Thursday, March 24, 2016

Thursday, March 24, Night Wall Street Roundup: Wall St. closes flat, five-week rally ends

By Laila Kearney
March 24, 2016

U.S. stocks broke a five-week winning streak on Thursday with a strengthening dollar weighing on commodity-related shares.

The three major indexes closed mostly flat on the day, paring losses by the session's end.

"After the run that we've had ... I think it's natural for folks to take a deep breath and take some chips off the table," said Jeff Buetow, president of BFRC Services in Charlottesville, Virginia.

The Dow Jones industrial average .DJI rose 13.14 points, or 0.08 percent, to 17,515.73, the S&P 500 .SPX lost 0.77 points, or 0.04 percent, to 2,035.94 and the Nasdaq Composite .IXIC added 4.64 points, or 0.1 percent, to 4,773.51.

Stocks began to dip this week after comments by U.S. Federal Reserve officials, who raised expectations for more interest rate hikes in coming months than investors expected. St. Louis Fed President James Bullard was the latest to join a chorus of officials who highlighted the chance of at least two rate rises this year.

The possibility of more interest rate hikes pushed the dollar .DXY to a fifth day of gains, its best run since April. Oil and materials sectors dropped as a result.

Record crude stockpiles further weighed on oil prices.

"This market is still in some respect taking its cues from what's going on with the oil market and the dollar," said Chuck Carlson, chief executive at Horizon Investment Services.

The deadly bombing attacks in Brussels on Tuesday added to investors' uncertainty this week.

Meanwhile, the financial sector .SPSY was the biggest loser, falling 0.65 percent. UBS rated Wells Fargo stock a "sell," due to a cloudy revenue outlook and credit risks. Wells Fargo, JP Morgan Chase and Citigroup were among the biggest drags on the S&P 500 index Thursday. Six of the 10 major S&P sectors were higher, however, led by a 1-percent rise in telecommunication services.

Yahoo (YHOO.O) shares rose 0.2 percent after activist hedge fund Starboard Value LP moved on Thursday to overthrow the entire board of the technology company.

Staples (SPLS.O) shares were up 7 percent at $10.75 after a media report said a U.S. judge rebuked the Federal Trade Commission's legal tactics in the Staples and Office Depot merger case.

NYSE advancing issues outnumbered decliners 1,532 to 1,460, for a 1.05-to-1 ratio on the upside; on the Nasdaq, a 1.17-to-1 ratio favored advancers.

Volume was light on the last day of the holiday-shortened week. About 6.2 billion shares changed hands on U.S. exchanges, below the 8.0 billion daily average for the past 20 trading days, according to Thomson Reuters data.

The S&P 500 posted 10 new 52-week highs and 1 new low; the Nasdaq recorded 20 new highs and 54 new lows.

Indexes are well off their 2016 lows, thanks largely to evidence of a reviving U.S. economy and the recent sharp rebound in oil prices.

Article Link to Reuters:

Karadzic guilty of Bosnia genocide, jailed for 40 years


March 24, 2016

Former Bosnian Serb leader Radovan Karadzic was convicted by U.N. judges of genocide for the 1995 Srebrenica massacre, the worst war crime in Europe since World War Two, and sentenced to 40 years in prison.

Karadzic, 70, the former president of the breakaway Bosnian Serb Republic, was found guilty on 10 out of 11 charges brought by war crimes prosecutors at the International Criminal Tribunal for the Former Yugoslavia in The Hague. He would appeal the decision, his legal adviser said.

"The accused was the sole person within Republika Srpska (the Bosnian Serb Republic) with the power to prevent the killing of the Bosnian Muslim males," said presiding judge O-Gon Kwok, in a reference to the 8,000 killed at Srebrenica.

"Far from preventing it, he ordered they be transferred elsewhere to be killed," the judge said.

Karadzic was acquitted of one count of genocide in various towns across Bosnia during the war of the 1990s.

The three-judge panel said Karadzic was "at the apex of power," heading the self-styled Bosnian Serb Republic and Supreme Commander of its armed forces, when crimes were committed by his troops.

Judges said the 44-month siege of Sarajevo could not have happened without his support; that he committed crimes against humanity in an attempt to purge Muslims and Croats from parts of Bosnia; and that he had intended to eliminate the Bosnian Muslim males of the town of Srebrenica.

Karadzic's legal adviser Peter Robinson said Karadzic was "disappointed by the verdict, astonished by the reasoning and he wants to appeal."

As the judges described the siege of Sarajevo, Karadzic looked pained and his face tightened into a grimace.


Victims' families in the courtroom, some of then elderly, listened intently when the genocide at Srebrenica was discussed. One wiped away tears as the judge described men and boys being separated from their families.

When Karadzic was ordered to stand for sentencing, he listened with eyes mostly downcast. After judges departed, he sat back heavily in his chair.

Victims' families embraced before quietly leaving the courtroom.

Outside, Hatidza Mehmedovic, who lost her entire family at Srebrenica, said she was enraged by the verdict, and no punishment could have been harsh enough.

"He can live in a cushy prison while I have to live in Srebrenica, where his ideology is still in place," she said.

"I have no sisters, no brothers, no husband."

Karadzic was arrested in 2008 after 11 years on the run, following a war in which 100,000 people were killed as rival armies carved Bosnia up along ethnic lines that largely survive today.

Serbian Prime Minister Aleksandar Vucic said he would stand by the Serbs of Bosnia.

"We will stand by our people and we will protect their existence and their right to have their own state," he said.

Serge Brammertz, the court's chief prosecutor, said he hoped the ruling would make populist politicians in the region more reluctant to hail convicted war criminals as heroes.

"There is nothing heroic about raping persons, about sexual abuse in camps," he said. "There is nothing heroic about executing 7,000 prisoners which have been detained in impossible circumstances. There is nothing heroic to kill with snipers children who are playing."

He said prosecutors may appeal Karadzic's acquittal on the second genocide charge.


The only more senior official to face justice before the Tribunal was the late Serbian President Slobodan Milosevic, who died in custody a decade ago before a verdict was reached.

Ratko Mladic, the general who commanded Bosnian Serb forces, was the last suspect to be detained over the Srebrenica slaughter and is also in a U.N. cell awaiting judgment.

The Srebrenica massacre and the Serb siege of Sarajevo were events that turned world opinion against the Serbs and prompted NATO air strikes that helped bring the war to an end.

Karadzic defended himself through his 497-day trial and called 248 witnesses, poring over many of the millions of pages of evidence with the help of a court-appointed legal adviser.

Rejecting the charges against him, Karadzic sought to portray himself as the Serbs' champion, blaming some of the sieges and shelling on Bosnian Muslims themselves. He says soldiers and civilians who committed crimes during the war acted individually.

Opponents of the ICTY say its prosecutors have disproportionately targeted Serbs as 94 of 161 suspects charged were from the Serbian side, while 29 were Croat and nine Bosnian Muslim. 

Prosecutors have been criticized for not bringing charges against two other leaders of that era who have since died - Croatian President Franjo Tudjman and Bosnian President Alija Izetbegovic.

Many Serbs, both in Bosnia and Serbia, regard the court as a pro-Western instrument, say Karadzic is innocent and believe his conviction is an injustice for all Serbs.

Article Link to Reuters:

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Ultra Petroleum -- Symbol #UPL -- should rebound quick for a nice Intraday gain. Buy UPL @ $.46; +/- .02

Why Brussels Makes a #NeverTrump Third-Party Bid Necessary

The attack raises the frightening possibility that Trump could become president by accident.

By Brian Beutler
The New Republic
March 24, 2016

If the #NeverTrump movement survives primary season and remains relevant during the general election, it will be thanks to a single animating insight—that winning a general election is actually much easier than winning a contested primary.

"The only conservatives truly committed to preventing the scenario of a rogue Trump presidency are the ones plotting a third-party strategy." -- Brian Beutler

The fear that animates #NeverTrump conservatives, like the fear driving some liberal voters to vote for non-Trump Republicans in open primaries, is that as the Republican nominee, Donald Trump could become president of the United States almost by accident.

As the Washington Post’s Greg Sargent has noticed, it isn’t uncommon for commentators to note with great foreboding—after violent incidents in Paris, San Bernardino, and now Brussels—that with Trump as the GOP nominee, we’d be one terrorist attack away from a Trump presidency.

It is this general fear—not of a terrorist attack, per se, but of how such an attack could lead to Trump becoming president—that has divided the right between those who want to stop Trump from securing the nomination by any means necessary, those who want to create some kind of third-party option for anti-Trump conservatives, and those who hope Trump can be controlled.

After Tuesday’s primary elections, in which Trump secured another 58 delegates, and extended his lead over Ted Cruz by 18 delegates, the first option is all but foreclosed. On Wednesday, House Speaker Paul Ryan became the face of option three.

In what can only be interpreted as an implicit rebuke of Trump, Ryan issued a plea for civility and political high-mindedness, without reversing his repeated commitment to supporting Trump, and working with him, if he becomes the GOP nominee. If this primary has proven anything, though, it is that Trump has much more power to shape Republican leaders than the other way around. The American political upshot of the terrorist attack in Brussels was that Cruz matched Trump’s proposal to ban Muslim entry into the United States by calling on “law enforcement to patrol and secure Muslim neighborhoods before they become radicalized.”

Ryan’s effective support for Trump may simply stem from his partisan obligations, but it also reflects a degree of denial about the predicament confronting his party. It is Ryan’s hope that Trump and the GOP can, against all prevailing incentives, dispense with Trump-esque rhetoric, then return to the policy dogmas that have defined Ryan’s political career—deregulation, free trade, reducing taxes on the affluent, and devolving the welfare state. Ryan’s own professional setbacks reveal the folly of that hope. Before the 2012 election, when he was the Republican Party’s vice presidential nominee, Ryan spoke in apocalyptic, almost Trumpian terms about the state of the country. A key liberal critique of conservatism has long been that the movement’s substantive objectives lack majority support and must thus be fused with divisive rhetorical subtext and innuendo. That formula may no longer work, but simply slicing off the rhetorical half without any concomitant changes to the policy agenda would be genuinely suicidal. If anything, Trump has demonstrated that rhetoric is the most important half of the formula. If Republican leaders attempt to control Trump, instead of abandon him, something will give, but it will not be the things that drive Trump’s support. Ryan is thus as unlikely to convert Trump to Jack Kemp-style conservatism as he is to constrain him in the event of a domestic suicide bombing.

The only conservatives truly committed to preventing the scenario of a rogue Trump presidency are the ones plotting a third-party strategy.

The notion that a terrorist attack might sway a Hillary Clinton-Donald Trump election to Trump stems from two premises: first, that national security threats enhance the appeal of the Republican Party’s militarism; second, that negative, exogenous shocks, like terrorist attacks, drive voters into the arms of the non-incumbent party. As a reckless, unpopular, and divisive figure, Trump has essentially invalidated the first premise. Republicans still maintain a generic polling advantage over Democrats on domestic security questions, but Trump trails Clinton badly. If terrorism drives voters toward politicians they trust to improve security, then the issue plays to Clinton’s, not Trump’s, advantage.

The problem is that it may not matter who tops the Republican ticket, because the second premise remains valid. The 2008 economic crisis redounded to then-Senator Barack Obama’s benefit because he was identified as a challenger to the existing regime. The 2004 terrorist bombing in Madrid swung control of Spain from the incumbent conservative party to the contesting socialist party for the same reason. A similar exogenous shock would naturally benefit the GOP this fall no matter who topped the ticket.

One unknown variable in this formula is that past exogenous shocks served not just to harm incumbents, but to rally opposition parties. We don’t know what happens when the opposition is led by someone who lacks support from a significant faction of his own party. And this is where the immensity of the #NeverTrump burden comes into clear focus. If a similar shock were to hit our system later this year, in a head-to-head Clinton-Trump race, the anti-Trump right would have to turn a final corner and, in an ultimate indignity, become active Clinton supporters.

Committed #NeverTrump activists must realize there is effectively little difference between opposing Trump and supporting Clinton. But under normal circumstances, opposing Trump is as far as they’d ever need to go. In the event of a close contest, even one that narrows due to events outside either candidates’ control, they will need an outlet.

A third-party protest candidacy provides an escape hatch. Without that option, partisan instincts are much likelier to take over, and bring even the most committed #NeverTrump activists along for the ride.

Iraq Finally Launches Military Offensive To Retake Mosul From ISIS


March 24, 2016

Iraq's armed forces started an offensive against Islamic State in the northerly Nineveh province on Thursday in what a military statement described as the first stage of an operation aimed at liberating the city of Mosul.

The assault was launched from the Makhmour area, to which thousands of Iraqi troops have deployed in recent weeks, setting up base alongside Kurdish and U.S. forces around 60 km south of Mosul.

Backed by air power from a U.S.-led coalition and by Kurdish peshmerga forces, Iraqi troops advanced westwards, recapturing several villages from the Islamist militants, according to multiple military sources.

"The first phase of the Fatah (Conquest) Operation has been launched at dawn to liberate Nineveh, raising the Iraqi flag in several villages," said a military statement cited by state TV.

Iraqi officials say they will retake Mosul this year but, in private, many question whether the army, which partially collapsed when Islamic State overran a third of the country in June 2014, will be ready in time.

The city, home to 2 million people before being taken over by the ultra-hardline jihadist group, is by far the largest center it controls in either Iraq or Syria, and is still heavily populated, complicating efforts to retake it.

The military statement urged civilians to stay away from buildings used by the insurgents, warning that they would be targeted in days to come.

"Iraqi security forces in Makhmour ... are beginning to expand the forward line of troops," said Colonel Steve Warren, a Baghdad-based spokesman for the U.S.-led coalition.

Makhmour is located in a strategic triangle of territory between Islamic State's core area of control in northwestern Iraq and the Hawija area, from which the militants have threatened oil installations around Kirkuk.

Thursday's advance brings Iraqi forces closer to the oil town of Qayyara on the banks of the river Tigris, control over which would help to isolate Hawija from Mosul.

A Shi'ite militia leader met Kurdish peshmerga commanders last week to discuss plans to push the insurgents out of the Hawija area together with the Iraqi army.

The offensive should also reduce the threat to the base in Makhmour, which has come under repeated attack from Islamic State, resulting in the death of a U.S. Marine last week.

The Iraqi military statement named the villages recaptured as al-Nasr, Garmandi, Kudila and Khurburdan.

Article Link to Reuters:

3 Long-Term Consequences of Negative Rates

By Mohamed A. El-Erian
The Bloomberg View
March 24, 2016

Most economists are tempted to rely on incremental analysis to explain the spread of negative interest rates and their implications for the global economy and markets. This is understandable, yet the inclination to focus primarily on marginal changes could be overly partial and even misleading -- especially for market participants who must navigate the unintended consequences of sub-zero yields, including the possibility of “tipping” events.

The conventional argument of economists goes something like this: The actions of central banks and the market pricing of government bond yields have proved that zero no longer constitutes a lower nominal bound for interest rates. As a result, the effects of negative rates are best analyzed in terms of deltas -- that is to say, by extrapolating the marginal impact of a change in rates (say from minus 0.2 percent to minus 0.3 percent), as opposed to assessing levels as a whole (how negative and for how long). Despite the historical anomaly of negative nominal rates, most economists are inclined to apply the traditional analysis of a continuum of pricing, behaviors and economic effects.

I am not so sure that this necessarily is the right approach. Three developments on the ground support this skepticism and suggest the need for more open thinking and analysis:

First, much of the institutional setup for providing financial services to millions in systemically important advanced economies was not designed to operate for long with negative nominal interest rates, and with the associated flattening of the yield curve. For example, with pressures on net interest margins, banks face greater challenges in intermediating funds and are increasingly inclined to turn away deposits. Moreover, providers of long-term financial savings, protection and assurances -- from pension funds to insurance companies -- find it harder to meet client expectations of meaningful safe returns many years in the future. There are no meaningful substitutes available in the short-term.

Second, persistent negative interest rates may compel a growing number of individuals to disengage from a financial system that now taxes them for placing deposits and savings. No wonder the sales of home safes soared in Japan after the Bank of Japan unexpectedly decided to follow the European Central Bank into negative policy rate terrain.

The longer these two sets of circumstances prevail, the greater the pressure on individuals and companies to self-insure rather than rely on the system’s collective insurance facilities. In turn, that risks translating into slower economic activity, as well as more fragmented financial markets that are harder to monitor, influence and regulate.

Third, if negative interest rates go beyond perceived thresholds of reasonableness and sustainability, the operating modalities of certain markets could change. This dynamic may be playing out in the recent puzzling behavior of foreign-exchange markets after both the Bank of Japan and the ECB adopted and reinforced their negative rates policy.

Rather than depreciate, both the yen and the euro have appreciated. Although some of these counterintuitive moves reflect a somewhat more dovish Federal Reserve, which has mitigated expectations of highly divergent interest rates among the world's central banks, there could well be something bigger in play: Specifically, the dilution of interest-rate differentials as the main driver of currency values, particularly as greater attention is paid to stock effects, including the ability of citizens to repatriate capital from abroad. This is an especial concern for Japan.

All this calls for further analysis and more open-mindedness from economists when assessing how the global economic and financial system is likely to operate now that about one-third of global government debt is trading at negative nominal yields. Specifically, stock effects and behavioral influences could alter the conclusions that are derived from an analysis based primarily on interest-rate differentials and other relative pricing considerations.

Should this prove to be the case, and I suspect it will, the implications for investors and traders would go well beyond the potential of a new set of unintended and unusual potential headwinds to economic growth and corporate earnings. The new understanding would require altering pricing models for foreign-exchange markets, recasting assumptions about correlations among different asset classes, being more open to the possibility of sudden market jumps and air pockets, and factoring in a larger liquidity risk premium.

Article Link to the Bloomberg View:

Paul Ryan's Crossroads

By Editorial Board
The Bloomberg View
March 24, 2016

What should we make of House Speaker Paul Ryan’s speech in the Capitol on Wednesday? Ryan, who has spent his career positioning himself as the Republican Party’s ideas leader, devoted most of his remarks not to policy but to politics.

In the most poignant moment, Ryan uttered something you don’t hear often from politicians -- “I was wrong” -- when he apologized for having rhetorically divided the nation into “makers” and “takers.”

“I shouldn’t castigate a large group of Americans to make a point,” Ryan acknowledged.

Such comments are rare in politics, and suggest admirable resources of integrity and a capacity for growth. But Ryan works within the context of a congressional party that appears determined to bury him in dysfunction and reaction, and he continues to cling to policies that offer no way out of the rubble.

Having promised a return to regular legislative order in the House of Representatives, and a season of big policy ideas, Ryan has been stymied by the same anti-government Republicans who undermined his predecessor, John Boehner. The House is about to leave for recess with no apparent progress on meeting an April 15 deadline for approving a federal budget.

The vision Ryan sketched Wednesday was nonetheless uplifting. In a “confident America,” he said, “we aren’t afraid to disagree with each other. We don’t lock ourselves in an echo chamber, where we take comfort in the dogmas and opinions we already hold.”

Yet Ryan leads a party that’s trapped, especially in the House, in precisely the kind of ideological lockdown he describes. One small but telling example: Republicans broke longstanding tradition and prohibited the White House budget director from testifying on the administration’s annual budget request.

With extremists in his party, including Ted Cruz, massed on one front, and Donald Trump positioned on another, Ryan occupies perilous ground. Yet he seemed confident of finding a way out. “Instead of playing to your anxieties, we can appeal to your aspirations,” Ryan said with perhaps unreasonable sunniness. “Instead of playing the identity politics of ‘our base’ and ‘their base,’ we unite people around ideas and principles.”

This is a statement of politics in the ideal, and it’s a good destination for Ryan to keep in mind. But the Republican leader and his troops have little likelihood of reaching it until their party takes a sharp turn away from dogma toward pragmatism and moderation.

Article Link to the Bloomberg View:

Terror bites, followed by EU Pavlov’s bark

The bloc is to discuss ideas on how to improve security it couldn’t agree to after previous attacks. 

By Jacopo Barigazzi  and James Panichi
Politico EU
March 24, 2016

Another terrorist attack, then the familiar EU response.

As Brussels struggled to get back on its feet in the wake of Tuesday’s deadly blasts, in which 31 people were killed and 270 injured, European politicians spoke of an urgent need for “a quick, more forceful response” to “catch and track the terrorists.”

On the evidence of the EU response to every previous terrorist outrage, the most recent just four months ago in Paris, this is the reality: The “extraordinary” meeting of justice and home affairs ministers called for Thursday in Brussels will produce noble sentiments and stand slim to no chance of adopting any meaningful change to the way the bloc protects itself from terrorists.

As before, the rhetoric came in forceful gusts from various quarters a day after bomb blasts ripped through Brussels airport and a metro station, the latter just down the street from where ministers will meet Thursday.

“The intelligence services must cooperate better,” German Interior Minister Thomas de Maizière told Germany’s NTV. “The best way to stop such attacks is exchanging information. There are different mentalities. People don’t want to share all of their information.”

“Implementing a European CIA would need a treaty change” — Gilles de Kerchove

The European Council’s counter-terrorism chief, Gilles de Kerchove, told CNN that the way forward was to tackle terror “quicker, more forcefully.”

“We will not succeed by acting in isolation,” Theresa May, the U.K.’s home secretary, told the British parliament Wednesday.

And French Prime Minister Manuel Valls on Wednesday reiterated calls for the swift approval of the Passenger Name Record (PNR) directive, which would oblige airlines to give EU countries their passengers’ data. “It’s an essential tool,” Valls said, saying this instrument would enable countries “to catch and track terrorists.” PNR, first proposed in 2011, was backed by EU countries in December but is awaiting approval in the European Parliament.

“The future of Schengen … is at stake,” Valls added, referring to the passport-free travel zone in Europe.

More ‘union’ cowbell

The French prime minister was speaking in Brussels while standing next to Jean-Claude Juncker, the European Commission president, who on Wednesday called for an “EU security union.” Vaguely referring to a series of Commission proposals that the EU countries might adopt, Juncker didn’t spell out clearly what that means, other than adding to an impressive list of EU “unions” — capital markets union, energy union, economic and monetary union…

The ambitious idea of establishing a European equivalent of the United States’ Federal Bureau of Investigation (FBI) or even a European version of the U.S.’s Central Intelligence Agency (CIA), as Belgium’s Prime Minister Charles Michel has advocated, is kept away in a locked drawer, deemed far too difficult to even contemplate by most EU leaders.

The ministers will pay lip-service to the need to work together, but the package of measures they will push through will have already been signed off

“[I]mplementing a European CIA would need a treaty change,” de Kerchove told Radio RTBF last December.

Commission officials say they cannot even come up with such a proposal because Brussels has no power to do so, saying it’s up to the national states.

“It’s a real pity we cannot … start working on something like that,” a diplomat said.

The “extraordinary security summit” on Thursday is by design largely a theatrical set-piece. Similar summits were held after the Paris attacks in November (death toll = 130) and the foiled attack on the Paris-bound Thalys fast train in August (death toll = 0).

"The ministers will pay lip-service to the need to work together, but the package of measures they will push through, mainly put forward by the Commission, will have already been signed off."

“Most of [the package] is not new — just a collection of what they are already doing,” said Jan Philipp Albrecht, a German Green MEP who is the vice-chair of the European Parliament’s Civil Liberties, Justice and Home Affairs Committee.

That includes setting up a team of national counter-terrorism experts at Europol’s European Counter Terrorism Center and a push for greater integration of European and international security databases, diplomats say, referring to the content of a draft joint statement leaders will agree at the summit.

It does not include anything significant to boost airport security, even though 11 of those killed on Tuesday were waiting to catch flights out of Brussels airport.

“Security is within the competence of national authorities,” Dimitris Avramopoulos, the European commissioner in charge of home affairs issues, said Wednesday. “I am sure the Belgian authorities have already taken into consideration recent experiences and will do their utmost in order to better provide, in security terms, safety to citizens.”

‘Rings of steel’

Not everyone thinks it should stay that way. The chairman of the European Parliament’s Civil Liberties, Justice and Home Affairs Committee, British MEP Claude Moraes, said the time had come for EU states to address the vulnerability of airport public spaces by agreeing on common security standards.

“These are very difficult, costly issues, but if you look at high-security airports around the world, you know that it is do-able,” Moraes said, citing the security model of Israeli airports, where cars are stopped on the way in and security personnel work both inside and outside the terminal.

This suggestion was rejected by fellow committee member Timothy Kirkhope, who said the creation of a “ring of steel” around an airport’s perimeter would create logistical problems and harm intelligence-gathering efforts.

“This would mean a total re-think to our approach to travel,” said Kirkhope, a qualified pilot.

Article Link to Politico EU:

The Real Reason Your Paycheck Is Not Where It Could Be

Here’s a closer look at America’s economic growth.

By Martin Neil Baily
March 23, 2016

For more than a decade, the economy’s rate of productivity growth has been dismal, which is bad news for workers since their incomes rise slowly or not at all when this is the case. Economists have struggled to understand why American productivity has been so weak. After all, with all the information technology innovations that make our lives easier like iPhones, Google GOOG -0.36% , and Uber, why hasn’t our country been able to work more productively, giving us either more leisure time, or allowed us to get more done at work and paid more in return?

One answer often given is that the government statisticians must be measuring something wrong – notably, the benefits of Google and all the free stuff we can now access on our phones, tablets and computers. Perhaps government statisticians just couldn’t figure out how to include those new services in a meaningful way into the data?

A new research paper by Fed economists throws cold water on that idea. They think that free stuff like Facebook FB 0.25% should not be counted in GDP, or in measures of productivity, because consumers do not pay for these services directly; the costs of providing them are paid for by advertisers. The authors point out that free services paid for by advertising are not new; for example, when television broadcasting was introduced it was provided free to households and much of it still is.

The Fed economists argue that free services like Google are a form of “consumer surplus,” defined as the value consumers place on the things they buy that is over and above the price they have paid. Consumer surplus has never been included in past measures of GDP or productivity, they point out. Economist Robert Gordon, who commented on the Fed paper at the conference where it was presented, argued that even if consumer surplus were to be counted, most of the free stuff such as search engines, e-commerce, airport check-in kiosks and the like was already available by 2004, and hence would not explain the productivity growth slowdown that occurred around that time.

The Fed economists also point out that the slowdown in productivity growth is a very big deal. If the rate of growth achieved from 1995 to 2004 had continued for another decade, GDP would have been $3 trillion higher, the authors calculate. And the United States is not alone in facing weak productivity; it is a problem for all developed economies. It is hard to believe that such a large problem faced by so many countries could be explained by errors in the way GDP and productivity are measured.

Even though I agree with the Fed authors that the growth slowdown is real, there are potentially serious measurement problems for the economy that predate the 2004 slowdown.

Health care is the most important example. It amounts to around 19% of GDP and in the official accounts there has been no productivity growth at all in this sector over many, many years. In part that may reflect inefficiencies in health care delivery, but no one can doubt that the quality of care has increased. New diagnostic and scanning technologies, new surgical procedures, and new drugs have transformed how patients are treated and yet none of these advances has been counted in measured productivity data. The pace of medical progress probably was just as fast in the past as it is now, so this measurement problem does not explain the slowdown. Nevertheless, trying to obtain better measures of health care productivity is an urgent task. The fault is not with the government’s statisticians, who do a tremendous job with very limited resources. The fault lies with those in Congress who undervalue good economic statistics.

Gordon, in his influential new book The Rise and Fall of American Growth, argues that the American engine of innovation has largely run its course. The big and important innovations are behind us and future productivity growth will be slow. My own view is that the digital revolution has not nearly reached an end, and advances in materials science and biotechnology promise important innovations to come. Productivity growth seems to go in waves and is impossible to forecast, so it is hard to say for sure if Gordon is wrong, but I think he is.

Fortune reported in June 2015 that 70% of its top 500 CEOs listed rapid technological change as their biggest challenge. I am confident that companies will figure out the technology challenge, and productivity growth will get back on track, hopefully sooner rather than later.

Article Link to Fortune:

What Do Millennial Workers Want? A Raise.

By Brendan V. Duke
Real Clear Policy
March 23, 2016

The business press is full of articles telling companies "what Millennials want" and "how to manage Millennials." Here's a simple hint: We want a raise.

My recent research shows that median compensation — wages plus the value of benefits from employers such as health-care premiums and 401(k) contributions — for a 30-year-old in 2014 was below that of a 30-year-old ten years earlier, after inflation. In fact, 30-year-olds today make around the same amount of money that 30-year-olds made in 1984.

The failure of wages for 30-year-olds to grow is especially discouraging considering that 30-year-olds today, on paper, should be the best-paid group of 30-year-olds in U.S. history. Today, 30-year-olds are 50 percent more likely to have finished college than they were in the mid-1980s, and despite the recent slowdown in productivity growth, the economy is still 70 percent more productive than it was then.

When we break down the numbers by educational attainment, the picture grows even more disappointing. A 30-year-old without a college degree makes less today than 30 years ago. And even though college-educated 30-year-olds have seen a modest increase in pay since 1984, they still make less than this age group did in 2004. Meanwhile, the real cost of a four-year public college has grown 30 percent over the last ten years, and student-loan debt has exploded.

The main reason pay for 30-year-olds hasn't budged is that they have entered a labor market where the deck is stacked against workers. The first challenge to Millennial workers' bargaining power is the incomplete labor-market recovery. Employers don't raise wages because they feel generous; they raise wages because they have no other option if they want to hire and retain qualified workers. When there are a dozen workers willing to do a job, it becomes that much harder to bargain for a higher wage.

Despite a record 71 months of private-sector job growth, there remains a great deal of slack in the Millennial labor market. The share of 25- to 34-year-old men with a job is 2.6 percentage points below its pre-recession level and a striking 6 percentage points below its level in 2000. In fact, between 1980 and the Great Recession, there were only eight months when the share of 25- to 34-year-old men with a job was lower than it is today.

The second challenge to Millennials' bargaining power is that they are almost entirely unable to join the institution that could help rebalance power — namely, unions. Unions traditionally have helped balance power by letting employees band together to negotiate for higher wages, better benefits, and additional job security. While union wages are not immune to the disempowering effect of weak labor markets, their growth rates are less cyclical than nonunion wages. Unfortunately, not only has union membership sharply declined among all workers in recent decades, but Millennials are also the generation least likely to belong to a union.

So what can we do to help 30-year-olds pull ahead? Policymakers traditionally suggest that raising the economy's productivity and educational attainment are solutions to stagnant wages. But the failure of median compensation for 30-year-olds to grow since 1984 despite more education and productivity strongly suggests that these solutions are not sufficient by themselves.

Instead, raising the wages of Millennials will require leveling the playing field between workers and employers. The first step is for the Federal Reserve to pursue an empirically driven monetary policy that recognizes that further interest rate hikes make no sense in a period of low employment rates, practically non-existent inflation, and negative interest rates in other advanced economies. The second step is to reverse the decades-long decline in union coverage by making it easier for workers to join together and bargain collectively.

Another important way to help Millennials is to recognize that not all of them are just trying to land that first full-time job: The oldest group of Millennials will turn 35 this year. As Millennial workers begin to raise children, they will have to balance work and family in an economy where two incomes are more necessary than ever.

Unfortunately, research finds that women see their wages decline 7 percent for each child they have, and about half of this "motherhood penalty" is explained by mothers' losing work experience and seniority while becoming more likely to take on part-time and seasonal jobs. Enacting the right set of work-family policies, such as paid family and medical leave and subsidized child care, would permanently raise Millennial mothers' wages, as they would need to take less time off from work to care for their families and would find it easier to hold full-time jobs.

Work-family policies wouldn't just benefit Millennial mothers. Millennial fathers report more egalitarian views regarding family and gender roles than did men of previous generations, but because the United States remains one of the few wealthy countries that do not guarantee the right of paid leave to fathers, many of these fathers are unable to take leave even when they want to. Extending work-family policies like paid leave to Millennial workers would help promote work-family balance for both men and women.

The U.S. economy has not rewarded young workers for achieving the highest educational attainment of any generation and working in a more productive economy. Fortunately, with the right set of monetary, labor, and family-friendly policies, Millennial workers can not only catch up with where they should be, but also leap ahead.

Article Link to Real Clear Policy:

Politics, Terrorism, Cuba, and Baseball

By Tom Bevan
Real Clear Politics
March 23, 2016

Watching some of America’s would-be political leaders respond to the terror attacks in Brussels yesterday had me channeling Casey Stengel, circa 1963. As manager of the last place New York Mets, Stengel watched his inept team bumble to yet another defeat before famously wondering aloud, “Can’t anybody here play this game?”

Baseball was on the mind of President Obama who, after spending just 90 seconds addressing the Brussels bombings at a speech given earlier that day in Havana, decided to attend an exhibition game between the Tampa Bay Rays and the Cuban national team.

Perhaps that’s a close call, but the president also went ahead with plans to grant an in-game interview to ESPN, where he again only briefly touched on the carnage caused by Islamic terrorists in Belgium. This was discordant.

“You want to be respectful and understand the gravity of the situation,” said Obama, wearing sunglasses and khakis, while on a split screen a Rays batter fouled off a curveball into the stands.

Obama went on to make the point that “the whole premise of terrorism is to try and disrupt people’s ordinary lives.” Fair enough. But Obama is not just some person living an ordinary life; he’s the leader of the free world.

U.S. presidents from Franklin Roosevelt to George W. Bush have insisted after deadly attacks by our enemies that the show must go on—specifically, that an essential component of the American spirit is to keep playing baseball during wartime.

Yet, these presidents also knew that optics matter. Skipping the game to make private phone calls to allies and national security professionals would have been a more serious and sober demonstration of American leadership than hanging out doing “the wave” at the ballpark with Cuba’s communist dictator.

Instead, as former NSA and CIA Chief Michael Hayden said yesterday on “Morning Joe,” the message Obama sent with his decision to attend the game is that the Brussels attack is “not that big a deal.”

Back home in the nation that invented baseball, however, two of the Republicans seeking to become Obama’s replacement went too far in the other direction. John Kasich and Ted Cruz used the Brussels attack as a pretext to attack Obama, whom they said should cut his trip short and come home. Cruz even suggested that Obama go to Brussels, which would have been the most perilous kind of grandstanding.

At a New York City campaign event Tuesday, Cruz sneeringly said that Obama "is happily at a baseball game, yukking it up with the Castro communist dictators.”

John Kasich, who usually knows better, echoed this sentiment.

“What I hope he will say is he's leaving Cuba and heading back to the White House [and] he’s going to begin to organize meetings with the leaders around the world,” Kasich said. “And at the same time get himself in the position of where we can send teams of people immediately to Europe to begin to dig in terms of what we need to do to address the vulnerabilities we have.”

But why should he do so? This wasn’t an attack on the United States, in which case cutting short a trip would be justified.

The president can do his job anywhere on the planet. It goes with the job. And it’s not like Obama is off on vacation; he’s in the middle of an official trip with historic implications that took months of planning.

More broadly, the president of the United States can’t and shouldn’t drop whatever he’s doing every time some deranged jihadists decide to blow themselves up somewhere around the world, which is the only implication of the position espoused by Kasich and Cruz. This is not something FDR or Dubya—or few U.S. presidents—would have even thought of doing.

Put simply, there’s a balance to be struck when responding to horrific events. The answer is not to pay them lip service and carry on as if nothing has happened, nor is to suggest the commander-in-chief overreact, drop everything and scurry home.

It’s worth noting that the two candidates who did the best job of striking that balance Tuesday were Donald Trump and Hillary Clinton, each of whom gave a multitude of interviews condemning the attack. Democrats denounced Trump’s rhetoric as overheated, and Republicans found Hillary’s response too boilerplate. But if this episode was any guide, maybe primary voters are giving us the general election we deserve after all.

Article Link to Real Clear Politics:

Inside the Mafia-ISIS Connection

The mobsters have the weapons, and they’re making a killing selling them off to Islamic radicals.

By Barbie Latza Nadeau
The Daily Beast
March 24, 2016

CASTEL VOLTURNO — By the time Aziz Ehsan, a 46-year-old Iraqi, was arrested near Naples on Tuesday, local anti-mafia police had already been trailing him for days to determine just why he was in the heartland of the Camorra crime syndicate’s territory. He was well known by both the French and Belgian secret services, which list him as a suspected ISIS contact. The Neapolitan cops were also aware of an international arrest warrant for him in Switzerland, where he was wanted in connection with a variety of offenses, including forgery, assault, and possession of illegal weapons.

He was apparently just the type of person Italian authorities thought might provide a valuable clue as they work to piece together the details of the complex relationship between Jihadist fighters and Italy’s various mobs.

But when the attacks took place in Brussels, the authorities decided it was time to move in and get him. He was arrested as he slept in a car with Italian license plates registered to a deceased man on Tuesday and is awaiting extradition to Switzerland, France, or Belgium.

He claimed that he was in the area to scout out luxury hotels for rich Iraqi tourists, but the police didn’t buy it; he appeared to have been living in the car for days. They also pointed to an absence of notebooks, a laptop, or tablet—items you’d think to bring on a research trip. His no-frills, no contract “burner” cell phone, like the kind currently favored by Western jihadis, was another sign that Ehsan wasn’t in the region to see which five-star hotels offered the best glass of Limoncello.

“We executed a European arrest warrant near Naples and arrested an Iraqi citizen known to the Belgian and French secret service,” Italy’s interior minister Angelino Alfano declared after his arrest. “He was in contact with terrorists.”

Ehsan’s presence in Italy very likely posed no imminent threat to anyone in this country, but it may be extremely significant in Europe’s losing battle against ISIS-motivated terrorism. Authorities now want to know if Ehsan was here on business, especially if he was working with the Camorra to secure false documents or illegal arms—both big moneymakers for the Neapolitan clans.

Since the Charlie Hebdo attacks in Paris in January 2015, Italian anti-mafia and anti-terrorism officials have been unraveling long-standing connections between Jihadi fighters and the Camorra in Naples. They have also uncovered ties to the Sicilian Cosa Nostra Mafia and the Calabrese ‘Ndrangheta gang, tracing weapons being trafficked in from the former Yugoslavia and several African nations which allegedly arrive easily in Neapolitan ports.

Italian anti-mafia police have made three major arrests in the last 12 months, during which they have confiscated major weapons arsenals that included Kalashnikov rifles, sub-machine guns, body armor and hundreds of rounds of ammunition that were ready to be sold to terrorist connections. They even found a price list for a wide variety of weapons available for prices ranging from €250 to €3,000 that was printed in Arabic, French and Italian.

“Naples has been, for many years, a central logistics base for the Middle East. The Camorra is also active in the world of Jihadist terrorism that passes through Naples,” Franco Roberti, head of Italy’s a prominent anti-mafia judge told The Daily Beast before the Brussels attacks. “Naples lends itself to this type of activity. In the past there have been contacts between Jihadi militants and the Camorra clans.”

He says that Italy’s mafia-fighting forces have “thwarted plots and synergies” between the terrorists and the mobsters. What’s not known, of course, is how many plots they’ve missed.

It is certainly a well-known fact that the Camorra runs a highly successful enterprise in the lawless Neapolitan hinterland running drugs, illegal arms and forged documents that make it especially easy for anyone entering Europe illegally to pass through even the tightest borders. It is just as well-known that the main client base has never been strictly Italian.

“We have evidence that groups of the Camorra are implicated in an exchange of weapons for drugs with terrorist groups,” Pierluigi Vigna, Italy’s national anti-mafia prosecutor said before he passed away in 2012.

Vigna’s words were quoted in a variety of Wikileaks cables that imply that the United States government has been well aware of the terrorist-mafia connection for some time. “Criminal interaction between Italian organized crime and Islamic extremist groups provides potential terrorists with access to funding and logistical support from criminal organizations with established smuggling routes and an entrenched presence in the United States,” according to one cable on Italy penned by the FBI.

Investigators say logistics help in moving Jihadi fighters through Europe is one of the hardest rackets to crack. Last summer, Salah Abdeslam, who, until last week, was the most wanted man in Europe for his role in the deadly terrorist attacks in Paris, traveled freely through Italy with the help of a network of what could be referred to as mafia-sponsored terrorism travel agents.

Authorities in Italy say he boarded a ferry in Bari headed for Greece last August, and that he used a pre-paid Italian debit card until the Paris attacks. Authorities say he used his real name tied to fake Italian documents in both instances.

The idea of Europe’s most wanted man running free is concerning enough. But what is at least as worrying is that the weapons being trafficked into Italy will end up being used in European capitals. Michele del Prete, an Italian counter-terrorism official who has been focusing on the links between organized crime and violent jihadists, warns that the two forces of evil have found a comfortable partnership. “It is established and proven that the lawless climate in Naples has often created favorable conditions for logistical support, exchange of weapons and false documents,” he said. “There are specialized groups we have tracked in various municipalities and prefectures that we know are facilitating terrorism.”

Investigator Roberti takes it a step further. “Campania, especially the province of Caserta and Castel Volturno, is one of the main gateways into Europe for those who wants to become a terrorist,” he said. “It has been demonstrated by numerous investigations. On this now, there are no doubts.”

Article Link to the Daily Beast:

Australia says Mozambique debris likely from missing MH370

By Byron Kaye and Swati Pandey
March 24, 2016

Australia said on Thursday debris recovered this month in Mozambique was highly likely to be from missing Malaysia Airlines flight MH370, while Malaysia called for a stepped up search of Africa's coast for clues to the plane's fate.

Official analysis found two pieces of debris were "almost certainly from MH370", Australian infrastructure and transport minister Darren Chester said in a statement, referring to the Boeing Co 777 that vanished in March 2014 with 239 people on board.

"That such debris has been found on the east coast of Africa is consistent with drift modeling ... and further affirms our search efforts in the southern Indian Ocean," Chester said.

The flight disappeared en route from Kuala Lumpur to Beijing, creating one of the most baffling mysteries in aviation history.

Investigators believe someone may have deliberately switched off the plane's transponder before diverting it thousands of miles off course, out over the Indian Ocean.

A search, led by Australia and one of the most expensive ever conducted, has focused on a 120,000-sq-km (46,330-sq-mile) band of sea floor in the remote southern Indian Ocean.

In 2015, French authorities said a wing part found on the Indian Ocean island of Reunion was part of the plane.

The Mozambique debris was examined by investigators from Australia and Malaysia, as well as specialists from Boeing, Geoscience Australia and the Australian National University in Canberra.


The discovery is likely to add to pressure from the public for the search to go on beyond a mid-2016 schedule for it to be wound up. Most of those on board were from China.

"If they don't find the plane in the area where they're searching now, they and others need to continue to look," said U.S. adventurer Blaine Alan Gibson, who found one of the new pieces of debris this month on his own independent search.

"They've got to solve this mystery. We can't give up after the current search area is completed," Gibson added in a telephone interview, shortly after being told by the authorities that his discovery matched the plane.

Malaysian Transport Minister Liow Tiong Lai said the coasts of South Africa and Mozambique should be searched and Malaysia wanted to send a team.

"We are currently awaiting approval from the South African authorities," Liow said. "The coastal search will be by a Malaysian team and focused around South Africa and Mozambique."

Liow, however, said the location of the underwater search need not be changed.

The piece of debris that Gibson found is a white, meter-long chunk of metal with "No Step" printed on it.

It arrived in Australia for testing this week, along with another piece of debris found in Mozambique soon after.

"I can't use the word happy to describe how I feel, because that means that the plane crashed, and that the plane crashed in a forceful impact," Gibson said.

"I'd use the word 'hopeful'."

Thursday, March 24, Morning Global Market Roundup: Dollar rise hits commodities as Fed talks of tightening


March 24, 2016

The dollar advanced for a fifth straight session on Thursday, pressuring commodities and Asian shares after yet another Federal Reserve official talked up the chance of more than one increase in U.S interest rates this year.

If the dollar .DXY can keep its footing going into the long Easter weekend it will notch up the first weekly gain in a month against a basket of major currencies. [USD/]

The euro eased to $1.1172 EUR=, leaving it well off last week's top of $1.1342. Sterling GBP also slid to $1.4096 GBP= on concerns the attacks in Brussels would aid the campaign to leave the European Union in June's "Brexit" vote.

Equity investors tend to dislike any hint of tighter U.S. policy and MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 1.0 percent.

The resource-heavy Australian market lost 1.1 percent and Shanghai .SSEC 0.6 percent.

Japan's Nikkei .N225 lost 0.6 percent. Trading house Mitsui & Co (8031.T) dived 7.5 percent after suffering its first ever loss as it was hit by big writedown on its copper and gas investments.

European equities were expected to open lower, with spreadbetting firm IG predicting Britain's FTSE 100 .FTSE to open 0.7 percent lower, Germany's DAX .GDAXI to fall 0.5 percent, and France's CAC 40 .FCHI to drop 28 0.6 percent.

On Wall Street the Dow .DJI ended Wednesday with a loss of 0.45 percent, while the S&P 500 .SPX eased 0.64 percent and the Nasdaq .IXIC 1.1 percent.

St. Louis Fed President James Bullard joined a chorus of officials in highlighting the risk of at least two rate hikes this year, with the first perhaps as soon as April.

Markets imply only one increase and dealers suspect an orchestrated attempt by the Fed to shift that thinking.

Yet for all the Fed's chatter about multiple hikes, the market seemed far from convinced. Fed fund futures <0> imply almost zero chance of a move in April and a rate of just 61.5 basis points by year end. The current effective funds rate is 37 basis points.

It was also notable that Treasury yields actually fell in response, with the 10-year US10YT=RR back down at 1.88 percent from a high of 1.95 percent on Wednesday.

Still, the rise in the dollar sparked profit-taking in a range of commodities from oil to gold to copper.

Oil took a further knock when data showed crude stockpiles had risen by three times the amount expected in the latest week. U.S. crude CLc1 fell a further 6 cents to $39.73 a barrel, after sliding 4 percent on Wednesday. Brent LCOc1 inched up 10 cents to $40.57. [O/R]

"Oil is still the center of attention for many markets. As their prices fall, markets are turning risk-off. We also should expect some correction given the fast pace of recovery in various asset markets," said Tohru Nishihama, senior economist at Dai-ichi Life Research Institute in Tokyo.

Gold XAU= was down at $1,216.80 an ounce, after hitting its lowest since late February at $1,214.7

Article Link to Reuters:

Why Europe must unify its intelligence networks

Israeli security experts claim that the high number of intelligence agencies and lack of cooperation in Europe hinders an efficient response to the battle against the Islamic State, which Israel's defense minister calls a "Third World War."

By Ben Caspit
March 24, 2016

“The increasing pressure on the Islamic State [IS] is causing the organization to change and to alter its modus operandi,” a former Israeli Mossad official told Al-Monitor, speaking on condition of anonymity. “The organization has lost quite a bit of territory in recent weeks and absorbing military defeats on the ground. In light of this situation, there are signs that IS is changing its strategy. From attempts to expand and continue building a caliphate, it is shifting to a survival mentality, maintenance of its current assets. In addition, it now emphasizes the launching of numerous, high-quality terrorist attacks on sensitive sites in the West, with its focus on nearby Europe, in which it can operate relatively easily.”

In recent months, Israel’s intelligence and security branches came to similar conclusions. IS, according to their assessments, is evolving into a more dangerous mutant. “We are looking at a new battlefield,” said the former official. “The West must learn to understand it, prepare for it and immediately battle against it. Any delay will cause great damage.”

After the March 22 IS attack in Brussels, Israeli Defense Minister Moshe Ya’alon said, “This is a Third World War against our common values.” Prime Minister Benjamin Netanyahu, in a taped speech delivered to the AIPAC conference in Washington, said, “Every day high-level delegations land at Ben Gurion Airport. They come from America. They come from Europe. Increasingly they come from Asia, from Africa, from Latin America. … They wish to learn from Israel’s proven security and intelligence capabilities how to better protect their own people.”

On this issue, a senior Israeli security official who requested anonymity said, “Israel should also adopt some humility on the issue. While it's true that we teach everyone else how to fight terror, we ourselves are unable to cope with the current terror wave that is mainly comprised of teenagers with knives or improvised guns.” Despite this cautionary statement, the West still knows that Israel has the most accumulated experience in dealing with Islamic terror, which has accompanied the state since the day it was founded.

“The most important thing is intelligence,” said Yaron Bloom, a former Shin Bet senior official. “It all begins and ends with intelligence. You cannot win without it. You must map out the areas in which the seeds of terror are sown and cultivated. You have to know what is being said in the mosques. You have to know where the extremists are located and then create a network of informers that will prevent ‘surprises.’”

Salah Abdeslam, one of the perpetrators of the Nov. 13 massacre in Paris, succeeded in hiding for months in the Brussels neighborhood of Molenbeek. Israeli security sources say that this proves that that neighborhood, like other places in Europe, has a terror-supporting infrastructure. This must be fully understood.

The main problem in today’s Europe, said a former senior officer from the Israel Defense Force’s (IDF) intelligence unit, is the lack of intelligence synchronization. In spite of Europe ostensibly being united, its security and intelligence organizations are scattered and unconnected. They do not sufficiently cooperate with one another. According to the source, there are six police and security organizations in Brussels alone. Belgium has 192 security organizations, while Germany has 16 intelligence organizations.

When intelligence does not flow in real time throughout the entire continent, the struggle is useless, said the IDF source, who cited the following example: It is known that Abdeslam was stopped at a checkpoint after the attacks in Paris, but released after a cursory check. This happened mainly because the necessary information did not arrive in time at the right place.

Europe has a knotty problem with political correctness, a senior Israeli figure who deals with securing airports emphasized. He said that a very high percentage of airport workers in Europe are Muslims. Although the vast majority of the workers are law-abiding citizens and have no connection to terror, even one lone worker who agrees to smuggle a bomb or detonator belt onto a plane or into a terminal can cause terrible damage. This is a time bomb. Such a scenario has already played out with the Russian passenger plane that crashed in the Sinai Peninsula in October.

This means that security branches must prepare for all scenarios and that security must be run by the state, like in Israel. This one sphere should never be privatized. The state is responsible for training, guidance, supervision and control. A large number of security circles must be in place, both visible and concealed. There must be active and passive security safeguards as well as synchronization among the systems. It is a never-ending “war of the brains,” but IS can be vanquished, if this is understood as a life or death struggle.

“The key to success,” said a former Mossad senior official speaking on condition of anonymity, “is that European leadership must understand that we are not talking here about a terror attack or some offensives against Paris or Brussels alone. This is an all-out war. In Europe, they still aren’t even able to utter the word combination ‘Islamic terror,’ as if it will go away if they don’t say these words. But it does exist, and it does threaten, and it seems to me, it is already clear that no compromise can be reached with it.

“Islamic State terror wants to destroy the West and replace it. The faster we understand this, the shorter and less difficult will be the path to victory. This brand of terror knows how to reach its audiences, knows how to use the networks and Internet, Sony PlayStation, Twitter and the social networks, in order to recruit and activate its agents. We must learn to monitor all these networks and terminate the recruitment systems. This is slow, time-consuming work. These are the new rules of the game, but with the proper allotment of resources and correct understanding of reality, victory is possible.”

The current “victory” photo belongs to IS. It was captured at a press conference by Federica Mogherini, the EU high commissioner for foreign affairs and security, and her Jordanian colleague after news of the attack in Brussels. Mogherini broke down in tears and left the podium. For IS, this is a victory photo. The West and Europe sanctify life, while IS and radical Islam worship death. This is the reason why the West will, ultimately, win. If it wants to live, it has no other choice.

Article Link to Al-Monitor:

Why Europe must unify its intelligence networks

In Chaos of Libya, Unity Government Only Adds to Disarray

By Rim Taher
March 24, 2016

Tripoli (AFP) - It was meant to finally bring an end to Libya's political chaos and unrest, but the creation of a new UN-backed unity government has only added to the country's disarray.

Desperate to resolve years of political deadlock that has allowed jihadists to gain an important foothold on Europe's doorstep, the United Nations and Western powers have been pushing hard for the acceptance of a Libyan power-sharing deal announced in December.

Under the agreement, Libya's rival administrations -- one supported by the internationally recognised parliament in the east and the other backed by an Islamist-backed militia in Tripoli -- are supposed to cede power to a new Government of National Accord (GNA) under prime minister-designate Fayez al-Sarraj.

But so far the only thing the two sides seem able to agree on is their mutual disdain for the new authority.

"The birth of this government in this way has done nothing but worsen the political crisis... create new conflicts and further destabilise" the country, said Mohamed Eljarh, a Libya analyst at the Washington-based Atlantic Council.

The extent of the crisis was hammered home on Wednesday when UN envoy Martin Kobler was prevented from travelling to Tripoli to work on installing the GNA.

"Again had to cancel flight to Tripoli... UN must have the right to fly (to) Tripoli," he wrote on Twitter, without specifying what had blocked the mission.

The GNA has not been formally endorsed by either parliament but it announced earlier this month it was taking office on the basis of a petition signed by a narrow majority of Libya's elected lawmakers.

The United States and its European allies have called on the government to swiftly move to Tripoli and take up power, threatening sanctions against those who undermine the political process.

But neither of Libya's rival administrations has so far shown any willingness to cooperate.

"Unless the international community can give the GNA control over Libyan finances, a powerful national army, and somehow make it legitimate in the eyes of the Libyan people, the GNA is poised to become the weakest of Libya's three competing national authorities," said Michael Nayebi-Oskoui, a US-based Middle East and North Africa analyst.

'A long way' from stability'

Libya collapsed into lawlessness following the 2011 NATO-backed ouster of longtime strongman Muammar Gaddafi.

Heavily armed groups rushed to the fill the power vacuum and in mid-2014 a militia alliance including Islamists overran Tripoli, forcing a recognised government that had struggled to function to flee to eastern Libya.

Eljarh said there was no hope of the GNA taking power in Tripoli "as long as the main armed groups are not ready to pledge allegiance" to the new authority.

"The international community would need to be ready to provide it with military protection if needed," he said.

And any attempt to force the government on Tripoli would be "a major security risk likely to cause clashes between armed groups".

The stakes are high. Just across the Mediterranean from Europe, Libya has become the latest stronghold of the jihadist Islamic State group.

IS has seized control of Gaddafi's coastal hometown of Sirte and launched a wave of attacks, both against rival Libyan forces and across the border in Tunisia.

The group claimed responsibility last year for two attacks in Tunisia -- on the Bardo national museum and at a beach resort near Sousse -- that killed a total of 59 tourists.

The lawlessness has also seen Libya became a favoured jumping-off point for smugglers bringing migrants on dangerous sea journeys to Europe.

Around 330,000 migrants have landed in Italy from Libya since the start of 2014, as Europe already struggles to cope with the influx of those fleeing five years of war in Syria.

Despite the international pressure, Nayebi-Oskoui said Libya is in such a shambles that it is unlikely the GNA will make a difference soon.

"Libya's fractured social and tribal structures require a strong and legitimate central government," he said. "Unfortunately we seem to be a long way from realising that objective."

Article Link to Yahoo News: