Saturday, June 17, 2017

"Derangement And Danger On The Potomac"

"Derangement And Danger On The Potomac"
by David Stockman

"The horrific shooting spree on the practice field of the GOP's congressional baseball team happened early that morning, but it was hardly the end of Wednesday's madness on the Potomac. As it happened, the former was apparently another random eruption by of one of America's sicko lone wolves - a wretch in the same league as South Carolina church killer, Dylann Roof. Notwithstanding that the latter had littered the nether regions of the internet with racist rantings while the former was apparently a prolific Never Trumper left-winger, neither represented a real threat to the nation's equanimity - even if they did bring a savage rain of violence to bear on those unfortunate dozens caught in their immediate line of fire.

Not so for the 325 million American citizens who were pounded upon during the balance of the day by the allegedly "sane" Imperial City officialdom which rules the roost in America.  Specifically, we have in mind Janet Yellen's hideous presser in which she declared "mission accomplished" and that the US economy is blessed with "solid fundamentals" that are getting ever stronger. And in the same vein of unreality, there soon came the Senate's 97-2 vote to smack the Donald in his ample jaws and impose even more sanctions on Russia, thereby bringing the nation another step closer to the brink of war and bankruptcy. 

Let us unpack this. The American people are being brought to ruin by three institutions that are mortal threats to liberty and prosperity. To wit, the Federal Reserve, the military/industrial/surveillance complex and a sinecured Congress that is burying unborn generations in debt - even as it sanctimoniously presumes that it is doing god's work by servicing the beltway racketeers who keep it perpetually in office. 

On the latter score, it is worth reminding once again. An incumbent House member standing for reelection has a smaller chance of losing his seat than did a Politburo member during the heyday of the post-war Soviet Union.  So it is no wonder that the Congress is filled by Warfare State lifers like Senator John McCain. This senile old fool appears to believe that he is some kind of latter day proconsul of the American Empire - who struts around Washington spreading bellicose lies and flagrant exaggerations about Washington's self-created enemies. 

So doing, McCain helps to keep the Imperial City enthrall to the defense contractors and military and intelligence bureaucracies that he champions out of sheer will to power and ornery bloodlust. Not surprisingly, therefore, McCain was one of the principal authors and movers behind this week's latest spasm of anti-Russia hysteria. The bill would impose new sanctions against Russia “in response to the violation of the territorial integrity of the Ukraine and Crimea, its brazen cyber-attacks and interference in elections, and its continuing aggression in Syria,” according to the deal's sponsors. 

Everyone of these assertions are blatant lies, of course. Russia is in Syria at the behest of its constitutionally established government; it is the CIA and its stooges among the Persian Gulf states which provides arms and billions to the head-chopping jihadist radicals, who are the real aggressors in what is now a desolate land of ruin and refugees.

Likewise, it was Washington's aggression - via funding and political support - in February 2014 that led to a coup on the streets of Kiev and the overthrow of its honestly elected President. The latter made the "mistake" of spurning NATO and the EU in favor of a more palatable economic deal with Moscow - its historic suzerain. Moreover, it was the virulent anti-Russian neo-Nazi putsch - handpicked by the US Ambassador to Ukraine - that led to insurrection against the Kiev regime in the historically Russian-speaking Donbas and Crimea regions; and then to the 90 percent referendum vote of the latter to rejoin Russia, which it had been an integral part of for more than 160 years after 1783. 

As for Russian "interference" in the 2016 elections in America - the very idea of it is ludicrous. The overwhelming source of "influence" in the American election process is the respective political parties, the legions of self-interested lobbies and PACs and the mainstream media and cable channels, which are overwhelmingly and irrationally anti-Putin. 

So where did this nefarious "influencing" come from? The RT television network? Puleese! Your editor can attest to having appeared on that network several times and to have attacked with some vigor the three rotten American institutions mentioned above - the Fed, the military/industrial/surveillance complex and the Congress. But never once did we get any instructions from the Russians on the formulation of our broadsides. We thunk 'em up all on our own! More importantly, we never heard from a single American viewer, either. Perhaps that's because RT apparently has fewer than a million viewers per day in the US. 

So all the brouhaha is apparently about two-bit cyber-hacking that may or may not be the work of Russian State actors. But so what? There exists a massive $200 billion per year internet security business in the world because by its very nature the worldwide web begets legions of hackers, thieves and malicious trolls. These hacking operations are overwhelmingly conducted privately for profit and malice, but there is one giant state actor that does operate for the purpose of political influence and meddling in the affairs of nearly every nation on earth. 

We are talking about the massive multi-billion hacking operation at National Security Agency (NSA) called Tailored Access Operations (TAO). The latter spends billions not only trolling every agency and bureau of the Russian Government - and the French government and Canadian government, too, among others - but also engages in worldwide cyber-false flag operations designed to lay down the "footprint" of Russian and others foreign agencies on top of Washington's own skullduggery. 

And that's just NSA. The CIA has a counterpart operation in the same kind of worldwide hacking business, and these may only be the tip of the iceberg. After all, the total acknowledged budget of the 17-agency "Intelligence Community" (IC) is upwards of $75 billion or nearly 50 percent more than Russia's entire military budget including aircraft fuel, soldiers pay and spare boots. 

Needless to say, the self-appointed imperial proconsuls' like McCain never stop to ask whether or not Washington's massive cyber warfare operations might be expected to generate counter-actions from those targeted as Washington's enemies or, more importantly, something even more insidious. That is, McCain and in his Capitol Hill war party do not even know for sure whether "fancy bear" and the other code-named Russian state malefactors constantly bandied about in the mainstream media are really anything more than a couple of fat guys sitting at desks at NSA headquarters in Ft. Meade propagating false-flag cyber-attacks. 

In any event, Senator McCain, was delighted with this week's handiwork. The amendment allows “broad new sanctions on key sectors of Russiaʼs economy, including mining, metals, shipping and railways” and authorizes “robust assistance to strengthen democratic institutions and counter disinformation across Central and Eastern European countries that are vulnerable to Russian aggression and interference.” 

Likewise, these new sanctions would be imposed on “corrupt Russian actors” and those “involved in serious human rights abuses". They would also target those who supply weapons to the Syrian government or who work with the Russian defense industry, as well as “those conducting malicious cyber activity on behalf of the Russian government” and “those involved in corrupt privatization of state-owned assets.” 

In short, Wednesday afternoon the US Senate just plain went nuts attacking a largely non-existent threat emanating from a pipsqueak nation that has a GDP equal to only seven percent of that of the US and no capacity whatsoever - other than one smoke-belching 40-year old aircraft carrier and a fleet rowboats - to attack the shores of New Jersey or any other place in the USA. 

But those realities did not stop McCain from gassing effusively about his own dangerous handiwork: 'We must take our own side in this fight. Not as Republicans, not as Democrats, but as Americans,' said Sen. John McCain (R-AZ) before the vote. 'Itʼs time to respond to Russiaʼs attack on American democracy with strength, with resolve, with common purpose, and with action.'

The truth is, Russia has no more attacked American democracy than did the North Vietnamese at the Bay of Tonkin or the Spaniards on the Battleship Maine in 1898. More importantly, no one else in the world thinks Russia is a serious threat - except the bureaucrats of NATO who make a living concocting such threats; and some itinerate nationalist politicians in Eastern Europe who are never loathe to play the Russian card in their quest for power and attention. 

Even the Donald's own Secretary of State had this to say earlier in the week during his congressional testimony: 'I have yet to have a bilateral, one-on-one, a poolside conversation with a single counterpart in any country: in Europe, Middle East, even South-East Asia, that has not said to me: please, address your relationship with Russia, it has to be improved,' Tillerson said on Tuesday, testifying before the Senate appropriations subcommittee about the proposed State Department budget.'

Folks, the point is quite simple. Unless Washington's bloated and wasteful $700 billion national security budget is pared back drastically, there is not a snowball's chance in the hot place of re-establishing fiscal discipline. As long the GOP hawks and pro-war Dems are pumping massive funding into the Deep End of the Swamp, the will be no cuts in domestic appropriations and no entitlement reforms, either.

Indeed, ever since Ronald Reagan's mild assault on the Welfare State was decisively turned back on Capitol Hill in the spring of 1981, the "guns and butter coalition" has ruled the roost. And that insidious coalition has taken the national debt from $1 trillion to $20 trillion along the way - even has it has locked in an automatic growth to $30 trillion or 140 percent of GDP by 2027. 

That is also why the Deep State and Washington's bipartisan War Party will not desist until they have removed the Donald from office. And that's for the unspeakable sin of suggesting that rapprochement with the Russians and Putin makes more sense than the path to war and fiscal bankruptcy that is underway today. 

Self-evidently, hell hath no fury like the prospect for world peace and the dismantlement of Imperial Washington's destructive global empire. A tiny step in that direction was all that General Mike Flynn undertook during his infamous calls with the Russian Ambassador in late December - a welcome initiative for which he was unceremoniously fired and is now under unrelenting persecution. 

But it gets worse. Based on new leaks to the Washington Post it is now clear that the Deep State has used the Flynn Affair and the Donald's naïve request to former FBI director Comey to "go easy" on Flynn as a pretext for obstruction of justice charges against the President himself: The special counsel overseeing the investigation into Russiaʼs role in the 2016 election is interviewing senior intelligence officials as part of a widening probe that now includes an examination of whether President Trump attempted to obstruct justice, officials said. 

The move by Special Counsel Robert S. Mueller III to investigate Trumpʼs own conduct marks a major turning point in the nearly year-old FBI investigation, which until recently focused on Russian meddling during the presidential campaign and on whether there was any coordination between the Trump campaign and the Kremlin. Investigators have also been looking for any evidence of possible financial crimes among Trump associates, officials said.

In this context, it is truly amazing that the "markets" have not yet woken from their stupor. The drive to unseat the Donald will leave the Imperial City in ungoverned chaos during the interim - meaning an unending crisis over debt ceilings, continuing resolutions and government shutdowns. 

Still, perhaps by the looks of today's sea of red, the whopper told by Yellen during her presser yesterday may finally be sinking in. Our clueless Keynesian school marm not only falsely claimed "mission accomplished" and that the US economy is heading for the promised land of permanent full employment and unprecedented prosperity. She also claimed that the Fed would soon begin normalizing its balance sheet to the tune of $50 billion per month of bond holdings runoff (i.e. effectively bond sales) - ultimately shrinking its holdings by more than $2 trillion - and that there would be nary a negative ripple effect thereupon. 

As we will soon document further, the first part of Yellen's proclamation is a risible lie. There has been zero net gain in industrial production since September 2007; no net gain in breadwinners jobs since January 2001; and zero gains in real median family incomes since 1989. And that's permanent full employment prosperity? But the real whopper was her assurance that the Fed's balance sheet normalization would be of no more moment than "watching paint dry" on a wall. 

Say what?  Surely, Yellen does not mean that the law of supply and demand in the bond market has been repealed - such that $2 trillion of extra supply will not have any impact whatsoever on the price and yield of government debt securities. After all, if that is true when the Fed is selling bonds, why would it not have been true when it was buying them hand-over-fist? 

Indeed, by the Fed's own lights its $3.5 trillion balance sheet expansion after the financial crisis caused bond yields to decline by more than 100 basis points - and we think that sharply understates the matter because it does not account for the "front-runners" effect. That is, the hundreds of billions of bond purchased by carry trade gamblers, who were given free overnight funding to the tune of 97 percent of their investment, in order to by the very same bonds - down to the exact CUSIP numbers - that the Fed had announced it would be buying. 

Stated differently, what was the point of QE if it was not to falsify and suppress bond yields in order to goose economic activity - even if that "stimulus", as it happened, never really left the canyons of Wall Street?  By the same token, why in the world would Yellen expect that the front-runners who fueled the bond bubble during QE will not find is profitable to short-sell what the Fed will be selling once its balance sheet shrinking campaign gets started? 

Needless to say, the 100-300 basis points rise in the 10-year bond year bond yield that would result from the combination of Fed selling and speculators piling on would cause the entire global bond bubble to implode, and all the economic rot that is built upon it to shatter.  How long, for example, would the $2.6 trillion market in junk loans and bonds last under that regime" Given that the Fed's own action fueled a manic stampede toward yield, the havoc is nearly unfathomable.

The fact, is when there are no new breadwinner jobs, there is no gain in living standards or real prosperity. Indeed, Janet Yellen is lost in a Keynesian puzzle palace - and that is extremely bad news for the casino punters who still refuse to acknowledge the obvious."

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