Scepticism has always surrounded Chinese growth data, especially its GDP statistics. The data is released extremely quickly after the end of a quarter and is hardly ever revised, making one wonder if it’s simply invented. Indeed, local and provincial officials are pressured to meet growth quotas handed down by the government, so there’s pressure to bias national GDP data upwards from those providing it. Here, we break down a recent Fed paper, ‘Is China Fudging Its GDP Figures? Evidence from Trading Partner Data’, to reveal a new take on assessing China’s economic activity.
What Alternative Measures have People Used?
Famously, in 2007 the current Premier, Li Keqiang, said he focused on ‘alternative indicators’ including electricity consumption, the volume of rail cargo, and the amount of loans disbursed. He added that ‘all other figures, especially GDP statistics are for reference only’.
Some have used even more innovative approaches, such as light emissions as measured by satellites. But lately these have been criticised as the data suffers from massive measurement inconsistencies. For instance, changes in the sensitivity of satellites over time.
Are There Other Non-Chinese Measures of Chinese Growth?
Import data has been shown to move closely with GDP across most countries. Whilst getting hold of Chinese import data is tricky, we can use other countries’ measures of their exports to China, which would of course correlate. This data is accurately measured since the number of importers is modest and countries have an incentive to measure trade data well for tariff purposes. Importantly, externally measured Chinese imports could then be used to test which Chinese indicators, such as the ones mentioned by Premier Li, most closely follow growth.
So What Chinese Indicators Most Closely Follow Growth?
The Fed paper looks at a suite of 14 domestic indicators that track the external measure of Chinese imports and find that 8 work best (see table below for full list, extracted from the paper).
Figure 1: Data Sources
These are: electricity, exports, industrial production, an index of consumer expectations, fixed asset investment, floor space construction, retail sales, and rail freight. You’ll note that this list doesn’t include lending data, which was often found to be a countercyclical indicator. Importantly, it also doesn’t include GDP.
The weakest indicators of the 8 are retail sales and fixed asset investment. In the end, the Fed uses all 8 indicators to construct an overall activity called the ‘China cyclical activity tracker (C-CAT)’.
What Does the C-CAT Measure Tell Us About Recent Chinese Growth?
The main conclusion is that since 2013, GDP figures look suspiciously smooth. Notably, the C-CAT measure showed much slower cyclical growth in 2015 than official GDP. But the trend growth of China appears to be accurately measured by official GDP data. As for the 2019 data, official GDP data and the C-CAT measure appear to be giving similar measures for Chinese growth (see chart).
Additionally, as The IIF’s Robin Brooks recent noted: Our China activity tracker, which diverges from official GDP, remains broadly stable at around 5% y/y.
Venezuela Wants To Use Bitcoins For Oil Transactions
According to Bloomberg, the Central Bank of Venezuela is examining whether it can receive and transfer cryptocurrencies.
The bank’s investigation follows the news of state-run Petroleos de Venezuela SA (PSDV), which has been running tests to eventually transfer Bitcoin and Etherum to the central bank and have it pay its suppliers with digital currency, according to four people with direct knowledge.
Sources said the central bank has been studying plans that would allow cryptocurrencies to be recorded as international reserves, now near-record-low levels.
Dwindling reserves come as US sanctions tighten the financial noose around President Nicolas Maduro.
Economic sanctions have taken Venezuela off the global financial system, inducing one of the worst financial crashes in modern time.
New rounds of sanctions by the US Department of the Treasury targeted 4 four entities and four vessels earlier this week for transporting Venezuelan crude to Cuba.
Since the US imposed sanctions on PSDV, President Maduro tried to launch Petro, a cryptocurrency issued by the government of Venezuela and backed by the country’s oil and mineral reserves. Efforts to launch the coin have widely failed in the last several years.
The chart below shows the moment when President Maduro tried to launch the coin on the backdrop of declining foreign-currency reserves, nearly halving since 2015.
It’s not entirely understood how PSDV acquired Bitcoin, Ethereum, and or other digital assets, or the total value of its holdings, but certainly, it’s enough that the oil company wants to use it for significant commodity transactions.
In August, PSDV received an oil payment in Chinese yuan after its customer had trouble finding a credible financial institution to facilitate a transaction.
Sources told Bloomberg since PDVSA is heavily sanctioned by the US, it would rather have the central bank store the digital assets and pay its suppliers with the crypto when needed.
“PDVSA may be hesitant to sell its cryptocurrencies on the open market because it would require the company to register with an exchange and subject itself to due diligence. Instead, it wants the central bank, which officials at the oil company believe is less exposed to potential blocks, to use the crypto to pay entities PDVSA owes money to.”
And since the US has cut Venezuela from the global banking system and sanctioned its economy into collapse, Maduro might have no other choice than gravitate not just to cryptos for oil transactions but adopt the System for Transfer of Financial Messages, an alternative payment system to SWIFT, that is managed by the Russians.
Typically when a major blockbuster film is released in the United States, warnings about the film are about its content—strong language, violence, perhaps a bit of sexual content or nudity.
But as audiences eagerly await the new Joker film, authorities in the U.S. have sounded the ominous alarm about what they fear may be in store for moviegoers flocking to theaters to catch the premiere on October 4 – a possible mass shooting committed by “incels” or “involuntary celibates.”
On Tuesday, the U.S. Army confirmed that it had widely distributed an advisory to service members about a potential mass shooting during the theatrical release of Joker.
According to Stripes, a U.S. Army Criminal Investigation Command was issued Monday, warning commanders at U.S. Army Fort Sill in Oklahoma that a law enforcement agency in Texas working with the FBI had uncovered “disturbing and very specific chatter in the dark web… regarding the targeting of an unknown movie theater during the release” date on October 4.
Speaking toKXAN, U.S. Army Criminal Investigation Command Chief of Public Affairs Chris Grey said that the source of the original information was the Texas Department of Public Safety Joint Crime Information Center.
A memo sent out at U.S. Army Base Fort Sill relating to dark web ‘chatter’ about a threat (Fort Sill CID Memo)
In the email marked “For Official Use Only” that was distributed on September 18, service members were told to be aware of their surroundings and to “identify two escape routes” when entering theaters. If a shooting is to take place, soldiers must then “run, hide, fight.”
The memo explained:
“Run if you can. If you’re stuck, hide (also known as ‘sheltering in place’), and stay quiet. If a shooter finds you, fight with whatever you can.”
Grey noted that the Ft. Sill field office sent the original memo to a “select internal group” on Monday “out of an abundance of caution to help keep our Soldiers and their families safe.”
The email also warned about the online subculture of “incels” (a portmanteau of “involuntary celibates”), reportsGizmodo. Incels are known to harbor extreme and violent misogynistic and misanthropic outlooks—including sympathies toward the “alt-right” fascist movement—and have been tied to past mass shootings, including the 2014 Isla Vista killings. Incels have also been arrested after threatening to carry out massacres.
As the military’s email explains:
“Incels are individuals who express frustration from perceived disadvantages to starting intimate relationships. Incel extremists idolize violent individuals like the Aurora movie theater shooter.”
The email added that incels “also idolize the Joker character, the violent clown from the Batman series, admiring his depiction as a man who must pretend to be happy, but eventually fights back against bullies.”
The email is a clear reflection of the anxiety felt in some quarters about a potential repeat of the tragic 2012 mass shooting at the Century 16 Theater in Aurora, Colorado in 2012, which took place at a screening of another Batman movie, The Dark Knight Rises.
Twelve people were killed and seventy were injured in the incident. As the email noted, Aurora mass shooter James Holmes—along with other mass murderers—has become a subject of praise from some members of the incel fringe group.
During the Aurora shooting, Holmes was sporting bright dyed-orange hair and, according to since-debunked reports, called himself “the Joker” at the time of his arrest. However, the chief of Aurora’s police at the time maintains that “there is no evidence” Holmes ever said that.
The film, which stars Joaquin Phoenix as the DC comics villain named Joker, has been praised for its realistic depiction of the titular character rather than retreading the typical cartoonish super-villain archetype depicted in other Batman films, comics, and television series. In the film, the Joker is depicted as a sort “angry virgin,” whose turn to villainy is a result of the mockery and bullying he encounters from his peers as well as his frustration over lacking attention or affection.
However, Joker has also been defended by critics from social media personalities who have characterized the film as supporting incel culture. As the Guardian film critic Christina Newland explained:
“The hand-wringing of cultural commentators is concerned that Joker might spark copycat violence or make the character a sort of folk hero for incels. It’s a possibility … Does The Wolf of Wall Street encourage people to go out and sell bad penny stocks? Does Scarface glamorize cocaine? How different is this from blaming gun violence on video games?”
5 Million DoorDash Customers Had Data Stolen In Hack Attack
About 4.9 million customers, Dashers, and merchants who joined DoorDash, an on-demand food delivery service, before April 2018, had their personal information stolen from an “unauthorized third party,” otherwise known as a hacker.
According to DoorDash’s blog, the breach was spotted earlier this month when the company “became aware of unusual activity involving a third-party service provider.”
Outside “security experts” were called in to assess the damage, what they discovered was devastating as hackers made off with millions of customers’ private data. Some of the data includes:
Profile information including names, email addresses, delivery addresses, order history, phone numbers, as well as hashed, salted passwords — a form of rendering the actual password indecipherable to third parties.
For some consumers, the last four digits of consumer payment cards. However, full credit card information such as full payment card numbers or a CVV was not accessed. The information accessed is not sufficient to make fraudulent charges on your payment card.
For some Dashers and merchants, the last four digits of their bank account number. However, full bank account information was not accessed. The information accessed is not sufficient to make fraudulent withdrawals from your bank account.
For approximately 100,000 Dashers, their driver’s license numbers were also accessed.
The San Francisco-based company’s blog said the breach occurred in May 2019. Those who have been affected should be receiving a notification from DoorDash in the next several days.
The company emphasizes the stolen data “is not sufficient to make fraudulent charges on payment cards or fraudulent withdrawals from bank accounts.”
“We deeply regret the frustration and inconvenience that this may cause you. Every member of the DoorDash community is important to us, and we want to assure you that we value your security and privacy. We’ve also set up a dedicated call center available 24/7 for support at 855–646–4683.”
And earlier this week, DoorDash began a week-long promotion, giving away up to 50,000 free steaks at Outback Steakhouse, something that we see as a promotional stunt to get ahead of bad news. And as we just found out, that bad news was the hack attack on millions of its customers. Shame on DoorDash.
Last week’s volatility in the market for fed funds gave a lot of equity managers an opportunity to brush up on their understanding of the workings of the short-term money markets. The Fed of New York was forced to offer cash to the Street in the form of forward repurchase agreements all week. These activities are likely to continue.
Nathan Tankus posted a good discussion of the mechanics of adjusting bank reserves on Twitter last week. He particularly highlights not only the Liquidity Coverage Ratio or LCR, but also the additional liquidity stash meant to fund a resolution of an insolvent money center bank.
Given that we would never actually resolve a bank over $100 billion assets, we wonder why this rule exists: What is the point of the “resolution liquidity” for a G-SIB if we’re likely to just put the bank into an FDIC conservatorship a la Indy Mac and then sell it after a bad asset cleanup?
We appreciate the kudos on our call this past July on CNBC regarding liquidity problems in the markets, but we erred in thinking that merely ending the runoff of the Fed’s portfolio was sufficient. When our colleagues who trade TBA, and agency and whole loan repo, saw cash tightening up in the middle of August, that was a sign that problems lay ahead. Even with the Fed’s operations, the repo market is still displaying a lack of liquidity.
A lot of people asked: what is going on? The best primer we can suggest is the 2018 book “Floored” by Dr. George Selgin of Cato Institute, who has been producing excellent research focused on the mechanics of monetary policy for years. Selgin describes “How a Misguided Fed Experiment Deepened and Prolonged the Great Recession.”
By deciding to target the Fed Funds rate after Congress amended the central bank’s mandate in 1977, the Federal Open Market Committee essentially nationalized what had been a free market rate. Since then, whenever the FOMC wanted to adopt a looser stance to achieve the inflation and/or employment mandates set by Congress, it would lower the target for Fed funds.
Here’s the problem. Who gave the FOMC the authority to essentially intervene in or “target” the private market for fed funds on a permanent basis? As Selgin notes:
“It is important to note that the federal funds rate, whose value the FOMC endeavors to control, is a private-market rate. Its level, like those of other market-determined, interest rates, depends on the interaction of supply and demand – specifically the supply and demand for the reserve balances at the Fed, a.k.a. ‘federal funds.’”
Tankus notes in his 20-part discussion of reserve mechanics that “Basel 3 has imposed liquidity requirements that encourage hoarding and discourage buying treasuries. The Federal Reserve is still behind the curve at becoming Dealer of Last Resort.” Ditto. And Selgin argues that paying interest on excess reserves held at the Fed has created some decidedly unanticipated consequences.
To understand why the Fed’s cash adding operations seen last week are likely to continue, read David Andolfatto of the Federal Reserve Bank of St. Louis and Jane Ihrig of the Federal Reserve Board of Governors: “Why the Fed Should Create a Standing Repo Facility.” They focus on how the FOMC’s use of increased or “excess” reserves that banks deposit at the Fed have distorted the money markets. They write:
“Even though balance sheet normalization is well underway, we think it is never too late to introduce a repo facility. The FOMC would learn over time whether the facility is working to reduce the demand for reserves. The FOMC could do so, for example, by permitting reserves to run off organically with the growth of currency in circulation while remaining confident that interest rate control would be maintained through the repo facility.”
The authors essentially argue that by making a market in Treasury and agency securities (at least GNMA and Federal Home Loan Bank issues) via a standing repo facility, the FOMC can encourage banks to meet their reserve requirements by holding securities instead of reserves.
They also suggests that a permanent repo facility would allow the FOMC to continue to shrink the system open market account portfolio. And they suggest another not insignificant benefit of encouraging banks to treat Treasury securities as equivalent to reserves:
“Finally, apart from being consistent with the 2014 Policy Normalization Principles and Plans, a repo facility would minimize the politically bad optics of the Fed paying interest on reserves (of which a large share goes to foreign banks). It seems both wise and proper to let the Treasury directly bear the interest expense associated with the regulatory demand for [high quality liquid assets] HQLA.” Indeed.
The question of how much monetary policy intrudes into private markets, including the fiscal operations of the Treasury, was raised in an exchange on Twitter last week. Nathan Tankus retorted to a question about the lack of discussion of fiscal operations in monetary policy:
As we learned long ago from Robert Eisenbeis, former head of research at The Federal Reserve Bank of Atlanta, the Treasury and Fed are alter-egos. The Fed is a creature of the Treasury and as such is merely a new layer of leverage added to the US political economy a century ago on the eve of WWI. Since then we’ve added the GSEs and various other government sponsored schemes to lever up the US economy even more. But the key point to us is that when the actions of the Treasury affect the federal funds rate or inflation or employment, how can the FOMC possibly know how to respond? Well, they don’t.
Former Fed Chairman Alan Greenspan told CNBC in 2015 that if all countries don’t tackle fiscal problems, monetary policy will be “become utterly irrelevant.”
“The real problem has got nothing to do with monetary policy—although I grant you it’s a crucial issue short term—it’s fiscal policy,” he said.
“If we [had] matched up to Simpson-Bowles basic recommendations of a few years ago, we’d be in a much better place now. And we could have a legitimate discussion about monetary policy … which is a minor consideration relatively speaking.”
Here are some other responses we got on the question we posed: Is fiscal policy “irrelevant” to monetary policy?
David Kotok, Chairman of Cumberland Advisors:
“Yes. Yes. And yes it is.
“Old days. Central bank supplied required bank reserves and currency. That was liability side of central bank balance sheet. Asset side of US treasury holdings were determined by the liability side.
“New days. Fed is an arm of fiscal finance, remits spread to the Treasury. Asset side permanently larger and liability side multidimensional use.”
Michael Pento, President of Pento Portfolio Strategies:
“This is an easy question to answer; profligate fiscal policies tend towards promoting loose monetary policies in order to augment demand for government bonds and ensure state borrowing costs remain tractable.”
Mike Fratantoni, Chief Economist at the Mortgage Bankers Association:
“It is certainly not irrelevant. The Fed is charged with keeping the economy at full employment while maintaining price stability and financial stability. They need to be aware of how different fiscal actions could impact the economy and their ability to reach these goals. The difficult balance is knowing when to speak out about their views on the consequences of fiscal policy actions with respect to their goals, without getting entangled in the necessarily political choices that many fiscal policy actions entail.”
Robert Brusca, Chief Economist FAO Economics NYC:
“No fiscal policy is never irrelevant. But no one is trying to make them work together either. So it is easy to see how some might think fiscal policy is irrelevant. In the 1980s Volcker held up a rate cut telling Congress it had to pass a bill to contain the deficit before he would cut rates.
“Janet Yellen and her Fed went ahead with a program of rate hikes in part because it saw the Trump tax cuts and fiscal policy as too expansive at a time the economy had ‘few idle resources’ that did not turn out well as the Fed over tightened and is currently in the process of rescinding its excessive rate hikes.
“The main ‘problems’ with fiscal policy is that it is too tempting. Keynes’ Idea was to use it as a counter-cyclical tool- on then off. But once governments start using fiscal policy for economic expansion they just can’t control themselves – fiscal policy is the opiate of.the elected.”
We think the key point is that the changes in the mechanisms used by the Fed that Selgin describes so nicely in “Floored” have, in turn, had a profound impact on the dealer community and their willingness to take risk. The volatility introduced into the market for reserve assets is not helpful either.
More, the HQLA and “resolution liquidity” that the largest banks are required to hold has also had the effect of tightening liquidity in the short-term markets. Banks, after all, are the largest cash providers to the repo market, that is typically populated by smaller dealers. These same dealers make markets in Treasury and agency securities, and provide financing to the non-bank sector.
So now we fix the problem largely caused by the Bernanke and Yellen FOMCs, Dodd-Frank and Basel III, by increasing the government’s control over the once private market for federal funds. The report by Andolfatto and Ihrig provides a road map for how the FOMC is likely to deal with the liquidity crisis in the short-term money markets, both immediately and in terms of addressing some of the structural flaws in Fed policy illustrated by Selgin in his book. The once private market for fed funds will now be truly “federal” going forward.
“A Looming Wall Of Dollar Debt:” 2020 Could Be A Disastrous Year For China’s Domestic Bond Market
New data compiled by Bloomberg, warns that 2020 could be the year of meltdowns in China’s domestic bond market.
The report said, “a looming wall of dollar debt,” issued by borrowers who are experiencing rapid financial deterioration, might have extreme difficulty in repaying $8.6 billion of offshore bonds coming due next year that have 15% yields.
This equates to 40% of the total outstanding corporate dollar bonds from China’s most distressed companies comes to maturity right before the 2020 US presidential election, and also, at a time when the global economy could be in a trade recession.
“This is a market where you want to go for safer bets rather than be a hero,” said Michel Lowy, chief executive officer at Hong Kong-based SC Lowy, which specializes in fixed income. “We are on the verge of a massive snowball effect,” where defaults spur funds to take money out of high-yield debt, driving up yields and making it all the harder for firms to refinance, he said.
Wonnie Chu, managing director of fixed income at GaoTeng Global Asset Management Ltd., revealed to Bloomberg that many of these companies acquired cheap debt during 2017/18, the period of synchronized global expansion.
Chu said a lot of the debt was issued with a “low-interest-rate not comparable to the credit risk.” She added that a full-blown shock will likely be avoided but adds that stress will certainly be seen next year among borrowers.
Morgan Stanley, in anticipation of economic turbulence next year, has cut their holdings of riskier companies. MS said Asian high-yield credit funds experienced outflows in August.
Bloomberg notes below several issuers with bonds coming due next year that have stressed-level premiums:
Yida China Holdings. Calls to the property developer in Shanghai seeking comment on its financing outlook went unanswered.
Tewoo Group Co. Calls to the state-linked trading group based in Tianjin, southeast of Beijing, also went unanswered.
Peking University Founder Group. A spokesperson for the technology services firm in Beijing said the group has an ample credit line with lenders, with 62.5 billion yuan ($8.8 billion) untapped as of June, and cash of 45.3 billion yuan.
Oceanwide Holdings. The developer based in Beijing declined to comment when reached by phone.
Bloomberg also said half of the stressed companies are in property development.
MS research warned that China’s high-yield dollar-debt issuers have higher default risks than peers in other countries.
Kelvin Pang, head of the MS’ Asia credit strategy team in Hong Kong, told clients last month that default risks are higher with these companies “because of relatively short bond-maturity profiles — at close to 2.5 years.”
Pang said high-yield issuers’ loans maturities are very short in duration, at one to three years. It means that “China corporates are extremely sensitive to credit conditions,” and with a global trade recession expected to strike by the 2020s, all eyes are on China ahead of a “looming wall of dollar debt” due next year.
And 2020, according to the Chinese calendar, will be the year of the ‘rat’ — a 12-year cycle of animals that last appeared in 2008.
An 89 year old man named Robert Allen was feeling depressed after Christmas.
He went to the emergency room, and told the doctor that he had thoughts of hurting himself. Using his powers under the Baker Act, the doctor sent Robert to a mental health facility called North Tampa Behavioral.
Florida’s Baker Act allows doctors, police, or judges to involuntarily commit patients to psychiatric hospitals for up to 72 hours if they show signs that they may hurt themselves or others.
But North Tampa Behavioral has a problem letting patients go.
Robert repeatedly told the facility he would like to leave. But after the three days, the hospital refused to release him.
This is actually illegal.
The only way the hospital can continue to legally hold a patient after three days is if they’re ordered to do so by a judge.
And if a hospital feels that they need to continue holding a patient, they’re required to formally request a court’s approval.
The Baker Act does authorize a psychiatric facility to hold a patient involuntarily for up to five additional days as soon as they file the request.
So, in total, Florida law allows a psychiatric facility to hold people against their will for eight days before any legal proceedings are required.
In the case of Robert Allen, he was released on the eighth day, just before the court hearing was supposed to have taken place.
It turns out that the psychiatric facility filed the request on Day 3 (as required by law), held Mr. Allen for an additional five days as they are legally entitled to do so, then CANCELLED their request and released Mr. Allen on Day 8.
If this were merely a single incident, it might be a coincidence.
But some investigative reporting from the local paper in Tampa shows this is a pattern with the facility that held Mr. Allen– North Tampa Behavioral.
It turns out that the hospital has a huge financial incentive to hold patients against their will. One night at North Tampa Behavioral costs $1,500. And given that the hospital admits thousands of patients each year, a few extra nights really adds up.
According to the report, the hospital habitually files legal requests to involuntarily hold patients past the 3-day limit… allowing them to hold patients for an additional five days (and charge an extra $7,500 per patient).
Then they conveniently cancel the hearing at the last minute, determining that the patients’ emotional states have miraculously improved.
In this way, the hospital is able to charge for extra days, but they don’t actually have to provide any evidence that patients should remain in their facility on an involuntary basis.
This is pretty scary when you think about it.
Look, obviously the Land of the Free is not North Korea. But this does highlight some pretty big issues about personal liberty.
People love to sing songs about how free they are. And yet there are literally millions of pages of laws, codes, and regulations at the federal, state, and local level that can deprive you of your freedom, including having you kidnapped and held against your will.
The Baker Act in Florida is just one example. There are countless more.
Nearly every local or country government across the country has Child Protective agencies that have the power to take your children away from you even when you’ve done nothing wrong.
Civil Asset Forfeiture laws entitle police forces to seize your property when you are completely innocent of any wrongdoing
Dozens of government agencies have the power to freeze your life savings with nothing more than a phone call to your bank.
The federal government can cancel your passport if they feel, in their sole discretion, that you owe back taxes.
Having some extra savings in a foreign bank account, for example, is not only completely legal, but it’s a sensible thing to do.
This is all part of why I write so much about having a Plan B.
If you find your bank account ever unjustly frozen, having funds in another jurisdiction ensures your life won’t be turned upside down while you battle with the government to release your money.
The same goes for having some physical cash and gold coins locked in a safe or secure storage facility.
Having a second passport guarantees that you’ll never be caught without the freedom to travel. And as we’ve discussed before, you might even be able to acquire a second passport at no cost because of your ancestry.
It’s all fine and well to be happy where you live and love your country. But have a rational view and understand both the good AND the bad… and then have a Plan B to reduce your exposure to the bad.
“Make India Great Again:” Lockheed Martin Offshores F-16 Production From US To India
A breaking report from Reuters indicates that Lockheed Martin is offshoring part of its F-16 combat jet production from the US to India. This completely goes against President Trump’s ‘America First’ policy.
It’s unclear how much of the F-16 production plant in Greenville, South Carolina, will be transferred to India, nevertheless, how many jobs will be lost, in Lockheed Martin’s apparent betrayal of “Making America Great Again.”
A senior executive told Reuters on Thursday that F-16 wing production will begin in 2020 at a facility in southern India.
Lockheed sold out American workers and the great people of South Carolina so that it could win a contract, worth more than $15 billion to supply the Indian Air Force with 114 combat planes. To sweeten the deal, Lockheed offered to shift production to India, which would only enrich shareholders.
Indian Prime Minister Narendra Modi’s “Make-in-India” program — is the attempt to diversify its manufacturing sector away from automobiles to bolster its aerospace and defense sectors.
Vivek Lall, vice president of Strategy and Business Development for Lockheed Martin Aeronautics, said the wing production of the F-16 would allow the company to sell the fighter jets worldwide. Lockheed entered into a joint venture with India’s Tata Advanced Systems in the southern city of Hyderabad to make the wings.
“The first wing prototype is being built now. The expectation is we will begin supplying by next year sometime, this will be the sole facility for future F-16 wing production,” Lall told Reuters.
The Indian Air Force (IAF) is entering a period of significant modernization, that means hundreds of MiG fighters will be replaced with new aircraft, likely the F-16 in the next decade.
Modi has insisted that if Lockheed wants to supply planes to the IAF, production would have to be moved to India.
Lall told Reuters that the Lockheed C-130J four-engine turboprop military transport aircraft is already being produced at the Hyderabad facility.
“We have been doing make-in-India for years now,” he said, adding that, “It is a huge potential business, India will be plugging into the world’s largest fighter jet ecosystem.”
As for the F-16 plant in South Carolina, there’s no word yet on what will be shut down and or how many people will be laid off.
Lockheed has chosen, in terms of the F-16 jet, to “Make India Great Again,” over “Make America Great Again.”
President Trump needs to have a stern talk with management.
After Lack Of US Progress, North Korea “Doubts Possibility Of Future US Talks”
Just a few minutes after US Secretary of State Mike Pompeo confirmed that the United States has not been able to arrange working-level meetings with North Korea in September – since negotiations aimed at dismantling North Korea’s nuclear and missile programs have stalled since a failed second summit – Korea’s Central News Agency reported North Korean officials issued a statement that “the prospects for future talks are not bright.”
This comes after Pompeo said at a news conference in New York, where he attended the United Nations General Assembly this week:
“We have see these public statements that we were hopeful that there would be working level meetings by the end of this month … we’ve not been able to make those happen and we don’t have a date yet when we will be able to get together.”
Notably, North Korean Foreign Minister Ri Yong Ho did not attend the annual gathering of world leaders, having done so for the past three years.
“Our team is prepared to meet with them, I think it’s important that we do,” Pompeo added.
As Reuters reports, North Korea said this month it was willing to restart nuclear talks with the United States in late September but warned that dealings between the sides could end unless Washington adopted a fresh approach. The concessions the United States has so far offered North Korea publicly have reportedly fallen far short of its expectations.
I’m interested in watching the recent seasoned talks in the United States.
The meetings and congresses of the seasons that have been conducted so far have become historical histories that marked the political will of the leaders of the two countries to end hostile seasoned relations and to bring peace and stability to the Korean peninsula.
However, the prospects for future talks are not bright, as the actual movement to carry out the problems agreed at the talks cannot be followed.
In order to build trust among the US and to implement the US Joint Statement, we have made a sincere effort to return Americans detained and to repatriate US remains.
The United States, however, did nothing to implement the joint statement. Rather, it regressed the US-Korea relations by resuming joint military exercises where the president pledged to stop and strengthening oppression against anti-communist forces.
I still have a different seasoning in the situation where Washington still claims that we should give up our nuclear weapons first so that we can get a bright future. We still have a view that the sanctions mislead us into dialogue. The opening of the talks does not dispel skepticism whether a new breakthrough will be made in the US-Korea relations.
I came to know that President Trump is different from his predecessors in political sense and decision while watching his approach to the DPRK, so I would like to place my hope on President Trump’s wise option and bold decision.
Me and our Foreign Ministry will keep an eye on the future trends of the United States.
Sounds fairly final to us, but then again, 38North’s Joseph Detrani has some vastly more experienced views on how to negotiate with North Korea…
The thirteen years (2003-2016) I invested in negotiations with North Korea in different capacities—Special Envoy, Associate Director of National Intelligence and as a private citizen—have made me guardedly optimistic that a peaceful resolution of issues with North Korea is possible. The US has successfully concluded agreements during the past twenty-five years of on-and-off negotiations with North Korea, notably the Agreed Framework of 1994, the Six Party Talks Joint Statement of September 19, 2005 and the “Leap Day Agreement” of February 29, 2012. From these experiences, we learned a lot about North Korea’s determination to have a normal relationship with the US and to be accepted as a nuclear weapons state; we also got to know the North Korean negotiators, many of whom we have been negotiating with since 1994. Conversely, over this period, North Korea acquired a better understanding of US intentions, while also getting to know our negotiators, who routinely rotated every few years. Although past achievements, after extensive negotiations and partial implementation, eventually collapsed, they offer important lessons that can help guide US negotiators through the thicket of obstacles they will confront in achieving US goals with North Korea.
Survival of the Leadership Is Paramount
Over the past 2,000 years, Korea has been invaded often by China, Russia, Japan and Mongolia. To survive against these powerful and aggressive neighbors, Korea had to be militarily strong and self-reliant. It is no surprise, therefore, that over the past 65 years North Korea has pursued a “military first” policy, highlighted by Kim Il Sung’s pursuit of nuclear weapons in the 1950s. Kim Jong Un has continued this tradition. He views a strong military, especially one with nuclear weapons and missile delivery systems, as the ultimate deterrent to the US or any country that may want to attack or remove the regime in North Korea, and thus essential to his survival and the preservation of the Kim dynasty. Simply put, getting Kim to agree to complete and verifiable denuclearization will continue to be a challenge.
Distrust of the US Persists
Since the end of the Korean War in 1953, North Korea has been convinced that the US was seeking regime change in the North. Even in negotiations, and regardless of the agreements reached, North Korea has seen US policy as hostile and harbored distrust of US security assurances. US statements that North Korea should follow the Libyan denuclearization model have reinforced the views of hardliners in Pyongyang that regime change is Washington’s ultimate objective, regardless of any agreement with the US. I lost count of the number of times I was told that North Korea will never follow the Libyan model, which they viewed as a US effort to topple the Gaddafi regime.
Tearing down this wall of North Korean distrust remains a considerable challenge, but progress can be made. For example, during the plenary sessions of the Six Party Talks in August 2003 and February 2004, our delegation was instructed to avoid one-on-one meetings with the North Korean delegation and to refrain from any private discussions with DPRK officials. The efforts US Assistant Secretary of State James Kelly and I made during these talks to engage our North Korean interlocutors in private discussions, notwithstanding our official instructions, engendered a more open and professional relationship and helped to build some trust. During the February 2004 meeting, at China’s Diaoyutai State Guesthouse, with Vice Foreign Minister Wang Yi as the host, Jim Kelly and I decided that we needed private talks with the North Korean delegation, similar to the private meetings we had with the other delegations, to discuss some of the issues that were on the table. At our request, Wang Yi provided a room for these private discussions with North Korea’s Vice Foreign Minister Kim Kye Gwan. I’m confident North Korea appreciated this outreach on the part of the US delegation. Although these talks didn’t produce any appreciable progress on the substantive issues, I believe they contributed to Pyongyang signing the September 19, 2005 Joint Statement, which committed North Korea “to abandoning all nuclear weapons and existing nuclear programs and returning, at an early date, to the Treaty on the Non-Proliferation of Nuclear Weapons and to IAEA safeguards.”
North Korea Wants Nuclear Weapons And Normal Relations with the US
A constant refrain I heard from my North Korean interlocutors through the years is that a normal relationship with the US would give the North greater access to the international community and facilitate foreign direct investment and trade, as well as permit North Korea to be less dependent on China. Indeed, North Korea’s mistrust of the US notwithstanding, Pyongyang’s ultimate objective is to have normal relations with Washington, and it has urged the US to accept it as a nuclear weapons state. Over the past two decades, senior North Korean officials have repeatedly stated that the North will never use nuclear weapons against the US or any other country, that nuclear weapons are a necessary deterrent for a vulnerable North Korea, that the US should treat North Korea as it treats Pakistan and that North Korea can become a good friend of the US. Washington’s response has been consistent: The US will never accept North Korea as a nuclear weapons state because of WMD proliferation concerns—specifically, a nuclear North Korea could spur other countries in the region to pursue nuclear weapons programs, increasing the risk that a weapon or fissile material would find its way to a rogue state or terrorist organization, with catastrophic consequences. I believe this consistent US response resonated with our North Korean interlocutors.
Personal Relationships Are Important
North Korean negotiators who meet with the US have spent their professional careers working on these issues. By contrast, US officials who interact and negotiate with North Korea routinely change. Given the years of hostilities between our countries, this rapid personnel turnover makes it more difficult to establish personal relationships that are conducive to building trust and confidence between our negotiators, which requires considerable time, continuity and patience. Having negotiated with North Korea during the Six Party Talks, I spent hundreds of hours in task force and plenary session meetings in Beijing and frequently used the “New York channel,” and was able in 2009, at the request of the US State Department, to use these interactions to engage in countless hours of negotiations with senior officials in Pyongyang to secure the release of journalists Euna Lee and Laura Ling and arrange for US President Bill Clinton to visit Pyongyang to finalize their release and return to the US. In 2011 and 2012, when I was Director of the National Counter Proliferation Center, the White House asked me to visit Pyongyang to meet with senior officials to discuss US concerns with North Korea’s highly enriched uranium program and to warn Pyongyang not to sell missiles and other weaponry. This engagement was possible because of my years negotiating with North Korea and establishing relations with senior officials in their Ministry of Foreign Affairs and other agencies. I can’t emphasize enough the importance of a good working relationship with counterparts in North Korea. This creates the trust necessary to have a dialogue and hopefully move forward on issues affecting relations with North Korea.
Confronting North Korea with Ultimatums Doesn’t Work
Being candid with North Korea is necessary, but any language that threatens North Korea with punitive consequences if it does not accept a US proposal will engender a defiant response or a cessation of negotiations. I’ve been in meetings when such rhetoric was used and the North Korean response was consistent and predictable. In fact, during the first round of Six Party Talks with North Korea, they were told that, in addition to nuclear weapons and facilities disablement, they would not be permitted to have a nuclear program for civil energy. North Korea balked, which explains why the 2005 Joint Statement declared that: “The DPRK stated that it has the right to peaceful uses of nuclear energy. The other parties expressed their respect and agreed to discuss, at an appropriate time, the subject of the provision of light water reactor [for civil energy] to the DPRK.” Not surprisingly, North Korea is very sensitive to threats from powerful countries or attempts to infringe on its sovereign rights.
Be Resolute on the Need for Complete and Verifiable Denuclearization
Any wavering on the part of the US on the need for North Korea’s complete and verifiable denuclearization will encourage some in the DPRK to believe that eventually the US will relent and permit the North to retain at least some of its nuclear weapons and/or nuclear weapons facilities. North Korea has spent billions of dollars and decades establishing a robust nuclear weapons program. To expect Kim to walk away from this program, without providing North Korea with the security assurances it seeks, a path to normal relations with the US and the lifting of sanctions, is unrealistic. Moreover, if the US makes clear that these deliverables would be available to North Korea with complete and verifiable denuclearization, it would be fair to assume that Kim might be willing to move forward with the US, pursuant to the June 12, 2018 Singapore Joint Statement that commits North Korea to complete denuclearization. Ultimate success will be the actual implementation of a negotiated agreement, ensuring North Korea receives the promised deliverables in return for progress with denuclearization and agreement on a detailed action-for-action road map with timelines.
Implementation of Any Agreement Will Take Years and Verification Is Key
Given the complexity of North Korea’s plutonium and uranium enrichment programs, and the verification challenges to ensure compliance with its denuclearization commitments, implementation of any agreement will take considerable time. Washington will need to work with the International Atomic Energy Agency (IAEA), probably China and Russia and other nuclear weapons states who can assist with the dismantlement of nuclear weapons and the disablement of nuclear weapons facilities. Verification will be a major challenge with any agreement. In 2009, implementation of the September 19, 2005 Joint Statement that committed North Korea to complete denuclearization came to an abrupt halt when North Korea refused to sign a verification protocol permitting nuclear monitors to visit non-declared suspect nuclear sites. At North Korea’s insistence, that was the end of the Six Party process that started in 2003.
Conclusion
These are just some of the lessons learned from years of negotiations and talks with North Korean officials. Hopefully, as we enter into working-level negotiations, we will benefit from all we have learned from these experiences.
Fox News Civil War: Tucker Carlson Blasts Shep Smith’s Analysis Of Trump’s Ukraine Actions
A war of words between anchors over at Fox News continues to brew, with Tucker Carlson repeatedly berating co-worker Shepard Smith on a segment Wednesday night that focused on Trump’s actions on Ukraine.
Smith had called Carlson and legal analyst Joe diGenova “repugnant” in a daytime analysis of their reporting on the Democratically manufactured Ukrainegate scandal. Smith was flanked by Fox News legal analyst Judge Andrew Napolitano, who drew a starkly different conclusion on Trump’s actions than pro-Trump lawyer diGenova, who appeared the night before on Carlson’s show.
Napolitano concluded that Trump’s actions regarding Ukraine constituted “a crime” during the day on Tuesday.
diGenova had called Napolitano a “fool” for his analysis on Tuesday night and Smith returned the volley during the day on Wednesday, stating that diGenova was a “partisan guest” who was “repugnant” for attacking Napolitano.
“Apparently our daytime host, who hosted Judge Napolitano, was watching last night and was outraged by what you said and quite ironically called you partisan,” Carlson said on Wednesday night.
“Not clear if that was you or me but someone is repugnant!” Carlson sarcastically continued.
“Now, unlike maybe some dayside hosts, I’m not very partisan. Is it a crime or not? Given everything that’s happened in the last 24 hours. I want to throw it to you again. Was it a crime or not?”
diGenova again stood by his analysis that Trump’s actions were not a crime.
And Carlson, again, took a shot at Smith to conclude the segment:
“It doesn’t seem honest to me when a host, any host on any channel, including this one, pretends that the answer is obvious. That’s not news, is it? That’s opinion. Why do we find ourselves in a situation where people aren’t willing to admit that their passions are guiding their news coverage?
Wouldn’t it be better if we just said out loud you know this is what I think? For example you will never hear me criticize Rachel Maddow. I never agree with anything she says. But she is straightforward, it’s her opinion. Why wouldn’t it be better if we were all that transparent about what’s driving our shows?
It makes people cynical when you dress up news coverage, when you dress up partisanship as news coverage and pretend that your angry political opinions are news, you know, people tune out.”
You can watch the full segment, courtesy of Mediaite, below:
