Matthew Robare Listens to Greenwald, Chomsky Discuss Snowden, the Media, and NSA Talking Points

part of his visit to America to promote his new book about Edward
Snowden and National Security Agency (NSA) surveillance, Glenn
Greenwald joined up with Noam Chomsky for a gathering in Cambridge,
Massachusetts, this week.

Journalist Matthew M. Robare attended and documented the
discussion, which ranged from Snowden’s conventional background,
the media’s lack of critical analysis of the government’s
pro-surveillance talking points, and how the world has changed
since Snowden began releasing information.

View this article.

from Hit & Run

What The Fed Won’t Tell You About Student Debt

Two weeks ago, the San Fran Fed released “research” on the topic of whether “it is still worth going to college.” What it “found” was that “Earning a four-year college degree remains a worthwhile investment for the average student…. The average college graduate paying annual tuition of about $20,000 can recoup the costs of schooling by age 40. After that, the difference between earnings continues such that the average college graduate earns over $800,000 more than the average high school graduate by retirement age… We show that the value of a college degree remains high, and the average college graduate can recover the costs of attending in less than 20 years. Once the investment is paid for, it continues to pay dividends through the rest of the worker’s life, leaving college graduates with substantially higher lifetime earnings than their peers with a high school degree.”

What was left unsaid, of course, is that the SF Fed merely was tasked with goalseeking a study that seeks to perpetuate America’s most exponential chart. The one showing federal student loans, which as we showed recently just hit an aggregate total of over $1.1 trillion, increasing 12%, or $125 billion, from this time last year.

As we have shown in the past (here and here), since US consumers have largely given up on the two conventional forms of leverage – credit cards and mortgages – no (taxpayer-funded) expense will be spared to promote the myth that (federal-debt funded) higher education is the way to go.

Alas, the San Fran Fed ignored something important. This is how we concluded our article: “Perhaps for the San Fran Fed to be taken seriously one of these years, it will actually do an analysis that covers all sides of a given problem, instead of just the one it was goalseeked to “conclude” before any “research” was even attempted.”

Namely the impact of debt.

And since the Fed can’t be bothered with an objective analysis covering both sides the most important debt issue for America, we go to Pew which recently concluded an analysis on the impact of student debt and found that “Student debt burdens are weighing on the economic fortunes of younger Americans, as households headed by young adults owing student debt lag far behind their peers in terms of wealth accumulation.”

At the big picture level, there is nothing surprising here, but the extent to which student debt burdens cripple wealth formation and accumulation was indeed stunning and explains why the Fed had to explicitly omit the impact of debt on one’s long-term well-being, because the result is nothing short of shocking.

From Pew:

About four-in-ten U.S. households (37%) headed by an adult younger than 40 currently have some student debt—the highest share on record, with the median outstanding student debt load standing at about $13,ooo.

An analysis of the most recent Survey of Consumer Finances finds that households headed by a young, college-educated adult without any student debt obligations have about seven times the typical net worth ($64,700) of households headed by a young, college-educated adult with student debt ($8,700). And the wealth gap is also large for households headed by young adults without a bachelor’s degree: Those with no student debt have accumulated roughly nine times as much wealth as debtor households ($10,900 vs. $1,200). This is true despite the fact that debtors and non-debtors have nearly identical household incomes in each group.


Another not surprising tangent: those who borrow to pay for college, are most likely to borrow for everything else too.

Among the young and college educated, the typical total indebtedness (including mortgage debt, vehicle debt and credit cards, as well as student debt) of student debtor households ($137,010) is almost twice the overall debt load of similar households with no student debt ($73,250). Among less-educated households, the total debt load of student debtors ($28,300) is more than ten times that of similar households not owing student debt ($2,500).

Either that, or households which do not have to borrow to pay for college, most likely don’t have to pay for other expenses. In other words, Pew uncovered the profound tautology that if you are rich, you remain rich, which all those others in the lower and middle classes who aspire to reach the upper class thanks to easy and cheap debt, only bury themselves even more in their aspirational approach to purchase class status with debt.

As American Interest observes about the Pew research, “the report revealed an alarming trend: While the total debt burden of households without student debt has declined since 2007, the total debt burden of households with student debt has increased. This holds true for all student debtors, whether they completed college or not.

There’s no way to figure out what is behind this huge disparity in wealth accumulation. As the study notes, it’s understandable that young people who went into debt to pay for college also lacked the money to pay for cars and other expenses, and thus borrowed more. The data may also reveal a widening gap between two types of people who go to college: those wealthy enough to afford most if not all of tuition, and those who have to borrow (and keep borrowing) to keep up with the spiraling costs.


Student debt is obviously an enormous burden on a household, and one that seems to set off a domino effect of borrowing. If we want to make sure that college students aren’t feeling the pain of student loans well into middle age (as a recent Gallop poll says they do), we’d better try to make college more affordable. After looking at these figures, can you doubt the severity of the problem?

By now we doubt anyone doubts the severity of the problem. What may be confusing, however, is the problem itself which after Pew’s far better research can be concluded as follows:

  • The San Francisco Fed is absolutely right in that college education is extremely valuable if one is rich enough to be able to afford it without resorting to debt. For those who need student loans to pay for college, the debt cost most likely vastly outweights the benefits from increasingly diminishing cash flows for college graduates, and it is certainly unclear if as the San Fran Fed concludes, the costs are more than paid off within 20 years. This is a profound falacy since there has been no cohort whose college debt IRR can be tested in a 20 year window, since the exponential rise in student debt only took over after the Lehman collapse (for one of the main reasons why college became so expensive following Lehman, read here).
  • The San Francisco Fed is absolutely wrong in not distinguishing how one funds their college education. Because the bottom line is that college educated households which took on student debt have a net worth of $8,700, which is less than the $10,900 net worth of not college educated households who don’t have student debt!

In any case, the conclusion is clear: if one is rich enough to be able to afford college tuition, room and board without requiring debt, college is a no brainer. For everyone else the payoff of a college education, especially in an economy where college grads are certainly not assured quality paying jobs, is far less clear and in fact as Pew finds, one is better off not borrowing to go to college.

Of course, the direct implication here is also very clear, if very sad: the rich who can afford college, will end up becoming even richer thanks to the better-paying jobs their degree affords them, while everyone else will either drown under the weight of student loans, or simply be relegated to far less-paying jobs during their career. And while the Fed can be confused about this conclusion, not even the Fed is confused that it itself is the reason for this record and increasing disparity between rich and poor.

So the next time you curse someone for making college so expensive you need hundreds of thousands in debt to pay for it, or are cursing the fate that made you into a 40+ year old debt slave, aim those curses where they belong: Alan Greenspan, Ben Bernanke and now, obviously, Janet Yellen. Because for all the “confusion” about America’s record wealth divide that French socialists have to reprise the role of Karl Marx, the fundamental reason for the greatest class divide in history is a very simple three letter word: the Fed.

via Zero Hedge Tyler Durden

Fed to Raise Rates in 9 Months

By EconMatters  


James Bullard Speech


The biggest news to come out of Friday`s financial market activity was James Bullard’s thoughts on when he expects the Fed to start raising rates, he believes the Fed will start raising rates sometime near the end of the first quarter of 2015.  


He also said, “While first-quarter GDP growth was weak, growth in coming quarters is still predicted to be robust,” according to slides for his speech. He added, “the average quarterly pace of growth in 2014 may still be an improvement relative to 2013.”


But the Fed may raise rates even sooner as we have thought that the market has become too complacent with regard to the Fed “talking down the market” which is at odds with the robust economic and inflation data of late, and the Fed will be forced to address the sharp rise in economic conditions of the second and third quarters “The FOMC would be ready and willing to get more aggressive if it was required,” including if inflation surged unexpectedly, he said. Another surging PPI report in the same direction fits this category in our opinion. 


The bond market is really asleep at the wheel right now in our opinion. With the recent surge in bond prices, right before a sea change that has been 6 years in waiting, the raising of the Fed funds rate is about to begin, and there are a whole bunch of folks on the wrong side of this trade, and all this money is going to have to come out of the bond market.



Market Squeezes Go Both Directions


Jeffrey Gundlach of Doubleline Capital has been talking up the notion of a bond market squeeze which of course would be good for his fund and his current positioning of the last six months, but squeezes work in both directions Jeffrey Gundlach, and there is far more money long the bond market right now than short, and yields are very depressed right before a sea change in terms of raising rates by the Fed.


All this long money has to come out with rising rates, I am sorry Gundlach but the real squeeze is going to be in the other direction after six years of a near zero Fed Funds Rate, rates are going to be raised and normalized, and according to James Bullard and Janet Yellen the fed will be targeting a normal short-term policy rate of 4 percent to 4.25 percent.


Six Years is not a Lifetime: Historical Interest Rates as Contextual History Lesson


The writing is on the wall, after six years of extremely loose monetary policy rates are going the other direction in the United States; and England is going to follow suit as their economy and inflation concerns have been on the rise as well, expect rate hikes likewise coming out of England in our opinion. 


Thus all this money came rushing into the bond market right before actual rates are going to be raised, talk about great timing and squeezes, over the next five years this is going to be one of the massive squeezes of all time, and in the short-term the 10-Year yield is going to blow past 3% faster than you can say December.



Remember those PPI, CPI and Employment reports are going to be hitting the Fed with an inflating and accelerating economic reality, and the Fed may be forced to act even sooner than 9 months with a couple more hot PPI and CPI reports like last week, and several more 250k plus Employments reports, it is going to get downright ugly in the bond market as all those longs of six years run for the exits under a normalized rate environment. 


Further Reading: May’s Employment Report To Top 300K

The Levered up Yield Trade & The Unwind of Fund Flows


Accordingly, thanks Jeffrey Gundlach for being mindful of squeezes in the bond market, because we are right at the precipice of the biggest Short yield squeeze in the entire history of the bond market with the actual raising of interest rates by the Federal Reserve after six years of extraordinarily low short term rates in terms of monetary policy that created artificially low yields that are about to adjust much higher or normalize.


Just think the amount of money levered up to chase yield because there has been so much cheap low interest rate money to borrow, and leverage up the yield trade, artificially pushing yields even lower, all this money has to be unwound with the raising of short-term rates – this is the worst carry trade in the history of financial markets right before a sharp upturn in short-term interest rates and a massive re-pricing of the entire interest-rate market! 


Calculate the massive amount of funds, derivatives and hedges that now have to start unwinding in the other direction – talk about wrong-footed and mispriced markets! 


Investors currently looking at the wrong market for being a bubble: hint it`s not Google


Everybody has talked about the bubble in the bond markets for six years, but with each passing year and near zero percent interest rates, more complacency has sunk in with the status quo thinking that this low rate environment is the “new normal”. But this couldn`t be further from the case if we review what constitutes normal short term rates, and this complacency was reinforced and even perpetuated by the Federal Reserve itself with their dovish talk and actions of the past six years. 


Now that the interest rate environment is about to change, and everybody should be on their toes, all the bond participants are in a sleep induced coma, and asleep at the proverbial wheel, not being prepared for the shock of their investing lifetimes. Yes short-term interest rates are going to rise in the United States and England in anywhere from six to nine months’ time – and the entire investing community is poorly positioned, and on the wrong side of the market. The bond market bubble is about to burst folks!


© EconMatters All Rights Reserved | Facebook | Twitter | Post Alert | Kindle

via Zero Hedge EconMatters

Assistant Police Chief Says “Too Many Sacrifices” to Allow Flag Defacing In His Pennsylvania Community

trigger warningThe U.S. Code makes desecration of an American
flag a crime punishable by
up to one year in jail. Most states have their own additional laws.
In Pennsylvania it is apparently illegal to “disrespect
the U.S. flag or to use it for publicity or commercial purposes.
(No one tell all the businesses in Philly, and elsewhere I’m sure,
that use American flags to advertise!)

Joshua Brubacker, of Alleghany Township, found out about laws
protecting the American flag last week after spray painting his and
flying it upside down in protest, he says, of the sale of Wounded

“I was offended by it when I first saw it. I had an
individual stop here at the station, a female, who was in the
military and she was very offended by it.” said Allegheny Township
police Assistant Chief L.J. Berg.

Berg said he took the flag down and charged Joshua Brubaker with
desecration and insults to the American flag….

“People have made too many sacrifices to protect the flag and to
have this happen in my community, I’m not happy with that,” Berg

Brubaker said he wishes those who were offended would have come to
him so he could have explained his position. He is facing
misdemeanor charges, but hopes police will

Brubaker also claims he never meant to offend someone which begs
the question of what he did intend with displaying a defaced,
upside down flag? Protest isn’t all that effective if it doesn’t
upset somebody—it’s kind of the point. Brubaker might find more
success appealing to his
First Amendment rights
rather than playing along with (or
buying into, as the case may be) the ridiculous notion that in
America offensiveness is something the police should, uh, police,
or that the right not to be offended is why Americans make
sacrifices for their country.

h/t Anthony B.

from Hit & Run

Bill Clinton’s Epic Double-Cross: How “Not An Inch” Brought NATO To Russia’s Border

Submitted by David Stockman via Contra Corner blog,

American foreign policy is mindlessly driven by the machinery of our Warfare State – a vast accretion of economic, diplomatic, spying and military capabilities which are ceaselessly in search of missions and justifications for their colossal call on the nation’s resources. If you don’t believe that just read Ray McGovern’s succinct summary below of the US’s epic double-cross of Russia on NATO.

It began as a pledge by the first Bush Administration to Gorbachev that in return for German unification and liberation of the “captive nations” there would be “not an inch” of NATO expansion. It ended up its opposite, and for no plausible reason of American security whatsoever. In fact, NATO went on to draft nearly the entire former “Warsaw Pact”, expanding its membership by 12 nations. So doing, it encroached thousands of kilometers from its old Cold War boundaries to the very doorstep of Russia.

So what was the grand logic by which the safety and security of the good folks living in Bangor ME, Lincoln NE and Spokane WA would be enhanced by the addition of Albania, Bulgaria, Croatia, Latvia, Slovakia and Slovenia, among others, to our military shield against, well, no identifiable industrial state enemy?  In Dustin Hoffman’s epigrammatic style, it was fear of one word: Wimp!

That’s right. Bill Clinton came to Washington fresh from wandering the Ozarks for 20 years after his stint as a Rhodes Scholar – and with no clue about the post-cold war world which had suddenly emerged after the fall of the Berlin wall. Accordingly, he was a sitting duck for catcalls from neocon Republicans and spurious platitudes from the national security bureaucracy about “nation-building” and  America’s post-war role as the “indispensable” keeper of the peace.

So as McGovern explains, Clinton just unilaterally cast aside the solemn pledges to freeze NATO at its existing borders that had been made by President Bush and Secretary Baker. In making these pledges the latter represented a world-wise generation that had experienced the long, costly, perilous cold war twilight and had recognized the profound opportunity for a fresh start that had fallen upon the world when the Soviet Union disintegrated.

By contrast, Clinton didn’t want to face re-election against the hawkish Bob Dole and be stuck with the foreign policy “wimp” tag:

From the campaign trail on Oct. 22, 1996, two weeks before he defeated Bob Dole for a second term as president, Bill Clinton used NATO enlargement to advertise his assertiveness in foreign policy and America’s status as the “world’s indispensable nation.” Clinton bragged about proposing NATO enlargement at his first NATO summit in 1994, saying it “should enlarge steadily, deliberately, openly.” He never explained why.

The startling thing in hindsight is that many of America’s most respected and experienced cold war thinkers saw the absolute folly of NATO expansion long before a single former member of the Soviet bloc had been added. The father of the “containment” doctrine and the original instigator of Truman’s excessively and unfortunately aggressive anti-Soviet policy, George Kennan, had no doubt about the distilled lessons of half a century:

Clinton made what quintessential Russian specialist Ambassador George Kennan called a “fateful error.” Writing in the New York Times on Feb. 5, 1997, Kennan asserted: “Expanding NATO would be the most fateful error of American policy in the entire post-cold-war era.”


“Such a decision may be expected to inflame the nationalistic, anti-Western and militaristic tendencies in Russian opinion; to have an adverse effect on the development of Russian democracy; to restore the atmosphere of the cold war to East-West relations, and to impel Russian foreign policy in directions decidedly not to our liking.”

Needless to say, Kennan could not have been more clairvoyant. Yet wisdom and analysis were impotent in the face of the inexorable drive of the Warfare State to perpetuate itself. Indeed, once the process of NATO expansion was set in motion by Clinton’s feckless campaign sloganeering, it took on the aura of United Way membership drive: Any nation east of the old cold war boundaries that had a flag and a couple of generals was fair game.

This mindless drive was eventually extended by George W.Bush’s neocon warmongers to encompass former constituent parts of the Soviet Union itself, including Stalin’s home province of Georgia and Khrushchev’s homeland in the Ukraine. The Warfare State machinery-minders in the beltway did not get the irony, nor did they heed the dire warnings from saner heads inside the national security bureaucracy itself.

The US ambassador to Moscow in 2008, William Burns, a pedigreed member of the War Party and current Under-Secretary of State, left nothing to the imagination in a dispatch prior to the fateful Bucharest summit in July 2008 in which NATO announced that Georgia and the Ukraine where being invited to join a military alliance against an unspecified enemy:

…we have the text of a State Department cable dated Feb. 1, 2008, from the U.S. Embassy in Moscow bearing the unusual title: “NYET MEANS NYET: RUSSIA’S NATO ENLARGEMENT REDLINES.”

As it turned out, Burn’s cable was just as clairvoyant as Kennan’s warning a decade earlier. He foresaw Ukrainian upheaval and civil war along almost the precise vectors which are unfolding today:

“Summary. Following a muted first reaction to Ukraine’s intent to seek a NATO membership action plan at the [upcoming] Bucharest summit, Foreign Minister Lavrov and other senior officials have reiterated strong opposition, stressing that Russia would view further eastward expansion as a potential military threat. NATO enlargement, particularly to Ukraine, remains ‘an emotional and neuralgic’ issue for Russia, but strategic policy considerations also underlie strong opposition to NATO membership for Ukraine and Georgia.


“In Ukraine, these include fears that the issue could potentially split the country in two, leading to violence or even, some claim, civil war, which would force Russia to decide whether to intervene.”

That was written in mid-2008, not mid-February of this year. Some future historian will doubtless wonder, therefore, about the next events in this baleful evolution. After all, six months later the “peace” candidate did win!

No matter. Barrack Obama quickly performed the beltway pivot and soon populated his government with leading lights of the War Party including Robert Gates and Hillary Clinton.

The rest is history. Not only was the utterly pointless expansion of NATO never re-considered, its aggressive encroachment on Russia’s borders was actually intensified by the current administration.

There is an underlying lesson here. It matters not a wit what candidates for President say about foreign policy or America’s role in the world. So long as the current massive Warfare State machinery is left in place, and fed by upwards of $900 billion per year in fiscal rations, it will determine policy, not the voters and not the officials they elect.

So the only platform that would make any difference in the future is the “dismantlement platform”.  That is, a campaign to: withdraw from NATO and liquidate it; shutdown entirely obsolete institutions like Radio Free Europe/Radio Liberty, the National Endowment for Democracy and the military and civilian aid bureaucracies; drastically curtail the NSA/CIA/DIA/spy state apparatus; and, of course, drastically demobilize and defund the Pentagon’s machinery of power projection and wars of invasion and occupation.

Absent a dismantlement of the Warfare State machinery, giant policy errors like the Bill Clinton’s double-cross on NATO and Obama’s foolish present confrontation with Putin are nearly guaranteed to recur.

How NATO Jabs Russia On Ukraine

By Ray McGovern

 Russian Foreign Minister Sergei Lavrov used Wednesday’s interview with Bloomberg News to address the overriding issue regarding the future of Ukraine, at least from Moscow’s perspective. Speaking in fluent English, he said Russia would be “categorically against” Ukraine joining NATO.

Lavrov said he welcomed the interviewer’s question regarding whether Ukraine can be part of NATO, recognizing it as a chance to shoehorn background information into the interview. It was an opportunity to explain Moscow’s position to a wide English-speaking international audience – first and foremost Americans. His comments seemed partly aimed at those so malnourished on “mainstream media” that they might be learning the history of NATO enlargement for the first time. Lavrov said:

“In my view, it all started … back in the 1990s, when in spite of all the pronouncements about how the Cold War was over and that there should be no winners – yet, NATO looked upon itself as a winner.”

Lavrov said U.S. and NATO reneged on a series of commitments: not to enlarge the Alliance; then (after NATO was expanded contrary to that commitment), not to deploy substantial forces on the territories of new NATO members; and then not to move NATO infrastructure to the Russian border.

“All these commitments have been, to one degree or another, violated,” said Lavrov, adding that “attempts to draw Ukraine into NATO would have a negative impact on the entire system of European security.” Lavrov said Russia’s national security interests and 25 years of recent history make this a key problem, not only for Ukraine and NATO, but also “an issue of Russia.”

Is Lavrov distorting the history? The answer is important – the more so inasmuch as the information needed to form cogent judgments is rarely found in the U.S. “mainstream media.” What happened in the months immediately before and after the fall of the Berlin Wall on Nov. 9/10, 1989, is key to understanding Russia’s attitude now.

No Dancing

To his credit, President George H. W. Bush sent a reassuring message to the Soviets, saying, “I will not dance on the Berlin wall.” And just three weeks after it fell, Bush flew to Malta for a two-day summit with Gorbachev.

At a joint press conference on Dec. 3, 1989, Gorbachev said, “We are at the beginning of a long road to a lasting, peaceful era. The threat of force, mistrust, psychological and ideological struggle should all be things of the past.”

In the same vein, Bush spoke of a new future just begun “right here in Malta” – one of lasting peace and enduring East-West cooperation. This came just six months after Bush had publicly called in a major speech in Mainz, West Germany, for “a Europe whole and free.” At the time it did not seem one had to be Pollyanna to hope that flesh could be pinned to the bones of that rhetoric.

According to Jack Matlock, then-U.S. ambassador to the U.S.S.R. who took part in the Malta summit, the most basic agreement involved (1) Gorbachev’s pledge not to use force in Eastern Europe where the Russians had 24 divisions (some 350,000 troops) in East Germany alone, and (2) Bush’s promise not to “take advantage” of a Soviet withdrawal from Eastern Europe.

In early February 1990, Bush sent Secretary of State James Baker to work out the all-important details directly with Gorbachev and Foreign Minister Eduard Shevardnadze. Ambassador Matlock again was there and took careful notes on the negotiations, which focused on German reunification.

From memory, Matlock told me that Baker tried to convince Gorbachev that it was in Moscow’s interest to let a united Germany remain in NATO. Matlock recalled that Baker began his argument saying something like, “Assuming there is no expansion of NATO jurisdiction to the East, not one inch, what would you prefer, a Germany embedded in NATO, or one that can go independently in any direction it chooses.” [emphasis added]

The implication was that Germany might just opt to acquire nuclear weapons, were it not anchored in NATO. Gorbachev answered that he took Baker’s argument seriously, and wasted little time in agreeing to the deal.

Ambassador Matlock, one of the most widely respected experts on Russia, told me “the language used was absolute, and the entire negotiation was in the framework of a general agreement that there would be no use of force by the Soviets and no ‘taking advantage’ by the U.S.”

He added, “I don’t see how anybody could view the subsequent expansion of NATO as anything but ‘taking advantage,’ particularly since, by then, the U.S.S.R. was no more and Russia was hardly a credible threat.”

In his book Superpower Illusions, Matlock wrote that NATO enlargement was a function of U.S. domestic politics not of foreign policy strategic thinking. It seems he got that right, too.

Tough Guy Clinton

From the campaign trail on Oct. 22, 1996, two weeks before he defeated Bob Dole for a second term as president, Bill Clinton used NATO enlargement to advertise his assertiveness in foreign policy and America’s status as the “world’s indispensable nation.” Clinton bragged about proposing NATO enlargement at his first NATO summit in 1994, saying it “should enlarge steadily, deliberately, openly.” He never explained why.

President Clinton, thus, reneged on the pledges made by Baker to Gorbachev and Shevardnadze. Clinton lamely called upon Russia to view NATO’s enlargement as an arrangement that will “advance the security of everyone.”

Clinton’s tough-guy-ism toward Russia was, in part, a response to even more aggressive NATO plans from Clinton’s Republican opponent Bob Dole, who had been calling for incorporating Poland, the Czech Republic and Hungary as full members of NATO and had accused Clinton of “dragging his feet” on this. Clinton was not about to be out-toughed.

Those three countries joined NATO in 1999, starting a trend. By April 2009, nine more countries became members, bringing the post-Cold War additions to 12 – equal to the number of the original 12 NATO states.

Clinton made what quintessential Russian specialist Ambassador George Kennan called a “fateful error.” Writing in the New York Times on Feb. 5, 1997, Kennan asserted: “Expanding NATO would be the most fateful error of American policy in the entire post-cold-war era.”

“Such a decision may be expected to inflame the nationalistic, anti-Western and militaristic tendencies in Russian opinion; to have an adverse effect on the development of Russian democracy; to restore the atmosphere of the cold war to East-West relations, and to impel Russian foreign policy in directions decidedly not to our liking.”

If you are the “sole indispensable” country in the world, though, you are sorely tempted not to heed the worrywarts.

Seeds of a Crisis

On Wednesday, Lavrov said the seeds of the current Ukraine crisis were sown in April 2008 during the NATO summit in Bucharest when NATO leaders stated in a declaration that “Georgia and Ukraine will be in NATO.”

Were Lavrov not the consummate diplomat, he might have also told his interviewer that, two months before the Bucharest summit, he had warned U.S. Ambassador to Russia William J. Burns to anticipate a strong Russian reaction to including Ukraine and Georgia in NATO. But diplomats don’t generally permit themselves an “I told you so.”

Thanks to Pvt. Chelsea (formerly Bradley) Manning and WikiLeaks, we have the text of a State Department cable dated Feb. 1, 2008, from the U.S. Embassy in Moscow bearing the unusual title: “NYET MEANS NYET: RUSSIA’S NATO ENLARGEMENT REDLINES.”

The IMMEDIATE precedence that the cable bears shows that Ambassador Burns (now Deputy Secretary of State) was addressing a priority issue under active consideration in Washington. Though it was six years ago, Burns interlocutor was the same Russian Foreign Minister Sergei Lavrov. Here is Burns’s introductory summary of his discussions with Lavrov:

“Summary. Following a muted first reaction to Ukraine’s intent to seek a NATO membership action plan at the [upcoming] Bucharest summit, Foreign Minister Lavrov and other senior officials have reiterated strong opposition, stressing that Russia would view further eastward expansion as a potential military threat. NATO enlargement, particularly to Ukraine, remains ‘an emotional and neuralgic’ issue for Russia, but strategic policy considerations also underlie strong opposition to NATO membership for Ukraine and Georgia.

“In Ukraine, these include fears that the issue could potentially split the country in two, leading to violence or even, some claim, civil war, which would force Russia to decide whether to intervene.”

Ambassador Burns continued: “Russia has made it clear that it would have to ‘seriously review’ its entire relationship with Ukraine and Georgia in the event of NATO inviting them to join. This could include major impacts on energy, economic, and political-military engagement, with possible repercussions throughout the region and into Central and Western Europe.”

Burns’s closing comment: “Russia’s opposition to NATO membership for Ukraine and Georgia is both emotional and based on perceived strategic concerns about the impact on Russia’s interest in the region. … While Russian opposition to the first round of NATO enlargement in the mid-1990s was strong, Russia now feels itself able to respond more forcefully to what it perceives as actions contrary to its national interests.”

We don’t know whether Secretary of State Condoleezza Rice read Burns’s prescient remarks, but Lavrov’s warning clearly fell on deaf ears. On April 3, 2008, the NATO summit in Bucharest issued a formal declaration that “NATO welcomes Ukraine’s and Georgia’s Euro-Atlantic aspirations for membership in NATO. We agreed today that these countries will become members of NATO.”

Now, with events quickly spinning out of control in Ukraine, some policymakers need to tell President Obama that there can be even bigger trouble ahead, if Russia’s national security interests are not taken into account.

Ray McGovern works with Tell the Word, a publishing arm of the ecumenical Church of the Saviour in inner-city Washington. He came to Washington over 50 years ago and worked as a CIA analyst under seven Presidents, one less than Gates. Ray now serves on the Steering Group of Veteran Intelligence Professionals for Sanity (VIPS).

Reprinted with permission from Consortium News.

via Zero Hedge Tyler Durden

Ronald Bailey on the Moral Case for Designer Babies

Should prospective parents seek information about
gene variants that increase the risk their children will develop
diseases as adults? Should physicians provide that information?
Some bioethicists believe that such pre-birth testing is wrong,
arguing that the information could stigmatize kids or lead parents
to terminate pregnancies of genetically at-risk fetuses. Children,
they contend, have a right to an “open future” unburdened by the
knowledge of their genetic predispositions for adult onset
illnesses. Ronald Bailey rejects the notion that genetic ignorance
is somehow liberating and lauds genome sequencing as a means for
people to safely reproduce when they would not have been able to

View this article.

from Hit & Run

This Is What Happens When You Leave A Tank Parked On A City Street In Ukraine

As Jalopnik reports, a BMP light tank was reportedly left stalled on a city street near Mariupol… A gassed-up, fully-loaded tank. Ready to roll. Ready to obliterate some separatists. This is what happened next…


Forward to around 46 seconds for when he finds the big red “Fire” button…

via Zero Hedge Tyler Durden

Bernanke Shocker: “No Rate Normalization During My Lifetime”

Forget all the talk about “dots“, “6 months”, or any other prognostication from the Fed’s new leadership about what will happen in the near and not so near future. For the real answer prepare to shelve out the usual fee of $250,000 for an hour with the Chairsatan, or read Reuters’ account of what others who have done so, have learned. The answer is a stunner. “At least one guest left a New York restaurant with the impression Bernanke, 60, does not expect the federal funds rate, the Fed’s main benchmark interest rate, to rise back to its long-term average of around 4 percent in Bernanke’s lifetime. “Shocking when he said this,” the guest scribbled in his notes. “Is that really true?” he scribbled at another point, according to the notes reviewed by Reuters.”

To think one could have read Zero Hedge for free for the past 5 years and get the same answer (time for a pop quiz: pumping liquidity into a closed system in perpetuity is i) inflationary or ii) deflationary?). But no, one would rather pay Bernanke’s former annual salary in less than an hour to get the answer from the same person who infamously stated that “subprime was contained”, that “there is no housing bubble”, and that he doesn’t buy the premise of house price declines as there has never been a “decline of house prices on a nationwide basis.”

Still, one can’t blame Bernanke for providing a service that the market (one market the former chairman didn’t manage to break with his central planning spree, unlike all other markets) demands. Alan Greenspan waited only a week after his departure before addressing a private dinner hosted by Lehman Brothers, the investment bank whose collapse in 2008 sent the financial crisis into high gear.

Bernanke’s private dinners, all of which cost around $250,000 began near the end of March, roughly two months after his retirement.

We say around because while Greenspan has already been rocked by 50% deflation in his “assets“, Bernanke too is starting to realize that without constant liquidity injections, his “inflationary” days are also numbered:

The baseline fee for a private get together is $250,000, and more if Bernanke needs to travel from his home in Washington, though the price has dropped some as he has done more events, the sources said. The size of that decline could not be immediately learned.

Certainly expect the price of a Bernanke dinner to tumble now that virtually everyone who matters, and can afford the fee, has already listened to the Chairsatan in private, and the value of Bernanke’s insight has been, shall we say, “diluted”:

Hedge fund attendees have included Paul Tudor Jones of Tudor Investment Corp and David Einhorn of Greenlight Capital. Others have included Michael Novogratz of Fortress Investment Group, and Larry Robbins of Glenview Capital, as previously reported in other media. All declined to comment to Reuters.


David Tepper, the hedge fund manager who earned $3.5 billion in 2013 to rank as the industry’s best paid investor, said at an industry conference this week that he attended the first private dinner and peppered Bernanke with questions. But Tepper said he didn’t make the best use of the information, a lapse he now regrets. “I screwed up that trade,” he said.


At the same conference, Novogratz from Fortress said many hedge funds that bet on big interest rate and currency movements missed a hint from Bernanke at the dinner and failed to buy long duration Treasuries.

Oh yeah, it was Bernanke hinting that Tsys are due for a surge – nothing to do with the fact that the global economy is stalling and that everyone and the kitchen sink was short rates, launching one of the biggest short squeezes in recent history.

Not surprisingly, not everyone is a happy customer:

Not every guest believes they came away from a Bernanke dinner with an exclusive insight.


“People can try all they want to feel that they got him to say something extra to them, but he never does,” said one person who attended one of the dinners.

As for Bernanke’s profound insight, it appears all he really did is admit that he failed at stimulating the economy.

In one dinner-table exchange with investors, Bernanke argued that fiscal tightening, constrained financial markets and lower U.S. productivity all point to lower real rates than would be considered normal for a long time to come.


Based on trading in the massive Eurodollar futures market, investors have in recent months tempered expectations of rate rises in the years ahead; as it stands, they don’t expect the fed funds rate to return to 4 percent until 2022. As recently as last September, futures markets signaled they thought this would happen by the end of 2018.


At the dinners, Bernanke has also argued the Fed would want to delay raising rates if the tighter financial conditions created could threaten to harm the economy. He has also stressed that financial stability concerns would more formally be considered in policy-making, according to the sources.

In other words, blame Congress for slowing down the economy as it did not engage in reform, the same Congress which explicitly made it clear it would not engage in reform and told the Mr. Chairman “to get to work” to compensate for Congressional ineptitude. And now Bernanke has the gall to blame Congress, which is only able to do what it does thanks to, you guessed it, the Fed’s ZIRP policy.

Of course, the slowing down of the economy, snow or no snow, is precisely the reason why bonds are bid. We explained as much recently:

“When the Fed begins lifting rates is almost not an issue any more,” Stan Jonas, former managing partner of Axiom Management Partners in New York, “The real question is how fast does the Fed increase rates and where do they stop. The market now sees diminished macroeconomic expectations and expects the Fed to ending the upcoming tightening cycle at around 3 percent.”



In other words, the bond market believes in the Japanization of America and another lost decade as the new normal low/no growth world slugs along with no escape velocity dreams anytime soon.


Or even more clearly – it’s about more than this cycle… the Fed’s taper will run its course, the Fed will tighten rates and the economy will slump rapidly meaning the Fed will ease once again (and by then QE will have lost all credibility as anything but an asset inflation machine and along with it – the Fed’s credibility)… the tumble in forward rates indicates the markets growing belief that the future growthiness looks very different from the dream priced into stocks…

Or, in other words, the Taper will lead to the Untaper, as we predicted exactly one year ago, leading to QE number… we don’t even know the nuimber any more – 5,  6,  7? Rinse. Repeat.

As for the conclusion:

He’s being paid … for sharing his wisdom and predictions, and presumably not to exert his influence on the Fed,” he added. This will go on “until he’s proven to not be all that clairvoyant.

The biggest shocker is not that Bernanke punked the market once again and after 5 years of QE the US economy is once again headed into a tailspin – most people with some common sense knew that in 2009.

The shocker is that people are still willing to pay even $1, let alone $250,000, to listen to Bernanke speak.

via Zero Hedge Tyler Durden

Instapundit’s Glenn Reynolds on the Future of Higher Education and How Kids are Getting Wise to Student Loan Debt

The next few weeks will be filled with university commencement
ceremonies that are being held all over the country. But what does
a college degree really mean today? Reason TV interviewed
Instapundits Glenn Reynolds last month on
perception of higher education and potential reforms. The original
writeup is below:

“It’s kind of a weird thing that’s happened with American
society—this idea that you have to have a college degree to be a
respectable member of the middle class,” says Glenn Reynolds,
professor of law at the University of Tennessee and purveyor of the
popular Instapundit blog.
Reynolds’ latest work,
The New School: How the Information Age Will Save American
Education From Itself
, looks at the higher education
bubble and how parents, students, and educators can remake the
education system. 

Reynolds sat down with Reason TV’s Alexis Garcia to discuss why
Americans are spending more for a college education and how
students are responding to increasing tuition costs. “Given how
expensive it is to go to college, there has to be a return
sufficient to make it worth the time and especially the money,”
Reynolds states. “You’re seeing declining enrollment in some
schools and you’re seeing much more price resistance on the part of
both parents and students.”

The discussion also includes Reynolds’ take on school choice,
the upcoming elections, the current state of the blogosphere, and
whether or not both political parties are necessary. Nearly a
decade after Reynolds published
An Army of Davids: How Markets and Technology Empower Ordinary
People to Beat Big Media, Big Government, and Other
, the blogfather still remains optimistic about
technology’s ability to empower the individual and inspire
grassroots movements. 

Approximately 19 minutes long.

to read Glenn’s favorite work, Memorandum from the
by Arthur A. Leff. 

Produced by Alexis Garcia. Camera by Paul Detrick, Zach
Weissmueller, and Tracy Oppenheimer. After Effects graphics by
William Neff. 

Scroll down for downloadable versions, and subscribe to Reason TV’s YouTube channel to
receive automatic notification when new material goes live.

from Hit & Run

Scott Shackford on Oculus Rift vs. SEC Regulations

The makers
of Oculus Rift, a virtual reality 3D headset, raised $2.4 million
on Kickstarter in 2012 after asking for just $250,000 to help get
the headset from drawing board to factory. As with all
Kickstarters, the terms of the deal clearly state that donors don’t
get their money back; the payoff is the warm fuzzy feeling you get
from supporting a cool project. Later that year, Facebook
bought Oculus for $2 billion, leaving many funders feeling
betrayed. But, the way investment regulatory structure is run,
small Kickstarter donors are simply not allowed to be
offered a piece of a fledgling company in exchange for their early
infusion of cash. That’s a problem supporters of crowdfunding are
trying to fix. Some are hoping a massive 585-page set of rules by
the Securities and Exchange Commission (SEC) will help. Scott
Shackford warns that, obviously, the SEC wants to attach a few
strings. Why else would it take a novel’s worth of prose to give
companies permission to sell stakes to small donors? 

View this article.

from Hit & Run