GOLD – It’s Time to Pay Attention

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The last time I shared my thoughts on gold, a subject I had previously wrote about constantly, was all the way back in July of last year. That post was titled, 4 Mainstream Media Articles Mocking Gold That Should Make You Think. Here’s an excerpt:

There are many reasons why I stopped commenting on markets, but the main reason is that I started to recognize I wasn’t getting it right. In fact, in some cases I was getting it spectacularly wrong. Whenever this happens, I try to isolate the problem and fix it. In this case there was no fix, because much of why I was no longer getting it right was rooted in the fact that my heart, soul and passion had moved onto other things. My interests had expanded, and I started a blog to express myself on myriad other matters I deemed important. Providing relevant market information needs intense focus, and my focus had shifted elsewhere. I recognized that I wasn’t intellectually interested enough in centrally planned markets to provide insightful analysis, and so I stopped.

Years ago, Martin Armstrong was saying that nothing goes up in a straight line and that gold would experience a severe correction before beginning its real bull market. We are seeing his prediction unfold before our very eyes. What he also said is that as gold approached the $1,000 per/oz mark or even below, everyone would proclaim that “gold is dead” and start making comically bearish statements. In a nutshell, negative sentiment would plunge to levels not seen in years, if not more than a decade. We are starting to see this now.

I didn’t write this article to “call the bottom in gold” or anything like that. I merely want to flag these four articles due to the hyperbolic nature of some of the statements made (they are exhibiting pretty much exactly the same behavior as the gold bugs they mock do). I do think that something is happening on the sentiment front that warrants we are closer to the bottom than the mid-stages of a bear market.

Fast forward six months, and gold has been more or less flat. Nevertheless, a lot has changed in the interim and it’s time for an update. Specifically, the multi-year fundamental outlook has turned far more bullish, while sentiment remains depressed. Yesterday, following multiple back-to-back  messages about gold on Twitter, someone asked me for my bullish thesis, I wrote:

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False Flags Are Just a Conspiracy Theor … Admitted Fact

Presidents, Prime Ministers, Congressmen, Generals, Spooks, Soldiers and Police ADMIT to False Flag Terror

In the following instances, officials in the government which carried out the attack (or seriously proposed an attack) admit to it, either orally, in writing, or through photographs or videos:

(1) Japanese troops set off a small explosion on a train track in 1931, and falsely blamed it on China in order to justify an invasion of Manchuria. This is known as the “Mukden Incident” or the “Manchurian Incident”. The Tokyo International Military Tribunal found: “Several of the participators in the plan, including Hashimoto [a high-ranking Japanese army officer], have on various occasions admitted their part in the plot and have stated that the object of the ‘Incident’ was to afford an excuse for the occupation of Manchuria by the Kwantung Army ….” And see this.

(2) A major with the Nazi SS admitted at the Nuremberg trials that – under orders from the chief of the Gestapo – he and some other Nazi operatives faked attacks on their own people and resources which they blamed on the Poles, to justify the invasion of Poland.

(3) Nazi general Franz Halder also testified at the Nuremberg trials that Nazi leader Hermann Goering admitted to setting fire to the German parliament building in 1933, and then falsely blaming the communists for the arson.

(4) Soviet leader Nikita Khrushchev admitted in writing that the Soviet Union’s Red Army shelled the Russian village of Mainila in 1939 – while blaming the attack on Finland – as a basis for launching the “Winter War” against Finland. Russian president Boris Yeltsin agreed that Russia had been the aggressor in the Winter War.

(5) The Russian Parliament, current Russian president Putin and former Soviet leader Gorbachev all admit that Soviet leader Joseph Stalin ordered his secret police to execute 22,000 Polish army officers and civilians in 1940, and then falsely blamed it on the Nazis.

(6) The British government admits that – between 1946 and 1948 – it bombed 5 ships carrying Jews attempting to flee the Holocaust to seek safety in Palestine, set up a fake group called “Defenders of Arab Palestine”, and then had the psuedo-group falsely claim responsibility for the bombings (and see this, this and this).

(7) Israel admits that in 1954, an Israeli terrorist cell operating in Egypt planted bombs in several buildings, including U.S. diplomatic facilities, then left behind “evidence” implicating the Arabs as the culprits (one of the bombs detonated prematurely, allowing the Egyptians to identify the bombers, and several of the Israelis later confessed) (and see this and this).

(8) The CIA admits that it hired Iranians in the 1950′s to pose as Communists and stage bombings in Iran in order to turn the country against its democratically-elected prime minister.

(9) The Turkish Prime Minister admitted that the Turkish government carried out the 1955 bombing on a Turkish consulate in Greece – also damaging the nearby birthplace of the founder of modern Turkey – and blamed it on Greece, for the purpose of inciting and justifying anti-Greek violence.

(10) The British Prime Minister admitted to his defense secretary that he and American president Dwight Eisenhower approved a plan in 1957 to carry out attacks in Syria and blame it on the Syrian government as a way to effect regime change.

(11) The former Italian Prime Minister, an Italian judge, and the former head of Italian counterintelligence admit that NATO, with the help of the Pentagon and CIA, carried out terror bombings in Italy and other European countries in the 1950s and blamed the communists, in order to rally people’s support for their governments in Europe in their fight against communism. As one participant in this formerly-secret program stated: “You had to attack civilians, people, women, children, innocent people, unknown people far removed from any political game. The reason was quite simple. They were supposed to force these people, the Italian public, to turn to the state to ask for greater security” (and see this) (Italy and other European countries subject to the terror campaign had joined NATO before the bombings occurred). And watch this BBC special. They also allegedly carried out terror attacks in France, Belgium, Denmark, Germany, Greece, the Netherlands, Norway, Portugal, the UK, and other countries.

False flag attacks carried out pursuant to this program include – by way of example only:

(12) In 1960, American Senator George Smathers suggested that the U.S. launch “a false attack made on Guantanamo Bay which would give us the excuse of actually fomenting a fight which would then give us the excuse to go in and [overthrow Castro]“.

(13) Official State Department documents show that, in 1961, the head of the Joint Chiefs and other high-level officials discussed blowing up a consulate in the Dominican Republic in order to justify an invasion of that country. The plans were not carried out, but they were all discussed as serious proposals.

(14) As admitted by the U.S. government, recently declassified documents show that in 1962, the American Joint Chiefs of Staff signed off on a plan to blow up AMERICAN airplanes (using an elaborate plan involving the switching of airplanes), and also to commit terrorist acts on American soil, and then to blame it on the Cubans in order to justify an invasion of Cuba. See the following ABC news report; the official documents; and watch this interview with the former Washington Investigative Producer for ABC’s World News Tonight with Peter Jennings.

(15) In 1963, the U.S. Department of Defense wrote a paper promoting attacks on nations within the Organization of American States – such as Trinidad-Tobago or Jamaica – and then falsely blaming them on Cuba.

(16) The U.S. Department of Defense even suggested covertly paying a person in the Castro government to attack the United States: “The only area remaining for consideration then would be to bribe one of Castro’s subordinate commanders to initiate an attack on Guantanamo.”

(17) The NSA admits that it lied about what really happened in the Gulf of Tonkin incident in 1964 … manipulating data to make it look like North Vietnamese boats fired on a U.S. ship so as to create a false justification for the Vietnam war.

(18) A U.S. Congressional committee admitted that – as part of its “Cointelpro” campaign – the FBI had used many provocateurs in the 1950s through 1970s to carry out violent acts and falsely blame them on political activists.

(19) A top Turkish general admitted that Turkish forces burned down a mosque on Cyprus in the 1970s and blamed it on their enemy. He explained: “In Special War, certain acts of sabotage are staged and blamed on the enemy to increase public resistance. We did this on Cyprus; we even burnt down a mosque.” In response to the surprised correspondent’s incredulous look the general said, “I am giving an example”.

(20) A declassified 1973 CIA document reveals a program to train foreign police and troops on how to make booby traps, pretending that they were training them on how to investigate terrorist acts:

The Agency maintains liaison in varying degrees with foreign police/security organizations through its field stations ….

 

[CIA provides training sessions as follows:]

 

a. Providing trainees with basic knowledge in the uses of commercial and military demolitions and incendiaries as they may be applied in terrorism and industrial sabotage operations.

 

b. Introducing the trainees to commercially available materials and home laboratory techniques, likely to he used in the manufacture of explosives and incendiaries by terrorists or saboteurs.

 

c. Familiarizing the trainees with the concept of target analysis and operational planning that a saboteur or terrorist must employ.

 

d. Introducing the trainees to booby trapping devices and techniques giving practical experience with both manufactured and improvised devices through actual fabrication.

 

***

 

The program provides the trainees with ample opportunity to develop basic familiarity and use proficiently through handling, preparing and applying the various explosive charges, incendiary agents, terrorist devices and sabotage techniques.

(21) The German government admitted (and see this) that, in 1978, the German secret service detonated a bomb in the outer wall of a prison and planted “escape tools” on a prisoner – a member of the Red Army Faction – which the secret service wished to frame the bombing on.

(22) A Mossad agent admits that, in 1984, Mossad planted a radio transmitter in Gaddaffi’s compound in Tripoli, Libya which broadcast fake terrorist trasmissions recorded by Mossad, in order to frame Gaddaffi as a terrorist supporter. Ronald Reagan bombed Libya immediately thereafter.

(23) The South African Truth and Reconciliation Council found that, in 1989, the Civil Cooperation Bureau (a covert branch of the South African Defense Force) approached an explosives expert and asked him “to participate in an operation aimed at discrediting the ANC [the African National Congress] by bombing the police vehicle of the investigating officer into the murder incident”, thus framing the ANC for the bombing.

(24) An Algerian diplomat and several officers in the Algerian army admit that, in the 1990s, the Algerian army frequently massacred Algerian civilians and then blamed Islamic militants for the killings (and see this video; and Agence France-Presse, 9/27/2002, French Court Dismisses Algerian Defamation Suit Against Author).

(25) In 1993, a bomb in Northern Ireland killed 9 civilians. Official documents from the Royal Ulster Constabulary (i.e. the British government) show that the mastermind of the bombing was a British agent, and that the bombing was designed to inflame sectarian tensions. And see this.

(26) The United States Army’s 1994 publication Special Forces Foreign Internal Defense Tactics Techniques and Procedures for Special Forces – updated in 2004 – recommends employing terrorists and using false flag operations to destabilize leftist regimes in Latin America. False flag terrorist attacks were carried out in Latin America and other regions as part of the CIA’s “Dirty Wars“. And see this.

(27) Similarly, a CIA “psychological operations” manual prepared by a CIA contractor for the Nicaraguan Contra rebels noted the value of assassinating someone on your own side to create a “martyr” for the cause. The manual was authenticated by the U.S. government. The manual received so much publicity from Associated Press, Washington Post and other news coverage that – during the 1984 presidential debate – President Reagan was confronted with the following question on national television:

At this moment, we are confronted with the extraordinary story of a CIA guerrilla manual for the anti-Sandinista contras whom we are backing, which advocates not only assassinations of Sandinistas but the hiring of criminals to assassinate the guerrillas we are supporting in order to create martyrs.

(28) An Indonesian fact-finding team investigated violent riots which occurred in 1998, and determined that “elements of the military had been involved in the riots, some of which were deliberately provoked”.

(29) Senior Russian Senior military and intelligence officers admit that the KGB blew up Russian apartment buildings in 1999 and falsely blamed it on Chechens, in order to justify an invasion of Chechnya (and see this report and this discussion).

(30) As reported by BBC, the New York Times, and Associated Press, Macedonian officials admit that the government murdered 7 innocent immigrants in cold blood and pretended that they were Al Qaeda soldiers attempting to assassinate Macedonian police, in order to join the “war on terror”.

(31) At the July 2001 G8 Summit in Genoa, Italy, black-clad thugs were videotaped getting out of police cars, and were seen by an Italian MP carrying “iron bars inside the police station”. Subsequently, senior police officials in Genoa subsequently admitted that police planted two Molotov cocktails and faked the stabbing of a police officer at the G8 Summit, in order to justify a violent crackdown against protesters.

(32) The U.S. falsely blamed Iraq for playing a role in the 9/11 attacks – as shown by a memo from the defense secretary – as one of the main justifications for launching the Iraq war. Even after the 9/11 Commission admitted that there was no connection, Dick Cheney said that the evidence is “overwhelming” that al Qaeda had a relationship with Saddam Hussein’s regime, that Cheney “probably” had information unavailable to the Commission, and that the media was not ‘doing their homework’ in reporting such ties. Top U.S. government officials now admit that the Iraq war was really launched for oil … not 9/11 or weapons of mass destruction. Despite previous “lone wolf” claims, many U.S. government officials now say that 9/11 was state-sponsored terror; but Iraq was not the state which backed the hijackers. (Many U.S. officials have alleged that 9/11 was a false flag operation by rogue elements of the U.S. government; but such a claim is beyond the scope of this discussion. The key point is that the U.S. falsely blamed it on Iraq, when it knew Iraq had nothing to do with it.).

(33) Although the FBI now admits that the 2001 anthrax attacks were carried out by one or more U.S. government scientists, a senior FBI official says that the FBI was actually told to blame the Anthrax attacks on Al Qaeda by White House officials (remember what the anthrax letters looked like). Government officials also confirm that the white House tried to link the anthrax to Iraq as a justification for regime change in that country.

(34) According to the Washington Post, Indonesian police admit that the Indonesian military killed American teachers in Papua in 2002 and blamed the murders on a Papuan separatist group in order to get that group listed as a terrorist organization.

(35) The well-respected former Indonesian president also admits that the government probably had a role in the Bali bombings.

(36) Police outside of a 2003 European Union summit in Greece were filmed planting Molotov cocktails on a peaceful protester.

(37) Former Department of Justice lawyer John Yoo suggested in 2005 that the US should go on the offensive against al-Qaeda, having “our intelligence agencies create a false terrorist organization. It could have its own websites, recruitment centers, training camps, and fundraising operations. It could launch fake terrorist operations and claim credit for real terrorist strikes, helping to sow confusion within al-Qaeda’s ranks, causing operatives to doubt others’ identities and to question the validity of communications.”

(38) Similarly, in 2005, Professor John Arquilla of the Naval Postgraduate School – a renowned US defense analyst credited with developing the concept of ‘netwar’ – called for western intelligence services to create new “pseudo gang” terrorist groups, as a way of undermining “real” terror networks. According to Pulitzer-Prize winning journalist Seymour Hersh, Arquilla’s ‘pseudo-gang’ strategy was, Hersh reported, already being implemented by the Pentagon:

“Under Rumsfeld’s new approach, I was told, US military operatives would be permitted to pose abroad as corrupt foreign businessmen seeking to buy contraband items that could be used in nuclear-weapons systems. In some cases, according to the Pentagon advisers, local citizens could be recruited and asked to join up with guerrillas or terrorists

The new rules will enable the Special Forces community to set up what it calls ‘action teams’ in the target countries overseas which can be used to find and eliminate terrorist organizations. ‘Do you remember the right-wing execution squads in El Salvador?’ the former high-level intelligence official asked me, referring to the military-led gangs that committed atrocities in the early nineteen-eighties. ‘We founded them and we financed them,’ he said. ‘The objective now is to recruit locals in any area we want. And we aren’t going to tell Congress about it.’ A former military officer, who has knowledge of the Pentagon’s commando capabilities, said, ‘We’re going to be riding with the bad boys.’”

(39) United Press International reported in June 2005:

U.S. intelligence officers are reporting that some of the insurgents in Iraq are using recent-model Beretta 92 pistols, but the pistols seem to have had their serial numbers erased. The numbers do not appear to have been physically removed; the pistols seem to have come off a production line without any serial numbers. Analysts suggest the lack of serial numbers indicates that the weapons were intended for intelligence operations or terrorist cells with substantial government backing. Analysts speculate that these guns are probably from either Mossad or the CIA. Analysts speculate that agent provocateurs may be using the untraceable weapons even as U.S. authorities use insurgent attacks against civilians as evidence of the illegitimacy of the resistance.

(40) Undercover Israeli soldiers admitted in 2005 to throwing stones at other Israeli soldiers so they could blame it on Palestinians, as an excuse to crack down on peaceful protests by the Palestinians.

(41) Quebec police admitted that, in 2007, thugs carrying rocks to a peaceful protest were actually undercover Quebec police officers (and see this).

(42) A 2008 US Army special operations field manual recommends that the U.S. military use surrogate non-state groups such as “paramilitary forces, individuals, businesses, foreign political organizations, resistant or insurgent organizations, expatriates, transnational terrorism adversaries, disillusioned transnational terrorism members, black marketers, and other social or political ‘undesirables.’” The manual specifically acknowledged that U.S. special operations can involve both counterterrorism and “Terrorism” (as well as “transnational criminal activities, including narco-trafficking, illicit arms-dealing, and illegal financial transactions.”)

(43) The former head of Secret Services and Head of State of Italy (Francesco Cossiga) advised the 2008 minister in charge of the police, on how to deal with protests from teachers and students:

He should do what I did when I was Minister of the Interior … infiltrate the movement with agents provocateurs inclined to do anything …. And after that, with the strength of the gained population consent, … beat them for blood and beat for blood also those teachers that incite them. Especially the teachers. Not the elderly, of course, but the girl teachers yes.

(44) At the G20 protests in London in 2009, a British member of parliament saw plain clothes police officers attempting to incite the crowd to violence.

(45) Egyptian politicians admitted (and see this) that government employees looted priceless museum artifacts in 2011 to try to discredit the protesters.

(46) Rioters who discredited the peaceful protests against the swearing in of the Mexican president in 2012 admitted that they were paid 300 pesos each to destroy everything in their path. According to Wikipedia, photos also show the vandals waiting in groups behind police lines prior to the violence.

(47) A Colombian army colonel has admitted that his unit murdered 57 civilians, then dressed them in uniforms and claimed they were rebels killed in combat.

(48) On November 20, 2014, Mexican agent provocateurs were transported by army vehicles to participate in the 2014 Iguala mass kidnapping protests, as was shown by videos and pictures distributed via social networks.

(49) The highly-respected writer for the Telegraph Ambrose Evans-Pritchard says that the head of Saudi intelligence – Prince Bandar – recently admitted that the Saudi government controls “Chechen” terrorists.

(50) High-level American sources admitted that the Turkish government – a fellow NATO country – carried out the chemical weapons attacks blamed on the Syrian government; and high-ranking Turkish government admitted on tape plans to carry out attacks and blame it on the Syrian government.

(51) The Ukrainian security chief admits that the sniper attacks which started the Ukrainian coup were carried out in order to frame others. Ukrainian officials admit that the Ukrainian snipers fired on both sides, to create maximum chaos.

(52) Burmese government officials admitted that Burma (renamed Myanmar) used false flag attacks against Muslim and Buddhist groups within the country to stir up hatred between the two groups, to prevent democracy from spreading.

(53) Britain’s spy agency has admitted (and see this) that it carries out “digital false flag” attacks on targets, framing people by writing offensive or unlawful material … and blaming it on the target.

(54) U.S. soldiers have admitted that if they kill innocent Iraqis and Afghanis, they then “drop” automatic weapons near their body so they can pretend they were militants

(55) Similarly, police frame innocent people for crimes they didn’t commit. The practice is so well-known that the New York Times noted in 1981:

In police jargon, a throwdown is a weapon planted on a victim.

Newsweek reported in 1999:

Perez, himself a former [Los Angeles Police Department] cop, was caught stealing eight pounds of cocaine from police evidence lockers. After pleading guilty in September, he bargained for a lighter sentence by telling an appalling story of attempted murder and a “throwdown”–police slang for a weapon planted by cops to make a shooting legally justifiable. Perez said he and his partner, Officer Nino Durden, shot an unarmed 18th Street Gang member named Javier Ovando, then planted a semiautomatic rifle on the unconscious suspect and claimed that Ovando had tried to shoot them during a stakeout.

Wikipedia notes:

As part of his plea bargain, Pérez implicated scores of officers from the Rampart Division’s anti-gang unit, describing routinely beating gang members, planting evidence on suspects, falsifying reports and covering up unprovoked shootings.

(As a side note – and while not technically false flag attacks – police have been busted framing innocent people in many other ways, as well.)

(56) A former U.S. intelligence officer recently alleged:

Most terrorists are false flag terrorists or are created by our own security services.

(57) The head and special agent in charge of the FBI’s Los Angeles office said that most terror attacks are committed by the CIA and FBI as false flags. Similarly, the director of the National Security Agency under Ronald Reagan – Lt. General William Odom said:

By any measure the US has long used terrorism. In ‘78-79 the Senate was trying to pass a law against international terrorism – in every version they produced, the lawyers said the US would be in violation.

(audio here).

(58) Leaders throughout history have acknowledged the “benefits” of of false flags to justify their political agenda:

Terrorism is the best political weapon for nothing drives people harder than a fear of sudden death”.
– Adolph Hitler

 

“Why of course the people don’t want war … But after all it is the leaders of the country who determine the policy, and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship … Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country.”
– Hermann Goering, Nazi leader.

 

“The easiest way to gain control of a population is to carry out acts of terror. [The public] will clamor for such laws if their personal security is threatened”.
– Josef Stalin

Postscript:  Unmarked Israeli fighter jets and unmarked torpedo boats attacked – and did everything they could to sink – a U.S. ship off the coast of Egypt in 1967 called the USS Liberty.

The attack started by targeting communications on the ship so that the Americans couldn’t radio for help. The Israelis then jammed the ship’s emergency distress channel, and shot at escaping life rafts in an attempt to prevent survivors from escaping.

Transcripts of conversations between the Israeli pilots and Israeli military show that Israel knew it was an American ship.

Numerous top-level American military and intelligence officials – including Admiral Thomas H. Moorer, former Chairman of the Joint Chiefs of Staff – believe that this was a failed false flag attack, and that Israel would have attempted to blame Egypt if the Israeli military had succeeded in sinking the ship. Indeed, President Lyndon Johnson dispatched nuclear-armed fighter jets to drop nuclear bombs on Cairo, Egypt.  They were only recalled at the last minute, when Johnson realized that it was the Israelis – and not the Egyptians – who had fired on the Liberty.

The following actions are arguably an admission that Israel intended to frame Egypt for the attack, and didn’t want the Liberty’s crew to be able to tell the world what really happened: (1) using unmarked jets and boats, (2) destroying the Liberty’s communication equipment and jamming the Liberty’s emergency distress channel, and (3) trying to sink the ship and destroy all liferafts.


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After Focusing on Social Conservatives, Can Cruz Appeal to Rand Paul’s Liberty-Minded Voters?

Are they similar enough for Rand fans?Sen. Ted Cruz has graced Reason‘s cover in an analysis of his ambitiousness, his background, his rebelliousness, and the extent that there’s a genuine libertarian streak to his positions and behavior. It’s worth taking a look at where Cruz stands now on these matters, not just because he won the Iowa caucuses, but with the announcement today that Sen. Rand Paul is suspending his presidential campaign. When reporting Paul’s campaign ending, the Wall Street Journal wonders in its lede whether Paul’s voters will be breaking Cruz’s way.

Paul and Cruz have not exactly been total allies, but they have worked together frequently. In the most recent debate, when Paul dinged Cruz for not being at the Senate to vote on Paul’s “Audit the Fed” bill, Cruz responded that he supported it and would be more than happy to sign it when he was president. Cruz also showed up to support Paul’s filibuster to stop the renewal of the part of the PATRIOT Act that authorized mass domestic surveillance (though Cruz differed from Paul by supporting the USA Freedom Act compromise, which Paul opposed because it didn’t go far enough). Paul also showed up to assist Cruz’s anti-Obamacare filibuster.

Recall that a few years ago, Cruz and Paul were lumped together as “Wacko Birds” by Sen. John McCain for not being good establishment conservatives and doing what they were told. But Cruz and Paul are not exactly “wacko birds” of a feather. Nick Gillespie recently decried “Cruz’s Laughable Libertarian Pose” over at The Daily Beast, criticizing Cruz’s militaristic foreign policy and anti-immigrant animus (and big spending promises). With Rand Paul perceived as more compromising to conservatives and less libertarian than his father, what does that make Cruz in the eyes of libertarian Republican voters?

Here are a few things libertarian Republicans may be chewing over about Cruz when considering where their vote might go (if it goes anywhere at all—staying home is an option, too):

  • Cruz seemed to have captured the evangelical conservative vote in Iowa, indeed bringing out a greater number of them to the caucuses (check out Stephanie Slade’s turnout analysis here). Social conservative appeals to religion have played a major role in Cruz’s campaign, and he is the most vocal of top candidates in opposition to same-sex marriage recognition. But even so, he promotes giving states authority to decide whether to recognize same-sex marriages, which is essentially the same position as Paul. But unlike Paul, Cruz is willing to bring aboard speakers to actually decry gay marriage as “evil” and “wicked” and to all but call for purges.
  • Cruz has flip-flopped, in a good way, on marijuana legalization. Cruz once criticized President Barack Obama for not demanding the Department of Justice crack down on Colorado and Washington to enforce the federal ban on marijuana use. Cruz has since embraced marijuana federalism, telling attendees at last year’s Conservative Political Action Conference that he would let states go their own way, though he personally still opposes legalization.
  • Cruz has flip-flopped, in a bad way, on federal sentencing reform. As Jacob Sullum recently detailed, Cruz was an original co-sponsor of the Smarter Sentencing Act to reduce some federal drug penalties and loosen mandatory minimum sentencing in some drug cases, part of a bipartisan push for criminal justice reform. But now, a year later, he’s apparently opposing sentencing reform, stoking fears that those who are released may commit new crimes.
  • After supporting reforms to restrict the federal government’s authority to collect mass amounts of metadata from its own citizens, Cruz nevertheless characterized Edward Snowden as a “traitor.” Sen. Marco Rubio, who supports pretty much letting the government collect whatever data it wants, has gone after Cruz and Paul in debates for calling for restraints in what the National Security Agency (NSA) may collect without getting a warrant. Cruz supported the passage of the USA Freedom Act, which curtailed the mass collection of all citizen cellphone metadata (but does give the NSA the authority to collect more specific information from phone companies themselves). It’s very obvious that this law would never have come into play and the mass surveillance authorities of Section 215 of the PATRIOT Act would not have been allowed to expire had Snowden not leaked what the NSA was doing to the American public. Early on, while not excusing the illegality of what Snowden had done, he said it seemed likely that Snowden had “done a valuable public service by bringing it to light.” Rubio used those comments to attack Cruz, prompting Cruz’s campaign put out a statement in January saying that Snowden’s actions had “materially aided terrorists” and that Snowden should be tried for treason.
  • Cruz takes some solid—even brave—positions against corporate subsides. Cruz won Iowa while getting attacked (particularly by Trump) for his call for scaling back and eventually eliminating ethanol subsides, which put him at odds with Iowa’s powerful biofuel industry. It was important moment for fighting crony capitalism on the right. He was also an opponent of reauthorizing the Export-Import Bank, a cronyist and unneeded institution that uses taxpayer dollars to guarantee loans for major corporations like Boeing. He managed to infuriate the Republican establishment in the process.
  • Cruz, like establishment Republicans, doesn’t think cutting spending and shrinking the government applies to the military and immigration enforcement. Cruz has voted against budget resolutions, arguing that we need “meaningful entitlement reform,” but also calls for tripling the size of the U.S. border patrol and supports increased military spending.

That’s a lot to consider. Establishment conservatives like McCain may see all these “tea party” insurgents the same way, but there are some significant differences between Paul and Cruz as candidates, especially when a libertarian is evaluating what they have to offer.

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The Bums of 2016: New at Reason

Rand Paul dropped out of the presidential race today, while candidates like Ted Cruz, Marco Rubio, and Bernie Sanders are trying to use momentum from Iowa to improve their performance in upcoming contests.

But who cares?

A. Barton Hinkle writes:

Iowans held their caucuses (cauci?) Monday. Not that it matters. Iowa does a lousy job of predicting final winners even in normal elections, which this isn’t. Besides, the results left a bad taste in a lot of people’s mouths—as, it seems likely, the rest of the election year will do

And well it should. Americans are looking over the sorriest bunch of candidates to run for president since, maybe, the 1856 three-way contest pitting James Buchanan against Millard Fillmore and… um, that other guy.

View this article.

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Is A New Era Upon Us?

Submitted by Patrick Buchanan via Buchanan.org,

Whoever wins the nominations, the most successful campaigns of 2016 provide us with a clear picture of where the center of gravity is today in both parties and, hence, where America is going.

Bernie Sanders, with his mammoth crowds and mass support among the young, represents, as did George McGovern in 1972, despite his defeat, the future of the Democratic Party.

That Hillary Clinton has been tacking left tells you Sanders is winning the argument. Should she avoid indictment in the email scandal, and win the nomination and the election, Clinton would be a placeholder president.

Yet, should Sanders win the nomination and election — highly improbable — he would become a frustrated and a failed president.

Why? Consider what he has on offer.

Free college tuition and universal health care, a breakup of the big banks and a reform of the tax code to make the Fortune 500 and the millionaires and billionaires pay for it all. Soak the rich!

Sound socialist economics, but this is the formula that turned Puerto Rico and Illinois into the booming showcases they are today. Moreover, unless Sanders swept both houses of Congress and won a 67-vote, veto-proof majority in the Senate, his agenda would be dead on arrival on Capitol Hill.

Yet there are areas where the Sanders agenda overlaps that of Donald Trump and other Republican candidates. Bernie is an anti-interventionist, anti-nation-building, anti-empire leftist of a breed common in the Labor Party after World War II, when the British Empire was liquidated, Churchill notwithstanding.

Moreover, Sanders is no free-trade globalist of the Davos school. He opposed NAFTA, GATT and MFN for China. Like Trump, he backs a trade policy that puts American workers first.

Thus, on both trade and foreign policy, there is common ground between the rebellions in the Democratic and Republican parties, even as Clinton has ideological allies among the GOP free-traders and neocons of the Bush I and II presidencies.

But while difficult to see how Sanders captures the nomination and wins in November, the rebellion in the GOP is larger, stronger and deeper. In every national or state poll, anti-establishment candidates command a majority of Republican voters. Which presents a problem for the establishment.

The Beltway elites may succeed in blocking Trump or Ted Cruz. But the eventual nominee and the party will have to respect and to some degree accommodate the agendas of the rebellion on immigration, border security, trade and anti-intervention, or face a fatal split.

We have been here before.

After Richard Nixon lost to JFK in 1960, the Goldwater movement arose to capture the party.

While it went down to a legendary defeat, those who wrote off 1964 as the temporary insanity of the radical right, and walked away from the nominee, were the ones who were history.

Nixon incorporated the conservative movement into his New Majority. Ronald Reagan reveled in the Goldwater title of Mr. Conservative and welcomed into the party the rising Moral Majority.

But it was the dismissive stance of Bush I toward the populist revolt in his party, and his indifference to concerns about illegal immigration, border security and the export of U.S. factories and jobs that brought Ross Perot into the ’92 race, and cost Bush his second term.

Today, the Republican leadership faces another insurrection. Either it will find a way to accommodate this rebellion, which is not going away after 2016, or it will find itself suffering the fate of the Rockefellers and Romneys, the establishment leaders of the 1960s.

While Sanders is an ideologue who has been on the far left of the political spectrum all his life, instinct, more than ideology, explains Trump. His success comes of having seen, felt and given voice to the broad anger of Middle America.

The old GOP agenda — roll back the Great Society, reduce the size of government, cut capital gains taxes, reduce marginal tax rates, balance the budget — this is not the red meat of the Trump rallies.

Populism, patriotism, nationalism, defying political correctness and dissing the establishment and the elites that monitor PC are where it’s at. And there are reasons for such populist rage.

Put bluntly, the nation seems almost everywhere on an unsustainable path. Mass immigration, legal and illegal, continues to alter the face of America. Obama doubled the debt, and the deficits are rising again.

Abroad, we are apparently going to keep troops in Afghanistan for generations, send more to Iraq and Syria, bring down Assad but keep ISIS and al-Qaida out of Damascus, confront Beijing over the Spratley and Paracel Islands in the South China Sea, build up U.S. forces in the Baltic states and Poland, send weapons to Ukraine, sanction Vladimir Putin for Crimea, repudiate the Iran nuclear deal and reimpose sanctions — all to be done while our NATO, Arab and Asian allies helpfully hold our coat.

The next president, be it Trump, Cruz, Clinton or Sanders, either will be the last president of an old era, or the first president of a new era.


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Is It Time To Panic About Deutsche Bank?

Back in April 2013, we showed for the first time something few were aware of, namely that “At $72.8 Trillion, The Bank With The Biggest Derivative Exposure In The World” was not JPMorgan as some had expected, but Germany’s banking behemoth, Deutsche bank.

Some brushed it off, saying one should never look at gross derivative exposure but merely net, to which we had one simple response: net immediately becomes gross when just one counterparty in the collateral chains fails – case in point, the Lehman and AIG failures and the resulting scramble to bailout the entire world which cost trillions in taxpayer funds.

We then followed it up one year later with “The Elephant In The Room: Deutsche Bank’s $75 Trillion In Derivatives Is 20 Times Greater Than German GDP.”

Then, last June, we asked the most pointed question yet: Is Deutsche Bank The Next Lehman?only this time it wasn’t just the bank’s gargantuan balance sheet risk shown below that was dominant…

Not good.

 

…. but the fact that it impaired assets had finally started to trickle down through to the income statement, leading to loss after loss, management exit after exit, market rigging settlement after market rigging settlement, and all culminating ten days ago with the bank’s “titanic”, and record, €7 billion loss, surpassing the bank’s troubles even during the depths of the Global Financial Crisis.

But while income statement losses can be brushed aside, far more troubling was that even other banks had started paying attention to the bank’s balance sheet. This is what Citi said:

We view the leverage ratio as the binding capital constraint for Deutsche. The current 3.5% is well below peers and the company’s own 4.5% target. Post restructuring & litigation charges and a Postbank divestment at 0.6x P/TB, we estimate a pro-forma leverage ratio of c3.3%. This implies a c€15bn shortfall, of which we expect part to be met by underlying retained earnings and part via AT1 issuance. However this still leaves an equity shortfall – we see a c4% leverage ratio by end-2017 – which is likely to necessitate a capital increase of up to €7bn in our view. In addition we note the target CET1 ratio of >12.5% only allows for a 0.25% management buffer above the fully-loaded SREP requirement. This provides the company with limited flexibility especially if BaFin were to introduce a counter-cyclical buffer (max 2.5% add-on).

And then there is the huge black hole that is China, and exposure to it… although others are starting to pay attention, and as New Europe wrote two weeks ago, “Major European banks… are significantly exposed to China and if there is significant deleveraging the impact will no doubt be global.” Banks such as HSBC, such as Deutsche Bank.

We bring all this up because here is what the stock price of Deutsche Bank has done since our first warning about the huge potential risks borne by Deutsche Bank, back in April 2013:

 

But the real chart everyone should be paying attention to – we certainly have been for a long, long time – is that of DB’s Credit Default Swaps, the earliest harbinger not of company risk, that has been there for a long, long time, but far more importantly of the market’s realization and admission of this risk.

 

So, our question for today, is it time to panic about Deutsche Bank yet?


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Managing Risk Through A Commodity Downturn

Submitted by Leonard Brecken via OilPrice.com,

As a small business owner I know all too well of the struggles to manage overhead as we all struggle through sky rocketing health care costs and taxes and inability to raise prices due to economic conditions.

Whether one is managing a small business or managing wealth, the top priority should be preserving cash to ride out the current storm. Instead of becoming more levered to debt, businesses try to de-lever and manage operations on a free cash flow (FCF) basis.

In a recent article I highlighted the predicament that Continental Resources finds itself in, but the situation can be equally applied to all businesses whether it be retail, manufacturing or housing/construction/real-estate.

One has to better scrutinize the risks to capital vs the rewards as we end an economic cycle vs begin it. For 7-8 years the U.S. government, mainly through Fed policy, has encouraged the opposite (and continues to do so!) while assuring that the economy is sound. Following the path of zero interest rates was too tempting for some, but many are now paying the price – businesses that did so now find themselves in deep financial distress.

The so-called anemic recovery has been fueled by debt, not the real growth that is typically found in most economic recoveries. Wages have declined (not increased); GDP growth never really exceeded 3 percent; underemployment never really improved despite government reports about the low unemployment rate; and all the while debt made up the difference.

Instead of looking at the rise of the NASDAQ to bubble territory and using that as a basis to assume the economy is strong, it is more useful to look at real assets like commodities. For real economic growth, commodities matter much more than a money printing drive to inflate stocks like biotech and technology.

I have repeatedly pointed to this divergence to highlight the false narrative that the mainstream media and central banks have laid out over the past few years, a narrative built on sand that is starting to erode as the economic cracks start to become exposed. Commodities are trading at pre-2008 recession prices while other assets are not.

This simply does not make any sense. For individuals this should serve as a stark warning that something is not right, and that investors should take on less risk.

The only way to manage through a debt-fueled economic cycle is to do the opposite: PRESERVE CASH. In the commodity sector we are about to witness a lot of bankruptcies – so many companies followed central bank policies off a cliff. The ones that resisted the economic drugs pushed by the Fed will be in the position to prosper through prudent cash management as many competitors close their doors and will be forced to liquidate.

The businesses or individuals that will prosper after all the smoke clears will be the ones who are run conservatively. Central banks are literally out of bullets as they desperately use negative rates to force even more risk. Unlike other late stage recoveries/early stage recessions we are entering it with empty guns.


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Ted Cruz Falsely Lays Claim to Reagan Mantle

Ted CruzThe pack of Republican presidential hopefuls have now descended on New Hampshire. Ted Cruz is trying to widen his appeal beyond the Evangelical base that put him over the top in the Iowa caususes. How? By claiming to be the political heir to Ronald Reagan. 

Today NPR’s Morning Edition reported:

Cruz…claimed for himself the one Republican legacy that almost all Republicans agree on – Ronald Reagan.

Cruz: We saw the old Reagan coalition coming together again – we saw conservatives and Evangelicals and libertarians and Reagan Democrats all standing together say “What on Earth is going on?”

Cruz evidently continued:

Marco made the decision, the conscious, deliberate decision to go and stand with Barack Obama and Chuck Schumer and Harry Reid and to lead the fight for amnesty.

Sadly, Marco Rubio has now essentially denounced himself for trying to fix the immigration mess.

In any case, do you know who else led the fight for amnesty for undocumented immigrants living in the United States? That would be Ronald Reagan. Here are a couple of salient quotations:

In an Oct. 21, 1984, debate with Democratic presidential nominee Walter Mondale, Reagan endorsed a comprehensive immigration overhaul that Congress was debating.

“I supported this bill. I believe in the idea of amnesty for those who have put down roots and who have lived here even though sometime back they may have entered illegally.”ReganSignsImmigrationReform

On Nov. 6, 1986, Reagan signed the Immigration Reform and Control Act, which allowed undocumented immigrants to become citizens if they paid a fine and back taxes and admitted guilt. From his signing statement that day:

“We have consistently supported a legalization program which is both generous to the alien and fair to the countless thousands of people throughout the world who seek legally to come to America. The legalization provisions in this act will go far to improve the lives of a class of individuals who now must hide in the shadows, without access to many of the benefits of a free and open society. Very soon many of these men and women will be able to step into the sunlight and, ultimately, if they choose, they may become Americans.”

On this issue, Cruz, and none of the other Republican presidential candidates have any justification for pretending to be the heirs to Ronald Reagan’ s legacy. Trying to claim Reagan’s mantle while in the same breath denouncing immigration reform amounts to a kind of political blasphemy.

For more background see my Reason colleague’s Matt Welch’s superb “The GOP’s Nativist Summer” and “Republicans vs. Reagan.”

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Here’s What Rand Paul Is Saying About Leaving the Presidential Race

Rand Paul announced today that he’s suspending this campaign for the presidency. And in a just-released video statement, he issued his thanks and said farewell to his campaign and its supporters, while declaring his intention to continue focusing on signature issues like criminal justice reform, privacy, and size of government.

Among other things, Paul promised that he would “continue to be a voice against the out of control regulation, spending and debt that is crippling our country’s economy and the future of our children,” and that he would “not ignore the terrible cost of decades of war and chaos in the Middle East, and the unintended consequences of regime change and nation building.” 

Rand Paul was once considered a promising contender for the GOP presidential nomination. A year ago, headlines suggested that he might even be the frontrunner. But Paul’s campaign has fallen short of those hopes, and after finishing a disappointing fifth place in the Iowa caucus this week, Paul announced that he would cease campaigning. 

Here’s a video of the complete statement. Read the full transcript after the jump. 

Transcipt:

“It has been an honor to participate in the 2016 Republican Presidential Primary. 

“I am proud of our principled campaign and the thousands of young people that have been energized by our message of limited constitutional government.  

“Ours has been a unique voice in this race – one that says Big Government threatens Americans from all walks of life, rich and poor, black and white – from the coal miner who has lost his job over President Obama’s destructive EPA regulations…  to the teenager from a poor family facing jail time for marijuana.   I will continue to fight for criminal justice reform, for privacy, and your 4th amendment rights.  I will continue to champion due process over indefinite detention. 

“I will continue to be a voice against the out of control regulation, spending and debt that is crippling our country’s economy and the future of our children.   I will not ignore the terrible cost of decades of war and chaos in the Middle East, and the unintended consequences of regime change and nation building.  I will never forget the thousands of American soldiers who have given their lives – and the thousands more who live everyday with catastrophic injuries.    

“These are the issues that have defined my campaign.  Kelley and I are deeply grateful to our outstanding staff and tireless volunteers and supporters – people who believe in liberty.  It has been a privilege to give voice to the liberty movement in this race and I believe we have broadened the debate by being part of it.  Although today I will suspend my campaign for the Presidency, I will continue to fight on for liberty, for the Constitution, and for justice in the United States Senate.   Thank you, and God Bless America.” 

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