Monday, June 20, 2016

How Rubio Got To ‘Maybe’

He has until June 24 to change his mind and enter the Senate race.


By Alexis Levinson 
The National Review
June 20, 2016

It was May 12 when Marco Rubio made a seemingly offhand comment to reporters in the capitol. The conversation had turned to Rubio’s plan not to seek re-election, and a reporter offered that he still had time to change his mind. “June 24,” Rubio responded as he walked away, citing the deadline to file for entry in the race.

“That’s when I called Jolly and said, ‘Hey, David, he’s getting in,’” says Max Goodman, Representative David Jolly’s campaign manager. Jolly was a candidate for Rubio’s Senate seat until Friday, when he announced he would instead run for reelection to his House seat.

Jolly’s camp is by no means a part of Rubio’s inner circle, but Goodman thought he saw the writing on the wall: There was the fact that Rubio had held fundraisers for lieutenant governor Carlos Lopez-Cantera, his friend and favored replacement, but had never formally endorsed him. Lopez-Cantera, struggling to raise money and trailing in the polls, could have used the boost.

Then were also the stories that appeared in early May about Rubio’s enthusiastic return to the Senate after his presidential bid: “Rubio Learns to Love the Senate,” wrote Politico, while the Miami Herald penned, “The Political Rehabilitation of Marco Rubio.”

Goodman was not alone in his suspicions that this was a coordinated series of developments designed to pave the way for Rubio to reverse course and seek re-election. Republicans, at least in retrospect, now see an effort to keep Rubio’s options open, if not by the senator’s allies then at least by others, including members of Republican leadership on Capitol Hill, who believe he provides them their best shot at keeping his seat. So while Rubio went from a definitive “no” to a strong “maybe,” seemingly in just four days, it was in reality a turn of events much longer in the making.

The effort to lure Rubio into the race began in earnest in late April and played out on multiple fronts. There were public entreaties by those in Senate majority leader Mitch McConnell’s orbit, who were quickly joined by several of Rubio’s Senate colleagues and by his political allies in Florida. But there were also private meetings with Mitch McConnell and the executive director of the National Republican Senatorial Committee (NRSC).

Rubio is mulling his own trajectory and his party’s, trying to decide how he can most effectively make a mark on the GOP’s future. He has repeatedly expressed frustration with his inability to make a difference from the Senate. Republican allies expect he will seek the presidency again in the near future, and it’s unclear whether four years toiling in the upper chamber during a potential Clinton administration would best position him to win the party’s nomination in 2020. Readying himself for another presidential bid from outside the political arena would present its own challenges. These are the matters that Rubio has undoubtedly been discussing with allies and with his family over the past several days.

According to a source, NRSC executive director Ward Baker first approached Rubio at the end of April. He also started calling senators and close confidants of Rubio, asking them to talk to him about running. Rubio was reluctant. But there was reason for interested parties to keep pressing him. Several polls conducted by the NRSC starting the first week of May determined that not one of the five candidates then running to replace Rubio had broken out of the pack. All were tied with or losing to the likely Democratic nominee, Patrick Murphy. And then there was Rubio: “He was not only in good shape,” says a Republican Senate operative who saw one of the polls, “but he blew Murphy out of the water.”

Around the same time, Rubio’s colleagues in the Senate started to sense a difference. In a couple of interviews, Rubio expressed regret that he did not have more time in the Senate. On the Senate floor, he was a passionate advocate for funding to combat Zika, a virus that could affect Florida more than other states.

According to the Republican Senate operative, in mid May, “[Nebraska senator] Ben Sasse casually mentioned to McConnell that he thought Rubio was having fun again and that he would miss the Senate.” Later that afternoon McConnell and Rubio spoke in the leader’s office, and he and asked Rubio to reconsider. It was not the first time McConnell had discussed the matter with him, but the result of the conversation was different this time, according to the operative: “Rubio left the door open a crack.” McConnell proceeded to enlist the entire Republican conference to convince Rubio to run.

It was shortly after this that the efforts to convince Rubio to run again went public. On May 26, CNN reported on McConnell’s efforts to rally his colleagues and coax Rubio into the race. Former McConnell chief of staff Josh Holmes turned his Twitter feed into a Draft Rubio effort and reached out to Republicans who might be able to help persuade the senator to change his mind.

The day after the CNN story broke, Rubio told Jake Tapper he would “maybe” reconsider his decision if Lopez-Cantera weren’t in the race. It struck some Republicans as an odd answer. This was the guy who had refused to step aside for his former mentor, Jeb Bush, in the presidential race, and who subsequently spent several months beating Bush up on the campaign trail. How much of a deterrent could his friendship with Lopez-Cantera really be if he wanted to run?

Some saw it as a signal from Rubio that if Lopez-Cantera got out, he would get in. And Lopez-Cantera had raised just over $1 million, a paltry sum that stoked doubts about his viability.

The repeated entreaties from all sides were hard to ignore. By late May, it wasn’t just his Senate colleagues. It was respected Florida politicos and allies, Mitt Romney — and even Donald Trump tweeted his encouragement: “Run Marco!

Still, as recently as last week, allies remained convinced that Rubio was not running. The circle of people with whom Rubio discussed his deliberations was a small one, say people close to him, with his family acting as the primary sounding board.

Then, on Sunday, June 12, after weeks in which the public pressure on Rubio to reconsider had continued to build, 49 people were gunned down and many others wounded at a gay nightclub in Orlando. The attack had a tremendous impact on Rubio, who has been particularly engaged on foreign policy and intelligence issues during his time in the Senate. “The event in Orlando really provided a moral crucible in which he, I think, then solidified the decision that this was something,” says John Stemberger, a conservative and an Evangelical leader in Florida.

The morning of the shooting, Stemberger says Rubio was the second person to call him. “He called me on my cell phone and he wanted to ask me to please plead with faith leaders in central Florida to pray for the victims and to really have an attitude of prayer and respect for those who were lost,” Stemberger says. Afterward, Stemberger says he “texted [Rubio] and said, ‘You are born to lead in moments like this, thank you.’”

“I think he was leaning against it up until that point [Orlando],” says former Florida House speaker Will Weatherford. “And some things just rock you to your core.”

It was that day, driving around Orlando in his pick-up truck, that he got the blessing of Lopez-Cantera, who was with him in his role as lieutenant governor, according to Politico.

By Monday, he was telling Hugh Hewitt he might reconsider. On Wednesday, he told reporters he was heading home to talk it over with his family. The next day, he reached out to allies to gauge their feelings on the possibility. One D.C. conservative tells National Review that Rubio called him on Thursday to ask for his thoughts, and that it was evident that Rubio was leaning toward running but had not made a final decision.

It’s clear why Rubio’s running would be a boon for Republicans hoping to hold his seat. But it’s less clear whether it would be good for Rubio, who would have to run with Trump at the top of the ticket and risk defeat not once, but twice in his home state in a single year — something that could damage his political prospects for life.

He would have to weather a primary that would probably leave him bruised. Wealthy home-builder Carlos Beruff, a self-funding candidate and a close friend of Governor Rick Scott’s, has promised to stay in the Senate race regardless of Rubio’s decision, as has another self-funder, Todd Wilcox, though he has thus far spent less money than Beruff on the race.

Rubio has been particularly vocal in his disapproval of Trump, but like many other Republicans, he has said he’ll still vote for him. The rhetorical gymnastics required to justify that position have not cast the most flattering light. Beruff, meanwhile, has positioned himself as the Trump-like candidate in the race: an outsider businessman with a brash, controversial style. (In one speech, Beruff repeatedly called President Barack Obama an “animal.”)

On Friday, Beruff’s campaign gave a glimpse of how they plan to attack Rubio if he jumps in the race. When Rubio ran in 2010, he was the tea-party upstart taking on the Republican establishment. Now, they say, he is the establishment. The fact that McConnell has had such a visible hand in nudging Rubio into the race might deepen that impression. And this last-minute change of heart could strengthen the perception that Rubio is someone who flip-flops.

“In an era where people are really disgusted with people they elect who suddenly seem to kind of change their mind about a host of issues, I think Marco may get some short-term flak” if he runs for re-election, says Brett Doster, a Florida GOP consultant.

Assuming he clears the primary, he’ll then be forced into a general-election campaign against Murphy, whose ability to raise huge sums of money from the get-go caught some Republicans by surprise. And in the state that could well determine the winner of the presidential race, the Senate candidates will, to a large degree, be at the mercy of the advertising and ground games employed by those at the top of the ticket.

If Rubio loses — a real possibility in a toss-up state, particularly with Trump at the top of the ticket — it could end his political career. If he wins, he’ll spend the next four to six years voting on bills in a Trump or Clinton administration, and then being called to account for those votes whether he runs for president again or for a third term in the Senate. Many of his likely competitors in a future presidential election, including Ted Cruz, Tom Cotton, and Ben Sasse, will be in the Senate with him, staring him down from the right.

Rubio allies say that if he does run, it will be because he wants to serve, not because he is weighing the costs and benefits to his political future. But the questions are one and the same: A failed Senate bid would severely limit his ability to serve in the future. A successful run could cast him as a hero. Whatever his choice in the coming days, his political future remains an open question.


Article Link to the National Review:

U.S. Diplomats Are Right On Syria

The former U.S. ambassador to Syria agrees that President Obama has lost the plot.


By Robert Ford
The Daily Beast
June 20, 2016

In response to the State Department dissent memo signed by 51 officials who have worked on Syria in recent years, the White House probably won’t change its approach to the broad Syrian conflict. After nearly two years of American military operations in Syria, after an estimated 400,000 or more dead in Syria, and after Syrian refugee flows have raised questions about European unity itself—the unity that was a goal of American foreign policy dating back to Truman—the memo is right to urge we review how can we achieve secure our strategic objective in Syria. The discussion is all the more urgent since there are no sure-fire solutions and no options without risks.

The dissent memo supports the administration’s goal of ending the conflict by having Syrians negotiate the establishment of a new government that could rally Syrians to fight extremists like the Islamic State. The memo doesn’t call for regime change; it doesn’t say that Bashar al-Assad has to go. That’s an issue for Syrians to negotiate in what surely would be very hard talks.

Those talks have never really started mainly because of constant Syrian government violations of the ceasefire. In a reminder of Richard Holbrooke’s use of NATO air power to change the calculations of Serbia and its Bosnian Serbian allies, the memo urges deterring the Syrian government from further violations by destroying some Syrian military assets with stand-off strikes. Once Assad understands the ceasefire is for real, and he can’t win militarily, the memo reasons that real political talks about Syria’s future can finally begin.

Some critics of a more muscular American approach warn that this is a recipe for Iraq 2003 redux or a replay of Libya 2011 when regimes fell and chaos ensued. George W. Bush didn’t seek a transition negotiation with Saddam. Qadhaffi had an ICC indictment waiting for him; Assad doesn’t. The future of Assad and his inner circle is an issue for Syrians to negotiate. The Syrian opposition even hinted once that it might drop the issue of holding Assad accountable if he steps down. The larger point is that the majority of the armed opposition is willing to negotiate a new government but the Syrian government isn’t.

Other critics of greater American involvement warn that it is naïve to think Assad will ever negotiate. Like the Fuhrer he’d rather go down in a fiery Gotterdamerung if abandoned by his allies (presumably his inner circle all would agree). Since the Russians and Iranians won’t abandon Assad, the Americans and their regional friends must instead abandon the opposition. These analysts haven’t explained why regional actors like Saudi Arabia and Qatar, or even Turkey, as uncomfortable as it is with Syrian Kurdish expansionism, would find this change to be in their interest.

More importantly, these analysts haven’t explained how millions of Syrians would be reconciled to an unrepentant Assad government and if, as likely, they cannot reconcile, and how much larger numbers of Syrians would rally around Assad to fight the many extremists in their midst. The State Department dissent memo warns that if local Sunni Arab communities don’t rally to fight the Islamic State and al-Qaida, then we will not contain the extremists over the long-term, and American military operations will never end. The question is how to get that local Sunni Arab support. The memo rightly asserts that stopping the Assad government attacks on civilian communities and resolving the larger Syrian conflict are key. The Obama administration focus on the Islamic State, and not the larger civil war, is misplaced.

Moreover, those wanting to accept Assad say international funding should appear, like magic, to rebuild Syria, but they don’t explain where it would come from. Is it realistic to think that the international community would rally around Assad to raise the absolutely enormous sums required for a reconstruction program his bloody, corrupt government would direct? Without national reconciliation and without national reconstruction, how will the millions of Syrian refugees go home and how will pressure on our European friends be eased? Proponents of accepting the Assad government as it is are really just saying there is no chance to stabilize Syria or address our broader interests. The dissent memo should receive credit for at least trying to figure out a better way forward.

Finally, some reject even limited U.S. military strikes because of the risk of direct confrontation with Russia. Striking Russian military assets in Syria would create such a risk. Hitting Syrian government targets is different; the Israelis appear to have hit targets in Syria with no vigorous Russian response. Moreover, the Russians have hit American-backed opposition groups. They set the precedent. If presented with an American military fait accompli, might the Russians respond by escalating with more bombing, more military aid to Damascus or even troops? Very likely they would. That would pose questions then about additional U.S. strikes if Damascus, counting on Russian backing, continues its violations. We could expect multiple rounds of Syrian, American and Russian tits for tats before any serious political talks—a riskier, less tantalizing proposition.

Other analysts, myself included, argue that before using still more American military force in Syria, we should first figure out how to boost the moderate opposition. The dissent memo itself urges empowering the moderate opposition. However, Defense Department and CIA efforts now are separate and have distinct goals. We should consider program resources, how to structure programs so that they are not blank checks to opposition groups but rather are part of a broader political opposition outreach effort, and how to channel our efforts in a mutually reinforcing manner. What is more absurd than Pentagon-backed Syrian Kurdish fighters attacking CIA-backed Syrian Arab fighters or a NATO ally shelling fighters (linked to a terrorist group) whom the Pentagon is arming? That suggests incoherence in Washington aggravating, not resolving, contentious agendas in Syria. We can do better.

Attaining the U.S. objective of a negotiated new government in Syria needs cooperation from Russia and Iran who must understand that they and Assad won’t be able to impose a political deal with only cosmetic changes that the majority of the Syrian opposition cannot and will not accept. That’s not an American dictate—it’s a Syrian one. The dissent memo should wake us up that the current approach ensures we will not secure our national interest in Syria, that broader U.S. interests will suffer as a consequence, and we need to reconsider our approach.


Article Link to The Daily Beast:

Russia Eyes ‘Greater Eurasia’

President Vladimir Putin’s new vision, which comes ahead of the enlargement plans of the Shanghai Cooperation Organization, is expected to unite major Asian states and also mend fences with the European Union


By Sergei Blagov 
The Asia Times
June 20, 2016

(AT)–The Kremlin outlined an ambitious vision of a new global integration grouping on top of already existing economic and political unions in Eurasia. Yet there is a lack of clarity over how the proposed entity could be reconciled with the existing regional organizations and agreements.

The Russia-led Eurasian Economic Union (EEU) can become part of a larger integration entity, a “Greater Eurasia,” President Vladimir Putin announced. This Greater Eurasian partnership could also include China, India, Pakistan and Iran, former Soviet states and other interested parties, he said.

Addressing an economic forum in St. Petersburg on June 17, Putin said that the Greater Eurasian partnership would aim at developing trade, reducing and eventually removing tariff barriers between participating countries. More than 40 countries indicated interest in forging free trade agreements (FTAs) with the EEU, he said.

The Russia-led EEU already moved to forge FTAs with Asian groupings. In May 2016, it was announced during the Sochi summit that ASEAN would consider FTA with the EEU. Possible closer economic ties between EEU, ASEAN and the SCO were also discussed.

However, the Kremlin apparently did not intend the “Greater Eurasia” plan to sound as a spat of anti-West rhetoric. Furthermore, Moscow invited the European nations to participate. The “Greater Eurasia” project is surely open for Europe too, and it can be mutually beneficial, Putin said.

Not surprisingly, Russia’s closest ally Kazakhstan strongly supported the idea of the Greater Eurasian partnership. Kazakhstan has long prioritized efforts to become a major trade link and transit route between Asia and Europe.

On June 17, President Nursultan Nazarbayev also advocated increased integration between the EEU and the European Union (EU) so as to develop the “Greater Eurasia.” The EEU is interested in stable European Union, he said.

Later this month, the Shanghai Cooperation Organization (SCO) finalizes entry of India and Pakistan into the SCO, Nazarbayev noted. Therefore, the total population of the SCO member states would reach three billion people, hence the organization becomes a great power, he argued.

It was hardly a coincidence that the “Greater Eurasia” rhetoric surfaced ahead of the summit meeting of the SCO in Tashkent, Uzbekistan on June 23-24. The organization — that currently includes Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan — is due accept major South Asian nations.

Last year, for the first time in its 15-year history, the SCO made a decision on its enlargement. On July 10, 2015, the SCO summit meeting in Ufa, Russia, approved entry of India and Pakistan into the SCO.

Moscow has long argued that the SCO expansion would serve to strengthen the international status of the organization. But now Russia apparently moved to suggest a kind of supra-SCO economic grouping.

The upcoming entry of India and Pakistan is expected to change the balance of power in the SCO, the organization previously dominated by China, both economically and politically. The expected entry of other new members from South-East Asia and the Middle East is supposed to turn the SCO into a truly global player.

Yet before official materialization of the SCO enlargement plans, Russia came up with the even more ambitious “Greater Eurasia” vision. The new entity is supposed not only to unite major Asian states, but also to mend fences with the European Union.

Therefore, the “Greater Eurasia” grouping is supposed to become a major global power. However, it is far from certain how the proposed grouping could be reconciled with the existing multilateral organizations and agreements in Eurasia. It remains to be seen whether the “Greater Eurasia” vision have chances to materialize any time soon.


Article Link to The Asia Times:

Enough With The Hysteria Over Trump’s Foreign-Policy Plans

By Amir Taheri
The New York Post
June 20, 2016

Ever since he threw his hat into the ring, Donald Trump, now the presumptive nominee of the Republican Party, has been branded a political novice.

Trump has been particularly taken to task for his lack of experience in foreign policy, especially when compared to his Democratic rival, President Obama’s former secretary of state, Hillary Clinton.

But this anti-Trump argument is far weaker than it looks.

Experience of the wrong kind can be worse than no experience at all. Consider Clinton’s résumé.

Her Russian “reset” helped whet Vladimir Putin’s aggressive appetite, leading to the annexation of Crimea, the bullying in the Baltics and the formation of an anti-US axis with Tehran.

Clinton also likes to claim parentage of the Iran nuclear deal — the biggest diplomatic swindle in modern times. A mistress of window dressing, Clinton also traveled to Burma to conjure a trompe l’oeil of democratization that consolidated the rule of the military with a thin civilian façade.

The way the Obama administration dealt with the so-called “Arab Spring” and its consequences, and the tragic situation in Syria, reeks of failure at every turn. And Clinton was either an active participant or a silent partner through it all.

What does Trump offer instead?

To start with, Trump makes it clear that he wishes to de-Obamaize US foreign policy.

He says he won’t go around the world apologizing to all and sundry for America’s alleged sins. Nor will he insist on flattering America’s Islamist enemies, as Obama did in his dishonest speeches in Istanbul and Cairo.

Maybe because of his diplomatic inexperience, Trump states his objectives clearly where Obama conjures opacity.

Obama says his aim is to “contain and degrade” the Islamic State. Trump says he wants “to utterly destroy ISIS.”

Obama says he is trying to persuade, in fact meaning bribe, Iran to “moderate its behavior.” Trump regards that as a mirage and says “we will totally dismantle Iran’s global terror network.”

For seven years Obama has said he was working with our “Chinese partners” to persuade North Korea to tone down its nuclear ambitions.

In Syria, Obama has spent vast sums training and arming various rebel groups that, like the Afghan Mujahedeen of the 1980s, may end up as enemies of the United States. At the same time, Obama has called for regime change in Syria while rejecting the idea of creating safe havens to protect Syrian civilians from genocide.

Trump says he will begin by finding out “what is really going on.” “We have no idea who our allies and enemies are,” he admits. Also, he won’t “train and arm rebels we don’t know and control.” He favors the creation of “safe havens” to allow displaced Syrians to stay inside their own land rather than defying death to reach Europe.

Obama prefers to pay lip service to NATO while in fact hampering its development. Trump, however, calls for a critical review of the role and place of the alliance in the new international context. The Republican nominee also insists on equitable burden-sharing in the alliance, especially the commitment by all member-states to devote 2 percent of their annual GDP to defense. At present, however, only two of the 28 members, the United States and Great Britain, do so, although some members are richer, per head, than both.

Trump also proposes a thorough review of commitments that the US has made to the defense of 66 nations across the globe. The issue merits closer attention.

In many cases there’s no need for US involvement. In other cases, such involvement may produce more tension. Also, it makes little sense that the United States should pay rent for bases it has set up to protect allies richer than itself, such as the oil-rich Arab states of the Gulf, Germany, Japan and South Korea.

To be sure, America isn’t a mercenary power. But a system of burden-sharing would make it easier to garner popular American support for such a leadership role.

Few would disagree that Obama has done great damage to relations with many close allies, especially in the Middle East. “President Obama has treated Israel horribly,” Trump says. The same is true of Egypt and Turkey — not to mention Great Britain and France, whose leaders Obama has publicly insulted.

Although portrayed as a jingoist, Trump says he supports normalization with Cuba provided the Cuban people get a better deal from their regime. He’s also on record that decisions by allies, notably Japan and South Korea, on their defense doctrines are primarily theirs and not Washington’s. Further, Trump insists that in crises affecting Europe, notably Ukraine, he would favor European allies, like Germany, taking the lead with full US support.

What Trump says is often more important than how he says it. The American public should listen carefully.


Article Link to the New York Post:

Hillary Had The Deck Stacked Against Bernie From The Start

By Post Editorial Board
The New York Post
June 20, 2016

Now that Hillary Clinton is the presumed Democratic nominee, hundreds of the campaign staffers who got her there are moving onto the payroll of the Democratic National Committee — where they’ll join other staff who have also been working to bring her this far.

In one sign that the fix was always in, the transition actually started last month, before she had crossed the line to a convention majority (counting those superdelegates, that is) in this month’s final primaries.

Another sign comes in the form of a DNC e-mail made public by a hacker going by the name of “Guccifer 2.0.” The DNC missive from May 26 of 2015 — that’s 13 months ago — declared that “our goals & strategy” are to “provide a contrast between the GOP field and HRC.”

No other possible Democratic candidate — not even Vice President Joe Biden, who was then still considering a run — counted. The DNC was all-in for Clinton long before a single Democrat voted.

The e-mail also exposes the basic strategy for helping Hillary: “Use specific hits to muddy the waters around ethics, transparency and campaign finance attacks on HRC.”

In other words, do your best to change the subject whenever anyone points out that she’s shady, deceptive and corrupt.

Hard to blame Bernie Sanders for supporting that primary challenger to Rep. Debbie Wasserman Schultz — the DNC chief who has blatantly had her thumb on the scale for Clinton all along.

We don’t expect many who “felt the Bern” to vote for Donald Trump come Election Day — but it’s hard to blame any who opt to stay home rather than cast a ballot for Clinton.


Article Link to the New York Post:

The Day After The U.K. Votes To Leave The EU

By Mohamed A. El-Erian
The Bloomberg View
June 20, 2016

Here's what the world could look like on June 24 if the “Leave” camp won the previous day’s referendum on whether the U.K. should continue to be part of the European Union:

The foreign exchange markets are in turmoil, with the pound falling 7 percent to 10 percent and the euro down about 3 percent to 5 percent.Stocks also are under considerable pressure as investors try to price in greater institutional uncertainties and the coming hit to economic growth.

Prime Minister David Cameron has announced his resignation, leaving his Conservative Party in disarray as it tries to figure out how to unite behind a new leader after a divisive debate in the months leading up to the referendum. Scotland is looking to resurrect its bid for independence. The Irish are wondering what will happen to the free transfer of goods and people between the republic and the north.

The rest of Europe is stunned, and worried about a domino effect. Meanwhile, those who backed the U.K.'s exit from the European Union are trying to make sure their victory doesn't turn into defeat, especially as some members if Parliament look into procedural ways to bypass the Leave vote.

Human nature being what it is, a media frenzy is feeding a blame game over who caused the U.K.'s departure from the EU.

The first target is the British electorate. Rather than casting their ballots on the basis of rational and calm consideration of the issues, too many voters ended up being motivated by a single, and very emotional, topic: immigration.

The electorate is largely indifferent to this accusation. After all, it was the Conservative Party, and Cameron in particular, that decided before the previous general election that a referendum was a good idea. Surely, the country's political leaders knew what they were doing, and had taken into account the nation's well-being.

Cameron's response is that the promise to hold a Brexit referendum was a necessity. The government was being squeezed by the U.K. Independence Party, the anti-EU, anti-establishment movement that was eating away at the Conservatives base. The choice for the Tories was to either lose the general election or promise a referendum during the next Parliament.

UKIP, however, is jubilant about the outcome. The party's leader Nigel Farage and his associates are certain that the short-term disruptions are a small price to pay for the opportunities available to Britain now that it is liberated from the restrictions of the EU. In their view, the U.K.'s membership in the union was a mistake from day one because the European project itself was flawed.

The architects of a united Europe say their vision of "an ever-closer union" -- economic, financial, social and political -- was never in doubt. And to the extent that the U.K. viewed the EU as only a super free-trade zone, this vision would have evolved over many decades of beneficial membership.

But such optimism has been rejected by anti-establishment parties in the countries traditionally viewed as anchoring a united Europe. These far-right groups, including the National Front in France, the AfD in Germany and the Danish People's Party, point to an economic system that has failed to deliver on its promise. How else to explain sluggish growth, alarmingly high youth unemployment in certain countries, recurrent financial drama in Greece and an inability to deal with the refugee crisis?

As in an Agatha Christie novel, there appear to be multiple suspects and, in this case, multiple culprits. But a single factor bears the largest responsibility for the debacle: The repeated inability of advanced countries to deliver high inclusive growth. And the longer this deficiency is allowed to persist, the greater the damage will be.

Sophisticated advanced economies do not do well in periods of frustratingly low growth, especially when the measly benefits go to segments of the population that are already the most well-off, as has been the case recently. Under these circumstances, the list of improbable and unthinkable events isn't limited just to the emergence of anti-establishment parties, the fragmentation of established ones, negative nominal interest rates, economic isolationism, increasingly ineffective if not counter-productive central banks, and the risk of a lost generation of unemployed and unemployable youth.

The solution to low and non-inclusive growth in the advanced world isn’t a mystery, however. Many economists already agree on what is needed and why. What has been sadly and persistently lacking is the political will and ability to implement such measures.

Perhaps the trauma of Brexit could bring about a "Sputnik Moment" that would shock political leaders into uniting behind a common vision of high inclusive shared growth and force an agreement on steps that would help avoid recessions and financial instability.

The realization that only a costly and painful economic and financial shock could trigger the appropriate policy response from legislatures on both sides of the Atlantic is further evidence of the political dysfunction that, for far too long, has placed too much of the policy burden on overstretched and increasingly exhausted central banks.

And we shouldn't feel reassured even if the U.K. ends up by voting to remain in the EU: Yes that would remove the immediate threat of economic and financial disruptions but, unfortunately, it would do nothing to address with the system's underlying growth defects, which are certain to cause further turmoil.


Article Link to the The Bloomberg View:

The Fallacy Of Lone Wolf Terrorism

By Michael Rubin
Commentary
June 20, 2016

In the days since the Orlando attack, the FBI has investigated whether Omar Mateen worked alone, whether his wife had foreknowledge of the attack, and whether or not Mateen was acting independently—a so-called “lone wolf”– or whether he was part of a broader Islamic State plot.

The categorization of a lone wolf versus a member of a larger terror plot may have outlived its usefulness, however. The New York Post has suggested the foreknowledge or buy-in of family members makes many lone wolves anything but. That may be true, but the problem goes beyond that. The notion of hierarchical control in terrorism is really a legacy of the Cold War when Soviet-sponsored terror groups (or Soviet sponsors period) issued orders for henchmen to carry out.

Lone gunmen might have existed, but they were few and far between. Their relative rarity was a testament to any lone wolf’s basic ignorance about tactics, weaponry, and logistics.

In the new era, however, terror groups may be less interested about calling the shots than in creating a petri dish upon which individual terrorists can rise up, self-train, and self-equip in order to contribute to the collective mission.

Al-Qaeda in the Arabian Peninsula publishes Inspire Magazine, a glossy, well-produced periodical celebrating violent jihad and instructing would-be proponents on how to create bombs or best conduct assassinations. The Tsarnaev brothers, who detonated pressure-cooker bombs to kill and maim at the Boston Marathon, learned how to do it from Inspire. That a U.S. drone strike in Yemen had killed Samir Khan, its Pakistani-American editor, simply underscored how Inspire was, for terrorists or potential terrorists, the gift that kept on giving.

The Islamic State has learned the lesson. It has launched Dabiq, a similar online magazine, which is distributed far and wide via the Internet. That Mateen traveled to Saudi Arabia would probably be less important than whether or not he had been reading the Islamic State’s magazine, which not only promotes ideology but also has a more practical, how-to element.

The point is that the idea of the “lone wolf” is really a pre-internet, pre-globalization concept. With terror groups adept at influence operations, publishing, and propaganda, the lone wolf is no longer so lone, so isolated, or so unsupported. Unfortunately, it seems, the Department of Homeland Security seems more intent on semantic battles than security ones, and the U.S. strategy more broadly seems better suited for the challenge as it appeared decades ago rather than the challenge that America now faces.


Article Link to Commentary:

Xi Struggles To Reform China's Politics—And Its Economy, Too

Has the era of reform ended?


By Christopher Whalen
The National Interest
June 19, 2016

Since the 2008 financial bust, all of the nations of Asia have been adjusting to a sharp drop in trade and economic activity with the Western market economies. The subsequent drop in demand and prices for oil, gas and other commodities was also a reaction to the global economic slowdown, a troubling trend that has caused central banks around to world to embrace negative interest rates with all of the attendant risks and costs. The slowdown in economic activity around the world may also be behind the rise of populism in many nations.

Now, eight years since the 2008 financial crisis, many developed nations have continued to accumulate piles of new public and private debt. Among them, China is arguably one of the most vulnerable to the accumulation of debt, albeit in the context of a command economy, where funds flows represent political priorities rather than commercial factors. Bank lending in China, for example, doubled in May to almost $150 billion, but these “loans” ought really be seen as allocations of cash rather than true extensions of credit. The Chinese government has traditionally bailed out indebted state companies and the “banks” that allocate liquidity based on direction from Beijing.

Overall, China’s total debt was 168.48 trillion yuan ($25.6 trillion) at the end of last year, equivalent to 249 percent of GDP, according to Li Yang, a senior researcher with the China Academy of Social Sciences, according to the Guardian. Borrowers ranging from local governments to private enterprises could ultimately default, says Li, creating the possibility for a systemic problem for China’s state-controlled banks.

The biggest factor behind mounting worries regarding China’s debt is the slowdown in economic growth, which is now at the lowest level in twenty-five years. Even as China has accelerated bank lending to boost demand, measures of GDP have been falling after decades of government-sponsored investment activity. At the same time, the government of paramount leader Xi Jinping and his trusted lieutenants has led a growing political purge that raises questions as to whether the reforms of the past several decades are now being reversed. Concepts such as collective leadership, for example, have been discarded under Xi.

“[O]nce Xi acceded to top office he was widely expected to pursue political liberalization and market reform,” notes veteran sinologist Andrew J. Nathan, Professor of Political Science at Columbia University, in the New York Review of Books. “Instead he has reinstated many of the most dangerous features of Mao’s rule: personal dictatorship, enforced ideological conformity, and arbitrary persecution.”

Other observers believe that Xi and his allies are in a struggle with vested interests resistant to economic reform. As the economic situation in China slows, the struggle among different factions within the Chinese Communist Party (CCP) is also intensifying. Several observers point to the failure of former Premier Wen Jiabao, in particular, which has led to some urgency in economic reforms, hence the need for Xi to remove party officials with significant economic interests that would resist change.

Another view published in Nikkei Asian Review says that Premier Li Keqiang and other senior government officials view the current state of the Chinese economy positively and want to focus on stabilizing the economy via increased government allocations of “credit” to avoid political instability. Xi, this view holds, opposes further use of debt for economic stimulus and instead wants to push structural reforms that would imply a consolidation of state-run companies and, in some regions, large-scale unemployment.

At the People’s National Congress in 2007, then premier Wen Jiabao warned that “The biggest problem facing China’s economy is that the growth is unstable, unbalanced, uncoordinated and unsustainable.” In that sense, the political purge by Xi does serve a practical purpose by giving China’s leader the practical ability to guide the country’s economic policy. Yet the cost of gaining this power to enact change seems to be very high.

To produce new leadership sufficiently decisive to satisfy Xi and his supporters, China’s leader has sidelined the other members of the Politburo Standing Committee and has taken the chairmanship of the most important seven of the twenty-two “leading small groups” that guide policy in specific areas. Xi established the “Central Leading Group for Comprehensively Deepening Reform,” which of note effectively removes management of the economy from Premier Li Keqiang. And Xi has created a National Security Council to coordinate internal security affairs. Nathan notes that “Xi emulates Mao in exercising power through a tight circle of aides whom he can trust because they have demonstrated their personal loyalty.”

Though only through half of his five-year term as president of China and CCP general secretary, Xi is expected to remain in power indefinitely, following the Maoist model. While the optimistic view is that China will refocus on economic reform after Xi has cleaned house politically, that may not be the case.

“His authoritarian style of leadership at home and belligerent posture abroad are ominous because they make China’s chances of being successful in reforming its own economy—on which the entire world now depends—increasingly unlikely,” writes Orville Schell of the Asia Society in New York.

Part of the difficulty for Xi in managing China’s economy is that the level of corruption among CCP cadres is extreme, thus consolidation of political power truly is a necessary condition for economic change. A key element of the structural reforms promised by Xi is to inject a degree of risk into China’s economy, notes Leland Miller, president of China Beige Book.

“Foreigners need to understand that China is in a constant state of stimulus,” notes Miller, who believes that Xi will eventually use his increase political control to start allowing state owned enterprises to fail and thereby force restructuring that will reduce excess capacity in many industries.

“Everyone thought that the anticorruption campaign would last for six months and then things would return to the status quo,” notes Miller. “Xi has shown that he will go after anybody outside of his inner circle, including former high CCP officials, which has given him the power to make difficult changes. But his attacks on high-level cadres has also injected a level of fear into society that has a negative impact on the economy.”

Miller expects Xi to continue to consolidate his political power and then turn to making significant structural changes to China’s state-dominated economy, but not necessarily changes that will magically produce a Western-style consumer economy. Western observers have for years expected a “rebalancing” of the Chinese economy away from investment led growth to a more Western-style, consumption-based model, but as we’ve noted previously in the National Interest, this may not really be possible.

Moving from a top-down command economy dominated by the CCP to a more decentralized model that allows for independent private business activity directly conflicts with Xi’s need for political control. Indeed, as the level of fear in China has grown in the two-plus years of Xi’s rule, the flow of capital flight to the West has accelerated. An estimated $700 billion flowed out of China last year, much of it flowing into the United States and other nations in the form of direct private investment.

Author and China observer James Rickards believes that the promise of structural reform touted by many Western observers is illusory. “He’s working around the edges, not really accomplishing much of substance,” Rickards tells the National Interest. “Just track monthly capital outflows, including the ‘trade deficit’ with Hong Kong, which is really just capital flight disguised as transfer pricing. That’s a good measure of confidence in the leadership. The outflows have fluctuated recently, but the major trend is those who can are getting their money out as fast as they can. The cronyism is too entrenched and the debt levels are too high. They waited too long to reform.”

Ultimately there is a conflict between the vision of China’s future held by most Western observers and the first priority of Xi—namely, maintaining the political dominance of the CCP with himself at the helm. Prior to Xi’s ascension to power, China’s leaders were reluctant to dismantle state-controlled industries for fear of a political reaction. Now several years into a political consolidation, Xi has established “rule by fear” such that he can make economic changes, but it remains to be seen whether change will actually occur. Meanwhile, China’s economy is increasingly moribund and the currency continues to weaken against the dollar, suggesting that the CCP may eventually return to the tried and true model of an export-led economy. Such a strategy may increase economic and political tensions between China and other industrial nations led by the United States, but it would ensure the political survival of the CCP.


Article Link to the National Interest:

Monday, June 20, Morning Global Market Roundup: Asia Stocks Gain As Brexit Fears Ebb Slightly, Safe-Havens Retreat

By Shinichi Saoshiro
Reuters
June 20, 2016

Asian stocks gained across the board on Monday as fears that Britain would vote to leave the European Union abated a little, aiding a recovery in both sterling and investor risk appetite.

Safe-haven assets and currencies like gold, government bonds and the yen retreated.

Spreadbetters expected equities to remain on the upswing, forecasting a significantly higher open for Britain's FTSE .FTSE, Germany's DAX .GDAXI and France's CAC .FCHI.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.3 percent.

Australian stocks added 1.4 percent and South Korea's Kospi .KS11 rose 1.5 percent.

Japan's Nikkei .N225 climbed 2.4 percent, helped by a retreat in the recently bullish yen.

"Those who were risk averse are reversing their positions," said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management in Tokyo.

"Sentiment was extremely negative last week, but it's recovering now, though we should not be overly optimistic."

Three British opinion polls ahead of the EU membership referendum on June 23 showed the "Remain" camp recovering some momentum, although the overall picture remained one of an evenly split electorate.

Global markets, buffeted this month by Brexit woes, had a breather at end of last week from a three-day suspension in British campaigning following the fatal attack on lawmaker Jo Cox, a strong supporter of Britain staying in the EU.

"It is hard to think the market's calmer tone to end last week is going to be an ongoing theme this week, particularly as Brexit campaigning and the release of opinion polls has resumed again," wrote strategists at ANZ.

"To be fair, the sad murder of UK politician Jo Cox may see the rhetoric from both camps get toned down somewhat. But markets will still, no doubt, swing about with movements in opinion polls, just as they did last week."

The pound meanwhile climbed 1.5 percent to $1.4580 GBP=D4, extending a recovery from last week's two-month trough of $1.4013. It jumped 2 percent to 152.72 yen GBPJPY=R, pulling well away from a three-year trough of 145.34 set on Thursday. [FRX/]

The euro rose 0.8 percent to $1.1371 EUR=.

The safe-haven yen, which had soared to a 22-month high of 103.555 per dollar last week on Brexit woes, pulled back. The dollar was up 0.5 percent at 104.640 yen JPY=.

The Australian dollar, seen as a rough measure of risk sentiment, was up 0.7 percent at $0.7450 AUD=D4 to put further distance between a two-week trough of $0.7286 touched late last week.

The dollar index .DXY touched an 11-day low of 93.449 as the greenback gave back ground against most of its major peers, apart from the yen.

Dovish comments from St. Louis Fed President James Bullard on Friday also weighed on the U.S. currency.

In commodities, crude oil prices extended gains as easing Brexit worries and a weaker dollar helped the commodity after six straight days of declines. [O/R]

U.S. crude CLc1 gained 1 percent to $48.44 a barrel and Brent crude LCOc1 was up 0.8 percent at $49.56 per barrel.

Gold fell as the latest ebb in risk aversion dented investor demand for safe-haven assets. Spot gold XAU= was down 1.3 percent at $1,281.00 an ounce, climbing down from a near two-year high of $1,315.55 scaled last week.

The U.S. Treasury 10-year note yield US10YT=RR rose to as high as 1.6610 percent, pulling back sharply from a four-year low of 1.5180 plumbed on Thursday. The 10-year Japanese government bond yield JP10YTN=JBTC also hovered significantly above a record low touched last week.


Article Link to Reuters:

With Oil Price Near $50, Resilient U.S. Shale Producers Eye New Chapter

By Ernest Scheyder and Terry Wade
Reuters
June 20, 2016

Two years into the worst oil price rout in a generation, large and mid-sized U.S. independent producers are surviving and eyeing growth again as oil nears $50 a barrel, confounding OPEC and Saudi Arabia with their resiliency.

That shale giants Hess Corp (HES.N), Apache Corp (APA.N) and more than 25 other companies have beaten back OPEC's attempt to sideline them would have been unthinkable just months ago, when oil plumbed $26 a barrel and collapses were feared.

To regain market share, the Organization of the Petroleum Exporting Countries in late 2014 pumped more oil despite growing global oversupply. It aimed to drive prices lower and force higher-cost producers out of the market, with shale oil seen as especially vulnerable.

The pain was acute. Industry revenue fell more than 30 percent in 2015 from the previous year, the U.S. drilling rig count dropped by more than 70 percent from when oil was still above $100 per barrel, stock valuations plunged and scores of small producers filed for bankruptcy.

But so far no U.S. producer that pumps more than 100,000 barrels per day (bpd) has gone bankrupt. The survival of these big producers partly explains why overall U.S. production has slipped only about 10 percent since peaking at 9.69 million bpd.

Their agility - which required slashing costs in half while doubling down on improved techniques to squeeze more oil from each new well - is now allowing the industry to cautiously focus on growth again.

But this time, U.S. producers say they will stay focused on capital returns, having abandoned a culture of maximizing production regardless of costs.

OPEC and Saudi Arabia "thought that there would be major capitulation and damage to U.S. shale producers as a result of the deep downturn," said Les Csorba, a leadership consultant at Heidrick & Struggles who works with shale executives. "But what happened was that it actually created a new paradigm among U.S. producers to transform their businesses."

Acquisition activity has picked up markedly in recent weeks, with Devon Energy Corp (DVN.N) finding buyers for more than $2 billion in non-core assets. The company is using part of that cash to boost its capital budget by $200 million.

WPX Energy Inc (WPX.N), which spent more on acquisitions last year than any U.S. oil company, sold 45 million new shares earlier this month, planning to use the funds to drill new Texas wells.

"We're a leaner organization than we were before the price crash," said Rick Muncrief, WPX's chief executive.

True, costs were slashed in the height of the price downturn when oil plumbed $26 per barrel in February and "there's a perception out there that if commodity prices go back up, you're going to lose those cost savings," Muncrief said.

But, he stressed, "that's simply not the case."

Industry consensus holds that costs for oilfield services - fracking and the like - may rise in tandem with oil prices, though high-tech advancements in sand, drilling and chemical technologies should stick around.

"Real progress for us has come on the cost side," said John Christmann, Apache's chief executive. "We plan to maintain a methodical approach to the cycle with a focus on returns."

U.S. oil prices CLc1 have recouped nearly half their losses from mid-2014 highs, almost doubling from the 13-year lows hit in February to reach over $51 in early June.

A year ago prices hit similar levels before plunging; oil executives are hoping past is not prologue.

"People are not necessarily freaking out anymore," said Sam Xu, an investment banker with CohnReznick Capital Market Securities LLC. "Instead of trying to keep their heads above the water, they're now trying to get back in the game."

To be sure, some executives say a bit more is needed - at least $60 a barrel - to ramp up drilling and fracking operations across most U.S. shale plays.

That attitude has been reflected in oil producers' capital budgets, which are still billions below 2015 levels.

Hess has long said it will add rigs in North Dakota when oil prices hit that mark, even though it is profitable in the state at $40.

"We need to see a period of stability in prices," Greg Hill, chief operating officer at Hess, said. "We need to make sure it's not quicksand."

Some oil companies aren't ready to even acknowledge the $50 milestone as relevant.

"We are head down and working and not ready to take any kind of victory lap," said Kristin Thomas, spokeswoman for Continental Resources Inc (CLR.N), North Dakota's second-largest oil producer.

Others are moving ahead in the Bakken, Eagle Ford and Permian, considered the cheapest and most-prolific U.S. shale oil fields.

"The Permian is set up for fairly explosive growth over the next several years," Scott Sheffield, CEO of Pioneer Natural Resources Co (PXD.N), said at a S&P Global Platts conference. Pioneer this week said it would increase its rig fleet by 40 percent.

Still, most producers are moving slowly.

"People are going to be waiting to see if this $50 price sticks around," said Muncrief, the WPX CEO.


Article Link to Reuters: