Category: zerohedge

Marvin Goodfriend is not a Fed governor yet, but it’s likely asking far too much to expect US lawmakers to block President Trump’s nomination.

Unfortunately for the American citizenry, Goodfriend (not) has all the establishment credentials which will likely see the nomination rubber-stamped: economic advisor to the White House (1984-5), director of research at the Federal Reserve Bank of Richmond (1993-2005) when he “regularly attended meetings of the Federal Open Market Committee", and currently Professor of Economics at Carnegie Mellon University. Watching the mainstream media’s response to Goodfriend’s nomination gave us a wry smile, as he is being portrayed as conservative. This was Reuters commenting on the news last week…

A former economic adviser in the administration of President Ronald Reagan and research director of the Richmond Federal Reserve Bank from 1993 to 2005, Goodfriend is arguably the most conservative of Trump’s Fed appointments yet. He has been critical of some recent Fed practices including the purchase of mortgage backed securities.

 

He has also argued that the central bank should invite more oversight from elected officials, including getting a congressional sign off on its 2 percent inflation target and more discussion of how its policy decisions line up with a “reference rule.” Those ideas are likely to find favor among conservatives on Capitol Hill who feel the Fed has accumulated too much influence.

Although some of Goodfriend’s views, which he’s no doubt enthusiastic about implementing, would be disastrous, Reuters argues (our emphasis).

Perhaps most significantly, he will bring recognized academic credentials to a Fed board that is losing Yellen, a recognized expert on labor markets, and in October lost Vice Chair Stanley Fischer, one of the intellectual forces behind modern central banking.

While we've seen the carnage that academic credentials can cause, we wouldn’t disagree that he looks (fairly) harmless.

One reason that Goodfriend is seen as conservative is that he is in favour of “rules-based” policy and would be less inclined than the likes of Janet Yellen to let inflation run “hotter” than the 2% target before putting the breaks on. Another reason is that Goodfriend has been critical of the Fed’s QE policy. However, that’s not because he is “conservative”, rather because he is in favour of far more radical measures.

We are less concerned about Goodfriend getting trigger happy for rate rises if inflation hits 2.2% or 2.5% than we are about his remedies to deal with the next financial crisis. Goodfriend is a big advocate of negative interest rates (which even the Bank of Japan is now backing away from) and, far worse, abolishing paper currency. As Bloomberg explains.

Economist Marvin Goodfriend doesn’t like the green paper rectangles in your wallet, which are formally known as “Federal Reserve notes”…Goodfriend may take the opportunity to pursue his academic interest in abolishing—or at least demoting—paper money.

Goodfriend is concerned that the existence of cash makes it harder for the Fed to lower interest rates below zero. In the next crisis, he says, the Fed might want to push interest rates into negative territory to prod people to stop sitting on their money and do something with it, such as consumption or investment, that would get growth going again.

But today, the Fed would not be able to push interest rates on checking or savings accounts very far below zero because as soon as it did, people would simply withdraw cash from the banks and store it in the mattress or a vault. The European Central Bank and Swiss National Bank have managed to push rates only slightly negative.

It’s clear from reading between the lines that although central bankers are not engaging in a public discussion, the architects of the boom-bust cycles are considering their policy options for the next crisis…the one where their latest credit/asset bubble bursts in horrendous fashion. It’s also clear that the preferred solution is negative interest rates and either abolishing paper currency or taxing it in line with a depreciating digital currency standard. For example, the IMF published a paper “Breaking Through the Zero Lower Bound” in October 2015, which explained how easy it would be to implement for any determined central banker.

There has been much discussion about eliminating the “zero lower bound” by eliminating paper currency. But such a radical and difficult approach as eliminating paper currency is not necessary. Much as during the Great Depression—when countries were able to revive their economies by going off the gold standard—all that is needed to empower monetary policy to cut interest rates as much as needed for economic stimulus now is to change from a paper standard to an electronic money standard, and to be willing to have paper currency go away from par. This paper develops the idea further and shows how such a mechanism can be implemented in a minimalist way by using a time-varying paper currency deposit fee between private banks and the central bank. This allows the central bank to create a crawling-peg exchange rate between paper currency and electronic money;

As we said, “cometh the hour…”

Bloomberg notes that Goodfriend was invited to present his ideas at last year’s Jackson Hole get together.

Trump’s nominee hasn’t tried to hush-hush his views on this controversial topic. Far from it. Goodfriend presented a paper on it in 2016 in Jackson Hole, Wyo., at a high-profile annual conclave of central bankers. His title: “The Case for Unencumbering Interest Rate Policy at the Zero Bound.”

To make it less convenient for people to hoard cash, he says in the paper, the government could phase out high-denomination bills or charge banks and the public whenever paper money is paid out or received. But even those steps might not be enough to suppress the use of cash, Goodfriend surmises. So he weighs three stronger measures.

Sadly, we disagree with Bloomberg that Goodfriend’s views on abolishing cash will be an “issue” in his confirmation hearings. However, we are pleased to see that highlighted several voices which are sounding the alarm (even though it will be futile).

Goodfriend’s dislike for cash could become an issue in his confirmation hearings, which are not yet scheduled. Senators could soon be getting an earful from constituents who fear that taking away paper money is a step toward socialism or totalitarianism.

Those voices are already being heard. “Is Marvin Goodfriend the Worst Fed Nominee of All Time?” asks a Dec. 1 post on the website of the Mises Institute, a think tank for the Austrian school of economics. An earlier Mises post in which Goodfriend’s name was first raised said, “Given his radical views on monetary policy, it’s not hyperbole to suggest that Goodfriend’s nomination would represent a genuine danger to the economic wellbeing of every American citizen—or at least those outside of the financial services industry.”

It’s not just the Mises people who want to hang onto paper money. “Cash Means Freedom, Which Is Why So Many Officials Hate It” was the headline on a post by the libertarian Reason Institute last year. Last year, in the Wall Street Journal, financial commentator James Grant attacked a book called The Curse of Cash by Harvard’s Kenneth Rogoff, writing, “The author wants the government to control your money. It’s as simple as that.”

In the meantime, other like-minded people to Goodfriend are lining up to support him, like author of “The Curse of Cash”, Kenneth Rogoff. Bloomberg asked Rogoff for his view on Goodfriend’s nomination. This was the predictable response. 

“Thank goodness there will be someone at the Fed with the foresight to realize that world needs to start thinking about how central banks can best deal with the inevitable next deep financial crisis. And negative interest rate policy is the best idea out there by a wide margin; hopefully we won’t need it anytime soon. Still, I believe that within a decade, all the world’s major central banks and treasuries are likely to have taken the simple steps necessary to create the foundations for effective negative interest rate policy in deep recessions or financial crises.”

Forgive us if we think it’s all a little too obvious where this is going, and has been, since we emerged from the last crisis. When the bubble burst in 2000, the Fed needed to cut the policy rate to 1% to reflate a new bubble. When that bubble burst in 2008, “conventional” monetary policy was insufficient to reflate the current bubble and unconventional ZIRP/QE policies had to be added to the mix. When the current bubble bursts “conventional unconventional” monetary policy will be insufficient to reflate the next bubble.

You can probably sense our skepticism that Goodfriend’s likely appointment as a Fed governor is happenstance.
 

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I’ve been asked about Bitcoin a lot lately. I’ haven’t written anything about it because I find myself in an uncomfortable place in agreeing with the mainstream media: It’s a bubble. Bitcoin started out as what I’d call “millennial gold” – the young (digital) generation looked at it as their gold substitute.

Bitcoin is really two things: a blockchain technology and a (perceived) currency. The blockchain element of Bitcoin may have enormous future applications: It may be used for electronic contracts, voting, money transfers – and the list goes on. But there is a very important misconception about Bitcoin: Ownership of Bitcoin doesn’t give you ownership of the technology. I, without owning a single bitcoin, own as much Bitcoin technology as someone who owns a million bitcoins; that is, exactly none. It’s just like when you have $1,000 on a Visa debit card: That $1,000 doesn’t give you part ownership of the Visa network unless you actually own some Visa’ stock.

Owning Bitcoin gives you a right to … what, actually? Digital bits?

I can understand gold bugs and the original Bitcoin aficionados. The global economy is living beyond its means and financing its lifestyle by issuing a lot of debt. Normally this behavior would cause higher interest rates and inflation. But not when you have central banks. Our local central bankers simply bought this newly issued debt and brought global interest rates down to near-zero levels (and in many cases to what would have been previously unthinkable negative levels). If you think investing today is difficult, being a parent is even more difficult. I tried to explain the above to my sixteen-year-old son, Jonah. I saw the same puzzled look in his eyes as when he found out where babies come from. I also felt embarrassed, for my inability to explain how governments can buy the debt they just issued. The concept of negative interest rates goes against every logical fiber in my body and is as confusing to this forty-four-year-old parent as it is to my sixteen-year-old.

The logical inconsistencies and internal sickness of the global economy have manifested themselves into a digital creature: Bitcoin. The core argument for Bitcoin is not much different from the argument for gold: Central banks cannot print it. However, the shininess of gold has less appeal to millennials than Bitcoin does. They are not into jewelry as much as previous generations; they don’t wear watches (unless they track your heartbeat and steps). Unlike with gold, where transporting a million dollars requires an armored track and a few body builders, a nearly weightless thumb drive will store a dollar or a billion dollars of Bitcoin. Gold bugs would of course argue that gold has a tradition that goes back centuries. To which digital millennials would probably say, gold is analog and Bitcoin is digital. And they’d add, in today’s world the past is not a predictor of the future – Sears was around for 125 years and now it is almost dead.

A client jokingly told me that his biggest gripe with me in 2016 and 2017 was that I didn’t buy him any Bitcoin. I told him not so jokingly that if I bought him Bitcoin, he’d be right to fire me. Maybe I’m a dinosaur; but, like gold, Bitcoin is impossible to value. What is it worth? It has no cash flows. Is a coin worth $2, $200, or $20,000? But Wall Street strategists have already figured out how to model and value this creature. Their models sound like this: “If only X percent of the global population buys Y amount of Bitcoin, then due to its scarcity it will be worth Z”. On the surface, these types of models bring apparent rationality and an almost businesslike valuation to an asset that has no inherent value. You can let your imagination run wild with X’s and Y’s, but the simple truth is this: Bitcoin is un-valuable.

In 1997, when Coke’s valuation started to rival some dotcoms, bulls used this math: “The average consumer of Coke in developed markets drinks 296 ounces of Coke a year. These markets represent only 20% of the global population.” And then the punchline: “Can you imagine what Coke’s sales would be if only X% of the rest of the world consumed 296 ounces of Coke a year?” Somehow, the rest of the world still doesn’t consume 296 ounce of Coke. Twenty years later, Coke’s stock price is not far from where it was then – but on the way it declined 60% and stayed there for a decade. Coke, however, was a real company with a real product, real sales, a real brand and real tangible, dividend-producing cash flows.

If you cannot value an asset you cannot be rational. With Bitcoin at $11,000 today, it is crystal clear to me, with the benefit of hindsight, that I should have bought Bitcoin at 28 cents. But you only get hindsight in hindsight. Let’s mentally (only mentally) buy Bitcoin today at $11,000. If it goes up 5% a day like a clock and gets to $110,000 – you don’t need rationality. Just buy and gloat. But what do you do if the price goes down to $8,000? You’ll probably say, “No big deal, I believe in cryptocurrencies.” What if it then goes to $5,500? Half of your hard-earned money is gone. Do you buy more? Trust me, at that point in time the celebratory articles you are reading today will have vanished. The awesome stories of a plumber becoming an overnight millionaire with the help of Bitcoin will not be gracing the social media. The moral support – which is really peer pressure – that drives you to own Bitcoin will be gone, too.

Then you’ll be reading stories about other suckers like you who bought it at what – in hindsight – turned out to be the all-time high and who got sucked into the potential for future riches. And then Bitcoin will tumble to $2,000 and then to $100. Since you have no idea what this crypto thing is worth, there is no center of gravity to guide you or anyone else to make rational decisions. With Coke or another real business that generates actual cash flows, we can at least have an intelligent conversation about what the company is worth. We can’t have one with Bitcoin. The X times Y = Z math will be reapplied by Wall Street as it moves on to something else.

People who are buying Bitcoin today are doing it for one simple reason: FOMO – fear of missing out. Yes, this behavior is so predominant in our society that we even have an acronym for it. Bitcoin is priced today at $11,000 because the fool who bought it for $11,000 is hoping that there is another, greater fool who will pay $12,000 for it tomorrow. This game of greater fools is not new. The Dutch played it with tulips in the 1600s– it did not end well. Americans took the game to a new level with dotcoms in the late 1990s – that round ended in tears, too. And now millennials and millennial-wannabes are playing it with Bitcoin and few hundred other competing cryptocurrencies.

The counterargument to everything I have said so far is that those dollar bills you have in your wallet or that digitally reside in your bank account are as fictional as Bitcoin. True. Currencies, like most things in our lives, are stories that we all have (mostly) unconsciously bought into. (I highly encourage you to read my favorite book of 2015: Sapiens, by Yuval Harari.) Of course, society and, even more importantly, governments have agreed that these fiat currencies are going to be the means of exchange. Also, taxation by the government turns the dollar bill “story” into a very physical reality: If you don’t pay taxes in dollars, you go to jail. (The US government will not accept Bitcoins, gold, chunks of granite, or even British pounds).

And finally, governments tend to look at Bitcoin and other cryptocurrencies as a threat to their existence. First, governments are very particular about their monopolistic right to control and print currencies – this is how they can overpromise and underdeliver. No less important, the anonymity of cryptocurrencies makes them a heaven for tax avoiders – governments don’t like that. The Chinese government outlawed cryptocurrencies in September 2017. Western governments are most likely not far behind. If you think outlawing a competitor can happen only in a dictatorial regime like China’s, think again. This can and did happen in a democracy like the US. With Executive Order 6102 in 1933, US President Franklin D. Roosevelt made it illegal for the US population to “hoard gold coin, gold bullion, or gold certificates.”

However, nothing I have written above will matter until it does. Bitcoin may go up to $110,000 by the end of the 2018 before it comes down to … earth. That is how bubbles work. Just because I called it a bubble doesn’t mean it will automatically pop.

So, how does one invest in this overvalued stock market? Our strategy is spelled out in this fairly lengthy article.

Vitaliy Katsenelson is chief investment officer at  Investment Management Associates  in Denver, Colo.  He is the author of “Active Value Investing” (Wiley) and “The Little Book of Sideways Markets” (Wiley). Read more on Katsenelson’s  Contrarian Edge  blog.

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Ever since someone paid a staggering, and record, $450 million for Leonardo Da Vinci’s “Salvator Mundi” at a Christie’s auction in November, the entire world has wanted to know just one thing: the identity of the buyer. To that end, we got a big clue this afternoon when Bloomberg reported that the Louvre Abu Dhabi will be the recipient of the record-breaking Da Vinci painting.

The Louvre Abu Dhabi, as Bloomberg notes, is a “franchise” of the Paris original and represents yet another symbol of the oil-rich sheikhdom’s drive to boost its “soft power” credentials (even if it achieves precisely the opposite). To differentiate itself from neighboring Dubai, the Abu Dhabi brand of “west world” targets affluent tourists looking for culture and art and it has also built hotels, theme parks and malls. And it has decided that by having the most, most, most expensive painting in the world, it will be taken really seriously as a cultural icon (it won’t). 

The Da Vinci was supposed to represent the pinnacle of achievement – because clearly most expensive is best – for the organization behind the museum, which became one of the most aggressive buyers on the global art market over the last decade. It opened last month with more than 600 artworks for its permanent collection, including such Old Master paintings as Giovanni Bellini’s “Madonna and Child.” Da Vinci’s “La Belle Ferronnière” is on loan there from the Louvre in Paris.

The museum’s opening has also coincided with a period of heightened political tension in the Gulf and the broader Middle East. As one of the seven sheikhdoms in the United Arab Emirates, and the one with the largest oil reserves, Abu Dhabi is entwined in a Saudi Arabian-led dispute with neighboring Qatar over its alleged support for terrorism.

Vain virtue, or rather artue signaling aside, the location of the painting was also a clear enough clue to the identity of the heretofore secret buyer, and his identity was unveiled also this afternoon, when the NYT reported that the buyer “is a little-known Saudi prince from a remote branch of the royal family, with no history as a major art collector, and no publicly known source of great wealth. But the prince, Bader bin Abdullah bin Mohammed bin Farhan al-Saud, is the mystery buyer of Leonardo da Vinci’s painting “Salvator Mundi,” which fetched a record $450.3 million at auction last month, documents show.”

There are several oddities about this purchase, the first of which is the timing of this glaring and ostentatious display of obscene wealth: Bader splurged on this controversial “and decidedly un-Islamic portrait of Christ” at a time when most members of the Saudi elite, including some in the royal family, are cowering under a sweeping crackdown against corruption and self-enrichment.

The purchase becomes less odd following the NYT’s revelation that Prince Bader is a friend and associate of the leader of the purge: the country’s 32-year-old crown prince, Mohammed bin Salman.

In other words, those who are in the circle of trust, or at least friends, don’t have to worry about a corruption crackdown, even if the stench thereof is overpowering; everyone else however, should prepare for an extended stay at the Riyadh Ritz Carlton where you can check out any time you like… with about 10% of your net worth. And strangely enough, the NYT, which has rarely if ever criticized the Royal family (see “”Groveling In Excrement”: Thomas Friedman Mercilessly Mocked For Bizarre Saudi Puff Piece“) sees things in the very same way:

The $450.3 million purchase is the clearest indication yet of the selective nature of the crackdown. The crown prince’s supporters portray him as a reformer, but the campaign of extrajudicial arrests has been unprecedented for modern Saudi Arabia, worrying Western governments about political stability in the world’s largest oil producer, alarming rights advocates and investors about the rule of law, and roiling energy markets.

Oops, the NYT may be asked soon to retract that particular piece of non-fake news.

In any case, even for an extremely wealthy, although completely unknown someone like Bader to buy a half a billion dollar painting, turned out to be a challenge:

Documents provided from inside Saudi Arabia and reviewed by The Times reveal that representatives for the buyer, Prince Bader, did not present him as a bidder until the day before the sale. He was such an unknown figure that executives at Christie’s were scrambling to establish his identity and his financial means.

Yet even after he had provided a $100 million deposit to qualify for the auction, the Christie’s lawyers conducting due diligence on potential bidders pressed him with two pointed questions:

Where did he get the money? And what was his relationship with the Saudi ruler, King Salman? “Real estate,” Prince Bader replied, without elaborating… well at least it wasn’t bitcoin. He also said the he was just one of 5,000 princes, according to documents and people involved.

The real estate may be worth much less, however, if Bader’s countrymen feel like burning it down. The reason: for Prince Bader, paying such an unprecedented sum for a painting of Christ also risks offending the religious sensibilities of his Muslim countrymen. Muslims teach that Jesus was not the savior but a prophet. And most Muslims — especially the clerics of Saudi Arabia — consider the artistic depiction of any of the prophets to be a form of sacrilege.

Some more on his background:

Prince Bader comes from a lesser branch of the royal family, the Farhan, who are descended from a brother of an 18th-century Saudi ruler. They do not trace their lineage to the founder of the modern kingdom, King Abdulaziz ibn Saud. But Prince Bader is a contemporary of Prince Mohammed. They attended King Saud University in Riyadh around the same time, if not together. And after King Salman, now 81, took the throne in 2015 and appointed Prince Mohammed to run much of the government, he named Prince Bader to high-profile positions, including one closely linked to the family.

 

In July, King Salman also named Prince Bader governor of a newly formed commission, led by Prince Mohammed, to develop the province of Al Ola, which contains an archaeological site that the crown prince hopes to turn into a tourist destination.

 

Prince Bader sat on the board of an energy company that did business in Saudi Arabia, Energy Holdings International, according to its website, and a short biography there describes him as “one of Saudi Arabia’s youngest entrepreneurs.” (It was not immediately clear if the company is still operating.)

 

According to the biography, he is also “chairman of the founding committee” of a local consortium that won a license from the kingdom to build a fiber-optic network, in a “strategic partnership” with Verizon. It is common for well-connected Saudi princes to profit by providing entry to the kingdom for international companies.

 

He is also described as one of the founders of a large recycling and waste-management business in Saudi Arabia. As for real estate, which Prince Bader described to Christie’s as the source of his money, the biography says he “has also been active in real estate projects in Saudi Arabia, Dubai and the rest of the Middle East over five years,” including in partnership with “large reputed companies.” The date of the biography could not be determined.

Furthermore, Prince Bader appears to have worked with Prince Mohammed on at least one grand project for his own leisure, as well. Together, the two approached Brent Thompson Architects, a firm based in Los Angeles, to design an elaborate resort complex near Jidda, according to a description of the project on the group’s website. It consisted of as many as seven palaces for princes in the Salman branch of the family, around an artificial body of water in the shape of a flower. “Petals of this tropical flower formed a series of private coves, each the home of an individual palace, its own private beaches, guesthouse, gardens and water sports facilities,” according to the description on the firm’s website.

And yet despite his obvious wealth, close family connections, and ostentatious style, the final purchase price of the Leonardo painting proved too much even for this royal:

The prince had told Christie’s that he intended to pay in one lump sum upon completion of the sale. But in light of the unexpectedly high sale price, a contract was drawn up specifying six monthly installments. Five are for $58,385,416.67.

 

The last installment is due on May 14. It is 2 cents less: $58,385,416.65.

It is unclear how Christie’s plan on repoing the world’s most valuable painting from the “most cultured country” in the middle-east, if for some reason the Prince decides not to make one or more monthly scheduled payments…

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In a historic moment, ignored by much of Western media, Russian military officials have announced the complete and utter defeat of ISIS in Syria. The Russian General Staff issued a statement Wednesday declaring that all territories previously under terrorist control were liberated in a final push by the Syrian Army this week, and with the support of Russian forces. 

“All terrorist units of ISIS on Syrian soil have been destroyed, and the territory is liberated,” Armed Forces Chief of Staff General Valery Gerasimov said in comments translated and published by RT.  "Therefore, as of today, there’s no territory controlled by ISIS in Syria,” he added. The announcement came during an annual briefing for foreign military attaches, and incidentally on the same day President Trump gave an extremely controversial televised address wherein he gave official US recognition of Jerusalem as the capital of Israel, thus it could mean that the demise of one problem could give rise to another in an increasingly volatile and explosive Middle East environment. 

The rapid collapse of ISIS – which once controlled an area the size of Britain stretching from the edges of Aleppo to Mosul in Iraq, and down to Ramadi and Fallujah – began in earnest in early September when the Syrian Army breached ISIS lines around Deir Ezzor city, after which the city was fully liberated by early November. As ISIS retreated in the Deir Ezzor countryside, it lost its previous Syrian capital of Raqqa in mid-October to the US-backed Syrian Democratic Forces (SDF), which also struck a deal to allow the quick exit of ISIS terrorists to other parts of Syria and region, according to a report by the BBC.

The Syrian Army this week continued its momentum in Deir Ezzor province, liberating the villages of Jalaa, Ramadi and Buq in rapid succession, while Russian bombers reportedly carried out massive strikes on remaining ISIS positions near al-Sayyal. Other locations were liberated in quick succession according to reports, including Khutaytah, ‘Abbas, Masra’at Shamr, Qit’ah, Mujawwadah, Jabal Nusuriyah, Tal Bani, and Tal Khinzir.

Syrian army celebrates the prior liberation of key territory. Image source: NDTV

After Russian President Vladimir Putin was briefed by his military staff on Wednesday, he acknowledged the end of the bulk of anti-ISIS military operations while also saying, “Naturally, there might be some spots of resistance, but the military work has been largely completed in the area and at the time. Completed with a full victory, I repeat, with a victory and defeat of the terrorists.” Putin further said that the political negotiation process over the future of Syria put in place by a Russia-Iran-Turkey agreement reached in Sochi last month must now become the focus, which may include future Syrian presidential elections. He cautioned, however, that this potential peace process will be “a very big and lengthy job."

Today's remarks followed an earlier address by Putin to a major gathering of Orthodox church leaders from around the world on Monday – an event hosted by the Russian Orthodox Church. Putin told the Christian leaders that Syria's ancient Christian heartland had been fully liberated: “The situation in this country [Syria] is gradually changing. The Syrian armed forces, supported by the Russian military, have liberated from terrorists almost the whole territory of the country, including historic Christian regions,” he said. Prior to the war, the Christian population in Syria was about 2 million, according to estimates. 

Indeed as early as March of 2012 the official Vatican news agency, Agenzia Fides, published a report citing “an ongoing ethnic cleansing of Christians” by anti-government fighters in Homs based on Syrian Orthodox church sources a report which made world headlines at the time. It was further widely reported in international press that 90% of the large Christian population of central Syria had been forcibly expelled and their homes confiscated by anti-Assad fighters.

Though the West had defended the insurgency as comprised of "moderate" Free Syrian Army fighters, this pattern of religious and ethnic cleansing became familiar throughout much of the rest of Syria as jihadists made gains in the midst of the war. When ISIS initially emerged on the Syrian battlefield in 2013 it routinely fought directly under and in coordination with US-backed FSA command structures – and later, in 2014, entire FSA groups would defect en mass to the Islamic State, taking their US/UK and Gulf-supplied weapons and communications gear with them – all of which allowed for the Islamic State's shockingly rapid growth. 

But when Russia militarily intervened in Syria in 2015 at the invitation of Damascus, the momentum changed dramatically in favor of the Syrian government, which painstakingly gained back territory over the following two years.

At the gathering of church leaders this week, Putin further stated that future stability in Syria was dependent on more than just military gains, but on refugees feeling secure enough to return to their homes, especially religious minorities which make up the pluralist fabric of Syrian society: “Over the past few years the Russian state alongside with the Russian Orthodox Church, as well as other religious organizations has provided humanitarian aid to Syria. It’s very important that the peaceful life is established as soon as possible, that the people can return to their homes, begin to rebuild the temples and churches,” Putin stressed.

Though Russian statements on Syria this week focused on declaring victory over ISIS, it is unclear what might be in store for al-Qaeda held Idlib in the coming months. Russia and other international powers have long weighed military options to dislodge the northwestern province from Hayat Ta?rir al-Sham (AQ in Syria) control, but with a highly concentrated civilian population, there are no easy options.

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Authored by Anthony Gockowski via Campus Reform blog,

At least one Kutztown University professor offered students extra credit Tuesday to participate in a rally against the GOP tax plan.

“Please join your faculty as we rally against the GOP Tax Bill that has serious implications to you and on Higher Education. This is an opportunity to gain additional extra credit,” the email states, with a bolded subject line of “Additional Extra Credit Opportunity!”

While the email was initially drafted by Dr. Mauricia John, a professor in the publicly funded school’s Anthropology and Sociology Department, it is unclear whether other professors are offering their students the same opportunity, as the email indicates that the rally is a collaborative effort by the faculty.

An advertisement for the rally, sponsored by the Association of Pennsylvania State College and University Faculties, was attached to the email, with a banner declaring “rally with us against the tax bill!”

“This bill threatens tax increases on our students. Tell congress to make education affordable to all. Defend not defund higher education. Tuition waivers should not be taxed,” the flyer goes on to state.

Faculty spokesperson Daniel Spiegel insisted that the event is "not in any way political or partisan," but is simply an effort to "stand up for higher education by alerting our campus community about the harm that the tax bill currently being considered in Congress could cause to the goals and accessibility of higher education." 

"The speakers will be speaking on the effect of this bill," he added. "We will be encouraging people to fulfill their obligation as a citizen  to contact their representatives to express their opinion."

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Just yesterday the Russian foreign ministry issued a stark warning to the international community that“the situation on the Korean Peninsula is on the brink of war,” adding that “Kim seeks to raise the stakes before any talks.” 

Of course, these warnings followed the announcement earlier this week that the US and South Korea launched their largest aerial drills yet, less than a week after North Korea tested its new Hwasong-15 missile which military observers said has the capacity to strike Washington DC, or nearly any other location in the continental US.

As we reported Sunday, the annual US-South Korean drills, called Vigilant Ace, will run until Friday. Six F-22 Raptor stealth fighters will be deployed among the more than 230 aircraft taking part. Not surprisingly, the North has condemned the exercises as yet another provocation.

And while continuous warnings such as these go mostly unnoticed by Americans, at least one local newspaper in the Jilin province of China on North Korea’s northeastern border figures its better to be safe than sorry and issued a helpful guide on what residents should do in the event of a nuclear attack.  Per Bloomberg:

An official Chinese newspaper near North Korea has published a page of articles on coping with nuclear attacks, in a sign of growing anxiety over Kim Jong Un’s weapons program.

 

The Jilin Daily — the government newspaper of Jilin province on North Korea’s northeastern border — published articles on page 5 explaining how nuclear weapons work and the damage they cause. The paper used cartoons to offer advice on what residents can do about radiation exposure and provided instructions on how to respond during an attack.

 

One article listed essential items for emergency kits, including fire extinguishers and breathing masks. Another warned that air raids could mean nuclear, chemical and biological attacks, and used the 1945 atomic bombing of Hiroshima as an example.

 

The cartoon images illustrated how residents should clean their bodies, boots and coats after being exposed to radiation. They suggested taking iodine tablets, if there is radiation nearby.

Meanwhile, the paper even offered some helpful cartoons for residents looking to prep for the nuclear apocalypse.  And while our Mandarin is not great, the cartoons seem to imply that so long as you cover your face with a cloth and down some iodine tablets…you’ll be just fine.

And, for those who like to be extra safe, the Jilin Daily also provides these helpful tips which presumably suggest you should clean your ears, take a shower and vomit as necessary.

Then again, we hear that taking “giant panic breaths” of pure oxygen also works well for scenarios such as these…

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CME Bitcoin Real-Time Index ($BRTI)

It’s no secret that Bitcoin is amidst its biggest net dollar gaining session ever.  Just when it seemed like Bitcoin price action couldn’t get any crazier…. Flirting with a potential $2,000+ daily gain (at publishing), Bitcoin just pushed above $14k on the $BRTI.  For those unfamiliar with the $BRTI, you’ll hear about it a lot more after December 18th, when the CME Bitcoin Real-Time Index-based Futures go live.

Even though CBOE futures go live on December 10th, no trader knows which Bitcoin futures contract will become the king of the coin – ala ES E-mini S&P 500 futures.  Although the frenzied price action of this behavior seems bonkers, it is par for Bitcoin’s course.  As crazy as this price action is, if we don’t press publish by the time we think about what’s happening next, it’s going to be up or down another 500 fiat $USD.

$BRTI 1-Minute

$BRTI 5-Minute

$BRTI 15-Minute

Where is Bitcoin heading right now?

Most likely up.  A lot higher.  On its way to eclipsing JPMorgan’s and other banks market capitilizations.  Why?  Because Bitcoin is an “extinction event” for Wall Street banks and fiat currency.

At the time of writing, Bitcoin is trying to regain $14,000, though by the time we press publish it may have scored another touchdown and be pushing $21K.

Lame as JPMorgan’s JamiesGeniusDaughtersDad fraudulently calling Bitcoin a fraud… though the TD Bank quip above may not be a joke, we can’t even begin to guess where long-term upside targets may lie, nor can or should any market technician pretend to.  What we can forecast based upon technical analysis is that if Bitcoin ever turns down and cools off, it will likely find support at $12,840, with extremely strong support at $11,750-12,000 and $11,000.

Bitcoin, Blockchain, or if you’re a Wall Street bankstah “the Bitchain”, is an extinction event for modern finance, 20th century banking, and fiat currency.

While we and every single person alive will have a lot of opinion about it today, tomorrow, and throughout the 21st century – for now, it is naptime, Mmmm.

–> Check out Fibozachi.com to learn about technical analysis and trading indicators that actually work.

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Authored by David Stockman via The Mises Institute,

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In a brief statement issued Wednesday afternoon, President Trump called on Saudi leadership to completely lift the years long Saudi military blockade on war-torn Yemen. The unexpected announcement came on the same day President Trump delivered an extremely controversial televised address wherein he gave official US recognition of Jerusalem as the capital of Israel.

“I have directed officials in my administration to call the leadership of the Kingdom of Saudi Arabia to request that they completely allow food, fuel, water and medicine to reach the Yemeni people who desperately need it,” Trump said through a White House press release. “This must be done for humanitarian reasons immediately.”

Image via Vice News

Though it's unclear exactly why the directive was suddenly issued after years of humanitarian catastrophe in Yemen, it is likely connected with the widespread shock and condemnation from world leaders which immediately followed in the wake of Trump's speech formally recognizing Jerusalem as the Israeli capital. The Yemen directive was published by the Office of the Press Secretary only a matter of two hours later.

And while Trump cites "humanitarian reasons" for the urgent directive requesting the lifting of the siege, Saudi Arabia has enforced a military blockade on deeply impoverished Yemen since it began bombing the country in 2015. Furthermore, media and human rights groups began reporting on the de facto naval blockade of Yemen's ports – which quickly left over 20 million Yemeni civilians facing a dire humanitarian crisis – soon after the war began in March of 2015. This occurred as the US and UK stationed military and intelligence officers in Saudi command and control centers in order to assist in targeting Yemeni Houthi rebel locations.

As early as June 2015, for example, a Guardian investigation found that the US and UK were enabling the crippling blockade, which has been widely acknowledged as a "humanitarian disaster". According to the report, "nearly 80% of the population are in urgent need of food, water and medical aid, in a humanitarian disaster that aid agencies say has been dramatically worsened by a naval blockade imposed by an Arab coalition with US and British backing."

While it's clear that the lifting of the siege is a welcome step in the right direction for the millions of suffering Yemeni men, women, and children impacted, the White House decision in reality has nothing to do with humanitarian concerns, as the US itself has for the past two years been partnering with the Saudis in all its actions in Yemen (also including Bahrain, Kuwait, UAE, Egypt, Sudan, and with the UK as a huge supplier of weapons).

Saudi airstrikes on the impoverished country, which have killed many thousands of civilians – a shocking percentage of children among them according to the UN – and displaced tens of thousands, have further involved the use of American military hardware. Cholera has recently made a comeback amidst the appalling war-time conditions, and civilian infrastructure such as hospitals have been bombed by the coalition. Though likely falling short of the true number, as of November 5,295 civilians have been killed and another 8,873 injured in the war, according to figures provided by the UN.

And the coalition's military campaign greatly intensified this week following former President Ali Abdullah Saleh’s death, which resulted in an uptick in the aerial pounding of Sanaa, which was overrun by Houthi rebels. 

So why is Trump belatedly citing "humanitarian reasons" now?

As Middle East analyst Hassan Hassan says, it appears that today's statement on Yemen is no doubt connected with what many described as the strong and vehement reaction to the earlier Jerusalem recognition move by both King Salman and MBS. "This sounds like a tit-for-tat statement concerning the Jerusalem move. What happened suddenly for this administration to care about Yemenis, esp given recent news the Saudi-led Coalition lifted some of the blockade?" observed Hassan Hassan shortly after the release of the Yemen directive.

This sounds like a tit-for-tat statement re Jerusalem move. What happened suddenly for this administration to care about Yemenis, esp given recent news the Saudi-led Coalition lifted some of the blockade? http://pic.twitter.com/xrtBjqkeBa

— Hassan Hassan ?????? (@hxhassan) December 6, 2017

No doubt, Trump understands how he can leverage regional allies on the issue of human rights anytime they don't fall in line with the US position – he knows where the skeletons are buried as the US has long been in the trenches with Saudi Arabia and other gulf allies during the region's "regime change" wars in places like Libya and Syria. But this goes the other way too, as we previously predicted of the recent Qatari-Saudi diplomatic war which resulted in both sides accusing the other of human rights abuses and aiding terrorism in the region: "the United States itself will not be spared in this new open season of airing dirty laundry as old allies turn on each other."

So while Trump suddenly and conveniently puts Saudi Arabia in the hot seat using human rights as an excuse, we should expect that Saudi Arabia will itself eventually retaliate, likely through some kind of leak or media interview. 

Trump has already received an immense amount of push back over his decision to recognize Jerusalem as the Israeli capital by moving the US embassy there. The countries condemning the move include the UK, France, Germany, Canada, Russia, China, Turkey, Saudi Arabia, Qatar, UAE, Egypt, Jordan, as well as the EU and Arab League. 

As Trump finds he's put himself in an isolated position over the Jerusalem move, and as he potentially lashes out further against US regional allies, things are about to get even more interesting in the Middle East.

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Authored by Daisy Luther via The Organic Prepper blog,

If you ever wondered what it would look like if the grid collapsed here on the mainland, the island of Puerto Rico is a tragic, real-life case study.

These stories show us what life is like for more than a million people who STILL don’t have power and running water nearly 3 months after Hurricanes Irma and Maria devastated their communities.

According to a website showing the status of utilities on the island, four months after two hurricanes wrought havoc, 32% of Puerto Ricans are still without power and nearly 10% are still without running water. However, even those who have running water must boil it.

But statistics don’t tell the real story.

At first, it was a war zone.

In the first days after the grid went down, chaos ruled. I vetted as many of the stories as I could and concluded:

…there is very little food, no fresh water, 97% are still without power, limited cell signals have stymied communications, and hospitals are struggling to keep people alive. There is no 911. Help is not on the way. If you have no cash, you can’t buy anything. As people get more desperate, violence increases. (source)

A friend wrote this post about her family on Puerto Rico:

“My family has lost everything. My uncle with stage 4 cancer is in so much pain and stuck in the hospital. However, conditions in the island are far worse than we imagined and my greatest fear has been made reality. The chaos has begun. The mosquitos have multiplied like the plague. Dead livestock are all over the island including in whatever fresh water supplies they have.

 

My family has been robbed and have lost whatever little they had left. The gang members are robbing people at gunpoint and the island is in desperation. People are shooting each other at gas stations to get fuel.

 

They’re telling us to rescue them and get them out of the island because they are scared for their lives. We’re talking about 3.5 million people on an island, with no food, no drinking water, no electricity, homes are gone. Family if you have the means to get your people out, do it. This is just the first week. Imagine the days and weeks to come. These are bad people doing bad things to our most vulnerable.

 

Imagine a few weeks with no resources and the most vulnerable become desperate. What are you capable of doing if your children are sick and hungry? We have to help.” (source)

Other outlets told the same stories. Jeffrey Holsman wrote a guest post for USA Today, sharing what he was witnessing.

The sounds of automatic weapons firing were audible Tuesday evening in San Juan. We were told the National Guard had arrived, but I hadn’t personally seen a Jeep or uniform in the streets yet.

 

Total darkness has swallowed Puerto Rico, as it has every night since the 12-hour monster Hurricane Maria roared across the island with more than 20 inches of rain and 155 mph winds. I’ve never experienced anything like it: wind and rain from every direction, pounding continuously.

 

Now, a war zone best describes what’s left of what was once an emerald green gem in the Caribbean…

 

…after Maria, we face hours upon hours of waiting in lines for gas that might not be there; hours waiting in bank and ATM lines for money that might not be there; hours waiting in grocery store lines for food that might not be there. (source)

It only took a few days before people began to become ill from the tainted water. There were many injuries related to the storm, as well as the aftermath, and these crises were compounded by the lack of medical assistance.

Only 11 of 69 hospitals on Puerto Rico have power or are running on generators, FEMA reports. That means there’s limited access to X-ray machines and other diagnostic and life-saving equipment. Few operating rooms are open, which is scary, considering an influx of patients with storm-related injuries. (source)

People were unable to acquire essential medications and treatments like dialysis.

And this was only the beginning.

One month after the disaster…

A month after Hurricane Maria, the situation was still very grim. Three million residents were still without electricity and one million were without running water. (source) Officials reported 54 deaths attributed to the hurricane but many said that the number was far higher. The mayor of San Juan said that the number of cremations had doubled and put the actual casualties at closer to 500 people.

She said: “It appears, for whatever reason, that the death toll is much higher than what has been reported. What we do know for sure is that people are being catalogued as dying…natural deaths”.

 

She explained that some of the deaths relating to the hurricane were being reported as “natural causes” because the storm was the secondary factor in their death.

 

For example, some people reportedly suffocated after their respirators stopped due to the power cut…

 

…The bodies were cremated before the medical examiner could determine whether they should have been included in the official death toll.

 

Accurate information about the figure is particularly important in the US because if a person dies in a natural disaster, their family has the right to claim federal aid. (source)

What outsiders are unable to see, perhaps, is that an entire culture has arisen around the catastrophe caused by Hurricane Maria – one with typically catastrophic traits: material scarcity, emotional trauma, economic catastrophe, environmental devastation.

 

Puerto Ricans are now facing a dramatically different way of life, which means our relatives and friends in the diaspora are, too.

 

Nothing about life resembles anything close to normal. An estimated 100,000 homes and buildings were demolished in the storm, and 90 percent of the island’s infrastructure is damaged or destroyed. Not only are there shortages of water and electricity but also of food, highways, bridges, security forces and medical facilities.

 

It’s dangerous to venture outside at night. An island-wide curfew was lifted last week, but without streetlights, stoplights or police, driving and walking are dangerous after dark.

 

The official tally of missing people varies, with police tallies ranging from 60 to 80 right now. Considering Puerto Rico’s hazardous conditions and limited health care services, that number is sure to rise. We are well aware that epidemic diseases, including leptospirosis and cholera, could come next. Health concerns are further stoked by the delays and disarray of the various federal agencies tasked with handling this emergency. (source)

It’s a Catch-22. Until the tourists return, many won’t be able to afford to restore their businesses. But until they restore their businesses, the tourists won’t return.

Two months after…

Two months to the date after Maria struck with a vengeance, only half of the residents of the island had power. The return of infrastructure began in the cities and wealthier areas. Those in poor or remote areas are still waiting. 

Here’s a video of what it looks like in Puerto Rico right now as people struggle to restore electricity.

Billions of dollars were allocated by the government and millions has come in from private donors.

 

Politicians have been in and out of the island and that has led to a spending law that provides $5 billion for Puerto Rico’s recovery and billions for government agencies providing disaster assistance. Projections are that a lot more will be needed.

 

On top of that, millions has been raised and contributed by private groups and foundations and individuals.

 

Cruz (the mayor of San Juan) said people from around the United States have been sending small donations, money orders, $50 or $10 attached to cards or pieces of paper. Some gave as much as $300 to $500.

 

“We’re going to use it to rebuild homes, to make sure people have good drinking water, because even if it comes out of a faucet it has to be drinkable, to schools for children. Some of the schools have been in really bad shape. Twenty-five percent of what comes into the foundation goes to other towns outside of San Juan,” she said. (source)

At two and a half months post-hurricane, PBS reported the following statistics:

• 66 percent of power on the island has been restored
• 93 percent of the island has access to water, but it remains on a boil advisory
• 73 percent of cell sites are up and running
• 982 survivors remain in 41 shelters across the island

The island still looks like a war zone.

Trash and debris from the storm remain a rampant problem. The U.S. Army Corps of Engineers reported it has removed more than 639,000 cubic yards of debris. But it is still tasked with removing at least 2.7 million remaining cubic yards. (source)

Residents of the island are without resources and are at the mercy of FEMA…and government funding.

Democratic Sens. Bernie Sanders and Elizabeth Warren unveiled a bill that would provide $114 billion in aid to Puerto Rico and the U.S. Virgin Islands…

 

[But] the package is unlikely to get a vote, analysts say

 

Meanwhile, more than 200,000 people from Puerto Rico have arrived in Florida since Maria hit, according to the Florida Division of Emergency Management.

 

FEMA is now moving from response to recovery mode. FEMA is still providing daily food, fuel, and water to survivors of Maria, the longest such sustained distribution after a disaster in FEMA history. (source)

You can get more details about the proposal here.

And now, the return of electricity has been further delayed.

Previously, Puerto Rican officials estimated that the island would have electricity again by December? It turns out they were wrong. Now it looks like everyone in Puerto Rico won’t have power until February… at the earliest.

PREPA acting Director Justo Gonzalez cited “natural” and hurricane damage to the power grid that was initially unidentified as the reason for the delay of power generation.

 

Others have said full power and other utilities will not be completely restored until March. (source)

Between Puerto Rico’s economic problems and an aging grid, this isn’t a speedy process.

Before the storm hit, I wrote an article predicting at least a 6-month wait before power was restored, and this was for a variety of reasons. I cited Philipe Schoene Roura, the editor of a San Juan, Puerto Rico-based newspaper, Caribbean Business, who wrote of the many reasons that it would take so long:

“The lifespan of most of Prepa’s equipment has expired. There is a risk that in light of this dismal infrastructure situation, a large atmospheric event hitting Puerto Rico could wreak havoc because we are talking about a very vulnerable and fragile system at the moment,” Ramos added…

 

…Francisco Guerrero (a fictitious name to protect his identity), a Prepa field worker for 23 years, said it would take months for Prepa to bring up Puerto Rico’s power system should a hurricane like Harvey strike the island.

 

The lack of linemen and other technical personnel, as well as a lack of equipment—including replacement utility poles for powerlines and replacement parts—are the issues of greatest concern among public corporation employees, who say they risk their lives working with equipment in poor condition that provides them with little safety.

 

Guerrero said that today only 580 linemen remain out of the 1,300 who were part of the workforce in previous years—and that’s not counting the upcoming retirement of another 90 linemen. Likewise, he said there are only 300 electrical line testers to serve the entire island.

 

The source also said that much of Prepa’s equipment dates back to the 1950s—and the more “modern” equipment that is still functional dates from the 1990s; in other words, it’s from the past century.

 

“If a hurricane like this one [Harvey] hits us, the system is not going to come online, I’d say, in over six months. Right now, the warehouses don’t even have materials. I’m talking about utility poles and other stuff,” Guerrero explained. (source)

It turns out that Rora was not exaggerating. But money and a dilapidated system aren’t the only problems. There is an issue of geography as well.

Puerto Rico’s biggest power generators are on the south of the island, but most of its inhabitants live on the north side, primarily in San Juan. There are four high-capacity transmission lines that carry power from the south to the north, and they pass through the center part of the island, the region Marin calls home. The problem is that central Puerto Rico is mountainous, full of huge swaths of thick forest, and mainly reachable only by driving on terrifyingly narrow dirt roads.

 

That makes it hard to reach those four vital lines even in the best of circumstances. In post-Maria Puerto Rico it’s even harder, because the center of the island was the region hardest hit by the hurricane. Since the government is trying to get power to San Juan first, that means those in the regions devastated most by the hurricane will be waiting the longest for power to be restored. Sánchez, the engineer, says workers would need to be flown in by helicopter to clear debris before repairs could even begin. (source)

Would you be prepared for something like this?

If you think something like this couldn’t happen to us on the mainland, you’re deluding yourself.

Our grid isn’t in fantastic shape either. For years, people in the know have been warning that our electrical infrastructure is aging and unstable. It would cost us a mindboggling 5 trillion dollars to replace the decrepit system, and age isn’t the only threat. The possibility of an EMP strike could take it down permanently (and that threat seems more real every day as tensions with North Korea rise.) If our grid was taken down by such an attack, it could kill 90% of Americans within the first year.

We would lose

• Power.
• Refrigeration.
• Heating and cooling.
• Our economy.
• Fresh, running water.
• Medical care.

The list could go on and on.

Few people would be ready for an event that took out the entire infrastructure for an extended period of time.  I personally lean toward a more low-tech plan for long-term scenarios like this. (For one reason, look how difficult fuel is to come by in Puerto Rico right now.)

Learning from the real-life experience of others give us just a glimpse of what we could expect.

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