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MH17 Will Usher In A Completely New Kind Of War - One The US Cannot Win

Zerohedge - Mon, 07/21/2014 - 21:01

Submitted by Simon Black of Sovereign Man blog,

Russians aren’t exactly known for having a great sense of humor. But the language is full of bizarre, often hilarious expressions like “perebrasyvanie kakashkami”.

Literally translated this means “throwing shit”. And it applies right about now—when a bunch of people is standing around blaming one another for something that has gone heinously wrong.

“Heinously wrong” is somewhat of an understatement.

The MH17 disaster is so bad that it’s made people forget about the roving army of fanatics that has taken over half of Iraq and parts of Syria in their quest to build a global caliphate.

This is much bigger. And there’s so much pent up tension between rising powers right now, there’s serious risk of it turning into a much greater conflict.

It seems ironic that the world was in a similar situation exactly a hundred years ago.

After the assassination of Archduke Franz Ferdinand in Sarajevo, Austria-Hungary issued a series of ultimatums to the Kingdom of Serbia, and ultimately declared war on July 28, 1914.

Tensions in Europe and around the world were at boiling point. The primacy of the British and other European colonial powers was waning, as recently formed unitary states of Germany and Italy were on the rise.

With so many rising powers, it was inevitable that conflict would ultimately ensue. Even if Franz Ferdinand’s assassination wouldn’t have happened, some other tinder would have lit the fire.

Similar conditions exist today.

Just like a century ago when waning British power invited a power struggle among rising nations, waning US power is creating conflict with Russia, China, etc.

A century ago, they settled it on the battlefield. Everyone knew war would eventually come to Europe. But the great miscalculation was they presumed it would be just another 19th century limited war.

It was anything but.

The great war brought brutal mass killings, bombings, heavy artillery, gassing, etc. And it changed warfare forever.

This time around, the way we conduct war is different. Similarly, leaders are miscalculating, thinking that they can scare their opponents with warships and fighter jets.

But modern warfare isn’t fought with boots on the ground. In 2014, cyberwar and economic war looms.

And this type of war is something that will affect literally every person who is plugged in to the global financial system.

I invite you to explore more with me on this critically important topic in today’s podcast. You can give it a listen here:

The New Republic Is Queen of the Presstitutes — Paul Craig Roberts

Paul Craig Roberts - Mon, 07/21/2014 - 20:51

The New Republic Is Queen of the Presstitutes

Paul Craig Roberts

UPDATE: According to the latest reports, the separatists in Donetsk have handed over to Malaysian authorities the black boxes from the downed Malaysian airliner, which indicates that those who have been blamed by Washington and the Western presstitute media have nothing to fear from the facts.

How much did the CIA pay the New Republic to print this false report? Re:

Probably a lot.

In the 1960s there was a prominent intellectual journal in London, Encounter. The journal had a distinguished editor and many distinguished people published important articles in the journal. None knew that they were publishing in a CIA cold war operation.

In retrospect I think Wm. F. Buckley’s National Review might have been on the CIA’s payroll. The magazine always seemed to take the CIA’s position. The New Republic pretended to be a protest magazine, but it wasn’t.

The New Republic article by Julia Ioffe is a collection of nonsense from obscure websites, some of which could be CIA operations, which Ioffe misrepresents as reports from the Russian state media. Ioffe paints a completely false picture of Russian reporting on the downed Malaysian airliner. No one could do this inadvertently.

As a person who pays attention to Russian media broadcasts and is routinely interviewed by the Russian media, I have never encountered any of the absurdities that Julia Ioffe misrepresents as Russian news.

What the Russian media reports is President Putin’s calls for objective non-politicized investigation under the auspices of the International Civil Aviation Organization. What the Russia media reports are the satellite photos of the Ukrainian Buk missile launchers deployed in the area where the Malaysian airliner was downed. The Russian media reports the Russian government’s requests that Washington release its own satellite photos of the area covering the period of the airliner incident.The Russian media also provides the flight paths of the Ukrainian fighter jet that approached the airliner moments prior to its demise.

What the West reports are unsubstantiated accusations and insinuations and misrepresentations by the likes of Julia Ioffe.

Listen to this Ioffe statement. She thinks she is describing the Russian media, but she is describing the Western presstitute media of which she is a part: “The Russian media space has become so uniform and independent voices so cowed and marginalized that there is no counterweight and, when there’s no counterweight, if you repeat a thing often enough, it becomes the truth.”

No truer words have ever been spoken about the Western presstitute media and the New Republic.

The post The New Republic Is Queen of the Presstitutes — Paul Craig Roberts appeared first on

How RenTec Made More Than $34 Billion In Profits Since 1998: "Fictional Derivatives"

Zerohedge - Mon, 07/21/2014 - 20:33

Ten days ago Bloomberg reported that as a result of various tax dodges, one of the fastest-trading hedge funds in the US, Jim Simmons' Renaissance Technologies, had managed to avoid paying ordinary income tax on billions in profits, by classifying trades that often times had a holding period of minutes if not seconds, as a long-term capital gain. As part of this finding, it was reported that there would be a hearing chaired by none other than Carl "Shitty Deal" Levin scheduled for tomorrow morning when yet another tax loophole abused by not only RenTec but all of its high churn and HFT peers (because the "friends and family" Medallion is at its core the original HFT fund) would be exposed for all to see. Moments ago, in advance of tomorrow's 9:30 am hearing, the permanent subcommittee on investigations released a 93 page report on just how it was that RenTec engaged in the "improper use of this structured financial product, known as basket options."

As the preamble to the report notes:

The report outlines how Deutsche Bank AG and Barclays Bank PLC, over the course of more than a decade, sold financial products known as basket options to more than a dozen hedge funds. From 1998 to 2013, the banks sold 199 basket options to hedge funds which used them to conduct more than $100 billion in trades. The subcommittee focused on options involving two of the largest basket option users, Renaissance Technology Corp. LLC (“RenTec”) and George Weiss Associates.


The hedge funds often exercised the options shortly after the one-year mark and claimed the trading profits were eligible for the lower income tax rate that applies to long-term capital gains on assets held for at least a year. RenTec claimed it could treat the trading profits as long term gains, even though it executed an average of 26 to 39 million trades per year and held many positions for mere seconds.


Data provided by the participants indicates that basket options produced about $34 billion in trading profits for RenTec alone, and more than $1 billion in financing and trading fees for the two banks.

And considering the topic of tax-evasion and loophole abuse is a rather sensitive and politically-charged one nowadays, to say the least, one can be certain that tomorrow's hearing, full of sound and fury targeting America's wealthiest tax evaders, will be quite a spectacle.

The highlights from the report:

For the last decade, the U.S. Senate Permanent Subcommittee on Investigations has presented case histories showing how financial institutions, law firms,  accountants, and others have designed and implemented complex financial structures to take advantage of and, at times, abuse or violate U.S. tax statutes, securities regulations, and accounting rules. This investigation offers yet another detailed case study of how two financial institutions – Deutsche Bank AG and Barclays Bank PLC – developed structured financial products called MAPS and COLT, two types of basket options, and sold them to one or more hedge funds, including Renaissance Technologies LLC and George Weiss Associates, that used them to avoid federal taxes and leverage limits on buying securities with borrowed funds. While that type of option product was identified as abusive in a public memorandum by the Internal Revenue Service (IRS) in 2010, taxes have yet to be collected on many of the basket option transactions and its use to circumvent federal leverage limits has yet to be analyzed or halted.


The basket option contracts examined by the Subcommittee investigation were used by at least 13 hedge funds to conduct over $100 billion in securities trades, most of which were short-term transactions and some of which lasted only seconds. Yet the resulting short-term profits were frequently cast as long-term capital gains subject to a 20% tax rate (previously 15%) rather than the ordinary income tax rate (currently as high as 39%) that would otherwise apply to investors in hedge funds engaged in daily trading. While the banks styled the trading arrangement as an “option” under which profits from short-term trades would be treated as long term capital gains, in essence, the banks loaned the hedge funds money to finance their trading and allowed them to trade for themselves in highly leveraged positions in the banks’ proprietary accounts and reap the resulting profits. The banks offering the “options” benefited from the financing, trading, and other fees charged to the hedge funds initiating the trades. In the end, the trading conducted by the hedge funds using the basket option accounts was virtually indistinguishable from the trading conducted by hedge funds using their own brokerage accounts, and provided no justification for treating the resulting short-term trading profits as long-term capital gains.

Note that the term "illegal" is not used once in the entire 93-page doc, for the simple reason that this latest tax-evading loophole wasn't. Instead hedge funds, having the sources to do so, merely scoured the tax code and sitting down with a couple of less than "moral" banks found yet another tax evasion maneuver, as well as a way to implement it, that was available to everyone who could afford to spend millions on the appropriate tax and legal advice. Call it "capital investment" for the New Normal.

Back to the filing, we find what will surely be Carl Levin's punchline to be used and abused tomorrow: "fictional derivatives."

The facts indicate that the basket option structures examined in this investigation were devised by sophisticated financial firms to allow clients to circumvent federal taxes and leverage limits. The structures rested on two fictions. The first was that the bank, rather than the hedge fund, owned the assets being traded in the designated option accounts, even though the hedge fund bought and sold the assets, was exposed to all significant risks and rewards, and profited from the trading, with little input from the bank serving as the nominal owner of the assets. In effect, the structure purported to enable the hedge fund to purchase an “option” on its own trading activity, an arrangement that makes no economic sense outside of an effort to bypass federal taxes and leverage limits. The second fiction was that the profits from the trades controlled by the hedge fund could be treated as long-term capital gains, even for trades lasting seconds. That fiction depended upon the hedge fund claiming that the profits came from exercising the “option” rather than from executing the underlying trades. In fact, the “option” functioned as little more than a fictional derivative, permitting the hedge fund to cast short-term capital gains as long-term gains and authorizing financing at levels otherwise legally barred for a customer’s U.S. brokerage account.

And, lo and behold, one of the two main enabling banks of this tax dodge is none other than Barclays, which somehow has managed to get itself involved in virtually every possible financial scandal in the past five years.

The basket options sold by Deutsche Bank AG starting in 1998, and by Barclays Bank PLC since 2002, produced a total of more than $35 billion in trading profits, of which at least $34 billion came from options exercised after more than one year. Most of those profits came from assets which were held for less than one year but which were treated by the hedge funds holding the options as having produced long-term capital gains taxable at the lower long-term capital gains rate. The options were also used by the participating hedge funds to trade on borrowed funds using a leverage ratio of as much as 20:1, versus the much lower federal leverage limit of 2:1 that normally applies to brokerage accounts held by U.S. broker-dealers for their clients. These financially engineered products – which relied on high volume trading, leveraged funds, and artificially lowered tax rates to produce their profits – warrant greater attention from federal tax, securities, and banking regulators to prevent their continued misuse.

Some details on the actual trading strategy, with pictures.

In the basket option contracts examined by the Subcommittee, the bank always appointed the general partner of the hedge fund client to act as the investment advisor for the trading account holding the referenced assets during the duration of the option. Once appointed, the investment adviser exercised complete control over the securities included in the option account, designing its own trading strategy and using the bank’s own facilities to execute the trades. In some cases reviewed by the Subcommittee, the investment advisor used algorithms to engage in a high volume of trading, executing more than a 100,000 transactions per day.

Oops, HFTs. Even assuming you can continue your spotless trading record now that your frontrunning gig has been shown to the entire world, there goes your tax-free lunch.

Many of those trading positions lasted minutes, and the overall composition of the securities basket changed on a second-to-second basis. One basket option account later reviewed by the Securities and Exchange Commission (SEC) was found to have experienced 129 million orders in a year. In other cases, the investment adviser purchased securities whose positions remained unchanged for weeks, but all of the basket option accounts reviewed by the Subcommittee were dominated by short-term trading involving assets held less than one year.


By acting as the investment adviser, the hedge fund – the option holder – became the party that actually controlled the trading strategy, the timing of trades, and what assets were selected for the referenced account. The hedge fund was also exposed to all significant rewards and risks associated with the trading. The banks claimed that the hedge funds did not bear 100% of the risk of loss, because the banks provided so-called “gap” protection in the event of a catastrophic market failure. That risk was so small, however, that despite, for example, hundreds of millions of trades that took place in the more than 60 basket options held by RenTec over a decade, including during the worst financial crisis in a generation, neither bank was ever required to satisfy a loss due to a market failure.


To further minimize the gap risk, the option contract contained several provisions designed to limit trading losses in the account to the 10% premium provided by the hedge fund. The key provision accomplished that objective by specifying a loss threshold – sometimes called a “barrier” or “knockout” amount – which if reached would cause the option to cease to exist, or “knockout,” and trigger the ability of the bank to liquidate the account assets.


During the period of the option, the securities transactions were executed in the name of the bank and the resulting securities were held in the bank’s proprietary trading account. The accompanying profits or losses also remained within the account until the option was exercised. The hedge fund chose when to exercise the option. Although the options reviewed by the Subcommittee often had three-year terms and the hedge funds claimed they wanted longer-term financing arrangements, the hedge funds often exercised the options shortly after 12 months. In all cases examined by the Subcommittee, the option accounts paid the profits to the hedge fund option holder.


Deutsche Bank developed its basket option product in 1998, naming it the Managed Account Product Structure (MAPS). Over the next 15 years, Deutsche Bank sold 156 MAPS options, of which 96 had terms greater than one year. At their peak, those 96 options had assets with a total initial notional value of about $60 billion. Deutsche Bank sold the MAPS options to 13 hedge funds, including 36 to RenTec. Of those 36 option contracts, the first 29 had terms greater than one year. The MAPS options sold to RenTec produced profits for that hedge fund totaling about $17 billion. The MAPS options sold to all 13 hedge funds produced revenues for Deutsche Bank totaling about $570 million.



The Barclays’ basket options product was developed in 2002, at the request of RenTec, and was named COLT. Barclays sold 43 COLT options to RenTec, of which 31 had terms greater than one year. At their peak, those 31 COLT options had assets with a total initial notional value of about $62 billion. The COLT options produced trading profits for RenTec totaling about $18.5 billion. They also produced revenues for Barclays totaling about $655 million.

And so on, with all the above complexity driven by a simple motive: to reclassify short-term capital gains into long-term profits, in the process saving about 25% of the absolute profit from any transaction.

What we hope to learn from tomorrow's hearing is whether it will explain why, even as actual stock trading volumes have plunged in recent years, trading in derivatives has literally exploded. Surely everyone engaging in comparable "basket option" strategies would explain at least a part of it.


If nothing else, however, we now know why some of the biggest HFT-related hedge funds in the world: Citadel, Millennium, Balysany and DE Shaw have such an epic regulatory-to-net asset leverage as we showed before: the reason, one as old as time itself: to avoid paying tax. From the report:

In addition to avoiding taxes, the structure was used by the banks
and hedge funds to evade federal leverage limits designed to protect
against the risk of trading securities with borrowed money. Leverage
limits were enacted into law after the stock market crash of 1929, when
stock losses led to the collapse of not only the stock speculators, but
also the banks that lent them money and were unable to collect.


Had the hedge funds made their trades in a normal brokerage account,
they would have been subject to a 2-to-1 leverage limit – that is, for
every $2 in total holdings in the account, $1 could be borrowed from the
But because the option accounts were in the name of the bank,
the option structure created the fiction that the bank was transferring
its own money into its own proprietary trading accounts instead of
lending to its hedge-fund clients.


Using this structure, hedge funds piled on exponentially more debt than leverage limits allow, in one case permitting a leverage ratio of 20-to-1. The banks pretended that the money placed into the accounts were not loans to its customers, even though the hedge funds paid financing fees for use of the money. While the two banks have stopped selling basket options as a way for clients to claim long-term capital gains, they continue to use the structures to avoid federal leverage limits.

And as we showed previously:


And while we understand the Congressional the fascination with RenTec, created by Jim Simons, the 64th richest man in the world with a $15.5 billion net worth, we wonder why the NY Fed's (and the PPT's) very own favorite Spoo-buying counterparty, Citadel, which has a gross leverage of over 9x(!) is not mentioned even once.

Source: Permanent Subcommittee on Investigations

Gaza Right Now: In Pictures

Zerohedge - Mon, 07/21/2014 - 19:55

The death toll among Palestinians from the Israeli offensive in the Gaza Strip reached over 500 on Monday, Gaza health officials said, as the two sides counted their dead following the bloodiest day of fighting so far in the two-week campaign. CBS reports the officials said some 3,150 Palestinians had been wounded. The IDF just announced 7 Israeli soldiers were killed today, raising the Israeli death toll to 25 (including 2 civilians). A glance at the stunning images below beggars belief that world equity markets (and Israel's) are shrugging at this escalating violence. We assume they 'believe' in the power of John Kerry.



Bombardement d'un hôpital dans la bande de Gaza

— Radio-Canada Info (@RadioCanadaInfo) July 21, 2014

#SOSPalestina RT:
"@RoaJavier: Ambulancia cruzando, mientras caían misiles lanzados por Israel en una zona de #Gaza"

— Luz Marina López (@koskita) July 21, 2014

Cuatro muertos en el bombardeo israelí de un hospital en Gaza

— El Periódico (@elperiodico) July 21, 2014

BREAKING PHOTO: Gaza last night after hundreds of rockets fired into Israel. Via mohammed saber

— PzFeed Top News (@PzFeed) July 21, 2014

BREAKING PHOTO: Gaza right now after an Israeli air strike. More than 100 rockets fired into Israel today. Reuters

— PzFeed Top News (@PzFeed) July 21, 2014

Israeli airstrike kills 20 people in Gaza - bringing the total number of dead to 501 (Reuters)

— The Telegraph (@Telegraph) July 21, 2014

#Israel drops #phosphorus bombs on #Gaza

— Press TV (@PressTV) July 21, 2014

Así está dejando Israel a #Gaza, reducida a escombros, muertos y horror. Foto del barrio de Shejaiyya ahora.

— Edgardo Rovira (@EdgardoRovira) July 20, 2014


And The IDF defends its actions...

Take a look inside: Hamas uses Shuja'iya as a fortress for its weapons.

— IDF (@IDFSpokesperson) July 20, 2014


And then there's this... an Israeli sniper killing a wounded gaza civilian...

It appears John Kerry's work is not yet complete...

Israel-palestinian Negotiations not going well. Maybe a humanitarian ceasefire. But maybe thats its. See what the morrow brings

— Richard Engel (@RichardEngel) July 21, 2014

july 21/GLD loses 1.8 tonnes of gold/SLV no change/gold and silver advance/gold demand from China 25 tonnes/Huge clash between Palestinians militants and Israels/Isis grabs Syrian oilfields/

Harvey Organ - Mon, 07/21/2014 - 19:29
Gold closed up $4.50  at $1313.70 (comex to comex closing time ). Silver was up 13 cents at $20.97 In the access market tonight at 5:15 pm gold: $1312.00 silver:  $20.92 GLD: a big loss of 1.8 tonnes of  gold inventory at the GLD (tonnage now 803.34) tonnes). SLV : no change in  silver  inventory at the SLV . Chinese demand from the SGE came in at 25 tonnes this week. Gold Harvey Organ

Liam Halligan: The dollar's 70-year dominance is coming to an end

GATA - Mon, 07/21/2014 - 19:27

By Liam Halligan
The Telegraph, London
Friday, July 19, 2014

In early July 1944, delegates from 44 countries gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire. A three-week summit took place, at which a new system was agreed to regulate the international monetary and financial order after the Second World War.

The US was already the world's commercial powerhouse, having eclipsed the British Empire several decades earlier. America was also on course to be among the victors of "Europe's conflict", even though its economy was largely unscathed by war. As such, Bretton Woods was US-dominated and produced a settlement largely on US terms.

Seventy years ago this week, that fateful summit ended. Its close marked the moment the dollar's unquestionable supremacy was secured. Since then, global commerce has been conducted largely in dollars and leading economies have held the greenback as their primary reserve currency.

... Dispatch continues below ...


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The same system remains intact today, with the lion's share of commercial settlements worldwide still clearing the US banking system -- even if the parties involved have nothing to do with the States.

The dollar's hegemony continues to be cemented, meanwhile, by the operations of the International Monetary Fund and World Bank. Founded at Bretton Woods, they're both Washington based, of course, and controlled by America, despite some Francophone window-dressing.

The advantages this system bestows on the US are enormous. "Reserve currency status" generates huge demand for dollars from governments and companies around the world, as they're needed for reserves and trade. This has allowed successive American administrations to spend far more, year-in year-out, than is raised in tax and export revenue.

By the early Seventies, US economic dominance was so assured that even after President Nixon reneged on the dollar's previously unshakeable convertibility into gold, amounting to a massive default, dollar demand kept growing.

So America doesn't worry about balance of payments crises, as it can pay for imports in dollars the Federal Reserve can just print. And Washington keeps spending willy-nilly, as the world buys ever more Treasuries on the strength of regulatory imperative and the vast liquidity and size of the market for US sovereign debt.

It is this "exorbitant privilege" – as French statesman Valéry Giscard d'Estaing once sourly observed – that has been the bedrock of America's post-war hegemony. It is the status of the dollar, above all, that's allowed Washington to get its way, putting the financial squeeze on recalcitrant countries via the IMF while funding foreign wars. To understand politics and power it pays to follow the money. And for the past 70 years, the dollar has ruled the roost.

This won't change any time soon. Something just took place, though, which illustrates that dollar reserve currency status won't last forever and could be seriously diluted. Last week, seven decades on from Bretton Woods, the governments of Brazil, Russia, India and China led a conference in the Brazilian city of Fortaleza to mark the establishment of a new development bank that, whatever diplomatic niceties are put on it, is intent on competing with the IMF and World Bank.

It's long been obvious the BRICs are coming. The total annual output of these four economies has spiralled in recent years, to an astonishing $29.6  trillion (£17.3 trillion) last year on a PPP-basis adjusted for living costs. That's within spitting distance of the $34.2 trillion generated by the US and European Union combined.

America's GDP, incidentally, was $16.8 trillion on World Bank numbers, and China's was $16.2 trillion -- within a whisker of knocking the US off its perch. The balance of global economic power is on a knife-edge. Tomorrow is almost today.

Consider also that the BRICs collectively hold sway over 50 percent of global currency reserves, rising to almost three-quarters if you take the emerging markets as a whole. The G7 nations between them control only 20 percent -- and less than 8 percent if you exclude Japan.

Based on such balance sheets, we're now seeing institutional change. The new BRICs Development Bank, modelled on the IMF, will have a $100bn currency reserve available to lend around the world, giving distressed debtor nations an alternative to the "Washington consensus."

For a long time, the BRICs have been paying in to the IMF, yet been denied additional influence over what happens to the money. Belgium has more votes than Brazil, Canada more than China.

The institutions governing the global economy have failed to keep pace with reality. Modest reforms giving the large emerging markets more power, agreed with much fanfare in 2007 and again in 2010, have been stalled by Washington lawmakers. The BRICs have now called time, setting up their own, rival institution based in Shanghai.

The key to the dollar's future is petrocurrency status -- whether it's used for trading oil and other leading commodities. Here, too, change is afoot. China's voracious energy appetite and America's increased focus on domestic production mean the days of dollar-priced energy look numbered.

Beijing has struck numerous agreements with Brazil and India that bypass the dollar. China and Russia have also set up rouble-yuan swaps pushing America's currency out of the picture. But if Beijing and Moscow – the word's largest energy importer and producer respectively -- drop dollar energy pricing, America's reserve currency status could unravel.

That would undermine the US Treasury market and seriously complicate Washington's ability to finance its vast and still fast-growing $17.5  trillion of dollar-denominated debt.

In May, Beijing and Moscow signed a huge multi-decade gas supply contract, to sit alongside a similar oil deal agreed in 2009. No one knows what share of this energy trade will be on a yuan-rouble basis -- and the two governments aren't saying. This question, seemingly inane, is among the most important diplomatic issues of our time.

At the moment, although Russia's export partners do sometimes settle in roubles, most Sino-Russian trade is still in dollars. But the combination of this new gas deal, and western sanctions on Russia -- has seen Moscow and Beijing step up bilateral efforts to facilitate large-scale non-dollar settlement.

With western anti-Russia sanctions likely to be tightened again after the tragic shooting of a Malaysian passenger plane over Ukrainian airspace, Beijing's response will be closely scrutinised. I, for one, expect the Chinese to say little until it's clearly established who grounded the plane and why.

Although the dollar's reserve status won't end overnight, the global payments system is now moving inexorably towards that outcome. The US currency accounted for just 33 percent of all foreign exchange holdings in 2013, on IMF numbers, down from 55 percent in 2001.

Within a decade or so, a "reserve currency basket" may emerge, with central banks storing wealth in a mix of dollars, yuan, rupee, reals and roubles, as well as precious metals. Perhaps some kind of synthetic bundle of the world's leading currencies will be developed, with emphasis placed, after years of Western money-printing, on assets backed by commodities and other tangibles.

I also believe central banks may include cyber-currencies (such as bitcoin) in their reserves. If you think that's mad, consider that mankind has long sought scarcity -- be it with shells, stones or metallic elements -- to store wealth. Now the money-printing taboo has been broken by yet another generation, it makes sense to use complex computer algorithms to ensure that only a certain amount of a particular currency unit can ever exist.

The dollar's status is a big question. Judging the outcome is more akin to star-gazing than scientific economics. But the establishment of this BRIC Development bank, timed to coincide with the anniversary of Bretton Woods, is an audacious and significant move. The world's emerging giants now have thumbscrews on the West.

* * *

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Malaysian Airlines In Hot Water Again, This Time For Flying Above War-Torn Syria

Zerohedge - Mon, 07/21/2014 - 19:26

Fool me once, shame on you; fly civilains over a war-zone twice, shame on Malaysian Airlines. In what is perhaps the most incredulous news of today (aside from Kerry's belief that he will make a difference in Gaza) is, as BNO reports, a Malaysia Airlines passenger plane flying from Kuala Lumpur to London flew over Syria on Sunday... The U.S. Federal Aviation Administration (FAA) and other organizations have warned airlines for more than a year to avoid the entire country. “Information from the International Civil Aviation Organization and open source reports of surface-to-air missile firings,” the FAA said in a notice last year, describing the risk to civilian flights as “significant.”


Source: FlightRadar24


Via BNO,

The log details published by flight tracking website Flightradar24 showed the flight path of Malaysia Airlines flight MH4, an Airbus A380 which departed Kuala Lumpur on early Sunday. The log showed the aircraft flying over Syria, which is in the midst of a raging civil war, from about 1:20 p.m. local time, flying close to the city of Homs.


Reports about Flight MH4 flying over Syria garnered the responses of thousands of people on the social networking website Twitter, where the vast majority described the airline’s route as irresponsible. It appeared Flight MH4 was routed over Syria after airspace over eastern Ukraine was closed following the shootdown of Malaysia Airlines Flight 17 last week.


No airspace restrictions are in place over much of Syria, but the U.S. Federal Aviation Administration (FAA) and other organizations have warned airlines for more than a year to avoid the entire country. “Information from the International Civil Aviation Organization and open source reports of surface-to-air missile firings,” the FAA said in a notice last year, describing the risk to civilian flights as “significant.”


There are some local flights going over to Iraq and Lebanon and Jordan, but they are not big airlines or transcontinental flights,” said Flightradar24 co-founder Mikael Robertsson.


“So Malaysia Airlines was the first flight I’ve seen going over there for like a year... I know that Iraqi Airways and Syria Air are flying over Syria sometimes. No big airlines.”

*  *  *

Of course, avoiding the world's ever-increasing warring nations is not
easy - perhaps it is time to consider trans-polar travel...

But with oil prices so high...

*  *  *

On the bright side...

#MH17 black boxes now in hands Malaysia delegation.

— Christopher Miller (@ChristopherJM) July 21, 2014

Turk notes weakening 'flash crashes'; Embry knocks Yellen's disinformation

GATA - Mon, 07/21/2014 - 18:57

5:57p ET Monday, July 21, 2014

Dear Friend of GATA and Gold:

"Flash crashes" in gold and silver, the attacks of market-rigging central planners, are having less effect, GoldMoney founder and GATA consultant James Turk tells King World News today. "With both gold and silver -- as well as the mining stocks -- being so undervalued," Turk says, " the central planners can't keep downward pressure on the precious metals for days or even weeks like they used to."

Turk's interview is excerpted at the KWN blog here:

Meanwhile Sprott Asset Management's John Embry, also interviewed at KWN, disputes last week's statement to Congress by Federal Reserve Chairwoman Janet Yellen. "That is one of the most naive statements I've ever read," Embry says. "There is untruth in virtually every assumption. I think there is a much stronger probability that economic activity in the United States is already contracting. This means monetary policy is going to have to be aggressive rather than accommodative or the system is going to collapse."

Embry's interview is excerpted at KWN here:

CHRIS POWELL, Secretary/Treasurer
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France Defies US, British Demands To Kill Mistral Sale To Putin... For Now

Zerohedge - Mon, 07/21/2014 - 18:55

While the theater of Russian sanctions has been streamed to a live, and global, studio audience non-stop in recent weeks, when it comes to money actually walking, the French sale of its amphibious marine warship, the Mistral, to Russia has continued as planned (a $1 billion ship we should add). And it is this intransigence by Paris that piqued the ire of not only the UK but also the US.

First, it was British Prime Minister David Cameron who earlier today "questioned" France's plan to sell Mistral helicopter carriers to Russia, saying fulfilling such an order would be unthinkable in Britain after the downing of the Malaysian Airlines plane in Ukraine. When asked about France's plan to press ahead with a 1.2 billion-euro ($1.66 billion) contract to sell the ships to Russia, Cameron said: "Frankly in this country it would be unthinkable to fulfill an order like the one outstanding that the French have.

Well, France is not the UK which is why the US also had to chime in, and as Reuters reported moments ago:


It is unclear if said official added that fulfilling such an order in the US would be unthinkable too.

Russia too had an opinion. As Interfax reported, "suspension of the Mistral contract would bring Russia much smaller damage than the damage France would suffer, should France backtrack on its obligation to deliver two helicopter carriers to the Russian Navy, said Deputy Prime Minister Dmitry Rogozin."

"Billions of euros stand behind these contracts. France has always been very pragmatic. I doubt that [Paris will backtrack on its obligations]," Rogozin told reporters in Samara on Monday.


"Suspension of the contract would bring 99% less damage to Russia than to France, as we have every right to claim the money and the deck components made by Russia's Baltzavod which France will have to disassemble," the deputy prime minister said.


"Russia has large-scale assembling know-how today. We can build such ships on our own, if required," he said.

So it was all up to France, which appears to have come up with a compromise of sorts, when moments ago it announced that while it is far "too late" to cancel the transaction of the first warship which will be delivered in October, regardless of how much farther European sanctions escalate, France would be willing to cancel the sale of the second Russian Mistral ship should sanctions be raised. Why? Because Russia still has not paid for said ship.

Of course, keep in mind that this is the same France which was already punished to the tune of $9 billion a few weeks ago when the US slapped a record fine on BNP, and which resulted in a statement by none other than the head of the French central bank (issued on the US independence day) that the BNP case would merely encourage "diversification" away from the dollar. 

 The reason for the fine? As Putin explained previously: to make blackmail France into selling any more ships to Russia.

Said otherwise, the US certainly does not enjoy being presented with counter-blackmail, and the second France warned that the USD may lose its reserve currency status, it was time to strike. What better way to do so than to show the world who is (still) boss than by depriving the French economy out of hundreds of million in much needed funds.

As for who the biggest loser is here, Russia was at least right about that. As the Telegraph reported moments ago: "the head of France’s business federation has called for an end to the 75pc tax rate and to the 35-hour working week, saying the country’s economy is “catastrophic”. Pierre Gattaz, president of the Medef – France’s equivalent of the CBI – said the 75pc tax that companies are forced to pay on employees’ annual salaries above €100,000 (£79,000) was damaging France’s competitiveness.

“It’s a symbol which, like the 35 hours, has gone around the planet, and it’s destructive. I never meet a single Chinese or American who doesn’t bring it up,” said Mr Gattaz. “The economic situation of the country is catastrophic … if France was a company, it would be going bankrupt.”

So sadly while France certainly has dire need for the funds, it will ultimately be forced to admit that, at least for now, the US is its superior, and once sanctions are once again raised, it will have no choice but to terminate the option for any more Russian ships... even if it means pushing its already "catastrophic" economy even deeper into the redline.

One wonders: with allies like these, is Paris certain it needs Russia as an enemy?

Saxobank: "Be Warned" Of Delayed Market Reaction To "Escalation Of Global Turmoil"

Zerohedge - Mon, 07/21/2014 - 18:16

Authored by Steen Jakobsen, Chief Economist of Saxobank,

There are causes worth dying for, but none worth killing for” – Albert Camus

The world is increasingly becoming engaged in civil wars and general turmoil where Camus' words could and should play a central but never will. This article is one of the hardest to write as war is never about right or wrong. They are per definition always wrong and extremely personal and emotional. The fact is, however, that we need to put "the risk of wars" into our macro outlook as they are increasing not only in intensity but also in the numbers of casualties.

I will not condone anyone or any party involved in the present conflicts – I learned my hard lesson advocating the removal of Saddam Hussein, only to learn that his successors are just as bad. Therefore, Camus’ words will remain my mantra.

The simplest way to “measure” geopolitical risk is to look at the price of energy. Energy is everything for a macro economist as it’s a tax on the economy when high, and a discount when low. High energy consumption levels makes it a critical part of any projection but despite this, energy assumptions are often exogenous (given!).

Think about this: Everything you did this morning involved energy consumption: Waking up to your smart phone (charging overnight), putting on the coffee, pouring the cold milk from the fridge, taking a shower, driving the car to work and walking into your air-conditioned office. Likewise, the rest of your day will be one big consumption of energy. The world's energy resources are primarily extracted from “volatile” or underdeveloped regions, creating a real risk of disruption of supply. Herein lies a clear and quantifiable risk.

The way I measure this geopolitical risk is through measuring the spread between the 5th contract of WTI crude oil and the first contract. Of course, there are other factor at work, but in the absence of a better alternative, I use this.

 Source: Bloomberg, Saxo Bank

As can be seen, since July 15 the “war premium” or more neutral “disruption premium” have increased by USD 2 and the world's consumers are now paying two dollars more per barrel of WTI crude. Overall there are many factors influencing the crude market but the price of energy remains the one component we need to know is stable and preferably falling.

The overall impact from war is negative despite the glorified analysis of how World War II stopped the recession – think of the 1970s – probably a better and more relevant analogy to today’s trouble in Gaza, Iraq, Russia/Ukraine, Libya, and Syria. Many will argue it’s different this time, back then we were too dependent on the Middle East!  Sure, but prices were only between 10 and 25 US dollars a barrel back then!


Now we have lived with an oil rise in excess of  USD 100 more or less since 2007! Crude is now four times higher in price than during the “inflationist” 1970s – the era in which we ended  the Bretton Woods system of monetary management and where central banks started targeting inflation instead.

No, the signal from the energy market about the demand of energy and the risk of getting enough of it is clear: Prepare for less growth, less certainty and more geopolitical risk. The market, however, maintains a steady hand: Israel will be contained inside a couple of weeks, Russia vs. Ukraine will find a solution. The non-acceptance of tail-risk (Black Swans) is clear for everyone to see. The market is “perfect” in its information, zero interest rates will save us and we have all been fooled into believing that the real world no longer matters.

Unemployment, social inequality, wars, innocents being killed, and TV images of people fighting to live another day are not relevant………except for the fact that for world growth to keep increasing we need to continue to see growth in Africa, the Middle East and Eastern Europe.

We need to accept that the world is now truly global – we smiled while globalisation reduced prices and made our companies more profit, now the escalation of wars reflect a world where growth is low, energy is expensive and increasingly hard to get and that we have gone full circle with macro and interventionist policies.

The escalation of turmoil in the world is yet to play a role for the market, but be warned: everything economic has a delayed reaction of nine to twelve month – whenever there is an action there will be a reaction. If the present state of alertness continues through the summer you can bet on higher energy prices having a serious impact on not only world growth but also on markets. But don't ever forget that the real losers are the individual families losing loves ones. No, Camus got it right. There is nothing worth killing for, plenty to fight for.

Netflix Meets EPS, Beats On International Subs, Guides To Lower Q3 EPS And Domestic Subs

Zerohedge - Mon, 07/21/2014 - 17:45

Moments ago Netflix reported Q2 Revenue and EPS which were precisely in line with Wall Street estimates, at $1.34 billion and $1.15 EPS. None of this mattered, because just like Amazon, nobody cares about where NFLX is now, everyone is much more focused on where it will be at some indefinite point in the future, with an emphasis on what many believe is virtually unlimited subscriber growth both in the US, but primarily, in the international market. Here is what NFLX reported to its subs growth.

  • Paid Domestic Subscribers rose to 35.085 million. The sequential increase of 708K was the smallest since Q2 2012. The Y/Y increase of 22.6%, likewise, was the weakest since 2012. Total streaming adds increased by 570K, just above the expected 540 increase. What's more troubling is that NFLX predicted that Q3 total domestic streaming adds will increase by 1.33 million, below the Wall Street estimate of 1.4 million.
  • Paid International Subscribers was the silver lining: it was here that NFLX reported that total subs rose to 13.8 million, an increase of 1.118 million, above the 0.97 million expected. And improving the international trend, NFLX hopes that in Q3 international subscribers will rise by a whopping 2.36 million, far above the 1.74 million expected.

So far so good. The problem, as those who tend to short the stock now and then know all too well, is that a major portion of the company's profit is generated by the doomed DVD business.  In Q2 this generated a profit of $92.8 million, however don't expect this to last as the decline curve here is dramatic as any other typical runoff business usually is: indeed, it was $16 million less than a year ago and declining fast.

As for the contribution profit of the company's fastest growing segment, international subs, it once again was a net drain of cash, soaking up some $15.3 million in Q2, which was the smallest negative cash burn since Q2 2011... but was still a cash burn.

The hope, of course, is that sooner or later the International business will become breakeven and generate incremental profits. So far, it hasn't.  This is what NFLX had to say about international growth:

Our international contribution loss of ($15.3) million has been rapidly approaching contribution profitability as we see improvements across all existing markets. Our broad success from Argentina to Finland has convinced us to further invest aggressively in global expansion. Our European expansion this quarter will add new expenses to the segment, so we expect a consolidated contribution loss of ($42) million for the international segment in Q3. Even after our upcoming expansion in Europe, we’ll only address about one-third (271 million of 728 million ) of current global broadband households, providing a great opportunity to build on our international success beyond 2014. As explained in our Long Term Letter, our plan remains to run at about global break-even to fund investment in global expansion.

Putting it all together, here is how much cash NFLX has generated in every quarter for the past three years.

In brief, in Q2, NFLX generated some $16.3 million in total cash, which however would have been substantially negative had it not been for the runoff DVD business.

So will international subs continue growing at a pace that will offset the tapering growth of domestics and certainly offset the declining contribution of the melting DVD ice cube?

That's folks continues to be the 64k question. Or rather 710x question, because that, on an LTM basis, is what what is NFLX EV/Free Cash Flow is (and we use the simple EV calculation, ignoring all the billions in off balance sheet liabilities, which would make this number well over 1,000x.

Finally, those wondering what original content is down the NFLX pipeline, here is the full story:

Earlier this month, Netflix original series and documentaries received 31 Emmy nominations, more than double the 14 we received in our first year of releasing original programming. In its first year of eligibility, Orange received 12 nominations, more than any other comedy series, while nominations for House of Cards grew from 9 last year to 13 this year. Notably, these two shows were nominated for Outstanding Comedy Series and Outstanding Drama Series while The Square, which received 4 nominations, is up for Outstanding Documentary. It is quite rare for a single network to receive nominations in all three of these categories as well as Outstanding Lead Actor and Outstanding Lead Actress for both drama (Kevin Spacey and Robin Wright for House of Cards) and comedy (Ricky Gervais for Derek and Taylor Schilling for Orange.)


Hemlock Grove debuted July 11 and has already begun to build on its Season 1 audience. We have been very pleased with the second season of Derek that launched in May and with the launch of our latest original documentary The Battered Bastards of Baseball.


In the coming weeks, we will premiere the all new 4th and final season of The Killing (8/1) and a new adult animated comedy BoJack Horseman (8/22). Also in August, we will release Mission Blue (8/15) from the Oscar-winning director of The Cove, Fisher Stevens.


Reflecting the increasingly global nature of the Netflix service, we now have original series in production around the world, involving some of the best storytellers working in television and film today. Marco Polo, a historical adventure from Executive Producer Harvey Weinstein, is shooting in Kazakhstan and Malaysia. In New York there is Marvel’s Daredevil, the first of our original series from Marvel Television, as well as the already eagerly-anticipated third season of Orange is the New Black; while in Baltimore, production is underway on the third season of House of Cards. In the Florida Keys, the creators of Damages (Glenn Kessler, Daniel Zelman, and Todd Kessler) are shooting a dark family thriller with an ensemble cast led by Kyle Chandler, Sissy Spacek, Sam Shepard, Linda Cardellini, Ben Mendelsohn, and Norbert Leo Butz. Sense8, a mind-bending series from the Wachowskis (The Matrix trilogy, Cloud Atlas) and J. Michael Straczynski (Babylon 5), began production in San Francisco last month, is now in Chicago, and will shoot in many international locations this year.


In August, production begins in Los Angeles on Grace and Frankie, a comedy led by Jane Fonda, Lily Tomlin, Martin Sheen and Sam Waterston; and in Colombia, Brazilian director José Padilha (Elite Squad, Robocop) will begin filming Narcos with an all-star international cast led by Wagner Moura.


During the quarter, we announced our first-ever talk show, hosted by Chelsea Handler, the popular comedian and best-selling author. As with scripted programming, but unlike news or sports, fewer people are watching talk shows live and are instead watching stacked episodes on DVR or online in the days and weeks following initial airing. Our intent is to produce a show with Handler and her team that reflects this shift to on-demand enjoyment and that will appeal to a global audience. Handler recently taped her first special for Netflix -- a stand-up show that’s been sold out across the U.S., the U.K. and Ireland -- and will produce four more in 2015 before we launch the talk show in early 2016.

Finally good luck with the whole "Net Neutrality" thing. Ironically, the bigger NFLX gets, the more likely the distributors will collude to squeeze every last drop of cash from the company.

Full NFLX press release

Just because it's a loo doesn't mean it can't be beautiful and have a wonderful...

Natural Homes - Mon, 07/21/2014 - 17:14
Just because it's a loo doesn't mean it can't be beautiful and have a wonderful view surrounded by plants that thrive on the end product. This is the composting toilet at Felin Uchaf in Wales.

Cob Composting Toilet
The cob toilet is built on a slate stem wall with reeds collected from the nearby estuary for its thatched roof.

Oil Jumps As Stocks Dump-And-Pump But Close Lower

Zerohedge - Mon, 07/21/2014 - 17:06

Equity prices tumbled early on - giving up all Friday's gains - before rampaging phoenix-like (thanks to an AUDJPY driven short squeeze) back to 'unch' after rumors of ceasefire discussions in Israel rolled around trading desks. Oil - it appears - was looking at the death-toll (and the fact that Hamas can only accept a deal that denies Israel's existence) and soared back towards $105 (its 2nd biggest day in over a month) notably divergent from stocks. The Russell 2000 was the laggard all day (ramped the most of the lows on the squeeze) and Trannies the leader. Since the MH17 headlines hit, the Nasdaq is the only index green, Treasury yields are -4bps, and oil up almost $4. The USD ended the day unch, 30Y Yield -2.5bps, gold, silver, and copper up modestly, and VIX up 0.5 vols at 12.7. Stocks closed on the weak side.


Friday's gains gone then regained... V-shaped recoveries everywhere... lower highs though...


Shorts triple squeezed today... but ended weak...


On the day, the morning dump was met by the AUDJPY pump.... to fill the gap... The Russell 2000 is -1.4% YTD and has crossed its 200DMA every day in the last 3 days...


Since MH17 Headlines, most indices are still red except Nasdaq of course.. why not buy the most growth-sensitive stocks at a time when geopolitical angst look sset to slow global growth (ask Germany)..


AUDJPY was in charge all day...


As an FYI - we note the selling in US equity futures started as Europe opened...


Bonds sold off (yields rose) as Obama spoke and did not unleash more sanctions hell and rumors of cease-fire discussions helped..


Credit markets remain less exuberant at what great news world war 3 is...


It appears Oil prices are continuing to reflect notably concerns about geopolitical tensions... but stocks not (not oil inverted to show 'negative' implications)


And bonds appear to reflect safe haven concerns (or growth concerns) a little more than stocks...


Since MH17 headlines hit, gold and silver are up...


Charts: Bloomberg

Ron Paul: What The Press Isn't Reporting About The MH17 Disaster

Zerohedge - Mon, 07/21/2014 - 16:57

Authored by Ron Paul via The Ron Paul Institute,

Just days after the tragic crash of a Malaysian Airlines flight over eastern Ukraine, Western politicians and media joined together to gain the maximum propaganda value from the disaster. It had to be Russia; it had to be Putin, they said. President Obama held a press conference to claim – even before an investigation – that it was pro-Russian rebels in the region who were responsible. His ambassador to the UN, Samantha Power, did the same at the UN Security Council – just one day after the crash!
While western media outlets rush to repeat government propaganda on the event, there are a few things they will not report.

They will not report that the crisis in Ukraine started late last year, when EU and US-supported protesters plotted the overthrow of the elected Ukrainian president, Viktor Yanukovych. Without US-sponsored “regime change,” it is unlikely that hundreds would have been killed in the unrest that followed. Nor would the Malaysian Airlines crash have happened. 


The media has reported that the plane must have been shot down by Russian forces or Russian-backed separatists, because the missile that reportedly brought down the plane was Russian made. But they will not report that the Ukrainian government also uses the exact same Russian-made weapons.


They will not report that the post-coup government in Kiev has, according to OSCE monitors, killed 250 people in the breakaway Lugansk region since June, including 20 killed as government forces bombed the city center the day after the plane crash! Most of these are civilians and together they roughly equal the number killed in the plane crash. By contrast, Russia has killed no one in Ukraine, and the separatists have struck largely military, not civilian, targets.


They will not report that the US has strongly backed the Ukrainian government in these attacks on civilians, which a State Department spokeswoman called “measured and moderate.”


They will not report that neither Russia nor the separatists in eastern Ukraine have anything to gain but everything to lose by shooting down a passenger liner full of civilians.


They will not report that the Ukrainian government has much to gain by pinning the attack on Russia, and that the Ukrainian prime minister has already expressed his pleasure that Russia is being blamed for the attack.


They will not report that the missile that apparently shot down the plane was from a sophisticated surface-to-air missile system that requires a good deal of training that the separatists do not have.


They will not report that the separatists in eastern Ukraine have inflicted considerable losses on the Ukrainian government in the week before the plane was downed.


They will not report how similar this is to last summer’s US claim that the Assad government in Syria had used poison gas against civilians in Ghouta. Assad was also gaining the upper hand in his struggle with US-backed rebels and the US claimed that the attack came from Syrian government positions. Then, US claims led us to the brink of another war in the Middle East. At the last minute public opposition forced Obama to back down – and we have learned since then that US claims about the gas attack were false.

Of course it is entirely possible that the Obama administration and the US media has it right this time, and Russia or the separatists in eastern Ukraine either purposely or inadvertently shot down this aircraft. The real point is, it's very difficult to get accurate information so everybody engages in propaganda. At this point it would be unwise to say the Russians did it, the Ukrainian government did it, or the rebels did it. Is it so hard to simply demand a real investigation?

James Turk - Historic Shift In The Gold & Silver Markets

King World News - Mon, 07/21/2014 - 16:53
With continued turmoil in major markets, today James Turk told King World News that we are witnessing a historic shift in the gold and silver markets. Turk also discussed what the implications of this historic shift in these markets means as well as what investors should expect next.

With ISIS Now Controlling 35% Of Syria And Most Of Its Oil Fields, Iraq Issues An Ultimatum To The US

Zerohedge - Mon, 07/21/2014 - 16:45

Remember when the extremist Al Qaeda spinoff ISIS (or, now known as Islamic State following the formation of its own caliphate in the middle of Iraq and Syria) was still a "thing" two weeks ago? In this case out of sight does not mean out of mind, and while the world has found a new story line to follow in the middle east with the war between Israel and Gaza, now in its 14th day - whenever it is not busy responding to emotional appeals about the MH 17 crash - ISIS has continued to expand and as Al Arabiya reports it "is now in control of 35 percent of the Syrian territory following a string of victories, the London-based Syrian Observatory for Human Rights said Friday."

What's more troubling is that ISIS holdings now include nearly all of Syria’s oil and gas fields. While these are hardly significant on a global scale, they certainly allow ISIS to preserve its self-sustaining and self-funding status.

One of the latest gains of the self-proclaimed “caliphate” was the seizure of the country’s biggest oil fields, in Deir el-Zour in eastern Syria, earlier in the week.


Deir Ezzor borders Homs province as well as Iraq, where the jihadist group has spearheaded a major Sunni militant offensive that has seen large swathes of territory fall out of the Baghdad government’s control.


Meanwhile, jihadists have killed 270 Syrian regime fighters, civilian security guards and employees since seizing a gas field in Homs province, the Observatory added, according to Agence France-Presse.


The London-based group described Thursday’s takeover of the Shaar field as “the biggest” anti-regime operation by the ISIS since it emerged in the Syrian conflict a year ago.


“Eleven of the dead were civilian employees, while the rest were security guards and National Defence Forces members,” he added.


A counter-attack by Bashar al-Assad’s forces on Friday left 40 ISIS militants dead, Abdel Rahman said.


The Syrian government did not officially confirm the deaths, but supporters of Assad posted photographs of the dead, and described their killings as a “massacre”.

Ironically, it only took ISIS a little over a month to take over Syria's energy infrastructure and cripple the Assad regime, something the US forces were unable to do last summer.  Perhaps it is time for the Pentagon to retain them, i.e., al-Qaeda 2.0, as mercenaries?

As for ISIS in Iraq, things continue to escalate and as the Institute for the Study of War reports, ISIS has placed IEDs in places such as Mada'in, Yusifiyah, and Mahmudiyah in the southern belts of Baghdad. Iraqi Shi'a militia executions inside Baghdad may increase in response to the VBIED wave in Shi'a neighborhoods on July 19. The deployment of volunteers from southern Iraq to Kirkuk province signifies the spread of their role to protect shrines in areas where ISIS is making advances. The reallocation of Iraqi security forces from Baghdad to Dhuluiya signals the real challenge that ISIS poses there.

ISW's conclusion is that ISIS may try to draw the ISF out of Baghdad in advance of more robust attackes there.

Visually, here are the latest areas of conflict in Iraq.

Perhaps sensing the fact that the tide of war may be shifting for the worse, Iraq has become increasingly more vocal in demanding US assistance and a few hours ago went as far as to issue an ultimatum on the US - help us now or we will find another bigger borther, one who will actually help us.

Bloomberg reports that earlier today, speaking at the Atlantic Council, the Iraqi Ambassador to U.S. Lukman Faily called for US air strikes warning that Iraqis are skeptical about U.S. intent to support Iraq in its fight against Sunni terrorist groups, and implicitly threatening that "other countries will step in to fill the vacuum if greater American support isn’t forthcoming."

Faily calls for U.S. air strikes to stop influx of terrorists from Syria, to target “terrorist camps,” and precision air strikes in urban areas “occupied by ISIL terrorists”

He also said that Iraq has chosen the U.S. as its preferred strategic partner, has bought >$10b in U.S. military equipment and plans "to buy billions more."

"If Iraqis do not believe meaningful U.S. assistance is forthcoming, they will not have enough incentives to adopt political reforms. Now more than ever the United States needs to be careful not to send mixed signals about its intentions. These mixed signals will create vacuum that will be filled by others."

Such as Russia?

As for Iraq, in the future pick better "preferred strategic partners."

The Reality of Survival: “Forget Good Guys and Bad Guys… The Prepared Guys Win”

SHTF Plan - Mon, 07/21/2014 - 16:32

The following article has been generously contributed by Selco of the SHTF School web site. For those who have never seen Selco’s work, he’s the real deal. He was there in the 1990′s when his city in the Balkans was surrounded by a hostile army. From one day to the next life as he and those around him knew it had changed drastically. The media, of course, told people that everything would be fine. But As Selco highlighted in a previous article, the reality of collapse was brutalPeace and stability very quickly turned to war and madness. He details his experience in his One Year in Hell survival course. In the article below, Selco shares his views on what it means to survive when your entire way of life has been cut off from the rest of the world. 

Do you want to know what it’s really like when it hits the fan? Then keep reading.

Survival Among Humans
By Selco

TV news and internet are covered with headlines like “shocking, captured Iraqis beheaded” or “they are killing everyone on their way” and “prisoners executed” and similar.

And folks who watch and comment on the news and videos who still live in a “normal” world without this kind of crazyiness going on, are shocked of course.

First comments are that those people and groups who are doing that are animals and they need to be “bombed to stone age”, or “they are not deserving better anyway” and then goes “they are all same there, let them kill each other” and similar.

While I would definitely like to see that fanatics getting “eradicated” there, there are more things that should be considered.

Most of the folks are not going to watch video of that violence, because it is too much for them (like this video that “promotes” ISIS), they will change channel, or simply open the page with news from the “celebrity world.”

People do not want to watch or think about bad things, people want to forget that, and yes, at the end there comes again that famous “it cannot happen to us” idea.

  • Do you really think that when (not if) SHTF events would be much different in your part of the world?
  • Do you think that when collapse happens, you and people around you in your town will be somehow able to organize food distribution, security and safety for residents, and all those criminals and sick bastards will somehow disappear, and there is going to be new better society?
  • Are you under the influence of movies and you think that good guys win almost always and that there is justice and sense in everything?

I hope you do not because I highly doubt anything like this is going to happen anywhere.

Forget good guys and bad guys. Prepared guys win, they can be good or bad, or both.

Problem is in the fact that simply too many people are waiting for S. to hit the fan so they can go out and play their own version of God. Just ask yourself this question: Who is more experienced living in place without any law, criminals or regular folks?

Criminals, sick folks, small Napoleons, guys who suddenly think that they have solution for building new society without including morale in story…

There are guys who wait for SHTF to go out and rule, to take your food, enslave you, recruit your older kids, or to take your wife maybe for fun.

Maybe how and when everything happens in your neighbourhood would be different when SHTF then in those news articles that we talking about, but lot of things gonna be the same, lot of people, not enough resources, and fight for power.

It is often hard to imagine for regular people how nasty other humans can become. If you have been to prison, war or deal a lot with criminals you know better.

And again, I am taking this from my own experience. Again.

One day I had job, family, car, restaurants, cinema, girlfriends, I was listening Guns n Roses and was angry about last album of Metallica. Life was nice and good to me, I had problems but they were in the range of am I lazy to go and rent video tape, or just spent afternoon reading something.

Then BAM!

I suddenly realized that I am living among guys who are finding amusement in taking women and teenage girls to “rape prisons”, or kill for fun and not for survival. I suddenly realized that I was living all the time among whole bunch of weird sick folks who when SHTF just went out to have fun.

And yes, I heard and read many times “they are just different down there, they are all the same, let them kill each other, they are different.”

And I am sure that if tommorow SHTF in Sweden, there s gonna be folks who gonna write “oh, leave them, they are animals anyway, not like we here, they are different.“”

It is the easy answer. It feels good to think like that.

But forget that, forget about image of “we are nice and decent folks here, and it is impossible to happen to us, these kind of atrocities.”

Be prepared.

Whenever someone I know tells me about bad situation here something like “OH, it is gonna be OK, it is not gonna happen to us, situation will be better,” in that same moment I get a strong urge to go out and buy more ammo.

Or whenever someone says to me “do not worry, we have system here, they gonna take care of everything,” I feel like I am gonna throw up.

Screw the system, you need to build your own system.

It is like people live in their own little pretty house. Outside you have monsters knocking on windows looking at the people inside but they look away. Facing reality is uncomfortable and most believe monsters never come in. Bad news is that closing your eyes does not make you invincible. You are just blind and more vulnerable.

Lesson here is, do not discount what you can learn from ongoing crisis half way around the world. I never expected people could turn into monsters all around me so fast, I adapted and survived, but you have chance today to understand this and be prepared for this.

Discuss this article at the SHTF School forums or in the comments below.

You can follow Selco’s story at SHTF School and learn how he survived one year in hell

More Excellent Reading From Selco:

A Survival Q & A: Living Through SHTF In the Middle of A War Zone

Advice From A Collapse Survivor: “RUN!” From Major Cities

Collapse Reality: “If I Had to Be an Animal, I Was an Animal. It Was About Survival.”

The New Scariest Chart In America

Zerohedge - Mon, 07/21/2014 - 16:29

For the last few years, the 'scariest' chart for Europeans has been the unending surge in youth unemployment. However, amid all the sound and fury of mainstream US media discussions of the 'recovery' in America and the President's employment track record, Constantin Gurdgiev notes another 'scariest chart of the US recovery' that remains in full 'crisis mode'...


The Duration of Unemployment In The US...


h/t True Economics blog

Guilt By Insinuation — Paul Craig Roberts

Paul Craig Roberts - Mon, 07/21/2014 - 16:13

Guilt By Insinuation

How American propaganda works.

Paul Craig Roberts

Why hasn’t Washington joined Russian President Putin in calling for an objective, non-politicized international investigation by experts of the case of the Malaysian jetliner?

The Russian government continues to release facts, including satellite photos showing the presence of Ukrainian Buk anti-aircraft missiles in locations from which the airliner could have been brought down by the missile system and documentation that a Ukrainian SU-25 fighter jet rapidly approached the Malaysian airliner prior to its downing. The head of the Operations Directorate of Russian military headquarters said at a Moscow press conference today (July 21) that the presence of the Ukrainian military jet is confirmed by the Rostov monitoring center.

The Russian Defense Ministry pointed out that at the moment of destruction of MH-17 an American satellite was flying over the area. The Russian government urges Washington to make available the photos and data captured by the satellite.

President Putin has repeatedly stressed that the investigation of MH-17 requires “a fully representative group of experts to be working at the site under the guidance of the International Civil Aviation Organization (ICAO).” Putin’s call for an independent expert examination by ICAO does not sound like a person with anything to hide.

Turning to Washington Putin stated: “In the meantime, no one [not even the “exceptional nation”] has the right to use this tragedy to achieve their narrowly selfish political goals.”

Putin reminded Washington: “We repeatedly called upon all conflicting sides to stop the bloodshed immediately and to sit down at the negotiating table. I can say with confidence that if military operations were not resumed [by Kiev] on June 28 in eastern Ukraine, this tragedy wouldn’t have happened.”

What is the American response?

Lies and insinuations.

Yesterday (July 20) the US Secretary of State, John Kerry confirmed that pro-Russian separatists were involved in the downing of the Malaysian airliner and said that it was “pretty clear” that Russia was involved. Here are Kerry’s words: “It’s pretty clear that this is a system that was transferred from Russia into the hands of separatists. We know with confidence, with confidence, that the Ukrainians did not have such a system anywhere near the vicinity at that point and time, so it obviously points a very clear finger at the separatists.”

Kerry’s statement is just another of the endless lies told by US secretaries of state in the 21st century. Who can forget Colin Powell’s package of lies delivered to the UN about Saddam Hussein’s “weapons of mass destruction” or Kerry’s lie repeated endlessly that Assad “used chemical weapons against his own people” or the endless lies about “Iranian nukes”?

Remember that Kerry on a number of occasions stated that the US had proof that Assad crossed the “red line” by using chemical weapons. However, Kerry was never able to back up his statements with evidence. The US had no evidence to give the British prime minister whose effort to have Parliament approve Britain’s participation with Washington in a military attack on Syria was voted down. Parliament told the prime minister, “no evidence, no war.”

Again here is Kerry declaring “confidence” in statements that are directly contradicted by the Russian satellite photos and endless eye witnesses on the ground.

Why doesn’t Washington release its photos from its satellite?

The answer is for the same reason that Washington will not release all the videos it confiscated and that it claims prove that a hijacked 9/11 airliner hit the Pentagon. The videos do not support Washington’s claim, and the US satellite photos do not support Kerry’s claim.

The UN weapons inspectors on the ground in Iraq reported that Iraq had no weapons of mass destruction. However, the fact did not support Washington’s propaganda and was ignored. Washington started a highly destructive war based on nothing but Washington’s intentional lie.

The International Atomic Energy Commission’s inspectors on the ground in Iran and all 16 US intelligence agencies reported that Iran had no nuclear weapons program. However, the fact was inconsistent with Washington’s agenda and was ignored by both the US government and the presstitute media.

We are witnessing the same thing right now with the assertions in the absence of evidence that Russia is responsible for the downing of the Malaysian airliner.

Not every member of the US government is as reckless as Kerry and John McCain. In place of direct lies, many US officials use insinuations.

US Senator Diane Feinstein is the perfect example. Interviewed on the presstitute TV station CNN, Feinstein said: “The issue is where is Putin? I would say, ‘Putin, you have to man up. You should talk to the world. You should say, if this is a mistake, which I hope it was, say it.’”

Putin has been talking to the world nonstop calling for an expert non-politicized investigation, and Feinstein is asking Putin why he is hiding behind silence. We know you did it, Feinstein insinuates, so just tell us whether you meant to or whether it was an accident.

The way the entire Western news cycle was orchestrated with blame instantly being placed on Russia long in advance of real information suggests that the downing of the airliner was a Washington operation. It is, of course, possible that the well-trained presstitute media needed no orchestration from Washington in order to lay the blame on Russia. On the other hand, some of the news performances seem too scripted not to have been prepared in advance.

We also have the advanced preparation of the youtube video that purports to show a Russian general and Ukrainian separatists discussing having mistakenly downed a civilian airliner. As I pointed out earlier, this video is twice damned. It was ready in advance and by implicating the Russian military, it overlooked that the Russian military can tell the difference between a civilian airliner and a military airplane. The existence of the video itself implies that there was a plot to down the airliner and blame Russia.

I have seen reports that the Russian anti-aircraft missile system, as a safety device, is capable of contacting aircraft transponders in order to verify the type of aircraft. If the reports are correct and if the transponders from MH-17 are found, they might record the contact.

I have seen reports that Ukrainian air control changed the route of MH-17 and directed it to fly over the conflict area. The transponders should also indicate whether this is correct. If so, there clearly is at least circumstantial evidence that this was an intentional act on the part of Kiev, an act which would have required Washington’s blessing.

There are other reports that there is a divergence between the Ukrainian military and the unofficial militias formed by the right-wing Ukrainian extremists who apparently were the first to attack the separatists. It is possible that Washington used the extremists to plot the airliner’s destruction in order to blame Russia and use the accusations to pressure the EU to go along with Washington’s unilateral sanctions against Russia. We do know that Washington is desperate to break up the growing economic and political ties between Russia and Europe.

If it was a plot to down an airliner, any safety device on the missile system could have been turned off so as to give no warning or leave any telltale sign. That could be the reason a Ukrainian fighter was sent to inspect the airliner. Possibly the real target was Putin’s airliner and incompetence in implementing the plot resulted in the destruction of a civilian airliner.

As there are a number of possible explanations, let’s keep open minds and resist Washington’s propaganda until facts and evidence are in. In the very least Washington is guilty of using the incident to blame Russia in advance of the evidence. All Washington has shown us so far are accusations and insinuations. If that is all Washington continues to show us, we will know where the blame resides.

In the meantime, remember the story of the boy who cried “wolf!” He lied so many times that when the wolf did come, no one believed him. Will this be Washington’s ultimate fate?

Instead of declaring war on Iraq, Afghanistan, Libya, Somalia, and Syria, why did Washington hide behind lies? If Washington wants war with Iran, Russia, and China, why not simply declare war? The reason that the US Constitution requires war to begin with a declaration of war by Congress is to prevent the executive branch from orchestrating wars in order to further hidden agendas. By abdicating its constitutional responsibility, the US Congress is complicit in the executive branch’s war crimes. By approving Israel’s premeditated murder of Palestinians, the US government is complicit in Israel’s war crimes.

Ask yourself this question: Would the world be a safer place with less death, destruction and displaced peoples and more truth and justice if the United States and Israel did not exist?

The post Guilt By Insinuation — Paul Craig Roberts appeared first on

Bail Hearing for Dr. Von Kiel

Weston Price - Mon, 07/21/2014 - 16:05

HELP NEEDED FOR DR. ERIK VON KIEL – Bail Hearing tomorrow July 22 and Support Letters Needed

As you may know, Dr. Erik Von Kiel is being held in the Philadelphia Federal Detention Center for Pre-trial Detention. Many of us benefited from his kind and generous nature and are doing well today because of him. I have been following this case from the beginning because who I know Dr. VK to be does not match the negative propaganda the government/media has been spreading.

After my testimony as a Grand Jury witness some of the charges against him were dropped. I believe with all my heart that when all is said and done, he will be found completely innocent.

His entire extended family is behind him 100%. I have seen the exonerating evidence. I am asking you now to put your enroll able hats on. We are looking for character references in support of the good doctor and the many good things he has done. Perhaps you recall his kind and patient manner when making sure all your questions were answered. Perhaps you appreciated the way he taught us how to take care of ourselves. Please read the letter from his attorney below and if you see yourself able to accomplish either request, I ask that you consider giving the extra mile that Dr VK often did for us. Some of you are in business because of him… some of you were charged very little to nothing for your extensive visit… some of you were greatly helped health wise… Whatever your story, please read below and please write a letter. If at all possible and however unreasonable this may be, I am asking that you attend the bail hearing. The attorney is looking for particular types of people and you are those. You each contribute an important piece of his character. Your presence will make the difference for his release.

Thank you. Loretta 908.256.9345

This from Dr VK’s attorney…..

Bail Hearing

Erik’s bail hearing will be on Tuesday, July 22 at 11:00 am at the Federal Court House, 601 Market Street, Philadelphia. If you are able to attend, let us know and we will let you know which room. Broadly speaking,Erik’s defense team wants people with no criminal records, no tax protesters, and no anti-government types. Nobody will be asked to testify, we all just stand up when the lawyer asks those in the court room to show support for Dr. Von Kiel please stand up. It is very important that we all respect the order of Judge’s court room, and not speak unless spoken to.

Support Letters

In a perfect world, we would all both show up at the bail hearing and send letters of support to Erik’s lawyer, Michael Engle. If you can do both, great, if not, then a support letter is much appreciated.

Support letters are character references, and should be addressed: “Dear Mr. Engle”– and mailed to:

Michael Engle, Esq.
Greenblatt, Pierce, Engle, Funt and Flores
123 S. Broad Street, Suite 2500
Philadelphia, PA 19109

Support letters should discuss how you know Erik, for how long, what he has done to positively impact your life, your impressions of his character, what type of person he is, is he trustworthy, is he non-violent. If you can tell a story of an encounter with Erik that supports your views, then great, make it personal. But keep it brief – one page is good. You will need to sign your letter, giving both name and address.

Support letters should not make any references to the court case, should not make statements as to the charges, should not make comments about his presumed innocence or guilt, and should not make judgmental statements about the government or how they have conducted their inquiry.

Support letters are character references, and should not stray from that mission.


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