The Nationalist Left Rises

Sean Scallon
theamericanconservative.com
August 20, 2013

U.S. Air Force photo

In a telling anecdote from President Clinton’s first inauguration in 1993, one attending Democrat looked up to watch the Air Force’s fighter jet fly-over and remarked: “Those are our F-15s now.” There was hardly a nationalist Left back then, as many liberals and those even further Left had spent the better part of two decades alienated from the institutions, symbols, and instruments of U.S. power and influence. Over the succeeding two decades, however, we have seen a muscular Left nationalism rise to set liberal foreign policy, and begin to set the Democratic agenda here at home.

Nationalism and patriotism were hard sells to a generation of the disenchanted Left, thanks to the Vietnam War and revelations of assassinations both attempted and successful, coups, and more nefarious activities carried out by the U.S. military and intelligence agencies. There was “Cold War liberalism” for a time, but it rarely if ever made vulgar attempts at jingoism to sell its policies to the wider public. Cold War liberalism always argued to work in concert with the international system that it had helped create. Such jingoism was instead often used by the Right, especially after the Liberal crack-up of the late 1960s when the Cold War liberals became isolated in the halls of the liberal power elite, cut off and opposed to their party’s activists on the Vietnam War, the size of military budget, nuclear weapons, U.S involvement in Central and South America, direct military action in placed like Lebanon, Grenada, Panama, the first Gulf War and other foreign policy issues.

What changed the American Left was power, pure and simple. The end of the Cold War in 1991 took foreign policy from being the main point of difference between the two parties and let questions of economics take center stage, making it possible for a scandal-tarred five-term Governor of Arkansas to become President of the United States. Out of power, it had been easy for the Left to dissent against the Cold War and U.S. foreign policy, just as it had been doing since the mid-1960s. Certainly the Clintons, both Hillary and Bill, did so as young political activists at the time. Once in power, though, they and others who came through that 20-year period as dissenters were now suddenly responsible for the defense of the nation. And at first things did not go very well for them. Without a Cold War to structure U.S. foreign policy, said policy found itself confused and directionless. Military and civilian personnel often clashed, especially over culture and protocol as some wanted a peace dividend, others wanted the use the military as place for social engineering (openly serving gays in the military, women in combat roles); still others saw the military as a global police force (“What’s the use of having this great military when you can’t use it?” as Madeline Albright put it.) The resulting confusion and conflict often led to disasters like the U.S. intervention in Somalia and led to speculation about a “shrinking Presidency,” as Time magazine put it.

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18 Signs That Global Financial Markets Are Entering A Horrifying Death Spiral

Michael SnyderEconomic Collapse
August 20, 2013

You can see it coming, can’t you?  The yield on 10 year U.S. Treasuries is skyrocketing, the S&P 500 has been down for 9 of the last 11 trading days and troubling economic news is pouring in from all over the planet. 

Credit: jurvetson via Flickr

The much anticipated “financial correction” is rapidly approaching, and investors are starting to race for the exits.  We have not seen so many financial trouble signs all come together at one time like this since just prior to the last major financial crisis.  It is almost as if a “perfect storm” is brewing, and a lot of the “smart money” has already gotten out of stocks and bonds.  Could it be possible that we are heading toward another nightmarish financial crisis?  Could we see a repeat of 2008 or potentially even something worse?  Of course a lot of people believe that we will never see another major financial crisis like we experienced in 2008 ever again.  A lot of people think that this type of “doom and gloom” talk is foolish.  It is those kinds of people that did not see the last financial crash coming and that are choosing not to prepare for the next one even though the warning signs are exceedingly clear.  Let us hope for the best, but let us also prepare for the worst, and right now things do not look good at all.  The following are 18 signs that global financial markets are entering a horrifying death spiral…

#1 The yield on 10 year U.S. Treasuries has risen for 5 of the past 6 days, and it briefly touched the 2.90% level on Monday.

#2 Rapidly rising interest rates are spooking investors and causing them to pull money out of bonds at a very rapid pace…

Investors have yanked nearly $20 billion from bond mutual funds and exchange traded funds so far in August. That’s the fourth highest pullback ever, according to TrimTabs data. In June, investors took out $69.1 billion — the highest on record.

#3 The sell-off of U.S. Treasuries is being led by foreigners.  In particular, China and Japan have been particularly aggressive in selling off bonds…

China and Japan led an exodus from U.S. Treasuries in June after the first signals the U.S. central bank was preparing to wind back its stimulus, with data showing they accounted for almost all of a record $40.8 billion of net foreign selling of Treasuries.

The sales were part of $66.9 billion of net sales by foreigners of long-term U.S. securities in June, a fifth straight month of outflows and the largest since August 2007, U.S. Treasury Department data showed on Thursday.

China, the largest foreign creditor, reduced its Treasury holdings to $1.2758 trillion, and Japan trimmed its holdings for a third straight month to $1.0834 trillion. Combined, they accounted for about $40 billion in net Treasury outflows.

#4 Thanks to rapidly rising bond yields, some of the largest exchange-traded bond funds are getting absolutely hammered right now…

• The $18 billion iShares iBoxx $ Investment Grade Corporate Bond fund (ticker: LQD) has fallen 7.94% since May 2, according to S&P Capital IQ. That’s including reinvested interest from the fund’s bond holdings.

• The 3.7 billion iShares Barclays 20+ Year Treasury Bond (TLT) has plunged 15.9% the same period. Longer-term bonds typically get hit harder when rates rise than shorter-term bonds. For example, the iShares Barclays 3-7 Year Treasury Bond fund (IEI) has fallen 3.2% since May 2.

• PowerShares Emerging Markets Sovereign Debt (PCY), which invests in government bonds issued in developing countries, has fallen 12.7%. The fund has $1.8 billion in assets.

#5 In recent weeks we have witnessed the largest cluster of Hindenburg Omens that we have seen since prior to the last financial crisis.

#6 George Soros has bet a tremendous amount of money that the S&P 500 is going to be heading down.

#7 At this point, the S&P 500 has fallen for 9 out of the last 11 trading days.

#8 Margin debt has spiked to extremely dangerous levels.  This is a pattern that we also saw just before the last financial crash and just before the dotcom bubble burst…

The exuberant mood comes as margin debt on Wall Street hovers near $377bn, just below its all-time high and well above peaks before the dotcom crash and the Lehman crisis.

“Investors have rarely been more levered than today,” said Deutsche Bank, warning that the spike in margin debt is a “red flag” and should be watched closely.

#9 The growth rate of new commercial bank loans and leases is now the slowest that it has been since the end of the last financial crisis.

#10 According to a shocking new report, Fannie Mae and Freddie Mac are masking “billions of dollars” in losses.  Will they need to be bailed out again just like they were during the last financial crisis?

#11 Wal-Mart reported very disappointing sales numbers for the second quarter.  Sales at stores open at least a year were down 0.3%.  This is a continuation of a trend that has been building for years.

#12 U.S. consumer bankruptcies just experienced their largest quarterly increase in three years.

#13 The velocity of money in the United States has hit another stunning new low.

#14 The massive civil unrest in Egypt threatens to disrupt the steady flow of oil out of the Middle East…

After last week’s bloody crackdown by the Egyptian army, fears of a disruption of oil supplies to the West have boosted the oil price. Brent crude prices were propelled to a four-month high of $111.23 on Thursday. If the turmoil gets worse – or unrest spreads to other countries – the risk premium currently factored into the price of crude is likely to increase further.

#15 European stocks just experienced their biggest decline in six weeks.

#16 The Japanese national debt recently crossed the quadrillion yen mark, and many are expecting the Japanese financial system to start melting down at any time.

#17 In Indonesia, the stock market is “cratering“.

#18 In India, the yield on their 10 year government bonds has skyrocketed from 7.1 percent in May to 9.25 percent now.

As the coming months unfold, keep a close eye on the “too big to fail” banks both in Europe and in the United States.  When the next great financial crisis strikes, they will play a starring role once again.  They have been incredibly reckless, and as James Rickards told Greg Hunter during an interview the other day, we are in much worse shape to deal with a major banking crisis than we were back in 2008…

What’s going to cause the next crisis?  Rickards says,“The problem in 2008 was too-big-to-fail banks.  Well, those banks are now bigger.  Their derivative books are bigger.  In other words, everything that was wrong in 2008 is worse today.” Rickards goes on to warn, “The last time, in 2008 when the crisis started, the Fed’s balance sheet was $800 billion.  Today, the Fed’s balance sheet is $3.3 trillion and increasing at $1 trillion a year.”  Rickards contends, “You’re going to have a banking crisis worse than the last one because the banking system is bigger without the resources because the Fed is tapped out.”  As far as the Fed ending the money printing, Rickards predicts, “My view is they won’t.  The economy is fundamentally weak.  We have 50 million on food stamps, 24 million unemployed and 11 million on disability, and all these numbers are going up.”

We never even came close to recovering from the last financial crisis and the last recession.

Now the next major wave of the economic collapse is coming up quickly.

I hope that you are taking this time to prepare for the approaching storm, because it is going to be very painful.

Terrorists ‘aim to hit Israeli, Jewish targets worldwide’ in coming weeks

The Times of Israel
August 20, 2013

Counter-Terror Bureau issues strident warning, citing ‘concrete, very high’ threats in numerous countries

Israeli and Jewish targets all over the world are likely to be sought out by terrorist organizations in the coming weeks, the Israeli government’s Counter-Terrorism Bureau warned in strikingly strident tones on Monday, listing dozens of countries where it said it had “concrete” indications of a terrorist threat.

It cited concerns about terrorist acts timed to coincide with the forthcoming Rosh Hashana (New Year), Yom Kippur and Succot festivals, and also said that the anniversary of the 9/11 terrorist attacks in the US was likely to be “a favored period” for al-Qaeda and other global jihadist groups to attempt to carry out acts of terrorism.

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Detroit: Government Chooses Big Banks Over the American People Once Again

Washington's Blog
August 18, 2013

Government Sides with the Big Banks Every Time

Ellen Brown noted recently that Detroit is yet another example of the government choosing big banks over the American people:

The argument for the super-priority of derivative claims [background] is that nonpayment on these bets represents a “systemic risk” to the financial scheme. Derivative bets are cross-collateralized and are so inextricably entwined in a $600-plus trillion house of cards that the whole financial scheme could go down if the betting scheme were to collapse. Instead of banning or regulating this very risky casino, Congress has been persuaded by the masterminds of Wall Street that it needs to be preserved at all costs.

The same tortured logic has been used to justify the fact that the federal government deigned to bail out Wall Street but not Detroit. Supposedly, the mega-banks pose a systemic risk and Detroit doesn’t. On July 29th, former Obama administration economistJared Bernstein pursued this line of reasoning on his blog, writing:

[T]he correct motivation for federal bailouts — meaning some combination of managing a bankruptcy, paying off creditors (though often with a haircut), or providing liquidity in cases where that’s the issue as opposed to insolvency – is systemic risk. The failure of large, major banks, two out of the big three auto companies, the secondary market for housing – all of these pose unacceptably large risks to global financial markets, and thus the global economy, to a major industry, including its upstream and downstream suppliers, and to the national housing sector.

Because a) there’s not much of a case that Detroit is systemically connected in those ways, and b) Chapter 9 of the bankruptcy code appears to provide an adequate way for it to deal with its insolvency, I don’t think anything like a large scale bailout is forthcoming.

The New York Times Editorial Board writes:

What we do have a problem with is shared sacrifice that does not seem to apply to the big banks that abetted Detroit’s descent into bankruptcy.

Last month, just days before its bankruptcy filing, Detroit reached its first settlement with creditors. The settlement was with UBS and Bank of America, and though the precise terms will not be nailed down until the bankruptcy judge weighs in, Detroit is set to pay an estimated $250 million to terminate a soured derivatives transaction from 2005.

The derivatives, known as interest-rate swaps, were supposed to protect Detroit from rising interest payments on a chunk of its variable rate debt. The banks would pay Detroit if interest rates rose, and Detroit would pay the banks if rates fell. By 2009, both interest rates and the city’s credit rating were falling, forcing Detroit to pay the banks some $50 million a year and to pledge roughly $11 million a month in casino-tax revenue as additional collateral. [Background on how the big banks suckered Detroit]

***

But the haircut doesn’t mean that the banks will suffer. They have already made money on the swaps; the true extent of any discount will not be known until the deal is finalized.

This much is clear:

■ The banks’ 25 percent hit is nothing compared with the city’s suggested 90 percentcut to the pensions’ unfunded liability  —  which will result in benefit cuts that would be disastrous in both human and political terms and that the State of Michigan must prevent from happening.

■ Municipal officials are prey for Wall Street. The Dodd-Frank financial reform law called on regulators to establish “enhanced protection” for municipalities and other clients in their dealings with Wall Street, but the Securities and Exchange Commission has not yet completed rules, while the Commodity Futures Trading Commission’s rules are so weak as to virtually invite the banks to exploit municipalities.

■ The special treatment banks receive when debtors are in or near bankruptcy is unfair and economically destabilizing. Detroit’s agreement with the two banks requires court approval, but, in general, swap deals by banks are not subject to the constraints that normally apply in bankruptcy cases; in effect, the banks are paid first, even before other secured creditors and certainly before pensioners. That privilege, dating to the heyday of derivatives deregulation in the 1990s and 2000s, is destabilizing because the assurance of repayment fosters recklessness.

Detroit’s problems are a reminder of broader challenges, identified but still unmet: protecting pensions; protecting municipalities from Wall Street; and, at long last,revoking the obscene privileges of banks that allow them to prosper on the failings of others

Reuters adds some details:

The city is paying its swap counterparties a fixed interest rate of approximately 6 percent and receiving payments back of approximately 0.57 percent (current three month Libor ~0.27 percent + 0.30 percent = 0.57 percent for the floating rate). The city’s swap counterparties cannot take haircuts if bankruptcy is filed, according to a creditor attorney that I spoke to. In fact, they move to the head of the creditor line. The same part of the bankruptcy code that was used in the Lehman bankruptcy (Chapter 11) applies to Detroit (Chapter 9). Swaps are settled (netted and paid) when the entity enters the bankruptcy process. From the Stanford Law Review:

Under the Bankruptcy Code, creditors of a failed entity are stayed or prohibited from seizing that entity’s assets. Since 1978, however, Congress has exempted derivatives counterparties from the automatic stay and permitted the termination of the derivatives contracts.

Clearly Detroit’s derivative counterparties will siphon precious cash away from the insolvent city if it were to enter bankruptcy. This cash payment to swap counterparties could likely be in the $400 million range.

The bigger pictures is that the government always chooses the big banks over the little guy:

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Coke Launching Major Ad Campaign To Defend Aspertame: Product Reportedly Made With GM Bacteria

The Motley Fool
By Rich Duprey
August 14, 2013

If you have to run ads defending your ingredients to stave off declining sales, maybe it's time to rethink your production.

Coca-Cola (NYSE: KO  )  launched its first ads today defending the use of the artificial sweetener aspartame, arguing that not only is it safe to consume, but it can be healthier for you, too. With sales of soft drinks losing their pop, the beverage giant wants you to know you don't have to fear drinking its soda.

Aspartame, known more commonly by the brand name NutraSweet, is a controversial ingredient that's witnessing a large and growing resistance to its presence in the food chain despite the FDA's having signed off on its safety. Monsanto  (NYSE: MON  ) owned the brand at one time but sold it to J.W. Childs in 2000. Even so, the sweetener is made with genetically modified bacteria -- E. coli, to be exact -- from the chemicals giant, and today the sweetener is found in more than 5,000 consumer foods and beverages worldwide. Sucralose, another widely used artificial sweetener, goes by its brand name Splenda.

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