Monday, August 15, 2016

Monday, August 15, Morning Global Market Roundup: China Shares Hit Seven-Month High; World Yields Keep Falling

By Wayne Cole
August 15, 2016

Asian shares set up camp at one-year peaks on Monday as a rally in Chinese stocks helped offset news that Japan's economic growth had ground to a halt last quarter, while oil prices extended their latest rally.

European bourses were seen starting slightly firmer, while the E-mini futures for the S&P 500 ESc1 ticked up 0.1 percent.

China stood out in Asia as the blue-chip CSI300 Index .CSI300 jumped 3.3 percent to a seven-month high amid speculation more stimulus would be forthcoming from Beijing after a raft of weaker-than-expected July data.

"In light of persistent headwinds from the external sector, weak business sentiment, and a cooling property market, we believe that policymakers need to accelerate policy easing and reforms," Jing Li, an economist at HSBC, wrote in a note.

The need for further policy action in Japan was underlined by its subdued second-quarter economic reading, leaving the Nikkei .N225 down 0.3 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS recouped early losses to edge up 0.2 percent.

It has climbed 14 percent since June when Britain's vote to leave the European Union unleashed a new wave of global policy stimulus, led by aggressive action from the Bank of England.

All this easing has pushed rich-world bond yields dramatically lower and driven investors to seek higher returns in longer-term debt and in emerging markets.

Yields on British 10-year gilts GB10YT=RR have more than halved to all-time lows of 53 basis points (bps), having been up at 1.39 percent just before the Brexit vote.

That has pulled down rates right across Europe, with Spanish yields ES10YT=RR falling over 60 bps to break under 1 percent for the first time.

The plunge in returns on bonds has made equities look more attractive in comparison. The Dow .DJI, S&P 500 .SPX and Nasdaq .IXIC all made record closing highs last week for the first time since 1999.

"The broader earnings trend has shown some further improvement in Asia but we believe it is really a surge in foreign buying that has pushed markets higher," say analysts at Nomura in a note.

"While a continued switch in flows from developed markets to emerging is something we expect on a medium-term basis, the recent pace has been very rapid and sentiment levels are elevated. In the near-term we now recommend positioning for a pause."

Parsing The Fed

High on the U.S. calendar this week are inflation figures for July ECONUS and minutes of the last Federal Reserve meeting which might offer more clues on the chance of an interest rate hike by year end. There are also five separate Fed speakers on the docket this week.

U.S. retail sales growth was unexpectedly flat in July as consumers cut back on buying clothes and other goods, while the producer price index fell 0.4 percent in July, the biggest drop in nearly a year.

The European Central Bank releases minutes of its last meeting on Thursday, and should strike a dovish tone.

Investors have recently lengthened the odds on any Fed hike this year, with futures <0> implying around a 46 percent chance of a move in December.

That in turn has weakened the bullish case for the U.S. dollar and dragged it down against the euro, yen and a range of emerging market currencies.

The dollar was little changed at 101.29 yen JPY= and not far from important support around 100.80. The euro was steady at $1.1160 EUR= having held in a $1.1050 to $1.1230 range for last couple of weeks.

One outlier has been sterling, which has slipped steadily since the BoE's easing to stand at $1.2926GBP= and ever closer to the post-Brexit trough at $1.2797.

In commodity markets, oil prices edged higher after boasting gains of 6 percent last week as Saudi Arabia's oil minister held out the chance of action to help stabilize the market.

Brent crude futures LCOc1 were up 35 cents on Monday at $47.32 a barrel, while U.S. crude CLc1 added 41 cents to $44.90.

Article Link To Reuters:

Why Blacks Really, Really Loathe Donald Trump

The Republican nominee is no David Duke—since at least David Duke says what he means, while Trump just dog whistles.

By Keli Goff
The Daily Beast
August 15, 2016

There is almost no group left that Donald Trump hasn’t offended: Muslims, babies,women, Gold Star families, and of course Hispanics. Yet there is one group that despises Donald Trump more than any other: black Americans.

At an average of just 2 percent support in the polls, Trump is running fourth among black voters, as Harry Enten noted last week. He’s 84 points behind Hillary Clinton, but also trailing Libertarian Gary Johnson and Green Jill Stein.

The findings of recent surveys read like an Onion headline or possibly a “Saturday Night Live” sketch left on the cutting room floor: “Former Ku Klux Klan leader David Duke has more black voter support than Donald Trump.” Just think about that for a second. A white guy who was actually a leader of an organization synonymous with not only hating, but terrorizing, black people is more popular with black people than a white guy who used to host a reality show and now may become president.

Trump’s insanely offensive rhetoric against other groups has drawn extensive media coverage and denunciations from people from both sides of the aisle. His allegations of bias against federal judge Gonzalo Curiel were called the textbook definition of racism by Republican House Speaker Paul Ryan, among many, many others. His early calls to ban the entry of Muslims to this country have been so widely denounced it’s hard to find a public figure --even among those who have endorsed him—who has not come out against the remarks. He’s made more derogatory comments about women that I can count.

While he has certainly had moments that can be perceived as offensive to black Americans, such as when he inaccurately tweeted that black people are responsible for 81% of white homicides (which was nowhere near true), when people think of groups Donald Trump has insulted we’re certainly not at the top of that list.

And yet, Trump is polling at 24 percent with Hispanic voters, and still has the support of 35% of women voters. With black Americans though, he is at 1 or 2%, depending on the poll. That rock-bottom number has put traditionally red states with notable pockets of black voters in play for Democratic nominee Hillary Clinton.

While black voters tend to be more party loyal than other groups, Mitt Romney still managed to get 6% of the black vote, and that was in an election year in which black voters turning out to reelect our first black president shattered previous historical turnout records and were given much of the credit for Obama’s glide back to the White House.

So what is it about the Donald?

It’s true that candidate Trump has not singled out black Americans for the same obsessive and insulting focus he has some other groups, but the contempt for him within the black community has been brewing for much longer.

For starters, he made himself the face of the “birther” lie against President Obama. He claims credit for pushing the President to release his birth certificate. (Ironic considering the President’s 2008 opponent, Sen. John McCain, really was born outside of the country, as was 2016 contender Sen. Ted Cruz, both of whom have since become Trump foes.) For many black Americans, the entire birther conspiracy was added to the list of indignities no previous commander-in-chief, all of whom were white, had been subjected to. While most birthers until Trump had primarily been seen as basement kooks who occasionally landed airtime on a few cable shows, he lent the movement a mainstream face that many black Americans have not forgotten or forgiven.

Additionally, while Trump’s language and policy proposals have perhaps not been as openly hostile to black Americans as some other groups, black people are well acquainted with coded dog whistles – and the impact they can have. For instance, Trump’s false tweet about the level of crimes committed by black Americans against whites is precisely the kind of rhetoric that plays into the worst fears of his overwhelmingly white supporters. He’s been doing this for decades, since he put out full-page ads calling for the death penalty for the five black boys of the Central Park Five (something he’s never apologized for, even after it emerged that those boys, who spend decades behind bars, were innocent).

Historically, rhetoric like Trump uses has resulted in terrifying fallout for black people. Many forget that the 1915 film “Birth of a Nation,” is credited with reinvigorating the membership of the Ku Klux Klan, the film’s message essentially that someone needed to take a stand against the rising tide of dangerous brown people. Sound familiar? The era immediately following the film’s release would be one of the most horrifying in terms of violence against black people, men in particular.

So when Trump says of a black protester “maybe he should have been roughed up,” and black protesters at his rallies are punched and otherwise assaulted, his candidacy inevitably calls to mind darker days – particularly for black Americans living in an age in which the shootings of unarmed black men by police are not an uncommon occurrence.

But perhaps the main reason so many black voters are repelled by Donald Trump is that he’s not David Duke. I have a family member who grew up in the segregated South who said she always prefers people who are honest about who they are. They’re simply safer. Ones who present a façade are much more dangerous. While you can see the David Dukes of the world –and all they represent – coming a mile away, there is something particularly dangerous about the kind of bigot that hides behind a suit, tie, a smile and a handful of so-called “black buddies” – who are on the payroll of course. (Here’s looking at you Omarosa.)

Duke’s bigotry may be offensive, but at least it’s honest. Trump’s is just plain offensive.

Article Link To The Daily Beast:

Lack Of Investment, Payment Delays Hamper Venezuela Oil Output

By Marianna Parraga
August 15, 2016

Venezuela, which holds the world's largest crude reserves, is on track to suffer its steepest annual oil output drop in 14 years as it suffers the effects of an economic crisis and years of under investment and mismanagement, according to data seen by Reuters and interviews with company sources and workers.

The state-run oil company, Petroleos de Venezuela (PDVSA), is struggling to stem a production decline that has accelerated this year as a result of payment delays to suppliers, lack of investment in equipment, and poor planning in the country's vast oil fields.

In the 12 months to June, Venezuela's crude output fell 9 percent to 2.36 million barrels per day (bpd), while the Organization of Petroleum Exploration Countries (OPEC) has boosted its output by 4 percent, according to the group's official figures.

Venezuela's oil minister and PDVSA president, Eulogio Del Pino, last month confirmed a 220,000-barrel-per-day production decline -- around 8 percent -- so far this year compared with 2015.

However, he said the "circumstantial fall" had been "contained." The Oil Ministry later said the country's output rebounded in July to 2.54 million bpd, without giving comparative figures. The data have not yet been reported to OPEC.

PDVSA's statistics have been a matter of debate for years.

Internal trade and supply data seen by Reuters show that PDVSA's crude exports, which account for 94 percent of the country's hard currency income, fell to 1.19 million bpd in July, excluding independent sales made by its joint ventures.

PDVSA did not respond to a request for comment on its sales to customers.

Several PDVSA workers and local union members, in interviews with Reuters, said that an increase in equipment theft, maintenance delays, low salaries, and what they called a sense of "abandonment" of some oilfields are continuing to hit production.

"I have never seen so much inefficiency in my 28 years in the oil industry," said a worker of a drilling firm hired by Petroboscan, a project with participation of U.S. Chevron that is one of more than 40 joint ventures by PDVSA and foreign firms.

Del Pino told local media last month that power outages and limited upgrading capacity to convert Venezuela's extra heavy oil into exportable crude has hampered production. It has forced PDVSA to import some 95,000 bpd of heavy naphtha and light crude to dilute its oil, Reuters trade flows data says.

These problems, occurring while oil services providers reduce operations in Venezuela, have analysts forecasting that production will not recover in the second half of the year, falling instead to its lowest level since a strike that brought output down to an average of 2.56 million bpd in 2003.

Venezuela's active rig count, a good indication of future production, fell to 49 in July according to Baker Hughes, the lowest since the end of 2011.

U.S.-based oil servicing giant Schlumberger noted a "significant reduction of operations" in Venezuela in its most recent earning release and Halliburton said it is operating on fewer active rigs in Latin America, including Venezuela. PDVSA has said there are ongoing talks to solve payment issues with many companies, including those.

Energy consulting firm IPD Latin America in May predicted that Venezuela's crude output will average 2.35 million bpd in 2016, a 400,000-barrel-per-day decline from last year. Medley Global Advisors, meanwhile, expects an average decline of 250,000 to 300,000 bpd, said analyst Luisa Palacios, who believes any rebound will not last.

"They achieve a temporary relief, but the declining trend continues," she said.

Inactive Rigs, Lost Equipment

The cutbacks in oil services have particularly afflicted Venezuela's second-largest producing region, Norte de Monagas, where companies have been halting operations and laying workers off, according to union representatives.

"There are many inactive rigs here in Monagas," said Luis Hernandez, a local union representative. "Some 60 workers are laid off for every halted rig. Some companies say PDVSA owes them money, there are also halted rigs due to lack of spare parts."

Being a technically challenging area, Norte de Monagas's output has declined faster than the country average in recent years, particularly affecting PDVSA's output of medium and light crudes used to dilute its extra heavy oil and creating a growing need for imports at a time when dollars are scarce.

"Monagas' confined reservoirs need a specific pressure to properly work. If natural gas is not injected correctly, the output falls," explained a former executive of PDVSA's exploration and production department, who did not want to be identified.

After Venezuela in 2009 nationalized oil services firms, including Venezuelan assets owned by Williams Companies, PDVSA has faced problems maintaining output levels at areas that need secondary recovery techniques such as water, gas and vapor injections into reservoirs.

Basic maintenance goes undone at many fields, workers say.

"It's painful to see how the equipment is lost deep in the weeds, including flow stations and jack pumps," the worker from the drilling company said.

The fall in output volume, coupled with the drop in global oil prices, has forced the government of President Nicolas Maduro to choose between paying external debt or supplying the dollars needed to sustain imports of basic goods.

"PDVSA, who has no money leftover at all, now needs even more investment in exploration and production than in the previous decade to see its output to revive. At this price level, that is not going to happen," the former PDVSA executive said.

Article Link To Reuters:

Nissan Revolution: Could New Petrol Engine Make Diesel Obsolete?

By Norihiko Shirouzu
August 15, 2016

Japanese automaker Nissan Motor Co (7201.T) has come up with a new type of gasoline engine it says may make some of today's advanced diesel engines obsolete.

The new engine uses variable compression technology, which Nissan engineers say allows it at any given moment to choose an optimal compression ratio for combustion - a key factor in the trade-off between power and efficiency in all gasoline-fuelled engines.

The technology gives the new engine the performance of turbo-charged gasoline engines while matching the power and fuel economy of today's diesel and hybrid powertrains - a level of performance and efficiency the conventional gasoline engine has so far struggled to achieve.

The potential breakthrough technology comes at a time when diesel engine technology has been tarnished by Volkswagen's (VOWG_p.DE) emissions cheating scandal.

The German automaker admitted last year to using secret software to cheat exhaust emissions tests on its diesel cars, affecting millions of vehicles worldwide, and prompting the departure of the company's CEO and other executives.

"Diesel engine is a hot topic globally. We believe this new engine of ours is an ultimate gasoline engine that could over time replace the (advanced) diesel engine of today," Kinichi Tanuma, a senior Nissan engineer who leads product development for the premium Infiniti brand, told reporters at a pre-launch briefing last month.

"Everyone's been working on variable compression and other technologies to significantly improve gasoline engine fuel economy ... at least for the last 20 years or so," said James Chao, Asia-Pacific managing director at consultant IHS.

"Increasing the fuel efficiency of internal combustion engines is critical to automakers. Not all consumers will accept a battery electric vehicle solution. But significant challenges remain, such as increased complexity and cost, as well as potential vibration issues."

To Infiniti...And Beyond

The new Variable Compression-Turbo (VC-T) powertrain, expected to be officially unveiled at next month's Paris motor show, will initially be showcased in an Infiniti car to be unveiled next year, Nissan engineers said, without elaborating. Eventually, it's expected to be used in Nissan cars and possibly by its alliance partner Renault (RENA.PA).

The turbo-charged, 2-liter, four-cylinder VC-T engine averages 27 percent better fuel economy than the 3.5-liter V6 engine it replaces, with comparable power and torque. Nissan says the new engine matches the diesel engine in torque – the amount of thrust that helps determine the car's acceleration.

The engine is also cheaper than today's advanced turbo-charged diesel engines, Nissan engineers said at the briefing at the company's technical and design center in Atsugi, south of Tokyo. They said it should also meet nitrogen oxide (NOx) and other emissions rules in certain markets without requiring costly treatment systems.

Optimal Ratio

The compression ratio measures how much the air-fuel mix is reduced, or compressed, in the gasoline engine's cylinders before it's ignited and produces energy. The higher the ratio, the more efficiently the engine works, producing better fuel economy and, with the addition of a turbo-charger, more power.

Traditionally, design engineers had to fix a gasoline engine's combustion compression ratio, essentially deciding whether to go for power or economy.

Nissan says the new VC-T engine can choose an optimal compression ratio variably between 8:1 and 14:1. That compares with mainstream production gasoline engines that run at compression ratios of 8:1 to 10:1. Exotic sports cars and racing cars run at 12:1 or more.

"We think the VC-T engine could replace or become an alternative to some of today's advanced diesel engines," Tanuma said, noting the new engine's fuel economy and performance could be significantly boosted by coupling it to a gasoline-electric hybrid system, an option Nissan said it's considering.

Article Link To Reuters:

NYSE Sees Double-Digit Asian IPOs Through 2017, With Focus On Tech

By Elzio Barreto and Steve Garton
August 15, 2016

The New York Stock Exchange (NYSE) sees technology companies driving a revival in new Asian listings and expects double-digit IPOs through the end of 2017 from the region, the exchange's global head of capital markets said in an interview.

New listings should start picking up pace in the next months after a slow first half of the year, said Garvis Toler, who is finishing up a trip to Asia with stops in Japan, Indonesia, Hong Kong and mainland China.

NYSE, which has seen only two listings from Asia this year, is betting that technology companies that have raised billions of dollars in private markets would lead the rebound.

"If that number was in the double digits in the next year and a half it wouldn't be surprising at all," Toler told Reuters. "I would absolutely say technology is where the greatest interest is coming from," he added.

The comments mirror those by Nasdaq Inc Chief Executive Officer Robert Greifeld, who said in June that Chinese companies were eager to list in the United States and double-digit listings this year would be seen as a success.

Companies including Chinese car-hailing app Didi Chuxing and financial technology company Lufax, plus India's Flipkart and cab hailing firm Ola, are among several that have raised billions of dollars from investors betting on the region's booming demand for internet services.

NYSE, which is owned by Intercontinental Exchange Inc (ICE.N), regularly battles with rival Nasdaq Inc for listings, including technology and internet companies that had been a staple for the Nasdaq for many years.

More recently the two have lost ground in China's technology sector, with a long list of companies looking to follow Giant Interactive and Focus Media in delisting their U.S. shares in search of a higher valuation closer to home. Recent departures include Youku Tudou, Mindray Medical and Qihoo 360 Technology, an internet security provider with a $9.3 billion market capitalization.

NYSE has had some high-profile tech IPOs the past years, including the world's largest in 2014 when Chinese e-commerce giant Alibaba Group Holding (BABA.N) went public, and Japan's Line Corp (3938.T)(LN.N) and communications software provider Twilio Inc (TWLO.N) this year.

New listings have plunged 50 percent globally so far in 2016 because of a spike in volatility in equity markets, in line with the decline in IPOs at the NYSE, while in market leader Hong Kong activity fell 26 percent, Thomson Reuters data showed. Large capital raisings in private markets and a pickup in mergers and acquisitions for technology companies also means a lot of them will postpone listing plans, Toler added.

"That said we're sitting here now with relatively low interest rates, equity valuations are at an all-time high, you've got really low volatility and so you have some of the trappings of what should be a decent IPO market," he said.

How the U.S. elections in November impact listing plans would be more apparent in early September, when the U.S. holiday season ends.

"It would be absolutely fair to say that companies and bankers are watching the elections with quite a bit of interest," Toler said.

Article Link To Reuters:

The Hothead Who Wanted WWIII

Not only the commander in chief has to keep calm when Armageddon threatens. The case of the JFK vs. Gen. LeMay is a scary warning.

By Clive Irving
The Daily Beast
August 15, 2016

The unnerving vision of Donald Trump one day getting within reach of the nuclear codesis bad enough, but the job specification of commander in chief demands more than just a cool head and stable personality. The president also needs the ability to handle and control hotheads who can appear around them in the midst of crisis.

To be sure, today’s Pentagon generals seem to be a suitably sober bunch, chastened by the cost in lives and treasure of recent wars. Sometimes, though, a general long-seasoned in battle and without doubt possessed of great personal courage can be the last person a president facing Armageddon should listen to.

Probably the most terrifyingly instructive example of this species appeared in the person of Gen. Curtis LeMay, the chief of staff of the Air Force and head of the Strategic Air Command during the Cuban Missile Crisis in 1962.

President John F. Kennedy and his brother Attorney General Robert Kennedy were facing a volatile and unpredictable threat from the Soviet leader, Nikita Khrushchev, who had covertly set up missile bases in Cuba. As the crisis built, the Kennedys found themselves in a minority that held to the belief that a diplomatic solution could head off a military confrontation that would easily trip into a nuclear war.

The Joint Chiefs of Staff, other generals, and some elder statesmen were demanding air strikes against the Russian bases in Cuba before the missiles became operational, to be followed by an invasion. Kennedy feared that, at the minimum, these American actions would lead to a Soviet attack on West Berlin.

LeMay was the most aggressive advocate of an immediate military response. Recorded on White House audio tapes, his disregard of the Kennedys’ authority is palpable.

“Now, as far as the military situation, I don’t share your view that if we knock off Cuba, they’re going to knock off Berlin,” LeMay said. “We’ve got the Berlin problem staring us in the face anyway. If we don’t do anything to Cuba, then they’re going to push on Berlin and push real hard because they’ve got us on the run. If we take military action against Cuba, then I think that the…”

“What do you think their reprisal would be?” JFK asked.

“I don’t think they’re going to make any reprisal if we tell them that the Berlin situation is just like it’s always been. If they make a move we’re going to fight. I don’t see any solution except military action right now. This [a naval blockade] is almost as bad as the appeasement at Munich,” LeMay said.

The reference to Munich and the appeasement of Hitler by Britain and France had a particularly bad vibe for the Kennedy brothers: Their father, Joseph Kennedy, had been a vocal appeaser himself, saying America had no place in a European war.

The Kennedys held on to their belief that the naval blockade of Cuba they had put in place would force Khrushchev to back off—which he did, but only at the last minute and in confusing circumstances.

At the time I was reporting on the crisis from New York (where the newspapers ran stories like Where to go when nuclear war comes).

“Although news of military movements became hard to get,” I wrote afterward, “Washington reporters were drawing lots to go on an unspecified naval mission. The inflammable rumor spread that Kennedy had ordered pin-point bombing of the bases.”

Nobody on either side of this argument—the Kennedy brothers and the generals—then knew that the Soviet officers in Cuba with 20 medium-range nuclear weapons under their command, in an unusual move, had been given the authority to respond to an American attack without consulting Moscow. The missiles were capable of reaching major U.S. cities including Washington, D.C.

Former secretary of state Dean Acheson, who had been called to advise Kennedy and supported the idea of a pre-emptive strike, later admitted that it was “just blind luck” that the two powers had not stumbled into nuclear war.

In the audio, LeMay’s manner and tone sound strangely familiar. It was brilliantly mimicked by George C. Scott in the 1964 movie Dr. Srangelove, playing Gen. Buck Turgidson, like LeMay a cigar-chewing Air Force zealot advocating an immediate nuclear response to a Soviet attack: “Mr. President. I’m not saying we wouldn’t get our hair mussed. But I do say no more than ten to twenty million killed, tops.”

LeMay was, for sure, a gift for satirical impersonation. But the risk is to dismiss him as a caricature, a totally bonkers rogue general and nothing more. In fact, he was a reflection of his own singular military career and the way in which the times sometimes summon the man as an indispensable player.

Le May’s attitude about air power was fueled by personal experience of how seriously neglected and underestimated it had been when he joined the United States Army Air Corps in the early 1930s. Most of its equipment was antique. Commercial airliners outperformed military airplanes.

LeMay got his break as a pilot as a result of a gigantic political fiasco. In 1934 President Roosevelt, spurred by advisers, decided to smash up what they regarded as a monopoly held by the airlines to deliver the Post Office’s mail. He ordered that the flying of mail be switched to the Air Corps, but the air force had neither the machines nor pilots equal to the task. The scheme was ended after 90 days and many crashes, and with 12 pilots killed.

Before it was ended a small group of pilots were trained to fly the first modern bomber delivered to the Army, the Martin B-10. They flew cross-country at night from Dayton to Indianapolis and Chicago and back, pioneering the new technology of “blind flying”—depending on instruments for the whole flight, including takeoffs and landings.

As a result, 25 pilots graduated on the new bomber, as skilled at instrument navigation as any in the world. One of them was LeMay. Thereafter, on frequent missions, he proved himself an unusually gifted navigator, able to find a target under the worst weather conditions.

By 1943 LeMay was in command of a bomber force based in Great Britain that was given a mission designed to prove the effectiveness of strategic long-range operations. He led 143 Boeing B17 Flying Fortresses on a raid deep into Germany, the target an airplane plant at Regensburg. After dropping their bombs, the B17s did not return to their British bases—instead, they flew on to North Africa, a flight completed with few losses.

The Regensburg raid was a success, but another force of 230 bombers sent at the same time to destroy a ball-bearing factory at Schweinfurt that had to return to British bases was badly mauled by German fighters and anti-aircraft fire. They were in incessant combat for six hours and lost 60 airplanes, with 600 crewmen missing.

Losses of that level did not weaken LeMay’s belief in strategic bombing. He was always himself in the lead airplane on missions, insisting on disciplined and accurate bombing. At the same time, he was becoming skeptical of the doctrine of precision bombing. Going after predictable and strongly defended targets in Germany produced a level of attrition that he believed was not justified by the results.

He had a different idea. The Germans and Italians had pioneered indiscriminate carpet-bombing of cities during the Spanish Civil War in the late 1930s. That had been with relatively small forces of relatively primitive bombers. The U.S. Army Air Forces was about to take delivery of a new Boeing bomber, the B-29, able to carry larger bomb loads far longer distances and to fly far higher, beyond where most anti-aircraft defenses could be effective.

As the war in Europe wound down, LeMay became commander of the XXI Bomber Command in the Pacific, equipped with B-29s. In March 1945 he demanded, and got, permission to begin fire-bombing Japanese cities. He wrote in a letter: “the destruction of Japan’s ability to wage war lies within the capability of this command.” He argued that precision bombing left his crews vulnerable to fighter attack, even though, by then, the Japanese had only 500 airplanes in poor condition and no effective radar for night operations.

LeMay’s bombers would carry the largest bomb loads of the war to Japan’s major industrial centers. Incendiaries were 75 percent of the bomb load. Out of 153,000 tons of bombs dropped on Japan, 98,000 were firebombs. Between May and August, 58 cities were destroyed by firebombing, with hundreds of thousands of casualties.

(Two of these conventional bombing attacks were capable of inflicting the same level of damage as each of the atomic bombs dropped on Hiroshima and Nagasaki—but, terrible as they were, they lacked the traumatic psychological impact of the new weapon and its long-term consequences through radiation.)

LeMay ended the war convinced of the rightness of his choice.

“There are no innocent civilians, “ he said. “It is their government and you are fighting a people, you are not trying to fight an armed force anymore. So it doesn’t bother me so much to be killing the so-called innocent bystanders.”

When, finally, the USAAF became free of its army connection, as the USAF, LeMay’s most enduring mark on the philosophy of air power was his creation, in the late 1940s and ’50s, of the Strategic Air Command. This was entirely his personal vision and fiefdom.

In theory the SAC was the Cold War sentinel that kept America safe from nuclear attack. Again using a revolutionary Boeing airplane, the first jet-powered bomber, the B-47, LeMay led a fleet of 2,000 bombers, carrying atomic bombs, and 800 tankers. These tankers, also produced by Boeing, enabled aerial refueling so that SAC bombers could always be in the air, 24/7, to be instantly sent to a target without the delay of taking off from bases.

However, behind the official façade of deterrence—the belief that SAC’s instant readiness would deter any first strike by the Soviets—LeMay believed that America had made a fundamental mistake not to take out the Russians with one huge strike (“killing a nation”) when they were weak. Later, on the record, he lamented: ”When the Russians had acquired (through connivance and treachery of Westerns with warped minds) the atomic bomb and yet didn’t have any stockpile—that was when we might have destroyed Russia completely and not even skinned our elbows doing it.”

This was the LeMay the Kennedy brothers had to hold in check in 1962, a commander whose basic nature or views had not changed since he firebombed Japan. And, in spite of his behavior then, he was not fired.

Indeed, during the Vietnam War he delivered a sentiment that has resurfaced in the mouths of Republicans this year: “My solution would be to tell the North Vietnamese that they’ve got to draw in their horns and stop their aggression or we’re going to bomb them into the Stone Age.”

It was Ted Cruz, not Donald Trump, who pledged to carpet-bomb ISIS and “make the desert glow at night.”

LeMay would doubtless agree. And let his final epitaph be: “I’ll tell you what war is about. You’ve got to kill people, and when you’ve killed enough they stop fighting.”

Article Link To The Daily Beast:

America Is Smashing Russia & OPEC's Grip On The Oil Market

The shale gas revolution in the United States is overturning the old order.

By Anthony Fensom
The National Interest
August 15, 2016

Far from being threatened by recent weak prices, America’s status as an emerging energy superpower has solidified in 2016, weakening OPEC’s grip over the oil market along with Russia’s influence over Europe’s gas supplies. For the next U.S. president, the geopolitical environment could look a lot more benign, should the nation’s energy industry continue on its current path.

The start of the revolution occurred in February, when the first major U.S. gas export shipment from Cheniere Energy set sail for Brazil. According to Cheniere, the United States could be “one of the three biggest suppliers of LNG (liquefied natural gas) by 2020.” In recent months, U.S. LNG has even been exported to the energy-rich Middle East, a move British newspaper the Financial Times described as akin to “sending coal to Newcastle.”

But the shale gas revolution in the United States is rapidly overturning the “old order,” and the dust has yet to settle.

Taking On The Cartel

For decades it was thought U.S. oil production had peaked around 1970, as thirty years of declining production set in and the OPEC cartel’s manipulation of oil supply and prices gave a number of politically sensitive regions an uncomfortably large degree of influence over global markets.

But in 2009, driven by the newly economically viable hydraulic fracking extraction method, U.S. oil production rose, and it kept rising until global oversupply forced U.S. production cuts last year.

After initially downplaying shale’s potential to rival OPEC’s monopoly, Saudi Arabia launched what critics called a price war against the new industry in 2014: it refused to cut production when many other OPEC states wanted to do so, and Riyadh contended that it was merely letting the market take its course. This continues to glut the market, with the Saudis hitting a new all-time production high just last month.

But while their strategy of oversupply may have made some high cost operators economically unviable, including those in OPEC member states Angola, Nigeria and Venezuela, U.S. shale extractors have proven highly adept at cutting costs. This has opened up a profit margin even below that which Saudi Arabia needs to fund its welfare state, which the International Monetary Fund believes could go bankrupt in five years without major policy changes.

Outgoing Pioneer Natural Resources CEO Scott Sheffield last month declared his company had cut pre-tax production costs in the West Texas Permian basin to just $2.25 per barrel, and low production costs are not the only advantage U.S. shale extractors enjoy.

New projects using traditional extraction methods typically have a five-year lead time and a ten-year payback time, while new shale projects have only a one-year lead time and an eighteen-month payback time, according to Goldman Sachs head of European Equity Research Michele Della Vigna. In addition, the ease of developing new projects, and of increasing or decreasing supply to meet demand, has drastically flattened the supply curve of the global oil market, and weakened OPEC’s power to manipulate prices.

Della Vigna expects this shift will leave the United States and OPEC fighting for market share as the two key players, with the rest of the producers battling to remain relevant.

Freeing Europe From Russia’s Stranglehold

Ten years ago, Russia, Qatar and Iran were the established gas giants, together owning 57 percent of global conventional gas reserves and forming the core of the Gas Exporting Countries Forum (GECF), referred to by then Russian Energy Minister Sergey Shmatko as the “gas OPEC.”

In 2005, the Energy Information Agency forecasted the United States would be importing 25 percent of its daily gas consumption in 2015, however thanks to shale gas the nation is now expected to be a net exporter by 2017.

In February, LNG exports commenced from Cheniere’s Sabine Pass plant in Louisiana, headed to South America, India, and most notably gas-rich United Arab Emirates and Kuwait. While both are among the top twenty nations in the world by proven gas reserves, a lack of investment and surging demand has forced an unprecedented need for the Middle East to turn to the United States for gas.

Thwarting GECF from becoming a global gas cartel, and reversing the flow of gas between the United States and the Middle East are seismic shifts in the global energy sector, but perhaps shale gas’s most far-reaching impact will be reducing Europe’s energy dependence on the increasingly unpredictable Russia.

Depleted domestic reserves in the North Sea have forced Europe to import two-thirds of its gas consumption, with roughly half coming from Russia. Unlike oil, natural gas has never been a globally transported commodity due to logistical issues, allowing Russia’s state-owned Gazprom to wield enormous influence over European gas deals.

If the United States opens up the global gas market to unprecedented levels of transparency and competition, which its shale-extracted LNG exports appear capable of doing, Russian President Vladimir Putin’s influence in the region will further diminish.

The financial consequences are enormous, too. A U.S. Energy Department study in December found that U.S. gas exports could inject between $7 billion and $20 billion per annum into the domestic economy. Jason Bordoff, former energy advisor to President Obama and the Founding Director of the Center on Global Energy Policy, believes U.S. LNG exports could save Europe $20 billion per annum on its gas bill, and cost Russia roughly the same.

If U.S. shale can withstand domestic political pressure against hydraulic fracking, and regulatory incentives promoting a shift to renewable energies, it stands to disrupt OPEC’s global oil cartel and Russia’s strong influence in Europe, and establish the United States as the new global energy superpower.

The old energy order looks on its way out, and should it keep its nerve, Washington is perfectly placed to seize the advantage.

Article Link To The National Interest:

The Atlantic Pivot

Brexit or not, Europe remains an indispensable strategic asset for the United States.

The National Interest
August 15, 2016

THE UNITED STATES and Europe have a blind date with history. By 2020, decisions made about the alliance of purpose and the union of necessity built during the Cold War will leave each either more united and stronger, or more divided and weaker. In June 2016, a referendum in Britain changed the terms of its relations with the European Union, but it may also have reactivated its indispensability to its member states, and even strengthened the role of NATO as a unifying factor with the United States. Now, the thirty-four members of NATO and the EU (including twenty states, not including Britain, that belong to both) need a Transatlantic Strategic Dialogue to share strategic foresight and provide policy input for a world of increasing complexity and permanent crises.

In all instances, the aim is to achieve a complementarity of action: even when the transatlantic partners do not act together on every issue, they can still make sure that together they act on all issues that shape the battle of ideas no less than the battlefield. If not America with Europe, with whom? If not Europe as a union, how? If not the EU and NATO, what? And if not now, when?

“Foreigners are not like the folks I’m used to,” Lyndon B. Johnson reportedly said. If asked, he might have added that the Europeans came closest to the folks he knew. Yet, this special affinity is ending. This is a demographic fact of life, which is unlikely to be reversed. Consider: As recently as 1965, 84 percent of all Americans were non-Hispanic whites; by 2015, that share had declined to 62 percent, with the Hispanic share rising from 4 to 18 percent while the Asian share rose from less than 1 to 6 percent. Now, non-Hispanic whites are projected to fall to 46 percent by 2065, with the Hispanic share of the population rising to 24 percent, and the Asian share to 14 percent, while the African American share will remain steady at about 13 percent. These trends suggest a post-American America whose world map is moving away from the Atlantic basin, which is where America was born, down to Latin America where it used to dominate and across the Pacific where it has been drifting.

Such a cultural separation, which also involves a significant demographic shift of Europe southward, makes it all the more important to move toward some transatlantic institutional finality—meaning a better understanding of the modalities that will govern the terms of transatlantic and intra-European relations. But now, instead, the EU is fading and NATO looks stale, with the latter arguably the least influential it has been since 1949 and with the EU visibly more troubled than at any time since the Maastricht Treaty in December 1991. For Britain to say “No” to Brexit would not have been enough to reverse either condition. But for Britain to have said “Yes” leaves Europe historically disfigured and geographically dismembered—a post-Atlantic Europe that moves America away and brings Russia closer, while making Germany more dominant and the EU less important.

THE CONSTRUCTION of Europe as “an ever-closer union” is often told as a fairy tale, including a happy ending. But it was written as a complex tale of treaties fraught with ambiguities and contradictions that made the recurrence of institutional crises inevitable. For the process to go on as it did, four conditions had to be met: first, robust and evenly shared economic growth to sustain a permissive consensus in all member states; second, stable and confident centrist national leaderships, whether left- or right-leaning; third, regional security, threatened in the east during the Cold War and in the south since September 11, 2001 especially; and fourth, a bi- or multinational locomotive to help keep the process moving after the United States had gotten it started during the first postwar decade.

As a whole, these conditions do not exist today. National borders are being closed again, the single currency is at risk, prosperity is receding as growth stagnates and unemployment remains high. Inequalities between the EU member states are widening, intra-EU bilateral relations are tense, the case for solidarity is shattered, democratic politics is under assault and security is at risk. Local and global anxieties reflect widely shared premonitions of impending disasters that the EU seems unable to deter or manage. In short, the idea of Europe has turned into a contentious issue as its citizens disagree over what the EU is, debate what it does, ignore what it has achieved and differ over what it should do next—all with self-defeating populist, anti-EU tones that raise the risks of institutional rollback. Predictably enough, this is cause for apprehension in the United States, whose interest in an ever-closer and bigger Europe now seems stronger than many EU members.

What next, then, for 2020? Brexit has made at least one thing clear: “muddling through” one crisis at a time with barely enough economic growth to permit incremental gains that mask a steady rise of public skepticism is not an option. Given the state of the union and the lack of unity within each state, inaction would be a choice for more regression and fragmentation. At half past the 2010s, three paths remain open, each with a chance to succeed but all vitiated by weaknesses.

A first path to 2020 would end the institutional logic of an ever-closer union (bigger is better, deeper is smarter and stronger is safer) and would instead follow a logic of cleavage (smaller is wiser, lesser is better and weaker is cheaper). Europe, in this scenario, would fragment into old-fashioned clusters of states to stop the refugees where the Habsburg Empire used to prevail, or to contain Russia east of the former Warsaw Pact members, or to return to Europe’s starting core of six states plus a very few, if willing and as needed. Admittedly, anticipating the regression and rollback of the EU is hardly new; but that it would no longer be limited to professional Euroskeptics reflects an unprecedented depth of concern over the fissures that have appeared during the past few years. While a clear majority of EU citizens still welcomes membership (71 percent approval), a nearly equal number objects to its policies and methods (72 percent), which leaves the EU increasingly vulnerable to the next crisis, meaning more Brexits and less Europe.

A second path would extend Germany’s unipolar moment in Europe at least to 2020. However, with sluggish and uneven EU-wide economic growth—1.5 percent or less—an austerity-conscious Germany that outperforms its partners would remain economically depressing and politically oppressive, thus increasing the resentment of a number of EU members about German leadership (now at 53 percent for, and 47 percent against) and deepening Berlin’s ambivalence about the burdens of EU membership. This is not just about Germany as Europe’s problem; it is also about Europe as Germany’s problem.

In a climate of strategic retrenchment, welcomed by Germany, and economic nationalism, favored by many EU members, the Transatlantic Trade and Investment Partnership (TTIP) would likely be stalled and eventually abandoned by an increasingly indifferent U.S. Congress and hostile national parliaments in Europe. Even with reduced refugee flows and no immediate prospect for another round of enlargement, anti-EU populist pressures would remain high, inducing more calls for a renationalization of, or opt-out from, some EU policies, notwithstanding feeble German attempts to steer the union away from institutional shrinkage and “save” the EU from itself and its citizens. Already, Germany’s political restlessness, demographic pressures and vulnerability to a sluggish world economy may be too difficult to overcome for its hegemonic role to last much beyond the end of the decade anyway—with or without a weakened Angela Merkel, but above all with no reliable alternative members able or willing to lead the EU.

A third path to 2020 would gradually reset Europe. With Brexit acting as a wake-up call, Europe’s institutional rebalance would be conceived one issue at a time around a political “new deal” that would follow a cycle of national elections—including France and Germany in 2017 after new elections in Britain would also have reorganized its relations with the union. (Remember the political turnover that shaped the Western pivot of the years 1979–83, from Margaret Thatcher and Ronald Reagan to François Mitterrand and Helmut Kohl?) A more prosperous global economy, buoyed by surging American and Chinese markets, would permit stronger and more evenly distributed gains among EU members. With a motivated new U.S. administration and stronger European governments, TTIP, including Britain and possibly other European members of NATO that are not EU members, could move forward and help to unleash the full potential of the transatlantic economy for a genuine transatlantic marketplace by 2025.

Entering a new decade, negotiations for further EU enlargement would also gain momentum, and improved conditions in the Middle East would reduce the flows of refugees and, together with better economic conditions, help abate populist pressures. With the gradual erosion of Germany’s unipolar moment, a wider leadership for the EU would facilitate the institutional reforms needed for what used to be known as Europe’s “finality,” as well as reset EU relations with a fading Russia and insist on a more active role elsewhere.

WHICH OF these conceptions of Europe’s future does the United States favor? The answer should be obvious. Putting an end to half a century of total wars, an ever-closer Europe has been cause for much satisfaction in the United States, and unsurprisingly, it remains the most desirable path to 2020. (In 2000, a survey of 450 American historians and political scientists singled out the reconstruction of Europe as the most successful U.S. policy since 1945, ahead of the civil-rights legislation and forty-eight other American achievements during the second half of the twentieth century.) Europe as a union, even without Britain onboard, stands as America’s most vital partner to address shared national anxieties and manage global turbulence. Indeed, since the Berlin-plus arrangements signed a decade ago granted the EU access to NATO planning, assets and capabilities, the EU is already a nonmember member of NATO, as in so many ways, the United States (and now Britain) has become a nonmember member state of the EU.

“We are going to stay—period,” President Truman declared during the first Berlin crisis in June 1948. America would stand with Europe. That was clarity. For the next forty years, the legitimacy of U.S. leadership in and with Europe grew out of its capabilities, which were shared with its allies; its intent, which was relatively benign; its methods, which remained generally war-averse; and its efficacy, which helped transform Europe into a community, now a union. That was an era of containment—a third way between the two strategic failures that had defined the first half of the twentieth century: brinkmanship à la 1914 and appeasement à la 1938.

During the twenty-five years since the Cold War, much of that legitimacy has dissipated—America’s reputation for efficacy has been devalued, with its capabilities discounted, its intent questioned and its methods challenged. There is plenty of blame to pass around: to Bill Clinton, who neglected Russia in the 1990s; to George W. Bush, who mismanaged the wars in Iraq and Afghanistan; to Barack Obama, who mishandled the Arab Spring after 2011; but also to Europe, where every problem seemed to depend on and await a U.S. solution.

For the first time in seventy years, the geopolitical landscape appears to have no leadership, no balance and no regulated order—a baffling world in mutation in which three rules of engagement prevail. First, no state and no institution, however preponderant, can be decisive without capable allies and complementary partners. Unilateralism does not pay: we are all multilateralists now. Second, no single dimension of power can suffice. Power is not readily divisible and no country can rely for long on one kind of capability, military or otherwise, without access to the others. And third, no issue, however significant, can define the new global order—neither the Soviet collapse in 1991 nor the dramatic aftermath of September 2001, the financial crisis of 2007, the Arab Spring of 2011, or even the rise of the Islamic State in 2014.

Forget, then, about the follies of total wars, the logic of containment, the bipolar duels of the Cold War and the swagger of unipolarity. Early in the twenty-first century, there are three overlapping and cumulative security agendas that provide little room for moral clarity and strategic coherence: postwars, postsecular and postnational.

FIRST, A traditional post war agenda born out of unfinished territorial and ideological business and clashing national interests and ambitions begins with a restive Russia. In August 2008, the short war in Georgia reignited Russian expansionism. The annexation of Crimea and the dismemberment of Ukraine, followed by an increasingly assertive posture in Syria, have made an unmistakable point. Russia is back—from its humiliating Cold War surrender in 1989 and from the wartime revolution that hijacked its name in 1917.

America and Europe have a shared interest in a stable and united Russia. Russia is not a European power, but it is a very significant power in Europe—too big, too near, too nuclear, too resourceful and too resentful to be either ignored or provoked. Russia’s military spending is an important, but inconclusive, indicator of its challenge to Europe. Moscow’s defense budget more than doubled between 2005 and 2013, improving its efficacy first in Georgia (2008), next in Crimea and Ukraine (2014), and most recently in Syria (2015). Yet, the test administered by Vladimir Putin is not primarily military but political: Russia’s influence in Europe and around the world has grown by default and improvisation no less than by design and vocation.

But a new Cold War is not upon us. While a strong and resolute NATO remains indispensable to deter the Kremlin’s ambitions, a Euro-Atlantic military clash is not a credible prospect so long as Russia stays out of any NATO and EU country. What Europe needs is a moderate buildup of U.S. forces (down to an all-time low of twenty-six thousand), more U.S. support for the NATO (and EU) members alarmed by the Russian imperial relapse and more efficient defense spending from EU countries. Russia, however, is running out of time, as its resources, capabilities, people and security space dwindle. Putin is finding it difficult to sustain his costly geopolitical portfolio. “We should not be thinking about how to cope with America,” a surprisingly subdued Putin acknowledged during his yearly television call-in in mid-April 2016, “we should think about how to cope with our internal problems.”

In short, Europe and the United States should not run out of strategic patience before Russia runs out of actionable capabilities. Au fond, NATO has maintained much of its initial strategic consistency: keep Russia away, settle America in and build the EU up. The stage is being set for yet another reset, and Russia should engage constructively on specific issues, including Ukraine. There, the Minsk Agreement framed a window of opportunity that may not stay open for long after Obama departs in 2017 and before Putin runs one year later. This fleeting opportunity is premised on the EU-based economic incentives for Putin to calm the violence in the second-largest country in the post-Soviet world, and the NATO-shaped strategic interests for the West to end the instability in its closest neighbor (and one of the Northern Hemisphere’s poorest countries).

China is by far the world’s most credible rising power. Unlike Russia, its power fundamentals are strong and durable. Although vulnerable to external conditions beyond its control, the Chinese government can afford to take its time. It is no longer the passive bystander it used to be. Beijing is growing more assertive in the South China Sea, more intrusive in neighboring Vietnam, North Korea and Pakistan, and more active in the greater Middle East, from Iran and Sudan to the Islamic State. Also unlike Russia, for now at least the main concern with China is over financial stability, including an economic slowdown (with growth drifting down to between 5 and 7 percent) and a deepening debt trap (with a weaker currency and a high level of nonperforming loans) to which the Euro-Atlantic economy is heavily sensitive.

There is still much uncertainty over whether and how China will ultimately use its rising capabilities and influence. Politically, China must avoid another of the many epic errors of governance it has made over the past decades, like the Cultural Revolution, the Great Leap Forward, and the one-child policy. Economically, China needs more time before it can claim the status to which it aspires. To that extent, it has little interest in undermining a global economic order that is still best managed by and with the West. For that reason, even though Russia will constitute the most immediate security priority for the rest of the decade, it is the geostrategic rise of China that presents the most formidable security challenge.

Neither NATO nor the EU can remain indifferent to this agenda, but neither can address it alone as well as with each other. Germany at the turn of the past century and the Soviet Union during the interwar years serve as reminders of the unintended consequences of strategic neglect and divisiveness. But irrespective of the next U.S. administration’s intent, priorities and resolve, no balanced transatlantic partnership will emerge meaningfully unless the states of Europe assume together the greater role to which they aspire, and which the United States expects.

SECOND, A daunting postsecular agenda has grown out of the most recent shocks in the greater Middle East, including the Arab Spring and the rise of the Islamic State. Like Europe’s “bloodlands” and the Balkans in the past, this is a region where land was allocated and moved at the pleasure of history and for the convenience of geography. Imaginary states created by colonial masters in the Levant are steadily deterritorialized while their lands are destroyed and their people savaged. These phantom limbs in the region’s body politic haunt the new world order and threaten the Euro-Atlantic zone’s institutional stability. Since 9/11, the region has imploded—yes, do blame America. Middle Eastern states are the legacy of an imperial order conceived elsewhere—yes, blame Europe. Everywhere now, self-induced or externally produced civil wars cross the lines between the sectarian and the secular—yes, don’t forget to blame Islam too. With everyone eligible for blame, no one can escape responsibility behind the fallacy of self-serving retrenchment, the illusion of a reassuring time out or the delusion of a bit of “leadership from behind.” For the United States and Europe the strategic choices are narrowing.

This post-secular agenda—in, from and about the greater Middle East—is especially urgent. Afghanistan is representative of the difficulty. After September 11, this was widely viewed as a legitimate war; now, after fifteen years, progress in pacification, reconstruction and stabilization remains far from satisfactory and ever further from resolution.

Regretfully, Afghanistan is not an aberration, and no Euro-Atlantic country can be sure that future interventions will yield results. The secular war in Iraq, which aimed at regime change, became a sectarian war for Iraq after Saddam Hussein’s removal. Now that the rise of the Islamic State has forced the need for a return of U.S. forces, it is time to address two daunting questions. Can Iraq ever have a functioning state at peace with itself, and if not, what is there to assist and against whom? Can any Iraqi state ever live at peace with its neighbors, and if not, what is there to deter and by whom?

Elsewhere, the situation is getting worse: in Tunisia and Egypt, where the Arab Spring got its start, but also in Syria, Libya, Yemen and Sudan. The latter four are dying states buried under civil wars that are spilling over into neighboring Jordan, Lebanon, Algeria and, increasingly, Turkey—an important NATO member (but not a member of the EU) dangerously singled out by the Islamic State as a target of choice. Risks of a meltdown are also rising in Saudi Arabia, and the next Israeli-Palestinian war seems near, separate from but also inseparable from everything else in the region. Finally, while a military confrontation with Iran has been postponed, the risk cannot be discarded yet, especially as Tehran extends its reach and influence throughout the area.

The Middle East is a region where surprises are expected, but even so the current implosion has been surprising. Agreeing on, or debating, what should not have been done (as in Iraq), or what was not done (as in Syria), or done poorly (as in Libya) and late (as in Iran) is easier than agreeing and acting on what should be done now. The region does not lend itself to much strategic coherence: if the enemy of my enemy is not my friend, but the enemy of my friend is not my enemy, who is my friend? In the century’s new global Balkans, this is a true Sarajevo moment, whose only strategic clarity is the urgency it conveys. By 2020, the expanding area of homeless nations, rearranged into sects, tribes and clans, will define the region and shape a new status quo—either much better or much worse but not the same.

President Obama’s professorial talk about “the unfixable” greater Middle East may well be justified. But that is the tyranny of primacy: as it has been noted, great powers do not do windows. Given this bleak picture, the Euro-Atlantic community’s fragmented response has failed to exploit its complementary range of national and institutional capacities—political, economic, military and social strengths with which to reduce the region’s instabilities and counter the spread of militant radical Islam. In a globalized and interconnected world, withdrawal from this struggle is not an option. A Transatlantic Strategic Dialogue would aim at some informal understanding as to which states or institutions should take the lead in producing the “first draft” of a comprehensive policy for consideration by all the members of the Euro-Atlantic community in response to, or in anticipation of, an evolving or emerging crisis.

THIRD, A postnational agenda transcends the nation-state and exceeds its capacity for effective management alone. Included in this agenda are slow-moving issues that do not sustain public interest and are bundled into circumstances that cannot be resolved without broad interstate cooperation: flows of refugees who seek an escape from failed and failing states; the rise of radical militant Islam within the Euro-Atlantic states; energy security; structural economic relations, including the management of multilateral institutions so as to make room for the emerging economies; the proliferation of weapons of mass destruction, including loose nukes, a subject now dominated by the ambitions of Iran, the defiance of North Korea, the instabilities of Pakistan and the known unknowns of the Islamic State; environmental concerns, including the nearly universally acknowledged threat of global warming and the enforcement of the Paris Agreement of December 2015; the unregulated and potentially decisive world of cyberspace; and much more.

In responding to these threats and challenges, Europeans and Americans face institutional rigidities that diminish their capabilities and stand in the way of successful outcomes. NATO often falls short because it lacks nonmilitary functionality; the reverse applies to the EU, because it lacks political punch to complement its economic jab; meanwhile, NATO-EU and EU-American dialogues often bog down on mundane qui-fait-quoi questions of competence between the institutions or among their members. Yet, even in a world in mutation said to be turning post-Western, the United States, NATO and the EU offer a unique set of relevant and complementary capabilities to lead in a multilateral context.

These capabilities will be made more effective if they can rely on a shared Euro-Atlantic security framework that includes EU members that are not in NATO and European members of NATO that are not in the EU. If twenty-one EU members can agree with their six NATO partners on a strategic concept, they should also be able to agree with their other seven EU partners on a strategic framework paper that can accommodate the six non-EU members of NATO. What is included in this document will be important, of course, and drafting it will not be easy. But as significant as its specific content will be, the demonstration that the Euro-Atlantic community shares a common view of the world is paramount.

IT IS in Europe that America completed its apprenticeship as a superpower, and it is with the United States that the former great powers of Europe regained their composure and confidence. Now, after half a century of total wars, and another of containment, this is a moment of permanent crisis. Neither the United States and NATO, nor the states of Europe and the EU, can passively await a solution. In December 1995, which was a time of transition, a New Transatlantic Agenda (NTA) was designed to respond to major political and institutional changes in Europe, including the disintegration of the Soviet Union and the Treaty on the European Union. The dialogue that followed proved to be the high point of transatlantic economic integration for an entire decade, and shaped a “big-bang” enlargement of the Euro-Atlantic community. But although the NTA facilitated cooperation on counterterrorism and the spread of weapons of mass destruction, it proved to be of limited relevance to high-politics issues, and transatlantic political differences therefore remained high, and policies erratic. It is that deficit that now needs correction to meet the strategic challenges of the moment.

A new transatlantic agenda with an elevated focus on security and foreign policy would not pretend to minimize differences in attitudes or interests on specific issues and regions of concern. Nor would it neglect the distinct mission, structure and identity of both NATO and the EU. Nor, finally, would it suggest that what is good for one transatlantic partner is necessarily beneficial, in equal measure, to all the others. But it would imply that what is bad for either institution, or any of its members on one side of the Atlantic, is likely to be bad for the other. And it would facilitate a process of Euro-Atlantic Political Coordination with a vital set of capabilities to help promote shared interests, common objectives and compatible values in a dangerously turbulent world.

Article Link To The National Interest:

Donald Trump Voter Fraud Warning: He's Right And Media Are Wrong To Dismiss It

They should talk to Chris Matthews and travel to Philly.

By John Fund 
The National Review
August 15, 2016

Yes, Donald Trump has muddied the issue of possible voter fraud in the November election with his comment that the only way Hillary Clinton can win Pennsylvania is by way of stolen votes. There doesn’t seem to be an issue that Trump can’t handle without hyperbole and exaggeration.

But the media pile-on that Trump has experienced over his call for election observers to monitor the polls in Pennsylvania is unfair. The Los Angeles Times claimed that his remarks calling for poll monitors in Pennsylvania had “strong racial overtones,” even though he never mentioned race. “The comments raised the specter of confrontations on Election Day in precincts with many minority voters,” the Times reported. Other commentators rebutted Trump by repeating spurious claims that voter fraud is extremely rare.

Savvy Pennsylvania politicos have begged to differ. Chris Matthews, the liberal MSNBC host who comes from Pennsylvania, vehemently opposes requiring ID at polling places. But he agrees that voter fraud is a Philadelphia tradition. In 2011, on his show Hardball, he explained a common scheme:

"People call up, see if you voted or you’re not going to vote. Then all of a sudden somebody does come and vote for you. This is an old strategy in big-city politics...I know all about it in North Philly — it’s what went on, and I believe it still goes on."

Philadelphia has a long reputation of fixing elections as a means of controlling patronage and municipal contracts. Voter intimidation also has occurred. In the 1960s, cops would routinely hassle black voters trying to vote. But intimidation can take many forms. In 2012, two members of the radical New Black Panther Party used nightsticks and racial epithets in an effort to scare white voters away from a Philadelphia polling place. The Obama administration ended up dropping almost all of the charges in the case against the Panthers.

The potential for fraud is also considerable. “People working the polls don’t ask for ID,” says Jimmy Tayoun, a former city councilman who went to prison in the 1990s for corruption. “You can flood a lot of phony names on phony addresses, and there’s no way they’re going to check.” In 1993, a federal judge had to overturn a special state senate election in which Democratic precinct workers had gone door to door with absentee ballot forms and “helped” voters fill them out. Ed Rendell, then Philadelphia’s mayor and later the state’s governor, explained away the irregularities at the time by saying, “I don’t think it’s anything that’s immoral or grievous, but it clearly violates the election code.”

Arlen Specter, who served Pennsylvania for 30 years in the Senate, first as a Republican and then as a Democrat, strongly opposed voter fraud during his career. He openly scoffed at liberal claims that there is no voter fraud. “They don’t see what they don’t want to see,” he told me before this death in 2011. “I’m from Philadelphia. It’s been a way of life here.” He said that even though he was a Democrat he stood by his 2007 vote in favor of requiring photo ID in all federal elections.

Specter, as a former district attorney of Philadelphia, had personal knowledge of voter fraud. I reported in 2012 at NRO:

"Specter was appalled at the activities of the far-left group ACORN, after it was discovered they were submitting hundreds of thousands of fake voter registrations around the country. As ranking Republican on the Senate Judiciary Committee, he unsuccessfully urged that a hearing be held on the ACORN scandal. He was shot down by, among others, New York Democrat Chuck Schumer, who claimed, “Fraud is not systematic, and it doesn’t occur very much.”

Even after he switched parties in 2009, Specter still voted with a majority of the Senate to end all federal funding of ACORN...“Every vote stolen cancels out that of someone else and attacks the heart of our democracy,” he told me. “That shouldn’t be a partisan issue but just one of basic integrity.”

The way to avoid disputed elections and political turmoil is to make sure as few problems as possible happen while votes are being cast. It’s almost impossible to detect fraud after secret ballots are thrown into a common pool. Sending properly trained election monitors — both governmental and private — where appropriate is one safeguard. Another is having prosecutors issue a warning right before Election Day that fraudsters will be prosecuted — a threat that the Obama administration has been singularly uninterested in. Giving federal grants to states to help them pay to upgrade and standardize their voting machines would also be a good step.

The laxity of our locally enforced election laws is an invitation to cheat. However inartfully expressed, what Donald Trump was warning against in Pennsylvania is a legitimate concern. Rather than dismiss such concerns out of hand, the media might want to visit Philadelphia and other cities and be educated on what really can happen there on Election Day if the integrity of the voting process is put at risk.

Article Link To The National Review:

The Truth About Hezbollah

Above all there is peace and tranquility at the Lebanese border. For the last 10 years not a single Israeli citizen was scratched and only four Israeli soldiers were killed.

By Yossi Melman
The Jerusalem Post
August 15, 2016

The good news is that the Israeli public is gradually maturing and is less and less holding its breath when Hezbollah’s secretary-general delivers his inflammatory speeches.

In the past the Israeli media were preoccupied with Nasrallah’s speaking engagements.

Over the weekend, Hezbollah leader Hassan Nasrallah delivered another speech and it got very little attention in Israel.

In other words, Hezbollah and Nasrallah are no longer frontpage news. This is also because slowly but surely, Israeli media and the public at large have changed their perception of the Second Lebanese War, the 10th anniversary of which both sides are commemorating.

Unlike the first years after the war, when it was promoted by the media as a colossal failure, there is a growing recognition that despite the tactical failures, it brought Israel important strategic achievements.

Above all there is peace and tranquility at the Lebanese border. For the last 10 years not a single Israeli citizen was scratched and only four Israeli soldiers were killed.

Since that war several top Hezbollah commanders were assassinated, including ”defense minister” Imad Mughniyeh and his successor and brother-in-law Mustafa Badreddine, in operations attributed to the Mossad. This shows how Israeli intelligence managed to deeply penetrated the Lebanese Shi’ite group.

Hezbollah is a much weaker organization while Israel is much stronger. This is also due to the bloody civil war in Syria in which at least 1,600 Hezbollah fighters were killed and another 6,000 wounded. Not a small matter for an army – conscripts and reservists combined – of 45,000.

On top of all this, Hezbollah has financial problems to the point that it delays payments to its members and the bereaved families and certainly to its suppliers. No wonder that Hezbollah is deterred and all its representatives, Nasrallah included, say that they don’t wish to be dragged into a new round of war with Israel.

True, Hezbollah has accumulated more than 100,000 missiles and rockets, at least a thousand of which are long-range and accurate enough to hit almost any strategic and military site in Israel. Hezbollah is also better equipped and trained than it was 10 years ago. It has better intelligence and it has drones.

In his speech, Nasrallah once again boasted about the strength of his organization and its determination to go on with its struggle to “resist” Israel.

He also bragged that Israel is a weak country torn inside out by its social and economic divisions, kind of a repetition of his address after the 2006 war in which he compared Israel to a spiderweb.

He knows better. The Hezbollah leader knows the true power balance between the two sides. In case another war breaks out, the Israeli military machine will crush Hezbollah, kill as many of its troops as possible and destroy its arsenals and bases. Hezbollah is no match for the IDF. The Israeli public knows it and so does Nasrallah.

Article Link To The Jerusalem Post:

The Truth About Hezbollah

The Tale Of Two Victories Against Assad’s Regime

By Hassan Hassan
The National
August 15, 2016

On two consecutive Fridays this month, Aleppo was the site of major victories against the Assad regime in Syria. In southwestern Aleppo, anti-government forces broke a month-long siege enforced by the regime. In eastern Aleppo, a coalition of Arab and Kurdish forces drove out ISIL from one of its critical strongholds, Manbij.

The two developments are a blow to the country’s worst killers, and thus should be commended. The win in southwestern Aleppo saved about 300,000 civilians from a crippling siege and a slow death, while the defeat of ISIL in Manbij will further weaken the group and deprive it a crucial planning and recruitment hub.

Notwithstanding the benefits of defeating regime forces in southern Aleppo, the liberation of Manbij is in many ways a far greater victory for Syria.

The battle for breaking the siege was framed as a victory for Al Qaeda’s newly-rebranded Jabhat Fateh Al Sham (JFS), formerly Jabhat Al Nusra. A week after the JFS-led forces stormed the Artillery Academy, one of the regime’s key bastions near the city of Aleppo, a tug-of-war erupted on social media after JFS members lashed out at attempts by some rebels to take credit for the accomplishment.

The attacks were first directed at Ahrar Al Sham’s former political officer, Labib Al Nahhas, who seemed to take credit for the well-publicised battle in an interview with the London-based Al Hayat, and who said JFS’s disengagement from Al Qaeda was insufficient. The discussions on social media, triggered by two JFS officials, was further evidence that the group wanted the battle to appear as largely its own. Worryingly for the opposition, the episode marks a new phase of hegemony that involves the elimination of rivals and co-optation of like-minded groups, as I wrote in this space last week.

More disturbing was the name the rebels chose for the battle to break the siege in Aleppo. The operation was dubbed the "Ibrahim Al Youssef battle", after the militant who gunned down dozens of his colleagues at the Artillery Academy in June 1979, as part of a Muslim Brotherhood insurrection against the rule of Hafez Al Assad. Captain Al Youssef reportedly separated Alawites from Sunnis and killed them. During the offensive in Aleppo, a spokesman for the JFS-led forces said they would do the same to Alawites today.

None of the participant groups, which ranged from moderates to jihadists, objected to the name choice. As it turned out, a non-jihadist group was the source of the name. One of Al Youssef’s sons, Yasser, is a commander with the Zinki, a faction that took part in the operation and was until recently backed by the United States.

Yasser posted a message he said he received from Ahrar Al Sham’s former political officer, Mr Al Nahhas, who is often portrayed as a moderate. In the message and separate posts, Mr Al Nahhas glorifies the militant and depicts the operation in Aleppo as revenge for Al Youssef. Referring to Al Youssef, the message posted by Yasser reads: "Today is your day, our day, the day of the father, those who fought as strangers and who were wronged by everyone. Today, we give them back the respect and regard they deserve."

Similarly, a member of a currently US-backed group near Damascus said this about Al Youssef: "My dear sir, my commander, the mission has been completely successfully. What you started in the past is being completed today by your sons."

This was unmistakably a new low for the Syrian rebels. Even Muslim Brotherhood officials have distanced themselves from Youssef, who was a pioneer of the Fighting Vanguard, a militant Brotherhood offshoot.

The sentiments shown towards his legacy also say a lot about the extremism of the government side, especially given the growing presence of foreign Shia militias in Aleppo, a predominantly Sunni city. But it is also clear that extremist rebel forces are seeking to drag more people into their unabashedly sectarian rhetoric, which the opposition should resist if it wants to avoid helping Bashar Al Assad in the same way the Fighting Vanguard helped his father.

In contrast, the operation in Manbij was named after someone viewed by many as a hero born of this conflict. Faisal Abu Layla fought against ISIL alongside the Kurdish People’s Protection Units (YPG). He was killed during the first week of the battle to retake Manbij, in June. In a video before his death, he is seen instructing his fighters not to intrude on civilians or engage in looting.

Complaints of summary executions were still reported during the offensive, and dozens of civilians were killed in US-led strikes in the city. Fears about the YPG’s hegemonic and undemocratic agenda persist.

But relative to previous operations, it is safe to say that the battle in Manbij has been largely successful in terms of discipline. And relative to the rebels’ gain the Friday before that, the operation is a far superior victory for all Syrians.

Article Link To The National:

Exposing Iran’s Boeing Lie

By Michael Rubin
August 15, 2016

After successful lobbying by Ambassador Thomas Pickering (who did not reveal his ties to Boeing when he testified before Congress and lobbied for the Iran deal), Secretary of State John Kerry and his team inserted a clause was inserted into the Joint Comprehensive Plan of Action (JCPOA) to permit the licensed sale of U.S. civilian aircraft to Iran. Much has been written about the subsequent proposed deal for Iran Air to purchase up to 100 Boeing aircraft worth perhaps $25 billion. Proponents of the deal point to Iran’s need to revitalize its aircraft amidst a poor air safety record. Opponents of the deal, myself included, argue that Iran might seek to cannibalize the planes to augment its military fleet or use them directly for troop transport.

Increasingly, it seems, the notion that Iranian authorities are concerned primarily about civilian aircraft safety is demonstrably false. Firstly, consider that Iran also seeks to purchase approximately 100 Airbus aircraft, meaning it seeks 200 new aircraft. From Boeing, it reportedly seeks four 747’s, thirty 777’s, and forty-six 737’s, on top of which it would lease another twenty-nine 737’s.

Compare that with Iran Air’s current fleet, which totals 43 planes, more than one-third of which are relatively small, 100-seaters. If both the Boeing and Airbus deals occur, Iran Air will have a larger fleet than Japan Airlines, Qatar Airlines, and Singapore Airlines. Iran Air—and any of the other Iranian carriers—simply will not be able to carry enough people domestically to fill even a fraction of those planes. And, as for international travel, even if some Iranian leaders see themselves as a tourist mecca, realistically, tourists are not going to flood back into the country so long as the regime’s security services continually imprisons those who do make the journey.

Boeing understandably wants a sale and Kerry’s poor crafting of the JCPOA adds to some proponents’ desperation as they fear that if the U.S. Congress questions the Boeing deal, Iranian authorities might walk away from even their watered down commitments. But given that Iran cannot possible use even a fraction of the 200 planes it seeks for civilian purposes, it behooves Congress to ask: Why does Iran need 200 planes when 40 would suffice for its market?

Article Link To Commentary:

The Stimulus Wore Off. What Now?

By Robert Samuelson
The Washington Post
August 15, 2016

A great mystery of our time - one that should frame the campaign debate - is why the economic recovery has been so sluggish. Consider this comparison. After the brutal recession of the early 1980's (peak unemployment: 10.8 percent), it took only 11 months for employment to regain its pre-recession level. By contrast, it required 51 months after the Great Recession for employment to reach its pre-recession numbers. Either economic policy let us down or the economy has become less robust. Maybe both.

We expected better. Sure, economic policy probably prevented a second Great Depression, and this was no mean feat. Remember, unemployment was 25 percent in 1933. Since the Depression, economists had supposedly acquired the knowledge to avoid deep slumps and feeble recoveries. So we thought. This failure has led to a search for explanations and villains.

The latest contribution is from Josh Bivens of the left-leaning Economic Policy Institute. His study asks why the recovery is taking so long. The answer, he says, is not enough government spending. More pump-priming was (and is) needed. Federal budget deficits should have been (and should be) larger. Total government spending at all levels (local, state and federal) has been weaker than in past recoveries. The absence of this extra stimulus has held the economy back.

This is the liberal analysis of the sluggish recovery. It could be right. In early 2016, Bivens notes, per capita government spending was 3.5 percent lower than at the depth of the Great Recession. By contrast, at a similar point in the recovery from the 1981-1982 recession, per capita government spending was up 17 percent. If government spending now had followed the same path, says Bivens, it would have been $1 trillion higher in 2015, "translating into several years of full employment."

It's the federal government that should borrow and spend more, says Bivens, because most states and localities are required to balance their operating budgets. (Also, many states and localities don't want to borrow, the Wall Street Journal reports. Despite low interest rates, they're scaling back "spending on aging roads, bridges and buildings," because taxpayers oppose added debt.)

It's a powerful case. If there's too little demand, government should create more. Still, there's room for skepticism.

For starters, the argument that robust government spending fueled fast recoveries in the past may be backward. The causation may have run in the other direction: Strong recoveries may have raised spending, as tax receipts surged and government spent the inflows.

Next, we tried a generous stimulus, and it only partially succeeded. From 2009 to 2012, federal budget deficits - including tax cuts as well as spending increases - totaled $5.1 trillion. On an annual basis, they averaged about 8 percent of the economy (gross domestic product). That's huge. Still, the recovery was tepid, and after 2012, deficits declined (in 2015, it was $439 billion or 2.4 percent of GDP).

The explanation shows the limits of stimulus policies. They are usually intended to be temporary. They cushion the economy while it adjusts to disruptions. Businesses and consumers repay excessive debts. Surplus inventories are sold. Speculative housing prices fall. In theory, these adjustments enable the private sector to resume its role as the economy's main locomotive.

Unfortunately, the locomotive is faltering. The economy didn't pick up after the stimulus wore off. What ails the private sector? Can we do anything about it? Those are the crucial questions.

On the first, theories abound. Some economists see a broad slowdown in technological advances (despite the Internet) whose adverse effects were masked by easy credit. Another theory is that the costs of the welfare state and regulation have come home to roost; they allegedly discourage risk-taking, business investment and work. Another view is that the financial crisis and the Great Recession so scared consumers and businesses that they are reluctant to spend.

Whether we can do anything about this is unclear; but we must at least be clear-eyed about the problem. What's distinctive about today's economic situation is that the problem is global. Almost every major country suffers from reduced economic vigor. Providing more stimulus may seem one response. But it may be shortsighted if it distracts from the more important problem of resuscitating the private sector.

It's worth remembering that China essentially did what American critics suggest we should have done - and should do now. China launched a huge stimulus program in 2008 (bigger than ours relatively) of public-works spending and industry investment. This did shield China from the worst of the crisis. But it didn't solve China's underlying economic problems, which are now worse for having festered.

Can a reinvigorated U.S. private sector escape a similar trap? Or are we fated to ever-increasing deficits? These are the questions that loom ominously over the campaign.

Article Link To The Washington Post: