by Tyler Durden on June 16, 2019 at 1:59 pm

Authored by Chris Martenson via PeakProsperity.com, Two more tankers were attacked near the Strait of Hormuz on Thursday morning  (6/13/19) in the Gulf of Oman, and if hostilities advance we could be facing a ‘black swan’ event. One that changes everything, and divides the world into ‘before’ and ‘after’ periods. A lot of us are waiting for ‘something’ to happen. We know that there are too many unsustainable trends and practices running and we fall into the “let’s just rip the Band-Aid off” camp.   Some, like myself, have lost faith in the political leadership and institutions and doubt they retain any capacity to attend to anything more than their own selfish interests, let alone manage the difficult tasks ahead rooted as they are in systems theory and managing complexity. So, let’s get on with it already.  Bring it on.  Black swans are welcome to those who feel a swift kick to the behind is sometimes needed to begin setting things straight. Like many, I am also conflicted because I also know that getting onto a new path will be disruptive and probably quite economically and financially painful for everyone, myself included.  Hoping for ‘something to break’ and hoping nothing breaks hang in an uneasy balance. Luckily, my hopes and wishes have nothing to do with what’s going to happen, or when.  I might as well be performing a secret hand ritual before the TV in my living room to ensure that my team’s basketball free-throw goes in.  The dry tinder of the next bonfire was laid down over many years and decades and it will catch fire when it does, no matter how much denial or how many superstitious practices we employ. When this current period of insane monetary policy, polarizing politics, and ecological destruction suddenly breaks for the worse is unknowable.  It’s going to break when it does.    I hope that’s not for ten years, and I hope that’s tomorrow.  True ambivalence. Black Swans A ‘black swan’ event is a term coined by Nassim Taleb which has three characteristics: It’s unpredictable It has a massive impact Afterwards, everyone comes up with an explanation for it There’s an honorary fourth characteristic which is that virtually no ‘experts’ saw it coming. Black swan events can be positive or negative.  Here’s an example of an “expert” missing something positive: I think it’s safe to say that Paul Krugman got that one a tiny bit wrong. The genesis of the term black swan comes from the (former) western belief that all swans were white.  100% of their experience with swans confirmed that they were all white in color.  However, in 1697 the Dutch explorer Willem de Vlamingh made it to Australia and discovered black swans. Once a black swan is seen, or a black swan event occurs, everything falls into a before vs after category. When it comes to massive, history altering events, while they may be explained in retrospect by earnest historians as having been due to some specific thing, they usually had plenty of dry tinder lying about waiting for a spark. Many of us learned that WW I was ‘caused’ by an Archduke being shot.  In truth if there hadn’t been many prior years of feuding, bad politics, terrible economic policies, and worse communications absolutely nothing more than an elaborate state funeral would have resulted from the Archduke being shot.  Afterwards everyone assigned a simple explanation to a complex situation because that’s what people do. Today there’s a similar pile of dry tinder laying about waiting for a spark. There’s too much debt, worsening geopolitics, terrible press and social media stripping away necessary context as a matter of habitual practice, stovepiped information and expertise, and increasingly alarming (if not terrifying) signals from the natural world that the sort of economic growth upon which everything is based cannot continue. It seems as if the world is waiting for something, a black swan, carrying a bright coal in its beak. When that time comes virtually none of the experts on TV or at the think tanks will have seen it coming, nearly everyone will be surprised at the impact, and few will grasp the complexities surrounding how all that dry tinder came to be laying about in the first place. We will all suffer the consequences to varying degrees depending on our financial, physical and emotional preparations, as well as due to luck and random misfortune. The Strait of Hormuz and Global Debts So let’s connect a couple of dots which I think have the potential to be the black swan event that changes everything. The first is the massive pile of debt and impossible-to-meet IOUs that the world’s central banks have enabled. The more debt you are carrying as a nation, company or individual, the better things have to go for you financially and/or economically.  Debt makes you more vulnerable to shocks. The world has never been more deeply in debt, nor has it ever had more deeply un(der)funded IOUs in the form of pension and entitlement promises. This is the financial tinder waiting for a spark: The nearly $100 trillion increase in global debt since the beginning of the Great Financial Crisis is an unprecedented act.  It was also an act of faith.  One rooted in the idea that global GDP growth would come along and save the day, or at least rationalize if not justify the new massive piles of debt.  In truth, this love affair with debt can be traced back to August 15th 1971 when the world abandoned the gold standard in favor of the idea that debts themselves could be the backing for debt. It should be noted, that virtually zero “expert economists” are publicly worried about the enormous rise in debts.  If they were, they wouldn’t be publicly known “experts” because nobody would invite them to speak about their ideas.  In a system dependent on exponential credit growth, nobody wants to hear about how that’s a bad long-term idea. As bad as the debts are, the unfunded liabilities – the IOU’s in this story – are 2x to 4x larger than the debts themselves, depending on the country. In the US, the entire collective pile – debts plus IOU’s – worked out to a staggering 1100% of GDP in 2017. That’s ~300% for debt and 800% for the underfunded liabilities. Notice that the debt part of the above chart (circled in orange) is actually the minor part of this story, even though that smaller portion usually receives most of the press. The only way to rationalize or justify such a pile of IOUs and debts is rapid economic growth.  And the only way to get that?  Cheap and plentiful oil.  Which brings us back to the recent spate of tanker attacks near the Strait of Hormuz through which some 30% of all exported oil flows on a daily basis. Oil’s role in our economic engine is enormously underappreciated by the usual economic ‘experts’ out there.  To them, energy is a substance that magically shows up whenever needed.  They have no deeper understanding than that.  To me energy is THE master resource without which no other activities are even possible.  You show me anything that you can buy, do, or consume and I’ll show you how oil was an essential precursor. It’s as simple as this.  The ever-increasing piles of debt (and IOUs) are an explicit call for a larger future economy. So, you want more economy?  Then you are going to use more energy.  In particular, do you want more global economy with everything shipped hither and yon and 30,000 mile supply chains?  Then you are going to use more energy and more oil specifically. More than 50 years of data says so: The above chart shows that world energy usage is tightly coupled with economic growth.  More economy = more energy consumed.  It’s linear too.  Very easy to grasp, yet most economic experts don’t bother themselves with such information.  It violates their dogmatic views about the necessary imperative for endless growth, which means it violates  literally everything they know and believe.  So they don’t ‘go there.’ They falsely believe that economic growth makes energy resources become available.  They have it backwards.  It’s the other way around.  Energy resources allow economic growth to occur.  Most believe that infinite growth on a finite planet is not only possible, but a good thing, despite virtual mountains of dismal ecological and resource data to the contrary. Oil is a weird substance economically.  If there’s even a few percent too much coming out of the ground (supply) compared to demand, the price plummets.  If there’s even a slight shortage, on the other hand, prices move sharply higher. Given the importance of oil, however, we should not be focused on merely its price, although that’s important, but also it’s availability.  Yes, shortages will lead to price spikes, and those will crush over-indebted countries, companies and individuals alike, but shortages will, by necessity, also lead to less economic activity.  Exactly how all that plays out is entirely unknowable.  Welcome to complexity theory which states that the behaviors of complex systems cannot be predicted.  They can be observed.  What actually happens are called emergent behaviors. If a war with Iran breaks out, and the Strait of Hormuz gets closed down for any length of time (say, more than a month) there will be a shortage of oil that will lead to a price spike.  And a physical shortage.  How all that plays out in a world groaning under the weight of too much debt is unknowable, but it won’t be favorable.  Or pretty, or desired. What happens to complex global, integrated, just-in-time delivery systems is also unknowable.  But it won’t be pretty.  We’ll just have to watch as supply chain disruptions spread though a complex universe of derivatives, 12% zombie companies, cov-lite loans, $4-trillion of emerging market dollar-denominated debt, already astonishing fiscal deficits, underfunded pensions and all the rest. With the new attacks on two more oil tankers in the Gulf of Oman, and the US’s immediate blaming of Iran, there’s a much higher than acceptable risk of a very damaging war breaking out that will close the Strait of Hormuz. Conclusion The world is sitting on an enormous pile of debts and related IOUs.  One that could easily catch fire and burn with the slightest provocation.  While the central banks can print money, create the easiest financial conditions in decades, and constantly intervene in both word and deed in every financial market (which they do), the one thing they cannot do is print up more oil. If the Strait of Hormuz gets shut down for any length of time that’s going to be a black swan event.  It will be unforeseen, have a large impact, and afterwards people will try to explain the resulting complexities in simplistic ways. You need to have a plan in place for what you’re going to do if or when that happens.   Everyone does. Already there are signs that oil traffic through the Strait of Hormuz has slowed a bit, perhaps to allow the insurance risks to be sorted out. It’s reasonable to suggest that it will take time to assess the actual risks and apply new policies and rates.  In the meantime, some ships will sit anchored or at port. An oil price and supply shock is exactly the sort of black swan event that will take nearly everyone by surprise.  The narrative has been one of shale-fueled abundance for so long that practically nobody is thinking about the flip-side of that story. After the fact, long after the damage has been done and dust has settled, historians may look back and say “It was that one c-308 variant missile from the shores of Iran striking and sinking the Saudi flagged VLCC (the “Layla”) in the center of the outbound shipping channel of the strait of Hormuz that caused everything that followed.” While that event may have happened, that explanation won’t be entirely accurate.  Without an entire bonfire of ultra-dry debt tinder laying about and without decades of ill-will and nefarious actions, the missile wouldn’t have flown in the first place and the bonfire wouldn’t have raged quite so fiercely.  Sometimes an Archduke is just that and insufficient to ’cause’ tens of millions of needless deaths in a war nobody can quite explain.  Other times they are all that and more. The US press loves to act as if these things all just happen, context-free, and in a vacuum, as if a half a century of US activity in the region never occurred.  Nothing ever happens in a vacuum.  There’s always context, and when it comes to Iran, there’s plenty.  Many decades of interference and blunt ‘diplomacy.’ So keep your eyes on the Strait of Hormuz and have your preparations and a plan in place before anything goes farther off the rails. There’s already an economic slowdown occurring which will very quickly morph into a serious recession if/when an oil shock occurs.  This third and most ill-advised credit bubble of them all has already lasted for far too long.  Every bubble is in search of a pin – or a black swan.  An oil shock would be an entire flock of black swans against which the central banks would be powerless. Will this simply be the end of The Everything Bubble? Or will this mark the end of the Grand Credit Experiment started back in 1971? The former will be very painful, the latter will change everything forever for everyone. In Part 2: What Happens When War Meets Recession? we discuss the tanker attacks, and the many recession indicators that are now stacking up. It’s not a question of if, but only when. Are you prepared? Click here to read Part 2 of this report (free executive summary, enrollment required for full access). […]

by Tyler Durden on June 16, 2019 at 1:20 pm

President Trump has hurled the dire charge of "Treason" at the New York Times for its lengthy investigative piece alleging US intelligence has stepped up systematic cyber attacks on Russia's power grid. “This is a virtual act of Treason by a once great paper so desperate for a story, any story, even if bad for our Country…” Trump tweeted Saturday evening in response to the story which ran hours earlier.  He then hastily added in a follow-up tweet in all caps, "ALSO, NOT TRUE!" — as if only then realizing his initial tweet seemed to actually vouch for the story. The follow-up further excoriated the Times for their reporting with "not even the slightest thought of consequence!" Whether this means the president is outraged that a true and verified report could be detrimental to US credibility and national security, or that fake news could hurt the US and invite unnecessary cyber retaliation is still not fully evident, but Trump's impulsive Saturday evening tweets appear to back the former.  .....ALSO, NOT TRUE! Anything goes with our Corrupt News Media today. They will do, or say, whatever it takes, with not even the slightest thought of consequence! These are true cowards and without doubt, THE ENEMY OF THE PEOPLE! — Donald J. Trump (@realDonaldTrump) June 16, 2019 And the Times was quick to respond to the "treason" charge as follows: Accusing the press of treason is dangerous. We described the article to the government before publication. As our story notes, President Trump’s own national security officials said there were no concerns. https://t.co/MU020hxwdc pic.twitter.com/4CIfcqKoEl — NYTimes Communications (@NYTimesPR) June 16, 2019 The NYT report outlines an alleged ongoing US operation to infiltrate and implant malware in Russia’s power grid as preparation for any potential major cyber warfare operation in the future, and further as "a warning" to the Kremlin. However, the story is light on details and heavy on the usual anonymous "current and former officials". According to the Times, “officials described the previously unreported deployment of American computer code inside Russia’s grid and other targets.” The officials described that “it has gotten far, far more aggressive over the past year,” and that they are “doing things at a scale that we never contemplated a few years ago.” Though US operations hadn't reached the level of specific attacks, the malware constitutes what's described as a “persistent presence” within Russia’s infrastructure. The report casts the latest ramped up cyber efforts targeting Russia as part of a broader campaign to clandestinely probe the country’s electrical grid going back to 2012 — efforts which grew following alleged Russian hacking and election meddling connected with the 2016 election.  Crucially, as CNN describes of the NYT report, "Two administration officials told the Times they believed President Donald Trump had not been briefed in any detail about the US computer code being implanted inside the Russian grid." And further, the story is outright suggesting the White House's own intelligence briefers are actually withholding vital national security information from the president: Pentagon and intelligence officials describe to the Times "broad hesitation" to tell Trump about the details of the operations against Russia. They tell the Times there was concern over how Trump would react, and the possibility that Trump might reverse the operations or discuss it with foreign officials. So there it is - assuming the report has merit - essentially a major "clandestine military activity" is being run by US defense and intelligence commanders but while intentionally circumventing the White House's lawful civilian oversight?  Indeed, perhaps Trump is right to have word "treason" as his first thought — though it wouldn't be on the part of the Times reporting but on the part of those seeking to hide the operation from the president himself.&nbs […]

by Tyler Durden on June 16, 2019 at 12:47 pm

The Juice is loose once again, this time bringing his "killer charm" to social media. Having selected the 25th anniversary of his wife's murder as a date to make his social media premier, Simpson created the user @TheRealOJ32 on Twitter early in the morning last Friday. As Fox News reminded us, June 13 marked the 25th anniversary of the murders of his ex-wife, Nicole Brown Simpson, and her friend, Ron Goldman. Coming Soon!!! pic.twitter.com/R1tXOuuLgO — O.J. Simpson (@TheRealOJ32) June 15, 2019 "If you don’t see it here, I didn’t say it," the Twitter account's bio reads. Simpson's first Tweet was a video of himself.  “Hey Twitter world, this is yours truly and I’m coming soon to Twitter. You get to read all my thoughts and opinions on just about everything,” Simpson says. He continued: “This should be a lot of fun. I’ve got a little getting even to do. So God bless, take care.” Is that a threat? Simpson has been out of jail for less than two years, after his release on October 1, 2017. In light of the growing absurdity of social media, we only have one question: do Twitter's Terms of Service say anything about people that have brutally murdered others in real life, or are they only concerned with cyber-bullying? […]

by Tyler Durden on June 16, 2019 at 12:10 pm

Authored by Martin Sieff via The Strategic Culture Foundation, Whom the gods would destroy, Friedrich Nietzsche famously said, they first make mad. What would Nietzsche make of the current, truly mad US and NATO obsession with charging into the Black Sea? It is a useful thought to ponder. The Black Sea was far outside NATO’s traditional theater of operations for most of the Alliance’s history. However, Brussels and Washington have been piling up their military assets and visibility in the region like bees at a honey pot – or like a rogue herd of elephants charging off the edge of a cliff. Yet NATO’s “In Your Face” presence in the Black Sea protects no one. On the contrary, it puts America’s allies in the region at grave risk by escalating tensions and increasing the danger that full scale war could break out by deliberately manufactured incident (Just think the Gulf of Tonkin in 1964) and or through a random error or clash that escalates out of control. The US/NATO forward presence in the Black Sea is strategic madness. And it replicates parallel incendiary US exercises in fake macho stupidity against Beijing in the South China Sea: A region from which the Chinese people suffered invasion and societal collapse on a genocidal scale following defeats by Britain and France in the First Opium War (1839-42) and by Imperial Japan in its terrible invasion of summer 1937. Washington seems equally intent on opening up a third front against Iran with its parallel forward policy in the Persian Gulf and the Indian Ocean. Three simultaneous wars against three major nations, two of which are the largest, most populous in the world and formidably nuclear armed? US grand strategy –insofar as there is one – seems to have national suicide as its only goal. This is especially bizarre in the Black Sea: Washington’s strongest and most important ally in the region, Turkey is now on the brink of being expelled from NATO because of the Turkish government’s determination to buy Russia’s excellent S-400 air defense system, the best of its kind in the world. Expelling Ankara makes no rational sense whatsoever for the US and NATO. Turkey has proven vital to Washington’s demented 21st “strategy” of stirring up trouble throughout the region, especially in Iraq and Syria. If Turkey is driven out of NATO, the US will lose its restraining leverage to prevent Ankara from cracking down hard on the quasi-independent Kurdish enclaves – a move that Iran, Iraq and Syria would all enthusiastically welcome. Worse yet, if the United States pushes ahead with defying the 1936 Montreux Convention and packing the Black Sea with its warships, combat aircraft and other military assets, it risks having them cut off if an enraged Turkey closes the Bosporus Strait past Istanbul to them. There is no way the United States could maintain its own, and other NATO forces meant to “protect” Ukraine and Georgia in the Black Sea if Russia and Turkey, supported by a friendly China and Iran decided to cut them off or move against them. The United States would then have the choice between surrendering, losing a catastrophic conventional war on a scale never before experienced or going nuclear. President Donald Trump repeatedly proclaims his desire for peace and appears to be sincere at a conscious level. Yet he has appointed and allowed himself to be surrounded by wild extremists and adventurers. Secretary of State Mike Pompeo, National Security Adviser John Bolton and Supreme Allied Commander Europe (SACEUR) General Curtis Scaparotti have all talked tough about maintaining and expanding US military power in the Black Sea. NATO Secretary-General Jens Stoltenberg, a man so feckless and irresponsible he could not even protect the teenagers of his own political party in his native Norway from being massacred by a single, hate-crazed extremist, continues to eagerly pour gasoline on this incendiary region, drunk in his delusion that he a leader of courage and competence. Probably 99 percent of Americans care less about the history and strategic importance of the Black Sea than about the Dark Side of the Moon. Yet no doubt, as usual they will let themselves be herded by the slick, superficial demagogues of their mass media into passively going along with these mad and delusional policies. The bottom line is all too clear: The US ever-expanding presence in the Black Sea cannot be sustained. The US itself is driving Turkey out of NATO which will force Ankara to join or associate with the Shanghai Cooperation Organization for its own protection and survival. Then Washington will no longer be able to get away with breaking the 1936 Montreux Convention at will to flood the Black Sea with its warships. The United States will then face the choice of either swallowing its pride, acknowledging its bluffs have failed and backing down and out of the region or facing the virtual certainty of national catastrophe. It is all too obvious what the choice will be. […]

by Tyler Durden on June 16, 2019 at 11:35 am

Knife crimes in the UK have hit a nine-year high, according to the Ministry of Justice (MoJ), which reports that in the first three months of 2019, more than 5,759 offenses were processed through the criminal justice system vs. 5,285 in the same period last year.  About three quarters of those dealt with in the year to March were first-time offenders, the Ministry of Justice (MoJ) said. Almost two thirds of cases did not result in an immediate prison sentence but for those jailed the average term was 7.9 months, up from 7.1 months the previous year. -The Times About 20% of those dealt with by the police were aged 10 to 17, while the number of juvenile offenders given warnings or convicted of possessing a knife increases by almost 50% between March 2015 and March 2019, from 3,800 to 5,600.  According to the new figures, police also dealt with 22,000 cases of people either possessing or making threats with a knife in the first three months of the year, roughly a 33% rise over the same period in 2018.  Fatal stabbings down slightly If there's a silver lining to the UK stabfest, it's that the number of fatal stabbings as of May 14, 2019 (100) puts the country on track for a slightly lower rate than 2018 - which was the deadliest since records began in 1946, according to the BBC.  There has been one fatal stabbing every 1.45 days so far this year in England and Wales. If killings continued at that rate for the rest of the year, the total would be slightly lower than the 285 stabbing deaths recorded in 2017-18. Thirty of the fatal stabbings were in London, 10 in Greater Manchester and eight in the West Midlands. -BBC (May 17) According to Reform think tank director Charlotte Pickles, the figures suggest that more jail time isn't the answer to reducing knife crime. "You cannot arrest your way out of this," she told The Times, adding that the UK must address the root causes of poverty, mental health, drugs and school exclusion first.  Javed Khan, chief executive of Barnardo’s, said: “Knife crime is a symptom of a much bigger problem. When young people feel there is little or no possibility of a positive future . . . they are vulnerable to exploitation and criminality.” The MoJ figures show that although the 22,000 total is an increase on five years ago, it is lower than the 28,000 recorded a decade ago. -The Times Will the UK adopt much-ridiculed MP Scott Mann's idea to embed GPS trackers in knife handles and track them in a database?  Every knife sold in the UK should have a gps tracker fitted in the handle. It’s time we had a national database like we do with guns. If you’re carrying it around you had better have a bloody good explanation, obvious exemptions for fishing etc. — Scott Mann (@scottmann4NC) March 14, 2019 "Trackers are showing a gang confrontation in Kensington. All units, prepare to enter premises. Lethal force authorised" pic.twitter.com/uEDOcV3oT1 — Daniel Tilles (@danieltilles1) March 14, 2019 “RIOT IN PROGRESS I REPEAT RIOT IN PROGRESS pic.twitter.com/p730Is4fo9 — Chad Sexington (@Kavorka69_420) March 14, 2019 […]