The Tower Of Babel Comes To Paris: The Folly Of Obama's "War" On ISIS

Submitted by David Stockman via Contra Corner blog,

US imperialism was once a fearsome force – mainly for ill. Under the latter heading, Washington’s savage destruction of Vietnam four decades ago comes readily to mind. But now the American Imperium has become just a gong show on the Potomac – even as its weapons have gotten more lethal and its purposes more  spurious and convoluted.

There is no more conspicuous proof than Obama’s quixotic “war” on ISIS. The quote marks are necessary, of course, because the White House insists that this is merely a counter-terrorism project that is not really a war; that the campaign to “degrade, disrupt and destroy” the Islamic State will not deploy a single American soldier—at least not one with his or her boots on; and that the heavy lifting on the ground against the barbaric ISIS hordes will be conducted by a “broad coalition” of so far nameless nations.

In truth, the whole thing is a giant, pathetic farce. There will be no coalition, no strategy, no boots, no ISIS degradation, no gain in genuine safety and security for the American homeland. This is an utterly misbegotten war against an enemy that has more urgent targets than America, but a war which will nonetheless fire-up the already boiling cauldron of Middle Eastern tribal, religious and political conflict like never before. There is no name for what Obama is attempting except utter folly.

Even before Secretary Kerry brought his medicine show to Paris, it was evident there is no coalition of the willing—or even the bought. The best that the 26 odd signatories to his communique could muster was a vague endorsement of Iraq’s boundaries and a pledge to support its still only partially formed, three-week old government “by any means necessary“………except not by a single one of the “means” that are actually available.

Let’s start with the neighboring nations which should fear ISIS far more urgently than the citizens in distant places like Lincoln NE and Spokane WA. The short answer is not a single one of them want to help, can help or will be invited to help. Obama’s putative coalition consists of the invisible (Germany), the indisposed (Turkey), the indecisive (the UK), the ineligible (Iran), the unwelcome (Saudi Arabia), the insolvent (Egypt) and the incensed (Russia), among others.

Thus, the heartland of the newly emerged Islamic State is in the upper Euphrates valley of Syria centered at Raqqah. That is, the fearsome threat against which Washington wants to mobilize two dozen nations sits cheek-by-jowl along a 560 mile border with Turkey. And the latter possesses the largest and most potent air force and army in the region—-a force of some 600,000 including reserves or 25X the size of the CIA’s most recent, and undoubtedly exaggerated, count of ISIS fighters.

Moreover, against the several score of tanks and armored vehicles that the jihadists seized from the retreating Iraqi Army, the Turkish military possesses 3,500 tanks, 9,000 armored fighting vehicles, 700 multiple-launch rocket systems, 2,000 towed artillery pieces and 1,000 aircraft and helicopters—-much of this right out of the latest US military specs. Finally, by virtue of its membership in NATO, it also happens to host one of the largest US air bases in the world.

But Turkey didn’t even sign the communique; won’t deploy its military against ISIS – despite its adjacency and capability to demolish the ISIS capital in short order; and won’t even permit US bombers to operate against ISIS out of the Incirlik  air base – notwithstanding that 60 years ago it was that very facility which allowed Turkey to avoid Stalin’s clutches.

Instead, it seems that the Islamist Sunni regime in Ankara has more urgent fish to fry than the medievalist Sunni sect encamped on its border: Namely, its far higher priority is deposing the secularist Alawite branch of the Shiite tribe represented by the Assad regime in Damascus. Yes, ISIS has 50 Turkish hostages, but that only guarantees that in the immediate neighborhood of the purported greatest terrorist threat ever, according to the US Secretary of Defense, there will be no war of Sunni-on-Sunni.

That means, of course, that the nation with the next largest army in the region ought to step right up because Iran is, after all, the epicenter of the worldwide Shiite community. And it is exactly the 1300-year old “heresy” of that confession which is the real target of the ISIS butchers. To be sure, the latter now find the freedom of young people in distant Buffalo NY to hang around strip malls listening to rap music and drinking beer to be evil incarnate, but their sword is meant first and foremost for the age-old infidel in their immediate environs.

Yet there will be no Shiite boots to mop up behind Obama’s bombers, either. Owing to express malice of forethought in Washington, the Iranians weren’t even invited to Paris. Needless to say, that was no small disappointment to the new government of the very nation we are attempting to rescue.

We had insisted for Iran to be there and we regret their absence,” Iraqi Foreign Minister Ibrahim al-Jaafari said in Paris, adding that Tehran had provided his government with “significant support” in fighting Islamic State.

In fact, Iran is the indispensable ally if Washington really means to takes sides in this latest eruption of an age-old Sunni vs. Shiite religious war that has virtually nothing to do with America’s legitimate security interests. But two decades of neocon and Israeli propaganda have deposited a thick vapor of lies throughout the entire beltway—-spurious claims that Iran is an aggressive, terrorist nation hell-bent on getting nukes, and that, therefore, it cannot be consorted with under any circumstance.

Yes, the mullahs are doctrinaire theocrats who rally the masses with thundering denunciations of the far enemy in Washington and the near one in Tel Aviv. But Iran’s purported two decade long program to acquire nuclear weapons is entirely an invisible one – a phantom campaign that only Washington’s neocon sleuths have ever been able to detect and which involved only a few small experiments that even the CIA says were abandoned a decade ago.

And, of course, Iran has never invaded another country in modern times–unlike Washington. As for supporting “terrorism”, that consists of thoroughly open and plausible alliances based on political and religious affinities with the elected government of Syria and the dominate, elected party – Hezbollah–in Lebanon. Before Washington went hysterical about “terrorism” those sorts of relationships used to be called foreign policy.

So the irony of the neocon demonization of Iran is that the one real political and military barrier to the expansionist ambitions of the Islamic State – the so-called “Shiite Crescent” of Iran, the Assad regime in Syria and Hezbollah – is not even admitt
ed onto the battlefield.
 Indeed, instead of facilitating the organizing and strengthening of the region’s indigenous opposition to ISIS, Washington continues to strangle the Iranian economy with brutal sanctions and attempts to overthrow the one regime with enough boots on the ground to actually halt the ISIS expansion.

Least there was any doubt that the Shiite Crescent is out of the ball game, Iran’s supreme leader, the ayatollah Khamenei quickly made it clear that it would not have gone to Paris even if invited. Thirty years of unrelenting enmity from Washington has its consequences, after all.

“I said we will not accompany America in this matter because they have got dirty intentions and hands,” Iran’s most powerful figure said in a televised address. “They see pretexts to interfere in Iraq and Syria, just as they did in Pakistan, where [the U.S.] can commit any crime it wants.”

On the other hand, Iran’s principle enemy on the Persian Gulf–the royal family of Saudi Arabia—does want to help. That is, they want to help as long as it only involves dropping bombs from high altitude fighters or hosting desert training camps populated by non-Saudi mercenaries.

But there are some real problems with that sort of “help”. In the first place, the Saudi’s have made it very clear that the only bombs they intend  to drop in Syria would be those meant for the incapacitation of Alawite soldiers in Damascus, not ISIS fighters in Raqqah.

Secondly, the Saudi’s are not even welcome to drop bombs on ISIS in Iraq because the newly installed government—actually the same old, same old Shiite gang—-won’t permit it. Indeed, the latter didn’t even need to speak up.  The Kurdish president of the country spoke out preemptively:

Iraq’s president insisted that Arab powers Egypt, the United Arab Emirates and Saudi Arabia do not need to join airstrikes against the Islamic State group. In an exclusive interview with The Associated Press, President Fouad Massoum said, it’s “not necessary”.

But that delimiting of outside help by the Iraqi government involves more than just the exclusion of Sunni Arab air power. The Shiite politicians and militia strongmen who dominate the south do not want to see the sight of any American boots on the ground— even should Obama relent.

In fact, the leaders of Iraqi Shiite militias allied with Iran such as Asaib Ahl al-Haq (“League of the Righteous”), Kata’b Hezbollah and the Madhi Army have warned that US soldiers would be targeted. In this regard, the nemesis of Washington’s first occupation of Iraq, firebrand Shiite cleric Moqtada al-Sadr, leaves nothing to the imagination:

Failing the threat of unrest keeping US troops off Iraqi soil, Sadr warned that they could find themselves once again a target of his allied militias, declaring “if you come back, we will be back too.

 

The Mahdi Army largely disbanded after the US pullout, but Sadr has kept ties with its leadership, threatening regularly to bring them out of retirement if the US tries to return to the country in a military role. With the ISIS war looking to do exactly that, they could quickly be another foe for the US in its ever-expanding conflict.

Mr. Sadr’s ingratitude might seem a trifle grating – after all among the infidel heads that ISIS would love to sever, his would surely rank high on the list. But actually his seemingly impudent remonstrations say it all – namely, that there is no longer an Iraqi nation or Iraqi army and no possibility that it can function as an ally on the ground in destroying ISIS.

What is left in the ancient land of Mesopotamia is only what was there before the last European empires still standing in 1916 drew lines on a map and declared it a nation – that is, sectarian enclaves and obstreperous militia that are more than able to defend their own territories, but do not want to be rescued by the Washington war machine.

And that’s why the chirping cherubs on the CNN War Channel get it so wrong night after night. They are pleased to report that Washington’s allies in Baghdad and Erbil have answered Obama’s call to arms, but have not figured out that this has nothing to do with degrading or defeating ISIS.

Stated differently, the Kurdish militias will doubtless effectively and ferociously defend Iraqi Kurdistan east and north of the Tigris river, but when it comes to the upper Euphrates valley where the Islamic State is actually embedded, there is a considerable problem. Namely, that Turkey considers most of the Kurdish militias which operate there – such as the PKK affiliated groups – to be terrorists and mortal enemies.

Likewise, the Shiite militias would be completely toxic in the Sunni lands where Obama’s bombers will need boots on the ground to accomplish anything except wanton destruction and hellacious blowback. In fact, it is not at all clear that they are any less barbaric than the ISIS fighters. As the New York Times noted, under a surely understated file called “Shiite Militias Post Challenge For US in Iraq”, militia justice is simple. As one fighter explained,

“We break into an area and kill the ones who are threatening people,” said one 18-year-old fighter with Asaib Ahl al-Haq, a Shiite militia that operates as a vigilante force around Baghdad.

In fact, the Shiite militias have been no less ruthless in Sunni neighborhoods than have the ISIS killers in the territories they occupy. As the NYT further noted,

At the end of July, a report from the research and advocacy group Human Rights Watch said it had documented the killings of 109 Sunni men – 48 in March and April, and 61 between June 1 and July 9 – in the villages and towns around Baghdad. Witnesses, medical personnel and government officials blamed Shiite militias for all of them, and “in many cases witnesses identified the militia as Asaib Ahl al-Haq,” the report said.

Well, that leaves Washington’s favorite delusion – the Free Syrian Army(FSA) – as the only available boots. At the end of the day there is no place else to go. Certainly, the peripheral Arab nations are not candidates.

Qatar, for instance, is aligned with the Muslim brotherhood and is therefore proscribed by Egypt and the Saudis. Besides, Qatar’s overwhelming objective is putting a natural gas pipeline though Syria – something that Assad has decisively rejected in deference to his Russian patrons, but which for a price the Islamic State would likely embrace in a heartbeat. So it is not even clear which side the Qataris are on.

Likewise,
the UAE has no soldiers – just money – while Egypt has a lot of the former but none of the latter.

And, yes, there is a roadblock with the so-called moderate rebels and FSA, too. Notwithstanding that the House GOP has already approved $500 million of funding so long as each and every fighter first submits a fitness and suitability report card to the House Armed services committee, it turns out that like Leroy, the reluctant running back of football lore, FSA doesn’t even want the ball.

As widely covered in the middle eastern press but hardly mentioned in Washington, most of the rag-tag remnants of the moderate rebel alliance have announced a truce with ISIS on the grounds that their real enemy resides in Damascus, not Raqqah.

 The Free Syrian Army has announced that it will not sign up to the US-led coalition to destroy Islamic State (IS) militants in Iraq and Syria. The group’s founder, Colonel Riad al-Asaad, stressed that toppling Syrian President Bashar al-Assad is their priority, and that they will not join forces with US-led efforts without a guarantee that the US is committed to his overthrow…

 

The announcement comes a day after a ceasefire was signed between another rebel group, the Syrian Revolutionary Front (SRF), and IS fighters in Damascus. The details of the truce agreement, published by Arabic news site Orient Net, showed that the two sides had agreed not to target each other. The Syrian Observatory for Human Rights said that IS and the SRF had agreed that Assad’s government and the forces allied to it are the principal enemy.

If there appears to be a pattern here, there is. Washington is trapped in a strategic cul-de-sac. Without troops on the ground in the 40% of Syria occupied by the Islamic State, US drones, tomahawks and bunker busters will simply turn these Sunni villages and cities into Gaza-On-Euphrates – that is, a wasteland which will breed ISIS fighters prolifically rather than degrade and destroy the jihadist threat.

But fielding a moderate rebel fighting force in Syria depends on eliminating the Assad regime first – an obviously fraught undertaking. It would result in not simply a two front war – with the Shiite Crescent and ISIS at the same time–but for all practical purposes a three front war, including Russia.

Perhaps the amateur warriors running the show in the Obama White House have not noticed, but their foolish campaign against Russia over the Ukrainian civil war is a direct threat to the only thing that keeps the Russian economy alive – its gas and oil exports to Europe. At the same time, elimination of the Assad regime would almost surely compound that threat by opening up a new gusher of competition for the European energy market in the form of a pipeline through Syria and Turkey for transport of Qatar’s now stranded but massive deposits of natural gas.

So to the nameless coalition of the willing, add an existentially motivated champion – Russia – of the status quo in Damascus. Indeed, were Obama to actually recognize that the route to regime change in Raqqah is through Damascus first, the resulting thunderous confrontation at the UN Security Council would be one for the ages. Putin would be banging his shoe in behalf of the sanctity of sovereign borders in Syria, while the Obama Administration would be reduced to saying that the international rules allegedly at issue in the Ukrainian civil war apply always and everywhere… except when Washington finds them inconvenient.

At the end of the day, of course, the White House will flinch – there will be no overt campaign to militarily eliminate the Assad regime, and therefore no boots on the ground, either. The peace candidate from the school of Saul Alinsky will become the Curtis Lemay of the 21st century. He will attempt to bomb back to the stone age a freakishly retrograde regime that would prefer to be there anyway.

And that points to the final folly of Obama’s war on ISIS. A band of medievalist butchers has seized power in the Sunni uplands of the Euphrates river because for 20 years Washington has been on the wrong side of the Islamic religious divide. It has consistently opposed secularizing Arab regimes in Iraq and Syria while coddling the nursemaids and bursars of Sunni fanaticism—the octogenarian gluttons and Wahhabi tyrants who occupy the throne in Riyadh.

Indeed, the Islamic State’s astonishing military success is almost solely attributable to the vast deposits of advanced weaponry that Washington has dumped into Syria and Iraq in its befuddled campaigns to destroy the Baathist regimes of Saddam Hussein and Bashar Assad. In a recent brilliant exposition in the socialist forum called Counterpunch, author Gary Leupp crystallized the giant strategic error:

George “Dubya” Bush gleefully destroyed the Iraqi state. He smashed a state in which Christians served in high posts, women attended college and felt free to leave their heads uncovered, rock n’ roll blared from radios, liquor stores operated legally, and there was even a gay scene. He replaced it with an occupation run by clueless cowboys literally marching around Baghdad in cowboy boots, issuing orders – most notably the orders of dissolution of the Baathist Party and the Iraqi Army… These were secular institutions, not tools for the propagation of any theology. Their dissolution was an attack, not on a religious belief system (about which the Occupation could have cared less), but on the Sunni community that had provided Saddam Hussein’s support base and dominated his regime.

In the hindsight of history it might well be asked what was Saddam’s offense – surely he was no more autocratic and barbarous than the regime in Saudi Arabia. During the last month alone the latter has accomplished 23 beheadings and, as a matter of general policy, it suppresses internal dissent with ruthless brutality and enforces barbaric medieval religious practices like stoning alleged adulteresses.

In truth, Saddam’s real offense was to pick a fight with the gluttonous emir of Kuwait – the proprietor of another artificial enclave drawn-up by Messrs. Sykes and Picot in deference to the interest of British Petroleum – that had no bearing on America’s security whatsoever. Indeed, 40 years on from the phony and failed oil embargo of 1973 it should be clear that it doesn’t matter which set of dictators and tyrannical rulers control the various hydrocarbon deposits along the Persian Gulf. Sooner or latter they produce and ship the oil because they need the revenue.

Likewise, international market prices have a proven, remarkable capacity to cause consumer economies to adjust to whatever price regime materializes from the rough and tumble of global political and economic developments. Just 15 years ago, the world oil price was under $20 per barrel and Chinese demand was only one-fourth of today’s level. In the interim, the price of oil has been to $150 per barrel and part-way back and there has been an explosion of new investment around the world in both conventional, deep off-shore and alternative energy forms – to say nothing of on-going material gains in energy efficiency across nearly all major economies.

So protecting the economic obscenity of the Gulf sheikdom’s has been an invalid excuse for intervention, but one that nevertheless suited the purposes of the neocons and Washington’s warfare state machinery. Yet what it did in the case of the destruction of the secular Baathist regime in Iraq was to open-u
p the gates to sectarian hell – a consequence that is played out nearly every day as Christian, Yazidi, Kurd, Sunni and Shiite villages take their turns at ethnic cleansing and retaliatory revenge.

So why is Washington promoting a repeat in Syria? After all, the Assads have been no more brutal and selfish than the House of Saud. It can’t be out of fear that they will use chemical weapons on their own citizens. By all accounts those are all gone. No, Washington’s entire campaign is predicated on Syria’s choice of foreign policy alignments – that is, its alliance with Tehran.

So having demonized the relatively enlightened theocrats of Qom and Tehran, Washington would now root-out another Baathist regime that would otherwise stand in the way of the Sharia fundamentalism of ISIS. To quote Gary Leupp again:

The Alawites of Syria have never been interested in establishing a religious state but rather have used the Baathist party to establish religious inclusiveness and prevent the emergence of a Sunni-dominated religious state. Bashar al-Assad’s father even attempted to change the constitution to remove the stipulation that the Syrian president be a Muslim. (This occasioned a massive Sunni uprising in Homs which he brutally crushed in 1982.)

So what we have now in the middle east is a replay of the bloody religious wars that once traumatized the West when Protestants accused Catholics of being idolatrous heretics and the latter returned the favor by putting Protestants to the stakes and the racks.  In the present instance, the real war being waged by ISIS is not against the liberties which pertain on the streets of New York City, but in Leupp’s words, “against the Shiites, Christians, Yezidis, secularists, and others it sees as unbelievers and as stooges of the west. But its primary target is the Shiites”.

Needless to say, since Washington has either destroyed, debilitated or marginalized the natural opposition to Sunni fundamentalism – that is, the Baathist regimes and the Iranian-Shiite alliance – the Islamic State has gained more territory and momentum than would have otherwise been remotely possible.

One way or another, however, 200 million Turks, Iranians, Iraqis, Jordanians, Syrians and Saudis, along with their leaders, will find ways to contain and ultimately eliminate a few thousand medievalist butchers. In the interim, America can remain vigilant at home – which is the only way to deal with the threat of terrorism anyway. Certainly, the confused disciple of Curtis LeMay currently occupying the Oval Office should put his bombs away at the very earliest opportunity.




via Zero Hedge http://ift.tt/1ulswtj Tyler Durden

The Tower Of Babel Comes To Paris: The Folly Of Obama’s “War” On ISIS

Submitted by David Stockman via Contra Corner blog,

US imperialism was once a fearsome force – mainly for ill. Under the latter heading, Washington’s savage destruction of Vietnam four decades ago comes readily to mind. But now the American Imperium has become just a gong show on the Potomac – even as its weapons have gotten more lethal and its purposes more  spurious and convoluted.

There is no more conspicuous proof than Obama’s quixotic “war” on ISIS. The quote marks are necessary, of course, because the White House insists that this is merely a counter-terrorism project that is not really a war; that the campaign to “degrade, disrupt and destroy” the Islamic State will not deploy a single American soldier—at least not one with his or her boots on; and that the heavy lifting on the ground against the barbaric ISIS hordes will be conducted by a “broad coalition” of so far nameless nations.

In truth, the whole thing is a giant, pathetic farce. There will be no coalition, no strategy, no boots, no ISIS degradation, no gain in genuine safety and security for the American homeland. This is an utterly misbegotten war against an enemy that has more urgent targets than America, but a war which will nonetheless fire-up the already boiling cauldron of Middle Eastern tribal, religious and political conflict like never before. There is no name for what Obama is attempting except utter folly.

Even before Secretary Kerry brought his medicine show to Paris, it was evident there is no coalition of the willing—or even the bought. The best that the 26 odd signatories to his communique could muster was a vague endorsement of Iraq’s boundaries and a pledge to support its still only partially formed, three-week old government “by any means necessary“………except not by a single one of the “means” that are actually available.

Let’s start with the neighboring nations which should fear ISIS far more urgently than the citizens in distant places like Lincoln NE and Spokane WA. The short answer is not a single one of them want to help, can help or will be invited to help. Obama’s putative coalition consists of the invisible (Germany), the indisposed (Turkey), the indecisive (the UK), the ineligible (Iran), the unwelcome (Saudi Arabia), the insolvent (Egypt) and the incensed (Russia), among others.

Thus, the heartland of the newly emerged Islamic State is in the upper Euphrates valley of Syria centered at Raqqah. That is, the fearsome threat against which Washington wants to mobilize two dozen nations sits cheek-by-jowl along a 560 mile border with Turkey. And the latter possesses the largest and most potent air force and army in the region—-a force of some 600,000 including reserves or 25X the size of the CIA’s most recent, and undoubtedly exaggerated, count of ISIS fighters.

Moreover, against the several score of tanks and armored vehicles that the jihadists seized from the retreating Iraqi Army, the Turkish military possesses 3,500 tanks, 9,000 armored fighting vehicles, 700 multiple-launch rocket systems, 2,000 towed artillery pieces and 1,000 aircraft and helicopters—-much of this right out of the latest US military specs. Finally, by virtue of its membership in NATO, it also happens to host one of the largest US air bases in the world.

But Turkey didn’t even sign the communique; won’t deploy its military against ISIS – despite its adjacency and capability to demolish the ISIS capital in short order; and won’t even permit US bombers to operate against ISIS out of the Incirlik  air base – notwithstanding that 60 years ago it was that very facility which allowed Turkey to avoid Stalin’s clutches.

Instead, it seems that the Islamist Sunni regime in Ankara has more urgent fish to fry than the medievalist Sunni sect encamped on its border: Namely, its far higher priority is deposing the secularist Alawite branch of the Shiite tribe represented by the Assad regime in Damascus. Yes, ISIS has 50 Turkish hostages, but that only guarantees that in the immediate neighborhood of the purported greatest terrorist threat ever, according to the US Secretary of Defense, there will be no war of Sunni-on-Sunni.

That means, of course, that the nation with the next largest army in the region ought to step right up because Iran is, after all, the epicenter of the worldwide Shiite community. And it is exactly the 1300-year old “heresy” of that confession which is the real target of the ISIS butchers. To be sure, the latter now find the freedom of young people in distant Buffalo NY to hang around strip malls listening to rap music and drinking beer to be evil incarnate, but their sword is meant first and foremost for the age-old infidel in their immediate environs.

Yet there will be no Shiite boots to mop up behind Obama’s bombers, either. Owing to express malice of forethought in Washington, the Iranians weren’t even invited to Paris. Needless to say, that was no small disappointment to the new government of the very nation we are attempting to rescue.

We had insisted for Iran to be there and we regret their absence,” Iraqi Foreign Minister Ibrahim al-Jaafari said in Paris, adding that Tehran had provided his government with “significant support” in fighting Islamic State.

In fact, Iran is the indispensable ally if Washington really means to takes sides in this latest eruption of an age-old Sunni vs. Shiite religious war that has virtually nothing to do with America’s legitimate security interests. But two decades of neocon and Israeli propaganda have deposited a thick vapor of lies throughout the entire beltway—-spurious claims that Iran is an aggressive, terrorist nation hell-bent on getting nukes, and that, therefore, it cannot be consorted with under any circumstance.

Yes, the mullahs are doctrinaire theocrats who rally the masses with thundering denunciations of the far enemy in Washington and the near one in Tel Aviv. But Iran’s purported two decade long program to acquire nuclear weapons is entirely an invisible one – a phantom campaign that only Washington’s neocon sleuths have ever been able to detect and which involved only a few small experiments that even the CIA says were abandoned a decade ago.

And, of course, Iran has never invaded another country in modern times–unlike Washington. As for supporting “terrorism”, that consists of thoroughly open and plausible alliances based on political and religious affinities with the elected government of Syria and the dominate, elected party – Hezbollah–in Lebanon. Before Washington went hysterical about “terrorism” those sorts of relationships used to be called foreign policy.

So the irony of the neocon demonization of Iran is that the one real political and military barrier to the expansionist ambitions of the Islamic State – the so-called “Shiite Crescent” of Iran, the Assad regime in Syria and Hezbollah – is not even admitted onto the battlefield. Indeed, instead of facilitating the organizing and strengthening of the region’s indigenous opposition to ISIS, Washington continues to strangle the Iranian economy with brutal sanctions and attempts to overthrow the one regime with enough boots on the ground to actually halt the ISIS expansion.

Least there was any doubt that the Shiite Crescent is out of the ball game, Iran’s supreme leader, the ayatollah Khamenei quickly made it clear that it would not have gone to Paris even if invited. Thirty years of unrelenting enmity from Washington has its consequences, after all.

“I said we will not accompany America in this matter because they have got dirty intentions and hands,” Iran’s most powerful figure said in a televised address. “They see pretexts to interfere in Iraq and Syria, just as they did in Pakistan, where [the U.S.] can commit any crime it wants.”

On the other hand, Iran’s principle enemy on the Persian Gulf–the royal family of Saudi Arabia—does want to help. That is, they want to help as long as it only involves dropping bombs from high altitude fighters or hosting desert training camps populated by non-Saudi mercenaries.

But there are some real problems with that sort of “help”. In the first place, the Saudi’s have made it very clear that the only bombs they intend  to drop in Syria would be those meant for the incapacitation of Alawite soldiers in Damascus, not ISIS fighters in Raqqah.

Secondly, the Saudi’s are not even welcome to drop bombs on ISIS in Iraq because the newly installed government—actually the same old, same old Shiite gang—-won’t permit it. Indeed, the latter didn’t even need to speak up.  The Kurdish president of the country spoke out preemptively:

Iraq’s president insisted that Arab powers Egypt, the United Arab Emirates and Saudi Arabia do not need to join airstrikes against the Islamic State group. In an exclusive interview with The Associated Press, President Fouad Massoum said, it’s “not necessary”.

But that delimiting of outside help by the Iraqi government involves more than just the exclusion of Sunni Arab air power. The Shiite politicians and militia strongmen who dominate the south do not want to see the sight of any American boots on the ground— even should Obama relent.

In fact, the leaders of Iraqi Shiite militias allied with Iran such as Asaib Ahl al-Haq (“League of the Righteous”), Kata’b Hezbollah and the Madhi Army have warned that US soldiers would be targeted. In this regard, the nemesis of Washington’s first occupation of Iraq, firebrand Shiite cleric Moqtada al-Sadr, leaves nothing to the imagination:

Failing the threat of unrest keeping US troops off Iraqi soil, Sadr warned that they could find themselves once again a target of his allied militias, declaring “if you come back, we will be back too.

 

The Mahdi Army largely disbanded after the US pullout, but Sadr has kept ties with its leadership, threatening regularly to bring them out of retirement if the US tries to return to the country in a military role. With the ISIS war looking to do exactly that, they could quickly be another foe for the US in its ever-expanding conflict.

Mr. Sadr’s ingratitude might seem a trifle grating – after all among the infidel heads that ISIS would love to sever, his would surely rank high on the list. But actually his seemingly impudent remonstrations say it all – namely, that there is no longer an Iraqi nation or Iraqi army and no possibility that it can function as an ally on the ground in destroying ISIS.

What is left in the ancient land of Mesopotamia is only what was there before the last European empires still standing in 1916 drew lines on a map and declared it a nation – that is, sectarian enclaves and obstreperous militia that are more than able to defend their own territories, but do not want to be rescued by the Washington war machine.

And that’s why the chirping cherubs on the CNN War Channel get it so wrong night after night. They are pleased to report that Washington’s allies in Baghdad and Erbil have answered Obama’s call to arms, but have not figured out that this has nothing to do with degrading or defeating ISIS.

Stated differently, the Kurdish militias will doubtless effectively and ferociously defend Iraqi Kurdistan east and north of the Tigris river, but when it comes to the upper Euphrates valley where the Islamic State is actually embedded, there is a considerable problem. Namely, that Turkey considers most of the Kurdish militias which operate there – such as the PKK affiliated groups – to be terrorists and mortal enemies.

Likewise, the Shiite militias would be completely toxic in the Sunni lands where Obama’s bombers will need boots on the ground to accomplish anything except wanton destruction and hellacious blowback. In fact, it is not at all clear that they are any less barbaric than the ISIS fighters. As the New York Times noted, under a surely understated file called “Shiite Militias Post Challenge For US in Iraq”, militia justice is simple. As one fighter explained,

“We break into an area and kill the ones who are threatening people,” said one 18-year-old fighter with Asaib Ahl al-Haq, a Shiite militia that operates as a vigilante force around Baghdad.

In fact, the Shiite militias have been no less ruthless in Sunni neighborhoods than have the ISIS killers in the territories they occupy. As the NYT further noted,

At the end of July, a report from the research and advocacy group Human Rights Watch said it had documented the killings of 109 Sunni men – 48 in March and April, and 61 between June 1 and July 9 – in the villages and towns around Baghdad. Witnesses, medical personnel and government officials blamed Shiite militias for all of them, and “in many cases witnesses identified the militia as Asaib Ahl al-Haq,” the report said.

Well, that leaves Washington’s favorite delusion – the Free Syrian Army(FSA) – as the only available boots. At the end of the day there is no place else to go. Certainly, the peripheral Arab nations are not candidates.

Qatar, for instance, is aligned with the Muslim brotherhood and is therefore proscribed by Egypt and the Saudis. Besides, Qatar’s overwhelming objective is putting a natural gas pipeline though Syria – something that Assad has decisively rejected in deference to his Russian patrons, but which for a price the Islamic State would likely embrace in a heartbeat. So it is not even clear which side the Qataris are on.

Likewise, the UAE has no soldiers – just money – while Egypt has a lot of the former but none of the latter.

And, yes, there is a roadblock with the so-called moderate rebels and FSA, too. Notwithstanding that the House GOP has already approved $500 million of funding so long as each and every fighter first submits a fitness and suitability report card to the House Armed services committee, it turns out that like Leroy, the reluctant running back of football lore, FSA doesn’t even want the ball.

As widely covered in the middle eastern press but hardly mentioned in Washington, most of the rag-tag remnants of the moderate rebel alliance have announced a truce with ISIS on the grounds that their real enemy resides in Damascus, not Raqqah.

 The Free Syrian Army has announced that it will not sign up to the US-led coalition to destroy Islamic State (IS) militants in Iraq and Syria. The group’s founder, Colonel Riad al-Asaad, stressed that toppling Syrian President Bashar al-Assad is their priority, and that they will not join forces with US-led efforts without a guarantee that the US is committed to his overthrow…

 

The announcement comes a day after a ceasefire was signed between another rebel group, the Syrian Revolutionary Front (SRF), and IS fighters in Damascus. The details of the truce agreement, published by Arabic news site Orient Net, showed that the two sides had agreed not to target each other. The Syrian Observatory for Human Rights said that IS and the SRF had agreed that Assad’s government and the forces allied to it are the principal enemy.

If there appears to be a pattern here, there is. Washington is trapped in a strategic cul-de-sac. Without troops on the ground in the 40% of Syria occupied by the Islamic State, US drones, tomahawks and bunker busters will simply turn these Sunni villages and cities into Gaza-On-Euphrates – that is, a wasteland which will breed ISIS fighters prolifically rather than degrade and destroy the jihadist threat.

But fielding a moderate rebel fighting force in Syria depends on eliminating the Assad regime first – an obviously fraught undertaking. It would result in not simply a two front war – with the Shiite Crescent and ISIS at the same time–but for all practical purposes a three front war, including Russia.

Perhaps the amateur warriors running the show in the Obama White House have not noticed, but their foolish campaign against Russia over the Ukrainian civil war is a direct threat to the only thing that keeps the Russian economy alive – its gas and oil exports to Europe. At the same time, elimination of the Assad regime would almost surely compound that threat by opening up a new gusher of competition for the European energy market in the form of a pipeline through Syria and Turkey for transport of Qatar’s now stranded but massive deposits of natural gas.

So to the nameless coalition of the willing, add an existentially motivated champion – Russia – of the status quo in Damascus. Indeed, were Obama to actually recognize that the route to regime change in Raqqah is through Damascus first, the resulting thunderous confrontation at the UN Security Council would be one for the ages. Putin would be banging his shoe in behalf of the sanctity of sovereign borders in Syria, while the Obama Administration would be reduced to saying that the international rules allegedly at issue in the Ukrainian civil war apply always and everywhere… except when Washington finds them inconvenient.

At the end of the day, of course, the White House will flinch – there will be no overt campaign to militarily eliminate the Assad regime, and therefore no boots on the ground, either. The peace candidate from the school of Saul Alinsky will become the Curtis Lemay of the 21st century. He will attempt to bomb back to the stone age a freakishly retrograde regime that would prefer to be there anyway.

And that points to the final folly of Obama’s war on ISIS. A band of medievalist butchers has seized power in the Sunni uplands of the Euphrates river because for 20 years Washington has been on the wrong side of the Islamic religious divide. It has consistently opposed secularizing Arab regimes in Iraq and Syria while coddling the nursemaids and bursars of Sunni fanaticism—the octogenarian gluttons and Wahhabi tyrants who occupy the throne in Riyadh.

Indeed, the Islamic State’s astonishing military success is almost solely attributable to the vast deposits of advanced weaponry that Washington has dumped into Syria and Iraq in its befuddled campaigns to destroy the Baathist regimes of Saddam Hussein and Bashar Assad. In a recent brilliant exposition in the socialist forum called Counterpunch, author Gary Leupp crystallized the giant strategic error:

George “Dubya” Bush gleefully destroyed the Iraqi state. He smashed a state in which Christians served in high posts, women attended college and felt free to leave their heads uncovered, rock n’ roll blared from radios, liquor stores operated legally, and there was even a gay scene. He replaced it with an occupation run by clueless cowboys literally marching around Baghdad in cowboy boots, issuing orders – most notably the orders of dissolution of the Baathist Party and the Iraqi Army… These were secular institutions, not tools for the propagation of any theology. Their dissolution was an attack, not on a religious belief system (about which the Occupation could have cared less), but on the Sunni community that had provided Saddam Hussein’s support base and dominated his regime.

In the hindsight of history it might well be asked what was Saddam’s offense – surely he was no more autocratic and barbarous than the regime in Saudi Arabia. During the last month alone the latter has accomplished 23 beheadings and, as a matter of general policy, it suppresses internal dissent with ruthless brutality and enforces barbaric medieval religious practices like stoning alleged adulteresses.

In truth, Saddam’s real offense was to pick a fight with the gluttonous emir of Kuwait – the proprietor of another artificial enclave drawn-up by Messrs. Sykes and Picot in deference to the interest of British Petroleum – that had no bearing on America’s security whatsoever. Indeed, 40 years on from the phony and failed oil embargo of 1973 it should be clear that it doesn’t matter which set of dictators and tyrannical rulers control the various hydrocarbon deposits along the Persian Gulf. Sooner or latter they produce and ship the oil because they need the revenue.

Likewise, international market prices have a proven, remarkable capacity to cause consumer economies to adjust to whatever price regime materializes from the rough and tumble of global political and economic developments. Just 15 years ago, the world oil price was under $20 per barrel and Chinese demand was only one-fourth of today’s level. In the interim, the price of oil has been to $150 per barrel and part-way back and there has been an explosion of new investment around the world in both conventional, deep off-shore and alternative energy forms – to say nothing of on-going material gains in energy efficiency across nearly all major economies.

So protecting the economic obscenity of the Gulf sheikdom’s has been an invalid excuse for intervention, but one that nevertheless suited the purposes of the neocons and Washington’s warfare state machinery. Yet what it did in the case of the destruction of the secular Baathist regime in Iraq was to open-up the gates to sectarian hell – a consequence that is played out nearly every day as Christian, Yazidi, Kurd, Sunni and Shiite villages take their turns at ethnic cleansing and retaliatory revenge.

So why is Washington promoting a repeat in Syria? After all, the Assads have been no more brutal and selfish than the House of Saud. It can’t be out of fear that they will use chemical weapons on their own citizens. By all accounts those are all gone. No, Washington’s entire campaign is predicated on Syria’s choice of foreign policy alignments – that is, its alliance with Tehran.

So having demonized the relatively enlightened theocrats of Qom and Tehran, Washington would now root-out another Baathist regime that would otherwise stand in the way of the Sharia fundamentalism of ISIS. To quote Gary Leupp again:

The Alawites of Syria have never been interested in establishing a religious state but rather have used the Baathist party to establish religious inclusiveness and prevent the emergence of a Sunni-dominated religious state. Bashar al-Assad’s father even attempted to change the constitution to remove the stipulation that the Syrian president be a Muslim. (This occasioned a massive Sunni uprising in Homs which he brutally crushed in 1982.)

So what we have now in the middle east is a replay of the bloody religious wars that once traumatized the West when Protestants accused Catholics of being idolatrous heretics and the latter returned the favor by putting Protestants to the stakes and the racks.  In the present instance, the real war being waged by ISIS is not against the liberties which pertain on the streets of New York City, but in Leupp’s words, “against the Shiites, Christians, Yezidis, secularists, and others it sees as unbelievers and as stooges of the west. But its primary target is the Shiites”.

Needless to say, since Washington has either destroyed, debilitated or marginalized the natural opposition to Sunni fundamentalism – that is, the Baathist regimes and the Iranian-Shiite alliance – the Islamic State has gained more territory and momentum than would have otherwise been remotely possible.

One way or another, however, 200 million Turks, Iranians, Iraqis, Jordanians, Syrians and Saudis, along with their leaders, will find ways to contain and ultimately eliminate a few thousand medievalist butchers. In the interim, America can remain vigilant at home – which is the only way to deal with the threat of terrorism anyway. Certainly, the confused disciple of Curtis LeMay currently occupying the Oval Office should put his bombs away at the very earliest opportunity.




via Zero Hedge http://ift.tt/1ulswtj Tyler Durden

The Silver Paradox In One Chart

As gold and silver prices tumble to multi-year lows, an odd thing is happening in the ‘paper’ precious metals ETF markets. Demand remains high for silver ETF exposure as ‘someone’ is aggressively unwinding gold ETF positions.. and yet the prices for both are falling rapidly. It appears the retail investor is taking advantage of the lower prices in silver to accumulate additional exposure as Credit Suisse notes, “the perception is that silver will do well, and should outperform gold as the economic recovery strengthens,” adding that “belief in silver’s dual properties, as a financial asset and also as an industrial metal, appears to remain strong.”

  • *SPDR GOLD HOLDINGS TUMBLE 1% TO 776.44 TONS, LOWEST SINCE 2008

ETF demand remains high for silver… as gold ETF demand tumbles…

 

And yet Silver prices are languishing just as much as gold prices…

  • *SILVER FUTURES FALL TO $18.125/OZ, LOWEST SINCE AUG. 2010

Short-term…

 

And longer-term…

Charts: Bloomberg

Bloomberg suggests,

Buyers of silver are less swayed by price movements, because unlike gold, the metal is a “buy and hold and forget about it kind of investment,” said Kendall, the third-most accurate precious-metals forecaster tracked by Bloomberg in the eight quarters ended June 30.  

 

“It’s not so actively managed by the retail crowd. It’s tucked away as a retirement store of value or hedge against disaster.”

*  *  *

As GoldCore noted earlier,

At the Denver Gold Summit, yesterday, Keith Neumeyer, president and CEO of First Majestic Silver Corp pointed out that after all the talk by the London Bullion Market Association (LBMA) of greater  transparency for  the new LBMA Silver Price and wider market participation in the auction, nothing much has changed:

 

“Any time you have a small group of people fixing a price, it’s prone to manipulation,” he said. “There’s no change from how it was done before to the way it’s done now – it’s just a different group of players and now they do it on a computer.”

 

To that we would add that the “group of players” is still not all that different since only one player has changed. The old Silver Fixing process had three participants, HSBC, ScotiaMocatta and Deutsche Bank. When Deutsche Bank announced in April that it was pulling out of the Silver Fixing, it precipitated the move by the LBMA to create the new Silver Price.

 

Then, when the new auction was launched on August 15, HSBC and ScotiaMocatta reappeared as participants, bringing Mitsui on board in place of Deutsche Bank. So it’s still the same old usual suspects continuing to fix the silver price each day in London, and there is still little or no transparency about the auction beyond a few netted out buy and sell volume figures.

 

It remains to be seen when if ever the LBMA Silver Price auction will allow in a wider range of direct participants such as mining companies and refiners.

In the meantime, the retail silver investor, as indicated by the silver ETF flows, appears to be taking advantage of the lower price environment to accumulate additional metal. This is also true in the silver coin and bar market.


via Zero Hedge http://ift.tt/1BVqfK6 Tyler Durden

Jackie DeAngelis Blows

I was originally going to title this post “Jackie DeAngelis Must Die”, but I thought she might take it the wrong way.

Anyway, earlier this week, Ms. DeAngelis “interviewed” famed short-seller Bill Fleckenstein on (gack, choke) CNBC, every permabull’s favorite network. Right out of the gate, she attacked him:

0919-bitch

 

You can watch the interview at the bottom of this page if you want, but I can save you the time by simply stating Mr. Fleckenstein was ambushed by a trio of CNBC permabulls, deriding him for missing out on the past five years of market rally.

I think it’s repulsive for a network to take a guest’s time and use it to berate him (why Bob 0919-cuntPrechter shows up on CNBC baffles me, since they just laugh at him). DeAngelis’ entire demeanor toward the Fleck was condescending, smug, arrogant, and mean-spirited. I can easily picture her at cheerleader practice, chastising a girl for being cut from the squad for gaining a few pounds. “I guess that cheeseburger mattered more to you than the Spirit Squad, huh, Becky?”

Ya know, if we had been in a government-rigged bear market for the past five years, CNBC wouldn’t even exist anymore. Bear markets tend to be over all too quickly, but I distinctly remember at the depths of the 2008/2009 bear market that Jim Cramer distinctly said without any qualification that he would tell anyone he cared about to stay out of equities for – – and I’m not making this up – – “the next five years.”

I’m weary of the female business “journalists” being hired for their pretty faces and bra sizes. I’d much rather have a woman that looked like Marlon Brando ask insightful, probing, and thought-provoking questions. They don’t have to pander to their guests, but surely there are ways one can draw meaningful ideas from smart people besides bullying them.

Oh, and if there’s one thing I wish I could have shorted, it’s CNBC viewership. Even with this phony bull market, CNBC is in a free-fall. Once the next bear market begins, I imagine CNBC will simply close up shop completely. Then any questions of the existence of a munificent God can finally be settled.

 


via Zero Hedge http://ift.tt/1BVqdBU Tim Knight from Slope of Hope

45 Facts That Show How Far America Has Fallen In This Generation

Submitted by Michael Snyder of The American Dream blog,

What has happened to America?  Please show these numbers to anyone that does not believe that the United States is in decline.  It is time for all of us to humble ourselves and face the reality of what has happened to our once great nation.  For those of us that love America, it is heartbreaking to watch the foundations of our society rot and decay in thousands of different ways.  The following are 45 facts that show how far America has fallen in this generation, but the truth is that this list could have been far, far longer…

#1 According to a survey that was just conducted, only 36 percent of all Americans can name the three branches of government.

#2 Only 25 percent of all Americans know how long U.S. Senators are elected for (6 years), and only 20 percent of all Americans know how many U.S. senators there are.

#3 Even if you include same-sex couples in the numbers, the marriage rate in the United States is at a 93 year low.

#4 For the first time ever, single Americans make up more than half the U.S. population.

#5 31.1 percent of American young adults in the 18 to 34-year-old age bracket are currently living with their parents.

#6 One out of every ten teen girls in America engages in “self-harm”.  Cutting and burning are the most common forms that this “self-harm” takes.

#7 One survey found that 85 percent of all young men in America and almost half of all young women in America watch porn at least once a month.

#8 A different survey discovered that 64 percent of American men of all ages view pornography at least once per month.

#9 The Internet can be used for great good, but it can also be used for great evil.  It is being reported that 83 percent of U.S. boys and 57 percent of U.S. girls have been exposed to group sex while on the Internet.

#10 One survey discovered that 25 percent of all employees that have Internet access in the United States visit sex websites while they are at work.

#11 There is an epidemic of porn watching among federal employees.  For example, one Treasury Department worker said that he viewed 13,000 pornographic images within the span of six weeks because he did “not have enough work to do“.

#12 An astounding 30 percent of all Internet traffic now goes to adult websites.

#13 Right now, 30 million Americans are on antidepressants.

#14 Americans account for about five percent of the global population, but we buy more than 50 percent of the pharmaceutical drugs.

#15 Americans consume a whopping 80 percent of all prescription painkillers.

#16 According to a study conducted by the Mayo Clinic, nearly 70 percent of all Americans are on at least one prescription drug, and 20 percent of all Americans are on at least five prescription drugs.

#17 Approximately 60 million Americans have a problem with alcohol addiction.

#18 Heroin traffic in New York City is at a 20 year high.

#19 Of all the major industrialized nations, America is the most obese.  Mexico is #2.

#20 Back in 1962, only 13 percent of all Americans were obese, but it is being projected that 42 percent of all Americans could be obese by the year 2030.

#21 70 percent of Americans do not “feel engaged or inspired at their jobs”.

#22 40 percent of all workers in the United States actually make less than what a full-time minimum wage worker made back in 1968 after you account for inflation.

#23 Small business ownership in the United States is at the lowest level that has ever been recorded.

#24 It is hard to believe, but 56 percent of all Americans now have “subprime credit”.

#25 The United States has the most lawyers per capita in the entire world.

#26 The United States has the highest incarceration rate and the largest total prison population in the entire world by a wide margin.

#27 While Barack Obama has been in the White House, the U.S. national debt has grown by more than 7 trillion dollars.

#28 During the Obama years, sexual assaults in the U.S. military have soared to an all-time high, and most of the assaults have been male on male.

#29 According to one absolutely shocking study, 22 military veterans kill themselves in the United States every single day.

#30 The top Democrat in the U.S. House of Representatives is Nancy Pelosi.  The top Republican in the U.S. House of Representatives is John Boehner.  More often than not, they seem to be working together.  Is this really the best that America can do?

#31 There are more than 3 million reports of child abuse in the United States every single year.

#32 At this point, approximately one out of every three children in the United States lives in a home without a father.

#33 18 percent of all women in the United States say that they have been raped at some point in their lives.

#34 According to a study conducted by the Centers for Disease Control and Prevention, approximately two-thirds of all Americans in the 15 to 24-year-old age bracket have engaged in oral sex.

#35 Approximately one-third of the entire population of the United States (110 million people) currently has a sexually transmitted disease according to the Centers for Disease Control and Prevention.

#36 Every single year, there are 20 million new STD cases in America.

#37 America has the highest STD infection rate in the entire industrialized world.

#38 Americans in the 15 to 24-year-old age group account for about 50 percent of all new STD cases each year.

#39 It costs our nation approximately 16 billion dollars a year to treat our sexually transmitted diseases.

#40 According to one survey, 24 percent of all U.S. teens that have STDs say that they still have unprotected sex.

#41 In the United States today, more than half of all couples “move in together” before they get married.

#42 For couples that have children that are just “living together”, two-thirds of them split up by the time they have a child turn 10 years of age.

#43 For women under the age of 30 in the United States, more than half of all babies are being born out of wedlock.

#44 It is estimated that one out of every four girls will be sexually abused before they become adults.

#45 Suicide has now actually surpassed car accidents as the number one cause of “injury death” in the United States.




via Zero Hedge http://ift.tt/1qSBWP4 Tyler Durden

Quantitative Proof The Fed Is Destroying The Middle Class

Submitted by Thad Beversdorf via Voices Of Liberty blog,

Listening to pundits on television, one would think we’ve found a magical species of leprechauns that piss gold rainbows amongst the masses and so we need never again worry about the economy, the markets and whether or not things are improving. And looking at the market’s six-year run to all-time highs, perhaps such euphoria is warranted.

I mean, isn’t the market supposed to be a highly efficient gauge of the underlying economy? The market is a function of expected future cash flows based on demand, supply and productivity. If true, and if the market is at all-time highs, then things must be good, correct?

Let’s look into this proposition. Under historical, normal conditions the market has been a very efficient gauge of the underlying economy. However, these are not normal times and we have unprecedented monetary policies in place. As such, we need to confirm whether or not markets are functioning the same way today as they do in normal times. Specifically we need to confirm that the unprecedented money printing and the Fed targeting higher stock prices haven’t impeded the markets ability to gauge the underlying economy.

Now it’s very difficult to know exactly how much money has been printed since the beginning of the last collapse. I’ve heard figures close to $100 trillion (T) if you consider all of the bailouts globally. But looking at a conservative figure based on M2 money supply and the Fed’s own balance sheet we come to about $4T or $5T since the middle of 2007.

fredgraph1_ThadBeversdorf

 

Since the collapse in 2008 we’ve had a first round of quantitative easing (QE1), a program of buying US Treasuries at a rate of hundreds of billions per month, followed by QE2. We are just nearing the end of QE3. In November 2010, then-Fed Chair Ben Bernanke explained the purpose of the purchasing programs was to boost economic growth through lower borrowing costs and higher stock prices. This is the first recovery attempt I am aware of that the Fed is explicitly targeting higher stock prices. The idea is to create a trickle down recovery. High equity values and low borrowing costs increase profitability expectations for capital investments by way of reduced capital costs. As such, prima facie, one would expect an increase in capital investments leading to job creation and increased demand which are the ingredients for a strong economy. From that perspective it seems reasonable that the Fed is doing the right things.

However, we have to remember that at the end of the day corporations are just money allocators like any hedge fund or mutual fund manager. CEOs are sworn to maximize shareholder funds. Understanding this we must expect corporations to invest based on the best risk/reward scenario available to them as we do for any other investors. Herein lies the invalidity of the Fed’s assumptions.

The Fed assumed that low borrowing costs and high equity values would drive corporate fixed capital investment. It did drive investment, but not fixed capital investment. Corporations, like all other investors, realized the stock market was being backstopped by the Fed. This essentially gave all market long side participants a free put option. In other words, the Fed was protecting folks from any downside risk by explicitly stating they were targeting higher stock prices. Thus corporations and everyone else realized the smart money was directly tied to the market.

To understand this more clearly, imagine you are a CEO of a company and you have sworn to make the best use of shareholder funds. Would you spend $1 billion (B) dollars building out new factories, expanding operations and hiring permanent workers under union contracts when the economy is still very unhealthy or would you simply invest that $1B into the stock market which you know the Fed is pushing higher?

When this strategy was first explained back in 2008, I put together a hypothesis that suggested such a strategy would in fact hurt not help economic growth. Given we are six years in, there is sufficient data to test my theory. Allow me to walk through the results.

My theory asserts the Fed is pulling money away from job creating fixed capital investment and toward no-growth investments, namely, financial markets. If this is correct we should see a decline in fixed capital investment and an increase in dividend payouts (dividends get paid out when the CEO is unable to produce better returns with that money than the shareholders can produce on their own i.e. in the market). Have a look at the following chart which depicts the fixed capital investment as a percentage of GDP less dividend payouts as a percentage of GDP.

 

fredgraph2_ThadBeversdorf

 

Note the line goes negative, meaning dividend payouts exceed fixed capital investment around the time the Fed’s QE1 program began. Another effect is that we should see increased levels of corporate share buy backs. The reason is the same, however, an added benefit to share buy backs is that they reduce the amount of shares outstanding and thus increase the very important earnings per share ratio. Let’s see if corporate share buy backs did, in fact, increase. Have a look at the following chart.

chart5_ThadBeversdorf

 

Again the chart supports the theory. You can see the blue bars increase significantly during QE1 all the way through QE3. I’ve added black slope lines to indicate periods of QE and red slope lines to indicate periods between QE programs. I did this to see if, during the QE pauses, there were differences in the rate of increase of the share buy backs. You can see from the chart that buybacks increase at a higher rate (black slopes) during periods of QE than periods between the QE programs (red slopes). So this is all in line with our theory that these QE programs targeting low borrowing costs and higher stock prices led to increased corporate investment directly to the market.

We proved that while the Fed is targeting higher stock prices, money moved away from fixed capital investment and moved into financial markets. But why is this important? I mean, do we really care what CEO’s do with their money? The answer is absolutely and I will show you why. This is where the theory becomes a bit more interesting. I have not seen the following two charts produced or discussed anywhere else.

So this is a premier event folks. Grab your popcorn, sit back and enjoy the show! The theory suggests that allocating funds away from fixed capital investment and into financial markets is a good decision for CEO’s with their microeconomic viewpoints but a very ineffective use of funds from a macroeconomic viewpoint. Given the overall economy is macro by definition we should be able to observe a positive correlation between the first chart above (showing money moving from fixed investment to markets) and M2 money velocity, which represents how effectively we are allocating our money to generate output. Let’s take a look.

 

fredgraph3_ThadBeversdorf

 

What we find is that as money is reallocated from fixed capital investment into financial markets the economy becomes less and less efficient. As a note, I regressed these two functions and found both stati
stical significance and very strong explanatory properties (adjusted R^2 of .8). Our theory seems to be getting stronger as we go so let’s not stop here. The theory also attempts to explain this inefficiency. It suggests that, as fixed capital investment declines, we get increasing slack in the job market due to reduced capacity. If this is true, we should also see a correlation between the first chart above and median household incomes which should decline as job market slack increases. Let’s have a look.

fredgraph4_ThadBeversdorf

 

And again we find significant support for our theory. One can see simply by looking at the chart there is a strong correlation between the reallocation from fixed capital investment to financial markets and median household incomes. Specifically, as we move away from fixed capital investment we see a decline in real median household incomes. As a note, I regressed these functions as well and although not as strong as the M2 regression I found statistical significance and good explanatory properties.

There appears to be material quantitative support for the theory, but what does it all mean and how does it all work? Fixed capital investments are required to sustain long term economic growth. Without it capacity deteriorates. As capacity deteriorates jobs go away. As jobs go away demand goes away. As demand goes away we circle back to more capacity reductions and the problem becomes circular. And so it begs the question, why did the Fed implement such a flawed strategy? The answer is because it worked in the past.

What the Fed overlooked was that between the crash in 2001 and the latest crash the Fed decided to be more transparent in its activities. They did this in hopes of being able to steer market behavior to some degree. This resulted in a very different message than in the past. This time we all knew the Fed was targeting higher stock prices. This is something that was perhaps assumed in the past but not made explicit. That made all the difference in the world.

Without the Fed targeting higher stock prices the market is still a very risky investment and corporations will be more inclined to stick with their area of expertise. In effect, they will invest in their own operations rather than risk shareholder funds in risky financial markets. Remember the Fed was also targeting lower borrowing costs by way of interest rates. And so companies could borrow cheap money to invest, however, this time the borrowed funds went to the financial markets rather than job creating investments.

The Fed’s strategy of targeting higher stock prices to boost economic growth has done the exact opposite. This strategy has pulled money away from effective macroeconomic investments and into ineffective macroeconomic albeit effective short term microeconomic investments. The end result is that we have all time high stock prices but no economic growth. This is exactly what our theory predicted would happen.

Now in economic terms these are all sunk costs, incredibly high sunk costs, but sunk costs nonetheless. The right course of action at this time is to admit the Fed’s strategy failed and to implement a new strategy that aligns both microeconomic and macroeconomic incentives. Whether this will happen is looking doubtful.

We continue to hear Fed Chair Janet Yellen indicate the economy is not yet healthy enough to stand on its own and so they will have to continue with the current strategy until it gets healthier. Given our discussion above, we know that this will never work.  We will be stuck in this economic lull until the Fed is ready to admit defeat and allow for a new more effective strategy to be implemented.


via Zero Hedge http://ift.tt/1qSBVuK Tyler Durden

First CalPERS, Now Texas Teachers Cut Hedge Fund Exposure

Earlier in the week, perhaps reflecting on the fact that 90% of hedge fund managers are overpaid, California Public Employers Retirement System (CalPERS) announced it would cut its entire exposure to hedge funds. It seems the decision is becoming more popular, as Bloomberg reports, the Teacher Retirement System of Texas, the sixth-largest U.S. public pension, has decided to cut its hedge fund allocation by 1 percentage point to only 8% of the fund. The decision enables the fund to reduce equity exposure and raise fixed income exposure.

 

As Bloomberg reports,

Texas will reduce hedge funds to 8 percent of the pension from 9 percent, according to board documents.

The board of the $126 billion Texas system approved the change today following an asset allocation study, Howard Goldman, a spokesman, said by e-mail.

Besides reducing its bet on hedge funds, the Texas pension lowered the portion of assets it gives to equities by 4 percentage points and to fixed-income securities by 2 percentage points, while adding 5 percentage points each to risk parity and private markets, according to board documents. Risk parity is a strategy for investing based on allocation of risk and private equity and real assets.

Texas Teachers’ has an unfunded liability of about $28.9 billion, meaning it has 80.8 percent of the assets needed to fund future payments to retirees.

*  *  *

Hardly surprising, as we noted previously…

Performance has not been great…

 

as Hedge funds have become nothing but beta…

 

*  *  *

But perhaps the most notable fact from the Texas pension fund’s statement is its great rotation from stocks to bonds…




via Zero Hedge http://ift.tt/1mnoaTR Tyler Durden

Congress Brings 'Atlas Shrugged' To America With This New Bill

Submitted by Simon Black via Sovereign Man blog,

It was known as Directive 10-289, and it was the government’s last-ditch, desperate effort to control the collapsing economy.

The President, along with some of his senior advisors at the Bureau of Economic Planning and National Resources, all widely agreed that the only way out of the crisis was expand government power.

The directive was passed quickly, and among its key provisions:

“Point One. All workers, wage earners and employees of any kind whatsoever shall henceforth be attached to their jobs and shall not leave nor be dismissed nor change employment. . ."

 

“Point Two. All industrial, commercial, manufacturing and business establishments of any nature whatsoever shall henceforth remain in operation, and the owners of such establishments shall not quit nor leave nor retire, nor close, sell or transfer their business. . .”

If you’re searching through your favorite news feed right now wondering why you haven’t heard of Directive 10-289, it’s because the law is fictitious. It’s part of the story from Ayn Rand’s Atlas Shrugged.

At that part in the book, the economy was in a full blown crisis.

The government had engineered one emergency after another, and their only idea to ‘fix’ things was to award themsleves even more power and control over the economy… specifically to freeze everything in place.

No one could be fired or quit his/her job. And no business could stop working. It didn’t matter how much money they were losing.

Crazy idea, right? This could never happen in reality… at least not in the West. It sounds like something straight out of the Soviet Union– forcing unprofitable companies to stay in business.

*  *  *

Enter H.R. 5445, the “Postal Jobs Protection Act of 2014″.

I was utterly stunned when I read this. The meat of the bill consists of just 26 words:

“Notwithstanding any other provision of law, no mail processing facility operating as of September 1, 2014, may be closed or consolidated prior to December 31, 2015.”

Let that sink in a minute: they want to pass a law to ensure that NO US postal center can be shut down through the end of next year.

For the sake of context, let’s walk through the numbers.

In its most recent quarter, the US Postal Service lost a massive $1.9 BILLION. That’s far worse than the $699 million loss they rack up over the same quarter last year.

And so far this fiscal year, USPS has lost over $4 billion.

What’s more– the post office has maxed out its $15 billion credit line. They have almost no liquidity left to continue financing operations, they’re not profitable, and they have no capacity left to borrow more money in order to plug the shortfall.

Perhaps most alarming is that, according to the US Postal Service’s own financial statements, its NET worth (i.e. assets minus liabilities) is NEGATIVE $44 billion.

This doesn’t happen by accident. And it’s not the result of some temporary downturn. It takes years… decades of mismanagement and structural issues to reach this point.

Just for kicks, I compared 2-day shipping rates among major carriers in the US for a simple envelope package.

FedEx: $25.12
UPS: $24.16

And the US Postal Service? $5.05 if I order online.

Duh. It doesn’t take a rocket scientist to see the problem here.

Bear in mind that FedEx and UPS are, you know, profitable, earning $3.3 billion and $6.7 billion in pretax income, respectively. (And they each paid an effective tax rate of more than 35%.)

Curiously, when I was in Ethiopia a few weeks ago, there was an article in the local paper there about how profitable the Ethiopian postal service had become.

I mean– postal services around the world have the same problems. A place like Ethiopia has a massive rural population, and it costs a lot to maintain those small offices. Everyone face rising fuel costs and declining volume.

Yet even in Ethiopia they’ve figured it out. They know they can’t continuously run an unprofitable operation, so they reinvent the business model. That’s life.

In fairness, the Postal Service knows what to do. They’re at the end of their rope. And if they’re going to survive, they need to raise revenue and cut costs dramatically.

This includes the uncomfortable prospect of laying off employees and closing down unprofitable processing centers.

But Congress doesn’t want that. And they’re lifting legislation directly from the pages of Atlas Shrugged to ensure the post office keeps operating at a loss.

This is yet another example of incredibly dangerous central planning being planned, proposed, or in progress in the Land of the Free.

Can you see where this trend is going?

*  *  *

Our goal is simple: To help you achieve personal liberty and financial prosperity no matter what happens.

If you liked this post, please click the box below.
You can Download our Free 17 page Report The 6 Pillars of Self Reliance.




via Zero Hedge http://ift.tt/1wOVC8U Tyler Durden

Congress Brings ‘Atlas Shrugged’ To America With This New Bill

Submitted by Simon Black via Sovereign Man blog,

It was known as Directive 10-289, and it was the government’s last-ditch, desperate effort to control the collapsing economy.

The President, along with some of his senior advisors at the Bureau of Economic Planning and National Resources, all widely agreed that the only way out of the crisis was expand government power.

The directive was passed quickly, and among its key provisions:

“Point One. All workers, wage earners and employees of any kind whatsoever shall henceforth be attached to their jobs and shall not leave nor be dismissed nor change employment. . ."

 

“Point Two. All industrial, commercial, manufacturing and business establishments of any nature whatsoever shall henceforth remain in operation, and the owners of such establishments shall not quit nor leave nor retire, nor close, sell or transfer their business. . .”

If you’re searching through your favorite news feed right now wondering why you haven’t heard of Directive 10-289, it’s because the law is fictitious. It’s part of the story from Ayn Rand’s Atlas Shrugged.

At that part in the book, the economy was in a full blown crisis.

The government had engineered one emergency after another, and their only idea to ‘fix’ things was to award themsleves even more power and control over the economy… specifically to freeze everything in place.

No one could be fired or quit his/her job. And no business could stop working. It didn’t matter how much money they were losing.

Crazy idea, right? This could never happen in reality… at least not in the West. It sounds like something straight out of the Soviet Union– forcing unprofitable companies to stay in business.

*  *  *

Enter H.R. 5445, the “Postal Jobs Protection Act of 2014″.

I was utterly stunned when I read this. The meat of the bill consists of just 26 words:

“Notwithstanding any other provision of law, no mail processing facility operating as of September 1, 2014, may be closed or consolidated prior to December 31, 2015.”

Let that sink in a minute: they want to pass a law to ensure that NO US postal center can be shut down through the end of next year.

For the sake of context, let’s walk through the numbers.

In its most recent quarter, the US Postal Service lost a massive $1.9 BILLION. That’s far worse than the $699 million loss they rack up over the same quarter last year.

And so far this fiscal year, USPS has lost over $4 billion.

What’s more– the post office has maxed out its $15 billion credit line. They have almost no liquidity left to continue financing operations, they’re not profitable, and they have no capacity left to borrow more money in order to plug the shortfall.

Perhaps most alarming is that, according to the US Postal Service’s own financial statements, its NET worth (i.e. assets minus liabilities) is NEGATIVE $44 billion.

This doesn’t happen by accident. And it’s not the result of some temporary downturn. It takes years… decades of mismanagement and structural issues to reach this point.

Just for kicks, I compared 2-day shipping rates among major carriers in the US for a simple envelope package.

FedEx: $25.12
UPS: $24.16

And the US Postal Service? $5.05 if I order online.

Duh. It doesn’t take a rocket scientist to see the problem here.

Bear in mind that FedEx and UPS are, you know, profitable, earning $3.3 billion and $6.7 billion in pretax income, respectively. (And they each paid an effective tax rate of more than 35%.)

Curiously, when I was in Ethiopia a few weeks ago, there was an article in the local paper there about how profitable the Ethiopian postal service had become.

I mean– postal services around the world have the same problems. A place like Ethiopia has a massive rural population, and it costs a lot to maintain those small offices. Everyone face rising fuel costs and declining volume.

Yet even in Ethiopia they’ve figured it out. They know they can’t continuously run an unprofitable operation, so they reinvent the business model. That’s life.

In fairness, the Postal Service knows what to do. They’re at the end of their rope. And if they’re going to survive, they need to raise revenue and cut costs dramatically.

This includes the uncomfortable prospect of laying off employees and closing down unprofitable processing centers.

But Congress doesn’t want that. And they’re lifting legislation directly from the pages of Atlas Shrugged to ensure the post office keeps operating at a loss.

This is yet another example of incredibly dangerous central planning being planned, proposed, or in progress in the Land of the Free.

Can you see where this trend is going?

*  *  *

Our goal is simple: To help you achieve personal liberty and financial prosperity no matter what happens.

If you liked this post, please click the box below.
You can Download our Free 17 page Report The 6 Pillars of Self Reliance.




via Zero Hedge http://ift.tt/1wOVC8U Tyler Durden