Is The Saudi’s Market Share Strategy Still Feasible?

Submitted by Michael McDonald via OilPrice.com,

Much of the rout in oil prices has been predicated upon the staying power of Saudi Arabia and other OPEC producers. As oil prices have continued to fall, virtually all of OPEC has been pumping oil as fast as possible to generate increased revenues at lower prices. That practice has helped to fuel the oil glut and led to a price that would have been unthinkably low just a couple of years ago. Oil markets have been largely assuming that OPEC producers could go on producing at these levels for years, but what if that’s not the case?

Take the strongest of the OPEC producers, Saudi Arabia for instance. Saudi Arabia has very low cost per barrel of production – much lower than any shale producer in the U.S. But as a country, Saudi Arabia also has other significant obligations that it has to meet and oil revenues are effectively its only way of meeting these obligations. The same principle holds true for all other OPEC producers, though most are in worse shape than the Saudis. With oil at these prices, all of OPEC is bleeding fast. The oil revenues that the Saudis and others are bringing in are simply not enough to meet their on-going obligations. As a result, Saudi Arabia and others have been forced to turn to their savings – foreign currency reserves.

Saudi Arabia started 2015 with roughly $720B in reserves. By August it was down to $650B. As of December, Saudi Arabia has around $620B in reserves. If oil averages $20 a barrel going forward for the next couple of years, Saudi Arabia will be broke by mid-2018 even after accounting for its recent budget cuts that trimmed internal spending. $30 a barrel oil buys the country about 6 months, tiding it over to early 2019. Libya, Iraq, and Nigeria are all in much worse shape, as of course is Venezuela.

Even before Saudi Arabia gets to the point of bankruptcy though, panic may begin to set in for OPEC. Saudi Arabia is the most stable member of OPEC, and other than its rival Iran, who is use to budgetary pressure, the rest of OPEC is largely bloated and ill-prepared for a long period of low oil prices.

Saudi Arabia will likely end 2016 with around $450B in reserves, and other OPEC members will be in much worse shape. With reserves that low, many OPEC members may be forced to turn to the bond markets. Unfortunately for OPEC, the interest rate environment around the world is starting to tighten and bond rates will likely be higher by the end of this year. Add to that the continuing uncertainty around oil prices, and some countries may find bond market access very difficult. Even the Saudis may find that their financial strain is causing concern among bond investors.

There is reason to think that the price of oil will remain subdued for a long time to come if the Saudis have anything to say about the matter. In particular, the Kingdom is concerned about the rest of the world switching to other forms of energy sources, and sees low oil prices as a way to delay the adoption of substitute forms of energy. It’s a wise long-term plan.

But even the Saudis don’t want to see oil prices this low, nor can they afford a prolonged period of oil prices below $50 a barrel. To say that oil is crucial to Saudi Arabia is an understatement; oil is to Saudi Arabia what gambling is to Las Vegas. The Saudi’s cannot withstand low oil prices forever, and if drastic changes don’t happen, then within two years, the world’s largest oil producer maybe facing very hard times.


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Trading Desks Stunned By ‘Brutal’ Selling: “The Crowded Trades Have Come Unglued On Obvious Unwinds”

Concerned about the dramatic market moves since the start of the new year, and especially in recent days? You are not alone, but as RBC’s head of US cash equities S&T Charlie McElligott, says fear not: everyone is in a “sell (or short) now, ask questions later” mood as wholesale derisking has gripped the market and nobody really has a clue what is going on except for one thing: the most popular, crowded trades are getting blown up at a ferocious speed, as “some leveraged players outright taking grosses down by selling longs and covering shorts; while others are focused on taking net exposure lower, selling longs but adding selectively to shorts.”

From RBC, Charlie McElligott, Head of US Cash Equities Salestrading

THAT WAS FAST

Seeing relief off lows but fading again, as thematically we just saw essentially ‘the’ crowded ’15 macro trades come unglued on obvious unwinds: long stocks (SPX -1.3%, Estoxx -2.3%), long HY (HYG -0.2%), long Dollar (DXY -1.4%), short UST (+0.4%), short VIX (+6.5%), short crude (+5.1%), short Euro (+1.4%) / Yen (+1.8%) / EMFX (+0.5%), short copper (+1.9%)…all going wrong-way.
 
Plenty of attribution going around, first being portfolio de-risking as performance for active-types (read: humans) has just been brutal. 

Others are re-treading the idea of ‘petro-state’ selling of liquid assets in light of the crude harsh fade from just 5 days ago.  I would posit that the violence (“price insensitive”) and synchronized nature of it looked quantitative in nature.
 
Single-stock world shows somewhat similar picture as broad macro, with popular shorts and longs trading-backwards generally speaking, although pockets of shorts continue being pressed.  Check-it:

The mixed-bag on equities short-side could be rationalized: some leveraged players outright taking grosses down by selling longs and covering shorts; while others are focused on taking net exposure lower, selling longs but adding selectively to shorts.

The second bullet jives with MS PB, which went out with this #HOTTAKE earlier:

Yest was one of the largest global net sell days over the past year and the largest sell day of 2016 so far, a 2.5 standard deviation (SD) event L/S funds were the main sellers as they BOTH sold longs AND added shorts.

One final point worth considering at this juncture in the  day: the final 30 minutes of the European session has been particularly noteworthy of late for extreme volatility, as correlation desks gamma hedge with ZERO tolerance for pain—especially after many large banks ‘over there’ noted equity derivs hits in the quarter numbers.


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“We’re Nearing The End” David Stockman Warns, Retail Investors Are “Heading For The Slaughter”

Submitted by Greg Hunter via USAWatchdog.com,

Former Reagan White House Budget Director David Stockman says retail investors are going to take, yet, another very big hit. Stockman explains,

“The retail investor waded in again. The sheep lined up and, unfortunately, are heading for the slaughter one more time. I think it is very hard to see how this Baby Boom generation, with 10,000 of them retiring a day, can afford one more devastating crash in their stock holdings. That is, unfortunately, what we are heading for. That’s why I say it’s dangerous. When the bubble breaks, it will spill and flow throughout the Main Street economy.”

Stockman warns the next crash will be bigger than any other in history. Stockman, the best-selling author of “The Great Deformation,” says,

“I think we have been building a bubble year by year since the early 1990’s. The earlier crashes that we are so familiar with, Dot Com and the Housing Crash, were only interim corrections that were not allowed to work their way clear.

 

The rot was not effectively purged from the system because central banks jumped back in within months of the corrections and doubled down in terms of the stimulus and liquidity that they pumped into the market.”

Stockman contends that “you simply cannot fake your way in this market any longer.” Stockman explains,

“I have pointed out that Wall Street continually tells you that the market is not that overvalued. . . . I have pointed out . . . actual earning are down 15%. The market is expensive, it is exceedingly expensive, and it’s really . . . 21 times earnings. Therefore, the whole bubble vision on valuations of the market is terribly misleading. Even the Wall Street version of earnings is going to be hard to maintain when the global recession sets in, and then investors are going to suddenly discover that the market is drastically overvalued.

 

They are going to want to get out, and they are all going to want to get out all at the same time. That creates the kind of selling panics that can take the market down. We have kind of been in no man’s land for the last 700 days. The market is struggling to stay above 1870 on the S&P 500. It first crossed that level in late March 2014. It has had 35 efforts to rally and break to new highs. None of them have been sustained. My point about all that is that’s the way bull markets die.”

Stockman contends,

“We are nearing the end. I think the world economy is plunging into an unprecedented deflation recession period of shrinkage that will bring down all the markets around the world that have been vastly overvalued as a result of this massive money printing and liquidity flow into Wall Street and other financial markets.”

On gold, Stockman says,

“I think it’s more of an insurance policy and an option on the ultimate failure of today’s form of central banking. When, finally, the Keynesians, who are running all the central banks, when they are totally repudiated, I think gold will soar in value.

Join Greg Hunter as he goes One-on-One with financial expert and best-selling author of “The Great Deformation,” David Stockman.


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Rand Paul Will Not Endorse Another Candidate in Primaries, His Staff Says

While Sen. Rand Paul (R-Ky.) has dropped out of the Republican presidential race, he will not be endorsing any other particular candidate as the primaries crawl on, said Paul’s campaign strategist Doug Stafford in a telephone press conference with Paul’s top campaign staff this morning.

Paul does, though, intend to endorse whoever the Republican Party eventually settles on.

That’s something his father Ron didn’t do, and to at least a small extent that difference in political styles and attitudes may have kept big portions of Ron’s support from surrounding Rand, in either giving or polling. I asked Stafford what the Rand campaign thought might have gone wrong with sustaining the perceived “Ron Paul movement.”

Stafford was sure that the “Ron Paul movement does exist” but couldn’t say precisely why Rand didn’t seem to fully re-ignite it. “Voters shift from time time and what’s most important to them is hard to capture” but he did see that there were many hundreds of kids still volunteering eagerly for Rand.

Most importantly, Stafford is sure that the issues Rand brought to the fore are still those that should energize anyone who was really into the Ron Paul thing. While “there are many issues that decide how people are going to vote, some within a candidate’s control and some not” he reiterated what Rand has said: that the liberty movement is “definitely alive, marching on, and Rand will continue to be its voice in the Senate.” 

Stafford admits even Bernie Sanders might have had some appeal to the old Ron Paul coalition, especially if they were only/mostly in it for the foreign policy, and that “we saw for ourselves, sometimes [students] seem to be attracted to a candidate who spoke their minds directly, who seemed not quite the normal politician.”

But he admits, when asked if Cruz might have captured some of the elusive “Ron Paul vote,” that “I don’t know if anyone knows where people went. It’s hard to tell. Someone might have voted for Ron and went somewhere else, to others in the Republican Party or even to another party if they were purely foreign policy supporters.” That said, Stafford is confident that “as we talked to liberty voters across Iowa, it is clear to us Rand was standing up for their issues.”

Asked about their prediction of 10,000 student caucusers for Rand in Iowa after fewer than 9,000 total votes went to him, well, “we came short in the number of folks who came out, which is not unheard of in trying to do things with organizing students” and other campaigns were fighting for same votes so “we were not operating in a vacuum” but still think the student efforts there “lit a fire of ideas” in thousands of kids and was good preparation for “a future fight for liberty.”

Chip Englander, Paul’s campaign manager, thinks that even their 5th place showing proves their organization paid off, beating “every single governor” in the race including ones who spent millions of tens of millions in advertising. But “macro messaging things” that he did not specify were “beyond their control, and that happens in political campaigns. 

Why did Rand Paul quit? Mostly, he realized there was little chance of winning. “We think he finished well for Iowa…but not well enough to seem like he had a chance at the nomination.” Stafford stressed the good the campaign did for the ideas of liberty in general, how especially in the debates Paul was a passionate and forceful voice for his issues, from foreign policy to the Fourth Amendment to criminal justice reform. If not for Paul, in no case would his unique perspectives on those matters have been aired.  

Paul wants to return to concentrating on being a “leader of an ideological movement and a leader in the Senate” and the trajectory of the race post-Iowa seemed beyond his ability to shape. 

Even in immediately forthcoming New Hampshire, which most people assumed Paul would try to fight through, while the campaign believed their ground game was solid, the media attention and money that the leading candidates had, plus the blow of being blocked from the debate prior to the primary, made them decide that “ground game couldn’t overcome numerous obstacles in our path a little larger than that.” Chip Englander also alluded as above to not-precisely-specified “macro message” issues, which might mean, though no one said it this bluntly, that Paul’s message just isn’t what a lot of Republican voters want to hear right now.

Of course, Trump changed everything, and as Stafford said “took all the oxygen out of the room” and commanded the discussion. He admitted it was “very difficult to have what you believe is a stronger message and a stronger candidate but you can’t break through because celebrity became the largest thing.” Paul faced a “brand new environment, for most involved in presidential politics we’ve never seen anything like it” and it hobbled Paul’s ability to take flight “in a critical time of the race.”

Stafford also acknowledged that the seeming rise of ISIS and the California terror attacks may have at least for a while shifted any possible GOP attraction to Paul’s more measured foreign policy. While Stafford believes that hawkishness is “not an issue the Republican Party is fully on one side of the other,” that it is likely that current events affected the ebb of public opinion in this “time of extreme events” that might have made Paul’s calmer approach less appealing.

In a separate email, Steve Grubbs, who ran the Iowa operation for the campaign, said that “Senator Paul is very practical. With limited financial resources and the unlikely potential of making the debate stage this week, he chose to make the decision to refocus his time and efforts on his senate campaign. He believes in doing his job as senator which also limited his opportunity to campaign in New Hampshire this week.”

Stafford in today’s call also stressed that Paul was in D.C., on the Senate floor, doing his job, and had maintained a 95 percent voting record while running for president. This is something his people hope and assume will help ensure that his Kentucky voters have no interest in firing him from that job, the race for which will take up Paul’s campaigning time for the rest of 2016. Chris LaCivita with the campaign insists that Paul will keep his presidential issues alive in the Senate race and that Kentucky’s Democrats are on the ropes this year and worried more about their state positioning than able to meaningfully challenge Rand for the Senate seat. The Paul campaign continues to insist the shift from primary to caucus for Kentucky, which the campaign helped finance and was intended to allow Rand to be on ballot for both president and Senate, is still a good idea for the state as it moves them further up in time when their vote might still matter to the outcome. 

From the SuperPAC world supporting Paul, Edward Crane, co-founder of the Cato Institute and chief of PurplePAC (which ran a TV ad for Rand in Iowa in the week prior), is disappointed by the whole thing. “Rand dropping out is a blow to the GOP and to the nation,” Crane wrote in an email this morning.  

“A plurality of Americans support market (not crony) capitalism, are socially tolerant and skeptical of the efficacy of the U.S. trying to be the world’s policeman,” Crane believes. “Rand should have been the candidate of that plurality but he failed to mobilize it.”

How did he fail? “The summer downplaying of his libertarianism when he should have been escalating it was huge mistake.  A huge lost opportunity.  I have tremendous respect for what Rand tried to do — the psychological, physical and financial stress are substantial — but he is not a natural leader.  He came across as someone who would rather not be there.  And who can blame him?”

Ultimately, Crane is “glad to have him in the Senate.” While PurplePAC still has what Crane calls “some” money, he sees it as in effect held like a bank for his donors and supporters needs, and later “we may play in some congressional races.”

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WATCH: 5 Months in Jail for Anti-Semitic Tweets

Did police avert a mass shooting in the picturesque mountain town of Whitefish, Montana, when they apprehended a young man following a string of disturbing social media posts? A handful of citizens and activists believe so.

“We do a lot of hand-wringing and praying and calling for action after school shootings. Here’s a case where, potentially, a school shooting was averted,” says Francine Roston, one of two rabbis living in Montana’s Flathead Valley.

When does constitutionally protected free speech cross the line into threatening speech? For deeper look at this case and its implications for free speech in the social media age, watch the Reason TV video above, and check out Elizabeth Nolan Brown’s previous coverage.

Approximately 7:37. Produced by Zach Weissmueller. Field producers are Paul Detrick and Alex Manning. Additioinal camera by Alexis Garcia. Music by Chris Zabriskie and Lee Rosevere. Additional photography provided by Greg Lindstrom and the Flathead Beacon.

Full text and downloadable versions at the link below.

View this article.

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Brown University Renames Columbus Day “Indigenous People’s Day”

Rhode Island’s Brown University has long been recognized as a punchline for virtually any and every joke about political correctness (its reputation as a safety school for the dimmer lights of the Kennedy clan also doesn’t help people take it more seriously).

Now the school has officially renamed Columbus Day as “Indigenous People’s Day.” The school stopped using the term Columbus Day back in 2009. Yesterday, the faculty voted for the new name, citing the following reasons:

Prior to the vote, faculty discussed the following goals presented by NAB [Native Americans at Brown]when advocating for the change:

  • to express the need for opportunities to increase visibility of Native Americans and recognition of Native Americans at Brown;
  • to celebrate the contributions of indigenous communities and cultures; and
  • to acknowledge a legacy of displacement and oppression of Native American peoples.

Full account here (hat tip: Insider Higher Ed).

As a private university, Brown is of course welcome to do whatever it wants for the most part and the faculty’s stated goals are all swell by me. Just 0.4 percent of the undergrad student body (and just 0.1 percent of the grad student body) identify as “American Indian of Alaska Native.” But there’s an irony here, too, that goes beyond simple political correctness, as the elite (read: expensive) educational institution is brushing aside one commemoration of ethinc aggrievement for another.

Columbus Day is far less a celebration of the New World’s objectively racist and morally awful “discoverer” than it is a celebration of Italian Americans (the Genoese explorer Christopher Columbus sailed for Spain, arguably the most brutal of the European colonial powers in the Americas). Although the first celebration took place in 1792, it only became a national holiday (and one fully attached to Italian Americans) in 1937, after intense lobbying by the Knights of Columbus, a Catholic fraternal organization highly identified with Italians. In other words, Columbus Day is an ethnic-heritage celebration every bit as fake—and purely American—as St. Patrick’s Day or Cinco de Mayo.

While Italian Americans have faced nothing like the systematic discrimination that Native Americans have, it’s not as if they’ve been in the driver’s seat for much of American history, especially when the nation’s worst crimes were being waged against Indians. For instance, Italians were singled out not only as a reason for New York City’s early 20th century gun-control laws (they come from the land of the vendetta, don’t you know, and are really emotional!) and were targeted by explicitly racist immigration laws passed in the 1920s (Africa begins at Rome and all that, amirite?).

So while Brown’s overwhelmingly wealthy students and faculty congratulate themselves for pushing aside one relatively powerless ethnic group in the name of an even more powerless group, they might at least give a nod to the idea that pitting groups against one another like this is exactly how the really powerful keep their own power from being challenged.

Take it away, Sopranos:

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Central Bank Currency Wars Have Engaged The “Nuclear Option”

By former FX trader and current Bloomberg commentator Richard Breslow

The Evil One

An enduring curse of this financial crisis is the inability of markets to disengage from the clutches of the correlation of one. We see it ad seriatim, often day to day: everything is wonderful, all hail the central bank (Friday); the world is crashing, these empty suits are running us over the cliff (Tuesday).

Having gone on long enough, this phenomenon has turned traders into inveterate cynics who know the price of everything, and the value of nothing.

Markets function effectively only when relative value among assets has some measure of reality. Discounting future returns in a world of zero and negative interest rates is a Sisyphean task in the theater of the absurd. In today’s world, we reduce everything to buy or sell the lot.

You hear the term “safe haven” constantly. It is meaningless in a negative-rate induced carry trade world. No one is buying safety in JPY on bad days. They are busy getting blown out of the high risk stuff they funded with minus 0.1% rates

Currency wars can be nasty and don’t always have a winner. When they are waged with increasingly negative rates, it becomes the nuclear option.

Central banks embracing uncontrollable volatility and the evil of one.

When “forecasters” tell you oil is going to go up or down by 50% this year, they are not just trying to hit a home run, they will be able to dine out on for the next five years. Nor do they have a better understanding of supply and demand than everyone else. They don’t and don’t have to. Hate the world and it’s collapsing. Feeling less dyspeptic and it’s due for a rally

Of course with oil trading at 70% implied volatility on a $30/bbl handle, making bold predictions of huge moves expressed in percentages is more sleight of hand than probative

Every time the dust threatens to settle, assets try to find their fair value and everyone panics. Central banks respond with the sentimental encouragement that we see an absurd value in everything and ignore the market price of any single thing. Wild(e)


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GOLD – It’s Time to Pay Attention

Screen Shot 2016-02-03 at 10.08.48 AM

The last time I shared my thoughts on gold, a subject I had previously wrote about constantly, was all the way back in July of last year. That post was titled, 4 Mainstream Media Articles Mocking Gold That Should Make You Think. Here’s an excerpt:

There are many reasons why I stopped commenting on markets, but the main reason is that I started to recognize I wasn’t getting it right. In fact, in some cases I was getting it spectacularly wrong. Whenever this happens, I try to isolate the problem and fix it. In this case there was no fix, because much of why I was no longer getting it right was rooted in the fact that my heart, soul and passion had moved onto other things. My interests had expanded, and I started a blog to express myself on myriad other matters I deemed important. Providing relevant market information needs intense focus, and my focus had shifted elsewhere. I recognized that I wasn’t intellectually interested enough in centrally planned markets to provide insightful analysis, and so I stopped.

Years ago, Martin Armstrong was saying that nothing goes up in a straight line and that gold would experience a severe correction before beginning its real bull market. We are seeing his prediction unfold before our very eyes. What he also said is that as gold approached the $1,000 per/oz mark or even below, everyone would proclaim that “gold is dead” and start making comically bearish statements. In a nutshell, negative sentiment would plunge to levels not seen in years, if not more than a decade. We are starting to see this now.

I didn’t write this article to “call the bottom in gold” or anything like that. I merely want to flag these four articles due to the hyperbolic nature of some of the statements made (they are exhibiting pretty much exactly the same behavior as the gold bugs they mock do). I do think that something is happening on the sentiment front that warrants we are closer to the bottom than the mid-stages of a bear market.

Fast forward six months, and gold has been more or less flat. Nevertheless, a lot has changed in the interim and it’s time for an update. Specifically, the multi-year fundamental outlook has turned far more bullish, while sentiment remains depressed. Yesterday, following multiple back-to-back  messages about gold on Twitter, someone asked me for my bullish thesis, I wrote:

continue reading

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False Flags Are Just a Conspiracy Theor … Admitted Fact

Presidents, Prime Ministers, Congressmen, Generals, Spooks, Soldiers and Police ADMIT to False Flag Terror

In the following instances, officials in the government which carried out the attack (or seriously proposed an attack) admit to it, either orally, in writing, or through photographs or videos:

(1) Japanese troops set off a small explosion on a train track in 1931, and falsely blamed it on China in order to justify an invasion of Manchuria. This is known as the “Mukden Incident” or the “Manchurian Incident”. The Tokyo International Military Tribunal found: “Several of the participators in the plan, including Hashimoto [a high-ranking Japanese army officer], have on various occasions admitted their part in the plot and have stated that the object of the ‘Incident’ was to afford an excuse for the occupation of Manchuria by the Kwantung Army ….” And see this.

(2) A major with the Nazi SS admitted at the Nuremberg trials that – under orders from the chief of the Gestapo – he and some other Nazi operatives faked attacks on their own people and resources which they blamed on the Poles, to justify the invasion of Poland.

(3) Nazi general Franz Halder also testified at the Nuremberg trials that Nazi leader Hermann Goering admitted to setting fire to the German parliament building in 1933, and then falsely blaming the communists for the arson.

(4) Soviet leader Nikita Khrushchev admitted in writing that the Soviet Union’s Red Army shelled the Russian village of Mainila in 1939 – while blaming the attack on Finland – as a basis for launching the “Winter War” against Finland. Russian president Boris Yeltsin agreed that Russia had been the aggressor in the Winter War.

(5) The Russian Parliament, current Russian president Putin and former Soviet leader Gorbachev all admit that Soviet leader Joseph Stalin ordered his secret police to execute 22,000 Polish army officers and civilians in 1940, and then falsely blamed it on the Nazis.

(6) The British government admits that – between 1946 and 1948 – it bombed 5 ships carrying Jews attempting to flee the Holocaust to seek safety in Palestine, set up a fake group called “Defenders of Arab Palestine”, and then had the psuedo-group falsely claim responsibility for the bombings (and see this, this and this).

(7) Israel admits that in 1954, an Israeli terrorist cell operating in Egypt planted bombs in several buildings, including U.S. diplomatic facilities, then left behind “evidence” implicating the Arabs as the culprits (one of the bombs detonated prematurely, allowing the Egyptians to identify the bombers, and several of the Israelis later confessed) (and see this and this).

(8) The CIA admits that it hired Iranians in the 1950′s to pose as Communists and stage bombings in Iran in order to turn the country against its democratically-elected prime minister.

(9) The Turkish Prime Minister admitted that the Turkish government carried out the 1955 bombing on a Turkish consulate in Greece – also damaging the nearby birthplace of the founder of modern Turkey – and blamed it on Greece, for the purpose of inciting and justifying anti-Greek violence.

(10) The British Prime Minister admitted to his defense secretary that he and American president Dwight Eisenhower approved a plan in 1957 to carry out attacks in Syria and blame it on the Syrian government as a way to effect regime change.

(11) The former Italian Prime Minister, an Italian judge, and the former head of Italian counterintelligence admit that NATO, with the help of the Pentagon and CIA, carried out terror bombings in Italy and other European countries in the 1950s and blamed the communists, in order to rally people’s support for their governments in Europe in their fight against communism. As one participant in this formerly-secret program stated: “You had to attack civilians, people, women, children, innocent people, unknown people far removed from any political game. The reason was quite simple. They were supposed to force these people, the Italian public, to turn to the state to ask for greater security” (and see this) (Italy and other European countries subject to the terror campaign had joined NATO before the bombings occurred). And watch this BBC special. They also allegedly carried out terror attacks in France, Belgium, Denmark, Germany, Greece, the Netherlands, Norway, Portugal, the UK, and other countries.

False flag attacks carried out pursuant to this program include – by way of example only:

(12) In 1960, American Senator George Smathers suggested that the U.S. launch “a false attack made on Guantanamo Bay which would give us the excuse of actually fomenting a fight which would then give us the excuse to go in and [overthrow Castro]“.

(13) Official State Department documents show that, in 1961, the head of the Joint Chiefs and other high-level officials discussed blowing up a consulate in the Dominican Republic in order to justify an invasion of that country. The plans were not carried out, but they were all discussed as serious proposals.

(14) As admitted by the U.S. government, recently declassified documents show that in 1962, the American Joint Chiefs of Staff signed off on a plan to blow up AMERICAN airplanes (using an elaborate plan involving the switching of airplanes), and also to commit terrorist acts on American soil, and then to blame it on the Cubans in order to justify an invasion of Cuba. See the following ABC news report; the official documents; and watch this interview with the former Washington Investigative Producer for ABC’s World News Tonight with Peter Jennings.

(15) In 1963, the U.S. Department of Defense wrote a paper promoting attacks on nations within the Organization of American States – such as Trinidad-Tobago or Jamaica – and then falsely blaming them on Cuba.

(16) The U.S. Department of Defense even suggested covertly paying a person in the Castro government to attack the United States: “The only area remaining for consideration then would be to bribe one of Castro’s subordinate commanders to initiate an attack on Guantanamo.”

(17) The NSA admits that it lied about what really happened in the Gulf of Tonkin incident in 1964 … manipulating data to make it look like North Vietnamese boats fired on a U.S. ship so as to create a false justification for the Vietnam war.

(18) A U.S. Congressional committee admitted that – as part of its “Cointelpro” campaign – the FBI had used many provocateurs in the 1950s through 1970s to carry out violent acts and falsely blame them on political activists.

(19) A top Turkish general admitted that Turkish forces burned down a mosque on Cyprus in the 1970s and blamed it on their enemy. He explained: “In Special War, certain acts of sabotage are staged and blamed on the enemy to increase public resistance. We did this on Cyprus; we even burnt down a mosque.” In response to the surprised correspondent’s incredulous look the general said, “I am giving an example”.

(20) A declassified 1973 CIA document reveals a program to train foreign police and troops on how to make booby traps, pretending that they were training them on how to investigate terrorist acts:

The Agency maintains liaison in varying degrees with foreign police/security organizations through its field stations ….

 

[CIA provides training sessions as follows:]

 

a. Providing trainees with basic knowledge in the uses of commercial and military demolitions and incendiaries as they may be applied in terrorism and industrial sabotage operations.

 

b. Introducing the trainees to commercially available materials and home laboratory techniques, likely to he used in the manufacture of explosives and incendiaries by terrorists or saboteurs.

 

c. Familiarizing the trainees with the concept of target analysis and operational planning that a saboteur or terrorist must employ.

 

d. Introducing the trainees to booby trapping devices and techniques giving practical experience with both manufactured and improvised devices through actual fabrication.

 

***

 

The program provides the trainees with ample opportunity to develop basic familiarity and use proficiently through handling, preparing and applying the various explosive charges, incendiary agents, terrorist devices and sabotage techniques.

(21) The German government admitted (and see this) that, in 1978, the German secret service detonated a bomb in the outer wall of a prison and planted “escape tools” on a prisoner – a member of the Red Army Faction – which the secret service wished to frame the bombing on.

(22) A Mossad agent admits that, in 1984, Mossad planted a radio transmitter in Gaddaffi’s compound in Tripoli, Libya which broadcast fake terrorist trasmissions recorded by Mossad, in order to frame Gaddaffi as a terrorist supporter. Ronald Reagan bombed Libya immediately thereafter.

(23) The South African Truth and Reconciliation Council found that, in 1989, the Civil Cooperation Bureau (a covert branch of the South African Defense Force) approached an explosives expert and asked him “to participate in an operation aimed at discrediting the ANC [the African National Congress] by bombing the police vehicle of the investigating officer into the murder incident”, thus framing the ANC for the bombing.

(24) An Algerian diplomat and several officers in the Algerian army admit that, in the 1990s, the Algerian army frequently massacred Algerian civilians and then blamed Islamic militants for the killings (and see this video; and Agence France-Presse, 9/27/2002, French Court Dismisses Algerian Defamation Suit Against Author).

(25) In 1993, a bomb in Northern Ireland killed 9 civilians. Official documents from the Royal Ulster Constabulary (i.e. the British government) show that the mastermind of the bombing was a British agent, and that the bombing was designed to inflame sectarian tensions. And see this.

(26) The United States Army’s 1994 publication Special Forces Foreign Internal Defense Tactics Techniques and Procedures for Special Forces – updated in 2004 – recommends employing terrorists and using false flag operations to destabilize leftist regimes in Latin America. False flag terrorist attacks were carried out in Latin America and other regions as part of the CIA’s “Dirty Wars“. And see this.

(27) Similarly, a CIA “psychological operations” manual prepared by a CIA contractor for the Nicaraguan Contra rebels noted the value of assassinating someone on your own side to create a “martyr” for the cause. The manual was authenticated by the U.S. government. The manual received so much publicity from Associated Press, Washington Post and other news coverage that – during the 1984 presidential debate – President Reagan was confronted with the following question on national television:

At this moment, we are confronted with the extraordinary story of a CIA guerrilla manual for the anti-Sandinista contras whom we are backing, which advocates not only assassinations of Sandinistas but the hiring of criminals to assassinate the guerrillas we are supporting in order to create martyrs.

(28) An Indonesian fact-finding team investigated violent riots which occurred in 1998, and determined that “elements of the military had been involved in the riots, some of which were deliberately provoked”.

(29) Senior Russian Senior military and intelligence officers admit that the KGB blew up Russian apartment buildings in 1999 and falsely blamed it on Chechens, in order to justify an invasion of Chechnya (and see this report and this discussion).

(30) As reported by BBC, the New York Times, and Associated Press, Macedonian officials admit that the government murdered 7 innocent immigrants in cold blood and pretended that they were Al Qaeda soldiers attempting to assassinate Macedonian police, in order to join the “war on terror”.

(31) At the July 2001 G8 Summit in Genoa, Italy, black-clad thugs were videotaped getting out of police cars, and were seen by an Italian MP carrying “iron bars inside the police station”. Subsequently, senior police officials in Genoa subsequently admitted that police planted two Molotov cocktails and faked the stabbing of a police officer at the G8 Summit, in order to justify a violent crackdown against protesters.

(32) The U.S. falsely blamed Iraq for playing a role in the 9/11 attacks – as shown by a memo from the defense secretary – as one of the main justifications for launching the Iraq war. Even after the 9/11 Commission admitted that there was no connection, Dick Cheney said that the evidence is “overwhelming” that al Qaeda had a relationship with Saddam Hussein’s regime, that Cheney “probably” had information unavailable to the Commission, and that the media was not ‘doing their homework’ in reporting such ties. Top U.S. government officials now admit that the Iraq war was really launched for oil … not 9/11 or weapons of mass destruction. Despite previous “lone wolf” claims, many U.S. government officials now say that 9/11 was state-sponsored terror; but Iraq was not the state which backed the hijackers. (Many U.S. officials have alleged that 9/11 was a false flag operation by rogue elements of the U.S. government; but such a claim is beyond the scope of this discussion. The key point is that the U.S. falsely blamed it on Iraq, when it knew Iraq had nothing to do with it.).

(33) Although the FBI now admits that the 2001 anthrax attacks were carried out by one or more U.S. government scientists, a senior FBI official says that the FBI was actually told to blame the Anthrax attacks on Al Qaeda by White House officials (remember what the anthrax letters looked like). Government officials also confirm that the white House tried to link the anthrax to Iraq as a justification for regime change in that country.

(34) According to the Washington Post, Indonesian police admit that the Indonesian military killed American teachers in Papua in 2002 and blamed the murders on a Papuan separatist group in order to get that group listed as a terrorist organization.

(35) The well-respected former Indonesian president also admits that the government probably had a role in the Bali bombings.

(36) Police outside of a 2003 European Union summit in Greece were filmed planting Molotov cocktails on a peaceful protester.

(37) Former Department of Justice lawyer John Yoo suggested in 2005 that the US should go on the offensive against al-Qaeda, having “our intelligence agencies create a false terrorist organization. It could have its own websites, recruitment centers, training camps, and fundraising operations. It could launch fake terrorist operations and claim credit for real terrorist strikes, helping to sow confusion within al-Qaeda’s ranks, causing operatives to doubt others’ identities and to question the validity of communications.”

(38) Similarly, in 2005, Professor John Arquilla of the Naval Postgraduate School – a renowned US defense analyst credited with developing the concept of ‘netwar’ – called for western intelligence services to create new “pseudo gang” terrorist groups, as a way of undermining “real” terror networks. According to Pulitzer-Prize winning journalist Seymour Hersh, Arquilla’s ‘pseudo-gang’ strategy was, Hersh reported, already being implemented by the Pentagon:

“Under Rumsfeld’s new approach, I was told, US military operatives would be permitted to pose abroad as corrupt foreign businessmen seeking to buy contraband items that could be used in nuclear-weapons systems. In some cases, according to the Pentagon advisers, local citizens could be recruited and asked to join up with guerrillas or terrorists

The new rules will enable the Special Forces community to set up what it calls ‘action teams’ in the target countries overseas which can be used to find and eliminate terrorist organizations. ‘Do you remember the right-wing execution squads in El Salvador?’ the former high-level intelligence official asked me, referring to the military-led gangs that committed atrocities in the early nineteen-eighties. ‘We founded them and we financed them,’ he said. ‘The objective now is to recruit locals in any area we want. And we aren’t going to tell Congress about it.’ A former military officer, who has knowledge of the Pentagon’s commando capabilities, said, ‘We’re going to be riding with the bad boys.’”

(39) United Press International reported in June 2005:

U.S. intelligence officers are reporting that some of the insurgents in Iraq are using recent-model Beretta 92 pistols, but the pistols seem to have had their serial numbers erased. The numbers do not appear to have been physically removed; the pistols seem to have come off a production line without any serial numbers. Analysts suggest the lack of serial numbers indicates that the weapons were intended for intelligence operations or terrorist cells with substantial government backing. Analysts speculate that these guns are probably from either Mossad or the CIA. Analysts speculate that agent provocateurs may be using the untraceable weapons even as U.S. authorities use insurgent attacks against civilians as evidence of the illegitimacy of the resistance.

(40) Undercover Israeli soldiers admitted in 2005 to throwing stones at other Israeli soldiers so they could blame it on Palestinians, as an excuse to crack down on peaceful protests by the Palestinians.

(41) Quebec police admitted that, in 2007, thugs carrying rocks to a peaceful protest were actually undercover Quebec police officers (and see this).

(42) A 2008 US Army special operations field manual recommends that the U.S. military use surrogate non-state groups such as “paramilitary forces, individuals, businesses, foreign political organizations, resistant or insurgent organizations, expatriates, transnational terrorism adversaries, disillusioned transnational terrorism members, black marketers, and other social or political ‘undesirables.’” The manual specifically acknowledged that U.S. special operations can involve both counterterrorism and “Terrorism” (as well as “transnational criminal activities, including narco-trafficking, illicit arms-dealing, and illegal financial transactions.”)

(43) The former head of Secret Services and Head of State of Italy (Francesco Cossiga) advised the 2008 minister in charge of the police, on how to deal with protests from teachers and students:

He should do what I did when I was Minister of the Interior … infiltrate the movement with agents provocateurs inclined to do anything …. And after that, with the strength of the gained population consent, … beat them for blood and beat for blood also those teachers that incite them. Especially the teachers. Not the elderly, of course, but the girl teachers yes.

(44) At the G20 protests in London in 2009, a British member of parliament saw plain clothes police officers attempting to incite the crowd to violence.

(45) Egyptian politicians admitted (and see this) that government employees looted priceless museum artifacts in 2011 to try to discredit the protesters.

(46) Rioters who discredited the peaceful protests against the swearing in of the Mexican president in 2012 admitted that they were paid 300 pesos each to destroy everything in their path. According to Wikipedia, photos also show the vandals waiting in groups behind police lines prior to the violence.

(47) A Colombian army colonel has admitted that his unit murdered 57 civilians, then dressed them in uniforms and claimed they were rebels killed in combat.

(48) On November 20, 2014, Mexican agent provocateurs were transported by army vehicles to participate in the 2014 Iguala mass kidnapping protests, as was shown by videos and pictures distributed via social networks.

(49) The highly-respected writer for the Telegraph Ambrose Evans-Pritchard says that the head of Saudi intelligence – Prince Bandar – recently admitted that the Saudi government controls “Chechen” terrorists.

(50) High-level American sources admitted that the Turkish government – a fellow NATO country – carried out the chemical weapons attacks blamed on the Syrian government; and high-ranking Turkish government admitted on tape plans to carry out attacks and blame it on the Syrian government.

(51) The Ukrainian security chief admits that the sniper attacks which started the Ukrainian coup were carried out in order to frame others. Ukrainian officials admit that the Ukrainian snipers fired on both sides, to create maximum chaos.

(52) Burmese government officials admitted that Burma (renamed Myanmar) used false flag attacks against Muslim and Buddhist groups within the country to stir up hatred between the two groups, to prevent democracy from spreading.

(53) Britain’s spy agency has admitted (and see this) that it carries out “digital false flag” attacks on targets, framing people by writing offensive or unlawful material … and blaming it on the target.

(54) U.S. soldiers have admitted that if they kill innocent Iraqis and Afghanis, they then “drop” automatic weapons near their body so they can pretend they were militants

(55) Similarly, police frame innocent people for crimes they didn’t commit. The practice is so well-known that the New York Times noted in 1981:

In police jargon, a throwdown is a weapon planted on a victim.

Newsweek reported in 1999:

Perez, himself a former [Los Angeles Police Department] cop, was caught stealing eight pounds of cocaine from police evidence lockers. After pleading guilty in September, he bargained for a lighter sentence by telling an appalling story of attempted murder and a “throwdown”–police slang for a weapon planted by cops to make a shooting legally justifiable. Perez said he and his partner, Officer Nino Durden, shot an unarmed 18th Street Gang member named Javier Ovando, then planted a semiautomatic rifle on the unconscious suspect and claimed that Ovando had tried to shoot them during a stakeout.

Wikipedia notes:

As part of his plea bargain, Pérez implicated scores of officers from the Rampart Division’s anti-gang unit, describing routinely beating gang members, planting evidence on suspects, falsifying reports and covering up unprovoked shootings.

(As a side note – and while not technically false flag attacks – police have been busted framing innocent people in many other ways, as well.)

(56) A former U.S. intelligence officer recently alleged:

Most terrorists are false flag terrorists or are created by our own security services.

(57) The head and special agent in charge of the FBI’s Los Angeles office said that most terror attacks are committed by the CIA and FBI as false flags. Similarly, the director of the National Security Agency under Ronald Reagan – Lt. General William Odom said:

By any measure the US has long used terrorism. In ‘78-79 the Senate was trying to pass a law against international terrorism – in every version they produced, the lawyers said the US would be in violation.

(audio here).

(58) Leaders throughout history have acknowledged the “benefits” of of false flags to justify their political agenda:

Terrorism is the best political weapon for nothing drives people harder than a fear of sudden death”.
– Adolph Hitler

 

“Why of course the people don’t want war … But after all it is the leaders of the country who determine the policy, and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship … Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country.”
– Hermann Goering, Nazi leader.

 

“The easiest way to gain control of a population is to carry out acts of terror. [The public] will clamor for such laws if their personal security is threatened”.
– Josef Stalin

Postscript:  Unmarked Israeli fighter jets and unmarked torpedo boats attacked – and did everything they could to sink – a U.S. ship off the coast of Egypt in 1967 called the USS Liberty.

The attack started by targeting communications on the ship so that the Americans couldn’t radio for help. The Israelis then jammed the ship’s emergency distress channel, and shot at escaping life rafts in an attempt to prevent survivors from escaping.

Transcripts of conversations between the Israeli pilots and Israeli military show that Israel knew it was an American ship.

Numerous top-level American military and intelligence officials – including Admiral Thomas H. Moorer, former Chairman of the Joint Chiefs of Staff – believe that this was a failed false flag attack, and that Israel would have attempted to blame Egypt if the Israeli military had succeeded in sinking the ship. Indeed, President Lyndon Johnson dispatched nuclear-armed fighter jets to drop nuclear bombs on Cairo, Egypt.  They were only recalled at the last minute, when Johnson realized that it was the Israelis – and not the Egyptians – who had fired on the Liberty.

The following actions are arguably an admission that Israel intended to frame Egypt for the attack, and didn’t want the Liberty’s crew to be able to tell the world what really happened: (1) using unmarked jets and boats, (2) destroying the Liberty’s communication equipment and jamming the Liberty’s emergency distress channel, and (3) trying to sink the ship and destroy all liferafts.


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After Focusing on Social Conservatives, Can Cruz Appeal to Rand Paul’s Liberty-Minded Voters?

Are they similar enough for Rand fans?Sen. Ted Cruz has graced Reason‘s cover in an analysis of his ambitiousness, his background, his rebelliousness, and the extent that there’s a genuine libertarian streak to his positions and behavior. It’s worth taking a look at where Cruz stands now on these matters, not just because he won the Iowa caucuses, but with the announcement today that Sen. Rand Paul is suspending his presidential campaign. When reporting Paul’s campaign ending, the Wall Street Journal wonders in its lede whether Paul’s voters will be breaking Cruz’s way.

Paul and Cruz have not exactly been total allies, but they have worked together frequently. In the most recent debate, when Paul dinged Cruz for not being at the Senate to vote on Paul’s “Audit the Fed” bill, Cruz responded that he supported it and would be more than happy to sign it when he was president. Cruz also showed up to support Paul’s filibuster to stop the renewal of the part of the PATRIOT Act that authorized mass domestic surveillance (though Cruz differed from Paul by supporting the USA Freedom Act compromise, which Paul opposed because it didn’t go far enough). Paul also showed up to assist Cruz’s anti-Obamacare filibuster.

Recall that a few years ago, Cruz and Paul were lumped together as “Wacko Birds” by Sen. John McCain for not being good establishment conservatives and doing what they were told. But Cruz and Paul are not exactly “wacko birds” of a feather. Nick Gillespie recently decried “Cruz’s Laughable Libertarian Pose” over at The Daily Beast, criticizing Cruz’s militaristic foreign policy and anti-immigrant animus (and big spending promises). With Rand Paul perceived as more compromising to conservatives and less libertarian than his father, what does that make Cruz in the eyes of libertarian Republican voters?

Here are a few things libertarian Republicans may be chewing over about Cruz when considering where their vote might go (if it goes anywhere at all—staying home is an option, too):

  • Cruz seemed to have captured the evangelical conservative vote in Iowa, indeed bringing out a greater number of them to the caucuses (check out Stephanie Slade’s turnout analysis here). Social conservative appeals to religion have played a major role in Cruz’s campaign, and he is the most vocal of top candidates in opposition to same-sex marriage recognition. But even so, he promotes giving states authority to decide whether to recognize same-sex marriages, which is essentially the same position as Paul. But unlike Paul, Cruz is willing to bring aboard speakers to actually decry gay marriage as “evil” and “wicked” and to all but call for purges.
  • Cruz has flip-flopped, in a good way, on marijuana legalization. Cruz once criticized President Barack Obama for not demanding the Department of Justice crack down on Colorado and Washington to enforce the federal ban on marijuana use. Cruz has since embraced marijuana federalism, telling attendees at last year’s Conservative Political Action Conference that he would let states go their own way, though he personally still opposes legalization.
  • Cruz has flip-flopped, in a bad way, on federal sentencing reform. As Jacob Sullum recently detailed, Cruz was an original co-sponsor of the Smarter Sentencing Act to reduce some federal drug penalties and loosen mandatory minimum sentencing in some drug cases, part of a bipartisan push for criminal justice reform. But now, a year later, he’s apparently opposing sentencing reform, stoking fears that those who are released may commit new crimes.
  • After supporting reforms to restrict the federal government’s authority to collect mass amounts of metadata from its own citizens, Cruz nevertheless characterized Edward Snowden as a “traitor.” Sen. Marco Rubio, who supports pretty much letting the government collect whatever data it wants, has gone after Cruz and Paul in debates for calling for restraints in what the National Security Agency (NSA) may collect without getting a warrant. Cruz supported the passage of the USA Freedom Act, which curtailed the mass collection of all citizen cellphone metadata (but does give the NSA the authority to collect more specific information from phone companies themselves). It’s very obvious that this law would never have come into play and the mass surveillance authorities of Section 215 of the PATRIOT Act would not have been allowed to expire had Snowden not leaked what the NSA was doing to the American public. Early on, while not excusing the illegality of what Snowden had done, he said it seemed likely that Snowden had “done a valuable public service by bringing it to light.” Rubio used those comments to attack Cruz, prompting Cruz’s campaign put out a statement in January saying that Snowden’s actions had “materially aided terrorists” and that Snowden should be tried for treason.
  • Cruz takes some solid—even brave—positions against corporate subsides. Cruz won Iowa while getting attacked (particularly by Trump) for his call for scaling back and eventually eliminating ethanol subsides, which put him at odds with Iowa’s powerful biofuel industry. It was important moment for fighting crony capitalism on the right. He was also an opponent of reauthorizing the Export-Import Bank, a cronyist and unneeded institution that uses taxpayer dollars to guarantee loans for major corporations like Boeing. He managed to infuriate the Republican establishment in the process.
  • Cruz, like establishment Republicans, doesn’t think cutting spending and shrinking the government applies to the military and immigration enforcement. Cruz has voted against budget resolutions, arguing that we need “meaningful entitlement reform,” but also calls for tripling the size of the U.S. border patrol and supports increased military spending.

That’s a lot to consider. Establishment conservatives like McCain may see all these “tea party” insurgents the same way, but there are some significant differences between Paul and Cruz as candidates, especially when a libertarian is evaluating what they have to offer.

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