Monthly Archives: January 2015

On Mitchell Plitnick’s view of Netanhayu’s intended destruction of the Palestinian Authority

After Abbas has done everything to submit to endless Israeli demands on the road to the mirage of peace, Netanhayu is negotiating with Mohammed Dahlan to become the new poodle at the PA, and this since Abbas finally showed some teeth (although too late as we have seen in the piece by Abdel Sattar Qassem). Netanhayu is also throwing his weight around the corridors of Congress with Lindsay Graham and others among his Congressional captives, to retrospectively change the law on sanctions against the Palestinian Authority.

Open link: http://www.lobelog.com/preparing-for-a-post-abbas-palestine/

On the other hand, Plitnik’s discourse takes place from quite a blinkered US Congressional establishment point of view. Abbas is very much part of the recognition of Palestine process taking place in Europe at the moment, and Netanhayu has – diplomatically and internationally speaking – much less of a free hand than he thinks he has. In terms of European politics he is increasingly seen as an (extremely) divisive figure.

See the events reported on:

http://www.haaretz.com/news/diplomacy-defense/.premium-1.636557

Even the New York Times columnist Roger Cohen believes that Netanyahu’s settlement policy in the West Bank and East Jerusalem is driving a new ghetto-isation of Israel. He hopes that the upcoming elections will see the defeat Netanyahu and his allies, all of whom want to expand settlements, and what Cohen says he seeks instead, is a coalition of more “moderate” parties which will halt expansion and revive the possibility of a two-state solution to the Israeli-Palestinian conflict.

http://www.nytimes.com/2014/12/21/opinion/sunday/roger-cohen-what-will-israel-become.html?_r=0

This is not to say that with moderates in charge Palestinians will get a substantially better deal, because of the imoveability of the settlement movement and its roots in the military, as Lawrence Davidson explains:

https://consortiumnews.com/2015/01/11/a-possible-israeli-turning-point/

However, where the “Zionist entity” will continue to be racist and aggressive, the fall out from all this appears to be more regional and international in nature. Once again, we comes back to my analysis of a split between a Congressional and non-congressional establishment in the US, going in two different directions on the matter of Palestine. We have the increasingly obvious fact that, in the context of “Empire” and the growth of new post-9/11 “Presidential politics”, Congress’ sell-out to AIPAC has reversed the normal course of democracy in America. I am not talking here about the disadvantages of the first-past-the post system of elections and the two-party dominance, with its disenfranchisement of the electorate, although this is clearly a problem in of itself. What I am talking about is the actual marginalisation of Congress as such within the body politic, within the internal but especially within the new external political structures of “Empire”.

 

Ban Ki-moon accepts validity of State of Palestine application

The ICC has said in a statement: “The President of the Assembly of States Parties to the Rome Statute (“the Assembly”), Minister Sidiki Kaba, welcomed the deposit by the State of Palestine of the instruments of accession to the Rome Statute of the International Criminal Court and to the Agreement on the Privileges and Immunities of the International Criminal Court (APIC), which were notified on 6 January 2015 by the Secretary-General of the United Nations acting in his capacity as depositary.”

According to the statement, Kaba said “Each ratification of the Rome Statute constitutes welcome progress towards its universality.”

The Court pointed out that “UN Secretary-General, Ban Ki-moon has recognised the State of Palestine application” in the 6th January note which sees Palestine’s accession as being effective from 1st April 2015 (Open link: https://pbs.twimg.com/media/B6trevCIcAAoMlo.png)

The ICC registrar wrote on 7th January in response to the Palestinian declaration made on 31st December 2014:

“I hereby confirm receipt, on 1 January 2015, of your 31 December 2014 ‘Declaration Accepting the Jurisdiction of the International Criminal Court’ which was lodged with me pursuant to article 12(3) of the Rome Statute, and in which you state that “the Government of the State of Palestine recognizes the jurisdiction of the Court for the purpose of identifying, prosecuting and judging authors and accomplices of crimes within the jurisdiction of the Court committed in the occupied Palestinian territory, including East Jerusalem, since 13 June 2014.

“Pursuant to Rule 4(2) of the Rules of Procedure and Evidence, a declaration under article 12(3) of the Rome Statute has the effect of the acceptance of jurisdiction with respect to the crimes referred to in article 5 of the Statute of relevance to the situation, as well as the application of the provisions of Part 9 of the Statute and any rules thereunder concerning to States Parties.

“I hereby accept the declaration and I have transmitted it to the Prosecutor for her consideration. This acceptance is without prejudice to any prosecutorial or judicial determinations on this matter.”

The Prosecutor, Fatou Bensouda, has committed herself to recognising Palestine’s application, since its accession to non-member observer state in November 2012, in her Guardian Op-ed (Read link: http://different-traditions.com/?p=2282).

See Nicolas Boeglin’s article as to whether Bensouda will be able to swing an inclusion of  Gaza war crimes, and the nature of political pressures on her in that respect (see: https://www.middleeastmonitor.com/articles/middle-east/16291-palestine-accession-to-rome-statute-and-other-international-instruments)

Abdel Sattar Qassem on the PA is the problem not the UNSC

original appears on

https://www.middleeastmonitor.com/articles/middle-east/16241-the-pa-and-the-security-council

Following in the footsteps of the Arab regimes, the Palestinian Authority continuously rushes to the United Nations in the hope of finding a light that would lead to the settlement of the Palestinian issue. However, just like the other Arab regimes, the PA is disappointed and frustrated either because the UN does not make the desired decisions or because it is unable to implement the decisions even if it makes one in favour of the Palestinians.

According to the whispers in the United Nations’ circles, the Arabs and the Palestinian Authority (PA) have made themselves the subject of mockery and ridicule because the Arabs account for millions of people and are spread over a wide geographical area, but are still unable to confront Israel by any other way than to complain, cry and wail.

The Arab complaints, as well as the Arab affairs in general, make up a large percentage of the United Nations’ operation, and if it weren’t for their continuous complaints, many of the United Nations staff would find themselves on the streets without jobs. The most recent complaint was in the form of the Palestinian Authority’s proposal to the UN Security Council to set a date to end the occupation of the West Bank and the Gaza Strip, but the proposal failed to receive the necessary votes to present to the council.

The improvisational Palestinian step

The Palestinian Authority faced three obstacles that needed to be overcome in order to achieve what they desired. They were:

  1. The first obstacle was the need to secure the nine votes necessary to present the Palestinian proposal to the Security Council. It was a well-known fact that these votes were unsure, especially since the United States is on guard and is resorting to pressuring the members of the council to dissuade them from voting in favour of the project, and it succeeded in doing so.
  2. The second obstacle was the American veto in the event that the proposal was presented to the council. The United States has informed the Palestinian Authority on more than one occasion that it will veto the proposal, but the US avoided using its veto by pressuring the concerned countries to withhold their votes.
  3. Israel posed the third obstacle because it is not expected to commit to the proposal if a decision was made in favour of the PA and because there is no international executive reference that compels Israel to implement the proposal. It is also likely that the international superpowers would encourage Israel not to comply.

The Palestinian Authority was fully aware of these things, but it did not explain to the Palestinian people why it went to the United Nations while it saw the failure right before its eyes.

Security Council as a cover for the PA’s defectiveness

Over the past 20 years or so, the Palestinian Authority has failed on various social, political, educational, economic, ethical and security levels, and completely failed to preserve the unity of the Palestinian people. The PA also ruined the social and moral make-up and kept the Palestinians’ livelihood in the hands of the enemies who robbed the Palestinian people of their free will and turned them into tools in the hands of others.

It seems that those leading the PA do not understand how much damage they have done to the body of the Palestinian people and the Palestinian cause. They do not realise that they have to bend the horse’s neck to change its direction to a new vision to address the internal Palestinian downfalls. It is clear that those who call themselves the leaders of this nation do not have the knowledge necessary to understand how much they have setback the people of Palestine, and they cannot handle things despite the fact that they persist and continue to paint a rosy picture of the ugly situation.

Due to the inability of the PA leadership and the PLO to move the Palestinian people forward, the PA resorts to fleeing outside the territories occupied in 1967 to address Palestinian concerns that can only be treated within the Palestinian circles.

The PA is fleeing because it is not interested in, and unable to find, the appropriate solutions for internal concerns. By doing so, it is trying to the tell the people that it is touring the world and going from one airport to the other in search of support and countries able and willing to pressure Israel, hoping that it brings about a solution to the issue. However, the PA comes back time and time again empty-handed and having failed. The PA has distracted the people for over two years by seeking to obtain the status of non-member state and was able to do so, but then failed to translate the decision in the service of the Palestinian people, so they did not feel a difference after the decision.

The international institutions are colonial institutions

The major colonial powers led by the United States, France and Britain are the ones who established the international institutions, including the United Nations, which exists to serve the interests of these countries. Countries such as Russia and China have participated in the formulation of these institutions’ goals and programmes, but they are not very influential in the international arena. In addition to this, when the colonial powers speak in the name of the international community, they are referring to themselves, not including Russia, China and India, which remain outside the framework of the international community they are referring to.

Therefore, the Arabs, especially the Palestinians, must be careful when dealing with such institutions. I am not saying that we must refuse to deal with international institutions, we must remain involved with these institutions in order for them not to become a hotbed for Israel, but we must also not rely too much on them, as they will definitely not liberate Palestine for us.

It is a well-known fact that the United Nations is the cause of the Palestinian disaster because it is merely a tool in the hands of Britain and America, which established Israel and displaced the Palestinian people. In 1948, the United Nations General Assembly voted in favour of the return of Palestinian refugees, but it has done nothing since then to facilitate the return refugees to their homeland. There are many resolutions issued by the United Nations General Assembly in favour of the Palestinians, but nothing has been implemented and no one is pushing for implementation.

Since the international institutions were born from the efforts of colonial powers, which until now have the greatest influence in the arena, they are basically tools for colonisation. If these institutions were to make decisions that are not in favour of these countries, the possibility of implementation is very slim. The colonial powers usually stall, procrastinate and use pressure in order to avoid a resolution being issued that would cause a scandal and embarrassment. This is what America did by pressuring the members of the Security Council in order to avoid using its veto power.

Being active in international institutions is important, but we must not limit ourselves to this. In order for the Arabs to build on such activity, they must work to accumulate and gather their power so that they can have a say in the international arena. The international arena is a playground for the strong – while the weak stand by and watch – if they are even allowed to do so. The problem is that the Arabs are determined to remain weak and are not looking for power as they prefer to remain a quiet lamb in a forest dominated by wolves.

Palestinian strategic errors

The Palestinians went to the United Nations with serious strategic errors which prevented them from getting what they wanted. I would like to refer to the following points:

The PA conceded the right to return despite the fact that it is difficult for any country – including the colonial countries – to dispute this right because they have been involved in a number of international charters and covenants that explicitly provide for the right of refugees to return to their homeland. The refugee issue is the core of the Palestinian cause, not the issue of Palestinian statehood, the establishment of a state is the second step after the right of return and is a part of the right to self-determination, which is recognised by most countries in the world.

The PA’s crime, and the PLO before it, is that they are seeking a Palestinian state without the Palestinian people, and this seeking is useless and will not lead to the resolution of the Palestinian issue. They should first find the Palestinian people who want to establish a state. The Palestinian people are mostly found in Lebanon, Syria and Jordan, but it would be intellectually and politically fruitless to seek a state without its people being present within its borders.

The PA left the core issue, which can be used to activate the international popular bases and went for the idea of a state of colonial origin which was established in order to dissolve the Palestinian cause. The PLO, followed by the PA, sacrificed two Palestinian symbols: the right of return and the refusal to recognise Israel, in exchange for the Palestinians becoming servants of the Israeli security.

The PA addresses the world and the Palestinian people while they are divided within themselves, unable to achieve national unity, and internally full of bickering, grudges and hatred. The state of Palestine’s internal affairs does not give the outside world a good impression and when countries realise this, they are very hesitant in responding to Palestinian demands.

In addition to this, the leaders of the PA and PLO are illegitimate, so the Palestinians have lost the respect of the world. The Palestinian Authority president is illegitimate because he was elected to serve until 2009 but he is still clinging on to his position and imposing his rule on the Palestinian people. As for the PLO leaders, they are illegitimate because all of the organisation’s committees are violating their internal regulations. The loss of the world’s respect does not attract sympathy and solidarity, but instead leads to the mockery of the Palestinian people and its leaders, and does not encourage the countries of the world to support failures.

The PA leadership is tyrannical and oppressive and only involves a few of its posse in decision-making. As for the Palestinian factions and the masses, they are not given the opportunity to participate in this and have to wait for the decisions made by the PA president to strike them like lightning bolts. The decision to head to the UN was made by four individuals out of a population of about 12 million Palestinians. The oppressive leadership is a failure and is unable to mobilise the people so they insist on disregarding them. If the leadership is failing internally then it is certainly failing externally.

The PA went to the UN to spite and challenge the hand that feeds them and provides them with their loaves of bread. For over 20 years, the PA did not arrange the West Bank and Gaza’s economy in a manner that would lead to the liberation of the Palestinian people, albeit partially, from the foodstuff enslavement of Israel and America, and instead preferred to remain dependent on others and beg.

How can the PA succeed in challenging those who provide it with sustenance? It chose not to go through with the economic development process and instead programme the people according to consumer culture. It kept itself within the circle of Western and Israeli nutritional oppression and then fought those who pushed to look for means of self-dependence.

With such strategic errors, how can any negotiator or diplomat succeed? The Palestinian Authority, and the negotiators speaking on its behalf, has collected a number of means to fail and constantly worked to weaken itself compared to Israel and the entire world. Was this a coincidence or ill fate? Certainly not.

The PA’s internal policies were and still are keen on weakening the people, fragmenting the community, affecting the moral system, maintaining a low level of education in schools and universities, and remaining poor and ignorant. As long as the situation remains the same, the Palestinians have double responsibilities; internal liberation from the circle of tyranny, injustice and oppression, and liberation from the Zionist occupation.

The US and Israel want to move against Palestine’s bid to join the ICC

The US is going to put pressure on the ICC not to accept Palestine’s bid to join on the basis that it isn’t a proper state – (no thanks to the US obviously)

http://www.aa.com.tr/en/headline/446714–us-believes-palestinians-ineligible-to-join-icc

But ICC Prosecutor Fatou Bensouda wrote unequivocally in August 2014:

The Palestinian Authority sought to accept the jurisdiction of the ICC in 2009. My office carefully considered all of the legal arguments put forth and concluded in April 2012, after three years of thorough analysis and public consultations, that Palestine’s status at the UN as “observer entity” was crucial – since entry into the Rome statute system is through the UN secretary general, who acts as treaty depositary. Palestine’s status at the UN at that time meant it could not sign up to the Rome statute. The former ICC prosecutor concluded that as Palestine could not join the statute, it could also not lodge an article 12-3 declaration bringing itself under the ambit of the treaty, as it had sought to do.

In November 2012, Palestine’s status was upgraded by the UN general assembly to “non-member observer state” through the adoption of resolution 67/19. My office examined the legal implications of this development and concluded that while this change did not retroactively validate the previously invalid 2009 declaration, Palestine could now join the Rome statute.”

Read Fatou Bensouda August 2014 Op-ed on:

http://www.theguardian.com/commentisfree/2014/aug/29/icc-gaza-hague-court-investigate-war-crimes-palestine

The question now poses itself: is the document that Abbas brandishes here worth the paper it’s printed on? The US can veto UNSC resolutions – can it run roughshod over General Assembly resolutions through sanctions action outside the UN framework?

Abbas at UN

Lara Friedman explains on Lobelog that actually joining the ICC doesn’t break any US laws about Palestine joining UN agencies, because the ICC isn’t actually funded by the UN. The FY15 Consolidated Appropriations bill passed last month by Congress [see Sec. 7041(j), A(i)(II)] sees actions if and only if “… Palestinians initiate an International Criminal Court judicially authorized investigation, or actively support such an investigation, that subjects Israeli nationals to an investigation for alleged crimes against Palestinian”. If the Congressional establishment is screaming and shouting, is because it feels that Abbas so far has “cheated” by obeying the letter but not the spirit of the law. Clearly it wants to see a Abbas capitulation, and may yet pass new laws.

But as things stand, Friedman sees sanctions coming into play problematically when and at such time as the Palestinians actually start actions in the ICC, although US law on this subject still allows Presidential waivers to be granted. The real problem arises, however, for the UN system itself  if Palestine joins any new UN agency, because US law is constructed here in such a way that there is no possible waiver, and that while the Palestinians may become sanctioned, the relevant UN Agencies will also be defunded by the US, as happened in the UNESCO case. This will become an increasingly important aspect of the whole Palestinian problem, to which the future of the UN is now tied (open link: http://www.lobelog.com/explainer-us-law-abbas-post-unsc-moves/).

Who are some of those Egyptian political prisoners dying a slow death from medical neglect?

Here are some names of people held on political grounds in Egypt who are being deliberately neglected by prison medical staff despite having serious medical conditions and whose lives are in imminent danger:

Ibrahim al-Yamani

Wadat kamal

Samia Shanan

Mohamed Sultan

Mahmoud Shabaan

These are but a smattering of names from among the over 41,000 political prisoners being held in Egypt today, whose political/judiciary system is held by US/EU officialdom to be “on the road to democracy”.

The fundamental significance of the Chicago Mercantile Exchange’s 10-K filing with the Security and Exchange Commission

The March 3rd filing with the Securities and Exchange Commission (SEC) last year, which can be seen on

http://investor.cmegroup.com/investor-relations/secfiling.cfm?filingID=1156375-14-12,

shows that the Chicago Mercantile Exchange (CME) has central banks as clients and gives them volume discounts for the trading of futures. A letter addressed to the Commodity Futures Trading Commission (CFTC) is even more explicit about the breathtaking range of futures contracts in which central banks regularly trade in high volume. This can be seen at:

http://www.cftc.gov/stellent/groups/public/@rulesandproducts/documents/ifdocs/rul012914cmecbotnymexandcomex1.pdf

These disclosures clarify that Western Central Banks are leading the investment banking community on Wall St and the City of London to bet against a rise in the prices of gold, oil, base metals, soft commodities, and anything else that might be deemed an indicator of inherent value, in order to deprive the independent observer, in other words the average thinking citizen, of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of fiat currencies across the board. At the same time, this in fact denies this very citizen, now as an investor, the opportunity to hedge against the fragility of the financial system by resorting to such freely traded markets as there are for non-financial assets.

These two aspects of post-1980 Western Central Bank policy, the withdrawal of a “stable numeraire” and of a proper market in real assets, were described by economist Peter Warburton in his book “Debt and Delusion: central Bank Follies that Threaten Economic Disaster” (published by Penguin UK in March 1999). Open link: http://www.amazon.com/exec/obidos/tg/detail/-/0713992727.

The question that all this raises is: why intervene in real markets in this strange way?

The new post-Volker institutional environment

Warburton’s book describes all this as part of Western governments scurrying to cover their tracks in their continued addiction to profligacy.

The book begins in the aftermath of Paul Volker’s triumph over the 1970s stagflation malaise. The conundrum facing governments at the time was: how to enable governments to continue to live beyond their means, without suffering inflationary consequences?” The old mechanism of “printing money” for commercial banks to buy government debt had failed. The new trick would involve issuing deficit finance bonds to be sold to private investors through bond markets, such that they would end up on the books of investment funds, rather than commercial banks, 

As public bond issues grew exponentially: $1 trillion in 1970; $23 trillion by 1997 and nearly $43 trillion by 2002, Western savings rates were on the decline.  As government debt has grown, there has been no corresponding domestic savings expansion. Nevertheless inflation has stayed low, if one takes financial assets out of the equation. Nobody cared until recently to ask how this trickery was possible. What was happening?

The institutional character of the markets was changing, and clearly Thatcher’s “Big Bang” (1986) and Clinton’s repeal of Glass-Steagall (1999) was the legislative context within which this plan was unfolding. We see clearly that 80s, 90s, and 00s inflation differed in the nature from that of the 70s, such that price changes following money quantity changes were expressed in the rise of stocks and bond prices, rather than in rises wages and the prices of consumption goods.

Under this new system, newly created money was injected into capital markets, to be immediately spent on the purchase of bonds.  Low yields in government bonds meant that even high quality corporate bonds and low dividend-yielding equities were attractive in competition with bonds.  So there was a knock-on effect as  inflationary price adjustments leaked out of government bonds into other financial assets. However, the question was: how come a multiplier didn’t progress through secondary and tertiary recipients of money to be spend on consumption goods, leading to an inflationary leak out of the financial markets?  The answer was that, in recent years, while vast sums of money have been injected into financial markets. nevertheless the resulting price effects were contained within it, through the use of 4 mechanisms:

(1) Interest Rate “Arbitrage”

In the new institutional framework, interest rates do not rise with increased loan demand to reflect actual scarcity, since the Fed creates whatever amount of money borrowers wish to borrow, to hold interest rates below market-clearing levels. Then, as long as a rate differential between short term and long term bonds remains, an essentially risk-free profit opportunity (known as the “carry trade”) will persist no matter how much “arbitrage” occurs between short and long dated stock. As banks and their clients borrow from the Fed at short-term rates to purchase bonds of longer maturity, profit is assured.

Warburton, in his book, locates the source of financial inflation in the ability of large bond buyers thus to borrow vast quantities of newly created money from the Fed at a fixed price.  Because the interest rate does not rise to meet increasing quantities of lending, this arrangement generates volumes of “synthetic demand” for the government bond markets at longer maturities.  Enough bonds are purchased to maintain their prices above, and their yields below true, market-clearing levels.  Warburton calls this “the illusion of an unlimited savings pool” and notes that this illusion “has grown more and more powerful and is matched by a new confidence among prospective bond issuers.” (Debt and Delusion : 136)

In such an environment, the term “arbitrage” clearly becomes a misnomer as borrowing and lending no longer represent a market-driven price adjustment process, and trading mainly recycles debt from the central bank to government borrowing.

(2) Gearing through derivatives

A second mechanism of financial asset inflation is the use of derivatives to create additional purchasing power.  Derivatives are financial contracts between two parties, where the value of a derivative contract is determined by some mathematical relation to the price of an underlying asset or commodity.  Derivatives on government bond interest rates are a large component of the total market volume of these instruments. For little money, assets can be controlled using this means.

Warburton writes: “Derivatives are used to secure the control of a more expensive asset from a much smaller commitment of capital.  The use of derivatives by hedge funds and the proprietary trading desks of large banks in relation to government bond markets represents itself as a grossly inflated demand for the underlying bonds.  This acts as an artificial support mechanism for both bond and equity markets, keeping yields lower and asset values higher than would otherwise be the case.  This synthetic source of demand is critically dependent on the downward progression of bond yields and on the slope of the yield curve.  While there is a sense in which all demand for financial assets are contingent on their expected performance, this is especially true of geared and unhedged derivatives positions.” (Debt and Delusion : 191)

These leveraged contracts are used to generate an additional “synthetic” source of demand for financial securities. (Debt and Delusion : 121)

So it becomes “…  possible to use unrealized gains in financial assets (including derivative contracts) as collateral for further purchases.  The persistent upward trend in underlying asset prices has amplified these unrealized gains and has enabled and encouraged the progressive doubling-up of ‘long’ positions, particularly in government bond futures.  It is easy to envisage how the cumulative actions of a small minority of market participants over a number of years can mature into a significant underlying demand for bonds.  While financial commentators are apt to attribute a falling US Treasury bond yield to a lowering of inflation expectations or a new credibility that the federal budget will be balanced, the true explanation may lie in progressive gearing. (Debt and Delusion : 120)

The initial injection of new money into the bond market explains why the effects of inflation would show up there first. The continued containment of inflation within the financial sector as money is spent, and then re-spent on financial securities, is created by the leveraging available through derivatives.  The funding of these derivatives is complex, but again it ultimately relies on borrowing at fixed low yields from the central bank.  The process circulates the newly created purchasing power over and over through the financial sector, rather than allowing it to leak out into wages or consumption goods.

(3) The Management of Expectations

Inflationary expectations are self-feeding. Recent history suggests that people attribute more importance to recent price changes in consumption goods, when they form expectations about the future trends in those prices. Similarly, consumers attribute look at price trends in financial assets to form opinions about the future price trends in financial assets.

To the extent that any price increases at all leak out of financial assets into consumption goods, the deliberate distortions in the measurement of the Consumer Price Index (CPI) have been introduced in order to create a false consensus that “there is no inflation.”  A variety of questionable price adjustment stratagems have been instituted in the CPI computation: the exclusion of food and energy, the use of lower “quality-adjusted” prices, seasonal adjustments, and the replacement of home prices with rental rates.  The index incorporates only consumption goods, when most of the price increases occur in financial assets.

It is in this context that we need to understand central bank intervention in the commodity futures markets, both on the level of preventing financial outflows from the government bond sector to other sectors, and on the level of seeking to preempt rises in commodity prices that will feed through to consumer goods and inflationary expectations.

So successful has been the management of expectations that inflation has disappeared from public discussion. But Warburton writes: “The impressive reduction of inflation is a dangerous illusion; it has been obtained largely by substituting one set of serious problems for another.” (Debt and Delusion : 25). The fact is that we live in a highly inflationary environment, which however is one where inflation as a statistic has been “managed” away. This is delusional.

(4) The Corruption of Savings

A peculiar feature of the social psychology of financial asset prices is their self-reinforcing character.   The upward trend in stock and bond prices has served to enhance the respectability of capital markets and their perceived safety as repositories of capital, which in turn has aided their cause of attracting even more of the increasingly meager savings in the private sector. Warburton documents a long-term trend of investment funds essentially chasing price inflation: shifting their cash out of low-yielding bank accounts, CDs, and money funds into bonds of longer maturities, and eventually, equities. (Debt and Delusion : 135)

Some commentators reason that inflation must now be quite low because the credit markets are patrolled by astute traders ever alert to punish central banks for their inflationary indiscretions, ready to dispense rough justice in the form of higher interest rates.  This analysis assumes that inflation is reflected primarily in consumption goods, and that bond yields are free to move on their own to convey meaningful information about changes in the value of the monetary unit. These assumptions are more or less the reverse of reality: the funneling of inflation into bonds as described above provides a floor under bond prices and hence a ceiling on bond yields, and there is no call for astute investing.

Another popular argument is a stock market that is expensive measured by P/E ratios is cheap or at least fairly valued because the low interest rate environment that we enjoy, justify higher multiples.  Stocks appear to be cheap in a dividend discount model that uses the current bond yields to discount future earnings.  However, this view fails to take into account of the overall argument here, namely that the bond bull market is really a symptom of high inflation, not of low inflation.  Inflated prices for bonds might make stocks look relatively cheap in comparison to bonds, but in the absolute sense both are inflated.

Conclusion: poor investment and the advancing destruction of the real economy

Many people think that none of this matters, but when one reflects on the inescapable fact that the economic purpose of capital markets is to provide a nexus between savers and borrowers for the financing of productive investment, and that venture capitalists, traders, and speculators, are essential in forecasting the best uses of available savings and bearing the risk in an uncertain world, we have to admit that such purpose is now entirely disrupted.

A typical example of the new type of dislocation in the real economy is the massive investment in essentially unprofitable shale oil and shale gas exploration and production, with the creation of an energy sector which is deficit-ridden from the start, with never any reasonable hope of getting its head above water. This has had remarkable and dangerous economic and political ramifications as it led to the recent collapse in oil prices. On the economic front, Saudi Arabia’s natural desire to keep its market share in the global oil market and drive all these unnecessary marginal producers to the wall, has led it to reinforce these trends. On the political side Saudi Arabia perceives that the US non-Congressional establishment is gradually turning towards an accommodation with Iran as its principal ally in the Gulf region. As result, the new US self-sufficiency in oil, resulting from new shale production, has to be put in question with the aggressive oil price policy they have decided to pursue.

This is but one example of current economic dislocation. More generally, what more disastrous dislocation can there be than the continuous channelling of resources into the Ponzi vortex of government debt and away from the real economy, where savers are being crushed by the financial repression, and where consumption is being subsidised? Is it surprising that the West is in decline? Is it surprising that China is on the rise if its raw material imports are being subsidised by this Western central banking scheme? We have to remember that the initial leg of China’s drive in the 80s and 90s had also been driven by Western governments through their manufacturing outsourcing strategy, which had been developed in order to keep inflation down. So it isn’t really hard to see why the global trends are the way they are.

So then, is a collapse due? There will definitely be new crashes. But as we saw in the 2008 sub-prime meltdown, and in a number of crashes before in 1987, 1992, 1995, 1998, 2000 etc… all that ever transpires is that Western governments double down on any crisis and simply monetise their way out. We see with the greater role of FACTA and the sanctions bureaucracy, that there is definitely a desperate need on the part of Western Central Banks, headed by the US Fed, to try to control the international financial system completely, in order for this one-way Ponzi scheme to continue to succeed.

The problem lies now in how long the majority of world trade can continue to be denominated in US dollars, under the control of US Federal Reserve, the US Treasury and the Justice Dept. At such time as a significant breach is made that takes world trade values effected in US Dollars to beneath 50% of global trade, cumulative capital flows will get under way which will undermine the whole house of cards. While all this may take some time, the more time it takes the taller the house of cards will be, by the very nature of Ponzi schemes.

By the time the tipping-point becomes inevitable, we will see US foreign policy change dramatically. The US will be forced to approach China, Russia and India to try to bury Bretton Woods, and attempt to rejig the international financial system. Meanwhile, if the US knows this, it is still trying to make as many gains on the ground in its favour as possible, ahead of the inevitable event.

 

US State department criticizes Israel for freezing Palestinian tax revenue

Netanhayu is withholding $125m from the PA as punishment for Abbas signing the Rome Treaty and is criticised by one of the mouthpieces of the non-Congressional establishment for doing so.

This withholding, similarly to illegal settlement expansion is simply a another war crime (in the context of continued Israeli military occupation of the West Bank).

Open link: http://www.aa.com.tr/en/headline/445569–us-criticizes-israel-for-freezing-palestinian-tax-revenue