‘Chinese Maritime Militia’ Launches Laser Attacks Against US Military Pilots In Pacific Ocean

Pilots of American military aircraft operating over the western Pacific Ocean have been targeted by lasers more than 20 times in recent months, US officials told The Wall Street Journal, following similar incidents in which Chinese nationals used lasersagainst American fighter pilots operating over Djibouti.

In April, the Pentagon issued a NOTAM, or “Notice to Airmen” warning of “unauthorized laser activity” resulting in minor injuries to an unspecified number of pilots over Djibouti. The lasers originated from a Chinese military base in the African country, just 8.3 miles from the American base.

Now officials are reporting similar laser attacks in the East China Sea, where the People’s Liberation Army Navy and Chinese commercial vessels operate. Multiple officials told the WSJ that lasers were directed at American military aircraft from fishing vessels and shore.

There have been more than two-dozen incidents in the region since September 2017, officials said. Attacks are becoming more frequent, as the perpetrators are using a wide variety of laser frequency bands.

While it is unclear who exactly is behind the attacks, it is interesting to note, Beijing trains and provides financial subsidies to fishing vessels operating in the East China Sea as what officials call China’s “maritime militia.”

As a deterrence, China’s maritime militia [civilian operated fishing vessels] are sailing through the East China Sea with laser pointers — striking low-flying American warplanes.

In these incidents, commercial-grade lasers are being used, as opposed to the military-grade lasers used against American pilots in Djibouti. Commercial or military, these beams of light can temporarily blind pilots and in some cases cause severe eye damage.

Unbeknownst too many, China has been equipping its military forces with blinding laser weapons in an apparent violation of a provision of the United Nations 1980 Convention on Certain Conventional Weapons. These weapons include the BBQ-905 Laser Dazzler Weapon, the WJG-2002 Laser Gun, the PY132A Blinding Laser Weapon, and the PY131A Blinding Laser Weapon.

The sophistication of these lasers attacks implies that Beijing could be sponsoring a hybrid deterrence system using fishing vessels armed with lasers that could be coordinated at American warplanes with radar.

In response, the Pentagon is ramping up the procurement of anti-laser protective eyewear for pilots. Each unit will cost the taxpayers around $500 to $2,500 per unit but will ensure that pilots are immune to lasers

As for the Chinese military and fishing vessels launching a series of coordinated laser attacks against American pilots from Africa to the East China Sea, well, this is not good because the Pentagon is itching for a fight to level China’s weaponized islands in the South China Sea.

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Students May Need Counseling After “Emotional” ‘Required’ Diversity Training

Authored by Cline Ryan via Campus Reform,

Minnesota State University will have counselors standing by to comfort “student leaders” who have an “emotional response” after being required to attend a new diversity training.

MSU announced Wednesday that two new 90-minute workshops on social justice and diversity are being implemented for “student leaders” this fall, noting that staff/faculty supervisors are expected to “make this training required.”

While the announcement does not provide a comprehensive definition of what constitutes a student leader, it does state that “examples of student leaders/workers include: Student Athlete Advisory Committee, Office Assistants, Resident Assistants, Student Orientation Counselors, etc.”

The announcement itself does not explicitly state that the workshops will be mandatory, saying only that “we encourage faculty and staff to send their student leaders and student workers to both training sessions.”

A supplementary document provided within the announcement, however, states that staff and faculty supervisors are “expected” to “make this training required for student leaders and stress the importance,” as well as “encourage student interaction during the trainings” and “require students to complete pre- and post-training surveys.”

The same document also lists desired learning outcomes for participants, saying that upon completing the workshops, it is expected that students will “be able to define core diversity and social justice concepts, including privilege, oppression, and microaggression,” as well as “recognize areas where they have privilege and how this shapes their experiences and interactions.”

Students will also “analyze how intersecting identities shape systems of power on individual and institutional levels in our everyday lives,” and will be taught the importance of “proactively responding to discrimination and navigating difficult dialogues.”

The first training, “Social Justice 101,” will focus on “core concepts of critical social justice, including identity, privilege and oppression, intersectionality, and microaggressions, while the second training will tackle “racism, sexism, and LGBTQ issues.”

The university warns that the second workshop may be triggering for some students, in that it “contains scenes that represent real life situations that may cause discomfort, anxiety, or an emotional response,” and “may include explicit or vulgar language.”

Out of concern that the training may too closely depict uncomfortable “real life situations,” the university promises that counseling staff will be on site “to speak with students who need to leave the training to talk during or after the program.”

Campus Reform reached out to the university for comment but did not receive a response in time for publication.

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Neil Gorsuch Joins Sonia Sotomayor in Questioning the Third-Party Doctrine

As Damon Root noted earlier today, Justice Neil Gorsuch’s dissent from Carpenter v. United States reads more like a concurrence, agreeing with the majority’s conclusion that police need a warrant to obtain cellphone location data but disagreeing with its reasoning. In fact, Gorsuch is bolder than the majority, recommending a broader reconsideration of the doctrine that says the Fourth Amendment imposes no limits on the government’s access to information that people entrust to third parties. At the same time, Gorsuch agrees with Clarence Thomas, who also filed a dissent in Carpenter, that it makes little sense to draw the boundaries of Fourth Amendment rights based on expectations of privacy that judges deem reasonable.

The Supreme Court developed the third-party doctrine in United States v. Miller, a 1976 case dealing with bank records, and Smith v. Maryland, a 1979 case involving “pen registers” that record the phone numbers called from a particular location. As the Court explained the principle in Miller, “the Fourth Amendment does not prohibit the obtaining of information revealed to a third party and conveyed by him to Government authorities, even if the information is revealed on the assumption that it will be used only for a limited purpose and the confidence placed in the third party will not be betrayed.” Gorsuch recognizes the sweeping implications of that principle in an age when sensitive information is routinely stored on remote servers:

What’s left of the Fourth Amendment? Today we use the Internet to do most everything. Smartphones make it easy to keep a calendar, correspond with friends, make calls, conduct banking, and even watch the game. Countless Internet companies maintain records about us and, increasingly, for us. Even our most private documents—those that, in other eras, we would have locked safely in a desk drawer or destroyed—now reside on third party servers. Smith and Miller teach that the police can review all of this material, on the theory that no one reasonably expects any of it will be kept private. But no one believes that, if they ever did….

Can the government demand a copy of all your e-mails from Google or Microsoft without implicating your Fourth Amendment rights? Can it secure your DNA from 23andMe without a warrant or probable cause? Smith and Miller say yes it can…But that result strikes most lawyers and judges today—me included—as pretty unlikely.

Sonia Sotomayor, who joined the majority opinion in Carpenter, expressed similar concerns in United States v. Jones, the 2012 decision that said monitoring a suspect’s movements by attaching a GPS tracker to his car counts as a “search” under the Fourth Amendment. In that case, Sotomayor observed that the third-party doctrine is “ill suited to the digital age, in which people reveal a great deal of information about themselves to third parties in the course of carrying out mundane tasks.”

Gorsuch notes that “the Court has never offered a persuasive justification” for the third-party doctrine. A person’s willingness to share information with someone else for a particular purpose does not imply that he is willing to share it with the world, and his awareness of the risk that it will nevertheless be divulged to others does not give those people permission to peruse it. Gorsuch draws an analogy to paper mail, which the Supreme Court since the 19th century has recognized as protected by the Fourth Amendment because the sender entrusts it to the postal service for delivery. The content of letters is protected even though people surrender possession of them and understand that they may be vulnerable to snooping.

Gorsuch is equally leery of linking Fourth Amendment rights to a “reasonable expectation of privacy,” as the majority does in Carpenter. That standard, which was invented in the 1967 eavesdropping case Katz v. United States, is hard to apply in a principled way, since everything depends on which expectations count as reasonable, a question judges may not answer the same way most people would. “Katz has yielded an often unpredictable—and sometimes unbelievable—jurisprudence,” Gorsuch writes, citing a couple of examples (citations omitted):

Take Florida v. Riley, which says that a police helicopter hovering 400 feet above a person’s property invades no reasonable expectation of privacy. Try that one out on your neighbors. Or California v. Greenwood, which holds that a person has no reasonable expectation of privacy in the garbage he puts out for collection. In that case, the Court said that the homeowners forfeited their privacy interests because “[i]t is common knowledge that plastic garbage bags left on or at the side of a public street are readily accessible to animals, children, scavengers, snoops, and other members of the public.” But the habits of raccoons don’t prove much about the habits of the country. I doubt, too, that most people spotting a neighbor rummaging through their garbage would think they lacked reasonable grounds to confront the rummager.

Gorsuch also notes that the Katz test has little to do with the text of the Fourth Amendment, which makes no mention of expectations or of privacy per se. Rather, the amendment protects “the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures.” That guarantee, as Thomas shows in his dissent, is intimately related to property rights. “This case should not turn on ‘whether’ a search occurred,” he writes. “It should turn, instead, on whose property was searched.”

For Thomas, the answer is clear: The property belonged not to Timothy Carpenter, whose location records were used to implicate him in a series of armed robberies, but to MetroPCS and Sprint, the companies that provided his cellphone service. Gorsuch, by contrast, thinks it’s “entirely possible a person’s cell-site data could qualify as his papers or effects under existing law.” He notes that federal law treats those records as “customer proprietary network information,” which people generally cannot obtain without the customer’s permission.

Gorsuch sees advantages to “a Fourth Amendment model based on positive legal rights,” as advocated by a brief the Institute for Justice filed in Carpenter, which draws on the work of law professors William Baude (University of Chicago) and James Stern (William & Mary). Under that model, the Fourth Amendment is implicated whenever the government seeks special access to information that ordinary people cannot legally see without the subject’s consent. That approach offers a promising alternative to the infinitely malleable Katz test, which invites judges to constitutionalize their own privacy preferences, and a Fourth Amendment that covers your data only as long as you retain physical possession of it.

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Jordan Sends Tanks To Border Amidst Syrian Army Advance

Images surfaced overnight Thursday of a large Jordanian military convoy reportedly headed to the border near the Syrian province of Daraa, including M-60 battle tanks and heavy military equipment. 

This as German Chancellor Angela Merkel met with Jordan’s King Abdullah in Amman on Thursday, telling him, “You live not just with the Syria conflict, but also we see Iran’s activities with regard to Israel’s security and with regard to Jordan’s border.” 

Beirut based Al Masdar News published the photos provided through its sources in the region with the description: The Jordanian military is deploying reinforcements, including heavy military equipment, on the border with the Syrian province of Daraa, according to Jordanian and Syrian sources.

A Jordanian M-60 battle tank en route to border with Syria. Via Al Masdar News

As we reported this week, the long awaited battle for Daraa has begun despite repeat warnings issued to the Syrian government from the US not to extend its military campaign to the country’s south, where the conflict first began with fierce anti-Assad protests in 2011 which quickly spiraled into violence. 

The convergence of geopolitical interests among the external and regional powers which have long fueled the Syrian proxy war makes Syria’s southwest region the perfect storm for potential outside intervention and dangerous broader conflagration.

The below summarizes this week’s developments which makes the rapidly unfolding events in Syria’s southwest provinces a highly volatile and escalating situation:

  • Israel has warned against the deployment Iranian and Hezbollah fighters allied with the Syrian government, especially near the contested Golan Heights area. 
  • The US has threatened to take “take firm and appropriate measures” should Damascus continue its military campaign in Deraa.
  • The Syrian Army and the US-backed group, Jaysh Al-Mughawir Al-Thoura from the Al-Tanf area clashed on Thursday, leaving one Syrian soldier dead.
  • Jordan’s King Abdullah has joined Israel in denouncing Iran’s “meddling” in the region, and met this week with Israeli PM Netanyahu in the first public meeting between the two leaders since 2014. 
  • King Abdullah also met this week with German Chancellor Angela Merkel and discussed countering “Iranian aggression”.
  • Israel attacked (or possibly US coalition) Syrian Army and Iraqi paramilitary forces near the Iraq-Syria border on Sunday, killing over 40 pro-Syrian and allied fighters.
  • Assad has vowed to liberate “every inch” of sovereign Syrian territory and sees the return of Al-Quneitra and Daraa governorates to the government as key to ending Israeli and other outside meddling, including an ISIS pocket which lies adjacent to Israel and Jordan. 
  • Huge Syrian military convoys have been seen entering the southwest provinces, preparing for a final major offensive. 
  • Jordan has sent reinforcements to its border opposite Daraa to both ensure fleeing militants don’t penetrate into Jordanian territory and in support of the US coalition desire to “counter Iran”. 

Beirut-based Al Masdar News published the photos provided through its sources in the region.

Meanwhile, thousands of civilians in the region are reportedly fleeing toward the Jordanian and Israeli borders as clashes in the northern part of Daraa province have begun. 

* * *

Notably ISIS has long maintained a stronghold along the Israeli occupied Golan Heights and Jordanian border — something which Israeli leadership and media are all too aware of and appear to have turned a blind eye to.

Western media has increasingly acknowledged Israel’s “not so secret” quiet support to jihadists along the Golan border, with even the Wall Street Journal confirming weapons transfers and medical aid given to al-Qaeda insurgents.  

Israel, the US, and Jordan have made “countering Iran” in Syria and the region their top priority, and not ISIS. Israeli media has claimed to be in possession of on the ground footage of ISIS terror training camps just across the Israeli border. 

PM Netanyahu and Israel’s military leadership have long been on record as advancing a policy of “let the Sunni evil prevail” in reference to seeing ISIS and al-Qaeda [Sunni] terrorism as the “lesser evil” when compared to Shia Iran and Hezbollah. 

Map of the current military situation in southwest Syria, including ISIS positions along the Jordanian border and Israeli occupied Golan:

Footage showing overnight clashes in south Syria:

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How Disruption In The Auto Business Actually Works

Authored by Nicholas Colas via DataTrekResearch.com,

If you want to understand how technological disruption actually works in the auto industry, you need to know the story of the radial tire. Don’t worry – this isn’t just a history lesson. We’ll get back to current issues quickly enough.

The background

Immediately after World War II, French company Michelin started producing radial tires. These differed from the existing global technology, called bias ply, in basic construction.

The primary benefit to radials was a longer operating life (2-3x) than bias ply, but they were also more fuel-efficient and had better handling characteristics. As the European auto industry got back on its feet after the war, they optimized their suspension designs for the new radial tire. Japanese tire company Bridgestone followed suit in the 1960s with its own radial design for locally made cars.

In the United States, however, the pre-war bias ply tire lived on happily and successfully through post war years. Fuel efficiency wasn’t an issue and American drivers liked the admittedly vague but soft ride and steering that bias tires provided. Imported cars with radials were a rare sight and replacements were typically only available at dealerships.

The catalyst for change

The 1973 oil shock more than tripled US gasoline prices in just a few months, and in the resultant recession the fuel efficient and durable radial tire finally became relevant. That combined with another oil shock in 1979 and increasing penetration of European and Japanese cars signaled the end for bias ply tires.

What this did to the US tire industry

Remember just how much longer radials last: instead of wearing out in 20,000 miles, they can go 40,000-60,000 miles. That means you need 50-66% less manufacturing capacity to supply a country running on radials than bias ply. Revenues, of course, will also be far lower even with a modest premium for the product.

Every tire manufacturer sitting in the US knew that math in 1973. Shifting capital expenditure budgets to produce more radials seemed like a ridiculous move, all the more so in a recession. Why spend money to create a product that would cut your revenues by half over a few years?

Only Goodyear Tire really took the plunge, shifting production aggressively to radials in the mid-late 1970s. The rest – names like Uniroyal, BF Goodrich and Firestone – were slow to switch, entered a long period of decline, and were all eventually purchased by Michelin, Bridgestone and other foreign tire makers. Who all, of course, were making radial tires all the while.

Why we bring this up today

Auto industry consultant AlixPartners was out with a study today warning of a “Pile up of epic proportions” as global automakers invest in electric and autonomous vehicles with uncertain futures. Alix is a serious firm, with deep roots in the car business, so their warnings deserve an airing:

  • “By 2023 a whopping $255 billion in R&D and capital expenditures is being spent globally on electric vehicles”
  • “Some 207 electric models are set to hit the market by 2022, many of them destined to be unprofitable”
  • “Meanwhile, and additional $61 billion – just the opening ante on that front – has been earmarked for autonomous-vehicle technologies, even though … consumers say they are wiling to spend just $2,300 for autonomy – compared with current industry costs of around $22,900”

OK, so what does this mean?

I can assure you every senior auto executive on the planet knows the story of the radial tire in intimate detail; I suspect no one in Silicon Valley does.

Car companies know disruptive technologies come along infrequently, but when they do you’re either all-in or you’re selling the business. If you choose to fight for survival, you basically invest as much as you can and hope for the best. Much of that investment is in capital equipment, and the numbers start at $1 billion/project and go from there.

Technologists think of capital as primarily human rather tangible. On the plus side, 1,000 coders are usually cheaper than the paint booth of an auto plant (those are +$500 million each). On the other, there may not be 1,000 coders on the planet who have the skills you need when a new technology like autonomous driving comes in. In that case, you will be spending a lot more than a paint booth’s worth to train them and keep them.

This, in a nutshell, is both why the AlixPartners warnings are both spot-on and irrelevant; both tech and car companies will spend whatever it takes here, regardless of return on capital. The global auto industry is in a “Radial tire moment”. The funny thing to me, having covered the industry for +25 years, is that only the car guys/gals seem to know how dangerous such periods can be. The tech industry, not so much.

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Leaked Navy Memo Contradicts Trump: Reveals Plan For “Temporary, Austere” Migrant Camps

“The United States will not be a migrant camp. And it will not be a refugee-holding facility – it won’t be.”

Trump made this statement on Monday. But it’s becoming rapidly apparent that the US government is, in fact, planning to build a series of massive tent cities that could potentially house thousands of migrants for months at a time. A Pentagon spokesperson said Thursday that the US is planning to shelter as many as 20,000 migrant children on four American military bases, according to the New York Times. Meanwhile, just this afternoon, Time Magazine reported that the US Navy is planning to build several massive tent cities to house thousands of immigrants in a few different states. Time, which obtained a Navy memo outlining the plan to build “temporary and austere” tent cities, said the document was sent to the Navy Secretary for his approval. The cities will house roughly 25,000 migrants in abandoned airfields just out side the Florida Panhandle near Mobile, Alabama, at Navy Outlying Field Wolf in Orange Beach, Alabama, and nearby Navy Outlying Field Silverhill.

The U.S. Navy is preparing plans to construct sprawling detention centers for tens of thousands of immigrants on remote bases in California, Alabama and Arizona, escalating the military’s task in implementing President Donald Trump’s “zero tolerance” policy for people caught crossing the Southern border, according to a copy of a draft memo obtained by TIME.

The internal document, drafted for the Navy Secretary’s approval, signals how the military is anticipating its role in Trump’s immigration crackdown. The planning document indicates a potential growing military responsibility in an administration caught flat-footed in having to house waves of migrants awaiting civilian criminal proceedings.

There are also plans for a camp that will hold as many as 47,000 people at former Naval Weapons Station Concord, near San Francisco. And another facility that could house 47,000 near Camp Pendleton, the largest training facility for US Marines situated along the SoCal coastline. The cities are said to be built to last between six months and a year, while the planning document estimates that the Navy would spend about $233 million to build the facility. Officials proposed a 60-day timeline to build the first temporary facility, which will house 5,000 adults. The military believes it could then add room for 10,000 more people every month.

Memo

Capt. Greg Hicks, Navy’s chief spokesman, declined to provide details on the matter. “It would be inappropriate to discuss internal deliberative planning documents,” he told TIME.

While this report will further incense liberals, who have hurled “concentration camp” comparisons at the Trump administration, we’d first like to remind readers that the majority of Americans (and swing voters, for that matter) support President Trump’s “zero tolerance” immigration policies.

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We Are Most Likely Alone in the Universe

Enterprise“Where are they?,” famously asked Italian physicist Enrico Fermi in the 1950s. By “they,” he meant space aliens. Fermi figured that if the galaxy contained space-faring civilizations it would only take them a few tens of millions of years to populate it. So why hasn’t there been a saucer-landing-take-me-to-your leader moment already? This is the Fermi Paradox.

In 1961, American astronomer Frank Drake devised an equation in which he tried to estimate the number of technological civilizations that might exist in our galaxy. Depending on the values plugged into it, the galaxy could be brimming with extra-terrestrials or we might its only technologically advanced denizens.

A new paper in arXiv seeks to “dissolve the Fermi Paradox” by specifying various values for the parameters in the Drake Equation. The paper is by three researchers from the Future of Humanity Institute at Oxford University, research fellow Anders Sandberg, nanotechnologist Eric Drexler, and philosopher Tod Ord. As the researchers note:

We examine these parameters, incorporating models of chemical and genetic transitions on paths to the origin of life, and show that extant scientific knowledge corresponds to uncertainties that span multiple orders of magnitude. This makes a stark difference. When the model is recast to represent realistic distributions of uncertainty, we find a substantial ex ante probability of there being no other intelligent life in our observable universe, and thus that there should be little surprise when we fail to detect any signs of it. This result dissolves the Fermi paradox, and in doing so removes any need to invoke speculative mechanisms by which civilizations would inevitably fail to have observable effects upon the universe.

By “fail to have observable effects upon the universe,” they are trying to address, among other issues, the prospect of a Great Filter that causes advanced civilizations to destroy themselves before they can colonize other stars or that aliens find watching television at home more edifying that traveling among the stars.

So what do the three conclude? From the article:

When we take account of realistic uncertainty, replacing point estimates by probability distributions that reflect current scientific understanding, we find no reason to be highly confident that the galaxy (or observable universe) contains other civilizations, and thus no longer find our observations in conflict with our prior probabilities. We found qualitatively similar results through two different methods: using the authors’ assessments of current scientific knowledge bearing on key parameters, and using the divergent estimates of these parameters in the astrobiology literature as a proxy for current scientific uncertainty.

When we update this prior in light of the Fermi observation, we find a substantial probability that we are alone in our galaxy, and perhaps even in our observable universe (53%–99.6% and 39%–85% respectively). ‘Where are they?’ — probably extremely far away, and quite possibly beyond the cosmological horizon and forever unreachable.

Two takeaways: First, there is no reason for us to keep quiet and cower at home as some timorous souls have counseled. And second, the galaxy is ours for the taking. Let’s go.

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Rickards Warns ‘A New Global Debt Crisis Has Begun’

Authored by James Rickards via The Daily Reckoning,

Emerging-market debt crises are as predictable as spring rain. They happen every 15–20 years, with a few variations and exceptions.

In recent decades, the first crisis in this series was the Latin American debt crisis of 1982–85. The combination of inflation and a commodity price boom in the late 1970s had given a huge boost to economies such as Brazil, Argentina, Chile, Mexico and many others, including countries in Africa.

This commodity boom enabled these emerging-market (EM) economies to earn dollar reserves for their exports. (By the way, we didn’t call them “emerging markets” in the 1980s; they were the “Third World” after the Western world and the communist world.)

These dollar reserves were soon supplemented with dollar loans from U.S. banks looking to “recycle” petrodollars that the OPEC countries were putting on deposit after the oil price explosion of the 1970s.

I worked at Citibank from 1976–1985 during the height of petrodollar recycling and even discussed the process personally with Walter Wriston, Citibank’s legendary CEO. In the 1960s, Wriston invented the negotiable eurodollar CD, which was later critical to funding those EM loans.

Wriston is considered the father of petrodollar recycling once the petrodollar was created by Henry Kissinger and William Simon under President Nixon in 1974. I remember those days extremely well. The bank made billions and our stock price soared. It was a euphoric phase and a great time to be an international banker.

Then it all crashed and burned. One by one, the lenders defaulted. They had squandered their reserves on vanity projects such as skyscrapers in the jungle, which I saw firsthand when I visited Kinshasa on the Congo River in central Africa. Most of what wasn’t wasted was stolen and stashed away in Swiss bank accounts by kleptocrats.

Citibank was technically insolvent after that but was bailed out by the absence of mark-to-market accounting. We were able to pretend the loans were still good as long as we could refinance them or roll them over in some way. Citibank has a long and glorious history of being bailed out, stretching from the 1930s to the 2010s.

After the defaults, the reaction set in. Emerging markets had to flip to austerity, devalue their currencies, cut spending, cut imports and gradually rebuild their credit. There was a major EM debt crisis in Mexico in 1994, the “Tequila Crisis,” but that was contained by a U.S. bailout led by Treasury Secretary Bob Rubin. On the whole, the EMs used the 1990s to rebuild reserves and restore their creditworthiness.

Gradually, the banks looked favorably on this progress and new loans started to pour in. Now the target of bank lending was not Latin America but the “Asian Tigers” (Singapore, Taiwan, South Korea and Hong Kong) and the “mini-tigers” of South Asia.

The next big EM debt crisis arrived right on time in 1997, 15 years after the 1982 Latin American debt crisis. This one began in Thailand in June 1997.

Money had been flooding into Thailand for several years, mostly to build real estate projects, resorts, golf courses and commercial office buildings. Thailand’s currency, the baht, was pegged to the dollar, so dollar-based investors could get high yields without currency risk.

Suddenly a run on the baht emerged. Investors flocked to cash out their investments and get their dollars back. The Thai central bank was forced to close the capital account and devalue their currency, forcing large losses on foreign investors.

This sparked fear that other Asian countries would do the same. Panic spread to Malaysia, Indonesia, South Korea and finally Russia before coming to rest at Long Term Capital Management, LTCM, a hedge fund in Greenwich, Connecticut.

I was chief counsel to LTCM and negotiated the rescue of the fund by 14 Wall Street banks. Wall Street put up $4 billion in cash to prop up the LTCM balance sheet so it could be unwound gradually. At the time of the rescue on Sept. 28, 1998, global capital markets were just hours away from complete collapse.

Emerging markets learned valuable lessons in the 1997–98 crisis. In the decade that followed, they built up their reserve positions to enormous size so they would not be disadvantaged in another global liquidity crisis.

These excess national savings were called “precautionary reserves” because they were over and above what central banks normally need to conduct foreign exchange operations. The EMs also avoided unrealistic fixed exchange rates, which were an open invitation to foreign speculators like George Soros to short their currencies and drain their reserves.

These improved practices meant that EMs were not in the eye of the storm in the 2007–08 global financial crisis and the subsequent 2009–2015 European sovereign debt crisis. Those crises were mainly confined to developed economies and sectors such as U.S. real estate, European banks and weaker members of the eurozone including Greece, Cyprus and Ireland.

Yet memories are short. It has been 20 years since the last EM debt crisis and 10 years since the last global financial crisis. EM lending has been proceeding at a record pace. Once again, hot money from the U.S. and Europe is chasing high yields in EMs, especially the BRICS (Brazil, Russia, India, China and South Africa) and the next tier of nations including Turkey, Indonesia and Argentina.

As Chart 1 and Chart 2 below illustrate, we are now at the beginning of the third major EM debt crisis in the past 35 years.

Chart 1 measures the size of hard-currency reserves relative to the number of months of imports those reserves can buy. This is a critical metric because emerging markets need imports in order to generate exports. They need to buy machinery in order to engage in manufacturing. They need to buy oil in order to keep factories and tourist facilities operating.

Chart 1 shows how many months each economy could pay for imports out of reserves if export revenue suddenly dried up.

Chart 2 shows the gross external financing requirement, GXFR, of selected countries calculated as a percentage of total reserves. GXFR covers both maturing debt denominated in foreign currencies (including dollars and euros) and the current account deficit over the coming year.

Both charts reflect a crisis in the making.

The hard-currency import coverage for Turkey, Ukraine, Mexico, Argentina and South Africa, among others, is less than one year. This means that in the event of a developed-economy recession or another liquidity crisis where demand for EM exports dried up, the ability of those EMs to keep importing needed inputs would be used up quickly.

Chart 2 has even more disturbing news. Turkey’s maturing debt and current account deficit in the year ahead is almost 160% of its available reserves. In other words, Turkey can’t pay its bills.

Argentina’s ratio of debts and deficits to reserves is over 120%. The ratio for Venezuela is about 100%, and Venezuela is a major oil exporter.

These metrics don’t merely forecast an EM debt crisis in the future. The debt crisis has already begun.

Venezuela has defaulted on some of its external debt, and litigation with creditors and seizure of certain assets is underway. Argentina’s reserves have been severely depleted defending its currency, and it has turned to the IMF for emergency funding.

Ukraine, South Africa and Chile are also highly vulnerable to a run on their reserves and a default on their external dollar-denominated debt. Russia is in a relatively strong position because it has relatively little external debt. China has huge external debts but also has huge reserves, over $3 trillion, to deal with those debts.

The problem is not individual sovereign defaults; those are bound to occur. The problem is contagion.

History shows that once a single nation defaults, creditors lose confidence in other emerging markets. Those creditors begin to cash out investments in EMs across the board and a panic begins.

Once that happens, even the stronger countries such as China lose reserves rapidly and end up in default. In a worst case, a full-scale global liquidity crisis commences, this time worse than 2008.

A full-blown EM debt crisis is coming soon. It is likely to start in Turkey, Argentina or Venezuela, but it won’t end there.

The panic will quickly affect Ukraine, Chile, Poland, South Africa and the other weak links in the chain.

The IMF will soon run out of lending resources and will have to pass the hat among the richer members. But the Europeans will have their own problems, and the U.S. under President Trump is likely to reply, “America First,” and decline to participate in bailing out the EMs with U.S. taxpayer funds.

At that point, the IMF may have to resort to printing trillions of dollars in special drawing rights (SDRs) to reliquify a panicked world. SDRs are essentially world money. Elites are working behind the scenes to ultimately replace the dollar with SDRs as the leading reserve currency.

A new crisis will bring that goal one step closer to reality.

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$4 Billion Miami Mega-Mall Moves Ahead, Ignores “Collective Belief In Sea-Level Rise”

Plans for a $4 billion mega-mall to be built on the coast line city of Miami are pushing forward, despite the fact that the city is likely going to have to deal with rising sea levels and worsening weather as the years progress. Or, it simply could find itself underwater within years, if other projections are accurate.

But don’t worry – academics at the University of Penn Wharton School of Business have a solution: just ignore the fact that Miami will soon be underwater, because otherwise you could create a panic that could, in turn, slow down tax revenue that the city is desperately going to need to – wait for it – adapt to being underwater.

So in the great spirit of Keynes himself, the project is pushing forward.

Government and developers are collectively moving forward on a project for a 6.2 million square foot mall that would house on its property a waterpark, ski slopes, and 2,000 hotel rooms. You may be asking yourself one, or both, of the following two questions.

1. Will Miami be underwater in several years?

2. Aren’t most malls collapsing and simply going out of business?

But this mall is part of a new theory on building malls: one that focuses not only on customers buying things, but also buying experiences.

The Wall Street Journal reported on the project moving forward:

At a time when store closures are accelerating and struggling malls pockmark the country, county commissioners in Florida have approved a plan to build what would be the largest mall in the U.S.

American Dream Miami would also be the most expensive mall ever built, according to Canadian developer Triple Five Worldwide Group of Cos. The 6.2-million-square-foot retail and entertainment complex would cost an estimated $4 billion, Triple Five says.

The cost would include 2,000 hotel rooms, indoor ski slope, ice-climbing wall and waterpark with a “submarine lake,” where guests could enter a plexiglass submarine and descend underwater.

Edmonton, Alberta-based Triple Five secured zoning approval in May from the Miami-Dade County Commission in an 11-1 vote, and is now in the process to secure environmental and water permits for the 174-acre site.

The project provides a window into the thinking of North America’s largest mall developers as they confront the revolution in the shopping world sparked by e-commerce. They recognize it’s no longer enough to fill malls with stores selling clothing, food, electronics and other merchandise people can more easily buy online.

Rather developers are filling malls with restaurants, rides, trampoline parks, gyms, services and other types of entertainment. This strategy taps into the increasing preference of consumers to spend their money on experiences as opposed to goods.

And, of course, like any project developer that takes on massive, potentially risky projects, this one has a history of landing government subsidies, despite claiming that it doesn’t want to.

A big part of the debate is over whether American Dream Miami should get any public subsidies. The South Florida Taxpayers Alliance, a group of mall owners including Simon Property Group , Taubman Centers Inc. and GGP Inc , have lobbied county officials to prevent Triple Five’s project from being funded or subsidized by taxpayer dollars.

The alliance said its aim was to have a level playing field, “where the new employment opportunities promised by the developers of this massive project do not come at the expense of current jobs,” according to its website.

Triple Five had a history of landing public subsidies for Mall of America and for American Dream Meadowlands.

But Triple Five says it isn’t planning on subsidies for the Miami project. “American Dream Miami will be built by private dollars,” Mr. Diaz de la Portilla said.

And so despite the fact that things look ominous for Miami’s – well, existence – real estate development in the area continues to grow. Why is this?

Because along other “common sense” lines of thinking, there is actually a scholarly argument out there that makes the case that building more real estate in Miami could be a way to combat climate change. How? By ignoring the obvious.

Yes, according to a recent Bloomberg report, published in 2014, one way that Miami residents should be planning on dealing with rising sea levels is – wait for it – pretending it doesn’t exist. The report, ironically prepared by a Professor of marketing and the co-director of the Wharton Risk Center at the University of Penn, makes the following insane conclusion:

That’s right, this study (surprisingly not funded by mall developers themselves), concluded that ignoring the problem could be the best way to create a false illusion of safety in the area and help generate the tax money needed to eventually deal with the coming change that will have to happen as a result of the sea levels rising.

Only in the world of Keynesian economics does this project – or anything related to it – makes sense.

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Kunstler: “Don’t Cry For Me, Rachel Maddow”

Authored by James Howard Kunstler via Kunstler.com,

The latest artificial hysteria cranked up by the Offendedness Cartel – re: detention of juvenile illegal immigrants — is the most nakedly sentimental appeal yet by the party out-of-power, a.k.a. “the Resistance.”

I have a solution: instead of holding these children in some sort of jail-like facility until their identity can be sorted out, just give each one of them an honorary masters degree in Diversity Studies from Harvard and let them, for God’s sake, go free in the world’s greatest job market.

Before you know it, we’ll have the next generation of Diversity and Inclusion deans, and America will be safe from racism, sexism, and Hispanophobia.

I won’t waste more than this sentence in arguing that official policy for the treatment of juvenile illegal immigrants is exactly what it was under Mr. Obama, and Mr. Bush before him.

I didn’t hear Paul Krugman of The New York Times hollering about the various federal agencies acting “like Nazis” back in 2014, or 2006.

You’d think that ICE officers were taking these kids out behind the dumpster and shooting them in the head.

No, actually, the kids are watching Marvel Comics movies, playing video games, or soccer, and getting three square meals a day while the immigration officials try to figure out who their parents are, or how to repatriate them to their countries-of-origin if they came here without any parents — say, with the assistance of the Sinaloa Drug Cartel.

By the way, these make up the majority of kids detained in the latest wave of mass border crossings.

Actual political leadership among “the Resistance” is AWOL this week. Nancy Pelosi and Chuck Schumer failed to offer up any alternative legislative plan for sorting out these children differently.

One can infer in the political chatter emanating from the Offendedness Cartel that immigration law is ipso-facto cruel and inhuman and that the “solution” is an open border.

In theory, this might play to the Democratic Party’s effort to win future elections by enlisting an ever-growing voter base of Mexican and Central American newcomers. But it assumes that somehow these newcomers get to become citizens, with the right to vote in US elections – normally an arduous process requiring an application and patience – but that, too, is apparently up for debate, especially in California, where lawmakers are eager to enfranchise anyone with a pulse who is actually there, citizen or not.

Krugman of The Times really hit the ball out of the park today with his diatribe comparing US Immigration enforcement to the Nazis treatment of the Jews.

As a person of the Hebrew persuasion myself, I rather resent the reckless hijacking of this bit of history for the purpose of aggrandizing the sentimentally fake moral righteousness of the Resistance. It actually diminishes the meaning of the Nazi campaign against European Jews. I daresay that commentary like Krugman’s will only serve to amplify a growing resentment of Jewish intellectuals in this country — including myself, increasingly the target of anti-Jewish calumnies and objurgations. You’d think the Mr. Trump had offered to blow up Ellis Island the way the Resistance is clamoring to pull down statues of Thomas Jefferson.

One also can’t fail to notice that this latest hysteria was ginned up the very same week that the Department of Justice Inspector General Michael Horowitz and FBI Director Christopher Wray testified in congress about the gross and astounding misconduct in the executive suites of those sister agencies — literally a bastion of the Resistance (or Deep State bureaucracy).

Some kind of giant worm is turning in that circle of the three-ring-circus US politics has become.

A lot of the characters who politicized the FBI – turned it into a chop-shop for election campaign shenanigans – will be headed for grand juries and some of them maybe even jail. It may be the sort of jail in the federal system that offers ping pong and bocce ball, but it won’t be the same as practicing law on K Street in a wainscoted office with coffered ceilings and lunch of poulet chasseur sent up from the brasserie downstairs.

Those confined will have plenty of time to commiserate with the kids from south-of-the-border who were dragged into the USA one way or another by people who didn’t care what happened to them, or reckon on it if they did care.

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