Month: September 2018

lt doesn’t appear that Syrian and Russian forces are overly concerned with the Monday evening threats from both President Trump and Nikki Haley warning Assad and Russia against attacking Idlib Province, as Middle East sources now report that Russia has resumed an intense air campaign over Idlib for the first time in 22 days. 

Beirut-based Al Masdar News reports, citing Syrian military sources, the Russian Air Force has begun its largest bombing campaign of the year in the Idlib Governorate. 

Moments ago at least ten Russian Sukhoi jets launched dozens of airstrikes over the southern and western parts of the Idlib Governorate.

Al Masdar’s sources said the Russian Air Force specifically targeted the Jisr Al-Shughour District, including the towns of Al-Shughour, Mahambel, Basnqoul, Zayzooun, Ziyarah, Jadariyah, Kafrdeen, Al-Sahn, Saraseef, and dozen others. The source added that the Russian airstrikes numbered over 50 thus far.

With the large Russian bombardment, the Syrian Arab Army’s (SAA) long-awaited ground offensive is bound to start in the next few days.

President Bashar al-Assad of Syria must not recklessly attack Idlib Province. The Russians and Iranians would be making a grave humanitarian mistake to take part in this potential human tragedy. Hundreds of thousands of people could be killed. Don’t let that happen!

— Donald J. Trump (@realDonaldTrump) September 3, 2018

Meanwhile the Kremlin has responded to President Trump’s Monday evening tweet. According to Reuters, Kremlin spokesman Dmitry Peskov said, “Just to speak out with some warnings, without taking into account the very dangerous, negative potential for the whole situation in Syria, is probably not a full, comprehensive approach.”

The Kremlin added that the area was a “nest of terrorists” in what’s a clear dismissal of Trump’s warnings of “Hundreds of thousands of people could be killed. Don’t let that happen!”

And following Trump’s Monday tweet, US Ambassador to the United Nations Nikki Haley tweeted her own statement based on the president’s words, while specifically invoking the US charge that Assad plans to use chemical weapons. Haley wrote: All eyes on the actions of Assad, Russia, and Iran in Idlib. #NoChemicalWeapons.

It appears that Trump and his cabinet were likely briefed on Monday that Russian strikes would be imminent.

We described previously how Washington is seeking to use the “Assad is gassing his own people” claim to gain leverage over Syria, Russia, and Iran as they seek to root out last major pocket of the al-Qaeda jihadist insurgency from the country. 

Despite the latest words from President Trump condemning Syrian and Russian actions in Idlib, the White House’s own top State Department official, special anti-ISIL envoy Brett McGurk,  issued an unusually frank and accurate assessment of the situation in Idlib a year ago: 

“Idlib provice is the largest al-Qaeda safe-have since 9/11, tied to directly to Ayman al Zawahiri, this is a huge problem.” 

But Trump’s latest words appear primarily designed for leverage as there is little on the ground pressure that the US is capable of exerting at this late hour, barring some kind of “chemical provocation” claim. 

As Russia has initiated what’s already being widely described as a “massive” campaign, we will likely see the major powers involved in the Syrian proxy war go further up the escalation ladder. 

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With the US returning from holiday, US equity futures are flat from Friday’s close, while stocks in Europe slumped, reversing an early gain as Italian and Spanish bank shares faded and the major London, Frankfurt and Paris bourses faltered; this followed a mirror image in Asian price action, where stocks reversed earlier losses helped by a 1.3% late surge from Shanghai.

S&P500 futures have been trading rangebound since Friday, and pointed to a mixed open for U.S. shares as traders return from Labor Day holiday. Nike fell in the pre-market after the sportswear-maker revealed its new ad campaign will star Colin Kaepernik who led protests during the playing of the national anthem.

The Stoxx Europe 600 index dropped 0.3% after earlier rising as much as 0.4% led by banks, miners and carmakers. Danske Bank retreats as much as 7.1%, ING falls as much as 3.2%. Danske said it is in the process of finalizing an internal investigation into allegations that its Estonian operations were used to launder billions of dollars in illicit funds; separately ING agreed to pay 775 million euros to settle an investigation by the Dutch prosecutor into issues including money laundering and corrupt practices, one of the biggest fines ever given to the country’s banks in a criminal case.

Italian government bond yields fell back from three-month highs, with investors encouraged by soothing comments from Italian ministers on forthcoming budget proposals. According to Reuters, Rome’s Economy Minister Giovanni Tria was pushing the governing coalition to keep next year’s budget deficit below 2 percent of output. Deputy Prime Minister Matteo Salvini had said on Monday that it would not breach the European Union’s 3 percent limit.

“I would say the overall price action is quite encouraging and Salvini’s comments yesterday gave the market another push,” Commerzbank rates strategist Christoph Rieger said.

Asian equities were choppy with the region indecisive as trade-related concerns lingered and after a non-existent lead from the US which was shut for Labor Day holiday. ASX 200 (-0.3%) was negative and fell below the 6300 level as weakness in tech, energy and financials dragged, while Nikkei 225 (unch) swung between gains and losses amid currency fluctuations.

In China for the second day in a row stocks shot up in the afternoon session as the Shanghai Composite Index rose in afternoon trade to head for its first gain in six sessions, with the 1%-plus surges in most major indexes strong enough for traders to start talking about the national team backing the move after Monday’s sharp rebound. And, as Bloomberg’s Garfield Reyonds notes, it certainly looks sudden enough (and sufficiently motive-less) to make that speculation plausible. If the national team, as state funds are called, is leading the charge, that signals China wants to set the floor higher than the 2,655 area on the Shanghai Composite that sparked intervention on Aug. 20. The fact that they felt the need to move in again so soon also underscores the challenges mainland equities face after sentiment was beaten down so hard this year.

Meanwhile, in a rare failed attempt to intervene in the currency, at least one large Chinese state-owned bank bought a significant amount of one-month USDCNH forwards Tuesday morning, pushing forward points higher and draining offshore yuan liquidity Bloomberg reported. The bank also bought forwards in other tenors shorter than one month. And yet despite this intervention, the offshore yuan failed to move higher, and has been steadily sliding for much of the overnight session as the latest attempt to squeeze the shorts has failed.

In emerging markets, equities declined for a fifth session with the JPM emerging markets FX index dropping to the lowest level this decade, pulled down by Indonesia’s rupiah and South Africa’s rand.

The dollar squeeze continued, with the greenback surging since early London hours as Treasuries and emerging-market currencies dropped amid concerns over global trade. No clear catalyst was cited for the dollar strength with some noting end of U.S. tariff consultation period on Wednesday, possible allocation flows given first effective trading day of the month and catch-up to EM concerns such as Argentina given Labor Day holiday. The Bloomberg Dollar Spot Index rose a fourth day to a more than two-week high as investors remained cautious amid a possible escalation in U.S.-China trade tensions.

“The general sentiment is that the dollar has not done too badly out of the trade war concerns, with concerns the U.S. might signal a fresh escalation in the trade conflict,” said Kenneth Broux, an FX strategist at Societe Generale in London.

Dollar strength saw the Aussie reverse the gains that followed a Reserve Bank of Australia policy statement which reduced expectations the central bank would become more dovish; the currency had earlier dipped after data showed the nation’s current-account deficit widened. RBA kept the Cash Rate Target unchanged at 1.50% as expected and reiterated that low rates are supporting the economy and that progress on inflation is expected to be gradual, but that it sees inflation higher in 2019. Furthermore, the RBA stated that the labour outlook remains positive and the economy seems to have grown above trend.

Meanwhile, the daily rout in emerging market FX continued, with another sea of red across the intraday EM monitor….

… with India’s rupee and Indonesia’s rupiah slumping to new record lows in Asia and the Turkish lira, Mexican peso and Russian rouble all skidding again, but the biggest loser was the South African rand, following news that South Africa “unexpectedly entered its first recession in 9 years.

Investors are now shifting focus to the U.S., where trading resumes after a holiday during which Argentina’s urgent financial measures increased concern about more volatility in emerging-market stocks and currencies. The jitters may add to the outperformance of developed markets, which advanced during the summer despite trade salvos from President Donald Trump and a Federal Reserve that’s heading toward a late-September rate hike.

Meanwhile, Bloomberg notes that U.S. trade negotiators are in difficult talks with their Canadian counterparts over a revision to NAFTA already agreed to by the U.S. and Mexico. On the China front, Trump may announce implementation of tariffs on as much as $200 billion in additional Chinese products as soon as Thursday.

In other news, outgoing Mexican President Pena Nieto stated that they didn’t accept quotas or restrictions in the deal with US and that they will participate in trilateral discussions with NAFTA partners, while he added it is important for Canada to remain in NAFTA.

In the neverending Brexit saga, Jacob Rees-Mogg claimed that he and the EU’s chief negotiator, Michel Barnier, bonded in a meeting in Brussels over their shared view that Theresa May’s Chequers plan is “complete rubbish”. The majority of voters in the Conservatives’ most marginal constituencies believe PM May’s Chequers plan is “bad for Britain”, a new poll has found. UK Chancellor Hammond could reportedly unveil the budget as soon as next month in order to avoid clashing with last stages of
Brexit discussions. As a reminder, the Treasury has originally wanted to release the budget at the end of November.

In geopolitics, President Trump warned Syrian President Assad to not recklessly strike the Idlib province in Syria, while Trump also said that Iran and Russia would be making a grave humanitarian error and that hundreds of thousands could be killed if they attack Idlib. Russia’s Kremlin replied by saying US President Trump’s warning against Idlib is offensive and such warnings are not a comprehensive approach to the problem

WTI and Brent futures trade on the front foot with both benchmarks above USD 71/bbl and USD 79/bbl respectively. Price action is supported as investors and traders assess the potential threat to US production from tropical storm Gordon that is expected to hit the Gulf Coast (with hurricane warnings in place). Anadarko Petroleum evacuated workers and shut production at two Gulf of Mexico platforms as the storm nears. Elsewhere, due to yesterday’s US Labor Day holiday, the API weekly crude inventories have been delayed until tomorrow. In terms of metals, the complex is heavily pressured by the strengthening dollar with gold taking outUSD 1200/oz to the downside.

Expected data include PMIs and construction spending. Coupa Software and HealthEquity are among companies reporting earnings, while Ford Motor Co. is scheduled to release August sales results

Market Snapshot

• S&P 500 futures up 0.1% to 2,905.25
• STOXX Europe 600 down 0.1% to 382.08
• MXAP down 0.2% to 163.96
• MXAPJ down 0.03% to 531.08
• Nikkei down 0.05% to 22,696.90
• Topix down 0.1% to 1,718.24
• Hang Seng Index up 0.9% to 27,973.34
• Shanghai Composite up 1.1% to 2,750.58
• Sensex down 0.2% to 38,248.43
• Australia S&P/ASX 200 down 0.3% to 6,293.07
• Kospi up 0.4% to 2,315.72
• German 10Y yield rose 1.5 bps to 0.348%
• Euro down 0.5% to $1.1564
• Italian 10Y yield fell 7.3 bps to 2.888%
• Spanish 10Y yield fell 2.6 bps to 1.424%
• Brent futures up 1.4% to $79.21/bbl
• Gold spot down 0.4% to $1,196.11
• U.S. Dollar Index up 0.4% to 95.54

Top Overnight News from Bloomberg

• President Donald Trump’s effort to force Canada into signing on to a new Nafta on his terms is facing new hurdles thanks to growing opposition at home to his threat to proceed without the U.S.’s northern neighbor. On the China front, Trump may announce implementation of tariffs on as much as $200 billion in additional Chinese products as soon as Thursday
• House Republicans had planned to use a second phase of tax cuts to force Democrats into a difficult vote ahead of mid-term elections. Now, party leaders may drop the effort, fearing it could backfire by antagonizing voters in some hotly-contested Congressional districts
• The only post-Brexit trade deal that the EU lead negotiator Michel Barnier will countenance with the U.K. is a so-called Canada Plus, meaning the rejection of Prime Minister Theresa May’s Chequers proposals, ITV News Political Editor Robert Peston wrote in a Facebook post, citing unidentified people familiar
• Global funds are cutting their holdings of Japanese debt at the fastest pace in more than two years, as investors juggle the possibility of higher yields in the world’s second-largest bond market
• European finance ministers and central bankers will gather in Vienna this week to discuss a key test for the euro zone’s expanding economy — whether it can cope with interest-rate hikes

Asian markets were choppy with the region indecisive as trade-related concerns lingered and after a non-existent lead from the US which was shut for Labor Day holiday. ASX 200 (-0.4%) was negative and fell below the 6300 level as weakness in tech, energy and financials dragged, while Nikkei 225 (-0.2%) swung between gains and losses amid currency fluctuations. Elsewhere, Hang Seng (Unch.) and Shanghai Comp. (-0.1%) also see-sawed as participants contemplated over the potential fresh US tariffs this week and amid CNY price swings, as well as continued liquidity inaction by the PBoC. Finally, 10yr JGBs were marginally higher amid the indecisive trade in riskier assets. However, upside was also capped as participants digested the BoJ’s Rinban announcement in which it upped its purchases of JPY 1-5yr by a total JPY 100bln, which would suggest monthly purchases of those maturities are on track to be reduced to JPY 3.25tln from JPY 3.30tln M/M if the purchase amounts are maintained, considering the recently announced reduction in the number of buying operations for this month.

• China Relaxes Rule for Banks’ Purchase of Local Govt Bonds: CSJ
• BOJ Lifts Short-Bond Purchases to Offset Fewer Buying Days
• Foreigners Love This Stock That China Investors Seem to Hate
• Tencent-Backed Meituan Takes Orders for $4.4 Billion IPO
• Philippine Stock Rebound Faces Skepticism Ahead of CPI Data

European equities trade mostly lower (Eurostoxx 50 -0.8%), with the core bourses unwinding gains and plunging into the red following a positive open. Italy’s FTSE MIB outperforming peers as the index is buoyed by Italian banks benefiting from BTP price action. Broad-based losses are experienced across European sectors, with energy names lifted by price action in the complex. The Eurostoxx 50 underwent a reshuffle with sources stating Deutsche Bank, E.on and St. Gobain due to leave the index whilst Linde, Amadeus and Kering are to ender the Stoxx 500. Elsewhere, SocGen (+0.1%) is expects to pay USD 1.4bln in fines over allegations of sanction violations, however the bank is expected to pay far less than rival BNP Paribas paid four years ago.

• ECB Endgame Has Governments Debating Possible Rate-Hike Damage
• Italian Markets Jump After Salvini’s Vow to Respect Budget Rule
• Covea Says Scor Refused to Enter Talks on $9.6 Billion Deal
• Rude Awakening for New WPP CEO as Margin Squeeze Hits Shares
• Danske Says ‘Complex’ Laundering Probe Is Now Being Finalized

In FX, there is a firm rebound in the dollar DXY index to almost 95.600 from lows only a fraction above 95.000 yesterday, and amidst broad gains vs G10 counterparts alongside further outperformance against flagging EMs. Technically, the DXY has near term resistance to aim for at 95.709, but will get further impetus and direction (one way or another) when US markets re-open after the long holiday weekend. EUR/CAD/CHF – All around 0.4-0.5% softer vs the Greenback, with the single currency well below 1.1600+ peaks and through a key Fib level (1.1569), but finding some traction ahead of 1.1500 and the 21 DMA (1.1544), while the Loonie has lost more ground ahead of the next round of NAFTA talks and BoC tomorrow, even though crude prices are bucking the weak commodity trend and in theory supportive. Usd/Cad is hovering just below 1.3150 with decent offers said to be sitting between 1.3160-70, while the Franc has retreated through 0.9700 and hardly flinched at in line Swiss CPI data. EM – More pain for the likes of the Lira, Peso, Rouble and Rand, with the latter hit even harder following an unexpected SA GDP contraction that means technical recession to compound the misery of domestic political problems and US sanctions. Usd/Zar up over 15.2500, Usd/Try 6.7200+ at one stage, Usd/Rub above 68.3800 and not helped by a non-committal Central Bank Governor ahead of next Friday’s policy meet, while Usd/Mxn is approaching 19.4400 and Usd/Ars is awaiting reaction to tighter fiscal measures announced yesterday.

In commodities, WTI and Brent futures trade on the front foot with both benchmarks above USD 71/bbl and USD 79/bbl respectively. Price action is supported as investors and traders assess the potential threat to US production from tropical storm Gordon that is expected to hit the Gulf Coast (with hurricane warnings in place). Anadarko Petroleum evacuated workers and shut production at two Gulf of Mexico platforms as the storm nears. Elsewhere, due to yesterday’s US Labor Day holiday, the API weekly crude inventories have been delayed until tomorrow. In terms of metals, the complex is heavily pressured by the strengthening dollar with gold taking out USD 1200/oz to the downside.

Looking at the day ahead, there’s a number of potentially interesting releases in the US particularly in the manufacturing sector with the ISM manufacturing print for August (57.6 expected) and final August manufacturing PMI due. July construction spending data is also due while August vehicles sales data will also be out at some stage. Away from the data the BoE’s Carney is scheduled to testify before lawmakers this afternoon on the August inflation report and policy decision. Also potentially interesting is a possible town hall meeting featuring German Economy and Energy Minister Peter Altmaier who may discuss Europe and US relations, Brexit and China. It’s worth noting today also marks the day that the full US Congress returns.

US Event Calendar

• 9:45am: Markit US Manufacturing PMI, est. 54.5, prior 54.5
• 10am: Construction Spending MoM, est. 0.4%, prior -1.1%
• 10am: ISM Manufacturing, est. 57.6, prior 58.1
• 10am: ISM Employment, prior 56.5
• 10am: ISM Prices Paid, est. 69.5, prior 73.2
• 10am: ISM New Orders, prior 60.2
• Wards Total Vehicle Sales, est. 16.8m, prior 16.7m

DB’s Jim Reid concludes the overnight wrap

The first business day of September might mark the start of the long slog into year-end but hopes were never really high for it being one of any real entertainment given the US holiday yesterday. Indeed it was a fairly mixed day across most of Europe in the end with the main stories being some divergence across country level PMIs following the final August data, a largely in-line Turkish CPI print but with little sign of respite ahead and a fiscal update from Argentina although both of which failed to stem more weakness across EM currencies including the Lira and Peso. We also had a bunch more mixed headlines second guessing Italy’s deficit target and finally a tough day at the races for Sterling post the weekend’s more Brexit unfriendly rhetoric.

More on all those shortly but as far as markets were concerned, the Stoxx 600 clawed back to a +0.07% gain by the end of play after spending much of the session passing between gains and losses. The CAC (+0.13%) did likewise however the DAX (-0.14%) failed to really get out of the starting blocks. The IBEX (-0.24%) also struggled however the FTSE MIB did jump to a +0.62% gain after falling heavily on the final two days of last week. The FTSE 100 (+0.97%) also had its best day in a month inspired by that decent slide for Sterling (-0.69%). There wasn’t much to write home about for bonds with Bunds (+0.7bps) a shade weaker and the periphery (BTPs -6.9bps) broadly stronger. Finally it was another tough session for EM FX led by the Turkish Lira (-1.45%), Brazilian Real (-2.51%)and  Argentine Peso (-4.17%). Indeed EM FX as a broad index was down -0.71% and for the ninth time in the last eleven sessions.

There’s a similar mixed picture across Asia this morning although moves have been fairly modest by all accounts. The Nikkei (-0.27%) and Shanghai Comp (-0.06%) are both tracking lower while the Hang Seng (+0.03%) and Kospi (+0.20%) are both just about holding onto gains. Futures on the S&P 500 are also +0.10% while Treasuries are little changed. Meanwhile the BoJ announced increased purchases of JGBs in the 1-3 and 3-5 year maturity buckets overnight, compensating for the now lower frequency of purchase operations. So more evidence that the stealth taper is in play. JGB yields are little changed on the back of that news.

Coming back to some of those main stories yesterday. In Turkey the August CPI print came in a shade above expectations at 17.9% (vs. 17.6% expected) but more significantly jumped a full two percentage points from July and to a new 15-year high. Our economists in Turkey noted that there were signs of general upward pressure across most sub-components owing to the unprecedented FX shock as well as higher utility tariffs. Also worth noting was the climb in producer prices with PPI jumping to 32.1% from 25.0% and also the highest in 15 years. The outlook for Turkish inflation doesn’t look like getting positive anytime soon with our economists noting that a new shock is scheduled to arrive in September in the form of a 15% and 9% rise in electricity and gas prices respectively. Our team have a 19% forecast for CPI by year end with single digit inflation unlikely any time soon (or at least until 2023).

Accompanying the CPI print was an unusual short statement from Turkey’s central bank stating that the “monetary policy stance will be adjusted at the September Monetary Policy Meeting in view of the latest developments”. So a hike in 10 days’ time appears a given now and our economists expect this to be in the magnitude of 425bps for the one week repo rate, pushing the rate to 22%. So with economic growth likely to slow meaningfully a great stagflation shock is looking more and more likely and it’s hard to see the newsflow out of Turkey dying down any time soon.

Rivalling Turkey for column space however is Argentina. Yesterday President Macri announced that the country was to impose taxes on exporters and aim to balance its budget a year earlier than previously planned. As another measure to cut spending, around half the current cabinet ministries will be cut. As noted earlier those measures did little to stem the collapse in the Peso again which has now weakened 51.61% YTD. Argentina’s main stock market also shed -1.66% after rallying in the few days ending last week. It’s worth noting that IMF Director Christine Lagarde is due to meet Argentina’s Treasury Minister today to review the details of a loan agreement from the IMF so we might well see more headlines as the day progresses.

In contrast to the EM turmoil yesterday’s PMIs in Europe were at least slightly more stable notwithstanding a bit of country  divergence. The final Eurozone manufacturing reading was confirmed at 54.6 and unchanged versus the flash. Germany was revised down 0.2pts to 55.9 and back to the recent June low while France was also revised down the same amount to 53.5, albeit still a three-month high. Spain printed at 53.0 (vs 52.5 expected) however the big downside surprise came from Italy which came in at 50.1 (vs. 51.2 expected) and down 1.4pts from July. That’s a two-year low for Italy while the output index actually dipped into contraction territory at 49.4. Forward-looking components like new orders paint a picture of further softness ahead too so signs that the uncertain fiscal outlook is spilling over into Italy’s manufacturing sector.

Staying with Italy, yesterday was another day with a slow trickle of budget related headlines. Reuters reported in the afternoon that Economy Minister Tria was pushing for a budget deficit below 2% which contrasted to Deputy PM Salvini’s weekend comment about “touching” 3%. Salvini then said yesterday that the budget would respect “all the rules” which appeared to be a much softer tone compared to his weekend comments. Clearly there is still plenty of noise around the subject though especially as we tick down to the deadline at the end of the month. Senior League officials are meeting with Salvini today about the budget so it’s worth looking out for any headlines on the back of that.

Here in the UK, as well as the various Brexit related headlines which seemed to be doing the rounds, namely the comments from the EU’s Michel Barnier on the weekend and former foreign secretary Boris Johnson, there was also a bit of back and forth concerning BoE Governor Mark Carney. A government spokesman was quoted as saying that “the Governor has said that he intends to step down in 2019 and that is still the plan” which is contrary to a BBC report suggesting that Carney might stay on. Carney is speaking to lawmakers today so it’s a topic that could be addressed this afternoon.

To the day ahead now where this morning it’s pretty quiet for data with the July Euro area PPI print the only release of note. There’s a number of potentially interesting releases in the US this afternoon though particularly in the manufacturing sector with the ISM manufacturing print for August (57.6 expected) and final August manufacturing PMI due. July construction spending data is also due while August vehicles sales data will also be out at some stage. Away from the data the BoE’s Carney is scheduled to testify before lawmakers this afternoon on the August inflation report and policy decision. Also potentially interesting is a possible town hall meeting featuring German Economy and Energy Minister Peter Altmaier who may discuss Europe and US relations, Brexit and China. It’s worth noting today also marks the day that the full US Congress returns.

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With South Africa reeling amid concerns of land expropriation, the rand tumbling amid broad emerging market fears and the local economy pressured by collapsing consumer spending, moments ago the Pretoria-based Statistics South Africa announced that Q2 GDP contracted at a 0.7% annualized rate, missing expectations of a 0.6% increase, and together with the sharp drop in Q1 GDP, South Africa has now officially entered its first recession since 2009.

There is a certain “rhyming” to this event because as Bloomberg notes, South Africa’s new President Cyril Ramaphosa suffered the same false start as his predecessor nine years ago: a recession in his first six months in office.

The decline was largely due to a collapse in agriculture and the farming sector – to be expected at a time when white farmers don’t know if they will be allowed to keep their land or have it be forcibly expropriated – and a parallel drop in consumer spending. Some more details from the report:

• Agriculture declined the most, recording an annualized 29.2% contraction
• Manufacturing shrank 0.3%
• Trade contracted 1.9%

The one positive was the mining sector where production expanded 4.9% Q/Q.

The rand fell 2.5% to 15.24 per dollar in Johannesburg on Tuesday. The currency has tumbled 18.8% YTD, with sentiment in the rand initially boosted after Ramaphosa came to power in December, ending Jacob Zuma’s corruption-plagued tenure of almost nine years, but that optimism quickly faded as structural reforms were not implemented fast enough while global trade wars emerging market turmoil has further sour sentiment, Bloomberg notes.

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Authored by Denis MacEoin via The Gatestone Institute,

On August 5, Britain’s former Foreign Secretary, Boris Johnson, published an article in The Daily Telegraph. Entitled “Denmark has got it wrong. Yes, the burka is oppressive and ridiculous – but that’s still no reason to ban it”, the article created a furore both within and outside his own Tory party, and for more than one reason.

Johnson is currently the strongest candidate to replace Theresa May as Prime Minister, given her increasing weakness as a leader, largely due to the problems surrounding Brexit and her inability to create a suitable deal for it. This is relevant to the furore. Johnson is an ambitious politician who is given to making controversial comments.

Despite his popularity in some circles, Johnson has his enemies, and not just within Jeremy Corbyn’s Labour Party (where the slightest hint of what is called Islamophobia must at all costs be condemned). It is regrettable then, that his careless remarks on women in niqabs and burqas resembling letterboxes or looking like bank robbers brought down the wrath of the politically correct and ended by ignoring the far more constructive statements in the article as a whole.

The varied, mostly negative, responses to Johnson’s article have been well explained by Soeren Kern. But not everyone thought badly of Johnson’s piece, given that he had not called for the full face veil to be banned in the UK, even though it is banned in several European countries and elsewhere. Before the Dutch ban, there was a ban by Denmark this year. Brendan O’Neill, the editor of Spiked, but writing in The Spectator, described Johnson as having taken a liberal stance on the veil by refusing to let the state determine how citizens may dress. He also pointed out that “as we now know, you’re not allowed to say anything even remotely critical about Islam or its practices these days”.

The controversy arising from Johnson’s article reignited a basic problem for liberal democracies. On the one hand, no democratic state can dictate rules for people on how to dress, eat, drink, engage in sexual relations, conform to heterosexual norms, and much more. Unlike Islamic states, such as Iran and Saudi Arabia, where even a woman dancing alone for pleasure can lead to a criminal charge, and where rules for female dress and comportment are centrally strictly enforced, Western countries and Israel pride themselves on huge liberties for everyone, including on how they dress.

On the other hand, the presence of Islamic garb from hijabs to niqabs and burqas on the streets of Britain is a problem for democrats precisely because of Western notions of individual freedom. To many, female Islamic clothing represents the powerful oppression of women’s rights. While some Muslim women insist that being covered represents modesty, provides respectability and insures that they will not, in public, be targets of unwanted attention, on Western streets they look as if they could be symbols of the undue pressures on women to conform to a patriarchal, deeply misogynistic code and the punishments that can be and often are inflicted on women for even a slight avoidance of the rules. Even in the West, women have been murdered by their own families in honour killings where they have opted to wear Western clothes (for example, here, here and here), however modest in our terms, or, in Europe, the United States, and Canada, just for being “too Western”. There are about 5,000 honour killings worldwide every year, even merely for refusing to wear a hijab. In 2015, an Indian Muslim man killed his four-year-old daughter for not covering her head while eating. Those are far from being the only cases. The murders seem often to be carried out by victims’ fathers, mothers, brothers, and cousins, or extended family members.

“[T]here is no basis in Islam for the niqab…. That’s why Muslim nations are themselves regulating and banning the niqab and burqa…” — Dr. Qanta Ahmed. (Photo by Peter Macdiarmid/Getty Images)

Is it, then, appropriate for such garments to be seen in countries where democratic norms find such abuses unacceptable? Some observers also feel that it is especially painful to see Western feminists marching and wearing black face masks in order to protect some Muslim women’s right to wear them, but failing to support the rights of other Muslim women who plead not to be forced into them.

Many Muslim women do wear hijabs and niqabs out of a mistaken belief that they are required religious garb; but many are also forced to wear them by family members.

Wearing full face coverings happens not just in the first generation of immigrants, but also in the second and third generations, often with the youngest more radicalthan their grandparents — a total reversal of what has happened to all earlier immigrants, notably in the US for Irish, Jews, Poles, Chinese, Japanese, and more.

As far as wider society is concerned, Islamic clothing serves to demarcate Muslim women from others. In two recent reports from the UK, Muslims have been identified as the most difficult of the country’s ethnic and religious communities to integrate, with women suffering in several ways from that inability to fit in. An article by Sir Trevor Phillips, once the architect of Britain’s multiculturalism policy, admitted that Muslims had not embraced the demands of living in a diverse society. Additionally, a 2016 government-sponsored review of social integration by Dame Louise Casey also concluded that Muslim communities were the most resistant of all incomer groups.

It is important to note that a number of Muslim women are strongly opposed to the veil, such as Yasmin Alibhai-Brown, Saira Khan, Masih Alinejad, possibly because, even when devout, they apparently want to integrate without the marks of the clerical oppression in their everyday lives. One of these is Qanta Ahmed, a medical doctor who has achieved some prominence as a journalist. She made a point of congratulating Johnson in a pointed and bracing article entitled “As a Muslim woman, I’d like to thank Boris Johnson for calling out the niqab”. She writes, revealingly, that “while Saudi Arabia is itself liberalizing, the niqab is increasingly adopted by Muslim women living in the West, often as an anti-Western pro-Islamist political statement opposing secularism.”

Referring to the various European bans on full-face veils, she writes:

“When Boris Johnson mocks the niqab, he is emphatically not mocking Muslim women because – and this is a point that we Muslims seem to be unable to get across to non-Muslims – there is no basis in Islam for the niqab. Claiming otherwise is a profound distortion of Islamic belief. That’s why Muslim nations are themselves regulating and banning the niqab and burqa – as in both Morocco and Turkey where these coverings are seen as an invasion of Salafist affinities and a risk to national security and societal integrity.”

After giving a brief description of why these veils are not Islamic in origin, she writes that:

“This convenient vacuum has allowed some to insert their own interpretation of veiling, for their own motives, including enforcing gender segregation and even gender apartheid, while also portraying Muslims in Europe as besieged by the false construct of Islamophobia which capitalizes on a false victimhood that so empowers Islamists as the persecuted darlings of blind liberalism.”

The Qur’an does not even use the word hijab (or the verb hajaba) to refer to a head-covering for women. Nor does it mention niqab or burqa as suitable garb for women. As Ahmed notes, Islam only calls for women to be modest, as many other religions do without demanding veils of any kind (although married Orthodox Jewish women do cover their hair with scarves, hats or wigs, and many Roman Catholic nuns also cover their heads).

The most popular Salafi website in the world (available in several languages) is Islam Question and Answer, a forum on which fatwas (often very long) concerning just about anything are posted as answers to questions from believers. It was founded by Muhammad Salih al-Munajjid, a scholar born of Palestinian refugee parents and educated by Salafi shaykhs in Saudi Arabia. According to al-Jazeera,

Al-Munajjid is considered one of the respected scholars of the Salafist movement, an Islamic school of thought whose teachings are said to inspire radical movements in the Arab world, including al-Qaeda and a group called al-Dawla al-Islamiya fil Iraq wal Sham (also known as the Islamic State, IS or Daesh).

In a fatwa published in 2004, in answer to the question: “Could u (sic) please supply me with some quotes (sic) from the Hadith and Quran on the importance of hijab for women.[?]”, we come across an extremely distorted reading of some Qur’anic verses. Here is a translation of part of a well-known verse in The Study Qur’an, a modern fully annotated version of the sacred text produced by a team of Muslim and non-Muslim scholars:

And tell the believing women to lower their eyes and to guard their private parts, and to not display their adornment except that which is visible thereof. And let them draw their kerchiefs over their breasts….” (Sura 24 [al-Nur], v. 31)

Now, here is the way the fatwa (in English) translates and interprets the same part verse:

And tell the believing women to lower their gaze (from looking at forbidden things), and protect their private parts (from illegal sexual acts) and not to show off their adornment except only that which is apparent (like both eyes for necessity to see the way, or outer palms of hands or one eye or dress like veil, gloves, headcover, apron), and to draw their veils all over Juyoobihinna (i.e. their bodies, faces, necks and bosoms)

It should immediately be clear just how much the fatwa introduces that is simply not there in the text. There is nothing in the original verse that necessitates veils, gloves, headcovers, or aprons, nor is there any requirement for women to cover their faces, necks, or bosoms, or reveal only one eye. For example, the word “adornment” (zayna) means “decoration, embellishment, finery, or something that beautifies”, or, in Hans Wehr’s authoritative dictionary, also “clothes, attire, finery”, can refer to things such as jewellery.

Most striking is the gloss given to the badly-transliterated word “Juyoobihinna” (better as juyubihinna) to mean “their bodies, faces, necks and bosoms”. The Arabic word juyub is the broken plural of jayb, which the always reliable Wehr translates as “breast” or “bosom”. It can also mean “heart”. It has nothing to do with whole bodies, faces, or necks, which is why the Study Qur’an renders it as “breasts”. Even in the modern West, it is normal for women to cover their breasts in public.

Finally, the translation “draw their veils” is misleading. The word for “veil” is actually simply khimar, pl. khumur. For some time, the khimar has been interpreted as a head covering, but the context is obviously not that. A more detailed examination of its original and Qur’anic meaning by a Muslim author, Joseph A. Islam, shows that a khimar is just something that covers something else. He translates the line in question as: “…And to draw their coverings over their chests” (24:31).

As Salafism grows in influence across the Middle East, in Europe, and North America, Salafi clerics are demanding that women wear, not just the niqab that shows only the eyes, but just one eye. In 2008, the BBC reported on Shaykh Muhammad al-Habadan, a Saudi ultra-conservative, for making just this demand. In Mosul, Islamic State enforcers made women wear full veils and gloves.

It seems that what is happening here is that religious fundamentalists, all men, often elderly men, want to make women invisible and wholly lacking in any female characteristics that could lead to their own sexual desire. By covering women’s faces and bodies, they make it impossible to distinguish one woman from another when in public, which is possibly the intent: to abolish a woman’s identity outside a close family circle that they say they are protecting.

All the while, it is not the Islamic religion that justifies these suppressions but a culturally-defined patriarchal system that could not be more out of keeping with Western societies, where many women are increasingly asking to be in command of their lives, and where men, however powerful, who abuse women are exposed – and sometimes arrested, tried and imprisoned. Yet we are expected to feel guilty if we dare to question what some Muslim women question: if shariah law is really the most wholesome lifestyle for many women.

The Netherlands is just the latest EU country to have banned the burqa in a major step towards affirming our democratic convictions about human rights and respect for the autonomy and individuality of everyone. Already, some twelve European countries have passed laws for full or partial bans on the burqa, while the UK government still stumbles over even the slightest restriction suggested.

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In an apparent bid to join the Italian-Hungarian “anti-immigration axis“, Czech Prime Minister Andrej Babis declared that Europe must fight for its culture and values amidst the migration crisis, and said the recent riots in Germany show how the uncontrolled influx of migrants leads to explosive situations.

“Chemnitz is just right around the corner!” Babis said on Sunday referring to the chaos that engulfed the eastern German city last week during pro and anti-migrant rallies held there. “I’ve been thoroughly explaining that this is a fight to preserve our European civilization and culture. We don’t want to live in Africa or the Middle East here. We must fight for our values.”

“Have you seen the pictures of migrant ships heading for tourist beaches? Europeans are shocked and frightened. The same thing happened in Chemnitz. There was not only a murder committed, but also the murders of teenage girls and sexual assaults,” Babis raged.

Last week, the Germany city of Chemnitz became the scene of standoffs between anti-migrant protesters and anti-fascists after a local German man was killed in a brawl with migrants from Iraq and Syria.

The ensuing violence was condemned by the authorities, and Foreign Minister Heiko Maas called on Germans to stand up against right-wing extremism, although he criticized many of his peer as being too lazy to stand up against racism.

Speaking on Czech TV, Babis said that events in Chemnitz demonstrate how the influx of migrants creates explosive situations, when foreigners clash with native-born citizens. Such cases are very dangerous for Europe, as the tensions in Germany also affect neighboring countries.

The minister also reiterated his long-standing opposition to the European Commission’s attempts to force his country into accepting migrants. He blasted the existing EU migration policies, and argued that European states must “unite” to come up with a viable solution on migration crisis.

As RT notes, Andrej Babis spent last week traveling to Italy, Hungary, and Malta, where he sought solidarity with his approach to tackling migration. He is set to meet German Chancellor Angela Merkel in Berlin on Wednesday. Foreign Affairs Minister Maas had earlier argued that the EU shouldn’t simply force its individual members into accepting asylum-seekers, a move that was commended by Babis.

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Authored by Abby Innes via The London School of Economics British Politics blog,

Abby Innes writes that the vote to leave the EU and the administrative chaos around it pull into focus the crisis we should have been talking about before: the failures of homegrown neoliberal policies and their dire implications. She argues that while Brexit has been heralded by supporters as a solution to a number of problems, what it will actually do is to accelerate to the point of ‘completion’ the already failed experiments to reform the state.

The Leave campaign in 2016 had a lot in common with the 1979 Conservative election manifesto. Both evoked the threat of a bureaucratic super-state and something approaching a conspiracy of that state against the public. Both promised to rescue a Greater Britain from the conspiratorial political forces that were holding it back. Both campaigns were a misdiagnosis of the real crisis at hand. This time we face a crisis of ungovernability potentially far more severe than that of the 1970s; but its roots are less in Europe than in the failures of the homegrown neoliberal reforms of the British state.

The ‘supply-side revolution’

The last three decades of state reform in Western democracies have aggravated rather than resolved the social divisions that emerged with de-industrialisation. Over the last thirty years, liberal market economies in general and the UK in particular have transformed the character of their states through privatization and outsourcing, through the development of quasi markets in welfare, and the rejection of industrial policies. At the same time, permissive tax and regulatory regimes have encouraged large corporations to opt out of their former social obligations in the name of maximising shareholder value.

The ‘supply-side revolution’ of the last thirty years was driven by the dominant New Right diagnosis of the economic crises of the 1970s and based on the radical public choice economics aligned with the Chicago and Virginia schools. According to this diagnosis it was the state that was primarily responsible for the end of the post-war ‘golden age of growth’ because of its inhibition of the market. Thus, according to the New Right and later New Labour too, it wasn’t technological change, or de-industrialisation in the face of emerging markets, it wasn’t the Nixon shock, or the end of Bretton Woods, nor rising exchange rate instability, it wasn’t stagflation or the oil crises that had confronted the country with a need to re-evaluate its production regime. It was the state. And so it was the state, above all else, that had to be transformed.

The first problem with the supply-side logic: the state as a firm

The supply-side critique of the state is profoundly flawed. It is rooted in abstract deductive logic derived from the first-principles of neoclassical economics uncalibrated against empirical reality. The public choice school based its understanding of politics on the assumptions of neoclassical economics that until the late 1950s had been applied only to decision-making in markets. Carrying over this methodology drove a devastating conclusion that is actually just an artefact of the method itself. To answer their questions around why the state had grown in the post-war era, public choice theorists simply asserted that politicians, bureaucrats and their voters are self-interested economic actors like any others in a marketplace.

By declaring that all public officials should be understood as homo economicus, the New Right could reconceive of democratic politics as a process in which politicians are effectively entrepreneurs who compete to gain control over the resources of a monopoly: the state. To increase their fiefdoms, both self-interested politicians and bureaucrats will generate policies most likely to appease self-interested voters in the market for votes. By this logic, according to the New Right, democracy is doomed to crowd itself out: the demand for state privileges by individually self-seeking voters will never be satisfied until the growth of the state has reached an unstoppable momentum towards totalitarianism. Bureaucrats, as in any monopoly firm, will tend only towards exploitative price-making and general budgetary greed. A responsible politician will strip the state of its powers to intervene in a ‘free’ market: the only ‘honest’ mechanism in a rationally selfish world.

The micro-foundations behind this thesis make it philosophically extreme. They assume a society populated by individuals who, in all contexts, deploy a clear and cold calculation of the costs and benefits of their actions, and do so with perfect information about their options. The supply-side diagnosis assumes that individuals are super-humanly rational around their immediate interests but completely witless about social or constitutional considerations and unmoved by ethics as distinct from material gain: implicitly, theirs is a voting population that can’t tell the difference between the NHS and communism. It is in this light that the European Union is viewed as no more and no better than a cartel of self-seeking monopoly enterprises. Clearly, if you conceive of the state in this way then the only rational solution is not to reform it but to break it.

The second problem with the supply-side logic: the state as a standard economic agent

But what if this metaphor is just wrong? What if it was always a normative assertion by a faction of academic theoreticians on a roll rather than an argument based on the historical evolution of actual states. What if the theory was an irresistible platform for large corporations who preferred to return to the good old days of laissez faire over a wise or sustainable political economic strategy? What if a failed firm enforces a limited reallocation of labour and capital, and a failing state collapses the effective mechanisms for democratic representation, the stability of capitalism, social integration and public order as such?

Not only does the supply-side revolution reintroduce market failures where they had always, historically, failed, it introduces state failures where they hadn’t previously existed.

As the economic theories of contract and property rights make clear, the higher the complexity of a good or product, the higher the risk of so-called ‘asymmetrical’ contracts in which the seller has more information than the buyer and hence can exploit that buyer. This is a fundamental problem when the state becomes that customer at the taxpayers’ expense. Transaction cost theory shows that trying to manage such asymmetrical contracts leads to massively increased costs. And these costs can never be rendered efficientbecause of the intrinsically unbalanced nature of the original contract, because of the complexity of the good. After thirty years the evidence suggests that introducing businesses into the UK state and competition between states produces the worst of both public and private regimes.

In the case of welfare reforms, the UK norm has become one of profit-seeking firms engaged at the tax-payers expense but in thoroughly non-competitive conditions. The resulting failure to produce either high quality services or lower costs has forced the state into doomed games of ever more Kafkaesque remedial action because of its continuing statutory responsibility for outcomes. Thus, in the name of this continuing supply-side experiment our schools, health service, prisons, transport services and social care institutions have become text-book case studies for ‘moral hazard’, in which private providers have few incentives to avoid risky or perfunctory behaviour because of the de facto insurance of continued public payment.

Private provision and its effect on government accountability

And this is before you consider the conflicts of interest that increasingly run through UK policymaking structures like a stick of rock. A relatively hidden dimension of today’s crisis of state failure is the increasingly pervasive role for private businesses throughout the entire state administration. After a sabbatical in the Cabinet Office Matthew Flinders reported that UK central government had lost the capacity to operate ‘meta-governance’ over state authority. That was in 2005. Since then that authority has increasingly been gifted into private hands. This process of dis-integrating state capacity was intensified after 2010 under the renewed supply-side zeal of the coalition and Conservative governments.

In 2015 Ruth Dixon and Christopher Hood found that reported administration costs in the UK had risen by 40% in constant prices over the previous thirty years, despite a third of the civil service being cut over the same period, whilst total public spending doubled. Running costs were driven up most in the outsourced areas. Deep failures of service, complaints, and judicial challenges had soared. This was in no respect the ‘better government for less money’ promised by governments of left and right. These reforms have also undermined the accountability of government because the more the state has become structurally dependent on private provision the harder it’s become to reverse even openly failing policies: the state capacity that used to be there has frequently been destroyed. The administrative chaos around Brexit demonstrate to the wider public the dysfunction that those who depend on the state have suffered for years.

The democratic principle of fiscal consent is that people are willing to pay their taxes because the liabilities are fair and the revenues never confiscated. But that principle is severely stretched. The wealthiest firms have escaped their side of the fiscal contract through an international race to the bottom on tax rates, standards, and enforcement. In the meantime the burden of continuing taxation has been pushed onto less mobile factors such as labour, consumption, and small and medium-sized businesses.

And all of this might have been worth it had we gained the promised renaissance of investment, innovation, higher quality employment, and growth that was supposed to occur spontaneously when the state was got out of the way. But what we have seen instead is the transformation of post-war democratic capitalism from a system of wealth-creation to one of wealth extraction.

A process of financialisation has occurred on three levels: financial markets and institutions increasingly displace other economic sectors as the source of profitable activity. Non-financial corporations are becoming financialized through a regime of maximizing shareholder value, wherein profits are increasingly extracted for higher executive pay through share buy-backs and dispersed through higher share dividends rather than reinvested. Finally, finance has penetrated into every aspect of life as people are increasingly incorporated into financial activity, and to a degree that significantly increases the systemic risk inherent in the boom and bust cycles of poorly regulated financial markets.

The existing structural divisions and the EU referendum

For a doctrine to require a super-human rationality to function as promised makes it totalitarian, whether that rationality is social, as in Marxism-Leninism, or utilitarian, as in neoliberalism: it requires a perfect consistency of human character. But it’s also in the nature of such ideologies that in the face of often terrible social consequences their dogmatism encourages the doubling down on their projects in the belief that the validity of the programme will be finally proved at the point of completion. As a result, the energy of these doctrines only becomes fully unspooled once the disorder that they create has spread to every single part of the polity. Hard Brexit is an invitation from supply-side zealots to enter the full disorder of a ‘liberated’ market.

The Global Financial Crisis was also used as a pretext by George Osborne for an acceleration of the supply-side project but that same government was heedless enough of the social consequences to offer an opportunity for a public judgement on the current direction of travel: the 2016 Referendum. The findings on subjective attitudes are telling. Those most likely to vote Leave were:

• Those finding it difficult to manage financially (70%) or just about getting by (60%);

• Those who believed Britain has got a lot worse in the last ten years (73%);

• Those who think things have got worse for them rather than other people (76%);

• Those who perceive themselves as working class (59%). Those who see themselves as English rather than British (74%) or more English than British (62%).

These are constituencies built by the supply-side revolution. They were unlikely to be persuaded by a Remain campaign that spoke only of the economic joys of the status quo. The voting split for Remain versus Leave is between the centres of the new knowledge economy – rooted in ICT and services – and those of the rural, industrial and mid-range technology economies, abandoned by a state no longer understood by government as the historical midwife of development.

These trends support the worrying thesis that there are deepening structural divisions in advanced capitalist economies between those higher educated voters who prefer the labour market dynamism of highly liberalised economies, versus those with little hope of achieving a stake in any such system.[1] The rising emphasis on English national identity follows as a reaction to the unmanageable pace of globalisation: the scale of displacement of manufacturing activities by imports into a region drove perceptions around the risks of immigration more than the scale of immigration as such. This is hardly a trajectory compatible with democracy.

It was under these conditions that the referendum was heralded by Leave as the solution to the collective pain and frustration of an already divided society. Under the UK’s constant leadership the EU had often become a champion of neoliberal policies. More often, however, it had acted as a brake on the more extreme preferences of UK supply-sider governments. It was the Conservative, Labour and Liberal parties in government that made of the British state both an inefficient public regime and an increasingly extractive private regime dominated by large corporations. The historical irony is that the supply-side revolution has effectively built the state that haunted the fever dreams of the public choice theorists.

Brexit as the last chance saloon

So why are we leaving the largest trading block in the world rather than having an empiricist public debate about the systemic crisis of the domestic political economy? One reason is that this crisis creates no neat division between party lines as it did in 1979: no party but the Greens gains from discussing their role in these developments. For Labour it is the deepest ideological division between its right and left. The expressive function of parties is further discouraged when the most powerful actors across the political economy are likewise implicated, from the City to the CBI. Even if supply-side reforms hadn’t built so powerful a large business constituency for their extension, it would be awkward for mainstream elites to call for the renewal of central and local state capacity after so many years of insisting its relative incompetence.

The entire history of empiricist political economy tends to teach us that both states and markets have their virtues and their vices. The virtues are typically interactive. Cooperative solutions tend to be more efficient than markets at solving problems characterised by complexity and uncertainty: Germany’s stakeholder production regime is exceptionally functional. Given the urgency of climate change the debate we ought to be having is about how to develop a political economic strategy with ecology at its very core. Even were we not dangerously behind on climate mitigation it is unclear how the trend towards increasing social polarisation driven by a doctrinally and practically corporate-captured state could be reversed without a radical shift in the political economic paradigm.

But in the face of these realities the strategy of the hard Brexiteers is uniquely unwise: it is to accelerate to the point of ‘completion’ the already failed supply-side experiments of the last thirty years and to deny climate change, all in pursuit of arrangements that exist nowhere but in the pages of the economic utopias of the 1960s. Brexit militants have offered no precise strategy for free-market greatness because it exists in no realisable place: the days of the British Empire are mercifully finished, a democratic free market is a fantasy. For its leadership, Brexit is the last opportunity to radically dismantle the state-as-economic-referee as the window on the popularity of neoliberalism starts to close. It is the hard right equivalent of rallying for Soviet Communism in 1989. As Arthur Koestler wrote of his former ideological zeal, “Gradually I learned to distrust my mechanistic preoccupation with facts and to regard the world around me in the light of dialectic interpretation. It was a satisfactory and indeed blissful state.” Koestler was talking about communism, but it sounds familiar for a reason.

When it comes to history repeating itself, it is both tragic and farcical that it is the most militant supply-siders of all who were crowned by the 2016 Referendum. It is this faction above all that gets the diagnosis of our current condition most exactly wrong. It is their idea of a cure that would be most lethal to the British body politic.

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A surge in populism has sent Sweden’s far-right Sweden Democrats (SD) Party surging in the polls leading up to the country’s September 9 election – placing them neck and neck with the Moderate party. The current ruling party, the Swedish Social Democrats (S), however, remain strongly in the lead. 

Perhaps dozens of cars torched by “misguided youths”, rapes, swiming pool sex assaults, news crew attacks, grenade attacks and government funded sex courses to teach migrants that 14 is just too young, aren’t sitting well with Swedes who may regret following their “feminist” government in welcoming over 400,000 people from countries and cultures not exactly known for their embrace of feminism. 

What’s more, Sweden’s Social Democrats have been criticized by “average wage-earners, pensioners and first-time voters” who now accuse Prime Minister Stefan Lofven of imperiling the country’s cherished welfare state by welcoming a flood of asylum seekers who are seen “as an economic and cultural threat,” according to Stockholm University sociology professor Jens Rydgren. 

“The balance of power has shifted, because of the EU, globalisation and digitalisation, and the Social Democrats are no longer able to keep their promises,” Sweden’s paper of reference Dagens Nyheter wrote recently. –AFP via France 24

A poll by Sifo has the Sweden Democrats, led by Jimmie Åkesson, ahead of the Moderates by 1 point, while Ipsos has the Moderates ahead by the same amount. 

Prime Minister Stefan Lofven’s Social Democrats, who have dominated Swedish politics since the 1930s, will remain the biggest party in the country but likely with a record low score, polls suggest.

The far-right Sweden Democrats (SD) are heading to make the most gains and come in a close second, followed by the conservative Moderates. -AFP

Sweden, Sifo poll:

S-S&D 26 %
SD-ECR 18 % (+1)
M-EPP 17 %
V-LEFT 11 %
C-ALDE 9 % (-1)
L-ALDE 6 %
MP-G/EFA 5 % (-1)
KD-EPP 5 %

Sample size: N/A
Field work: 28/08/18-02/09/18#val2018 #valet2018 #Sweden #svpol pic.twitter.com/xsOPCRD0nx

— Europe Elects (@EuropeElects) September 3, 2018

Sweden, Ipsos poll:

S-S&D: 27% (+1)
M-EPP: 17%
SD-ECR: 16% (-3)
V-LEFT: 11% (+1)
C-ALDE: 10% (+1)
L-ALDE: 6% (+1)
KD-EPP: 6% (+1)
MP-G/EFA: 5% (-1)

Field work: 28/08/18-02/09/18
Sample size: 1,874#val2018 #valet2018 #svpol #Sweden pic.twitter.com/jU2dTjEjCK

— Europe Elects (@EuropeElects) September 3, 2018

Sweden: Our election mod shows a 0.6% chance for a majority of S (S&D) and M (EPP) in the national parliamentary election based on current polls. It would be the first time since the foundation of M in 1904 that S and M do not gain a majority. #svpol #valet2018 #val2018 pic.twitter.com/TWVttvNv4a

— Europe Elects (@EuropeElects) September 2, 2018

And while Sweden is still quite progressive – legislating paternity leave for new dads while maintaining strict environmentalist policies as the “most sustainable country in the world,” times are changing.  

But this year’s election campaign posters signal a change of tone in the public debate: “No to Prayer Calls”, “Speak Swedish to become Swedish”, and “Hate or Debate?”.

Neither Lofven’s left-wing bloc nor the centre-right four-party Alliance are seen winning a majority. And both blocs have ruled out a collaboration with the far-right.

That said, they may have no choice but to adopt policies that reflect a growing resent towards open-border policies. 

Nationalism rising

Sweden isn’t the first “open-border utopia” to experience a surge in nationalism. Germany’s Alternative for Deutschland (AfD) party holding steady at 17% in the latest INSA poll. 

Germany, INSA poll:

CDU/CSU-EPP: 29% (+1)
AfD-EFDD: 17%
SPD-S&D: 16% (-1)
GRÜNE-G/EFA: 14%
LINKE-LEFT: 10% (-1)
FDP-ALDE: 10%

Field work: 31/08/18 – 03/09/18
Sample size: 2,069 pic.twitter.com/9yPenfqVXf

— Europe Elects (@EuropeElects) September 3, 2018

Meanwhile, Italy’s right-wing League rose to 32.2% in the latest poll by SWG, up from 30.3% in their last survey conducted at the end of July. The League notably got 17.4% of the vote in the March general election, while the country’s populist Five Star Movement received 32.7%. The League and the Five Star Movement are currently governing Italy in coalition. 

Italy’s League Seen Rising to 32.2% in SWG Poll from 30.3% in prior poll; it got 17.4% in the March election: YouTrend

— zerohedge (@zerohedge) September 3, 2018

Who could have guessed that open-border socialist policies would backfire? And to think, Gadhafi wanted a scant 5 billion Euros to keep illegal migration from North Africa at bay, warning the alternative was a “black Europe.”

“Tomorrow, Europe might no longer be European and even black as there are millions [of Africans] who want to come in,” Gadhafi said in 2010. Instead “we came, we saw, he died.” 

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Authored by Tom Luongo via The Strategic Culture Foundation,

It’s no secret that President Trump believes NATO is an anachronism. It’s also no secret that French President Emmanuel Macron wants a Grand Army of the EU and a single EU Finance Minister to further integration of the EU into the United States of Europe.

He and German Chancellor Angela Merkel have been championing these two things since the day after Macron took office. They are both pushing hard for the EU to conduct independent foreign policy, framing Trump’s belligerence as the catalyst for its need now.

So, I’m not surprised in the wake of Merkel’s garden summit with Russian President Vladimir Putin recently that both of these policy initiatives are being pushed now.

Both Merkel and Macron are in trouble politically. Their approval ratings are dropping. Both have seen cabinet defections. So, they need political wins and rapprochement with Russia is something very much desired by many European nations, like Italy, and necessary to gain some economic momentum after four years of ruinous sanctions.

Macron now openly engages the idea of a security framework with Russia. The same Russia that not three months ago Macron was pulling diplomats from over the poisoning of Sergei and Yulia Skripal.

This admission on his part is a major bombshell. If sincere, it changes the entire narrative and accelerates the shift of Europe away from the U.S.’s abusive use of the dollar as a whip to command compliance.

It also cuts to the heart of Trump’s criticisms of NATO, that the threat of Russian invasion of Eastern Europe as promoted by Poland and the Baltics is laughable.

In his recent press conference in Helsinki (ironic that), Macron echoed Merkel’s statements from earlier this year that Europe can no longer rely on the United States for its security; France should build a strategic partnership with Russia and Turkey.

I’ve been arguing for weeks now that Trump’s hostile policies towards Iran as well as Europe had the ultimate goal of accelerating the end of NATO by putting direct pressure on Germany and France to end the policy of using the U.S. as their defense pack horse.

Trump was right to point out at July’s NATO Summit the fundamental hypocrisy of spending billions on NATO to defend Germany while Germany is building a gas pipeline with Russia, Nordstream 2, to run its economy and resell gas around Europe.

This statement by Macron is an admission that Trump has won the standoff between the EU and the U.S.

Previous to Trump the goal was to simultaneously bind down the U.S. via trade deals and transnational agreements like TTIP and the Paris Accord on Climate Control while elevating Europe’s interests abroad by letting Iran off the hook and back into the global economy and expanding trade with China.

The inversion of the relationship between the U.S. (master) and Europe (satrap) would have been completed under a Clinton Presidency.

The arrangement being that the U.S. would continue bankrupt itself maintaining a military empire around the world and pay the lion’s share of NATO’s costs while the EU set policy. Trump rightly called that out during the campaign and has been resolute on this as President.

And to him, the Iran Nuclear Deal represented the ultimate slap in the face to the U.S., allowing Europe access to cheap Iranian oil and gas, paid for with euros, in exchange for zero real guarantee of Iran not developing a nuclear missile, thereby destabilizing the entire Middle East.

And, while, I believe Iran was upholding its end of the bargain as written, the spirit of the agreement was the problem. Trump believes, and, here I agree with him, that North Korea and Iran were working together to develop a nuclear ballistic missile. North Korea built the warhead while Iran worked on the delivery system.

Trump confirmed this was his belief in a tweet last year. It signified that Trump understands this connection and was unhappy about it.

That tweet changed everything. It set us on the path we’re on today. Here’s what I wrote back in late September of 2017.

Trump has made a big show about how the JCPOA is a ‘bad deal.’ This tweet tells you why.

But, so what? Until we show some willingness to define American interests less broadly and honor our agreements, why should anyone negotiate? Why should Iran and North Korea not pursue their interests which is obtaining a nuclear arsenal to deter the U.S. from violent regime change?

And that’s the place we are in right now with Europe. Why should they negotiate with Trump unless he offers them something in return, something he wants to give them; their foreign policy independence.

Trump is defining American interests less broadly. He’s saying Europe’s defense isn’t our responsibility anymore. He’s saying you don’t get to have your Iranian oil and hollow out our economy at the same time.

Macron is actively taking him up on the offer because he knows, like Merkel, that the U.S. will not lift a finger under Trump to tamp down unrest in Europe due to political instability brought on by central bank financial repression and mass immigration.

Because of this NATO is worried. Selling the world on permanent conflict with the evil Russians and ‘terrorists’ is the main way to keep selling arms around the world. That’s what NATO is at this point; a vast graveyard for productive capital to be wasted on weapons we don’t need to fight enemies that don’t exist.

This is why it’s political mouthpiece, The Atlantic Council, is advising Facebook on what is and is not ‘fake news’ coming from Russia. This is why the media, bureaucracies and lobbyists in D.C. all hate Trump. He’s undercutting the reasons for all of these weapons by forcing the real narrative about Europe’s security into the open.

Which is that the biggest danger to Europe’s security is Europe’s own leadership.

As I said at the outset, these plans for a Grand Army of the EU have been in the works for years. The EU was supposed to have its cake – U.S. money and support – and eat it too – its own private military — with the ultimate goal of merging their command structures with the U.S. in the subservient role.

And that plays into the other possibility of what this offer by Macron signifies. I’ve given you the bull case, as it were. Now here’s the bear case.

This statement by Macron could also be meant as an enticement to Russia to abandon its partnership with Iran and China in exchange for a closer relationship with Europe. We all know that Henry Kissinger has been advising Trump on this front; to create conditions by which to break the Russia/China alliance.

Because, while the U.S. is ‘not agreement capable,’ France and Germany are the kindler, gentler face of Western expansionism. So, Macron offers up a security arrangement for Russia and Turkey that excludes the U.S., giving Trump what he wants, an end to the U.S. funding Europe’s defense, while keeping NATO alive to turn on Russia at a later date, say after Trump is impeached.

So which path does this offer by Macron represent?

The one that leads to European independence on foreign and energy policy out from under the umbrella of NATO and the U.S. and into an agreement with Russia and Turkey, as Macron said.

Or is it simply a stalking horse for further EU integration after Trump is removed from office and the original path paved by Obama re-established but this time with Russia neutered having betrayed its allies, China and Iran?

I’m betting Putin isn’t that stupid.

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