Magical Thinking

ORIGINAL LINK

Submitted by Ben Hunt of Epsilon Theory

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Duane Hall:     Can I confess something? I tell you this as an artist, I think you’ll understand. Sometimes when I’m driving … on the road at night … I see two headlights coming toward me. Fast. I have this sudden impulse to turn the wheel quickly, head-on into the oncoming car. I can anticipate the explosion. The sound of shattering glass. The … flames rising out of the flowing gasoline.
Alvy Singer:     Right. Well, I have to — I have to go now, Duane, because I … I’m due back on planet Earth.

“Annie Hall” (1977)

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One of my all-time top-ten movie scenes. Of course, Duane ends up driving Alvy and Annie back to the airport that night. No one does crazy better than Christopher Walken. Except maybe the Fed’s #2, Stanley Fischer. We’re all just passengers in the backseat of the Fed-driven car.

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Alvy Singer:    This guy goes to a psychiatrist and says, “Doc, my brother’s crazy; he thinks he’s a chicken.” And the doctor says, “Well, why don’t you turn him in?” The guy says, “I would, but I need the eggs.” Well, I guess that’s pretty much how I feel about relationships; y’know, they’re totally irrational, and crazy, and absurd … but, I guess we keep going through it because most of us … need the eggs.

“Annie Hall” (1977)

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We’re all passengers in the backseat of the Fed-driven car, and we all suspect that our drivers might be high-functioning lunatics, and we’re all terrified about what they might do next.

But we need the eggs.

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“What are the stars?” said O’Brien indifferently. “They are bits of fire a few kilometres away. We could reach them if we wanted to. Or we could blot them out. The earth is the centre of the universe. The sun and the stars go round it.”

“For certain purposes, of course, that is not true. When we navigate the ocean, or when we predict an eclipse, we often find it convenient to assume that the earth goes round the sun and that the stars are millions upon millions of kilometres away. But what of it? Do you suppose it is beyond us to produce a dual system of astronomy? The stars can be near or distant, according as we need them. Do you suppose our mathematicians are unequal to that? Have you forgotten doublethink?”

Winston shrank back upon the bed. Whatever he said, the swift answer crushed him like a bludgeon. And yet he knew, he knew, that he was in the right. The belief that nothing exists outside your own mind — surely there must be some way of demonstrating that it was false? Had it not been exposed long ago as a fallacy? There was even a name for it, which he had forgotten. A faint smile twitched the corners of O’Brien’s mouth as he looked down at him.

“I told you, Winston,” he said, ‘”that metaphysics is not your strong point. The word you are trying to think of is solipsism. But you are mistaken. This is not solipsism. Collective solipsism, if you like. But that is a different thing: in fact, the opposite thing.”

? George Orwell, “1984” (1949)

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As O’Brien patiently explains to Winston between torture sessions, or what we would call today “FOMC meetings”, Collective Solipsism is the voluntary abdication of empirical and independent thought. But it’s not ordinary solipsism — a pathological egocentrism where reality is entirely defined by one’s own thoughts. Instead, Collective Solipsism annihilates one’s own thoughts and replaces them with state-sponsored thoughts. Your reality is just as fake. But you’re living someone else’s fantasy.

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Grief turns out to be a place none of us know until we reach it. … We might expect that we will be prostrate, inconsolable, crazy with loss. We do not expect to be literally crazy, cool customers who believe that their husband is about to return and need his shoes.

In the version of grief we imagine, the model will be “healing.” A certain forward movement will prevail. The worst days will be the earliest days. We imagine that the moment to most severely test us will be the funeral, after which this hypothetical healing will take place. … We have no way of knowing that this will not be the issue.

There was a level on which I believed that what had happened was reversible.

? Joan Didion, “The Year of Magical Thinking” (2005)

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The best book I’ve ever read on the emotion of grief. Central bankers today are grieving the death of the so-called Great Moderation, and they are expressing their grief in the same way that Didion expressed hers — through magical thinking, through the pathological belief that if only the right words are said and the right thoughts are thought, then the dearly departed might walk through the front door and ask for his shoes.

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Mr. Hilsenrath:	What kind of compromise would it take to get the FOMC to move in September? I mean, so the tradition is there’s some kind of — like you say, some kind of agreement. What would it take to get them there?
Mr. Bullard:	Well, I have no idea, so — and it’s really — it’s really the chair’s job to fashion that. But I will say that — I’ll talk historically about the FOMC, the kinds of things that the FOMC would do. You would trade off. You would say, OK, we could hike today, but then we’ll not plan to do anything in the future. That would be one way to — one way to go about a consensus. So that often happens on the FOMC. Or vice versa. If you read the Greenspan-era transcripts, he’ll do things like, OK, we won’t go today, but we’ll kind of hint that we’re pretty sure we’re going to go next time.
Mr. Hilsenrath:	Right.
Mr. Bullard:	And so you get this inter-tempo kind of trade-off, and that often — that often is enough to get people to sign up.
Mr. Hilsenrath:	So, hike today and then delay.
Mr. Bullard:	Yeah. (Laughs.)
Mr. Hilsenrath:	Or, no hike today and then no more delay.
Mr. Bullard:	Yeah, yeah.
Mr. Hilsenrath:	Something like that.
Mr. Bullard:	Yeah, those kinds of trade-offs are, historically speaking — I’m not saying I know what Janet’s doing, because I don’t. But, historically speaking, those are the kinds of things that the FOMC has done.
Mr. Hilsenrath:	I came up with my catchphrase for the — for the month. (Laughter.)
Mr. Bullard:	Those are great. That’s worthy of a T-shirt. (Laughs, laughter.) You could have one on the front and one on the back.
Ms. Torry:	Or a headline.
Mr. Hilsenrath:	Well, that’s the St. Louis framework now, right?
Mr. Bullard:	Yeah.
Mr. Hilsenrath:	Hike today and then delay.
Mr. Bullard:	Yeah. That’s what it would be, yeah.
Mr. Hilsenrath:	But if you decide to use that, maybe you can credit — you know, include a little footnote to the Wall Street Journal.
Mr. Bullard:	OK. (Laughs.)
? Wall Street Journal, “Transcript: St. Louis Fed’s James Bullard’s Interview from Jackson Hole, Wyo.” (August 27, 2016)

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Reading this transcript made me throw up in my mouth a little bit. And Bullard is the best of the lot. At least he’s honest about the intellectual poverty about the whole FOMC interest rate-setting exercise. They’re just making it up as they go along, a hallmark of magical thinking.

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In point of fact magicians appear to have often developed into chiefs and kings.

? James George Frazer, “The Golden Bough” (1890)

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Frazer’s book on the history and anthropological foundations of magic was a revelation to me when I first read it, as it was to as disparate a group of writers and poets as Yeats, TS Elliot, Freud, Hemingway, Joyce, and … Jim Morrison.

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Courtier T.L. — Amid all the people starving, missionaries and nurses clamoring, students rioting, and police cracking heads, His Serene Majesty went to Eritrea, where he was received by his grandson, Fleet Commander Eskinder Desta, with whom he intended to make an official cruise on the flagship Ethiopia. They could only manage to start one engine, however, and the cruise had to be called off. His Highness then moved to the French ship Protet, where he was received on board by Hiele, the well-known admiral from Marseille. The next day, in the port of Massawa, His Most Ineffable Highness raised himself for the occasion to the rank of Grand Admiral of the Imperial Fleet, and made seven cadets officers, thereby increasing our naval power. Also he summoned the wretched notables from the north who had been accused by the missionaries and nurses of speculation and stealing from the starving, and he conferred high distinctions on them to prove that they were innocent and to curb the foreign gossip and slander.

? Ryszard Kapuscinski, “The Emperor” (1978)

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f you can only read one book on the end of an ancien regime and the magical thinking that ALWAYS takes place in its wake, this is it. Kapuscinski chronicles the final years of Haile Selassie’s reign in Ethiopia from the inside out, interviewing dozens of courtiers to paint a first-hand portrait of an entire society lost in the fantasy world of Collective Solipsism.

Selassie and his Inner Party maintained the fantasy for years after it lost all connection with reality, so that a mighty fleet consisted of a single ship with a malfunctioning engine, promotions and medals were conflated with real-world power and influence, and bad people and bad ideas were constantly lauded and rewarded to keep hard questions from being asked.

Spoiler alert: it doesn’t end well for Selassie or for Ethiopia. In the words of another famous solipsist, Louis XIV, “après moi, le deluge.” After Selassie came The Dergue. Think Pol Pot in committee form.

The last years of Selassie’s rule are more than a parable for our times … they ARE our times.

Magical thinking is a term of art in both clinical psychology and cultural anthropology, and it refers to the common belief among both children and “primitive” societies (yes, intentional quotation marks there to show my arched eyebrow at the word) that thinking the right thoughts or saying the right words can control the invisible forces that shape our world.

For example, as Jean Piaget (the father of developmental psychology) noted, children from the ages of 2 to 7 tend to have very little conception of real-world causality. Tell your four-year-old son that the family dog has died, and he is likely to a) blame himself for something he did or didn’t do for “causing” the death, and b) believe that there is some combination of proper words and proper thoughts and proper actions that can make the dog come back to life. That’s magical thinking. It’s a profoundly ego-centric conception of the world, and if you’re a parent you know exactly what Piaget is talking about. Every four-year-old child is an egomaniac, in the clinical, non-judgmental sense of the word.

It’s the same thing with what cultural anthropologist Claude Levi-Strauss called “The Savage Mind” in his groundbreaking 1962 book. Societies without a causal explanation for, say, the weather will always construct some sort of combination of words and thoughts and actions to be performed by privileged caste members like priests or kings, through which the entire society convinces itself that humans exercise some sort of control over these incredibly powerful real-world forces and that they aren’t just buffeted this way and that by the inexorable might of a big bad world that really couldn’t care less about them. In fact, that’s the literal origin of the word “inexorable”, from the Latin in (not), ex (away), orare (to pray) — something that cannot be prayed away.

In early days of any human society, this sort of magic usually emphasizes some form of sympathetic or like-for-like object … for example, you might rub a banana-shaped crocodile tooth against a banana plant to make it bear fruit (I’m not making this up). Over time, however, the spellcasting caste and society at large convince themselves that you don’t really need actual crocodile teeth, but you can instead invoke the power of a crocodile tooth by calling it by its secret name. Maybe you need to write down that secret name using the secret language of the priests in order to make the spell work, but you definitely don’t need to go out and hunt down a real-world crocodile. It’s at this point that hunter/soldier-kings are replaced by academic/priest-kings … the pen is truly mightier than the sword, or at least writing “crocodile” carries a longer life expectancy than hunting crocodiles. Over still more time, the secret names and the secret language of the priest-kings become a vast edifice of magical thinking, an edifice that provides great comfort and stability to the entire society. Because there is nothing more important to societal stability than the belief that nature is under control. That the invisible forces of nature can, in fact, be prayed away.

Until they can’t. Until all the banana plants die because of some rare nematode infestation in the roots, and all the secret words and secret languages and even the “old magic” of the actual crocodile teeth are useless. They were useless all along, of course, as the banana plants would have borne fruit for the past 50 years with or without the spells, but hey … until this year there was a 98% correlation between the spells and a healthy banana crop! And my VAR was really quite negligible!

Okay, Ben, we see what you’ve done here. Yes, yes … quite droll, really … you’ve found a clever metaphor for railing against our central banker ruling class. Again. Thanks for the diversion, but now we need to get back to planet Earth. Important work to be done, and all that. Love your quotes, by the way.

Wait! This is not a metaphor. This is not an anthropological parable for our times. This IS our times. Want to see what a magic spell looks like? Here you go:

This is the Gaussian Copula spell. It’s what you write down to make sure that your AAA-rated slice of a massive bunch of mortgages pays you 6% a year with only an infinitesimal risk of default. It’s not a metaphor for a spell. It is an actual magic spell, exactly the same in form and function as the talismanic scripts written on, say, Egyptian funerary urns in 1000 BC to make sure that your body and soul get to the afterlife with only an infinitesimal risk of default.

Secret language no one can read or understand? Check. Not really comprehensible even by most magicians? Check. Administered by a privileged caste with appropriate pomp and ceremony? Check. Reflective of an innate human desire to control invisible forces that are, in fact, uncontrollable and inexorable, like death and business cycles? Check. Highly effective in motivating human behavior and supporting status quo political institutions? Check. And mate.

The Gaussian Copula spell wishes away the possibility of a nationwide decline in U.S. home prices (if you haven’t already, please read Felix Salmon’s 2009 Wired magazine article on the Gaussian Copula — “The Formula That Broke Wall Street” — my all-time favorite piece of financial market journalism). The magical thinking embedded in this spell is that a nationwide decline in U.S. home prices is not just unlikely, it is — literally — unthinkable. It is an incantation that generated enormous societal stability and wealth, creating out of whole cloth a belief that a $10 trillion (yes, that’s trillion with a T) asset class in residential mortgage-backed securities (RMBS) was a solid thing, a triumph of Science (why, just look at all those Greek letters and the mathematical stuff!), an example of man’s mastery over the invisible vagaries of nature.

And then we had a nationwide decline in U.S. home prices. Which broke our world.

Here’s another spell:

This is the Taylor Rule spell. It’s what you write down to make sure that the inflation rate in your economy goes up or down the way you want it to go up or down. There are lots of other spells that go along with the Taylor Rule spell for “controlling” inflation, but it’s the main one, I’d say. This is the spell that has created a $12 trillion asset class in negative yielding sovereign debt. Because, you know, the lower interest rates go, the more you’re going to borrow and spend, and the higher inflation goes. Right? Right?

If the Gaussian Copula is like a funerary spell, trying to assure investors that they will get to investor heaven like dead Egyptian Pharaohs were assured of getting to dead Egyptian Pharaoh heaven, the Taylor Rule is like a weather spell. When I read this from James Frazer’s The Golden Bough:

So in Scotland witches used to raise the wind by dipping a rag in water and beating it thrice on a stone, saying:

I knok this rag upone this stane
To raise the wind in the divellis name,
It sall not lye till I please againe.

I can’t help but think of Stanley Fischer, vice-warlock of the Fed coven, saying in Jackson Hole that we need thrice interest rate raises (one last December, two more this year) to quell the inflationary winds. Or raise them. Or whatever sort of weather that Fischer is trying to manufacture. It’s really hard to tell.

But here’s the kicker. When a spell doesn’t work, no one in the magically thinking society believes it’s because spell-casting itself doesn’t work. It means that the spell wasn’t performed properly. Either the priest-kings said the words wrong or they didn’t think the right thoughts or there’s some other invisible force that we need to propitiate first. So what always happens, and I mean “always” in the sense of This. Is. Human. Nature. and has been happening in a rhyming sense for tens of thousands of years across every human society that ever lived, is this:

In phase 1, the priest-kings try harder. They seek out purer ingredients for their spells. They speak more loudly, more convincingly, more stridently. If two crocodile teeth were used in the past, now they use four. Or eight. It’s not just “more”, it’s “MOAR!”. Often there’s an internal purge near the end of phase 1.

In phase 2, the priest-kings regroup and tweak the spell. Maybe instead of “targeting” (another word for “praying for”) a 2% inflation rate, we need to “target” a 4% inflation rate. Maybe we should change the magic word “inflation” to “nominal GDP growth” and see if that works any better. Sure, why not? This tweaking process has happened, it is happening now, and it will happen all the way to the bitter end. What will never happen is that the priest-kings quit. There’s always another tweak, always another word choice, always another order in which the words can be said.

In phase 3 — and this is where we are now in the historical process, somewhere near the end of phase 2 and the beginning of phase 3 — the priest-kings are challenged by a rogue priest in their midst (rare) or an alt-priest coming out of nowhere (common). By “nowhere” I mean that the alt-priest is an Other, whether that’s a foreign religion or a foreign geography or a foreign (i.e., non-priestly) caste. The alt-priest isn’t about tweaking the spell or casting it louder. He’s about doing an entirely different spell, and he’s about accusing the incumbent priests of incompetence or worse. The alt-priest is always a populist, and populism comes easy when the incumbent spells have been failing … and failing … and failing.

So what happens? It depends on reality. It depends on whether the banana plants get better on their own or if they die. If they get better on their own (and this happens more often than you might think), then the incumbent priest-kings remain. If the banana plants give up the ghost, then the incumbents are swept away. For future reference, this is what dead banana plants look like.

Interestingly — and this was Frazer’s big point in The Golden Bough — even if the incumbent mode of magical thinking survives, it’s necessary for societal stability to perform a public human sacrifice of the primary incumbent priest-king. The king is dead. Long live the king. Fortunately for all involved, human sacrifice today is a lot less literal than it was during, I dunno, the heyday of the Etruscans. A little public shaming, a tearful interview with Anderson Cooper, a quiet hermitage in the form of a deanship at a small New England college … yeah, that should do the trick.

The way this all plays out also depends on how deeply the incumbent priest-kings retreat into their fantasy world of tweaking spells and magical thinking, and that’s where I’m most concerned. The fact is that the global economy — particularly the U.S. economy and the Chinese economy — is more robust than the alt-priests tend to let on. Amazingly enough, the U.S. can still grow its way out of the massive debt we’ve taken on. I know … hard to believe. But it’s true. The power of compounding is truly inexorable, and it’s amazing what a steady 3.5% growth rate on a huge economic base can do to make manageable even trillions of dollars in debt. The rest of the developed world? Impossible to grow their way out of debt. They’re finished. Or rather, to use the lingo of my distressed debt friends, Japan and Europe ex-Germany are now “work-out situations”. But if the U.S. could just get out of its own way … if we could stop arguing about who gets to use what bathroom and start arguing about how to increase productivity (i.e., how to make technology a tool for humans doing more stuff rather than a replacement for humans doing stuff at all) … then we could actually come out of this okay.

I know, I know … I’m a dreamer. And for all the political fragmentation and polarization reasons that I write about ad nauseam, or at least here, here, here, and here, the politics of identity are unlikely to be replaced by the politics of growth anytime soon. Not in the West, anyway. But that’s why I want to pull my hair out when I watch the Jackson Hole theatre. Guys, you’re not helping!

I was dumbfounded by the stultifying, excruciating more-of-the-sameness that came out of Jackson Hole. Oh my god, are we really saying that the entire FOMC decision-making process comes down to whether there’s a good jobs report on Friday? Why don’t we just inspect the entrails of a goat? Are we really still arguing about one-raise-or-two when LIBOR is now pushing 90 basis points? Was there any mention — any mention at all — of LIBOR during the entire Jackson Hole meeting? Do these people, and it’s not just the central bankers themselves but all the courtiers — the journalists, the academics, the hangers-on — do they even recognize that a world exists outside of their imaginations and theories? Answer: NO.

Yep, at first I was disappointed in them. But on reflection I became more and more disappointed in us.

See, the problem isn’t with the Fed. They’re going to do what solipsistic, magical thinking priest-kings have done for ten thousand years … more of THAT. More solipsism. More magical thinking. More 4 year old egomaniacal determination that their spell casting efforts are the ONLY thing that stand between us and utter ruin.

No, the bigger problem is with us. The bigger problem is that we cannot imagine a solution for our current economic and political problems that does not rely on greater and greater state-directed spell casting. Monetary policy spells not working? Well, golly, I guess our ONLY alternative is to try some fiscal policy spells. Really? That’s the best we can come up with? I understand that this is what the courtiers are going to say. But I expect more from the rest of us. I expect more from myself.

Look, I get it. To riff on Woody Allen’s famous joke, we need the eggs. We need a stock market that goes up, not down. We need financial asset price inflation. We need the eggs so badly that we’re willing to support the magical thinking crew and smile at their courtiers even though we think they’re totally out of touch with reality. We’ve become so used to getting our eggs delivered on time and without fail that our first, second, and third responses are to ask for more magical thinking from the incumbent priest-kings, not less.

This is a dangerous, myopic game. Because we will get what we ask for. We will get more magical thinking. Only it won’t come just from the status quo magicians. It will also come from the alt-priests, some of whom will represent the absolute worst impulses of humanity. There are really bad ideas lurking on the wings today — there always are — but these really bad ideas about how human society should be organized always resurface and grow more powerful at times like this. Because it’s the old magic, an old magic that the human animal is hard-wired to respond to.

Maybe we’ll get lucky. Maybe the banana plants of global growth will turn green again, and we can have a grand celebration of the particular variant of the policy spell that was coincidentally cast at the same time. That could happen. As Otto von Bismarck, the Iron Chancellor of 19^th century Europe supposedly said, “there is a special providence for children, fools, and the United States of America.” Any portfolio manager with long enough tenure knows what it’s like to be bailed out by the market, and it’s a beautiful thing. Now we just need that to happen on a much larger scale.

But we should do better than just trust to luck. I’m not saying that we have to deny our human nature and stop believing in the act of spell-casting itself. I’m not (that) delusional. What I’m saying is that the more we embrace and encourage state-directed magical thinking, whether it’s of the monetary or fiscal policy sort, what we are actually doing is opening the city gates to the old evil magic and the alt-priests of fascism and totalitarianism. We don’t need the eggs that badly. What I’m saying is that we need to think less about Scottish witchcraft, a la Macbeth and James Frazer and Stanley Fischer, and more about the Scottish Enlightenment, a la David Hume and Adam Smith and Alexander Hamilton. What I’m saying is that we need to focus on empiricism and on what works in the real world, not theory and what “works” as an equation. What I’m saying is that usually the better course of state-directed action is to do less, not more, and the better course of individually-directed action is to do more, not less. What I’m saying is that the old good magic of small-l liberalism and technological innovation in the service of man rather than the replacement of man is pretty darn powerful itself, and the stories still inspire. Let’s embrace and encourage THAT as we make our way through what is still a largely inexorable world.

It matters whether or not we call things by their proper names, because the words and the spells motivate human behavior like nothing else. It matters whether or not we sleepwalk our way through our own fin de siècle, because the really bad people and the really bad ideas that periodically wreck our world can’t be wished away. It matters whether or not we become courtiers ourselves, because the courtiers always fall the farthest. The problem with magical thinking run amok and its perpetuation of a fantasy world is that sooner or later the dream of the delusional king becomes a real world nightmare for real world people. It’s time to wake up.

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The "Secret Sauce" of the Byzantine Empire: Stable Currency, Social Mobility

ORIGINAL LINK

How did Byzantium endure for 1,000 years after the fall of Rome?

One of my reading projects over the past year is to learn more about empires:how they are established, why they endure and why they crumble.

To this end, I've recently read seven books on a wide variety of empires. The literature on empires is vast, so this is only a tiny slice of the available books. Nonetheless I think these 7 titles offer a fairly comprehensive spectrum:

How Rome Fell: Death of a Superpower (Adrian Goldsworthy)

War and Peace and War: The Rise and Fall of Empires (Peter Turchin)

The Rise of Rome: The Making of the World's Greatest Empire (Anthony Everitt)

428 AD: An Ordinary Year at the End of the Roman Empire (Giusto Traina)

Genghis Khan and the Making of the Modern World (Jack Weatherford)

Venice: A New History (Thomas F. Madden)

Byzantium: The Surprising Life of a Medieval Empire (Judith Herrin)

I was not exposed to much history of the Byzantine Empire in high school or college, so I found the last book of particular interest, despite its dry academic style.

The Byzantine Empire, based in Constantinople (now Istanbul), began as the Eastern Roman Empire when the Roman Empire was split into East and West to facilitate defense.

In the original conception, the two halves would be jointly ruled by two emperors. But as the Western Roman Empire frayed and devolved, power shifted to the still-vibrant Eastern Roman Empire, which spoke Greek rather than Latin and was Orthodox Christian rather than Catholic.

The Byzantine (Eastern Roman) Empire endured from the western empire's fall in 476 A.D.  to 1453 A.D., when Constantinople fell to invading Turkish forces.

Thus the Byzantine Empire endured for roughly 1,000 years after the Fall of Rome (977 years, to be exact).  It was an Empire that spanned the Medieval ages, that reached its zenith around 1025 A.D., and lasted right up to the dawn of the Renaissance.

How did Byzantium endure for 1,000 years after the fall of Rome? There are many factors, of course, but I think these four elements are the "secret sauce" of the Eastern Roman Imperial longevity:

1. A stable currency. When the Empire devalued its currency for the first time in the 13th century, it triggered a long-lasting loss of faith in the currency. This devaluation was the beginning of the end, as the Empire never recovered its financial footing.

Lesson: you cannot devalue your way to stability, influence, power or prosperity.

2. Multiple pathways of social mobility via the church, military and civil bureaucracy. Men from poor provincial villages and towns could make their mark and rise to positions of wealth and power via joining the church or military hierarchies, or by serving ably in the Imperial bureaucracy.  Women could rise to positions of wealth and influence via marrying well.

3. Pervasive tax collection to fund defense. Empires and states were under essentially constant attack for much of this 1,000 year period of history, and the empire collected land and other taxes via a vast bureaucracy of tax records and collections. Interestingly, it is estimated that the Imperial taxes absorbed about 20% of all income--roughly the same percentage the U.S. government absorbs.

When the tax system fell into disrepair, revenues sagged and defenses almost failed.  Competent leadership restored the tax system and defenses, giving the Empire another few hundred years of life.

4. Safe trading routes and markets. The Empire provided protected sea and land routes for traders from everywhere, and Constantinople offered a vast depot for trading and manufacture. Much of the Empire's wealth and tax revenues flowed from trade, and the Empire maintained a long history of offering lucrative trade deals with allies such as Venice.

I see these dynamics as being just as critical in the present age. If a nation's currency loses value, the ladders of social mobility are broken, the tax system is corrupt and/or unfair and trade is restricted or suppressed, the nation/empire is doomed to erosion and collapse.

This essay was drawn from Musings Report 21. The Musings Reports are emailed weekly to subscribers ($5/month) and major contributors ($50+ annually). If you'd like to support this blog, please consider subscribing (links below or in the right sidebar). 


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The Central Banks Are Now Ready To Launch Their 'Brave New World'

ORIGINAL LINK

Submitted by Brandon Smith via Alt-Market.com,

The latest Federal Reserve meeting in Jackson Hole, Wyoming, is over and so far it would seem that the general investment world is not too happy about Janet Yellen’s statements as well as those of other Fed officials.  In fact, many people are looking for some simple clarity as to what the central bank is actually planning.

Most importantly, investors want to know why the Fed is suddenly so adamant about continued interest rate hikes in 2016.  Only a couple months ago, almost everyone (including alternative economic analysts) was arguing that the Fed would “never dare” to raise rates again so soon, and that there was no chance of a rate hike so close to the presidential elections.

Instead, investors have been greeted with surging rate-hike odds as Fed officials openly hint of another boost, probably in September.

As I have been saying for years, if you think the Fed’s motivation is to protect or prolong the U.S. economy, then you will never understand why they do the things that they do.  Only when people are willing to accept the reality that the Fed’s job is to undermine the U.S. economy can they grasp central bank behavior.

Here is the issue that scares mainstream markets — many day traders are greedy, but not necessarily dumb.  They KNOW full well that the only pillar holding up stocks at record highs has been central bank intervention.  A vital part of this intervention has been the use of near-zero interest rates.  That is to say, cheap and free overnight loans through the Fed have allowed banks and other corporations to remain “solvent,” and these loans have been the fuel companies have used for corporate buybacks of stocks.

Corporate buybacks have been a primary driver in the bull market rally that supposedly saved the world from the ongoing deflationary destruction of capital.  In 2015, buybacks reached historic levels and garnered one of the largest equities reversals in history.   While these buybacks do little or nothing to heal the economy on Main Street, they certainly do wonders for equities portfolios.  By buying up their own shares, corporations boost the value of remaining shares through a brand of legal trickery.  And, in the process, these corporations also boost the overall perceived value of global stock markets.

As Edward Swanson, author of a study from Texas A&M, noted on stock buybacks used to offset poor fundamentals:

“We can’t say for sure what would have happened without the repurchase, but it really looks like the stock would have kept going down because of the decline in fundamentals… these repurchases seem to hold up the stock price.”

Yes, to us he seems to be stating the obvious, but for the average American, a green stock market means a recovering economy.  There is no deeper question of why the markets are rallying, and this lack of understanding is dangerous for our country.

Even marginal hikes in borrowing costs will kill the party and, while people not involved in finance and stocks are oblivious, day traders know exactly what is going on.  This is the reason for the underlying panic felt by the investment world at any hint of a rate hike by the Fed.

As we saw with the limited audit of TARP, the Fed was pumping tens of trillions in overnight loans into distressed banks and companies, even foreign companies overseas.  I suggest that if a FULL audit of the Fed were ever conducted, we would find tens of trillions more in overnight loans since 2008.

Imagine for a moment if those loans never stopped.  Imagine that such loans have been an ongoing mainstay of our financial system and stock markets in general.  Now, ask yourself, what would happen if the companies reliant on these free loans suddenly had to pay interest on them?

Think about it; what would the interest cost be on a mere .5% to 1% of $16 trillion in overnight loans through TARP?  What would the cumulative cost be on all the loans banks and companies need to survive every quarter?   In the end, corporations would either drown in billions of dollars in exponential debt or they would have to stop accessing loans from the Fed.  Once the loans stop, the stock buybacks stop.  Once the buybacks stop, stock markets crumble.

Without free cash from the Fed, the bubble in stock markets will finally and thoroughly implode, crashing down to meet all other fundamentals.

Why would the central bank pull the plug on life support to stock markets?  There are multiple reasons, but a top reason is that this is the Federal Reserve’s modus operandi.  They consistently seem to raise rates into recessionary conditions that they also tend to create.  In essence, the Fed likes to acclimate and addict markets to low interest percentages, and then increase those percentages to agitate and elicit a chaotic reaction.

In my article Brexit Aftermath - Here’s What Will Happen Next, I stated:

“Really, the only safe measure the Fed can take from now on is to do nothing.  I highly doubt that they will do nothing.  In fact, even in the face of the Brexit I still believe the Fed will raise rates a second time before the end of the year.  Why?  This is what the Fed has always done as recession takes hold.  Historically, the Fed raises rates at the worst possible times.  As with the Brexit, I am going to have to take the contrary position to most analysts on this.”

What analysts out there need to understand, whether they are independent or mainstream, is that a great shift in central bank policy and attitude is coming. Christine Lagarde at the IMF calls it the “economic reset,” some Fed officials, like Atlanta Fed President Dennis Lockhart, state that central banks are entering a “brave new world.” These are highly loaded phrases that represent a drastic overhaul of the global financial system; an overhaul that is quite deliberate and inevitably destructive for certain nations and economies, including the U.S.

If we examine the policy pursuits and recently stated goals of central banks around the world, and those statements made after the Brexit referendum, we find that a process of complete global centralization is underway. This includes a push for all central banks to “coordinate policy” under a single directive.

Alternative analysts already know that all central banks are ALREADY covertly coordinated by the Bank for International Settlements.  So, when central bankers call for policy coordination in the mainstream press, what they really mean is, they want the existing coordination that is covert to become publicly accepted and celebrated.  They want that which is illegal to become legal.  That which is morally reprehensible to become morally relative.

Central bankers also want their position of authority over the global economy to become a public priority.  Ten years ago, when I asked average people what they knew about the Federal Reserve, most of them responded with confusion.  They had never heard of the institution, let alone what its function was.  Today, almost everyone knows about the Fed, but there is also an assumption attached that central banks, whether they are successful or not, are supposed to maintain economic stability.  Keep in mind that global stocks barely vibrate today until a central bank somewhere publishes a policy statement.  This is not how investment is supposed to function.  The jawboning of central banks should be mostly meaningless.

The brave new world of central banking is a plan to expand on this corrupt correlation.  That is to say, the general public and the mainstream should be questioning whether central banks should exist at all.  Instead, people are arguing over what policies are better for central banks to adapt.  The existence of central banks is considered an absolute.  The masses are only given the option to debate what faces and what hats central banks should wear.  If we get anything out of this deal, we only get to choose the form of our destructor.

I should point out also the growing trend in the mainstream media of criticism against the Fed.  This is a relatively new thing.  For the past several years the more effectively critical the alternative media became against the Fed, the louder MSM talking heads would cheerlead for the establishment.  With central bankers becoming more open about their global shift into something "different", a new program of stabbing at the Fed has been initiated.  This is not a coincidence.

As I have argued in various articles, the Fed itself may be just as sacrificial to the elites as the U.S. economy.  In the process of global centralization, the Fed would eventually have to take a back seat to the IMF, World Bank and the BIS.  It is not surprising to me in the slightest that the bought-and-paid-for mainstream media is changing gears and attacking the institution they once desperately defended.  Priorities are evolving.

I believe that with the advent of a second rate hike in 2016, many conditions will change.  The Dow and some emerging markets will no longer enjoy unmitigated support, and they will begin to fall going into the elections.  As I have mentioned many times in past articles, Donald Trump is the most likely candidate to take up residence in the White House.  Conservatives will be lulled into a temporary euphoria, happy just to have defeated she-demon Hillary Clinton, only to discover that an overall global implosion has entered a new stage.  This implosion will of course be blamed on those same conservative movements.

In the meantime, central banks around the world are going to start openly coordinating while the IMF will take up a “leadership role” in managing international policy.  Central banks will also be branching out and taking on new powers.  As suggested at Jackson Hole, many central bankers are arguing for “new tools” to fight future fiscal downturns, and no, this does not mean negative interest rates.  Instead, watch for central banks to change the definition of inflation on a whim, or adjust the relative value of currencies through agreements with other countries instead of allowing free markets to determine values, and watch for complete overhauls in how economic instability is calculated.

What we are heading for is a world in which many nations will suffer from reductions in living standards and where some first world nations will be reduced to third world conditions.  In order to normalize increased global poverty, you have to stop calling it poverty and start calling it a “brave new world.”  You have to convince the populace that the economic degradation is not a problem that can be solved — rather, it is a problem we must all adapt to and accept.

Be very wary when elites and international financiers mention “global reset,” or a “brave new world,” or a “new world order.”  What they are talking about is not a program that is in your best interest.  What they are talking about is the deliberate creation of chaos; a slow burning calamity that can be exploited to derive the benefits of even more centralization and even more power.

They will call it random.  They will call it coincidence or fate or even blame it all on their ideological opponents.  In the end, they will eventually call it a natural progression of events; a social and financial evolution.  They will call it inevitable.  None of this will be true.  There is nothing natural about a totalitarian framework — it is a machine that is carefully crafted piece by piece, maintained by the hands of a select few tyrants and fed with the labor, sacrifice and fear of the innocent.

The only solution is to expunge the parasites from our fiscal body.  These institutions and the people behind them should not exist.  Most if not all of our sociopolitical distress today could be cured if a “brave new world” meant wiping the slate clean and dispelling financial elites and central bankers into a bottomless pit.

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Newly Revealed Benghazi Emails Bring Hillary Clinton's Server Scandal Full Circle

ORIGINAL LINK

The FBI successfully recovered nearly 15,000 emails previously deleted from Hillary Clinton's private server, and we now know that at least 30 of those emails discussed the 2012 terrorist attack in Benghazi, Libya.

These newly discovered Benghazi emails will add fuel to the fire surrounding Clinton's decision to use a private email server while she was Secretary of State and could raise further questions about whether she fully cooperated with an investigation into the attack that killed four American diplomats in Libya on September 11, 2012.

Even as this revelation adds a new dimension to Clinton's ongoing email scandal, it also brings the whole investigation back to where it started. It was the congressional inquiry into Clinton's handling of the Benghazi attack that initially uncovered Clinton's use of a private email server. After being ordered to turn over the content of that private server to the committee investigating Benghazi, Clinton's lawyers hastily deleted nearly 15,000 emails and claimed they were not connected to official government business. The FBI's subsequent criminal investigation of her use of a private server while being Secretary of State resulted in some of those deleted emails being recovered via a variety of different means and, well, now here we are back at Benghazi.

The Associated Press reports that the existence of the emails was confirmed by the State Department on Tuesday in a federal court hearing. The hearing was part of an ongoing lawsuit brought by Judicial Watch, a conservative group that has filed federal Freedom of Information Act lawsuits seeking the disclosure of Clinton's emails. In response, the State Department said the FBI has turned over about 14,900 emails "purported not to have been among those previously released," the AP reported.

Previously, Clinton has told reporters and a congressional committee that all work-related emails were turned over last year—and even though these new emails may well turn out to be of a personal nature, it's hard to believe that any discussion by a sitting Secretary of State about a terrorist attack on a U.S. consulate would be completely non-work-related. The text of the emails will not be released for at least another month, while the Department of State reviews and redacts them, according to the AP.

This isn't the first time questions have been raised about whether Clinton actually turned over all the relevent emails from her work at the State Department. In June, the Wall Street Journal reported on a 2010 email exchange between Clinton and Huma Abedin, her top aide, in which the secretary worried about her personal email becoming accessible to the public. That exchange was included in the State Department Inspector General's report on Clinton's email use but it was absent from the files turned over to the FBI and released to the public—a sign that was "raising questions about the thoroughness of her disclosures to the government and her record-keeping practices as secretary of state," the paper said.

Those questions will be raised again in the wake of Tuesday's disclosure—more loudly, one would expect, since the public has more awareness of the Benghazi attack than it does about internal State Department IT policies.

Clinton was cleared of any criminal wrongdoing in July by FBI Director James Comey, though he said she was "extremely careless" in handling important government information. It's too soon to know whether the content of those 30 emails (or any others) will bolster a potential perjury case against Clinton.

Even if there are no additional legal repercussions for Clinton, the very existance of these deleted Benghazi emails could hurt her politically by giving voters another reason to distrust the Democratic nominee.

"Clinton swore before a federal court and told the American people she handed over all of her work-related emails. If Clinton did not consider emails about something as important as Benghazi to be work-related, one has to wonder what is contained in the other emails she attempted to wipe from her server," said Jason Miller, a spokesman for Donald Trump's presidential campaign, in a statement.

As of Tuesday afternoon, Clinton's campaign has not commented on the discovery of the Benghazi emails.

Having Benghazi back in the news is bad for Clinton on another front, too, though the Trump campaign may not be deft enough to exploit it.

On top of her handling (or mishandling) of the Benghazi incident, Clinton should face tougher questions over her decision while Secretary of State to push the Obama administration into attacking Libya—a move that has left the country in turmoil and potentially turned it into a breeding ground for terrorism. Obama has admitted that the Libyan intervention was a mistake, but Clinton has not given any indication that she would approach foreign affairs any differently as a result of lessons learned there.

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Zika: A Masterpiece of Public Mind Control

http://healthimpactnews.com/2016/zika-a-masterpiece-of-public-mind-control/

35 Facts (and Controversies) About Zika

https://sharylattkisson.com/35factsandcontroversiesaboutzika/

Don't Think Armageddon, Think "A Thousand Balls Of Flame... And Then Crickets!"

ORIGINAL LINK

Authored by Dmitry Orlov, originally posted at ClubOrlov.com,

A whiff of World War III hangs in the air. In the US, Cold War 2.0 is on, and the anti-Russian rhetoric emanating from the Clinton campaign, echoed by the mass media, hearkens back to McCarthyism and the red scare. In response, many people are starting to think that Armageddon might be nigh - an all-out nuclear exchange, followed by nuclear winter and human extinction. It seems that many people in the US like to think that way. Goodness gracious!

But, you know, this is hardly unreasonable of them. The US is spiraling down into financial, economic and political collapse, losing its standing in the world and turning into a continent-sized ghetto full of drug abuse, violence and decaying infrastructure, its population vice-ridden, poisoned with genetically modified food, morbidly obese, exploited by predatory police departments and city halls, plus a wide assortment of rackets, from medicine to education to real estate… That we know.

We also know how painful it is to realize that the US is damaged beyond repair, or to acquiesce to the fact that most of the damage is self-inflicted: the endless, useless wars, the limitless corruption of money politics, the toxic culture and gender wars, and the imperial hubris and willful ignorance that underlies it all… This level of disconnect between the expected and the observed certainly hurts, but the pain can be avoided, for a time, through mass delusion.

This sort of downward spiral does not automatically spell “Apocalypse,” but the specifics of the state cult of the US - an old-time religiosity overlaid with the secular religion of progress - are such that there can be no other options: either we are on our way up to build colonies on Mars, or we perish in a ball of flame. Since the humiliation of having to ask the Russians for permission to fly the Soyuz to the International Space Station makes the prospect of American space colonies seem dubious, it’s Plan B: balls of flame here we come!

And so, most of the recent American warmongering toward Russia can be explained by the desire to find anyone but oneself to blame for one’s unfolding demise. This is a well-understood psychological move—projecting the shadow—where one takes everything one hates but can’t admit to about oneself and projects it onto another. On a subconscious level (and, in the case of some very stupid people, even a conscious one) the Americans would like to nuke Russia until it glows, but can’t do so because Russia would nuke them right back. But the Americans can project that same desire onto Russia, and since they have to believe that they are good while Russia is evil, this makes the Armageddon scenario appear much more likely.

But this way of thinking involves a break with reality. There is exactly one nation in the world that nukes other countries, and that would be the United States. It gratuitously nuked Japan, which was ready to surrender anyway, just because it could. It prepared to nuke Russia at the start of the Cold War, but was prevented from doing so by a lack of a sufficiently large number of nuclear bombs at the time. And it attempted to render Russia defenseless against nuclear attack, abandoning the Anti-Ballistic Missile Treaty in 2002, but has been prevented from doing so by Russia’s new weapons. These include, among others, long-range supersonic cruise missiles (Kalibr), and suborbital intercontinental missiles carrying multiple nuclear payloads capable of evasive maneuvers as they approach their targets (Sarmat). All of these new weapons are impossible to intercept using any conceivable defensive technology. At the same time, Russia has also developed its own defensive capabilities, and its latest S-500 system will effectively seal off Russia’s airspace, being able to intercept targets both close to the ground and in low Earth orbit.

In the meantime, the US has squandered a fantastic sum of money fattening up its notoriously corrupt defense establishment with various versions of “Star Wars,” but none of that money has been particularly well spent. The two installations in Europe of Aegis Ashore (completed in Romania, planned in Poland) won’t help against Kalibr missiles launched from submarines or small ships in the Pacific or the Atlantic, close to US shores, or against intercontinental missiles that can fly around them. The THAAD installation currently going into South Korea (which the locals are currently protesting by shaving their heads) won’t change the picture either.

There is exactly one nuclear aggressor nation on the planet, and it isn’t Russia. But this shouldn’t matter. In spite of American efforts to undermine it, the logic of Mutual Assured Destruction (MAD) remains in effect. The probability of a nuclear exchange is determined not by anyone’s policy but by the likelihood of it happening by accident. Since there is no winning strategy in a nuclear war, nobody has any reason to try to start one. Under no circumstances is the US ever going to be able to dictate its terms to Russia by threatening it with nuclear annihilation.

If a nuclear war is not in the cards, how about a conventional one? The US has been sabre-rattling by stationing troops and holding drills in the Baltics, right on Russia's western border, installing ABM systems in Romania, Poland and South Korea, supporting anti-Russian Ukrainian Nazis, etc. All of this seems quite provocative; can it result in a war? And what would that war look like?

Here, we have to look at how Russia has responded to previous provocations. These are all the facts that we know, and can use to predict what will happen, as opposed to purely fictional, conjectural statements unrelated to known facts.

When the US or its proxies attack an enclave of Russian citizens outside of Russia's borders, here are the types of responses that we have been able to observe so far:

1. The example of Georgia. During the Summer Olympics in Beijing (a traditional time of peace), the Georgian military, armed and trained by the US and Israel, invaded South Ossetia. This region was part of Georgia in name only, being mostly inhabited by Russian speakers and passport-holders. Georgian troops started shelling its capital, Tskhinval, killing some Russian peacekeeping troops stationed in the region and causing civilian casualties. In response, Russian troops rolled into Georgia, within hours completely eliminating Georgia’s war-making capability. They announced that South Ossetia was de facto no longer part of Georgia, throwing in Abkhazia (another disputed Russian enclave) for good measure, and withdrew. Georgia’s warmongering president Saakashvili was pronounced a “political corpse” and left to molder in place. Eventually he was forced to flee Georgia, where he has been declared a fugitive from justice. The US State Department recently gave him a new job, as Governor of Odessa in the Ukraine. Recently, Russian-Georgian relations have been on the mend.

 

2. The example of Crimea. During the Winter Olympics in Sochi, in Russia (a traditional time of peace) there occurred an illegal, violent overthrow of the elected, constitutional government of the Ukraine, followed by the installation of a US-picked puppet administration. In response, the overwhelmingly Russian population of the autonomous region of Crimea held a referendum. Some 95% of them voted to secede from the Ukraine and to once again become part of Russia, which they had been for centuries and until very recently. The Russians then used their troops already stationed in the region under an international agreement to make sure that the results of the referendum were duly enacted. Not a single shot was fired during this perfectly peaceful exercise in direct democracy.

 

3. The example of Crimea again. During the Summer Olympics in Rio (a traditional time of peace) a number of Ukrainian operatives stormed the Crimean border and were swiftly apprehended by Russia's Federal Security Service, together with a cache of weapons and explosives. A number of them were killed in the process, along with two Russians. The survivors immediately confessed to planning to organize terrorist attacks at the ferry terminal that links Crimea with the Russian mainland and a railway station. The ringleader of the group confessed to being promised the princely sum of $140 for carrying out these attacks. All of them are very much looking forward to a warm, dry bunk and three square meals of day, care of the Russian government, which must seem like a slice of heaven compared to the violence, chaos, destitution and desolation that characterizes life in present-day Ukraine. In response, the government in Kiev protested against “Russian provocation,” and put its troops on alert to prepare against “Russian invasion.” Perhaps the next shipment of US aid to the Ukraine should include a supply of chlorpromazine or some other high-potency antipsychotic medication.

 

Note the constant refrain of “during the Olympics.” This is not a coincidence but is indicative of a certain American modus operandi. Yes, waging war during a traditional time of peace is both cynical and stupid. But the American motto seems to be “If we try something repeatedly and it still doesn't work, then we just aren’t trying hard enough.” In the minds of those who plan these events, the reason they never work right can’t possibly have anything to do with it being stupid. This is known as “Level III Stupid”: stupidity so profound that it is unable to comprehend its own stupidity.

 

4. The example of Donbass. After the events described in point 2 above, this populous, industrialized region, which was part of Russia until well into the 20th century and is linguistically and culturally Russian, went into political turmoil, because most of the locals wanted nothing to do with the government that had been installed in Kiev, which they saw as illegitimate. The Kiev government proceeded to make things worse, first by enacting laws infringing on the rights of Russian-speakers, then by actually attacking the region with the army, which they continue to do to this day, with three unsuccessful invasions and continuous shelling of both residential and industrial areas, in the course of which over ten thousand civilians have been murdered and many more wounded. In response, Russia assisted with establishing a local resistance movement supported by a capable military contingent formed of local volunteers. This was done by Russian volunteers, acting in an unofficial capacity, and by Russian private citizens donating money to the cause. In spite of Western hysteria over “Russian invasion” and “Russian aggression,” no evidence of it exists. Instead, the Russian government has done just three things: it refused to interfere with the work of its citizens coming to the aid of Donbass; it pursued a diplomatic strategy for resolving the conflict; and it has provided numerous convoys of humanitarian aid to the residents of Donbass. Russia’s diplomatic initiative resulted in two international agreements—Minsk I and Minsk II—which compelled both Kiev and Donbass to pursue a strategy of political resolution of the conflict through cessation of hostilities and the granting to Donbass of full autonomy. Kiev has steadfastly refused to fulfill its obligations under these agreements. The conflict is now frozen, but continuing to bleed because of Ukrainian shelling, waiting for the Ukrainian puppet government to collapse.

 

To complete the picture, let us include Russia’s recent military action in Syria, where it came to the defense of the embattled Syrian government and quickly demolished a large part of ISIS/ISIL/Daesh/Islamic Caliphate, along with various other terrorist organizations active in the region. The rationale for this action is that Russia saw a foreign-funded terrorist nest in Syria as a direct threat to Russia’s security. Two other notable facts here are that Russia acted in accordance with international law, having been invited by Syria’s legitimate, internationally recognized government and that the military action was scaled back as soon as it seemed possible for all of the legitimate (non-terrorist) parties to the conflict to return to the negotiating table. These three elements—using military force as a reactive security measure, scrupulous adherence to international law, and seeing military action as being in the service of diplomacy—are very important to understanding Russia’s methods and ambitions.

Turning now to US military/diplomatic adventures, we see a situation that is quite different. US military spending is responsible for over half of all federal discretionary spending, dwarfing most other vitally important sectors, such as infrastructure, public medicine and public education. It serves several objectives. Most importantly, it is a public jobs program: a way of employing people who are not employable in any actually productive capacity due to lack of intelligence, education and training. Second, it is a way for politicians and defense contractors to synergistically enrich themselves and each other at the public’s expense. Third, it is an advertising program for weapons sales, the US being the top purveyor of lethal technology in the world. Last of all, it is a way of projecting force around the world, bombing into submission any country that dares oppose Washington’s global hegemonic ambitions, often in total disregard of international law. Nowhere on this list is the actual goal of defending the US.

None of these justifications works vis-à-vis Russia. In dollar terms, the US outspends Russia on defense hands down. However, viewed in terms of purchasing parity, Russia manages to buy as much as ten times more defensive capability per unit national wealth than the US, largely negating this advantage. Also, what the US gets for its money is inferior: the Russian military gets the weapons it wants; the US military gets what the corrupt political establishment and their accomplices in the military-industrial complex want in order to enrich themselves. In terms of being an advertising campaign for weapons sales, watching Russian weaponry in action in Syria, effectively wiping out terrorists in short order through a relentless bombing campaign using scant resources, then seeing US weaponry used by the Saudis in Yemen, with much support and advice from the US, being continuously defeated by lightly armed insurgents, is unlikely to generate too many additional sales leads. Lastly, the project of maintaining US global hegemony seems to be on the rocks as well. Russia and China are now in a de facto military union. Russia’s superior weaponry, coupled with China’s almost infinitely huge infantry, make it an undefeatable combination. Russia now has a permanent air base in Syria, has made a deal with Iran to use Iranian military bases, and is in the process of prying Turkey away from NATO. As the US military, with its numerous useless bases around the world and piles of useless gadgets, turns into an international embarrassment, it remains, for the time being, a public jobs program for employing incompetents, and a rich source of graft.

In all, it is important to understand how actually circumscribed American military capabilities are. The US is very good at attacking vastly inferior adversaries. The action against Nazi Germany only succeeded because it was by then effectively defeated by the Red Army—all except for the final mop-up, which is when the US came out of its timid isolation and joined the fray. Even North Korea and Vietnam proved too tough for it, and even there its poor performance would have been much poorer were it not for the draft, which had the effect of adding non-incompetents to the ranks, but produced the unpleasant side-effect of enlisted men shooting their incompetent officers—a much underreported chapter of American military history. And now, with the addition of LGBTQ people to the ranks, the US military is on its way to becoming an international laughing stock. Previously, terms like “faggot” and “pussy” were in widespread use in the US military’s basic training. Drill sergeants used such terminology to exhort the “numb-nuts” placed in their charge to start acting like men. I wonder what words drill sergeants use now that they’ve been tasked with training those they previously referred to as “faggots” and “pussies”? The comedic potential of this nuance isn’t lost on Russia’s military men.

This comedy can continue as long as the US military continues to shy away from attacking any serious adversary, because if it did, comedy would turn to tragedy rather quickly.

• If, for instance, US forces tried to attack Russian territory by lobbing missiles across the border, they would be neutralized in instantaneous retaliation by Russia’s vastly superior artillery.
• If Americans or their proxies provoked Russians living outside of Russia (and there are millions of them) to the point of open rebellion, Russian volunteers, acting in an unofficial capacity and using private funds, would quickly train, outfit and arm them, creating a popular insurgency that would continue for years, if necessary, until Americans and their proxies capitulate.
• If the Americans do the ultimately foolish thing and invade Russian territory, they would be kettled and annihilated, as repeatedly happened to the Ukrainian forces in Donbass.
• Any attempt to attack Russia using the US aircraft carrier fleet would result in its instantaneous sinking using any of several weapons: ballistic anti-ship missiles, supercavitating torpedos or supersonic cruise missiles.
• Strategic bombers, cruise missiles and ballistic missiles would be eliminated by Russia’s advanced new air defense systems.

So much for attack; but what about defense? Well it turns out that there is an entire separate dimension to engaging Russia militarily. You see, Russia lost a huge number of civilian lives while fighting off Nazi Germany. Many people, including old people, women and children, died of starvation and disease, or from German shelling, or from the abuse they suffered at the hands of German soldiers. On the other hand, Soviet military casualties were on par with those of the Germans. This incredible calamity befell Russia because it had been invaded, and it has conditioned Russian military thinking ever since. The next large-scale war, if there ever is one, will be fought on enemy territory. Thus, if the US attacks Russia, Russia will counterattack the US mainland. Keeping in mind that the US hasn’t fought a war on its own territory in over 150 years, this would come as quite a shock.

Of course, this would be done in ways that are consistent with Russian military thinking. Most importantly, the attack must be such that the possibility of triggering a nuclear exchange remains minimized. Second, the use of force would be kept to the minimum required to secure a cessation of hostilities and a return to the negotiating table on terms favorable to Russia. Third, every effort would be made to make good use of internal popular revolts to create long-lasting insurgencies, letting volunteers provide the necessary arms and training. Lastly, winning the peace is just as important as winning the war, and every effort would be made to inform the American public that what they are experiencing is just retribution for certain illegal acts. From a diplomatic perspective, it would be much more tidy to treat the problem of war criminals running the US as an internal, American political problem, to be solved by Americans themselves, with an absolute minimum of outside help. This would best be accomplished through a bit of friendly, neighborly intelligence-sharing, letting all interested parties within the US know who exactly should be held responsible for these war crimes, what they and their family members look like, and where they live.

The question then is, What is the absolute minimum of military action—what I am calling “a thousand balls of fire,” named after George Bush Senior’s “a thousand points of light”—to restore peace on terms favorable to Russia? It seems to me that 1000 “balls of fire” is just about the right number. These would be smallish explosions—enough to demolish a building or an industrial installation, with almost no casualties. This last point is extremely important, because the goal is to destroy the system without actually directly hurting any of the people. It wouldn’t be anyone else’s fault if people in the US suffer because they refuse to do as their own FEMA asks them to do: stockpile a month’s worth of food and water and put together an emergency evacuation plan. In addition, given the direction in which the US is heading, getting a second passport, expatriating your savings, and getting some firearms training just in case you end up sticking around are all good ideas.

The reason it is very important for this military action to not kill anyone is this: there are some three million Russians currently residing in the US, and killing any of them is definitely not on strategy. There is an even larger number of people from populous countries friendly to Russia, such as China and India, who should also remain unharmed. Thus, a strategy that would result in massive loss of life would simply not be acceptable. A much better scenario would involve producing a crisis that would quickly convince the Russians living in the US (along with all the other foreign nationals and first-generation immigrants, and quite a few of the second-generation immigrants too) that the US is no longer a good place to live. Then all of these people could be repatriated—a process that would no doubt take a few years. Currently, Russia is the number three destination worldwide for people looking for a better place to live, after the US and Germany. Germany is now on the verge of open revolt against Angela Merkel’s insane pro-immigration policies. The US is not far behind, and won’t remain an attractive destination for much longer. And that leaves Russia as the number one go-to place on the whole planet. That’s a lot of pressure, even for a country that is 11 time zones wide and has plenty of everything except tropical fruit and people.

We must also keep in mind that Israel—which is, let’s face it, a US protectorate temporarily parked on Palestinian land—wouldn’t last long without massive US support. Fully a third of Israeli population happens to be Russian. The moment Project Israel starts looking defunct, most of these Russian Jews, clever people that they are, will no doubt decide to stage an exodus and go right back to Russia, as is their right. This will create quite a headache for Russia’s Federal Migration Service, because it will have to sift through them all, letting in all the normal Russian Jews while keeping out the Zionist zealots, the war criminals and the ultra-religious nutcases. This will also take considerable time.

But actions that risk major loss of life also turn out to be entirely unnecessary, because an effective alternative strategy is available: destroy key pieces of government and corporate infrastructure, then fold your arms and wait for the other side to crawl back to the negotiating table waving a white rag. You see, there are just a few magic ingredients that allow the US to continue to exist as a stable, developed country capable of projecting military force overseas. They are: the electric grid; the financial system; the interstate highway system; rail and ocean freight; the airlines; and oil and gas pipelines. Disable all of the above, and it’s pretty much game over. How many “balls of flame” would that take? Probably well under a thousand.

Disabling the electric grid is almost ridiculously easy, because the system is very highly integrated and interdependent, consisting of just three sub-grids, called “interconnects”: western, eastern and Texas. The most vulnerable parts of the system are the Large Power Transformers (LPTs) which step up voltages to millions of volts for transmission, and step them down again for distribution. These units are big as houses, custom-built, cost millions of dollars and a few years to replace, and are mostly manufactured outside the US. Also, along with the rest of the infrastructure in the US, most of them are quite old and prone to failure. There are several thousand of these key pieces of equipment, but because the electric grid in the US is working at close to capacity, with several critical choke points, it would be completely disabled if even a handful of the particularly strategic LPTs were destroyed. In the US, any extended power outage in any of the larger urban centers automatically triggers large-scale looting and mayhem. Some estimate that just a two week long outage would push the situation to a point of no return, where the damage would become too extensive to ever be repaired.

Disabling the financial system is likewise relatively trivial. There are just a few choke points, including the Federal Reserve, a few major banks, debit and credit card company data centers, etc. They can be disabled using a variety of methods, such as a cruise missile strike, a cyberattack, electric supply disruption or even civil unrest. It bears noting that the financial system in the US is rigged to blow even without foreign intervention. The combination of runaway debt, a gigantic bond bubble, the Federal Reserve trapped into ever-lower interest rates, underfunded pensions and other obligations, hugely overpriced real estate and a ridiculously frothy stock market will eventually detonate it from the inside.

A few more surgical strikes can take out the oil and gas pipelines, import terminals, highway bridges and tunnels, railroads and airlines. A few months without access to money and financial services, electricity, gasoline, diesel, natural gas, air transport or imported spare parts needed to repair the damage should be enough to force the US to capitulate. If it makes any efforts to restore any of these services, an additional strike or two would quickly negate them.

The number of “balls of flame” can be optimized by taking advantage of destructive synergies: a GPS jammer deployed near the site of an attack can prevent responders from navigating to it; taking out a supply depot together with the facility it serves, coupled with transportation system disruptions, can delay repairs by many months; a simple bomb threat can immobilize a transportation hub, making it a sitting duck instead of a large number of moving targets; etc.

You may think that executing such a fine-tuned attack would require a great deal of intelligence, which would be difficult to gather, but this is not the case. First, a great deal of tactically useful information is constantly being leaked by insiders, who often consider themselves “patriots.” Second, what hasn’t been leaked can be hacked, because of the pitiable state of cybersecurity in the US. Remember, Russia is where anti-virus software is made—and a few of the viruses too. The National Security Agency was recently hacked, and its crown jewels stolen; if it can be hacked, what about all those whose security it supposedly protects?

You might also think that the US, if attacked in this manner, could effectively retaliate in kind, but this scenario is rather difficult to imagine. Many Russians don’t find English too difficult, are generally familiar with the US through exposure to US media, and the specialists among them, especially those who have studied or taught at universities in the US, can navigate their field of expertise in the US almost as easily as in Russia. Most Americans, on the other hand, can barely find Russia on a map, can’t get past the Cyrillic alphabet and find Russian utterly incomprehensible.

Also consider that Russia’s defense establishment is mainly focused on... defense. Offending people in foreign lands is not generally seen as strategically important. “A hundred friends is better than a hundred rubles” is a popular saying. And so Russia manages to be friends with India and Pakistan at the same time, and with China and Vietnam. In the Middle East, it maintains cordial relations with Turkey, Syria, Israel, Saudi Arabia, Yemen, Egypt and Iran, also all at the same time. Russian diplomats are required to keep channels of communication open with friends and adversaries alike, at all times. Yes, being inexplicably adversarial toward Russia can be excruciatingly painful, but you can make it stop any time! All it takes is a phone call.

Add to this the fact that the vicissitudes of Russian history have conditioned Russia’s population to expect the worst, and simply deal with it. “They can’t kill us all!” is another favorite saying. If Americans manage to make them suffer, the Russian people would no doubt find great solace in the fact they are making the Americans suffer even worse, and many among them would think that this achievement, in itself, is already a victory. Nor will they remain without help; it is no accident that Russia’s Minister of Defense, Sergei Shoigu, previously ran the Emergencies Ministry, and his performance at his job there won him much adulation and praise. In short, if attacked, the Russians will simply take their lumps—as they always have—and then go on to conquer and win, as they always have.

It doesn’t help matters that most of what little Americans have been told about Russia by their political leaders and mass media is almost entirely wrong. They keep hearing about Putin and the “Russian bear,” and so they are probably imagining Russia to be a vast wasteland where Vladimir Putin keeps company with a chess-playing, internet server-hacking, nuclear physicist, rocket scientist, Ebola vaccine-inventing, polyglot, polymath bear. Bears are wonderful, Russians love bears, but let’s not overstate things. Yes, Russian bears can ride bicycles and are sometimes even good with children, but they are still just wild animals and/or pets (many Russians can’t draw that distinction). And so when the Americans growl about the “Russian bear,” the Russians wonder, Which one?

In short, Russia is to most Americans a mystery wrapped in an enigma, and there simply isn’t a large enough pool of intelligent Americans with good knowledge of Russia to draw upon, whereas to many Russians the US is an open book. As far as the actual American “intelligence” and “security” services, they are all bloated bureaucratic boondoggles mired in political opportunism and groupthink that excel at just two things: unquestioningly following idiotic procedures, and creatively fitting the facts to the politics du jour. “Proving” that Iraq has “weapons of mass destruction”—no problem! Telling Islamist terrorists apart from elderly midwestern grandmothers at an airport security checkpoint—no can do!

Russia will not resort to military measures against the US unless sorely provoked. Time and patience are on Russia’s side. With each passing year, the US grows weaker and loses friends and allies, while Russia grows stronger and gains friends and allies. The US, with its political dysfunction, runaway debt, decaying infrastructure and spreading civil unrest, is a dead nation walking. It will take time for each of the United States to neatly demolish themselves into their own footprints, like those three New York skyscrapers did on 9/11 (WTC #1, #2 and #7) but Russia is very patient. Russia is ready to respond to any provocation, but the last thing the Russians want is another war. And that, if you like good news, is the best news you are going to hear. But if you still think that there is going to be a war with Russia, don’t think “Armageddon”; think “a thousand balls of flame,” and then—crickets!

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America The Debt Pig: We Are A ‘Buy Now, Pay Later’ Society – And ‘Pay Later’ Is Rapidly Approaching

ORIGINAL LINK

If you really wanted to live like a millionaire, you could start doing it right now.  All you have to do is to apply for as many credit cards as possible and then begin running up credit card balances like there is no tomorrow.  At this point, I know what most of you are probably thinking.  You are probably thinking that such a lifestyle would not last for long and that a day of reckoning would eventually come, and you would be exactly right.  In fact, anyone that has ever had a tremendous amount of credit card debt knows how painful that day of reckoning can be.  To mindlessly run up credit card debt is exceedingly reckless, but unfortunately that is precisely what we have been doing as a nation as a whole.  We are a “buy now, pay later” society, and our national day of reckoning is approaching very, very quickly.

Often we like to focus on our exploding national debt, but household debt is out of control too.  In fact, the total amount of household debt in the United States is now up to a whopping 12.3 trillion dolllars…

In the second quarter, total household debt increased by $35 billion to $12.3 trillion, according to the New York Fed’s latest quarterly report on household debt. That increase was driven by two categories: auto loans and credit cards.

We throw around words like “trillion” so often these days that they often start to lose their meaning.  But the truth is that 12.3 trillion dollars is an astounding amount of money.  It breaks down to about $38,557 for every man, woman and child in the entire country.  So if you have a family of four, your share comes to a grand total of $154,231, and that doesn’t even include corporate debt, local government debt, state government debt or the gigantic debt of the federal government.  That number is only for household debt, and there aren’t too many Americans that could cough up their share right at this moment.

Do you remember when I wrote about how credit card companies are specifically targeting less educated and less sophisticated consumers?  Well, that is where much of the credit card debt growth has come lately.  Just check out these numbers…

Now, credit cards are returning among individuals with low credit or subprime credit scores below 660. Among people with credit scores between 620 and 660, the share that had a credit card rose to 58.8% in 2015 from a low of 54.3% in 2013. Among those with scores below 620, the number of people with a credit card increased to 50% from a low of 45.6% two years ago. Both figures for 2015 are the highest since 2008.

In America today, we are enjoying a standard of living that we do not deserve.

We consume far more wealth than we produce.  The only way we are able to do that is by going into debt.

Debt takes future consumption and brings it into the present.  In other words, we are damaging the future in order to make the present a little bit better.  On an individual level, we may enjoy the big screen television we buy with a credit card today, but we are taking away our ability to spend money later.  And on a national level, what our unprecedented debt binge is doing to future generations of Americans is beyond criminal.

Earlier this month I explained these things to a live studio audience down at Morningside, and you can view a video of that right here…

In this article I haven’t even talked about corporate debt yet.  Instead of learning their lessons from the last financial crisis, big corporations have gone on the biggest debt spree of all time.  If you can believe it, corporate debt has approximately doubled since the last financial crisis.  In other words, since the last recession we have essentially matched the total amount of corporate debt that we accumulated from the beginning of the country up to 2009.

Unfortunately, a lot of that debt is now going bad.

In previous articles I have documented that corporate debt delinquencies are now the highest that they have been since the last financial crisis, and corporate debt defaults are also the highest that they have been since the last financial crisis.

At this point, even the mainstream media is acknowledging that we have a corporate debt “crisis”.  The following comes from an article that was just put out by the Denver Post…

The number of companies that have defaulted so far this year has already passed the total for all of last year, which itself had the most since the financial crisis. Even among companies considered high-quality, or investment grade, credit-rating agencies say a record number are so stretched financially that they’re one bad quarter or so from being downgraded to “junk” status.

Companies whose debt is already deemed “junk” are in the worst shape in years. To pay back all they owe, they would have to set aside every dollar of their operating earnings over the next eight and a half years, more than twice as long as it would have taken during the 2008 crisis, according to Bank of America Merrill Lynch.

Are you starting to get the picture?

And I haven’t even started talking about our national debt yet.  When Barack Obama entered the White House, we were 10.6 trillion dollars in debt.  Today, we are 19.4 trillion dollars in debt.  That means that we have added 8.8 trillion dollars to the national debt under Obama, which breaks down to an average of 1.1 trillion dollars of additional debt a year.

We have been taking more than 100 million dollars of future consumption and bringing it into the present every single hour of every single day during the Obama administration.  That is why I am constantly referring to our “debt-fueled standard of living”.  We do not deserve to live the way that we do, but since we are able to steal from our children and our grandchildren we are able to enjoy a standard of living that most people in the world can only dream about.

Of course we are literally destroying the future of America in the process, but very few people seem to care about that these days.

Without all of this debt, we would be in a very deep economic depression right now.

But even with all of this “stimulus”, we are still mired in the worst economic “recovery” since 1949.  In fact, Barack Obama is actually on track to be the very first president in all of American history to not have one single year when U.S. GDP grew by 3 percent or better, and he has had two terms in which to try to get that accomplished.  The percentage of working age Americans that actually have a job is way down from where it was just prior to the last recession, and in this video I explain why the employment numbers put out by the government are not nearly as good as the administration would have us believe…

If the American people would have been willing to sacrifice and make some very hard choices a long time ago, maybe we could have gotten a handle on all of this debt.

But instead we continue to rack up debt as if there is no tomorrow, and in the process we are literally destroying tomorrow.

Every dollar of debt that we accumulate now makes life worse for our children and our grandchildren.

Unfortunately, we are a bunch of debt pigs, and we just can’t help ourselves.  We have come to believe that it is “normal” to go into so much debt, and as a society we continue to race toward economic oblivion.

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Ruling Against Burkini Ban Hinges on the Meaning of 'Decency' and 'Public Order'

ORIGINAL LINK

Last Friday's decision overturning a local burkini ban in France was a welcome victory for tolerance and religious freedom. But it relied on a narrow reading of public policy goals that supporters of such bans, including French Prime Minister Manuel Valls, define more broadly. That broader interpretation was accepted by a lower court in this case and by courts hearing challenges to other restrictions on religiously motivated clothing.

The Council of State, France's top administrative court, ruled that the mayor of Villeneuve-Loubet, one of more than 30 seaside towns that have forbidden women to wear full-body swimsuits, exceeded his legal authority as protector of safety, hygiene, decency, and public order on the beach. Limits on freedom "must be justified by proven risks of harm to public order," the court said, and the city has failed to demonstrate any such risk from allowing women to wear burkinis.

"In the absence of such risks," the court added, "emotions and concerns arising from terrorist attacks, including those committed in Nice on July 14, will not suffice to justify in law the contested prohibition." Hence "the contested decree has imposed a serious and manifestly illegal restraint on fundamental freedoms such as freedom to come and go, freedom of conscience, and personal freedom."

Villeneuve-Loubet's ban, like the others, did not mention Islam specifically. Instead it banned swimwear that is not "respectful of morality and the principle of secularism, and in compliance with hygiene and safety rules." Whether such a command is legal depends on how you understand "decency" and "public order," two inherently subjective justifications for municipal beach regulations. In a ruling last Monday, a judge of the Nice Administrative Court deemed the burkini ban a "necessary, appropriate, and proportionate" precaution aimed at preventing public disorder following recent terrorist assaults, especially the truck attack that killed 86 people in Nice on July 14. The Council of State rejected that rationale, viewing "emotions and concerns arising from terrorist attacks" as irrelevant to the ban's legality.

Although the burkini ban cited "the principle of secularism" as a justification, Valls argues that such laws have nothing to do with religion per se. "The burkini is not a religious sign," he says on Facebook. "It is the affirmation of political Islam in the public space." Valls has also called the burkini a tool for "the enslavement of women." He insists that last week's ruling "doesn't exhaust the debate that has opened up in our society on the question of the burkini."

Defending its ban on full-face veils in public, the French government likewise claimed "the practice was a recent phenomenon which was not required by religion but arose from radicalization and extremism" and maintained that it violated the principle of gender equality. In 2014 the European Court of Human Rights rejected the latter rationale but agreed that the law was justified to protect "public safety" and "the rights and freedom of others." The court reasoned that wearing a veil is inconsistent with "respect for the minimum requirements of life in society" because "the barrier raised against others by a veil concealing the face is perceived…as breaching the right of others to live in a space of socialization which makes living together easier."

In other words, the veil causes social disharmony by offending people. Supporters of burkini bans believe the same is true of excessively modest swimwear. Once such considerations are admitted as legitimate rationales for restricting freedom, it is hard to find a principled stopping point.

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