Saudi Oil Production Surges By Over 400,000 Barrels In June: OPEC

The energy community was looking with particular interest to the latest, just released July OPEC monthly report, for signs of the promised – if only by Saudi Arabia – boost in oil output, and it got what it was looking for, if to a lesser extent than some had expected: in June, OPEC’s collective oil production rose by 173Kb/d to 32.327MM, according to secondary sources.

While the total production rose to the highest level in months, it was well below both year end 2016 and 2017 production, both of which were above 32.6MM as a result of production declines and stoppages among some key OPEC members.

In June, Crude output was boosted mostly in Saudi Arabia, where it increased by over 400K to 10.420mmb/d, with Iraq, Nigeria, Kuwait and UAE also increasing their monthly production. On a self-reported basis, Saudi said it had boosted output by 459kb/d, bringing the total to 10,489mmb/d.

Meanwhile, production declined in Angola as well as the two more troubled nations Libya, which has recently seen a sharp drop in output due to political infighting, and Venezuela, where the nation is grinding to a halt due to the ongoing economic collapse.

That said, Libya may soon be returning to peak production with the NOC announcing overnight it had regained control of Eastern oil ports, with operations set to resume to normal levels “in a few hours.”

Elsewhere in the report, OPEC’s 2018 global oil demand growth forecast remained unchanged, forecast to increase by around 1.65mln bpd to average 98.85mln bpd. In 2019, initial projections indicate a global increase of around 1.45mln bpd, with annual average global consumption anticipated to surpass the 100mln bpd threshold. Non-OPEC oil supply (now excluding the Republic of the Congo) in 2018 was revised up from the previous MOMR by 140k bpd to average 59.54mln bpd; an increase of 2mln bpd Y/Y.

OPEC also cautioned that U.S. refinery runs may drop from near-record level in coming month amid strong gasoline inventories, something we have seen in practice in recent weeks.

“High gasoline inventories and weak refining margins, despite positive performances in the bottom of the barrel, are most likely going to pressure refinery runs from the current high levels in the coming month.”

The report also noted that US oil products market in June showed “substantial losses” amid high crude prices and lower gasoline demand, and added that refinery margins declined in June because of lower gasoline demand, high crude prices and narrowing WTI/Brent spread.

The report also observed that U.S. crude intake levels almost hit record levels, leading to higher product output, further pressuring product markets with demand lower than expected; meanwhile refinery utilization rates increased in June to average 96.9%; thoughput at 18m b/d, up 837k b/d m/m.

Finally, addressing the most critical outstanding issue, whether supply can meet global demand, OPEC said that there is enough “rival” supply to meet 2019 demand, when OPEC sees “rival”, i.e. shale, supply to meet demand growth.

In other words, OPEC is happy to abdicate the title of the marginal oil producer to the US. Whether shale can take advantage of this will determine whether oil continues to surge in the next year, or once again tumbles. Meanwhile, if oil indeed hits $150/bbl as some have predicted, the outcome will be simple: recession, which will be the surest, most effective way of sending oil prices lower.


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Author: Tyler Durden


“Germany Is A Captive Of Russia”: Trump Slams German Hypocrisy Over Russian Pipeline

President Trump came out swinging in Brussels after arriving on Air Force One for his second NATO summit. Speaking with journalists before a meeting with the NATO secretary general Jens Stoltenberg – and all caught strategically on video –  Trump slammed Germany for expecting the US to foot the bill for Europe’s security in the face of Russian aggression while Germany and others cut massive energy deals with Russian energy companies, per RT.

Germany is so dependent on Russia for energy, Trump said, that it’s essentially being “held captive” by Vladimir Putin and his government, Trump said during his breakfast with Stoltenberg having himself been the object of withering critique for the past two years by the US liberal media that he himself is a Putin pupet.

“Germany is captive of Russia because it is getting so much of its energy from Russia. They pay billions of dollars to Russia and we have to defend them against Russia,” said Trump at a breakfast with NATO chief Jens Stoltenberg.

Trump even tweeted a video of the exchange for public consumption:

As muni expert Cate Long commented after the exchange:

“President Trump called out Germany for expecting the US to pay for their defense against Russia while they cut a massive oil and natural gas deal with Russia. The simplicity and elegance of his argument cannot be overstated. The duplicity of the German govt is outrageous.”

Trump, of course, is course correct: Germany like much of central Europe, is held hostage by Russian energy exports, a reality of life in Europe and what many believe was the initial cause for the proxy was in Syria which sought to push a Qatar gas pipeline across Syria and Turkey to reduce Europe’s reliance on Russia, and is the reason why most Europeans have been pushing to ease sanctions against the Kremlin. Meanwhile, the US has been struggling to butt into the European energy market, with the Trump administration doing everything in its power to send more LNG exports Europe’s way, benefiting US companies.

In an effort to lighten the tension (and also rib Trump for his complaints about NATO members not paying their fair share) following what was described as a “contentious” breakfast, Stoltenberg told reporters that he enjoyed”some nice fruit salad, paid for by the United States.”

The pipeline has been a frequent target of attacks by Trump, who threatened to escalate the trade war against Germany several months ago if it supported the construction of the pipeline, which the Trump administration has claimed would grant Russia a quasi-monopoly over European energy markets.


With the completion of the pipeline, Russian LNG has become cheaper and more reliable than US energy exports, helping Russian energy firms muscle out their US rivals in the European market. Back in May, the Trump administration threatened sanctions against German companies who participated in the construction of the pipeline, while Trump reportedly warned German Chancellor Angela Merkel that the US could impose punitive trade measures against Germany in retaliation for its support for the pipeline. The pipelinewhich carries gas directly from Russia under the Baltic Sea.

Trump bashed Germany again for supporting the pipeline, calling it a “very sad” state of affairs, according to Bloomberg.

It’s very sad when Germany makes a massive oil and gas deal with Russia where we’re supposed to be guarding against Russia and Germany goes out and pays billions and billions of dollars a year to Russia,” Trump said before meeting with NATO Secretary General Jens Stoltenberg on Wednesday morning.

German Defense Minister Ursula von der Leyen responded to Trump’s criticisms of the Nord Stream pipeline in an interview with the BBC in Brussels: “We can cope with it. We’ve heard him before and seen the tweets. We have an independent energy supply, we are an independent country, we are just diversifying.”

Trump also reiterated his criticisms of NATO partners whom he has accused of shirking their financial obligations to the alliance.

“Many countries owe us,” Trump said in Brussels, before attending the summit at NATO headquarters. “The United States is paying far too much and other countries are not paying enough…This has been going on for decades, for decades, it’s disproportionate and not fair to the taxpayers of the United States.”

Here, too, Trump is correct as the following map shows, although it is unclear if the US is truly losing from an arrangement where the US military-industrial complex benefits disproportionately from US domination of NATO, which in turn send MIC stocks to all time highs, making shareholders and management especially rich… largely at the expense of US taxpayers.


As Bloomberg pointed out, Trump’s aggressive rhetoric suggested that the NATO summit will follow the same trajectory as the G-7 summit in Canada earlier this summer, where Trump’s allies joined together to try and counter his criticisms.

“NATO is an an alliance of 29 nations and sometimes there are differences and different views and also some disagreements, and the gas pipeline from Russia to Germany is one issue where allies disagree,” said Stoltenberg. “But the strength of NATO is despite these differences we have always been able to unite around our core task, to protect and defend each other, because we understand we are stronger together than apart.”

However, at least one diplomat agreed with Trump’s concerns about Nord Stream. Polish Foreign Minister Jacek Czaputowicz said Trump has a point: “Some countries are too close” to Russia, he said on a panel at a parallel event to NATO, accusing Russia of using proceeds from the pipeline to fund its military.

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Author: Tyler Durden

Elon Musk Launches Bizarre Public Spat with Thai Hero Rescue Chief

Elon Musk – continuing his recent streak of bizarre behavior – has publicly questioned the authority and expertise of one of the key individuals responsible for successfully navigating the rescue of 12 boys and one soccer coach trapped in a cave in Thailand. 

If there has been one major world event that has brought people together and dominated the news over the course of the last several days, it has been this successful rescue. The rescue sparked jubilation and feel good headlines worldwide like this one, from the Guardian:

The group was trapped unexpectedly after the cave flooded due to heavy downpours and they were stranded for more than nine days before anybody was able to reach them or definitively figure out their location. 18 days later, all 12 boys and their coach were rescued successfully, thanks to the efforts of Thailand’s Navy SEALs and a collaborative effort by thousands of people who helped bring a happy ending to this national news story.

The ending was feel good for just about everybody – except Elon Musk.

Musk had thrust himself into the headlines of the story over the last few days as he frantically posted on social media about efforts that he was trying to lead to construct a device that could help rescue the trapped individuals.

Within the last 72 hours, Musk posted that his team of engineers had come up with an “escape pod” that they had tested locally in a swimming pool and were going to deploy to Thailand to try to help with the rescue efforts. Musk himself also wound up traveling to Thailand. Over the last 48 hours, Elon Musk and the story became intertwined with one another, with some people commending him for his efforts to try and help and others accusing him of trying to thrust himself into the spotlight of the national event where his help wasn’t specifically asked for.

Regardless, as the rescue effort took place over the course of several days and finally, when on Tuesday it was reported that all 12 children and the coach were in fact safe, Musk’s “escape pod” wasn’t deployed or used in any fashion.

And instead of assuming that “all’s well that ends well” and being happy for the individuals who were rescued, Musk took it upon himself on Tuesday to actually question the authority of one of the joint commanders of the operation.

The Guardian picked up the story on Tuesday and wrote:

Elon Musk has questioned the expertise of Thai rescue officials who turned down his offer of a submarine, despite their having organised the successful rescue of all 12 boys and their football coach from a flooded cave.

The entrepreneur had offered his help and posted footage of tests being carried out on the apparatus he proposed in recent days.

But while Narongsak Osatanakorn, the head of the joint command centre co-ordinating the operation, acknowledged Musk’s offer he said that the mini submarine would not have been practical for the cave rescue.

“Even though their equipment is technologically sophisticated, it doesn’t fit with our mission to go in the cave,” Osatanakorn told reporters.

In response, Musk said Osatanakorn was “not the subject matter expert”, adding that he believed he had been “inaccurately described as rescue chief”, and should be more accurately referred to as the “former Thai provincial governor”.

After this, Musk said he was going to leave the mini-sub behind in case it becomes useful in the future.

Elon Musk’s petulant behavior – taking a shot at the project’s rescue chief, instead of simply congratulating all who were involved – continues to validate the concerns of many who believe Musk may not be fit to head up Tesla,  or that he may be spread too thin and under too much pressure, resulting in him being “all over the place” and mis-allocating his time and resources into numerous projects that aren’t bearing fruit.

Musk’s behavior has gotten more and more bizarre as the days have gone on. Unfortunately for him, from a PR standpoint, his conduct on the Thailand cave issue has overshadowed what was supposed to be “good news” from the company as it reported – for at least the third time in the last 3 years – that Tesla would be moving into China.

CEO Elon Musk himself also had another PR meltdown last week, once again lashing out at members of the media who have written even the slightest bit of critical press about his company. It has led some analysts to ask, “What the F*ck is Elon Musk Doing?” 

This isn’t new, either. We have seen Musk lash out at the media over the last couple of months – blaming everybody from the Economist to Consumer Reports for being in a conspiracy to defame the company.

This latest round of attacks on journalists goes after Linette Lopez at Business Insider, who was one of the first to break the story that Tesla may have been suspending certain of its Model 3 brake tests in order to help move vehicles off the line more efficiently.

Musk’s behavior even caused left-leaning media outlets like Slate to publish articles like this one called, “Elon Musk Needs to Stop Tweeting Things He Can’t Prove (And Grow Up)”. Similarly, articles about Musk’s handling of the Thailand situation haven’t exactly been favorable. 

It seems that as of late Musk is focused on anything but Tesla. Could this be foreshadowing?

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Author: Tyler Durden

“Past Point Of No Return”: World Markets Tumble Amid Global Trade War Shockwaves

In almost every way, the overnight trading action has been a mirror image of the ramp observed on Monday morning, when trade tensions – inexplicably, one trading day after trade war started – were said to have “gone away” leading to a furious global rally.

Not so much today, when hours after Trump unveiled the second round of trade war – at the worst possible time according to bulls, just ahead of earnings season, once again spoiling the positive effect of what is set to be another 20%+ EPS rise for the S&P – by pushing ahead with plans to impose tariffs of 10% on an additional $200 billion of Chinese goods by releasing a list of targeted products that includes consumer items such as clothing, television components and refrigerators, global stocks are a sea of red amid a worldwide market selloff as traders realized that not only is trade war not hibernating, but it is set to keep getting worse as Steven Englander explained last night, as escalation has now crossed past “the point of no return.”

While the duties have some time before taking effect, and the soonest they could be implemented would be after public consultations end on Aug. 30, Beijing has described the move as “totally unacceptable” bullying and vowed it will be forced to retaliate, without however giving details. 

However, the biggest risk is that, as Bloomberg wrote, Trump has pushing his China trade conflict beyond “a point of no return”, where neither side can back down. China now has seven weeks to make a deal or dig in and try to outlast the U.S. leader. However, president Xi Jinping, facing his own political pressures to look tough, has vowed to respond blow-for-blow. He’s already imposed retaliatory duties targeting Trump’s base including Iowa soybeans and Kentucky bourbon.

Yet matching the latest U.S. barrage would force China to either levy much higher tariffs or take more disruptive steps like canceling purchase orders, encouraging consumer boycotts and putting up regulatory hurdles. Not only does that risk provoking Trump to follow through on threats to tax virtually all Chinese products, it could unleash nationalist sentiment on both sides that fuels a deeper struggle for geopolitical dominance.

“It’s already past the point of no return,” said Pauline Loong, managing director at research firm Asia-Analytica in Hong Kong. “What’s next is not so much a trade war or even a cold war as the dawn of an ice age in relations between China and the United States.”

As noted above, the Chinese Commerce Ministry said on Wednesday that it would be forced to retaliate against what it called “totally unacceptable” U.S. tariffs, with China’s Vice Minister of Commerce Wang Shouwen saying in comments to Bloomberg that Beijing “never yields to threat or blackmail” and will retaliate against the “groundless” tariffs.”

“The U.S. side ignored the progress, adopted unilateral and protectionist measures, and started the trade war.”

In the aftermath of the latest development, OCBC analysts told clients to “expect a risk-off tone to prevail over Asian markets today as investors prepare for the next escalation of U.S.-Sino trade tensions and China’s response.”

They were right, and sure enough the two key markets that everyone looks at first in the morning, US equity futures, which are down over 20 points and set for the biggest drop in 2 weeks, wiping out the gains from the past two days…

… and the Shanghai Composite, which closed -1.8% lower after sliding even more earlier in the session…

… have been hammered, dragging down the rest of global assets. Here one reason why Trump may be willing to keep pressing China is that a pattern observed so far in the escalating battle between the world’s top two economies is that the tensions hit Chinese shares harder than American ones – they are now in a bear market, while the S&P 500 is within about 3 percent of a record high.

In Europe, the Stoxx Europe 600 Index ended its best run since March, led lower by tariff-related sectors such as miners and autos and the MSCI Asia Pacific Index fell. Stoxx 600 basic resources index SXPP dropped as much as 3.4%, most in 2-1/2 weeks, with technical charts showing index testing key support levels amid new escalation in global trade war. After rising back over the 200DMA, Stoxx 600 is back under this key moving average.

Commenting on the latest escalation, Nomura FX strategist Dushyant Padmanabhan said that “this escalation, and the timing of it, seems to have caught the market a bit by surprise,” adding that “the $34 billion and $16 billion tariffs were well flagged and, as such, had little impact on markets,” but while this $200 billion has been mentioned before there’s no clear sense of timing around it.

Meanwhile, China’s currency – that other global risk on/off catalyst – tumbled, with the offshore yuan falling as much as 0.74%, the most in a week, and dropping 1000 pips in 2 days…

… while the onshore yuan slid 0.46% to 6.6710 and was headed for the weakest close in 11 months, since August 2017. The Yuan may fall closer toward multi-year low of just below 7 per dollar, with 6.7 the next key level to watch, Nomura strategists wrote in note Wednesday

At the same time, the dollar rallied strongly against G-10 and all other currencies too as the latest escalation in the U.S.-China trade war caught the market off guard, increasingly shorted the greenback and long-risk.

Elsewhere in FX, the euro predictably weakened the most in more than a week to re-test the 1.17 level, while the pound dropped ahead of the publication of the Brexit white paper Thursday. That said, there was one silver lining in overnight trading: volatility in G-4 currencies saw a rather muted response with traders in no rush to add exposure as the new list of tariffs won’t be implemented till end-August. The loonie fell toward a one-week low before the Bank of Canada’s rate decision and amid lower oil prices. Meanwhile, the Australia and New Zealand dollars led losses among G-10 currencies on renewed trade war.

“In the short run it’s very difficult to see what’s going to bring an end to this escalation of tit-for-tat,” Richard Turnill, chief investment strategist for BlackRock told Bloomberg TV. “It’s those increasing concerns that are going to weigh on market returns and force investors increasingly to look for more resilience in their portfolios.”

In rates, US Treasuries were trading close to overnight highs, with the curve unchanged. The yield on the 10Y dropped 4 bps to 2.83%: the lower yields slide, the greater the threat a sharp short squeeze takes them even lower as a result of another record shorts in the US rates complex.

In commodities, oil dropped below $74 a barrel in New York, even as the latest API report showed shrinking U.S. crude stockpiles. Brent is falling faster than WTI as a result of Libya’s NOC resuming control of Eastern oil ports, with operations set to resume to normal levels “in a few hours.” This is undoing the support offered on Tuesday by a larger than expected draw in API crude inventories. The metals sector is also seeing broad based losses, with Gold down 0.2%, copper falling over 3% during Asia-Pac trade to its lowest in around a year, Shanghai zinc fell limit down shortly after the Chinese open and lead is languishing around near 1 year lows. Platinum is also in negative territory with the market set for its 4th consecutive surplus this year, on the back of falling demand in the auto sector, as according to the CPM Group.

What to watch today: NATO summit in Brussels; U.S. sells 10-year notes; producer prices, wholesale inventories; BOC rate decision, press conference to follow; New York Fed President John Williams, ECB’s Mersch and Nouy speak.

Market Snapshot

  • S&P 500 futures down 0.8% to 2,775.50
  • STOXX Europe 600 down 1.1% to 381.85
  • MXAP down 0.9% to 164.27
  • MXAPJ down 1% to 534.79
  • Nikkei down 1.2% to 21,932.21
  • Topix down 0.8% to 1,701.88
  • Hang Seng Index down 1.3% to 28,311.69
  • Shanghai Composite down 1.8% to 2,777.77
  • Sensex up 0.2% to 36,316.39
  • Australia S&P/ASX 200 down 0.7% to 6,215.60
  • Kospi down 0.6% to 2,280.62
  • Brent futures down 2.1% to $77.19/bbl
  • Gold spot down 0.4% to $1,250.05
  • U.S. Dollar Index up 0.3% to 94.42
  • German 10Y yield rose 4.4 bps to 0.364%
  • Euro down 0.2% to $1.1726
  • Italian 10Y yield rose 0.5 bps to 2.405%
  • Spanish 10Y yield fell 0.3 bps to 1.275%

Top Overnight News from Bloomberg

  • U.S. releases $200bn list of Chinese goods for additional possible tariffs, would take effect Aug. 30
  • China confirms it will take countermeasures, describes latest U.S. move as totally unacceptable and urges other countries to join China to protect free trade
  • Brexit: Euroskeptic Tories that failed to stop PM May’s soft Brexit plan are considering a radical last ditch move that could bring down her minority government later this year, according to people familiar
  • Libya: force majeure lifted at eastern oil ports, exports to return to normal levels
  • President Donald Trump opened up another front in his tussle with allies on his arrival at NATO’s annual summit, targeting Germany over its support for the Nord Stream 2 gas pipeline from Russia
  • Euroskeptic Tories have failed to stop U.K. Prime Minister Theresa May’s plan for a soft Brexit and are considering a radical last ditch move that could bring down her minority government later this year
  • Deutsche Bank AG is deploying top executives, as well as billions of dollars, as it seeks to win more business with Wall Street’s most active dealmakers
  • Malaysia’s central bank left its benchmark interest rate unchanged in the first policy meeting under a new governor, providing support to an economy that Prime Minister Mahathir Mohamad is trying to revamp

Asian stocks slumped across the board with sentiment spooked on increased trade concerns after the US announced a new tariff list on an additional USD 200bln worth of Chinese goods. The renewed US trade offensive picks up from Trump’s threats made last month and in turn weighed heavily on US equity futures as well as Asia-Pac bourses, while some commodities in Shanghai went into free fall alongside the broad risk-averse tone. ASX 200 (-0.7%) and Nikkei 225 (-1.2%) were lower with commodity-related sectors in Australia suffering after declines in the complex in which Shanghai Zinc fell 6% to hit limit down and copper fell to its lowest in about a year, while losses in Tokyo were exacerbated by safe haven flows into the JPY. Elsewhere, Hang Seng (-1.3%) and Shanghai Comp. (-1.8%) took the brunt of the increased trade tensions, although both were off the day’s lows after an initial composed response from China which stated it was vital to send a positive signal of cooperation and suggested that if the US will go low, it will go high. Finally, T-note futures traded higher overnight with prices spurred by the tariff list announcement, while 10yr JGBs were flat after they failed to benefit from the broad risk-averse tone, as well as the BoJ’s presence in the market for JPY 960bln in 1yr-10yr maturities.

Top Asian News

  • China Selloff Regains Momentum as Tariff List Hits Stocks, Yuan
  • Turkey Faces Ticking Bomb With Energy Loans of $51 Billion

European equities (Euro Stoxx 50 -1.1%) are following in step with Asian stocks and falling sharply on the back of trade concerns as the US begun the process of imposing new 10% tariffs on a further USD 200bln of Chinese imports. This new list was said to include several metals and as such material names are underperforming alongside energy names (on softer oil prices), but losses are broad based and being seen across all sectors. 21st Century Fox have increased their bid for Sky (-0.6%) to GBP 14.00/share, an independent committee from Sky has  said they have reached an agreement on this increased recommended pre-conditional cash offer

Top European News

  • Hedge Fund Said to Sell Playtech Stake Before Profit Warning
  • Indivior Plunges as U.S. Generic Setback Hurts Drug Orders
  • European Stocks Extend Early Losses as Miners, Autos Hammered
  • Danske Fine May Be $670 Million as Analysts Look at New Evidence

In FX, AUD Extending recent losses vs its US counterpart and underperformance within the G10 bloc, with a further retreat from near 0.7500 peaks to breach support just ahead of the big figure below (0.7401 was the 10 DMA and support from there not seen until the 61.8% fib around 0.7377). The Aud continues to track US-China import tariff developments as a barometer for wider global trade contagion and repercussions given closest links and relations with China, while its NZD antipodean peer is less sensitive and has held up better as a result – cross back below 1.0900 but Kiwi losing 0.6800 vs the Usd. CNH/CNY – Taking a direct hit from threats to raise the bar on imports to $250 bn in total by Beijing in response to a further $200 bn Chinese goods and services listed by the White House, but also weaker via the latest PBoC Cny fix amidst ongoing speculation that depreciation could be deployed as another trade war weapon. Usd/Cny closed around 6.6667, with resistance for Usd/Cnh just above 6.7000 subsequently tested. EM/SCANDI : Weaker across the board on general risk-off position and more independent bearish factors as the Lira lurches again on more fall-out from President Erdogan’s cabinet appointments and Usd/Try rallies to circa 4.7600+ again. 

In commodities, oil is currently being hit by the risk-off mood, with both Brent and WTI in the red. Brent is falling faster than WTI as a result of Libya’s NOC resuming control of Eastern oil ports, with operations set to resume to normal levels “in a few hours” as of 08:45 BST. This is undoing the support offered on Tuesday by a larger than expected draw in API crude inventories. The metals sector is also seeing broad based losses, with Gold down 0.2%, copper fell over 3% during Asia-Pac trade to its lowest in around a year, Shanghai zinc fell limit down shortly after the Chinese open and lead is languishing around near 1 year lows. Platinum is also in negative territory with the market set for its 4th consecutive surplus this year, on the back of falling demand in the auto sector, as according to the CPM Group.

Looking at the day ahead, in the US the most significant release is the June PPI report (core PPI of 2.6% yoy expected), while May wholesale trades sales and final May wholesale inventories are also due. Away from the data, BoE Governor Mark Carney will speak late in the afternoon on the global financial crisis at a conference in Boston while New York Fed President John Williams will speak to business and community leaders at an event in Brooklyn. Meanwhile the NATO meeting begins, continuing into Thursday, while Japan PM Abe meets European Council President Tusk and EC President Juncker. Meanwhile the ECB’s Draghi, Praet, Mersch and Nouy will speak at Frankfurt. England will meet Croatia for a place in the World Cup final.

US Event Calendar

  • 7am: MBA Mortgage Applications, prior -0.5%
  • 8:30am: PPI Final Demand MoM, est. 0.2%, prior 0.5%; PPI Ex Food and Energy MoM, est. 0.2%, prior 0.3%
    • PPI Ex Food and Energy YoY, est. 2.6%, prior 2.4%; PPI Ex Food, Energy, Trade YoY, prior 2.6%
  • 10am: Wholesale Trade Sales MoM, est. 0.5%, prior 0.8%; Wholesale Inventories MoM, est. 0.5%, prior 0.5%

DB’s Jim Reid concludes the overnight wrap

It’s a sign of how good England have been at this World Cup that even without playing last night they made it through to the last 3. Happy days. Congratulations to readers in France and commiserations to those in Belgium this morning. Whoever gets through tonight will have a tough game against a very skilful French team. Ahead of the biggest game in this country for 28 years tonight I’m a little fragile this morning. Last night I finished packing away the last of nearly 2000 CDs I’ve had in my garages since streaming came along and made them largely redundant. They are to be collected by a charity shop today although given some of my peculiar album purchases over the years some of them might remain on the shelf longer than England’s football team have been away from a World Cup final. In skimming through them as I packed, it really did feel like I was saying goodbye to the soundtrack to my adolescence and young adult life. I hope I’ve done the right thing. If you think I’m going to regret this please let me know ASAP before they get picked up today and are gone forever. This moving house thing is very stressful and we haven’t even moved yet.

As a contrast, this week has been noticeable for the lack of stress mostly due to no further escalation of the trade dispute. However things have taken a different turn after the US markets closed overnight. The US Trade Representative  office has released a list of an additional $200bn worth of Chinese imports to be hit with higher tariffs of 10%, although a final decision on the tariffs is not expected until after the public consultations period which ends on 30th August. The  affected product list includes consumer goods such as clothing, refrigerators but excludes items such as mobile phones. In terms of initial reactions, China’s Commerce Ministry noted it is “shocked” by the US actions which “were hurting China… the entire world and the US itself” and that it will have no choice but to respond to the US move. Back in the US, the Senate Finance Chair Hatch called the proposal “reckless”.

This morning in Asia, markets have pared back deeper losses at the open to trade c1.5% lower with the Nikkei (-0.96%), Kospi (-0.53%), Hang Seng (-1.42%) and Shanghai Comp. (-1.87%) all down as we type. Meanwhile the Chinese Yuan is down c0.4% and futures on the S&P are also down c0.6%. Datawise, Japan’s June PPI edged up 0.1ppt mom to an in line print of 2.8% yoy.

As a reminder, DB’s Peter Hooper and team have recently published a note looking at the impact of trade frictions on the US macro economy. They noted that higher tariffs on $250bn worth of Chinese goods and $350bn worth of automotive products could reduce imports and lift the US GDP by c0.5ppt. However, this gain is likely to be swamped by various negative effects if the tariffs are actually implemented. These include: i) -0.4ppt hit to US GDP from higher prices and lower consumer spending, ii) -0.6ppt on US GDP from retaliatory tariffs from China and the EU as it depresses exports and iii) -0.5ppt hit to GDP from the confidence hit to businesses and households, particularly the flow on drags on investments and consumption spending. Refer to their note for details.

As for markets yesterday, risk assets edged up in the absence of further trade tensions (before the peace was shattered overnight) and investors turning their focus to the US results season. The S&P was up for the fourth straight day (+0.35%) as PepsiCo’s share price jumped the most in c9 year (+4.8%) following an above market result and guidance that Q4 earnings will be “substantially higher”. Elsewhere financials was the only sector in the red after rallying the prior day. In Europe, the Stoxx 600 advanced for the sixth straight day (+0.4%), marking the longest winning streak since March. As a quick stock take, the S&P is now the highest in c5 months and +8.2% higher than its February lows, albeit still down -2.8% from its record high in January. In comparison the Stoxx 600 and Shanghai Comp. are down -4.1% and -20.6% respectively from their January high, although the former has partly recovered to a c1 month high. The overnight news will likely put a dent in these recoveries though.

In government bonds, yields on 10y treasuries reversed earlier gains of c2bp to close -0.6bp lower at 2.851% following the aforementioned threat of higher tariffs on Chinese goods. We’re another 1bps lower in the Asian session. Back in Europe, core bonds broadly weakened (Bunds +2bp; OATs +1.3bp) while Gilts rose +4.9bp as Brexit uncertainties somewhat stabilised and GDP data pointed to a healthy return in economic growth.

In FX, Sterling reversed losses to be up +0.12% as concerns for a potential leadership challenge to PM May eased and German Chancellor Merkel also seems to be backing PM May’s softer Brexit proposal, calling it a “solid step forward”, although she also added that “we’ll continue to have lively discussions (on the proposals)”. Meanwhile the US dollar index (+0.09%) and Euro (-0.06%) were both little changed, while Brent oil rose for the second straight day (+1.01%).

Following on with some more specific Brexit headlines. After PM May’s latest proposal for a softer Brexit approach, the EU’s Chief Brexit negotiator seems to be pushing back on the plans, indicating that “we’ll protect this single market, which is based on the indivisibility of…..the four freedoms…of people, goods, services and capital”. Notably, Bloomberg cited sources that noted EU diplomats have not fully started going through the UK plans yet while the Irish PM Varadkar was relatively upbeat as he noted the EU may be “entering into a space” where it can show flexibility in Brexit talks. So lots bubbling along.

Moving onto Italy, the Bank of Italy Governor and the ECB’s Visco noted that Italy’s economic growth has slowed this year and could face follow on risks linked to the US tariffs decisions, but he still expects growth to be above 1%, in part given the supportive financial policy conditions in the EU bloc. He also added that a relaunch of investments and pro-growth policies are as important as cautious management of public finances for the country.

Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the May JOLTS report reported a 0.1ppt mom rise in the quits rate to 2.4% – the highest since February 2001, which should bode well for expectations of future wage gains. Meanwhile the June NFIB small business optimism index moderated 0.6pts from last month’s 34 year high to an above market print of 107.2 (vs. 106.9 expected).

In Europe, the macro data were broadly weaker than expectations. In Germany, the July ZEW survey on the current situation was 72.4 (vs. 78.1 expected) while the expectations index fell for the fifth straight month to the lowest level  since 2012 (-24.7 vs. -18.9 expected). Meanwhile the Euro area’s ZEW expectations reading also fell to the lowest since August 2012 (-18.7 vs. -12.6 previous). For May industrial productions, the UK, France and Italy’s readings were all weaker than expectations at 0.8% yoy (vs. 1.9% expected), -0.9% (vs. 0.4% expected) and 2.1% (vs. 2.8% expected) respectively. Back in the UK, the May trade deficit was narrower than expected at -£2.8bn (vs. -£3.4bn expected) with upward revisions to the prior month’s reading. Elsewhere, the inaugural ONS estimate of monthly GDP growth indicated that the economy grew at an in line rate of 0.3% mom in May and based on the first two months of the quarter, Q2 appears on track for growth of about 0.4% qoq (vs. 0.2% previous). Following the above and no escalation in the political risk, the implied Bloomberg odds of an August rate hike rose 7ppt to 74%.

Looking at the day ahead, there are no releases of note in Europe while in the US the most significant release is the June PPI report (core PPI of 2.6% yoy expected), while May wholesale trades sales and final May wholesale inventories are also due. Away from the data, BoE Governor Mark Carney will speak late in the afternoon on the global financial crisis at a conference in Boston while New York Fed President John Williams will speak to business and community leaders at an event in Brooklyn. Meanwhile the NATO meeting begins, continuing into Thursday, while Japan PM Abe meets European Council President Tusk and EC President Juncker. Meanwhile the ECB’s Draghi, Praet, Mersch and Nouy will speak at Frankfurt. Oh and England will meet Croatia for a place in the World Cup final!!





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Author: Tyler Durden

Brexit Doomsayers Could Not Have Been More Wrong, So Why Believe Them Now?

Authored by Daniel Lacalle via,

If there is anything that we have learned from the development of the British economy since the Brexit referendum is that doomsayers were wrong.

Since the Brexit vote, the UK has created 450 thousand jobs.

Unemployment stands at a 4% rate, the lowest since 1975. Labor Participation Rate is at 75%. This compares to an EU unemployment of 8.7% and 58% labor participation rate in the 28 member states.

Productivity is growing at the fastest rate in 6 years, while UK factory orders at 4-year high.

At the same time, wage growth has accelerated to two-year highs.

Inflation is above expectations, but that has nothing to do with Brexit and all to do with the Bank of England’s extremely loose monetary policy.

Additionally, GDP growth is expected to range between at 1.5% and 1.9% for 2018 and 2019, very far away from the expectations of plunging straight into recession just from a Brexit vote.

Remember this before you say “Brexit hasn’t happened yet”. Doomsayers expected the UK to collapse into recession and a net destruction of jobs simply from a “Yes” vote.

Should the UK economy grow below 2%? No. But the expected figures fail to show the economy has been growing well above the EU and the G7 economies for seventeen years.  The UK annual GDP growth has almost doubled the European Union one for years.

So, the economy is doing well despite the undoubted challenges brought by Brexit and the doomsayers have been atrociously wrong.

Suddenly, a political crisis erupts. Boris Johnson, David Davis, and Steve Baker have resigned after Theresa May imposed a “my way or the highway” solution. May’s plan was clearly the “softest possible Brexit” including the UK maintaining EU’s customs border and collecting EU tariffs for the bloc, while May would accept restrictions on access to the single market for services, according to CNBC.

In a nutshell, May’s Brexit is the worst solution for Leavers and Remainers. It tries to please Remainers, who are obviously not satisfied as they want a full reversal of the EU exit.

In essence, the plan is the worst of both worlds. Leaves the UK with all the perceived negatives that led to a “Yes” vote in the referendum and none of the alleged benefits of staying in the European Union.

Furthermore, the proposal does not shield the UK from the risks that are rising in Italy and the immigration crisis. In fact, it leaves many loopholes that effectively mean that the entire agreement is subject to interpretation. Lack of clarity is dangerous in any agreement, but being deliberately vague is simply devastating when the time is passing and the deadline is obvious.

May’s way is not the only way. The UK should deliver a strong Brexit proposal that creates certainty, that eliminates the excessive costs and regulations. There is a reason why the EU has a “Canadian” or “Norwegian” solution because they were created ad-hoc for those countries. May fails to recognize the strengths of the UK to achieve a specific “British solution” that is good for both parties. She seems to accept at face value that the EU rules, those that the EU itself bends at will, are untouchable.

This political crisis adds uncertainty to business, gross capital formation, and job creation, but also diminishes the UK government’s influence on crucial international matters. Instead of delivering a message of strength, May has delivered a message of uncertainty.

I would have preferred the UK to stay in the EU and be a driving force for change and renovation, for freedom. But Brexit happened. And now the government is putting the economy at risk by creating an unnecessary political crisis that may affect many important sectors, while ignoring the results of the vote.

Brexit should have been a serious warning to the increasingly interventionist European Union to change its ways and should have been negotiated swiftly from the position of strength that the UK had as the second largest net contributor to the EU.

It should have been a fantastic opportunity for both the EU and the UK to thrive. Instead, May has done the job for Brussels showing the European Union is an unchangeable entity, like the Hotel California where “you can check out anytime you like, but you can never leave”.

May’s “my way or the highway” plan has strengthened the EU’s stubborn resistance to change.

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Author: Tyler Durden

“We’re In Uncharted Waters” – Stocks, Yuan, Commodities Slump As US-China Trade Wars Re-Escalate

Just when you thought it was safe to BTFTrade War Dip, a headline hits to remind you that President Trump is anything but done with China.

The new list marks the latest escalation of the trade war between the world’s two biggest economies.

And judging by the reaction in stocks and the yuan, it appears that the market’s brilliant extrapolation of “no more trade wars” as a result of a 3 days silence (of which 2 was during the weekend) may have been wrong.

As Asia markets open, Dow Futs are down around 300 from the closing highs

And S&P Futures down around 1%…

FTSE China A50 Index Futures Fall 2% in Singapore.

Japanese stocks are making new lows for Wednesday, with the Nikkei 225 now down 1.5%.

Copper in London Falls as Much as 3.8% to $6,092.50/Ton (Crude is also sliding)

Additionally offshore yuan is tumbling…

Treasury yields dropped…

*  *  *

The US has released the list of $200 billion in Chinese products that could be subject to an additional 10% tariff, fulfilling President Trump’s promises for further escalation of the burgeoning trade war between the US and China. Meanwhile, a senior US official reportedly told CNBC that China isn’t seriously negotiating on trade, suggesting that the hoped-for negotiated settlement might not materialize – at least not anytime soon.

“As a result of China’s retaliation and failure to change its practices, the President has ordered USTR to begin the process of imposing tariffs of 10 percent on an additional $200 billion of Chinese imports.

This is an appropriate response under the authority of Section 301 to obtain the elimination of China’s harmful industrial policies.

USTR will proceed with a transparent and comprehensive public notice and comment process prior to the imposition of final tariffs, as we have for previous tariffs.”

U.S. Trade Representative Robert Lighthizer reportedly took into consideration what might cause the biggest disruptions to China’s economy while building the list.

“For over a year, the Trump administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition.”

“China has not changed its behavior — behavior that puts the future of the U.S. economy at risk. Rather than address our legitimate concerns, China has begun to retaliate against U.S. products. There is no justification for such action.”

The tariffs, some which will impact goods from “Made in China 2025” sectors, a state-planned initiative to establish China as a leader in several key industries, including artificial intelligence and wireless technology. The tariffs will go into effect on August 30th, after a two-month review process, with two public comment sessions. Trump has threatened to impose tariffs on as much as $500 billion in Chinese imports, which would cover roughly all of the Chinese-made products entering the US.

“If the U.S. loses its senses and publishes such a list, China will have to take comprehensive quantitative and qualitative measures,” the Ministry of Commerce said at the time.

The National Retail Federation, one of the most powerful trade associations in Washington, says simply that:

Trump’s new list “doubles down on a reckless strategy that will boomerang back to harm U.S. families and workers. We still don’t know what the endgame is” for Trump’s strategy.

The full list can be found in the document below:

As we have noted previously, China only imports around $130 billion worth of U.S. goods meaning it has a limited ability to match U.S. tariffs dollar for dollar. The U.S. imported $505 billion of goods from China last year and has promised tariffs on $250 billion worth of those products.

China could jack up existing tariffs well beyond the 25 percent level imposed so far, though that would cause pain on both sides. Analysts say it’s more likely China will resort to non tariff barriers such as making it much tougher for America Inc. to do business in China.

The responses across Wall Street are almost unanimously bad (where were all these views as The Dow surged 800 points in the last few days?)

Goldman: “The tariff would not take effect until September at the earliest but nonetheless marks an escalation of trade tensions. Networking equipment, computer components, and furniture would be the most heavily impacted imports in this round. We believe that the release of the list raises the probability that further tariffs will be implemented, though we note that the publication of the list is not a commitment to implementation, which would need to be ordered in a separate step following a comment period.”

Mark Mobius: “We are in uncharted waters.”

Don Riley, chief investment officer at Wiley Group: “Markets won’t like it and yes earnings positives will most likely be overwhelmed by trade fears.

Strategists at Singapore’s DBS bank: “The tariff news was also ill-timed for investors hoping for a trade war respite to capitalize on the expected stream of strong US corporate earnings. Overall, Trump reminded markets that US-China trade tensions are likely to escalate ahead of the US mid-term elections in November.”

Edward Alden, senior fellow at CFR, says Trump’s crackdown on trade with China is a “dangerous miscalculation”.

Richard Turnill, chief investment strategist at BlackRock, told Bloomberg TV earlier: “In the short run it’s very difficult to see what’s going to bring an end to this escalation of tit-for-tat. It’s those increasing concerns that are going to weigh on market returns and force investors increasingly to look for more resilience in their portfolios.”

And of course, politicians had to chime in:

Senate Finance Chairman Orrin Hatch immediately called the action “reckless” and not “targeted.”

House Ways and Means Committee Chairman Kevin Brady:

With this announcement, it’s clear the escalating trade dispute with China will go one of two ways – a long, multi-year trade war between the two largest economies in the world that engulfs more and more of the globe, or a deliberate decision by President Trump and President Xi to meet and begin crafting an agreement that levels the playing field between China and the U.S. for local farmers, workers and businesses.”

“Despite the serious economic consequences of ever-increasing tariffs, today there are no serious trade discussions occurring between the U.S. and China, no plans for trade negotiations anytime soon, and seemingly little action toward a solution.”

“It’s time to take the first step into a new era of fair and free trade. I strongly urge President Trump and President Xi to meet soon face-to-face to craft a solution to establish fair and lasting trade between our two countries.”

Republican Senator Jeff Flake has told reporters there will be a Senate vote on Wednesday on a nonbinding measure aimed at limiting President Trump’s power to impose tariffs. Flake says he expects a majority of both Republicans and Democrats to support the bill

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Author: Tyler Durden

Major Israeli Daily: Our Government Is “Arming Neo-Nazis In Ukraine”

It’s not everyday that one reads such a shocking headline as this in a major Israeli daily paper: Rights Groups Demand Israel Stop Arming neo-Nazis in Ukraine.

An investigative report in Haaretz, Israel’s longest running and arguably most influential newspaper, details a broad campaign underway by over 40 human rights leaders to pressure Israel’s High Court of Justice to order the cessation of Israeli arms exports to Ukraine, as they argue militant neo-Nazi groups are among the recipients of those weapons. 

An Azov militiaman – an openly neo-Nazi group – holding an Israeli Tavor rifle. Image source: Azov YouTube channel screenshot

According to Haaretz’s investigation:

They argue that these weapons serve forces that openly espouse a neo-Nazi ideology and cite evidence that the right-wing Azov militia, whose members are part of Ukraine’s armed forces, and are supported by the country’s ministry of internal affairs, is using these weapons.

An earlier appeal to the Defense Ministry was met with no response.

The ministry’s considerations in granting export licenses for armaments are not disclosed to the public, but it appears that the appearance of Israeli weapons in the hands of avowed neo-Nazis should be a consideration used in opposing the granting of such a license.

We’ve covered the infamous Azov Battalion many times before, and though it took the mainstream media years to catch up to this story, the group is so openly and unrepentantly pro-Nazi that even US Congress was forced to take notice while ironically at the same time directly propping up their political patrons in the pro-EU/US Kiev government that Washington helped install in 2014. 

In terms of the extent of covert Israeli support to such groups as the neo-Nazi Azov Battallion, Haaretz lists as examples high level meetings between Ukrainian military officials and Israeli defense companies, especially involving contracts related to communications systems, warplanes, and helicopters; as well as Tel Aviv’s approval for the Ukrainian company Fort to produce Tavor, Negev, and Galil rifles under Israeli contract; and further IDF officers and instructors overseeing military training schools that include Azov militiamen; and perhaps most shocking a Ukrainian media interview which featured a former Israeli army officer who admitted to participating in battles in eastern Ukraine while also training militiamen. 

There’s also of course the fact that Azov Battalion itself has never been shy about showing of its Israeli military hardware in social media photographs and videos. 

The official Avoz YouTube channel has posted “review” videos of locally made Tavor rifles produced under Israeli contract:

 Haaretz concludes: “All of this is unambiguous proof that Israel is exporting weapons to Ukraine, knowing that they reach right-wing militias, some members of which are avowed neo-Nazis who enjoy the support of the authorities.”

As we detailed previously Azov militia members sport fascist symbols from the World War II era and their founder and chief patron, Andriy Biletsky also a prominent member of Ukrainian parliament  has openly declared that the goal of his group is to “lead the White Races of the world in a struggle for their survival.” He’s recently pushed to ban “race mixing” in the Ukrainian parliament. 

There was so much bad publicity surrounding the Azov Battalion over the past years that Congress unanimously passed legislation forbidding any aid to the group – a provision, as this piece by Joseph Epstein in the Daily Beast pointed out long ago, was ultimately meaningless as is was essentially unenforceable:

“In an interview with The Daily Beast, Sgt. Ivan Kharkiv of the Azov battalion talks about his battalion’s experience with U.S. trainers and US volunteers quite fondly, even mentioning US volunteers engineers and medics that are still currently assisting them. He also talks about the significant and active support from the Ukrainian diaspora in the US As for the training they have and continue to receive from numerous foreign armed forces. Kharkiv says ‘We must take knowledge from all armies… We pay for our mistakes with our lives.’

“Those US officials involved in the vetting process obviously have instructions to say that US forces are not training the Azov Battalion as such. They also say that Azov members are screened out, yet no one seems to know precisely how that’s done. In fact, given the way the Ukrainian government operates, it’s almost impossible.”

Yes, an unfortunate yet familiar theme: your tax dollars funded the arming, training, and feeding of neo-Nazis in Ukraine. That’s what we bought into when Washington decided to launch a regime change operation in that bedraggled corner of southeastern Europe. Your money has also long gone toward propping up the country’s war-stricken economy – albeit not before corrupt government officials rake their cut off the top.

And now it appears the Israeli public and rights groups are wising up to the Israeli government’s longtime partnership with Washington in propping up fascist Ukrainian paramilitary groups. 

According to Haaretz the issue began receiving more attention after a recent rise in anti-Semitic attacks and incidents across Ukraine:

In tandem with the rising power of Azov, which has more than 3,000 members, there is a rise in anti-Semitic incidents and attacks against Ukraine’s minorities. Neo-Nazi groups have attacked Jews and Jewish memorial sites across Ukraine, as well as journalists, Roma and members of the LGBT community.

And further, according to Haaretz:

Last May right-wing groups marched through Odessa, their leaders claiming that the city belongs to Ukrainians, not Jews, and that they would get rid of the latter.

All this is happening as the Ukrainian administration is trying to deny the country’s role in the Holocaust, just as is happening in Poland (now with the support of the Netanyahu government).

All of this ought to of course be especially sensitive in the Jewish state — which is possibly why it’s taken so long for the explosive issue to receive mainstream Israeli media coverage. 

It will be interesting to see if Israel’s High Court of Justice acts on or even acknowledges the demands of the Israeli activist groups currently petitioning for a ban on weapons exports to Ukraine, but we won’t hold our breath. 

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Author: Tyler Durden

“Pay Up You NATO Deadbeats…Or Else!”

Authored by Eric Margolis via,

“We are the schmucks” thundered President Donald Trump.   The object of Trump’s wrath at his ‘Make America Great Again’ rally in Great Falls, Montana was the craven, stingy European members of NATO, only 16 of 22 members are on budget for their US-commanded military spending.  Trump wants them to spend much more. 

Infographic: Expenditure Of Nato Countries In 2016 | Statista

You will find more infographics at Statista

Trump and his fellow neocons want NATO to serve as a sort of US foreign legion in Third World wars in Africa and Asia. 

NATO was formed as the North Atlantic Treaty Organization to defend western Europe, not to fight in Afghanistan and who knows where else?

Equally bad, according to Trump, is that the US runs a whopping trade deficit with the European Union which is busy shipping high-end cars and fine wines to the US.  The wicked foreigners don’t buy enough American bourbon, corn and terribly abused pigs.

Trump is quite right that America’s NATO allies, particularly Germany and Canada, don’t spend enough on defense.  Germany is reported to have less than twenty operational tanks. Canada’s armed forces appear to be smaller than the New York City police department.

But the Europeans ask, ‘defense against whom?’   The Soviet Union was a huge threat back in the Cold War when the mighty Red Army had 55,000 tanks pointed West.  Today, Russia’s land and naval power has evaporated.  Russia has perhaps 5,500 main battle tanks in active service and a similar number in storage, a far cry from its armored juggernaut of the Cold War. 

More important, Russia’s military budget for 2018 was only $61 billion, actually down 17% from last year.  That’s 4.3% of GDP.  Russia is facing hard economic times.  Russia has slipped to third place in military spending after the US, China and Saudi Arabia.   The US and its wealthy allies account for two thirds of world military spending.  In fact, the US total military budget (including for nuclear weapons and foreign wars) is about $1 trillion, 50% of total US government discretionary spending.

In addition, Russia must defend a vast territory from the Baltic to the Pacific.  The US is fortunate in having Mexico and Canada as neighbors.  Russia has North Korea, China, India, the Mideast and NATO to watch.  As with its naval forces, Russia’s armies are too far apart to lend one another mutual support. Two vulnerable rail lines are Russia’s main land link between European Russia and its Pacific Far East.

Infographic: The U.S. Is Pouring Money Into Air Bases Flanking Russia  | Statista

You will find more infographics at Statista

Trump’s supplemental military budget boost this year of $54 billion is almost as large as Russia’s entire 2018 military budget.  As for Trump’s claim that Europe is not paying its fair share of NATO expenses, note that that Britain and France combined together spend more on their military forces than Russia.

In Europe, it’s hard to find many people who still consider Russia a serious threat except for some tipsy Danes, right wing Swedes, and assorted Russophobic East Europeans.  The main fear of Russia seems concentrated in the minds of American neoconservatives, media, and rural Trump supporters, all victims of the bizarre anti-Russian hysteria that has gripped the US.

Equally important, most civilians don’t understand that neither US and NATO forces nor Russia’s military are in any shape to fight war that lasts more than a few days.  Both sides lack munitions, spare parts, lubricants, and battlefield equipment.  The overworked US Air Force, busy plastering Muslim nations, has actually run low on bombs.  US industry can’t seem to keep up supplies. There has even been talk of buying explosives from China!

These essentials of war have been seriously neglected in favor of buying fancy weapons. But such weapons need spares, electronics, fuel depots, missiles and thousands of essential parts.  As former US Secretary of Defense Donald Rumsfeld observed, ‘you go to war with what you have.’  Neither side has enough.  A war would likely peter out in days after supplies were exhausted.  Besides, no side can afford to replace $100 million jet fighters or $5 million apiece tanks after a war, however brief.      

President Trump has learned about war from Fox TV. Europeans have learned from real experience and don’t want any more. 

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Author: Tyler Durden

New Satellite Images Reveal Russia Is Preparing For War In Kaliningrad

The July 16 summit in Helsinki, Finland, between Presidents Donald Trump and Vladimir Putin offers a unique opportunity to de-escalate Cold War 2.0 between the United States and Russia.

Ahead of the summit, several reports have detailed a new alarming trend of Moscow’s rapid modernization efforts to improve its westernmost military facilities in Kaliningrad, a strategic enclave of Russian territory situated between Poland and the Baltics.

Last month, the Federation of American Scientists (FAS) published satellite images revealing significant upgrades to a nuclear weapons storage bunker situated at a secret facility in Kaliningrad.

“It has all the fingerprints of typical Russian nuclear weapons storage sites,” Hans Kristensen, the director of the Nuclear Information Project at Federation of American Scientists (FAS), said in a report.

“There is a heavy-duty external perimeter of multilayered fencing. The bunkers themselves have triple fencing around them as well. These are typical features from all the other nuclear weapons storage sites that we know about in Russia,” Kristensen explained.

A buried nuclear weapons storage bunker in the Kaliningrad district has been under major renovation since mid-2016. (Source: Federation of American Scientists (FAS))

This comes at a time when Moscow expressed its concern over the North Atlantic Treaty Organization’s (NATO) military infrastructure expansion near the Poland–Kaliningrad border. On May 28, Kremlin Spokesman Dmitry Peskov declared that Russia is prepared to take appropriate measures in response. That statement was a reaction to the Pentagon debuting plans to build a permanent military base in Poland.

NATO forces have surrounded Kaliningrad, as it seems Moscow is in the final stages of installing and upgrading military structures and other bunker improvements in this strategic slice of territory in the heart of NATO-allied eastern Europe. Moscow knows its fate with NATO, and that is why it is preparing for war.

Now, there is more evidence that Russia has been constructing even more structures and bunkers 8 miles away from the nuclear bunker facility that FAS reported last month.

The new report, by an American private Earth-imaging company Planet Labs and Defense One, shows significant changes around a bunker facility in Baltiysk, near the Polish border. Matt Hall, a senior geospatial analyst at 3GIMBALS, a firm that provides human-machine integrated location-based analytics, told Defense One that the facilities in the satellite images (below) are used to store artillery.

The visible change between the two images provided appears to be the fortification of buildings, characteristic of explosive storage bunkers, utilizing earthen berms to further insulate these structures. There also appears to be clearings, new structures visible within the the forested portion of the installation, as well as a berm and exterior fence surrounding the installation,” said Hall.

The unforested regions include explosive ordinance bunkers, he said. “Every structure in the northern non-forested sector have been reinforced during the three month period of the imagery,” he said. “The berms appear to be continually fortified to make them more obscured from aerial detection.”

“In the forested sector, a different type of storage facility exists, some of which are bermed and appear to be leveled off. There appears to be additional uncovered storage, some with berms but not heavily fortified. In this area some of the structures have changed, potentially showing roofing structures or tarps that have since been removed to reveal caches of items. Some of the berms appear to be more extensive, but the foliage in the second imagery may obscure this analysis. Additionally, there appear to be new or redistributed items — potentially identifiable as shipping containers,” said Hall.

Hall also identified a railroad line in the satellite images. It connects to the broader national system, which runs to and through Lithuania. Defense One said Russia constructed a similar line in the Georgian province of Abkhazia before invading that country in 2008.

Defense One asked National Geospatial-Intelligence Agency officials about the recent activity in Kaliningrad. They replied with no comment because such information is deemed classified.

Russia has been adding troops since 2015 to the region, which is the home base of Russia’s 11 Army Corps and the headquarters of the Russian Baltic Fleet.

There is only one reason why Russia would be quickly fortifying various military facilities and upgrading nuclear storage bunkers in Kaliningrad: Moscow sees war on the horizon.

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Author: Tyler Durden

A New World Order: Brought To You By The Global-Industrial Deep State

Authored by John Whitehead via The Rutherford Institute,

“There are no nations. There are no peoples … There is only IBM and ITT and AT&T, and DuPont, Dow, Union Carbide and Exxon. Those are the nations of the world today. The world is a college of corporations, inexorably determined by the immutable by-laws of business.”—Network (1976)

There are those who will tell you that any mention of a New World Order government – a power elite conspiring to rule the world – is the stuff of conspiracy theories.

I am not one of those skeptics.

What’s more, I wholeheartedly believe that one should always mistrust those in power, take alarm at the first encroachment on one’s liberties, and establish powerful constitutional checks against government mischief and abuse.

I can also attest to the fact that power corrupts, and absolute power corrupts absolutely.

I have studied enough of this country’s history—and world history—to know that governments (the U.S. government being no exception) are at times indistinguishable from the evil they claim to be fighting, whether that evil takes the form of terrorism, torture, drug traffickingsex trafficking, murder, violence, theft, pornography, scientific experimentations or some other diabolical means of inflicting pain, suffering and servitude on humanity.

And I have lived long enough to see many so-called conspiracy theories turn into cold, hard fact.

Remember, people used to scoff at the notion of a Deep State (a.k.a. Shadow Government), doubt that fascism could ever take hold in America, and sneer at any suggestion that the United States was starting to resemble Nazi Germany in the years leading up to Hitler’s rise to power.

We’re beginning to know better, aren’t we?

The Deep State (“a national-security apparatus that holds sway even over the elected leaders notionally in charge of it”) is real.

We are already experiencing fascism, American-style.

Not with jackboots and salutes, as Robert Kagan of the Brookings Institution notes, “but with a television huckster, a phony billionaire, a textbook egomaniac ‘tapping into’ popular resentments and insecurities, and with an entire national political party — out of ambition or blind party loyalty, or simply out of fear — falling into line behind him.”

And the United States is increasingly following in Nazi Germany’s footsteps, at least in the years leading up to Hitler’s rise to power.

Given all that we know about the U.S. government—that it treats its citizens like faceless statistics and economic units to be bought, sold, bartered, traded, and tracked; that it repeatedly lies, cheats, steals, spies, kills, maims, enslaves, breaks the laws, overreaches its authority, and abuses its power at almost every turn; and that it wages wars for profit, jails its own people for profit, and has no qualms about spreading its reign of terror abroad—it is not a stretch to suggest that the government has been overtaken by global industrialists, a new world order, that do not have our best interests at heart.

Indeed, to anyone who’s been paying attention to the goings-on in the world, it is increasingly obvious that we’re already under a new world order, and it is being brought to you by the Global-Industrial Deep State, a powerful cabal made up of international government agencies and corporations.

It is as yet unclear whether the American Police State answers to the Global-Industrial Deep State, or whether the Global-Industrial Deep State merely empowers the American Police State. However, there is no denying the extent to which they are intricately and symbiotically enmeshed and interlocked.

This marriage of governmental and corporate interests is the very definition of fascism.

Where we go wrong is in underestimating the threat of fascism: it is no longer a national threat but has instead become a global menace.

Consider the extent to which our lives and liberties are impacted by this international convergence of governmental and profit-driven interests in the surveillance state, the military industrial complex, the private prison industry, the intelligence sector, the technology sector, the telecommunications sector, the transportation sector, and the pharmaceutical industry.

All of these sectors are dominated by mega-corporations operating on a global scale and working through government channels to increase their profit margins: Walmart, Alphabet (formerly Google), AT&T, Toyota, Apple, Exxon Mobil, Facebook, Lockheed Martin, Berkshire Hathaway, UnitedHealth Group, Samsung, Amazon, Verizon, Nissan, Boeing, Microsoft, Northrop Grumman, Citigroup… these are just a few of the global corporate giants whose profit-driven policies influence everything from legislative policies to economics to environmental issues to medical care.

The U.S. government’s deep-seated and, in many cases, top secret alliances with foreign nations and global corporations are redrawing the boundaries of our world (and our freedoms) and altering the playing field faster than we can keep up.

Global Surveillance

Spearheaded by the National Security Agency (NSA), which has shown itself to care little for constitutional limits or privacy, the surveillance state has come to dominate our government and our lives. 

Yet the government does not operate alone.

It cannot.

It requires an accomplice.

Thus, the increasingly complex security needs of our massive federal government, especially in the areas of defense, surveillance and data management, have been met within the corporate sector, which has shown itself to be a powerful ally that both depends on and feeds the growth of governmental bureaucracy.

Take AT&T, for instance. Through its vast telecommunications network that crisscrosses the globe, AT&T provides the U.S. government with the complex infrastructure it needs for its mass surveillance programs. According to The Intercept, “The NSA considers AT&T to be one of its most trusted partners and has lauded the company’s ‘extreme willingness to help.’It is a collaboration that dates back decades. Little known, however, is that its scope is not restricted to AT&T’s customers. According to the NSA’s documents, it values AT&T not only because it ‘has access to information that transits the nation,’ but also because it maintains unique relationships with other phone and internet providers. The NSA exploits these relationships for surveillance purposes, commandeering AT&T’s massive infrastructure and using it as a platform to covertly tap into communications processed by other companies.”

Now magnify what the U.S. government is doing through AT&T on a global scale, and you have the “14 Eyes Program,” also referred to as the “SIGINT Seniors.” This global spy agency is made up of members from around the world (United States, United Kingdom, Australia, Canada, New Zealand, Denmark, France, Netherlands, Norway, Germany, Belgium, Italy, Sweden, Spain, Israel, Singapore, South Korea, Japan, India and all British Overseas Territories).

Surveillance is just the tip of the iceberg when it comes to these global alliances, however.

Global War Profiteering

War has become a huge money-making venture, and America, with its vast military empire and its incestuous relationship with a host of international defense contractors, is one of its best buyers and sellers. In fact, as Reuters reports, “[President] Trump has gone further than any of his predecessors to act as a salesman for the U.S. defense industry.”

The American military-industrial complex has erected an empire unsurpassed in history in its breadth and scope, one dedicated to conducting perpetual warfare throughout the earth. For example, while erecting a security surveillance state in the U.S., the military-industrial complex has perpetuated a worldwide military empire with American troops stationed in 177 countries (over 70% of the countries worldwide).

Although the federal government obscures so much about its defense spending that accurate figures are difficult to procure, we do know that since 2001, the U.S. government has spent more than $1.8 trillion in the wars in Afghanistan and Iraq (that’s $8.3 million per hour). That doesn’t include wars and military exercises waged around the globe, which are expected to push the total bill upwards of $12 trillion by 2053.

The illicit merger of the global armaments industry and the Pentagon that President Dwight D. Eisenhower warned us against more than 50 years ago has come to represent perhaps the greatest threat to the nation’s fragile infrastructure today. America’s expanding military empire is bleeding the country dry at a rate of more than $15 billion a month (or $20 million an hour)—and that’s just what the government spends on foreign wars. That does not include the cost of maintaining and staffing the 1000-plus U.S. military bases spread around the globe.

Incredibly, although the U.S. constitutes only 5% of the world’s population, America boasts almost 50% of the world’s total military expenditure,  spending more on the military than the next 19 biggest spending nations combined. In fact, the Pentagon spends more on war than all 50 states combined spend on health, education, welfare, and safety. There’s a good reason why “bloated,” “corrupt” and “inefficient” are among the words most commonly applied to the government, especially the Department of Defense and its contractors. Price gouging has become an accepted form of corruption within the American military empire.

It’s not just the American economy that is being gouged, unfortunately.

Driven by a greedy defense sector, the American homeland has been transformed into a battlefield with militarized police and weapons better suited to a war zone. Trump, no different from his predecessors, has continued to expand America’s military empire abroad and domestically, calling on Congress to approve billions more to hire cops, build more prisons and wage more profit-driven war-on-drugs/war-on-terrorism/war-on-crime programs that pander to the powerful money interests (military, corporate and security) that run the Deep State and hold the government in its clutches.

Global Policing

Glance at pictures of international police forces and you will have a hard time distinguishing between American police and those belonging to other nations. There’s a reason they all look alike, garbed in the militarized, weaponized uniform of a standing army.

There’s a reason why they act alike, too, and speak a common language of force.

For example, Israel—one of America’s closest international allies and one of the primary yearly recipients of more than $3 billion in U.S. foreign military aid—has been at the forefront of a little-publicized exchange program aimed at training American police to act as occupying forces in their communities. As The Intercept sums it up, American police are “essentially taking lessons from agencies that enforce military rule rather than civil law.”

Then you have the Strong Cities Network programFunded by the State Department, the U.S. government has partnered with the United Nations to fight violent extremism “in all of its forms and manifestations” in cities and communities across the world. Working with the UN, the federal government rolled out programs to train local police agencies across America in how to identify, fight and prevent extremism, as well as address intolerance within their communities, using all of the resources at their disposal. The cities included in the global network include New York City, Atlanta, Denver, Minneapolis, Paris, London, Montreal, Beirut and Oslo.

What this program is really all about, however, is community policing on a global scale.

Community policing, which relies on a “broken windows” theory of policing, calls for police to engage with the community in order to prevent local crime by interrupting or preventing minor offenses before they could snowball into bigger, more serious and perhaps violent crime. 

It sounds like a good idea on paper, but the problem with the broken windows approach is that it has led to zero tolerance policing and stop-and-frisk practices among other harsh police tactics.

When applied to the Strong Cities Network program, the objective is ostensibly to prevent violent extremism by targeting its source: racism, bigotry, hatred, intolerance, etc. In other words, police—acting ostensibly as extensions of the United Nations—will identify, monitor and deter individuals who exhibit, express or engage in anything that could be construed as extremist.

Of course, the concern with the government’s anti-extremism program is that it will, in many cases, be utilized to render otherwise lawful, nonviolent activities as potentially extremist. Keep in mind that the government agencies involved in ferreting out American “extremists” will carry out their objectives—to identify and deter potential extremists—in concert withfusion centers (of which there are 78 nationwide, with partners in the private sector and globally), data collection agencies, behavioral scientists, corporations, social media, and community organizers and by relying on cutting-edge technology for surveillance, facial recognition, predictive policing, biometrics, and behavioral epigenetics (in which life experiences alter one’s genetic makeup).

This is pre-crime on an ideological scale and it’s been a long time coming.

Are you starting to get the picture now?

We’re the sitting ducks in the government’s crosshairs.

On almost every front, whether it’s the war on drugs, or the sale of weapons, or regulating immigration, or establishing prisons, or advancing technology, if there is a profit to be made and power to be amassed, you can bet that the government and its global partners have already struck a deal that puts the American people on the losing end of the bargain.

Unless we can put the brakes on this dramatic expansion, globalization and merger of governmental and corporate powers, we’re not going to recognize this country 20 years from now.

It’s taken less than a generation for our freedoms to be eroded and the police state structure to be erected, expanded and entrenched.

Rest assured that the U.S. government will not save us from the chains of the global police state.

The current or future occupant of the White House will not save us.

For that matter, anarchy, violence and incivility will not save us.

Unfortunately, the government’s divide and conquer tactics are working like a charm.

Despite the laundry list of grievances that should unite “we the people” in common cause against the government, the nation is more divided than ever by politics, by socio-economics, by race, by religion, and by every other distinction that serves to highlight our differences.

The real and manufactured events of recent years—the invasive surveillance, the extremism reports, the civil unrest, the protests, the shootings, the bombings, the military exercises and active shooter drills, the color-coded alerts and threat assessments, the fusion centers, the transformation of local police into extensions of the military, the distribution of military equipment and weapons to local police forces, the government databases containing the names of dissidents and potential troublemakers—have all conjoined to create an environment in which “we the people” are more divided, more distrustful, and fearful of each other.

What we have failed to realize is that in the eyes of the government, we’re all the same.

In other words, when it’s time for the government to crack down—and that time is coming—it won’t matter whether we voted Republican or Democrat, whether we marched on Washington or stayed home, or whether we spoke out against government misconduct and injustice or remained silent.

When the government and its Global-Industrial Deep State partners in the New World Order crack down, we’ll all suffer.

If there is to be any hope of freeing ourselves, it rests—as it always has—at the local level, with you and your fellow citizens taking part in grassroots activism, which takes a trickle-up approach to governmental reform by implementing change at the local level.

One of the most important contributions an individual citizen can make is to become actively involved in local community affairs, politics and legal battles. As the adage goes, “Think globally, act locally.” 

America was meant to be primarily a system of local governments, which is a far cry from the colossal federal bureaucracy we have today. Yet if our freedoms are to be restored, understanding what is transpiring practically in your own backyard—in one’s home, neighborhood, school district, town council—and taking action at that local level must be the starting point.

Responding to unmet local needs and reacting to injustices is what grassroots activism is all about. Attend local city council meetings, speak up at town hall meetings, organize protests and letter-writing campaigns, employ “militant nonviolent resistance” and civil disobedience, which Martin Luther King Jr. used to great effect through the use of sit-ins, boycotts and marches.

And then, as I make clear in my book A Government of Wolves: The Emerging American Police State, if there is any means left to us for thwarting the government in its relentless march towards outright dictatorship, it may rest with the power of communities and local governments to invalidate governmental laws, tactics and policies that are illegitimate, egregious or blatantly unconstitutional.

Nullification works.

Nullify the court cases. Nullify the laws. Nullify everything the government does that flies in the face of the principles on which this nation was founded.

We could transform this nation if only Americans would work together to harness the power of their discontent.

Go to Source
Author: Tyler Durden