One day after Steven Mnuchin engaged in damage control in Buenos Aires, saying there was “no chance” that a currency war would break out in the aftermath of Trump’s comments from last week, and which saw a turbulent start to the week with both the BOJ and PBOC stepping up to stabilize markets, European stocks opened lower as traders reacted to warnings from the G-20 about the adverse impact of protectionism on growth before gradually edging back with the auto sector underperforming while US equity futures pointed towards a muted open with ES trading just below the unchanged line.
The big overnight news came early in the session, when Japanese 10-year government bonds plunged as cash markets caught up with Friday’s drop in futures on a media report of possible changes to the BOJ’s ultra-loose monetary policy, sending the yield up the most in almost two years…
… while the yen surged to a 2-week high, sending the USDJPY briefly below 111 below rebounding modestly.
“It’s all that concern investors have about the move from global quantitative easing to global quantitative tightening. That fear gets stoked when you have reports such as this,” said Psigma Investment Management’s Rory McPherson. “The ECB meeting this week will be more in focus now that we’ve had this concern about Japan.”
The sharp drop in JGBs spurred the central bank to offer to buy an unlimited amount of bonds in a fixed-rate operation at a rate of 0.11% (which was left unused), reinforcing Kuroda’s Yield Curve Control policy. Yet while the BOJ denied the report of an imminent change to its YCC framework, JGBs slumped throughout the session seemingly uncomforted by the BOJ’s actions.
Looking at the dollar, it initially slumped in continuation from Friday’s Trump-induced jawboning which saw the president warn that a strong dollar hurts the economy, but has since rebounded as US traders started coming in; they may be taking Treasury Secretary Steven Mnuchin’s comments at face value, after he gave assurances of the U.S. commitment to a strong greenback at the weekend G-20 summit. The Bloomberg Dollar Spot Index turned positive, recouping all losses and sending the euro, pound and yuan lower in tandem.
“The current U.S. administration has a clear preference for lower U.S. dollar rates and a weaker currency,” said Australia & New Zealand Banking Group’s Daniel Been in a note to clients Monday. “This will keep markets wary of further strength in the U.S. dollar; especially given the scale of the recent rally and the large long position already held by the market.”
Dollar strength also led to a reversal in China’s yuan, which erased a gain of as much as 0.66% to trade little changed at 6.7863 per dollar as of 4:41pm in Shanghai, while the offshore yuan slumped as low as 6.8165 after trading as low as 6.77.
The PBOC was also active, halting reverse-repurchase operations and draining net 170b yuan via open- market operations, but at the same time it provided 502BN yuan in one-year Medium-term Lending Facility and keeps interest rate unchanged at 3.30%. Today’s MLF operation adds to 188.5BN yuan of such loans provided on July 13 that matched the maturities on the day with the monthly net MLF injections the highest since December 2016 as China continues to gradually ease financial conditions.
Going back to equities, Europe’s Stoxx 600 fell 0.2% in early morning trade as investors braced for a packed earnings week and a meeting between European Commission President Jean-Claude Juncker and Trump to discuss threatened auto tariffs which could damage carmakers. “The pattern of Trump’s meetings has generally been more conciliatory when he meets in person. It could actually be good for autos,” Psigma’s McPherson said.
Europe’s autos sector fell 0.6 percent, hitting a 2-1/2 week low, led by Fiat Chrysler (-2.1%) which announced the sudden departure of long-time CEO Sergio Marchionne. The index is down 9% this year and is among the worst performing European sectors. Goldman analysts said auto tariffs, if they came to pass, were likely to cause weakness in the Canadian dollar and Mexican peso, possibly also affecting the euro, pound, yen, and Korean won as investors priced in a hit to the economy.
“The global economy is still okay, but the risk is now very high, and if trade policies don’t make a U-turn very soon, we’ll see a measurable impact on growth already next year,” UniCredit chief economist Erik Nielsen said.
Earlier in the session MSCI’s index of Asia-Pacific shares outside Japan fell 0.2 percent. In Japan the Nikkei closed 1.3% to 22,396.99, while the Topix was only 0.4% lower to 1,738.70. The reason behind the divergence of Japan’s two benchmark equity indexes: the price action of one stock, Fast Retailing. The shares of the $48 billion Uniqlo owner – which was down as much as 5.2% on Monday – have a material 8.3% weighting in Nikkei 225, but a tiny 0.3% weighting in Topix.
Emerging market equities traded down 0.1% as the dollar recovered. Dollar strength has driven selling in EM stocks this year as the currency puts pressure on emerging economies with large dollar-denominated debt piles.
Europe’s bond yields climbed after a Reuters report that the BoJ was discussing modifying its huge easing program sent Japan’s 10-year bond yield to a six-month high. The report rekindled anxieties about monetary stimulus easing around the world and piled further pressure on investors already struggling to navigate rising protectionism.
The yield on Europe’s benchmark bond, the German 10-year Bund hit a one-month high of 0.39% and U.S. 10-year Treasury yields also hit their highest in a month at 2.90% before retracing all gains as the dollar rose, and were trading at 2.88% last.
In other overnight news, G20 officials reaffirmed FX commitments made in March and will subsequently pledge to not engage in competitive devaluations. They said global growth remains robust and many emerging-market countries are better prepared to face crises, but risks to the world economy have increased.
US President Trump warned Iranian President Rouhani to never threaten the US again or they will suffer consequences the likes of which few throughout history have ever suffered before. Trump added that US will no longer stand for Iran’s demented words of violence & death, while he warned the Iranian President to be cautious. This was after comments from Rouhani that the US cannot prevent Iran from exporting oil and who warned a confrontation would be the ‘mother of all wars’. US President Trump was also said to be asking for daily updates on how North Korean negotiations are proceeding and is said to have shown frustration regarding the pace despite tweeting about how well it is going.
Crude futures rally as Trump/Iran tension ratchets up over the weekend following a furious Trump tweet on Sunday night warning Iran’s president Rouhani never to threaten the US or suffer unimaginable consequences. WTI oil was steady near $69 a barrel amid concern that escalating trade disputes will undercut energy demand, undermining reassurances from Saudi Arabia that it won’t flood global crude markets.
Copper rose 0.2% from a one-year low hit last week, trading at $6,160 a tonne, having declined for the sixth week in a row last week. Gold prices declined 0.2 percent to $1,229.1 an ounce.
This week we’ve got 175 S&P 500 companies slated to release their latest quarterly reports, including more of the tech heavyweights. The highlights include Alphabet on Monday, Verizon, AT&T and Harley Davidson on Tuesday, Coca-Cola, General Motors, Facebook and Boeing on Wednesday, Intel and Amazon on Thursday, and Exxon Mobil and Chevron on Friday. In Europe UBS reports on Tuesday and Royal Dutch Shell on Thursday. It’s still relatively early stages so far with just 86 S&P 500 companies having reported but an eye watering 81 of those companies have beat earnings expectations, while a still solid 65 have beaten revenue expectations.
Expected data include June existing home sales and Chicago Fed National Activity Index. Alphabet and Halliburton are among companies reporting earnings.
- S&P 500 futures down 0.04% to 2,799.50
- STOXX Europe 600 down 0.2% to 384.93
- MXAP up 0.06% to 166.01
- MXAPJ down 0.07% to 536.94
- Nikkei down 1.3% to 22,396.99
- Topix down 0.4% to 1,738.70
- Hang Seng Index up 0.1% to 28,256.12
- Shanghai Composite up 1.1% to 2,859.54
- Sensex up 0.4% to 36,624.49
- Australia S&P/ASX 200 down 0.9% to 6,227.56
- Kospi down 0.9% to 2,269.31
- Brent Futures up 0.6% to $73.53/bbl
- Gold spot down 0.06% to $1,228.81
- U.S. Dollar Index up 0.1% to 94.53
- German 10Y yield rose 1.6 bps to 0.386%
- Euro up 0.01% to $1.1725
- Brent Futures up 0.3% to $73.25/bbl
- Italian 10Y yield rose 8.3 bps to 2.324%
- Spanish 10Y yield rose 6.5 bps to 1.379%
Top Overnight News
- BOJ officials are said to be looking for ways to keep the stimulus program sustainable, while reducing the adverse effects on markets and banks’ profitability, according to several reports ahead of the July 31 policy announcement
- As the clock counts down to the Bank of Japan’s July 31 policy announcement, officials are looking for ways to keep their stimulus program sustainable while reducing the harm it causes in markets and to the profitability of commercial banks
- Italy’s Deputy Premier Matteo Salvini and one of his League party’s top economic advisers said Italy should push back against European Union budget restrictions, which officials in Brussels say are vital for the country’s economic expansion
- The Bank of Japan announced its first unlimited fixed-rate bond purchase operation since February after yields jumped on reports it will discuss possible changes to its ultra-loose monetary policy next week
- U.S. President Donald Trump fully supports Federal Reserve independence and isn’t trying to interfere in foreign-exchange markets, Treasury Secretary Steven Mnuchin said Saturday. He also reiterated the strong-dollar policy is in the U.S. interest in the longer term
- Trade tensions threaten global growth as the engines of leading economies fall out of sync, finance ministers and central bankers from the Group of 20 nations warn in a statement at the end of the 2-day summit
- Iran’s president warned his U.S. counterpart Donald Trump not to threaten the Persian Gulf nation’s oil exports and called for improved relations with its neighbors, including arch-rival Saudi Arabia. Trump warns Iran’s Rouhani to ‘NEVER, EVER THREATEN” the U.S. again
- U.K. Foreign Secretary Jeremy Hunt is heading to Berlin on Monday to warn that the EU needs to do its part to avoid the chaotic scenario of Britain leaving without a divorce deal
Asian stocks traded mixed with the regional bourses initially dampened across the board amid speculation the BoJ could
discuss tweaking policy and after last week’s renewed tariff threats from US President Trump who stated that the US is ready to impose tariffs on all USD 505bln of imported goods from China. ASX 200 (-0.9%) and Nikkei 225 (-1.3%) were lower with Japan the underperformer amid a firmer JPY and slump in bonds after source reports suggested the BoJ may discuss potential policy changes at its meeting including the yield curve target to allow for a long-term natural increase. This was despite a denial by Governor Kuroda of having any knowledge of the basis for the reports and who stated that remarks would be inappropriate given the proximity of the bank’s monetary policy meeting. Elsewhere, Hang Seng (+0.1%) and Shanghai Comp. (+1.1%) also began subdued amid ongoing trade concerns, although later found some support from PBoC efforts in which the central bank injected CNY 502bln through its 1yr Medium-term Lending Facility. Finally, 10yr JGBs were lower by around 50 ticks shortly after the open on policy tightening fears which saw 10yr yields higher by around 6 bps. This later prompted the BoJ to announce its first fixed-rate buying operation since February to purchase an unlimited amount of 10yr JGBs at 0.110%, which effectively placed a floor on JGBs and helped them nurse part of day’s losses. As noted above, the PBoC skipped reverse repos but later announced to inject CNY 502bln through its Medium-term Lending Facility
Top Asian News
- China Takes ‘More Flexible Way’ on Wealth Products Rule Changes
- Japan Stocks to Watch: Retail, Olympus, Shionogi, Showa Shell
- Arroyo Installed as House Speaker Before Duterte Congress Speech
- Even a Small BOJ Tweak May Have Repercussions for Global Bonds
European equities (Eurostoxx 50 -0.4%) trade lower across the board amid a mixed lead from Asia with traders mindful of ongoing trade concerns with US President Trump last week stating that the US is ready to impose tariffs on all USD 505bln of imported goods from China. This also comes in the context of the US Commander-in-Chief having taken to social media to complain about currency manipulation that has subsequently led to a firmer USD. Newsflow from the European session has otherwise been particularly light with not much to look ahead to on the calendar. In terms of sector specifics, losses are relatively broad-based with price action across the equity space largely dominated by individual stock stories with earnings season well underway. Ryanair (-4.0%) stand at the foot of the Stoxx 600 after their latest earnings update revealed a 20% decline in profits; easyJet (-2.4%) lower in sympathy. Elsewhere, Fiat Chrysler (-2.5%) shares are lower amid the news that their CEO Marchionne has had to stand down from the Co. due to ill-health with Jeep boss Manley named as his successor; Ferrari (-4.2%) and CNH Industrial (-2.4%). Finally, markets await any developments from reports suggesting that Shell could consider a huge USD 25bln buyback alongside their earnings on Thursday and speculation that GSK could consider spinning-off their consumer division.
Top European News
- Italy’s League Pushes for Challenge to EU Budget Restrictions
- A Rare Hedge Fund Bet Targets the World’s Biggest Shipping Firm
- Turkey’s Finance Minister Is Said to Meet With Economists Monday
- How to Revive Active Fund Management? AGI Is Trying Sneakers
In FX, the DXY dollar index is relatively rangebound between 94.200-450 after the G20 meeting and aforementioned Trump verbal intervention, with support seen circa the bottom end of the band and not a lot in terms of resistance until 95.000 and the ytd high of 95.652 set last Thursday. All in all, a quiet start to Monday’s session, but US data later may provide some impetus. The Yen was the clear G10 outperformer was the JPY on sourced reports suggesting that the BoJ will look at various policy tweaks at its end of July meeting, including potential changes to the way it manages the JGB yield curve to allow for a long-term natural increase. Even though Governor Kuroda denied any knowledge of the claims, Usd/Jpy retreated further from recent 113.00+ peaks to a low circa 110.75 before retesting offers around 111.00, while Jpy crosses also dropped sharply to 1+ week lows. Technically, the landscape will remain bearish if the headline pair closes below 111.25 (Fib), and more so sub-110.96 (30 DMA). EUR/CAD/AUD – All narrowly mixed vs the Greenback with the single currency maintaining around 1.1700, the Loonie holding above 1.3150 and Aud reclaiming 0.7400+ as China’s Yuans hold off recent lows (Usd/Cny and Usd/Cnh both just below 6.8000).
In commodities, WTI and Brent crude futures sit comfortably in positive territory (WTI +1.0%, Brent +1.3%) with traders eyeing mounting geopolitical tensions between the US and Iran, while the benchmarks breached USD 69/bbl and USD 74/bbl respectively. Tensions between the two rose over the weekend after Iranian President Rouhani reiterated the US cannot stop its oil exports and warned Trump not to play with the lion’s tail or he will regret it, while Trump responded aggressively in which he warned Rouhani to never threaten the US again or they will suffer consequences the likes of which few throughout history have ever suffered before. Earlier today, reports stated Total’s North Sea oil platforms are hit by a 24-hour strike (as warned of at the end of last week) Price action for oil markets could also be swayed by any trade developments as European Commission Juncker heads to Washington on Thursday in an attempt to defuse tensions. In metals markets, spot gold sits in minor negative territory alongside the modestly firmer USD. Copper in London is hovering about the yearly lows set last week, whilst steel prices were firmer overnight as production cuts in the Chinese city of Tangshan kicked-in.
On Today’s calendar, we’ll get the June Chicago Fed National activity index print followed by June existing home sales data. Away from that, the BoE’s Broadbent will speak to the Society of Professional Economists in London in the evening. Meanwhile, Alphabet will releasing earnings.
US Event Calendar
- 8:30am: Chicago Fed Nat Activity Index, est. 0.3, prior -0.1
- 10am: Existing Home Sales, est. 5.45m, prior 5.43m
- 10am: Existing Home Sales MoM, est. 0.18%, prior -0.4%
DB’s Craig Niccol concludes the overnight wrap
The relentless summer heatwave here in the UK at the moment got us thinking that usually at this time of the year when we’re doing the EMR we’re struggling a bit for interesting stories with markets generally on autopilot and enjoying the summer lull. However, this year couldn’t be much different and it may well be that we look back at last week as a bit of a turning point for markets. Indeed, what started as a war on trade now appears to have grown a new set of roots with the seeds of a potential currency war now seemingly sown and threatening to break out. For those off enjoying a summer break last week, Friday’s session included President Trump publically making his feelings known about China’s Yuan depreciation, tweeting that the nation has been “manipulating” their currency lower. He also said that the EU was doing likewise and that both were also manipulating interest rates lower. This of course comes after China’s Yuan has fallen for six consecutive weeks, including a -1.17% fall last week to the weakest level in over a year.
That’s not to say that the trade war has been put to one side. In fact it’s quite the opposite with President Trump on Friday also saying that he is “ready to go” with tariffs of $500bn on China imports. It is worth caveating that this isn’t the first time the President has threatened tariffs on what amounts to be virtually all of China’s imports before, however these comments clearly continues to signal that there is no near-term de-escalation of these tensions in sight. As a side plot to all this you’ve also now got the President’s criticism of the Fed and it’s worth noting that the blackout period for the FOMC actually kicks in this week so it’s likely that the comments remains one-sided for now and we’ll have to wait some time to hear Fed officials’ responses to questions about the President’s comments.
For now though the biggest question for markets is whether the bark is bigger than the bite. Indeed if you ignored the headlines going around and looked purely at moves last week across various asset classes you probably wouldn’t think much of it. For equities, the S&P 500 (+0.02%) and Nasdaq (-0.07%) were virtually unchanged over the 5 days, with as we touch on further down a strong earnings season clearly well timed, while the Stoxx 600 was down a very modest -0.15% in Europe. In China the Shanghai Comp was also down a very modest -0.07% while the Nikkei was actually up a solid +2.30%. In credit the likes of CDX IG (+0.7bps), CDX HY (+5.8bps) and iTraxx Crossover (+5.8bps) were barely concerned while in bond markets, most of the action came on Friday but over the week the 10y Treasury was a fairly modest +3.5bps higher in yield, 10y Bund a minuscule +0.8bps higher and yields in Asia similarly uninterested. What this shows is that any signs of concern at the moment are really only showing up in moves for FX and Commodities for now. Indeed as well as that move for China’s Yuan, other EM currencies like the Russian Ruble, Chilean Peso, Argentine Peso and South African Rand all weakened at least 1% last week. In commodities WTI Oil tumbled -3.87% while metals like Gold (-1.19%), Silver (-1.90%), Copper (-1.43%), Lead (-3.04%) and Nickel (-3.18%) were all sharply lower.
So the other big question is will this stay contained or broaden out into other assets. In terms of what to look out for this week President Trump’s meeting with European Commission President Juncker on Wednesday should be a closely watched event given the auto import tariffs talk and it could well set a bit of a benchmark for how things progress in the near term. Over the weekend we’ve also had a conveniently timed G20 meeting with the final communique unsurprisingly referencing the risk from trade tensions, specifically saying that “downside risks over the short and medium term have increased” including “rising financial vulnerabilities, heightened trade and geopolitical tensions and global imbalances and inequality”. Treasury Secretary Steven Mnuchin was the US representative at the meeting and speaking on the sidelines of the event he told reporters that the President’s intention isn’t to put pressure on the Fed and also that Trump’s comments on currencies “is not in any way the President trying to intervene in the currency markets”. Further, when asked if investors should be concerned about the prospect of a currency war, he said “no”.
So a quick glance at our screens this morning and there’s only one place to start and that’s with China’s Yuan (+0.17%) which is slightly stronger following a fairly well behaved session so far, while futures on the S&P are down -0.12%. Equities across Asia are trading more mixed, with losses led by the Nikkei (-1.42%) while the Kospi (-0.46%) is also in the red. The Hang Seng (+0.10%) and Shanghai Comp (+0.37%) are higher however.
Meanwhile JGBs have sold-off across the board this morning following reports that hit the wires from Friday and continued into the weekend. On the moves firstly 2y, 10y and 30y yields are +1.8bps, +4.5bps, and +8.0bps higher respectively while the Yen (+0.45%) has strengthened. 10y JGBs actually weakened by the most in two years at one stage before the BoJ stepped in to offer to buy unlimited bonds at a fixed rate of 0.11%, helping to cap the move. The report which garnered the most attention on Friday came from Jiji and suggested that the BoJ might be willing to let 10y JGB yields rise to some degree including a possible hike of the target level (which is currently “around 0%”). Since then Reuters reported that the BoJ is in “unusually active discussions” ahead of next week’s policy meeting including a step to make policy more flexible. Asahi reported that the BoJ statement next week might include language indicating that measures are being taken to reduce the side effects of monetary easing while the Nikkei also reported that a hike in the 10y yield target is to be considered.
It’s worth noting that our strategists in Japan do not think that the BoJ will announce a tightening policy measure as the meeting will also likely include updated inflation projections which point to lower CPI forecasts this year and next, an issue they believe the BoJ will be unable to justify if they were to tighten. They note that the statement might very well end up featuring nothing more than a declaration of intent to explore means of reducing any negative impact of monetary easing. It’s worth noting that the BoJ’s Kuroda, at the G20 meeting over the weekend, said that “I know absolutely nothing about the basis for those reports” and that it would be inappropriate to comment.
Thankfully there are some other distractions for markets his week with the global PMIs due out on Tuesday, the ECB meeting on Thursday and corporate earnings releases really starting to ramp up in the US. It’s difficult to envisage the ECB being a particularly exciting meeting however with the autopilot mode now somewhat on for the rest of the year following the last policy meeting decision. Our European economists expect Mario Draghi to aim for a “Goldilocks” tone during his conference – that is neither sound too hawkish nor too dovish. The team believes that the impression from recent press stories is that the ECB thinks the market has priced its new policy stance too dovishly. Indeed using their modified Taylor Rule, the team shows that the market is fully pricing an escalation of a trade war – a markedly worse economic scenario than the ECB’s baseline or the consensus. Without a clear materialization of the risk scenarios, the team believe the market should price a first hike by end 2019 with a reasonable probability. DB’s baseline call is a 20bp deposit rate hike in September 2019 (25bp refi. hike).
As for earnings, this week we’ve got 175 S&P 500 companies slated to release their latest quarterly reports, including more of the tech heavyweights. The highlights include Alphabet on Monday, Verizon, AT&T and Harley Davidson on Tuesday, Coca-Cola, General Motors, Facebook and Boeing on Wednesday, Intel and Amazon on Thursday, and Exxon Mobil and Chevron on Friday. In Europe UBS reports on Tuesday and Royal Dutch Shell on Thursday. It’s still relatively early stages so far with just 86 S&P 500 companies having reported but an eye watering 81 of those companies have beat earnings expectations, while a still solid 65 have beaten revenue expectations. So an impressive earnings season so far in the US.
It’s worth also noting that this week should be a decent test for the Treasury market with about $119bn due to be auctioned. That’ll all be in maturities up to 7 years so should put the spotlight back on the yield curve, especially given that last week was the first week in six that the 2s10s curve actually steepened, albeit with most of that coming on Friday.
Turning back to markets on Friday. Equities were weaker albeit modestly following softer corporate results and those further comments on trade tariffs, with the Stoxx 600 (-0.15%) and S&P (-0.09%) both marginally down. Meanwhile the US dollar index dropped for the first time in four days (-0.72%) and 10y yields on Treasuries rose +5.5bps. Elsewhere yields on 10y BTPs climbed +8.2bps, in part reflecting conflicting press reports on the future of Finance Minister Tria, who is generally seen as a supporter of the euro and an unified EU bloc (per FT). In FX, Sterling jumped +0.94% following a more conciliatory tone from EU Chief negotiator Michel Barnier, where he noted the EU is open to amending the Brexit proposal on the issue of Irish border, whilst also adding that “I’m sure we’ll find a way forward”.
What to look for today: In Europe the only data scheduled today is the advance July consumer confidence reading for the Eurozone. In the US we’ll get the June Chicago Fed National activity index print followed by June existing home sales data. Away from that, the BoE’s Broadbent will speak to the Society of Professional Economists in London in the evening. Meanwhile, Alphabet will releasing earnings.
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President Donald Trump launched a new verbal attack against Iran’s president Rouhani, vowing “consequences the likes of which few have ever suffered before” if Hassan Rouhani continues threatening America in a late-night Sunday all caps tweet.
In the tweet, addressed to Rouhani, Trump said, “To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!”
To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!
— Donald J. Trump (@realDonaldTrump) July 23, 2018
Trump’s threat was in response to the earlier warning by Iranian President Hassan Rouhani, who on Sunday warned the US not to provoke Iran or halt Iranian oil exports, saying that “Americans must understand well that peace with Iran is the mother of all peace, and war with Iran is the mother of all wars” adding that “it would only lead to regret.”
The head of Iran’s paramilitary Basij forces dismissed Trump’s words as part of a psychological war saying the U.S. “wouldn’t dare make the mistake of taking action against Iran,” Gholamhossein Gheybparvar was quoted as saying by the semi-official Iranian Students’ News Agency.
Trump’s threat, similar to ones Trump issued last year in warning North Korea about its nuclear weapons program, risks leading to a speedy escalation if neither side backs down, and traders quickly took notice as brent oil traded up 1% to $73.78 a barrel.
The already tense relations between Washington and Tehran have been strained further by the US State Department’s campaign to subvert the Iranian government through propaganda. US Secretary of State Mike Pompeo announced on Sunday that the US will be lending its support to dissidents in Iran with a new 24/7 Farsi-language channel and backing what he described as “the long-ignored voice of the Iranian people.”
“For 40 years the Iranian people have heard from their leaders that America is the Great Satan,” Pompeo said. “We do not believe they are interested in hearing the fake news any longer.”
Pompeo also accused the country’s leaders of corruption and urged European allies to join the pressure campaign against the Islamic Republic. Pompeo said Iran’s leadership is made up of “hypocritical holy men” responsible for “crooked schemes” that have hurt the country’s economy and people, according to Bloomberg.
The US Secretary of State added that America stands in solidarity with Iranians and reiterated the November deadline for countries to get their imports of Iranian oil to “as close to zero as possible.” While the administration has said it doesn’t seek regime change, it has repeatedly said that Iran’s leaders don’t have their citizens’ interests at heart.
“While it is ultimately up to the Iranian people to determine the direction of their country, the United States, in the spirit of our own freedoms, will support the long-ignored voice of the Iranian people,” Pompeo said in the speech in Simi Valley, California. The audience included Iranian-Americans, Arkansas Republican Senator Tom Cotton — a leading Iran critic in Congress — and former California Governor Pete Wilson.
Citing his own travels to North Korea as an example, Pompeo said it’s still possible for the Trump administration to build a relationship with Tehran, but he didn’t seem optimistic that such an outcome was likely. He said Iran must make a series of changes to become a “normal” country. “That I don’t see happening today, but I live in hope,” he said.
As Bloomberg notes, Pompeo sought to portray his message Sunday in terms of good-versus-evil, as a major moment in history. He cited President Ronald Reagan’s 1982 Westminster Speech in which he challenged the Soviet Union and warned that its ideology would be left on the “ash heap of history.”
Tensions with Iran come as the U.S. moves closer to imposing sanctions on countries including key allies that don’t eliminate or significantly cut imports of Iranian oil by Nov. 4. Earlier this year, the Trump administration’s decision this year to withdraw from the Iran nuclear accord, which eased economic sanctions on the Islamic Republic in return for restraints on its nuclear program.
The administration will have to decide how hard to enforce its sanctions. Previously both Pompeo and Treasury Secretary Steven Mnuchin have told European leaders they won’t get waivers. But, as Bloomberg points out, other countries such as Iraq, are major importers of Iranian natural gas, and sanctions could strain alliances the U.S. seeks to maintain. As for China, which is a key Iran customer, it is unlikely that the US will have much sway if at all, and many have speculated that Beijing could purchase all of Iran’s excess output – at deeply discounted prices – if only to spite Trump.
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A study on issues of competition in fintech, commissioned by the European Parliament Committee on Economic and Monetary Affairs (ECON), was published July 20. It found that central bank-issued digital currencies could be a “remedy” for a lack of competition policy in the crypto sector:
“The arrival of permissioned cryptocurrencies promoted by banks, even by central banks, will reshape the current competition level in the cryptocurrency market, broadening the number of competitors.”
The study mentions cryptocurrencies like Bitcoin (BTC) as “technological and operational paradigms that are a source of disruption for the entire sector, including monetary policy and financial stability.” Other “disruptive and innovative applications” of new technologies include “AI, cloud computing, biometrics, digital identity, blockchain, cybersecurity, RegTech, internet of things (IoT), augmented reality.”
Private digital currencies are defined separately from central bank-issued digital currencies (CBDC), noting that the CBDCs differ by being based on a “conventional bilateral settlement with a trusted central party.”
According to the study, since closed cryptocurrency systems require a supervisory authority, central banks could be considering using “permissioned cryptocurrency systems” to “complement or substitute” the currencies already used.
The study claims that CBDCs “will reshape the current competition level in the inter-cryptocurrency market” by adding to the pool of competitors:
“A potential inadequacy of traditional competition policy to address competition issues in the cryptocurrency markets can be found, suggesting direct public participation through a central-bank digital currency as a remedy.”
The competition issues, the ECON study notes, can be divided into “inter-cryptocurrency market” competition between cryptos, and “intra-cryptocurrency” market competition between service providers like wallets and exchanges.
In terms of “inter-crypto market” competition, the study reports that the “presence of network effects” and a high number of users of a cryptocurrency could provide a barrier to entry for other cryptos attempting to join the market. The study hypothesizes that this competition “may lead to potential collusive agreements between members of hypothetical cartels.”
For “intra-crypto market” competition, wallets, exchanges, and payment providers could create practices that would keep others out of the market, such as receiving inducements from miners that favor one cryptocurrency over another.
In mid-July, a new EU directive came into force that set stricter transparency rules for digital currencies to protect against money laundering and terrorist financing.
Also in July, virtual currencies were discussed for the first time at ECON’s “Monetary Dialogue” session, with five different briefing reports discussed on topics ranging from crypto and central banks to crypto and the “Eurosystem.”
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Pratt & Whitney, a division of United Technologies corp., announced last Thursday a ‘Growth Option 2.0’ upgrade for the F135 engine, which powers the fifth-generation Lockheed Martin F-35 Lightning II, that could provide increased power and thermal management system (PTMS) capacity.
“As the F-35 program moves forward with the Continuous Capability Development and Delivery (C2D2) strategy, we strive to stay in front of propulsion advances needed to enable F-35 modernization,” said Matthew Bromberg, president, Pratt & Whitney Military Engines. “We’re continuously assessing customer needs and responding with technology options to keep them ahead of evolving threats.”
According to Aviation Week & Space Technology, additional engine power and thermal management capabilities of the F135 engine will allow for the use of directed energy weapons and other Defense Advanced Research Projects Agency (DARPA) inspired armaments, and if approved, would be featured in an upgrade package called Growth Option 2.0 (GO2).
Pratt & Whitney describes GO2 as an upgraded compressor and turbine technologies that significantly increases PTMS. This enables the fifth-generation fighter to burn less fuel, increase thrust, and enables it to fire exotic directed energy weapon systems.
“Growth Option 2.0 incorporates the same suite of compressor and turbine technologies offered in the previously announced Growth Option 1.0, and also brings scaled advances in PTMS capacity while maintaining the same fuel burn (5-6 percent) and thrust improvements (6-10 percent) across the F-35 flight envelope. By selecting from the engine’s full suite of available technologies, F-35 customers can chose the magnitude of PTMS improvements that the mission requires.
Increases in PTMS can enable the F-35 to utilize an enhanced spectrum of offensive and defensive weapon system technologies. Growth Option 2.0 can provide a significant improvement in PTMS capacity in the near-term by utilizing several low-risk technologies ready for Engineering and Manufacturing Development (EMD) today. Pratt & Whitney is also maturing additional technologies that are projected to provide even greater PTMS capability,” said Pratt & Whitney.
GO2 represents the next phase of Pratt & Whitney’s Future Adaptive Spiral Technology approach, which enables the integration of next-generation propulsion technologies into current and future platforms. The company is set to unleash a suite of new adaptive engine technologies to meet the demands of range, persistence, survivability, maintainability, and advanced weapon systems [lasers turrets] for the modern battlefield. In other words, the defense manufacturer indicates that advanced technologies can be smoothly transitioned as they become available.
“Our spiral approach allows Pratt & Whitney to offer rapid, iterative upgrades such as Growth Option 1.0 and Growth Option 2.0 that put next-generation propulsion technologies into the hands of the warfighter as fast as possible,” added Bromberg. “These upgrades are aligned with the F-35 C2D2 strategy and provide a range of options to meet future weapons system requirements for the F135 engine.”
Back in 2014, Lockheed Martin, Notre Dame University, DARPA and the Air Force Research Lab (AFRL) started flight testing a miniaturized airborne laser turret.
This new directed energy weapon turret allows for 360 degrees aiming coverage for future military aircraft in the not so distant future.
Earlier this month, Lockheed senior fellow for laser and sensor systems said at a media briefing:
“We’re looking at concepts for the integration of a laser weapon onto the F-35. We’re also looking at the utility and doing models and calculations so you would understand the utility of a laser weapon system in the F-35.”
General Ellen Pawlikowski, commander of Air Force Materiel Command, said recently that the US Air Force is continuing efforts to field directed energy weapons:
“I think we’re on the cusp of actually being able to field a true laser weapon within the next five to six years. We’ve got an activity that’s going forward, to put a laser on a fighter aircraft, not to blow up scud missiles or to win in a dogfight, but as an air defense.”
And there it is, as soon as the fifth-generation stealth fighter receives its upgraded Pratt & Whitney F135 engines, then, that is when directed energy weapons will be mounted on the aircraft and rapidly deployed to an airbase in either Europe or Asia – ready for deployment in the next round of hybrid wars set to accelerate by the mid 2020s.
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Over the past decade or so, a disturbing number of Russian nationals living in Britain have met untimely deaths. The victims – at least 14 – have been high-profile individuals, such as oligarch businessman Boris Berezovsky or former Kremlin security agent Alexander Litvinenko. All were living in Britain as exiles, and all were viewed as opponents of President Vladimir Putin’s government.
Invariably, British politicians and news media refer to the deaths of Russian émigrés as “proof” of Russian state “malign activity”. Putin in particular is accused of ordering “the hits” as some kind of vendetta against critics and traitors.
The claims of Russian state skulduggery have been reported over and over without question in the British media as well as US media. It has become an article-of-faith espoused by British and American politicians alike. “Putin is a killer,” they say with seeming certainty. There is simply no question about it in their assertions.
The claims have also been given a quasi-legal veracity, with a British government-appointed inquiry in the case of Alexander Litvinenko making a conclusion that his death in 2006 was “highly likely” the result of a Kremlin plot to assassinate. Putin was personally implicated in the death of Litvinenko by the official British inquiry. The victim was said to have been poisoned with radioactive polonium. Deathbed images of a bald-headed Litvinenko conjure up a haunting image of alleged Kremlin evil-doing.
Once the notion of Russian evil-doing is inculcated the public mind, then subsequent events can be easily invoked as “more proof” of what has already been “established”. Namely, so it goes, that the Russian state is carrying out assassinations on British territory.
Thus, we see this “corroborating” effect with the alleged poisoning of a former Russian double-agent, Sergei Skripal, and his daughter in Salisbury back in March this year.
What actually happened to the Skripals is not known – who are said to have since recovered their health, but their whereabouts have not been disclosed by the British authorities. Nevertheless, as soon as the incident of their apparent poisoning occurred, it was easy for the British authorities and media to whip up accusations against Russia as being behind “another assassination attempt” owing to the past “established template” of other Russian émigrés seeming to have been killed by Kremlin agents.
For its part, the Russian government has always categorically denied any involvement in the ill-fate of nationals living in exile in Britain. On the Skripal case, Moscow has pointed out that the British authorities have not produced any independently verifiable evidence against the Kremlin. Russian requests for access to the investigation file have been rejected by the British.
On the Litvinenko case, Russia has said that the official British inquiry was conducted without due process of transparency, or Russia being allowed to defend itself. It was more trial by media.
A common denominator is that the British have operated on a presumption of guilt. The “proof” is largely at the level of allegation or innuendo of Russian malfeasance.
But let’s turn the premise of the argument around. What if the British state were the ones conducting a campaign of assassination against Russian émigrés, with the cold-blooded objective of using those deaths as a propaganda campaign to blacken and criminalize Russia?
In a recent British media interview Russia’s Foreign Minister Sergei Lavrov was typically harangued over alleged Russian malign activity in Britain. Lavrov rightly turned the question around, and said that the Russian authorities are the ones who are entitled to demand an explanation from the British state on why so many of its nationals have met untimely deaths.
The presumption of guilt against Russia is based on a premise of Russophobia, which prevents an open-minded inquiry. If an open mind is permitted, then surely a more pertinent position is to ask the British authorities to explain the high number of deaths in their jurisdiction.
As ever, the litmus-test question is: who gains from the deaths? In the case of the alleged attempted assassination of Sergei Skripal and his daughter, would Russia risk such a bizarre plot against an exile who had been living in Britain undisturbed for 10 years? Or would Britain gain much more from smearing Moscow at the time of President Putin’s re-election in March, and in the run-up to the World Cup?
The more recent alleged nerve-agent poisoning of two British citizens – Charlie Rowley and Dawn Sturgess – in the southern English town of Amesbury revived official anti-Russia accusations and public fears over the earlier Skripal incident in nearby Salisbury.
The Amesbury incident in early July occurred just as a successful World Cup tournament in Russia was underway. It also came ahead of US President Donald Trump’s landmark summit with Vladimir Putin in Helsinki.
Again, who stands to gain most from these provocative events? Russia or Britain?
Another revealing twist in the presumed narrative of “Kremlin criminality” came from a recent interview given to Russian news media by the daughter of the deceased oligarch Boris Berezovsky. Of course, her side of the story received no coverage in the British media.
Liza Berezovsky believes that her father’s death in 2013, while living in exile in Britain, was the dirty work of British state assassins. The case has added importance because it links directly to the previous death of Alexander Litvinenko, who was also living as an exile in Britain.
Berezovsky’s daughter believes that her father wanted to return from Britain to Russia so that he could live out his old age in his native country. She claims that the oligarch had vital information on how the death of Litvinenko in 2006, reportedly from radioactive polonium poisoning, had actually been staged as a smear against Putin and the Kremlin.
Boris Berezovsky, his daughter claims, played a key role along with the British state in orchestrating the demise of Litvinenko to look like an assassination plot carried out by the Kremlin. It was Berezovsky who apparently suggested that Litvinenko, with whom he was an associate, shave off his hair in order to drum up the suspicion of Kremlin poisoning.
Liza Berezovsky contends that, seven years after Litvinenko died, her father was preparing to divulge the dirty tricks involving the British state and their anti-Russian campaign. She said the oligarch wanted to atone for his past misdeeds and to make his peace with Mother Russia. She believes that British state agents got wind of his plans to come clean, which would have caused them an acute international scandal.
In March 2013, just days before he was due to depart from Britain, the oligarch was found dead in his mansion near Ascot, in the English countryside, apparently from suicide caused by a ligature around his neck.
In the end, however, a British civil coroner did not conclude suicide, and left an “open verdict” on the death. An eminent German pathologist hired by Liza Berezovsky provided post-mortem evidence that her father’s body showed signs of his death having not been self-inflicted. He was, in their view, murdered.
It is not beyond the realms of possibility that British secret services are running an assassination program on Russian exiles. These exiles are often used for a time by the British state as media assets, presented as high-profile critics of the Kremlin and lending testimonies to much-publicized allegations of “authoritarianism” and “human rights abuses” under Putin.
At some opportune later time, these Russian dissidents can be liquidated by British agents. Their deaths are then presented as “more proof” of Russian malign activity and in particular for the purpose of criminalizing President Putin and his government.
Considering how London has become an international haven for Russian oligarchs whose wealth is often tainted as being proceeds from criminal activity against Russian laws and who therefore are easily framed as Putin opponents – the British state has ample opportunities for setting up “assassinations” and anti-Putin provocations.
Such a nefarious British program is by no means unprecedented. During the 30-year armed conflict in Northern Ireland ending in the late 1990s, it is documented that the British state ran clandestine assassination campaigns against Irish republican figures, as well as ordinary citizens, as a coldly calculated political instrument of state-sponsored terrorism. It was an instrument honed by the British from other colonial-era conflicts, such as in Kenya, Myanmar (formerly Burma), Malaysia (formerly Malaya), and in several Arab countries like Bahrain and Yemen, as detailed by British historian Mark Curtis in his book Web of Deceit.
Adapting such heinous techniques for a contemporary propaganda war against Russia wouldn’t cost any qualms to British state grandees and their agents. Indeed, for them, it would be simply Machiavellian business-as-usual.
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Throughout the course of human history, the biggest cities have always seemed impossibly large.
For many millennia, it was almost unfathomable for a city to sustain more than 1 million residents. In fact, as Visual Capitalist’s Jeff Desjardins notes, it wasn’t until the 19th century that the largest cities globally, such as London and Beijing, were able to consistently hold populations beyond that impressive mark.
Despite this, in the modern era, we’ve quickly discovered that a city of 1 million people isn’t remarkable at all. In China alone, there are now over 100 cities with a million people today – and as such, our mental benchmark for what we consider to be a “big city” has changed considerably from past times.
Just like a city the size of modern Tokyo was hard to imagine for someone living in the 19th century, it can be an extremely difficult thought experiment for us to visualize what future megacities will look like.
Researchers at the Global Cities Institute have crunched the numbers to provide us with one view of the potential megacities of the future, extrapolating a variety of factors to project a list of the 101 largest cities in the years 2010, 2025, 2050, 2075, and 2100.
Today’s video uses this data – it’s also an extension to the previous work we did based on the report here.
THE LARGEST MEGACITIES BY 2100
According to the report, human geography will look completely unfamiliar by the turn of the century.
Here is a list of the 20 largest megacities projected for 2100:
By the year 2100, it’s estimated that 13 of the world’s largest megacities will be located in Africa. Meanwhile, India will hold three of them – and there will be zero of them found in the Americas, China, or Europe.
Here’s a final look at the top three:
#1: Lagos, Nigeria
Nigeria’s largest city, Lagos, is expected to push the limits of how big a metropolis can get. Already, Lagos has seen explosive growth over the past few decades, and is growing so fast that no one really knows how many people live there. Over 2,000 people emigrate to the city every day, and current population estimates vary widely from 11 to 21 million inhabitants.
Either way, by the turn of the century, Lagos is projected to have a population north of 88 million.
#2: Kinshasa, DRC
Kinshasa, the capital of the Democratic Republic of Congo is projected to be the second largest city in the world with a population of 83 million.
#3: Dar Es Salaam, Tanzania
Dar Es Salaam, a city on the coast of Tanzania, has a population of just 4.4 million today. By 2100, its population is projected to jump by a whopping 1,588%, putting the total at 74 million inhabitants.
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How does Turkish president Recep Tayyip Erdogan fight his political opponents, including those who have been working hard to expose the atrocities of the Islamic state terror group, ISIS? By throwing them into jail for allegedly “supporting terrorism.”
Since the 2016 botched coup attempt in Turkey, Erdogan has been waging a massive crackdown on his opponents and critics, including politicians, political activists, journalists and members of the Turkish security forces and army.
The latest victim of this crackdown is Eren Erdem, a former deputy of the main opposition Republican People’s Party (CHP), who is known for his activities to expose the crimes of ISIS and other terrorist groups.
Erdem was recently detained on charges of “aiding a terrorist organization” and is also being investigated for “insulting the Turkish state.” He faces a prison sentence of 9 to 22 years on charges of “knowingly and willingly aiding an armed terrorist organization as a non-member”, “revealing the identity of an anonymous witness” and “violating the confidentiality of the investigation.”
The author of nine books, Erdem worked as a journalist before being elected as a CHP member of parliament for Istanbul in 2015. He appears to be the bravest MP who has exposed ISIS activities across Turkey during his tenure and has often urged the ruling Justice and Development Party (AKP) government to stop these activities and bring the perpetrators to account.
Erdem meticulously cited evidence from criminal cases, indictments and investigations by state authorities as well as news reports in his statements and parliamentary motions. On December 10, 2015, for example, Erdem made a speech in Turkey’s parliament about ISIS activities in Turkey. These included ISIS’s transfer of the ingredients of sarin gas through Turkey to Syria “with which thousands of children were murdered in the Middle East”. Referring to the investigation and indictment by the Adana office of a public prosecutor, he said:
“Some people in Turkey have contacted the members of the ISIS terrorist organization and transferred the raw material of sarin gas, which is a chemical weapon, to Syria. The prosecutor started an investigation on this. The suspects who carried out the transfer were arrested and jailed. Upon the order of the prosecutor, the telephones of all suspects were wiretapped, the details of which are in this indictment… But within a week, the case was closed, the suspects were released and allowed to leave Turkey to cross the border to Syria.”
Because of the statements he made in parliament, Erdem became the target of a smear campaign, particularly after he spoke to the international press. In December 2015, for example, he told RT: “Chemical weapon materials were brought to Turkey and put together in ISIS camps in Syria, which was known as the Iraqi Al-Qaeda at that time.”
Erdogan, condemning Erdem for the RT interview, said that Erdem “has sunk in the pit of treason” and called on the CHP to dismiss him: “Shame on his party, me and my nation for letting him stay in his party.” A investigation into treason was then launched against Erdem.
Erdem then stated that after the publication of the interview, he received death threats over social media, with his home address posted by pro-government Twitter users presumably to enable an attack on his house:
“I just shared the contents of the indictment with the people… I provided them with a document… [The government] is carrying out a lynching campaign against me. Because they are disturbed by me. I have exposed their filths and exploitation of religion in my books… I have received more than a thousand death threats. My email address is filed with death threats… If something happens to me, the pro-government media and AKP deputies are responsible.”
Undeterred by the pressure and threats, Erdem has continued exposing and speaking about the activities of jihadist terror groups in the region. During a speech at Turkey’s parliament in June 2016, for instance, Erdem once again criticized the government for turning a blind eye to ISIS activities: “ISIS has sleeper cells in Turkey. These cell houses are monitored [by state authorities]… The information gained from technical surveillance on these cells has confirmed that ISIS is organized in Turkey.”
The primary suspect of ISIS’s terror attack in Ankara, Erdem said, who goes by acronym I.B. [Ibrahim Bali] “sent 1,800 terrorists to ISIS, all of whom were monitored through technical surveillance but not a single police or military operation was carried out on them… Where are the police forces? I identified 10.000 addresses [of ISIS members] in these documents of investigations conducted by prosecutors and judges…. Why are these men not in jail?”
Erdem also commented on the Turkish language online magazine published by ISIS, Konstantiniyye:
“ISIS sends these magazines to bookstores and its cell houses. The government knows this. But no police or military operation has been carried out on anywhere including the printing house of this magazine.”
Erdem then showed a photo of the “database” interface ISIS created of its injured and treated members and said that many ISIS terrorists received medical treatment in Turkey. He also called on the parliament to open a commission to investigate ISIS activities in Turkey, but the call was rejected by the votes of the ruling AKP party. A day later, at a press conference at Turkey’s parliament, Erdem said:
“If the commission we proposed were established, we would crush all of the ISIS cells across in Turkey in a few months. There would be no cell left. Because we know the addresses of these cells. We learn them from the police… We also learn from the investigation by police that ISIS members get organized in Istanbul through a magazine called ‘the Islamic World’. But there has been no police operation against them. This is not neglect. This is cooperation [with ISIS].”
Erdem also said that he received threats and curses on social media after he proposed establishing a commission for investigating ISIS. He added that he was provided with security guards by the governor as a precaution to death threats.
Eren Erdem at a June 2016 press conference. (Image source: Eren Erdem video screenshot)
In May 2018, an Islamist association demanded prosecutors to issue an arrest warrant against Erdem. He responded that he was “being exposed to yet another lynching campaign”. He then received a ban on going abroad as he was about to leave Turkey for Germany with his family on May 21. He was stopped at the Istanbul airport by authorities and his passport was seized.
When Erdem’s party, the CHP, failed to nominate him as MP candidate for June 24 elections, he lost his parliamentary seat and his immunity. On June 26, he was arrested in Istanbul.
The terror organization to which Erdem’s indictment refers is the FETÖ (Fethullahist Terrorist Organization), named after Islamic cleric Fethullah Gülen. It is an organization that Erdogan and other members of the Turkish government accuse of staging a 2016 attempted coup, and often use as an excuse to arrest its critics.
A lawsuit was filed against Erdem due to his works at newspaper Karşı, where Erdem was the editor-in-chief. The accusation that he is a “FETÖ supporter” is particularly baseless given that in 2016, he published a book entitled “Nurjuvazi” that criticized Gülen and his movement.
In the meantime, a former CHP deputy announced on July 3 that CHP MPs who wanted to visit Erdem in prison were not given permission by authorities. “This,” he wrote on Twitter, “is isolation against Erdem.”
Another investigation was recently opened against him that is looking into his criticism against the Free Syrian Army (FSA) for allegedly violating Article 301 of the penal code, which prescribes prison terms for “denigration of Turkey, the Turkish nation, or Turkish government institutions.”
In an Orwellian nightmare, a former deputy and a journalist who has so courageously dedicated his career to exposing and condemning terrorist organizations, is now being accused of “aiding terrorists”. The real terrorists he has condemned, however, remain free.
Erdem is paying the price for telling the truth in Turkey. He has risked his life to stop ISIS and help save lives. Now is the time for human rights activists and the media to defend him.
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In 1935, Major General Smedley Butler warned the world that “War is a racket. It always has been…”
“It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives.”
And we ignored it.
26 years later, in 1961, President Dwight Eisenhower – a retired five-star Army general – gave the nation a dire warning about what he described as a threat to democratic government. He called it the military-industrial complex, a formidable union of defense contractors and the armed forces.
“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists, and will persist.“
In his remarks, Eisenhower also explained how the situation had developed:
“Until the latest of our world conflicts, the United States had no armaments industry. American makers of ploughshares could, with time and as required, make swords as well. But we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions.”
57 years after that, we see exactly what they warned about… and as far as we can tell, only Ron and Rand Paul remain to argue against ‘war’ – even though President Trump talks of ‘peace’, the bombing continues – and so here we are today, beholden to the US war machine…
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NATO’s obsession with pulling in as many small, unstable and potentially extremist countries in Eastern Europe as possible makes a world war inevitable rather than deterring one.
The reason for this could not be more simple or clear: Small countries start world wars and destroy the empires and great nations that go to war to defend them.
Belgium doomed England and Serbia doomed Russia in 1914.
The Russian Empire, the largest nation in the world in terms of area and the third largest after the British Empire and China in terms of population at the time, went to war to defend Serbia from invasion by Austria-Hungary.
This was a spectacularly unnecessary and catastrophic decision: Count Witte, the great elder statesman of the czarist aristocracy was completely against it. So was the notorious, but ultimately well-meaning mystic and self-proclaimed holy man Gregory Rasputin., He frantically cabled Czar Nikolai II to not take the fateful decision.
Russia in truth owed Serbia nothing beyond a general feeling of solidarity for a fellow Slav nation. The Serbian government’s attitude towards Russia was far different. They were determined to pull Russia into a full-scale war with Austria-Hungary to destroy that empire. There is no sign that anyone in the Serbian government expressed any concern or regret then or ever afterwards for the 3.4 million Russian deaths in the war, not to mention the many millions who were killed in the Russian civil war, British, Japanese and French military interventions and the terrible typhus epidemic of 1920 that followed.
Indeed, Serbia, in modern terms, was a terrorist state in 1914. Serbian Military intelligence financed, organized and armed the Black Hand terrorist group that gunned down the Archduke Franz Ferdinand, the heir to the Habsburg throne in the Austro-Hungarian Empire. Austro-Hungarian intelligence was so incompetent they were never able to prove the connection at the time.
Britain’s descent into the chaos of World War I was even more unnecessary than Russia’s. Britain had no treaty commitment to go to the aid of France but it did have a treaty guaranteeing the security of tiny Belgium. However, that 1839 Treaty of London was 75 years old – even older than the NATO alliance is today and the British were free to ignore it.
Instead, the British therefore went to war in 1914, amid an orgy of public sentiment to defend “gallant, little Belgium.”
But the kingdom of Belgium was not “gallant” at all. A mere four years before the outbreak of war, international pressure had forced Belgium’s King Leopold to end a 30 year genocide in the heart of Africa, the Belgian Congo, later known as Zaire and today as the Democratic Republic of Congo.
It was one of the worst genocides and examples of mass killing in human history. Leopold’s agents killed an estimated10 million people in the Congo over a 30 year period in order to plunder it of all forms of natural resources and wealth.
Britain therefore went to war in 1914 to protect the successors to a truly genocidal regime in tiny Belgium. Yet that conflict killed, crippled or led to the premature deaths from injuries and hardships of one in three every male Britons between the ages of 18 and 45 when the war started.
As the great British 20th century novelist C.S. Forester later observed in his book The General, Englishmen through that conflict were dying at in greater numbers and at a faster rate than at any time since the Black Death bubonic plague epidemic of the 1340s, 570 years earlier.
The lesson that obsessive concerns about small and irresponsible countries needlessly pull great nations and empires to their own destruction was retold a quarter century later when Britain and France went to war with Nazi Germany to defend Poland in 1939.
1930s Poland, British historian Paul Johnson pointed out in Modern Times was a racist regime whose systems of legal persecution against Russians, Ukrainians and Jews closely paralleled that of Afrikaaner, white supremacist South Africa in the 20th century.
Yet the Poles, who had previously waged successful aggressions to seize territories from Lithuania, Czechoslovakia and even from the Soviet Union in 1920, flatly refused to cooperate with the Soviet Union, the only nation militarily capable at the time of deterring any Nazi attack. The British and the French agreed with the Poles. Hence they failed to take the only credible action that could have prevented the war.
Today, it is the United States that is treading down the fateful path that Czar Nikolai, the British in 1914 and the Western Allies in 1939 all followed. The United States is committed to defend Poland, Lithuania, Estonia and Latvia. It has recklessly extended serious commitments to Ukraine and Georgia. In each case, the governments of these countries are often fiercely anti-Russian and prone to extreme and irresponsible nationalist pressures. These are dangerous commitments for a nuclear superpower to make.
Commitments to small nations by big ones are almost always dangerous. The tail wags the dog and the greater nation sacrifices its own interests to maintain an empty prestige among small countries that is not worth having.
Worse yet, large nations like Russia in 1914 or Britain and France in 1939 are drawn into obscure local conflicts where they have no interests of their own and from which they can gain no benefit. Yet they risk being pulled into world-spanning wars that can destroy their own countries.
It is never worth it.
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Despite soaring trade policy uncertainty and a collapsing yuan, “the equity market has largely looked through the marginal risk from tariffs“, according to Goldman’s David Kostin recently wrote:
No clear relationship exists between reliance on imports from China and recent industry performance. Among at-risk industries, Computer & Electronic Products, which include Semiconductors, have lagged the Russell 3000, while Electrical Equipment stocks have outperformed. As our Tech Hardware and Retail analysts have noted, trade headlines may overstate fundamental risk, as companies have many tools at their disposal to minimize margin pressures. Some firms may be able to switch to other suppliers, while others will pass through costs. A basket of TMT stocks with high imported COGS has also shrugged off the risk from tariffs, matching the broader Info Tech sector’s 12% rally since March.
However, Kostin cautions that this may be a mistake, however not due to the quantitative aspects of the trade war, namely the downstream impact of tariffs, but the qualitative, and thus much more ambiguous, implications.
In other words, it’s not tariffs that investors should be worried about: as the Goldman strategist writes, “a greater risk lies in potential government intervention” and lists the following examples:
Geopolitical tension can manifest itself in ways beyond tariffs. As precedent, China publicly encouraged consumer boycotts that led to a plunge in Japanese auto sales (in 2012) and South Korean products (in 2017). Last week, China issued a temporary injunction on some of Micron’s (MU) chip sales due to alleged patent infringement. The stock fell by 6%. MU downplayed the impact on sales and the share price has since recovered.
So there we have it, instead of a 10% tariff on all US imports being the so-called “worst case scenario,” Goldman is warning that a much bigger problem for the US economy (and markets) is if the Chinese begin to boycott US goods, period.
Which is why the news today, via The Financial Times, that a new survey finds that a majority of Chinese consumers would be prepared to boycott US goods in the event of a trade war with Washington.
The survey found that 54 per cent of 2,000 respondents in 300 cities across China would “probably” or “definitely” stop buying US-branded goods “in the event of a trade war”. Just 13 per cent said they would not.
The remaining 33 per cent said they were unsure or did not at present buy US branded goods, according to the survey, conducted for FT Confidential Research (FTCR), a research unit at the Financial Times.
The survey was carried out between June 27 and July 10, mostly before the US imposed 25 per cent tariffs on $34bn of Chinese goods on July 6. The move elicited an immediate tit-for-tat response from Beijing.
To date, China has avoided calling for any boycott of US goods.
As, for now, analysts said Beijing was unlikely to do so because of fears over a backlash.
“The Chinese authorities haven’t done anything like they did with Japan and South Korean goods in the past,” said Kent Kedl, senior partner in the Shanghai office at Control Risks, a risk consultancy.
But, market continue to ignore the risk of this more ‘qualitative’ aspect of trade war. Bear in mind that Japanese car exports plunged 32% in the 12 months after China launched a boycott over disputed islands in September 2012.
We leave it once again to Goldman’s David Kostin to conclude: “All things considered, we do not think the outlook is very bright.”
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