Monday, August 1, 2016

Today's Links

1--Over 60% of Americans back tuition-free college, survey says


Sixty-two percent of Americans said that they support making public college tuition free for anyone who wants to attend, according to a survey by Bankrate, which polled 1,000 people in late July. The overall margin of sampling error was plus or minus 4 percentage points...

Tuition-free college was more popular with millennials than baby boomers. Seventy-seven percent of people ages 18 to 29 supported tuition-free college while roughly half of people 50 and older did.


2--Global stocks hit highest in a year but banks take shine off Europe


Global stocks hit their highest in almost a year on Monday as investors pared back expectations of when U.S. interest rates would rise, although a fall in bank shares after stress tests took the shine off European shares.


3--Corporate debt soars to $51 trillion. defaults and crisis to follow


Global corporate debt now sits at a record $51 trillion and is poised to hit $75 trillion by 2020 – just four years away. If interest rates rise and the economy slows, it will be very hard for companies to roll these bonds over – and then we get what S&P Global Ratings is calling “Crexit.”

The bond markets dry up for corporate lending, especially higher-yield junk bonds. This would set off a chain of corporate defaults and bankruptcies that would cause central banks to start to lose control of the economy, as they did in 2008 forward....


At the worst of the recession in 2009, we saw around 180 total corporate bond or loan defaults. As of the first half of 2016 alone, we just hit 100. That means 200+ by year-end… and we’re just at the beginning of the next financial crisis. Note that most of the 2009 defaults were in the U.S., as is the case again due to the energy “frackers.” But Europe has a bigger flurry coming this time....

how did this occur? It’s another product and cost of ZIRP and QE policies that appear to create something for nothing. Corporations lever up at such low rates and use that money to buy back stock and engineer mergers and acquisitions – all just re-arranging the pie, not growing it.


4--"Sell everything" says Gundlach



On Friday, the S&P 500 hit another all-time high, after it was reported that the US economy grew at a painfully slow rate of 1.2% annualized in the second quarter, after a first quarter of 0.8% growth, which produced a first-half growth of 0.9% annualized, the worst in four years.

Even “adjusted” ex-bad-items earnings of S&P 500 companies have declined on a year-over-year basis for four quarters in a row. Total business sales in the US have declined since mid-2014. Defaults of companies rated by Standard & Poor’s have jumped to the highest level since the Financial Crisis. Overall business bankruptcies are soaring. Yet, stocks march higher.

So Gundlach told Reuters in a telephone interview: “The artist Christopher Wool has a word painting, ‘Sell the house, sell the car, sell the kids.’ That’s exactly how I feel – sell everything. Nothing here looks good.”


5--The Divide Between GDP and Jobs


Will the real economy please stand up?

Gross domestic product grew at just a 1.2% annual rate in the second quarter, the Commerce Department reported on Friday, not much better than the first quarter’s 0.8% and well below the 2.6% economists expected to see. Details of the report suggested the economy wasn’t as poky as the headline figure suggested—consumer spending was strong, and there was a big drag from companies cutting inventories that ought to be reversed later.

Even so, the message from the GDP report is that the economy is growing only slowly—a message greatly at odds with labor market readings. In the first six months of this year, the economy gained over one million jobs. If the historical association between GDP and employment growth from before the financial crisis held, about 400,000 fewer jobs would have been added   ...

One explanation for why GDP figures and labor-market data seem at odds may be that economy’s productivity problem is even worse than believed. Under this view, years of weak investment spending have cut into companies’ efficiency gains, so that even slight increases in demand compel them to hire. With much of the labor markets’ slack already taken in, they must pay up more to get the workers they need.


6--The Fragile U.S. Economy Now Facing a Slowdown in Building Boom


Construction has been one of the few pockets of strength in the U.S. economy -- until recently. Construction payrolls have declined since March and spending in May rose less than 3 percent from a year earlier, the lowest rate since 2011. Coming after super-charged growth of 10 percent last year, the question now is whether the sputtering is just a blip or something more lasting that portends a significant drag on the economy.

“It’s a deceleration process after two years of fairly decent growth,” said Robert Murray, chief economist of Dodge Data & Analytics, which gathers data on construction.

construction may be a victim of its own success. A torrid pace of apartment building has saturated some markets. Foreign investment, looking for returns, has poured into high-rise condos in Miami and hotels in New York, creating some overcapacity. In one example, Pollack Shores Real Estate Group, a privately held group, put on hold plans to build a 315-unit apartment complex in the Atlanta area as several new buildings cropped up.

Regulators have flagged a heightened risk of lending to commercial real estate, noting that hundreds of banks increased loans to the sector by more than 50 percent during the last three years....

Construction spending still has room to grow. As a percentage of the U.S. economy it was 6.4 percent in the first quarter, below the 50-year average of 8.3 percent. And while housing starts have rebounded slowly to 1.1 million last year from a 2009 low of 554,000, they remain well under a rate of 1.4 million a year since the 1960s.

7--Abe’s Fiscal Plan Follows a Long Road of Packages That Failed


(US is following same policy direction)

Prime Minister Shinzo Abe’s "bold" plan to revive the economy with a $273 billion package leaves him traveling down a well-trod path: it marks the 26th dose of fiscal stimulus since the country’s epic markets crash in 1990, in a warning for its effectiveness.

The nation has had extra budgets every year since at least 1993, and even with that extra spending, it has still had six recessions, an entrenched period of deflation, soaring debt and a rapidly aging population that has left the world’s third-largest economy still struggling to get off the floor...

Abe came to power in late 2012 promising to drag Japan out of a deflationary malaise by changing the economy. The symbol of that was a new 2 percent inflation target, the achievement of which was meant to show that Japan had returned to a stable economic footing. Since then, the economy has contracted in five quarters, economic growth is forecast to have slowed sharply last quarter, and prices stopped rising and started falling again...

A decision to introduce a sales tax increase in 2014 triggered a recession and plans for another increase -- vital for raising government revenues -- have been put back to 2019. The yen has strengthened 16 percent this year, cutting corporate profits. Wage growth has been slow, companies and households are still hoarding cash, and progress on the third arrow of Abenomics -- structural reforms -- remains slow....

"Looks to me like they have a 1990s diagnosis of a 2010s problem," said Richard Jerram, the chief economist at Bank of Singapore Ltd. " I don’t really see the benefit of a short-term demand stimulus."

8--Helicopter money talk takes flight as Bank of Japan runs out of runway (When neoliberalism succeeds, the economy fails.)


With the BOJ's annual JGB purchases already more than twice the volume of new debt issued by the government, Japan has already adopted something akin to helicopter money, said Etsuro Honda, a former special adviser to the Cabinet and a key architect of Abe's reflationary economic policy.


But it has not been enough to stop consumer prices falling in June at their fastest since the BOJ began quantitative easing in 2013.....

"The comprehensive review might be the first step toward further collaboration with the government, hinting at helicopter money," said Daiju Aoki, economist at UBS Securities.
"The government could issue 50-year bonds, and if the BOJ makes a commitment to hold them for a very long time, that would be like helicopter money."

The helicopter money metaphor for the aggressive printing of new money was first used by American economist Milton Friedman in 1969 and cited by former U.S. Federal Reserve chairman Ben Bernanke in 2002 as a scheme that could fight deflation.
Some economists, however, fear it could trigger hyperinflation and uncontrollable currency devaluation. (20 years of experimental monetary policy has only made matters worse.)

9--Slowdown in US, global economy


New data for the United States and the eurozone released late last week reveal that the global economy is sinking deeper into stagnation, driven by cash-rich corporations that refuse to make productive investments even as central banks and governments continue to pump hundreds of billions of dollars into the financial markets. Just last week, the US Federal Reserve reassured the financial elite that it had no plans to raise interest rates from their historic lows any time soon.

Gross domestic product (GDP) both in the US and Europe grew at a snail’s pace in the second quarter. In the case of the US, the 1.2 percent growth rate fell well short of economists’ predictions of a 2.5 percent rebound from the miserable 0.8 percent recorded for the first three months of the year. In the first six months of 2016, the US economy grew at an annualized rate of only 1.0 percent.

Over the same period, despite extreme volatility at the start of the year and a sell-off in the immediate aftermath of the British vote to exit the European Union, stocks in the US and in much of the rest of the world have soared to new record highs. The Dow Jones Industrial Average stands at more than 18,400 and the broader Standard & Poor’s 500 index increased by over 5 percent just in the month of July.

The most significant statistic in the report by the US Commerce Department was the sharp fall—minus 9.7 percent—in business investment, the third straight quarterly decline. The second-quarter fall was the biggest since the depths of the financial crisis in 2009....

These developments underscore the fact that there has been no recovery in the real economy since the financial crash of September 2008....

The stagnation in the US economy has taken on historic proportions. The so-called “recovery” touted by the Obama administration is, a Wall Street Journal analysis notes, “by far the weakest of any since 1949.” Since the recession officially ended in June of 2009, the US economy has grown at a rate of just 2.1 percent per year. No other nominal recovery on record has seen annualized growth rates of less than 3 percent, with the notable exception of the last recovery—that which lasted from 2001 to 2007.

In over seven years of tepid economic growth, corresponding to the two terms of the Obama administration, the US economy has expanded by just 15.5 percent. By way of comparison, the recovery from the late 1950s recession, which lasted from 1961 to 1969, the years of the Kennedy and Johnson administrations, saw the economy grow by 52 percent....

With roughly $2 trillion on hand, US corporations are awash in cash, as are the bank accounts and stock portfolios of the wealthiest Americans. Yet none of this wealth is finding an outlet in productive investment.

10--Erdogan accuses US of supporting failed coup in Turkey (Today's "must read")


The statements by both Erdogan and the US officials underscore the drastic deterioration in relations between Washington and Ankara that had already occurred prior to the coup. Far from welcoming Erdogan’s survival, Washington is attacking a government that narrowly survived a coup attempt that claimed over 270 lives and nearly led to Erdogan’s assassination...

Turkey has become increasingly concerned that the Syrian war is strengthening the position of separatist Kurdish forces. Under those conditions, Ankara intitated a broad shift in its foreign policy this spring. It signaled that it might cease backing the Syrian war, which it had agreed to support shortly after Washington launched it five years ago....

Since 2001, US imperialism has laid waste to Afghanistan, Iraq, Libya and Syria in order to install pro-US puppet regimes, crush Russian influence and dominate the Middle East. It takes little imagination to recognize that powerful sections of the American bourgeoisie, which historically backed three successful coups in Turkey (1960, 1971 and 1980), might have at least tolerated last month’s coup attempt in order to cut off developing ties between Russia and Turkey.

The US foreign policy establishment is, moreover, deeply disturbed by the policies Erdogan outlined after the coup, indicating that he was considering an alliance with Russia and Iran. In a telephone call with Iranian President Hassan Rouhani a few days after the coup, Erdogan said that Turkey is now “even more determined to work hand-in-hand with Iran and Russia to resolve regional issues and strengthen our efforts to return peace and stability to the region.” Erdogan is now scheduled to meet Russian President Vladimir Putin in St. Petersburg on August 9.

US officials in Aspen insisted that such alliances were unacceptable to Washington. Clapper accused Moscow of trying to “drive a wedge between Turkey and the West, specifically Turkey and NATO.”
As for Scaparrotti, he declared, “We will watch closely how this relationship develops. I would be concerned if they were departing from the values that are the bedrock of the Washington Treaty [which founded NATO]—the rule of law....

Under these conditions, US claims that Washington had no advance warning of the coup are simply not credible. Turkey’s Incirlik Air Base, which hosts more than 5,000 American soldiers and is the main base for the US-led bombing campaign against Syria and Iraq, was the organizing center of the putsch. Pro-coup fighter jets flew in and out of Incirlik as the coup unfolded. Shortly after the coup failed, the base commander, General Bekir Ercan Van, was arrested along with other pro-coup soldiers at the base.

Given that Incirlik is the site of dozens of US nuclear weapons, no credibility can be given to claims that US intelligence was unaware that a coup against Erdogan was being organized from there. Were that truly the case, it would represent a CIA intelligence breakdown of stunning proportions.
It is now being reported that Ankara received warning of the coup and Erdogan escaped assassination only because of reports from Russian forces that US-linked assassins were on the way to kill him

It is now being reported that Ankara received warning of the coup and Erdogan escaped assassination only because of reports from Russian forces that US-linked assassins were on the way to kill him.

Russian forces at the nearby Khmeimim airbase in Syria reportedly intercepted coded radio signals containing information about preparations for a coup and shared them with the Turkish government. Erdogan left a hotel in Marmaris only minutes before 25 rebel soldiers descended on the hotel and began shooting. Ultimately, hundreds were killed and thousands wounded as rebel army units bombed the Turkish parliament and attacked pro-Erdogan protesters and loyal military and police units.

A pro-coup officer captured by the Turkish government, Lieutenant Colonel Murat Bolat, told the conservative Yeni Savak newspaper that his unit was designated to detain and possibly murder Erdogan after receiving precise information on Erdogan's location from US sources.

“A person in the meeting, whom I guess was an officer from the Special Forces, said, ‘Nobody will be allowed to rescue the president from our hands,’” he said, indicating that this meant Erdogan was to be shot after he was captured if the forces who had arrested him faced any counterattack.

Yeni Safak also identified US General John F. Campbell as the “man behind the failed coup.” According to the newspaper, the former commander of the Resolute Support Mission and United States Forces in Afghanistan worked with a team of 80 CIA operatives, distributing $2 billion to pro-US and pro-Gülen elements in the Turkish military to prepare the coup.

11--Turkey -Iran Detante


12--US fails to live up to its commitments under the Iran Nukes Deal (JCPOA)


“Regional nations are capable of resolving these issues and while calling on regional governments [to help fix these issues], we also reaffirm that the US is not trustworthy and sees the Arab governments as a tool to protect the Zionist regime [of Israel] and meet its own hegemonic interests in the region,” Ayatollah Khamenei said

13--"Delicate Operations"...More on the Turkish coup


If Erdogan’s power is reinforced in the coming months, we will see an Islamist republic within NATO. With an established dictatorship regime. The head of Turkey will be an unpredictable and ambitious president who will command all three branches in the country. Will it continue to pursue its neo-Ottoman revanchist plans? To clarify – the Justice and Development Party is in the big family of the “Muslim Brotherhood”. It includes “Hamas”, the Syrian “Brothers” who are fighting against Bashar al-Assad, and the Egyptian “Brothers” who wage war against the regime of General Sisi in Egypt. There is an abundance of information about the events in Turkey. At the same time, its very difficult to “filter” information about the actual processes taking place in the Turkish military and political elite. What is happening in Turkey, determines not only the present and future of the country, but also the balance of the geopolitical vectors – Balkans, Europe, Asia, and the world. From the internal Turkish processes, depend Ankara’s relations with Brussels, Washington, Moscow, Beijing, Tehran, Riyadh, Doha, and not to mention Sofia...

Especially interesting is that only hours after the start of the putsch in Turkey, rumors began to spread that Recep Tayyip Erdogan is frightened, fleeing or had already fled to Berlin, Paris, London and others. This is a classic technique to discredit the national leader in front of people and to disillusion his supporters. Absolutely the same formula was applied in the overthrow of Hosni Mubarak in Egypt. At the outset reports came out that he had fled abroad with his family. This is the same handwriting that the organization of the coup came from outside. There’s hardly anyone left that believes in the spontaneity of the Arab Spring. And there is hardly a sane person who would believe that Recep Erdogan himself spread these rumors. Just a classic stereotype to discredit a leader...

Judging by observations during the first hours of the coup, almost all the military command of Turkey was against Erdogan, or was on the side of the plotters. Who with their actions. Who with their silence, or inaction. They were waiting for the answer to the main question: Is Erdogan killed or not? Once they understood that the president has survived, higher military ranks distanced themselves from the rebels. This shows that Erdogan still has serious opposition among the military, and more specifically among the old elite. What led to the coup? There are serious reasons to believe that in the last 1-2 months, Erdogan was preparing a sharp change of foreign policy in the country. Currently, all are concentrated in the triangle US-Turkey-Russian Federation. As for Russia’s policy towards Turkey, it is abundantly clear. Russia knows that Turkey is a major “player” in the American geopolitical strategy “Anaconda”, which aims at strangulation of the Russian Federation, to fragment and return it to the times of Boris Yeltsin. Baltic-Black Sea rim, which make up the United States begins from the Baltic and passes in Poland, Romania and Bulgaria and ends with Turkey.

Therefore, the removal of Turkey from the US strategy “Anaconda” is a major geopolitical goal of Moscow. This is why Russia reacted swiftly to the attempted coup and supported the government in Ankara. Radical changes in Turkish foreign policy are about to rearrange the geopolitical mosaic in favor of the Kremlin. The change in US policy toward the Kurds and the desire of certain circles in the United States to overthrow Recep Tayyip Erdogan, push the Turkish president to seek a warming of relations with the Kremlin. Whether this trend will continue or will be stopped, it will become clear over time. But only through this prism concerning the strategy “Anaconda”, may we seriously evaluate the actions of Vladimir Putin regarding Turkey. This is the prism of real geopolitics. There is no room for sentimental irrational tirades that are far from realpolitik...

At the beginning of July 2016 contacts between Ankara and Beijing aimed at discussing the construction of railway communications within the “economic belt of the Silk Road” sharply intensified. It is quite clear that a seizure of power by the military and Gülenists, and a sharp destabilization of Turkey would negatively affect the dynamically developing Turkish-Chinese relations. Moreover, such destabilization would be sped up with activity of supporters for the creation of East Turkestan in China. Which serves US geopolitical strategy in Asia...

Turkey is the base for US “exports” in the region, and the conducting of “delicate operations”. According to the former Belgian pilot the “Turkish Air Force is a direct extension of USAF (US Air Force) – a fact that was not known in Europe.” Against the background of this information, the idea that the pilot of the Turkish F-16s which took down the Russian Su-24, and the pilot that targeted the Turkish president during the coup as being one and the same, is not quite devoid of logic.

14--"... Turkey’s Post-Coup Attempt Military Purge" ISW


Turkish President Recep Tayyip Erdogan’s ongoing military purge is not merely a response to a coup, but an aggressive restructure, rebranding, and reorientation of the Turkish military. Erdogan began to purge the Turkish Armed Forces (TSK) after elements of it launched an unsuccessful coup attempt on July 15, 2016. Turkish security forces detained nearly 10,000 service members including 143 general officers and admirals in the first week, totaling over 1/3 of the officer corps. Erdogan justified his crackdown on a counterterrorism basis, claiming to remove members of exiled cleric Fetullah Gulen’s movement, which Turkish authorities have designated as the “Fetullah Terrorist Organization (FETO).” He has also dismissed, and in some cases arrested, tens of thousands of judges, civil society members, and academics, and he closed down dozens of newspapers. The extent of Erdogan’s purge and his use of a counterterrorism justification demonstrate his intent to use the coup attempt as an excuse to transform the Turkish military into a source of personal power and eliminate sources of dissent in Turkey.

The current military purge is part of an ongoing campaign by Erdogan to eliminate threats to his Islamist regime


15--Washington's "tacit support" for Gulen


is not farfetched to think that there are some groups in the administration – perhaps in the intelligence branches – who have been protecting Gulen because they think he is useful to U.S. foreign policy interests. This could be because Gulen’s brand/mask of moderate Islam is a rare thing in that part of the world. It could be because taking Gulen down would only benefit groups in Turkey they consider more inimical to U.S. interests – Erdogan’s AKP and the arch-secularists. It is even possible that the movement has occasionally performed services for U.S. intel operations. (Some of Gulen’s schools in Central Asia were used to “shelter” American spies according to a former Turkish intelligence chief.) That kind of thing would not be beneath either the CIA or the Gulen movement.


Perhaps these groups have so far have had the better of the argument and have held the upper hand in the administration against those in State or elsewhere who know full well what the Gulen movement is up to and would rather see him go. In the aftermath of the coup, perhaps this balance will change in favor of the latter. Perhaps not. Whether it does or not, I think the Gulen issue will ultimately explode in somebody’s face in the U.S. The only questions are whose, and when....



Tacit support?
The U.S. government may not have had a direct hand in Gulen’s activities, but it is more difficult to dismiss the argument that it provided tacit support – or that some parts of the U.S. administration prevailed on other parts who were less keen on Gulen.
Judging by Wikileaks cables, U.S. diplomats in Turkey were exceptionally knowledgeable about Gulenist activities. These cables are in fact a goldmine of information on the Gulen movement. Form these we learn, among others, about the elaborate ruses used by Gulenist sympathizers to infiltrate the Turkish army, Gulen’s request for support from the Jewish Rabbinate’s during his green card application, and the attempt by sympathizers within the Turkish national police to get a “clean bill of health” for Gulen from the U.S. consulate in Istanbul....

The failed coup
The mystery only deepens after the botched coup. The U.S. has demanded credible evidence from Turkey on Gulen’s involvement, which is as it should be. But beyond that, it appears from the outside as if administration officials have been interested mostly in throwing cold water on the Turkish government’s claim that Gulen was behind the coup – a claim that is largely justified.
The most egregious example is that of James Clapper, the Director of National Intelligence. Asked whether Turkish allegations that Gulen planned the attempted coup passed the “smell test” of credibility, Clapper answered: “No. Not to me.” Clapper said Secretary of State Kerry “was right on the ball” to press the Turks to back up their extradition request with evidence of Gulen’s involvement, adding: “We haven’t seen it yet. We certainly haven’t seen it in intel.”

Now coming from the head of American intelligence, this is no less than a stunning statement. As the Wikileaks cables I referred to above make clear, the State Department, at least, has been well aware of Gulenist infiltration of the Turkish military for quite some time. The Gulenists’s role in Sledgehammer, which led to the discharge of many of the most Kemalist/secularist officers in the military is equally clear. Beyond Sledgehammer, the Gulenists’ wide range of clandestine operations against opponents in Turkey must be well known to American intelligence. So when the most senior intelligence officer in the U.S. instinctively brushes off Gulen’s possible involvement, it looks awfully like he is either incompetent or has something to hide.

Since Clapper’s statement was made, the head of the Turkish military, who was held hostage by the putschists during the coup attempt, has said that one of his captors offered to put him in touch with Gulen directly. This, on its own, is prima facie evidence of Gulen’s involvement, and likely passes the “probable cause” test that is required for extradition. Incredibly, administration officials are still quoted as saying “there is no credible evidence of Mr. Gulen’s personal involvement.” In other words, these officials must think that the army chief of their NATO ally is lying

16--Coup soldier told Turkey's top general to talk to Gülen: Erdoğan

17--Soldier’s testimony reveals how Gülenists lured recruits


S.A. said those houses never had televisions or the Internet and students were banned from smoking, drinking alcohol or having girlfriends. He later became his house’s “imam” and would meet others weekly to discuss Gülen’s messages.

He and his fellow students were encouraged to vote for the AKP and said they were directly instructed to vote in favor of the changes offered to Turkey’s constitution in a 2010 referendum.

The instructions were part of a rigid system demanding complete obedience, he added. It was this obedience that saw him move out of FETÖ-linked housing in his final year at university to stay with friends.

“It was an order to obey,” he said. “I also bought a new phone with a new number.”

18--Turkey Accuses CIA-FBI of Coup Involvement as Protestors Demand Closure of NATO Base



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