“Cudjo meetee de people at de gate and tellee dem, ‘You see de rattlesnake in de woods?’ Dey say ‘Yeah.’ I say ‘If you bother wid him, he bite you. If you know de snake killee you why you bother wid him? Same way with my boys, you unnerstand me.'”
With these words, Cudjo Lewis—né Oluale Kossula—explains his child-rearing philosophy to an upstart anthropologist named Zora Neale Hurston in 1927. Captured by a neighboring tribe as a young adult in Africa, purchased by whites, and smuggled to U.S. soil 50 years after the Atlantic slave trade was outlawed, Lewis was freed just five years later in the wake of the Civil War and went on to have a family, found a town, and grow old in the Jim Crow era, writes Katherine Mangu-Ward in her editor’s note on Hurston’s long lost work Barracoon: The Story of the Last “Black Cargo.”
Despite the fanfare with which the White House unveiled its “American Patients First” initiative earlier this year, it appears American pharmaceutical giants didn’t get the memo, and are still going ahead with their annual “price modifications.” As the Financial Times reports, Pfizer, the largest drug company in the US, has raised prices on 100 products.
The price hikes were announce just weeks after President Trump claimed that US drug companies would soon announce “massive” voluntary price cuts. Pfizer’s decision “threatens to fuel the backlash over the soaring cost of medicines used in the US” as the price increases hit some of the company’s most popular drugs, including erectile-dysfunction drug “Viagra” (the “little blue pill”).
The increases are effective as of July 1. In most cases, the increases are just over 9%, which is in line with the annual 10% price hikes adopted by most drug companies. Putting that number in context, core inflation printed at 2% last week.
While news of the price hikes occupied the headlines, Pfizer would like consumers to know that its price “modifications” also included lowering the prices of five drugs by between 16% and 44%. According to the FT, this is Pfizer’s second round of price hikes this year.
Drug prices were a major issue during the 2016 campaign, with both Trump and his Democratic opponent Hillary Clinton. Last year, Trump accused the pharmaceutical industry of “getting away with murder.” However, one insider pointed out that it’s “business as usual” for the pharmaceutical industry as, when accounting for the increases in price as of January, some drug prices have risen by almost 20%.
“The latest increases signal that it is ‘business as usual’ rather than the voluntary concessions that Trump indicated were coming,” said Michael Rea, chief executive of Rx Savings Solutions, which makes software that helps employers and health insurers lower the amount they spend on prescription drugs.
Viagra and Chantix have endured price hikes of 20% and 17%, respectively, so far this year. Pfizer defended its decision by arguing that the “list price” for most of its inventory remains untouched. Furthermore, insurers and customers rarely pay the sticker price.
Pfizer said: “The list price remains unchanged for the majority of our medicines. We are modifying prices for 10 per cent of our medicines, including some instances where we’re decreasing the price.”
“List prices do not reflect what most patients or insurance companies pay,” the company added, pointing out that the net price increase – which accounts for discounts and rebates — was expected to be in the “low single digits.”
In response to scrutiny from politicians, most pharmaceutical companies have switched from raising drug prices twice per year to raising prices once per year, and Pfizer certainly hasn’t been the only company to hike prices this month. Of course, bringing the pharmaceutical companies to heel will be no easy task for the administration, as the industry spends more on lobbying than the next two biggest spenders combined.
Risk tone soured in Europe as US tariffs concerns and German political instability lead all equity markets into negative territory
US President Trump said he spoke to Saudi Arabia’s King Salman on raising production by as much as 2mln barrels and that prices were too high, which the Saudi ruler agreed with
Looking ahead, highlights include, US mfg PMIs, US construction spending, ISM manufacturing and ECB’s Praet
JPMorgan’s warning that the Chinese rout is far from over “as 2018 becomes 2015” proved prescient, and overnight global sentiment quickly shifted to “risk off” as soon as China opened for trading, leading to a resumption of selling first in China, then across Asia, and finally around the world, resulting in a market snapshot which this morning is another sea of red ahead of this Friday’s deadline for the US-Chinese trade war, when 25% tariffs kick in on some $34 billion in Chinese exports to the US.
The underlying concerns are well known: trade-war jitters, political risk in Europe and divergence in fiscal and monetary policy and economic performance between the US and the rest of the world weighed on investors’ minds.
“It’s not a happy start to the second half,” Saxo commodity head Ole Hansen said. “Trade war concerns, U.S. sanctions, Trump’s rants and political problems in Europe, as well as worries about slowing emerging-market growth are all playing their part.”
Political risks dragged the euro and pound down, the Mexican peso’s rally was short lived after the election of the country’s first leftist president in decades, while Treasuries climbed and dollar strength again slammed emerging markets. Overnight, Mexico’s Andres Manuel Lopez Obrador won a decisive victory in the Presidential election with quick count results showing he received 53.0%-53.8% of votes, while an exit poll also showed that Lopez Obrador is set to get a majority at the lower house.
Once again, it started with China, whose stocks took another battering on Monday as selling returned amid concern about a falling currency, housing curbs and the impact of trade tariffs. The Shanghai Composite Index extended last month’s 8% rout – with real estate and bank stocks heavily offered as leverage and credit exposure is under increasing pressure – sliding another 2.5% on Monday and bringing its bear market rout to -22% since the January high….
… while the yuan touched its weakest level since Oct. 3, resuming its sharpest drop since China’s August 2015 devaluation….
… after another unexpectedly sharp overnight selloff, sent the offshore Yuan down 0.6% to 6.6760 and fast approaching the 6.70 barrier.
What is curious is that the PBOC set the Yuan stronger than the expected fixing, suggesting that China is not yet using yuan depreciation as an active tool in its trade conflict with the U.S., and will likely step in to avert any disorderly decline, according to Morgan Stanley. “The PBOC could step up intervention if depreciation risk intensifies,” according to China economists at the bank, led by Robin Xing in Hong Kong. Goldman strategist on Friday also concluded that the PBOC has been “leaning against excessive depreciation in recent days.” We wonder what will happen if China decides to lean in…
Adding to concerns about China, over the weekend, China’s June PMI indicated weaker-than-expected manufacturing data and showed that new export orders slid into contraction, suggesting that trade war concerns are starting to seep through the Chinese economy.
Chart: Tom Orlik
It wasn’t just China: trade also weakened in export powerhouse South Korea, which reported June exports which were modestly down Y/Y.
Chart: Tom Orlik
The Asian turmoil quickly spread to Europe, where nearly all members of the Stoxx Europe 600 Index retreated. Miners were the biggest losers in Europe as metals fell and West Texas oil traded near $74 a barrel after U.S. President Donald Trump called for 2 million barrels in increased Saudi production. The Stoxx 600 Banks Index fell as much as 1.3%, led by drops in Italian and Spanish lenders. The Spanish Ibex 35 Banks Index fell 2%, with all 6 members dropping. The reason: BBVA and Banco Sabadell are among Spanish companies with exposure to Mexico where leftist Andres Manuel Lopez Obrador won Sunday’s presidential elections. Separately, Deutsche Bank once again tumbled, slides as much as 3.4% to €8.91 and near its all time low, but it has since found a bid.
Italian bonds made the European party complete with BTP futures sliding again, as yields rose as much as 9bps across 2- to 10-year sectors, widening vs core bonds as risk appetite continues to sour following European open.
Needless to say, investors are no longer enamored with Europe, which in Q2 saw the biggest quarterly ETF outflow in 2 years.
The US wasn’t immune to the global rout and futures on the S&P 500, Nasdaq and Dow all dropped, with the S&P set to erase all of Friday’s gains (which were far less as a result of that last hour selling rush).
There was more turmoil in FX: after rallying the most in a month Friday, the euro slipped -0.4% on Monday, erasing all earlier losses, as concern about a potential escalation in the German political crisis provides investors with another reason to fade rallies. On Monday, Merkel’s CDU and Bavarian CSU are holding last-ditch talks to reach a compromise over migration policy disputes.
On Sunday, Germany Interior Minister and CSU party leader Seehofer offered to resign, which follows a meeting over the weekend with Chancellor Merkel that Seehofer described as pointless and in which he rejected the migration deal that was negotiated at the EU summit. However, reports later stated that Seehofer is said to remain in politics if Chancellor Merkel’s CDU party backs down regarding migration, while he also said he wants to avoid the collapse of Merkel’s government and is said to be seeking one more discussion with the CDU. SU caucus chief Dobrindt opposed the resignation and requested an internal vote, while there were also comments from Economy Minister Altmaier who stated that the German coalition is in a serious situation.
As a result of the escalating German political crisis, the common currency dropped as much as -0.5% to touch 1.1626 day low, before paring losses. CFTC data published on June 29 shows hedge funds sold the euro for a seventh week in a row, a bearish momentum unseen in more than five years.
Some were quick to assure traders not to dump the euro: “Principally, it can be quite relevant for the euro if the political situation in Germany changes dramatically,” wrote Commerzbank FX strategist Esther Maria Reichelt. “However, for now there is little reason to doubt that all parties who might be suitable for a formation of the government support a similar economic and principally pro-European course. That means that the stability of the euro is not under threat even if the disagreements on asylum escalate further.”
Similarly, the Mexican peso turned lower, reversing an early advance of 1.3%, after Mexicans elected leftist Andres Manuel Lopez Obrador as their first left-wing president in decades.
On the other hand, the dollar kicked off the second half of the year on a strong footing as global equities slid amid trade concerns, while the yuan hit a nine-month low.
The return of dollar strength led to another drop in emerging-market stocks, which gave up half of Friday’s gain.
Crude futures gap lower at the Globex reopen, pressured as markets react to a tweet from US President Trump over
the weekend that he spoke with Saudi Arabia’s King Salman on raising production maybe by as much as 2mln barrels and that prices were too high which the Saudi ruler agreed with. However, the White House were quick to clarify that Saudi Arabia stated they could raise output if required and that there was no actual agreement to raising output by the said amount. In regards to this, Iran’s OPEC Governor Ardebili said on Saturday “there is no way one country could go 2mln BPD above their production allocation unless they are walking out of OPEC”. An Iranian official later stated that adjustments to the OPEC output levels would require an emergency meeting
Elsewhere, gold (-0.3%) is subdued by a slightly firmer dollar as the yellow metal continues to be detached from the risk sentiments. Chinese iron ore futures fell almost 2% on Monday, due to a fresh increase in iron ore stocks at China’s ports, after a hat trick of positive closes last week.
Looking ahead, highlights include US mfg PMIs, US construction spending, ISM manufacturing and ECB’s Praet.
Market Snapshot
S&P 500 futures down 0.6% to 2,705.00
STOXX Europe 600 down 0.9% to 376.36
MXAP down 1.2% to 164.11
MXAPJ down 0.7% to 535.26
Nikkei down 2.2% to 21,811.93
Topix down 2.1% to 1,695.29
Hang Seng Index up 1.6% to 28,955.11
Shanghai Composite down 2.5% to 2,775.56
Sensex down 0.5% to 35,240.17
Australia S&P/ASX 200 down 0.3% to 6,177.79
Kospi down 2.4% to 2,271.54
German 10Y yield fell 0.9 bps to 0.293%
Euro down 0.4% to $1.1637
Italian 10Y yield fell 9.9 bps to 2.413%
Spanish 10Y yield fell 1.4 bps to 1.307%
Brent Futures down 1.1% to $78.39/bbl
Gold spot down 0.3% to $1,248.72
U.S. Dollar Index up 0.4% to 94.83
Top Overnight News from Bloomberg
Mexicans elected Lopez Obrador as their first left-wing president in decades, according to exit polls that showed him headed for a landslide victory over two business-friendly rivals
Fate of German Chancellor Merkel’s ruling bloc is due to be decided Monday as a coalition dispute over migration policy reaches its endgame
German Chancellor Angela Merkel’s Christian Democratic Union and its Bavarian sister party will hold joint talks later Monday in Berlin in an effort to broker an 11th-hour compromise after separate discussions failed to end the standoff over migration policy
Chinese stocks took another battering on Monday as selling resumed amid concern about a falling currency, housing curbs and the impact of trade tariffs. The Shanghai Composite Index extended last month’s 8 percent rout, while the yuan touched its weakest level since Oct. 3
A one-day rally in Chinese stocks fizzled out as the yuan resumed declines and data showed further signs of weakness in the economy. Purchasing manager index readings for June released Saturday showed a gauge of export orders tumbled
Commodity powerhouse Australia warned that rising trade protectionism will hurt global growth, adding its voice to a chorus of alarm just days before the U.S. and China slap duties on each other, risking a spiral of tit-for-tat tariffs
Confidence among Japan’s large manufacturers cooled after reaching a 13-year high at the end of last year. While trade tensions are casting a shadow over companies globally, big producers in Japan cited a lack of workers and the rising cost of materials as key concerns
After decades of pleading for easier access to the China’s car market, manufacturers saw duties on overseas imports almost halved to 15% on Sunday. But the reprieve for producers of those models is set to end in five days. For BMW AG, Tesla Inc. and other global automakers whose future is ever-more dependent on China’s burgeoning market, any gains from lower import tariffs this week will likely be short-lived — thanks to President Donald Trump’s trade war
Asian equity markets began H2 softer with the region constrained by disappointing data releases including Chinese Official & Caixin Manufacturing PMIs which both fell short of estimates, while the latest BoJ Tankan survey was mixed with headline Large Manufacturing Index also below forecasts. As such, ASX 200 (-0.3%) and Nikkei 225 (-2.2%) were lacklustre although strength in Property and Healthcare sectors kept Australia afloat for most the session, while Japan was dampened following mixed Tankan data but with a weaker JPY intiially limiting the downside. Elsewhere, Shanghai Comp. (-2.5%) was among the underperformers after both the Official and Caixin Manufacturing PMI missed estimates, while PBoC inaction resulting to a net daily drain and the absence of participants in Hong Kong for public holiday also ensured a subdued tone. Finally, 10yr JGBs were marginally higher amid the cautious risk tone in Japan and BoJ’s presence in the market, while the less than impressive BoJ tankan survey and source reports the BoJ are to revise lower its CPI forecasts at this month’s Outlook Report is also seen to likely to keep the BoJ maintaining its ultra-loose policy for a prolonged period.
Top Asian News
Global Automakers Prepare for ’Nightmare’ China Tariff Whiplash
Sentiment Sours in Asian Stocks as Trade War Hits China Exports
Top Iron Ore Shipper Cuts Outlook as Price Seen Back in $50s
European equities kick off the week in negative territory, albeit off lows (Eurostoxx 50 -1.0%) following the tone seen in the AsiaPac session, with sentiment also dampened by the latest developments in Germany. Over the weekend, German Interior Minister Seehofer rejected Chancellor Merkel’s deal with the EU on migration whilst also threatening to resign. Trade war woes continue to linger after the EU threatened to impose new retaliatory tariffs worth USD 300bln if the US continues with the EU auto tariffs. Financials and industrials underperform amid the uncertainty surrounding the potential fall of the German government (Interior Minister Seehofer is to meet Chancellor Merkel today) and the fall of base metals. Energy names take a hit following the recent decline in oil prices. In terms of stocks specifics, Microfocus (+5.1%) shares were lifted following reports they’re to sell their SUSE business to EQT partners for USD 2.4bln. Vedanta (+26.8%) shares spiked higher after Volcan approached the company with a buyout offer. Meanwhile, Playtech (-29.3%) shares slumped after the company lowered their guidance.
Top European News
UBS Makes Sweeping Changes to Europe Investment Bank Leadership
Brexit Banker Kids Leave Top U.K. Schools With Rare Empty Seats
German Banks Are Plotting a Counter-Attack Against MiFID II
U.K. Manufacturing Growth Holds Up in June After Subdued Quarter
In FX, the EUR has been under pressure in early EU trade, as 1.1700 held firm vs the Usd amidst reports of decent selling against vs the JPY after the cross breached 129.00 to the downside, from 128.95 to 125.80. Meanwhile, a prominent US bank has also implemented a short Eur position on unstable German political grounds and despite the prospect of SNB intervention via the CHF around 1.1550, targeting 1.1200 with a 1.1660 stop. Back to the headline pair, 1.1623 represents 10 DMA support just below the base so far. USD – Although the Dollar has retreated from best levels vs several major counterparts the DXY remains underpinned above 94.500 with Usd/Jpy holding midway between 110.50-111.05 and the Greenback broadly firmer across the board. Sub-forecast Chinese PMIs suggest that trade wars may hit the world’s 2nd largest economy more than the US, and the YUAN continues to weaken in response if not by design. AUD/NZD – Among the G10 underperformers on the latest downturn in overall risk sentiment, and with the Aud also undermined by a slower PMI print and decline in job ads overnight, as it slips further below 0.7400 vs its US peer and pivots 1.0900 against the Kiwi that is striving to keep its head above 0.6750 vs the Usd. MXN – Off recent peaks vs the Usd, but with the Peso still holding above 20.000 in wake of the election and convincing win for AMLO
In commodities, oil traded lower with WTI (-0.4%) and Brent (-0.9%) pressured as markets react to a tweet from US President Trump over the weekend that he spoke with Saudi Arabia’s King Salman on raising production maybe by as much as 2mln barrels and that prices were too high which the Saudi ruler agreed with. However, the White House were quick on clarifying that Saudi Arabia stated they could raise output if required and that there was no actual agreement to raising output by the said amount. In regards to this, Iran’s OPEC Governor Ardebili said on Saturday “there is no way one country could go 2mln BPD above their production allocation unless they are walking out of OPEC”. An Iranian official later stated that adjustments to the OPEC output levels would require an emergency meeting. Amongst the weekend comments, Saudi crude output reached a near-record 10.7mln BPD according to a survey while Russian June output reached over 11mln BPD according to the oil ministry. Libya’s NOC declared a force majeure at Hariga and Zeutina ports while weekend reports suggested around 850K BPD may be offline in the country. Elsewhere, gold (-0.3%) is subdued by a slightly firmer dollar as the yellow metal continues to be detached from the risk sentiments. Chinese iron ore futures fell almost 2% on Monday, due to a fresh increase in iron ore stocks at China’s ports, after a hat trick of positive closes last week.
Looking at today’s calendar, in the US the June ISM manufacturing will also be closely watched in the afternoon. Other data due out includes May PPI and the unemployment rate reading for the Euro area. Meanwhile the ECB’s Praet is due to speak.
US Event Calendar
9:45am: Markit US Manufacturing PMI, est. 54.7, prior 54.6
10am: Construction Spending MoM, est. 0.5%, prior 1.8%
10am: ISM Manufacturing, est. 58.5, prior 58.7
10am: ISM Employment, prior 56.3
10am: ISM Prices Paid, est. 74.8, prior 79.5
10am: ISM New Orders, prior 63.7
DB’s Jim Reid concludes the overnight wrap
Welcome to the second half of the year. For all the fire and fury in H1, the S&P 500 continues to be the star core equity market performer but at +2.6% in total return terms, it has struggled to maintain its flying start where it was +5.7% alone in January. The large majority of equity markets are lower in 2018 with EM leading the way as trade wars and higher US yields and a firmer dollar take their toll. Actually June saw the Renminbi (-3.3%) see its worst month since FX markets were established in China back in 1994. On the other hand the best performer in our global suite of assets in June, Q2 and YTD has been Oil.
This weekend the main stories have concerned Mrs Merkel, US/China tariffs and a Trump tweet on Saudi Oil production. The other main story is that one of Russia, Croatia, Sweden, Switzerland, Colombia or England will be in the World Cup final in just under 2 weeks!! Expect the low expectations previously seen in England to reach fever pitch optimism before tomorrow’s game!
Firstly on Germany, according to the DPA, the CSU party leader Mr Seehofer has offered his resignation as German interior minister following policy differences on migration issues with Merkel, but said he’ll stay in politics if she backs down. The Euro initially traded higher but later reversed gains to be -0.2% lower this morning. Looking ahead, both the CSU and CDU are expected to reconvene for more meetings today, with Mr Seehofer telling reporters in the early hours of Monday morning that “all other steps will be decided after the discussion” with Mrs Merkel’s Party. So it could still be a big day for German politics and the survival of Germany’s government.
Moving onto oil, which rose 8.1% last week (WTI) to a fresh c3.5 year high. Over the weekend Potus indicated mixed messages on oil on social media and in a live interview. This morning, WTI oil is trading -1.2% lower.
In terms of trade tensions, Canada’s retaliatory tariffs on $12.6bn worth of US goods went into effect yesterday. The country has imposed a 25% tariff on metal products and a 10% tariff on 250 other goods. The Canadian Foreign minister Freeland noted “we’ll not escalate and we’ll not back down”. Meanwhile, the US treasury department is also due to release its report outlining investment restrictions on Chinese investments in certain US industries soon.
This morning in Asia, markets are trading lower with the Nikkei (-1.35%), Kospi (-1.57%) and Shanghai Comp. (-1.13%) all down while the Hang Seng is closed for holiday. In Mexico, exit polls by El Financiero showed Lopez Obrador winning the election with 49% of the votes where he will be the country’s first left wing President in c4 decades (as per Reuters). The Mexican Peso is trading c0.9% higher this morning. Datawise, over the weekend China’s June manufacturing PMI slowed 0.4pt mom to 51.5 (vs. 51.6 expected), but this was partly offset by a stronger non-manufacturing PMI print of 55, leading to a still solid composite PMI of 54.4 (-0.2pt mom). Earlier this morning, the June Caixin China manufacturing PMI also edged down 0.1pt to 51 (vs. 51.1 expected).
As for this week, it will be a disjointed one as the US celebrates AMEXIT day on Wednesday with markets closing early tomorrow ahead of this. Around this the data highlights are today’s final global PMIs/US ISM, Wednesday’s services equivalent in Europe (Thursday in US) and then Friday’s US payrolls. Current consensus is for a 195k print (May was 223k). Average hourly earnings is expected to come in at a solid +0.3% mom which, if realised, would push the annual rate up one-tenth to +2.8% yoy and back to the January highs just before the vol shock. We also have the latest Fed minutes on Thursday where more details should emerge about the hawkish hike seen a few weeks back. Elsewhere, outside of this weekend’s trade stories, Friday is when the US is scheduled to impose tariffs on $34bn of Chinese goods. So plenty of time for some more trade headlines.
As for markets back on Friday. European equities were all higher (Stoxx 600 +0.81%; DAX +1.06%), boosted by a rebound in tech stocks and a lift in sentiment as EU leaders reached a preliminary agreement on migration issues. In the US, the S&P also traded c1% higher initially, but fell late in the session following an Axios report which suggested President Trump was keen for the US to withdraw from the WTO. Later on, White House officials denied the story, but the damage was partly done with the S&P only closing +0.08% higher.
Meanwhile European bond yields were broadly lower, in part as Reuters reported that the ECB is considering recycling more of its maturing assets into longer-term bonds. Across the region, the 10y yields on Bunds (-1.7bp), OATs (-4bp) and Italian BTPs (-10.1bp) were all down, while treasuries (+2.4bp) and Gilts (+1.5bp) nudged higher. In FX, the US dollar index weakened for the first time in four days (-0.88%) while the Euro and Sterling both jumped +0.99%.
Before we take a look at today’s calendar, we wrap up with other data releases from Friday. In the US, the May core PCE was firmer than expected at 0.213% mom, leading to an annual growth of 2% yoy (vs. 1.9% expected) – the highest since April 2012. The three-month and six-month annualized rates of inflation also nudged up to 2.2% and 2.3% saar respectively. Meanwhile the May personal income growth was in line at 0.4% mom while personal spending was weaker than expected at 0.2% mom (vs. 0.4% expected). Elsewhere, the June Chicago PMI was above market (64.1 vs. 60 expected) while the final reading of the June University of Michigan consumer confidence index was revised down by 1.1pt to 98.2. Following the above, the Atlanta Fed’s estimate of Q2 GDP growth was cut by seven-tenths to 3.8% saar.
In Europe, the Euro area’s core June CPI edged down 0.1ppt mom to an in line print of 1% yoy while France’s CPI was also in line at 2.4% yoy. In Germany, the June unemployment rate was in line at 5.2% while the May retail sales disappointed at -1.6% mom (vs. 1.9% expected). Over in the UK, the final reading of the 1Q GDP was unchanged at 1.2% yoy. Elsewhere, the May mortgage approvals was the highest since January (64.5k vs. 62.3k expected) while the net lending on secured dwellings also beat at £3.9bn (vs. £3.7bn expected).
Looking at today’s calendar, the flash June manufacturing PMIs for Spain, Italy and the UK along with final June manufacturing PMI reads for France, Germany, the Eurozone and the US are due. In the US the June ISM manufacturing will also be closely watched in the afternoon. Other data due out includes May PPI and the unemployment rate reading for the Euro area. Meanwhile the ECB’s Praet is due to speak.
The current state of the financial markets and the global economy depends on one single resource that nobody, even such renowned economists as Paul Krugman or Robert J. Shiller and dissenters like Max Keiser and Jim Rickards, dares to talk about. In private discussions central bank managers told us that they were aware that none of the existing economic theories and models fit this new situation.
Yet, they do not broach it in their public speeches and lectures, preferring to deal with such topics as balance sheets and business cycles. All of which reminds one of a family visiting a terminally sick relative: everybody knows that he will never recover, and nobody whispers as much as a word about it.
All productive nations whether in East Asia or the West, have reached the peak of their 250-year-long development. Even the most devastating wars could not prevent their populations from growing in the long run. It is only now, during the many decades of peace and affluence, that the numbers of the inhabitants of the developed countries have been decreasing and the trend continues. The phenomenon has not been brought about by any famine or natural disaster but by the sheer fact that people do not want to have children.
Japan is an economic bellwether. The country refrained from mass migration and during the 2006-2016 period its population shrank by 0.5%, oil consumption dropped by 22%, car sales by 7% and GDP by 4%.
Japan is the first country to cope with the new reality and investors need to change their mindset to understand what this new reality stands for. In the past, every business cycle, recession or recovery, ended with a higher GDP and larger economy than before. In the future we will see the opposite: every business cycle will conclude with a lower GDP and a smaller economy than the previous one.
A shrinking population entails economic consequences. Oil consumption will decline, car sales will go down, and national GDP will be lower and lower. The paradox of it all is that the total economy may be shrinking, and yet people in the US, Europe and Japan will be doing better than before. Why? Because a less crowded country means less dependence on (foreign) oil, lower pollution and CO2 emissions, fewer traffic jams, more space and food abundance.
It is the financial sector that will be afflicted by the new reality, not the people. Without the support of central banks the Western financial industry will not survive a continued depopulation, a situation in which people save and spend less and less money. A buoyant economy invests in win-win deals, a stable economy is a zero-sum game, and in a depressed economy all investors lose. That is why central bankers are considering the imposition of negative interest rates. These are flashing warning signals.
Confronted with this reality, the American and European leaderships have opted for re-population. If the pace of this process remains the same, before this century is over, 50% of the Western states will be replaced with people from the Third World.
The Washington establishment began with the acceptance of unprecedented numbers of migrants from Latin America while the enlargement of the European Union made up for the lack of people, at least for the time being. As under the banner of the free movement of labour, Germany, the UK and the Netherlands got a fair share of migrants from Central Europe, this part of the continent has been deprived of its youth. For example the Polish generation in the age bracket 15-20 is 30% smaller. Now it is Ukraine’s turn to hand over its youth to Western Europe. After the 2014 revolt in Kiev the European Union was in a desperate hurry to grant Ukrainian “patriots” the right of visa-free travel, so that they could leave their allegedly beloved home country.
Demographics is quite precise, and those in power saw the coming “disaster” in advance. Peter Sutherland, a former Goldman Sachs banker, became an advocate of mass migration. In 2008 he said: “Rich countries should not try to restrict migration from poor countries, even during the economic slowdown.” Alas, migration is not about helping the poor – there are just too many of them – migration is about re-populating Europe. Migration is also about economics and finance.
All theories, all models that we know about the economy, finance and markets were developed when the European populations grew. The global economy is dependent on the industrialized world. Without Europe, the Sheikhs of Dubai would relapse into the life in tents, Africa’s population would be about 90 million instead of 1.2 billion, and today’s US would be a sparsely populated country with very few nomad tribes.
Prestigious consultancy firms have told their corporate clients that all societies are in essence the same and well on the way to becoming like Western economies. The Africans only need to change the law, and they will be as productive, diligent and efficient as people in Europe. Those pundits believe that if car sales stall in Europe, China will be the next market; if the Chinese market is flooded, we have still India, and then – probably around 2040 – the Africans will be the new customers.
We believe that the world’s economy is concentrated in East Asia and in the West, with all other economies being but satellites, and it is not going to change, at least in the foreseeable future. If the West together with Eastern Asia collapse, the rest of the world will follow suit. If the West and Eastern Asia stop being interested in African resources, the Black Continent will crumble. We remind the reader that all African countries are dependent on food imports which they finance with the exports of commodities. Africa cannot sustain its current population let alone the doubling of it within 25 years. 50% of the African youth is younger than 25.
The consultancies of Ernst and Young call these youngsters “demographic dividend”, a treasure trove for the global companies to reap. If they cannot capitalize on them in Africa, they have to bring them to Europe, as we see happening now. The current migration process which goes by the name of crisis is engineered and promoted by an influential lobby.
Russia is modernizing its submarine force around Europe to directly challenge American naval dominance — greater than any other period since the Cold War, Admiral James Foggo told Stars and Stripes in an interview last week.
The commander said the U.S. must expand its naval force, along with enhancing its submarine fleet to combat Russian aggression in the region.
Tensions between Russia and NATO have never been higher. According to a new report from the United States Naval Institute(USNI), the USS Harry S. Truman (CVN-75), the eighth Nimitz-class aircraft carrier of the U.S. Navy, has exited the Mediterranean Sea and is now patrolling the Atlantic Ocean, an unnamed defense official recently told USNI.
USS Harry S. Truman (CVN-75) conducts a strait transit. Truman is currently deployed as part of an ongoing rotation of U.S. forces supporting maritime security operations in international waters around the globe on April 27, 2018. (Source: US Navy Photo/USNI)
Earlier this week, the Harry S. Truman (CVN-75)/Carrier Air Wing One (CVW-1), a U.S. Navy aircraft carrier air wing based at Naval Air Station Oceana, Virginia, and its support vessels sailed through the Strait of Gibraltar, a narrow strait that connects the Atlantic Ocean to the Mediterranean Sea.
UNCONFIRMED REPORT USS Harry S. Truman, CVN 75, left the Mediterranean Sea after passing the Strait of Gibraltar, Interfax reported, citing data from systems monitoring the movement of sea-going vessels. pic.twitter.com/ZzEFCq52jI
— IXEscuadrillaVirtual (@EscuelaAeronav) June 29, 2018
“As a matter of longstanding policy, we do not discuss future operations, but I can tell you that the Harry S. Truman Carrier Strike Group will continue to conduct operations in support of our NATO allies, European and African partner nations, coalition partners, and U.S. national security interests,” Cmdr. John Perkins, a spokesman with U.S. Naval Forces Europe and Africa, told USNI News.
USNI believes the shifting of U.S. naval assets to the Atlantic Ocean is the expression of two themes: remain superior over Russia and be strategically predictable and operationally unpredictable.
Russia’s Navy, as a whole, is still dealing with underinvestment following the collapse of the Soviet Union. However, in recent years, Putin has modernized the military with new attack submarines to alter the balance of naval power with NATO. USNI pointed out that these Russian high-tech submarines are being deployed in the “North Atlantic at a pace not seen since the Cold War,” which has alarmed NATO officials.
“Russian submarines are prowling the Atlantic, testing our defenses, confronting our command of the seas, and preparing the complex underwater battlespace to give them an edge in any future conflict,” current U.S. Naval Forces Europe-Africa commander Adm. James Foggo wrote in U.S. Naval Institute’s Proceedings in 2016.
“Not only have Russia’s actions and capabilities increased in alarming and confrontational ways, its national-security policy is aimed at challenging the United States and its NATO allies and partners.”
Bryan Clark, a senior fellow at Center for Strategic and Budgetary Assessments (CSBA), told USNI that USS Harry S. Truman is operating in the Atlantic for all 29 NATO members.
“Our Atlantic coast guys need a chance to train against good submariners,” he said. “Either they’re it doing with the French or the British for training or for hope of finding a Russian submarine.”
USNI details the composition of the carrier strike group. It says “up to six guided-missile destroyers and the German Navy guided missile frigate FGS Hessen (F 221)” will be accompanying USS Harry S. Truman in the Atlantic.
Clark said, “the U.S. DDGs are equipped with an effective anti-submarine warfare packages that work well in the Atlantic but aren’t typically deployed there”.
“You have to make a special effort to put them there,” he added.
Chief of Naval Operations Adm. John Richardson also hinted on an increased presence of Russian submarine activity in the Atlantic.
“It’s an aspect of the security environment that it’s getting harder to do things without being observed, no matter where you are. So we’re going to have to be clever about that,” he told USNI News last month.
A U.S. Navy official told USNI on Friday that “the Navy is making deliberate prioritization decisions in accordance with the [national defense strategy] which may disrupt the ‘business as usual’.”
“We must prioritize lethality, deterrence capability, training and readiness of the defined fighting unit, and will ensure the mission is met with the right capability and platform,” the unnamed defense official told USNI.
Back in May, we covered a stunning piece indicating the U.S. Navy reactivated its Second Fleet to counter the increasing threat from Russia.
Admiral John Richardson, chief of naval operations, said the fleet, deactivated in 2011, could oversee roughly 6,700,000 square miles of the Atlantic Ocean from the North Pole to the Caribbean Sea and from the East Coast of the United States to the middle of the Atlantic Ocean.
While the U.S. Navy did not officially acknowledge the USS Harry S. Truman’s mission in the Atlantic to hunt Russian submarines, the probability that Moscow and Washington could be headed for a collision in the Atlantic has exponentially increased.
Scotland Yard reports just 5.5 percent of burglary reports in the United Kingdom between April 2017 and April 2018 resulted in an arrest. And police made arrests in just 7 percent of robberies reported in that period. In defense of the police, Chief Constable Bill Skelly, a spokesman for the the National Police Chiefs’ Council, says that those numbers include many crimes in which there is “no suspect and little prospect of a criminal justice outcome.”
The vast majority of deradicalization programs in the UK are at best ineffective and at worst counter-productive, according to a recent study by the Behavioural Insights Team (BIT, also known as the “nudge unit“), a social purpose company partially owned by the UK government, but that works in partnership with the Cabinet Office.
As the Times reported recently, BIT examined 33 deradicalization programs across Britain, in schools, youth centers, sports clubs and English-language classes. Most of these are part of Prevent — a strategy presented in 2011 to the UK Parliament by the Secretary of State for the Home Department — designed to keep vulnerable citizens from becoming terrorists or supporting any form of violent extremism inspired by radical Islamist or right-wing ideologies. BIT found that only two of the programs have been successful.
The main reason for the failure of the other 31 programs, according to the Times‘ report on the study, is:
“…that facilitators were uncomfortable dealing with sensitive topics and would often refuse to engage if they were brought up. BIT found that teachers in particular were afraid to bring up matters of race and religion with their students without appearing discriminatory, often causing them to refuse to talk about these topics entirely.”
The two effective initiatives, according to the Times, were “one defying political correctness and tackling difficult issues head-on and the other directly addressing extremism in religious [Islamic] texts.”
In Britain, the majority (82%) of the 228 people in custody for terrorism-related offenses espouse Islamist extremism. In August 2017, the EU’s counter-terrorism coordinator, Gilles de Kerchove, said that the UK has more radicalized Muslimsthan any other European country. He added that Britain “has identified 20,000 to 35,000 radicals. Of these, 3,000 are worrying for MI5, and of those 500 are under constant and special attention.”
In a speech in London on June 4, Britain’s recently appointed Home Secretary, Sajid Javid MP, said that the UK’s
“… biggest threat [today] is from Islamist terrorism – including Al Qa’ida, but particularly from Daesh.
“While the so-called caliphate is a thing of the past, Daesh continues to plan and inspire attacks both here and abroad as well as recruiting British citizens to fight.
“Over the past 5 years, our law enforcement and intelligence agencies have foiled as many as 25 Islamist-linked plots.”
…
“But the threat doesn’t only come from Daesh.
“Extreme right-wing terrorism is also an increasing threat… Daesh and the extreme right wing are more similar than they might like to think.
“They both exploit grievances, distort the truth, and undermine the values that hold us together.
“And they don’t hesitate to learn lessons from each other.”
…
“The Prevent strategy will remain a vital part of our counter-terrorism work.
“Yes, I recognise the criticisms, but I absolutely support it.
“Misapprehensions around Prevent are often based on distortions.
“They are based on a lack of understanding about the grassroots work that is involved, and the efforts by civil society groups and public-sector workers to protect vulnerable people.
“We have a moral and social obligation to safeguard vulnerable people from the twisted propaganda of those seeking to radicalise them.
“And Prevent is about doing just that.”
To illustrate the benefits of Prevent programs, Javid told the story of a 13-year-old boy:
“He witnessed domestic abuse at home and suffered from racist bullying at school. He started to watch violent propaganda online and to show an interest in fighting for Daesh. But he was given the mentoring and support that he needed to stop him from going down that wrong path. Now his mum says, and I quote, ‘he’s no longer on the path to radicalisation and all he wants to be is a car salesman.'”
Unwittingly, by recounting this tale, Javid showed just why the deradicalization programs he is defending do not work. He reduced the radicalization of a Muslim teenager to domestic abuse, racist bullying at school and online violent propaganda. He said nothing about the boy’s family’s religious faith, radical Islam or the narrative of hate and intolerance founded on a “radical” interpretation of the Quran and Sunna to which the boy may well have been exposed at home, at the mosque and over the internet. Instead, Javid provided a politically correct narrative to back up his assertion that Prevent is not only a success, but part of the “new counter-terrorism strategy” he was unveiling.
Javid then devoted a whole section of his speech to his fellow Muslims in Britain:
“After any [terrorist] attack, a lot of well-meaning people will line up to say it has nothing to do with Islam. That the perpetrators are not true Muslims. I understand this reaction. I know they are not true Muslims. But there’s no avoiding the fact that these people they self-identify as Muslims.
“Let me be very clear. Muslims are in no way responsible for the acts of a tiny minority who twist their faith. And I know that there is no such thing as a single, homogenous Muslim community. Muslims live and thrive in all walks of British life and society.
“Globally, Muslims are by far the biggest victims of Islamist terrorism. And Muslims are fighting and dying on the frontline of the battle against terrorism every day.
“It would be absurd to say that the actions of a tiny handful in any way represent a peaceful, wonderful religion shared by a billion people worldwide.
“That’s exactly why, although we all share the responsibility for tackling terrorism, there’s a unique role for Muslims to play in countering this threat.
“British Muslims up and down the country are leading the fight against Islamist extremists by throwing them out of their mosques and by countering poison online and on the streets. It is incredibly powerful when a young Muslim man turns their back on the preachers of hate, and say: ‘Your bigotry and bloodlust have no place in the modern world.’
“I want to say to all those who stand up against all forms of extremism that this government stands with you…”
Sajid Javid, Britain’s Home Secretary. (Photo by Chris J Ratcliffe/Getty Images)
The trouble with Javid’s tribute to those Muslims who “stand up against all forms of extremism” is that bigotry and bloodlust are not merely figments of Islamist extremists’ minds that lead to their violent conduct. They stem from an authentic interpretation of Quranic verses and hadiths, which — according to Londonistanauthor Melanie Phillips — “although millions of Muslims don’t subscribe to it, currently dominates the Islamic world.” Sadly, worldwide, Muslims, too, are often victims of Muslim violence.
For deradicalization programs — and counter-terrorism initiatives — to work, they must first defy political correctness, tackle the root causes of Islamist extremism and address all related sensitive issues, including those which appear in Islamic texts. British Muslims should not only participate in this endeavor, but be on the front lines, monitoring early signs of radicalization and ceasing to show sympathy for or to rationalize violence.
The Russian militaryapproved the first state procurement contract for a dozen fifth-generation stealth fighter aircraft, said Deputy Defense Minister of Russia Alexei Krivoruchko on Saturday.
Krivoruchko told reporters that a batch of the Sukhoi Su-57, a stealth, single-seat, twin-engine multirole fifth-generation stealth fighter will be delivered to the Russian military in the near term.
Speaking highly of the work by the Sukhoi aircraft manufacturer on the production of the fifth-generation fighter jet, Krivoruchko added that engineers are concluding the last round of tests on the aircraft’s second-stage engines.
The aircraft will be manufactured at Komsomolsk-on-Amur Aircraft Plant, based in Komsomolsk-on-Amur in the Russian Far East, which is the largest aircraft-manufacturing company in the country.
The Su-57 was designed as a heavy air superiority platform and more capable in an air-to-air combat role, The analysis gives advantage to the Sukhoi Su-57 in its speed, altitude, sensors, missile carriage, engagement range, and maneuverability. pic.twitter.com/OcHPvlRnxJ
The Su-57 is a Russian multi-role fighter of the fifth generation, developed by Sukhoi aircraft manufacturer. The jet fighter is designed to fly at supersonic speeds, have super maneuverability, stealth technology, and advanced sensors to challenge the North Atlantic Treaty Organization’s (NATO) fifth-generation aircraft.
The first flight of the Su-57 occurred in early 2010 in the Komsomolsk-on-Amur region.
Yury Slyusar, director of the United Aircraft Corporation, informed RIA Novosti that the first batch of SU-57s should be delivered to the Russian military in 2019.
Earlier this year, we uncovered unverified photos and video footage circulating Twitter, showing two new Russian Su-57 stealth fighters landing at Khemimim air base, near Latakia, in northwestern Syria.
Russia has deployed a wide variety of high-tech weapons to the proxy war in Syria to showcase and test their performance. Most military strategists believe that deployment of the Su-57 to Syria was to directly challenge America’s fifth-generation fighter aircraft (Lockheed Martin F-22 Raptor and Lockheed Martin F-35 Lightning II) and let the world know: Russia has fifth-generation fighter aircraft for a fraction of the cost.
Russia is now open for business, and for those in the market for a cheaper stealth fighter, the promo clip of the Su-57 is below:
Both India and Turkey have said they will defy President Trump’s call for them to stop buying Iranian oil once the U.S. reapplies sanctions in November. That isn’t really news.
Both of them defied the Obama administration in 2012, albeit in different way. Turkey changed its banking rules to monetize gold and used its gold reserves as a means to launder Iranian oil payments for third parties through its banking system.
India bypassed cutting off Iran from the U.S. dollar by beginning a goods-for-oil swap program.
Today, however, the geopolitical background is far different. Today, Iran can and does list its oil for sale in Shanghai’s futures market payable in Chinese Yuan. Turkey can recycle its Yuan it receives from its large trade deficit with China to up its purchases of Iranian oil if need be.
But, more importantly, both India and Turkey have geopolitical freedoms they didn’t have in 2012. I have covered the Turkey angle on this at length. India, on the other hand, I haven’t.
Turkey, a NATO ally, is dependent on imports for almost all of its energy needs. In the first four months of this year, Turkey bought 3.077 million tons of crude oil from Iran, almost 55 percent of its total crude supplies, according to data from Turkey’s Energy Market Regulatory Agency (EPDK).
President Recep Tayyip Erdoğan last year said Turkey was looking to raise the volume of its annual trade with Iran to $30 billion from $10 billion.
And it doesn’t look like this will change with Trump’s sanctions.
With President Erdogan winning re-election he now goes into the NATO Summit with Trump on July 11-12th with a lot of leverage. Erdogan has openly courted Russia on energy supplies.
It just began construction on its first nuclear power plant being built by Russia which is due to begin generating power by 2023. But, in the near term, Turkey is in bed with Gazprom on the Turkish Stream pipeline, which is ready to begin the land-based portion.
The permits have not been issued however. Turkey has been dragging its feet on this. And with good reason, Erdogan knows Turkish Stream is a bargaining chip for him with Trump at the NATO summit.
Turkey’s NATO status is becoming problematic and it’s why I don’t really expect Trump to take the U.S. out of the treaty organization just yet. He wants to lessen our involvement and may very well announce a major funding cut at the Summit, but if his regime change strategy for Iran (and Germany) is to succeed he can’t completely alienate Erdogan just yet.
India’s Silk Road Goes Through Iran
The biggest tell that the U.S. is having to resort to begging to keep its geostrategic allies in line came from the most unlikely source though, U.N. Ambassador and neoconservative Buffoon herself, Nikki Haley.
While urging India to curb its Iranian oil purchases, Haley said the United States supported India’s project to help Iran build a major port complex in Chabahar, which is being developed as part of a new transportation corridor for landlocked Afghanistan.
Calling the port project “vital,” Haley said, “We know the port has to happen and the U.S. is going to work with India to do that.”
Haley acknowledged that the port project will also benefit Iran even as Washington tries to cut Tehran off from international markets.
“We realize we’re threading a needle when we do that,” she said.
This is blatant pandering on Haley’s part to keep India from jumping ship towards the Russia/China/Iran alliance. The port development project at Chabahar has been delayed for months because of Trump’s threatening to scuttle the JCPOA and make it difficult for Indian companies to do business with Iran.
It’s a major infrastructure project meant to position India, technically, outside of China’s One Belt, One Road (OBOR) project which has poured more than $50 billion into India’s biggest rival, Pakistan under the rubric of CPEC — The China Pakistan Economic Corridor.
So, this admission by Haley that the port and railroad upgrades in Iran have to go forward to appease India is telling as to who really has the leverage here.
Ultimately, India will be allowed to bypass the dollar for its oil trade with Iran, if the U.S. wants to remain a serious influencer of policy. It is already a member of the Shanghai Cooperation Organization (SCO) and Iran now has a free-trade pact with the Eurasian Economic Union, which India is exploring becoming affiliated with.
As much as India may not like the OBOR project from the perspective of national price, its leadership recognizes it will ultimately benefit India tremendously.
So will Turkey. Trump will talk a big game about sanctioning China but doing so would crash the global economy. So, it’s all noise.
China National Petroleum Company (CNPC) is taking over for France’s Total on the important South Pars B gas field. While India and Iran continue to haggle over the South Azadegan oilfield development plan.
A lot of these deals between India and Iran have the stink of U.S. meddling in them, trying to keep them in limbo while furious haggling goes on behind the scenes. There’s a reason why Haley went to India.
And then there’s another reason why a major “2+2” meeting between the U.S. and India between Secretaries of Defense and State, James Mattis and Mike Pompeo and their Indian counterparts was just unilaterally postponed by the U.S.
The upcoming summit with Putin in Helsinki. This will not sit well with India as this is the latest in a series of delays because of uncertainty at the State Department under Trump.
In the end, expect India and Turkey to mostly get their way in the coming months on energy and defense policy. They both understand that Trump is simply trying to manage the retreat of the U.S. empire from Eurasia as best as he can and both are more than willing to play it against the Russia/China/Iran axis to get the best deals they can for themselves.
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The Trump administration did not rise, prima facie, like Venus on a half shell from the sea. Donald Trump is the result of a long process of political, cultural and social decay. He is a product of our failed democracy. The longer we perpetuate the fiction that we live in a functioning democracy, that Trump and the political mutations around him are somehow an aberrant deviation that can be vanquished in the next election, the more we will hurtle toward tyranny. The problem is not Trump. It is a political system, dominated by corporate power and the mandarins of the two major political parties, in which we don’t count. We will wrest back political control by dismantling the corporate state, and this means massive and sustained civil disobedience, like that demonstrated by teachers around the country this year. If we do not stand up we will enter a new dark age.
The Democratic Party, which helped build our system of inverted totalitarianism, is once again held up by many on the left as the savior. Yet the party steadfastly refuses to address the social inequality that led to the election of Trump and the insurgency by Bernie Sanders. It is deaf, dumb and blind to the very real economic suffering that plagues over half the country. It will not fight to pay workers a living wage. It will not defy the pharmaceutical and insurance industries to provide Medicare for all. It will not curb the voracious appetite of the military that is disemboweling the country and promoting the prosecution of futile and costly foreign wars. It will not restore our lost civil liberties, including the right to privacy, freedom from government surveillance, and due process. It will not get corporate and dark money out of politics. It will not demilitarize our police and reform a prison system that has 25 percent of the world’s prisoners although the United States has only 5 percent of the world’s population. It plays to the margins, especially in election seasons, refusing to address substantive political and social problems and instead focusing on narrow cultural issues like gay rights, abortion and gun control in our peculiar species of anti-politics.
This is a doomed tactic, but one that is understandable. The leadership of the party, the Clintons, Nancy Pelosi, Chuck Schumer, Tom Perez, are creations of corporate America. In an open and democratic political process, one not dominated by party elites and corporate money, these people would not hold political power. They know this. They would rather implode the entire system than give up their positions of privilege. And that, I fear, is what will happen. The idea that the Democratic Party is in any way a bulwark against despotism defies the last three decades of its political activity. It is the guarantor of despotism.
Trump has tapped into the hatred that huge segments of the American public have for a political and economic system that has betrayed them. He may be inept, degenerate, dishonest and a narcissist, but he adeptly ridicules the system they despise. His cruel and demeaning taunts directed at government agencies, laws and the established elites resonate with people for whom these agencies, laws and elites have become hostile forces. And for many who see no shift in the political landscape to alleviate their suffering, Trump’s cruelty and invective are at least cathartic.
Trump, like all despots, has no ethical core. He chooses his allies and appointees based on their personal loyalty and fawning obsequiousness to him. He will sell anyone out. He is corrupt, amassing money for himself—he made $40 million from his Washington, D.C., hotel alone last year—and his corporate allies. He is dismantling government institutions that once provided some regulation and oversight. He is an enemy of the open society. This makes him dangerous. His turbocharged assault on the last vestiges of democratic institutions and norms means there will soon be nothing, even in name, to protect us from corporate totalitarianism.
But the warnings from the architects of our failed democracy against creeping fascism, Madeleine Albright among them, are risible. They show how disconnected the elites have become from the zeitgeist. None of these elites have credibility. They built the edifice of lies, deceit and corporate pillage that made Trump possible. And the more Trump demeans these elites, and the more they cry out like Cassandras, the more he salvages his disastrous presidency and enables the kleptocrats pillaging the country as it swiftly disintegrates.
The press is one of the principal pillars of Trump’s despotism. It chatters endlessly like 18th-century courtiers at the court of Versailles about the foibles of the monarch while the peasants lack bread. It drones on and on and on about empty topics such as Russian meddling and a payoff to a porn actress that have nothing to do with the daily hell that, for many, defines life in America. It refuses to critique or investigate the abuses by corporate power, which has destroyed our democracy and economy and orchestrated the largest transfer of wealth upward in American history. The corporate press is a decayed relic that, in exchange for money and access, committed cultural suicide. And when Trump attacks it over “fake news,” he expresses, once again, the deep hatred of all those the press ignores. The press worships the idol of Mammon as slavishly as Trump does. It loves the reality-show presidency. The press, especially the cable news shows, keeps the lights on and the cameras rolling so viewers will be glued to a 21st-century version of “The Cabinet of Dr. Caligari.” It is good for ratings. It is good for profits. But it accelerates the decline.
All this will soon be compounded by financial collapse. Wall Street banks have been handed $16 trillion in bailouts and other subsidies by the Federal Reserve and Congress at nearly zero percent interest since the 2008 financial collapse. They have used this money, as well as the money saved through the huge tax cuts imposed last year, to buy back their own stock, raising the compensation and bonuses of their managers and thrusting the society deeper into untenable debt peonage. Sheldon Adelson’s casino operations alone got a $670 million tax break under the 2017 legislation. The ratio of CEO to worker pay now averages 339 to 1, with the highest gap approaching 5,000 to 1. This circular use of money to make and hoard money is what Karl Marx called “fictitious capital.” The steady increase in public debt, corporate debt, credit card debt and student loan debt will ultimately lead, as Nomi Prins writes, to “a tipping point—when money coming in to furnish that debt, or available to borrow, simply won’t cover the interest payments. Then debt bubbles will pop, beginning with higher yielding bonds.”
An economy reliant on debt for its growth causes our interest rate to jump to 28 percent when we are late on a credit card payment. It is why our wages are stagnant or have declined in real terms—if we earned a sustainable income we would not have to borrow money to survive. It is why a university education, houses, medical bills and utilities cost so much. The system is designed so we can never free ourselves from debt.
However, the next financial crash, as Prins points out in her book “Collusion: How Central Bankers Rigged the World,” won’t be like the last one. This is because, as she says, “there is no Plan B.” Interest rates can’t go any lower. There has been no growth in the real economy. The next time, there will be no way out. Once the economy crashes and the rage across the country explodes into a firestorm, the political freaks will appear, ones that will make Trump look sagacious and benign.
And so, to quote Vladimir Lenin, what must be done?
We must invest our energy in building parallel, popular institutions to protect ourselves and to pit power against power. These parallel institutions, including unions, community development organizations, local currencies, alternative political parties and food cooperatives, will have to be constructed town by town. The elites in a time of distress will retreat to their gated compounds and leave us to fend for ourselves. Basic services, from garbage collection to public transportation, food distribution and health care, will collapse. Massive unemployment and underemployment, triggering social unrest, will be dealt with not through government job creation but the brutality of militarized police and a complete suspension of civil liberties. Critics of the system, already pushed to the margins, will be silenced and attacked as enemies of the state. The last vestiges of labor unions will be targeted for abolition, a process that will soon be accelerated given the expected ruling in a case before the Supreme Court that will cripple the ability of public-sector unions to represent workers. The dollar will stop being the world’s reserve currency, causing a steep devaluation. Banks will close. Global warming will extract heavier and heavier costs, especially on the coastal populations, farming and the infrastructure, costs that the depleted state will be unable to address. The corporate press, like the ruling elites, will go from burlesque to absurdism, its rhetoric so patently fictitious it will, as in all totalitarian states, be unmoored from reality. The media outlets will all sound as fatuous as Trump. And, to quote W.H. Auden, “the little children will die in the streets.”
As a foreign correspondent I covered collapsed societies, including the former Yugoslavia. It is impossible for any doomed population to grasp how fragile the decayed financial, social and political system is on the eve of implosion.
All the harbingers of collapse are visible: crumbling infrastructure; chronic underemployment and unemployment; the indiscriminate use of lethal force by police; political paralysis and stagnation; an economy built on the scaffolding of debt; nihilistic mass shootings in schools, universities, workplaces, malls, concert venues and movie theaters; opioid overdoses that kill some 64,000 people a year; an epidemic of suicides; unsustainable military expansion; gambling as a desperate tool of economic development and government revenue; the capture of power by a tiny, corrupt clique; censorship; the physical diminishing of public institutions ranging from schools and libraries to courts and medical facilities; the incessant bombardment by electronic hallucinationsto divert us from the depressing sight that has become America and keep us trapped in illusions.
We suffer the usual pathologies of impending death. I would be happy to be wrong. But I have seen this before. I know the warning signs. All I can say is get ready.
“Cudjo meetee de people at de gate and tellee dem, ‘You see de rattlesnake in de woods?’ Dey say ‘Yeah.’ I say ‘If you bother wid him, he bite you. If you know de snake killee you why you bother wid him? Same way with my boys, you unnerstand me.'”
Scotland Yard reports just 5.5 percent of burglary reports in the United Kingdom between April 2017 and April 2018 resulted in an arrest. And police 
