Thursday, May 19, 2016

Rove: What If Clinton Gets Indicted?

It would scramble the campaign if Hillary or her aides lose the vital FBI primary.

By Karl Rove
The Wall Street Journal
May 18, 2016

Despite losing the Oregon primary while barely eking out a win in Kentucky, Hillary Clinton emerged with 51 of Tuesday’s delegates to Bernie Sanders’s 55. To reach the 2,383 needed for the nomination, Mrs. Clinton now needs only 92 of either the 890 still-to-be-elected delegates or the 148 still-unpledged superdelegates. This is because she is already supported by 524 superdelegates—the Democratic Party’s unelected overclass—to Mr. Sanders’s 40.

Still, she must be concerned about losing the FBI primary. If the bureau recommends that the Justice Department indict Mrs. Clinton or close aides like Cheryl Mills, Huma Abedin or Jake Sullivan for acting with gross negligence—disregard of known or easily anticipated risks—in sending classified information over a private email server, the campaign could be completely scrambled.

The FBI may not recommend indictments, or the Justice Department could refuse to issue them. The latter could result in high-profile resignations like those in 1973 with the Watergate “Saturday Night Massacre,” when several top Nixon officials were fired or resigned. Only this time, the turmoil would be covered on cable TV and in high-def.

If there are indictments, Team Clinton will dismiss them as an overreaction to unintentional, minor mistakes and try pushing on through. But that may be unacceptable to the party’s hierarchy, especially if indictments occur before the Democratic convention in Philadelphia opens July 25.

The party establishment might balk at having the ticket led by someone mired in a national-security scandal or by Mr. Sanders, a socialist and independent who has never before sought election as a Democrat or attended a state or national convention.

Instead, the party establishment might move to replace Mrs. Clinton with Vice President Joe Biden, a sentimental favorite, or Secretary of State John Kerry, whom many in the party’s leadership think more substantive, less prone to gaffes and, because of his 2004 loss against President George W. Bush, more deserving.

The legally unbound superdelegates hold the balance of power. Neither Mrs. Clinton nor Mr. Sanders can get the nomination without their votes. And the rest of the Democratic delegates, unlike their Republican counterparts, aren’t bound by state laws or party rules to vote for the candidate they were pledged to in their state’s primary for a certain number of ballots.

The Democratic National Committee’s Rule 12.J. simply says: “Delegates elected to the national convention pledged to a presidential candidate shall in all good conscience reflect the sentiments of those who elected them.” So superdelegates could deadlock the convention until enough Clinton and Sanders supporters are willing to discard their original choices and swing the convention to a substitute.

What happens, however, if Mrs. Clinton or someone in her inner circle is indicted after the convention? The Democratic leadership could move to replace her on the ticket. Presumably this would require her to agree to resign as the nominee and be replaced either by a snap convention or by the Democratic National Committee acting on the party’s behalf. Mrs. Clinton wouldn’t give up easily—she and her husband have brazenly pressed through previous scandals.

Even if she agreed to step down, Democrats would have only a narrow window to act. While many states allow election officials to place major-party nominees on the ballot at their discretion, at least 25 states set deadlines for parties to formally certify nominees.

According to a summary by the National Association of Secretaries of State, Texas and Michigan have the earliest deadlines—the first business day after the Democratic convention’s adjournment. That would be July 29 or Aug. 1, depending on the hour of adjournment. Ten other states have certification deadlines sprinkled across the month of August, from Delaware on Aug. 2 to Utah on Aug. 31. These dozen states have a total of 150 Electoral College votes.

What if Democrats act after certifying Hillary Clinton on the ballot in early-deadline states, and then make Mr. Biden or Mr. Kerry the nominee everywhere else? It could then be virtually impossible for them to win the presidency outright, especially since six early-deadline states (Alabama, Michigan, Ohio, Oregon, Utah and Virginia) have “faithless elector laws” that compel electors to support the popular-vote winner. The best possible outcome for Democrats then might be to kick the election to the House of Representatives by denying Donald Trump an electoral-college majority.

An indictment of any higher-up in Clinton World would produce a royal mess for Democrats. You can bet there are wise strategists in a backroom somewhere gaming this out, just in case.

Article Link to The Wall Street Journal:

Thursday, May 19, Night Wall Street Roundup: Stocks Weaken, Dollar Gains Amid Fed Hike Talk

By Lewis Krauskopf
May 19, 2016

Stocks around the world sold off on Thursday, while the U.S. dollar gained, pressuring oil and other commodities, as investors absorbed the possibility that the U.S. Federal Reserve will raise interest rates in the near term.

Oil prices erased most losses as supply worries offset the drag from the dollar.

Financial markets were adjusting to the minutes of the Fed April meeting, released on Wednesday, in which the U.S. central bank opened the door to a rate hike in June, catching investors off guard.

Speaking on Thursday, New York Fed President William Dudley said the U.S. economy could be strong enough to warrant an interest rate increase in June or July.

"We are on track to satisfy a lot of the conditions" for a rate increase, Dudley said.

Traders were projecting a 32-percent chance the Fed would raise rates in June, according to the CME FedWatch tool, up from 15 percent on Tuesday. A majority now expect a rate hike at the July meeting.

"The Fed seems to think the economy is quite a bit stronger than some market pundits and maybe investors in general think," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.

"Not only is there the concern that they will, in fact, do damage to the economy, but also one more step in removing the easy money that clearly has been a benefit for rising asset prices over the last few years," McCain said.

The Dow Jones industrial average .DJI fell 91.22 points, or 0.52 percent, to 17,435.4, the S&P 500 .SPX lost 7.59 points, or 0.37 percent, to 2,040.04 and the Nasdaq Composite.IXIC dropped 26.59 points, or 0.56 percent, to 4,712.53.

The Dow and S&P touched roughly two-month lows before paring losses. Financials .SPSY, which tend to benefit in a rising rate environment, shed 0.9 percent after posting their best day in a month on Wednesday.

The pan-European FTSEurofirst 300 index .FTEU3 ended down 1.2 percent, as commodity-linked names fell. European travel and leisure stocks .SXTP fell 1.5 percent after EgyptAir jet carrying 66 passengers and crew from Paris to Cairo disappeared.

MSCI's gauge of global stocks .MIWD00000PUS dropped 0.9 percent, falling for a third straight session.

The global index is off about 2 percent for 2016. Concerns about the global economy persist and investors are responding to diverging policies between the Federal Reserve and other major central banks.

The Fed comments are "affecting the markets today and I think it’s going to continue to affect the markets over the next few weeks as we inch closer towards June," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa.

The dollar .DXY rose 0.3 percent against a basket of currencies, adding to gains after hitting its highest point since late March on Wednesday.

Oil prices settled largely unchanged as worries about Canadian and Nigerian supply outages offset the impact of a stronger dollar. A stronger dollar makes commodities denominated in greenbacks more expensive for holders of other currencies.

U.S. crude Clc1 settled down 3 cents at $48.16 a barrel. Benchmark Brent's front-month contract, July LCON6, settled down 12 cents at $48.81 a barrel. It had fallen more than 3 percent during the session.

U.S. Treasury prices rose, rebounding from Wednesday's selloff. Yields, which move inversely to prices, had climbed to their highest in about two months for shorter-dated maturities after the Fed's minutes were released.

Benchmark 10-year U.S. Treasuries US10YT=RR rose 10/32 in price to yield 1.8487, down from 1.883 percent late on Wednesday.

Spot gold XAU= was down 0.4 percent, and touched a three-week low.

Article Link to Reuters:

Liberal Media Turns On Sanders

By Niall Stanage
The Hill
May 19, 2016

Bernie Sanders is suddenly facing a barrage of criticism from liberal commentators.

As the fallout from last weekend’s Nevada Democratic convention spreads, sharply critical pieces about the White House hopeful and his campaign have appeared in progressive outlets such as Mother Jones, Talking Points Memo and Daily Kos within the past 48 hours.

The Sanders campaign has also taken hits from progressive CNN contributor Sally Kohn, who endorsed the Vermont senator from the stage at a massive rally in New York City just before the Empire State’s April primary.

Kohn wrote an article published Wednesday for Time magazine that was headlined, “I felt the Bern but the Bros are extinguishing the flames.”

The fact that the criticism is coming from left-leaning sources makes it more difficult for Sanders supporters to rebut it.

Meanwhile, Democrats outside Sanders’s orbit argue the jabs show that even influential writers on the left — who tend to take more progressive positions than Democratic leaders in Washington — are concluding that the senator is hurting the party.

“Progressive thought-leaders were early validators for Bernie Sanders’s candidacy, helping him define himself as a credible candidate for president,” said Democratic strategist Evan Stavisky.

“However, as it becomes clear to anyone who can do basic math that Hillary Clinton is going to be the Democratic nominee ... people who live in the real world see that the time has come for Bernie Sanders to say he did the best he could. Ultimately the math simply isn’t there for it to be viable.”

Some of the flak Sanders has faced has been unusually personal in nature, which is particularly striking given the leftward lean of many of the outlets involved.

“The one thing I do keep wondering about is what happened to Bernie Sanders,” writer Kevin Drum opined in Mother Jones. “Before this campaign, he was a gadfly, he was a critic of the system, and he was a man of strong principles. He still is, but he’s also obviously very, very bitter. I wonder if all this was worth it for him?”

At Talking Points Memo, Josh Marshall said he had been wrong to think that the “key driver of toxicity in the Democratic primary race” had been Sanders’s campaign manager, Jeff Weaver. Instead, he wrote, “it all comes from the very top” — from Sanders himself.

Criticism of the tone of the 74-year-old Independent’s campaign has been building for some time. Clinton’s large lead in delegates, and the shrinking number of contests left, have led some to suggest that Sanders’s quest is a quixotic one that is only likely to hurt the all-but-certain nominee.

But those fears became newly urgent after Saturday’s chaotic convention in Nevada.

Though many facts are still in dispute, complaints from Sanders supporters that the proceedings were biased against them led to scuffles at the venue and the event being shut down early because security personnel could no longer guarantee order. The state party chairwoman later had her cellphone number posted to social media and had threats made against her.

The scenes of mayhem led to Senate Minority Leader Harry Reid (D-Nev.), among others, calling on Sanders to dial down the rhetoric. Instead, he released a fiery statement insisting that some of the criticisms were “nonsense” and that the Democratic Party needed to be open to change. Sanders continued that tone with a speech in Southern California on Tuesday night.

Markos Moulitsas of the Daily Kos, who is a columnist for The Hill, was among the most emphatic critics of the statement, describing it as “an utter disgrace” and complaining that Sanders gave too much prominence to talking points and not enough to his condemnation of violence, which appeared in the third paragraph of the statement.

Tad Devine, a senior adviser to the Sanders campaign, pushed back against such charges.

“Of course Bernie Sanders and the people around him condemn any talk of violence or threats of violence. We certainly don’t condone it. And whether the senator did that in paragraph number 3 or number 2 or number 1 should not be relevant,” Devine said.

He also complained about the fact that the Nevada state party had used the phrase “penchant for violence” to describe Sanders backers. To Devine, “that is completely out of bounds. That is an unfair assertion, and it leads to everyone jumping on it, and then some of the vitriol that followed that.”

But those explanations are not entirely persuasive to someone like Kohn, who told The Hill that, even before she endorsed Sanders, the online behavior of some of his most fervent supporters “gave me pause.”

Reflecting on the events in Nevada and the aftermath, Kohn said there was too much equivocation for her tastes in Sanders’s response.

“There is always a but — ‘But they’re passionate; but it’s rigged,’ ” she said.

“Has he done everything he can to truly distance himself from this kind of behavior in the full sense of moral leadership? I don’t think he has.”

Article Link to The Hill:

Republicans' New Reality: Forever Trump

Win or lose in November, his supporters have already won key positions within the party that ensure their influence will extend well past 2016.

By Kyle Cheney
May 19, 2016

Donald Trump’s Republican doubters like to think of him as an aberration, a one-time dalliance with a candidate who, once he’s defeated this fall, will be swept off the stage, leaving the GOP back in their rightful hands.

They’re already wrong: Even if Trump never sets foot in the White House, his stamp on the Republican Party will linger long past 2016.

Trump’s primary run spurred a string of like-minded allies to ride his coattails into positions of power within the Republican party, including seats on the Republican National Committee. With or without Trump, they — coupled with a host of conservative rabble-rousers swept in with the help of Ted Cruz — already marshal enough power within the party to change its course, whether the GOP establishment likes it or not.

Adding staying power to the 2016 rebellion is the fact that many of the incoming RNC members have won 4-year terms, virtually guaranteeing they’ll exert significant influence over the Republican Party through the 2020 presidential election and possibly long after.

“The one thing that I’ve seen across the country are change agents getting involved,” said Maryland’s David Bossie, the Trump ally and Citizens United CEO who ousted a 12-year member of the committee Saturday. “Whether they are 100 percent with me or not, I appreciate people who will stand up and be counted. That’s really I think what Mr. Trump’s done is given voice to a whole bunch of people who are going to be heard.”

In other words, when Republican elites lost control of their party during the 2016 primary, they lost it to a movement that has no intention of giving it back.

Along with Bossie, the next RNC roster will feature pro-Trump firebrand Lori Klein Corbin of Arizona and anti-establishment Cruz zealot Cynthia Dunbar of Virginia. They’ll join the potentially dozens of new RNC members that will take their seats in July after the national convention. Many current members are leaving because of term limits set by state parties. At least two were ousted in competitive races, with other contests still to come over the next three weeks.

The RNC, which includes two national committee members and a GOP chairman from every state and territory, drives the party’s message, fundraising, data gathering and presidential nominating process every four years. Members are elected either by state party insiders or at annual state conventions, where party activists gather to choose their leadership.

Turnover is nothing new on the 168-member RNC, which typically sees a 40 percent change in membership every four years, according to party officials.

This year, Trump’s fierce race against Cruz led to intense wrangling at those conventions that spilled over into the races for national committee posts. Though Trump himself didn’t get involved in recruiting or campaigning for RNC allies, the ginned-up interest by supporters of the two outsider candidates has fueled some of the RNC’s turnover.

The new members arriving on the Trump-Cruz wave will bolster the ranks of a slim but loud minority that is already pushing to give more power to grassroots Republicans — from Virginia’s Morton Blackwell to Oregon’s Solomon Yue. Though Trump and Cruz were bitter rivals on the campaign trail, both candidates’ followers share an anti-establishment fervor that could give them common cause when it comes to reforming the party.

“The Trump and Cruz forces are natural allies and reflect a lot of the conservative orientation that you’ve seen historically in the party,” said Jim Bopp, a former RNC member who is now special counsel to the RNC. “Every four years over the last decade, the RNC becoming increasingly conservative. I think that influence has grown … I do think that we’ll see a dramatic change. I do think that aspects of what is going on right now is revolutionary.”

What the new RNC member would like to accomplish is another matter. Typically, critics of the current structure argue that it’s too top-heavy — prone to control by Washington D.C. interests rather than the GOP grassroots. That’s reflected in presidential nominating rules that tip power away from local parties and toward the RNC — from the way delegates are selected to limits on how much support a candidate must earn to be eligible for nomination.

Blackwell told POLITICO he’s hopeful that the anti-establishment fervor driving today’s political climate helps him reshape those battles.

“Since I first started paying attention to these things back in the 1960s, there are probably fewer movement conservatives on the RNC than at any time. That is because we’ve had the nominations of McCain and Romney, neither of whom is sympathetic to movement conservatives,” he said. “I think it would be reasonable to assume that since a big majority of the delegates elected to the Republican National Convention in Cleveland supported either Cruz or Trump, that there would be more anti-establishment people elected.”

Blackwell hopes that will translate to what he says would be a new approach: “Under the new committee, there will be greater opportunities for power to rise from the bottom up rather than the top down.”

Trump hasn’t shown any direct interest in reshaping the RNC to fit his anti-establishment mold, but his supporters — as well as those who backed Cruz — stuffed convention halls and helped tip the balance of those meetings anyway.

“He didn’t directly have any role in Dave Bossie’s campaign, but obviously, we saw a different element come into central committees and different party offices,” said Louis Pope, who was bested by Bossie at the Maryland convention.

Pope, who was vying for a fourth four-year term as an RNC member, said he saw the seeds of change planted in 2012 when libertarians attempted to take over aspects of the convention that nominated Mitt Romney for president. Those changes have been reinforced and accelerated this year, he said.

“You’re going to have a more conservative party. You’re going to have a little bit more libertarian party,” he said. “Less, for lack of a better word, establishment.”

Shane Goettle, who won an election to fill the seat of retiring North Dakota committeeman Curly Haugland, said he supported multiple candidates before he came around to supporting Trump. But he said he now views the lesson of Trump’s candidacy for the GOP as shaking up the status quo.

“I don’t buy the idea that Trump is the end of the Republican Party. Trump is an opportunity for this party,” Goettle said. “I think shaking things up can be good.

That doesn’t mean, however, that these insurgents will have full power over the party. Establishment-backed Republicans continue to hold top posts at the RNC, and committee veterans cautioned that the ranks of these RNC newcomers are unlikely to rewrite the calculus on the RNC’s core functions.

Indeed, some of the newcomers fit the mold of more traditional RNC members, such as Keiko Orrall, an ally of moderate Massachusetts Gov. Charlie Baker and supporter of Marco Rubio’s presidential bid; California’s Harmeet Dillon the first Indian American elected to the RNC; and Tennessee’s two new members: Oscar Brock, the son of former Sen. Bill Brock, and Beth Campbell, a veteran party insider.

“I don’t see a whole lot of maverick in either one of them,” said Peggy Lambert, one of the outgoing Tennessee RNC members.

But the impact of the anti-establishment wave won’t just be felt among the RNC newcomers. It’s also influencing members who are already on the committee.

“You can’t ask for voters to give their input, and then they give it to you, and you just ignore it. That’s what some in the party want us to do, they want us to act like it didn’t happen,” said one veteran RNC member who spoke on condition of anonymity. “Donald Trump won. That’s the fact. That has consequences.”

Article Link to Politico:

Republicans' New Reality: Forever Trump

Parties Raise Big Money Off Disgust With Trump, Clinton

The 2 expected presidential nominees have been great for their opposing party's fundraising.

By Rachael Bade
May 19, 2016

One GOP email solicitation asks donors to pony up because of Hillary Clinton’s history of “attacking sexual harassment victims, defending an accused child rapist, [and] playing a major role in the Whitewater and Benghazi scandals.” A Democratic email highlights Donald Trump’s proposed ban on Muslim immigrants: “Stand with us and denounce Donald Trump’s bigoted plan.”

Congressional Republicans and Democrats may despise the other party’s pick for the White House, but let’s face it: Trump and Clinton are great for business. The business, that is, of raising huge sums of money for the battle to control the Senate and House in 2017.

Both Republican and Democratic congressional fundraising committees see major monetary promise in the other party’s candidates. For the right, Clinton’s endless cloud of controversies — from Whitewater to the ongoing FBI investigation of her email practices as secretary of state — offers a gold mine for their cash operations. Ditto for the left and Trump’s comments about deporting Hispanics, banning Muslims and punishing women who’ve had abortions.

Each side says the specter of the other’s presumed nominee has already been critical to priming the financial pump. National Republican Congressional Committee Web pages mentioning Clinton, for example, are bringing in 44 percent more in revenue than pages without her, officials say. And Democratic Congressional Campaign Committee Chairman Ben Ray Luj├ín believes Trump’s primary romp in the first quarter of this year is a key reason his outfit raised $25 million — a record, he said, for the first part of a presidential campaign cycle.

“With Trump as the front-runner, the DCCC has seen a major spike in grass-roots enthusiasm and donations,” the New Mexico Democrat said in an interview. “Trump at the top of the ticket … provides a greater opportunity to gain seats. Our supporters are more engaged and generous to ensure Democrats have the resources necessary to win.”

Republican fundraising committees weeks ago started trumpeting the most controversial parts of Clinton’s past, even highlighting years-old but sensitive issues like her defense of an accused child rapist as a criminal defense attorney early in her career.

“She’s a living history of scandal, lies and spin,” says the narrator in a new National Republican Senatorial Committee video set to dramatic music and a thudding background heartbeat. “Defended an accused child rapist, then laughed about his lenient sentence. Whitewater. Travel-gate. China-gate. File-gate… She politically attacked sexual harassment victims… Democrat Senate candidates, she is your burden to bear.”

That video is tucked into an NRSC email blasted out Sunday, asking to "show that you're #NEVERHILLARY... with your donation of just $3 or more today.”

Another NRCC email to donors Wednesday lists another series of Clinton controversies: “Benghazi coverup, sending classified information through her private, unsecured email server, improper ties between the Clinton Foundation and State Department contracts. When is enough, enough?"

NRCC spokeswoman Katie Martin said internal committee data confirm Clinton's effect on donors. More than 60 percent of all NRCC sales are for items, such as bumper stickers, branded “Hill No!" And emails that mention Clinton have a 10 percent higher engagement rate than ones that don't, NRCC officials told POLITICO.

Another sure tell: The NRCC’s second-best online fundraising day last year was the day Clinton announced her candidacy for president. And now, the committee has a record amount of cash on hand: $50 million, more than in any presidential election cycle before.

NRCC Chairman Greg Walden (R-Ore.) said Clinton's politics are as much of a factor as her controversies, with many viewing her candidacy as a continuation of the Obama administration.

“The whole Clinton history is such that just as [Minority Leader] Nancy Pelosi has motivated our bases because she has such a liberal agenda set, I think Hillary Clinton is going to be right there with her,” Walden said. “Our supporters don’t want to see the Obama philosophy perpetuated for another four years.”

Democrats are similarly finding that invoking Trump opens wallets. In the period since the New York mogul won the New Hampshire primary on Feb. 9, the campaign arm has raised nearly $1.5 million just from emails that focus on him, officials said.

The DCCC tapped Muslim Rep. Keith Ellison (D-Minn.) personally to send an email to donors just hours after Trump first came out with his pitch to ban Muslim immigration last December.

“Was I shocked when Donald Trump called for a ban on Muslims entering America? Sadly, no,” Ellison wrote. “That’s why I’m asking you to take a stand: Denounce the Republicans’ anti-Muslim bigotry right away.”

Months later, they’re still offering “stop bigotry” stickers to donors who respond to online solicitations.

Democrats have also raise money off of Trump's success. After the Manhattan mogul won the New York primary on April 19, for example, the DCCC asked supporters for money to stop the former reality TV star from making it to the White House.

“After Donald Trump’s huge victory in New York last night, one thing is clear. We CANNOT allow him to be our president,” the email read. “We need $150,000 in the door by midnight tonight to fight back…. Will you chip in $5 to defeat Republicans?”

Lujan said linking Trump to Hill Republicans is an easy call, in part because he believes Trump's comments are “putting a national spotlight on House Republicans' extreme tea party positions.”

“Donors want to beat Trump but also House Republicans that are spewing similar divisive, anti-women, anti-immigrant positions that have helped pave the way for his rise,” he said.

Trump, however, may be giving a boost to House Republicans, too. Many Republican donors, Walden said, fear that Clinton will beat Trump and Democrats will take the Senate. That would make the House the last bulwark against a Democratic-controlled Washington, the NRCC head said.

“There’s certainly a large donor block that is very committed to making sure we maintain a majority of the House, because they realize the Senate is a bit tenuous… and the White House is clearly in play as well,” he said. “The House is the backstop guarantee you can invest in and secure. So we’re finding that while donors may have fatigue elsewhere, they’re bought into our program because we’ve delivered results.”

Article Link to Politico:

Parties Raise Big Money Off Disgust With Trump, Clinton

Thursday, May 19, Morning Global Market Roundup: Prospect Of Early U.S. Rate Hike Boosts Dollar, Bashes Bonds

By Marc Jones
May 19, 2016

Revived prospects of an early U.S. interest rate rise, possibly as soon as June, lifted the dollar to a near two-month high on Thursday and left bonds, stocks, commodities and emerging markets all nursing losses.

Minutes from the Federal Reserve's last meeting took the market off guard after they revealed most policymakers thought a June rise would be appropriate if the U.S. economy continued its recent improvement.

It suggested the central bank is closer to lifting rates again than most investors had expected and saw a scramble from traders to readjust.

European stocks <0> and bond markets opened under pressure after volatile U.S. and Asian sessions, as anticipation of higher global borrowing costs on the back of any U.S. rate hike triggered selling.

With U.S. Treasury yields sharply higher, the dollar .DXY stayed strong after scaling its highest level against other top currencies since late March.

"A June hike is definitely back on the table," said UniCredit's Global Head of FX Strategy Vasileios Gkionakis.

"The bottom line is that the market is going from an excessively complacent view (on the likelihood of Fed hikes) to a more realistic one."

Benchmark U.S. Treasuries US10YT=RR were just starting to stabilize after one of their biggest sell-offs in almost three years.

Germany's 10-year Bund yield hit a two-week high before pulling back slightly as traders waited for what are likely to be far more dovish ECB meeting minutes later.

Analysts said concern about an EgyptAir plane that went missing en route from Paris to Cairo could also be lending the safe-haven German market some support.

CME Fed fund futures showed that the probability of a June U.S. rate increase rose to 34 percent after the release of the FOMC minutes on Wednesday from 19 percent earlier in the day, 15 percent on Tuesday, and less than 1 percent a month ago.

U.S Treasury yields have backed up considerably, with 10-year rates close to 1.90 percent and up almost 20 basis points since Monday. Two-year rates at 0.91 percent are at their highest since mid-March.

"With April activity indicators consistent with a healthy bounce-back in growth, we see risks of two rate hikes in 2016, with the first coming in the June/July time horizon," strategists at Barclays said.

Asia Falling

But many in the market are still skeptical the Fed would raise rates before Britain's June 23 referendum on whether to remain in the European Union, a risk noted by some Fed policymakers. July may be a stronger possibility.

Retail sales data from Britain on Thursday showed that the Brexit angst that has dented business confidence in recent months is having less of an effect on shoppers. Sterling hit its highest since February.

Fed Vice Chairs William Dudley and Stanley Fischer are due to speak later in the day and the markets will be eager to get more details on the Fed's thinking.

Emerging and commodity markets remained deep in the red as trading in Europe settled as the stronger dollar weighed.

Gold XAU= which tends to be inversely correlated to monetary policy easing, fell 0.1 percent to a three-week low $1256 per ounce, while MSCI's main EM stocks index .MSCIEF and China's currency, the yuan, both hit 2-1/2 month lows.

The greenback also weighed on commodities such as oil, with U.S. crude futures CLc1 losing 0.4 percent to $48.00 a barrel. A stronger dollar tends to put non-U.S. buyers of greenback-denominated commodities at a disadvantage.

"We suspect the oil market has moved too high, too far, too soon," French bank BNP Paribas said, as a near 60 percent surge in Iranian output added to price pressure.

Overnight, South Korea .KS11 and Australia had led Asia Pacific markets lower with 0.6 and 0.8 percent falls to dovetail with the latest fall in the yuan.

Moody's Investor Services said in a note rising leverage in China and emerging markets in general is an even greater concern now that the possibility of another U.S. interest rate hike this summer is back on the table.

Japan's Nikkei .N225 rose early thanks to a weaker yen, which fell to a three-week low against the dollar but later pared its gains to just 0.2 percent.

"In the short term, emerging markets are the most vulnerable," Steven Englander, global head of G10 FX strategy at Citibank wrote in a note to clients.

"Overall, the divergence trade is revived until further notice," he added, saying the Canadian and Australian dollars CAD= AUD=D3 were also vulnerable due to concerns around their economies.

Article Link to Reuters:

Why Iran Should Focus On Turkey, Not Russia, For Syria Cooperation

Despite all talk of a nascent Russian-Iranian alliance, it appears that Iranian interests — and the objective of peace in Syria — are perhaps best served through Iranian-Turkish cooperation.

May 19, 2016

TEHRAN, Iran — Eight months after the start of its military campaign, Russia has been successful in presenting itself as an influential international player in Syria. Along with Iran, it has been recognized as one of two states publicly supporting the Syrian government’s military operations against rebel and terrorist groups. This has prompted discussion of an alliance between Moscow and Tehran, with plenty of debate on what connects the two on Syria. But what is less debated is the important issue of what disconnects them.

Iran has steadily — and increasingly — supported the Syrian government since the outset of the crisis back in 2011. In contrast, just six months after Russia’s first airstrikes in Syria, Moscow declared a partial withdrawal of troops and its readiness to focus on finding a political solution together with the United States. Moreover, while senior Iranian officials have repeatedly said that the ousting of Syrian President Bashar al-Assad is a red line and any precondition that involves removing Assad is unacceptable, the Russians have been more flexible on this point. Indeed, most recently, Russian Foreign Minister Sergey Lavrov stated that Assad “is not Moscow's ally like Ankara is to Washington.” Furthermore, while Iran has always emphasized the necessity of preserving Syria’s centralized and unitary system of governance, Russian officials have occasionally expressed support for the idea of federalism — or at least not seriously opposed it.

The trajectory of Russian policy toward Syria suggests that it is based on a logic that can be described as “pragmatic minimalism.” It is pragmatic because its goal is to guarantee Russia’s obvious and specific interests in Syria, topped by the securing of its military bases in the west of the country and its access to the Mediterranean region. It is minimalist since the Russians are open to concessions and cooperation with the United States on any issue except these “hard” interests. In this vein, Russian policy rests on three fundamental pillars.

First, Russia’s most important objective is to preserve its geopolitical interests in western Syria. In fact, Moscow only decided to get militarily involved after rebel and terrorist advances raised the specter that such groups could dominate western regions. This is the only issue on which the Russians will not compromise.

Second, in Moscow’s view, Assad could remain in power — though not necessarily. Russian officials, at least in their official statements, have said that Assad could be a part of the future of Syria. But remarks such as the abovementioned one by Lavrov show that this doesn’t mean that Assad is a Russian “red line.” To Moscow, any secular and non-radical government that can maintain stability in Syria is acceptable.

Third, not only do the Russians not oppose the establishment of a federal political system in Syria, they in fact support it. Moscow sees federalism as a means to consolidate its geopolitical positions in western Syria. Moreover, the formation of an autonomous Kurdish entity in Syria — which could increase political and security pressure on neighboring Turkey — would be welcomed by the Russians. The establishment of close ties between Moscow and Syrian Kurds in recent months is a clear indication of this.

In contrast, Iran’s policy toward Syria can perhaps best be described as “ideological maximalism.” It is ideological because the ideological orientation of the future government in Syria is of great importance to Iran, and it is maximalist because Iran is not ready to compromise over any of the factors under discussion, such as Assad and federalism.

In terms of its vision for the future government of Syria, Iran shares the Russian view of opposing the rise of extremists. In this vein, Tehran sees the continuation of Alawite rule as the best possible option. At the same time, regarding the fate of Assad, Iran maintains that only the Syrian people can decide. Moreover, Tehran strongly opposes any plan to federalize or disintegrate Syria, especially because Kurdish autonomy could be a problem for Iran in terms of its possible effects on Iranian Kurds.

Russia has focused on cooperation with the United States to find a mutually acceptable solution — or better put, a kind of solution between “great powers.” Indeed, Moscow is satisfied that Washington treats it as a somehow equal power and lends consideration of its interests in Syria. Meanwhile, there is no doubt that Russian-Iranian cooperation in Syria has thus far produced undeniable benefits for both sides. Yet because of their obvious differences on important subjects such as Assad and federalism, it does not seem that the Russian-Iranian collaboration is sustainable.

Thus, Iran needs to pursue a regional initiative in which another influential regional actor, namely Turkey, could potentially have an important role.

Like Iran, Turkey also pursues a logic of “ideological maximalism” in its policy toward Syria, with converse insistence on the necessity of overthrowing Assad and establishing a “moderate Sunni” government close to Turkey’s ruling Justice and Development Party. Moreover, Turkey and Iran are strongly joined in their opposition to federalism in Syria.

From a realist point of view, both Iran and Turkey are most interested in the preservation of Syria’s territorial integrity. Federalism or disintegration could pose a direct threat to Iranian and Turkish national security alike. Moreover, Turkey and Iran’s other interests in Syria — preserving a level of influence, maintaining stability in their neighboring regions and containing Kurdish centrifugal tendencies in the wider region — can only be served by preserving its unity and territorial integrity.

To Tehran and Ankara, the best means to achieve these objectives could be the forging of an understanding — as supporters of opposing sides in Syria — under which the Syrian people can determine their own future in accordance with accepted international norms. Such a mechanism should involve all groups — whether Alawite, Sunni or Kurd — with such participation potentially easing the severity of demands for autonomy or secession, thereby preserving the country’s unity and both regional powers’ interests. Lastly, within this context, although Russia has a strained relationship with Turkey, the broad international support for a democratic solution for Syria means Moscow is not likely to turn against such an initiative — provided that its geopolitical interests are considered and preserved.

Article Link to Al-Monitor:

Where It All Went Wrong For Obama

By Noah Rothman
May 18, 2016

President Barack Obama warned the nation in September of 2013 that, if the United States did not pursue military action against Bashar al-Assad, it could soon become easier for terrorist organizations to obtain and use those weapons. He was right.

“If we fail to act, the Assad regime will see no reason to stop using chemical weapons,” Barack Obama said in a prime-time address to the nation. “As the ban against these weapons erodes, other tyrants will have no reason to think twice about acquiring poison gas, and using them. Over time, our troops would again face the prospect of chemical warfare on the battlefield. And it could be easier for terrorist organizations to obtain these weapons, and to use them to attack civilians.”

Of course, America did fail to act. The rest is tragic history, and the grim future that the president foretold in his prime time address has only just begun to come to pass. According to a TIME Magazine analysis of police reports, an Iraqi police position just south of the city of Kirkuk was shelled in early May by ISIS fighters using what is now believed to have been chemical munitions.

This isn’t the first ISIS attack using chemical arms believed to have been taken from Assad’s stockpiles. In March, the Associated Press revealed that ISIS staged a two-stage chemical attack in Northern Iraq that wounded over 600. “The US-led coalition said the chemicals Isis has used so far include chlorine and a low-grade sulfur mustard,” the AP reported. ISIS reportedly deployed mustard gas against Syrian government soldiers in April. In fact, ISIS has been liberally deploying chemical agents confiscated from Syrian army positions since at least August of 2015.

The president was correct to warn of the consequences of inaction, as they have come to pass. His more ominous admonitions have yet to manifest, but they probably will. The erosion of the international norm prohibiting the battlefield use of weapons of mass destruction (particularly one as common as chemical weapons) is uniquely threatening to American armed forces, which are deployed globally and are the equivalent of the world’s first responders. American men and women in uniform are already deployed to battlefields characterized by chemical warfare in Iraq and Syria. These are unlikely to be the last nightmarish killing fields to which American soldiers will be sent.

“This is not a world we should accept,” Obama said. It was a shame that he never meant it. That is a world as it now is, and it is a world that we have accepted.

This was just one of the many ill-considered statements in what historians may look back upon as the most muddled, contradictory, and self-defeating of the Obama presidency.

This was a speech in which the president touted the necessity of strikes for a “just” cause, particularly one as obvious as retaliation against a dictator executing genocidal attacks on civilians using chemical weapons. This was a speech in which the president made the case that, the failure to contain the spiraling civil war in Syria would inevitably result in the conflict spreading to neighboring nations like Iraq, Jordan, and Turkey. And yet, despite the president’s willingness to buck public opinion in order to deploy U.S. forces into combat and training missions all over the world, this was a speech in which Obama deferred to a skeptical Congress. Even only to authorize airstrikes on a narrow set of airstrikes on regime targets, the president requested war powers, and only because he was reasonably certain he would not get them.

That wasn’t the president’s only failsafe that would prevent him from finally making good on his August 2012 “red line” for action in Syria. This was a speech in which Obama revealed that Russian President Vladimir Putin had agreed to help broker a temporary resolution of the conflict between the Russian client in Damascus and the West. Assad would surrender his chemical weapons stockpiles in order to avoid further military action. In hindsight, this approach was misguided. Assad did not surrender his stockpiles of chemical weapons, and military action over the skies of Syria was merely postponed. Assad’s regime, however, was spared the vengeance of the Western powers – he continues to slaughter his people even today.

In leaning on Putin to broker peace over the skies of Syria, he demonstrated Washington’s reliance on the Kremlin to serve as a diplomatic lever not merely in Syria but in talks with Iran over its nuclear program. It is likely that this reassurance emboldened Putin and convinced him that few consequences would follow his invasion and annexation of Ukrainian territory just six months later. Almost precisely two years after Obama’s address, it was Russian forces that were aggressively intervening in the Syrian civil war to secure Assad’s position.

“Others have asked whether it’s worth acting if we don’t take out Assad. As some members of Congress have said, there’s no point in simply doing a ‘pinprick’ strike in Syria,” Obama said. “Let me make something clear: The United States military doesn’t do pinpricks.” In this overly dramatic rebuke, the president was responding both to members of Congress and his own Cabinet. Amid the administration’s failed effort to drum up support for a coalition strike on Assad in London, it was his own secretary of state who suggested the forthcoming military action would barely be noticed. “That is exactly what we are talking about doing, unbelievably small, limited kind of effort,” Secretary John Kerry said during a joint press conference with Britain’s foreign secretary.

That admission followed a New York Times revelation that the Pentagon’s target list included fewer than 50 regime sites. “One U.S. official who has been briefed on the options on Syria said he believed the White House would seek a level of intensity ‘just muscular enough not to get mocked,’” read a report in the Los Angeles Times. In his rebuke, was the president correcting Republicans, Democrats, America’s British allies, or the members of his own Cabinet? Perhaps the answer is all of the above.

“What kind of world will we live in if the United States of America sees a dictator brazenly violate international law with poison gas, and we choose to look the other way?” asked the president. He closed the speech by asking the country to summon up the resolve to punish Assad while simultaneously justifying his predetermination to stay his hand. It was the most confused and irresolute speech given by a sitting American president in living memory. It was, however, not without its share of pertinent warnings. The horrors the country would invite if America declined to act are upon us. How many more will follow?

Article Link to Commentary:

Leaving Europe Is A Risk The UK Shouldn't Take

By Michael R. Bloomberg
The Bloomberg View
May 19, 2016

The British electorate does not need Americans to tell them how to vote in the June 23 referendum, and I wouldn’t dare try. I have always had great admiration for the British people -- and great respect for the country’s democratic traditions. But from across the Atlantic, we Yanks are watching the campaign closely -- and many of us who have deep personal and business ties to the UK can’t help but take a close interest.

The special relationship between the UK and U.S. holds a special place in my heart, and not just because I had the great privilege of being named an honorary Knight of the British Empire by the Queen in 2014. I consider London my second home, my daughters hold British passports (thanks to their British mother), the company I founded employs nearly 4,000 people here, and we have long supported some of London’s world-class cultural institutions.

David Cameron and Boris Johnson, while on opposite sides of the debate, are both good friends and have assured me that no matter what the outcome of the vote, thanks to the Freedom of the City of London I was awarded in 2008, I will still have the right to herd sheep and cattle over London Bridge, and to carry a sword around Piccadilly Circus or anywhere else. Thank goodness for that!

Of course, there is so much more at stake in next month’s referendum, economically and politically -- first and foremost for the British people, but also for Americans and the world. I recognize that, as in most political campaigns, some of the rhetoric on both sides has been wildly exaggerated. But there is no disputing one fact: Given the uncertainty of Brexit’s potential impact, a vote to leave is a risk. The question is: Is the risk worth taking?

I should note: I’ve never been averse to taking risks. In 1981, I started a company to create a product that had no demand, with technology that didn’t exist. Twenty years later, I ran for mayor of New York when no one thought I had even the slightest chance of winning. Against the odds, both decisions turned out better than I could have ever dreamed of. But over the course of my career, there are certain risks that I have refused to take (including running for U.S. president this year) after weighing the evidence and concluding that they were likely to produce more harm than good. Some risks are just not worth it.

As the founder of a business that specializes in financial data, news and analysis, I have carefully evaluated the question of Brexit and concluded that the risks involved are troubling. No one can say for certain if an “Out” vote would shrink the financial services industry, which accounts for about 12 percent of the UK’s economic output and the bulk of our customer base. But in my conversations with chief executives of banks and other industry leaders, with rare exceptions, they see Brexit as a serious complication that could lead some jobs to shift to the continent over time. Some in Frankfurt and Paris are rooting for Brexit for this reason.

Bloomberg is building a new European headquarters in London. Whatever the outcome of the vote, we are committed to the UK. But if some of our clients move operations across the channel -- and there is a good chance that some foreign exchange and derivative trading will migrate overseas -- we may need to move more resources and personnel there, too. In addition, as the competition for talent intensifies, restrictions on free movement could force us to divert resources to other global technology centers, leaving fewer job opportunities for skilled British workers.

I also worry that Brexit will leave our UK employees worse off. No one knows for certain how the UK would fare in trade negotiations with the European Union, but we know Brussels would hold substantial leverage, given that the UK is far more dependent on the EU for exports than the EU is dependent on the UK. What price EU leaders would exact is impossible to predict, but deterring other countries from breaking away -- not to mention the opportunity to punish an old rival -- is likely to discourage them from looking sympathetically upon Britain. Even if fair terms are secured, achieving them may take years, and families may feel a pinch well into the next decade.

Those are risks that, as an entrepreneur who has invested heavily in the UK, I find unsettling. And as an American who has served in public office and seen the importance of international cooperation, the prospect of the UK leaving the EU is even more worrisome.

At a time when liberal democracies are threatened by anti-Western terrorists, it is critical that we closely coordinate on security policies and intelligence. In the aftermath of multiple terrorist attacks, British leadership on counterterrorism and intelligence is all the more crucial. Yet leaving the EU would diminish the UK’s ability to lead on security matters. Strategically, having the UK in the EU is a vitally important asset for the U.S. The UK and U.S. will always have a special relationship, but Brexit would leave the UK, America and the rest of the world in a weaker position to combat terrorism, promote trade, and confront other global challenges including climate change.

In the face of foreign threats and domestic economic struggles, it is inevitable that some will call for a retreat from international affairs. In the States, retreat from cross-border trade has unfortunately been a theme of candidates in both parties. One in particular, Donald Trump, has gone further, by scapegoating our foreign neighbors and competitors. Recently Trump has said that if he were casting a ballot on June 23, he would vote to leave.

I’m not advising the British electorate how to vote. But for centuries the British people and the world have benefited enormously from a confident, forward-looking and outward-facing UK -- and based on my desire to see the UK and U.S. both grow stronger in the years to come, I’m hoping that tradition continues.

Article Link to the Bloomberg View:

Bernie and Jane Sanders Play Thelma and Louise

As the Berniacs go nuts, Bernie himself is egging them on.

By Michael Tomasky
The Daily Beast
May 19, 2016

Now we are forced to ask whether Bernie Sanders has decided he wants to destroy the Democratic Party. I’m sure he would say he wants to save it. The way we saved villages in Vietnam. You know the quote.

I don’t allege that he decided to run as a Democrat for this reason. He did so, I’m told by those who’d know, because he did not want to be the 21st-century Ralph Nader and because he knew that running against Hillary Clinton would give him a much bigger stage on which to inveigh against the parasites.

That was then. But now, after the Nevada fracas and his gobsmacking statement in the wake of it, it’s remorselessly clear that he wants to obliterate the Democratic Party. Revolutions take on lives of their own. Robespierre never thought back in 1790 or ’91 that the guillotine would be needed. But as the dialecticians like to say, historical circumstances change. By 1793, those little sheep who’d been misled by sellouts like Danton were part of the…corrupt establishment.

Consider the statement. Have you read it? You must. Remember the context: It had just been revealed, only hours before, that his supporters had hurled abominable epithet at Nevada Democratic Chairwoman Roberta Lange, threatening death and calling her a “c--t.” That word, especially thrown at a woman, crosses an obvious line.

In such a circumstance, a normal politician would say something like: I still think the process in Nevada last weekend was unfair to my delegates. However, there is no place in my movement for this kind of invective, these kinds of threats. I renounce and denounce them completely. And I tell my supporters now, refrain from that. Hillary Clinton is my opponent in this primary; she is not our enemy.

Easy peazy. But here instead is what he said. Oh—after, after he ducked a question about it from a reporter, walking away in mid-question. Now that’s courage! Presidential! So then he put out a statement. Which began:

"It is imperative that the Democratic leadership, both nationally and in the states, understand that the political world is changing and that millions of Americans are outraged at establishment politics and establishment economics. The people of this country want a government which represents all of us, not just the 1 percent, super PACs and wealthy campaign contributors.

The Democratic Party has a choice. It can open its doors and welcome into the party people who are prepared to fight for real economic and social change – people who are willing to take on Wall Street, corporate greed and a fossil fuel industry which is destroying this planet. Or the party can choose to maintain its status quo structure, remain dependent on big-money campaign contributions and be a party with limited participation and limited energy."

What? Excuse me? Your supporters just threatened to kill a woman, called her a c---t, and this is how you open your official statement on that event? He did throw in a sentence about not condoning violence, but it was buried so that the effect of it was to communicate: yeah, yeah, I have to say this. Bitch.

Most things that happen in campaigns tell us something about people as politicians. This statement told us something about Sanders—and, I suspect, about his wife, Jane, and Jeff Weaver, his campaign manager—as human beings. Everything is subordinated to ideology. Basic human impulses are buried. There is only politics, only ideology, only the movement. I’m really glad we’re not in Romania in 1965. I know where I’d be.

I know this because I’ve known lots of people like this. Leftists like Sanders regard the Democratic Party as a far bigger problem in the world than the Republican Party. The thinking goes like this: The Republicans, sure, everybody knows they’re evil. That’s obvious. But the Democrats, they’re evil too. They adopt a few attractive positions, say nice things on certain issues as long as saying those nice things doesn’t really threaten the established economic order, so they’re even worse, finally, because they fool people into thinking they’re on their side. I heard this a hundred times from the old guys who used to hector me at the Socialist Scholars Conference in Manhattan 25 years ago when I used to speak there.

That’s what Bernie is. If he’d stayed in Brooklyn, he’d have been a Social Scholars Conference hectorer. He had the wisdom to move to a podunk state, and the luck to do so just as it was becoming the place where all the aging hippies were moving, and so he became a mayor and then a House member and, finally and exaltedly, a senator.

All that said I give him some credit. He’s much better on the big stage than I thought he’d be. And I certainly don’t have contempt for all his supporters. I am friends with some of his supporters. I love some of his supporters—not that way, but dear friends, extended family, like that. And I think most of his supporters are rational people who’ll accept the reality that he just didn’t get as many votes as the other person and in November will vote for the other person.

But they’re not what’s at issue here. What’s at issue here is the people who won’t accept reality, and in particular the Pied Piper who’s blowing on the flute and waltzing them off the pier. He is becoming a sputtering joke, a man who lost 58-42 and thought—really, truly thought, deep down in his kishkes—that it was stolen from him. And his aides, according to a New York Times piece posted Wednesday night, are ready to "harm" Clinton over the course of the next month, because Sanders also believes these farkakte general-election polls taken before anyone has spent a single dollar attacking him.

It could still be different for him. If the Democrats take the Senate, he could have more power than he’s ever had, more power than he’s ever imagined. He could be chairman of the Budget Committee. Imagine. That’s power! As any Marxist knows, the budget is what it’s all about.

He has a national stage. A legion who’d follow him through a brick wall. A Senate seat for life. He can leave a huge mark on this country.

But right now, he and Jane are like Thelma and Louise. Driving the car off the cliff. With Weaver in the backseat for good measure, saying “let’s not get caught” as Bernie floors it.

The cliff is in Philadelphia. There’s still time to hit the brakes. But it’s not clear the wheelman is interested.

Article Link to The Daily Beast:

Can America Ever Escape Its Failing Foreign Policy?

A bad strategy leads Washington into errors—but Washington doesn't care.

By John Allen Gay
The National Interest
May 18, 2016

America’s current foreign-policy framework has produced a string of failures. Iraq and Afghanistan were expensive messes; Libya and the Balkan interventions, destabilizing wars of choice; we’re plainly overextended in Europe and can never seem to realize our long-promised pivot to Asia. Many of our allies carp about the need for U.S. “leadership” and growing threats in their neighborhoods while spending pittances on their own defense; at the same time, the publics in the same countries appear to resent our efforts to defend them. We have amassed all the downsides of empire, while seeing few of its benefits. And within many Washington foreign-policy circles, the solution to the problems our approach has created is to double down. Indeed, while most public discussion has focused on the shortcomings of one major party’s candidate for the presidency, few seem concerned that the other major party is poised to nominate a candidate who was an enthusiastic cheerleader for all of the serious foreign-policy blunders I listed above. Perhaps the United States simply has no alternative to its current strategy.

Not so, argues Stephen Walt. In a keynote address to the Charles Koch Institute’s Advancing American Security conference today in Washington, D.C., the Harvard professor made a bracing case for a different direction, a U.S. foreign policy far more restrained than today’s adventurism yet far more engaged than the isolationism of, say, Sakoku-era Japan. By remaining aloof from many of the world’s friction points, the United States would be able to invest more in its own affairs, building a firmer foundation of national power.

In Walt’s view, the United States enjoys advantages that almost no other great power in history has had. We are separated from all other major states by two vast oceans, and enjoy unquestioned supremacy in our entire hemisphere. We have the world’s largest and most dynamic economy, which underwrites the world’s strongest military. We can resort to nuclear weapons in the event that all these fail to protect us. We face few serious existential threats from other states.

It is precisely this tremendous advantage, says Walt, that has enabled us to sustain our current approach in spite of its many failures. Under this approach, which he brands “liberal hegemony,” America seeks to dominate every region of the globe while advancing liberal goals: open markets, democratic governance, international rule of law. The push for global dominance has enabled allies to cut back on military spending and free ride on our commitments to their defense. The desire to advance democracy, sometimes at the point of a gun, has had particularly damaging effects—the regimes we wish to change feel threatened and do unpleasant things like pursue nuclear weapons, while the regimes we do change require replacement, which often means occupation, which stirs resentment and violence. It’s a foreign policy with few successes and serious costs.

The alternative to liberal hegemony, Walt says, is a strategy of “offshore balancing.” Under this approach, the United States seeks to prevent the emergence of a rival hegemonic power in three key regions of the globe: Europe, Northeast Asia and the Persian Gulf. (In a clever touch, the menu at the lunch included foods from each of those regions, plus some all-American cheeseburger sliders.) Washington preserves dominance in its own hemisphere, and leans on local states first to check the rise of potential hegemons, since they have an even deeper interest in blocking their ascent. It continues active trade and diplomacy around the world, and prepares a military centered on air and sea power, with modest, more scalable ground forces. For today’s policymakers, that means drawing down from Europe (where the locals already spend four times more on defense than Russia) and pushing for a limited rapprochement with Iran, which is a mere potential hegemon.

Asia is more complicated: China has the power and possibly the ambition to push for dominance in its region, and its local rivals are far apart, fractious and, in some cases, feeble. This can make Walt and his frequent coauthor John Mearsheimer sound like China hawks at times: our Asian friends may need American aid and even American force to put paid to Peking’s pronunciamentos. China has deeper economic interests around the world than the last major potential hegemon, the Soviet Union, which may also incline it toward foreign adventures. And China’s growing strength may ultimately need to inform American policy in the Persian Gulf as well: while Iran can’t be allowed to achieve hegemony there, it would also be an error to harry it into Chinese arms.

But why not pursue something closer to isolationism, letting the cards fall where they may in other regions? Why fear hegemons halfway around the world? Walt suggests that these hegemons, once totally secure in their home regions, would be able to pursue their interests far around the globe—much as we do today. That might lead to their presence in the Western hemisphere, presenting the United States with security challenges it has not faced in ages.

The greater challenge to Walt’s proposal is, I think, getting from our current strategy to his. This poses difficulties on the international level, of course: a quick drawdown in Europe would leave nothing but weepy hipsters between Vlad and Vilnius. But the domestic side may be tougher. Though Walt is likely correct that American voters are willing to accept a more restrained foreign policy, the vast share of the people who make our foreign policy are not. An entire generation of policymakers has not needed to think seriously about which national interests are vital and which are peripheral. So far, none of their errors have been disastrous enough to force a rethink. And even a big foreign-policy failure that we can clearly attribute to the liberal hegemony strategy (say, U.S. involvement in a Baltic war) might not be enough—after all, supporting the Iraq War proved to be a foreign and domestic disaster for Hillary Clinton, yet she remains a hawk.

So suppose a president takes office determined to implement Walt’s strategy. How does he staff his administration with fellow adherents? As Stalin once said, “Cadres decide everything.” Mid- and low-level appointees who don’t think like the president will struggle to translate his grand ideas into detailed policies and will require constant supervision just to stay on course. The end result might be policies that are, in places, contradictory to the president’s vision; other states may feel these policies impact them more than the president’s declared intentions. The resistance the president faces may also manifest in the advice he receives and in press coverage. He might find himself surrounded by a chorus of critics. If his advisors criticize most of his ideas, including the good ones, how will he know when his ideas are bad?

But let’s bypass that and assume the president carries out Walt’s strategy to the hilt. The opposing party will campaign against his foreign-policy approach, because that is what opposing parties do. When they take office after four or eight years of offshore balancing, they’ll likely want to shift back toward a strategy of liberal hegemony. This inevitable future shift will reduce the credibility of the president’s promises in his own time. Worse, when it is carried out, the infrastructure of liberal hegemony—the far-flung bases, the doubtful defense commitments, etc.—will have atrophied. Maybe this will force a more restrained version of liberal hegemony. But maybe it will lead to liberal hegemony being pursued on even weaker infrastructure. One of liberal hegemony’s greatest drawbacks is that it breeds a provocative weakness, a palpable mismatch between our ambitions and our means. The big ambitions would be back, and the means to back them up would be even feebler.

That’s not to say these are decisive objections to Walt. Administrations must always make policy in the shadow of future change, and the challenges of undoing a bad strategy are not arguments in favor of its continuation. The challenge of finding loyal policymakers may lessen, too: the rising generation of policymakers rose to political maturity watching the Iraq disaster, not watching America stand as the world’s unquestioned champion. Yet all these are certainly dynamics that any future administration would face in carrying out a realist foreign policy like the one Walt proposes.

Article Link to the National Interest:

China's Nuclear Subs Are Coming

Beijing will soon be able to launch nuclear missiles from the sea. And that’s going to make it harder to deter any future Chinese aggression.

By David Axe
The Daily Beast
May 19, 2016

China’s about to join an exclusive club for nuclear powers. After decades of development, 2016 could be the year the Chinese navy finally sends its ballistic-missile submarines—“SSBN” is the Pentagon’s designation—to sea for the first time for operational patrols with live, nuclear-tipped rockets.

If indeed the Jin-class subs head to sea this year, China will achieve a level of nuclear strike capability that, at present, just two countries—the United States and Russia—can match or exceed.

“China will probably conduct its first SSBN nuclear deterrence patrol sometime in 2016,” the Pentagon warned in the latest edition of its annual report on the Chinese military, published in mid-May. Once the Jins set sail, Beijing will command a nuclear “triad” composed of ground-, air- and sea-launched nuclear weapons.

That’s a big deal, according to the dominant theory of nuclear warfare. “The theory is that a diverse array of delivery systems creates survivability by complicating a first strike,” Jeffrey Lewis, an expert on nuclear geopolitics with the James Martin Center for Nonproliferation Studies, told The Daily Beast.

In other words, if a country possesses all three kinds of nukes, it’s harder for an enemy to wipe them all out in a surprise attack. And if you can’t destroy your enemy’s entire atomic arsenal, he can nuke you back—so you’d better not attack at all.

The word for that is “deterrence.” And China could be on the verge of gaining a deterrence capability that most countries simply can’t afford. China reportedly possesses several hundred atomic warheads, but no one outside of the Chinese Communist Party leadership and, perhaps, top foreign intelligence agencies, knows the exact number.

Regardless, that’s far fewer than the roughly 7,000 warheads that the U.S. and Russia each possess but more than any of the world’s other nuclear powers, with the possible exception of France. And compared to Beijing only Moscow and Washington boast a wider range of launchers for their nukes.

The Chinese military’s rocket branch maintains around a hundred long-range rockets in land-based silos. The Chinese air force’s H-6 bombers first dropped atomic bombs back in the 1970s—and modern versions of the bombers can fire cruise missiles that are compatible with nuclear warheads. When the Jins are finally war-ready, they will complete Beijing’s land-air-sea atomic triad.

To be fair, the Chinese vessels are, in a sense, playing catch-up. The Soviet Union and the United States deployed the first nuclear ballistic-missile submarines at the height of the Cold War in the 1960s—and France and the United Kingdom soon followed suit. Today the U.S. Navy’s 14 Ohio-class missile subs take turns quietly sailing deep in the Pacific and Atlantic Oceans, ready to fire their 24 nuclear-tipped rockets on a moment’s notice.

Russia, France and the U.K. still operate SSBNs, and India is developing one of its own. The Chinese navy began tinkering with missile subs in 1981. The experimental Xia-class vessel and its JL-1 rocket were technological failures and never sailed on an operational mission.

Since 2007, the Chinese navy has completed four of the follow-on Jin-class subs and is reportedly planning on building four more. More than 400 feet long, a Jin can carry as many as a dozen JL-2 rockets, each with a range of 4,500 miles. A Jin sailing in the central Pacific Ocean could strike targets anywhere in the United States.

If the Jins finally deploy this year, a whopping 35 years will have passed since China first tried to develop a functional SSBN. But developing a missile sub is hard.

Expensive, too. China has not disclosed the cost of the Jins, but consider that the U.S. Navy plans to spend $97 billion replacing its 14 Ohios with a dozen new submarines. Missile subs are big and complex—and their rockets are, too. Training reliable crews and designing an effective command-and-control system are equally difficult to do. Chinese subs have been plagued with quality-control problems.

“While it is clear that the [Chinese navy] is making strides towards correcting these issues, the capabilities of China’s nuclear-powered submarine fleet remain in a process of maturity,” the Nuclear Threat Initiative, a Washington D.C.-based advocacy group, explains on its website.

To Beijing, achieving a nuclear triad is apparently worth the labor and expense. But Lewis cautions against reading the development of the Chinese atomic triad as the result of some sort of clear, top-down policy.

Officials in the U.S. and Russia take for granted the wisdom of a nuclear triad. But in fact, the triads in both of those countries developed as a result of rivalries within their respective militaries. During the early Cold War, the U.S. Navy lobbied lawmakers and the president for missile submarines in part to wrest from the U.S. Air Force some of the funding and prestige that came with being America’s main nuclear strike force.

The same internal conflict could be behind the Jins’ development. And whether China’s missile subs set sail for the first time this year could depend as much on politics as on technology and training. “There are a lot of rivalries and intrigues playing out that might result in a triad—or not,” Lewis said.

Article Link to The Daily Beast:

Obama’s Iran ‘Echo Chamber’ Just Can’t Stop

By Seth Mandel
The New York Post
May 18, 2016

After top Obama adviser Ben Rhodes made waves by admitting the administration manipulated an “echo chamber” of allies to sell the Iran nuclear deal, you might have expected the echoes to die down for a while.

You’d be wrong.

Instead, the president’s allies in Congress and in the press unwittingly confirmed the accusations that they can’t think for themselves.

House Republicans called a hearing Tuesday on Rhodes’ admission that President Obama’s foreign-policy team lied their way to the Iran deal — specifically, that the negotiations were predicated on the rise of a “moderate” Iranian president, which opened a window for rapprochement.

In fact, Team Obama didn’t believe the moderates were actually in charge — it’s not clear they thought such moderates even existed — and the talks began under the previous leadership of the lunatic Mahmoud Ahmadinejad anyway.

Since they made the whole thing up, Obama and his advisers needed willing propagandists or foolish dupes to sell the story. That’s when Rhodes created an “echo chamber.”

Rhodes refused to show up to the hearing Tuesday. But in his place, both Oversight Committee’s Democratic minority and Obama’s supporters in the media took turns parroting the same, specific talking points intended to discredit one of the witnesses.

They created an echo chamber to deflect attention from the fact that they were an echo chamber, made all the more clumsy and obvious by the oddly specific talking point they all settled on.

The witness in question is John Hannah, a former aide to Vice President Dick Cheney during the lead-up to the Iraq war.


“I find it incredibly hypocritical to invite Mr. Hannah, who worked for Dick Cheney and helped market the Iraq war based on false pretenses, to come now before us as an expert witness on an alleged false White House narrative,” sneered Rep. Carolyn Maloney (D-NY).

“If our goal is to hear from an expert who actually promoted false White House narratives, then I think you picked the right person,” sniffed Rep. Elijah Cummings (D-Md.), referring to Hannah.

Cummings said he found it “ironic.” So did Rep. William Lacy Clay (D-Mo.): “Mr. Hannah, you worked for Dick Cheney, you actively participated in the preparation of Secretary Powell’s infamous speech to the United Nations about Iraq’s weapons of mass destruction. I find it incredibly ironic that the chairman invited you here to testify about false White House narratives given your involvement in that debacle.”

The most amusing was Rep. Matt Cartwright (D-Pa.): “It is with great regret that I see it has turned into a political football the way it has,” Cartwright lamented about the Iran deal, before offering a vivid illustration of his lack of self-awareness. “Mr. Hannah, let me get this straight: You drew up the false talking points for Colin Powell when he spoke in front of the UN . . . And you’re here today to question somebody else’s credibility and somebody else’s professionalism.”

It wouldn’t be a real echo party without the media, of course. And liberal writers, too, seemed to somehow, magically, coincidentally seize on Hannah.

The day before the hearing, Mother Jones’ David Corn wrote that the decision to invite Hannah was “awkward” because “Hannah was one of the architects of the speech then-Secretary of State Colin Powell gave to the United Nations in February 2003 that was designed to pave the way to war.”

The next day, Corn’s colleague at Mother Jones, Max Rosenthal, wrote a follow-up whose sole purpose seemed to be to echo . . . er, quote Corn’s report.

Over at the Forward, J.J. Goldberg pronounced that the inclusion of Hannah was “where our tale enters the Twilight Zone.” Why? Well, you can probably guess: “Hannah should know a thing or two about fabricating narratives to justify Middle East policy initiatives. In 2002, while serving in Cheney’s office in the Bush White House, he played a key role in assembling the false intelligence that helped build the case for the American invasion of Iraq in 2003.”

At, former ThinkProgress reporter Ali Gharib slammed the panel’s “war hawks,” focusing most of his attention on the “irony of John Hannah’s participation.”

As Hannah pointed out to his inquisitors, George W. Bush didn’t actually lie about WMDs, he simply believed bad intelligence. Team Obama, however, did lie about Iran. And Obama’s defenders are using a supposed case of lying as a defense against their actual lying while echoing each other and feigning outrage at being accused of acting as an echo chamber.

Now that’s ironic.

Article Link to The New York Post:

Trump Finger on Nuclear Button? Too Risky, Says Maine Senator

The Bloomberg View
May 19, 2016

If you wonder whether Donald Trump’s lack of experience in the national security arena could hurt his candidacy, consider Senator Angus King, the only independent in Congress. After a recent trip on the “doomsday plane,” the one to be used by the president in the event of a nuclear attack, King has concluded that the presumptive Republican nominee is not fit to be commander-in-chief.

The Maine Senator, a member of the Armed Services and Intelligence committees, said he and several other lawmakers recently flew in a mock exercise on the plane. That persuaded him that it would be too risky to put Trump in a position to order the use of a nuclear weapon. "In that situation, there is only one person making that decision," King said Wednesday on the Charlie Rose PBS program. "One person has about 20 minutes to decide the fate of civilization."

King said he’d worry both about Trump's lack of strategic knowledge and his temperament, declaring, "he seems hot, impulsive" instead of "measured."

The first-term senator caucuses with the Democrats but has endorsed candidates of both parties. As Congress's only independent, he has nonpartisan credentials; the "doomsday" scenario is one that Hillary Clinton’s campaign may try to use against Trump in the general election.

Although King hasn't officially endorsed anyone, he left no doubt he opposes Trump. The billionaire New Yorker's lack of knowledge and reckless remarks have unnerved experts, including leading Republicans. During a Republican debate in December, for example, Trump was unable to explain what the term “nuclear triad” means – it’s the U.S. land, air and sea-based system for delivering nuclear weapons. He has also raised the possibility that Japan and South Korea might need nuclear weapons, contrary to decades of U.S. policy.

"Do we want two more countries with nuclear weapons and all those dangers?" King asked rhetorically. "It's not a very thoughtful policy prescription."

He said Trump's call for NATO countries to pay more for their own defense is a familiar thought among U.S. policymakers, including President Barack Obama. But he said Trump has gone further, questioning the "underlying premise of NATO” and its relevance, which he called “an invitation to aggression."

He added that Trump's call for a temporary ban on Muslims entering the U.S. is "exactly” what the violent jihadist group Islamic State wants “to drive a wedge between the West and the peaceful Muslim community."

King was generally complimentary of Clinton, whom he called "steady and thoughtful." He said he doubted that her use of a private e-mail server while Secretary of State compromised national security. But he called it "a self-inflicted wound" that is "going to dog her."

King said his unanswered questions about Clinton involve whom she would listen to as president, “and does she listen?"

He also said there’s “about 95-percent odds” that Obama’s Supreme Court choice, federal appeals court Judge Merrick Garland, would be confirmed in a lame-duck senate session if Clinton wins the presidency in November. King has previously criticized Republicans for refusing to hold a hearing on Garland’s nomination.

The Charlie Rose program aired on PBS Wednesday evening and is to be rebroadcast Thursday night on Bloomberg Television.

Article Link to the Bloomberg View:

The Bernie Sanders Trainwreck

By Jonathan Bernstein
The Bloomberg View
May 19, 2016

At this point, the best thing Bernie Sanders’s supporters can probably do for his reputation is to vote against him in the remaining primaries and caucuses.

Hillary Clinton long ago wrapped up the nomination. Tuesday’s results -- her narrow victory in Kentucky and his win by about 10 percentage points in Oregon -- doesn't change anything: It's over. If you include super-delegates, Clinton is only about 100 delegates away from clinching, and with Democratic proportional allocation she is basically guaranteed to get there.

Yet the closer Clinton gets to her official victory, the more Sanders and his campaign act as if the nomination was unfairly stolen from him -- that somehow the doors of the party have been unfairly closed against his followers. This culminated in an ugly scene in Nevada last weekend, with Sanders supporters threatening Democratic Party officials there.

The result? Liberals have turned on Sanders, urging him to get out of the race now or, at least, to change his tone. Talking Points Memo's Josh Marshall says Sanders is "lying to [his] supporters." At Mother Jones, Kevin Drum calls him "very, very bitter." Paul Krugman says Sanders "has a problem ... in facing reality" and calls his campaign a "terrible mess."

As Ed Kilgore details, claims that the nomination was stolen or rigged or whatever are complete bunk. Some longtime rules worked against Sanders. He did worse in states with closed primaries (restricting voting to only registered Democrats). But the systems in other states worked for him. He cleaned up in the caucuses.

The biggest rule-based effect has probably just been that the Democrats’ proportional representation system has created an illusion of a tight battle. The truth is that Hillary Clinton has won more states. She won bigger states. She won, overall, by bigger margins, with the exception of a handful of caucuses, most of which were in small states. Overall, she has won about 57 percent of the vote, beating Sanders by some 14 percentage points.

That’s a blowout. And, for what it’s worth, it matches Clinton’s national polling lead over Sanders.

Sanders has said he would support Clinton against Donald Trump in a general-election battle, and there's no reason to doubt his word. Nor is a national party convention as easy to disrupt as a state gathering. Sure, Sanders supporters could hold demonstrations and grant interviews to a media that is always looking for controversy, but his fans are more likely to look like sore losers than anything else. Meanwhile, almost all rank-and-file liberals -- who, remember, have always liked Clinton even as many of them have voted for Sanders -- will line up behind the nominee and against Trump. This is true even if a handful of “Bernie or bust” die-hards dissent.

But the Vermont senator's truculence could have serious effects on his movement and on his own ability to wield influence after the campaign. His ability to excite large crowds and win plenty of votes could make him a more formidable presence in the Senate than he has been. But if he behaves irresponsibly, he’ll forfeit that influence.

This is why at this point the best thing for Sanders may be that he loses solidly in California and New Jersey on June 7, making it clear to his followers -- and perhaps to the candidate himself -- that he lost the nomination fair and square. Yes, he’ll fall short even if he wins each remaining contest, but it won’t be nearly as obvious that he was solidly beaten.

And apparently being solidly beaten is what it’s going to take for Sanders to convert his impressive but losing campaign into a positive force for his ideas in the future.

Article Link to the Bloomberg View: