Category Archives: Governments

How America Armed Terrorists in Syria, by Gareth Porter

The real US goal in Syria has never been to fight Islamic extremists, it has been to depose Bashar al-Assad. In furtherance of that goal, rather than fight the extremists, the US has armed them. From Gareth Porter at americanconservative.com:

Three-term Congresswoman Tulsi Gabbard of Hawaii, a member of both the Armed Services and Foreign Affairs committees, has proposed legislation that would prohibit any U.S. assistance to terrorist organizations in Syria as well as to any organization working directly with them. Equally important, it would prohibit U.S. military sales and other forms of military cooperation with other countries that provide arms or financing to those terrorists and their collaborators.

Gabbard’s “Stop Arming Terrorists Act” challenges for the first time in Congress a U.S. policy toward the conflict in the Syrian civil war that should have set off alarm bells long ago: in 2012-13 the Obama administration helped its Sunni allies Turkey, Saudi Arabia, and Qatar provide arms to Syrian and non-Syrian armed groups to force President Bashar al-Assad out of power. And in 2013 the administration began to provide arms to what the CIA judged to be “relatively moderate” anti-Assad groups—meaning they incorporated various degrees of Islamic extremism.

That policy, ostensibly aimed at helping replace the Assad regime with a more democratic alternative, has actually helped build up al Qaeda’s Syrian franchise al Nusra Front into the dominant threat to Assad.

The supporters of this arms-supply policy believe it is necessary as pushback against Iranian influence in Syria. But that argument skirts the real issue raised by the policy’s history.  The Obama administration’s Syria policy effectively sold out the U.S. interest that was supposed to be the touchstone of the “Global War on Terrorism”—the eradication of al Qaeda and its terrorist affiliates. The United States has instead subordinated that U.S. interest in counter-terrorism to the interests of its Sunni allies. In doing so it has helped create a new terrorist threat in the heart of the Middle East.  

The policy of arming military groups committed to overthrowing the government of President Bashar al-Assad began in September 2011, when President Barack Obama was pressed by his Sunni allies—Turkey, Saudi Arabia and Qatar—to supply heavy weapons to a military opposition to Assad they were determined to establish. Turkey and the Gulf regimes wanted the United States to provide anti-tank and anti-aircraft weapons to the rebels, according to a former Obama Administration official involved in Middle East issues.

To continue reading: How America Armed Terrorists in Syria

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If We Don’t Change the Way Money Is Created, Rising Inequality and Social Disorder Are Inevitable, by Charles Hugh Smith

Charles Hugh Smith points out some of the many problems that render central banking unsustainable. From Smith at oftwominds.com:

Centrally issued money optimizes inequality, monopoly, cronyism, stagnation and systemic instability.
Everyone who wants to reduce wealth and income inequality with more regulations and taxes is missing the key dynamic: central banks’ monopoly on creating and issuing money widens wealth inequality, as those with access to newly issued money can always outbid the rest of us to buy the engines of wealth creation.
History informs us that rising wealth and income inequality generate social disorder.
Access to low-cost credit issued by central banks creates financial and political power. Those with access to low-cost credit have a monopoly as valuable as the one to create money.
Compare the limited power of an individual with cash and the enormous power of unlimited cheap credit.
Let’s say an individual has saved $100,000 in cash. He keeps the money in the bank, which pays him less than 1% interest. Rather than earn this low rate, he decides to loan the cash to an individual who wants to buy a rental home at 4% interest.
There’s a tradeoff to earn this higher rate of interest: the saver has to accept the risk that the borrower might default on the loan, and that the home will not be worth the $100,000 the borrower owes.
The bank, on the other hand, can perform magic with the $100,000 they obtain from the central bank. The bank can issue 19 times this amount in new loans—in effect, creating $1,900,000 in new money out of thin air.
This is the magic of fractional reserve lending. The bank is only required to hold a small percentage of outstanding loans as reserves against losses. If the reserve requirement is 5%, the bank can issue $1,900,000 in new loans based on the $100,000 in cash: the bank holds assets of $2,000,000, of which 5% ($100,000) is held in cash reserves.

Are Illinois & Puerto Rico Our Future? by Patrick J. Buchanan

The answer is yes (see “A Jubilee is Coming“). From Patrick J. Buchanan at buchanan.org:

If Gov. Bruce Rauner and his legislature in Springfield do not put a budget together by Friday, the Land of Lincoln will be the first state in the Union to see its debt plunge into junk-bond status.

Illinois has $14.5 billion in overdue bills, $130 billion in unfunded pension obligations, and no budget. “We can’t manage our money,” says Rauner. “We’re like a banana republic.”

Speaking of banana republics, Puerto Rico, which owes $74 billion to creditors who hold its tax-exempt bonds, and $40 billion in unfunded pension liabilities, has already entered bankruptcy proceedings.

The island’s imaginative 38-year-old governor, Ricardo Rossello, however, has a solution. Call Uncle Sam. On June 11, Rossello held a plebiscite, with a 23 percent turnout, that voted 97 percent to make Puerto Rico our 51st state.

“(T)he federal government will no longer be able to ignore the voice of the majority of the American citizens in Puerto Rico,” said Rossello. Washington cannot “demand democracy in other parts of the world, and not respond to the legitimate right to self-determination that was exercised today in the American territory of Puerto Rico.”

Had the governor been talking about the island’s right to become free and independent, he would have had a point. But statehood inside the USA is something Uncle Sam decides.

Rossello calls to mind Count Mountjoy of Grand Fenwick, who, in “The Mouse that Roared,” plotted to rescue his bankrupt duchy by declaring war on the U.S., sailing to America to surrender, and then demanding the foreign aid America bestows on defeated enemies.

Yet Puerto Rico’s defaults on its debts may soon be our problem. Many bond funds in which Americans have invested their savings and retirement money are full of Puerto Rican bonds.

According to The New York Times, the U.S. Virgin Islands, the Northern Marianas and Guam are in the same boat. With 100,000 people, the Virgin Islands owe $6.5 billion to pensioners and creditors.

Then there is Connecticut, a state that has long ranked in the top tier in per capita income and wealth.

Connecticut, too, appears wobbly. Rising pension benefits, the cost of servicing the state debt and falling tax revenue due to fleeing residents and companies like Aetna and General Electric, have dropped Connecticut to near the national bottom in growth prospects.

To continue reading: Are Illinois & Puerto Rico Our Future?

 

A Jubilee is Coming, by Robert Gore

The greatest debt expansion in history draws to a close.

Conventionally measured economic growth is related to two aspects of debt: its growth rate and its marginal effectiveness. In terms of economic growth, debt should be thought of as a factor affecting production, like the supply and cost of labor, capital goods, and land. A business can increase the supply of whatever goods or services it produces by borrowing money. Whether it does so depends on the cost of debt service versus the expected return from the expansion. As long as the latter is greater than the former, the business should add debt and expand. This analysis applies to an economy as a whole: debt should increase as long as the return from debt is greater than its cost.

The more debt an entity incurs, the less productive each additional unit of debt becomes—diminishing marginal returns. For the global economy, the point has been reached where the benefit of an additional unit of debt is less than its cost. That point was probably reached years ago, but debt-funded consumption, and governments and central banks machinations, have obscured this reality. In GDP accounting, an increase in consumption is treated as an increase in GDP, regardless of where the money came from to pay for it. Increasing debt to fund consumption increases GDP. However, such debt, because it does not fund investment, does not increase production. There is no economic return to offset its costs; it’s economically counterproductive.

For at least the last seventy years, debt in the US has grown faster than GDP. The same is true for most of the developed world, including, since the turn of the century, China. The increasing absolute level of debt relative to GDP has only been partially offset by generally falling interest rates. The debt service burden has increased, debt is increasingly funding consumption, and that which is funding production has run into minimal or negative returns.

DEBT THAT PAYS FOR WAR IS THE STUPIDEST DEBT OF ALL

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If this were happening in a strictly market economy, debt would be reduced, either paid off, rescheduled, or repudiated and written off. However, government and central bank fiat debt—debt that can be incurred in unlimited quantities by governments and central banks—stifles these adjustments. The central bank can use its fiat debt to purchase the government’s fiat debt (debt monetization) and in so doing set the price, or interest rate, for the government debt, influencing the configuration of interest rates throughout the economy.

Some who despair at these machinations conclude that there are no longer any adjustment mechanisms and that the machinations can continue in perpetuity, the tree of some asset prices (equities and real estate) growing to the sky. Perhaps they are right; the global expansion of central bank balance sheets since the last financial crisis is unprecedented; it’s at least a theoretical possibility that it will never end. However, this game of central banks conjuring fiat debt and monetizing governments’ debt (and other financial assets) doesn’t operate in a vacuum, rather it has promoted debt growth in the overall economy. There, signs that the marginal return on debt is now negative, that the burden of debt service outweighs the benefits of debt, are abundant, and debt contraction will happen regardless of the desires of central bankers and government officials. There are only so many private income streams that can pay debt service, only so many private assets that can be collateralized.

Global debt stands at a record 325 percent of global GDP. That number includes government and private debt, but not unfunded pension and medical liabilities. Their inclusion would significantly raise that percentage. As a greater proportion of income is devoted to debt service, a smaller proportion is left for saving and investment, which funds future growth, and consumption.

The long downtrend in global growth confirms the increasing toll of interest and principle repayment. In the most heavily indebted nations—Japan, Greece, Italy, Spain, Portugal, Puerto Rico, Brazil—GDP has been in multiyear contractions. In much of the rest of the developed world’s welfare states—the US and Western Europe—growth has been in long-term decline, and suspect price index calculations and seasonal adjustments cast doubt as to whether those economies are growing at all. In the US, annual growth never reached 3 percent during President Obama’s tenure, a first for a US president. Debt-fueled economic growth in China is slowing, probably more than suspect Chinese statistics are allowed to show.

US household debt has surpassed its 2008 peak and corporate and US government debt are at all time highs. Puerto Rico and Detroit have sought relief from creditors and Illinois and Chicago will soon join them. The municipal insolvency parade is just starting. Mounting unfunded pension liabilities are swallowing an ever-increasing share of municipal budgets.

Banco Popular in Spain was sold earlier this month for one euro after it exhausted its credit lines in a vain effort to contain depositor withdrawals. Equity and bond owners bore the brunt of the bank’s losses. Last Friday, two banks in Italy were shut down by the European Central Bank after repeated rescue attempts failed. More Italian banks will fall; their entire system is essentially insolvent and the economy hasn’t grown in years. Europe is holding its breath hoping that Italy’s depositors don’t panic, but they will

The last financial crisis started in the housing, mortgage, and mortgage-backed security sector, but was not, contrary to numerous official assurances, “contained” there. A debtor’s debt is a creditor’s asset. When the credit creation process reverses and a debtor’s debt is either rescheduled or repudiated, its creditor’s assets are impaired. That can impair the creditor’s ability to pay its own debt and curtail its extension of new debt. The 2008 crisis demonstrated how this chain reaction quickly spreads beyond the sector in which it began. Now there are multiple sectors that are as inflated as housing was back then and some are already unraveling.

According to Citibank, the growth in total global credit has just gone negative after eight years of the greatest expansion of government debt and central bank balance sheet expansion the world has ever seen. Their fiat debt can expand without limit, but not so the debt of individuals, businesses, and smaller governments bound by legal restrictions on debt issuance and without recourse to central bank monetization. Declining long-term growth trends and outright contraction, increasing outbreaks of fiscal stress around the globe, huge and growing unfunded pension and medical fund liabilities and aging populations that will draw on them are all indications that debt expansion by every class of entities but central banks and governments has hit a wall and is reversing.

There are proposals for central banks to simply hand out their fiat debt to everyone—helicopter money—and for partial or complete debt jubilees—legally mandated debt forgiveness. Helicopter money would be hyperinflation, which would devalue all debt and amount to a partial jubilee. One shouldn’t underestimate the political potency of such proposals. There are always more debtors than creditors and governments themselves are the biggest debtors. In the US there have been calls for student loan forgiveness, which are, not surprisingly, popular with millennials.

Whether or not governments enforce debt forgiveness, a de facto jubilee is coming. The world has far more debts and pension and medical liabilities than it can support and they will not be repaid, regardless of how much fiat debt governments and central banks crank out. There has never been a worse time to be a creditor: maximum risk, minimum yield. That serial defaulter Argentina was able to issue 100-year bonds at 8 percent interest is emblematic of the credit market’s thirst for yield and disregard of risk. The next ten years will a lender’s nightmare.

WHEN BUSINESS RAN ON INGENUITY, NOT DEBT

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When the Detainee Is American… by Robert Koehler

The death of Otto Warmbler, the American student sentenced to 15 years of hard labor for taking a propaganda poster off the wall in his hotel in North Korea, is obviously a tragedy. However, the North Korean government is not the only one that devalues human life. The US government certainly does the same. From Robert Koehler at antiwar.com:

The corpses pile up like sandbags along the planet’s geopolitical borders.

“Perhaps his condition deteriorated and the authorities decided it was better to release him in a coma than as a corpse.”

So said an expert on North Korea recently, quoted in the New York Timesfollowing the death of 22-year-old Otto Warmbier, six days after he had been released in a comatose state from a North Korean prison. He had been sentenced to 15 years of hard labor a year and a half ago because he had taken a propaganda poster off the wall in his hotel. He had been with a tour group.

Oh Lord. The shocking wrongness and horror of this young man’s death – the absurdity of his arrest, the razor slash of his tears – is all over the news. Of course. Who couldn’t identify – with him, with his parents? He had been dehumanized. He had a future, but it got pulled away from him by uniformed lunatics, or so the news presents this tragedy: in the context of America and its enemies.

And there’s no enemy out there with less legitimacy than North Korea. Any time the country and its supreme leader, Kim Jong-un, show up in the news, they look, you might say, like evil cartoon characters. But they possess, as the Times story informed us, “nuclear arms and missiles capable of striking the United States.”

And this is the context of the news and the limit, apparently, of the consciousness of the U.S. media. But the arrest, abuse and death of Otto Warmbier took place in a context more complex than good vs. evil. It’s still a horrific tragedy, a wrong that should never have occurred, but the devaluing of human life isn’t simply a game played by the so-called bad guys.

To continue reading: When the Detainee Is American…

 

Europe Surrenders to Radical Islam, by Guy Millière

Creeping Islamization will turn Europe into a very different continent if a few decades. From Guy Millière at gatestoneinstitute.org:

  • In spite of three attacks in three months, Britain does not seem to be choosing the path of vigilance and determination. June is not even over but the media barely talk about terrorism any more.
  • Then, in the early hours of June 19, a man who acted alone drove a van into a crowd of Muslims leaving Finsbury Park Mosque in London: the main “threat” to the British right now was soon presented in several newspapers as “Islamophobia”.
  • Decolonization added the idea that the Europeans had oppressed other peoples and were guilty of crimes they now had to redeem. There was no mention of how, throughout history, recruits to Islam had colonized the great Christian Byzantine Empire, Greece, Sicily, Corsica, North Africa and the Middle East, most of the Balkans and eastern Europe, Hungary, northern Cyprus and Spain.
  • While most jihadist movements were banned by the British government, more discreet organizations have emerged and demurely sent the same message. The Islamic Forum for Europe, for example, depicts itself as “peaceful”, but many of those it invites to speak are anything but that. The Islamic Human Rights Commission uses the language of defending human rights to disseminate violent statements against the Jews and the West.

London, June 5, 2017. A minute of silence is held at Potters Field Park, next to the City Hall, to pay tribute to the victims of the London Bridge jihadist attack three days before. Those who came have brought flowers, candles and signs bearing the usual words: “unity”, “peace” and “love”. Faces are sad but no trace of anger is visible. The Mayor of London, Sadiq Khan, a Muslim, gives a speech emphasizing against all evidence that the killers’ ideas have nothing to do with Islam

To continue reading: Europe Surrenders to Radical Islam

 

Everything You’re Not Being Told About the US War Against ISIS in Syria, by Darius Shahtahmasebi

This is a good effort to make the terribly confused situation in Syria somewhat understandable. For a satirical look at the situation in Syria, see Prime Deceit. From Darius Shahtahmasebi at theantimedia.org:

(ANTIMEDIA) It’s time to have a sane discussion regarding what is going on in Syria. Things have escalated exponentially over the past month or so, and they continue to escalate. The U.S. just shot down yet another Iranian-made drone within Syrian territory on Tuesday, even as authorities insist they “do not seek conflict with any party in Syria other than ISIS.”

Col. Ryan Dillon, chief U.S. military spokesman in Baghdad, seemed to indicate that the coalition would avoid escalating the conflict following Russia’s warning that it will now treat American aircraft as potential targets. He stated:

“As a result of recent encounters involving pro-Syrian regime and Russian forces, we have taken prudent measures to reposition aircraft over Syria so as to continue targeting ISIS forces while ensuring the safety of our aircrews given known threats in the battlespace.”

So what is really going on in Syria? Is the U.S. actually seeking an all-out confrontation with Syria, Iran, and Russia?

The first thing to note is that a policy switch under the Trump administration has seen the U.S. rely heavily on Kurdish fighters on the ground as opposed to the radical Gulf-state backed Islamist rebels, which the U.S. and its allies had been using in their proxy war for over half a decade. Even the Obama administration designated the Kurds the most effective fighting force against ISIS and partnered with them from time to time, but Turkey’s decision to directly strike these fighters complicates the matter to this day.

Further muddling the situation is the fact that the U.S. wants the Kurds to claim key Syrian cities after ISIS is defeated, including Raqqa. However, the reason this complicates matters is that, as Joshua Landis, head of the Middle Eastern Studies Center at the University of Oklahoma explains, the Kurds have “no money” nor do they have an air force.

To continue reading: Everything You’re Not Being Told About the US War Against ISIS in Syria