Month: June 2018

As was widely expected, this morning Mariano Rajoy’s six year reign as Spain’s prime minister, ended when he become the first prime minister in Spain’s democratic history to be ousted by parliament after losing a vote of no-confidence amid a corruption scandal engulfing his Popular party. He will be replaced by the Socialist opposition leader Pedro Sánchez.

A small but sufficient majority of Spanish lawmakers was sufficient to end Rajoy’s career, voting 180 to 169 to remove the prime minister, cutting short the second term of one of Europe’s longest-serving leaders currently in power. The center-left Socialist Party had called the no-confidence vote last week and proposed its leader to replace Mr. Rajoy.

Quoted by the FT, in his brief final speech to parliament, Rajoy bade farewell to the country after seven years in power: “It has been an honour to leave Spain better than I found it. Thank you to all Spaniards and good luck.” The speech came after a last meal of sorts:

Mr Rajoy spent eight hours in a Madrid restaurant on Thursday afternoon instead of sitting through the first part of the parliamentary debate, but appeared composed on Friday during his resignation speech.

Socialist Party leader Pedro Sánchez, who becomes prime minister immediately, told lawmakers that his policy goals include bolstering social policies to address problems such as unemployment and poverty levels, both of which remain high despite Spain’s strong growth. Among Sanchez’ challenges will be managing the eurozone’s fourth-largest economy and dealing with internal problems such as the crisis in Catalonia.

The new socialist prime minister will lead a weak minority government with just 84 seats in parliament, part of a coalition that includes a “hodgepodge” of different political parties, including the far-left Podemos group and a string of regional national parties including the Basque Nationalist party and two Catalan nationalist parties; this suggests a tumultuous time is in store for Spain both before and after the upcoming elections.  Indeed, as the WSJ notes,  the new premier’s minority government will struggle to pass legislation and has already promised to call parliamentary elections ahead of the current 2020 deadline.

The leader of the liberal Ciudadanos party, Albert Rivera, labelled this a “Frankenstein government” due to its lack of unifying views. The Catalans want full independence from Spain, for instance.

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Rajoy’s ouster comes just as an antiestablishment government comes to power in Italy, now home to Western Europe’s largest anti-establishment movement, after a three-month power vacuum.

Paradoxically, coming at a time when Europe is supposedly “growing” and following several years of ECB QE meant to stabilize Europe, the two high-profile political crises this week in southern Europe underscore the social and economic scars still borne by the region years after the eurozone’s 2011-12 crisis, damage that is feeding political discontent and stirring hunger for change.

Rajoy had seen his support steadily erode since he became prime minister in 2011 and began to enact a series of painful economic reforms during the eurozone crisis. He has shouldered much of the political blame for a recovery that has left millions of Spaniards behind. He is the first Spanish prime minister to be unseated in a vote of confidence.

That is not to say he didn’t bring it on himself: after numerous lawsuits and years of corruption allegations against Rajoy’s Popular Party came to a head last week when a top Spanish court ruled that his party financially benefited from an illegal kickback scheme. The party has said it would appeal the ruling.  Rajoy hasn’t been charged and denies knowledge of the scheme, however if recent events in other developing nations such as Malaysia are an indication, the public will demand a fall guy, and it may be only a matter of time before Rajoy finds himself behind bars.

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Adding insult to ruinous injury, just hours after Deutsche Bank stock crashed to all time lows after it was revealed that it had been put on the Fed’s “secret” probation list one year ago, overnight S&P downgraded Deutsche Bank’s credit rating by one notch to BBB+ from A-, just three away from junk, citing “significant execution risks in the delivery of the updated strategy amid a continued unhelpful market backdrop” adding that “relative to peers, Deutsche Bank will remain a negative outlier for some time.”

S&P had initiated the credit review on April 12, shortly after the Christian Sewing was appointed new CEO, replacing John Cryan, saying repeated leadership changes pose questions over its long-term direction, against a background of chronically low profitability.

In its statement (see below), S&P said that “Deutsche Bank’s updated strategy envisages a deeper restructuring of the business model than we previously expected” and that while management is taking “tough actions to cut the cost base
and refocus the business in order to address the bank’s currently weak profitability” the bank “appears set for a period of sustained underperformance compared with peers, many of whom have now finished restructuring.”

The good news is that S&P said the rating outlook is stable, reflecting its view that management will “execute its strategy in earnest and, over time, will show progress against its 2019 financial objectives and so achieve its longer-term objective of a more stable and better-functioning business model.”

To be sure, the bank’s first sub-A rating will likely raise its cost of debt even further, adding to the pressure already suffered by its bonds in the recent selloff and increases the stakes for new CEO Christian Sewing, who replaced John Cryan in April with a mandate to accelerate the bank’s restructuring while refocusing on Deutsche Bank’s European home European market. S&P had initiated its review after Sewing’s appointment, saying repeated leadership changes pose questions over its long-term direction, against a background of chronically low profitability.

Forced to defend itself twice in two days, Sewing, in a letter to staff following the downgrade, said that the bank’s financial strength is “beyond doubt,” though it has to deliver on its strategy “speedily and rigorously.” In the Corporate & Investment Bank “we have a clear strategic direction and we’re well on the way to implementing what we recently announced.”  On Thursday, the bank sent out a similar statement after its stock crashed to all time lows, assuring investors that “Deutsche Bank AG, is very well capitalized and has significant liquidity reserves.“

In a separate blow, Bloomberg reported that Deutsche Bank faces cartel charges over its role as underwriter for a A$2.5 billion ($1.9 billion) share sale by Australia & New Zealand Banking Group Ltd. in 2015. Citigroup Inc. also faces the same charges.

Meanwhile, also overnight Reuters reported that the ECB saw Deutsche Bank’s liquidity as being at a good level and the lender has made significant progress regarding its responses to any concerns of the ECB supervisors, Reuters reported, citing an unidentified person familiar with the ECB’s view.

“This is nothing that keeps us awake at night,” Deutsche Bank spokesman Joerg Eigendorf said about the ratings downgrade. “We have refinanced ourselves this year at quite or very good conditions, so that’s not a worry at all for us. And we are able to react if necessary.”

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Looking at the stock reaction, it appears that the downgrade may have been priced in, as DB stock was 3.5% higher this morning trading a €9.48, and rebounding from an all time low hit on Thursday.

Credit traders were less convinced that the worst has passed, with DB CDS jumping as the cost of insuring against a default in Deutsche Bank’s senior debt, jumped to 179 basis points on Friday, from just above 70 at the beginning of the year. By comparison, the spreads for BNP Paribas and Barclays, two of its biggest regional rivals, were 53 and 104 basis points respectively.

The full flow-through of the downgrade remains to be seen, with Goldman arguing in a recent report that losing the A- rating at S&P could cost the bank dearly.

“Further counterparty aversion could follow in the event of a downgrade, especially with those clients that have ‘automatic rating triggers’ within their risk policies,” Goldman’s Jernej Omahen wrote. That in turn may hurt Deutsche Bank’s market share further and weaken the company’s ability to generate revenue, the analysts argued according to Bloomberg.

S&P’s downgrade brings its rating more closely into line with that of rivals Moody’s Investor Service. Moody’s long-term senior unsecured debt rating for Deutsche Bank is Baa2. At the time of Sewing’s appointment, Moody’s had affirmed all of its ratings on Deutsche Bank’s debt, but had changed the rating on its A3 deposit and senior debt ratings to negative, from stable.

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The full text of the S&P downgrade is below.

Deutsche Bank Long-Term Rating Lowered To ‘BBB+’ On Elevated Strategy Execution Risks; Outlook Stable

• On May 24, Deutsche Bank announced further details of its planned multi-year restructuring, focusing notably on its U.S. equities sales and trading business.
• We consider that management is taking tough actions to cut the cost base and refocus the business in order to address the bank’s currently weak profitability.
• However, we see significant execution risks in the delivery of the updated strategy amid a continued unhelpful market backdrop, and we think that, relative to peers, Deutsche Bank will remain a negative outlier for some time.
• We are lowering to ‘BBB+’ from ‘A-‘ our long-term issuer credit rating on Deutsche Bank and its core operating subsidiaries.
• We are affirming our ratings on Deutsche Bank’s subordinated debt issues, including our ‘BBB-‘ rating on its senior subordinated (also known as senior non-preferred) instruments.
• The stable outlook reflects our view that management will execute its strategy in earnest and, over time, will show progress against its 2019 financial objectives and so achieve its longer-term objective of a more stable and better-functioning business model. Our central scenario assumes that cost-cutting measures will be tailored and targeted  enough to preserve the bank’s capital markets franchise, in particular in Europe, and avoid substantial revenue loss.

LONDON (S&P Global Ratings) June 1, 2018–S&P Global Ratings today lowered its long-term issuer credit ratings (ICR) on Deutsche Bank AG and its core subsidiaries to ‘BBB+’ from ‘A-‘. The outlook is stable.

We removed the ratings from CreditWatch negative.

At the same time, we affirmed our ‘A-2’ short-term ICRs and our ‘trAAA/A-1’ Turkish national scale ratings on Deutsche Bank. We also affirmed our issue credit ratings on all the hybrid instruments issued or guaranteed by the bank, including our ‘BBB-‘ rating on the bank’s senior subordinated debt
instruments.

The lowering of our long-term issuer credit rating reflects that Deutsche Bank’s updated strategy envisages a deeper restructuring of the business model than we previously expected, with associated non-negligible execution risks. While we consider management is taking tough, although likely inevitable, actions and proposes a logical strategy to successfully restore the bank to more solid, sustainable profitability over the medium to long term, the bank appears set for a period of sustained underperformance compared with peers, many of whom have now finished restructuring. Over the coming 18 months, we will look in particular for robust delivery against 2019 objectives, such as the €22 billion cost target, and evidence that the bank retains the solid support of its clients, something that would help underpin the revenue base in the CIB division amid a period of downsizing. While we regard capital markets earnings as inherently more volatile than retail and commercial banking, we consider a well-balanced blend of profitable businesses to be supportive of the bank’s creditworthiness. Therefore the bank’s ability to preserve its global capital  markets franchise, focused in particular on Europe, underpins our stable outlook.

Our removal of the CreditWatch follows a three-month period during which Deutsche Bank has been under intense scrutiny, which culminated in it parting company with former CEO John Cryan (on April 8). Then, new CEO Christian Sewing delivered a high-level communication of the updated strategy on April 26, with further elaboration on May 24, and ultimately won shareholder support for that strategy at the annual general meeting the same day. This is the latest iteration in the bank’s longer-term restructuring story that started under John Cryan in 2015 and which has already yielded some key actions to strengthen the bank. This includes the rundown and divestment of noncore assets and businesses, a substantial capital raising, and an operational overhaul to reduce complexity and control risk and improve efficiency. The gradual resolution of outstanding litigations has reduced some earnings-event risk, but so far management has not delivered any marked upturn in financial performance, which remains burdened by a high cost base.

By 2021, the bank targets a sustainable revenue share of approximately 50% from the Private & Commercial Bank and the DWS asset management business. Adding the revenues of Global Transaction Banking, the share of more stable revenues would be around 65%, which we view positively, especially compared with Deutsche Bank’s historical earnings dependence on more volatile markets businesses. Likely coinciding with this, management targets a post-tax return on tangible equity (ROTE) of about 10% in a normalized operating environment–that is, assuming a modest rise in central bank base interest rates and moderately higher market volatility and activity after the nadir of 2017. Aside from one-off restructuring costs of up to €800 million in 2018, the Management Board has committed to keep the adjusted cost base at €23 billion for 2018 and bring it to €22 billion by 2019. The execution of the strategy notably includes:

In the Personal and Commercial Banking (PCB) division:

• The delivery of the planned cost efficiency program following the May 25 legal merger of the group’s two principal domestic markets subsidiaries–Deutsche Postbank AG and Deutsche Bank Privat- und Geschäftskunden AG–into DB Privat- und Firmenkundenbank AG, the largest private and commercial bank in Germany.
• Seeking more revenue growth in Germany, something that depends in large part on eventual central bank interest rate rises, and in markets like Italy and Spain.
• Ensuring that the above actions and investment in digital transformation bring the cost-to-income ratio of this business to 65% by 2022.

In the Corporate & Investment Bank (CIB) division:

• A sharp focusing of activities and resources on its European and multinational clients and the products that are most relevant for them.
• Refocusing cash equities on electronic trade execution solutions, growing structured product capabilities in equity derivatives, and refocusing resources on key clients in prime finance.
• Scaling back other areas where Deutsche Bank no longer has a competitive advantage in the changed market environment, such as U.S. rates sales and trading.
• Shrinking the balance sheet, notably via a €100 billion cut in leverage exposure (around 10% of the group’s exposure at March 2018).

We believe that management is taking decisive actions to address the fundamental cost issue the bank has, notably in some market segments. We expect management will also pursue broader efficiency measures to delayer management structures, to remove duplication and overlaps, and to increase the speed of decision making. The accelerated cost reduction that the steps above imply will see group headcount fall to well below 90,000 from 97,000.

Our use of the negative peer adjustment notch reflects our view that relativities with ‘A’ rated peers became too strained and are unlikely to move back into line quickly. Notably, while much of the heavy-lifting should be completed  in 2018, Deutsche Bank’s restructuring will likely only start bearing fruit in 2019, and only fully by 2021. By contrast, key peers such as Barclays, Commerzbank, Credit Suisse, and the Royal Bank of Scotland (RBS) have now worked through their restructuring and business model optimization and are already starting to see improved performance.

That said, we continue to be broadly supportive of the strategy. We expect the planned refinements to optimize the CIB division around its strongest franchises and anticipate that a well-performing, more efficient CIB division will  ultimately support Deutsche Bank’s creditworthiness. In PCB, the size of the domestic franchise is clear, but we consider it critical that these efficiencies deliver, with the Asset Management division, the solid base of predictable profitability that we observe among major European peers. The unchanged ‘bbb’ stand-alone credit profile (SACP) remains underpinned by the actions that management took in 2017 to strengthen the balance sheet (in terms of capitalization, liquidity, and asset quality). These actions gave the bank good solvency and liquidity buffers and restored investors’ confidence, which in our view helps the new management to deliver its strategy. While litigation risks remain–the main outstanding case, in our view, is a U.S. Department of Justice investigation into mirror trades in Russian equities–we see them as having reduced significantly and are no longer a material downside risk.

We anticipate that Deutsche Bank’s profitability in the second quarter of 2018 could be muted given flat period-to-date market conditions, with only a very low single-digit return on equity for the full year 2018. Depending in part on market conditions and activity, we expect that profitability will improve in 2019 as the benefits of strategic execution emerge, leading to a mid-single-digit ROTE. We assume that asset quality will remain robust, and liquidity buffers strong. We estimate the bank’s capitalization measured under our risk-adjusted capital (RAC) methodology to have been close to 10.0% at end-2017, but we expect this to decline to 9.0%-9.5% during 2018/2019. The bank reported a fully-loaded Common Equity Tier 1 ratio of 13.4% at March 2018, down from 14.0% at end-2017.

On April 19, 2018, we published new criteria for assigning resolution counterparty ratings (RCRs) to certain financial institutions. We consider that there is an effective resolution regime in Germany, and that an RCR may be relevant to Deutsche Bank under these criteria. In coming weeks, we will review our analysis of the resolution regime across 26 countries, including Germany. This review will identify liability categories, if any, that are protected from default risk by structural or operational features of a given resolution framework. Upon completion of this review, we may assign  RCRs under our new criteria to banks located in Germany, including Deutsche Bank.

The stable outlook acknowledges the continued execution risks inherent in Deutsche Bank’s restructuring, but reflects our view that the refreshed management team has the backing of the Supervisory Board, is pressing ahead in earnest, and has taken decisive actions to help the bank deliver more solid and more sustainable returns. Still, we will continue to observe how the execution of this strategy unfolds and to what extent the franchise of Deutsche Bank, and its earning generation capacity, has been damaged or not by the management changes and restructuring. Over the coming 18 months, we will look in particular for robust delivery against 2019 objectives, such as the €22 billion cost target, a meaningful improvement in reported ROTE, and evidence the bank has retained the solid support of its clients, something that would help underpin the revenue base in the CIB division amid a period of substantial downsizing. 

We could lower our long-term issuer credit rating on the bank if we see setbacks in the delivery of the updated strategy or signs that 2019 financial objectives could materially slip, leading to a stalling of improving profitability. This would be consistent with a view that, notwithstanding Deutsche Bank’s position as a leading European bank, the business stability that comes with an end to restructuring and delivery of satisfactory financial performance is likely to remain elusive, and also that its franchise and competitive position have weakened. In this scenario, we would very likely revise down the ‘bbb’ SACP, and so lower our issue credit ratings on all rated debt, including the senior subordinated debt and regulatory capital instruments.

An upgrade is unlikely in the coming 18 months because we expect the financial benefits of strategic execution in 2018 to become more evident only in 2019 and to represent progress in the ongoing journey rather than its conclusion. Still, we could upgrade the bank once we gain greater confidence in Deutsche Bank’s execution such that it appears well set to achieve a more stable and predictable business model, thereby narrowing the gap with its global peers in terms of revenue generation and cost control. We would likely make this revision by removing the notch of adjustment to the issuer credit rating. It would therefore affect only the senior (preferred) debt, not our ratings on the senior subordinated debt and regulatory capital instruments.

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Authored by Daniel Lacalle via DLacalle.com,

Political risk in Europe was largely ignored in international markets because of the mirage of the so-called ‘Macron effect’, the ECB’s massive quantitative easing program, and a perception that everything was different this time in Europe added to the illusion of growth and stability.

However, a storm was brewing and the same old problems seen throughout the years in Europe were increasing.

In Italy, the shock came with an election that brought a coalition of extreme left and extreme right populists. Disillusion with the Euro was evident in Italy for years, as the economy continued to be in stagnation while debt soared. However, international bodies, mainstream analysts, and banks preferred to ignore the risk, instead continuing to announce impossible growth estimates for the following year and science-fiction banks’ profitability improvements.

Italy’s economic problems are self-inflicted, not due to the Euro. Governments of all ideologies have consistently promoted inefficient dinosaur “national champions” and state-owned semi-ministerial corporations at the expense of small and medium enterprises, competitiveness and growth, labor market rigidities created high unemployment, while banks were incentivized to lend to obsolete and indebted state-owned companies in their disastrous empire-building acquisitions, inefficient municipalities, as well as finance bloated local and national government spending. This led to the highest Non-Performing Loan figure in Europe.

Now, the new government wants to solve a problem of high government intervention with more government intervention. The measures outlined would imply an additional deficit of some €130bn by 2020 and shoot the 2020 Deficit/GDP to 8%, according to Fidentiis.

Italy’s large debt and non-performing loans can create a much bigger problem than Greece for the EU. Because this time, the ECB has no tools to manage it. With liquidity at all-time highs and bond yields at all-time lows, there is nothing that can be done from a monetary policy perspective to contain a political crisis.

In Spain, something similar happened.

The Spanish recovery from the worst crisis in decades was impressive and an example for other European countries, but weak and fragile. Spain recovered more than half of the jobs lost during a crisis and slashed deficit by half. Exports rose to 33% of GDP.

However, large imbalances continued to build.

Spain, like Italy, France and Portugal, saw a rising populist wave and, in typical European Union fashion, decided to combat populism by increasing spending and adding public sector imbalances. By doing so, Spain, like Italy, did not stop the populist demands.

However, growth was impressive. In 2018, despite an evident slowdown of the Eurozone, Spain showed a 3% annualized growth in the first quarter. The reason for the difference in performance of Spain relative to other neighboring countries was a very ambitious set of structural reforms. But they came at a cost, as we have seen in many other countries where tough decisions had to be made, and the government lost an absolute majority in the past elections. Now, internal forces put the recovery in danger and threaten the economy again.

The excuse for a vote of no-confidence came from recent corruption cases that have affected the Popular Party, mainly the so-called Gurtel scandal of illegal financing, but any discernable investor knows this is pure political tactic, because the alternative parties are also involved in very relevant corruption cases. All these cases come from the past. From the housing bubble at the beginning of the 2000s (PSOE has the unemployment fraud in Andalucia and the Catalan separatists the embezzlement scandal called “the 3%” because of the bribes requested for public contracts).

The main risk in Spain is very similar to Italy. A weak minority government led by parties that demand massive government spending and more entitlements with larger deficits, could be in power at a crucial time for Spain. When the tailwind of massive liquidity injections and low rates from the ECB ends, Spain will have refinancing requirements that exceed €300 billion per annum before 2022. In 2018, 41.2 billion euro, in 2019, 82.4, in 2020 83.9 and in 2021 58.5 billion euro, with 60.4 billion maturing in 2022.

Italy finds itself in a similar situation, with 84 billion euro maturities in 2018, 161 billion in 2019, 164 billion in 2020 and 172.5 billion euro in 2021.

It is not just a case of sovereign borrowing. The economies, like in 2010-2011, suffer dramatically when borrowing costs rise… And the Credit Default Swap of Italy and Spain have risen dramatically. Spain’s 10-year sovereign bond Credit Default Swap has almost doubled in the five days since the vote of no confidence was announced.

Spain needs to make an adjustment of 15 billion euro in 2018 to meet its commitments with Brussels, and the risk to the economy is that the budget bets the entire deficit reduction on higher tax revenues from stronger growth. That is why markets are so concerned. Spain is a very cyclical economy and the wrong policies can send the country to recession very quickly, as we saw in 2008-2010. However, in 2010 debt was much lower and rates were higher, so there was some fiscal space once the ECB started to lower interest rates… Unfortunately, like Italy, France and Portugal, Spain abandoned its reform agenda to bet it all on monetary policy when the conservative government lost absolute majority.

Now that the tide is turning and the placebo effect of the ECB’s quantitative easing is disappearing, we are seeing a very evident slowdown in the European economy, and Spain’s main trading partners are Eurozone countries, which could damage exports. But we are also witnessing the sudden stop in emerging markets like Brazil or Argentina, and the external sector also depends strongly on exports to these countries.

The likely coalition of Socialists, communists and separatists is aiming to unwind the labor market reform, which is likely to hurt job creation in a country with 15% unemployment where rigid labor laws have made it have an average of 17% unemployment since 1980. Additionally, as we have seen in so many European countries, they want to increase spending massively for entitlements and “relax” deficit targets, i.e. borrow more. The economic programs announced promise up to €60 billion more spending with €47 billion more revenues from raising taxes. The latter will not be achieved, and the former will be overspent, as always.

Like in Italy, the risk is that none of these parties talk of breaking the euro or defaulting now, but most of them have signed in Brussels requests for mechanisms for “orderly exit”. Obviously, with monster debt and massive imbalances, orderly exit is an oxymoron.

The risk of default is currently kept low by the massive quantitative easing of the ECB, but at some point Germany and other countries are going to say “enough is enough”.

Obviously, populists in Spain, like Italy, blame it all on “austerity”. With government spending 13% higher than in 2007, and public spending to GDP at almost 40%, calling the current situation austerity would be a joke if it was not so serious.

Why is there a risk on corporates and the overall economy? In Spain and Italy the real economy is extremely dependent on banks. While in the US banks finance less than 20% of the real economy, in the European Union it is more than 80%. Banks, at the same time, are extremely dependent on sovereign risk. Not just due to their holdings of sovereign bonds, but because of massive lending to local, regional and state administrations. This makes SMEs and families very exposed to sovereign risk.

The main German, French and Spanish banks hold very significant amounts of Italian debt.  Italian banks, €118.76 billion, French ones, €44.27 billion, Spanish financial entities, €28.75 billion and German ones, €24.06 billion.

The Financial systems of Italy, Spain, Portugal and Germany are the largest holders of their countries’ sovereign bonds, at 18%, 13%, 11% and 10% of total assets respectively. Many investors believe that the European Central Bank is going to solve this whole problem monetizing excess deficits and spending. The main problem is that this is the recipe for a Japan-style stagnation process. The central bank cannot print growth.

Analysts ignore the demographics risk in Europe, the excessive spending in entitlements and the constant crowding out of the public sector against the private sector.

The problem in Spain and Italy is not the Euro or the financial markets. It is the continuous, relentless policies of subsidizing the unproductive and the public sector at the expense of the high productivity sectors and taxpayers.

A coalition of socialists, populists and separatists in Spain would not only demolish the reforms that have helped the recovery, it would immediately destroy credit confidence by demanding more wasteful spend and more entitlements while promising a deficit improvement that never arrives through giant tax increases.  These parties want to “recover” the policies that existed before the crisis. The ones that destroyed 3.5 million jobs with the largest stimulus package ever applied in Spain (almost 30% of GDP deficit spending).

The risks in Europe are being underestimated, and the only thing I hear all the time as a bullish argument is “the ECB will monetize it”. Careful what you wish for. The best outcome is a Japan-style stagnation. The worst, back to 2011.

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This was originally published as a Hedgeye Guest Contributor note.

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Even the Washington Post now admits that Assad is “here to stay” —“The writing is now indisputably on the wall: The Syrian regime is going nowhere.”

In a newly published wide ranging sit-down interview with RT journalist Murad Gazdiev in Damascus, Syrian President Bashar al-Assad revealed his perspective of major recent events which have prolonged the war and taken it to new dangerous levels of escalation, including the Douma chemical attack claims in April and Russia’s thwarting the West’s objective of regime change.

“They told a story, they told a lie, and the public opinion around the world and in the West didn’t buy their story, but they couldn’t withdraw. So, they had to do something, even on a smaller scale,” Assad said of the April 14th massive airstrikes on Syria carried out by the US, UK, France, and Israel after videos purporting to show victims of a chlorine gas attack were released by the Saudi-financed Jaish al-Islam and the White Helmets.

The world learns to live with Assad in Syria by @ishaantharoor https://t.co/C7ks3K8cTI

— Joshua Landis (@joshua_landis) May 31, 2018

Assad appeared to be indirectly referencing the stream of skeptical reporting which began emerging once Western correspondents physically entered the attack site for the first time, notably veteran Middle East reporter Robert Fisk among them, who stunned his British and world audience in concluding, “they were not gassed.” There were also skeptical television reports in American and European media by journalists walking around Douma.

Of Douma in particular, supposedly gassed by the Syrian Army in the very moments it stood poised to liberate the last 5% of East Ghouta, Assad questioned, “Is it in our interest? Why, and why now?” Assad noted that each time his forces were closest to achieving overwhelming battlefield victory, a major and inexplicable provocation happened to sway international opinion.

He said further that despite continued US interference, especially in Syria’s northeast, Damascus has nearly won the seven-year war with Russian military support, which thwarted Western attempts of an Iraq-style military intervention: “With every move forward for the Syrian Army, and for the political process, and for the whole situation, our enemies and our opponents, mainly the West led by the United States and their puppets in Europe and in our region, they try to make it farther – either by supporting more terrorism, bringing more terrorists to Syria, or by hindering the political process,” Assad told RT.

And of the April 14th US coalition attack, he explained that Russia’s presence kept it to a limited, largely symbolic strike on alleged weapons production facilities: “The Russians announced publicly that they are going to destroy the bases that are going to be used to launch missiles, and our information – we don’t have evidence, we only have information, and that information is credible information – that they were thinking about a comprehensive attack all over Syria [speaking of the Russian response], and that’s why the threat pushed the West to make it on a much smaller scale.”

Assad did not downplay the potential for the outbreak of wider regional war after multiple clashes with the West: “We were close to having direct conflict between the Russian forces and the American forces, and fortunately, it has been avoided, not by the wisdom of the American leadership, but by the wisdom of the Russian leadership,” he said, and added, “We need the Russian support, but we need at the same time to avoid the American foolishness in order to be able to stabilize our country.” Assad further thanked Russia for carefully avoiding unnecessary escalation with the “foolish” US.

While denouncing the US as supporting terrorists that war against the state, Assad refused to mount personal attacks against Trump or other Western leaders. Gazdiev asked him if he had an epithet for Trump in return while referencing the US president’s recent “animal Assad” comments: “This is not my language, so I cannot use similar language. This is his language; it represents him,” the Syrian president stated. “I think there is a very known principle that what you say is what you are. So, he wanted to represent what he is and that’s normal,” he added.

President Assad responds to Trump calling him “Animal Assad” by saying he is above such petty language.

He should have went with “Okay, first of all, Assad means lion in Arabic and I am the lion of Damascus so-” pic.twitter.com/Bo3yNcfYtF

— Serge (@Zinvor) May 31, 2018

Assad showed himself willing to take a pragmatic approach in dealing with the US-backed Syrian Democratic Forces (SDF), supported by 2000 or more US troops currently occupying parts of northeast Syria. He said Washington has generally long be in the process of “losing its cards” in Syria and can be brought to the negotiating table. “Our challenge is how can we close this gap between their plans and our plans,” he said of Washington and its military advisers in Syria.

He explained further of the US trained and equipped SDF: “We’re going to deal with it by two options: the first one we started now opening doors for negotiations, because the majority of them [SDF] are Syrians. Supposedly they like their country, they don’t like to be puppets to any foreigners,” Assad said. “If not, we’re going to resort … to liberating those areas by force. It’s our land, it’s our right, and it’s our duty to liberate it, and the Americans should leave. Somehow they’re going to leave,” he added.

However, this explanation didn’t stop the Associated Press from immediately misrepresenting this portion of the interview, headlining its story “Syria’s Assad threatens force against US-backed Kurds.” RT interviewer Murad Gazdiev, who heard Assad’s words firsthand, said of the AP’s claim, “Misleading, if not outright fake news. Assad said he has begun negotiating with Kurds and prefers reuniting Syria peacefully. But if there are those who don’t want to negotiate, he will use force.”

Misleading, if not outright fake news. Assad said he has begun negotiating with Kurds and prefers reuniting Syria peacefully. But if there are those who don’t want to negotiate, he will use force.

Shameful, AFP https://t.co/m9ZTIYJztH

— Murad Gazdiev (@MuradGazdiev) May 31, 2018

Though he seems convinced that the great power confrontation over Syria is now winding down, the threat of terrorism will perpetuate, despite the ongoing Russia-Turkey-Iran brokered Astana talks which have sought to reach out to select anti-Assad groups.

Assad explained his goal is to expel all terrorists and restore order: “Factions like Al-Qaeda, like ISIS, like Al-Nusra, and the like-minded groups, they’re not ready for any dialogue, they don’t have any political plan; they only have this dark ideological plan, which is to be like any Al-Qaeda-controlled area anywhere in this world. So, the only option to deal with those factions is force.”

“The more escalation we have, the more determined we’ll be to solve the problem, because you don’t have any other choice; either you have a country or you don’t have a country,” the Syrian president told RT.

Ironically, prior US government official threat assessment studies seem to be in agreement that Damascus has fundamentally faced a largely al-Qaeda fueled foreign terrorist insurgency over these past years of war.

The US State Department’s own 2014 Country Report on Terrorism confirms that the rate of foreign terrorist entry into Syria over the past years has been unprecedented among any conflict in history:

“The rate of foreign terrorist fighter travel to Syria — totaling more than 16,000 foreign terrorist fighters from more than 90 countries as of late December — exceeded the rate of foreign terrorist fighters who traveled to Afghanistan and Pakistan, Iraq, Yemen, or Somalia at any point in the last 20 years.”

And these figures were merely from the 2014 report, and likely reflect lower estimated numbers than the reality.

But regardless of what some analysts have described as Syria’s “endless insurgency” problem, we actually find ourselves in rare agreement with the Washington Post, that Assad is most certainly “here to stay” (it must have pained WaPo greatly to have to write those words). He has clearly long outlasted nearly each and every political leader in the West who once called for his ouster.

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Authored by Alex Gorka via The Strategic Culture Foundation,

Moscow has expressed its concern over NATO’s military infrastructure that has been built adjacent to the Russian border. On May 28, Kremlin Spokesman Dmitry Peskov declared that Russia is prepared to take appropriate measures in response. That statement was a reaction to Warsaw’s plans to host a permanent US military presence on its territory.

Russian lawmakers point out that this would move Poland to the top of Russia’s list of military targets.

That deployment would breach the Russia-NATO Founding Act (1997), in which NATO pledged not to seek “additional permanent stationing of substantial combat forces” inside Russia’s neighbors “in the current and foreseeable security environment.” It’s hardly a coincidence that the news went public before the NATO-Russia Council meeting scheduled for May 31.

According to Politico, Poland wants a US armored division permanently deployed on its soil. It is willing to pay $2 billion to help construct the installation. Five possible sites in northern Poland have been offered for consideration. The draft proposal comes just a little more than a month before a NATO summit that will be held July 11-12 in Brussels.

The issue of a permanent base had probably been previously discussed behind closed doors. According to the defense draft budget for fiscal 2019, the US Senate Armed Services Committee has already asked the defense secretary to assess the cost of a permanent presence in Poland.

America’s military, as well as the personnel of other NATO countries, are stationed in the country on a rotating basis but Warsaw doesn’t think that’s enough. Poland is one of just five bloc members that spend at least two percent of its national GDP on defense. The move dovetails with President Trump’s policy of making other nations pay for US protection. This could be just the beginning, with other countries eager for the American umbrella following suit and starting to negotiate by offering financial proposals that turn military-political agreements into commercial deals.

Meanwhile, work is in full swing to construct a new storage site and warehouse facility in Powidz , which will become a NATO hub for the Baltics and all of Northern Europe. A year ago, the US Army Europe established a new tactical headquarters in Poznan to control the rotating American forces in Eastern and Northern Europe. Poland and the Baltic States have reached an agreement to link Poland, Finland, and the Baltic States with the unified Trans-European Transport Network, which is crucial for the free movement of those forces. This “Rail Baltica,” stretching from Tallinn to Warsaw via Kaunas and Riga, is a key element of NATO’s infrastructure modernization.

According to Lieutenant General (ret.) Ben Hodges, former Commander of US Army Europe, “Any contingency we have to deal with, we’ll almost certainly have to come through Poland,” as that country has become the “center of the center of gravity” for the American military.

Poland will be increasing the size of its army by at least 50% in the coming years (from about 95,000 to 150,000). There are plans for three new brigades to be deployed on the eastern flank. No to be alarmist, but the fact that Poland has shifted its best military forces eastward, including its most modern tanks, has not gone unnoticed in Russia. The long-term modernization program provides for new air-defense systems, aircraft, ballistic missiles, submarines, self-propelled howitzers and around 1,200 drones, at least 1,000 of which are expected to be armed. The US Patriot PAC-3 will become the backbone of the Polish national air-defense system.

Poland has signed a contract with the US to acquire 70 AGM-158B JASSM-ER air-to-surface missiles by 2020 or a bit earlier. This is a first-strike stealth weapon with a range of roughly 1,000 km and a penetrating warhead capable of striking key stationary infrastructure sites inside Russian territory, including the Iskander short-range surface-to-surface missiles deployed in the Kaliningrad region.

In November, Poland will host Anakonda 2018, a truly massive NATO military exercise. It will involve about 100,000 troops, 5,000 vehicles, 150 aircraft, and 45 warships, all assembled to practice offensive operations against Russia.

The Intermarium (Intersea) political project to create a cordon sanitaire between Germany and Russia that would protect the integrity of the countries of Central and Eastern Europe is still very much alive in Poland and influencing the mindset of those who shape Warsaw’s foreign policy. Josef Pilsudski, who led the country after WWI, made an unsuccessful effort to get that project off the ground. The plan was to create an anti-Russian alliance that would be sponsored by Poland, include the Baltic States, Finland, Belarus, Ukraine, Czechoslovakia, Hungary, Romania, and Yugoslavia, and stretch between the Adriatic, Baltic, and Black Seas.

In 2005, Jaroslaw Leszczynski, came up with the idea to establish the Fourth Polish Republic — a transborder common space shared by Poland, Ukraine, Belarus, and Lithuania and modeled on the Rzeczpospolita. The prospects for forming a kind of association of Central and East European states united by their anti-Russian policies were discussed last year at a forum for the former presidents of Poland, Ukraine, Moldova, and the Baltic States that was held March 9-10 in Kaunas. President Trump’s visit to Warsaw in 2017 stirred up the Intermarium debates.

Poland, along with the Baltic States, has become a kind of mini-East European NATO, which is 100% pro-American and willing to become a base of operations for threatening Russia. That country has become the fiercest opponent of the Nord Stream 2 pipeline project that would supply Europe with cheap Russian gas, while offering itself as the hub for more expensive supplies entering Eastern Europe from the US.

Meanwhile, the EU-Poland rift is growing. Polexit is a possibility. Europe is in revolt against US domination. Because of the country’s ambitions and dreams of power, Warsaw is seeking its own piece of the global pie, dreaming of becoming a vertex of power in the erroneous belief that dancing to the US tune is the way to achieve this goal. It could end up breaking with Europe, only to find itself faced with a cold shoulder from the US when Poland is no longer needed. Then Warsaw would have to deal with Russia – a relationship it sacrificed for the sake of cozying up to America. In order to enjoy a high international standing one must have an independent foreign policy, not kowtow to other states, no matter how powerful they might be.

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Facebook, which has until recently dominated the social media landscape among America’s youth, is now just the fourth most popular online platform among teens between ages 13 and 17, with just 51% saying they use it, according to a new survey from the Pew Research Center. Facebook use among teens pales in comparison to YouTube (85%), Instagram (72%) and Snapchat (69%). Twitter is fifth with just 32% of teens reporting using the platform. 

The decline in Facebook use is stunning compared to Pew’s 2014-2015 study, in which 71% of teens reported being Facebook users, and other platforms such as Instagram and Snapchat were nowhere near today’s figures, at 52% and 41% respectively.

Meanwhile 95% of teens now have a smartphone or access to one, while 45% of teens say they are online on a near-constant basis, fueling ever-growing online activities.

This shift in teens’ social media use is just one example of how the technology landscape for young people has evolved since the Center’s last survey of teens and technology use in 2014-2015. Most notably, smartphone ownership has become a nearly ubiquitous element of teen life: 95% of teens now report they have a smartphone or access to one. These mobile connections are in turn fueling more-persistent online activities: 45% of teens now say they are online on a near-constant basis. –Pew

Breaking down teen use of Facebook by household income, 70% of teens from households making under $30,000 per year report using Facebook, while just 36% of teens from households making $75,000 or more are on the platform. 

Notably, lower-income teens are more likely to gravitate toward Facebook than those from higher-income households – a trend consistent with previous Center surveys. Seven-in-ten teens living in households earning less than $30,000 a year say they use Facebook, compared with 36% whose annual family income is $75,000 or more. -Pew

How teens view the impact of social media

Pew also asked the teenagers how they thought the use of social media affected their lives – and found no clear consensus. 

A plurality of teens (45%) believe social media has a neither positive nor negative effect on people their age. Meanwhile, roughly three-in-ten teens (31%) say social media has had a mostly positive impact, while 24% describe its effect as mostly negative.

Given the opportunity to explain their views in their own words, teens who say social media has had a mostly positive effect tended to stress issues related to connectivity and connection with others. Some 40% of these respondents said that social media has had a positive impact because it helps them keep in touch and interact with others. Many of these responses emphasize how social media has made it easier to communicate with family and friends and to connect with new people: -Pew

“I think social media have a positive effect because it lets you talk to family members far away.” (Girl, age 14)

“I feel that social media can make people my age feel less lonely or alone. It creates a space where you can interact with people.” (Girl, age 15)

Others in this group cite the greater access to news and information that social media facilitates (16%), or being able to connect with people who share similar interests (15%):

“My mom had to get a ride to the library to get what I have in my hand all the time. She reminds me of that a lot.” (Girl, age 14)

“It has given many kids my age an outlet to express their opinions and emotions, and connect with people who feel the same way.” (Girl, age 15)

Smaller shares argue that social media is a good venue for entertainment (9%), that it offers a space for self-expression (7%) or that it allows teens to get support from others (5%) or to learn new things in general (4%).

“[Social media] allows us to communicate freely and see what everyone else is doing. [It] gives us a voice that can reach many people.” (Boy, age 15)

There is slightly less consensus among teens who say social media has had a mostly negative effect on people their age. The top response (mentioned by 27% of these teens) is that social media has led to more bullying and the overall spread of rumors.

“People can say whatever they want with anonymity and I think that has a negative impact.” (Boy, age 15)

“Because teens are killing people all because of the things they see on social media or because of the things that happened on social media.” (Girl, age 14)

Video Games

84% of teens say they own or have access to a game console at home, and 90% say they play video games of any kind (whether on a computer, game console or cell phone). 

While a substantial majority of girls report having access to a game console at home (75%) or playing video games in general (83%), those shares are even higher among boys. Roughly nine-in-ten boys (92%) have or have access to a game console at home, and 97% say they play video games in some form or fashion.

There has been growth in game console ownership among Hispanic teens and teens from lower-income families since the Center’s previous study of the teen technology landscape in 2014-2015. The share of Hispanics who say they have access to a game console at home grew by 10 percentage points during this time period. And 85% of teens from households earning less than $30,000 a year now say they have a game console at home, up from 67% in 2014-2015. -Pew

Read the report here: 

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Authored by Finian Cunningham via The Strategic Culture Foundation,

The Dutch-led probe into the 2014 Malaysian airliner disaster has the hallmarks of a psychological operation to frame-up Russia and to justify further sanctions and aggression from the NATO powers.

The so-called Joint Investigation Team (JIT) released an update last Thursday on its ongoing probe into the MH17 air disaster over Eastern Ukraine, in which all 298 people onboard were killed. The JIT’s latest release moves the accusation of culpability closer to Russia, with the team claiming that an anti-aircraft Buk missile, which allegedly shot down the plane, was brought into Ukraine by Russia’s 53rd Brigade based in Kursk, southwest Russia.

Then on Friday, the day after the high-profile JIT presentation, a news report compiled by US-based McClatchy News and UK-based self-styled online investigative website Bellingcat was published claiming to have identified a senior Russian military intelligence (GRU) officer as being involved in the transport of the missile system.

The Russian GRU officer is named as Oleg Vladimirovich Ivannikov. The report includes a photograph of the named man, who is said to have at least one residential address in Moscow and who used the call sign “Orion”. Tellingly, the McClatchy report claims that news of identifying the Russian military officer was not known by the JIT when it made its presentation the day before. But McClatchy reported that the Dutch-led investigators now want to arraign “Orion”.

Over the weekend, the Dutch, Australian and British governments upped the ante by formally accusing Russia, and demanding that Moscow pay financial compensation to families of the crash victims.

Most of those onboard the doomed MH17 were Dutch, Malaysian and Australian nationals.

What we are seeing here is a choreographed sequence trying to give the public impression that developments in the probe are taking a natural course based on “evidence” imputing blame to Russia. The same technique of media psychological operation can be seen in the Skripal poisoning affair in which Moscow is blamed for trying to assassinate a former spy in England. Allegations, purported evidence, and then sanctions (expulsion of Russian diplomats) all follow a choreographed sequence.

On the MH17 incident, Russia has vehemently denied any involvement in the passenger plane’s downing. Moscow says its own investigation into the incident points to the Kiev regime’s armed forces as being responsible, possibly using their stock of Soviet-era Buk anti-aircraft missiles. Significantly, Russia’s investigative results have been spurned by the JIT, while Moscow’s offers of contributing to the probe have been rebuffed. As in the Skripal affair, where the British authorities have also refused Russia’s offers of joint investigation, or Russia’s ability to independently verify the supposedly incriminating data.

In a dramatic twist, Russia’s Ministry of Defense said that the missile casing displayed by the Dutch investigators bore features dating the weapon to 1986 when Ukraine was a Soviet Republic. The Russian military said that all such Buk models were replaced by its forces in 2011. Therefore, the alleged offensive weapon presented by the JIT last week could not have come from Russian forces. Besides, Moscow denies that any of its brigades crossed into Ukrainian territory.

The JIT, which includes investigators from Holland, Belgium, Australia, Malaysia and – invidiously – Ukrainian secret services, openly acknowledged in its presentation last week that it is cooperating with the Britain-based Bellingcat website. The latter is cited for its analysis of videos purporting to show the transport of a Russian military Buk convoy through Eastern Ukraine at around the time of the airliner being shot down. Those videos have already been exposed as fabrications.

Now it seems rather strange that the JIT was reported by McClatchy as not knowing of Bellingcat’s next “scoop” published the following day in which it claims to identify a Russian military officer, named as Oleg Ivannikov or Orion, for being involved in coordinating the transport of the Buk convoy, which the JIT says came from the 53rd Brigade in Russia’s Kursk.

The JIT and Bellingcat have collaborated in a previous update to its MH17 probe, in 2016, when the dubious videos were presented as purportedly showing the Buk convoy traversing Eastern Ukraine back to Russia. Bellingcat was cited again in the JIT’s update last Thursday.

That raises the question of why the information claiming to identify the Russian military officer was not available to JIT, even though the latter has worked closely with Bellingcat before? It was the next day when the McClatchy-Bellingcat news report came out, seemingly separate to the JIT presentation.

The sequence suggests a concerted effort to “build” a public perception that “clues” into the cause of the air crash and the incrimination of Russia are being assembled in an independent manner. When, in reality, the sequence is actually a deliberately orchestrated media campaign, to more effectively smear Russia.

Bellingcat’s media activities indicate that it is not the supposed “independent online investigative website” it claims to be. During the Syrian war, it has helped to peddle claims that videos sourced from the White Helmets are “authentic” when in fact there is strong evidence that the White Helmets have been fabricating videos of atrocities on behalf of NATO-sponsored terrorists in order to smear the Syrian government and its Russian ally.

For the Dutch-led JIT to associate with Bellingcat as a source of “evidence” is a matter of grave concern as to the probe’s professional credibility.

Moreover, what is also fatally damaging to the MH17 probe is that the Ukrainian secret services (SBU) under the control of the Western-backed Kiev regime, which came to power in the NATO-backed February 2014 coup d’état, is the source for much of the so-called evidence implicating Russia or the pro-Russian separatists in Eastern Ukraine for shooting down the MH17 airliner.

The dubious videos cited by the JIT and Bellingcat were sourced from the SBU. Those videos were purportedly posted on social media at the time of the plane crash by anonymous members of the public. The Russian government has dismissed those videos as fake.

The latest claims by McClatchy and Bellingcat of identifying a Russian military officer are based on allegations that mobile phone intercepts are attributable to the man named as Orion. Bellingcat appears to have expended a lot of effort trawling through digital phone books to identify the individual. The report also relies on embellishment of Orion’s alleged secret military career in Ukraine and South Ossetia by way of lending a sense of credibility and sinister innuendo.

However, the bottomline is that McClatchy and Bellingcat both admit that they are relying on the Ukrainian secret services for their phone intercepts, as they had previously for the videos of the alleged Russian Buk convoy.

The SBU and its Kiev masters have an obvious axe to grind against Moscow. Their partisan position, not to say potential liability for the air crash, thus makes the JIT and subsequent Western media reporting highly suspect.

Such close involvement of a Western media outlet (McClatchy) with a fake news engine (Bellingcat) and Ukrainian state intelligence is indicative of coordinated public psychological operation to smear Russia.

The prompt responses from Western governments calling for criminal proceedings against Moscow are further indication that the whole effort is an orchestrated campaign to frame-up Russia.

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For the first time ever, China has overtaken America in healthy life expectancy at birth, according to a new report. “Healthy life expectancy” is defined by years lived in good health or without significant illness.

The report, from the World Health Organization (WHO), reveals Chinese newborns could experince 68.7-years of healthy life ahead of them, compared to just 68.5-years for American babies. While the margin between healthy life for both countries is minuscule, the crossover represents the understanding that America is in decline.

Though Americans born in 2018 can still expect a longer life — 78.5-years to be exact, compared to China’s 76.4-years; however, the last ten years of an American’s life is usually plagued with significant health-related problems.

“The lost years of good health that are a factor in calculating healthy life expectancy at birth are lower for China, Japan, Korea and some other high-income Asian countries than for high income ‘Western’ countries,” said WHO spokeswoman Alison Clements-Hunt.

The data also shows that America is one of the only five countries, along with Afghanistan, Georgia, Grenadines, Saint Vincent, and Somalia, where healthy life expectancy at birth is reversing.

Since 2005, the outlook for Singaporean babies has never been better, who can live free of significant health-related issues until 76.2-years, followed by Japan, Spain, and Switzerland.

In overall global life expectancy rankings, America places 40th among all other countries, while China ranks 37th.

China has seen a dramatic improvement in overall life expectancy in recent years. Meanwhile, overall life expectancy in the United States peaked in 2014 at 79-years, which Reuters calculates that China could overtake the United States around 2027.

“Chinese life expectancy has increased substantially and is now higher than for some high-income countries,” said Clements-Hunt.

The WHO’s numbers reflect that something is not quite right in America. The Centers for Disease Control (CDC) confirmed in December that the average American life expectancy at birth declined in 2016 for the second consecutive year – the first multiyear decline since 1963, when a flu epidemic led to a rash of deaths as hundreds of thousands of elderly Americans succumbed to the virus.

Clements-Hunt believes drug overdoses and worsening wealth inequality could be some of the trends responsible for declining American life expectancy.

“The increasing rates of drug overdose deaths, mainly from opioids, suicides, and some other major causes among younger middle-aged Americans, particularly in less affluent area,” she said.

While it is no mystery that American Exceptionalism is declining, China, on the other hand, is gradually accelerating with a healthier workforce that will be the needed energy in its economy to dethrone the American Empire in the next decade. Significant changes are coming to the global economy and while today’s data from the WHO does not seem substantial, remember, a critical component of any economy besides robots is the human factor.

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Authored by Mac Slavo via SHTFplan.com,

It’s not a secret that government’s want to seize as much from the producers as possible to bloat their power-hungry heads.  But a new lawsuit is actually giving the details on just how the government uses the “justice” system to keep the poor in dire states of poverty.

The ACLU of North Carolina, the Southern Poverty Law Center, and the Southern Coalition for Social Justice have slapped the state of North Carolina with a federal lawsuit over the state’s practice of suspending drivers’ licenses over unpaid tickets.

According to Splinter News, in North Carolina, the DMV (Department of Motor Vehicles) is required by state law to automatically revoke a license after it receives notice from the court that a person has failed to pay their fines or penalties or associated costs. The lawsuit alleges that this state law violates the Fourteenth Amendment.

The Fourteenth Amendment reads:

All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside. No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

The two plaintiffs in the case are 27-year old Seti Johnson and 31-year old Sharee Smoot. According to the lawsuit, Johnson is unemployed and can’t afford to pay off a traffic ticket as well as support his three children. He was able to save up $700 to get his license back last year, but before he was able to finally pay it off, he was hit with another ticket for $100 plus $208 in court costs. He covered the $100 ticket, but still owes $228 in court costs, and will lose his license sometime around the end of July. Although Johnson just got a new job, the lawsuit says, “he will have to either forego the job and figure out a different way to get his children to school, daycare, and the doctor’s office, or he will have to illegally drive.”

“I’d previously fallen behind on my rent and sacrificed the needs of my children just to keep my license,” Johnson said in a statement provided by the ACLU of North Carolina. “I cannot afford to do that again. This has to stop.”

Smoot, a single mother who works at a call center 45 minutes away from her home to help support her grandmother as well as her nine-year-old daughter said:

“I just want a fair chance to take care of my family. I can’t afford to pay the tickets right now, but that shouldn’t prevent me from having a driver’s license.”

However, this is a national problem not limited to North Carolina and stems from law enforcement looking to extort money for victimless crimes, and having the state in charge of driver’s licenses. In fact, a Washington Post report from earlier this month found that over 7 million people around the country may have had their licenses revoked for traffic debt-related reasons, although that number could be much higher. It’s just another way that both law enforcement and the justice department, as a whole, kneecaps the poor.

To read about how it all began, see here.

Extorting money from people for victimless crimes (most traffic violations are victimless) does not function to prevent any violent crime or crime with victims. The drug war does not help anyone, and the era of time in which the people of the US were most free, proves that this is the formula for prosperity. Even given the vastly different technology and capabilities of today, it would seem that this formula of freedom for prosperity would add up.

The problem is, we aren’t free and haven’t been for quite some time.  And no matter who gets elected, we get more police, more violence, more “criminals”, and higher taxes. 

But, it is time we began opening our eyes to the issue instead of repeating the “we’re free” lie. The best way to end poverty is not to throw money at it but to increase the rights and freedoms of everyone.

And in case you were wondering just how much all this newly militarized policing costs the average joe taxpayer, Statista’s Niall McCarthy notes that approximately $6 billion of excess Department of Defense property has been transferred to U.S. law enforcement agencies since 1990. Under the 1033 Program, all sorts of items from laptops to assault rifles have been passed from the military to the police. These fall into two categories – controlled items (like drones or helicopters) and uncontrolled items (like office furniture and tools).

Even though police militarization has become increasingly controversial, particularly in the wake of Ferguson when mine-resistant vehicles and heavily armed officers appeared on the streets, the flow of weaponry has continued without interruption. A recent RAND analysis of the situation found that in fiscal years 2015 to 2017, the value of uncontrolled transfers came to $1.2 billion while controlled items had a value of $775 million.

You will find more infographics at Statista

RAND found that the current value of all excess Department of Defense items held by law enforcement agencies across the U.S. today stands at $1,888,559,339.

The infographic above takes a closer look at a selection of equipment from the analysis and how much it’s currently worth. There are 849 mine-resistant vehicles in operation at U.S. police departments and they have a value of just under $583 million. Elsewhere on the list, 64,689 5.56 millimeter rifles have been transferred to law enforcement and they are worth $27.83 million while the grand total for all aircraft in the program comes to around $433 million.

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