NATO has institutionalized killing as the new normal. And in order to maintain this ‘eternal war on terror’ that sustains the US economy, we need ever-so-often a ‘fake’ terror attack – to keep the fear alive, to keep the arms flowing,…
Contemporary developments point to a historical shift in the structure of military alliances which indelibly contributes to weakening US hegemony as well as creating conditions which could result in the breakup of NATO.
After a recent anti-NATO conference in Florence, we spoke with Michel Chossudovsky about the alliance’s problems. ‘NATO’s unspoken aim has been to implement a de facto “military occupation” of Western Europe, in all but name.’…
The Fed has inflated the money supply to astronomical levels, and they keep creating hundreds of billions more out-of-thin-air. When it shows up in higher prices, it shouldn’t surprise anyone.
The debate on the amount of above-ground silver stocks is completely meaningless when we compare it to the value of global assets. It is also true when we compare the estimated above-ground stocks of gold versus silver.
On Thursday afternoon, the Washington Post sent out a news alert headlined “John Kerry Endorses Biden in 2020 Race, Saying He Has the Character and Experience to Beat Trump, Confront the Nation’s Challenges.” Meanwhile, in Iowa, Joe Biden was also touting his experience. “Look,” Biden said as he angrily lectured an 83-year-old farmer at a campaign stop, “the reason I’m running is because I’ve been around a long time and I know more than most people know, and I can get things done.”
But Kerry and Biden don’t want to acknowledge a historic tie that binds them: Both men were important supporters of the Iraq war, voting for the invasion on the Senate floor and continuing to back the war after it began. Over the years, political winds have shifted – and Biden, like Kerry, has methodically lied about his support for that horrendous war.
The spectacle of Kerry praising Biden as a seasoned leader amounts to one supporter of the Iraq catastrophe attesting to the character and experience of another supporter of the same catastrophe.
The FactCheck.org project at the Annenberg Public Policy Center has pointed out: “Kerry agreed that Saddam Hussein had weapons of mass destruction and should be overthrown, and defended his war authorization vote more than once – including saying in a May 2003 debate that Bush made the ‘right decision to disarm Saddam Hussein.’ … Kerry also told reporters in August 2004 that he would have voted for the resolution even if he had known that the U.S. couldn’t find any weapons of mass destruction.”
As for Biden, he can’t stop lying about his major role in pushing the war authorization through the Senate five months before the March 2003 invasion. During his current presidential campaign, more than 16 years after the invasion, Biden has continued efforts to conceal his pro-war role while refusing to admit that he was instrumental in making possible the massive carnage and devastation in Iraq.
Three months ago, during a debate on ABC, Biden claimed that he voted for the war resolution so it would be possible to get U.N. weapons inspectors into Iraq – saying that he wanted “to allow inspectors to go in to determine whether or not anything was being done with chemical weapons or nuclear weapons.” But that’s totally backwards.
It was big news when the Iraqi government announced on September 16, 2002 – with a letter hand-delivered to UN Secretary General Kofi Annan – that it would allow the UN weapons inspectors back in “without conditions.” The announcement was a full 25 days before Biden joined with virtually every Republican and most Democratic senators voting to approve the Iraq war resolution.
That resolution on October 11 couldn’t rationally be viewed as a tool for leverage so that the Iraqi government would (in Biden’s words) “allow inspectors to go in.” Several weeks earlier, the Iraqi government had already agreed to allow inspectors to go in.
Biden keeps trying to wriggle out of culpability for the Iraq war. But he won’t be able to elude scrutiny so easily. In a mid-October debate, when Biden boasted that he has a record of getting things done, Bernie Sanders (who I actively support) made this response:
“Joe, you talked about working with Republicans and getting things done. But you know what you also got done? And I say this as a good friend. You got the disastrous war in Iraq done.”
Indeed, Biden – as chair of the Senate Foreign Relations Committee – presided over one-sided hearings that greased the war-machine wheels to carry the war resolution forward. He was the single most pivotal Senate Democrat for getting the Iraq invasion done. While sometimes grumbling about President George W. Bush’s diplomatic performance along the way, Biden backed the invasion with enthusiasm.
Now, dazzled by Kerry’s endorsement of Biden, mainstream news outlets are calling it a major boost. Media hype is predictable as Kerry teams up with Biden on the campaign trail.
“The Kerry endorsement is among Mr. Biden’s most significant to date,” the New York Times reports. “His support provides Mr. Biden the backing of the Democratic Party’s 2004 presidential nominee and a past winner of the Iowa caucuses.” Kerry praised Biden to the skies, declaring that “I believe Joe Biden is the president our country desperately needs right now, not because I’ve known Joe so long, but because I know Joe so well.”
This year, many progressives have become accustomed to rolling their eyes at the mention of Biden’s name. A facile assumption is that his campaign will self-destruct. But that may be wishful thinking.
The former vice president has powerful backers in corporate media, wealthy circles and the Democratic Party establishment.Deceitful and hidebound as he is, Joe Biden stands a good chance of becoming the party’s nominee – unless his actual record, including support for the Iraq war, catches up with him.
Israel Conducted Nuclear Missile Test “Aimed At Iran”: FM Zarif
Iran is crying foul after Israeli’s Defense Ministry confirmed a major test of a mystery new “rocket propulsion system” on Friday morning.
“The defense establishment conducted a launch test a few minutes ago of a rocket propulsion system from a base in the center of the country,” the ministry said. “The test was scheduled in advance and was carried out as planned.”
Giving no further details, international reports were rife with speculation over the nature of the rocket, with many saying it was a nuclear-capable ballistic missile. This was enough for Iran’s Foreign Minister Mohammad Javad Zarif to go off, saying in a statement posted to Titter: “Israel today tested a nuke-missile, aimed at Iran.”
Israel today tested a nuke-missile, aimed at Iran.
E3&US never complain about the only nuclear arsenal in West Asia — armed with missiles actually DESIGNED to be capable of carrying nukes — but has fits of apoplexy over our conventional & defensive ones. https://t.co/r4EqXkhcCN
And he further complained that the West looks the other way when it comes to“about the only nuclear arsenal in West Asia,” but that it “has fits of apoplexy over our conventional defensive [rockets].”
The mystery Israeli test was significant enough to require the temporary diversion of all inbound flights to Tel Aviv’s Ben Gurion Airport.
Israeli media publications also considered the possibility that it was a ballistic missile test, likely nuclear warhead capable surface-to-surface Jericho system, an intercontinental ballistic missile which according to foreign reports can support a nuclear payload.
It comes at a tense time in the region following Israeli airstrikes on Syria and even Iraq, against what the IDF alleges were ‘Iranian targets’. According to the Times of Israel:
Israel does not publicly acknowledge having ballistic missiles in its arsenals, though according to foreign reports, the Jewish state possesses a nuclear-capable variety known as the Jericho that has a multi-stage engine, a 5,000-kilometer range and is capable of carrying a 1,000-kilogram warhead.
And according to a Avi Scharf, the editor of the English version of Haaretz newspaper, the missile test may have had a flight trajectory deep into the Mediterranean, as far West as past the island of Crete.
Tehran officials, while complaining about the provocative rocket test which they claimed was an ICBM, vowed they are still “determined to resolutely continue its activities related to ballistic missiles and space launch vehicles.”
Israeli residents captured part of the rare launch on video:
Washington has repeatedly condemned similar Iranian launches, even while the program is not formally banned under the 2015JCPOA, and has leveled sanctions targeting the Islamic Republic’s ability to produce advanced missiles.
Macro Hive: “When We Fall Back Into A Recession And Real QE Returns, Watch Out“
Submitted by George Goncalves of MacroHive; Goerge is a twenty years fixed income markets veteran. Over that time he has covered rates, structured products and credit. He worked both on the buy-side and sell-side.
Fed’s Challenge To Administer Liquidity Into Year-End And Beyond
Even with hundreds of billions of dollars in new liquidity created out of thin air, it’s too soon for the Fed to signal a clear coast for repo markets. On the one hand, through heavy liquidity dosages the Fed has doused the fire; but on the other hand, we do not know if that dosage was too much or too little. The true test still lies in the weeks around year-end.
Fed Fears the Worst
The Fed has not idled in wait of potential new flare-ups. Since our last update on Fed policy dynamics, it has rolled out more repo operations and added 42-day calendar repos to help provide funding over the year-end turn. These operations have seen nearly double the amount of submissions versus the offering size of $25bn each. This demonstrates that primary dealers aren’t taking any chances either.
In addition to daily and term repo operations, the Fed has purchased over $100bn T-bills for its SOMA portfolio since October. These so-called ‘not QE’ asset purchases, along with the repo operations, have led to the Fed’s balance-sheet growing at a faster clip than that experienced in the first twelve weeks of QE2 and QE3 (Chart 1). Luckily it’s not QE though, right?
If that’s true, we come to our primary question: what comes next in 2020? But before we brainstorm that and the implications thereof, we should take stock of what has changed in the key Fed balance sheet categories.
The Balance Sheet Changes Since September
As of November’s last week, the Fed’s balance sheet has grown in size by nearly $300bn since the repo flare-up. This speed goes to prove a concept well known in the marketplace: the Fed tightens slowly and eases quickly. In less than three months the Fed unwound basically half of QT.
The Fed has imperfect control over its liabilities, so investors should never assume a one-for-one relationship exists between asset purchases and the expansion of excess reserves. For starters, currency in circulation has been on cruise control since the financial crisis (rising at ~6% a year). But it’s the non-reserve items, foreign central bank (FCB) reverse repos, and Treasury general account (TGA) that make it challenging to predict reserve trends.
As seen above (Chart 2), total reserves have increased. But the TGA grew much more in total (in fact, the first week post 9⁄11 was the week that led to the reserve shortfall/repo spike as TGA expanded). It’s as if most of the Fed repos since that period indirectly provided short-term cash to the Treasury as dealers are able to purchase more USTs and ‘temporarily’ fund them with the Fed.
Now, it’s not that simple and there is overlap with the T-bill purchases which are producing more permanent excess reserves. Nonetheless, the amount of Fed repos nearly matches the growth in TGA. If the Fed had not expanded, its balance sheet there would have been more reserve draining because UST issuance would have mopped up cash needed to restock the TGA. Meanwhile, FCBs have pulled some money from the Fed and are providing relief by reducing their F-RRP allocation.
The Hand-off From Repo to ‘Not QE’ Reserve Growth
The effective Fed funds rate is back under control as are repo rates for the most part. That said, there is the occasional drift up in rates and the year-end turn is trading hundreds of basis points above the Fed target. The rest of this month could still see further pressures build as dealers pull back balance sheet usage and shy away from Fed term repos. Dealers will also aim to run a tight ship and will likely operate one day at a time in December.
But here is the tricky part (and another example of falling into a false sense of security). Clearly with the Fed on notice and providing a laddered safety net of repo liquidity, this year-end should theoretically be better than last year. And once we turn the calendar into 2020, commercial banks should start to open up their balance sheets and so Fed’s repo should decline as well.
The 2020 Path
So back to our main concern: 2020. Assuming there isn’t something more nefarious going on in the banking system by some point in early next year, Fed repo assets should decline in size. That said, the handoff from temporary liquidity to ‘not QE’ T-bill purchases may end up being more abrupt than risk markets are comfortable with.
Case in point: as seen in Chart 3, in the months after the initial spike due to Lehman, some of the Fed’s temporary liquidity programs started to see less usage as the panic subsided. This led to actual reserve declines as QE1 took some time to replace them. On a smaller scale, there is risk of a similar sort of repeat in 1H20. For example, if repo usage dropped to normal levels (i.e. as they were used pre-crisis), repo assets at the Fed could drop by over $200 bn (it would take over 3 months to replace those reserves via T-bill purchases).
Curve Could Steepen
Further complicating matters, if the Fed only buys T-bills they may end up enriching enough to encourage money market funds to start using the RRP again (which would drain reserves from banks). If that were to occur, the Fed would likely need to start buying out the curve and buy less T-bills (maybe via a curve control process through 5s). At that point they would need to stop their line that their purchases are “not-QE” (it would clearly be QE). This would favour staying with steepeners outright and/or on a forward basis as the front part of the curve (eg 2ys) would start to get depressed by this QE.
One way the Fed could avoid having to morph the T-bill purchases into outright QE would be to figure out how to launch a standing repo facility soon. This would be akin to ‘QE on demand’ but more so for reserve expansion for banks whenever they actually need it. All of these moving parts highlight how difficult it becomes for a central bank that is increasingly active on providing cash and collateral to the marketplace.
Bottom Line: This all feels very technical but, unfortunately, it’s the world we live in since the Fed needs to provide reserves in ample supply to keep using the floor system to set rate policy. If and when we fall back into a recession and real QE returns, watch out. In many ways that is what risk markets are yearning for: forward expectations of QE. Meanwhile, as we wait the risk is that the Fed’s balance sheet can actually temporarily shrink before growing(slowly via the T-bill purchases). Such a scenario is not priced into most asset classes.