Month: September 2018

Authored by Jeff Thomas via InternationalMan.com,

As a boy, I was quite non-violent, but I confess to having been fascinated with professional wrestling. For one hour, every Saturday morning, I’d watch Yukon Eric, Haystack Calhoun and Killer Kowalski attack each other in the ring in what was called, “professional wrestling.”

Of course, even as a boy, it was evident that it was a sham. Some wrestlers played the role of angry bullies; others were practically cartoon characters. The threats each made to the other before the match, the silly outfits, the absurd holds and body slams – it was clearly phony.

And yet, each Saturday, my friends would say, “Okay, maybe some of it’s phony, but did you see that guy bleedin’? That was real!”

Were my friends as gullible as that? Well not by nature, possibly, but, if they’d accepted that televised wrestling were totally phony, it would have lost all its excitement. Viewers would grow bored with it and cease to watch it. And, of course, it was so compelling – seeing two tough guys dramatically fighting it out in the ring.

And, of course, there was the tension created, since the protagonists always seemed to have been fairly evenly matched. Some viewers rooted for one wrestler, some rooted for the other. Right until the end of the match, it remained uncertain which would win. Tension was maximized.

But, today, wrestling has been taken to another level. The outfits are more theatrical, the drama is greater and, best of all, pretty women have been introduced. In fact, some had previously been beauty pageant contestants. Somehow it seems that the prettier they are, the more likely they’ll be capable wrestlers.

But, as adults, we’ve matured and are no longer so easily taken in.

Today, as responsible adults, we turn off wrestling and watch network news.

When I was a boy, it was impossible to tell whether the reporter was a liberal or a conservative. They reported the news dryly and allowed the viewers to make up their own minds. But, sometime in the 80’s, this began to change. It became apparent that there were liberally-leaning networks and conservatively-leaning networks.

The news studios were more expansive and more expensive, with lots of coloured lights.

Each network now presents a panel to discuss issues. On a liberal network, three erudite liberals debate against one inept conservative, beating him easily, demonstrating that liberal views are superior. On a conservative network it’s much the same – three erudite conservatives making mincemeat out of a carefully-chosen inept liberal, demonstrating that conservative views are superior.

And, remember, at one time, all news reporters were experienced former field correspondents who were now middle-aged – dull, possibly, but very capable.

Today, there’s a mix of younger-to middle-aged men, but, increasingly, the emphasis is on female reporters. And they all seem to be very attractive indeed, with a preponderance for long blonde hair. In fact, some of them were (literally) previously beauty pageant contestants. Somehow it seems that the prettier they are, the more likely they’ll be capable reporters.

Some reporters play the role of angry bullies (Bill O’Reilly, Sean Hannity, etc.); others are practically cartoon characters (Greg Gutfeld, Rachel Maddow, etc.). And, like wrestling, it’s so compelling – watching liberals and conservatives trying to out-shout each other on the stage. Clearly, this is not objective, sober news-reporting, but it’s most certainly producing the desired effect – to get those who are gullible enough to tune in every night to receive the latest updates on a ceaseless rehash of recent events.

In recent years, the average viewer has begun to admit that this is largely a stage show; that conservative networks present a dramatically-skewed conservative slant, whilst liberal networks present a dramatically-skewed liberal slant. This practice has become so extreme that, if the viewer can force himself to flip back and forth from one station to the other, the same news event actually appears to be two different occurrences, the reporting is so divergent.

Interestingly, though, liberals are only too happy to swallow their chosen network’s presentation of the behavior of conservatives, whilst stating that the news on the conservative networks are unquestionably lies.

And the reverse is true for conservatives. They accept their own network’s presentation without question, whilst vilifying the presentation by the liberal network.

Each concedes that his own network fibs a bit, yet maintains a hatred of the opposing network, to the point that he can’t stand to watch it, even for five minutes.

The net result is that, with each passing day, the media increase the polarization between the two primary political factions. Conservatives blindly hate liberals; liberals blindly hate conservatives.

And, of course, this is the whole point. Just like televised wrestling, the idea is to increase the drama as much as possible, in order to keep viewers tuning in each night. As Hitler said, “Make the lie big, keep it simple, keep saying it and eventually they will believe it.”

But, surely, this reference to Hitler is an exaggeration as regards the news media?

No, I’m afraid not.

The lie in question is, “If the opposing party is elected, the country is in imminent danger of being destroyed.”

In each presidential election, the electorate exhibit greater anxiety than in the last. They bite their nails throughout the process, as though their very survival depends upon the outcome. After the election they either swoon with relief or plunge into despair, stating that they may have to leave the country.

And, yet, just as in televised wrestling, the protagonists are secondary. The show’s promoters – the Deep State – are unelected and retain power forever. The protagonists are mere bit players. Each puts his own twist on the show, but the overall direction of the country is maintained, regardless of which actor wins the match.

Televised wrestling is harmless entertainment for kids and also for those adults who would prefer to have their entertainment be at a low intellectual level. Hopefully, however, for those of us who recognize the need to see past the masquerade if we’re to make intelligent decisions, we either turn off the television, or, at the very least, stand way back mentally when we’re viewing and recognize that what we’re seeing is not just a slight difference of interpretation of people and events, it’s choreographed propaganda.

The viewer, if he cannot maintain total objectivity, watches at his own peril.

*  *  *

Clearly, there are many strange things afoot in the world. Distortions of markets, distortions of culture. It’s wise to wonder what’s going to happen, and to take advantage of growth while also being prepared for crisis. How will you protect yourself in the next crisis? See our PDF guide that will show you exactly how. Click here to download it now.

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In an sharp deterioration of diplomatic ties, China has blocked a request for a U.S. warship to visit the post of Hong Kong, the U.S. consulate in the Chinese city said on Tuesday, amid rising tensions between Beijing and Washington over escalating tariffs and a U.S. decision to impose sanctions on China’s military for engaging in military deals with Russia.

The ship, the Wasp Expeditionary Strike Group, is currently in the East China Sea, according to the WSJ which notes that Beijing’s decision will affect hundreds of service members serving on board. The Wasp, which can support as many as 1,600 Marines and sailors, has been at sea since August. Its home port is in Sasebo, Japan. The amphibious assault ship Wasp was due to make a port call in the former British colony of Hong Kong in October, diplomatic sources said, however Beijing flatly denied the request.

“The Chinese Government did not approve a request for a U.S. port visit to Hong Kong by the USS Wasp,” a consulate spokeswoman said adding that “we have a long track record of successful port visits to Hong Kong, and we expect that to continue.”

Earlier on Tuesday, Foreign Ministry spokesman Geng Shuang did not directly answer a question on whether China had denied the request: “For requests for U.S. military ships to visit Hong Kong, China has always carried out approvals case by case, in accordance with the principle of sovereignty and the detailed situation,” he told reporters cryptically.

Beijing previously denied passage by U.S. military vessels in a similar expression of displeasure. In April 2016, a time of tension over the territorial disputes in the South China Sea, it refused the U.S. aircraft carrier John C. Stennis a visit to Hong Kong.

Separately, China also canceled an upcoming meeting between top naval officers from the two countries, as we reported previously following China’s decision to summon the US ambassador after the US imposed sanctions on Chinese entities in retaliation for purchasing Su-35 combat aircraft and equipment for S-400 surface-to-air missile systems from Russia in late 2017 and early 2018 from Russia.

Chinese Vice Admiral Shen Jinlong was scheduled to meet in the U.S. with Chief of Naval Operations Adm. John Richardson at the International Seapower Symposium, a gathering of global naval officials in Rhode Island, according to the Journal.

“We were informed that Vice Adm. Shen Jinlong has been recalled to China and won’t conduct a visit with Adm. Richardson. We have no additional information at this time,” Pentagon spokesman and Army Lt. Col. David Eastburn told the newspaper in a statement.

China and the United States are also embroiled in an increasingly bitter trade war, which culminated this week with a decision by the Trump administration ti impose its latest round of tariffs on China earlier this month, targeting $200 billion of Chinese imports. That announcement prompted China to retaliate with tariffs on $60 billion of U.S. imports.

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Authored by Mike Shedlock via MishTalk,

Foreign Direct Investment (FDI) in the US should be rising. Tax cuts spur investment and the US economy seems much stronger than abroad. Nonetheless, FDI is negative…

The lead-in chart is from the Organization for International Investment report on Foreign Direct Investment in the United States, Preliminary 2nd Quarter 2018.

Second-quarter 2018 foreign direct investment flows in the United States were in negative territory, resulting in a divestment of $8.2 billion, following a relatively strong first quarter. The second quarter was marked by unusually high selloff and purchase activity, which suggests that some $100 billion invested in the United States has transferred ownership abroad. In that quarter, U.S. affiliates paid off $32 billion in loans to related parties. Clearly, much of this unprecedented FDIUS activity is due to changes in ownership. Yet, it can partially be viewed as a response to import tariffs and other trade actions from the Trump Administration as international companies hit the pause button on potential investments.

Foreign direct investment in the United States in 2017 was the fourth-strongest for the past decade, but was down 40 percent from 2016. This followed record-breaking years in 2015 and 2016; FDIUS for each year reached nearly half a trillion dollars.

These investments benefit the American economy as international firms build new factories across the United States, buoy their well established U.S. operations, fund American research and development activities, and employ more than 6.8 million Americans in well-paying jobs.

Looking at foreign direct investment more broadly, foreign companies invest in the United States for many reasons. A list of positive factors include the large U.S. market, world-class research universities, a stable regulatory regime, and a solid infrastructure that allows businesses to easily access the U.S. market.

Whether the United States will retain its status as the world’s most attractive investment location hinges mainly on future macroeconomic developments and changing financial conditions.

Annual FDI

FDI From China Alone

On July 30, 20128, the WSJ reported Chinese Investors Pulled Back in U.S. in 2017

The cumulative level of Chinese investment in the U.S. declined in 2017, according to a new Commerce Department report, showing Chinese investors’ enthusiasm for American assets was waning even before trade tensions ramped up.

China’s appetite for U.S. investment had picked up in recent years, nearly quadrupling from 2014 to 2016. Yet despite some high-profile transactions and rapid growth, China isn’t a large investor in the U.S., making up less than 1% of the more than $4 trillion of foreign direct investment in the country last year.

China’s decline stood out for two reasons. First, because of rising trade tensions between the two nations. Second, because the overall foreign direct investment position in the U.S. continued to increase last year, rising by $260.4 billion in 2017, according to Monday’s report, leaving China an outlier. The Commerce Department said the overall increase “mainly reflected” increased investment from Europe, “primarily Ireland, Switzerland and the Netherlands.”

Although investment from China to the U.S. is small overall, it has been of special concern for the White House and Congress. The administration considered a plan this year to restrict Chinese investment into the U.S., ultimately deferring to a congressional initiative to bulk up the committee that reviews proposed foreign takeovers of U.S. businesses and can recommend the president block such takeovers.

China Not Wanted

That last paragraph is telling. China accumulates US dollars as a result of China’s trade surplus with the US. It would like to invest in the US but can’t.

Meanwhile, the rest of the world is having second thoughts.

How Trump Is Repelling Foreign Investment

Foreign Affairs explains How Trump Is Repelling Foreign Investment

This year, net inward investment into the United States by multinational corporations—both foreign and American—has fallen almost to zero, an early indicator of the damage being done by the Trump administration’s trade conflicts and its arbitrary bullying of companies and governments. This shift of corporate investment away from the United States will decrease long-term U.S. income growth, reduce the number of well-paid jobs available, and reinforce the ongoing shift of global commerce away from United States. That shift will subject the entire world economy to greater instability.

Unlike speculative flows of capital or indicators of sentiment, these kinds of corporate investment decisions must be taken with 10-, 20-, or 30-year time horizons in mind, and once undertaken, they are difficult to reverse. As a result, if the relative attractiveness of investing in the United States compared with other countries—in terms of freedom from government interference, of dependable access to global markets for both inputs and sales, and of brands and hiring being helped, not hurt, by association with the United States—declines, so should direct investment in the United States.

The numbers are clear. To compare like for like, look at flows of foreign direct investment (FDI) into the United States in the first quarter of 2018, the latest for which data are available from the U.S. Bureau of Economic Analysis, and in the same quarter of 2017 and 2016. In the first quarter of 2016, the total net inflow was $146.5 billion. For the same quarter in 2017, it was $89.7 billion. In 2018, it was down to $51.3 billion. This decline was not driven by changes in Chinese investment, which flows both ways and so contributes little to changes in the net figure.

Self Harm

The decline is all the more worrying since many factors should have been pushing direct investment in the United States up this year. The massive fiscal stimulus passed by Congress should have increased FDI in three ways: by boosting spending, which increases U.S. growth prospects; by making the tax code more favorable to production in the United States; and by cutting the corporate tax rate. Even if one discounts the direct incentive effects for business investment in the legislation, the corporate tax changes certainly encouraged investment.

Consider how the tariffs on vehicles and auto parts under consideration by the Trump administration would feed into future investment decisions by some of the world’s largest multinationals: auto companies and their suppliers. If the United States imposes the threatened 25 percent tariffs and U.S. trading partners retaliate proportionately (as is likely), the move would have a major immediate effect on the U.S. economy. The tariffs would directly cost as many as 625,000 workers their jobs. But that would not be the end of it: shuttering factories also damages the wider communities of which they are a part, hurting other businesses that rely on autoworkers.

As antimarket governments have repeatedly shown, and as was the case with the U.S. auto industry in the 1960s and early 1970s, protection stifles innovation and results in worse products for consumers in the protected domestic industry. Going down that road will, in turn, hurt overall research and development in the United States, of which investment from automakers (including foreign ones) makes up a large part, and the United States’ reputation as a place to do business.

Flows of direct investment, especially of net FDI, into the United States are therefore worth watching as an early indicator of how far the global economy has moved toward a post-American era. The signs suggest that Trump’s approach to globalization is getting the world there faster than many realize.

As Trump Hardens Stance FDI Declines

Some of the ideas in the following article are similar to those presented above. Instead, I list new ideas from the article.

The Straits Times reports Foreign Investment Diverts from US as Trump Hardens Trade Stance.

Uncertainty from the administration’s negotiation strategies around trade agreements and tariffs are causing people to think about their investment decisions, said Rod Hunter, a partner at Baker McKenzie and former senior director of international economics at the National Security Council under President George W. Bush.

Part of the concern stems from Trump’s use of CFIUS, an inter-agency government panel that reviews foreign deals for national security risks, as a way to curb investment. The administration has backed bipartisan legislation to strengthen CFIUS that is making its way through Congress.

Trump is also using 232 investigations, sometimes called the “nuclear option” in trade laws, to counter cheap imports.”The 232 tariff cases have made many of our companies pause and wonder what the next two to three years hold,” said McLernon.

Federal Reserve Chairman Jerome Powell also has voiced concern on the trade climate’s impact on investment. In a Senate hearing Tuesday, he noted that tariffs are leading companies to delay capital spending decisions.

“We don’t see it in the numbers yet, but we’ve heard a rising chorus of concern which now begins to speak of actual capex plans being put on ice for the time being,” Powell said.

Ten-, Twenty-, Thirty-Year Decisions

Let’s return to a key idea:

Unlike speculative flows of capital or indicators of sentiment, these kinds of corporate investment decisions must be taken with 10-, 20-, or 30-year time horizons in mind, and once undertaken, they are difficult to reverse.

This is yet another reason that talk of “winning” these trade wars via the methods Trump uses is preposterous.

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On Tuesday a series of leaked photos were posted online showing that the S-300 missile defense system may have already been delivered to Syria despite the Russian Ministry of Defense previously suggesting a roughly two week timeline. 

As Al Masdar News reports, at least three photos were posted by Uralinform.Ru, showing the arrival of the Krasukha 4 electronic suppression of navigation and communication systems, touching down via Russian transport aircraft inside Syria on Monday night.

According to the author of the Russia-based publication, the Russian military has already delivered the S-300 hardware to Syria via a Russian-made aircraft from Mozdok Airport in the North Ossetian region. Likely the “leaked” photos are intentionally meant as public signalling to Israel that advanced S-300 deterrence is already fast being established. 

This comes after Russia early this week effectively declared a no-fly-zone over Latakia Province — which is the location of Russia’s Hmeymim airbase and the general area of last Tuesday’s large scale Israeli attack which resulted in a “friendly fire” downing of a Russian plane by Syrian missiles amidst the confusion. 

On Monday Russian Senator and former Air Force commander Viktor Bondarev stated that Russia has established a no-fly-zone over Latakia after last week’s Israeli attack. “The establishment of a no-fly zone over the Russian military base in Latakia will prevent a repeat of the IL-20 aircraft tragedy,” Bondarev told the Russian Federation’s Council. He further declared that “it is necessary to announce that any unauthorized objects in the sky over Hmeimim Airport will definitely be eliminated.”

The Krasukha 4 electronic suppression equipment, shown in the below photos being unloaded at the Hmeymim Military Airport in Latakia province, is a key part of Russia’s “response” to Israel and its allies which was announced early on Monday. Russia’s MoD had promised that along with the S-300 anti-missile defense system, advanced electronic countermeasures would be installed in order to “suppress satellite navigation, onboard radar systems and communications of warplanes attacking targets on Syrian territory.”

On Tuesday the Russian outlet Uralinform.Ru published the “leaked” photos. 

Israel has long claimed to be acting primarily against Iran inside Syria, often firing from over “neutral” Lebanese airspace, but additional new electronic countermeasures to be erected along with the S-300 system will blanket the Syrian coastline, per RT:

The third measure announced by the Russian defense ministry is a blanket of electronic countermeasures over Syrian coastline, which would “suppress satellite navigation, onboard radar systems and communications of warplanes attacking targets on Syrian territory.”

Shoigu further said the measures are meant to “cool down ‘hotheads’ and prevent misjudged actions posing a risk to our service members.” 

He added that if attacked in spite of the countermeasures, the Russian military “would act in accordance to the situation.”

Meanwhile Prime Minister Benjamin Netanyahu said on Tuesday that Israel will continue to strike Iranian targets inside Syria despite what will be vastly upgraded Syrian defenses. 

Netanyahu made the provocative statement before heading to the United States where he plans to meet with President Trump on the sidelines of the UN General Assembly . 

“Israel has been very successful in the last three years in preventing Iran’s military buildup in Syria as well as its attempts to deliver lethal weapons to Hezbollah in Lebanon,” Netanyahu said.

Netanyahu and Trump are expected to discuss Russia’s S-300 delivery to Damascus, something which US National Security Advisor John Bolton has called a “significant escalation” while appealing to Moscow to “reconsider”. 

However, it appears Russia isn’t bluffing, and is likely already moving forward with delivery, as the photos suggest. 

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Authored by Raul Ilargi Meijer via The Automatic Earth blog,

Axios reporter Jonathan Swan “broke” the story yesterday morning that Rod Rosenstein was going to resign before he would be fired, and he was on his way to the White House for that. Just about every would-be journalist in the US followed suit with speculation and ‘updates’ by anonymous sources either close to the White House or to Rosenstein.

Through the day it became clear that Swan’s entire story was pure speculation (though he just published an alleged resignation letter), and at the end of the day Rosenstein is still the Deputy AG, scheduled for a talk with Trump on the entire matter on Thursday. In short, Jonathan Swan dented Axios’ credibility by more than he will admit. So who has any credibility left by now? It’s not a long list anymore. Where can you get your news? Not where you used to.

Several voices volunteered that the White House had pumped the Rosenstein story in order to deflect attention from the Kavanaugh narrative. That made little sense: why would they do that? There may be some who think that Kavanaugh means a whole lot of trouble from Trump, but are they really paying attention, or merely thinking wishfully?

Kavanaugh himself didn’t look all that destroyed in his interview last night. And he made a very bold move: he said he was a virgin until well past high school. All it would take to break down that claim is one woman to step forward and say she had sex with him. And if he did have consensual sex even just once, nothing to do with assault, he’d still be exposed as a liar, so why make such a claim unless it’s true?

All this puts the allegations made against him in an eery light. Christine Blasey Ford’s story looked shaky from the start, because of all the things she said she couldn’t remember, but many people were granting her the benefit of the doubt. Then Deborah Ramirez added an allegation that if anything looked even less coherent. Even the New York Times could find no-one to corroborate her story, and she herself couldn’t, either.

Now, for all we know Kavanaugh may have been an adolescent monster, but we would still need proof of that before we nail him to a cross, or, worse still, keep him off the Supreme Court. Which is, obviously, what got the whole circus started.

Thursday will be yet another eventful day in the guaranteed to be always entertaining presidency of Donald Trump, and we wonder in eager anticipation how Axios and all the other news outlets will cover the events. Their Kavanaugh narrative looks shot right now, but we’d expect another woman, or two, or ten, to pop up with inflammatory tales.

Look for the one about consensual sex, that would seem to have a better chance than another assault with a penis chapter, and he set it up himself last night by his virgin declaration. Also, look for desperate attempts to smear the judge. There are still many people in Washington and beyond who really really don’t want him confirmed.

But then, everything they tried so far has backfired, even if that’s not what they see. That same thing may well happen in the Rosenstein saga. It’s no secret, never has been, that Trump has different opinions than Rosenstein, or for that matter Jeff Sessions, have on several matters. But they’re both still in their jobs.

Trump appointed Rosenstein, and he appointed Sessions, who turned around and recused himself from the Russian collusion case, putting Rosenstein in charge of that. Rosenstein appointed former FBI chief Robert Mueller as Special Counsel, though it was obvious from miles away that the FBI was heavily involved in the case.

Now, after all the Strzok/Page mails and the Andrew McCabe bumbling, we know that Robert Mueller, after almost two years, still hasn’t found any proof of collusion. We know this because he hasn’t presented any, which he would have been obliged to do if he had any, simply because the allegation of working with a foreign government to undermine the US is so serious; you can’t hold back that sort of information.

That all said, is it so strange that Trump has perhaps had enough of this? That he might like an actual Attorney General who actually takes charge of the case, and a Deputy AG who has some distance from Mueller and asks him to finish up the investigation which hasn’t produced anything but tax evasion charges for Manafort and 14 days in jail for Papadopoulos, who presumably pled guilty because, like Michael Flynn, he couldn’t afford to defend himself?

There are times one gets the impression the whole thing only continues because newspapers and TV channels make so much money off of painting Trump as the modern Antichrist. And while the man undoubtedly is full of flaws, that’s not what they’re all aiming for. They go for Russiagate, because it sells to have an archenemy to talk about, and they go for Stormy Daniels and Kavanaugh’s penis, because sex sells more than anything.

Along with all the anti-Trump rhetoric, there is a running story about a Blue Wave that will hand the Democrats back control over the House and perhaps the Senate. But while I think it might be good to restore some balance in Washington, if only so people must actually talk, I also think that Blue Wave thing is perhaps the biggest mistake America’s formerly left can make.

Because the Democrats, no matter how they see themselves, have no identity. Other than they’re not Trump and they hate the man. We saw that loud and clear the other day when they helped the GOP push a record military budget through the House. They’re merely a flipside of a coin. They have nothing of their own.

Yes, there’s Ocasio-Cortez and a handful others who try to define something different, but surely they must know that when you call yourself Socialist in America you’re tying an arm and a leg behind your back. Kudos for trying, but that’s not going to work. Bernie Sanders is done after allowing Hillary’s DNC to push him aside; people remember such things.

That leaves the usual suspects, Schumer, Pelosi, Feinstein, calcifying in their seats, with Hillary in the wings for a glorious return to viability in 2020. And they think that combo will make them win elections, and win them big, just because voters are so sick of Trump? Methinks perhaps they have started to believe their own stories, while neglecting those of their one-time voters.

But sure, let’s see what happens on Thursday, and before, with Blasey Ford and Kavanaugh’s testimonies, and with Rosenstein’s friendly chat with the President. I’m thinking there’s nothing so bizarre I would count it out, but I may have to rethink that. Maybe Robert Mueller will resign tomorrow before Rosenstein can be fired -assuming Trump would want to-, maybe Kavanaugh had sex with an entire boys’ choir twice a week, leaving him technically still a virgin.

Our fantasy is just about endless. But that’s the exact biggest problem with everything about this: there’s far too much fantasy involved, far too many allegations that remain unproven but leave traces left and right, far too many accusations that nobody is made to own up to.

One last thing: if it turns out Christine Blasey Ford can prove none of her accusations vs Kavanaugh, and he’s been telling the truth all along, what does that mean for all the women who’ve told their stories of rape and assault under the #WhyIDidntReport hashtag? How betrayed will they feel, how tricked? Or will they continue to insist that he must be guilty even if there is zero proof?

And no, it’s not Just the Democrats, it’s Washington as a whole, egged on by despairing media who see their revenues and credibility plunge and resort to cheap tricks. The Republicans with their inane plans to re-open the hunt on grizzlies are just as bad. Want to Make America Great Again? Start with protecting the grizzlies and manatees and moose and eagles. They are what makes the country rich. There won’t be anything great about a barren desert land devoid of life.

But the urgent question in Washington right at this moment is, in light of Rosenstein and Kavanaugh: how deeply can you divide a country, for political ends, before it bursts? And what will it take, what can still be done today, to pull it away from the looming abyss?

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Following an intense week of salacious claims against Supreme Court nominee Brett Kavanaugh, Senate Judiciary Committee Chairman Chuck Grassley has scheduled the confirmation vote for Friday morning at 9:30 a.m., following Thursday’s planned testimony by both Kavanaugh and accuser, Christine Blasey Ford. 

NEW: Grassley sets committee vote on Kavanaugh for 9:30 a.m. Friday. pic.twitter.com/7w0oF2rpza

— Greg Stohr (@GregStohr) September 25, 2018

Grassley wrote to Senator Dianne Feinstein (D-CA) earlier Tuesday to “respectfully decline” her request to postpone Thursday’s hearing, after assuring to provide Ford with a “safe, comfortable, and dignified opportunity to testify.” 

“Besides being unfair to Dr. Ford, whose attorneys asked for a public hearing one week ago, delaying the hearing further would be unfair to Judge Kavanaugh and his family. He has asked the Committee repeatedly for the chance to testify as soon as possible. He has categorically denied the allegations that have been made public. He did this in a transcribed interview with several Senate investigators.” 

Trust Grassley. pic.twitter.com/clqqvmQgvC

— Praying Medic (@prayingmedic) September 25, 2018

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President Donald Trump and Turkey’s President Recep Tayyip Erdogan won’t be doing any handshaking, back slapping or chummy antics before photographers anytime soon. The two leaders reportedly engaged in a handshake and very brief and presumably icy exchange behind the scenes at the United Nations General Assembly on Tuesday. 

There was also some diplomatic confusion during President Trump’s address to the assembly, with Erdogan getting up and leaving the assembly hall during Trump’s speech. This caused some reporters present to interpret the move as a snub; however, the Turkish delegation later clarified in a statement that Erdogan was preparing for his own speech, which followed Trump’s in the official schedule. 

According to Bloomberg the two shook hands out of site of reporters’ cameras, but did not broach key tensions dividing the two NATO allies, as they encountered each other between speeches. 

As Bloomberg reports, “Cordial” would not describe the current state of U.S.-Turkey relations. Trump unexpectedly doubled tariffs on Turkey in August as a dispute over the fate of Andrew Brunson, an American pastor detained in Turkey, remained unresolved.

Pastor Brunson, a 50-year-old evangelical pastor from Black Mountain, North Carolina was detained starting in 2016, and is undergoing trial in Turkey while under “house arrest” and is facing charges of espionage and aiding terrorist groups after being accused of cooperating with “Kurdish terrorists” and colluding with the Gulenist Islamic movement. He faces up to 35 years in prison if found guilty, and has now been in Turkish custody for two years. 

Trump has made it a personal mission to free Brunson, issuing statements via Twitter condemning his detention. For example last July, Trump stated, while addressing the Turkish president directly: “A total disgrace that Turkey will not release a respected U.S. Pastor, Andrew Brunson, from prison. He has been held hostage far too long. Erdogan should do something to free this wonderful Christian husband & father. He has done nothing wrong, and his family needs him.” Congress has also held up transfer of F-35 fighters which were set to be delivered to Turkey, citing its horrible human rights record and the detention of Brunson. 

Though Trump took shots at various countries during his Tuesday UN address, Turkey was nowhere mentioned in his remarks. Meanwhile Erdogan underscored Turkey’s growing alliance with Russia and his support for the Palestinian cause in a perhaps indirect shot at the recent White House decision to relocate the US embassy to Jerusalem and cut funding for UN Palestinian refugee aid.

Meanwhile Turkey’s economy has suffered amidst the damaged ties with Washington, with the Turkish lira losing more than 45 percent of its value this year.

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Authored by James Rickards via The Daily Reckoning,

Free riding is one of the oldest problems in economics and in society in general. Simply put, free riding describes a situation where one party takes the benefits of an economic condition without contributing anything to sustain that condition.

The best example is a parasite on an elephant. The parasite sucks the elephant’s blood to survive but contributes nothing to the elephant’s well-being.

A few parasites on an elephant are a harmless annoyance. But sooner or later the word spreads and more parasites arrive. After a while, the parasites begin to weaken the host elephant’s stamina, but the elephant carries on.

Eventually a tipping point arrives when there are so many parasites that the elephant dies. At that point, the parasites die too. It’s a question of short-run benefit versus long-run sustainability. Parasites only think about the short run.

A driver who uses a highway without paying tolls or taxes is a free rider. An investor who snaps up brokerage research without opening an account or paying advisory fees is another example.

Actually, free-riding problems appear in almost every form of human endeavor. The trick is to keep the free riders to a minimum so they do not overwhelm the service being provided and ruin that service for those paying their fair share.

The biggest free riders in the financial system are bank executives such as Jamie Dimon, the CEO of J.P. Morgan. Bank liabilities are guaranteed by the FDIC up to $250,000 per account.

Liabilities in excess of that are implicitly guaranteed by the “too big to fail” policy of the Federal Reserve. The big banks can engage in swap and other derivative contracts “off the books” without providing adequate capital for the market risk involved.

Interest rates were held near zero for years by the Fed to help the banks earn profits by not passing the benefits of low rates along to their borrowers.

Put all of this (and more) together and it’s a recipe for billions of dollars in bank profits and huge paychecks and bonuses for the top executives like Dimon. What is the executives’ contribution to the system? Nothing. They just sit there like parasites and collect the benefits while offering nothing in return.

Given all of these federal subsidies to the banks, a trained pet could be CEO of J.P. Morgan and the profits would be the same. This is the essence of parasitic behavior.

Yet there’s another parasite problem affecting markets that is harder to see and may be even more dangerous that the bank CEO free riders. This is the problem of “active” versus “passive” investors.

An active investor is one who does original research and due diligence on her investments or who relies on an investment adviser or mutual fund that does its own research. The active investor makes bets, takes risks and is the lifeblood of price discovery in securities markets.

The active investor may make money or lose money (usually it’s a bit of both) but in all cases earns her money by thoughtful investment. The active investor contributes to markets while trying to make money in them.

A passive investor is a parasite. The passive investor simply buys an index fund, sits back and enjoys the show. Since markets mostly go up, the passive investor mostly makes money but contributes nothing to price discovery.

The benefits of passive investing have been trumpeted by Jack Bogle of the Vanguard Group. Bogle insists that passive investing is superior to active investing because of lower fees and because active managers can’t “beat the market.” Bogle urges investors to buy and hold passive funds and ignore market ups and downs.

The problem with Bogle’s advice is that it’s a parasitic strategy. It works until it doesn’t.

In a world in which most mutual funds and wealth managers are active investors, the passive investor can do just fine. Passive investors pay lower fees while they get to enjoy the price discovery, liquidity and directional impetus provided by the active investors. Passive investors are free riding on the hard work of active investors the same way a parasite lives off the strength of the elephant.

What happens when the passive investors outnumber the active investors? The elephant starts to die.

The following chart shows that this is exactly what is happening. Since 2009, over $2.5 trillion of equity investment has been added to passive-strategy funds, while $2.0 trillion has been withdrawn from active-strategy funds.

The active investors who do their homework and add to market liquidity and price discovery are shrinking in number. The passive investors who free ride on the system and add nothing to price discovery are expanding rapidly. The parasites are starting to overwhelm the elephant.

This chart reveals the most dangerous trend in investing today. Since the last financial crisis, $2.5 trillion has been added to “passive” equity strategies and $2.0 trillion has been withdrawn from “active” investment strategies. This means more investors are free riding on the research of fewer investors. When sentiment turns, the passive crowd will find there are few buyers left in the market.

There’s much more to this analysis than mere opinion or observation. The danger of this situation lies in the fact that active investors are the ones who prop up the market when it’s under stress. If markets are declining rapidly, the active investors see value and may step up to buy.

If markets are soaring in a bubble fashion, active investors may take profits and step to the sidelines. Either way, it’s the active investors who act as a brake on runaway behavior to the upside or downside.

Active investors perform a role akin to the old New York Stock Exchange specialist who was expected to sell when the crowd wanted to buy and to buy when the crowd wanted to sell in order to maintain a balanced order book and keep markets on an even keel.

Passive investors may be enjoying the free ride for now but they’re in for a shock the next time the market breaks, as it did in 2008, 2000, 1998, 1994 and 1987.

When the market goes down, passive fund managers will be forced to sell stocks in order to track the index. This selling will force the market down further and force more selling by the passive managers. This dynamic will feed on itself and accelerate the market crash.

Passive investors will be looking for active investors to “step up” and buy. The problem is there won’t be any active investors left or at least not enough to make a difference. The market crash will be like a runaway train with no brakes.

The elephant will die.

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Back in March, when looking at the latest political wave sweeping across Europe, Deutsche Bank’s Jim Reid wrote a report which observed that “it’s hard to get away from the fact that populism is currently going through an explosion in support at present” of which today’s vote of no confidence of Swedish prime minister Lofven was just the latest example. DB focused on Europe, as shown in the following chart, and noted that high double-digit youth unemployment has become a hotbed for anti-establishment sentiment, which has everything to do with the economy, and lack of opportunities.

The German bank then warned that the “liberal world order” is in jeopardy, and concluded rather ominously:

As of now the rise in populism hasn’t yet destabilised markets however we find it difficult to get away from the fact that uncertainty levels are bound to remain high while such power brokers remain in major elections. Indeed the unpredictability of  Trump’s policies is such an example, with the recent tariff threats which have subsequently escalated market concerns about a trade war being one. At a time when global central banks are moving towards an unprecedented era of tightening and dealing with years of massive asset purchases, risks from rising populist support has the ability to seriously disturb the prevailing equilibrium of the last few years and subsequently markets.

Fast forward to today, when Bank of America strategist Barnaby Martin tackles the thorny issue of ascendant populism, which he attributes to the “lost decade” following Lehman’s collapse and what he dubs the “era of hubris” – a time when the richest 1% has seen its collective wealth surpass $100 trillion.

Martin begins by reminding us that a decade ago, “the collapse of Lehman Brothers sent shock waves through financial markets” to which the response was an unprecedented amount of central bank support, both in terms of its size and creativity.

And as we have observed on countless occasions, with central banks as a tailwind, financial markets have outperformed real assets over the last decade. Even so, the dichotomy in many cases is staggering:

Note that the cumulative total return on ICE BofAML’s Global Broad Market bond index since ‘08 is 50%…yet the growth in house prices globally over this time has been just a miniscule 1%.

Simply said, the last decade has seen those who hold financial assets become richer, as markets have lurched higher; meanwhile those without such assets – the vast majority of the middle class – have been increasingly left behind, however, even as wage growth remained stagnant and indebted governments have struggled to provide strong social support. As a result, a great wave of populism emerged as “issues such as wealth and income inequality have started to polarize societies much more.”

The next chart shows in staggering fashion just how “rich” the rich are today, especially when compared to some other big numbers and markets. According to BofA estimates the wealth of the top 1% globally has surpassed $100tr now…a number greater than the sum of the big-4 central bank balance sheets, current world GDP and the cost of the ‘07/’08 global financial crisis, for instance.

The great divide between the haves and the have nots has manifested itself not only in terms of accumulated wealth, but income as well, as the wealthy have had greater income-generating opportunities at their disposal, mostly due to access to better technology and education. It is therefore mostly the wealthy that have been able to reap the benefits of globalization, and perhaps the reason why the “not so wealthy” have been eager to tear apart the globalist system, and willing to listen, follow and vote for any populist leader who promises that.

Meanwhile, the top 1% richest in the world have witnessed impressive income growth since 1980 – in many cases, multiples of that seen by the less well-off in society. Also notice what Martin calls the “hollowing out” of the middle class over this period – where income growth has been the weakest- as “many have simply found their jobs replaced by either highly-skilled or low-skilled workers.”

Which brings us back to the core topic: the rise of social discontent, manifesting itself in growing populism. Observing the growing wealth and income inequality, Martin writes that these have been “important factors (albeit not the only ones) contributing to the rise in voters’ frustrations and resentment across the world.”

The result, as Deutsche Bank showed back in March, has been for the electorate to increasingly embrace “populist” or “antiestablishment” parties in hope of better times…and to shun mainstream left or right institutions.

As the next chart shows, the growth of populist voter tendencies has been clear since the late ‘80s, with the trend increasing in the post-GFC era. 

There are few signs as yet of it fizzling out. At the end of 2017, ten governments in Europe included one or more authoritarian populist parties, according to Timbro. Average voter support for far left populist parties has also notably risen since 2011.

In his conclusion, Martin echoes DB’s Reid, saying that “the continued rise in income and wealth inequality globally suggests that populism is here to stay” and yet it remains to be seen how effective it will be at tackling inequality and placating voter frustrations.

Meanwhile, even economies that have witnessed strong growth in recent times have struggled to generate “inclusive growth” instead becoming the world’s new breeding grounds of pervasive inequality. As the next chart shows, income inequality in China has jumped dramatically since 1990 despite very strong economic momentum.

What is ironic, is that since 2008, the Chinese government – which is terrified of a middle-class revolt – has introduced measures specifically aimed at reducing inequality. But as chart 4 highlights, while this has slowed the rise in income inequality in China, as yet it has not meaningfully reduced it. Will China be ground zero of the next social revolution as the people decide their “communist” leaders have betrayed them and take matters into their own hands.

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Submitted by Oilprice.com

Oil truck drivers in Iran have started a new strike demanding improved working conditions, and the industrial action has resulted in large lines forming at gasoline stations in Iran, The Middle East Monitor reports, quoting the Anadolu Agency and local media.

The strike is the second that truck drivers in Iran have staged this year, after a prolonged strike action in May in which they protested against rising costs for insurance, repairs, spare parts, and tolls, while their wages were stagnant. Back in May, the government has reportedly agreed to raise the pay for truckers by 15 percent, VOA reported.

According to The Middle East Monitor, nothing has been done yet to meet the truckers’ demands from May.

The latest industrial action by oil truckers in Iran comes less than two months after the first set of U.S. sanctions on Iran snapped back, and just six weeks before the second round of sanctions, including on Iran’s key revenue source—oil exports—kick in.

Over the past few months, Iran’s economy has faltered, and its currency, the rial, hit a new low this week against the U.S. dollar on the unofficial exchange rate.

According to data compiled by U.S. economist Steve Hanke of Johns Hopkins University, Iran’s annual inflation rate as of Monday was 293 percent—an all-time high.

The economic hardships are causing a surge in the price of goods, including diapers. Shortages of goods also abound, with Iranian authorities conducting raids to confiscate illegal hoards of rare and costly items such as diapers.  

The sanctions on Iran’s oil are now expected to remove more than 1 million bpd from the oil market, compared to earlier projections of around a 500,000-bpd loss, before the United States started to show signs that waivers would be given sparingly, if at all.

Although Iran’s oil exports are unlikely to drop to zero, they could halve to 1 million bpd-1.3 million bpd, Ben Luckock, co-head of oil trading at commodity trader Trafigura, told S&P Global Platts this week.

Meanwhile, in more bad news for Iran, Bloomberg reported that India is not planning to buy any crude oil from Iran in November, raising the prospect that Tehran will lose another major customer as U.S. sanctions kick in.

Indian Oil Corp. and Bharat Petroleum Corp. haven’t asked for any Iranian cargoes for loading in November, according to officials at the companies. Nayara Energy also doesn’t plan any purchases, said an industry executive. Mangalore Refinery and Petrochemicals Ltd. hasn’t made any nominations for that month, but may do so later, a company official said.

India is Iran’s second-largest buyer of oil, having imported an average of 577,000 barrels a day this year, or about 27% of the country’s total exports. With South Korea, Japan and European nations also cutting imports to zero, the loss of the Indian refiners, even if temporarily, is a major blow for the Islamic republic.

While final decisions on purchases aren’t due until early October, and the refiners could still change their minds, investors are already contemplating a worst-case scenario. And one of the reason why Brent surged above $82 to a new 4 year high is that rapid drop in Iranian exports, while OPEC has refused to provide a guarantee that it would step in to replenish the lost market share.

Further output losses could push prices even higher as refiners urgently seek replacement barrels elsewhere. Around the world, only Saudi Arabia and, to a lesser extent, United Arab Emirates and Russia, have the capacity to pump more.

Brent hit an intraday high of $82.55 a barrel on Tuesday, up 23 percent this year, just after U.S. President Donald Trump railed against OPEC and demanded the cartel lower oil prices, a plea which however was met with a stern defiance after the weekend’s meeting in Algiers.

At the same time, with U.S. sanctions set to go into effect in early November, a major gap in the global oil market is emerging just as Brent crude hits a four-year high above $80 a barrel. Mercuria Energy Group and Trafigura among the world’s biggest trading houses, are predicting the loss of Iran’s supply will boost prices to $100 a barrel for the first time since 2014.

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