Venezuela’s Inflation: The Wall Street Journal’s Reportage is Off, Way Off

Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

 

Recent reportage in the Wall Street Journal by Matt Wirz, Carolyn Cui, and Anatoly Kurmanaev states that Venezuela’s annual inflation rate is 500 percent. The authors fail to indicate the source for that 500 percent figure. Knowing that the most accurate estimate of Venezuela’s current annual inflation rate is 55 percent, I concluded that the Journal was way off and set out to determine the source for its incorrect figure. The most likely candidate turned out to be the International Monetary Fund’s (IMF) October 2016 World Economic Outlook (WEO), which contains an estimate for Venezuela’s annual inflation. This report projects Venezuela’s annual inflation to average 475.8 percent for 2016, a far cry from my current estimate of 55 percent. The IMF’s figure, though, gives the appearance of a finger-in-the-wind approach because no methodology accompanies the IMF’s October report. The 95% rule reigns – 95% of what you read in the financial press is either wrong or irrelevant. 

 

So, how does one make an accurate estimate of inflation in countries experiencing elevated inflation levels? The Johns Hopkins-Cato Institute Troubled Currencies Project calculates reliable inflation estimates. These are based on changes in black market (read: free market) exchange rates. The principle of purchasing power parity (PPP) is used to translate exchange rate changes into estimates of implied inflation rates. When inflation is elevated, this method provides deadly accurate estimates.

via http://ift.tt/2f4QA7i Steve H. Hanke

The Secrets Of Self-Employment: Overhead And Capital Accumulation

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

There are still opportunities to not just earn a wage, but the overhead, profit and capital skimmed by global corporations.

So how can someone earning $15 an hour as an employee get ahead? The short answer is: they can't. One worker earning $15/hour will struggle to get ahead, which I define as building capital that generates an income stream.

A family with four adults working full-time at $15 an hour with benefits can get ahead; together, they're earning $60/hour plus another $40/hour in benefits. Assuming they live under one roof and live frugally, their combined earnings of $100/hour will enable investing in income-producing capital.

There is another path to getting ahead: self-employment. Working for yourself isn't for everyone, but it does provide two avenues of wealth-building that are not available to employees: overhead and capital accumulation.

Consider a typical Corporate employee, and what the company charges customers for their time. The corporation charges the customer $100 an hour for the employee and pays the employee $20 an hour. The other $80 an hour goes to the corporation for labor overhead (Social Security, healthcare, pension /401K contribution, workers compensation insurance, etc.), general overhead (office, vehicles, accounting, Internet, phones, etc.) and profit.

Now consider the self-employed person who charges $70 an hour for the same work. The customer not only gets a 30% discount, they get someone who is motivated to do the job well enough to earn a referral or renewal of the contract.

The self-employed worker has $50/hour for overhead and hopefully some profit. The corporate employee earning $20/hour has to pay for his/her own vehicle, Internet service, etc. out of his/her wage.

The self-employed person pays the business-related expenses for vehicles, tools, Internet and phone service, accounting, home office, healthcare and other overhead expenses with pre-tax income–the $50 an hour he/she earns above and beyond the $20/hour wage.

The self-employed worker is also constantly investing in the capital of his/her enterprise. Capital comes in many forms: new tools, skills, contacts, collaborators/ subcontractors– all the many variations of intellectual, social and human capital that create value.

In the corporate/employee setting, the corporation captures much or most of the employees' capital accumulation. The self-employed worker captures 100% of all capital accumulated.

Over a decade, this accumulated capital generates wealth that is unavailable to employees of corporations or the state. If we compare wealthy people with everyone else, what we notice is the wealthy own businesses and have very little debt, while everyone else owns very little productive capital while being burdened with plenty of debt.

Is it easy to be self-employed / start a new enterprise? No, it isn't. If anything, it's become more difficult in an era of corporate/ cartel dominance and regulatory capture:

But there are still opportunities to not just earn a wage, but the overhead, profit and capital skimmed by global corporations. Entrepreneurial success ultimately flows not from just from specific skills but from the eight essential skills that anyone can develop–skills I describe in Get a Job, Build a Real Career and Defy a Bewildering Economy.

Let's face it–lots of stuff no longer works very well. As costs rise, globalization supplies defective, pirated parts, and fewer people care due to burn-out, more and more of everyday life falls into the category of "no longer works very well." Every one of those things that no longer works well offers an opportunity for a self-motivated person to fix someone else's problem– and not just for a wage, but for the overhead, profit and accumulated capital that is currently skimmed by global corporations.

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Meet the Utah State Senator Who Switched from the Republican to Libertarian Party: New at Reason

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“[James] Madison warned us about devolving into a two-party system,” says Utah state senator Mark Madsen. “And we see why now.”

Earlier this year, Madsen announced he was leaving the Republican party to become a Libertarian. This came on the heels of a contentious Republic National Convention wherein Donald Trump supporters and party loyalists shouted down members of the Utah delegation who attempted to cast a first ballot for Sen. Ted Cruz. Cruz later gave a speech and received booes from a crowd angry that he declined to endorse Trump (Cruz eventually did give Trump his endorsement). Madsen refers to this ordeal as the “Cleveland experience” and credits it with spurring him to make the switch he’d been pondering for years.

Reason TV sat down with Madsen in the chambers of Utah’s capitol building in Salt Lake City to discuss more about what motivated his switch, what he hopes to accomplish as a Libertarian, and what the future of the Republican and Libertarian parties might look like.

“We think things are bad now. Four years from now might be when the Libertarians have to step up and save the nation,” says Madsen.

Produced by Zach Weissmueller. Camera by Alex Manning. Music by Doctor Turtle.

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Your dog probably has better healthcare than you do

Below is a short email that my friend Sam posted this morning to his Facebook page about his surprisingly positive experience with the US healthcare system.

I thought it a fantastic read, and I wanted to pass it along to you:

I had to run to the emergency room today for what may be a neurological issue. Dizziness, staggering, loss of balance, that kind of thing.

I’m in San Diego, one of the most expensive cities in the world, and I have no insurance. I figured I was screwed.

But instead, the experience was unreal.

I got seen immediately. I didn’t even have time to sit down, they just whisked me into an examination room.

The doctor and nurse were ON IT, and they took their time with the exam and consultation.

The visit ultimately involved staying the whole day for observation, all kinds of tests, sedation and reversal, blood pressure check, a full blood panel work up (results tomorrow, yes TOMORROW keep your fingers crossed) and having both ears cleaned and flushed.

The bill was a mere $374.63.

Do I have some insane insurance plan? Nope.

Am I being super-subsidized by the rest of America? Nope.

Am I a privileged politician with a special “bosses only” healthcare plan? Don’t make me laugh.

It turns out that the care was for my dog, not for me. And we didn’t go to a ‘people’ hospital– I obviously took my dog to an animal hospital.

She and I are both biological machines, mammals made mostly of water (though she sheds more than I do).

The only other real difference is that the government is regulating the hell out of healthcare for people, while (relatively speaking), leaving healthcare for animals alone.

And that, my friends, is the reason Obamacare has flopped, and why your healthcare costs will keep going up.

It’s not greed. It’s not the drug companies. It’s not anything other than the application of government intervention in what should be a free market.

Simon again.

It’s not exactly controversial these days to suggest that the US healthcare system is in bad shape.

According to data collected by numerous independent agencies like the Institute of Medicine, Commonwealth Fund, and Kaiser Family Foundation, the US still ranks dead last among advanced economies in overall quality of its healthcare system.

In fact, the US healthcare system has the worst record in the number of deaths caused by mistakes or inefficient care.

And wait times in the US for urgent care and primary care visits rank lower than every other developed nation.

Americans pay at least 50% more for healthcare in terms of annual spending than people in other advanced nations, yet they receive less care as measured by the number of doctor visits.

Sure, it’s great that there are fewer uninsured people than ever before in the US, but this is a measure of QUANTITY, not a measure of QUALITY.

Undoubtedly the US is home to some of the finest medical professionals in the world.

But they’ve been buried under an expensive, over-regulated bureaucracy that continues to erode overall quality in the system.

A 2015 report from the National Academy of Sciences summed it up by stating, “For Americans, health care costs and expenditures are the highest in the world, yet health outcomes and care quality are below average by many measures.”

But instead of trying to understand WHY the system is so slow, bureaucratic, and expensive to begin with, politicians try to ‘fix’ it by creating more regulations.

It’s as if they believe they can legislate their way to a quality, efficient medical care system, just as they believe they can legislate their way to a better education system or economic prosperity.

This almost never works.

After all, the people who come up with these rules are notoriously unqualified and have rarely ever held a job outside of their giant government bureaucracy.

So despite what may be some very good intentions to fix the system, they invariably make things worse.

The end result is that your pet probably has access to more efficient healthcare than you do.

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When AT&T Profits Off Government Snooping, Shouldn’t We Be Blaming the Government?

AT&TIt is easy to forget that Americans had actually been clued in to the likelihood of domestic telecommunication surveillance by the National Security Agency (NSA) long before Edward Snowden’s leaks. Snowden helped us understand the massive scope and many particulars about which we were unaware and really put the issue before the public in a way we hadn’t seen before.

But have we all forgotten Room 641A? That was the room in San Francisco where telecommunications company AT&T set up a system for the NSA to access the company’s internet traffic for surveillance. It was exposed by the Electronic Frontier Foundation and a former AT&T technician all the way back in 2006, years before Snowden’s leaks.

That background is relevant again as The Daily Beast has a story that puts AT&T’s cooperation with federal authorities with surveillance in a whole new light. The reason why AT&T has been so helpful to the government in providing data about its customers (or anybody who communicates with their customers) is because it has found a way to monetize it. The Hemisphere Project was first revealed in 2013 by The New York Times. Hemisphere was a database system provided by AT&T to help law enforcement officials access data from any call that passes through their system (which means not just their own customers). This data was then used by the government for drug busts.

In order to participate in the program, government agencies were required by the contract to keep the existence of Hemisphere a secret and not reference it in any government document. This was not unlike the contracts we have been seeing from law enforcement agencies using “Stingray” devices used to track mobile phones. It’s where we learned about “parallel construction,” where law enforcement agencies kept this information they had received from surveillance secret, but used it to create a second chain of evidence that could be introduced in court cases. The Times story from 2013 mentioned that government paid AT&T for access to Hemisphere (and even for AT&T employees to embed with drug-fighting units to assist them), but the Times didn’t know the cost.

Kenneth Lipp from The Daily Beast provides that information today, along with news that the Hemisphere program was not just for fighting drugs. It’s being used to fight all kinds of crime. And while the government can force telecommunications companies like AT&T to provide data about users with a subpoena, it appears AT&T took this all to the next level, turning it all into a program that can be marketed, and more importantly, sold to law enforcement agencies. They found a way to make money off government demands for data. And if you think the prices were modest, you obviously know nothing about government contracts:

Sheriff and police departments pay from $100,000 to upward of $1 million a year or more for Hemisphere access. Harris County, Texas, home to Houston, made its inaugural payment to AT&T of $77,924 in 2007, according to a contract reviewed by The Daily Beast. Four years later, the county’s Hemisphere bill had increased more than tenfold to $940,000.

“Did you see that movie Field of Dreams?” [American Civil Liberties Union tech policy analyst Christopher] Soghoian asked. “It’s like that line, ‘if you build it, they will come.’ Once a company creates a huge surveillance apparatus like this and provides it to law enforcement, they then have to provide it whenever the government asks. They’ve developed this massive program and of course they’re going to sell it to as many people as possible.”

This reporting hits AT&T at a time when they’re trying to plan a merger with Time Warner. There’s a thought, one supposes, that this either might or should hurt AT&T’s chances there, but given that this program is in full cooperation with the very federal government that has authority to approve or deny the merger, it seems unlikely that whether this particular behavior is “good for the consumer” is going to influence the Department of Justice’s decision whether to intervene.

On the one hand, this certainly makes it appear as though AT&T has little concern about its customers’ privacy. On the other hand, AT&T has no choice but to cooperate when it receives subpoenas from law enforcement anyway. That’s the problem with the current legal interpretation of the Fourth Amendment that data held by third parties (like telecom and internet companies) doesn’t require warrants to access but simple subpoenas. As requests for data from law enforcement officials have skyrocketed, it would be eminently logical for a company like AT&T to create a program to make it easier for themselves to comply with the parade of government orders. And to find a way to make money off these demands, well it’s preferable to seeing companies actually lose revenue due to the costs of complying with these subpoenas.

In all, it feels a bit like people want to hold AT&T accountable for not more powerfully resisting the surveillance and data-collecting authority of our own government. In that, it’s reminiscent of a situation earlier in October where the ACLU was demanding social media companies be more accountable for how law enforcement uses its tools to engage in surveillance. I noted then: “It feels like an acknowledgment that we cannot expect our police to respect our privacy and we can’t expect that they will be held accountable for violations. Instead the ACLU is demanding that these companies employ more resources, both human and technological, to keep authorities at bay.”

The same holds true here. Obviously there’s something creepy about AT&T turning law enforcement demands for our data into an opportunity to earn money. But given the kinds of pressure and intimidation the federal government has brought to bear against these companies in order to force cooperation, consider what options AT&T actually had. Remember Lavabit? Remember Qwest? AT&T is essentially the company the federal government made it become. Imagine them trying to get permission for this merger with Time Warner if they hadn’t been so cooperative with the federal government with surveillance.

And that capitulation is a reminder here about who is calling the shots. The government will not be considering this merger on the basis of whether it serves the “consumer interest,” though certainly that’s what we’ll be told. The merger will be decided on the basis on whether it’s in the government‘s interest. AT&T at least understands that.

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Austria Sells €2 Billion In 70 Year Bonds, Pushes Global Duration Risk To Record High

The latest evidence of the unprecedented scramble for yield and duration came yesterday when it was revealed that Austria would join the rest of the Eurozone in selling ultra-long dated debt in the form of 70 Year bonds. It didn’t take long to find willing buyers, and moments ago Bloomberg reported that this latest offering priced without a hitch when Austria sold 2 billion euros of bonds due in November 2086.

The 70-year bond was priced to yield 53 bps more than that on the February 2047 security. At the same time, the Treasury in Vienna also sold 3 billion euros of notes maturing in July 2023.

Austria’s 30-year bund yields fell two basis points, or 0.02 percentage point, to 0.99%, but hardly a notable selloff. The 1.5% security due in February 2047 rose 0.592 to 113.419. The yield on bonds maturing in January 2062, the nation’s longest-dated outstanding debt, dropped two basis points to 1.17%.

The sale follows this year’s century bond offerings from Belgium and Ireland, as well as 50-year deals from France, Italy and Spain, as Europe’s nations take advantage of the ECB’s negative interest rate policy which has pushed interest rates to record low yields. The 100-year bond sales by Belgium and Ireland were private placements for 100 million euros each.

Quoted by Bloomberg, Martin van Vliet, a senior interest-rate strategist at ING Bank NV in Amsterdam said that “many issuers have been extending the average maturity of their funding. It makes sense for them to try and lock in low funding costs for a long time. On the demand side, there are still many buyers out there like pension funds and insurance companies that want to buy these bonds for hedging purposes.”

Meanwhile, the duration risk keeps piling up: the amount of government debt due in 10 years or more has swelled by a record $733 billion this year, having more than doubled since 2009 to about $6 trillion, data compiled by Bloomberg and Bank of America Corp. show.

The scramble for yield has also pushed bond duration to all time highs: the effective duration on Bank of America’s global government bond index climbed to an all-time high of 8.23 in 2016, from 5 when it began in 1997. The metric set a record 5.9 for U.S. obligations, 7.2 across the euro area and 8.8 in Japan.

Putting this in practical terms, a one-percentage point increase in interest rates equates to about $2.1 trillion in losses for global investors. We are confident central banks are aware of the massive MTM losses that bondholders will suffer as they attempt to push bond curves steeper.

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Never Invest In These HORRIBLE Things. Ever!

By Chris at http://ift.tt/12YmHT5

A reader asked me some time back what I thought about a particular ETF. I told him I often hate ETFs and promised to provide a more detailed explanation as to why some day. Today is that day.

ETFs which simply hold equities or bonds are mostly fine.

ETFs with derivatives as their underlying collateral decay by design. Bad!

And ETFs with futures as an underlying that are leveraged will all go to zero. It’s a mathematic certainty, as reliable as knowing James Bond will always make it out alive even if along the way the villains throw a few monkey wrenches in the way.

If you are looking to invest for the long term, levered ETFs will be as successful for you as you would be trying to cut off your thumbs with a wooden spoon.

In fact, if your time horizon is long enough shorting leveraged ETFs is quite possibly the most certain investment you can probably make in this lifetime. Like Bond you’ll absolutely make it out alive and win. The script is already written in the math.

That’s the short version. If you don’t care about why stop reading now but etch the above into your mind and you’ll save yourself a lot of money and pain.

For everyone else here’s why.

Contango and Roll Decay 

Contango is just a fancy name for when the spot price is lower than the future price.

Contango is also a very “normal” market, one which central bankers are incidentally doing their damndest to turn on its head but that’s a discussion for another day after a stiff drink.

In last week’s edition of the WOW I discussed the VIX. Now since the dawn of creation VIX futures have been in contango. The iPath S&P 500 VIX Short term futures ETF (VXX) tracks the VIX. I picked on it last week and so, like the bully I am, I’m going to go and pick on it again.

To understand why buying VXX as anything but a short term trade is a terrible idea, take a look at how it is structured. VXX tracks the S&P 500 VIX Short Term futures Index. Notional exposure is always 30 days out. In order to achieve this the futures contract is rolled every day.

For practical purposes what happens is that on day one the ETF will be in the nearest contract month. On day two it notionally sells a small portion in order to buy the next months contract repeating this process every trading day thus ensuring that the ETF is always notionally 30 days out.

Why this matters for anyone thinking of “investing” in this creature is because VXX is in contango.

Let me explain.

As I write this spot VIX Futures settling October 2019 are at $16.80. The November 2016 contracts are at $17.57 and spot VIX is at $15.91. So this means that if VIX stays at current levels, contango from spot to front month is 6% and 5% between October and November.

Right now volatility is low and it’s not unusual for the contango to run 20% month to month when volatility is high. When you annualize these figures it amounts to one heck of a headwind.

Fighting contango

Fighting contango

This is where contango matters. The chart below shows the VIX in red and green and the VXX ETF which tracks it. You can see over time that the VXX doesn’t do what you want it to do. This is because the juice is being sucked out of it on a daily basis as contracts are rolled and the fact that the market is in contango.

vxx

Now take a look at the chart below. We’re looking at the VIX index in blue and the Proshares Ultra VIX ETF (UVXY) (levered 2x) in red and green.

uvxy

Remember when volatility spiked in August of 2015?

We can see this on the chart with the VIX rising from the ashes but for those poor suckers holding UVXY which “offers 2x leverage to the VIX” you needed to have bought it just ahead of the spike and sold it immediately after in which case you’d have enjoyed roughly 2x leverage to VIX.

Anything longer and it’d have been like getting married to a pig because it was going to just keep dragging you back into the mud. Which brings me to…

Volatility: The Real Killer

Let’s take a theoretical 3 x leveraged ETF as an example. Any will do.

We’ll run the numbers on holding one of these for just two weeks. We’ll start day 1 with a value of the leveraged ETF as well as the underlying index at 100 for easy math.

Day Index Move Index 3x ETF
1 -2% 98.00 94.00
2 -3% 95.10 85.50
3 4% 98.90 95.80
4 5% 103.80 110.20
5 -3% 100.70 100.30
6 -1% 97.70 97.30
7 1% 100.70 100.20
8 -3% 97.70 91.20
9 4% 101.60 102.10
10 -1.5% 100.00 97.50

As you can see in half the time it takes you to receive your broker statement to realise what an idiot you are, you’re down 2.5% while the underlying index hasn’t budged from where it started.

In the chart below we’ve looking at the S&P 500 index in red and UPRO which is a 3x leveraged ETF on the S&P 500 index.

spo

S&P 500 Index (red) and UPRO 3X S&P 500 (blue)

You can see that it’s barely managed to keep up with the index over time let alone triple it, even though it sports 300% leverage. One reader wrote to me a couple years ago telling me that he’d been holding UPRO in his portfolio for over 2 years. I had to tell him he’d just bought leveraged time decay. Terrible.

The thing is he’d not even noticed as he’d been looking at the stock quote on UPRO and it seemed consistent.

Why?

Well, this is the other thing which we’ve not covered yet…

Stock Splits

Due to all the reasons just mentioned you can see why the value of these ETFs falls. As a result they are frequently reverse split. This simply makes them look more attractive to retail investors.

So for example, you can be holding 10,000 shares of a leveraged ETF in month one and a few months later you’re suddenly holding just 5,000 shares. The price may have not moved much and if you’ve been looking at the price ticker on your feed and not reconciling your broker statements you’re not going to know.

I’ve often seen financial websites which track ETFs fail to keep up with all these reverse splits, especially on the leveraged ETFs.

The job of tracking all of them and how often they’re reverse splitting must be harder than keeping up with Americas political scandals.

Lesson

So there you have it. Trade ’em, just don’t invest in ’em.

Don’t say I didn’t warn you.

Next Week

ETFs are largely designed to allow for passive investing. I want to write about the unintended consequences to passive investing because the opportunities created, by what looks awfully like a bubble in passive investing to me should not be ignored.

Until then, keep safe.

– Chris

PS: Passive investing is an oxymoron. If it’s not active, it’s speculative. Ben Graham makes this point clear:

“An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” — Benjamin Graham

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Clever Clinton Camp Mocks Trump Supporters With DIY Tin Foil Hats

After Project Veritas just exposed Hillary’s genius idea to launch the “Donald Ducks Releasing His Tax Returns” campaign, we get the following “Trump Tin Foil Hat” for all of the “alt-right” conspiracy theorists out there.  This is actually a very clever idea, we’ve seen it executed with amazing results in numerous high school student body elections.

Conspiracy 1

 

Of course, our favorite Hillary conspiracy theory is that one about how she’s really sick…that one was great. 

 

Or, the one about how the Clinton Foundation is a massive pay-to-play organization that accepts donations from questionable foreign leaders.

Conspiracy

 

Or, there is also that really crazy one where people allege that Hillary conspired to delete federal email records despite the existence of a Congressional subpeona. 

Conspiracy

 

Perhaps Jimmy Kimmel said it best:

“You know, these conspiracy theories about Clinton’s health would be a lot harder to believe if they didn’t actually come true.”

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Smith College Contracts Private Organization to Run 24/7 ‘Bias Response’ Hotline

Smith CollegeSmith College has hired a third-party organization to run a misconduct “hotline,” giving students the ability to report bias incidents 24/7.

EthicsPoint is already in use at Tufts University, Brown University, and Amherst College, according to The Sophian:

The Smith administration has made it clear that this program is not meant to replace the current system for reporting sexual assault, nor is it a 911 service for reporting emergencies. Rather, it is a way for students and staff to report instances of misconduct in a way that allows them to remain anonymous.

What kind of misconduct? Anything, really. There are more than two dozen kinds of violations, according to Smith’s website—including bias incidents and harassment. The university defines harassment as “unfair treatment, uninvited or unwelcome verbal or physical conduct,” because of “race, creed, color, religion, national/ethnic origin, sex, sexual orientation, gender identity, gender expression, age,” or disability status.

That’s a fairly broad definition. Verbal conduct should have to be more than just “unwelcome” to count as harassment. Are Smith students not free to criticize other people’s religious beliefs, even if it makes them uncomfortable?

Like other bias reporting systems, EthicsPoint allows students to report anonymously—furthering the potential for abuse.

“There is a considerable risk that this will be abused by students since virtually anything could be reported on,” Kira Barrett, a junior at Smith, told Campus Reform.

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The US Military Lied To Thousands Of Soldiers (And Now Veterans Are Paying for It)

Submitted by Alice Salles via TheAntiMedia.org,

Shortly after the U.S. invasion of Iraq, the Pentagon hired Bell Pottinger, a London-based PR agency. The PR firm was tasked with promoting what the Pentagon called “democratic elections” in Iraq, ultimately earning over a hundred million dollars yearly. Part of the firm’s job included producing “fake al Qaeda propaganda films,” the Bureau of Investigative Journalism recently reported.

Despite the PR operation’s hefty price tag, the Pentagon seemed to have no issue allocating taxpayer resources to have these videos produced. But over ten years after the Iraq invasion, the Pentagon is now concerned about its past appropriations — at least part of them, anyway.

Ten years after promising $15,000 bonuses to soldiers willing to re-enlist in 2006 and 2007, the Pentagon is now forcing California veterans to pay the bonuses back.

In California, the Los Angeles Times reports, “officials signed up soldiers in assembly-line fashion” in 2006 and 2007, outlining the “generous terms available for six-year reenlistments” to those willing to sacrifice their safety, leaving their homes, once again, to fight abroad in exchange for a large bonus. Now, the Pentagon wants their money back.

To Get Soldiers to Re-enlist, the National Guard Lied

In 2008, the movie “Stop-Loss” highlighted a reality few members of the public were informed about.

With the growing involvement of U.S. military forces in Iraq and Afghanistan, soldiers who had already served in Iraq and Afghanistan for several tours were being asked to reenlist. Sometimes, these soldiers’ term duties were extended forcefully via the government’s controversial stop-loss policy, which allows the government to extend the period a soldier must spend on active duty involuntarily.

In California, the state’s National Guard began promising thousands of soldiers that they would receive $15,000 bonuses for going back to war.

Now, nearly 10,000 soldiers who took the National Guard’s promise at face value are being ordered to pay the bonuses back plus interest charges. In some cases, their wages are being garnished to fund the payments.

This issue was first brought up when veterans “whose only mistake was to accept bonuses offered when the Pentagon needed to fill the ranks” were the target of an investigation launched in 2010.

After receiving reports of improper payments, a federal probe found “thousands of bonuses and student loan payments were given to California Guard soldiers who did not qualify for them, or were approved despite paperwork errors.”

As a result of the investigation, Army Master Sgt. Toni Jaffe, who also served as the California Guard’s incentive manager, pleaded guilty to filing false claims totaling $15.2 million in 2011. He was sentenced to spend 30 months in federal prison, and three other officers who also pleaded guilty to fraud were put on probation.

Breaking the National Guard’s promise to soldiers whose reenlistment depended on the bonus distribution, the California Guardassigned 42 auditors to comb through paperwork for bonuses and other incentive payments given to 14,000 soldiers.”

In September 2016, these auditors finalized the investigation, finding roughly 9,700 current and retired soldiers who had been given “improper” bonuses. These soldiers have been toldto repay some or all of their bonuses” since the probe was launched and the first cases were discovered.

According to the California National Guard, these repayments have recovered more than $22 million so far, compromising veterans like Robert Richmond, who now works for a construction company in Texas. He was an Army Sergeant First Class living in Huntington Beach when in 2006, he was asked to reenlist.

I signed a contract that I literally risked my life to fulfill,” Richmond explained, adding that he only agreed to go back to war because he was told he qualified for a $15,000 bonus as a special forces soldier.

The veteran had gone through a divorce after being deployed to Afghanistan in 2002 and 2003. Asked to consider the bonus to reenlist, Richmond thought the money was going to give him “breathing room,” so he agreed. In 2007, he was sent to Iraq’s “Triangle of Death,” an area a few miles south of Baghdad known for intense fighting.

In one of the hundreds of missions against insurgents he was a part of, Richmond sustained permanent back and brain injuries after his vehicle triggered a roadside bomb.

In 2014, the California Guard headquarters contacted him, letting the former special forces soldier know he was being urged to repay the $15,000 bonus he received in 2006. If he failed to make the payment, the letter said, he would face “debt collection action.”

Richmond refused to give the government any money back, filing appeal after appeal. [Impacted soldiers] want somebody in the government, anybody, to say this is wrong and we’ll stop going after this money,” he said.

‘Support the Troops!’: Code for ‘Don’t Question War?’

In Washington, D.C., lawmakers have condemned the Pentagon, saying the soldiers were not at fault for accepting a bonus they were promised.

Promising to open an investigation into the enlistment bonus problem, House Majority Leader Kevin McCarthy (R-CA) called the Pentagon’s demands “disgraceful.”

The Department of Defense should waive these repayments,” McCarthy said in a statement. “The House will investigate these reports to ensure our soldiers are fully honored for their service,” he added.

Rep. McCarthy says the government should not be demanding any money back from veterans in his statement. The California Republican and also argued that “we are the ones who owe a debt for the great sacrifices our heroes have made — some of whom unfortunately paid the ultimate sacrifice.‎”

Instead of using this opportunity to highlight the importance of safeguarding our soldiers and keeping them from engaging in unconstitutional wars that are only successfully sold to the American public because administrations lie, McCarthy celebrates these very soldiers’ sacrifices.

Using this discussion to repeat the traditional “support the troops” line, lawmakers like McCarthy steer the debate away from what’s causing these soldiers so much pain and distress, acting as if relentless war hasn’t been the reason they were lied to. Instead, McCarthy and others are pushing the government to keep its promise without reevaluating how the U.S. government goes about irresponsibly sending these men and women abroad to fight insurgents who didn’t pose a threat to Americans at the time.

In the 1964 film, “The Americanization of Emily,” which was based on a novel written by a veteran who had been a SeaBee officer on D-Day, character Lt. Comdr. Charles E. Madison gives a short speech explaining that “[those] who make heroes of our dead and shrines of our battlefields … perpetuate war by exalting its sacrifices.”

Failing to discuss the real costs of war with the American electorate while exalting the sacrifices made by those who serve in the military is part of an ongoing campaign — deliberate or otherwise — to keep America involved in perpetual war.

Don’t believe me? Don’t take my word for it. Instead, read what journalist Randolph Bourne had to say about the country’s thirst for war in 1918:

In times of peace, we usually ignore the State in favour of partisan political controversies, or personal struggles for office, or the pursuit of party policies. It is the Government rather than the State with which the politically minded are concerned. The State is reduced to a shadowy emblem which comes to consciousness only on occasions of patriotic holiday. …

 

“With the shock of war, however, the State comes into its own again. The Government, with no mandate from the people, without consultation of the people, conducts all the negotiations, the backing and filling, the menaces and explanations, which slowly bring it into collision with some other Government, and gently and irresistibly slides the country into war.”

War, Bourne concluded, “is the health of the state.” This is not because all individuals involved with governing enjoy death and destruction per se, but because “it is … in war that the urgency for union seems greatest, and the necessity for universality seems most unquestioned,” which forces the public to unite behind the state no matter what — especially if the occasion leading to war is “terrifying” the public.

While veterans whose bonuses are being questioned ten years later should be heard and protected from government abuse, we must not forget it was government’s own thirst for war that initiated this cycle of deception. Let us not ignore the reasons why we should support our troops — and how we should go about it; simply claiming to be interested in celebrating U.S. soldiers for their sacrifice does nothing for them.

via http://ift.tt/2dSS0iJ Tyler Durden