“Perfect Storm” – The (Ominous) Problem With Global Liquidity

Authored by Tuomas Malinen via GnSEconomics.com,

Market liquidity is crucial for well-functioning capital markets. There has been a quite lot of talk about diminished market liquidity and the role of machines in it (see, e.g. Q-review 4/2017this and this). These are worrying developments.

However, while market liquidity is crucial for markets, global financial flows, i.e. liquidity, is also essential to the real economy and for global economic growth. The availability of credit on a global basis fuels investments and growth around the world.  Such financial flows fell by a massive 90 % during the 2008 crisis, which quickly translated into a global recession.  Investment and consumption collapsed almost everywhere, with the exception of China where a massive credit stimulus was enacted.

Since then, there has been an uneven recovery. Cross-border bank lending has never really recovered (see Q-review 1/2017), but the issuance of vast amounts of government and corporate debt has taken its place. This creates a serious risk for the global real economy if highly over-valued capital markets crash.

The metamorphosis of global liquidity

In its recent quarterly report, the Bank of International Settlements, or BIS, raises three crucial points for global liquidity:

  1. Global outside-US dollar denominated debt has risen to a record.

  2. The role of non-bank institutions on providing funding has increased.

  3. The composition of international credit has shifted from bank loans to debt securities.

Combined with the asset purchase programs of central banks (QE) these developments have far-reaching consequences for the global economy.

Currently, non-banking institutions and households outside the US hold over 11.5 trillion worth of dollar-denominated debt—a record. The “shadow banking” sector could conceivably hold the same amount. This means that all policies affecting global dollar liquidity, will have a large effect on the global economy.

The increased role of non-bank institutions in providing credit means that an increasing proportion of international finance comes from unregulated sources. Effectively, this means that these institutions, including money market funds, investments banks, etc., have unwittingly assumed even bigger risks in their lending practices than commercial banks. This also means that when the downturn comes, the share of non-performing and/or defaulted loans will grow higher than before.

As we have noted several times (see, e.g., Q-reviews: 2/20131/20161/20171/2018), the QE-programs of central banks have distorted prices and, therefore, underlying risks in the capital markets. Moreover, the artificial liquidity created by these programs has spread to stock, junk bond and even real estate markets (see Q-review 1/2018). However, QE-programs have had the biggest effect on government bond markets. The prices of sovereign bonds have been driven down (yields have risen) to unprecedented levels across the globe. This in turn has fueled the expansion of debt issuance in international credit markets and which has made it possible for non-bank sources to increase their role in the economy. There has also been a re-balancing towards more risky assets.

Artificially-high asset prices have been supported by the intrusion of CBs in public capital markets, but this is now ending (see Figure 1). The Federal Reserve has already begun to reduce its balance sheet (QT), which has been one of the main reasons for retreating global dollar-liquidity, rising interest rates, and the recent downturn in both emerging and now developed stock markets.

Figure 1. The combined balance sheet of the BOJ, ECB, FED and the PBOC is US dollars and its forecast. Source: GnS Economics, BOJ, ECB, FED, Trading Economics.

What follows the onset of global QT, which seems imminent, is a chaotic correction towards the true market pricing of risk (a crash). Because capital markets carry a larger burden of global finance than before (see Figure 2), their collapse would immediately eliminate funding for companies, households, and even governments globally. Such a dramatic reduction in global liquidity implies an instant recession. This would then be followed by a wave of bankruptcies by “zombified” companies (those with the weakest capital structures, dependent upon loose credit conditions for survival) further accelerating the world economy into a potential depression.

Figure 2. The cross-border bank lending and international debt securities from non-bank financial institutions. Source: GnS Economics, BIS

The “perfect storm”

The collapse of the ‘everything bubble’ created by central banks does thus directly threaten not just asset markets but also the real economy. If (when) the asset markets crash, we will see a dramatic fall in global liquidity which will paralyze both capital investment and consumption.  A perfect storm in global capital markets, banking sectors and—most importantly—the real economy is likely to develop with frightening speed.

What this means is that we might be heading to the largest economic crash in human history, whose aftermath would not spare any corner of the global economic order. This is truly a scenario from our worst nightmare, and we know the creators. Central bankers have set us up.

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South Africa City To Begin Confiscating Land From Whites In National “Test Case”

The debate about land redistribution in South Africa has been a passionate one, as many South African cities face a housing crunch that has left hundreds of thousands of people living in informal settlements. Just as this debate is starting to reach a fever pitch, one South African city, Ekurhuleni, is about to embark on what mayor Mzwandile Masina calls “a test case” for the nation: the government is going to seize hundreds of acres of land, from white citizens without paying for it, to build low-cost housing.

Last month, the city voted in favor of pushing forward with “expropriation without compensation”. According to ABC News, this was  cited by the African National Congress as a legal rule that is necessary in order to distribute land equitably and correct “historic injustices” that took place in the country.

The mayor of Ekurhuleni stated the same thing, saying that landowners in South Africa should not be scared. Mayor Masina told AP: “Our policy is not to take the land by force. Our policy is to make sure the land is shared amongst those that need it.” It was unclear what those whom the land is taken from thought about this policy.

The total amount of land that’s going to be expropriated amounts to about 865 acres. The land is both private and government owned, and some of it has been vacant for decades. Masina, who heads the local ANC-led coalition, did not specify which landowners will be hit be the measure.

The internationally debated land reform was approved by South Africa’s ruling party to address the historic injustices of apartheid, and distribute land among the population more equitably. According to the country’s President Cyril Ramaphosa, over 77 percent of South African farms and agricultural holdings are owned by white citizens with only four percent of lands belonging to black South Africans. White citizens make up just nine percent of the country’s population, while black citizens account for 76 percent. This, to the ruling regime, is a green light to repossess land that has been owned by white citizens, in many cases for generations.

Cyril Ramaphosa

President Cyril Ramaphosa said in July that the ANC had planned to amend the constitution in order to allow this expropriation despite the fact that many are concerned that it could destabilize the country and send the economy into a tailspin. To address this, the ANC has been working to reassure people that what they’re doing is legal and should not be worrisome. Quoted by ABC, Ramaphosa said that everyone should “relax” about this process and that “it would end up very well”.

As reported previously, this land redistribution is being done to address people awaiting government assistance who are forced to live in “horrible” conditions. The city expects to be taken to court after it notifies private landowners that it is going to try and seize their land. This is apparently part of the plan, as the city seems to feel as though it could be victorious in court.

Mzwandile Masina/AP

Ben Cousins, research chair in poverty, land and agrarian studies at the University of Western Cape told ABC News: “You can’t guarantee the outcome. The court may find you do have to pay some level of compensation. It could backfire quite badly.”

And Masina is literally laying it all on the line with this decision; as a result of it, the opposition party, the Democratic Alliance, has tabled a motion of no confidence in the Mayor to be heard October 25. The case study of Ekurhuleni is supposed to figure out how such land redistribution could take hold in other areas, including urban areas, where demand for land is also intense.

Dikgang Uhuru Moiloa, head of the provincial department of Human Settlements, told ABC News: “We have to be very rational. We can’t just chase people out of land, their livelihoods, and providing food for the nation. We can’t do that. Those that use the land effectively definitely will have to be left to use the land effectively.”

There are now more than 1.2 million South Africans that are waiting for government subsidized housing and the backlog continues to grow. More than 11,000 people live in settlements despite registering for government housing as early as the late 1990s. Meanwhile, an exodus of white landowners is quietly fleeing the country amid fears that in addition to having their land confiscated, they may soon be the victims of violence following repeated threats by Julius Malema, aka the Hitler of South Africa, telling white people that he “won’t kill them… yet.”

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The Coming Inflation Threat: The Worst Of Both Worlds

Authored by Charles Hugh Smith via PeakProsperity.com,

Expect falling asset inflation, but rising cost inflation…

Inflation is a funny thing: we feel it virtually every day, but we’re told it doesn’t exist—the official inflation rate is around 2.5% over the past few years, a little higher when energy prices are going up and a little lower when energy prices are going down.

Historically, 2.5% is about as low as inflation gets in a mass-consumption economy like the U.S. that depends on the constant expansion of credit.

But even 2.5% annually can add up if wages are stagnant. According to the Bureau of Labor Statistics (BLS), what cost $1 in January 2009 now costs $1.19. https://www.bls.gov/data/inflation_calculator.htm

That 19% decline in the purchasing power of dollars is tolerable as long as wages go up by 20% over the same period, but for many American households, wages haven’t kept pace with official inflation. 

While the nominal hourly wages keep rising, adjusted for inflation, wages have stagnated for decades.  Here’s a chart based on BLS data that shows median weekly earnings adjusted for official inflation rose $6 a week after five years of decline:

But stagnant wages are only part of the inflation picture: official inflation under-represents real-world inflation on several counts.

First, the weightings of the components in the Consumer Price Index (CPI) are suspect.  Many commentators have explored this issue, but the main point is the severe underweighting of expenses such as healthcare, which is only 8.67% of the CPI but over 18% of the U.S. Gross Domestic Product (GDP).

Second, the “big ticket” components—rent/housing, healthcare and higher education—are under-reported for those who have to pay the unsubsidized cost.  The CPI reflects minor cost decreases in tradable commodity goods such as TVs and clothing that are small parts of the family budget, while minimizing enormous expenses such as college tuition and healthcare that can cost $20,000 annually or more.

Third, by lumping the entire nation into one basket, the CPI ignores the reality that the inflation rate experienced by the protected class whose big-ticket expenses are subsidized by the government or employers is far lower than the rate experienced by the unprotected class that pays full freight. While the protected class complains about healthcare visit co-pays rising from $20 to $40, the unprotected class is getting hit with monthly increases of hundreds of dollars or co-pays in the thousands of dollars.

Fourth, there are significant regional differences which the CPI doesn’t reflect: inflation in coastal areas is running white-hot compared to lower-cost regions.

The Chapwood Index attempts to measure apples-to-apples real-world expenses, and as you can see, the Index estimates real inflation is above 10% for many American households.

It’s hard to believe 2.5% inflation includes the soaring costs of goods such as insulin:

Or student loan payments:

Then there’s the mystery of how the Federal Reserve can create trillions of dollars of new currency and governments and banks can issue trillions of dollars in newly borrowed money—private, corporate and sovereign—can flood into the economy without generating higher official inflation.

Here’s a chart of all credit outstanding in the U.S.: $70 trillion, up $40 trillion since 2000 and up $15 trillion since 2009:

The answer of course is most of that new money has flowed into assets, pushing the valuations of assets such as stocks, high-yield (junk) bonds and real estate to the moon.

This vast inflation of asset prices has pushed household net worth to the moon, too, but…

..the problem is, the wealth isn’t distributed very evenly. The gains have flowed mostly to the top .1% and to a lesser degree to the top 5%:

Unsurprisingly, this asset inflation has greatly enriched those who were already rich, i.e. the owners of the assets which have soared in value.

The fly in the ointment is the real economy hasn’t expanded at the same rate as debt; the ratio of debt to GDP now far exceeds the extremes of the Roaring 20s that set up the collapse of both debt and the asset prices that depended on new debt to fuel demand for overpriced assets.

The enormous expansion of debt and the resulting asset inflation are global phenomena:

Three secular trends have driven asset inflation and moderate deflation of commoditized goods and services:

  1. Globalization, a.k.a. global capital moving around the globe, reaping the gains of labor, credit, environmental and tax arbitrage: move from high-cost, high-tax, environmentally regulated locales to low-tax, low-labor costs and environmentally lax locales and skim all the profits.

  2. Declining interest rates.  Increasing production overseas and stock buybacks have been encouraged by central banks’ maintaining super-low interest rates and easy lending liquidity. Both have pushed corporate profits much higher.

  3. Financialization, i.e. low interest rates, ample liquidity, expanding leverage, the commoditization of previously low-risk financial instruments such as home mortgages, expansion of credit-default swaps and other derivatives and the generalized belief that risk can be eliminated by counterparty contracts.

All three of these secular trends are reversing: globalization is under assault on multiple fronts, as people are starting to question globalization’s role in increasing inequality, environment damage and the hollowing out of domestic economies and the middle class.

A decade of financial repression to keep interest rates near zero is slowly being “normalized” by central banks, enabling rates to rise.  As the overhang of bad debt and the rising risk of defaults start being priced into the bond and debt markets, the pressure on rates will only increase as higher risks demand higher compensation via higher yields.

Furthermore, all the trillions in existing debt will be rolled over at much higher rates going forward, squeezing the revenues of all borrowers, governments, corporations and households alike.

Financialization is following an S-Curve of diminishing returns: all the speculative games that have boosted assets to the moon are running out of steam or faltering.

This is visible in the divergence of GDP (the real-world economy) and household net worth (speculative debt-fueled asset bubbles) mentioned above:

So what happens to inflation as the trends that kept real-world inflation officially low and boosted asset inflation to unprecedented heights all reverse?

The obvious conclusion is asset valuations re-correlate to the trend line of the real-world economy, which is another way saying they drop a lot in a global repricing of risk and the impact of secularly rising interest rates.

That will put the kibosh on the much-vaunted wealth effect that supposedly boosted the animal spirits of borrowing and spending (and speculating) that has fueled the “recovery” of the past decade.

As the global economy spirals into recession, central banks will panic (as usual) and attempt to spark flagging consumption by lowering interest rates and governments will increase deficit spending (i.e. government borrowing) to boost household incomes and corporate revenues.

But unlike last time, these policies may not reflate asset bubbles that have popped, or suppress real-world inflation. Rather, they may fail to boost asset inflation and succeed in boosting real-world inflation while wages continue stagnating and household net worth craters.

Simply put, the world has changed, and the unintended consequences of the past decade’s policies cannot be stuffed back in the bottle. The easy years of watching index funds and other assets rise like clockwork because central banks willed it are over.

In Part 2: Get Ready For “QE For The People” we detail the likeliest next steps in this story in which, under the guise of “progressive fairness”, the next phase of money printing will transmit free money directly into the populace’s pockets.

What’s not to like about that? Well, for starters, it won’t create any true prosperity, it will send cost inflation skyrocketing, and it will further subjugate the populace to the cartels running our economy and political system. But the masses will cheer for it anyways. So get ready.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access

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This Is The Worst Case Scenario If Investors Dump Saudi Arabia

So many Wall Street CEOs and other titans of investing and industry have pulled out of next week’s “Davos in the Desert” conference that even the Ritz-Carlton, owner of the Riyadh venue hosting the conference (as it did last year), has been slammed by human rights groups over its continued support for Crown Prince Mohammad bin Salman and his brutal regime. In perhaps the biggest blow to the conference’s clout, Treasury Secretary Steven Mnuchin has opted not to attend, eve as President Trump has insisted that Saudi Arabia’s story about the circumstances surrounding the (now confirmed) death of critical journalist (and former government insider) Jamal Khashoggi is “credible”. To deflect blame away from MbS, the Saudi leadership has orchestrated a purge of the country’s senior intelligence apparatus and arrested 18 other Saudi nationals for their “involvement” in orchestrating and carrying out the killing. And in the mother of all ironies, the royal family has tasked MbS with running a ministerial committee responsible for restructuring the Saudis foreign intelligence service.

Though Silicon Valley and Wall Street would probably have you believe that they aren’t simply ready to “forget” about Khashoggi, the reality is slightly more nuanced. But the simple fact is that both industries have become too reliant on Saudi money to simply walk away, as Bloomberg and the New York Times laid bare in a batch of stories that exposed this corporate indignation as little more than posturing.


But that doesn’t change the fact that Saudi Arabia’s economy is reliant on foreign money, without which it would grind to a halt (imagine what would happen if foreigner buyers of Saudi oil simply walked away?). While the Saudi Tadawul All Shares Index has rebounded off its lows, many investors are worried about what impact Khashoggi’s killing could have on MbS’s “Vision 2030” initiative, as well as his plans to build a high-tech megacity (tentatively named NEOM). 

In an effort to more thoroughly parse the situation,  the Associated Press has published a Q&A examining the potential repercussions for the Saudi economy (full Q&A courtesy of AP).

* * *

Q: Why does Prince Mohammed need foreign investors?

A: The crown prince wants to diversify the economy away from oil and transform its business and political model. For years, oil revenues paid for plenty of government sector jobs and benefits. That model has come under strain amid a growing population and a period of low oil prices.

The prince’s Vision 2030 strategy foresees the creation of a vibrant private sector. As part of that, he wants to develop new industries like alternative energy, tourism and entertainment. Projects include a new business zone near the Red Sea called NEOM that would focus on advanced manufacturing, renewable energy, artificial intelligence, and biotechnology.

Saudi Arabia has its own companies in more traditional fields like construction, which would get a lot of that investment. But the country would need technology, expertise and financing from outside to carry out Prince Mohammed’s ideas. He wants, for instance, to have his Public Investment Fund — the state-backed investment vehicle – raise more money by selling a stake in chemicals company SABIC to state oil firm Saudi Aramco. Analysts say Saudi Aramco would likely have to borrow to make the deal happen. The PIF itself has already borrowed $11 billion from international banks.

“Foreign investment is a main pillar of Vision 2030,” said Sebastian Sons, an expert on Saudi Arabia at the German Council on Foreign Relations. “The old tradition is on the brink. Diversification of the economy is strongly needed and Vision 2030 is the strategy for that.”

Q: How would the Khashoggi disappearance affect that?

A: Foreign investors already had doubts about the country amid regional conflicts like a blockade of neighbor Qatar and a brutal war against rebels in Yemen. Saudi Arabia ranks 92nd out of 190 countries on the World Bank’s ease of doing business index, which measures things like ability to enforce contracts and get goods in and out of the country. Another cloud was cast over the business environment when Prince Mohammed locked up several dozen members of the Saudi elite in Riyadh’s Ritz-Carlton hotel and seized what the country’s attorney general said was more than $100 billion in assets.

The Khashoggi scandal comes at a time when “the private sector is cowed and hurting in many ways,” said David Butter, an analyst with the Middle East and North Africa program at the Royal Institute of International Affairs in London.

The hotel incident shows that “they don’t know if their assets are safe from sequestration.” And grisly details reported in news media about Khashoggi’s alleged killing “are just going to make the private sector even more worried,” he said.

The war in Yemen has led to horrors such as an air strike by the Saudi-led coalition that killed 40 children, but the Khashoggi incident is harder to play down as a regrettable mishap of war. Butter said Prince Mohammed’s image as the “face of future reform is now much more difficult to sustain.”

Turkish authorities say Khashoggi was killed. The Saudis have denied involvement.

Q: Are people losing faith in Saudi Arabia as a business destination?

A: Foreign business and political leaders are dropping out of next week’s Future Investment Initiative, an annual event started last year to showcase the country as a place to do business. Among those cancelling are U.S. Treasury Secretary Steven Mnuchin, JPMorgan CEO Jamie Dimon, Ford Motor Co. Chairman Bill Ford and Uber CEO Dara Khosrowshahi.

Sons of the German Council on Foreign Relations, said the no-shows “are a serious indicator for Mohammed bin Salman that he is losing trust, that Saudi Arabia is not seen as the ideal place to invest.”

Q: Why are the Saudis investing abroad as well?

A: They’ve been buying stakes mainly in technology firms to diversify their revenue and show the country as forward-looking and tech-friendly place.

The sovereign fund has invested $3.5 billion in Uber, for example. It has pledged $45 billion for the SoftBank Vision Fund, a private equity fund that has taken stakes in Uber and messaging software maker Slack Technologies Inc.

The question now is, whether companies will be leery of Saudi money for fear it will taint their reputations. Richard Branson, the billionaire founder of Virgin Group, has said he is freezing talks for Saudi investment in his space companies. Other executives have limited themselves to the symbolic rebuke of shunning next week’s Saudi conference. Others have simply kept quiet.

Q: How likely are sanctions against Saudi Arabia?

A: Republican Senators Marco Rubio and Lindsey Graham called for Saudi Arabia to be punished if it is confirmed it organized Khashoggi’s disappearance. But they did not specify what that might mean in practice.

The 2016 Global Magnitsky Act makes it possible to impose visa bans barring entry into the U.S. and targeted sanctions on individuals for committing human rights violations or acts of significant corruption. Congress can submit proposed names.

Analyst Butter at the Royal Institute said the prospect of sanctions was unclear but that “any kind of sanctions would have a strong symbolic effect.”

President Donald Trump has promised “severe punishment” if regime involvement is proved, but has also said he does not want to cost U.S. jobs by curtailing U.S. sales of military equipment to the Saudis.

* * *

While US lawmakers from both parties have condemned the killing and threatened sanctions against Saudi Arabia, it appears that – for now at least – the Trump administration plans to do everything in its power to make sure that this doesn’t happen. However, if new information arises that casts the Saudi’s story in doubt – say, if Turkey were to release the purported audio tapes of Khashoggi’s killing – then the international outrage cycle could begin anew, and lawmakers could force Trump to make good on the “severe punishment” that he promised.

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Is Gold Becoming Cool Again?

Authored by John Rubino via DollarCollapse.com,

The sentiment shift is still subtle, but it’s both real and widespread. After a few years of being ignored and/or dismissed as basically useless, gold is cool again, attracting positive comments in the media and increasing accumulation by big investors.

India, for instance, imported less gold than usual in the first part of this year but lately has ramped up its buying, with August imports more than double the year-earlier amount.

Hungary just did something even more dramatic:

Hungary Boosts Gold Reserves 10-Fold, Citing Safety Concerns

Hungary’s central bank increased its gold reserves 10-fold, citing the need to improve its holdings’ safety, joining regional peers with relatively high ownership in the European Union’s east.

Following a similar move by Poland, the central bank in Budapest now holds 31.5 tons of the metal, taking the share among total reserves to 4.4 percent, in line with the average in the region, according to a statement published on its website Tuesday.

Meanwhile, the long-dormant South African gold miners are seeing sudden interest:

Is the Canary in the Gold Mine Coming to Life Again?

Back in late 2015 and early 2016, we wrote about a leading indicator for gold stocks, namely the sub-sector of marginal – and hence highly leveraged to the gold price – South African gold stocks. Our example du jour at the time was Harmony Gold (HMY) (see “Marginal Producer Takes Off” and “The Canary in the Gold Mine” for the details).

As we write these words, something is cooking in South African gold stocks, that much is absolutely certain. Here is a chart of the JSE Gold Index in ZAR (South African rand) terms:

While we cannot be sure why investors have suddenly become enamored with the precious metals sector, it is probably a good guess that gold stocks are by now so cheap that they are considered a worthwhile target for rotation purposes.

And it’s not just South African miners. The industry’s big names are suddenly outperforming tech stocks. From yesterday’s Wall Street Journal:

Investors Are Digging Gold Again

In times of market turmoil, investors often embrace gold. And when that happens, gold-mining stocks tend to do even better.

That has certainly been the case so far this month. New York gold futures are up about 3% so far in October versus a roughly 4% decline for the S&P 500. Shares of many of the world’s biggest gold miners, meanwhile, have notched double-digit gains.

Companies like Toronto’s Barrick Gold Corp ABX +0.75% , South Africa’s AngloGold Ashanti AU -0.15% and Acacia Mining are all up around 15% to 19% after a bruising summer. The VanEck Vectors Gold Miners exchange-traded fund and the iShares MSCI Global Gold Miners fund—which track indexes of global gold-mining firms—are up around 9% to 11% this month.

Gold-miner stocks allow investors to double down on bets the gold price will rise. These companies have higher fixed-investment costs and can become much more profitable when gold prices climb. Many of these companies pay out hefty dividends, too.

An added bonus: Hopes for further consolidation are adding to the momentum after Barrick Gold in September agreed to buy Randgold Resources Ltd. for $6 billion.Investors have poured $278 million into the VanEck gold miner ETF over the past month, according to FactSet, while flows into EPFR-tracked gold funds climbed to an 11-week high last week.

Notice the WSJ appealing to investor animal spirits by touting the benefits of gold miner leverage: “Gold-miner stocks allow investors to double down on bets the gold price will rise. These companies have higher fixed-investment costs and can become much more profitable when gold prices climb. Many of these companies pay out hefty dividends, too.”

This is the kind of thing that hasn’t been said of gold miners for a long time, because when the metal’s price is declining extreme leverage works in reverse to crush earnings. Now, however, the other, happier edge of the leverage sword is starting to cut.

WSJ also predicts a surge in M&A — which is always exciting because it offers a sudden payoff without the long wait for earnings to accrete over time — and then points out that money is pouring into related ETFs, thus reassuring new investors that they’re not alone, but part of a growing trend. These are the kind statements that get people excited.

If history is any guide, end-of-cycle dynamics should now take over, with rising volatility sending capital pouring out of “risk-on” assets and into safe havens. So expect a lot more media accounts explaining the advantages of sound money and the benefits of miner leverage.

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Facebook Sells Disabled Iraq Vet $300,000 In Ads, Then Deletes His Influential Pages

Facebook banned several pages operated by disabled by Air Force veteran Brian Kolfage, after he says he spent $300,000 on advertising. The social media giant removed without warning Kolfage’s Right Wing News and Military Grade Coffee Company (which donates 10% of all profits to veteran organizations), in a site-wide effort to crack down on “misinformation” on the network.

Right Wing News alone had over 3 million followers at the time of its banning. 

According to his new wesbite, Kolfage, a triple amputee, explains: 

I’m not a “conservative.” I’m not a “liberal.” I’m an American, with deep beliefs in what our country stands for. I proved this by vowing to protect and fighting for Americas greatest tenet: free speech.

Many Americans have fought for these political freedoms … freedom of speech … and every American has enjoyed those freedoms … UNTIL TODAY. On October 11, 2018, Facebook shut down thousands of Facebook accounts for their political opinions, saying in effect that they don’t have a “legitimate political argument.” STOP SOCIAL MEDIA CENSORSHIP NOW! Fight4freespeech.com

Kolfage says his “income as a father and husband is threatened,” and that he “invested over $300,000 in ads at Facebook’s own request,” according to Breitbart‘s Lucas Nolan.  

In a Facebook post on his personal page, Kolfage wrote “Facebook lied, they shut down my page because it was conservative, powerful, and the elections are in 2 weeks.

Operation Iraqi Freedom

In 2004, Kolfage was on his second deployment in Iraq when his airbase came under rocket attack. He would lose both legs and an arm as a 107mm rocket shell “exploded about three feet” away, throwing him into the air and against a wall of sandbags. 

Airman Kolfage’s best friend was thrown from his bed during the attack. He heard the screams and rushed outside to find his friend bloody, mangled, and clinging to life. The Airman and a medic rushed to help Airman Kolfage, who was struggling to breathe with only one lung after the other had collapsed. Brian’s friend desperately tried to divert his attention from the seriousness of his injuries, but calmly, Airman Kolfage assured him that he already knew the extent of his wounds, and that he just wanted to go home to his family. –Briankolfage.com 

Brian spent 11 months at Walter Reed medical center, and claims that to this day he is “still the most severely wounded Airman to survive any war.” 

Not going quietly

“If I have to roll into their headquarters and sit there with people in the media, I will,” said Kolfage of his plans to fight Facebook’s decision. “I will be there exposing everything they’ve done to me and my family and our employees. We’re going to take legal action if we don’t get our pages back. It’s just going to turn into a sloppy mess for them. I think they’ve underestimated what they’re dealing with, attacking me, attacking conservatives in general, right before the elections. Never once did Facebook come to us to say there was any issue with RWN or our other pages. Never. But they sure loved taking our money.” 

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In Latest Provocation To Beijing, US Plans New Warship Passage Through Taiwan Strait

In Washington’s latest attempt to provoke Beijing, the United States is planning to send warships through the Taiwan Strait according to Reuters, a mission meant to ensure “free passage” through the strategic waterway and which will further heighten political tensions with China. Reuters sources did not discuss the potential timing for any fresh passage through the strait.

The last time the US conducted a similar crossing under the “free passage” umbrella, China responded angrily over what it saw was the latest US incursion in its geopolitical sphere of influence and a fresh mission would only exacerbate the state of affairs between the two superpowers; meanwhile any repeat would be seen in self-ruled Taiwan as a fresh expression of support by President Donald Trump’s government.

China, which views Taiwan as a wayward province, has been ramping up pressure to assert its sovereignty over the island and it raised concerns over U.S. policy toward Taiwan in talks this week with U.S. Defense Secretary Jim Mattis in Singapore.

Meanwhile, even as Washington mulls ordering a fresh passage through the strait in a show of support for Taiwan and defiance of China’s growing sphere of influence, it has been trying to explain to Beijing that its policies toward Taiwan are unchanged. Mattis delivered that message to China’s Defense Minister Wei Fenghe personally on Thursday, on the sidelines of an Asian security forum.

“Minister Wei raised Taiwan and concerns about our policy. The Secretary reassured Minister Wei that we haven’t changed our Taiwan policy, our one China policy. So it was, I think, a familiar exchange” said Randall Schriver, U.S. assistant secretary of defense who helps guide Pentagon policy in Asia. While Washington has no formal ties with Taiwan, it is bound by law to help it defend itself and is the island’s main source of arms, a topic near and dear to president Trump’s heart: Washington has sold Taiwan more than $15 billion in weaponry since 2010.

Sparring over Taiwan has been just one of a growing number of flashpoints in the U.S.-China relationship, which also include a bitter trade war, U.S. sanctions and China’s increasingly assertive military posture in the South China Sea.

In response to Chinese concerns about US interference in the region, Mattis told Wei on Thursday that the world’s two largest economies needed to deepen high-level military ties so as to navigate tension and rein in the risk of inadvertent conflict.

Meanwhile, some U.S. officials told Reuters that the US has not been aggressive enough when it comes to Taiwan, and say U.S. warship passages in the Taiwan Strait are still too infrequent, noting that a U.S. aircraft carrier hasn’t transited the Taiwan Strait since 2007, during the administration of George W. Bush.

Last year, two U.S. warships, both destroyers, sailed through the Taiwan Strait in July; it was the first such operation in about a year.

The U.S. Navy destroyer Benfold, one of the two destroyers sent through the Taiwan Strait on July 7, 2018

Predictably, Beijing – which has never renounced the use of force to bring Taiwan under its control – responded to the July passage with a warning to the United States to avoid jeopardizing “peace and stability” in the strategic waterway. China has also viewed U.S. overtures toward Taiwan “with alarm”, including the unveiling a new de facto embassy in Taiwan and passage of the Taiwan Travel Act, which encourages U.S. officials to visit the island.

Military experts say the balance of power between Taiwan and China has shifted decisively in China’s favor in recent years, and China could easily overwhelm the island unless U.S. forces came quickly to Taiwan’s aid.

China has also alarmed Taiwan by ramping up military exercises this year, including flying bombers and other military aircraft around the island and sending its aircraft carrier through the narrow Taiwan Strait separating it from Taiwan.

Meanwhile, in more delightful news for US weapons producers and exporters, Taiwan’s President Tsai Ing-wen said last week the island will increase its defense budget every year to ensure it can defend its sovereignty, including resuming domestic development of advanced training aircraft and submarines. Not that any of that will help it defend against the world’s largest  opulous army.

“At this time, China’s intimidation and diplomatic pressure not only hurts relations between both sides, but seriously challenges the peaceful stability in the Taiwan Strait,” she said in a National Day speech in Taipei on Oct. 10.

Her remarks came ahead of island-wide local elections in late November that are seen as a bellwether for her ruling party’s performance in presidential elections due in 2020.

Whatever Taiwan’s fate, the upcoming deliberate US provocation over what China views as its key national interest will only serve to further deteriorate relations between the two nations which are already engaged in both currency and trade war, a relationship in which some have been asking what will be the “accidental” catalyst that escalates the ongoing war between the two superpowers into its “kinetic” phase.

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US Navy Investigating Two Mysterious Helicopter Crashes Amid Rash Of Suspicious Incidents

The USS Ronald Reagan has resumed flight operations Friday morning after a mysterious incident where a MH-60R Seahawk helicopter crashed while making an emergency landing on the ship’s flight deck shortly after taking off at 9 am on Oct. 19. The Navy said it is investigating the crash after the helicopter, a member of the “Saberhawks” Helicopter Maritime Strike Squadron, crash landed shortly after lifting off from the ship’s deck at approximately 9 am on Oct. 19.

The carrier, a member of the Navy’s 7th fleet, was situated off the coast of the Philippines at the time of the crash.

All the sailors injured in the incident were said to be in stable condition and their injuries were non-life threatening, the Navy said. They ranged from minor abrasions and lacerations to fractures. The most seriously injured were airlifted to a hospital in the Philippines.

A Navy spokesman told Stars and Stripes that four crew were aboard the helicopter when the crash happened. In total, 12 people were injured and the carrier sustained some damage. The helicopter crashed during “routine operations” in the Philippine Sea, after the carrier participated in an international naval review near a South Korean island last week.


Meanwhile, Stars and Stripes reported Friday in a different article that the Navy is investigating the cause of another crash involving a HH-60H Seahawk helicopter, which crashed into another helicopter on an Okinawa runway on Oct. 9.

That crash, which involved helicopters from Helicopter Sea Combat Squadron 85, happened at Kadena Air Base. Details were said to be scarce but the investigation is ongoing. Fortunately, there were no injuries in the Oct. 9 incident, but the crash was reported as a Class A mishap, meaning that the damage was either more than $2 million, or at least one of the aircraft is a total loss.

Oddly enough, that was the second Class A mishap reported by the Navy this year this year. On Oct. 4, an F/A-18F Super Hornet made an emergency landing at Naval Air Station Lemoore, Calif., after an engine caught fire during a training exercise. Luckily, nobody was hurt.

While certainly of a much smaller scale, the crashes are eerily reminiscent of the mysterious collisions of US Naval ships last year, which raised questions about the Navy’s honesty in sharing details of the incident – with some even speculating that foreign hackers may have temporarily seized control of the ships involved. Ultimately, the accidents were blamed on human error.

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Did The British Collude To Steal The Election For Hillary?

Authored by Thomas Farnan via American Greatness,

To borrow a Shakespearean expression turned colloquialism, “there’s something rotten in the state of Denmark.”

Great Britain has reportedly applied diplomatic pressure against releasing the unredacted Carter Page FISA documents. Why? Is it that British spy agencies were hot on the trail of Russian collusion and they do not want to have their sources compromised?

Or, more likely, was MI6 spying on an American political campaign with a Russian pretext and it does not want to be embarrassed?

A formal alliance permits intelligence agencies from the United Kingdom and the United States to engage in common spying to stop enemies from doing things like running jets into skyscrapers. Called “Five Eyes,” the alliance also includes Australia, Canada and New Zealand.

At the behest of the FBI, minor members of the Trump campaign, including Carter Page and George Papadopoulos, were invited to London to talk to Cambridge professor Stefan Halper about Trump and Russia.

Unless U.S. intelligence agencies were freestyling in England, MI6 was spying on the Trump campaign.

At the time, Donald Trump was making an unlikely and inexplicable run at the Republican nomination on what has been understood as a nationalist platform.

The Brits were dealing with their own unlikely and inexplicable political event. Tens of millions of working-class voters were angling to do the unthinkable: reject rule by their intellectual betters at the EU.

It was the run-up to the Brexit vote and a wave of nationalism was sweeping the UK. Just like their American liberal counterparts, British elites cannot psychologically process rejection on the merits.

If the common man was turning down their benevolent band of bureaucrats, someone had to be controlling their minds. How else would they act against their own interest?

As I wrote here in August:

The British aristocracy has a condescending view of the hoi polloi who voted for Brexit, regarding them as easily manipulated Pygmalion-like by smarter people. They assumed Vladimir Putin was somehow playing Professor Henry Higgins to the flower girls who voted to reject the EU, because that’s how they see the world. Among the Cambridge class, this simple prejudice renders Russian collusion a first principle with no need for supporting evidence.

Whatever their motivation, it is indisputable that British intelligence agencies were imagining Putin under mattresses in 2016.

If that extreme paranoia influenced behavior, Russian collusion to steal the election is void ab initio. It was instead British collusion under a false Russian pretext. Proof of British collusion can be found in the number of British spies and the absence of anyone Russian in the sordid tale.

Halper is inferentially a British spy. The alternative is that he was an American spy conducting rogue operations from England.

Then there is Joseph Mifsud, who walks, quacks and acts like a British spy. The alternative is that he somehow showed up in the middle of a British sting operation against George Papadopoulos as a real Russian spy to play the part of a Russian spy.

More, Mifsud has documented connections to British spy agencies. He traveled to the United States in early February 2017 as a guest of the State Department, an accommodation not ordinarily made to Russian operatives who just stole an election.

Finally, there is the ubiquitous Christopher Steele, author of the dossier. His connections to MI6 cannot be denied. He is a British spy emeritus, who had most recently been employed to find out why England lost itsWorld Cup bid to Russia.

His answer? Putin did it. When you need a retired British spy to find Putin under a mattress, he’s your guy.

Steele was hired by the Clinton campaign but also used as an FBI asset because they were in the Russian collusion business together.

The joint British-U.S.-Clinton effort to fabricate a Russian canard to thwart Trump had a huge effect on the election and its aftermath.

In March, Hillary Clinton’s campaign chairman had fallen for a ridiculous phishing scheme, releasing his confidential emails to an unknown source.

This has been called “hacking,” but it was not. The DNC’s emails were not hacked until July. The official DNC talking points conflate the phishing with the later hack, which is sometimes confusing.

Even if duplicates of John Podesta’s emails were lost during the July hack, however, expert analysis performed at the behest of the progressive publication The Nation reveals conclusively (until someone can say differently) that it could not have been sourced in Russia, based on the unimpeachable science of download speeds.

For more complete and incisive analysis of the hack that wasn’t, please read Michael Thau’s series here atAmerican Greatness.

The Clinton campaign was able to avoid press scrutiny for the embarrassing contents of the Podesta emails by blaming Trump and Putin under the false Russian flag. More, Trump was caricatured in the crucial last days of the election as Putin’s stooge.

That was the most significant piece of fake news in the election cycle. It necessarily cost Trump votes and could have cost him the election.

In the aftermath of the election, phony Russian collusion disrupted first the transition and then the presidency.

Thanks to the tireless efforts of Rep. Devin Nunes (R-Calif.) and the House Intelligence Committee, as well as some enterprising reporting by journalists such as Lee Smith, Sara Carter, Andrew McCarthy, John Solomon, Sharyl Attkisson, and Julie Kelly, the facts are coming out.

Maybe the Tea Party needs to reconvene to expel the Crown for meddling in American politics.

Hang a lantern aloft in the belfry arch of the North Church tower as a signal light: One if by land, two if by sea, and three if by coordination with American intelligence services and a political campaign.

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Sweden’s Most Powerful Family Braces For The Next Global Crisis

When it comes to families that exercise undue influence over their country, the Kochs, the Morgans, the DuPonts, even the Rothshilds and the Bushes pale in comparison with the Swedish Wallenberg family.

Here’s why: the Wallenbergs are renowned as bankers, industrialists, politicians, bureaucrats, diplomats; they are present in most large Swedish industrial groups, like Ericsson, Electrolux, ABB, SAS Group, SKF, AIK, Atlas Copco and more. In the 1970s, the Wallenberg family businesses employed 40% of Sweden’s industrial workforce and represented 40% of the total worth of the Stockholm stock market

And now they are preparing for the next global crisis.

According to Bloomberg, the Wallenberg family’s holding company Investor AB – which today owns stakes in a fifth of the companies listed on the country’s large-cap index – is preparing for the inevitable downturn in global economy, and to do so it is making sure the holdings in its 372 billion-krona ($42 billion) portfolio of stocks are “agile and flexible” enough to handle a “changed outlook” after leading indicators started pointing to a softer demand environment. To shore up liquidity while it can, not when it has to, the company recently also sold a €500 million bond.

“There are a number of things that we need to watch,” Investor CEO Johan Forssell told Bloomberg in an interview after reporting third-quarter results on Wednesday.

But I don’t have a crystal ball. For us the most important part is that we’re prepared, and that’s why we issued a big bond and why we work closely with our companies to make sure we’re flexible and can adapt to different environments as good as we can.”

Forssell may not have a crystal ball, but the signs are clear: the CEO has been evaluating the leading economic indicators out of China, Europe and globally, observing the recent weakened. He is also worried about the softer demand on the automotive side, as well as risks stemming from Brexit, Italy and the currency devaluations in Argentina and Turkey. Finally, there is the looming threat of a full-blown global trade war.

And unlike most investors who keep “buying the dip”, the warden of Sweden’s greatest family fortune, is preparing for the worst.

“With the combination of these risks, it’s of course necessary to be prepared,” Forssell said, adding that the risk of trade wars constitutes one of the biggest fears. That’s because “having an open market with free trade creates efficiency and is better for the global economy,” the CEO said.

A global trade war would hit Sweden especially hard: for Sweden’s small and open economy, where half of economic output is made up of exports, the stakes are high.

Sweden is home to global companies such as vehicle makers Volvo AB and Volvo Cars, furniture giant Ikea and clothing retailer Hennes & Mauritz AB and is a major exporter of cars and trucks, machinery, paper and pulp products, iron and steel, technological equipment and medical and pharmaceutical products.

And Investor AB holds stakes in many of these listed companies, which apart from Ericsson and Electrolux include Atlas Copco AB, Husqvarna AB, Swiss-Swedish engineering giant ABB Ltd. and U.K.-Swedish drugmaker AstraZeneca Plc. It also has a raft of unlisted holdings and private-equity investments through EQT.

Risks are not only external, however, with threats to the family fortune originating at home. After Sweden’s September election provided an inconclusive result, with neither of the traditional blocs securing a majority due to a surge in support for the nationalist Sweden Democrats, it’s been in political gridlock.

For Forssell – a globalist who wants to see a strong government that is able to take structural initiatives and create a favorable business environment – that development poses a risk.

“I think the more it drags on, the more it creates uncertainty,” Forssell said.

“And it also creates a situation where important decisions that might need to be taken are postponed, and of course, that is not good.”

Perhaps it is not good for the Wallenberg, but for the populist wave sweeping Europe, which in addition to refugees and immigrants has targeted those who have benefited at the expense of the middle class, it’s just the outcome that was eluding much of Europe for decades. And now the tables are turning.

Which means that for the Wallenbergs the risk is two-fold: if the upcoming global crash does not impair the wealth accumulated across the generations, it may be the internal blowback that does.

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