He Said That? 12/16/17

From Fyodor Dostoyevsky (1821-1881), Russian novelist, short story writer, essayist, journalist and philosopher, The House of the Dead (1862):

Money is coined liberty, and so it is ten times dearer to the man who is deprived of freedom

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The Great Oil Swindle, by Chris Martenson

Supposedly declining break even costs for oil rigs often embody unrealistic assumptions about the amount of oil that will be produced from those rigs. From Chris Martenson at peakprosperity.com:

When it comes to the story we’re being told about America’s rosy oil prospects, we’re being swindled.

At its core, the swindle is this: The shale industry’s oil production forecasts are vastly overstated.

Swindle:  Noun  – A fraudulent scheme or action.

And the swindle is not just affecting the US.  It’s badly distorted everything from current geopolitics to future oil forecasts.

The false conclusions the world is drawing as a result of the self-deception and outright lies we’re being told is putting our future prosperity in major jeopardy. Policy makers and ordinary citizens alike have been misled, and everyone — everyone — is unprepared for the inevitable and massive coming oil price shock.

An Oil Price Spike Would Burst The ‘Everything Bubble’

Our thesis at Peak Prosperity is that the world’s equity and bond markets are enormous financial bubbles in search of a pin. Sadly, history shows there’s nothing quite as sharp and terminal to these sorts of bubbles as a rapid spike in the price of oil.

And we see a huge price spike on the way.

As a reminder, bubbles exist when asset prices rise beyond what incomes can sustain.  Greece is a prime recent example. In 2008 when the price of oil spiked to  $147/bbl, Greece could no longer afford imported oil. But oil is a necessity so it was bought anyway, their national balances of payments were stressed to the point that they were exposed as insolvent and then their debt bubble promptly and predictably popped.   The rest is history.  Greece is now a nation of ruins and their economy might as well be displayed alongside the Acropolis.

What happened to Greece will happen to any and every financially marginal oil-importing nation. As a reminder, the US still remains a net oil importer (more on that below).

Well, if you thought that world debt levels were dizzyingly high back at the beginning of the Great Recession in 2008, then you might want a fainting couch nearby before looking at this next chart:

(Source)

To continue reading: The Great Oil Swindle

Why America’s Law Enforcement Empire Resembles Secret Police in a Dictatorship, by Philip M. Giraldi

The biggest danger posed by 9/11 has been the US government’s response to it. From Philip Giraldi at strategic-culture.org:

Secret police are characteristic of dictatorships, or so goes the conventional thinking on the subject. Police in democracies operate for the most part transparently and within a set of rules and guidelines that limits their ability to gratuitously punish citizens who have done nothing wrong. If a policeman operating under rule-of-law steps out of line, he can be held accountable. That is also conventional thinking.

But what happens when an ostensibly “democratic” police force becomes corrupted and starts doing things that are outside its zone of responsibility, and does so to benefit a political relationship that will in turn protect those who have broken the law under cover of carrying out their official duties? That is the characteristic of what we have been calling a “deep state,” where forces drawn generally from the political class and security services conspire together to control what the public is allowed to know while also manipulating nuisances like elections to make sure that the “correct” outcome emerges.

Indeed, deep state operating in a democracy or republic is far more dangerous that the secret police in a dictatorship. That is because in a system where the forces of the state are all-powerful, nearly everyone expects that what they read and what the government says is all a lie. In a democratic system there is what intelligence officers would refer to as plausible denial, which means that even when the government is behaving very badly much of the public will believe that it is acting honorably because they want to trust that the system works. And when the deep state includes management of the media, many citizens will likewise believe what they are reading or hearing is honest reporting, even when it is not.

Due to the events of the past year in particular, many Americans have become convinced that there now exists something like a secret police operating in the United States that is a fusion of some political dealmakers with certain politicized elements in the intelligence and security services. However one regards President Donald Trump and his former National Security Adviser Michael Flynn, there is nevertheless something odd in terms of how they have been investigated and, in the case of Flynn, legally entrapped to convict him of lying to the FBI to force him to cut a deal with the Special Counsel inquiry headed by Robert Mueller.

To continue reading: Why America’s Law Enforcement Empire Resembles Secret Police in a Dictatorship

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The Best Film Synopsis Ever, from The Burning Platform

Bond Markets Really Are Signalling a Slowdown, by Lakshman Achuthan and Anirvan Banerji

Historically, a steadily flattening yield curve has a reasonably good record of predicting recessions. From Lakshman Achuthan and Anirvan Banerji at bloomberg.com:

Analysts shouldn’t dismiss the yield curve’s message just because inflation expectations have been declining in recent years. 

Exercise caution.

Photographer: Bildquelle/ullstein bild via Getty Images

When it comes to the economic outlook, the bond market is smarter than the stock market. That Wall Street adage appears to be on the money from a cyclical vantage point, with key indicators in the fixed-income markets independently corroborating slowdown signals from the Economic Cycle Research Institute’s leading indexes.

 The yield curve is widely considered to be among the most prescient indicators. That’s why its flattening this year has been troublesome for an otherwise optimistic consensus to explain away.
This hasn’t stopped optimistic analysts from dismissing the yield curve’s message on the grounds that inflation expectations have been declining in recent years, or that foreign central banks like the European Central Bank and the Bank of Japan continue to artificially suppress their bond yields, pulling down U.S. yields. We’re reminded of Sir John Templeton’s warning that “this time it’s different” are the “four most costly words in the annals of investing” — but that’s effectively what it means to simply ignore the slowdown signals emanating from the fixed-income markets.

Of course, there’s no Holy Grail in the world of forecasting, which is why we look at a wide array of leading indexes that each includes many inputs. From that vantage point, the yield curve flattening actually makes a lot of sense. Growth in ECRI’s U.S. Short Leading Index, which doesn’t include the yield curve, has been falling since early this year (top line in chart), pointing to a U.S. growth rate cycle downturn that should become evident in coming months.

 

Next, please note the separate slowdown signal coming from the difference between the yields on junk bonds and investment-grade corporate bonds — also known as the quality spread (middle line, shown inverted). It has widened in recent months because the rising default risk for junk bonds during economic slowdowns makes their yields climb faster than those of investment grade bonds, which are less likely to default.

To continue reading: Bond Markets Really Are Signalling a Slowdown

Iran to Join EAEU – 45 Years of Foreign Policy Down the Drain, by Tom Luongo

The US has tried to isolate, pressure, and sanction Iran since the Iranian revolution in 1979. The policy has failed. From Tom Luongo at tomluongo.me:

Iran is joining the Eurasian Economic Union (EAEU). By early next year, February by this account, Iran will join the five founding members of the Union and open the door for Turkey to do so later in 2018.

Between this and the end of the war in Syria, it’s not hard to declare the Brzezinski Doctrine of U.S.-led Central Asian chaos as gasping its last breaths.

Iran finally joining the EAEU is a response to a number of factors, the most important of which is the continued belligerence by the U.S. Expanded economic sanctions on Iran and the EAEU’s leader Russia has created the need for greater coordination of economic and foreign policy objectives between them.

And it is creating the new realities in the region that will reshape the word for the next hundred years.

The Nuclear Gambit

In the dying days of the Obama administration it looked like the goal was to placate Iran to stop its pivot towards Russia and China. I believe that was the driving force behind Obama’s negotiating the controversial nuclear deal.

In effect, Obama tried to trade unfreezing Iran’s hundreds of billions in assets held in Western banks for Iran to ignore our atomization of Syria and the creation of a complete mess there.

When you stop to think about it like that how venal are we? After putting Iran under economic lockdown, having frozen its accounts, barring them from interbank communication with customers (SWIFT removal), inducing hyperinflation to sow regime change they would agree to allowing its ally, Syria, to be handed over to Wahabist animals.

In exchange they would repudiate Russisa and be thankful for the opportunity to get their money back by signing a deal which forbade them from obtaining nuclear weapons?

Such is the ‘logic’ of the mental midgets running our foreign policy under Obama.

So, now, having assisted Russia and the Syrian army in defeating ISIS Iran is making the smart move by further integrating its economy in need of diversification and investment by joining an economic union which should align all of Central Asia’s interests along a similar path.

Chaos no longer. Zbigniew Brzezinski isn’t just dead, his strategy is as well.

Left to the likes of Obama, Hillary Clinton, John McCain and the dimbulbs of the Bush the Lesser administration before them, these buffoons were outplayed at every turn by Vladimir Putin, Chinese Premier Xi Jinping and Iranian President Hassan Rouhani.

And the world will soon be a better place for it.

To continue reading: Iran to Join EAEU – 45 Years of Foreign Policy Down the Drain

FBI Edits To Clinton Exoneration Go Far Beyond What Was Previously Known; Comey, McCabe, Strzok Implicated, by Tyler Durden

Any language which implicated that Hillary Clinton might have done something illegal in connection with her emails in James Comey’s draft statement was excised from the final statement. From Tyler Durden at zerohedge.com:

The Senate Homeland Security and Governmental Affairs Committee has discovered that edits made to former FBI Director James Comey’s statement exonerating Hillary Clinton for transmitting classified info over an unsecured, private email server went far beyond what was previously known, as detailed in a Thursday letter from committee chairman Sen. Ron Johnson (R-WI) to FBI Director Christopher Wray.

James Comey, Andrew McCabe, Peter Strzok

The letter reveals specific edits made by senior FBI agents when Deputy Director Andrew McCabe exchanged drafts of Comey’s statement with senior FBI officials, including Peter Strzok, Strzok’s direct supervisor, E.W. “Bill” Priestap, Jonathan Moffa, and an unnamed employee from the Office of General Counsel (identified by Newsweek as DOJ Deputy General Counsel Trisha Anderson) – in what was a coordinated conspiracy among top FBI brass to decriminalize Clinton’s conduct by changing legal terms and phrases, omitting key information, and minimizing the role of the Intelligence Community in the email investigation. Doing so virtually assured that then-candidate Hillary Clinton would not be prosecuted.

Heather Samuelson and Heather [sic] Mills 

Also mentioned in the letter are the immunity agreements granted by the FBI in June 2016 to top Obama advisor Cheryl Mills and aide Heather Samuelson – who helped decide which Clinton emails were destroyed before turning over the remaining 30,000 records to the State Department. Of note, the FBI agreed to destroy evidence on devices owned by Mills and Samuelson which were turned over in the investigation.

Sen. Johnson’s letter reads:

 According to documents produced by the FBI, FBI employees exchanged proposed edits to the draft statement. On May 6, Deputy Director McCabe forwarded the draft statement to other senior FBI employees, including Peter Strzok, E.W. Priestap, Jonathan Moffa, and an employee on the Office of General Counsel whose name has been redacted. While the precise dates of the edits and identities of the editors are not apparent from the documents, the edits appear to change the tone and substance of Director Comey’s statement in at least three respects
 It was already known that Strzok – who was demoted to the FBI’s HR department after anti-Trump text messages to his mistress were uncovered by an internal FBI watchdog – was responsible for downgrading the language regarding Clinton’s conduct from the criminal charge of “gross negligence” to “extremely careless.”