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When This Caterpillar Dies …

… We Don’t Get a Butterfly
 
by Tom Lewis

The Daily Impact (September 23 2015)

In order to have an industrial economy you have to build industrial things –  roads, ports, buildings, power stations and their grids, airports, houses and shopping centers –  and you have to replace them when they wear out. Such building is the activity on which an industrial society rests, the primary source of jobs and all the consequent economic activity that flows from people with jobs. What every one of these building projects needs, in addition to capital and workers, is heavy machinery. That is why the health of Caterpillar, the world’s dominant manufacturer of heavy equipment, and to a lesser extent England’s JCB, are taken as precursors of the world’s financial health.

Call hospice.

It’s bad enough the Caterpillar’s world sales were down eleven percent year-to-year in August, worse that they have declined by a similar amount every month this year. What is truly awful is that Caterpillar has a string of such sales declines –  on average ten percent per month –   going back almost three years. It’s the longest stretch of sales declines in the history of the company. To those who regard Caterpillar as a bellwether, and it has been reliable in the past, our future is going to be called the Second Great Depression.

The good news is, we’re not alone. In the UK, JCB has just announced it is cutting 400 jobs worldwide in the face of staggering declines in the economies of the countries in which it works. CEO Graeme Macdonald said in a press release,

In the first six months of the year, the market in Russia has dropped by seventy percent, Brazil by 36% and China by 47%. Parts of Europe are also struggling, with France down by 26%.

Both of these companies are global operators; both are engaged in creating and maintaining the foundations of the industrial age. Their decline and fall is the decline and fall of the age.

This bull isn’t a dozer, he’s a goner.

UPDATE (September 24 2015) –  Caterpillar today reduced its sales forecast for 2015 by a billion dollars. and announced it will be firing up to 10,000 people in the next few years as part of a desperate cost-cutting program. It is facing, said its CEO, a “convergence of challenging marketplace conditions”.

http://www.dailyimpact.net/2015/09/23/when-this-caterpillar-dies-we-dont-get-a-butterfly/

Categories: Uncategorized

Two Outs in the Bottom of the Ninth

by Administrator in Economy | Politics | Social Issues

The Burning Platform (September 25 2015)

Zero Hedge (September 25 2015)

The housing market peaked in 2005 and proceeded to crash over the next five years, with existing home sales falling fifty percent, new home sales falling 75%, and national home prices falling thirty percent. A funny thing happened after the peak. Wall Street banks accelerated the issuance of subprime mortgages to hyper-speed. The executives of these banks knew housing had peaked, but insatiable greed consumed them as they purposely doled out billions in no-doc [non-documented] liar loans as a necessary ingredient in their CDOs of mass destruction.

The millions in upfront fees, along with their lack of conscience in bribing Moody’s and S&P to get AAA ratings on toxic waste, while selling the derivatives to clients and shorting them at the same time, in order to enrich executives with multi-million dollar compensation packages, overrode any thoughts of risk management, consequences, or  the impact on homeowners, investors, or taxpayers. The housing boom began as a natural reaction to the Federal Reserve (“Fed”) suppressing interest rates to, at the time, ridiculously low levels from 2001 through 2004 (child’s play compared to the last six years).

Greenspan created the atmosphere for the greatest mal-investment in world history. As he raised interest rates from 2004 through 2006, the titans of finance on Wall Street should have scaled back their risk taking and prepared for the inevitable bursting of the bubble. Instead, they were blinded by unadulterated greed, as the legitimate home buyer pool dried up, and they purposely peddled “exotic” mortgages to dupes who weren’t capable of making the first payment. This is what happens at the end of Fed induced bubbles. Irrationality, insanity, recklessness, delusion, and willful disregard for reason, common sense, historical data and truth lead to tremendous pain, suffering, and financial losses.

Once the Wall Street machine runs out of people with the financial means to purchase a home or buy a new vehicle, they turn their sights on peddling their debt products to financially illiterate dupes. There is a good reason people with credit scores below 620 are classified as sub-prime. Scores this low result from missing multiple payments on credit cards and loans, having multiple collection items or judgements and potentially having a very recent bankruptcy or foreclosure. They have low paying jobs or no job at all. They do not have the financial means to repay a large loan. Giving them a loan to purchase a $250,000 home or a $30,000 automobile will not improve their lives. They are being set up for a fall by the crooked bankers making these loans. Heads they win, tails the dupe gets kicked out of that nice house onto the street and has those nice wheels repossessed in the middle of the night.

The subprime debacle that blew up the world in 2008 was created by the Federal Reserve, working on behalf of their Wall Street owners. When interest rates are set by central planners well below levels which would be set by the free market, based on risk and return, it creates bubbles, mal-investment, and ultimately financial system disaster. Did the Fed, Wall Street, politicians, and people learn their lesson? No. Because we bailed them out with our tax dollars and have silently stood by while they have issued $10 trillion of additional debt to solve a debt problem. The deformation of our financial system accelerates by the day.

The $3.5 trillion of Quantitative Easing (“QE”), six years of zero percent interest rates for Wall Street (why are credit card interest rates still thirteen percent?), and $8 trillion of deficit spending by the Federal government have provided the outward appearance of economic recovery, as the standard of living for most Americans has declined significantly. With real median household income still 6.5% BELOW 2007 levels, 7.3% BELOW 2000 levels, and about equal to 1989 levels, the only way the ruling class could manufacture a fake recovery is by ramping up the printing presses and reigniting a housing bubble and an auto bubble. They even threw in a student loan bubble for good measure.

The entire engineered “housing recovery” has had a suspicious smell to it all along. The true bottom occurred in 2009 with an annual rate of four million existing home sales. An artificial bottom of 3.5 million occurred in 2010 after the expiration of the Keynesian first time home buyer credit that lured more dupes into the market. The current rate of 5.31 million is at 2007 crash levels and on par with 2001 recession levels. With mortgage rates at record low levels for five years, this is all we got?

What really smells is the number of actual mortgage originations that have supposedly driven this 35% increase in existing home sales. If existing home sales are at 2007 levels, how could mortgage purchase applications be 55% below 2007 levels? If existing home sales are up 35% from the 2009~2010 lows, how could mortgage purchase applications be flat since 2010?

New home sales are up eighty percent from the 2010 lows, but before you get as excited as a CNBC bimbo over the “surging” new home sales, understand that new home sales are still sixty percent BELOW the 2005 high and 25% below the 1990 through 2000 average. So, in total, there are 1.5 million more annual home sales today than at the bottom in 2010. But mortgage originations haven’t budged. That’s quite a conundrum.

As you can also see, the median price for a new home far exceeds the bubble highs of 2005. A critical thinking individual might wonder how new home sales could be down sixty percent from 2005, while home prices are fifteen percent higher than they were in 2005. Don’t the laws of supply and demand work anymore? The identical trend can be seen in the existing homes sales market. The median price for existing home sales of $228,700 is an all-time high, exceeding the 2005 bubble levels. Again, sales are down thirty percent since 2005. I wonder who is responsible for this warped chain of events?

You guessed it – the Federal Reserve. There is no doubt these Wall Street captured academics with their models, theories, formulas, and Keynesian beliefs have created another immense bubble that endangers a global financial system already teetering on the brink of collapse due to central bank shenanigans by EU, Japanese, and Chinese central bankers. QE and ZIRP have encouraged rampant gambling by amoral greed-driven financial institutions. John Hussman sums up the “solution” implemented by the serial bubble blowers at the Fed:

The main impact of suppressed interest rates is to encourage yield-seeking speculation, to give low quality creditors access to the capital markets, to misallocate scarce saving, to subsidize leveraged carry trades, to reduce the long-term accumulation of productive capital, and to foment serial bubbles and crashes.

The suppressed interest rates and Yellen Put have encouraged Wall Street hedge funds, banks, finance companies, and fly by night mortgage brokers to finance a buy and rent scheme, house flippers, and once again subprime borrowers. The withholding of foreclosures from the market and the hedge fund purchase of millions of homes drove home prices higher. The artificially low mortgage rates also allowed people to buy more house than they normally could buy, thereby driving home prices even higher. This market manipulation has now priced out all but the richest Americans from buying a home. As expected, the Wall Street machine has decided to try and steal home with two outs in the bottom of the ninth. They’ve decided loaning money to people who are incapable of repaying the loan will surely work this time.

Existing home sales fell in August by 4.8%, and the rate of increase has been decelerating over the last twelve months. Hedge funds stopped buying, first time buyers are few as they are saddled with student loan debt, and the middle class doesn’t have the financial wherewithal to trade up. The Wall Street debt machine is running out of financially able customers, so they’ve ramped up subprime lending at the worst possible time. While overall existing home sales were up 6.2% over last year, the number of subprime first mortgage originations was up 30.5%, subprime home equity loans was up 29.5%, and subprime home equity lines of credit rose 20.4%. The percentage of subprime mortgage loans is the highest since 2008. While prime lending declines, subprime lending accelerates. This will surely end well.

And this is being promoted by the government through the Federal Housing Authority (“FHA”) . Subprime mortgages  are increasingly being underwritten by thinly capitalized non-banks and guaranteed by FHA. In 2012, when this data was first tracked, large banks represented 65.4% of FHA-backed loans. That number is now 29.6%. In their place, non-banks now represent 62.2% of the FHA lending. These fly by night outfits, who proliferated during the 2003 to 2008 subprime disaster, have little or no capital cushion and when these mortgages begin to default they will go bankrupt quickly, leaving the FHA (you the taxpayer) on the hook for the inevitable losses.

The FHA has been directed by their politician benefactors to pump up the housing market at any cost. You can get an FHA loan with a credit score as low as 500, so long as you have a ten percent down payment. And once you hit a 580 credit score, you only need a 3.5% down payment. The FHA is exempt from the qualified mortgage requirement of a 43% debt-to-income ratio. Many loans have a debt-to-income above 55%. The FHA only looks at mortgage payments in their calculation. The FHA is willing to accept a gift or inheritance as a down payment. You could have no savings, a 500 FICO, a fifty percent debt-to-income and an inheritance and that would be sufficient to get you a loan.

These fly by night mortgage companies are created by slimy get rich quick hucksters who are willing to take huge risks, because there is a big difference between the risk that faces the company, and the risk that faces the owner.  He will take incredibly rich commissions on all loans he books. Wall Street is again packaging these subprime slime loans into high yielding mortgage backed securities and getting the rating agencies to stamp it with a AAA rating.

Foolish investors receiving a good yield and a guarantee from the US government, are as clueless as they were in 2008. The owner of the mortgage company doesn’t care about default risk, since some other sucker has assumed that risk. When the mortgage company goes bankrupt, the owner has no personal liability. When it all blows up again, an already bankrupt FHA will be on the hook, which really means the taxpayer will pay again. You are underwriting the new subprime crisis.

This exact same scenario is also playing out in the economically important auto market. It is clear the Fed, Treasury, Wall Street and the politicos in Washington DC decided they needed to re-inflate the housing and auto bubbles to provide the appearance of economic recovery so they could resume their looting and pillaging of the national wealth. They have succeeded in ramping up auto sales from the 10.4 million annual rate in 2009 to 17.5 million in 2015, if you can call these sales. Short-term rentals is a better description. Auto leasing now accounts for thirty percent of “sales” (up from 22% in 2012), while subprime auto “sales” accounted for another 23.5%. The vast majority of the other sales are done with seven-year zero-percent financing. Does that sound like a sound business formula?

And now they’ve run out of dupes. The seasonally adjusted annual rate of sales for August 2015 was 17.2 million, flat with August 2014 and down from 17.5 million in July 2015. As the auto sales have gone flat and are poised to fall, the Wall Street finance machine has ramped up subprime lending from eighteen percent of all loans in 2010 to 23.5% today. With overall sales flat with last year, subprime lending is up 9.6% in the last year. The pace of subprime auto loans has been more than double the pace of prime auto loans since 2010.

Over ten percent of subprime auto loans are delinquent within the first twelve months. Subprime auto loan delinquency rates are soaring by twenty percent at Ally Financial. Santander is a Lehman Brothers in the making as their total delinquency rate approaches twenty percent. A critical thinking person might wonder why automaker profits are in decline, while GM and Ford stock prices are well below 2011 levels, if the auto market is booming.

The table is set for the next financial crisis. The apologists for the warped ideology that has resulted in $10 trillion of additional debt being layered on the original unpayable $52 trillion, argue subprime lending is lower than the 2008 peak, so all is well. They fail to realize the system is far more fragile and will collapse once the next Lehman moment arrives. The country is already in, or headed into recession. All economic indicators are flashing red. The stock market has fallen over ten percent in the last month. Virtually every new car owner you see driving that fancy BMW, Lexus, or Volvo is underwater on their auto loan. Home price growth has stalled at record levels. Mortgage rates are poised to rise from record lows. We all know what happens next. Look out below.

Some people never learn. They follow the same path that destroyed their finances in the past. Wall Street is desperately packaging the increasing amounts of subprime slime in new derivatives of mass destruction and peddling them to clients, while shorting those same derivatives. It’s called the Goldman Sachs method. When home prices begin to tumble, these derivatives will self-destruct again. What is happening today is nothing more than rearranging the deck chairs on the Titanic. The iceberg has been struck, we’re taking on water, and this sucker is going to sink. Game Over.

Part of the reason the Fed found it so difficult last week to justify a move away from zero interest rates is that the Fed seems incapable of recognizing, much less admitting, the speculative risks it has created. The strongest reason to normalize monetary policy was to reduce those risks, but the proper time to have done that was years ago. At this point, obscene equity valuations are already baked in the cake on valuation measures that are reliably correlated with actual subsequent stock market returns. At this point, hundreds of billions of dollars of low-grade covenant-lite debt have already been issued at risk premiums that are next to nothing. The bursting of this bubble is no longer avoidable. If history is any guide, policy makers will manage the resulting disruption by the seat of their pants, since they seem incapable of learning from history itself.

– John Hussman

http://www.theburningplatform.com/2015/09/25/two-outs-in-the-bottom-of-the-ninth/

http://www.zerohedge.com/news/2015-09-25/table-set-next-financial-crisis

Categories: Uncategorized

Markets Gone Mad

by Mike Whitney

CounterPunch (September 25 2015)

Imagine your doctor put you on a daily dose of oxycontin, phenobarbital and Quaaludes for six years straight. Then he suddenly cancelled your prescription.

Do you think your behavior might become a bit erratic?

This is what’s going on with the stock market. It’s trying to shake off six years of over-medication brought on by the US Federal Reserve’s (“Fed’s”) zero rates [of interest] and liquidity injections.

Let me explain: Until recently, stocks had been on a tear that pushed valuations into the stratosphere. Volatility stayed low because Bernanke’s easy money and Quantitative Easing (“QE”) made investors more placid, serene and mellow. They ventured further out on the risk curve and took more chances because they were convinced that the Fed “had their back” and that there was nothing to worry about.

Then things began to fall apart. The Fed ended its asset purchase program and started talking about “normalization”, an opaque term the Fed uses to avoid the harsher sounding [interest] “rate hikes”. This is what began to rouse investors from their drug-induced trance. The era of cheap money was coming to an end. The punch bowl was being taken away.

Then – just as the Fed’s surging liquidity had calmed the markets for six years – the absence of liquidity and high-frequency trading sent stocks gyrating wildly for months on end. The markets became unpredictable, convulsive, topsy-turvy. And while [interest] rates remained fixed at zero throughout, the mere anticipation of higher rates was enough to ignite a sustained period of extreme volatility unlike anything traders had ever seen before.  By taking its foot off the gas pedal and trying to restore traditional market dynamics, the Fed had slammed the vehicle into reverse unleashing pandemonium across global markets.

Naturally, the pundits tried to blame the mayhem on China or emerging markets or droopy commodities prices or even deflation. But it’s all baloney. The source of the problem is the Fed’s easy money policies, that’s what created the disconnect between valuations and fundamentals, that’s what sent stock prices to the moon, and that’s what inflated this ginormous stock-and-bond bubble that is just now beginning to unwind. China might have been the trigger, but it’s certainly not the cause.

Last Thursday, the unthinkable finally happened: The FOMC issued a statement that the interest rates would not be raised after all, but that ultra-accommodative policies would remain in place for the foreseeable future. On similar occasions, the markets have always rallied in gratitude for more-of-the-same easing. But not this time. This time, the Dow Jones surged 100 points before cratering 299 into the next session.

“Ah, the Fed has lost its magic touch”, the analysts opined.  The promise of zero rates was no longer enough to push stocks higher. What does this mean?  If the Fed does not have supernatural powers, then who will keep the markets from plunging? Who will keep the bubble intact? Who will save us from a painful correction?

Nobody knows.

What we do know is that stocks are currently rising on the back of cheap credit that is being diverted into Mergers and Acquisitions (M&A) and stock buybacks. Corporate debt continues to grow even while earnings and revenues shrink. In other words, the Fed’s perverse incentives (zero interest rates) have seduced corporations into piling on record debt for financial engineering and asset stripping, while investment in building up their companies for future growth (capital expenditures)  has fallen to post-war lows. That’s the kind of shenanigans that’s driving the markets.

Corporations have been riding the crest for the last three years, refinancing more than $1 trillion per year from 2012 to 2015. But tighter credit conditions and mounting debt servicing is expected to curb their appetite for more borrowing, dampening the prospects for higher stock prices. The same rule applies to stock buybacks. When equities prices flatten out or drift lower, and debt gets more pricey, share repurchases no longer make sense. So, you can see that – even if rates stay low – tighter credit and extra debt servicing is going to pull the rug out from under the market and put stocks into a deep freeze.

The point is, the Fed knows what’s going on but just looks the other way. They know their easy money isn’t building a strong, sustainable recovery. They know it’s being used to beef up leverage on risky bets so dodgy speculators can make a killing. They know it all, but they don’t give a rip. They just want to keep the game going a little bit longer, that’s all that matters to them. Heck, maybe Yellen has convinced herself that she can pull a rabbit out of her hat at the last minute and save us all from disaster?  It’s possible, but I doubt it.  I think she knows we’re goners. The economy is soft, the markets are zig-zagging wildly, and the whole bloody contraption looks like its ready to blow. She must know that the game is just about over.

http://www.counterpunch.org/2015/09/25/markets-gone-mad/

Categories: Uncategorized

Know World War Two …

2015/09/29 1 comment

… Avoid World War Three

US Provocation and Propaganda directed against China

by Tony Cartalucci

Global Research (September 27 2015)

Land Destroyer (September 27 2015)

An Asian state aggressively expanding its military, bullying its neighbors, illegally fortifying islands, and bent on regional, then global domination –  sound familiar? Are you thinking it’s China 2015? No, it is Japan 1937~1944.

So shockingly similar is American propaganda regarding Japan during World War Two to the propaganda being leveled against Beijing today that it seems almost intentional. Or perhaps those on Wall Street and Washington think so little of the general public’s ability to discern fact from fiction, they see no reason to revise the script and are going ahead with a remake faithful to the original with only a few minor casting twists.

This US government production is titled “Why We Fight: A Series of Seven Information Films” with this particular part titled, “The Battle of China” released in 1944.

It describes Japan almost verbatim as how the US today describes China.

China is depicted as a righteous victim –  but as the film elaborates –  it is clear that any affinity shown toward the Chinese people is only due to the fact that the US held significant economic and geopolitical interests there. Admittedly, the US military was already occupying China after extorting through “gunboat diplomacy” concessions from China’s subjugated, servile government –  not unlike US troops occupying Japan today, hosted by a capitulating government in Tokyo.

Japan in the film is depicted as a “blood crazed” race of barbarians, while the Chinese are depicted as noble resistors. Of course, this narrative shifted immediately as soon as US interests were ousted from China and US troops began occupying and shaping the destiny of conquered Japan after the war.

The Warnings Then are Warnings Now

US Marine Corps General Smedley Butler in his book War is a Racket (1935) would specifically warn about a military build up aimed at Japan for the jealous preservation of American conquests in Asia Pacific. Speaking specifically about these conquests, General Butler would say:

What does the “open door” policy to China mean to us? Our trade with China is about $90,000,000 a year. Or the Philippine Islands? We have spent about $600,000,000 in the Philippines in thirty-five years and we (our bankers and industrialists and speculators) have private investments there of less than $200,000,000.

Then, to save that China trade of about $90,000,000, or to protect these private investments of less than $200,000,000 in the Philippines, we would be all stirred up to hate Japan and go to war –  a war that might well cost us tens of billions of dollars, hundreds of thousands of lives of Americans, and many more hundreds of thousands of physically maimed and mentally unbalanced men.

Of course, for this loss, there would be a compensating profit –  fortunes would be made. Millions and billions of dollars would be piled up. By a few. Munitions makers. Bankers. Ship builders. Manufacturers. Meat packers. Speculators. They would fare well.

Yes, they are getting ready for another war. Why shouldn’t they? It pays high dividends.

Of provoking Japan, he would state specifically that:

At each session of Congress the question of further naval appropriations comes up. The swivel-chair admirals of Washington (and there are always a lot of them) are very adroit lobbyists. And they are smart. They don’t shout that “We need a lot of battleships to war on this nation or that nation”. Oh no. First of all, they let it be known that America is menaced by a great naval power. Almost any day, these admirals will tell you, the great fleet of this supposed enemy will strike suddenly and annihilate 125,000,000 people. Just like that. Then they begin to cry for a larger navy. For what? To fight the enemy? Oh my, no. Oh, no. For defense purposes only.

Then, incidentally, they announce maneuvers in the Pacific. For defense. Uh, huh.

The Pacific is a great big ocean. We have a tremendous coastline on the Pacific. Will the maneuvers be off the coast, two or three hundred miles? Oh, no. The maneuvers will be two thousand, yes, perhaps even thirty-five hundred miles, off the coast.

The Japanese, a proud people, of course will be pleased beyond expression to see the United States fleet so close to Nippon’s shores. Even as pleased as would be the residents of California were they to dimly discern through the morning mist, the Japanese fleet playing at war games off Los Angeles.

Incidentally, General Butler’s warning of provoking war to fulfill the ambitions of lobbyists in Washington and to protect America’s ill-gotten holding in Asia Pacific, would come to full and devastating fruition.

Today, a similar scenario plays out verbatim. The US seeks to expand its military in Asia Pacific to preserve what US policy makers call “US primacy over Asia”, and has been intentionally provoking China, by flying, sailing, and otherwise maneuvering just at the edge of Chinese territory.

In addition they have attempted to encircle China with military bases from South Korea and Japan to as far south as Darwin, Australia, and as far west as Afghanistan, all while attempting to carve off Chinese territory in the Xinjiang and Tibet regions, destabilize Hong Kong, and stitching together Southeast Asia into an supranational bloc with which to isolate and threaten China with economically and militarily. Political subversion underwritten by the US State Department is ongoing in Xinjiang through the use of Uyghur terrorists, Tibet via the Dali Lama, Myanmar via Aung San Suu Kyi and her “Saffron monks”, Thailand through the Shinawatra family and their ultra-violent “red shirt” mobs, Malaysia via Anwar Ibrahim and his Bersih street movement, and Hong Kong via the so-called “Umbrella revolution”.

Despite this effort, American designs are failing, and China has likely learned many lessons before, during, and after World War Two. Asian nations who seek regional peace and stability as well as cooperation with Beijing, have also learned much about the inner-working of US hegemony and how to confound it.

Beijing is unlikely to exhibit the hubris and impatience of the Japanese in World War Two, or allow themselves to be provoked into an unwinnable war. Beijing is also well aware that as impressive as America’s grand strategy of geopolitically and militarily encircling China may be, it is failing on all fronts.

China has learned these lessons of history, and by examining history ourselves, we can see how the US provoked, then framed the war with Japan during World War Two, and how it is using precisely the same tricks today against China.

Disclaimer: The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible for any inaccurate or incorrect statement in this article.

Copyright (c) Tony Cartalucci, Global Research (2015)

http://www.globalresearch.ca/know-world-war-ii-avoid-world-war-iii-us-provocation-and-propaganda-directed-against-china/5478351

Categories: Uncategorized

No Brains In Washington

by Paul Craig Roberts

Institute for Political Economy (September 25 2015)

Washington’s IQ follows the Federal Reserve’s interest rate –  it is negative. Washington is a black hole into which all sanity is sucked out of government deliberations.

Washington’s failures are everywhere visible. We can see the failures in Washington’s wars and in Washington’s approach to China and Russia.

The visit of Chinese President Xi Jinping, was scheduled for the week-end following the Pope’s visit to Washington. Was this Washington’s way of demoting China’s status by having its president play second fiddle to the Pope? The President of China is here for week-end news coverage? Why didn’t Obama just tell him to go to hell?

Washington’s cyber incompetence and inability to maintain cyber security is being blamed on China. The day before Xi Jinping’s arrival in Washington, the White House press secretary warmed up President Jinping’s visit by announcing that Obama might threaten China with financial sanctions.

And not to miss an opportunity to threaten or insult the President of China, the US Secretary of Commerce fired off a warning that the Obama regime was too unhappy with China’s business practices for the Chinese president to expect a smooth meeting in Washington.

In contrast, when Obama visited China, the Chinese government treated him with politeness and respect.

China is America’s largest creditor after the Federal Reserve. If the Chinese government were so inclined, China could cause Washington many serious economic, financial, and military problems. Yet China pursues peace while Washington issues threats.

Like China, Russia, too, has a foreign policy independent of Washington’s, and it is the independence of their foreign policies that puts China and Russia on the outs with Washington.

Washington considers countries with independent foreign policies to be threats. Libya, Iraq, and Syria had independent foreign policies. Washington has destroyed two of the three and is working on the third. Iran, Russia, and China have independent foreign policies. Consequently, Washington sees these countries as threats and portrays them to the American people as such.

Russia’s President Vladimir Putin will meet with Obama next week at the UN meeting in New York. It is a meeting that seems destined to go nowhere. Putin wants to offer Obama Russian help in defeating ISIS, but Obama wants to use ISIS to overthrow Syrian President Assad, install a puppet government, and throw Russia out of its only Mediterranean seaport at Tartus, Syria. Obama wants to press Putin to hand over Russian Crimea and the break-away republics that refuse to submit to the Russophobic government that Washington has installed in Kiev.

Despite Washington’s hostility, Xi Jinping and Putin continue to try to work with Washington even at the risk of being humiliated in the eyes of their peoples. How many slights, accusations, and names (such as “the new Hitler”) can Putin and Xi Jinping accept before losing face at home? How can they lead if their peoples feel the shame inflicted on their leaders by Washington?

Xi Jinping and Putin are clearly men of peace. Are they deluded or are they making every effort to save the world from the final war?

One has to assume that Putin and Xi Jinping are aware of the Wolfowitz Doctrine, the basis of US foreign and military policies, but perhaps they cannot believe that anything so audaciously absurd can be real. In brief, the Wolfowitz Doctrine states that Washington’s principal objective is to prevent the rise of countries that could be sufficiently powerful to resist American hegemony. Thus, Washington’s attack on Russia via Ukraine and Washington’s re-militarization of Japan as an instrument against China, despite the strong opposition of eighty percent of the Japanese population.

“Democracy?” “Washington’s hegemony don’t need no stinkin’ democracy”, declares Washington’s puppet ruler of Japan as he, as Washington’s faithful servant, over-rides the vast majority of the Japanese population.

Meanwhile, the real basis of US power – its economy – continues to crumble. Middle class jobs have disappeared by the millions. US infrastructure is crumbling. Young American women, overwhelmed with student debts, rent, and transportation costs, and nothing but lowly-paid part-time jobs, post on Internet sites their pleas to be made mistresses of men with sufficient means to help them with their bills. This is the image of a Third World country.

In 2004 I predicted in a nationally televised conference in Washington DC, that the US would be a Third World country in twenty years. Noam Chomsky says we are already there now in 2015. Here is a recent quote from Chomsky:

Look around the country. This country is falling apart. Even when you come back from Argentina to the United States it looks like a third world country, and when you come back from Europe even more so. The infrastructure is collapsing. Nothing works. The transportation system doesn’t work. The health system is a total scandal – twice the per capita cost of other countries and not very good outcomes. Point by point. The schools are declining …

Another indication of a third world country is large inequality in the distribution of income and wealth. According to the CIA itself, the United States now has one of the worst distributions of income of all countries in the world. The distribution of income in the US is worse than in Afghanistan, Albania, Algeria, Armenia, Australia, Austria, Azerbaijan, Bangladesh, Belarus, Belgium, Benin, Bosnia/Herzegovina, Burkina Faso, Burundi, Cambodia, Cameroon, Canada, Cote d’Ivoire, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Germany, Ghana, Greece, Guinea, Guyana, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Kenya, South Korea, Kyrgyzstan, Laos, Latvia, Liberia, Lithuania, Luxembourg, Macedonia, Malawi, Mali, Malta, Mauritania, Mauritius, Moldova, Mongolia, Montenegro, Morocco, Nepal, Netherlands, New Zealand, Nicaragua, Niger, Nigeria, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russia, Senegal, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Taiwan, Tajikistan, Tanzania, Timor-Leste, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, UK, Uzbekistan, Venezuela, Vietnam, and Yemen. {1, 2}

The concentration of US income and wealth in the hands of the very rich is a new development in my lifetime. I ascribe it to two things. One is the off-shoring of American jobs. Off-shoring moved high productivity, high-value-added American jobs to countries where the excess supply of labor results in wages well below labor’s contribution to the value of output. The lower labor costs abroad transform what had been higher American wages and salaries and, thereby, US household incomes, into corporate profits, bonuses for corporate executives, and capital gains for shareholders, and in the dismantling of the ladders of upward mobility that had made the US an “opportunity society”.

The other cause of the extreme inequality that now prevails in the US is what Michael Hudson calls the financialization of the economy that permits banks to redirect income away from driving the economy to the payment of interest in service of debt issued by the banks.

Both of these developments maximize income and wealth for the One Percent at the expense of the population and economy.

As Michael Hudson and I have discovered, neoliberal economics is blind to reality and serves to justify the destruction of the economic prospects of the Western World. It remains to be seen if Russia and China can develop a different economics or whether these rising superpowers will fall victim to the “junk economics” that has destroyed the West. With so many Chinese and Russian economists educated in the US tradition, the prospects of Russia and China might not be any better than ours.

The entire world could go down the tubes together.

Links:

{1} https://en.wikipedia.org/wiki/List_of_countries_by_income_equality : https://en.wikipedia.org/wiki/List_of_countries_by_income_equality

{2} https://www.cia.gov/library/publications/the-world-factbook/fields/2172.html

Copyright (c) 2013 PaulCraigRoberts.org. All rights reserved.

http://www.paulcraigroberts.org/2015/09/25/brains-washington-paul-craig-roberts/

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Initiatives for Transforming the Global Economy

China’s “One Belt One Road”

by Chandra Muzaffar

Global Research (September 21 2015)

A number of important initiatives linked largely to the economy made public in the last few years may have a huge impact upon the future of humankind. ASEAN and China have played a pioneering role in some of them.

The ASEAN initiated Regional Comprehensive Economic Partnership (RCEP), negotiations for which started in early 2013, seeks to forge a pact among the ten ASEAN members and its six free trade partners, namely, Australia, China, India, Japan, New Zealand and South Korea on trade in goods and services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement and other issues. RCEP is, in a sense, a diluted version of the East Asia Economic Caucus (EAEC) proposed by former Malaysian Prime Minister, Dr Mahathir Mohamad, in the early 1990s.

EAEC, confined to ASEAN and the three East Asian states, China, Japan and South Korea, had a more coherent economic, cultural, geographical and historical basis but the idea was vehemently opposed by the United States of America and to a lesser extent, by Japan.  In spite of its geographical dispersion, RCEP is still a viable proposition. At its third ministerial meeting in Kuala Lumpur in August 2015, there was a determined effort to give RCEP a push. Some consensus was reached about eliminating tariffs in the goods sector. There are issues pertaining to agriculture, investments, intellectual property and dispute settlement which have yet to be resolved. A momentum of sorts has been created in Kuala Lumpur largely through the hard work of officials at the Malaysian Ministry of International Trade and Industry (MITI) which one hopes will be sustained through future meetings.

A more significant initiative emanating from China is of course the much publicized Asian Infrastructure Investment Bank (AIIB). Formed in October 2014, it is a multilateral development bank that aims to provide finance to infrastructure projects in Asia. It has been estimated that Asia requires eight trillion US dollars’ worth of infrastructure investment from 2010 to 2020 to be able to sustain its economic development. Neither the Japan led Asian Development Bank (ADB) nor the US helmed World Bank has the capacity or the inclination to fund such a mammoth transformation. China’s willingness to respond to the challenge has been warmly welcomed by a number of countries. Besides, the Chinese leadership is also frustrated by the lack of sincerity on the part of the US and Japanese governments in reforming the World Bank and the ADB respectively to reflect the new demands and the emerging realities of the global economy.

While the AIIB is an important development in itself, it is the response of a number of close allies of the US to the bank which is revealing of current and future patterns of global economic power. Sensing the shift in global economic power, Britain withstood intense pressure from the US Administration and joined the AIIB in March 2015. Three other European allies of the US  –  Germany, France and Italy  –  followed suit. US allies from West Asia, Eastern Europe and the Pacific have all signed up. The bank’s membership is rapidly approaching seventy. The two major economies that have decided to stay out are the US and Japan.

It is not just the AIIB that is reflective of the emerging pattern of global economic power. China has also been at the forefront of BRICS which brings together Brazil, Russia, India, China and South Africa. Collectively, this grouping, which held its first summit in Yekaterinburg, Russia in June 2009, represents three billion people. Its nominal Gross Domestic Product (GDP) stands at sixteen trillion US dollars.  BRICS emphasizes cooperation in economic and financial matters. It created a bank called the New Development Bank with a 100 billion dollar base in July 2015.

There is a third Chinese initiative that has the potential for transforming a whole range of economies in both the Global South and the Global North. The One Belt One Road (OBOR) project built upon the ancient Silk Road focuses on both land and maritime routes. The aim is to invest in infrastructure development and other economic activities in Southeast Asia, parts of South Asia, Central Asia, East Africa and West Asia right up to Europe.

The question that is often asked nowadays is whether China, given its slowing economy, would be able to finance all these massive projects in the coming years?  The slowdown is to a great extent due to a deliberate policy decision to shift from export-led growth to domestic consumption. This in turn would help to reduce income and social disparities within China which would in the medium and long-term strengthen the economy and society.

Disparities are undoubtedly one of the formidable challenges facing China. Corruption, enhancing the rule of law, legitimizing dissent, and improving the quality of the environment would be some of the other major challenges which are all being addressed by the leadership with varying degrees of effectiveness. But China’s ability to transform the global economy would also be determined by the solidarity of its ties with its neighbors and friends and whether it succeeds in overcoming certain longstanding territorial disputes with some of them. There is yet another decisive factor that will impact upon China’s global role: how would the antagonism of those who resent China’s rise as a global power express itself in the coming years?

_____

Dr Chandra Muzaffar is the President of the International Movement for a Just World (JUST).

Disclaimer: The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible for any inaccurate or incorrect statement in this article.

Copyright (c) Chandra Muzaffar, Global Research, 2015

http://www.globalresearch.ca/initiatives-for-transforming-the-global-economy-chinas-one-belt-one-road/5477264

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Putin and Xi Rock da House

by Pepe Escobar

Asia Times (September 25 2015)

Pope Francis may be the rock star. But once again, the real heart of the action is all about Russia and China –  those prime “threats” to Exceptionalistan, according to the Pentagon.

Where’s Benjamin’s Angel of History when we need him? His gaze is now certainly focused on the home of the brave. Francis may have brought the House down in DC, but it’s Xi Jinping who really rocked da house in the West Coast, while Putin gets ready to be crowned the new King of New York. Who’d imagine that the New Great Game in Eurasia could be so fun?

Calling Frank Underwood

Even before Putin talked new world order geopolitical business at the UN, China’s Xi Jinping was talking Silicon Valley business with, well, the whole Silicon Valley elite. It’s all in the photo, delightfully deconstructed by the South China Morning Post {1}.

This is where the action is –  much more than in what Xi may have discussed with Obama; cyberspace piracy, spying, new Japanese laws on defense, the environment. China needs top IT to turbo-charge not only the internal market but also key nodes of the New Silk Roads.

Even Facebook was allowed to bow to the Red Emperor. Mark Zuckerberg, in suit and red tie, talked to Xi for less than a minute, in Mandarin, at Microsoft’s campus. Side by side was none other than a smiling Lu Wei –  who controls China’s Great Firewall, which blocks, among others, Facebook. As a priceless aside, here’s Internet-alert Lu Wei calling all and sundry to “sail into the future with mutual benefit and win-win” {2}.

Barely blinking while he bought 300 Boeings for lunch, Xi’s real howler in the West Coast was his House of Cards gambit.

Referring to Beijing’s massive crackdown on graft, he said, “We have punished tigers and flies … It has nothing to do with power struggles. In this case there is no House of Cards.”

Non-biased China hands all interpret the anti-corruption campaign as essentially a clean up of the Chinese Communist Party (CCP) so it may continue to rule ad infinitum. It’s the party, stupid. So obviously there’s a “hard rain’s gonna fall” component, because resistance from powerful interest groups is immense.

The irruption of House of Cards was predictable. Much more than a nod to Netflix, this was about China. According to GlobalWebIndex, no less than over 200 million Chinese have been using VPNs to get to Netflix and watch the season three of House of Cards on streaming video.

Millions among these are Beijing residents, comfortably middle class; and that includes a lot of Party heavyweights –  such as the head of the anti-corruption committee, Wang Qishan, a huge fan of Frank Underwood. Check out this priceless Global Times piece showing how House of Cards heavily draws from Sun Tzu’s The Art of War {3}.

On top of it, season two of House of Cards was already China-intense, featuring cyber-war, the South China Sea and currency manipulation. Sharp Chinese viewers inevitably compared factional fighting in Washington with Beijing’s anti-graft campaign, which, so far, has nailed 80,000 functionaries, at least ninety high-caliber politicians and thirty PLA generals. China Daily didn’t measure its words –  stating that House of Cards represents a “mirror” of these Chinese functionaries.

Xi knew exactly who his audience was when he invoked US soft power –  tremendously popular in China –  to send a message. And he also knew that even when the American system is critically eviscerated –  as in House of Cards –  the fascination quotient of US soft power remains unbeatable. If you can’t beat them, join them. Why not instrumentalize House of Cards as Beijing deploys its own version of The Art of War?

Start Spreading the News …

And now, live from New York, it’s Putin The Great.

Last week on Asia Times {4} we saw how if there’s going to be some solution to the Syrian tragedy, it’s all Putin’s fault. (Not) reacting to it, the Obama administration remained mired in its proverbial bewilderment –  or perplexity {5}.

Finally, the White House was forced to announce that the coin finally dropped on Obama, and he will talk to Putin on the sidelines of the UN General Assembly.

Right on cue, a senior adviser to Bashar al-Assad started spinning that the US and Russia had reached a “tacit agreement” on ending the mess in Syria.

Quick recap. Putin started it all by refusing “Assad must go” as a prerequisite for peace negotiations. Then he turbo-charged the military build up in Latakia; proverbially, once again, neither the Pentagon nor the White House ever saw it coming.

So this is what Putin accomplished even before Obama saw the light and decided to talk:

1. Forget about a Libya-remixed NATO war on Syria.

2. Forget about a Sultan Erdogan-driven no-fly zone over areas controlled by Damascus.

3. Out with the old world order. This is how the emerging new world order should work, and Russia is also driving it.

Putin’s speech on Monday at the UN General Assembly will be about “the joint struggle against terrorism” (as branded by TASS). One should expect abundant apoplexy, much more than perplexity, all across the Washington/New York axis.

Foreign Minister Sergey Lavrov, last Sunday on Russian TV, already clarified the themes at the heart of the speech; the unipolar world order, and the absolute necessity of the “joint struggle against terrorism”, which “must be waged without double standards”.

Lavrov was very sharp when referring to “unilateral coercive measures” –  and not only as far as Russia is concerned. In his own words:

Nowadays, you know, our Western partners, primarily, under the influence, perhaps, of American mentality, are losing in general the culture of a dialogue and the culture of achieving diplomatic solutions. The Iranian nuclear program was a bright –  and even very bright –  exception. In most other cases –  in conflicts that continue to flare up in the Middle East, in North Africa –  they try to resort to measures of military intervention, as was the case in Iraq and Libya, in violation of UN Security Council decisions, or to resort to sanctions.

Expect Putin to talk about all of it in detail. But the showstopper will be, predictably, Putin on Syria. In Lavrov’s words:

We have declared that we will be helping the Syrian leaders, as we help the Iraqi leaders, or the leaders of other countries who are facing the threat of terrorism. And our military-technical cooperation pursues exactly these objectives. Of course, the supplies of arms [by Russia], they have been going on, they are going on [now] and they will continue. Their [supplies] are inevitably accompanied by our specialists that help put the according equipment up, help to train Syrian [military] personnel to handle these weapons and there are absolutely no mysteries and no secrets [in all of this].

And yes, Putin will call the usual suspects –  from Turkey to the GCC petrodollar gang –  to help Assad “without indoctrinations or double standards” in the fight against ISIS/ISIL/Daesh. And he will demonstrate how the refugee crisis was not created by Assad, but by the fake “Caliphate”. As far as these refugees from the Sykes-Picot-smashed Middle East are concerned, it’s up to the EU to deal with them. In Lavrov’s words:

Russia has been fulfilling all her obligations under the international conventions. All those who fall under the category of refugees, we take in, and we will take into the Russian Federation, sometimes even going beyond the criteria that is applied. I refer to the refugees from Ukraine, there are about one million [in Russia]. We sympathize with our European neighbors with regard to the problem that they have been facing, and I believe that they will solve it [on their own].

Last but not least, Putin will make it very clear Russia never again will be fooled into signing dodgy documents such as UNSC Resolution 1973, which legitimized R2P in 2011 via that legendary “no-fly” zone over Libya, with the corollary of NATO bombing the country into a wasteland run by militias. No wonder deranged R2P groupie Samantha Power wants to kick Russia out of the Security Council. Who needs a shoe-banging Khrushchev? Black (Apoplexy) Monday will definitely be a riot.

Links:

{1} http://www.scmp.com/tech/leaders-founders/article/1861033/whats-picture-unspoken-messages-xi-jinpings-group-portrait

{2} http://www.chinadaily.com.cn/world/2015xivisitus/2015-09/24/content_21968401.htm

{3} http://www.globaltimes.cn/content/845149.shtml

{4} http://atimes.com/2015/09/peace-in-syria-its-putins-fault-escobar/

{5} http://www.politico.eu/article/u-s-perplexed-by-putins-syria-ploy/

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http://atimes.com/2015/09/putin-and-xi-rock-da-house-escobar/

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