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In its attempt to redirect the public’s attention from its historic failure to deliver unbiased, objective, factual reporting in the context of the presidential election in which virtually every single mainstream media outlet was revealed (courtesy of the hacked Podesta emails) and acted as a Public Relations arm for the Clinton campaign, said media has opened a new can of worms by ushering in the topic of “fake news” – a purposefully vague, undefined term meant to deflect and scapegoat by “exposing” propaganda websites, which in the latest incarnation of the narrative, are now allegedly serving to further Russian propaganda in the US.

As we reported earlier, none other than the Washington Post – a company owned by Jeff Bezos, who for the past year has been involved in a famous media spat with president-elect Donald Trump – pounced on a list created by a website that was created (according to its whois profile) on August 21 using godaddy.com as registrar and had its first tweet on November 2, and which among others, lists Drudge Report and Zero Hedge as representatives of “Russian propaganda.” This is how the “scientists” at the Goebbels-esque “PropOrNot” describe their qualifications in determining and recommending which websites are fit to be burned (starting with a plea for investigations by the Obama administration) in a post “fake news” world:

PropOrNot is an independent team of computer scientists, statisticians, national security professionals, journalists, and political activists dedicated to identifying propaganda – particularly Russian propaganda targeting a US audience. We collect public-record information connecting propaganda outlets to each other and their coordinators abroad, analyze what we find, act as a central repository and point of reference for related information, and organize efforts to oppose it.

 

We work to shine a light on propaganda in order to prevent it from distorting political and policy discussions, to strengthen our cultural immune systems against hostile influence, and to improve public discourse generally.

 

Many of our contributors wish to stay anonymous, in light of possible Russian retaliation, as has happened in Finland and elsewhere.

In other words, while attacking the anonymity of so-called “Russian propaganda” websites (websites which chose to remain anonymous knowing this kind of retaliation was inevitable), the public servants and experts devoted to rooting out Russian propaganda in the US opt, themselves, to remain anonymous.

To be sure, we have no interest in uncovering who may be behind this particular organization (which conveniently stepped in after a similar list was floated last week by a discredited liberal professor, who likewise defined Zero Hedge as “fake news”). We do, want, however to warn readers about who the real source of documented fake news in the US traditionally has been. The US government itself, through its vast espionage and counterespionage apparatus.

But please don’t take our word for it.

Back in 1975, the United States Senate Select Committee to Study Governmental Operations with Respect to Intelligence Activities found in 1975 that the CIA submitted stories to the American press, and that as part of the CIA’s playbook was the usage of disinformation tactics against America’s own population:

Question: “Do you have any people being paid by the CIA who are contributing to a major circulation — American journal?”
Answer: “We do have people who submit pieces to American journals.”

Question: “Do you have any people paid by the CIA who are working for television networks?”
Answer: “This I think gets into the kind of uh, getting into the details Mr. Chairman that I’d like to get into in executive session.”

 

(later)

 

Question: “Do you have any people being paid by the CIA who are contributing to the national news services — AP and UPI?”
Answer: “Well again, I think we’re getting into the kind of detail Mr. Chairman that I’d prefer to handle at executive session.”

One can imagine what was said later during the “executive session.” Then-CBS President Sig Mickelson goes on to say that the relationships at CBS with the CIA were long established before he ever became president, and that “entirely in order for correspondents to make use of CIA station chiefs and other members of the executive staff of CIA as sources of information.”

“I thought that it was a matter of real concern that planted stories intended to serve a national purpose abroad came home and were circulated here and believed here because this would mean that the CIA could manipulate the news in the United States by channeling it through some foreign country,” Democratic Idaho Senator Frank Church said at a press conference surrounding the hearing. Church chaired the Church Committee, a precursor to the Senate Intelligence Committee, which was responsible for investigating illegal intelligence gathering by the NSA, CIA and FBI.

This exact tactic — planting disinformation in foreign media outlets so the disinfo would knowingly surface in the United States as a way of circumventing the rules on domestic operations — was specifically argued for as being legal simply because it did not originate on U.S. soil by none other than CIA Director William Casey in 1981.

Former President Harry S. Truman, who oversaw the creation of the CIA in 1947 when he signed the National Security Act, later wrote that he never intended the CIA for more than intelligence gathering. “I never had any thought that when I set up the CIA that it would be injected into peacetime cloak and dagger operations,” Truman penned in 1963 a year after the disastrous CIA Bay of Pigs operation.

Of course, there was also the whole “Operation Mockingbird” fiasco:

“After 1953, the network was overseen by Allen W. Dulles, director of the CIA. By this time, Operation Mockingbird had a major influence over 25 newspapers and wire agencies. The usual methodology was placing reports developed from intelligence provided by the CIA to witting or unwitting reporters. Those reports would then be repeated or cited by the preceding reporters which in turn would then be cited throughout the media wire services. The Office of Policy Coordination (OPC) was funded by siphoning off funds intended for the Marshall Plan [i.e. the rebuilding of Europe by the U.S. after WWII]. Some of this money was used to bribe journalists and publishers.”

As contributor “George Washington” adds,  In 2008, the New York Times wrote:

During the early years of the cold war, [prominent writers and artists, from Arthur Schlesinger Jr. to Jackson Pollock] were supported, sometimes lavishly, always secretly, by the C.I.A. as part of its propaganda war against the Soviet Union. It was perhaps the most successful use of “soft power” in American history.

A CIA operative told then-Washington Post owner – yes, ironic – Philip Graham the following, in a conversation about the willingness of journalists to peddle CIA propaganda and cover stories:

You could get a journalist cheaper than a good call girl, for a couple hundred dollars a month.

Famed Watergate reporter Carl Bernstein wrote in 1977:

More than 400 American journalists … in the past twenty?five years have secretly carried out assignments for the Central Intelligence Agency, according to documents on file at CIA headquarters.

 

***

 

In many instances, CIA documents show, journalists were engaged to perform tasks for the CIA with the consent of the managements of America’s leading news organizations.

 

***

Among the executives who lent their cooperation to the Agency were [the heads of CBS, Time, the New York Times, the Louisville Courier?Journal, and Copley News Service. Other organizations which cooperated with the CIA include [ABC, NBC, AP, UPI, Reuters], Hearst Newspapers, Scripps?Howard, Newsweek magazine, the Mutual Broadcasting System, the Miami Herald and the old Saturday Evening Post and New York Herald?Tribune.

 

***

 

In November 1973, after [the CIA claimed to have ended the program], Colby told reporters and editors from the New York Times and the Washington Star that the Agency had “some three dozen” American newsmen “on the CIA payroll,” including five who worked for “general?circulation news organizations.” Yet even while the Senate Intelligence Committee was holding its hearings in 1976, according to high?level CIA sources, the CIA continued to maintain ties with seventy?five to ninety journalists of every description—executives, reporters, stringers, photographers, columnists, bureau clerks and members of broadcast technical crews. More than half of these had been moved off CIA contracts and payrolls but they were still bound by other secret agreements with the Agency. According to an unpublished report by the House Select Committee on Intelligence, chaired by Representative Otis Pike, at least fifteen news organizations were still providing cover for CIA operatives as of 1976.

 

***

 

Those officials most knowledgeable about the subject say that a figure of 400 American journalists is on the low side …. “There were a lot of representations that if this stuff got out some of the biggest names in journalism would get smeared” ….

How ironic that in the end it was the Washington Post itself which would get smeared.

* * *

An expert on propaganda testified under oath during trial that the CIA now employs THOUSANDS of reporters and OWNS its own media organizations. Whether or not his estimate is accurate, it is clear that many prominent reporters still report to the CIA.

A 4-part BBC documentary called the “Century of the Self” shows that an American – Freud’s nephew, Edward Bernays – created the modern field of manipulation of public perceptions, and the U.S. government has extensively used his techniques.

Former Newsweek and Associated Press reporter Robert Parry notes that Ronald Reagan and the CIA unleashed a propaganda campaign in the 1980’s to sell the American public on supporting the Contra rebels, utilizing private players such as Rupert Murdoch to spread disinformation. Parry notes that many of the same people that led Reagan’s domestic propaganda effort in the 1980’s are in power today:

While the older generation that pioneered these domestic propaganda techniques has passed from the scene, many of their protégés are still around along with some of the same organizations. The National Endowment for Democracy, which was formed in 1983 at the urging of CIA Director Casey and under the supervision of Walter Raymond’s NSC operation, is still run by the same neocon, Carl Gershman, and has an even bigger budget, now exceeding $100 million a year.

* * *

Perhaps the most damning evidence, as highlighted by @pierpont_morgan, can be found inside the Final report of the abovementioned Select Committee to Study Governmental Operations with Respect to Intelligence Activities, published in Aptil, 1976, in which several sections stand out.

One admits explicitly how the press had been extensively captured by the CIA and how dozens of American journalists collaborated with the CIA to fabricate, create and distribute dake news:

The Committee has also found a small number of past relationships that fit this category. In some cases the cover arrangement consisted of reimbursing the U.S. newspaper for any articles by the CIA  agent which the paper used. In at least one case the journalistic functions assumed by a CIA staff officer for cover purposes grew to a point where the officer concluded that he could not satisfactorily serve the requirements of both his (unwitting) U.S. media employers and the CIA, and therefore resigned from the CIA. He maintained contact, however, with the CIA and continued, very occasionally, to report to the CIA from the countries in which he worked.

 

(2) Of the less than ten relationships with writers for small, or limited circulation, U.S. publications, such as trade journals or newsletters, most are for cover purposes.

 

(3) The third, and largest, category of CIA relationships with the U.S. media includes free-lance journalists; “stringers” for newspapers, news magazines and news services; itinerant authors; propaganda writers; and agents working under cover as employees of U.S. publishing houses abroad. With the exception of the last group, the majority of the individuals in this category are bona fide writers or journalists or photographers. Most are paid by the CIA, and virtually all are witting; few, however, of the news organizations to which they contribute are aware of their CIA relationships.

 

(4) The fourth category of covert relationships resembles the kind of contact that journalists have with any other department of the U.S. Government in the routine performance of their journalistic duties. No money changes hands. The relationships are usually limited to occasional lunches, interviews, or telephone conversations during which information would be exchanged or verified. The difference, of course, is that the relationships are covert. The journalist either volunteers or is requested by the CIA to provide some sort of information about people with whom he is in contact. In several cases, the relationship began when the journalist approached a U.S. embassy officer to report that he was approached by a foreign intelligence officer ; in others, the CIA initiated the relationship.

Another section of the report focuses on how the CIA co-opted academics, reporting that “the Central Intelligence Agency is now using several hundred American academics who in addition to providing leads and, on occasion, making introductions for intelligence purposes, occasionally write books and other material to be used for propaganda purposes abroad. Beyond these, an additional few score are used in an unwitting manner for minor activities.

These academics are located in over 100 American colleges, universities, and related institutes. At the majority of institutions, no one other than the individual concerned is aware of the CIA link. At the others, at least one university official is aware of the operational use made of academics on his campus. In addition, there are several American academics abroad who serve operational purposes, primarily the collection of intelligence.

There is also the admission that the CIA used books explicitly for propaganda purposes:

The Committee has found that the Central Intelligence Agency attaches a particular importance to book publishing activities as a form of covert propaganda. A former officer in the Clandestine Service stated that books are “the most important weapon of strategic (long-range) propaganda.” Prior to 1967, the Central Intelligence Agency sponsored, subsidized, or produced over 1,000 books; approximately 25 percent of them in English…. The Committee found that an important number of the books actually produced by the Central Intelligence Agency were reviewed and marketed in the United States.

Oh, the CIA particularly enjoyed using the NYT and Washington Post for “repeat propaganda” (from page 200 of the report):

CIA records for the September-October 1970 propaganda effort in Chile indicate that “replay” of propaganda in the U.S. was not unexpected. A cable summary for September 25, 1970 reports: 

 

Sao Paulo, Tegucigalpa, Buenos Aires, Lima, Montevideo, Bogota, Mexico City report continued replay of Chile theme materials. Items also carried in New York Times,  Washington Post. Propaganda activities continue to generate good coverage of Chile developments along our theme guidance. . .

And so on, and on, for over 670 pages of details how it was the CIA – not Russia, not Putin – that has been the primary creator and distributor of misleading, propaganda material in the US, also known as “fake news.”

* * *

Of course, all of the above remains largely under the radar; it will never be branded “fake” news in a polite setting. Meanwhile, anyone who dares to challenges the status quo – as we have seen in recent days – is immediately labeled a purveyor of “fake news”, or worse – a servant of the Kremlin.

Contributor “George Washington” has some topical thoughts on this particular issue, noting that the First Amendment of the U.S. Constitution protects the freedom of the press from censorship by government. Indeed, the entire reason that it’s unlawful for the government to stop stories from being printed is because that would punish those who criticize those in power.

Why? Because the Founding Father knew that governments (like the British monarchy) will always crack down on those who point out that the emperor has no clothes.

But the freedom of the press is under massive attack in America today. For example, the powers-that-be argue that only highly-paid corporate media shills who will act as stenographers for the fatcats should have the constitutional protections guaranteeing freedom of the press.

A Harvard law school professor argues that the First Amendment is outdated and should be abandoned. When financially-savvy bloggers challenged the Federal Reserve’s policy, a Fed official called all bloggers stupid and unqualified to comment. And the government is treating the real investigative reporters like criminals … or even terrorists:

• Obama has gone after top reporters. His Department of Justice labeled chief Fox News Washington correspondent James Rosen a “criminal co-conspirator” in a leak case, and for many years threatened to prosecute Pulitzer-prize winning New York Times journalist James Risen

• The Obama administration also spied on Risen, Rosen, the Associated Press, CBS reporter Cheryl Atkinson and other media

• In fact, top NSA whistleblowers tell Washington’s Blog that the NSA has spied on reporters for well over a decade … to make sure they don’t reveal illegal government programs

• The Pentagon smeared USA Today reporters because they investigated illegal Pentagon propaganda

• Reporters covering the Occupy protests were targeted for arrest

• The government admits that journalists could be targeted with counter-terrorism laws (and here). For example, after Pulitzer Prize winning journalist Chris Hedges, journalist Naomi Wolf, Pentagon Papers whistleblower Daniel Ellsberg and others sued the government to enjoin the NDAA’s allowance of the indefinite detention of Americans – the judge asked the government attorneys 5 times whether journalists like Hedges could be indefinitely detained simply for interviewing and then writing about bad guys. The government refused to promise that journalists like Hedges won’t be thrown in a dungeon for the rest of their lives without any right to talk to a judge

• In an effort to protect Bank of America from the threatened Wikileaks expose of the bank’s wrongdoing, the Department of Justice told Bank of America to a hire a specific hardball-playing law firm to assemble a team to take down WikiLeaks (and see this)

• The NSA and its British counterpart treated Wikileaks like a terrorist organization, going so far as to target its employees politically, and to spy on visitors to its website

* * *

With the (failing) mainstream media now desperate to focus the public’s attention to the fake “fake media” to divert attention from the real “fake media“, those Washington Posts and New York Times who have traditionally served as vessels for the government apparatus to brainwash the public, expect an even greater backlash as the American population realizes that none of this is actually new, and that it has always been the US government that was directly responsible for the blanket propaganda that has covered the US for decades: something which the government itself has confirmed on countless occasions in the past – one just needs to do the effort of stepping away from the information they are spoon-fed, and do their own research and analysis.

Which, incidentally, is what this latest round in the eternal war for information and influence, is all about.

Source

via http://ift.tt/2fx2kdE Tyler Durden

Now that Brangelina is over, meet Donigel (or Farrump)…

 

THIS. IS. EVERYTHING!!! ???????????? http://pic.twitter.com/cWMOIVup1n

— Raheem Kassam (@RaheemKassam) November 24, 2016

via http://ift.tt/2fwTf4E Tyler Durden

Hillary Clinton already conceded the election and isn’t interested in dividing the country via a ridiculous recount. After all, she was the one holding Trump’s feet to the fire in accepting the outcome of the elections and not challenging its efficacy. Enter Shill Stein and her money grabbing schemes — playing off the butthurt feelings of the millions of people crying into their dinner jackets over the Clinton loss — raising enormous amounts of funds from them since Wednesday. Let me rephrase that so it can sink in. Jill Stein is brazenly taking advantage of people by hanging hope of their heads, saying send me your money and I will ensure Trump isn’t the next President of the United States. Essentially, that’s what this is about, no? Since Wednesday, Stein’s money raising schemes have topped $5 million. Her original goal was $2.5m, but rose, dramatically, after the money started to roll in. Her new goal is $7 million. Recounts will begin in Wisconsin soon. She’s hoping to do recounts in PA and MI too, for the sake of the people, of course. Via her own website:

“We cannot guarantee a recount will happen in any of these states we are targeting. We can only pledge we will demand recounts in those states.”

If the recounts don’t happen, what will become of all that money? Stein’s website says any “surplus will also go toward election integrity efforts and to promote voting system reform.”

Intesrestingly, as her money raising schemes proved successful, the alleged costs associated with the recount rose dramatically — including millions to be paid out to lawyers.

It appears that as more money came in, Jill Stein’s estimated recount costs rose dramatically. https://t.co/aoOqH0VVkP http://pic.twitter.com/kcoYTrSUm3

— Yashar (@yashar) November 24, 2016

READ THE FINE PRINT: There probably won’t be a recount and Jill Stein will line her pockets with the money for “integrity efforts” #NoRefund http://pic.twitter.com/a3fF5JOpGP

— Tim Young (@TimRunsHisMouth) November 24, 2016

Nate Silver isn’t a fan.

Not saying this Jill Stein thing is a scam, but if it were a scam, it would probably look a lot like this. https://t.co/pg4eAuFQ4h

— Nate Silver (@NateSilver538) November 25, 2016

Jonah sums it up perfectly.

Jill Stein’s racket is incredible:

Step 1: Cost the Dem the Election
Step 2: wait for Trump panic
Step 3: Bilk millions for recount.

— Jonah Goldberg (@JonahNRO) November 25, 2016

Here’s Stein’s conference, discussing her absurd contest.

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The neverending election continues.

via http://ift.tt/2fwVhl2 The_Real_Fly

It’s time to take off the dollar blinkers, exclaims Bloomberg's Mark Cudmore, and take stock of what’s really going on in markets.

The dollar has been so strong since the election that it’s clouding the vision of all US-centric observers. Any market decision requires an accurate assessment of the state of play. So apart from the roaring greenback, what are the other themes?

First thing to clear up is that most Asian emerging-market currencies are doing well. Indian rupee is at a record low? Rubbish. That’s only versus the dollar. The rupee is an outperformer since the election, and has rallied 5% on a trade-weighted basis since its year-to-date low in June.

 

When will the yuan stop depreciating? Four months ago. Catch up. It’s at the stronger end of a multi-month range.

For European investors, these currencies not only offer yield, but also capital appreciation. The corollary is that any U.S. investor who thinks they’ve done a great job playing the USD strength versus INR and CNY has actually underperformed – they’ve paid negative carry for less return than just shorting EUR/USD, let alone the returns from long USD/JPY.

Importantly, away from the panic-mongering headlines, these EM currencies aren’t in a negative spiral at all.

So which currencies really are in genuine free-fall?

The Turkish lira is, with its large external debt pile. For example, TRY/INR is down 35% during the past two years. Again, stop worrying about the rupee.

 

Another market conclusion from registering the power of dollar rally is that recent commodity strength is even more dramatic in local currencies. For example, copper has gained 45% in lira terms during the past month.

The effective liquidity tightening caused by dollar strength has been well documented and is a valid concern. But it’s also important to note that since the U.S. is the major consumer of the world, there’ll be a significant boost to the real economies of exporting EM economies.

A final thought: at what point does USD strength become auto-correcting? Not yet perhaps, but it’s a serious disinflationary pressure to be aware of. If inflation doesn’t take off as expected, Fed hikes may not arrive as quickly as anticipated, which would remove a key pillar of the USD rally.

via http://ift.tt/2gdFfOF Tyler Durden

Submitted by David Gordon via The Mises Institute,

 

via http://ift.tt/2gdF4mw Tyler Durden

After scoring internships at Goldman, Morgan Stanley and BAML over the course of her undergraduate university career, Jess Greenberg became a YouTube sensation this summer after exposing her many other “talents” to a rapidly growing online fan club.  After posting over 60 guitar solos to her YouTube Channel that garnered millions of views, many had assumed Greenberg was done with the world of high finance.

Alas, as efinancialcareers points out, Greenberg hasn’t given up on her finance career after all as she recently joined the London-based hedge fund, Winton Capital Management.  As the job search portal notes, Greenberg is “amply equipped” for a job in finance after earning a degree in statistics, economics and finance from University College London with stellar grades.

While Winton Capital has historically preferred to hire “data scientists with PhDs including extragalactic astrophysicists, computer scientists and climatologists,” they must have recognized some “unique talent” in Greenberg that made her a good fit straight out of her undergraduate career.

Certainly, Greenberg will be missed by her YouTube followers after recreating a variety of classic pieces from Hendrix…

 

Dylan….

 

…and, of course, Zeppelin.

 

While we would certainly never try to dissuade someone from pursuing their dreams, we would just point out that we’re fairly bearish on the future prospects of the finance industry…just throwing that out there.

via http://ift.tt/2fheUCm Tyler Durden

Submitted by Jayant Bandari via Acting-Man.com,

When Money Dies

In part-I of the dispatch we talked about what happened during the first two days after Indian Prime Minister, Narendra Modi banned Rs 500 and Rs 1000 banknotes, comprising of 88% of the monetary value of cash in circulation. In part-II, we talked about the scenes, chaos, desperation, and massive loss of productive capacity that this ban had led to over the next few days.

 

Indian prime minister Narendra Modi – another finger-wagger, as can be seen in this photograph. Beware finger-wagging politicians, as we always point out. Modi now plans to impose income tax penalties on large bank deposits; the State’s rapaciousness knows no bounds and evidently the mere possession of some arbitrary amount of money considered “too large” now means one is deemed a criminal a priori in India. It goes without saying that the concept of property rights is alien to Modi. [PT]

Photo via indianexpress.com

 

Now, two weeks later, the situation is getting much worse, and more desperate. It is obvious that Modi single-handedly took the decision to ban the banknotes, with most people in his cabinet and virtually all in the central bank oblivious to his plan.

There is virtually no visible opposition to the enforced ban, for any politician who opposes the ban risks having his own misdeeds — and they are all corrupt — brought to the public space by Modi. A true demagogue, Modi, has already convinced the gullible, salaried middle class that anyone who opposes the ban is hiding corrupt money and is anti-national.

With every passing day, it has not only  become clearer that the ban was of no use to eradicate hidden cash, but has also inflicted deep, wide and irreparable damage to the society.  The economy is rapidly moving toward stagnation.  The lives of literally hundreds of millions are in deep chaos.

This event may well go down in the history books as one of the worst man-made crises ever.

Cash conversion has been reduced to Rs 2000 ($30) per person. As a result people are  facing humiliation and stand in queues for as much as 12 hours or more. Often repeated visits to the bank are necessary, with no guarantee that the bank will have cash available for the conversion. Old and disabled people, the 25% of India’s society without  ID-cards, and women (unless they are prepared to be molested) don’t even have this chance. For those who are able join the queues, the scene has turned into a battlefield, with people fighting among themselves and getting brutalized by the police. But so far most people seem to still carry a favorable opinion of Modi, backed by cult-like “intellectual” climate created by the salaried middle class (who lack critical thinking and reasoning capability), and supported by the international media and institutions like the IMF, i.e., people who are sitting in Western cities have no clue about the realities on the ground. But all this will change as the stories of personal suffering should eventually start to dominate over the propaganda—reality does have a way of catching up. But India’s descent toward a police state is now written in concrete. Even if Modi eventually goes, a new demagogue will take his place.

Should a single person have so much power to be able to destroy the lives of almost one out of every five human beings on the planet? On this occasion it may be worth reminding ourselves that Modi also has the authority to launch nuclear bombs.

Modi suffers from worst possible type of corruption: an insatiable desire for personal glory at any cost, an extremely deep moral and spiritual corruption. He also represents the worst aspect of democracy: a demagogue who caters to an irrational populace’s cravings for self-identity and release from self-responsibility.

The government monopoly on cash economically connects 1.3 billion Indians. The perceived value of this paper currency does not comes not from any value inherent in it (it is just as irredeemable as other fiat monies), but from government edicts.

Cash is the thread that weaves relationships, transactions and commitments. For the proper functioning of society, it is absolutely crucial that people have a liquid medium of exchange, the essential lubricant to effect trade in today’s complex economy. Today, win-win transactions — except for barter, which has emerged in many parts of India — can no longer take place, for the monopolistic money instrument, India’s fiat currency, has been paralyzed by Modi.

Two millennia of progress in money have been destroyed. Rural places are increasingly falling back on barter. In a barter economy, economic calculation is no longer possible; only the most basic economic exchanges can take place. The market will have to adopt alternative media of exchange if the coincidence of wants problem is to be overcome.

 

Should a single person have the authority to flip a switch and bring all trade, transactions, indeed the entire economy to a halt?

As it stands, money is now dead in India – and a police state is rapidly encroaching. Both at home and abroad the only topic of conversation for Indians is the currency ban. If they are not busy planning how to escape the depredations of the tax authorities (whose minions are rapacious and will insist that people be obsequious and pay them large bribes), people exchange slogans, sound-bites and mere hopes  – which seems to be the best India’s irrational society can do. Should this be all people are communicating about? Human beings were destined for higher things in life, not merely for the task of protecting themselves against the State.

What tyranny, socialism and an authoritarian order enforced from the top down mean for those who have been reduced to mere cogs

 

Crumbling Institutions

Most people — particularly the salaried middle class — still seem to have a favorable opinion of Mr. Modi. They have been indoctrinated – in India’s extremely irrational and superstitious society – to believe that this demonetization will somehow alleviate corruption and that anything but support of Modi’s actions is anti-national and unpatriotic.

This gives me pause to reflect.

What a crazy idea it is to have a State monopoly on money, particularly a money that carries no inherent value and depends on regulatory edicts.  On a deeper level, it makes me reflect on why for the culture of India — which is tribalistic, nativistic, superstitious and irrational — “India” is actually an unnatural entity.

Such a society should consist of hundreds of tribes and countries, which is what “India” was before the British consolidated it.  In a tribalistic and irrational society, decentralization makes life much safer and makes the market more free, as complex decisions will be taken on the local level, where they belong.

India’s institutions — not just organizations, but larger socio-political beliefs — have begun to decay and crumble after the British left, losing their underlying essence, the reason for which they had been institutionalized in the first place. This degradation is now picking up pace. They must eventually fall apart — including the nation-state of India –  to adjust to the underlying culture .

Let us consider some of these institutions. Western education implanted in India has mutated. It is making individuals cogs in a big machine, all for the service of one great leader. Public education and the mass-media have become instruments of propaganda.

Complexity and the diversity of options that technology brings make an irrational thinker extremely confused, forcing him to seek sanity in ritualistic religion —hence the increase in religiosity in India and elsewhere in the region. This has happened despite the explosion in information technology.

The concept of the nation-state, when it took hold in Europe, was about the values the emergent rational and enlightened societies of Europe shared and had collectively come to believe in, at least among their elites. In India, the idea of the nation-state has morphed into a valueless thread, which binds people together through nothing but a flag and an anthem, symbols completely devoid of any values.

It has collectivized tribalistic and irrational people (an irrationality that is amply epitomized by the  negative force Islam has become in the last two decades). In India and many similarly constituted countries, institutions that are not natural to their culture— the nation state, education, monetary system, etc. — must eventually face entropy, slowly at first, and then rapidly.  India has now entered the rapid phase.

The death of money – amid a lack of respect for property rights (which again are a purely European concept that emerged from the intellectual revolutions of the last 800 years) – has been sudden and will very likely be catastrophic. It is a man-made disaster of gargantuan proportions.  It will fundamentally change India in a very negative way, particularly if the demonetization effort succeeds, as it will have created the foundations enabling the rapid emergence of a police state.

 

A Rapidly Evolving Police State

After just a few years under Modi’s rule, there is no independent body left in India. Courts simply do not take a position against Modi. Not that the situation was much better earlier, mind. These days, journalists and opposing voices are increasingly stifled, while people at the fringe at least spoke their mind in the past.

For the first time, Hindus who were tolerant of intellectual differences have come to believe in Hindutava (fanatic Hindu nationalism, rapidly metastasizing as a particular mutation of nationalism).

Police now reserves the right to randomly search people’s possessions without a warrant. Those who live in India — in an economy in which 97% of all consumer transactions are in cash, most salaries are paid in cash, and most revenues are collected in cash — routinely transport and carry large amounts of cash on their person.

When policemen stop them, they often find some cash, which now ends up being confiscated and used for the Modi propaganda machine. None of this means that the confiscated cash is illegal, undocumented, or involved in tax evasion efforts. But truth has no place in propaganda.

 

A regular sight outside of bank branch offices, where poor desperate people laid off from work because of the monetary crisis must bear insults and physical harm from the police, all for the “greater good” and a “corruption-free” India

 

The fear among small businessmen and those with savings outside of the banking system, even if they are fully legitimate, is palpable. They are now deemed to be criminals and it is their job to prove themselves innocent.

They are extremely afraid of facing tax inquiries, which always involve heavy penalties and large bribes (the level of which has gone up noticeably in this police state). Whatever small focus they previously had on wealth-creation is now gone.

Historically, India has been a negative-yielding economy. Interest rates have mostly been negative in real terms. Stock market returns are negative-yielding, even before adjusting for business and jurisdictional risks. In such an environment, savers have no option but to keep their money in gold, or outside the formal economy.

Any oppression of savers forcing them to direct their money into the negative-yielding formal economy will only lead to even more of their savings going into gold and escaping to foreign jurisdictions, eventually making India much less well-off. Even in the short-term, India’s economy is rapidly going into paralysis.

 

An old man has died in the queue at the bank. No one came to help him, due to the risk of losing their place in the queue. A large number of people have died in similar circumstances.

 

Corruption is Entrenched Across India

There is indeed a belief that at the very top, financial corruption has declined. I have no way to be sure of this, but I am tempted to believe it. But India’s proximal problem is with its bureaucracy and lower-level politics.

I have yet to meet a public servant who does not ask for a bribe. Simple financial corruption would have merely redistributed wealth. But the real problem with the public servant is his utter moral and spiritual corruption.

He expects citizens to grovel, a sadistic pleasure every Indian public servant enjoys in his demeaned existence. He is incapable of taking a decision or of thinking straight. It is here that the State suffocates society and wealth-creation. This is the real corruption characterizing the State.

More fundamentally, the real problem of India is not even its bureaucracy, but Indians as such.  Indians will pay and take bribes when given an opportunity. They will strive to get into positions that give them the power over other people. They know exactly how others should live. The fingers of my hands exceed the number of Indians I have known who are different.

But hasn’t the way Indians view corruption changed in recent times, given that they are supporting Modi in his fight against corruption, however erroneous his policies might be?

An irrational society is also deeply hypocritical and can exist with massive cognitive dissonance. If you delve deeper into the issue, you realize that Indians do indeed want corruption to end, but with a minor exception. They want everyone to stop giving and taking bribes simultaneously and collectively.

As in any collectivist society, the individual has no value or meaning, so the individual Indian excludes himself when he wants corruption to end. He does not see how any meaningful impact on society at large might be achieved if he were to stop his own corruption. As any rational person can see, this does not add up – but in the irrational society of India it does seem to add up.

I often find myself in social conversations in which everyone talks badly about corruption in others and in the public space and makes proposals how to end it, and in the next breath, the very same people collude between themselves, engaging in corrupt practices. When I point the contradiction out to them, they simply and honestly fail to see it.

A rational personal cannot truly understand this issue, even when repeatedly told about it, as rational people suffer from a major handicap: they fail to understand the true nature of irrationality and how entrenched it can be.

 

In 2013, shortly  ascending to India’s most powerful political post, Modi was exonerated by the courts in the Gujarat riots case ex-post – an exercise that stretches credulity for many. It has taken many years for the SIT commission examining the case to release its report and quite a few people still think it was simply a whitewash attempt (we are in no position to judge or opine on the matter – we merely point out that it remains disputed – PT)

Cartoon by Narsimha P

 

Modi was allegedly behind the massacre and rapes of thousands of Muslims in 2002 when he was the Chief Minister of the Indian state of Gujarat. As a result of this, Modi was banned from entering most Western countries. Modi has no family. He left his wife soon after he married.

He does not let his 94-year-old mom stay with himself. He claims he has given up his family for the nation. In his narrow vision, he is indeed correct. While he may personally not have taken any bribes in recent years, there is no way he could have risen to his position without having made massive and horrendous moral compromises, as the massacre of Muslims to gain Hindu votes demonstrates.

Financial corruption is merely the tip of the iceberg. Those obsessed with financial corruption forget something very important. Financial corruption is the most enlightened aspect of corrupt activities, for at least it is win-lose. Ending financial corruption from the top down cannot or will not improve a society. If it could, Eritrea and North Korea would be the richest countries in the world.

What keeps India in continual penury is its irrationality, its tribalism and its superstitions, of which financial corruption is merely a visible expression. There is no easy way to make a society rational. In the past, European missionaries even tried removing babies from their parents in a desperate attempt to bring about change. This didn’t work. Making a society rational is a process that could last  millennia.

For now, India is in essence becoming more corrupt, even if obvious financial corruption eventually recedes for fear of the autocrat, as has been the case in Eritrea. India is becoming rather more nationalistic, fundamentalist, tribalistic and irrational.

The cult-like status Modi enjoys in India is the result of a lack of self-responsibility among Indians, their hope that despite massive inherent contradictions, the pain that corruption imposes on Indians can be got rid of through a magic wand –  without self-reflection, or without them giving up corruption themselves.

Modi’s biggest support comes from the salaried middle class, whose members are mostly unaffected by the ban, and who may even have benefited as food prices have fallen as a result of the masses of starving poor people now unable to buy. Hence the middle class can claim to occupy the moral high-ground, albeit on the back of other people’s suffering.

 

Protesting farmers in India. Buyers cannot buy products for they no longer have access to their own money. Unable to sell, sellers are stuck with their produce and cannot pay their debts, driving them  and their creditors into bankruptcy. This is a very complex vicious cycle. Even if liquidity is eventually restored — which is unlikely — the demonetization has crippled the production system.

 

Depending on who you ask, even food market sales have fallen by 20% to 80%. It is too early to say if people are eating less or if they are consuming emergency stores they have kept at home; perhaps both. If farmers cannot sell their food, they cannot buy seeds for the next planting season. A vicious cycle is going to get entrenched.

Indian Express photos: Pavan Khengre

 

Gresham’s Law Gone Wild

In the past two weeks, the government has completely failed to reliquefy the monetary system. With 88% of outstanding currency now illegal, people are rushing to convert the banned currency they hold into Rs 100 or lower denomination banknotes. Once these or the newly printed banknotes end up with financially strong persons, they straight-away go under the mattress.

The result is that the remaining 12% of the monetary value represented by banknotes that are still legal is rapidly going out of circulation, and so is most of the newly issued currency. Markets are empty. This means cash is not trickling down. The poorest 50% of India’s population, who have no reserves, are the worst affected and are going hungry.

 

16^th century British financier Thomas Gresham famously explained in a letter to Queen Elizabeth upon her accession to the throne that “good and bad coin cannot circulate together”  and explained that due to the coin debasements practiced by her predecessors Henry VIII and Edward VI, “all your fine gold was convayed [sic] out of this your realm”.

Painting by Anthonis Mor

 

Ironically, the banned Rs 500 and Rs 1,000 banknotes are today the most used currency. Those who have these banknotes and are afraid of going to the bank, mostly because they are worried about unnecessary problems from the rapacious and extremely corrupt tax department, force their workers and suppliers to accept the banned notes.

In the local market, if you want to buy gold or silver, you must pay in the banned banknotes — ironically the sellers to do not want to accept official legal tender. The banned notes, when used in large quantities, are circulating at 80% or less of their face value. Mafias have spontaneously emerged around the country. They ensure that these banknotes are deposited across hundreds of millions of accounts. The mafia makes a neat 25% profit.

The mafia is also providing special favors to certain politicians by converting their ill-gotten money for no commission. Who thinks this will reduce corruption?

Many workers from factories and shops, even if they have not yet been thrown out of work for lack of demand or due to the cash-crunch affecting their employer, have found a very lucrative profession. They now work for the money-converting mafia. This system is already fully in place a mere two weeks after the announcement of the ban.

The underground system is rapidly distributing the banned currency notes across a large number of people who then deposit them. This market is so liquid and easily accessible, that for all intents and purposes there is no way that someone with the banned notes cannot exchange them, albeit at a loss. So much for Modi’s claim that those with large amounts of undeclared money won’t be able to convert or deposit it.

But this will get much worse. When all this is over, hundreds of thousands of small-time bullies trained by the mafia will have made a small fortune. They will have also have found out who the rich people with cash are. A social scientist will conclude that this segment of society will be extremely corrupt and criminal. These people will have gotten a taste for easy money, in contrast to patient and laborious wealth-creation.

 

Moral Dilemmas Galore

Poor people have traditionally never systematically robbed shops in India. Out of hunger, they are experimenting with this for the first time. They are learning that when a mob robs, the police disappears. Social relations have a taken a very serious hit, fragmenting society. Society stands hugely divided, except in terms of the thread that connects them to Modi, the autocrat.

 

Modi, the snake charmer?

Cartoon by Chappatte

 

What keeps transactions in any society going is liquidity in the money-markets. Given that most people are stuck with banned currency, they are telling anyone they owe money to that they will only make payment in form of the banned notes, which now trade at a discount.

This massive moral dilemma has come to appear because people found themselves stranded with banned notes overnight, and want to avoid the 20% hit in value that they will have to take by converting them through the mafia.

Imagine someone who has collected ten million rupees in cash, facing the ban a day before he had to return the money to someone he borrowed from. What is  he likely to do? Force his creditor to accept these banned notes, or bear the loss of 20%, which he might not have the capacity to absorb?

Spouses are fighting, as they have suddenly become aware that their significant other has been hiding cash for a rainy day. Poor people are almost invariably getting paid in banned notes, which requires them to line up in queues the next day to convert what they received, wasting at least 50% of their productivity –  assuming they have a job.

There are moral dilemmas galore. But this had to happen in a society run by rulers who have absolutely no sense of morals, reason, not to mention respect for private property.

Money deposited in the banks is mostly frozen, something that people are not yet paying much attention to, for all their focus is on getting rid of the banned cash. The problem of frozen bank accounts will surface once the current conversion stops by the end of this year. That is when the salaried middle class, which mostly supports Modi, will finally wake up.

It is also clear that Modi has to take more and more increasingly repressive steps to keep people from taking protective measures. As noted above, India will rapidly become a police state.

The worst sufferers are poor people, whose ownership of currency was neither unaccounted for nor corrupt. Not being street-smart and not understanding how banks work, as they are often bullied by standoffish bank officers, they are stuck with the old currency, clueless as to what to do.

They are the silent 25% to 50% of the India population. They cannot even participate in the money-converting mafia, because they don’t understand many of the things that look quite simple to members of the middle class.

 

Many tourists have found themselves stranded without money in India as well. Video by mint.

 

Conclusion

India faces a highly uncertain future. A vicious cycle has been set into motion by Modi and it will not end well. Unpredictable problems and unintended consequences are bound to surface incessantly. If Modi comes under sufficient  pressure, he could easily go to war with nuclear-armed Pakistan

Modi, in his permament search for personal glorification could easily impose a state of emergency or martial law. This is in fact extremely likely, perhaps even inevitable, for the so-called intellectuals will beg for it.

As we have said previously: this will go down in the history books as one of the most naïve, least thought through policy decisions ever, a massive man-made disaster.

via http://ift.tt/2g0jQL8 Tyler Durden

The long-end of the US Treasury curve rallied on the week (for the first time since Trump's win) with 30Y yields ending down almost 3bps, as a last minute panic bid hit stocks and bonds at the early market close; and despite the exuberance in US bank stocks, the yield curve continues to collapse…

 

At the cash equity close today, bonds and stocks were suddenly both bid… with 30Y back at 3.00%

 

10Y and 30Y yields ended the week lower for the first time since Trump but the short-end remained weaker…

 

Bonds decouped from Yuan weakness…

 

And despite all the exuberance over 'growth', the yield curve is collapsing…

 

Decoupling completely from the high NIM expectations of banks….

via http://ift.tt/2gdlSVT Tyler Durden

Submitted by Brendan Brown via The Mises Institue,

 

via http://ift.tt/2gHJPIu Tyler Durden