Tuesday, December 1, 2015

New Smoking Gun: U.S. and UK KNEW Saddam Did NOT Possess WMDs

We've reported again and again and again and again and again that everyone knew that Iraq didn’t have weapons of mass destruction (WMDs).
Today, a new smoking gun has  been disclosed.  The Guardian notes:
Tony Blair went to war in Iraq despite a report by South African experts with unique knowledge of the country that showed it did not possess weapons of mass destruction, according to a book published on Sunday.

God, Spies and Lies, by South African journalist John Matisonn, describes how then president Thabo Mbeki tried in vain to convince both Blair and President George W Bush that toppling Saddam Hussein in 2003 would be a terrible mistake.

Mbeki’s predecessor, Nelson Mandela, also tried to convince the American leader, but was left fuming that “President Bush doesn’t know how to think”.


The claim was this week supported by Mbeki’s office, which confirmed that he pleaded with both leaders to heed the WMD experts and even offered to become their intermediary with Saddam in a bid to maintain peace.

South Africa had a special insight into Iraq’s potential for WMD because the apartheid government’s own biological, chemical and nuclear weapons programme in the 1980s led the countries to collaborate. The programme was abandoned after the end of white minority rule in 1994 but the expert team, known as Project Coast, was put back together by Mbeki to investigate the US and UK assertion that Saddam had WMD – the central premise for mounting an invasion.

Mbeki, who enjoyed positive relations with both Blair and Saddam, asked for the team to be granted access.
“Saddam agreed, and gave the South African team the freedom to roam unfettered throughout Iraq,” writes Matisonn, who says he drew on sources in Whitehall and the South African cabinet. “They had access to UN intelligence on possible WMD sites. The US, UK and UN were kept informed of the mission and its progress.”

The experts put their prior knowledge of the facilities to good use, Matisonn writes. “They already knew the terrain, because they had travelled there as welcome guests of Saddam when both countries were building WMD.”

On their return, they reported that there were no WMDs in Iraq. “They knew where the sites in Iraq had been, and what they needed to look like. But there were now none in Iraq.”

In January 2003, Mbeki, who succeeded Mandela as president, sent a team to Washington to explain the findings, but with little success. Mbeki himself then met Blair for three hours at Chequers on 1 February, the book relates.

He warned that the wholesale removal of Saddam’s Ba’ath party could lead to a national resistance to the occupying coalition forces. But with huge military deployments already under way, Blair’s mind was clearly made up. When Frank Chikane, director-general in the president’s office, realised that the South Africans would be ignored, it was “one of the greatest shocks of my life”, he later wrote in a memoir.

Matisonn adds: “Mandela, now retired, had tried as well. On Iraq, if not other issues, Mandela and Mbeki were on the same page. Mandela phoned the White House and asked for Bush. Bush fobbed him off to [Condoleezza] Rice. Undeterred, Mandela called former President Bush Sr, and Bush Sr called his son the president to advise him to take Mandela’s call. Mandela had no impact. He was so incensed he gave an uncomfortable comment to the cameras: ‘President Bush doesn’t know how to think,’ he said with visible anger.”


Mbeki’s spokesman, Mukoni Ratshitanga, confirmed that Mbeki met Blair at Chequers to advise against the war and the UK’s involvement in it. Blair disagreed, Ratshitanga said, insisting that he would side with Bush.

“President Mbeki informed the prime minister that the South African government was about to send its own experts to assist and encourage the Iraqis to extend full cooperation to the UN weapons inspector, Dr Hans Blix,” Ratshitanga said. “He urged the prime minister to await the report of the SA experts before making any final commitment about going to war against Iraq.


Mbeki also had a phone conversation with Bush in 2003 and tried to discourage him from going to war, the spokesman said. “President Bush said he would rather not go to war but needed a clear and convincing signal that the Iraqis did not have WMDs to enable him to avoid the invasion of Iraq.

“President Mbeki informed him about the report of the SA experts which by then had already been sent to the UN secretary general, Dr Hans Blix and the UN security council. He informed President Bush that the report of the SA experts said Iraq had no WMDs. President Bush said he did not know about the report but would obtain a copy from the US ambassador at the UN, New York.”

It is not known whether Bush did obtain a copy of the report.
Mbeki later contacted Blair to ask him to find out from the US president what would constitute a “convincing signal” from Saddam, promising that he would contact Saddam to persuade him to send such a signal, according to Ratshitanga. “President

Mbeki understood from his sources and was convinced that Prime Minister Blair received his message as reported above, but did not convey it to President Bush.”

Blair’s office did not deny the meeting with Mbeki or the specifics of what was said.
But the U.S. and UK wanted war ... not peace.  They even rejected an offer from Saddam Hussein to leave Iraq and allow in weapons inspectors.
Obama and Clinton did the same thing in Libya and Syria.  They also falsely blamed those regimes of using WMDS or the like, and supported Islamic terrorists in both Libya and Syria.

Sunday, November 29, 2015

How A Secretive Elite Created The EU To Build A World Government

Voters in Britain's referendum need to understand that the European Union was about building a federal superstate from day one
As the debate over the forthcoming EU referendum gears up, it would be wise perhaps to remember how Britain was led into membership in the first place. It seems to me that most people have little idea why one of the victors of the Second World War should have become almost desperate to join this "club". That's a shame, because answering that question is key to understanding why the EU has gone so wrong.
Most students seem to think that Britain was in dire economic straits, and that the European Economic Community – as it was then called – provided an economic engine which could revitalise our economy. Others seem to believe that after the Second World War Britain needed to recast her geopolitical position away from empire, and towards a more realistic one at the heart of Europe. Neither of these arguments, however, makes any sense at all.
The EEC in the 1960s and 1970s was in no position to regenerate anyone’s economy. It spent most of its meagre resources on agriculture and fisheries and had no means or policies to generate economic growth.
When growth did happen, it did not come from the EU. From Ludwig Erhard's supply-side reforms in West Germany in 1948 to Thatcher's privatisation of nationalised industry in the Eighties, European growth came from reforms introduced by individual countries which were were copied elsewhere. EU policy has always been either irrelevant or positively detrimental (as was the case with the euro).
Nor did British growth ever really lag behind Europe's. Sometimes it surged ahead. In the 1950s Western Europe had a growth rate of 3.5 per cent; in the 1960s, it was 4.5 per cent. But in 1959, when Harold Macmillan took office, the real annual growth rate of British GDP, according to the Office of National Statistics, was almost 6 per cent. It was again almost 6 per cent when de Gaulle vetoed our first application to join the EEC in 1963.
In 1973, when we entered the EEC, our annual national growth rate in real terms was a record 7.4 per cent. The present Chancellor would die for such figures. So the economic basket-case argument doesn’t work.
What about geopolitics? What argument in the cold light of hindsight could have been so compelling as to make us kick our Second-World-War Commonwealth allies in the teeth to join a combination of Belgium, the Netherlands, Luxembourg, France, Germany and Italy?
Four of these countries held no international weight whatsoever. Germany was occupied and divided. France, meanwhile, had lost one colonial war in Vietnam and another in Algeria. De Gaulle had come to power to save the country from civil war. Most realists must surely have regarded these states as a bunch of losers. De Gaulle, himself a supreme realist, pointed out that Britain had democratic political institutions, world trade links, cheap food from the Commonwealth, and was a global power. Why would it want to enter the EEC?
The answer is that Harold Macmillan and his closest advisers were part of an intellectual tradition that saw the salvation of the world in some form of world government based on regional federations. He was also a close acquaintance of Jean Monnet, who believed the same. It was therefore Macmillan who became the representative of the European federalist movement in the British cabinet.
In a speech in the House of Commons he even advocated a European Coal and Steel Community (ECSC) before the real thing had been announced. He later arranged for a Treaty of Association to be signed between the UK and the ECSC, and it was he who ensured that a British representative was sent to the Brussels negotiations following the Messina Conference, which gave birth to the EEC.
In the late 1950s he pushed negotiations concerning a European Free Trade Association towards membership of the EEC. Then, when General de Gaulle began to turn the EEC into a less federalist body, he took the risk of submitting a full British membership application in the hope of frustrating Gaullist ambitions.
His aim, in alliance with US and European proponents of a federalist world order, was to frustrate the emerging Franco-German alliance which was seen as one of French and German nationalism.
.The French statesman Jean Monnet, (1888 - 1979), who in 1956 was appointed president of the Action Committee for the United States of Europe
The French statesman Jean Monnet, (1888 - 1979), who in 1956 was appointed president of the Action Committee for the United States of Europe
Monnet met secretly with Heath and Macmillan on innumerable occasions to facilitate British entry. Indeed, he was informed before the British Parliament of the terms in which the British approach to Europe would be framed.
Despite advice from the Lord Chancellor, Lord Kilmuir, that membership would mean the end of British parliamentary sovereignty, Macmillan deliberately misled the House of Commons — and practically everyone else, from Commonwealth statesmen to cabinet colleagues and the public — that merely minor commercial negotiations were involved. He even tried to deceive de Gaulle that he was an anti-federalist and a close friend who would arrange for France, like Britain, to receive Polaris missiles from the Americans. De Gaulle saw completely through him and vetoed the British bid to enter.
Macmillan left Edward Heath to take matters forward, and Heath, along with Douglas Hurd, arranged — according to the Monnet papers — for the Tory Party to become a (secret) corporate member of Monnet’s Action Committee for a United States of Europe.
According to Monnet’s chief aide and biographer, Francois Duchene, both the Labour and Liberal Parties later did the same. Meanwhile the Earl of Gosford, one of Macmillan’s foreign policy ministers in the House of Lords, actually informed the House that the aim of the government’s foreign policy was world government.
Monnet’s Action Committee was also given financial backing by the CIA and the US State Department. The Anglo-American establishment was now committed to the creation of a federal United States of Europe.
Today, this is still the case. Powerful international lobbies are already at work attempting to prove that any return to democratic self-government on the part of Britain will spell doom. American officials have already been primed to state that such a Britain would be excluded from any free trade deal with the USA and that the world needs the TTIP trade treaty which is predicated on the survival of the EU.
Fortunately, Republican candidates in the USA are becoming Eurosceptics and magazines there like The National Interest are publishing the case for Brexit. The international coalition behind Macmillan and Heath will find things a lot more difficult this time round — especially given the obvious difficulties of the Eurozone, the failure of EU migration policy and the lack of any coherent EU security policy.
Most importantly, having been fooled once, the British public will be much more difficult to fool again.

Wednesday, November 25, 2015

Charting The Full Impact Of Europe's Plunging Currency On U.S. Corporate Revenues

When it comes to the current round of currency war between Europe and the US, Europe is winning and the US is losing, and  nowhere is this more obvious than the revenues of the largest US corporations.
Here is FactSet showing that Dow 30 companies continued to report sales declines in Europe in Q3 as a result of the surge in the US Dollar.
“Foreign exchange impacts reduced sales by 7.4 percentage points, with notable year-on-year declines in the euro, yen, and Brazilian real. These currencies devalued versus the U.S. dollar by 15%, 14%, and 37% respectively.” –3M (October 22)
Coming into the Q3 earnings season, there were concerns in the market regarding the impact of slower economic growth and the stronger dollar relative to the euro on U.S. corporate earnings for the third quarter. With the final DJIA components (Home Depot and Wal-Mart Stores) reporting results for Q3 this past week, how did companies in the DJIA perform in the third quarter in Europe in terms of sales?
How did the revenue numbers for Q3 2015 compare to prior quarters?
Overall, 11 of the 30 companies in the DJIA provided revenue growth numbers for Europe for the third quarter. Of these eleven companies, nine reported a year-over-year decline in revenues. This number is equal to the number of Dow 30 companies that reported a year-over-year sales decrease in the previous quarter (9). For seven of these DJIA companies, the third quarter marked (at least) the third consecutive quarter of year-over-year declines in revenues from Europe.
Why? Thank the Fed that topline growth is declining as a result of the soaring dollar... even if the full impact won't be felt for a long time because for some unclear reason, earnings multiples are rising even as profitability itself is declining: "The stronger dollar appeared to be a factor in the weaker revenue performance of these companies in Europe.Of the 11 companies in the DJIA that provided revenue growth numbers for Europe, all 11 cited some negative impact on revenues or EPS (or both) for Q3 due to unfavorable foreign exchange during their earnings conference calls."
At some point the Fed will say enough, and that the time has come to give US corporations the benefit of a weak currency. It will probably come just as the Fed is stuck neck-deep in its "tightening cycle."

Tuesday, November 24, 2015

Nasdaq poised to launch FX trading platform: top executive

Nasdaq (NDAQ.O) is poised to launch a platform for foreign exchange trading which it says would make the $5 trillion-a-day global market more transparent and would diversify its own business, a top executive from the stock market operator said.
Nasdaq Co-President Hans-Ole Jochumsen, one of two presidents who are both second in command of the tech-oriented stock market operator, told Reuters the FX trading platform is ready to be tested with banks although a launch was more likely in 2016.
Authorities in the United States and Europe have fined major banks more than $10 billion for failing to stop traders from trying to manipulate foreign exchange rates on the largely unregulated forex market.
"There are two main problems in retail FX markets. How can customers be sure they receive the correct price and secondly the counterparty risk," said Jochumsen, also the head of Nasdaq's transaction business.
"The criticism of banks and the fines show the market is not transparent and compliant and it speaks for it to be organized more like a stock market," Jochumsen told Reuters at the stock exchange in Copenhagen which is owned by Nasdaq.
Stock exchanges globally have been positioning themselves to take leading roles in foreign exchange as regulatory pressures force banks to move more trading onto exchanges, which tend to be more transparent than traditional phone-based trading between brokers.
The counterparty risk became real in January when losses from the surprise move by the Swiss National Bank (SNB) to end its currency cap against euro nearly crippled brokerage FXCM (FXCM.N) while online forex broker Alpari UK was forced into administration after suffering heavy losses on the Swiss franc.
Copenhagen-based foreign exchange brokerage Saxo Bank last week said the SNB's move cost it 700 million Danish crowns ($109 million) and booked a loss of 485 million crowns for the first six months in 2015 due to that cost.
Jochumsen declined to say when exactly Nasdaq will launch the FX platform but said it was likely to happen in 2016.
"We have a system ready that banks can test in their own systems but we don't want to launch it before we have enough banks committed to secure sufficient liquidity," he said.
He did not see why most currency pairs such as EUR/USD, GBP/USD and USD/CHF could not trade on a system similar to the stock market where banks add bid and ask prices every day.
Deutsche Boerse (DB1Gn.DE) in July beat out U.S. commodities and currency exchange operator CME Group (CME.O) in an auction to buy the Germany-based foreign exchange trading platform 360T for 725 million euros ($842.4 million).
And in March, BATS Global Markets, the No.2 U.S. stock exchange operator by volume and the largest pan-European stock market operator, closed its acquisition of FX trading platform Hotspot from KCG Holdings (KCG.N) for $365 million.
But while Nasdaq's aim is the same – to enter the lucrative world of FX trading – its plan differs by building its own platform rather than buying one.
Competing electronic forex trading platforms include EBS, owned by ICAP PLC (IAP.L), and FXall, owned by Thomson Reuters Corp (TRI.TO) (TRI.N), the parent of Reuters News.
Citigroup (C.N) is the leading foreign exchange trading bank with a market share of 16.1 percent, according to the Euromoney FX Survey 2015.
Deutsche Bank (DBKGn.DE) and Barclays (BARC.L) remained in second and third spots, but their market shares fell to 14.5 percent from 15.7 percent and to 8.1 percent from 10.9 percent, respectively.
In July, Nasdaq launched the "NFX" platform for trading energy derivatives such as oil, gas and power futures.

Nasdaq is heavily exposed to the level of activity on the stock market and Jochumsen said he hopes the decision to target energy futures market and the FX market will diversify Nasdaq's business more.

The Good Ol' Days: When Tax Rates Were 90 Percent

It’s quite interesting indeed when both progressives and conservatives seem to be nostalgic for those good ol’ days in the 1950s, for different reasons, of course.Conservatives want to go back to the nuclear Leave It to Beaver family and what not while liberals like to talk about those 90-percent tax rates that we owe our prosperity to. Or something like that. We’ll focus on the latter for the time being.
Bernie Sanders noted that “When radical, socialist Dwight D. Eisenhower was president, I think the highest marginal tax rate was something like 90 percent.” Paul Krugman said the same thing as did Michael Moore in his film Capitalism: A Love Story and you’ll see this factoid repeated on countless memes floating around the Internet.
However, what a tax rate is and what is actually paid are two very different things. Indeed, in 1955, the only people paying 90 percent (actually 91 percent) were thosemaking over $3,425,766 when adjusted for inflation. And these are marginal rates, so they only paid that on any earnings above that threshold.
Tax law has changed a lot over the years. As you can see by looking at the top marginal rate versus the inflation-adjusted top income bracket for those filing jointly from 1950 until 2013:
Top marginal rate versus the inflation-adjusted top income bracket
Source: Tax Foundation.
Today, there are seven tax brackets. In 1989, there were only two. In 1955, there were an utterly ridiculous twenty-four different tax brackets.
Regardless, one should ask how much the rich were actually paying. It should be noteworthy that back in the 1950s, the government wasn’t actually collecting any more in tax revenue as a percentage of GDP. There’s something called Hauser’s Law, which basically states there is a maximum threshold on how much the government can tax out of its population. I think this “law” is no such thing. If the government really wanted to expropriate more, it could do so. But Hauser’s Law based on the fact that in pretty much every year since 1950, the government has collected between 17 to 20 percent of GDP in taxes. Here are the government tax receipts compared to the top marginal tax rate:
Total Tax Receipts vs Top Marginal Tax Rate
Sources: Tax Foundation and Tax Policy Center.
As you can see, no matter what the rate has been, the tax receipts have pretty much been the same. Whether or not you can raise the amount collected is really immaterial here, the only thing that matters is what has happened (particularly when tax rates were over 90 percent) and it’s pretty much always been the same.
Of course, there are a lot of other taxes than personal income taxes. Still, tax receipts from personal income taxes have consistently been between 7 and 9 percent. In 2014, they were 8.1 percent. Furthermore, as you can see, the chart looks pretty much the same when looking at personal income tax receipts and the top marginal tax rate.
Income Tax Receipts vs Top Marginal Tax Rate
Source: Tax Foundation.
But who is paying these taxes a liberal might retort? Has the burden fallen more on the middle and lower classes? Well, no. In fact, the percentage of taxes paid by the highest quintile of income earners has steadily gone up since 1980. In 1980, the top 20 percent paid about 55 percent of all income taxes. Today, it’s just shy of 70 percent. The same goes for the top 1 percent, which went from about 15 percent in 1980 to just shy of 30 percent today.
The first of many reasons that this was the case is that we need to look at the effective tax rate, not the top marginal tax rate. So for example, if I make $20,000, I owe 10 percent under today’s tax code, but only on any income over $18,450 (filing jointly). So I only owe 10 percent of $1550, or $155. Yes, my marginal tax rate may be 10 percent, but my effective tax rate is 0.78 percent.
A study from the Congressional Research Service concludes that the effective tax rate for the top 0.01 percent of income earners during the period of 91-percent income taxes wasactually 45 percent. Given that the top bracket is so much lower today ($3,425,766 in 1955 vs. $413,200 in 2015), the 39.6 percent top marginal rate probably yields something pretty close.
Some of this was because corporate rates have always been lower than 50 percent. And as Alan Reynolds noted, when the personal income tax rates were reduced, it “… induced thousands of businesses to switch from filing under the corporate tax system to filing under the individual tax system.” In other words, many rich people kept their money in corporate entities when personal tax rates were higher.
Another major factor was the myriad of deductions and loop holes that used to be available. Many of these were eliminated by the Tax Reform Act of 1986, which by no coincidence coincided with the biggest rate deductions. For one, interest had previously been deductible on all loans. After the act, it has only been deductible on home mortgages.
But what was probably the biggest lost deduction for wealthy individuals was the elimination of deductions on passive investment losses on real estate. Before 1986, wealthy individuals would often buy real estate with no hopes at all of it cash flowing. That wasn’t the point. The point was that real estate is depreciated every year in the eyes of the IRS. Even though in the long run, properties usually go up in value, the IRS assumes that every twenty-seven-and-a-half years a property’s value will depreciate to zero.
This “loss” can be written off. So, for example, say a man earning $100,000 a year buys a property worth $275,000. He rents out the property and breaks even on it. The tax code allows that person to write off $10,000 as a loss which he can count against his income for that year. So now he only has to pay taxes on $90,000. If he owned ten such properties, his income would be zero, at least according to the IRS.
That deduction is now gone for everyone but “active” real estate investors, or those who invest in real estate as a career.
Indeed, one former tax accountant even made the case that there were so many deductions, loop holes and the like in the pre-1986 tax code that “… there was a massive amount of tax fraud at all income levels under the old code. It was so bad and so common that most people took pride in telling others how they cheated on their taxes.”
I’ll leave how true that statement is to the reader, but from what I’ve heard, it sounds about right.
Regardless, the simple fact is that the rich never paid 90 percent of their income in taxes or anything even remotely close to that. Unfortunately though, some memes die hard.

Friday, November 20, 2015

European Borders May be Redrawn as Europe Embraces Nationalism

NOVEMBER 20, 2015
In the wake of the Paris attacks, Europe is being pulled in two directions at once. On the one hand is the rise of localist nationalism in the form of border closings, border fences, and Euroskepticism. On the other hand is the rise of renewed militarism as the French state calls for even more aggressive foreign policy from its European allies in the name of security. In some ways, these two trends appear to be at odds, but they are really just different expressions of nationalism.

European Countries Closing their Borders

Even before the Paris attacks, the European Union faced rising skepticism and opposition over its immigration policies. Writing in the UK IndependentJohn Lichfield noted that
North vs south; east vs west; Britain vs the rest; German leadership or German dominance. The refugee crisis is like a diabolical stress test devised to expose simultaneously all the moral and political fault lines of the European Union.
As the wealthier (and therefore more politically powerful) nations of western Europe handed down edicts as to how migrants shall be spread around Europe, some of the less powerful nations revolted and began to refuse migrants.
Meanwhile, Austria, Hungary, Slovenia, and Macedonia all began building walls to keep out migrants. Serbia, Bulgaria, and Romania have all threatened to do the same.
Late last month, Polish voters elected a new Euroskeptic, anti-immigration government that has pledged to renew opposition to Brussels’ diktats on immigration and national borders.
And then, in the wake of Paris came an even bigger blow to the Europhile plans for a borderless Europe. France, a longtime leader in the European Commission’s efforts to force migrants throughout Europe — called for a suspension of the Schengen Area, the “borderless” zone in Europe through which travelers and migrants may move unimpeded.
In practice, the Schengen Area had shown serious strain even before the Paris attacks occurred. In addition to Eastern European resistance, Sweden introduced border checks in early November. Finland, in response to neighboring Sweden’s policy of accepting large numbers of migrants, began border checks of its own.
In response to France’s request, in an effort to save at least a remnant of Schengen, the Dutch delegation has suggested a “mini-Schengen.” Recognizing that a geographically unified Europe has long been a key component of the plan to build a European megastate, some in Europe are seeing benefits in a reduced version of Schengen, even if it means, as the Daily Mail reports, “kicking out” several members, including Spain, Italy, and Greece. Most of the current Schengen EU members from eastern Europe would be excluded as well, including Poland and Hungary.
Many European elites continue to express confidence in the current expansive version of Schengen, and claim that any changes will be temporary. Clearly, however, any pull back in Schengen is a sign of political weakness on the part of Europhiles, and is a significant step backward in terms of the political unification of Europe. How long before a Mini-Schengen is followed by a “Mini-European Monetary Union” with roughly the same borders?
If Brussels decides that Spain and Italy are not integral to Europe’s core in regards to Schengen, what’s to prevent a similar conversation when the next sovereign debt crisis rears its head in southern Europe?
In fact, any move toward a Mini-Schengen may prove what the smaller countries of eastern Europe have been claiming all along: it’s rich, western Europe versus everybody else.
But rich, western Europe isn’t immune to the localist, nationalist tide either. The Paris attacks have given new voice to nationalist parties in Germany and Europe, and the attacks have further aided France’s nationalist parties and their chief spokeswoman, Marine LePen. Also, dissenters from the Europhile line have been calling for border closings with renewed vigor in Britain, the Netherlands, Belgium, and Germany.
A lack of confidence in the European Commission appears to be spreading, and is weakest outside the core of the wealthy west. Even within the “core,” though, political unification of Europe is facing some of the strongest headwinds it has seen in decades.

Western Europe Looks to Increased Militarism

While Europe may be fracturing on domestic affairs, there are few signs of a European willingness to abandon its aggressive military stance in regard to Russia, Africa, the Middle East, and the world in general.
Europhiles have dreamed for years of creating a unified “EU army,” and thanks to the Paris attacks, things are looking up. In the wake of the attacks, according to the UK’s Express, French President Hollande “invoked Article 42.7 of the EU’s Lisbon Treaty, which states that if a member state ‘is the victim of armed aggression on its territory’ then the 27 other member states are obliged to provide aid and assistance ‘by all the means in their power’.”
This is being played up as a turn away from NATO, but that is only partly true. France, especially, has longed for a way to draw upon the military resources of its allies while not having to submit to the NATO bureaucracy.
This goes back at least to the 1960s when de Gaulle failed to get NATO help putting down rebellions in France’s colonies. In response, de Gaulle expelled NATO troops from French soil, built up France’s nuclear stockpiles, and removed France from NATO’s central command structure.
Always committed to aggressively and militarily exploiting its former colonies in Africa and the Middle East, the French state may have finally found the opportunity it needs to create an international military organization that can be dominated by France.
After all, when we’re talking about a possible European military, what we’re really talking about is a French-British-German military, with some token participation from other smaller countries. The UK, France, and Germany are among the world’s biggest spenders on military hardware, and it would be much easier for the French government to wield out-sized influence among only a handful of European governments, than within NATO.
So don’t be fooled. The Telegraph may be claiming that NATO was “shunned” at a recent meeting of European states, but Europe has no intention of abandoning NATO any time soon.
Europe has long freeloaded off the American taxpayer via NATO to ensure the global status quo for European elites, keep the European welfare states humming, and ensure that Europe need not worry about any unwanted diplomatic or military influence from Russia or China.
NATO’s war in Libya, for example, rather conveniently helped reduce Chinese influence which had been rising in North Africa at the expense of French and Italian interests.
Similarly, NATO’s presence helps ensure that European powers (and the Americans) can continue to antagonize the Russians without having to worry about any serious reprisals. In the case of any real conflict, the American taxpayers will pick up most of the tab.
Nevertheless, from the European point of view, a Euro Army offers a chance at renewed international influence for European states. If the Europeans can go their own way in “destroying ISIS,” Europe may be able to carve out its own sphere of influence in the oil-rich region, separate from those of the Americans and Russians.

European Union: Getting Smaller before it Gets Bigger?

The borders of Europe are indeed being redrawn. But, it would be premature to declare the project of European unity imperiled. Rather than full dissolution, it seems we’re more likely to see the EU retreat to its wealthier core in northern and western Europe. The newly expelled southern and eastern European countries would serve as buffer zones for migrants while allowing more freedom for the former “Great Powers” (i.e., UK, Germany, and France) to re-assert themselves as global players under the pretense of anti-terrorism.
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

In $64 Billion Bust, China Nabs "Underground Bank" Kingpin

Late last month, we introduced you to “Mr. Chen”, a catch-all for the operators of tiny storefronts and kiosks in China who can either get you some tea and a Snickers bar, or smuggle millions out of the country, whichever you prefer. 
“Mr. Chen” is part and parcel of China’s vast underground bank network which Chinese use to circumvent Beijing’s capital controls.
Officially, you’re only allowed to move $50,000 per year out of China, but there are any number of ways to get around that limit. One popular method - until Xi began to crack down that is - was the UnionPay end-around, which entails making what amounts to a fake purchase for something like, say, an expensive watch, and receiving cash from the merchant instead of merchandise. The underground bank method is more complex than that, but not by much. As WSJ explained in October, “large sums are divided into legally allowed amounts and then channeled out of the mainland via hundreds of bank accounts controlled by the underground banker.” Alternatively, “underground banks can match yuan deposited with them on the mainland with equivalent amounts in foreign currency paid into a client’s bank account elsewhere: Give the underground bank a sum, and a matching sum appears in Hong Kong, minus a cut of anywhere between 0.3% and 3%. No money physically or electronically crosses the border; the match is built on networks on both sides controlled by the underground bank.”
As we mentioned earlier this month when, courtesy of Bloomberg, we presented “5+1 Ways To Smuggle Billions Out Of China,” this is an underground business and so things don’t always go as planned, something a “Mr. Chan” (with an "a") discovered when he attempted to move CNY63 million out of the country via “Mr. Chen” (with an "e") only to find that once the transaction was complete, he only had CNY8 million left. That’s a pretty hefty fee even in the world of money laundering and so, Chan reported “Chen” to the authorities. The subsequent investigation led to the arrest of some 31 people and netted 1,087 accounts holding some CNY12 billion. 
Those arrested were never heard from again. 
Well, we're not sure if some other "Chan" got robbed and subsequently ratted on "Chen", but whatever the case, Chinese authorities have broken up another underground bank - more specifically, the largest such operation in the country which allegedly handled some $64 billion in illicit FX transactions. 
As Bloomberg reports, “more than 370 people have been arrested or face lawsuits or other punishment in the case centered in eastern Zhejiang province.” According to the details from Xinhua, it took police more than a year to sort the whole thing out, but by the time it was all said and done, 1.3 million transactions were scrutinized and 3,000 accounts were frozen. According to Jinhua City Public Security Bureau of Economic Investigation Detachment Vice Captain Zhang Hui, it took 35,000 sheets of paper to print out all of the evidence.
The group’s “Mr. Chen” is a guy called Zhao Mouyi, and as Bloomberg goes on to detail, he “set up more than 10 companies in Hong Kong from 2013 and transferring more than 100 billion yuan through so-called non-resident accounts, which are used by offshore companies in China when they are transferring money abroad.” 
Amusingly, HSBC - the global bastion of money laundering - assissted Zhao in exchanging yuan for foreign currency. Here's the account from The People's Daily (Google translated):
Hui said that unlike traditional underground banks by domestic and foreign "knock" level account transfer of funds approach, this is the first case of the use of the case to commit the crime of domestic accounts NRA found that the use of NRA accounts management loopholes and no foreign exchange purchase limit features, bypassing the foreign exchange regulation, the RMB cross-border transfer accounts directly through the NRA, hit the accounts provided by the "customer" in the settlement after HSBC and other banks.
Well, if you're going to launder money (because that's basically what this is... you're taking an illicit sum and via a series of transactions rendering it free and clear) we suppose you might as well go with the guys who have the most experience.
HSBC didn't comment.
We suppose the only question now is whether anyone will ever hear from "Zhao" or any of his accomplices again.
You can expect this crackdown to continue unabated. The market believes (rightly) that Beijing is targeting a much larger deval going forward as the economy continues to falter. That means the pressure on the yuan isn't likely to dissipate in a meaningful way. Indeed, as Goldman noted a few days ago, based on the sum of outright spot transactions and freshly entered (but unsettled) forward contracts, FX outflow was about US$26bn in China during October, composed of US$24bn in net outright spot transactions and US$2bn via net forward transactions. In other words: capital is still flowing out of China. 
As long as the pressure on the yuan is there, "Mr. Chen" will be around, white-haired, peering out from behind the candy and trinkets - and Xi will keep trying to stop him.

Wednesday, November 18, 2015

If We Want To Stop Terrorism, We Should Stop SUPPORTING Terrorists

In the wake of the barbaric Paris terror attacks, everyone is arguing over what we should do to stop further terrorism.
Some say we need more war against Islamic countries … or more spying … or more crackdowns on our liberties.
In reality – despite what the talking heads may say – the methods for stopping future attacks are well known …

I. Stop Overthrowing the Moderates and Arming the Crazies

We know it’s a difficult concept to grasp, but if we want to stop terrorism we should – wait for it – stop supporting terrorists.
Specifically, we’re arming the most violent radicals in the Middle East, as part of a really stupid geopolitical strategy to overthrow leaders we don’t like (more details below). And seethisthisthisthis and this. And – strangely – we’re overthrowing the moderate Arabs who stabilized the region and denied jihadis a foothold.
Indeed, the U.S. and its allies are directly responsible for creating and supplying ISIS.  As an internal Defense Intelligence Agency (DIA) document produced recently shows, the U.S. knew that the actions of “the West, Gulf countries and Turkey” in Syria might create a terrorist group like ISIS and an Islamic CALIPHATE.
Indeed, the former head of the DIA explained:
It was a willful decision [by America] to … support an insurgency that had salafists, Al Qaeda and the Muslim Brotherhood ….
If we want to stop terrorism, we need to stop supporting the terrorists.

II. Stop Supporting the Dictators Who Fund Terrorists

Saudi Arabia is the world’s largest sponsor of radical Islamic terrorists.  The Saudis have backed ISIS and many other brutal terrorist groups. And the most pro-ISIS tweets  allegedlycome from Saudi Arabia.
According to sworn declarations from a 9/11 Commissioner and the Co-Chair of the Congressional Inquiry Into 9/11, the Saudi government backed the 9/11 hijackers (see section VII for details).
Saudi Arabia is the hotbed of the most radical Muslim terrorists in the world: the Salafis (both ISIS and Al Qaeda are Salafis).
And the Saudis – with U.S. support – back the radical “madrassas” in which Islamic radicalism was spread.
And yet the U.S. has been supporting the Saudis militarily, with NSA intelligence and in every other way possible for 70 years.
In addition, top American terrorism experts say that U.S. support for brutal and tyrannical countries in the Middle east – like Saudi Arabia – is one of the top motivators for Arab terrorists.
U.S. and NATO-supported Turkey is also massively supporting ISISprovided chemical weapons used in the jihadi’s massacre of civilians, and has been bombing ISIS’ main on-the-ground enemy – Kurdish soldiers – using its air force.  And some of the Turkish people also seem to be unsympathetic to the victims of terrorism.
The U.S.-backed dictatorships in Qatar and Bahrain also massively fund ISIS.
So if we stop supporting the tyrannies in Saudi Arabia, Turkey, Qatar and Bahrain, we’ll get a two-fold reduction in terror:
(1) We’ll undermine the main terrorism supporters

And …

(2) We’ll take away one of the main motivations driving terrorists: our support for the most repressive, brutal Arab dictatorships
What a concept!

III. Stop Bombing and Invading When a Negotiated Settlement Is Offered

The U.S. rejected offers by Afghanistan, Iraq and Syria to surrender … and instead proceeded to wage war.
Security experts – including both conservatives and liberals – agree that waging war in the Middle East weakens national security and increases terrorism. See thisthisthisthisthis,thisthis and this.
For example, James K. Feldman – former professor of decision analysis and economics at the Air Force Institute of Technology and the School of Advanced Airpower Studies – and other experts say that foreign occupation is the main cause of terrorism. University of Chicago professor Robert A. Pape – who specializes in international security affairs – agrees.
So negotiating peaceful deals will drain the swamp of terrorists created by war and invasion.

IV. Stop Imperial Conquests for Arab Oil

The U.S. has undertaken regime change against Arab leaders we don’t like for six decades. We overthrew the leader of Syria in 1949, Iran in 1953, Iraq twice, Afghanistan twice, Turkey, Libya … and other oil-rich countries.
Neoconservatives planned regime change throughout the Middle East and North Africa yet again in 1991.
Top American politicians admit that the Iraq war was about oil, not stopping terrorism (documents from Britain show the same thing). Much of the war on terror is really a fight for natural gas. Or to force the last few hold-outs into dollars and private central banking.
And the U.S. military described terror attacks on the U.S. as a “small price to pay for being a superpower“:
A senior officer on the Joint Staff told State Department counter-terrorism director Sheehan he had heard terrorist strikes characterized more than once by colleagues as a “small price to pay for being a superpower”.
Remember, Al Qaeda wasn’t even in Iraq until the U.S. invaded that country. And the West’s Iraq war directly led to the creation of ISIS.
If we want to stop terrorism, we have to stop overthrowing Arab leaders and invading Arab countries to grab their oil.

V. Stop Drone Assassinations of Innocent Civilians

Top CIA officers say that drone strikes increase terrorism (and see this).
The CIA – the agency in charge of drone strikes – even told Obama that drone kills can increase terrorism.
If we want to stop creating new terrorists, we have to stop the drone strikes.

VI. Stop Torture

Top terrorism and interrogation experts agree that torture creates more terrorists.
Indeed, the leaders of ISIS were motivated by U.S. torture.
Once again, we have a very current example: Charlie Hebdo-murdering Frenchterrorist Cherif Kouchi told a court in 2005 that he wasn’t radical until he learned about U.S. torture at Abu Ghraib prison in Iraq.
If we want to stop creating new terrorists, we have to stop torturing … permanently.

VII. Stop Mass Surveillance

Top security experts agree that mass surveillance makes us MORE vulnerable to terrorists.
Indeed, even the NSA admits that it's collecting too MUCH information to stop terror attacks.
Stop it.

VIII. Stop Covering Up 9/11

Government officials agree that 9/11 was state-sponsored terrorism … they just disagree on which state was responsible.
Because 9/11 was the largest terror attack on the U.S. in history – and all of our national security strategies are based on 9/11 – we can’t stop terror until we get to the bottom of what really happened, and which state was behind it.
Many high-level American officials – including military leadersintelligence officials and 9/11 commissioners – are dissatisfied with the 9/11 investigations to date.
The Co-Chair of the congressional investigation into 9/11 – Bob Graham – and 9/11 Commissioner and former Senator Bob Kerrey are calling for either a “permanent 9/11 commission” or a new 9/11 investigation to get to the bottom of it.
The Co-Chair of the Congressional Inquiry into 9/11 and former Head of the Senate Intelligence Committee (Bob Graham) said that the Paris terror attack, ISIS, and other terrorist developments are a result of failing to stand up to Saudi Arabia and declassify the 9/11 investigation’s report about Saudi involvement in 9/11:
The 9/11 chairs, Ron Paul, and numerous other American politicians have called for declassification, as well.
Again, others have different ideas about who was behind 9/11. But until we get to the bottom of it, terror attacks will continue.

Stop Throwing Bodies In the River

Defenders of current government policy say: “we have to do something to stop terrorists!”
Yes, we do …
But we must also stop doing the 8 things above which increase terrorism. We have to stop “throwing new bodies in the river.”
But the powers-that-be don’t want to change course … they gain tremendous power and influence through our current war on terror strategies.
For example, the military-complex grows rich through war … so endless war is a feature – not a bug – of our foreign policy.
Mass surveillance is about economic and diplomatic advantage and crushing dissent.
Supporting the most radical Muslim leaders is about oil and power … “a small price to pay” to try to dominate the world.
A leading advisor to the U.S. military – the Rand Corporation – released a study in 2008 called “How Terrorist Groups End: Lessons for Countering al Qa’ida“. The report confirms what experts have been saying for years: the war on terror is actually weakening national security (see thisthis and this).
As a press release about the study states:
“Terrorists should be perceived and described as criminals, not holy warriors, and our analysis suggests that there is no battlefield solution to terrorism.”
We, the People, have to stand up and demand that our power-hungry leaders stop doing the things which give them more power … but are guaranteed to increase terrorism against us, the civilian population.
Postscript:  It’s not yet clear whether any of the terrorists were “refugees”, and some say that ISIS WANTS to stop all refugees from leaving Syria and Iraq. However, we also take therisk of infiltration of refugee groups by terrorists very seriously.
The bottom line is that we have to stop throwing new bodies in the river, so that we drastically reduce the amount of terrorists in the first place.