Monday, December 29, 2014

Today's Links

Nick Beams, WSWS:  "The divergence between the real economy and the financial markets is rooted in the economic breakdown that began with the financial crisis of September 2008. After mobilising trillions of dollars to prevent a complete meltdown of the financial system, central banks, with the US Fed taking the lead, have continued to pump money into the sclerotic arteries of the financial system in order to maintain it....Nothing like it has been seen in history.... From its founding in 1913, it took the Fed 94 years to expand its balance sheet to $900 billion...It now stands at more than $4 trillion."


Ben Bernanke:  "As a scholar of the Great Depression, I honestly believe that September and October of 2008 was the worst financial crisis in global history, including the Great Depression …Out of maybe the 13 of the most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two."


1---If Prices Keep Falling, OPEC Must Act To Restore ‘Fair’ Rate Of $70-$80, oil price


Yet there is a possibility that OPEC eventually may have to intervene if the global price of oil remains stubbornly around $60 per barrel or falls further, said Iraqi Oil Minister Adel Abdul Mahdi, one OPEC representative who allowed his name to be used in an interview with Bloomberg News.
“If prices keep falling to very low levels where the whole equation is not balanced, then definitely OPEC has to step in,” Abdul Mahdi said. But he said nothing about OPEC remedying the problem through production cuts, which Iran, along with Venezuela, have been calling for in vain.


Influential OPEC leaders such as Saudi Oil Minister Ali al-Naimi have since argued that the reason for maintaining the production level was to recoup market share lost to high-cost or “inefficient” non-OPEC oil producers such as American frackers or Russians, making oil production unprofitable for them


2--Robert Parry on propaganda, SC


Today’s coverage of the Syrian civil war or the Ukraine crisis is so firmly in line with the State Department’s propaganda “themes” that it would put smiles on the faces of William Casey and Walter Raymond if they were around today to see how seamlessly the “perception management” now works. There’s no need any more to send out “public diplomacy” teams to bully editors and news executives. Everyone is already onboard.


Rupert Murdoch’s media empire is bigger than ever, but his neocon messaging barely stands out as distinctive, given how the neocons also have gained control of the editorial and foreign-reporting sections of the Washington Post, the New York Times and virtually every other major news outlet. For instance, the demonizing of Russian President Putin is now so total that no honest person could look at those articles and see anything approaching objective or evenhanded journalism. Yet, no one loses a job over this lack of professionalism.


The Reagan administration’s dreams of harnessing private foundations and non-governmental organizations have also come true. The Orwellian circle has been completed with many American “anti-war” groups advocating for “humanitarian” wars in Syria and other countries targeted by U.S. propaganda. [See Consortiumnews.com’s “Selling ‘Peace Groups’ on US-Led Wars.”]Much as Reagan’s “public diplomacy” apparatus once sent around “defectors” to lambaste Nicaragua’s Sandinistas by citing hyped-up human rights violations now the work is done by NGOs with barely perceptible threads back to the U.S. government. Just as Freedom House had “credibility” in the 1980s because of its earlier reputation as a human rights group, now other groups carrying the “human rights” tag, such as Human Rights Watch, are in the forefront of urging U.S. military interventions based on murky or propagandistic claims. [See Consortiumnews.com’s “The Collapsing Syria-Sarin Case.”]At this advanced stage of America’s quiet surrender to “perception management,” it is even hard to envision how one could retrace the many steps that would lead back to the concept of a democratic Republic based on an informed electorate. Many on the American Right remain entranced by the old propaganda theme about the “liberal media” and still embrace Reagan as their beloved icon. Meanwhile, many liberals can’t break away from their own wistful trust in the New York Times and their empty hope that the media really is “liberal.”.....


....
In January 1983, President Reagan took the first formal step to create this unprecedented peacetime propaganda bureaucracy by signing National Security Decision Directive 77, entitled “Management of Public Diplomacy Relative to National Security.” Reagan deemed it “necessary to strengthen the organization, planning and coordination of the various aspects of public diplomacy of the United States Government.”...


As a result of Reagan’s decision directive, “an elaborate system of inter-agency committees was eventually formed and charged with the task of working closely with private groups and individuals involved in fundraising, lobbying campaigns and propagandistic activities aimed at influencing public opinion and governmental action,” the draft Iran-Contra chapter said. “This effort resulted in the creation of the Office of Public Diplomacy for Latin America and the Caribbean in the Department of State (S/LPD), headed by Otto Reich,” a right-wing Cuban exile from Miami.....


Repeatedly, Raymond lectured his subordinates on the chief goal of the operation: “in the specific case of Nica[ragua], concentrate on gluing black hats on the Sandinistas and white hats on UNO [the Contras’ United Nicaraguan Opposition].” So Reagan’s speechwriters dutifully penned descriptions of Sandinista-ruled Nicaragua as a “totalitarian dungeon” and the Contras as the “moral equivalent of the Founding Fathers.”
As one NSC official told me, the campaign was modeled after CIA covert operations abroad where a political goal is more important than the truth. “They were trying to manipulate [U.S.] public opinion … using the tools of Walt Raymond’s trade craft which he learned from his career in the CIA covert operation shop,” the official admitted....


Thus, the American people were spared the chapter’s troubling conclusion: that a secret propaganda apparatus had existed, run by “one of the CIA’s most senior specialists, sent to the NSC by Bill Casey, to create and coordinate an inter-agency public-diplomacy mechanism [which] did what a covert CIA operation in a foreign country might do. [It] attempted to manipulate the media, the Congress and public opinion to support the Reagan administration’s policies.”...


Gershman and his NED played important behind-the-scenes roles in instigating the Ukraine crisis by financing activists, journalists and other operatives who supported the coup against elected President Yanukovych. The NED-backed Freedom House also beat the propaganda drums. [See Consortiumnews.com’s “A Shadow Foreign Policy.”]Two other Reagan-era veterans, Elliott Abrams and Robert Kagan, have both provided important intellectual support for continuing U.S.
interventionism around the world. Earlier this year, Kagan’s article for The New Republic, entitled “Superpowers Don’t Get to Retire,” touched such a raw nerve with President Obama that he hosted Kagan at a White House lunch and crafted the presidential commencement speech at West Point to deflect some of Kagan’s criticism of Obama’s hesitancy to use military force


3--Afghans now on their own in fight against Taliban
 4--As US, NATO exit, thousands of Afghans flee returning Taliban
Thousands of Afghans are pouring into makeshift camps in the capital where they face a harsh winter as the Taliban return to areas once cleared by foreign forces, who this week are marking the end of their combat mission.
On the grimy outskirts of Kabul, hundreds of families are huddled in flimsy tents or mud shelters at the Bagrami camp. By day the children forage for fuel and food. At night the families burn garbage to try to keep warm as the icy winds sweep down from the Hindu Kush mountains surrounding the city and temperatures plunge to below freezing.


"Violence has forced us out of our homes but here misery and poverty have made our life even more difficult," said Abdul Qayyum, 52, who fled here with his wife and eight children. "Such a life is not worth living."
The insurgents are now once again on the move, and have extended the summer fighting season as foreign forces have handed over front-line combat responsibility to Afghan security forces. This week the U.S. and NATO are formally ending their combat mission, 13 years after the invasion that toppled the Taliban in the wake of the Sept. 11 attacks.
The insurgents have taken advantage of the vacuum and seized territory across the country, redrawing battle lines through urban areas and putting civilians at greater risk. The Sangin fighting began in June after Afghan forces replaced withdrawing U.S. troops


5--Taliban Declare 'Defeat' of US, Allies in Afghanistan , VOA


Taliban insurgents in Afghanistan on Monday declared the “defeat” of the U.S. and its allies in the 13-year-old war, a day after the coalition officially marked the end of its combat mission.
The NATO-led International Security Assistance Force is shifting to a support mission for Afghan army and police more than a decade after an international alliance ousted the Taliban government for sheltering the planners of the Sept. 11, 2001, attacks on American cities.
“ISAF rolled up its flag in an atmosphere of failure and disappointment without having achieved anything substantial or tangible,” Taliban spokesman Zabihullah Mujahid said in an statement emailed on Monday.


About 13,000 foreign troops, mostly Americans, will remain in the country under a new, two-year mission named “Resolute Support” that will continue the coalition's training of Afghan security forces to fight the insurgents, who have killed record numbers of Afghans this year.
While the U.S. and its allies say the Afghan army and police have been able to prevent the Taliban from taking significant territory, violence has shot up as the insurgents seek to gain ground.
For Afghanistan's new president, Ashraf Ghani, keeping government control of territory and preventing security from further deteriorating is a top priority.


Vowing to restore their former hard-line Islamist regime, Taliban spokesman Mujahid vowed that “the demoralized American-built forces will constantly be dealt defeats just like their masters.”
The Taliban have launched increasingly deadly attacks this year. Nearly 3,200 Afghan civilians were killed in the conflict between the militant group and the army in 2014, and more than 4,600 Afghan army and police died in Taliban attacks.


6---Following the income leads us to wonder how the 99% of households whose income is declining in real terms can borrow and spend more every year.

Following


Foreign investors have had just about enough of Abenomics.
After pumping record amounts of cash into Japanese shares last year, they’ve hardly added to holdings in 2014. Inflows are down 94 percent this year to 898 billion yen ($7.5 billion), on pace for the smallest annual amount since the 2008 global financial crisis. The month of April 2013 alone registered almost three times as much foreign investment in the stock market as all of 2014.
These figures provide the clearest look at how global investors have become disillusioned with Prime Minister Shinzo Abe after he pushed through a tax increase in April that sent Japan into recession...


Fund flows from the central bank and GPIF underpin Morgan Stanley MUFG Securities Co.’s forecast for the Topix to climb to 1,680 by the end of 2015, an 18 percent jump from the last close. A lower currency will buoy earnings and return on equity is improving, according to the brokerage. The median projection of 10 analysts and investors surveyed by Bloomberg is for the Topix to gain 16 percent to 1,650. ...


The government approved 3.5 trillion yen of extra spending to aid the economy over the weekend, including shopping vouchers, subsidized heating fuel for the poor and low interest loans for small businesses hurt by rising input costs. A panel will submit a draft plan for a company tax cut of “slightly more than” 2.5 percentage points for the next fiscal year, NHK reported Dec. 26


8---They're coming for your deposits, Max Keiser
"Adequacy of loss absorbing capacity of global systematically important banks in resolution"


9--Ditching US dollar: China, Russia launch financial tools in local currencies, RT
China and Russia have effectively switched to domestic currencies in trading using financial tools as swaps and forwards, as they seek to reduce the influence of the US dollar and foreign exchange risks.
The agreement signed in the end of October comes into force Monday, December 29, and provides a currency swap of CNY150 billion (up to US$25 billion).


The country’s Foreign Exchange Trade System will carry out similar transactions with the Malaysian ringgit and the New Zealand dollar.
From now on yuan swaps are available for 11 currencies on the foreign exchange market.
“China won’t stop yuan globalization or capital account opening because of the volatility in emerging market currencies,” Ju Wang, a senior currency strategist at HSBC Holdings Plc in Hong Kong told Bloomberg.
China has set up bilateral currency swap lines with more than 20 countries and regions since 2009, including Switzerland, Brazil, Hong Kong, Indonesia and South Korea, Xinhua News reported in July.


10--​West behind falling ruble, oil prices - Russian spy chief, RT


11--Taliban claims victory in Afghan War as NATO ends combat mission, RT


“We consider this step a clear indication of their defeat and disappointment,” the terror group said in a statement, arraigning the US-led mission of “barbarism and cruelty” that left “a pool of blood” behind.
The comment from the Taliban comes a day after NATO marked the end of its combat mission with a low-key ceremony in Kabul, arranged in secret due to the threat of a militant attack.


“America, its invading allies... along with all international arrogant organizations have been handed a clear-cut defeat in this lopsided war,” claimed the Taliban, which ruled Afghanistan from 1996 to 2001. ...


No fewer than 12,500 NATO troops - among them 10,000 US personnel - will remain in Afghanistan through 2016, as part of a ‘Resolute Support Mission’ assistance program.


The Taliban promised to continue its fight “for the establishment of a pure Islamic system by expelling the remaining invading forces unconditionally.”
Afghan President Ashraf Ghani has said recently that his administration is open to peace talks with the Taliban, but the group turned down the proposal, saying it would “continue its jihad and struggle so long as a single foreigner remains in Afghanistan in a military uniform.”


12--Phyllis Bennis: I think there is no possibility of anything remotely resembling peace without negotiations. The US was not able to impose peace when it had 100,000 troops on the ground at one time in Afghanistan with another 45,000 international NATO troops. Now when it has 11,000 troops and about 2,000 international troops it certainly isn’t going to be able to militarily impose anything remotely resembling peace. What we will see is a gradual erosion of the security situation even further. The people in Afghanistan are facing a horrific escalation in violence already and I'm afraid it’s going to get worse. The possibility is going to be there for a negotiated settlement, it’s not a good thing. The Taliban still represents an extremist version of social life that they would impose where they are in control. But of course we have to take into account that the current government of Afghanistan - new President, new Prime Minister are not - is also made up largely of former warlords who themselves share many of those same very misogynistic anti-women and socially very backward, in my view, views on human rights. So when we look at the Taliban it’s a terrible situation, but when we look at the government and in particular the warlords’ presence in the government of Afghanistan, it’s not much better.


12--The Dow at 18,000: Contradictions mount in world economy, WSWS


The divergence between the real economy and the financial markets is rooted in the economic breakdown that began with the financial crisis of September 2008. After mobilising trillions of dollars to prevent a complete meltdown of the financial system, central banks, with the US Fed taking the lead, have continued to pump money into the sclerotic arteries of the financial system in order to maintain it....


The growth of fabulous wealth at the heights of society, the result of speculation and parasitism, together with worsening conditions for the overwhelming majority, signifies a build-up of enormous tensions that will erupt in social and political struggles.
At the same time, the conditions are being created for another financial crisis that could set these struggles in motion. The actions of the central banks in fuelling the insatiable demands of finance have created a massive financial asset bubble that threatens to burst if the supply of cheap cash is turned off or reduced.
As a recent report by the credit strategy department at Deutsche Bank put it: “The problem for central bankers is that they have inflated certain asset prices to levels where, if they reined in their actions too much, then they would likely see adverse market moves and a loss of confidence in the system.” The report concluded that those in charge of monetary and economic policy were nowhere nearer to finding a solution than they were in 2008–2009.


Nothing like it has been seen in history, as even a brief review of the amounts involved makes clear. From its founding in 1913, it took the Fed 94 years to expand its balance sheet to $900 billion, where it stood on the eve of the financial crisis. Just six weeks after the collapse of Lehman Brothers, it had doubled in size.
By the end of the year, it had tripled. It now stands at more than $4 trillion
 
As the year draws to a close, there is an ever-widening gap between what is taking place in financial markets and the state of the underlying real economy. Wall Street has reached record highs, with the Dow topping 18,000 this week, while the world economy remains largely in the grip of tightening recessionary conditions.


This disparity portends the eruption of economic and social contradictions.
Throughout this year, financial markets have followed a basic pattern: periods of sudden turbulence followed by a new surge. The most serious was the bond market “flash crash” of October 15, when conditions emerged resembling those following the collapse of Lehman Brothers in September 2008.
But at every point, financial markets have been revived with the promise that the supply of cheap money from central banks would continue. At the same time, stagnation and outright recession continue across much of the world.


13---108,000 Private Contractors Are in Afghanistan and We Have No Idea What They're Doing, policy


Two recently released reports, one by the Congressional Research Service (CRS) and one by the Government Accountability Office (GAO), show that not only is the number of private contractors in Afghanistan increasing, but the Pentagon is also unable to tell what they are even doing there. Citing the reports, David Francis of the Fiscal Times points out that there are now 108,000 private contractors in Afghanistan (over 30,000 of whom are Americans), far more than the 65,700 U.S. troops still there,and the number was counted at 110,404 last month. That amounts to 1.6 contractors, roughly 18,000 of which are private security contractors, for every American soldier.


Although the U.S. presence in Afghanistan is ostensibly winding down towards an eventual handover to Afghan security forces, as Francis argues, "the increase in the contractors to troop ratio is yet another indication that although the vast majority of troops are leaving Afghanistan, a private army will remain in the country for years."


According to the CRS, the U.S. wars in Iraq and Afghanistan show the increasing reliance of the military on private contractors. But replacing the military with private contractors is not necessarily a good thing. Highlighting the abuses committed by private military contractors, Angela Snell of the University of Illinois College of Law has called this trend a "convenient way for the U.S. government to evade its legal obligations, including the responsibility to protect the human rights of civilians in war and peace, by allowing private individuals, rather than official state actors, to perform services on behalf of the U.S. military."
Not only does the growing use of private contractors give lie to the idea of a withdrawal from the country, but they are also very costly. Although still dwarfed by the ever-mounting total costs of the wars in Iraq and Afghanistan, CRS reports that "over the last six fiscal years, DOD [Department of Defense] obligations for contracts performed in the Iraq and Afghanistan areas of operation were approximately $160 billion and exceeded total contract obligations of any other U.S. federal agency."


Moreover, Francis points out that the CRS and GAO did not just measure the number of contractors and the cost, but the reports also assessed the Pentagon's ability to monitor the work of contractors. And the results are damning. According to Francis, taken together the reports:


The U.S.-led wars in Iraq and Afghanistan have been massive, and destructive, wastes of lives and money. Although the U.S. and its allies say that they plan to remove combat troops from Afghanistan by 2014, this will in no way be the end of the West's presence in the country. Francis reports that much of the work currently done by the military will be done by the private contractors after the military leaves. So while the attention paid to Afghanistan is likely to continue to dwindle even further, as has been the case in Iraq, as the military withdrawal picks up, the foreign occupation, by what one analyst has called "a de facto army," looks set to continue on.


14---Runs still threaten the repurchase market: 2014 in review, repowatch


In the early 21st century, lenders (on the repurchase market) lost faith in the solvency of their borrowers  (investment banks) and suddenly demanded their money back. But the banks didn’t have the money any more. They had re-used it to make loans and investments. This created a panic that threatened to bankrupt the investment banks and the economy.
As Federal Reserve Governor Daniel Tarullo, the governor with the most responsibility for post-crisis reforms, explained in a November 20 speech  about progress that’s being made toward preventing runs:
The financial turbulence of 2008 was largely defined by the dangers of runs–realized, incipient, and feared. Facing deep uncertainty about the condition of counterparties and the value of assets serving as collateral, many funding markets ground to a halt, as investors refused to offer new short-term lending or even to roll over existing repos and similar extensions of credit. In the first instance, at least, this was a liquidity crisis. Its fast-moving dynamic was very different from that of the savings and loan crisis or the Latin American debt crisis of the 1980s. The phenomenon of runs instead recalled a more distant banking crisis–that of the 1930s....


With the collapse of these financial giants, the potential damage to thousands of their trading partners, and the runs that then hit the broad financial markets, the U.S. economy came close to Armageddon, Federal Reserve Chairman Ben Bernanke told the Financial Crisis Inquiry Commission.
As a scholar of the Great Depression, I honestly believe that September and October of 2008 was the worst financial crisis in global history, including the Great Depression …Out of maybe the 13 of the most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two. 


15--The Big Money World of Mercenaries and Private Security, global research


The world’s most powerful mercenary armies:
• G4S: employs 625,000
• Presence in more than 125 countries
• 2nd largest employer in the world (after WalMart)
• Unity Resources Group: 1,200 employees
• Strong presence in Iraq
• Erinys: more than 15,000 (unofficial)
• Asia Security Group, employs 600. Formerly owned by Karzai, president of Afghanistan.
• Dyncorp: staff in excess of 5,000.

Just two years ago, the International Energy Agency (IEA) predicted that Iraq would be able to double its oil production by the end of the decade, raising output to 6.1 million barrels per day. Even more compelling is the fact that the IEA also believes that Iraq will make up an inordinate share of global supply growth over the long term – more than U.S. shale, more than other OPEC members.


But that looks increasingly unlikely for two major reasons. First is the onslaught from ISIS, which has torn the country apart. The militant group’s advance has been halted and is slowly being rolled back, but nevertheless, the presence of violence and the lack of security are already deterring investment in new production.
The chief economist of the IEA warned in November that ISIS threatens the stability of oil markets. “Suddenly a new parameter has come into the oil markets,” Fatih Birol told the FT in an interview. “In the past we talked about prices, supply, demand and economic growth. Now there is a new parameter: Isis.”


The other factor holding back Iraq’s oil potential is lower prices, an unexpected trend that is draining cash from Iraqi government coffers. As a result, Iraq’s government approved a trimmed down 2015 budget in late December, opting to spend 123 trillion dinars (US$103 billion), down from an original level of 141 trillion dinars. The spending cuts could hurt investment in new oil projects.
In fact, the Iraqi government is already coming to the realization that its original estimates for oil production increases over the next five years may have been too ambitious. With the threat of ISIS, the Iraqi government will need to divert more money to security. But the fall in oil prices is shrinking the pie of resources. Taken together, they amount to a double whammy for Iraq’s oil prospects.

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