.

Singapore’s monetary authority is obviously concerned about financial markets. They understand that you can’t expect to conjure trillions of dollars out of thin air without creating epic bubbles and even more epic consequences.

Sure, you can shuffle those consequences out a few months… even a few years. But at some point those bubbles must be reckoned with.

Perhaps the greatest concern is how few people seem to care.

Central banks and institutional investors turn a deaf ear to obvious risks and fundamentals that are screaming out in desperation hoping some conservative steward will notice that we are tap dancing on a knife’s edge, where nearly every single financial market is simultaneous at/near an all-time high, and central bankers keep pumping money into economies that they claim to be ‘recovered’.

This is the ‘uneasy calm’ that Mr. Lim discussed– a prevailing attitude that there’s nothing to see here; keep calm and buy the all-time high.

And he’s telling banks to get ready for something to happen.

Curiously, Singapore’s banks are already better capitalized and more liquid than most western banking systems. Back in 2008, Singapore demonstrated a lot of resilience as a financial center, sidestepping most of the problems with zero bank failures.

But for a country that went from third world to first world in just a few decades, complacency is not a cultural norm.

According to Mr. Lim, Singapore’s experience with the 2008 crisis “shows how the buildup of risks can severely destabilise even the most developed and sophisticated financial markets.”

So he wants them to increase their capital and liquidity even more.

If a senior official presiding over one of the world’s safer banking jurisdictions wants his banks to become even safer, a rational person would certainly wonder– “What do these guys know about the financial system that I don’t?”

They must be expecting the mother of all busts.

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I hate it here. But I love it here.

shutterstock 189761369 I hate it here. But I love it here.

June 24, 2014
Yangon, Myanmar

When I was a kid, I had a 4800 baud modem. At the time, it was about the most whiz-bang rockin’ modem on the street, and everyone would coo over its blinding speed.

If you’ve never heard the term ‘baud’ (i.e. you’re under 25 and have never known a day without Internet), it refers to the old way of clocking data transmission before they started using the more common tongue of ‘bits (or Megabits) per second’.

To give you a comparison, my 4800 baud modem would have taken over an hour to download a simple music file that can now be live-streamed from a mobile phone.

I bring this up not for the nostalgic trip down technology’s memory lane… but out of envy.

Because right about now after my 43rd explitive-laced tirade since the start of the weekend, I’m really longing for my old modem.

That’s because the Internet quality in Myanmar is absurdly, pathetically slow.

I don’t mean “Oh, snap, I can’t stream 4 Youtube videos and have a Skype call at the same time” slow.

I’m talking Usain Bolt vs. Tortoise slow. I’m talking paint-drying slow. I’m quite certain the Mars Rover can upload images to Houston faster that I can check my email.

Bandwidth is a precious resource here. They just don’t have it.

((http://ift.tt/TmL938))

People with political connections are given the fastest bandwidth. And what few breadcrumbs remain is largely unaffordable to most of the population.

If you’re lucky enough to get home Internet service, it can run $1,000+ just for installation. And the monthly fee can be several hundred dollars to boot.

This, coming from a place where the average wage is less than $100/month.

Along with just about everything else in Myanmar, it’s truly third world (as outdated as that 1950s era term may be).

Actually that’s generous. Myanmar has some catching up to do before it reaches third world status. It’s realistically ‘fourth world’.

But here’s the thing– and this is important: last time I was here, Myanmar was in even worse shape, even less developed. Let’s say ‘fifth world’.

It’s been less than a year. And yet there’s been a marked improvement.

Roads are paved that once weren’t. Buildings are complete that didn’t exist… with actual honest to goodness tenants doing real business. New business.

More people have mobile phones than before. And more people than ever are having their first taste of this ridiculously slow Internet.

Mr. Zuckerberg has picked up over a million locals in the last year.

There are even folks engaging in a prehistoric version of e-commerce business.

This is real growth; it’s not the result of some debt-fueled consumer binge. (You know, the thing that keeps the US economy on life support).

There’s not even a functioning consumer credit system in Myanmar. Hell, there was hardly a working ATM twelve months ago.

This is good old fashioned GDP growth based on the investment of a pool of savings (mostly foreign investment) in vast enhancements of productivity and infrastructure.

Myanmar hit rock bottom back in the 1960s and spent the next several decades rattling around as an impoverished mess. No doubt, they have a long, hard slog back up the mountain, just to catch up with a place like Cambodia.

But it’s going to be a spectacular climb. And over the next decades, I suspect it will potentially even rival China’s meteoric rise.

It’s one of the last places on earth with that kind of potential. Just be sure to bring you modem.

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Shrinkage: Kiev doubles the price of cold water, shuts off hot water

george costanza shrinkage Shrinkage: Kiev doubles the price of cold water, shuts off hot water

June 23, 2014
Undisclosed location

No one ever thinks about the water. Or the toilet paper, as it were.

But these are among the many, many staples that become luxuries when one’s nation is in crisis.

Hours ago, the local gas company in Kiev (Kyivenergo) announced that they would be shutting off the hot water supply to most of the city.

While the official reason for the hot water shutoff is that Kyivenergo (the energy supplier to Kiev) owes a debt to the Ukrainian state gas company (Naftogaz) of over $100 million.

It’s just a quirky little coincidence that this debt suddenly became materially important only one week after Russia shut off natural gas supplies to Ukraine.

Funny thing is that Ukrainian politicians for years had been telling people not to worry about this.

You see, Ukraine has its own domestic natural gas supplies. And they tell people that the domestic gas is strictly for the people and their utilities (like hot water).

Russian gas, according to this story, is imported for businesses to use. But that domestic gas is sacrosanct, only for the people.

Clearly this turned out to be a big fat lie.

Bear in mind, it was just a few weeks ago that utility companies announced that the price of cold water would jump from 3.18 hryvnas per cubic meter to 6.22– a 95% increase, practically overnight.

So there’s an entire city now taking cold showers… and paying twice the price for the privilege! Insult. Injury.

I have several Ukrainian employees with family still in the country; they’re telling me how their loved ones are now finally starting to look at their options to get out of dodge.

It’s strange when you think about it– war, revolution, inflation, etc. All of that was OK. Cold showers?!?! “Honey pack the bags, it’s time to leave.”

I jest of course; all of this is accumulated pain that eventually culminates in reaching one’s breaking point… especially when a rational look into the future suggests this situation will not resolve itself anytime soon.

You know the outlook isn’t so great right now because Ukraine’s Vice Premier Minister is telling people that they can survive the -winter- (still months away) without Russian gas imports.

While I’m sure everyone appreciates the ‘turn that frown upside down’ approach, they’d probably just rather take a hot shower and not be lied to about the nation’s ability to sustain shrinkage.

A few key lessons I wanted to pull out of this:

1. Politicians always lie. They will tell you that your nation is stronger than it really is, that your country is prepared for whatever may come, that your benefits will never be cut, etc.

And even though they may be well-intentioned, these are not promises that can be kept… especially by a nation in crisis.

2. A nation in crisis affects just about everything. It’s not just about numbers and data, or even Molotov cocktails. It’s hot water and toilet paper. It’s food on the shelves. It’s the stuff we all take for granted that suddenly doesn’t function anymore.

3. Even though the obvious warning signs are there, most people wait until it’s too late (or at least suboptimal) before considering their options.

When you wait until a full blown crisis, you have to rush through critical decisions in haste instead of planning things out slowly, rationally.

Rational people have a plan B because we all have a breaking point. Do you know what you would do if you reached yours?

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Why the St. Kitts economic citizenship program’s days may be numbered

shutterstock 136243085 Why the St. Kitts economic citizenship programs days may be numbered

June 20, 2014
Bangkok, Thailand

What do you get when you mix Bitcoin Jesus, Marriott, St. Kitts, and terrorists?

I’m afraid we’ll all find out soon.

It wasn’t but a month ago that I told you about the US government’s opening salvo against the St. Kitts economic citizenship program.

They’re trying to patch up a small scratch that’s turning into a sucking chest wound; thousands of Americans are now renouncing their citizenship and divorcing themselves from the US government.

And along the way, many of them tend to pass through St. Kitts, make a $250,000+ investment, and obtain citizenship there.

For some, this seems like a radical idea. For others, it sounds incredibly liberating.

After all, once these former Americans renounce and become ex-tax slaves, they’re able to live in dozens of countries around the world without having to cough up a huge slice of their earnings to finance war, drones, the NSA, etc.

This is a big leak for the US government… so they seem to have set their crosshairs very squarely on St. Kitts.

I told you about this last month– the Financial Crimes Enforcement Network (FinCEN) fired off an opening salvo, ripping the government of St. Kitts for its “lax controls”, and asserting that “illicit actors” were obtaining citizenship.

This is code, of course, for terrorists.

And since we’re all programmed to quiver in fear at the thought of men in caves, the government can do whatever it wants just by uttering the T-word. After all, the Land of the Free is now a nation that values security far more than liberty.

I signed off last month telling you there would be substantial changes to the program as a result of this. And I was right.

As a start, the government of St. Kitts is now confirming that they have curtailed their ‘fast track’ option… something where people used to be able to pay extra for speedier processing.

It’s also clear that the processing time is going to be much slooooooower.

But now there’s a new development. Bitcoin entrepreneur Roger Ver, aka Bitcoin Jesus, has launched a new business which allows people to invest in the St. Kitts program using Bitcoin, including a real estate investment at the St. Kitts Marriott resort.

I think this is a great idea, particularly for folks who are sitting on huge Bitcoin gains and already bought their fill of duvet covers on Overstock.com.

But Uncle Sam has already made his feelings on Bitcoin quite clear; like the St. Kitts passport, they view Bitcoin as the plaything of criminals, terrorists, tax evaders, and money launderers.

(Apparently legitimate people shouldn’t have multiple passports or own Bitcoin…)

And I’m concerned this will give them even more ammunition to put pressure on St. Kitts. So, yes, I’m expecting even more changes to the program in the coming months.

Having said that, there will still be a lot of great options for obtaining a second passport.

Remember, a second passport is like an insurance policy. Not a lame one that the government requires you to have by law, but one that might really save your ass some day.

But for most folks, it honestly doesn’t make sense to plunk down hundreds of thousands of dollars for a passport, especially if that’s a meaningful percentage of your assets.

There’s a Jason Bource allure to having a box full of passports. But is it worth all that money? No.

Besides, if you’re lucky, you can trace your bloodline back to an ancestor from Italy, Ireland, Poland, Hungary, etc. and obtain citizenship for almost nothing.

You can also trade time instead of money and become a naturalized citizen of any number of places– Belgium, Singapore, Uruguay, Chile, etc.

And, yes, if you don’t mind swapping hardware with someone, there are also plenty of places (Brazil is a great example) where walking down the aisle can get you a passport as well.

There are plenty of pasport options out there for rational, clear-thinking people. And having one is important. Sure, you might not ever need it. And you might never need a seat belt either.

But if the day comes when you do, you’ll be damn glad you have a second passport.

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Spot the oxymoron: “Growth down, optimism up”

billymays resize Spot the oxymoron: Growth down, optimism up

June 20, 2014
Bangkok, Thailand

With a nod to the absurd, Federal Reserve Chair Janet Yellen freely admitted earlier this week that the Fed really has no idea what’s going to happen to the economy.

Bear in mind this is the person who controls interest rates in the United States, effectively setting the ‘price of money’ for the most widely used currency in the world.

This is key– because the price of money (interest rates) influence the prices of so many other things. Real estate. Business investment. Automobile sales. Agricultural commodity prices. Oil prices. Etc.

Of course, there’s a knock-on effect. Consider, for example, how many products and services are influenced by the price of oil… fertilizers, plastics, shipping, etc. And then how many products and services are influenced by the price of shipping… like everything in the world that’s imported / exported.

So in setting the price of money, Ms. Yellen is influencing the price of just about everything.

Yet she and her fellow members of the Federal Open Market Committee (FOMC) admittedly don’t have a clue where the economy’s going.

This stands in stark contrast to what investors are used to. Back in the 90s, Fortune put former Fed Chair Alan Greenspan on the cover with a headline– “It’s HIS economy, stupid”.

Greenspan 290x300 Spot the oxymoron: Growth down, optimism up

That’s how clear it was back then. Greenspan was the benevolent wizard… the ‘maestro’ in masterful command pulling the strings of the largest economy in the world. And investors had all the [misplaced] confidence in the world in this arrangement.

So you’d think that with such a demonstration of ignorance that investors would be heading for the hills, right?

Not so. The big banks and institutional investors (who appointed most of the FOMC members to begin with) rewarded the Fed’s stunning admission and lack of foresight with… record high stock prices.

If I could quote our long-lost Billy Mays– BUT WAIT, THERE’S MORE!

The Fed also reduced its GDP growth forecasts for the US economy from 2.9% to 2.2%. In case you’re not too fast on the ‘calc’ icon, that’s a 24% proportional reduction in GDP growth. Not exactly a drop in the bucket.

AND, of course, there’s the recent data that inflation has ticked up, even according to their own official numbers. Of course Ms. Yellen proceeded to downplay the inflation, writing it off as ‘noise’.

So this morning I received yet another analysis from a large private bank I deal with; the report’s headline– FED: Growth down, optimism up.

Hmmm. Spot the oxymoron here. (OK fine, paradox)

Growth is down. Inflation is up. The grand wizards don’t have a clue. Yet people are excited about this?

I feel like there’s an alternate universe out there where this sort of paradox would make sense… some magical 5th dimensional world where up is down and men breathe through their nipples. (why else are they there, gents?)

But alas, this is not some alternate universe… ’tis the sad state of our FUBARTASTIC financial system.

Fundamentals no longer matter. Common sense is now a totally foreign entity. High frequency traders and algorithms dominate the marketplace, brokers steal customer funds to cover their own losses, banks sell their customers ‘shitty deals’ and take the other side of the trades.

And everyone is drinking from the same spiked punch bowl where bad news is good news, good news is good news, and a single clueless committee has all the power.

Looking at this ridiculous market, I really I find it hard to believe that the odds are stacked particularly well in favor of the little guy.

Bottom line: if you’re in the markets, invest with caution. And if you have the courage to swim against the school, bear in mind there’s a whole world of alternative investments– primarily things like private businesses that are far less susceptible of being directly manipulated.

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The Coming Global Generational Adjustment

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

All sorts of promises, explicit and implicit, were issued to win votes. All the promises are now empty, and we might as deal with this reality head-on.

Here's what often happens when people start discussing Baby Boomers, Gen-X and Gen-Y online: rash generalizations are freely flung, everyone gets offended and nothing remotely productive results from the generational melee.

These sorts of angry, accusatory generalizations reflect what I call the Generational Monster Id (GMI), the urge to list faults in generations other than our own.

I think the source of generational angst and anger is the threat that the entitlements promised by the developed-world governments will not be delivered as promised.

These entitlements range from healthcare to education to old-age pensions to "a good paying job now that I have a college degree."

The bottom line is that the promises cannot and will not be kept. The promises were issued in an era of cheap, abundant fossil fuels and favorable demographics: the next generation was considerably larger and more productive (due to more education, longer working lives, etc.) than the previous generation it would support through old age with taxes.

In that bygone era, there were as many as 16 workers for every retiree. Even 4 workers for every retiree is a sustainable level if energy remains cheap and full-time jobs remain plentiful.

But the global reality is the Baby Boom generation is so large that it dwarfs the younger generations. Regardless of any other conditions, this reality negates all the promises issued to retirees: as the ratio of workers paying substantial taxes on their full-time earnings to retirees slips below two workers to one retiree, there is no way the workers can support the lavish costs of healthcare and old age pensions without becoming impoverished themselves.

This is already a reality. As I have noted in this week's series, there are 118 million full-time jobs in the U.S. and 57 million people drawing benefits from Social Security, and a similar number drawing Medicare and Medicaid benefits. As Boomers retire en masse in the decade ahead and full-time employment stagnates or declines, the ratio will slip to 1.5-to-1 or even lower.

Many low-birth-rate European nations are facing worker-retiree ratios of 1-to-1. This is simply not sustainable.

The prospects of the younger generations are much poorer than those enjoyed by their elders.

Adding to the unsustainability of the promises blithely issued to gain political approval, energy is no longer cheap.That means income that 30 years ago was available for taxes or discretionary consumer spending now goes to pay for energy. In effect, higher energy costs are a tax that does not support retirees or the government. The workers paying the energy tax are poorer, but the retiring generation is not wealthier as a result.

The Status Quo has compensated for this higher cost basis by lowering interest rates. The basic idea is that if wage-earners and companies pay less interest, then that leaves more for them to spend on taxes and consumption.

But lowering interest rates and making credit freely available–the basic strategies of central banks around the globe–have triggered structurally destructive consequences. These policies inflated credit bubbles that jacked up the value of assets such as houses, rendering them unaffordable to younger people, and they distorted the mechanics of the real economy, widening wealth and income disparity and creating systemic mal-investments that have led to a destabilizing dependence on zero-interest rates and credit/asset bubbles.

One way to understand this is: you can't fool Mother Nature. You can print enough money and issue enough credit to create the illusion of solvency and sound collateral, but these claims come crashing down once you try to sell the overpriced assets en masse.

The unlimited printing of money and issuance of credit also has global unintended consequences, as these monetary manipulations destabilize the bond and currency markets.

I addressed these basic themes in detail in this week's series:

The Happy Story of Boomers Retiring on Their Generational Wealth Is Wrong
The Fed's Hobson's Choice: End QE and Zero-Interest Rates or Destabilize the Dollar and the Treasury Market
The Generational Short Part 2: Who Will Boomers Sell Their Stocks To?
The Next 20 Years Will Not Be Like the Last 20 Years–Here's Why

There are four Grand Narratives at work: demographics, resource extraction, geopolitical conflict and the changing nature of the economy and paid work. The last two are heavily influenced by the first two; some studies suggest that large cohorts of unmarried, under-employed males are precursors to war, as political leaders channel that restless and potentially disruptive force against external enemies.

Economies based on endless resource extraction founder when the resources are found to be less than endless.

The Grand Narrative of the U.S. economy is a global petro-dollar empire that has substituted financialization for authentic, sustainable economic expansion. In shorthand, those people with access to the Federal Reserve's "free money" credit have taken advantage of the asset bubbles financialization inflates. They have a chance to do very well for themselves, if they have the presence of mind to exit the asset bubbles in stocks, bonds and real estate before they deflate.

Those people who do not have access to cheap credit and rentier assets become poorer. That is the harsh reality of neofeudal, neocolonial financialization: Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012)

Large cohorts generate their own self-referential feedback loops. A large cohort of home buyers drives up real estate as demand exceeds supply, and those who get in early are handsomely rewarded. Those seeking similar returns provide the fuel for further advances. This is the basic story of housing from 1974 to 2006 and the stock market from 1981-2014, as the Baby Boom cohort bought houses and saved for retirement via stock and bond mutual funds.

As the Boomer cohort sells its homes, bonds and stocks, supply will exceed demand and prices will decline, especially if household capital and access to credit are also declining. This selling cycle will also be self-reinforcing.

Central banks have masked this generational selling by becoming buyers of last resort. The Fed has purchased trillions of dollars of Treasury bonds and home mortgages, to push interest rates to zero and prop up a generationally unsustainable housing bubble. But central bank buying of assets to prop up valuations also generates unanticipated blowback: To quote songwriter Jackson Browne: Don't think it won't happen just because it hasn't happened yet.

Mainstream financial pundits were crowing that household assets recently topped $80 trillion in the U.S. Inflate bubbles in real estate, bonds and stocks, and it's not surprising that nominal net worth goes through the roof.

As a back-of-the-envelope calculation, I reckon $40 trillion or half of this sum is phantom, meaning that it will vanish into thin air when these enormous asset bubbles deflate.

These bubbles are all based on one-off conditions that cannot be repeated: the global boom fueled by a now-maturing China, the central banks pushing interest rates to zero and "solving" a credit crisis of phantom collateral by issuing an unprecedented flood of new credit and buying trillions of dollars of assets at bubble valuations, and a surge of new fossil fuels from Africa and North America.

The reality is that promises made two generations ago were made in circumstances that were not as sustainable as those making the promises believed. Extending linear projections in a non-linear world inevitably generates wrong conclusions. Promises made in one set of rosy circumstances are no longer valid in an entirely different and much less rosy set of circumstances. The citizenry will have to adjust to these systemic realities, and demanding we wuz promised is guaranteed to lead directly to failure.

All sorts of promises, explicit and implicit, were issued to win votes. All the promises are now empty, and we might as deal with this reality head-on–if we can muster up the almost-lost ability to deal with reality rather than rely on fantasy/wishful thinking.




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