Thursday, August 18, 2016

Thursday, August 18, Morning Global Market Roundup: Asia Stocks Jump, Dollar Trips As Risk Appetite Returns

By Saikat Chatterjee 
Reuters
August 18, 2016

Asian shares are on track for their biggest single-day rise in nearly two weeks while the greenback retreated after minutes of the U.S. Federal Reserve's latest meeting showed that the chances of a September rate hike are looking pretty slim.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.7 percent, its biggest rise since Aug. 8, as investors took the Fed's hesitancy as a reason to increase their positions after a 14 percent rise over the last two months. Tech and telecom firms shone.

"Right now, observers think a September policy rate hike is off the table," Richard Clarida, global strategic advisor at bond giant PIMCO, wrote in a blog.

Hong Kong shares .HSI were the top gainer in Asia with a 1 percent rise, while a stronger yen, thanks to the Fed's cautious outlook, pulled Japan's Nikkei .N225 back 0.9 percent.

The July meeting's minutes published on Wednesday showed that Fed policymakers were generally upbeat about the U.S. economic outlook and labor market. But they also said they wanted to "leave their policy options open" as any slowdown in hiring would argue against near-term monetary tightening.

Market participants interpreted the minutes as moderately positive for risk-taking, with the Fed remaining divided on the timing of the next hike. Futures contracts dipped slightly, signaling a receding of bets on a U.S. rate increase.

"There is clearly strong disagreement within the Fed with regards to the timing of further rate hikes," wrote Angus Nicholson, market analyst at IG in Melbourne.

Bond markets greeted the rate Fed minutes with cautious optimism with the iShares iBoxx $ High Yield Corporate Bond ETF (HYG.P) poised to set a fresh one-year high. The yield on 10-year Australian government debt AU10YT=RR edged lower to 1.95 percent, about 100 basis points down from end-2015.

Yields on Japanese debt sunk deeper into negative territory after steady investor demand was seen at an auction of five-year government bonds. In currency markets, the dollar was down 0.2 percent at 10003 yen JPY=, near a post-Brexit low of 99.55 hit on Tuesday.

The euro edged up 0.2 percent to $1.13060 EUR= with the common currency on track to rise more than 1 percent this week.

The dollar index was flat, having lost about 0.7 percent so far this week, during which it touched a 7-week low of 94.426 on Tuesday.

The greenback felt the sting of lower U.S. Treasury yields, which fell overnight after the release of the Fed minutes. [US/]

The weaker dollar was an additional help to commodities like crude oil though oil prices dipped in early trading on the prospect of record Saudi output.

International Brent crude oil futures LCOc1 were at $49.69 per barrel at 0050 GMT, down 0.3 percent from their last close.

Copper, which had slid on the dollar's rise earlier in the week, trimmed some of its losses as the U.S. currency flagged.

Benchmark copper on the London Metal Exchange CMCU3 extended gains to be up 0.7 percent at $4,806 a ton after losing 0.8 percent on Wednesday.


Article Link To Reuters:

Gains For Oil Prices Fade On Persistence Worries Over Global Supply Glut

By Jenny W. Hsu
MarketWatch
August 18, 2016

Crude prices petered out in early Asian trade Thursday as growing global inventories trumped any bullishness associated with the latest bigger-than-expected reduction in U.S. crude stockpiles.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU6, +0.36% traded at $46.80 a barrel, down $0.01 in the Globex electronic session. October Brent crude LCOV6, +0.10% on London’s ICE Futures exchange fell $0.16 to $49.69 a barrel.

Oil prices eked a 0.3% rise overnight after the Energy Information Administration reported U.S. crude stocks contracted by 2.7 million barrels last week while gasoline stocks fell by 2.2 million barrels.

As the world remains awash with excess oil, any reduction in inventories or signs of a rebalance can be bullish for sentiment even though at this level, U.S. crude and gasoline stocks are far above their five-year highs, said Michael Wittner, the chief commodities analyst at Societe Generale.

Oil prices have risen around 9% since last Monday when the Organization of the Petroleum Exporting Countries announced it would discuss measures to stabilize the market. The 14-member bloc is due to meet in late September in Algeria.

The market was further encouraged after Russia, a non-OPEC player which produced 10.85 million barrels a day in July, threw its weight behind a possible collaboration among the producers.

However, the positive streak was soon snapped by the growing speculation over the commitment of these heavyweight producers, many of which are currently producing at elevated levels. Analysts say unless global demand surges, a production freeze at this level would have little impact on prices or the global oversupply.

The cartel also has a track record of undelivered pledges. Earlier this year, the proposal of an output cap was crushed after Saudi Arabia and Iran rebuffed the idea, underscoring the difficulty for political rivals to forge consensus.

Moreover, many say any price bump would only entice the U.S. shale producers to crank up their production.

“One unique trait of the U.S. shale producers is that they are very quick and responsive to price changes and could easily interrupt any supply arrangement,” said Ric Spooner, chief analyst at CMC Market.

Still, the possibility of a concerted effort to stimulate the oil market has prodded Brent prices closer to $50 per barrel, a level that many traders no longer consider sexy because of the anticipated strong resistance at that level.

“We see additional technical resistance scaling in at $50.72 ahead of prior highs at $51.92 to $52.29,” wrote Tim Evans, a Citi Futures analysts, who expects prices to bob in a narrow band until the OPEC meeting.

Nymex reformulated gasoline blendstock for September RBU6, +0.57% — the benchmark gasoline contract — rose 24 points to $1.4529 a gallon, while September diesel traded at $1.4866, 26 points lower.

ICE gasoil for September changed hands at $434.75 a metric ton, up $4.75 from Wednesday’s settlement.


Article Link To MarketWatch:

Will It Matter? That's The Question To Ask Of Any Oil Producers' Deal

By Clyde Russell
Reuters
August 18, 2016

Asking whether the world's major crude oil-exporting countries can reach a deal to limit output is probably the wrong question. Asking whether it matters if they do is more relevant.

Once again the speculative "will they, won't they" merry-go-round has been fired up ahead of a planned meeting of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers.

As in the run-up to previous meetings, investors and traders will hang on every twist and turn in the words of oil ministers in the six weeks between now and the meeting at a forum in Algeria on Sept. 26-28, trying to work out if a deal is likely.

While this is interesting and will keep the media and analysts occupied, it's likely only to exert short-term influences on oil prices and increase volatility.

It's a more pertinent exercise to ask what will happen if the producers do manage to reach a deal, having failed in their previous six attempts.

There is certainly increased motivation for a deal to be reached, as the ongoing weakness in oil prices is causing rising fiscal pain for many producers. Some, such as Venezuela are teetering on the brink of social collapse, and others are eating through monetary reserves.

Still, given the inherent tensions between even fellow OPEC members such as Saudi Arabia and Iran, and the disparate nature of a group that includes outsiders as well, achieving a workable consensus in Algeria will be a challenge.

The price of global market Brent crude has jumped 20 percent since hitting a four-month low on Aug. 2 to close near $50 a barrel on Wednesday, reflecting some optimism the producers will be able to agree on limiting output.

The price is still below the peak so far this year of $52.86 on June 9, and is less than half of what it was in June 2014, when the last big downturn started.

However, assuming that some sort of agreement is reached in Algeria, what becomes important is the nature of the deal.

The consensus view is that any agreement would likely be a weak pact that did little to alter the supply-demand balance in the short to medium term, but that may tighten the market from late 2017 onwards on the basis that supply would remain flat while demand eventually rises.

Any agreement that allows major oil producers to continue pumping at current rates - near records for some - will merely serve to confirm that supply will remain robust.

Middle East Producers Pumping Merrily 


The top producers in the Middle East have all been ramping up output recently, with industry sources quoted by Reuters saying number one exporter Saudi Arabia may pump record volumes in August.

Saudi Arabia's oil shipments, as tracked by Thomson Reuters Supply Chain and Commodities Research, are likely to be around 33.22 million tonnes in August, equivalent to about 7.82 million barrels per day (bpd).

This figure is still subject to the possibility of more vessels departing, but even if it stays the same, the final number will be similar to what was shipped in July, which was the second-highest monthly total since the beginning of 2015.

Saudi Arabia's average monthly exports since the start of 2015 are around 31.1 million tonnes, and the six months from March to August have all seen totals higher than this average, according to the Thomson Reuters data.

Iran's August shipments have been estimated at 10.477 million tonnes, the highest since Western sanctions against the Islamic republic were lifted in January and about 60 percent higher than the average since the beginning of 2015.

Regional rival Iraq is slated to ship 14.457 million tonnes in August, the most since April and above its average of 13.43 million since January 2015.

The United Arab Emirates is expected to ship 12.43 million tonnes in August, the third-highest since January last year and above the 11.56 million average of the last 20 months.

Thus, the overall picture that emerges from the major Middle East producers is one of plentiful and rising supply, meaning that merely freezing output is unlikely to do much to remove the overhang of crude in the market.

Also, the gains in output ahead of the September meeting are unlikely to sit well with those who have been battling to keep up their production, such as Venezuela and Nigeria, or those who have been largely steady, such as Russia and Angola.

Even if an agreement is reached in Algeria to freeze output, it may be self-defeating as any increase in crude prices will merely encourage producers not party to the deal, such as U.S. shale and Canadian oil sands companies, to boost output.

Unless the OPEC and non-OPEC producers can come up with an agreement that changes the structural dynamics of the oil market, it's hard to see anything more than a fleeting impact, deal or no deal.


Article Link To Reuters:

China's Empty Oceans

By Adam Minter
The Bloomberg View
August 18, 2016

On Wednesday, Indonesia celebrated its Independence Day with a bang -- blowing up several Chinese boats that had been caught fishing illegally in its waters and impounded. China doesn't dispute Indonesia's territorial claims, but Chinese fishermen have more pressing concerns. According to reports in Chinese state media this week, overfishing and pollution have so depleted China's own fishery resources that in some places -- including the East China Sea -- there are virtually "no fish" left.

That's a frightening prospect for an increasingly hungry country: China accounted for 35 percent of the world's seafood consumption in 2015. Seeking catches further afield -- including in Indonesian waters -- isn't really a solution; fish stocks in the disputed South China Sea have themselves fallen by as much as 95 percent from 1950s levels. If China doesn't want the rest of Asia's fisheries to suffer the same fate as its own, it's going to have to think much more ambitiously about how to create a sustainable food supply for the region.

As in other developing countries, China's ascent up the income ladder has been accompanied by an improvement in quality and quantity of diet. Seafood -- once a pricey luxury in much of the country -- has become commonplace, even inland; China is now the world's biggest seafood consumer and exporter. The economic impact has been extraordinary. Between 1979 and 2013, China's fleet of motorized fishing vessels grew from 55,225 to 694,905 boats, while the number of people employed in the fishing industry exploded from 2.25 million to more than 14 million. Meanwhile, the average fisherman's income increased from around $15 per month to nearly $2,000 per month. Today, the fishing industry generates more than $260 billion annually, accounting for around 3 percent of Chinese GDP.

But in pursuing growth (and catch) at all costs, China's fishermen have exacted a terrible environmental toll. Today, the Yangtze River, which supplies 60 percent of China's freshwater catch, produces less than a quarter of the fish it did in 1954, and most of the 170 species in the river are on the verge of extinction. The situation is no better offshore. The government acknowledges that Chinese fishermen routinely exceed annual sustainable catch limits in Chinese territorial seas by 30 percent or more. A visit to any Chinese seafood market will turn up large inventories of under-sized fish that should never have been hauled in in the first place.

Blame for this state of affairs falls on both the fishing industry and the government, which spent $6.5 billion on fisheries subsidies in 2013 alone. Nearly all of that money paid for cheap fuel that allowed and arguably encouraged Chinese fishermen to venture further from shore, often into the comparatively un-plundered exclusive economic zones of countries such as Indonesia. Worse, the Chinese military has openly abetted those efforts by subsidizing everything from ice to GPS on Chinese fishing boats. The goal: to solidify China's claim to "historical fishing rights" in the vast and deeply contested South China Sea.

Chinese regulators are fighting a losing battle against these other wings of the government. In 1999, China imposed a seasonal fishing ban in the South China Sea, and in 2002 regulators did the same in sections of the Yangtze River. But the continued deterioration of both fisheries only underscores how ineffective those restrictions have been. In response, in 2013 one Chinese scientist proposed an outright 10-year moratorium on fishing in the economically essential Yangtze. This week, Chinese officials signaled they were open to the idea and were even considering a wholesale culling of China's fishing fleet.

While both measures would be a boon to Asia's fisheries, they're only a start. To make a real difference, China would need to demilitarize its fishing fleets and end the ruinous military-funded fuel subsidies that are encouraging unregulated catches, not to mention raising geopolitical tensions. Fishing fleets should be regulated by civilian marine and agricultural authorities, not generals with little interest in environmental sustainability.

Equally important, China should explicitly link the task of reviving and preserving fisheries to the clean water and other environmental initiatives in its economic planning documents, including the government's five-year plans. Doing so would raise them to a national priority akin to cleaning up Beijing's air.

Those priorities could then be extended to trade agreements, including the Regional Comprehensive Economic Partnership (RCEP) China's currently negotiating with other Asian nations, as well as bilateral deals with other claimants in the South China Sea. The goal should be to make China a leader -- and perhaps even a brand -- in sustainable seafood. With luck, that would buy China not just more fish to eat, but a reputation as a responsible global citizen.


Article Link To The Bloomberg View:

Lenovo First-Quarter Profit Leaps, Helped By Asset Sale, But Smartphone Losses Linger

By Yimou Lee 
Reuters
August 18, 2016

China's Lenovo Group (0992.HK), the world's biggest PC maker, said first-quarter profit jumped nearly two-thirds, helped by a one-off asset sale, but its mobile arm lost money again as a $3 billion bet on buying Motorola to diversify has yet to pay off.

Lenovo said on Thursday net profit climbed 64 percent to $173 million for the quarter ended June compared with a year earlier, when profit was hit by restructuring costs. A $132 million gain from the sale of a Beijing office property boosted profit well beyond the $130.1 million average estimate of analysts polled by Thomson Reuters SmartEstimates.

But the company, which bought the Motorola handset business in 2014 to reduce exposure to a shrinking global PC market, said global smartphone shipments plunged 31 percent in the quarter from a year ago. It said the mobile division - housing Motorola and other operations - won't make a profit before the fiscal half beginning October 2017.

"We can completely turn the business around," Chairman and Chief Executive Officer Yang Yuanqing told Reuters in an interview. Lenovo is eyeing the more lucrative premium smartphone sector, he said, while ramping up marketing expenses.

Lenovo previously said it expected a turnaround by this quarter in Motorola's mobile operations, bought from Google (GOOGL.O). On Thursday, Yang said Motorola "has made a lot of progress", though the company declined to give numbers for the operations, saying they're now merged into its overall mobile business.

At 0540 GMT (1.40 a.m. ET), Lenovo shares were up 3.2 percent, outperforming a 1.2 percent gain in the broader market .HSI.

The firm's drive into smartphones comes as growth in the global market slows while competition intensifies. According to researcher TrendForce, Lenovo had a 4.5 percent share of the global smartphone market in April-June, making it a distant seventh after top player Samsung Electronics Co Ltd's (005930.KS) 24 percent and Apple Inc's (AAPL.O) 15 percent.

Like Chinese peer Xiaomi Inc [XTC.UL], Lenovo has been focusing on diversifying away from intense competition in low-margin devices in China - still the world's largest handset market but affected by the slowing Chinese economy.

Lenovo has an "urgent need to formulate a sustainable strategy in smartphones, particularly in China," said Jefferies analyst Ken Hui, citing competition from domestic rivals with extensive sales networks in China such as Huawei Technologies Co Ltd [HWT.UL].

The company said its share of the global PC market grew over the quarter as it performed "slightly better than expected" thanks to a stronger performance in mature markets. PC shipments fell 2 percent year-on-year, compared with a 4 percent decline in the broader industry.

Across the whole company, first-quarter revenue dropped 6 percent to $10.05 billion from a year earlier, beating an average of $9.63 billion estimated by analysts.

"Revenue is better than expected but core profitability is a question mark," said Jefferies analyst Hui.


Article Link To Reuters:

As Technology Shifts, More Layoffs Loom At Tech Companies

By Malathi Nayak and Deborah M. Todd
Reuters
August 18, 2016

Cisco Systems Inc's announcement on Wednesday that it plans to lay off 5,500 employees is unlikely to be the last round of Silicon Valley pink slips as hardware companies struggle to keep up with rapid technology shifts, analysts and recruiters said.

Companies that traditionally have made most of their money selling computers, chips, servers, routers and other equipment are especially vulnerable, analysts say, as mobile applications and cloud computing become increasingly important.

The Cisco layoffs come in the wake of Intel's announcement in April that it was laying off 12,000 workers. Dell Inc said in January it had shed 10,000 jobs and is expected to make further cuts after it closes a $67 billion deal to acquire data storage company EMC Corp.

So far this year, technology companies in the United States have shed about 63,000 jobs, according to outplacement consultancy Challenger, Gray & Christmas, Inc.

"The hi-tech industry is going through a serious deconstruction," said Trip Chowdhry, an analyst at Global Equities Research. "There is more pain to come."

Chowdhry said he expects job cuts to rise drastically as more companies subscribe to "super cloud" services from the likes of Amazon.com Inc and Microsoft Corp. These services manage hardware, software, networks and databases and eliminate the need for workers to manage various technology layers, Chowdhry said.

In January, Chowdhry estimated that layoffs in the tech industry would hit 330,000 this year. On Wednesday, he said he had raised his estimate to 370,000. Some other analysts said that forecast was too bleak.

IBM Corp, Hewlett Packard Enterprise Co, Oracle Corp and Dell Inc could be the next to shed workers, analysts said.

Hewlett Packard Enterprise, Dell and Oracle declined comment and IBM could not be immediately reached for comment.

'Tremors Of Change'


"Tech incumbents are all bracing for the tremors of change. said Glenn O'Donnell, an analyst at Forrester Research. "We fully expect a lot of collateral damage as this plays out - not just with Cisco."

Cisco and other old-guard technology companies have been pursuing a challenging shift to software-oriented services. Margins in software services are higher than hardware because they bring recurring revenue and there are "fewer people involved on the cost side," said Roger Kay, an analyst at Endpoint Technologies Associates.

That could mean more job cuts. Silicon Valley job recruiters offered mixed views about the fate of hardware engineers laid off at Cisco and other tech firms.

“Nobody wants to be laid off but if job elimination is going to happen, 2016 is not a bad time for it to happen,” said John Reed, Senior Executive Director of the tech recruitment firm Robert Half Technologies.

Still, recruiters said, hardware engineers may need to be flexible and willing to retrain if they want to find work.

"Nobody wants hardware designers and engineers,” said Andy Price of executive search firm SPMB. “There was a moment in time when devices were hot and (action-camera maker) GoPro made everyone excited about devices, but a lot of those types of companies died on the vine.”

Currently, he said, “hardware engineers are probably the least attractive skill set imaginable in the Valley.”


Article Link To Reuters:

Robots Will Not Be A Barrier To Job Creation

By Robert Samuelson
The Washington Post
August 18, 2016

We are such an anxiety-ridden society that we worry about problems that haven't happened, and, almost certainly, won't. Robots are an apt example. Even McKinsey and Co., the high-powered management consulting firm, professes to be concerned. We imagine hordes of robots destroying jobs, leaving millions of middle-class families without work and income. Relax. Unless we adopt self-destructive policies, this is one doomsday we'll avoid.

One thing that the U.S. economy excels at is creating jobs. You might doubt this listening to Donald Trump and Hillary Clinton, who promise personally to create millions of high-paying jobs. This is misleading. The overwhelming share of jobs are created by the private market, not government or politicians.

Yes, there are recessions. Two of them in the post-World War II era were quite severe (those of 1981-82 and 2007-09). We had scary levels of unemployment. But eventually the job creation machine reasserts itself. In 2015, employment totaled 149 million, up from 99 million in 1980 and 137 million in 2000.

What about the robots? In truth, they are not a new problem. There have always been new technologies and products that eliminate entire industries and occupations. But lost jobs and destroyed industries give way, over time, to new industries and jobs. Cars replaced buggies; smartphones are replacing landlines.

Robots are simply the latest chapter in this narrative. Sure, some jobs will vanish. But others will materialize. Often, increases occur so silently and slowly that they're only noticed when they've become a major part of the labor force.

Just the other day, the Census Bureau released a report on "information technology" workers, a job category that didn't exist until 1970. Since then, their numbers have increased 10-fold, growing from 450,000 to 4.6 million. These are well-paying jobs; median earnings in 2014 were $80,665.

The same logic applies to robots. Someone has to design the robots, program them, sell them, service them and fix them. These people buy homes, send their kids to college, take vacations and have health costs. The economy is a circular process, where one person's costs are another person's income. If robots cut costs, the savings have to go somewhere - lower prices, higher wages, higher profits or more business investment. All potentially augment demand.

None of this demeans the hardships - sometimes tragedies - of workers who lose their jobs to new technologies and competitors. Workers whose skills and contacts become obsolete face a difficult time. But this is a long-standing problem that has defied many efforts to solve it.

There are two dangers for the future. One is that the new jobs created by new technologies will require knowledge and skills that are in short supply, leaving unskilled workers without income and the economy with skill scarcities.

The second danger is that government will damage or destroy the job creation process. We live in a profit-making economic system. Government's main role is to maintain the conditions that make hiring profitable.

If we make it too costly for private firms to hire (through high minimum wages, mandated costs and expensive regulations) -- or too difficult to fire - guess what? They won't hire.

That's what ought to worry us, not the specter of more robots.


Article Link To The Washington Times:

Did A Cartel Kidnap El Chapo's Son?

The most mysterious fact of Alfred Guzman’s capture is that he was captured at all. Rival narco kings kill their enemies. What gives?


By Christopher Dickey 
The Daily Beast
August 18, 2016

In the annals of the gruesome Mexican narcowars, the kidnapping of jailed drug lord Joaquín “El Chapo” Guzmán’s son and heir apparent at the beginning of the week is, to say the least...strange.

In the dark early hours of Monday morning, heavily armed sicarios, or hitmen, abducted 29-year-old Alfredo Guzmán and five other men at a restaurant called La Leche in the Mexican resort town Puerto Vallarta, Mexican authorities said.

The interior of the upscale establishment is all white, like leche, and in a movie about the gang wars of Mexico, blood would be splattered all over the décor after an incident like this. But there was not a drop. Not a shot was fired. And the nine women who were with the kidnapped men weren’t taken, weren’t shot, weren’t hurt at all.

In the days since, authorities have concluded the kidnappers were from Mexico’s new “super cartel” known as the CJNG, Cartel Jalisco Nueva Generación. The cartel has spread like a flesh-eating bacteria across the Mexican underworld, challenging any gang that looked weak, even and especially, it would seem, El Chapo’s once-mighty Sinaloa Cartel since he was returned to prison in January.

Law enforcement officials noted that nobody in El Chapo’s family has filed a report on the kidnapping or asked for help from the police. But that’s no surprise. This is the kind of thing the cartels settle among themselves. And what we’ve seen of the quotidian carnage at the hands of both Sinaloa and the CJNG can be absolutely hideous.

As The Daily Beast reported in March, the CJNG isn’t just super-sized. It’s also super ruthless and hyper-violent, even by Mexican cartel standards. Back in 2011 the group slaughtered 35 members of the Zetas, a rival cartel, and dumped the bodies — including 12 women — on an interstate highway at rush hour. Commuters were confronted with a hellish scene worthy of some modern Hieronymus Bosch.

And, as we reported, that was just a warm-up act. Since 2015 the CJNG has developed a reputation for taking the fight to law enforcement, launching guerrilla-like assaults that have claimed dozens of officers’ lives. In at least one instance, they managed to shoot down a Mexican Army helicopter, killing everyone aboard.

So, given that record, what’s with this bloodless coup at La Leche?

Is some grotesque exaction on El Chapo’s son in the offing? Or is this an inside job, and not a CNJG op at all? Could it be a ruse? In Narcolandia, no one theory necessarily excludes another; in a war of succession, the game of cartel thrones, who is loyal? Who betrays? Who knows?

In June, for instance, a large group of men reportedly attacked the house of El Chapo’s aged mother. But that wasn’t the CNJG. That appears to have been an intra-family feud between one Guzmán relative known as “El Guano,” bird shit, and another called “El Mochomito,” the little desert ant (after Alfredo Beltrán Leyva, a jailed drug lord and Chapo rival who was the Big Desert Ant). Mama wasn’t there in any case, but several people were killed at what once was the sanctum sanctorum of El Chapo (which means Shorty, in case you were wondering).

The Spanish newspaper El Mundo, which follows these stories in detail but with prudent detachment, notes that a core rivalry inside the Sinaloa Cartel appears to be between an old crony of El Chapo’s, Mayo Zambada, and El Chapo’s sons, los Chapitos, Ivan (still at large) and Alfredo, who apparently was kidnapped.

Both of the boys have had, to say the least, a presence on social media. Last year Ivan posted an Instagram of his gold-plated AK-47 propped up against the dashboard of his Ferrari. Alfredo posted a pic of a snarling lion cub on the trunk of his Bentley.

But we know a bit more about Alfredo, up close and personal, thanks to Sean Penn’s extended Rolling Stone article in January about El Chapo in hiding. Alfredo had acted as Penn’s escort to the secret meeting place:

“He's handsome, lean and smartly dressed,” wrote Penn, “with a wristwatch that might be of more value than the money housed by the central banks of most nation-states. He's got one hell of a wristwatch.”

As they flew to the rendezvous with Chapo, Penn asked Alfredo how he could be sure they were not being followed or watched.

Alfredo smiled (Penn noted that he didn’t blink very often) and pointed out a red scrambler switch below the cockpit controls.

"That switch blocks ground radar," said Alfredo, adding that the cartel had an inside man who told them when the military's high-altitude surveillance plane has been deployed. “He has great confidence that there are no unwanted eyes on us,” Penn wrote.

As they drove deep into the jungle, two uniformed government soldiers, weapons at the ready, approached their vehicle. “Alfredo lowers his passenger window; the soldiers back away, looking embarrassed, and wave us through,” wrote Penn. “Wow. So it is, the power of a Guzman face.”

What power that face has now is an open question.


Article Link To The Daily Beast:

Putin Is Gobbling Up Whatever He Can – While Obama Does Nothing

By Benny Avni
The New York Post
August 18, 2016

As Americans focus on who’ll replace President Obama, Russian strongman Vladimir Putin marches around the globe unabated, rushing to gobble up anything and everything he can before the new president takes office.

Amassing troops on Ukraine’s border. Bombing Syria mercilessly. Allying with Turkey, a NATO member, to bring it into the Moscow-Tehran-Damascus axis.

On Tuesday, Russia announced it was using an Iranian air base to launch bombing sorties in Syria. That’s quite a coup. The mullahs don’t easily allow foreigners to use their soil for military purposes. Iranian officials protest that the Russian Air Force merely uses Iran for “refueling,” but that’s not what Moscow says or Washington sees.

Also, last week Moscow revealed a plan to turn Hmeymim, Syria, an airbase near Latakia, into a “full-fledged” Russian facility, making it a permanent Russian hub in the world’s hottest war zone. (Unlike the Iranian base, Hmeymim can’t facilitate Tupolev-22M3 or Sukhoi-34 heavy bombers, needed to escalate Putin’s Syria war.)

Syria’s hottest current battle is over Aleppo, once a financial capital and now a ghost town filled with extremists where Russian and Syrian-government planes pound schools and hospitals.

And American officials, at best, make speeches about the need to help the United Nations deliver humanitarian aid to Aleppo.

We won’t do much about Putin’s renewed aggression against Ukraine, either. On the pretext that Ukrainian extremists are planning “sabotage” in Crimea (the peninsula Putin annexed two years ago), Russia last week amassed 40,000 additional troops on the Crimea-Ukraine border.

It reminded Ukrainian UN Ambassador Volodymyr Yelchenko of 2008: “During the Olympic Games, on the eve of a US election, Russia started aggression against Georgia,” he said, “pointing to parallels” to that time, when Putin annexed Georgia’s Abkhazia and South Ossetia regions by force.

And what are we doing about this? We rebuff Ukraine’s pleas for defensive arms, even as other strategic assets in the former Soviet Union are in Putin’s crosshairs. Last week, for example, he signed a new three-way pact with Azerbaijan and Turkey.

Wait, Turkey? Wasn’t President Recep Tayyip Erdogan angry as hell with Moscow? Didn’t Putin sever ties after Turkey downed a Russian plane near its Syria border in 2015?

That was then. This is now. Erdogan visited Moscow last week, and the two are now thick as thieves, even raising fears about the integrity of NATO. (Remember: Strategically located Turkey commands the alliance’s second-largest army.)

Erdogan is angry over our refusal to extradite Fatullah Gulen, the Pennsylvania-based preacher Erdogan accuses of masterminding a failed military coup against him. But will Turkey now bar US and NATO planes from continuing to use the Incirlik airbase near the Syrian border?

“You have never seen such a cheap tactic from Turkey,” an Ankara parliamentarian named Taha Ozhan told me recently.

Well, at least not since 2003, when Erdogan abruptly blocked a US-led alliance from using Turkish soil to launch the Iraq war, forcing a major last-minute strategy shift.

Either way, Putin sees a US-Turkish rift and seizes on it. With his Turkey-Azerbaijan move, which includes a planned natural-gas pipeline, he can dominate Central Europe’s energy markets. And as a bonus, Turkey and Russia are promising to share intelligence on Syria.

Though we’ll see if that lasts. After all, unlike Russia, Erdogan remains opposed to keeping Assad in power.

But wait, hasn’t Secretary of State John Kerry been trying to negotiate a similar intel-sharing agreement with Moscow since mid-July? Well, yes — but it’s on ice.

And so is an announced US-Russian plan to launch political talks aimed at ending the Syrian war. The plan’s coordinator, UN Syria envoy Staffan de Mistura, is on the verge of resigning, I’m told. He’s frustrated by the fact that talks between Moscow and Washington have led nowhere.

“From early on, de Mistura’s plan was to lead from behind,” a senior diplomat told me recently. “In this case, it meant leading behind America and Russia.”

Or, he added, “to be perfectly honest, it’s really just Russia.”

We’re too obsessed with allegations of Kremlin meddling in our election to even notice Putin’s global march, let alone do anything about it.

Putin’s known as a great poker player who holds the weakest hand. But we facilitate his activist, daring and immoral style of play by constantly whining about our own hand, and by endlessly waiting to be dealt a pair of aces.

No wonder Putin now sits in front of a much larger stack of chips than even he dreamed of eight years ago, when he began this expansion in earnest by invading Georgia with barely a peep from Bush-era America.


Article Link To The New York Post:

Is Putin Playing Trump Like He Did Berlusconi?

‘Bromance’ between the Russian leader and the Italian billionaire has echoes in Donald Trump’s dealings with Moscow.


Politico EU
August 18, 2016 

In January 2009, the U.S. ambassador in Rome cabled Washington to raise an alarm. Russian President Vladimir Putin, the diplomat wrote, had cultivated a troubling relationship with the country’s prime minister, Silvio Berlusconi.

“Berlusconi admires Putin’s macho, decisive, and authoritarian governing style, which the Italian PM believes matches his own,” wrote the ambassador, Ronald P. Spogli. “From the Russian side, it appears that Putin has devoted much energy to developing Berlusconi’s trust.“

The ambassador noted with concern that the brash Italian billionaire, who was driven from office by scandal in 2011, was openly challenging U.S. policy toward Russia and echoing Putin’s views on issues from NATO expansion to Kosovo to missile defense.

And he shared reports from opposition party contacts of a more nefarious factor: talk that “Berlusconi and his cronies are profiting personally and handsomely” from business ties to Russia.

Seven years after that cable, disclosed by WikiLeaks, the Berlusconi-Putin bromance has acquired a new resonance, as foreign policy analysts and even some U.S. officials see unsettling echoes in the recent long-distance kinship between the Russian leader and Donald J. Trump.

It may even suggest that Putin is applying a specific method to the Republican nominee. In recent years Putin has befriended several major Western European politicians, including former leaders of France and Germany, who openly challenge U.S. and European policies toward Russia, including NATO’s buildup in Eastern Europe and economic sanctions punishing Putin’s annexation of Crimea from Ukraine.

"Putin’s friendship with the Italian may simply demonstrate that the Russian leader has a natural chemistry with a rich, politically incorrect businessman."


But Trump is most frequently compared to the 79-year-old Berlusconi. Both men are wealthy populists known for their expensive tastes, outrageous rhetoric, relationships with women and all-around showmanship. Like Berlusconi, Trump has demonstrated an unusual affinity for Putin — along with notable dissent from confrontational U.S. and Western European policies toward Russia.

Putin’s friendship with the Italian may simply demonstrate that the Russian leader has a natural chemistry with a rich, politically incorrect businessman.

To some, however, it hints at something more.

“The parallels with Trump are a little too disturbing,” says a U.S. government analyst who closely tracked Russia’s relationship with Europe when Berlusconi was in office. “Putin is very strategic. He would focus on people’s vulnerabilities — whether their vanity or greed or financial needs.”

That view echoes the analysis of former deputy CIA director Michael Morell, who recently wrote in The New York Times that Putin, drawing from his background as an intelligence officer, had made a “calculated” overture to Trump early in the presidential campaign, “playing upon Mr. Trump’s vulnerabilities by complimenting him,” and turning Trump into an “unwitting agent” of Russia.

Asked about Trump in December, Putin described the New Yorker as “bright and talented,” words that clearly pleased Trump: “It is always a great honor to be so nicely complimented by a man so highly respected within his own country and beyond,” the mogul told reporters soon after. Since then, Trump has praised and defended Putin — including against the charge of having Russian journalists killed — and has pledged to establish better relations with Moscow.

Though Trump, in recent interviews, has downplayed his affinity for Putin, the Republican nominee has also taken several policy positions that echo the Kremlin line. He has questioned the relevance of the 67-year-old NATO alliance, called for U.S.-Russian cooperation against the Islamic State, and questioned U.S. and European sanctions imposed on Moscow after Putin’s forcible March 2014 annexation of Ukraine’s Crimean peninsula.

Prankster Pals


Berlusconi, who remains close to the 63-year-old Putin, has offered similarly Putin-friendly views over the years. During a September visit to Crimea with Putin, Berlusconi called a 2014 referendum there in favor of Russia’s forcible annexation of the strategic peninsula “democratic” and “valid,” even though the U.S. and European Union have denounced the vote as invalid. Trump also recently cited the referendum as evidence that Russia’s claim on Crimea may be legitimate.

But Trump’s relationship with Putin — whom Trump says he’s never even met — remains embryonic compared to the extraordinary kinship between the Russian leader and his Italian chum.

Putin and Berlusconi bonded in the early 2000s, soon after each took office — Putin in 1999 and Berlusconi, who had already served one term as prime minister in the mid-90s, in 2001. Berlusconi holidayed at Putin’s dacha on the Black Sea, while the Russian stayed at the Italian leader’s villa in Sardinia. Even as Putin’s international reputation darkened, they hit the slopes in Sochi and dined in a tent on a wildlife reserve in giant fur hats.

They even became merry pranksters. During one Berlusconi visit to St. Petersburg, Putin jokingly startled his Italian pal: “Putin hid behind the pillar, and did ‘coo coo’ to me from behind!” he told the BBC in a 2014 interview.

U.S. officials suspected the friendship went beyond innocent antics. An October 2009 cable from the U.S. embassy fretted that Berlusconi had recently skipped a state visit by Jordan’s King Abdullah, claiming illness the day before a planned three-day visit with Putin. U.S. ambassador David Thorne wrote that Berlusconi had “left the impression that … he was husbanding his flagging energies for a blow-out party at Putin’s dacha.”

As the January 2009 cable noted, the officials also suspected that illicit money might be fueling the friendship. One October 2008 U.S. cable from Rome noted that “many (including his own party officials) suspect [Berlusconi] has a personally and financially enriching relationship” with Putin’s oligarch allies.

In recent weeks, allies of Hillary Clinton have fanned rumors and speculative press reports suggesting that Russian investments in Trump business ventures have influenced his views. Trump and his son Donald Jr. have made numerous trips to Russia exploring business deals there, and in 2008 Donald Jr. told an audience that Russian money makes up a “disproportionate share” of the family company’s assets. Trump has denied having financial ties to Russia, though his refusal to release his tax returns makes that impossible to verify.

The U.S. official said that, like Trump, Berlusconi — who left office in 2011 under a cloud of legal charges, including tax fraud and sex with a 17-year-old prostitute (for which he was cleared) — often took a friendly line toward Russia under the guise of his nation’s self-interest. “He seemed to be providing a very rational approach to Russia, but it was always on Russia’s terms,” the official said.

At various times Berlusconi defended Putin’s military incursion into the republic of Georgia, which the U.S. and much of Europe strongly denounced. He praised Putin’s leadership style. And after a fall 2008 meeting with Putin, Berlusconi echoed the Kremlin line that the U.S. had “provoked” Russia by backing independence for Kosovo, moving forward with missile defense systems in Eastern Europe and wooing Ukraine and Georgia closer to NATO. In a cable at the time, a senior U.S. diplomat in Rome wrote that the Italian leader wanted to “lobby the incoming U.S. President to take a softer line on Russia.”

“Berlusconi faces trial for bedding women,” Putin said in September 2013. “If he was gay, no one would ever lay a finger on him.”

“In reality, what he was doing was pushing Putin’s agenda with no real guarantee that Putin would ever compromise on our agenda,” says the U.S. official, who spoke to POLITICO. “I see a similar trend with Trump.”

Other members of Berlusconi’s government often expressed surprise at the prime minister’s views, the official said — a view backed up by a diplomatic cable reporting that an unnamed Italian Ministry of Foreign Affairs official told U.S. diplomats in Rome that “she had no insight whatsoever as to what had animated” Berlusconi’s remarks on Kosovo and missile defense.

Putin, for his part, returned his friend’s praise — and even defended Berlusconi from the charge he’d had sex with underage girls at his notorious “bunga bunga” parties.

“Berlusconi faces trial for bedding women,” Putin said in September 2013. “If he was gay, no one would ever lay a finger on him.”

Vintage Vladimir

Measuring the precise effect Berlusconi’s views had on U.S. or European policy toward Russia is difficult. Samuel Charap, a former State Department official now with the International Institute for Strategic Studies, noted that “Italy, generally speaking, is one of the more Russia-friendly countries in Europe.”

But Putin has also courted other prominent European leaders of his generation. After leaving office, the former German chancellor Gerhard Schroeder joined the board of the Russian energy giant Gazprom, and in 2014 he attended a lavish 70th birthday party thrown for him by a Gazprom subsidiary in St. Petersburg at which Putin was in attendance. Schroeder has reportedly infuriated his successor, Angela Merkel, with his comments downplaying the severity of Putin’s incursions into Ukraine.

A recent visit to Moscow by former French president Nicolas Sarkozy, meanwhile, raised eyebrows in Paris and Washington, after Sarkozy — who may run for president again next year — warned against a new Cold War and spoke in favor of lifting sanctions on Russia.

U.S. officials bridle at the way such talk muddles their carefully orchestrated message of U.S.-Europe unity against Putin’s aggression. And they say Berlusconi, who remains close to Putin, still does his share of the troublemaking.

During an October 2014 international summit in Milan, the Russian dropped in on Berlusconi’s villa for a nightcap at 1:30 a.m. that reportedly lasted beyond 3 a.m. On a trip to Rome the next year, Putin again dropped in on his Italian friend, who pledged to use his enduring political influence to push for an end to European sanctions against Russia — and later publicly pledged to help “convince our American friends that the return to the atmosphere of the Cold War is inadmissible.”

Most memorably, perhaps, the two men paid a joint visit in September to Crimea — itself a political statement, given the landmass’ disputed status. While touring a winery, the two men were shown several bottles of a dust-covered 1775 vintage wine imported during the reign of Catherine the Great.

Berlusconi asked whether it was possible to drink the wine; it was. Though it’s unclear whether the men had more than “a taste,” as the Italian later put it, some reports had them polishing off an entire bottle, priced at more than $100,000. Crimea’s top prosecutor threatened criminal charges over what he called the violation of “the heritage of all Ukrainian people.”

Berlusconi, for his part, was unfazed by both the political and oenophilic controversies.

“You should see the love, the gratitude and the friendliness that welcomed Putin” in Crimea, he told reporters, calling Putin the world’s “No. 1” political leader. “Women threw themselves into his arms saying, ‘Thank you, Vladimir. Thank you, Vladimir,'” he added.

As for the wine, Berlusconi pronounced it “delicious.”


Article Link To Politico EU:

What Kerry Should Do To Divide Iran And Russia

By Eli Lake
The Bloomberg View
August 18, 2016

For the last year, Secretary of State John Kerry has worked and worked to get Russia to help end Syria's civil war. He has cajoled. He has sniped. He has spent countless hours in meetings and on the phone with his counterpart, Sergei Lavrov. And he pretty much has nothing to show for it.

This point was driven home Tuesday when Russia announced it had started bombing missions from a base inside Iran.

It was the latest in a series of humiliations for Kerry. As soon as the Iran nuclear deal was concluded last July, the Russians and Iranians began plotting a surge for Syria on behalf of the dictator, Bashar al-Assad. As Kerry made plans for talks in Geneva, the Russians set up air bases in Syria. Once their campaign started, they bombed U.S.-backed Syrian rebels. In June, Russian planes bombed a U.S. and British special operations base near the Syrian border.

But the announcement of the bombing from Iran stings Kerry the most. Kerry himself, only a year ago, told the Atlantic's Jeffrey Goldberg that Iran's foreign minister, Javad Zarif, had told him after the completion of the nuclear deal, "I am now empowered to work with and talk to you about regional issues."

Now the Iranians can't stop working with the Russians about regional issues. Meanwhile, Iran keeps detaining and arresting American dual-nationals, testing missiles and threatening American allies.

The Russian flights out of Iran should not come as a surprise. The American Enterprise Institute's Critical Threats Project observed what appeared to be Russian aircraft at an Iranian base back in December.

But on Tuesday the Russians made it official and announced that its Tupolev-22M3 bombers and Sukhoi-34 fighter-bombers had taken off from the Hamadan airfield, about 200 miles west of Tehran.

None of these developments are likely to persuade Kerry to end his quest for a Syria deal with the Russians. And while this may seem to meet a definition of insanity (doing the same thing over and over and expecting a different result), there is an opportunity now for the secretary of state to advance U.S. interests.

It will require Kerry to face some hard truths about Iran. He needs to stop thinking of Zarif and Rouhani as moderates he must empower against their country's hardliners. Instead, he should see Russian bombers in Iran as a chance to undermine his old negotiating partners and turn them against one another.

This sounds like a long shot, and in many ways it is. But it's unprecedented for Iran to allow a foreign military to operate on its soil. Iran's constitution, following the 1979 revolution, specifically prohibits this kind of thing. It's one of the reasons why revolutionaries took over the U.S. embassy in Tehran, which they saw as a den of spies that secretly controlled their country.

Hence Iran's Supreme National Security Council Secretary, Ali Shamkhani, spoke about the Russian announcement euphemistically, telling the Fars News Agency that Iran and Russia had an agreement to share facilities, not an agreement for the Russian Air Force to occupy a military base.

"There are a lot of optics the Iranians have to worry about because of this," Matthew McInnis, a former Defense Intelligence Agency Iran expert and scholar at the American Enterprise Institute, told me Tuesday. "They don't like to admit the Russians are doing this right now." He added, "The Iranian leadership will have to spin this in a way that doesn't look like the country is inviting foreign forces on its soil, which it has not had since 1979."

Kerry should exploit this. He could deliver a speech at the U.N. General Assembly congratulating Iran on finally getting over its inordinate fear of imperialism and seeing the value of a great power's military generosity. The State Department could produce Farsi materials on the 19th-century treaties of Gulistan and Turmenchay, in which the Russian empire humiliated the Persians.

This public diplomacy should also be backed up with a campaign of leaks and misinformation about current U.S. diplomacy with Russia. As anyone who has ever read through the Twitter feed of Iran's supreme leader knows, the regime is a sucker for a good conspiracy theory. U.S. diplomats should try to get the Iranians to believe that Russia at any moment could cut a separate deal with Washington. It's not so far-fetched. As I reported in June, the Russians have a side deal in Syria with Israel.

The best news about all of this is that Kerry really doesn't have to change much of his outward behavior. He can still try and try to get Russia to work with him on a political deal for Syria. Such a deal remains a long shot. But with a little luck, this charade could blow apart a burgeoning Iranian-Russian alliance and perhaps even turn the Iranian regime upon itself. It's no less crazy than Kerry's current plan to end the war in Syria.


Article Link To The Bloomberg View:

What Will History Say About Aleppo?

By Jonathan S. Tobin
Commentary
August 18, 2016

If a humanitarian disaster doesn’t get shown on television, is it really happening? Perhaps that’s what the Obama administration is thinking as it ponders the unfolding catastrophe in Aleppo, Syria as the Assad government and its Russian allies pound the city into rubble while its people face potential starvation. Focused as it has always been on winning the news cycle against Republicans or helping the president’s designated successor against her incompetent opponent, the White House doesn’t appear to be that worried about the consequences of inaction as the siege of the city of roughly two million people continues. But for a man who seems to care a lot about his legacy, perhaps President Obama should be thinking today about what history will say about his willingness to give the Russians and their barbarous ally a green light to go on slaughtering so many people.

Objective observers must concede that there have never been many good options for the U.S. in the conflict in Syria. Moreover, once the president failed to act at the beginning of the civil war when bold leadership from the West might have averted the worst outcomes and then failed to back up his “red line” comment about Bashar Assad’s use of chemical weapons against his own people, it may be that America’s chance to have a positive impact had vanished. But even if we avoid recriminations about Obama’s past failures on the Syrian conflict, the president can’t get a pass for his current ineffectual stance. As it stands now, the administration is acknowledging that the situation is a disaster. But it can’t avoid responsibility for the current loss of life and the potential for an even greater catastrophe because the people who are carrying out these atrocities—Russia—are doing so under the assumption that the U.S. has handed off responsibility for the conflict to Putin and Assad. Though the Russians understand they must make some gestures—such as temporary halts to the bombing—to appease Obama, the U.S. protests about the siege aren’t doing much to alter the situation on the ground.

The fighting around Aleppo is confusing since Islamic State advances have helped to cut off the city. But the Russians and Assad forces are pounding neighborhoods that are controlled by rebels, not aligned with ISIS. The chaos there is enough to make even those Americans who bother to follow the story throw up their hands in disgust and hopelessness. And with no TV crews to film the devastation or to pluck the heartstrings of Western audiences—such as was the case when the international media was there in full force to cover Gaza when Hamas terrorists were fighting Israel in 2014—there is no public groundswell to force a cease-fire or to ensure that the people of Aleppo aren’t deprived of food or medical supplies.

The Russians have happily accepted the administration’s decision to punt on Syria since it essentially gives them free reign to, with the help of Iran and its Hezbollah auxiliaries, ensure Assad’s survival. They have also played along with Secretary of State John Kerry’s pathetic efforts to create a diplomatic solution secure in the knowledge that they will fail and leave them in charge as Vladimir Putin’s effort to resurrect the Soviet empire gains ground. Since President Obama wants to essentially withdraw America from the Middle East, leaving Russia and Iran in charge and Israel and moderate Arab states in peril, he has been prepared to stand by futilely while what is left of Syria and its population is ground into the dust. The fact that the Russians and Assad have prioritized the defeat of non-ISIS rebels only makes this deal with the devil even more of a loser for the U.S.

The president’s belief that letting the Russians have their way in Syria will help the war against ISIS is another mistake. The group will thrive so long as the current regime remains in power and it is seen as the defender of Sunnis against Assad’s Alawites and the Russians.

But this another moment when the geopolitical miscalculations must be put aside and the situation on the ground must be recognized for what it is. If the Russians and Assad are not stopped, the loss of life in Aleppo will be enormous. The Russians must be warned that the U.S. will not tolerate that happening and that it will rethink the cooperation it has been giving Moscow if they are not heeded. But history will judge Obama harshly if a few weak statements about the situation are the best he can do.

Past presidents, such as Bill Clinton, have regretted their failure to act to save lives when a massacre was about to happen as it did in Rwanda on his watch. But Clinton’s failure there will not be as egregious as Obama’s in Syria since the perpetrators are under the impression that they have tacit U.S. permission to do as they like. On Obama’s watch, hundreds of thousands have been killed and millions have been made refugees in Syria. If those totals grow even more in his last months of office, he will not be able to say that he was without guilt.


Article Link To Commentary:

Brecht On Brexit

By Howard Davies
Project Syndicate
August 18, 2016

In the wake of the 1953 workers’ uprising in East Germany, the playwright Bertolt Brecht mordantly suggested that “if the people had forfeited the confidence of the government,” the government might find it easier to “dissolve the people and elect another.” It is a sentiment that resonates with many in the United Kingdom today, in the aftermath of June’s Brexit referendum.

In the heat of the referendum campaign, Michael Gove, then the justice secretary and a leading member of the “Leave” camp, said, “I think the people of this country have had enough of experts from all kinds of organizations with acronyms, who have consistently got it wrong.” His targets were the IMF, the OECD, the LSE, and all the other covens of economists who argued that leaving the European Union would damage the British economy.

Unfortunately, Gove was right – not about what would happen to the economy, but about UK voters’ low regard for economic expertise. Despite the near-unanimous view of the economics profession that Brexit would tip the UK into recession and lower its long-term growth rate, voters went with their hearts, not their wallets. The “Remain” campaign was accused of using the economists’ warnings to try to frighten voters into submission.

Some have argued that the blame for the referendum’s outcome lies with economists themselves, because they were unable to speak a language that ordinary people could understand. A similar charge is made against bankers and other financiers, who, widely perceived to be arguing from narrow sectoral self-interest, were equally unpersuasive.

There is undoubtedly some truth in this criticism, but the problem was not simply over-complex language and impenetrable jargon. The economists all began from the assumption that the UK was doing fine, with GDP growth well above the European average, and unemployment well below. It seemed self-evident that EU membership was good for Britain, especially as we had avoided joining the euro and were thus not tied up in monetary and fiscal knots designed in Brussels and Frankfurt.

The problem was that this rosy picture did not resonate with voters outside London and the Southeast of England, for reasons set out with great clarity in a recent speech by Andy Haldane, the Bank of England’s chief economist.

Haldane cites national statistics showing that Britain’s GDP is 7% above its pre-crisis peak, employment is 6% higher, and wealth is 30% greater. But, he adds, national income per head is flat. Median real (inflation-adjusted) wages have barely risen since 2005. The UK population has grown, partly owing to immigration.

The recorded increase in wealth has come about mainly from increases in property prices in favored areas, especially London, and in the value of occupational pensions. If you are not lucky enough to own property in the Southeast of England, and are not in a final-salary pension scheme, your wealth has stagnated or fallen. The regional breakdown of GDP figures shows that London and the Southeast are the only areas of the UK where people are better off, on average, than they were in 2009, at the trough of the recession.

It may well be true that Brexit will exacerbate these inequalities. If intra-European trade barriers are imposed, and companies choose to invest elsewhere to access Europe’s single market, lower-paid jobs in disadvantaged regions may disappear altogether, or wages will fall further. But that sounds like “expert” talk, and the former Leave campaigners have a response to it: economists are talking down the UK to prove that their gloomy forecasts were correct. If the experts couldn’t be trusted before the referendum, they certainly can’t be trusted now.

That is the inauspicious background against which talks on the UK’s future relationship with the EU will soon begin. It is especially unfavorable for the City of London. There is clearly a trade-off between access to the single market, which most financial firms greatly desire, and one of its main conditions: freedom of movement for EU citizens, which is seen as having contributed to wage stagnation in the rest of the UK. So an outcome that benefits London (which, unsurprisingly, voted overwhelmingly to remain in the EU) must be advocated with subtlety and care, lest it be seen as sacrificing the wellbeing of the many to the interests of a few.

The strongest argument in favor of remaining in the single market is that putting the City of London at risk jeopardizes the entire UK economy. Financial services may account for only 3% of employment, but they generate 11% of tax revenues. Killing the goose that lays the golden tax egg would be foolhardy: if the economy slows, which seems the best we can expect, those revenues will be sorely needed. And at a time when the UK’s balance-of-payments deficit is over 5% of GDP (the second largest in the OECD), the financial sector’s 3%-of-GDP trade surplus has been essential to prevent an external blowout.

It is no surprise, therefore, that sterling has dropped sharply since the Brexit vote. Some argue that exchange-rate depreciation will narrow the trade deficit by making British exports more competitive, but the experience of 2008, when the pound also fell sharply, is that the impact on the external deficit may not be great. The UK has few price-sensitive exports for which there is significant spare capacity available to expand production.

So these are nervous times in London’s financial markets. We need new experts, unadorned with despised acronyms like IMF, to explain the unpleasant facts of economic life to a highly suspicious public. No one should take Brecht’s ironic suggestion seriously. The British people have spoken, and a way must be found to achieve their desires at the lowest possible economic cost.


Article Link To Project Syndicate:

With Campaign Shakeup, Trump Puts Primary Strategy On Steroids

Chafing at criticism, Donald Trump brings in cheerleaders likely to tell him the road to victory is paved with orange bricks.


By Eliana Johnson 
The National Review
August 18, 2016

A Trump campaign that has seesawed between inexperienced loyalists and longtime party flaks seesawed back again early Wednesday morning as campaign chairman and erstwhile foreign lobbyist Paul Manafort was layered between Breitbart CEO Stephen Bannon, now serving as CEO of the Trump campaign, and newly named campaign manager Kellyanne Conway.

“This is a reversion,” says a top Trump campaign aide. Manafort’s predecessor atop the Trump organization was 40-year-old Corey Lewandowski, who pioneered the hands-off managerial maxim “Let Trump be Trump.” The shakeup represents not just a reversion but an intensification of the media-driven strategy by which Trump bested 16 adversaries in the Republican primary. At Breitbart, Bannon has been leading a brigade of vociferous Trump defenders, and like his new boss, Bannon is a media-savvy operator who understands the value of shock and awe. And with Conway at the helm, the notoriously poll-obsessed candidate now has a veteran pollster running his operation. Trump is being Trump.

As such, the move is also a rejection by Trump of efforts to give him a more presidential bearing. The campaign announced on Wednesday that, in contrast to the scripted remarks Trump delivered Monday and Tuesday, he will hold back-to-back rallies — his stock-in-trade during the primary season — on Thursday, Friday, and Saturday. It’s but one signal that Trump is also shedding all pretenses that he will pivot in a general election.

Gone too is any pretense of objectivity from some elements of the conservative media, including Breitbart and parts of Fox News. Bannon’s elevation marks a formal merger of what has come to be known as the alt-right media and the Trump campaign. The former helped incubate the populism and nationalism to which Trump gave voice on the campaign trail. The New York Times reported Tuesday that former Fox News president and CEO Roger Ailes is advising Trump ahead of the presidential debates. The news makes perfect sense. On his watch, many noticed that the network’s primetime hours took on a decidedly Trumpian tilt, and there’s a sense that things have come full circle. 

Outside the nexus of the Trump campaign and a handful of media outlets, the response has been bleaker. A longtime Republican-party operative described the general mood in the party in the wake of last night’s shakeup as “despairing.” Neither Bannon nor Conway bring to their new roles experience on a general-election campaign — let alone a flailing one. Trump loyalists argue that a return to the strategy that vaulted him ahead of 16 opponents in the primary is the best way to defeat Hillary Clinton in a general election, too; skeptics say the divided primary field made it easier for Trump to clinch the nomination, and that Trump’s tactics aren’t sufficient to draw new voters into his political coalition. Bannon declined to be interviewed for this article, and Conway did not respond to an immediate request for comment.

While Manafort’s ouster has been chocked up to Trump’s post-convention tumble in the polls, its roots lie in the campaign’s previous shakeup, which ended when former Trump campaign manager Corey Lewandowski was frog-marched from Trump Tower in late June.

Lewandowski was the rare campaign manager who shadowed his boss, and his departure also meant the loss of a loyal aide who spent his days whispering in Trump’s ear, taming, massaging, and encouraging the volatile and restless candidate. It’s a role that Conway, who has been traveling with Trump, is expected to fill. Nonetheless, Lewandowski’s exit had consequences for the candidate and the campaign. “I don’t know what’s happening except for that they’ve lost control of Mr. Trump,” a second Trump aide told me ten days ago, in the wake of Trump’s attacks on the Khan family and his public refusal to endorse House speaker Paul Ryan in his primary race. “I’ve always maintained that the person who dominates his ear is the best manager. If you’re in his headspace, then you’re a successful manager.”

Manafort, who has a decades-long history of successfully making over crackpot dictators abroad, vowed to do the same with Trump. Trump chafed. Manafort wasn’t in his headspace, either, having opted to direct both the candidate and the campaign at a distance, planting himself at Trump Tower in Manhattan.

As campaign chairman, Manafort never named a replacement for Lewandowki, absorbing his duties instead, and Trump went without a campaign manager from Lewandowski’s June 20 departure until Conway’s appointment last night. The result was a candidate who was often untethered from his own campaign and who earned rebukes from Manafort for his inability to stick to a script. “No marriage can work if one person is constantly trying to change the other,” says the first Trump aide.

Manafort had also marketed himself as the maestro of political conventions — and Trump’s, mired by accusations of plagiarism and the candidate’s own remarks on NATO, fell flat. The results were predictable: His poll numbers, to which he is comically sensitive, dropped precipitously.

If that was the impetus for Manafort’s ouster, there were dozens of proximate causes, including news reports of his longstanding ties to the deposed Ukrainian strongman Viktor Yanukovych and, by extension, to Putin’s Russia.

The relationship between Trump and Manafort began to sour almost immediately after Manafort came aboard in late March, according to several sources with knowledge of the campaign. Manafort’s deputy and longtime consigliere, Rick Gates, hired experienced GOP operative Rick Wiley in mid April. Lewandowski had hired the firm WizBang Solutions as a direct-mail vendor for the campaign, paying the company about $500,000 in April, according to FEC reports. On Manafort’s watch, Wiley, a Wisconsin native, brought in another direct-mail firm with roots in Madison, Wisc., that was paid more than $730,000 by the Trump campaign over the course of just five days. Trump ruthlessly scours the campaign’s financial reports; when he saw the numbers, according to an aide, he peered up at Gates from his stack of papers and asked, “Well who the f*** are you?” Wiley left the campaign the following month.

Trump, however, never managed to resolve the civil war simmering between Lewandowski and Manafort, which had created dueling camps inside the campaign that remained even after Lewandowski’s defenestration. “Frankly there are still a lot of Lewandowski fans around who felt he was treated poorly after he helped engineer one of the greatest primary victories of all time,” says a source with knowledge of the situation. “You don’t just dump the guy and have armed guards escort him out the door. So I think there’s some payback here, not from Corey but from his allies.” Even Trump himself remained torn between the two: According to New York magazine, he continues to consult with Lewandowski.

With Manafort effectively sidelined, Trump is back in his comfort zone. Yes, it’s the zone from which he toppled 16 primary opponents. Nonetheless, many remain skeptical that even an amped-up version will prove deft enough to defeat the Clinton machine.


Article Link To The National Review:

Law And Order: Trump Unit

For global and domestic disorder, Trump’s answer looks better than Clinton’s answer.


By Daniel Henninger 
The Wall Street Journal
August 18, 2016

Richard Nixon, law and order’s most famous practitioner, used the reality of domestic unrest to defeat Hubert Humphrey in the annus horribilis, 1968. President George W. Bush persuaded voters in 2004 that John Kerry would provide uncertain leadership in the post-9/11 war on terror.

Donald Trump, always willing to test the limits of any thought, is campaigning for law and order on a global scale. He’s accusing Hillary Clinton of being soft on crime at home and soft on terror everywhere in the world. It’s “Law and Order: Global Victims Unit,” Donald J. Trump producer.

Tuesday in Milwaukee, which last weekend looked a lot like Baltimore’s 2015 street riots, Mr. Trump said: “The Hillary Clinton agenda hurts poor people the most. There is no compassion in allowing drug dealers, gang members and felons to prey on innocent people. It is the first duty of government to keep the innocent safe.”

In Monday’s foreign policy speech he pledged to do a reverse-Obama by keeping Gitmo open and trying accused terrorists in military tribunals. Likening his strategy to “the effort to take down the mafia,” he said “this will be the understood mission of every federal investigator and prosecutor in the country.”

With most of the battleground states looking more like Republican burial grounds, it may be pressing the membrane of believability to say the Trump law-and-order strategy just might work. That said, Mr. Trump’s naming this week of the adept Republican political strategist Kellyanne Conway as his campaign manager means he may yet give his supporters a competitive presidential campaign.

Democrats deserve to have a Trumpian version of “law and order” unloaded on them. I don’t think the Democrats are soft on crime and terrorism. They’re just ambivalent. Ambivalence can get you killed, especially around people with guns and bombs.

Asked after every primary to rank four issues, Democrats nearly always put terrorism fourth. It hardly came up in the Clinton-Sanders debates.

And whether the domestic shooters are San Bernardino’s terrorists, Orlando’s nut or Chicago’s gangs, the Democrats’ offer the same silver bullet: gun control.

The problem with how they’ve teed up the cops has been the nonexistence of any Democratic alternative beyond patrolling the toughest streets with a blue version of Casper the Friendly Ghost.

On national security, an example of progressive foreign policy’s half-in, half-out attitude was former Attorney General Eric Holder’s remark in May that the traitorous Edward Snowden “actually performed a public service by raising the debate that we engaged in and by the changes that we made.” No, it was not worth anything.

In a Journal article last month, an administration official summarized the Obama anti-terror policy. It reads like aggression with footnotes:

“Not just in Afghanistan, but in Iraq and Syria, it’s very evident what his approach is, which is to make sure we’re doing everything necessary to disrupt and ultimately defeat terrorist networks while significantly reducing the role of the U.S. military in terms of the ground presence and also reducing the resources associated with that presence.”

There is a specific, well-known reason for a Democratic policy of “reducing the resources associated with that presence,” one that 50 former Bush officials should have thought about before unfurling their Hamlet-like statement last week on the election and national security.

The reason is guns versus butter, military spending versus always unsated domestic needs. The liberals’ battle for butter began in the 1960s, when they vilified Lyndon Johnson for spending on Vietnam and the Cold War rather than the Great Society.

Right now, foreign-policy liberals and some conservatives are pushing sotto voce assurances that Hillary will “get it right” on national security. They had better go line-by-line through the economic-policy speech she gave last week in Michigan. After the greatest outlay on infrastructure spending “since World War II,” tuition-free college for the middle class and “debt-free for everyone,” plus uncountable tax credits, anything Mrs. Clinton gets right will be on the cheap. Like her “intelligence surge.”

This isn’t Bill Clinton’s center-left Democratic Party. It’s the left-only party of Bernie Sanders, Elizabeth Warren and Barack Obama. What they want is butter, lakes of it. Anti-terrorism gets to tread water, alongside the cops.

Defeating Islamic terror is a rare unifying issue for conservatives and indeed for the world. Unlike any conceivable Democratic president, Donald Trump is at least willing to lead this battle, reflecting the truth that it won’t happen without active, unrelenting U.S. leadership.

No doubt this is yet another issue with which voters have to struggle, wanting an alternative to the Obama-Clinton Democrats but burdened with misgivings that are of Mr. Trump’s own creation.

But Donald Trump didn’t create the law-and-order issue. Cities and nations under assault did that. Just now, his answer for both looks better than her answer.


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If You Thought The Old Donald Trump Campaign Was Wild And Crazy, Just Wait

By E.J. Dionne Jr.
The Washington Post
August 18, 2016

If you thought the old Donald Trump campaign was wild and crazy, just wait for the new Trump campaign now that Breitbart’s Steve Bannon has taken over as chief executive.

The new leadership — with Bannon and pollster Kellyanne Conway displacing Paul Manafort of the Ukrainian Connection at the top of the heap — is likely to steer Trump even more in the direction of the European far right. It also tells you something that Bannon sees Sarah Palin, about whom he made a laudatory documentary, as a model for anti-establishment politics.

Bannon is close to Nigel Farage, the former head of the right-wing U.K. Independence Party, who offered “massive thanks” to Breitbart News for supporting the party’s successful campaign on behalf of Britain’s departure from the European Union. “Your UKIP team is just incredible,” Bannon told Farage during an interview after the June Brexit vote.

Judging from Bannon’s history, Trump’s campaign will become even harsher in its attacks on Hillary Clinton and work hard to insinuate anti-Clinton stories into the mainstream media. Bloomberg Businessweek’s Joshua Green quoted Bannon proudly declaring in mid-2015: “We’ve got the 15 best investigative reporters at the 15 best newspapers in the country all chasing after Hillary Clinton.”

And count on Trump to ramp up his appeals to Bernie Sanders’s supporters and the left. Pushing his anti-Clinton film “Clinton Cash” in May, Bannon said he wanted progressives to “understand how the Clintons, who proclaim to support all your values, essentially have sold you out for money.” In his conversation with Farage, Bannon expressed great interest in the role played by left-of-center voters in Brexit’s victory.

A Trump news release Wednesday bragged about the headline on Green’s important Bloomberg Businessweek article describing Bannon as “the most dangerous political operative in America.” The new CEO poses dangers not only to Clinton, but also to Republicans such as House Speaker Paul D. Ryan (Wis.) who have been tiptoeing around their party’s nominee by simultaneously criticizing him and endorsing him. Bannon has no use for Ryan. A December piece Bannon co-wrote began: “Paul Ryan’s first major legislative achievement is a total and complete sell-out of the American people masquerading as an appropriations bill.”

Bannon could thus speed the defection of longtime GOP officeholders, while Senate and House campaigns are likely to become even more distant from Trump. In his past endeavors, Bannon targeted not only Clinton but also Jeb Bush. Trump’s relations with the Bush wing of the party could hardly be worse, but Bannon is likely to make them impossible.

There is much good news but one piece of bad news for Clinton in the Trump shake-up. The bad news is that she is likely to have to play more defense, especially if Bannon builds on his success in enticing reporters at non-conservative media outlets to work on stories damaging to her.

The good news is that Trump seems determined to fight through the campaign on his own terms. This reduces the chances that he will drop out of the presidential race, which, in turn, means that Clinton is more likely to avoid what would be the biggest blow to her chances: a Trump withdrawal and the naming of a new GOP candidate.

Trump’s campaign is also likely to look more extreme, which cannot help the flailing candidate in the suburban, highly educated precincts in states such as Pennsylvania, Virginia, Colorado and North Carolina where he is hemorrhaging more upscale Republican votes. Bannon’s fascination with Palin, who turned off many such voters to John McCain after he chose her as his running mate in 2008, could aggravate, rather than ease, this problem.

And if the theme of this latest bit of Trump court intrigue is a return to the “Let Trump be Trump” philosophy, Clinton’s operatives will only cheer. Trump being Trump is precisely what led him to this crisis point.

Bannon’s rise dramatizes the catastrophe GOP establishmentarians brought upon themselves by imagining that they could use the far right for their own purposes while somehow keeping it tame. Bannon’s European interests suggest he is far more impressed by right-wing third parties than by traditional Republicanism. He believed the anti-establishment rhetoric that Republican politicians deployed but never really meant when they were attacking President Obama. Now, the GOP faces the possibility of a real split.

It fell to Palin in her January endorsement of Trump to tell the party establishment off: “We are mad, and we’ve been had. They need to get used to it.” They are unlikely to get used to Bannon.


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