Thursday, June 30, 2016

Trump Makes Protectionism Great Again

By Rich Lowry
Politico Magazine
June 30, 2016

Donald Trump is an optimist. He believes there is nothing wrong with America that autarky can’t fix.

Trump’s economic speech this week was a high-octane assault on the American free-trade regime that has been a matter of a bipartisan consensus for decades and a bulwark of the post-World War II international order — not to mention an article of GOP economic orthodoxy.

It’s not necessarily a problem that the Republican presidential nominee is crosswise with the U.S. Chamber of Commerce, or is speaking in a more populist voice, or is mindful of the human costs that are often neglected in the elite consensus in favor of open trade.

One can imagine a Republican candidate doing all those things without lurching into cut-rate AFL-CIO economics. Trump thinks he can appeal to Bernie Sanders voters. He’d be right if all the Sanders cadres cared about was the simplistic, conspiracy-tinged belief that the American economy is “rigged” and can be righted only by government intervention — a view shared by their socialist champion and the Republican business mogul.

If policy on this issue is all that mattered, the protectionist Ohio Democrat Sherrod Brown should be on Trump’s VP short list as well as Hillary’s.

Of course, Trump is more robustly nationalistic than his left-wing counterparts. In his speech, he wrapped his case in the great nationalist cause of the hour, Brexit. But now that it has won the referendum to exit the European Union, the Brexit leadership is seeking exactly what Trump inveighs against — free and open trade wherever it can be had.

Trump never says he opposes free trade as such. Few protectionists will ever avow, “Yes, dammit, I’m a protectionist — come and get me, copper.” They couch their protectionism in opposition to existing free-trade agreements and in the promise of somehow reaching wondrously different and better agreements — once all the existing ones are ripped up.

This is the Trump tack. He argues that every trade deal is deeply flawed, but not because there’s an inherent problem with free trade, nor because any negotiation always involves trade-offs, but because in roughly 70 years we have never once produced a competent negotiating team. What are the odds?

The Trump/Sanders story is that the middle class has been devastated by these trade deals, especially in the manufacturing sector. To make this case requires ignoring much of the evidence, in favor of a stilted morality tale.

The truth is, if the metric is employment, U.S. manufacturing was sliding before anyone thought of the North American Free Trade Agreement or the WTO. As the indispensable Scott Lincicome of the Cato Institute points out, manufacturing began to decline as a share of the U.S. workforce in the 1940s, and the absolute number of manufacturing workers has been dropping since 1979.

The main cause is technology-driven productivity gains that make it possible to do more with fewer workers. The American manufacturing sector is more productive than ever. If Trump really wants to relieve the glory days of the old American factory, he’ll have to make America less technologically proficient again.

There is no doubt that trade has downsides, and harms specific sectors and geographic areas. But Trump won’t acknowledge the significant benefits; he seems to regard imports as about as welcome as the Spanish flu. Cheap goods are a boon to consumers. Domestic manufacturers use imports as inputs in their own products. And, as the U.S. loses less sophisticated operations, it focuses on higher-skilled, more productive manufacturing.

This is the future of a first-world economy where the tide of innovation won’t be stopped. Protectionists love to invoke Harley-Davidson in the 1980s as a example of tariffs saving a storied American brand. The motorcycle company did get a temporary respite from competition, but it was fundamentally saved by a retooling of its business.

We hear less often of all those troubled companies that have successfully lobbied for trade protection over the years, only to go out of business anyway. Trump’s punitive tariffs would be a festival of special-interest lobbying, with businesses clamoring for government protection at the expense of everyone else. Whatever jobs were saved by Obama’s tariffs on Chinese tires in 2009 came at an inordinate cost to the rest of the economy.

At the end of the day, protectionism is like gun control. Even if you accept its premises, facts on the ground make it impossible to implement realistically. In the case of gun control, it’s the tens of millions of guns already in circulation that are the obstacle; in the case of trade, it’s a highly integrated global supply chain.

“U.S. manufacturers,” Lincicome writes, “have evolved over decades to become integral links in a breathtakingly complex global value chain — whereby producers across continents cooperate to produce a single product based on their respective comparative advantages.” It is often hard to disentangle what is American and what is foreign in such recognizably “all-American” products as cars manufactured by the Big Three.

Even researchers who have found a negative impact on U.S. wages and jobs from the initial “shock” after China entered the global economy don’t believe the problem was free trade per se. Rather, it was the slow adjustment of the U.S. labor market to new conditions. There are ways to try to address this, but none of them make for compelling demagoguery.

The Trump/Sanders story is too gratifyingly emotive to let facts or logic intrude.

Article Link to Politico Magazine:

Trump Makes Protectionism Great Again

'Never Trump' Plots Its Last Stand

By Jonathan Easley
The Hill
June 30, 2016

Republicans opposed to Donald Trump are plotting a last-ditch effort to deny him their party’s nomination at the convention in Cleveland.

A coalition of delegates, lawyers, rules experts and PACs has formed in what participants say is the most coordinated effort to date to dump Trump from the Republican ticket.

The organizers are confident of success and say they’re being underestimated.

“This is a laser-guided bomb aimed right at the foundation of the Trump campaign,” said Beau Correll, a Virginia delegate and central figure in the opposition movement.

But despite the gains the groups say they’ve made in fundraising, staffing, coordination and media attention, few are taking their efforts seriously.

Trump’s campaign, led by battle-tested convention manager Paul Manafort, has been working closely with the Republican National Committee (RNC).

It will be Trump’s convention, and his loyalists will have control of the agenda, the microphones, and access to an army of supporters ready to surround and shout down insurgents looking to cause a scene inside the Quicken Loans Arena.

No one at the RNC or within the Trump campaign is expressing any degree of panic over the uprising. RNC strategist Sean Spicer told The Hill the effort is nothing more than “tweets and media fascination.”

Skeptics say the insurgents don’t have the votes they need on the Rules Committee — a bastion of party traditionalists — to “unbind” delegates from Trump. And while an emergency legal challenge to unbind delegates in Virginia has a chance, legal experts say, it’s not a great one.

Even if the rebels are able to convince hundreds of delegates to ignore the results of the months-long primary contest — won handily by Trump — there are processes in place that could ensure the New York mogul becomes the nominee.

“They’ve laid down the dried leaves to start the fire but they need lightning to strike,” said one prominent conservative lawyer who requested anonymity. “It is really tough to organize the kind of whip operation you need at something as sprawling as Republican National Convention. Really, really tough.”

Still, the effort appears more organized than any of the failed “Never Trump” movements that came before it.

Conservative media figures Erick Erickson, Steve Deace, and Bill Kristol have begun joining the conference calls for the coalition and are fanning the flames in editorials and on the airwaves.

Republicans are closely watching the lawsuit Correll filed in federal court on Friday that challenges a state law that binds delegates to the primary winner. A ruling is expected before the convention, and could come as early as this week.

Legal experts interviewed by The Hill say the lawsuit has a better chance than similar efforts that have failed in the past, but still described it as a “long-shot.”

“Never Trump” Republicans believe a decision in their favor could ignite a stampede away from presumptive nominee by validating their argument that all of the delegates to the convention are unbound.

“It would be like a shot of Red Bull straight to the vein,” said Kendal Unruh, a Colorado delegate and one of the main organizers of the planned convention revolt.

Unruh’s efforts have so far earned the lion’s share of media attention.

She sits on the Rules Committee and is waging a campaign to achieve 57 votes from the 112-member panel in favor of a “Conscience Clause” that would unbind delegates to support whomever they choose.

Unruh says she has 17 firm commitments and eight soft pledges so far. That’s short of the 28 signatures she needs for the rule to even be considered for adoption. Party insiders interviewed by The Hill don’t see her reaching that threshold.

Several other groups are ready with back-up plans in case she falls short.

Colorado conservative activist Regina Thomson, who runs a PAC called Free the Delegates, is organizing a floor fight irrespective of the Rules Committee’s decision.

Thomson is overseeing an effort to convince delegates that they’re already unbound. She is talking to delegates about parliamentary rules and how to protest on the convention floor if their representative doesn’t cast a vote in accordance with their wishes.

Another group called Delegates Unbound, led by GOP strategist Dane Waters, is overseeing a national lobbying campaign focused on contacting delegates before they arrive in Cleveland to urge them to vote their conscience.

His group has raised $2.5 million and has already run a $150,000 spot on Fox News Channel. Waters said he will have a staff of 15 regional and state directors manning his national whip operation.

Those three groups are now strategizing together and sharing data.

They claim to have secured enough money to launch a legal defense fund and invest in communications technologies that will keep them in contact with one another on the convention floor.

They say they started bringing volunteers on as full-time employees this week and that they will have lawyers and convention experts on the ground in Cleveland.

Thomson says 350 to 400 delegates and alternates have already inquired about how they can help. An organizing conference call on Sunday night hit maximum capacity of 2,000 participants, Thomson said.

Still, the deck is stacked mightily against the rebellion.

Many Republicans interviewed by The Hill privately grumbled about the effort, describing it as a tiny band of disgruntled delegates engaged in a vanity project that would destroy the party if it were successful.

They believe the likeliest end game is that a few skirmishes break out on the convention floor but are quickly extinguished.

The organizers say they’re already under intense pressure at the state level to back away from the effort. Delegates considering joining the rebellion will face the same pressure.

And a host of parliamentary rules designed to make the convention a coronation rather than an election are available to Trump and the RNC to beat back any inroads the insurgents might make.

“I don’t see anything here that would spark a stampede away from Trump,” said the conservative lawyer.

“What sets off the stampede is Trump doing badly in the polls and Senate candidates falling behind because of it. They need someone, somewhere, like Reince Priebus or Paul Ryan or Mitch McConnell to show an ounce of leadership if they’re to be successful. That’s been nonexistent so far.”

Article Link to The Hill:

Fear Of The Boring Election

June 30, 2016

Real Clear Politics analyst David Byler published a timely essay on Wednesday on the growing discrepancy between national polls of a Trump versus Clinton race, which continue to suggest a forthcoming Clinton blowout, and state-level polls that don’t. Byler offered some compelling reasons for why this might be the case but concluded that he didn’t know the answer and neither did anyone else. Uncertainty reigns. But is that uncertainty warranted or is it a merely the aftershock from a primary race that unfolded in a way few political observers expected? The latter, more likely. The polls, which have been relatively accurate in 2016, indicate the race between Donald Trump and Hillary Clinton will not be a squeaker.

There is one consistent story being told in both national and state-level polling. It is that Donald Trump has won the support of approximately 40 percent of the voting public, and he is having tremendous difficulty winning over a greater share of the electorate. If the election were held today, that would result in a disaster for both Trump and the party he leads. Though Trump is today in a bit of a trough—one which might be fueled by some artless comments on his part and, thus, may not be long-lived—Trump has never crested 45 percent in the Real Clear Politics polling average. The high water mark for Trump—44.3 percent—was reached in December of last year.

When plotted out in a line graph, the pattern looks familiar. It looks very much like the polls in 2012, in which Mitt Romney consistently trailed Barack Obama and only closed the gap in the final month before the general election to create the illusion of a competitive race. In the end, Barack Obama out-performed his final RCP average by 3.2 points. The polls of 2016 also look remarkably like the polls of the race for the White House in 2008. The race to replace George W. Bush was never an especially competitive contest, save for the earliest part of the year when Hillary Clinton was still assumed to be the likely Democratic nominee. Like Romney, John McCain enjoyed a short-lived bounce out of the convention, but his brief and tenuous lead was not to last. The summer of 2004 gave John Kerry a prolonged bounce in the polls that had previously shown the race narrowly favoring President Bush’s reelection. That bounce disappeared after the GOP nominating convention and Bush then enjoyed a resurgence that never dissipated.

No one wants to whistle past any graveyards here, so it must be noted—as some have—that one reason Trump’s state and national-level polls differ so appreciably is that he may be well and truly remaking the map. Trump’s weakness among Hispanic voters has rendered his support soft in the Southwest, for example, while he is likely to perform better than the average Republican in the Rust Belt and New England, due to his support among white voters. Is that enough to pull off an upset? Not at the moment.

Those who want to argue that the polls are simply off or under-sampling the voters that will carry Trump to an unexpected victory must explain then why the polls of the primary race were not wrong. Political analysts who have been performing mea culpas for betting against Donald Trump in the primaries specifically ignored the data in favor of amorphous institutional and structural factors that never materialized.

Barring a paradigm-shifting event, the race for the White House in 2016 between Hillary Clinton and Donald Trump is shaping up to be a predictable one. For political observers, that might be the most terrifying revelation of the all. The 2016 race that began as such a thrill may end as a crushing bore.

Article Link to Commentary:

In Bed With A Terrorist State

By Jonathan S. Tobin
The National Interest
June 30, 2016

Several months into the implementation of the Iran nuclear deal, the arrangement seems to be working perfectly—for both Iran and the Western companies that joined the Tehran gold rush, that is. Iranian oil is being shipped again to European ports while Western firms are going all out to meet the needs of the Islamist regime and hoping to make a mint from the transactions. Though American laws (which President Obama doesn’t have the power to annul) still prevent U.S. companies from taking part in this bonanza, the exceptions granted to the Boeing Company in the pact have resulted in a contract to supply Iran with commercial airliners and other goods and services. But if you are judging the nuclear pact by whether it appears to be moderating the Iranian government, the deal must already be judged a failure.

Today, the New York Times reports, current Supreme Leader Grand Ayatollah Ali Khamenei has purged the head of the Iranian military. Firaz Shirouzabadi had been chief of staff of the Iranian army since 1989. But he has now been replaced by one of his deputies, Mohammad Bagheri. The new guy is the former deputy intelligence and operations director of the Iranian Revolutionary Guard Corps. The IRGC is the power behind the throne in Tehran. More than that, the shadowy group is the security/military group that operates Iran’s terrorist network abroad.

Putting a former IRGC operative in control of the army can’t be treated as a mere detail, though ih it can be argued that the separate approaches of the Iranian military and the IRGC are often best defined as distinctions without a difference. Bagheri’s elevation is one more signal that Iran remains every bit the terrorist state that it has been since the Islamic Revolution of 1979. It is an indication that Iran remains committed to its quest for regional hegemony and war on Israel and moderate Arab states, as well as the effort to keep Bashar Assad in power in Syria.

Placing the IRGC in that strong position also has implications for the ongoing efforts by the administration to further economic ties with the regime. The problem with the Boeing Iran deal is that the terror group controls some of the companies Boeing will be doing business with. But with the military also connected in this fashion to international terrorists, President Obama’s belief that Iran’s goal is to “get right with the world” is farcical.

The reality of post-nuclear deal Iran is a regime that is more radical than ever staffed by leading players that are determined to prevent any true rapprochement with the West. While Tehran is glad to do business with Western firms that can help it, it is the same country that remains the world’s leading state sponsor of terrorism. Not only has Boeing gotten into bed with terrorists, the same can be said of those who are counting on all the new business ties changing the nature of a terrorist regime.

Article Link to Commentary:

Is Clinton’s Cough The New Benghazi?

Right-wing media, led by Donald Trump, are obsessed with questioning Hillary Clinton’s physical fitness to govern—beginning with her dry cough.

By Lloyd Grove
The Daily Beast
June 30, 2016

If all else fails, the people dreading a Hillary Clinton presidency can comfort themselves with her coughing fits.

The presumptive Democratic nominee’s occasional coughing on the stump—a staple of this year’s campaign reports in various right-leaning media outlets—has been a conservative meme for nearly a decade.

There’s even an anti-Clinton Twitter feed, @hillarycoughing, that has been active since February chronicling the frontrunner’s supposed respiratory tic.

Her 70-year-old Republican rival, Donald Trump, trailing consistently in the latest polls, sometimes refers to the 68-year-old Clinton’s alleged lack of “strength and stamina”—apparently, the cough is evidence of same—and fired Trump campaign manager-turned-CNN political analyst Corey Lewandowski has used Clinton’s coughing bouts to question her health.

“My own feeling is you have a 68-year-old woman running for president who has intense coughing fits in public, and I think the question is, ‘What’s that about?’” said Tucker Carlson, editor of the conservative Daily Caller, which has highlighted the former secretary of state’s cough. “I’m not a physician. I couldn’t hazard a guess. But as of this morning, she’s likely to win. So I’d love to know. It’s a legitimate question.”

Carlson, a cohost of Fox News’s weekend Fox & Friends, told The Daily Beast: “Having covered presidential campaigns for 25 years, I’ve never seen anybody cough that much. It doesn’t mean it’s a problem, but it raises obvious questions for a person who is likely to be the next president of the United States…In the 19th century, it was a sign of consumption…She coughs like a romantic poet.”

The fanatical coughing coverage began as early as May 20, 2007, when the Drudge Report posted the headline, “HILLARY COUGHING, WHEEZING AT COMMENCEMENT,” about her speech to graduates of New Orleans’ historically black Dillard University when the former first lady was a New York senator launching her first presidential campaign. It has continued through this past Monday, when Drudge posted the headline “HILLARY COUGHING FIT RETURNS!” to characterize a video clip featuring the candidate emitting four dry little coughs during the raucous Cincinnati rally at which she appeared with Sen. Elizabeth Warren.

In a story about the conservatives’ coughing fixation this past April, The Washington Post noted that Matt Drudge, the agenda-setting web site’s namesake, was happy to minimize Clinton’s commencement cough nine years ago, reasoning that “the campaign trail is long and tough.” He exhorted the candidate on his radio show: “Hillary, dear, take care of yourself. We need you…Take a few days off, what’s this frenetic pace?” He added: “She was professional. She kept going. She finished the speech.” (Drudge didn’t respond to an email seeking comment.)

However, from 2007 till now, and especially this year, the Drudge Report has posted 20-odd cough links to various news and opinion outlets, treating the cough as a serious problem—many on the right side of the ideological divide such as The Weekly Standard,Breitbart News, The Washington Free Beacon and Heat Street, among others, although the nominally liberally Salon has also trafficked in coughing coverage.

“There’s just this leftover sense that Hillary is old and frail and can be mocked for that, and it’s accentuated because they [the conservative media] know that this pisses off liberals,” said The Washington Post’s David Weigel, who has made a point of monitoring the coughing coverage phenomenon. “It’s a desire to portray her as lame and feeble…Some of this is like an appendix, a vestigial thing going back to when the Republicans were supposed to have a great young bench and smart Republicans were assuming that Marco Rubio would win.”

Indeed, the ageist derision might have made more sense during the early months of last year, when the then-44-year-old Florida senator, instead of a septuagenarian reality show billionaire, was a promising presidential prospect, and Senate Majority Leader Mitch McConnell, himself no spring chicken, quipped to a conclave of conservatives: “Don’t tell me that Democrats are the party of the future when their presidential ticket for 2016 is shaping up to look like a rerun of the ‘Golden Girls.’ ”

Matthew Continetti, editor of The Washington Free Beacon, said his own outlet’s coverage of the coughing Clinton “is just a recurring joke. We’ve made light of Hillary’s age for years.”

For instance, two years ago, when People magazine published a cropped cover photo of Clinton leaning on a patio chair in her Chappaqua, N.Y., backyard, and the Drudge Report asked, “IS CLINTON HOLDING A WALKER?”, the Free Beacon turned the supposed mystery into a running gag.

“We did items about how Hillary’s always having to steady herself with the chair, and asking if she could walk under her own power,” Continetti said. “It was just a joke, and it annoyed her people, or at least it annoyed people we enjoy annoying.”

But Weigel, who said he admires much of the Free Beacon’s writing and noted that the outlet is hardly in Trump’s pocket, argued: “This is exactly the sort of personality trolling that Trump does all the time and which does quite well for him…They [the Free Beacon] don’t seem to be aware of giving into the abyss with this stuff. And the abyss is staring back at them.”

Article Link to The Daily Beast:

Why China Is Ready For Rodrigo Duterte

The Philippines’ new president may grasp China's vision of the South China Sea better than most American strategists.

The National Interest
June 29, 2016

A paradoxical mixture of glee and foreboding has taken hold among Western strategists as the world awaits the judgment of the Hague tribunal ruling on the South China Sea case brought by Manila against Beijing. Into this witch’s brew of obvious conflict precursors, including but not limited to escalating great-power rivalry, nationalism and resource competition, one must now factor in the Donald Trump of Asia-Pacific politics, Philippine president-elect Rodrigo Duterte, inaugurated at the end of June.

He has already turned more than a few heads in Washington, not only with his extreme statements about law and order and with his misgivings about alleged U.S. intelligence activities in the Philippines, but more particularly with respect to his suggestion that he would negotiate directly with Beijing on the difficult question of conflicting claims in the South China Sea. That would constitute a nearly 180-degree course correction from his predecessor’s confrontational approach toward China. Indeed, on May 16, Duterte held a friendly consultation in Davao with China’s ambassador to the Philippines, Zhao Jianhua.

Needless to say, Beijing is studying the evolution of the political climate in Washington and also Manila with some degree of optimism. In fact, Chinese scholarship has been working meticulously and with the utmost seriousness to fully divine the nature of the long love-hate relationship that constitutes U.S.-Philippine relations. For example, as I discuss in my 2015 book, myriad studies have been published in the last decade in the Chinese language that examine the details of America’s colonial administration of the Philippines. Not surprisingly, the Chinese military has also taken more than a passing interest in this relationship and this edition of Dragon Eye will summarize the findings of two Chinese military scholars from the Marine Academy (海军陆战学院) in Guangzhou.

Their “Analysis of the Appropriate Scope of the ‘U.S.-Philippines Mutual Defense Treaty’” was published in a PLA journal in December 2015 and funded as a “National Social Science Fund Project” (国家社科基金项目). True, the journal where it was published is not the PLA’s most prestigious journal, but on the other hand, Guangzhou (headquarters of the southern theater command) is likely where China’s South China Sea contingency plans are developed, so the piece might be worth a look at after all.

Of course, the analysis begins with the obligatory statement that the Spratlys and nearby sea areas fall under the “incontestable sovereignty of China.” The point is made predictably that Manila is seeking “solid backing” (坚实后盾) for its maritime claims, but that Washington’s so-called “vague policy” (模糊政策) has created a predicament in which the U.S.-Philippines Mutual Defense Treaty itself has become an “important bargaining chip” in the evolving South China Sea situation. There is no great surprise to learn that the authors’ main thesis is to argue that the scope of the “treaty does not necessarily cover the Spratly Islands” (并不明确表明条约是否适用于南沙群岛).

This effort will not attempt to parse all the twists in the Chinese legal argument here—and there are several—except to say that the line of reasoning seems to rest on the assertion that the Philippines’ borders were generally set by the 1898 treaty between the United States and Spain. The PLA authors assert, moreover, that Philippine claims were only truly asserted over the course of the 1970s. Since the U.S.-Philippines Defense Treaty of 1951 predates those claims, say the authors, “. . . there is no way [the treaty] can cover the Spratly Islands.”

The discussion takes an interesting twist when these Chinese military analysts delve into 1970s-era declassified U.S. archival documents published in the Foreign Relations of the United States collection, which is cited numerous times in this article. For example, they quote at length a memo dating from 1976 from then national security advisor Brent Scowcroft, stating that the United States must preserve “flexibility” with regard to the Mutual Defense Treaty, and stating that the U.S. commitment should “neither be expanded, nor truncated” so that “we can . . . avoid major risks” (不会曾加也不会缩小… 我们避免…带来的重大风险). According to this Chinese analysis, Secretary of State Henry Kissinger said about the same time, in response to pleas from Manila, that the mutual defense pact would cover Philippine sovereign territory without any problem, but that “we are worried about getting dragged into a military conflict because of Philippine actions at Reed Bank and in the Spratly Islands” (我们担忧会因菲律宾在礼乐滩和南沙群岛的行动而被拖入军事冲突). Significantly, a scholar from the Philippines who writes frequently on this site does not appear to dispute these historical interpretations regarding the significance of the Mutual Defense Treaty.

Ultimately, these PLA authors conclude that Washington is unlikely to “clearly express that the ‘Philippines-U.S. Mutual Defense Treaty’ applies to the Spratly Islands . . . assuming unnecessary risk.” As evidence for the expected cautious U.S. approach, they cite both the April 2012 Scarborough Shoal incident, as well as President Obama’s April 2014 “refusal to clearly answer” (拒绝明确回答) questions regarding a hypothetical armed clash between China and the Philippines in the South China Sea while on a visit to the Philippines. They suggest that if the United States did actually take such a step to clarify its stance on the Spratlys, this could lead “directly” to armed conflict in the South China Sea.

To be sure, it is sobering to consider that these Chinese military planners may fundamentally misread the mood in Washington, where it seems many strategists are eager to paint red lines over the next reef. “No more Scarboroughs,” goes the common refrain. Indeed, the many hawks of the Washington “blob” are sure to argue for the supposed “imperative” to clarify Washington’s vague policy with respect to the Philippine mutual-defense pact that apparently dates back to the 1970s.

However, that would be unwise for numerous reasons, including the troubling possibility that good insurance policies can actually encourage arsonists, figuratively speaking. Related to the tricky three-way risk calculus at issue here, there are also the slowly but steadily shifting military balance, irrational yet nevertheless highly potent nationalism in Beijing and, most importantly, the ample scope for compromise in these maritime disputes that remains disappointingly unexplored, especially given China’s solid record of bilateral dispute resolution. Could it be that the “rogue” Duterte understands these issues better than most American strategists? Perhaps he is seeking a “win-win-win,” as an alternative to the “lose-lose-lose” of militarized rivalry that will only benefit military contractors and bellicose nationalists. This is not to even mention the grave, absurd and yet ever more real possibility of actual military conflict between nuclear-armed great powers over rocks.

Article Link to the National Interest:

The Battle That Killed One Million Began A Century Ago

By George F. Will
The New York Post
June 30, 2016

“See that little stream? We could walk to it in two minutes. It took the British a month to walk to it — a whole empire walking very slowly, dying in front and pushing forward behind.”

— F. Scott Fitzgerald, “Tender Is The Night”

The walk began at 7:30 a.m., July 1, 1916, when British infantry advanced toward German trenches. In the first hours, eight British soldiers fell per second. By nightfall 19,240 were dead, another 38,230 were wounded.

World War I, the worst manmade disaster in human experience, was the hinge of modern history. The war was the incubator of Communist Russia, Nazi Germany, World War II and innumerable cultural consequences. The hinge of this war was the battle named for “that little stream,” the river Somme.

The scything fire of machine guns could not be nullified even by falling curtains of metal from creeping artillery barrages that moved in advance of infantry. Geoff Dyer, in “The Missing of the Somme,” notes: “By the time of the great battles of attrition of 1916-17 mass graves were dug in advance of major offenses. Singing columns of soldiers fell grimly silent as they marched by these gaping pits en route to the front-line trenches.”

William Philpott’s judicious assessment in “Three Armies on the Somme: The First Battle of the Twentieth Century” is that the Somme was “the cradle of modern combat,” proving that industrial war could only be won by protracted attrition. And hence by the new science of logistics. The 31 trains a day required to supply the British at the Somme became 70 when the offensive began. The romance of chivalric warfare died at the Somme, which was what the Germans called Materialschlacht, a battle of materials more than men.

Geographic objectives — land seized — mattered less than the slow exhaustion of a nation’s material and human resources, civilians as well as soldiers.

In the next world war, the distinction between the front lines and the home front would be erased. In 1918, Randolph Bourne, witnessing the mass mobilization of society, including its thoughts, distilled into seven words the essence of the 20th century: “War is the health of the state.”

Relations between government, the economy and the individual were forever altered, to the advantage of government.

Military necessity is the most prolific mother of invention, and World War I was, Philpott writes, “a war of invention,” pitting “scientific-industrial complexes” against each other: “Gas, flame-throwers, grenade-launchers, sub-machine guns, trench mortars and cannon, fighter and bomber aircraft, tanks and self-propelled artillery all made their battlefield debuts between 1914 and 1918.”

Attritional war had begun in earnest at Verdun, which occupies in France’s memory a place comparable to that of the Somme in British memory. And the Somme offensive was begun in part to reduce pressure on Verdun and to demonstrate that Britain was bearing its share of the war’s burden.

In December 1915, Winston Churchill, then 41, said, “In this war the tendencies are far more important than the episodes. Without winning any sensational victories we may win this war.”

The war itself may have been begun by a concatenation of blunders, but once begun it was worth winning, and the Somme, this “linear siege” (Philpott), set the tendency for that.

Germany, trying to slow the trans-Atlantic flow of materiel, resorted to unrestricted submarine warfare, which, five months after the Somme ended, brought the United States into the war and, in a sense, into the world.

Thomas Hardy’s description of the 1813 Battle of Leipzig — “a miles-wide pant of pain” — fit the battle of the Somme, where a soldier wrote, “From No Man’s Land . . . comes one great groan.”

The Somme ended on Nov. 18, with men drowning in glutinous lakes of clinging mud sometimes five feet deep. This was the war that British poet Rupert Brooke had welcomed as God’s gift to youth awakened from sleeping, “as swimmers into cleanness leaping.”

By November, a million men on both sides were dead — 72,000 British and Commonwealth bodies were never recovered — or wounded. Twenty-two miles of front had been moved six miles.

But because of this battle, which broke Germany’s brittle confidence, the war’s outcome was discernible. Not so its reverberations, one of which was an Austrian corporal whose Bavarian unit deployed to the Somme on Oct. 2. Adolf Hitler was wounded on his third day in the line.

The battle of the Somme is, in Dyer’s words, “deeply buried in its own aftermath.” As is Europe, still.

Article Link to The New York Post:

Turkey Could Knock Out ISIS, But Will It?

It’s got a huge army on ISIS’s doorstep—and all the motivation in the world to use it. Will Turkey finally go on the offensive this time?

By Roy Gutman and Nancy A. Youssef
The Daily Beast
June 30, 2016

Cleaning crews were still clearing the rubble and broken glass, and barriers proclaiming a “maintenance zone” blocked what had always been the main arrivals area, but just a half day after suicide bombers staged a major terror attack at Istanbul’s main airport, the crowds had returned and most flights were operating.

It wasn’t quite business as usual at Ataturk airport, one of Europe’s busiest, but the recovery seemed remarkable, and there was little sign of enhanced security. Some passengers no doubt stayed home, but there were long lines at airline check-ins, and even longer lines at ticket offices to rebook their flights.

Forty-two people were killed, 12 of them foreigners and the rest Turks, and 239 wounded, according to the Turkish government. Among the wounded were an American and a Canadian, but officials did not give their names. Nor did the government identify the three suicide bombers, who arrived by taxi Tuesday evening toting explosive vests and submachine guns.

One of them blew himself up near the entrance to the arrivals section, and in the confusion, the other two entered the arrivals area, shot people randomly and then blew themselves up.

Reopening the air terminal is one way to respond to the outrage which the Turkish government believes was carried out by Islamic State extremists: resuming the appearance of normalcy, while pursuing all avenues to close down the network that facilitated the attack. (U.S. CIA director John Brennan, using the American government’s preferred acronym for the Islamic State, said the attack in Istanbul “certainly bears the hallmarks of ISIL’s depravity.”)

The other way is to take direct action against the force, which operates out of an effective sanctuary in Syria. Unlike Belgium, whose main airport in Brussels was attacked in March, Turkey is directly next door to ISIS’ so-called Caliphate with its capital in Raqqa, Syria.

Its army of some 400,000, supported by its NATO allies, could deliver a knockout blow against the Caliphate, but there’s no sign that anything of the kind is in the works, or that NATO allies would support it.

As a mid-sized power of some 80 million, Turkey is reluctant to intervene in an Arab state that was part of the Ottoman Empire until World War I. Its own public shows no sign of supporting a unilateral military intervention inside Syria, and there are at least four other big reasons why it’s reluctant to act against the extremists: Iran, Russia, Syria, and Turkey’s own disputed role in the rise of ISIS.

Turkey has been criticized for allowing extremists to move back and forth into Syria until spring of last year, when it ordered its borders closed. It has also been at loggerheads with Washington over the U.S. decision to ally in the battle against the Islamic State with a Kurdish militia in Syria that Turkey considers a part of the banned Kurdistan Workers’ Party or PKK. Officials here say Turkey has killed over 1100 ISIS fighters, and that “we’re at war with these guys.”

U.S. officials aren’t so sure. “Maybe this will get Turkey to see ISIS as a priority over [Syrian President Bashar al-]Assad and the Kurds,” one such U.S. official told The Daily Beast. “They need to better secure that border.”

Obama voiced “heartbreak” over the Istanbul attacks, but introduced no new plans to counterattack. Apparently, he plans to continue the low-profile approach of high altitude bombing in support of local ground forces attacking ISIS fighters.

In a phone call to Turkish President Recip Tayyip Erdogan, Obama expressed “his deep condolences,” the White House said. And he offered support “in the investigation” and as Turkey takes additional steps to strengthen its security.

But those steps will likely be limited. One reason Turkish officials cite for their hesitance to intervene directly in Syria is Russia, which sent warplanes into Syria in late September and has been bombing civilians and moderate Syria rebels backed by the US and Turkey ever since. Ankara had expected the U.S. to step up its supply of arms to the Syrian opposition to blunt the Russian intervention and to protect the civilian population, but it didn’t happen.

Instead of raising the price, Turkish officials saw U.S. policy as one of offering Moscow a permanent grip on the region. “You need to change your attitude toward the Russians,” one senior Turkish official said. But the U.S. did not heed its frontline allies and instead teemed up with Russia to supervise a cease-fire that Russia and its Syrian ally, have continually broken.

Although Russia has withdrawn some of its warplanes, it has continued the bombing, not just of U.S.-backed moderate rebels, but also hospitals, schools and camps for the displaced. And most recently it’s been using cluster bombs and even phosphorus bombs against civilians, independent humanitarian aid groups say.

But the Obama administration says little about the bombing campaign and even classified its intelligence, so it almost never publicly blames Russia for violating the cease-fire.

When Turkey shot down a Russian plane in early October that had strayed into its territory, the U.S. said little to support Turkey publicly. And after Russian President Vladimir Putin announced economic sanctions and a tourist boycott of Turkey, there was no sign that Washington would try to fill the gap in any way and make Turkey whole. After months of holding back, Turkey’s Erdogan expressed regrets this week, and Putin said he’d lift the sanctions and the travel boycott.
Turkish officials said if Turkey intervened in Syria against the Islamic State, and Russia retaliated, they doubted that the U.S. would back its NATO ally.

Turkey has repeatedly pleaded for U.S. support to create a safe area inside Syria for the millions displaced from their homes by regime barrel bombs and missile attacks, but been turned down repeatedly. This would, of course, be a massive logistical operation—one with the potential to create the kind of refugee camps that have often become breeding grounds for extremism. But Turkish officials see another reason for the American reluctance: fear that Iran—the principal outside backer of President Bashar al Assad would send in volunteers to oust a pro-western force of Syrian rebels that Ankara envisaged would provide security for the zones.

“The Iranians feel a kind of free hand in the region,” one Turkish official said in a 2015 interview. “They know they don’t have a determined counterpart. They know the U.S. will never at against them.” He said Iran was taking advantage of this “policy of appeasement” because “they won’t have such an opportunity for decades to come.”

Then there’s the matter of Iran’s ally, the Assad regime, which would surely brand a Turkish incursion to destroy the Islamic State, even in the name of self-defense, as a declaration of war. The administration says it won’t send forces into Syria to fight the Assad regime, and that decision seems to apply to U.S. allies as well.

But there’s another reason—the U.S. reliance on the People’s Protection Force or YPG, a Syrian Kurdish force, which is based in northern Syria and serves as the spearhead in the U.S.-backed battle against the Islamic State in Syria. Turkey has repeatedly voiced its reservations about the strategy, viewing the YPG as the Syrian affiliate of the Kurdistan Worker’s Party (PKK), with which it is now actively fighting in southern Turkey. It seems highly unlikely that the YPG would allow Turkish forces to cross its territory unscathed. Nor is the Turkish government in the mood to, in effect, bolster the YPG and PKK.

The current policy “needs to be revised,” a Turkish government official said Wednesday. If the Islamic State “is a serious threat, there must be a change in strategy.” But he said that seemed unlikely until the United States completes presidential elections in November.

For now, U.S. officials are trying to nail down that ISIS was really behind the airport plot. While those officials could not point to any intelligence showing who perpetuated the attacks, they increasingly said the attack itself suggested that ISIS not only inspired the attack but had some role in crafting it. (“To my knowledge, there is no credible claim of responsibility at this point, but that’s not very surprising because, at least in most instances, if not all, ISIS has not claimed credit or responsibility for attacks that are perpetrated inside of Turkey,” Brennan said Wednesday.)

Unlike most violent incidents inspired by ISIS, which are led by lone attackers, the attack at Ataturk airport consisted of multiple bombers. And rather than one major attack, Tuesday’s attackers staged an assault that consisted of an initial blast and second explosion intended to create an opening for another major assault. This use of multi-pronged strikes to create maximum effect has become an ISIS calling card.

Moreover, the bombs used Tuesday were sophisticated, not the kind of explosive constructed by an lone attacker, merely inspired by ISIS’ ideology of hate.

The location of the attack also suggested an ISIS plot, not only because they struck an airport but one in Turkey, which increasingly has drawn the ire of ISIS.

Perhaps most importantly, the attack came one day on the purported two-year anniversary of the group’s declaration that it had formed a caliphate.

What remains unclear is whether the attackers lived in Turkey or traveled from neighboring Syria as that border is a commonly used ISIS thoroughfare. One U.S. defense official told the Daily Beast that it appears to be a combination of both kinds of fighters.

There are challenges for ISIS to use either kind of attacker. Using only Turkish attackers could expose to local security officials an ISIS network inside Turkey. On the other hand, ISIS cannot easily pull fighters from Syria. ISIS increasingly needs those fighters to maintain its grip in parts of northeastern Syria as it comes under assault from the U.S.-led coalition and local ground forces. The terror group would need those militants even more, if Turkey ever decided to launch a major offensive of its own.

Article Link to The Daily Beast:

Sanders: Making His Goodbye Count

By E.J. Dionne
The Washington Post
June 30, 2016

WASHINGTON -- Nick Salvatore, the biographer of Eugene V. Debs, wrote that the popularity of the great American Socialist leader in the early decades of the 20th century "rested upon his ability to articulate and symbolize something of the severe dislocation experienced by all Americans in the transformation to industrial capitalism."

Bernie Sanders' appeal bears a striking similarity to his political hero's. Debs gave voice to the unease and unhappiness bred by the disruptions of the industrial period. Sanders speaks forcefully for those dismayed by the inequalities and injustices in this era of deindustrialization.

Like Debs, Sanders failed to achieve victory in a presidential contest. Nonetheless, both democratic socialists spoke for many who neither shared their ideology nor voted for them. Just as Debsian socialism had a powerful impact in preparing the way for the New Deal, so will Sanders have an influence on where American politics moves next.

The free-spirited Brooklyn native from Vermont, however, confronts very different political choices than those faced by Debs, who consciously and proudly worked outside the framework of the two-party system. By contrast, Sanders has a long and complicated relationship with the Democratic Party.

Until this election, Sanders ran independently of the party, but he often enjoyed its tacit support. He caucuses with the Democrats in the Senate and exercises a measure of power as a result. He still keeps the party at a critical distance even as he seeks its presidential nomination.

Sanders stands in a tradition of leaders and activists on the American left who, since the days of Franklin Roosevelt, have seen the Democratic Party as a vehicle for egalitarian purposes and have sought to build a strong progressive bloc inside the party.

Now that he has lost to Hillary Clinton, Sanders' task is to maximize his side's influence down the road. Given the threat posed by Donald Trump to so many of his own values, Sanders also has a moral obligation to help Clinton win this election.

So far, Sanders has been effective in influencing the writing of the Democrats' 2016 platform, and Clinton's forces, by past standards in these matters, have been remarkably accommodating to his wishes.

One of Sanders' key voices on the platform committee, Rep. Keith Ellison, D-Minn., supported a draft that took major steps toward Sanders' views. It backed a $15 minimum wage in principle, a more moderate approach to his desire to break up large banks, and a new version of the Glass-Steagall law that had separated commercial from investment banking. The draft would also put the party on record opposing the death penalty.

Sanders did not get everything he wanted. There was no call for a ban on fracking, no endorsement of a Medicare-for-all health care system, no backing for a carbon tax. The drafters also declined to oppose the Trans-Pacific Partnership, but its silence represented deference to President Obama, whose administration negotiated the trade deal.

Still, Ellison praised the document for "significant accomplishments that move our party firmly toward justice, fairness and inclusion." It is certainly one of the most progressive platforms in the party's history.

Sanders, however, is not satisfied. He has yet to endorse Clinton (though he did say he'd vote for her over Trump) and has said he would fight for further platform victories on the Democratic convention floor. He has taken to lecturing Clinton on the steps she needs to take. On CNN's "State of the Union" Sunday, he urged her campaign to "stand up, be bolder."

In the eyes of his staunchest supporters, this is Bernie being Bernie, keeping the pressure on to the very end. But is his fight-to-the-last approach the best way to maximize his leverage on behalf of progressive policies should Clinton defeat Trump?

Sen. Elizabeth Warren, the other leading politician revered by the Democratic left, has made a different choice: She's embracing Clinton fully. Warren campaigned on her behalf this week with enthusiasm, even glee, and seems to have a special gift for getting under Trump's skin.

Clinton, a friend of hers said, has a history of going out of her way on behalf of those who stand with her. Warren has joined this magic circle.

Sanders is staying on its outskirts, maintaining the Debs-style pressure. The risk is that he will lose his moment since some Clinton partisans already see a more centrist campaign as the best way to win over millions of middle-of-the-road voters who find Trump abhorrent. Sanders has to decide if accelerating his plans to endorse Clinton is now the best way to maximize progressive influence.

Article Link to the Washington Post:

Oil Falls On Improving Supply Outlook, Economic Worries

By Henning Gloystein
June 30, 2016

Oil prices fell on Thursday, with Brent struggling to hold $50 per barrel as fears over strike outages in Norway faded and as Nigeria's production improved, while the economic outlook darkened.

Brent crude futures LCOc1 were trading at $50.16 per barrel at 0620 GMT, down 45 cents, or 0.9 percent, from their last settlement. U.S. crude CLc1 was down 43 cents, or 0.84 percent, at $49.45 a barrel.

But with markets overall tightening this year, Brent has risen by over a third since the beginning of January, and by around 25 percent in the second quarter. U.S. crude prices are also up by more than a third this year.

Yet looking forward, traders said the lower prices on Thursday were a result of a higher supply outlook as well as concern over a slowing economy, compounded by Britain's vote to leave the European Union.

"With a ceasefire in Nigeria and Canadian wildfires (receding) oil prices may come under pressure," ANZ bank said.

"The vote to exit adds further to uncertainty in the global economy."

In Asia's No.2 economy, Japan, industrial output slid in May at the fastest rate in three months to its lowest level since June 2013, in the latest sign that Asian growth is stalling.

On the supply side, fears of sharp production cuts from a looming strike by Norway's oil sector eased as output from the North Sea's biggest producer would only fall by about 7 percent in case of a walk-out, according to Norway's Petroleum Directorate.

In Nigeria, output has recovered by 200,000-300,000 barrels per day (bpd) since mid-June after attacks on oil infrastructure knocked out some 600,000 barrels of daily oil production to around 1.25 million bpd.

"The government (is) optimistically aiming for a return to normal production by end-July," Goldman Sachs said.

Prior to the disruptions, Nigerian production stood around 2 million bpd.

Goldman Sachs also said that production outages from Canadian wildfires since May, which peaked around 1.5 million bpd, would recover and virtually end by September.

In other regions, however, supplies tightened.

U.S. crude stockpiles fell 4.1 million barrels in the week to June 24, the sixth consecutive week of drawdowns, to 526.6 million barrels, according to the U.S. Energy Information Administration.

U.S. crude production was at 8.62 million bpd, down from a peak of over 9.6 million bpd last year.

In the Middle East, Iraq is set to see output fall for a second straight month, with seaborne exports in the first 29 days of June averaging 3.14 million bpd, 60,000 bpd lower than in May.

Article Link to Reuters:

Oil Falls On Improving Supply Outlook, Economic Worries

Climate Denial Finally Pays Off

A series of Journal editorial page-bashing ads shows the climate cause in mid-crackup.

By Holman W. Jenkins, Jr.
The Wall Street Journal
June 30, 2016

No contributor has written more frequently on the subject of climate change on these pages—45 times over the past 20 years according to the “study” behind a recent series of ads (at $27,309 a pop) assailing the Journal’s editorial page for its climate coverage.

Yet how ploddingly conventional my views have been: I’ve written that evidence of climate change is not evidence of what causes climate change. The Intergovernmental Panel on Climate Change agrees, in its latest report estimating with less than 100% confidence that a human role accounts for half the warming between 1951 and 2010.

I’ve written that it would be astonishing if human activity had no impact, but the important questions are how and how much. The IPCC agrees, estimating that a doubling of atmospheric CO2 from pre-industrial times would hike temperatures between 1.5 degrees and 4.5 degrees (Celsius), notably an increase in the range of uncertainty since its last report.

I’ve said science has been unable to discern signal from noise in the hunt for man-made warming. Yup, that’s why the IPCC relies on computer simulations. Indeed, the most telling words in its latest report are a question: “Are climate models getting better, and how would we know?”

I’ve said it’s difficult to justify action on cost-benefit grounds. The Obama administration agrees, acknowledging that its coal plans will cost many billions but have no meaningful impact on climate even a century from now.

So how many columns out of 45 win approval from the Partnership for Responsible Growth, the new group paying for the Journal-baiting ad? Only two, describing the superiority of a carbon tax, the option the Partnership exists to plump for, compared to other climate nostrums.

Here’s what else I’ve learned in 20 years. Many advocates of climate policy are ignoramuses on the subject of climate science, and nothing about the Partnership for Economic Progress—founded by former Democratic congressman Walt Minnick plus a couple of big donors—breaks with this tradition.

Only a nincompoop would treat a complex set of issues like human impact on climate as a binary “yes/no” question—as the Partnership and many climate policy promoters do. Only an idiot would ask an alleged “expert” what he knows without showing any curiosity about how he knows it—a practice routine among climate-advocating journalists.

So Tom Gjelten, host of a recent NPR discussion of the Journal ad controversy, is completely satisfied when Matt Nisbet, a professor of communications studies at Northeastern University, explains, “On the fundamentals of climate science, there is absolutely no debates. The overwhelming majority of scientists . . . strongly agree that climate change is happening, that it’s human-caused and that it’s an urgent problem.”

Notice that he doesn’t cite any science but an (undocumented) agreement of people who agree with him, while conflating three very different questions.

To be sure, Prof. Nisbet then promptly covers his derrière and takes it all back, saying: “In the field, there is some disagreement on the pace of climate change, the severity, its specific impacts.”

By then the damage is done. The discussion proceeds on the basis that anybody who takes part in this disagreement about pace, severity and specific impacts is a denier and enemy of science.

Here’s what you also won’t learn from most climate reporting: Climate models that predict significant warming presume natural feedbacks that magnify the impact of human-released carbon dioxide by 100% to 400%. Models that presume no dominant feedbacks see warming of only about one degree Celsius over the entire course of a doubling of atmospheric CO2. Who knows what future scientific advances will reveal, but models that assume minimal feedback are more consistent with the warming seen so far—and remember, we’ve been burning coal for 200 years and accumulating temperature records for longer than that.

The U.S. political system gets a bad rap but has rationally concluded that it can’t sell large costs on this evidence. More to the point, never has it been the case that major legislation or policy departures are adopted only when all opposition and dissent are silenced. The premise of the assault on Exxon, the Journal, other campaigns against “deniers,” is worse than foolish. The climate crowd has turned to persecuting critics as a substitute for meaningful climate action because, as President Obama has acutely observed, voters won’t support their efforts to jack up energy prices.

Functionally, whatever advocates tell themselves, these attacks end up churning the waters and propagandizing for those niggling little things that actually can be enacted, having no impact on climate but lining the pockets of organized interests who return the favor with campaign donations.

That’s how our political system behaves, on climate and most other subjects—which perhaps explains why voters are so tired of the people who man our political system.

Article Link to The Wall Street Journal:

Climate Denial Finally Pays Off

Thursday, June 30, Morning Global Market Roundup: Asian Stocks Rise As Post-Brexit Rebound Continues, Yen Held In Check

By Shinichi Saoshiro
June 30, 2016

Asia stocks rose on Thursday, tracking an overnight rally on Wall Street, while the safe-haven Japanese yen was held in check as global markets regained a semblance of calm after the Brexit shock.

Spreadbetters forecast a slightly higher open for Britain's FTSE .FTSE, Germany's DAX.GDAXI and France's CAC .FCHI.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.5 percent, pulling further away from a one-month low on Friday when it plunged more than 3 percent in reaction to Britain's decision to leave the European Union. The index has dropped about 0.8 percent in the April-June quarter.

Japan's Nikkei .N225 climbed 0.6 percent.

Following the market's initial panic over Brexit, "it doesn't look like it is spreading to a financial crisis or something serious, at least at this moment," said Hikaru Sato, senior technical analyst at Daiwa Securities in Tokyo.

Overnight, the Dow .DJI rose 1.6 percent while Britain's FTSE .FTSE rallied for the second day, letting the London benchmark retrace all of its losses right after the Brexit vote.

U.S. President Barack Obama said on Wednesday he expects the world economy will be steady in the short run after Britain's decision but expressed concern about longer-term global growth.

Still, expectations that major central banks will ease monetary policy in the wake of Brexit have buoyed risk assets globally.

Analysts also saw the recent plunge in sovereign debt yields as a factor driving investors to equities.

"While the full consequences of Brexit are still uncertain, the one thing it has accomplished very successfully is dropping global bond yields to new lows and keeping global monetary policy looser for longer," wrote Angus Nicholson, market analyst at IG in Melbourne.

"Negative yielding government debt has surged... in such a situation, the drive for yield has never been stronger, which has seen people piling into dip-buying with little thought for the fundamental picture."

German and Japanese benchmark 10-year government debt yields have both fallen to historic lows below zero over the past week. Irish, French and Dutch 10-year yields hit record lows on Wednesday, all approaching zero. [GVD/EUR]

The 30-year U.S. Treasury yield, while still positive, has approached record lows as well.

In currencies, the battered sterling came off multi-decade lows. The pound was last traded at $1.3399 GBP=D4, putting distance between a 31-year trough of $1.3122 touched on Monday. It has still lost more than 6 percent in the quarter.

The euro, another casualty in the days after Brexit, fetched$1.1105 EUR= after reaching $1.0912 on Friday, its lowest since March.

The dollar was little changed at 102.770 yen JPY= after sliding to 99.00 on Friday, a trough last seen in November 2013. For the quarter, the greenback was headed for a nearly 9 percent drop against the yen.

Precious metals rose in part due to a weaker dollar, although the gains also highlighted underlying investor appetite for safe assets amid longer-term financial uncertainty after Brexit.

Silver hovered near a 1-1/2-year high touched Wednesday, while platinum and palladium stood tall after rallying more than 3 percent overnight. Spot gold XAU= was nearly flat at $1,314.38 an ounce after rising modestly on Wednesday. [GOL/]

Crude oil prices retraced some of their gains from Wednesday's sharp rally as fears over strike outages in Norway abated. Brent crude LCOc1 was down 1.2 percent at $50.00 a barrel after jumping more than 4 percent overnight, thanks to a larger-than-expected drawdown in U.S. crude inventories. [O/R]

Oil has mostly recovered what it lost after the Brexit shock. For the quarter, Brent has risen 26 percent on hopes that declining production in some countries would ease a global glut.

Article Link to Reuters:

Asian Stocks Rise As Post-Brexit Rebound Continues, Yen Held In Check

North America Leaders Mount Strong Defense Of Trade Despite Threats

By Roberta Rampton and David Ljunggren
June 30, 2016

Canada, the United States and Mexico on Wednesday mounted a fierce defense of free trade, vowing to deepen economic ties despite an increasingly acrimonious debate about the value of globalization.

U.S. President Barack Obama and Mexican President Enrique Pena Nieto also took swipes at U.S. Republican presidential candidate Donald Trump, who has vowed to renegotiate or scrap the North American Free Trade Agreement (NAFTA) if he wins November's election.

"The integration of national economies into a global economy: that's here, that's done," Obama told a news conference at the end of a summit dubbed the "Three Amigos".

"And us trying to abandon the field and pull up the drawbridge around us is going to be bad for us," he said after the talks, hosted by Canadian Prime Minister Justin Trudeau.

Trump says free trade has been disastrous, costing thousands of U.S. jobs and depressing wages.

Similar complaints were heard in Britain ahead of a surprise referendum vote last week to leave the European Union and its free trade area.

Obama and Pena Nieto stressed the importance of the relationship between their countries, which has come under strain amid heated U.S. campaign rhetoric.

"Isolationism cannot bring prosperity to a society," Pena Nieto said after bilateral talks with Obama.

Later, at the news conference, Pena Nieto warned of the dangers of populism in a globalized world and defended comments earlier this year in which likened Trump to Adolf Hitler and Benito Mussolini.

"Hitler, Mussolini, we all know the result," he said when asked to explain the comparison. "It was only a call for reflection and for recognition, so that we bear in mind what we have achieved and the great deal still to achieve."

The summit, Trudeau's first and Obama's last, could be the final harmonious one between the three countries if Trump wins the White House in the November U.S. presidential election.

Trudeau, who has generally steered clear of commenting on Trump's remarks since taking power last November, said that regardless of rhetoric the three nations would continue to have tremendously close relations.

Obama has strongly criticized Trump in recent weeks and took aim at the Republican's promises to clamp down on what he says is out-of-control illegal immigration.

The United States, he said, acknowledged public fears about the uncontrolled arrival of foreigners and had worked hard to secure its borders.

"America is a nation of immigrants. That is our strength ... The notion that we would somehow stop now on what has been a tradition of attracting talent and strivers and dreamers from all around the world, that would rob us of the thing that is most special about America," he said.

Obama - whose progressive social policies are very similar to Trudeau's - later received a rapturous welcome when he addressed the Canadian Parliament. In a speech often interrupted by prolonged applause, he said he understood that some people had genuine concerns about the pace of change.

"If the benefits of globalization accrue only to those at the very top, if our democracies seem incapable of assuring broad-based growth and opportunity for everyone, then people will push back out of anger or out of fear," he said.

"For those of us who truly believe that our economies have to work for everybody, the answer is not to try and pull back from our interconnected world. It is, rather, to engage with the rest of the world, to shape the rules so they're good for our workers and good for our businesses."

Protests over immigration have also been seen in Britain in the wake of the so-called Brexit vote last week, which at one point wiped more than $2 trillion off global equity markets.

Obama said he expected the world economy would be steady in the short run but expressed longer term concerns about global growth if Brexit went ahead.

Trump also opposes the 12-nation Trans-Pacific Partnership, which was signed in February but may not be ratified by the United States given increasing domestic resistance. Obama said on Wednesday he was committed to ensuring the pact contained high labor and trade standards.

One obstacle to free trade is the dumping of products at artificially low prices, and Trudeau, Obama and Pena Nieto said they agreed on the need for the governments of all major steel-making nations to address excess capacity.

The three also pledged to produce 50 percent of their nations' electricity from clean energy by 2025.

Article Link to Reuters:

North America Leaders Mount Strong Defense Of Trade Despite Threats

Wednesday, June 29, 2016

A Better National To-Do List

What problems can we actually solve?

By Kevin D. Williamson 
The National Review
June 29, 2016

In 2014, Islamic terrorists had a banner year, nearly doubling their annual body count to 32,658, according to the Institute for Economics and Peace. Last year probably wasn’t any less bloody, and this year probably will be just as bad.

But, as always, it is important to keep such numbers in perspective. That horrifying Islamist death toll is about 1/227 the combined global kill count of respiratory cancer, HIV, diarrhea, diabetes, and road injuries, which each account for about 1.5 million deaths a year. We should not downplay the horrors of Islamist terrorism or fail to take measures against it, no more than it would be wise to go swimming where you know there to be sharks, even though you are, statistically speaking, about 300,000 times more likely to die of a mosquito bite. The current hysteria surrounding the Zika virus may be excessive, but the attention paid to mosquito-borne diseases is entirely appropriate.

Not all dangers are equally responsive to public policy and public action, and the line between political acts and public results isn’t always straight or clear. For instance, our states derive tremendous revenues from the sale of tobacco products, and only a tiny share of that (less than 3 percent) is used for purposes such as educating people about the dangers of smoking. But it does seem that the past 40-plus years of anti-smoking propaganda has had some effect: New cases of lung and bronchial cancers have declined steadily for decades. And that is an excellent thing, inasmuch as respiratory cancers are a particularly nasty sort: Almost the same number of Americans are diagnosed with lung and bronchus cancers every year as breast cancer (225,000 vs. 247,000), but while lung cancer lags a little bit in incidence, it far exceeds breast cancer in deaths, 158,000 to 40,000. Fewer than one in five lung-cancer patients will survive for five years or more.

Is there any obvious public-policy takeaway from that? Some people will look at those figures and say: We should do even more to discourage people from smoking. It seems obvious, but it isn’t. Most people who smoke never get lung cancer. Men die of lung cancer more often than women, and blacks more often than whites, with black men having a dramatically higher death rate than white men.

Men in Kentucky get lung cancer at five times the rate of men in Utah. Those numbers parallel the prevalence of smoking. Perhaps the U.S. Department of Health and Human Services should be consulting the Church of Jesus Christ of Latter-day Saints on the question of tobacco use and its prevention.

Smoking prevention gets a lot more attention than does lung-cancer treatment, for a couple of reasons. One is that people get moralistic about lung cancer: It’s one of those diseases, like HIV, that bring a special joy to a certain kind of person, a very common type, who likes to say: “You brought that on yourself.” These are the sort of people who tell people suffering from depression that they should just think of how much worse off the poor kids in China are. There isn’t really very much to say about these people. But on the question of smoking, their puritanism is amplified by the fact that the people who create public policy are in the main people who disapprove of smoking, which they see as a vice characteristic of dirty people without liberal-arts degrees.

And that produces some strange consequences. The American Heart Association has compiled a fair amount of research suggesting that vaping — the inhalation of nicotine vapor produced by an electronic device, which looks a lot like smoking but isn’t — is in fact less destructive to one’s health than is smoking cigarettes, and that it might be a useful tool in smoking cessation. The American Heart Association is practically alone in taking a sober, evidence-driven approach to the question. For the rest of the world, vaping means nicotine (which isn’t the thing in tobacco that kills you) and looks like smoking — it feels like smoking, culturally — and, therefore, it is treated like smoking. The city fathers of New York banned vaping in public spaces simply because it too closely resembles smoking, an act that has produced inevitable litigation. The FDA just issued 499 pages of vaping regulation, which will impose ruinous costs on many vaping-oriented businesses, which does not displease the tobacco barons with whom they compete.

That is something to keep in mind the next time you hear from the so-called party of science, when their favorite “experts” produce policy prescriptions that are only loosely coordinated, if that, with any meaningful evidence.

Politicians tend to pay the most attention to issues that command public fascination. And the public’s attention is most easily commanded when the public is given someone to hate: Try explaining the integration of global supply chains to your average American college student and he will be beyond even Adderall’s reach, but talk about “inequality” — which is to say, give him a rich-guy villain to hate — and he’s rapt. People who make lots of money in finance or as entrepreneurs are “those people.” Smokers and vapers are, for members of the policy-making class, “those people,” the same way that people with HIV or heroin addictions are “those people” for others. The NRA is “those people” for the gun-control gang, even though the people who do most of the shootings in these United States are not very much like the people who belong to the NRA.

It is easy to substitute an enemies list for careful thinking.

One of the most interesting projects of recent years is the Copenhagen Consensus, the Bjørn Lomborg–led project to apply welfare economics to deep-seated global problems, inviting economists and issue scholars to do some rigorous number-crunching and come up with some projects to maximize the bang/buck ratio. The recommendations have been surprisingly unsexy: micronutrient-supplement programs, bigger and better-structured subsidies for malaria prevention (those damned mosquitos, again), immunization, the spread of better agricultural practices, water projects.

Straight-up policy questions, notably barriers to trade, also are on the radar. While foreign aid accounts for only a tiny share of U.S. government spending, in absolute dollars the sums are considerable. It is spent better than you might expect: Thanks in no small part to President George W. Bush, the United States has made large investments in HIV prevention, especially in Africa, which actually seems to do some good. A great deal of money is spent on infrastructure projects and capacity-building for foreign states such as Afghanistan, which, even with the inevitable graft and waste, is probably the right approach.

What’s needed is a similar approach to domestic questions, and to a few foreign-relations questions closer to home. It’s a hard sell when a non-trivial share of the population has adopted “Eek! A Mexican!” as the main principle governing relations with our southern neighbor, but it is inarguable that the United States would be much, much better off if Mexico were a lot more like Canada and a lot less like Venezuela (Mexico is only two steps ahead of the late Boss Hugo’s socialist heap on the GDP/capita rankings) and if it had stronger institutions that were more capable of dealing with things like drug cartels and internal economic refugees. But who is going to help Mexico build that capacity? Guatemala?

In a sane world, U.S. political debate would be less about how rich men live in Greenwich and San Mateo Park and more about how the schools are run in Cleveland and Philadelphia, and we’d acknowledge that Mohammed al-Kaboom isn’t going to kill nearly as many Americans this year — or any year — as diabetes and prescription-drug addiction. We’d acknowledge that what is hurting the U.S. economy is mainly decisions made in Washington (and, Albany, Sacramento, Columbus, Lansing . . . ) and not schemes hatched in Beijing or Mexico City. The headlines would be about mosquitos, not about sharks. This isn’t a call for post-ideological “pragmatism,” which is almost always just 20th-century progressivism dressed up with a few dodgy charts, but rather for a genuine effort at discerning what actually can be done, at what cost, and establishing priorities among those things.

But that would require some hard work, maturity, literacy, tolerance, forbearance, and delayed gratification — and nobody ever made a career in Washington selling that basket of goods.

Article Link to The National Review:

Wednesday, June 29, Morning Global Market Roundup: Asia Stocks Bounce, Bonds Benefit From The Unknown

By Wayne Cole
June 29, 2016

Asian shares were swept up in a global relief rally on Wednesday as the immediate drag from the Brexit vote began to ebb and investors wagered central banks would ultimately ride to the rescue with more stimulus measures.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.0 percent to recoup around one-third of Friday's stinging loss. Japan's Nikkei .N225 climbed 1.6 percent, while Australian stocks added 0.8 percent.

In Europe, both the FTSE and DAX were seen starting around 1 percent higher, with the CAC up 1.2 percent. EMINI futures for the S&P 500 ESc1 added 0.2 percent.

Any bounce was welcome, given global equity markets shed $3 trillion in value in the two days following Britain's shock vote, according to S&P Dow Jones Indices. Investors also pointed to solid U.S. economic data as helping to steady the ship.

Yet Britain's course out of the EU remains unknown, leaving the future of the entire bloc and its currency an open question.

"The only certainty in Europe is uncertainty," analysts at ANZ said in a note.

"European leaders appear to want to move forward with Brexit plans as quickly as possible, but political turmoil within Britain suggests a quick turnaround is unlikely," they wrote.

The unease was evident in sterling, which slipped a third of a U.S. cent over the session to huddle at $1.3332 GBP=, not far from the recent 31-year low of $1.3122.

The euro regained only a little ground to $1.1064 EUR=, while the safe-haven yen steadied at 102.33 per dollar JPY=.

For now, investors are counting on central banks to step in with fresh stimulus to support markets over time.

Japanese Prime Minister Shinzo Abe urged the Bank of Japan to provide ample funds to ensure market liquidity.

In the first of Federal Reserve policymakers to comment since the vote, Governor Jerome Powell said it had shifted global risks "to the downside".

That only reinforced market expectations the Fed will no longer be able to hike U.S. rates this year, and could even be forced to cut if the domestic economy falters.

Yielding Less Than Nothing

On Wall Street, the Dow .DJI ended Tuesday up 1.57 percent, while the S&P 500 .SPX gained 1.78 percent and the Nasdaq .IXIC 2.12 percent. Badly beaten financials .SPSY and tech stocks .SPLRCT were among the top gaining sectors.

The calmer mood was reflected in the CBOE Volatility Index .VIX which fell about 21 percent on Tuesday to near where it was before the vote. It was its largest one-day percentage decline since August 2011.

Aiding sentiment was data showing the U.S. economy grew at a 1.1 percent annualized rate in the first quarter, rather than the 0.8 percent pace reported last month.

Yet concerns about the impact of Brexit on global growth, plus all the talk central banks might have to ease anew to offset it, kept sovereign bonds well supported.

Yields on U.S. 10-year notes US10YT=RR held at 1.47 percent, just above a near four-year low of 1.406 percent hit on Friday. Comparable German DE10YT=RR and Japanese bonds JP10YT=RR are into record territory and pay negative yields.

Indeed, all Japanese bonds out to 40 years now offer less than 0.1 percent, a nightmare for pension funds and insurers desperate for a "decent" return.

In commodity markets, gold was firmer XAU= around $1,319.00 an ounce, off a low of $1,305.23 touched Tuesday.

Oil prices gained as a looming strike by Norwegian oil and gas field workers threatened to cut output. There were also reports oil producers and refiners in crisis-struck Venezuela were struggling to keep output up.

U.S. crude oil futures CLc1 were up 27 cents at $48.12, while Brent crude LCOc1 rose 21 cents to $48.79.

Article Link to Reuters:

Asia Stocks Bounce, Bonds Benefit From The Unknown

European Market Update:

European shares rose on Wednesday, with higher oil prices and the chance of more monetary stimulus helping markets in their bid to recover from the hit from Britain's vote to exit the European Union.

The pan-European STOXX 600 index, which had slumped 11 percent over the course of Friday and Monday, rose 1.2 percent, building on a 2.6 percent gain in the previous session.

The FTSEurofirst 300 also stood 1.2 percent higher.

The shares of European oil majors rose as the impact from a potential strike in Norway lifted oil prices.

European stocks were further supported from a drop in sovereign bond yields, with France's 10-year bond yield hitting a new record low amid expectations for further monetary stimulus to offset the negative impact of last week's 'Brexit' vote on the euro zone economy.

Article Link to Reuters:

Oil Prices Rise On Norway Strike Threat; Brexit Shock Fades

By Henning Gloystein
June 29, 2016

Oil rose on Wednesday as financial traders poured money back into commodities following the initial shock of Britain's vote to leave the European Union, and as a potential strike in Norway and crisis in Venezuela threatened to cut supply.

Brent crude futures were trading at $48.95 per barrel at 0948 GMT, up 37 cents from their last settlement. U.S. crude was had climbed 44 cents to $48.29 a barrel.

Both oil benchmarks gained on Tuesday after markets shook off some of the shock from the referendum in Britain in which most voters chose to exit the EU.

"The risk-on tone should see commodities continue to push higher," ANZ Bank said.

"Oil led the (commodities) sector as the shock of the UK voting to leave the EU wore off. Oil gains were solidified by news that the decline in Venezuela's oil output appears to be accelerating, while a strike in Norway also looked like it would impact production," it added.

Standard Chartered said that it expected oil prices to return to $50 per barrel rapidly after the Brexit-related fall as the referendum's impact on demand was limited.

On the supply side, a looming strike by Norwegian oil workers threatened to cut output from the biggest North Sea producer.

In crisis-struck Venezuela, oil producers and refiners were struggling to keep output up due to power outages and equipment shortages, also supporting prices, traders said.

Additionally, the American Petroleum Institute (API) indicated in a report on Tuesday that U.S. crude inventories fell nearly 4 million barrels for the week to June 24, some two-thirds more than the 2.4 million barrels expected by analysts.

The U.S. Energy Information Administration will issue official stockpile data on Wednesday.

Despite the tightening supply-side, there are concerns that a looming refined products glut especially in Asia, which has halved benchmark Singapore production margins since January, might spill back into the crude market as refiners cut output and orders of their main feedstock, crude.

"Refining margins ... have averaged lower than the same period last year, which should be supportive of lower fuels production," said analysts at BMI Research.

Bankers also said that knock-on effects from Britain's EU exit vote would continue to impact oil.

Citi said that Brexit's "uncertainty and volatility ... are both likely to be persistent for a long time to come."

And investment bank Jefferies said: "Brexit ... has brought currency considerations to the fore ... Near-term, a strengthening U.S. dollar makes a barrel of oil more expensive in local emerging market currencies and so likely weighs on demand."

Article Link to Reuters:

Syrian Rebels Battle ISIS At Iraqi Border, Aiming To Cut 'Caliphate' In Two

By Suleiman Al-Khalidi  and Tom Perry
June 29, 2016

Syrian rebels advanced into an Islamic State-held town at the border with Iraq on Wednesday, a rebel commander told Reuters, in a new U.S.-backed offensive aimed at cutting the jihadists' self-declared caliphate in two.

The operation aiming to capture the eastern Syrian town of Al-Bukamal, which began on Tuesday, adds to the pressure facing Islamic State as it faces a separate, U.S.-backed offensive in northern Syria aimed at driving it away from the Turkish border.

The offensive is being waged by rebels of the "New Syria Army" formed some 18 months ago from insurgents driven from eastern Syria at the height of Islamic State's rapid expansion in 2014. Rebel sources say it has been trained with U.S. support.

"The clashes are inside the (town) and matters are not yet settled," said the rebel commander of the Asala wa-al-Tanmiya Front, one of the main elements of the New Syria Army. The rebel forces entered the town at dawn, he said.

The Syrian Observatory for Human Rights said the offensive was being mounted with backing of Western special forces and U.S.-led air strikes.

Islamic State's capture of Al-Bukamal in 2014 effectively erased the border between Syria and Iraq. Losing it would be a huge symbolic and strategic blow to the cross-border "caliphate" led by Abu Bakr al-Baghdadi.

The town is just a few kilometers (miles) from the Iraqi frontier in Deir al-Zor province, nearly all of which is under Islamic State control.

The U.S.-led campaign against Islamic State has gone up a gear this month, with an alliance of militias including the Kurdish YPG launching a major offensive against IS in the city of Manbij in northern Syria. In Iraq, the government this week declared victory over Islamic State in Fallujah.

Rebels Hit By Russians

Syrian rebel sources say the rebel force has received military training in U.S.-run camps in Jordan, but most of their training was now being conducted in a main base at al-Tanf, a Syrian town southwest of Al-Bukamal at the border with Iraq.

The New Syria Army's base in al-Tanf was hit twice earlier this month by Russian air strikes, even after the U.S. military used emergency channels to ask Moscow to stop after the first strike, U.S. officials say.

The rebel commander and the Observatory said the rebels had also captured an air base from Islamic State militants near Al-Bukamal. Heavy clashes were underway, with militants dug in at the Hamadan air base, 5 km (3 miles) northwest of Al-Bukamal.

The rebels also announced the capture of nearby Hamadan village. U.S.-led coalition air strikes had hit militant hideouts in the town, the Observatory said.

Islamic State militants have cut power and communications in Al-Bukamal and dug trenches around the town, rebel sources say.

The rebel force, numbering several hundred, had secured the desert approaches to Al-Bukamal after a rapid advance across sparsely inhabited desert from al Tanf.

A U.S. Defense Department spokesman, Major Adrian J.T. Rankine-Galloway declined on Tuesday to comment on the latest campaign but said Washington was assisting unnamed Syrian rebel groups.

Article Link to Reuters: