Archive for July 2018

"Doomsday Weapon" - How Could The West Respond To Russia's Underwater Nuke Drone?

Mikhail Khodarenok, military commentator for Gazeta.ru, via RT.com,

US and British navies could counter Russia’s nuclear-powered autonomous torpedo, Poseidon, by using undersea sensors and anti-submarine aircraft, writes Covert Shores website. But is this really a viable tactic?

The development of the Poseidon unmanned underwater vehicle (UUV), originally known as ‘Status-6’, was first mentioned in November 2015. Western media later dubbed the submarine drone a doomsday weapon. 

On March 1, 2018, Russian President Vladimir Putin officially confirmed the weapon’s existence in his annual address to the Federal Assembly.

We have developed unmanned submersible vehicles that can move at great depths – I would say extreme depths – intercontinentally, at a speed multiple times higher than the speed of submarines, cutting-edge torpedoes and all kinds of surface vessels, said Putin.

It is reported that the main goal of the torpedo is to deliver a thermonuclear warhead to enemy shores in order to destroy important coastal infrastructure and industrial objects, as well as ensure massive damage to the enemy’s territory by subjecting vast areas to radioactive tsunamis and other devastating consequences of a nuclear explosion.

Another potential use for the Poseidon torpedo is to strike US aircraft carrier battle groups.

On December 8, 2016, US intelligence reported that, on November 27, Russia had conducted a test of a nuclear-powered UUV, launched from a B-90 Sarov-class submarine. In February, the Pentagon officially added Status-6 to Russia’s nuclear triad by mentioning it in the US Nuclear Posture Review.

At present, the technical specifications of Poseidon torpedoes are classified information. So far, it is known that the UUV is over 19 meters in length and almost two meters in width. Earlier, it was assumed that Poseidon would be equipped with a 100-megaton thermonuclear warhead that could obliterate entire coastal cities and cause destruction further inland, triggering tsunamis laden with radioactive fallout.

However, according to the latest information, the power of the Poseidon’s warhead is just two megatons. But this does not change much. This amount of nuclear material is still enough to destroy large coastal cities, naval bases and cause a tsunami.

In addition, a warhead of this class could easily wipe out any carrier strike group of the US Navy.

According to some reports, Poseidon can develop speeds up to 70 knots, which is faster than any US nuclear submarine or anti-ship torpedo. The operational depth of the Poseidon is more than a thousand meters, which also significantly exceeds the capabilities of US submarines.

According to Covert Shores, the new Russian UUV can be located with the help of Anti-Submarine Warfare Continuous Trail Unmanned Vessel (ACTUV).

ACTUV drone is a DARPA-financed US project to develop an unmanned ship designed to detect and track enemy submarines with the help of sonars. It is assumed that the vessel will not be equipped with weapons of any kind and will be used solely for reconnaissance purposes – however, this may change in the future.

Sea floor sensor networks, including sonar buoys could also be deployed by maritime patrol aircraft, such as Boeing’s P-8 Poseidon, to locate the Russian UUV, according to Covert Shores.

Strangely enough, Covert Shores doesn’t mention the SOSUS system, Rear Admiral Arkady Syroezhko, ex-chief of the autonomous vehicles program of the Main Operations Directorate of the General Staff of Russia’s Armed Forces, told Gazeta.ru.

SOSUS is the US sound surveillance system for detecting and identifying submarines. It should be noted, however, that this system will be deployed only on the frontiers – for example, in the GIUK (Greenland, Iceland, and the UK) gap, along the North Cape – Medvezhy Island line, in the Denmark Strait, and in a couple of other places. So it would be a mistake to believe that the SOSUS system is deployed in all parts of the global ocean. In the Pacific, for instance, it is hardly used at all.

Syroezhko believes that, when it comes to tracking underwater objects, the key thing is to select the right location for the tracking system. But it’s very difficult to determine where Poseidon might appear, given its almost unlimited range and high speed.

Also, according to Syroezhko, tracking Poseidon is only half the battle. To destroy the UUV, you need to have a permanent and combat-ready counter system, which means having forces and equipment on constant alert and ready for deployment. But the US doesn’t have such a system yet. To deploy such a system would require substantial financial resources — even for the US.

As for the capabilities of our hypothetical enemies to destroy the Poseidon, they are extremely limited.

Today the MU90 Impact is the only NATO torpedo capable of reaching the depth of 1,000 meters, Konstantin Makienko, deputy director of the Center for Analysis of Strategies and Technologies, told Gazeta.ru.

The expert emphasizes that a single torpedo of this class costs over $2 million. Also, according to other military experts, even in a high-speed mode (92 km/h), which decreases its range significantly, this torpedo is still slower than the Poseidon.

Makienko says that the Mark 54, which is the fastest US Navy torpedo, operates at 74 km/h. He believes that it is not capable of catching up with Poseidon or reaching its operational depth.

"Until we see a live experiment, any claims about the potential detection or destruction of the Poseidon are completely groundless. Thus far, all we hear is just words," says the former Chief of Staff of the Russian Navy Viktor Kravchenko.

Currently no hypothetical adversary has a weapon capable of overtaking the Poseidon UUV at its operational depth or reaching its speeds, says Syroezhko.

India To Purchase US Missile Shield For National Capital Region

India To Purchase US Missile Shield For National Capital Region

To safeguard major cities across India, the government is in discussion with Washington to procure the next-generation air defense system to protect the National Capital Region (NCR) from Chinese or Pakistani aerial threats.

The process for procuring the National Advanced Surface to Air Missile System-II (NASAMS-II), a distributed and networked medium to long-range air-defense system, is currently underway, which includes new missile shields to replace outdated systems.

Indian sources say the defense acquisitions council (DAC), chaired by defense minister Nirmala Sitharaman, has approved the “acceptance of necessity (AoN) for the acquisition of the NASAMS-II worth around $1 billion.”

Sources told The Times of India that the Delhi Area Air Defence Plan, which includes Rashtrapati Bhawan, Parliament, North, and South Blocks, could soon deploy these new multi-tiered air defense networks to adequately secure its airspace from incoming fighter aircraft, missiles and unmanned aerial vehicles (UAV).

The NASAMS-II, armed with the three-dimensional Sentinel radars, short and medium-range rockets, multiple ground launchers, fire-distribution centers, and command and control units to rapidly detect, track and shoot down multiple airborne threats, is the same air defense system embedded in Washington, D.C, NATO countries, and Israeli cities.

India’s move to quickly acquire NASAMS-II comes as the Defence Research and Development Organisation (DRDO) is nearing completion of developing its two-tier ballistic missile defense (BMD) shield, which is designed to intercept nuclear missiles over the country.

“Once the Phase-I of the BMD system is operational, it will be deployed to protect cities like Delhi and Mumbai from long-range missiles with a 2,000-km strike range. The NASAMS, in turn, is geared towards intercepting cruise missiles, aircraft and drones,” said a source.

The Times of India notes that the government has kept a $2 billion procurement of two dozen Sikorsky MH-60 Black Hawk helicopters on pending status till the “two-plus-two” dialogue between New Delhi and Washington on September 06.

Before granting AoN on the MH-60 Black Hawks, India wants to “assess the US response” on different subjects, including its sanctions regime under the Countering America’s Adversaries Through Sanctions Act (CAATSA) that attempts to block India from purchasing Russian armaments or Iranian energy.

“The AoN for the helicopters, which are used to detect, track and hunt enemy submarines, has been deferred till September. Earlier also, it was not fielded in the DAC after US abruptly cancelled the two-plus-two dialogue (between Sitharaman and foreign minister Sushma Swaraj with their American counterparts, Jim Mattis and Mike Pompeo) slated for July,” said a source. Indian sources later explained to The Times of India that it was due to US’s upcoming engagement with North Korea.

The Times of India said Washington is moving towards granting a waiver to India from CAATSA, which means certain trade restrictions pertaining to Russia and Iran could be lifted.

India is nearing the final stages in acquiring the Russian S-400 Triumf missile system despite strong criticism from Washington, which could be the trade-off Washington needs to solidify the NASAMS-II transfer. Since 2007, Washington has sold $15 billion in military weapons to India.

As part of efforts to strengthen the country’s aerial security, India is in the process of deploying missile shields over critical cities across the country as the probability of conflict between China and Pakistan increases.

Japan, China Markets Turmoiling

Japan, China Markets Turmoiling

As the first full trading day since The BoJ shifted policy ever-so-gently, Japanese bond yields have blown out, spiking to 11bps. At the same time, Chinese stocks and Yuan are sliding on the heels of Trump's tariff escalation.

It seems no one was interested in buying 10Y JGBs as Kuroda faces his first test...

"The market is more likely to test an upside to bond yields sooner or later given the BOJ allows wider deviations in the 10-year yield, and the yen will probably strengthen during the process," Kato said.

The policy tweak "points to a distant-future exit and thus is a catalyst for yen strength in the medium-to-long term."

This is the widest intraday range since 2016...


The offshore yuan slipped as China weakened its fixing for the currency to the lowest since May 2017.

“The tariff issue is ongoing, I think it’s a negotiating tactic,” Nick Griffin, chief investment officer at Munro Partners, said on Bloomberg Television.

“How much we take of this as real and affecting earnings is questionable at this stage. In terms of an actual earnings effect, it’s not that big at the moment, it’s mainly just sentiment and risk appetite and for that it’s a moving feast.”

And that is continuing to weigh on Chinese stocks at the break...

And US Futures have been unable to rebound for now...


The Real 'Useful Idiots': How Our Intelligence Agencies Helped Putin Weaken America

The Real 'Useful Idiots': How Our Intelligence Agencies Helped Putin Weaken America

Authored by John O'Connor, op-ed via The Daily Caller,

Today, no informed American citizen should have any doubt but that the Russian government attempted to meddle in the 2016 presidential election, one clear purpose having been to sow discord in the electorate. Many of these citizens, on both the left and right, have as well questioned President Trump’s rhetorical conflation of the question of Russian meddling, clearly proven, with the issue of Russian collusion, glaringly unproven. But this rhetorical confusion, obvious to all, is of little serious consequence beyond the political sniping it engenders.

However, such resulting kerfuffles, unfortunately, divert focus from a far more critical issue of whether our intelligence agencies, directed by politicized partisans, have analytically conflated this Russian meddling with a Russian bias for Trump, in turn corroborating in their assessment the Russian collusion narrative.

If such conflation has occurred, our intelligence agencies were either shamefully duped, or, worse, were enticed into intentionally framing a disliked political figure. In either case, these agencies would have helped Putin sow discord in America, the very wrongdoing they were sworn to investigate fully and fairly.

While such questions demand, as would be expected, declassification and production of key documents, quite fortunately American citizens are not foreclosed by agency stonewalling from examining the infamous Steele dossier for at least partial and tentative answers. What these documents suggest to any critical thinker is that either because of frank partisan dishonesty or dumbfounding credulity, born of political bias, these former officials have thrown our country into divisive turmoil, weakening it beyond Vladimir Putin’s fondest dreams, as well hurting America’s standing in the eyes of the world.

Before we delve deeply into this subject, let’s examine prefatorily what this Steele dossier is and what it isn’t. Many on the right see the Steele dossier as the flawed beginning of the Russian collusion investigation, just as many on the left had viewed it earlier as both the start and the solid heart of the investigation. Both are in error: the Steele dossier was in fact the Hail Mary pass thrown by American intelligence to get a FISA warrant after seven months of failure to prove an electoral conspiracy.

While now discredited, it figures prominently in Congressional accusations against deposed officials John Brennan, James Comey, Peter Strzok, James Clapper and Bruce Ohr. For the past several months the debate on the Steele dossier has been whether it is, as the anti-Trumpers would have it, merely an “unverified” report which may ultimately be proven, or, as the Congressional majority would argue, a screed manufactured out of whole cloth.

While this is an important argument, to be sure, the more compelling analysis is a deciphering of the meaning of the dossier under the assumption that it is literally true. What we mean by “literally true” is not that Trump and Putin colluded because Putin wanted Trump to win, but rather that it is true that Kremlin sources verified the collusion narrative to Steele researchers. If they did, the implications would be profound.

If Kremlin sources in fact conveyed the Russia-Trump collusion narrative to Steele, the narrative would thereby likely be untrue. This is because Putin’s Kremlin would never easily and voluntarily reveal its true plans to a group affiliated with America political interests and Western intelligence, which the Steele/Nellie Ohr group obviously represented.

In addition to relying on the shadowy Sergei Millian for confirmation of the collusion narrative on behalf of the Trump campaign, the Steele dossier purported to rely on numerous “Kremlin sources” or sources “close to Putin” or other high Russian officials. These supposedly knowledgeable sources lent the Steele dossier its formerly-touted authoritative power. But even though it is now acknowledged that the Steele dossier is a form of rubbish, the degree of stink debated, we should not merely toss it into the trash, because it still has much to tell us.

That is so because we can all agree that any substantive statement issuing from the Kremlin, or officials close to Putin or other top officials, would likely have been approved by Putin himself. Let’s put it another way: if a Kremlin official disclosed a purported strategy of Putin he did not want revealed, would he see his skin curdle, or would his internal organs liquify, as the first symptom he had been poisoned by the SVR?

In any case, let us assume some degree of professional standards practiced by ex-MI6 agent Steele and his main researcher, Nellie Ohr, who previously worked for Open Source Works, the CIA’s in-house open source research shop. We would not reasonably expect that they simply fictionalized their sources, but, rather, actually spoke to individuals who claimed knowledge, even if in fact only hearsay and rumor.

We can further assume that Steele and Ohr had no means of coercing reluctant, and therefore likely true, statements from these sources. Indeed, a cursory reading of the dossier describes a group of highly talkative sources readily volunteering information. It is this eager divulging of information which cause any critical observer to assume that anything offered was Kremlin misdirection.

Given these unassailably logical suppositions, it is very easy to view the Steele dossier as one big piece of Putin/Kremlin disinformation designed to hurt America. The ready connivance of Russian asset Sergei Millian, falsely posing as a Trump insider, only corroborates this assessment. What was said to Steele is important not for its substantive truth, but as a true reflection of falsehoods Putin wants us to confront uncomfortably, which we are now doing. If Putin wanted Clinton and/or her close allies in the partisan CIA and FBI directorships to believe in Trump-Russian collusion, and, inevitably to politicize it, he would have caused the disclosure of exactly what he did disclose to the willfully credulous Steele group.

No intelligent person, however, should conclude from this scenario that Putin wanted Clinton to win, a deduction that goes a bridge too far, much like the simplistic inference that Putin wanted Trump to win. After all, Putin did, we must believe from the Mueller indictment of GRU operatives, hack and release Clinton emails. Indeed, it is reasonable to believe that Putin thought hobbling the sure winner, Clinton, would be more beneficial to Russia than harming the sure loser. That said, the Steele Dossier destroys the claim that Putin’s motive was a Trump win, since such is impossible to square with treasonous and salacious anti-Trump slurs Putin seemingly condoned in those dossier documents.

But we can come to several less extreme, more reasonable assessments. First, we can reasonably believe that Putin’s motives were mainly to sow discord in the electorate and weaken our democracy already riven by partisan discord. Secondly, and perhaps more importantly, reading the Steele dossier should tell any critical reader that Trump and Putin could not have been even tentatively colluding. If in fact they were colluding, would Putin have authorized such a confirmatory narrative to be released? Alternatively, if against Putin’s wishes, would Kremlin operatives have risked their lives to reveal the plot? Neither scenario seems credible. From the moment the ink was dry on the phony Steele dossier, John Brennan, James Comey, James Clapper, Peter Strzok and Bruce Ohr should all have known there was no electoral collusion.

Other events, of which these officials knew well, corroborate this collusion. If there was a collusion conspiracy in full flower, would Russian agents have approached George Papadopoulos in April 2016, to tell of hacked emails? If the collusion narrative had an ounce of truth to it, why would anyone think that Papadopoulos needed either recruiting or informing? If American intelligence really thought there was a collusion conspiracy being pursued, why would they think that Peter Stone would be interested in purchasing for Trump from an FBI informant, Henry Greenberg, hacked DNC emails in exchange for payment of $2 million? Wouldn’t the conspiracy already underway have set methods, means and terms of colluding previously agreed upon? Why would American intelligence have Stephan Halper approach Papadopoulos, Carter Page and Stephen Miller, in July 2016, if they believed the plot was already in existence, as the Steele dossier suggested? In short, an intelligence officer has to either be criminally dishonest or frighteningly credulous to have bought the Trump-Putin collusion story. There never should have been an investigation left open after the laughably phony Steele dossier, preceded by seven months of investigative goose eggs. That an investigation did proceed, to the point of a thrice-renewed FISA warrant, followed by the sneaky Comey’s chumming up of the Mueller investigation, could only have gladdened Putin’s heart.

The collusion investigation has roiled the country, dividing it even more stridently into red-blue factionalism. The American president has just met with his Russian counterpart, amid the propitiously-timed indictment by a special counsel of twelve GRU agents. This strife, which includes absurd partisan attacks on an obviously thin-skinned president in Trump, accompanied by shrieks from a herd of shallow journalists, has presented a seriously divided and weakened front to Putin. Trump’s amateurish press conference with Putin provided only icing on this already divided cake.

So clearly these former American intelligence officers have weakened our country, and have wittingly or unwittingly done Putin’s bidding. How much of this is a product of fraud, and how much is simply partisan credulity, should be a serious issue of future studies, hopefully soon to be accelerated with a declassification of pertinent Russiagate-related documents.

If in fact the Russiagate investigation had a sound basis, one would think that, in addition to causing nasty leaks, these officials would be the loudest proponents of the declassification and release of key documents elucidating the grounds for the probe. So their present diffidence should be seen as a big tip-off as to what these documents will show and what they will not show.

Brennan, Comey and the rest likely know that if key documents are to be produced, their current, absurd cries of treason will be their last hurrah. Indeed, logic suggests that they have been either dishonest or, yes, grossly negligent, in the discharge of their duties, in either case growing out of blinding partisanship. So it seems apparent that there have been no more useful idiots, pushing Putin’s malevolent designs, than the recent heads of American intelligence. We hope - without confidence - that they will soon get their just due, and American intelligence will return to an honest, nonpartisan professional enterprise.

*  *  *

John D. O’Connor is the San Francisco attorney who represented W. Mark Felt during his revelation as Deep Throat in 2005. O’Connor is the co-author of “A G-Man’s Life: The FBI, Being ‘Deep Throat,’ and the Struggle for Honor in Washington” and is a producer of “Mark Felt: The Man Who Brought Down the White House” (2017), written and directed by Peter Landesman.

Do Americans View Their Trade Relationships As Fair?

Do Americans View Their Trade Relationships As Fair?

Understandably, most people are not experts on the subject of trade.

But, as Visual Capitalist's Jeff Desjardins notes,  while the average person won’t likely be able to guess the U.S. trade deficit with Mexico, perceptions of trade relationships in the public eye are still a crucial indicator.

If the majority of Americans think they are getting the short end of the stick on international trade, this sentiment ultimately affects how politicians campaign, how policy decisions are made, and the success of the wider economy.


In today’s chart, we break down the data from a recent Gallup poll on how Americans view the country’s trade relationships.

Courtesy of: Visual Capitalist

At a high level, here is how it looks by country:

Source: Gallup, June 18-24, 2018

The majority of Americans think relationships with Canada (65%), the European Union (56%), and Japan (55%) are fair. When it comes to Mexico, respondents are split (44% fair, 46% unfair).

Meanwhile, it’s clear that most Americans think they are getting the short end of the stick with China, with 62% of respondents describing the relationship as unfair.


China is America’s largest trading partner, so this negative sentiment has meaningful implications.

The balance of trade that the U.S. has with China is also crystal clear: in 2017, the two countries traded $636 billion of goods, but the vast majority of this number comes from Chinese imports into the United States:

Most economists actually think that trade deficits are less important than they appear, but this trade gap is also visceral for many people. After all, U.S. exports barely make a dent in the mix, and this sends a message that America is “losing”.

Between the above trade deficit, intellectual property issues, and jobs going overseas, it’s understandable why the perception of Chinese-U.S. trade is under fire in terms of public sentiment.

And with the start of the recent trade war, the view on China could sour even further.


Interestingly, Democrats and Republicans have very different views on U.S. relationships, including the one with China:

Source: Gallup, June 18-24, 2018

Comparing Republicans and Democrats, three different relationships have opinion gaps of about 30%: Canada, European Union, and Mexico. In all cases, Democrats favored the relationships far more than Republicans.

That said, when it comes to China and Japan, the parties are slightly more aligned.

Only a minority in both parties thought the U.S. trade relationship with China was fair, with 21% of Republicans and 38% of Democrats in agreement.

Buchanan: Will Tribalism Trump Democracy?

Buchanan: Will Tribalism Trump Democracy?

Authored by Patrick Buchanan via Buchanan.org,

On July 19, the Knesset voted to change the nation’s Basic Law.

Israel was declared to be, now and forever, the nation-state and national home of the Jewish people. Hebrew is to be the state language.

Angry reactions, not only among Israeli Arabs and Jews, came swift.

Allan Brownfeld of the American Council for Judaism calls the law a “retreat from democracy” as it restricts the right of self-determination, once envisioned to include all within Israel’s borders, to the Jewish people. Inequality is enshrined.

And Israel, says Brownfeld, is not the nation-state of American Jews.

What makes this clash of significance is that it is another battle in the clash that might fairly be called the issue of our age.

The struggle is between the claims of tribe, ethnicity, peoples and nations, against the commands of liberal democracy.

In Europe, the Polish people seek to preserve the historic and ethnic character of their country with reforms that the EU claims violate Poland’s commitment to democracy.

If Warsaw persists, warns the EU, the Poles will be punished. But which comes first: Poland, or its political system, if the two are in conflict?

Other nations are ignoring the open-borders requirements of the EU’s Schengen Agreement, as they attempt to block migrants from Africa and the Middle East.

They want to remain who they are, open borders be damned.

Britain is negotiating an exit from the EU because the English voted for independence from that transitional institution whose orders they saw as imperiling their sovereignty and altering their identity.

When Ukraine, in the early 1990s, was considering secession from Russia, Bush I warned Kiev against such “suicidal nationalism.”

Ukraine ignored President Bush. Today, new questions have arisen.

If Ukrainians had a right to secede from Russia and create a nation-state to preserve their national identity, do not the Russians in Crimea and the Donbass have the same right — to secede from Ukraine and rejoin their kinsmen in Russia?

As Georgia seceded from Russia at the same time, why do not the people of South Ossetia have the same right to secede from Georgia?

Who are we Americans, 5,000 miles away, to tell tribes, peoples and embryonic nations of Europe whether they may form new states to reflect and preserve their national identity?

Nor are these minor matters.

At Paris in 1919, Sudeten Germans and Danzig Germans were, against their will, put under Czech and Polish rule. British and French resistance to permitting these peoples to secede and rejoin their kinfolk in 1938 and 1939 set the stage for the greatest war in history.

Here in America, we, too, appear to be in an endless quarrel about who we are.

Is America a different kind of nation, a propositional nation, an ideological nation, defined by a common consent to the ideas and ideals of our iconic documents like the Declaration of Independence and Gettysburg Address?

Or are we like other nations, a unique people with our own history, heroes, holidays, religion, language, literature, art, music, customs and culture, recognizable all over the world as “the Americans”?

Since 2001, those who have argued that we Americans were given, at the birth of the republic, a providential mission to democratize mankind, have suffered an unbroken series of setbacks.

Nations we invaded, such as Afghanistan and Iraq, to bestow upon them the blessings of democracy, rose up in resistance. What our compulsive interventionists saw as our mission to mankind, the beneficiaries saw as American imperialism.

And the culture wars on history and memory continue unabated.

According to The New York Times, the African-American candidate for governor of Georgia, Stacey Abrams, has promised to sandblast the sculptures of Robert E. Lee, Stonewall Jackson and Jefferson Davis off Stone Mountain.

The Republican candidate, Brian Kemp, has a pickup truck, which he promises to use to transfer illegal migrants out of Georgia and back to the border.

In Texas, a move is afoot to remove the name of Stephen Austin from the capital city, as Austin, in the early 1830s, resisted Mexico’s demands to end slavery in Texas when it was still part of Mexico.

One wonders when they will get around to Sam Houston, hero of Texas’ War of Independence and first governor of the Republic of Texas, which became the second slave republic in North America.

Houston, after whom the nation’s fourth-largest city is named, was himself, though a Unionist, a slave owner and an opponent of abolition.

Today, a large share of the American people loathe who we were from the time of the explorers and settlers, up until the end of segregation in the 1960s. They want to apologize for our past, rewrite our history, erase our memories and eradicate the monuments of those centuries.

The attacks upon the country we were and the people whence we came are near constant.

And if we cannot live together amicably, secession from one another, personally, politically, and even territorially, seems the ultimate alternative.

"There's Just No Slack In The System" - The Real Perils Of Pandemic Risk

Authored by Adam Taggart via PeakProsperity.com,

As far as existential threats to the human species go, pandemics rank near the top of the list.

What's the probability of an agbressive, highly-fatal outbreak occuring soon? Is it high enough to worry about?

And if one occurs, what can/should we do to protect ourselves and our loved ones?

To address these questions, we interview John M. Barry, author of the award-winning New York Times best-seller The Great Influenza: The Epic Story of the Deadliest Plague in History. John was the only non-scientist to serve on the US government's Infectious Disease Board of Experts and has served on advisory boards for MIT's Center for Engineering System Fundamentals and the Johns Hopkins Bloomberg School of Public Health. He has consulted on influenza preparedness and response to national security entities, the George W. Bush and Obama White Houses, state governments, and the private sector.

His verdict? The risk of a massively fatal world-wide pandemic like the 1918 Spanish flu is remote, but very real -- and is heightened by the hyper-connectedness of our modern society (i.e., the ease and speed with with people can travel). And our readiness for such an outbreak is woefully lacking:

An often-overlooked part of the damage a virulent pandemic can do is its impact on supply chains and the economy.

If you’ve got 20 to 30% of your air traffic controllers sick at the same time, what's that going to do to your economy?

Most of the power plants in the United States are still coal powered. They get their coal, most of them, from Wyoming. You see these enormous trains – that's a highly skilled position, the engineers who move those trains which are a mile and a half long. Suppose they're out. You're not going to have power in many of the power plants.

These are things that we don’t automatically think of as relating to a pandemic. Even a mild one that makes a lot of people sick without killing them will wreak an economic impact.

In terms of the health care system, practically all of the antibiotics are imported. If you interrupt those supply chains then you start getting people dying from diseases that are unrelated to influenza that they would otherwise survive. We had a small example of that with saline solutions bags which were produced in Puerto Rico. Because of the hurricane, Puerto Rico was no longer producing them; so we had tremendous shortages in those bages after the hurricane. Other suppliers worldwide have picked up the slack, so that's not a problem today.

But in a pandemic, you're going to have supply chain issues like that simultaneously all over the world. So you're not going to be able to call on any reserve, anywhere, because everybody's going to be in the same situation whether you talk about hypodermic needles or plastic gloves -- any of that stuff. The supply chain issues in a moderate pandemic are a real problem. If you’ve got a severe pandemic, the hospitals can't cope. There are many fewer hospital beds per capita than there used to be because everything has gotten more efficient. In this past year's bad influenza season, many, many hospitals around the country were so overwhelmed they all but closed their emergency rooms and weren't talking any more patients for any reason.

There's just no slack in the system. What efficiency does is eliminate as much as possible what's considered waste, but that waste is slack. And when you have a surge in something, you need that slack to take care of the surge. If I were grading generously I would give us a D in terms of overall preparedness. If we had a universal influenza vaccine, maybe we'd be relatively okay, but we don’t.

Click the play button below to listen to Chris' interview with John M. Barry (56m:47s).

"Humiliation" - Iran's Lawmakers React To Trump's 'No Preconditions' Offer Of Direct Talks

"Humiliation" - Iran's Lawmakers React To Trump's 'No Preconditions' Offer Of Direct Talks

Iranian President Hassan Rouhani and his advisors are likely scrambling over what strategy to agree on, if any, in response to President Trump's unexpected and unprecedented Monday offer of "no preconditions" talks with Rouhani.

An official response to Trump's surprise words  “I would certainly meet with Iran if they wanted to meet. I don’t know if they’re ready yet”  issued at a White House press conference was not immediately forthcoming afterward or throughout the day Tuesday

However, while Tehran's top leadership has kept mum on what it might be thinking, lawmakers in Iran's parliament didn't hold back Tuesday, with the deputy speaker of parliament declaring "it would be a humiliation" for Iran's leaders to sit down with Trump.

According to the AFP-associated Iranian affairs journal Bourse & Bazaar:

Skepticism was rife in Iran on Tuesday after US President Donald Trump offered talks, with one lawmaker saying negotiations would be a "humiliation."

The country's top leaders did not give an immediate response to Trump's statement a day earlier that he would meet them "any time" without preconditions.

But several public figures said it was impossible to imagine negotiations with Washington after it tore up the 2015 nuclear deal in May

Iran's semi-official Fars News which typically reflects a more Islamic conservative angle, quoted Ali Motahari, the deputy speaker of parliament, as follows on Tuesday: "With the contemptuous statements (Trump) addressed to Iran, the idea of negotiating is inconceivable. It would be a humiliation." 

The same report cited Interior Minister Abdolreza Rahmani Fazli, who slammed Trump's statement, saying "America is not trustworthy," and questioning, "After it arrogantly and unilaterally withdrew from the nuclear agreement, how can it be trusted?"

One Iranian government advisor and University of Tehran professor, Mohammad Marandi, who helped negotiate the 2015 nuclear deal, said, "We cannot negotiate with someone who violates international commitments, threatens to destroy countries, and constantly changes his position," according to Bourse & Bazaar.

A new round of US sanctions are set to hit Iran starting August 6. Both current sanctions and news of the impending regimen have already contributed to an economy in severe downward spiral.

Iran's rial hit a historic low this week after over the weekend the it took a stunning 12.5% dive, falling from 98,000 IRR/USD on Saturday to 116,000 IRR/USD by the close of Sunday. As Forbes noted this kind of classic death spiral hasn't happened since September 2012. And By Monday the currency hit 119,000 against the dollar on the black market, a new low.

Thus far the only official statement from a top Iranian authority on the possibility of talks was actually issued before Trump's surprise remark of a "no preconditions" meeting. Foreign ministry spokesman Bahram Ghasemi said on Monday morning, "there is no possibility for talks" — though there's no way Tehran could have known of the US president's words ahead of time. "Washington reveals its untrustworthy nature day by day," Ghasemi had stated, according to the Mehr news agency

“Mr. Trump thinks that every morning the world wakes up with him. One should not take him seriously,” Ghasemi added ahead of Trump's statement.

Though things are clearly not looking positive on the prospect of any kind of renewed direct face to face talks between the White House and Tehran, some Iranian officials have expressed openness. For example the head of parliament's foreign affairs commision, Heshmatollah Falahatpisheh, told the semi-official ISNA news agency, "Negotiations with the United States must not be a taboo." And he explained further, "Trump understands that he does not have the capacity to wage war with Iran, but due to historic mistrust, diplomatic ties have been destroyed."

The White House for its part appears to have played a dangerous game that has involved creating an intense, high pressure environment of stringent sanctions and threat of military force, while simultaneously throwing out the proverbial "carrot" at the very moment things reach breaking point, which seems to be what Trump did Monday. 

When LBJ Attacked A Fed Chairman

When LBJ Attacked A Fed Chairman

Authored by Ryan McMaken via The Mises Institute,

In his column today, Ron Paul mentions that those who insist the Fed functions with "independence" tend to forget - or at least not mention - the numerous historical episodes in which the Fed did not exercise any such independence.

As an example, Paul mentions the time President Lyndon Johnson

summoned then-Fed Chairman William McChesney Martin to Johnson’s Texas ranch where Johnson shoved him against the wall. Physically assaulting the Fed chairman is probably a greater threat to Federal Reserve independence than questioning the Fed’s policies on Twitter.

For those unfamiliar with the episode, I thought it might be helpful to look at some of the historical context surrounding the situation.

In his book The Man Who Knew: The Life and Times of Alan Greenspan, Sebastian Mallaby writes:

Johnson had pushed Kennedy's economic policies to their logical extreme. In 1964, he had delivered a powerful fiscal stimulus by signing tax cuts into laws, and he had proceeded to bully the Federal Reserve to keep interest rates as low as possible. When the Fed made a show of resistance [in 1965], Johnson summoned William McChesney Martin, the Fed chairman, to his Texas ranch and physically showed him around his living room, yelling in his face, "Boys are dying in Vietnam, and Bill Martin doesn't care."

This was the 1960s version of "you're either with me or you're with the terrorists."

Of course, Johnson didn't stop at pushing around a central banker. Mallaby continues:

If the tax cuts and low interest rates caused inflationary pressure, Johnson believed he could deal with it with more bullying and manipulation. When aluminum makers raised prices in 1965, Johnson ordered up sales from the government's strategic stockpile to push prices back down again. When copper companies raised prices, he fought by restricting exports of the metal and scrapping tariffs so as to usher in more imports. The president battled uppity prices for household appliances, paper cartons, newsprint, men's underwear, women's hosiery, glass containers, cellulose, and air conditioners; when egg prices rose in 1966, he had the surgeon general issue a warning on the hazards of cholesterol..."

In other words, Johnson was willing to apply pressure to the Fed through means other than making threats or engaging in physical assault. Johnson's manipulation of prices through strategic stockpiles illustrated that Johnson used a wide array of fiscal and industrial policies to get his way. It's entirely possible that in addition to demanding the Fed keep rates low, Johnson wanted to show Martin and other voting members at the Fed that Johnson had his own set of tools he could use to stimulate the economy as he saw fit. Politically speaking, Johnson might have been showing the Fed he could provide it political cover by helping to keep inflation low alongside the desired easy-money policy employed by the Fed. Of course, a good economist would point out that using such methods constitutes playing with fire. But there's no reason to believe that Johnson was particularly interested in good economic theory. He was likely only interested in short-term political gains that might be had from manipulative fiscal policy. 

For good measure, we might note that another account of the Johnson meeting — provided by Martin biographer Robert Bremner in Chairman of the Fed — is this: 

In December 1965, President Lyndon Johnson was pacing in the office at his ranch in Johnson City, Texas, while he waited for William McChesney Martin Jr., the chairman of the Federal Reserve Board, to visit for what Johnson called "a trip to the woodshed." Two days before, Martin had led the Fed's board of governors to an increase in the Federal Reserve discount rate, the first in more than five years of uninterrupted economic growth. Through Henry "Joe" Fowler, his Treasury secretary, and Gardner Ackley, his Council of Economic Advisors (CEA) chairman, Johnson had advised Martin to delay the rate increase, and his instructions had been rejected. Few people ignored Lyndon Johnson's instructions, and he was furious when he heard of the Fed's move...

The meeting was a classic confrontation. Johnson was a powerful and manipulative president who believed that a Fed tightening would jeopardize the economic expansion and the tax revenues he needed to finance the most important goals of his presidency...

When Martin walked into the office, Johnson immediately accused him of placing himself above the presidency and totally disregarding Johnson's wishes: "You went ahead and did something that I disapproved of ... and can affect my entire term here." 

As if so often the case among defenders of Fed independence, Bremner writes, "Martin admitted later that he was shaken but determined to stick to his position and not to insult the president of the United States."

The truth, however, is that it's impossible to know how much Johnson's political pressure influenced Martin's actions. Of course, Martin is going to say he was not influenced in any way, and most commentators on the matter simply take Martin at his word. Credulous observers often assume that since the discount rate rose slightly in early 1966 that Martin "stood his ground." But how much might the rate have increased without Johnson's intervention? Indeed, the rate went down again in 1967, and it was only after it became clear that Johnson would not have a third term that we begin to see a significant rise in the discount rate.

Johnson announced he would not run for re-election in March 1968. The Fed's discount rate then shot up from 4.66 percent in March to 5.5 percent two months later. The last time rates had increased so rapidly had been under the Eisenhower administration. Are we to believe this was just a coincidence? It's possible, but there's no reason passively accept the claim that Martin was not influenced by Johnson's politicking.

Moreover, this sort of thing is impossible to measure, as political scientist Irwin Lester Morris has noted in Congress, The President, and the Federal Reserve. Looking at attempts by presidents to influence monetary policy — such as Johnson's — Morris writes:

When do presidents achieve their monetary policy objectives? When they are personally convincing and domineering? Possibly, but how would one go about measuring these qualities?

The "qualities" of the political actors here, of course, include both the president and the Fed chair, as well as other voting members at the Fed.

It's exceedingly difficult to say how much presidents influence these members, although it would be naïve to conclude presidents exercise no influence. After all, in other agencies and branches of the Federal government it is often assumed that efforts at exercising influence are effective — including efforts brought to bear on non-elected, non-partisan officials. Yet, we are to believe that the Fed is immune from all of this. 

As a final note, it is also important to reject the assumption that pressures on the Fed always take the form of efforts to ensure an expansionist monetary policy. There is not actually any reliable empirical evidence for this assumption, as Morris notes in his survey of the research on the Fed and political pressure groups: "At least in the case of the Fed, the assumption that elected officials consistently favor inflationary monetary policies at the expense of price stability is unsubstantiated."

Politicians are often just as fearful of inflation as they are of a slowdown in economic growth — at least historically — and politicians are not content to simply let the Fed do its own thing out of some vague devotion to "independence." The Lyndon Johnson episode is just one illustration of this.  

SolarCity Booked "Millions in Phantom Revenue", Created "Bogus Accounts" Ex-Employee Claims

SolarCity Booked "Millions in Phantom Revenue", Created "Bogus Accounts" Ex-Employee Claims

A SolarCity ex-employee has told ARS Technica that they believe millions of dollars in phantom revenue was recorded by the company - and that after "more than a dozen" people reported the event to the company, and to Elon Musk himself, nothing was done about it. 

This revelation, and others suggesting that SolarCity operated like a "struggling startup" were made as ARS Technica sought comment on a new lawsuit filed against SolarCity, and its parent corporation, Tesla.

The news of a lawsuit alleging that SolarCity is guilty of discriminatory practices against its employees has been making the rounds over the last couple of days: we reported it two days ago when the news first broke and the lawsuit was first made available.

But what was not fleshed out in the original piece – and is now the focus of a new report – is the alleged "tens of hundreds of millions [sic]" of dollars in fake revenue that may have been recorded by SolarCity as a result of fake accounts that the company tacitly may have been aware of. ARS Technica cites "a person with knowledge of the lawsuit who used to work in the San Diego office", and who spoke under the condition of anonymity. That person stated the following:

A person with knowledge of the lawsuit who used to work in the San Diego office said that "thousands" of bogus SolarCity accounts may have been created by supposedly requesting solar panels for homes that turned out not to exist. Sometimes, these faux deals would be a valid residence but with a fake property owner's name—the real person did not intend to move ahead with solar panels.

This tactic allegedly resulted, this person said, in tens of hundreds of millions of dollars in phantom revenue. He added that more than a dozen people reported the practice to the relevant human resources representatives, and CEO Elon Musk himself, who never replied. Ars granted anonymity as this person feared reprisal from Tesla.

On top of that, the same employee stated that SolarCity is allegedly just "crap" behind the scenes, noting that the company operated like a "struggling startup". The disorganization and inefficiency, according to this employee, trickled down all the way from the human resources office to curtailing the amount of sugar and milk they were offering employees with their coffee:

This former San Diego employee also said that, despite working for a high-tech energy company, the SolarCity office, just south of the Marine Corps Air Station Miramar, operated more like a struggling startup, with electrical plugins that didn't work, spotty office lighting, and even cutting back on sugar and creamer for the shared office coffee.

“Everything else behind the scenes was just crap," he said.

The report also provides further details about the discrimination lawsuit we wrote about days ago. The lead plaintiff in the case alleges that even after he brought to the company's attention that he, a gay man, was being berated and called names like "faggot", "bitch" and "pussy", that the company did nothing. He also claimed he had reached out to CEO Elon Musk personally, but to no avail. Perhaps Musk was out personally delivering a Model 3 that day.

The lead plaintiff in the case, Andrew Staples, who is gay, also alleged that he was "repeatedly and continuously harassed" by a supervisor from another department, Grant Katzenellenbogen.

"Specifically, this supervising employee continuously harassed Plaintiff Staples by calling him things like 'bitch,’ 'pussy' and 'faggot,’" his lawyers wrote. "These comments were made to Staples on numerous different days throughout his employment."

According to the civil lawsuit filed last Wednesday in San Diego County Superior Court, Staples reported the insults and the questionable corporate practices to various managers, including to CEO Elon Musk himself, who seemingly took no action.

Staples was then terminated from his position at the end of May 2017, which he believes was retaliation for his complaints.

Another employee corroborated Staples' claims:

According to Michael Beardsley, a former Tesla employee who said he was "witness" to much of the allegations outlined in the lawsuit, confirmed the ex-employees' allegations. Beardsley, who is not named in the lawsuit, provided copies of emails that Staples sent to Tesla HR.

"I really appreciate you taking the time and effort," Staples wrote on April 14, 2017. "I have voiced my concerns in the past to management, but I haven’t received a response and the seemingly unethical behavior by some on the team hasn’t changed. I can put up with a lot, but to have people that I’m mentoring become frustrated, and some who have come to me in tears over these issues and others disturbs me. I’m concerned that those who are truly putting in the effort and who are upstanding individuals are becoming disheartened."

He also provided ARS Technica with specific examples of what he called "frat boy locker room crap", including photos of female colleagues in their panties:

In addition, Beardsley explained, they were sent "incendiary pictures, memes and even pictures of female employees in their panties, etc." It is not clear under what circumstances such pictures were taken or obtained.

Beardsley provided Ars with an example of a picture of someone he said was a female colleague dressed in what appears to be a bra and underwear running on a lawn at night. The San Diego ex-employee, who corroborated receiving that same picture from a different female colleague, was dismayed by what he called "frat boy locker room crap."

Perhaps it is this kind of "locker room crap" that Tesla's CEO finds interesting. Any questions about potential fraud at Solar City on tomorrow's earnings call, on the other hand, should promptly lead to another "boring" temper tantrum.

How BRICS-Plus Clashes With The US Economic War On Iran

Authored by Pepe Escobar via The Asia Times,

Rhetorical war has far-reaching consequences, including a potential economic slump via the disruption of global oil supplies...

The key take away from the BRICS summit in Johannesburg is that Brazil, Russia, India, China and South Africa – important Global South players – strongly condemn unilateralism and protectionism.

The Johannesburg Declaration is unmistakable:

“We recognize that the multilateral trading system is facing unprecedented challenges. We underscore the importance of an open world economy.”

Closer examination of Chinese President Xi Jinping’s speech unlocks some poignant details.

Xi, crucially, emphasizes delving further into “our strategic partnership.” That implies increased BRICS and Beyond BRICS multilateral trade, investment and economic and financial connectivity.

And that also implies reaching to the next level;

“It is important that we continue to pursue innovation-driven development and build the BRICS Partnership on New Industrial Revolution (PartNIR) to strengthen coordination on macroeconomic policies, find more complementarities in our development strategies, and reinforce the competitiveness of the BRICS countries, emerging market economies and developing countries.”

If PartNIR sounds like the basis for an overall Global South platform, that’s because it is.

In a not too veiled allusion to the Trump administration’s unilateral pullout from the Iran nuclear deal (JCPOA), Xi called all parties to “abide by international law and basic norms governing international relations and to settle disputes through dialogue and differences through consultation,” adding that the BRICS are inevitably working for “a new type of international relations.”

Relations such as these certainly do not include a superpower unilaterally imposing an energy export blockade – an act of economic war – on an emerging market and key actor of the Global South.

Xi is keen to extol a “network of closer partnerships.” That’s where the concept of BRICS Plus fits in. China coined BRICS Plus last year at the Xiamen summit, it refers to closer integration between the five BRICS members and other emerging markets/developing nations.

Argentina, Turkey and Jamaica are guests of honor in Johannesburg. Xi sees BRICS Plus interacting with the UN, the G20 “and other frameworks” to amplify the margin of maneuver not only of emerging markets but the whole Global South. 

So how does Iran fit into this framework?

An absurd game of chicken

Immediately after President Trump’s Tweet of Mass Destruction the rhetorical war between Washington and Tehran has skyrocketed to extremely dangerous levels.

Major General Qassem Soleimani, commander of the Islamic Revolutionary Guard Corps’ (IRGC) Quds Force – and a true rock star in Iran – issued a blistering response to Trump: “You may begin the war, but it is us who will end it.”

The IRGC yields massive economic power in Iran and is in total symbiosis with Supreme Leader Ayatollah Khamenei. It’s no secret the IRGC never trusted President Rouhani’s strategy of relying on the JCPOA as the path to improve Iran’s economy. After the unilateral Trump administration pullout, the IRGC feels totally vindicated.

The mere threat of a US attack on Iran has engineered a rise in oil prices. US reliance on Middle East Oil is going down while fracking – boosted by higher prices – is ramping up. The threat of war increases with Tehran now overtly referring to its power to cripple global energy supplies literally overnight.

In parallel the Houthis, by forcing the Yemen-bombing House of Saud to stop oil shipments via the Bab al-Mandeb port, are configuring the Strait of Hormuz and scores of easily targeted pipelines as even more crucial to the flow of energy that makes the West tick.

If there ever was a US attack on Iran, Persian Gulf analysts stress only Russia, Nigeria and Venezuela might be able to provide enough oil and gas to make up for lost supplies to the West. That’s not exactly what the Trump administration is looking for.

Iranian “nuclear weapons” was always a bogus issue. Tehran did not have them – and was not pursuing them. Yet now the highly volatile rhetorical war introduces the hair-raising possibility of Tehran perceiving there is a clear danger of a US nuclear attack or an attack whose purpose is to destroy the nation’s infrastructure. If cornered, there’s no question the IRGC would buy nuclear weapons on the black market and use them to defend the nation.

This is the “secret” hidden in Soleimani’s message. Besides, Russia could easily – and secretly – supply Iran with state-of-the-art defensive missiles and the most advanced offensive missiles.

This absurd game of chicken is absolutely unnecessary for Washington from an oil strategy point of view – apart from the intent to break a key node of Eurasia integration. Assuming the Trump administration is playing chess, it’s imperative to think 20 moves ahead if “winning” is on the cards.

If a US oil blockade on Iran is coming, Iran could answer with its own Strait of Hormuz blockade, producing economic turmoil for the West. If this leads to a massive depression, it’s unlikely the industrial-military-security complex will blame itself.

There’s no question that Russia and China – the two key BRICS players – will have Iran’s back. First there’s Russia’s participation in Iran’s nuclear and aerospace industries and then the Russia-Iran collaboration in the Astana process to solve the Syria tragedy. With China, Iran as one of the country’s top energy suppliers and plays a crucial role in the Belt and Road Initiative (BRI). Russia and China have an outsize presence in the Iranian market and similar ambitions to bypass the US dollar and third-party US sanctions.

Beam me up, Global South

The true importance of the BRICS Johannesburg summit is how it is solidifying a Global South plan of action that would have Iran as one of its key nodes. Iran, although not named in an excellent analysis by Yaroslav Lissovolik at the Valdai Club, is the quintessential BRICS Plus nation.

Once again, BRICS Plus is all about constituting a “unified platform of regional integration arrangements,” going way beyond regional deals to reach other developing nations in a transcontinental scope.

This means a platform integrating the African Union (AU), the Eurasian Economic Union (EAEU), the Shanghai Cooperation Organization (SCO) as well as the South Asian Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).

Iran is a future member of the SCO and has already struck a deal with the EAEU. It’s also an important node of the BRI and is a key member, along BRICS members India and Russia, of the International North-South Transportation Corridor (INSTC), essential for deeper Eurasia connectivity.

Lissovolik uses BEAMS as the acronym to designate “the aggregation of regional integration groups, with BRICS Plus being a broader concept that incorporates other forms of BRICS’ interaction with developing economies.”

China’s Foreign Minister Wang Yi has defined BRICS Plus and BEAMS as the “most extensive platform for South-South cooperation with a global impact.” The Global South now does have an integration road map. If it ever happened, an attack on Iran would be not only an attack on BRICS Plus and BEAMS but on the whole Global South.

A Record 18% Of China's GDP Goes To Debt Service

A Record 18% Of China's GDP Goes To Debt Service

Think China's new "proactive" fiscal policy shigt will be sufficient to kick start the local economy, and boost global GDP? Think again.

In the latest analysis from Vertical Group's Gordon Johnson, the strategist writes "that China's proactive fiscal policy pledge could fall short as servicing its existing credit stock absorbs an increasing share of GDP."

As a reminder, last week, China’s State Council said it will adopt a proactive fiscal policy, outlining ways to fund ¥1.4tn in bonds to local government for infrastructure & provide ¥1.1tn in tax cuts, among other actions (e.g., R&D tax credits), all while urging no broad-based stimulus.

In Johnson's view, this is a narrative that is rather reminiscent of ‘14, when the gov’t unleashed a wave of “micro-stimulus” measures after a string of weak data points (i.e., 5 mos. of contracting real estate investment). Yet, as he notes, the most recent PBoC mini-stimulus is much smaller than ‘14, while key restrictions remain in place for real estate/shadow loans (historically growth-driving conduits), compounded by the law of diminishing returns, suggesting a smaller boost from a much larger base this time around.

Moreover, China’s total credit stock is markedly higher now than in ’14, implying more of every yuan in stimulus is going to service outstanding debt. How much? That may well be the critical question to gauge the flow through from any new fiscal policy.

Here is Vertical Group's answer:

While China exited ’17 with an est. 266% of total credit to GDP, some economists put that ratio at >300% today. On trailing 12-mo. nominal GDP of ¥86.5tn, as of 2Q, this equates to >¥259.5tn in credit, which, assuming an avg. borrowing cost of 6%, means China’s annual debt service is ~¥14.3tn, or 18.0% of GDP – sensitizing interest & credit-to-GDP, to a respective range of 4-7% & 285-320%, puts China’s debt service at 14-22% of GDP.

Johnson's punchline:

Indeed, China may stimulate more, as it did in ’15-’17, but, as of yet, it is doing far less than in ’14, as an increasing amount of “growth” is required to feed existing debt.

If this analysis is accurate, China will have a far more difficult time not only stimulating its domestic economy this time compared to 2014, but in offshoring the favorable inflationary externalities from its latest expansion. In short: the world's growth dynamo may be getting choked up with debt, which means that in the next global crisis, China will no longer be able to step in and kickstart global growth. And with central banks running out of securities to monetize, just who will arrest the next recession?

The Internet Is Changing Its Mind About Elon Musk

The Internet Is Changing Its Mind About Elon Musk

Authored by Anthony Xie  (Founder of HODLbot), via Hackernoon.com,

Elon Musk is perhaps this century’s most enigmatic figure. For two decades, he’s been unstoppable, uprooting more industries — energy, transportation, payments, space  - than any one person could reasonably expect in a lifetime.

For a while, Elon Musk seemed like our greatest hope. He claimed his sole aim was to fight off humanity’s greatest existential threats. We were enamoured by his optimism, and his grandiose visions of the future.

But something has changed. If you look at today’s headlines about Elon Musk, you won’t find stories about his heroics.

Instead you find the picture of a frantic man falling short of his promises to shareholders, lashing out at critics on Twitter.

The same news outlets that worshipped him are now dragging his name through the dirt.

Quantifying a change in sentiment

Rather than relying on anecdotal evidence, we’re going to quantify this change in sentiment. Reddit is often considered a trend-setter on the internet, so we’ll start there.

I’ve pulled over 250,000 comments mentioning Elon Musk from January 1, 2015 to July 27, 2018.

Here is the number of comments plotted over time.

Following a peak in February, we are coming off the precipice of another period of Musk-mania.

Here are the 25 subreddits with the most mentions of Elon.

Calculating the Sentiment Score of 250,000 Comments

Looking at the # of comments is all fine and dandy, but our real mission is to understand sentiment.

To do so, we’re going to enlist the help of a powerful python library called VADER (Valence Aware Dictionary and sEntiment Reasoner). VADER was specifically designed to help analyze social media text. You can read more from the paper here.

Not that VADER

You can think of VADER as a giant dictionary of sentiment. It looks up a phrase and spits out a sentiment score between -1 and +1.

Here are a few neat things about VADER:

  • It can calculate the sentiment for a huge number of words including emojis, slang, and acronyms. 🙏 🔥

  • VADER uses punctuation, capitalization, and modifiers to amplify positive or negative sentiment

  • The sentiment behind every word is calculated by averaging a large number of human impressions.

Enough talk. Let’s run our comments through VADER to see what we get.

We can see from the big peak in the middle that most of the comments have a neutral score. There also seems to be slightly more area under the right hand side of the plot where sentiment is positive.

Just to gut-check, let’s look at some of the most negative comments.

That’s pretty negative alright

And the most positive.

Wow so wholesome

Measuring Love & Hate  - Avg. Sentiment across Subreddits

There are two ways we can compute average sentiment.

The first way is to simply calculate the average sentiment score across every single comment.

Only subreddits with more than 750 comments mentioning Elon are considered

At a glance, this chart makes a lot of sense.

The top subreddit by average sentiment is /r/IAMA. Elon Musk did a AMA that was extremely well received in 2015. It got 67k upvotes and over 11k comments.

We would also expect higher average sentiment in subreddits that are named after his companies: SpaceX, Teslamotors, and SpaceXLounge. Beyond that, he is also highly praised in subreddits like /r/space and /r/futurology.

The second way we can calculate average sentiment is by calculating the weighted average based on comment score.

We’ll take the score from a comment, and divide it by the total sum of comment scores from that subreddit. Then we’ll multiply the result with our VADER score.

A comment with 10 points for example, will be weighed 10x as much as a comment with 1 point.

Comments with negative score will be weighted in the opposite direction. A negative comment with negative score will end up being treated like a positive comment.

The weighted average score gives us slightly different results.

Only subreddits with more than 750 comments mentioning Elon are considered

Unlike the first method, some subreddits actually have negative average sentiment. It’s possible this is the case because people are more comfortable anonymously upvoting negative comments than writing mean comments themselves.

Surprisingly /r/cars out-edges /r/wallstreetbets as the subreddit that is the most negative towards Elon.

A casual search for “elon” in /r/cars indicates that the subreddit doesn’t like Musk much

Polarizing opinions from investors— /r/investing vs. /r/wallstreet bets

According to our data, /r/investing is generally positive about Elon. We can gut-check this by searching for the top posts mentioning him.

But man oh man, /r/wallstreetbets does not like Elon. We can see that it ranks among the lowest subreddits by average sentiment score. The consensus in the subreddit is that Elon is a poor businessman, who is consistently falling short of his promises.

I found these two posts scrolling through the front page of /r/wallstreetbets today.

Something the alt-right and alt-left can both agree on

Another funny observation is that the two subreddits known for their alternative political stances, /r/the_donald for the alt-right and /r/chapotraphouse for the alt-left, both dislike Elon.

In our data, they rank as two of the lowest subreddits by average sentiment score.

Some classic /r/the_donald posts

Chapo Trap House is a podcast that is closely identified with the “Dirtbag Left”.

Finally they’ve found something to agree on?

A Change of Heart…

Looking at the average sentiment across subreddits doesn’t show us how sentiment changes over time. We’ll need to visualize the data as a time series for that.

Over the last 3 and a half years, there’s been a slow decline in sentiment. The last 3 months have been among the worst. Only time will tell if this trend will continue.

The subreddits that have experienced the largest downturn in sentiment are /r/cars, /r/wallstreetbets, /r/investing/, and /r/politics.


You either die a hero, or you live long enough to see yourself become the villain.

The internet changes its mind about a lot of people. It’s not surprising that Elon Musk is one of them.

Perhaps Musk’s descent into infamy is self-inflicted. For too long, he has over-promised and under-delivered and now his critics have come home to roost.

Or maybe we are treating Musk like we treat every celebrity. The combination of our obsession for news and drama and the echo-chamber of social media groups turns every tidbit of controversy into an avalanche.

Whatever the reason, the tides are changing.