Syria’s Afrin Move: “Artful Assistance To Allies” Or “Armageddon In The Making”?

Authored by Andrew Korybko via Oriental Review,

Syria reportedly agreed to the Kurdish PYD-YPG “federalist” militia’s request to enter Afrin and stop the Turks’ military advance, though it still remains to be seen whether Damascus will actually carry through on this decision or not.

There have been conflicting reports on this topic all across the past week, but the official “Syrian Arab News Agency” (SANA) confirmed that the “Popular Mobilization Units” (PMU) will deploy to the region in order to thwart the Turks, debunking earlier claims that the Syrian Arab Army (SAA) will directly do so instead. Even so, this would b e a very dangerous development if it actually happens because it could quickly lead to the Syrian Arab Army (SAA) entering the fray in support of their pro-government partners and thus sparking a conventional state-to-state war with Turkey. Syria has every sovereign right to deploy its own forces and those of its allies anywhere within its territory, but taking a step back from principled idealism and soberly assessing the reality of the situation, this might not be the wisest decision at the moment.

The Turkish Foreign Minister warned in no uncertain terms that his country’s military forces will not be stopped by the SAA or its allied PMU if they intervene on behalf of the PYD-YPG “federal” Kurds that Ankara equates with the terrorist-designated PKK, and it’s very likely that the war-weary and completely exhausted Syrian military might be routed by the much more powerful Turks if “push comes to shove”. Not only that, but there’s close to no possibility that Russia would get involved in “saving Syria” either since its military mandate is strictly for anti-terrorist purposes and President Assad’s closest advisor Ms. Bouthaina Shaaban confirmed that Moscow withdrew all of its ground forces except for a few remaining aircraft.

In addition, Dr. Vitaly Naumkin – Russia’s premier Mideast expert and the man who’s playing a crucial role in organizing Moscow’s peacemaking efforts in Syria – wrote in the position paper released at the beginning of the prestigious Valdai Club’s two-day conference earlier this week that “part of the government elite may have greater hopes for military victory than the dividends that negotiations would eventually pay”. This is the strongest statement yet of Moscow’s growing impatience with Damascus’ refusal to enter into the “compromises” that President Putin suggested that the authorities make back in November in order to facilitate an internationally brokered peace to the conflict. On top of that, Damascus rejected the outcome of the “Syrian National Dialogue Congress” just last week, which may have prompted Naumkin’s stark warning about so-called ‘hardliners’ who might prospectively impede the peace process.

Bearing in mind this high-level official’s words and the fact that Russia withdrew most of its military forces from Syria, as well as Moscow’s visibly growing dissatisfaction with the Syrian government’s procrastination on making any tangible progress towards a “political solution”, there are concrete grounds for predicting that Russia would not support the SAA if they enter into conflict with the Turks, further amplifying the existential risk that Damascus faces if it allows the Kurds to “play them like a fiddle” and falls for this disastrous scenario. It might be for this reason why the authorities never carried through on their implied threat to dispatch conventional military units to Afrin, begrudgingly realizing after President Putin’s phone call with President Erdogan that Russia would “hang them out to dry” as they initiate what might have amounted to an act of “national suicide”.

Nevertheless, the situation is still highly combustible right now and a larger war could break out at any time due to even the slightest miscalculation by the Syrian side, thus leaving the whole world watching with bated breath to see what happens next.

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“Wow, That’s Weird” – FOIA Exposes FAA Tapes From Oregon UFO Incident

On October 25, an unidentified flying object (UFO) was detected on radar, which turned into a series of eyewitness accounts made by commercial airline pilots over the skies of Northern California and Oregon. Even the U.S. Air Force scrambled their McDonnell Douglas F-15 Eagles as part of the military’s protocol to combat threats of an intruding aircraft penetrating deep inside America’s airspace. By the time the interceptor fighter jets arrived, the mysterious aircraft became invisible and disappeared from radar.

Last November, “The War Zone” blog of the automotive website The Drive, posted an exclusive story detailing the mysterious white object buzzing around the skies near commercial airliners in Northern California and Oregon. The blog tracked down various accounts of what happened that day from pilots and also obtained confirmation about the F-15 Eagles launch to intercept the intruding aircraft that has left so many people puzzled.

Now, through the Freedom of Information Act (FOIA), The War Zone presents a mindblowing and insightful account of official documentation surrounding what really happened on October 25 over the skies of Northern California and Oregon. The FOIA includes “fascinating audio recordings of radio transmissions and phone calls made as the incident was unfolding, as well as pilot interviews, and conversations between FAA officials made in the aftermath of the highly peculiar incident,” said The War Zone.

The first video is a brief overview of the entire incident:

Full radar obtained from the FAA via FOIA for Northern California and Oregon from 4:34 pm to 5:25 pm PST on October 25.

The War Zone indicates that Oakland Center controllers first spotted the mysterious aircraft on radar moving “very fast at 37,000” feet near sector 31 and bordering sectors 13/14.

Oakland Center Sector 31 first detected the target around 4:30pm PST. Below is a chart showing where Oakland Center’s high altitude sectors are situated around Northern California. Sector 31 spans roughly from Sacramento up towards Redding, before its northern edge, which is near the border with Oregon, terminates and Seattle Center’s airspace begins. To the east, the airspace sits along the California-Nevada border. This makes sense as the craft was eventually tracked by airline pilots as it made its way up over Crater Lake and towards the Willamette Valley.

In the audio, the Oakland Center controller notes that it is near his boundary, so it seems the aircraft’s first appearance officially occurred near the border of Oakland Center Sector 31 and Seattle Center Sector 13 or 14. The target was moving “very fast at 37,000” feet when it was first detected.

As the mysterious aircraft disappeared from radar, numerous reports from different airline crews began radioing into the air traffic controller of an unidentifiable white aircraft. Shortly after, F-15 fighter jets were scrambled to intercept the mysterious white aircraft, but it had turned on “stealth mode,” said one controller.

The “intruder” quickly dropped off radar and that’s when the visual sightings made by airline crews began. They continued for roughly half an hour and over hundreds of miles. The exchanges between nearby pilots and air traffic control regarding the unidentified aircraft were constant in the audio, with the same description coming back time and again—that of a white aircraft cruising at around 37,000 feet that is too far away to tell the type or if it has markings of any kind on it.

At roughly 27:30 into the video we get our first indication that the F-15s out of PDX are about to scramble, with the air traffic controller noting this while talking to another FAA controller, during which the controller also reiterates that there has still been no radar contact with the aircraft. The controller also repeatedly asks aircrews nearby to check their Traffic Collision Avoidance Systems (TCAS) for the aircraft, which all come back negative.

The F-15s first appear on radar as they climb out of Portland to the south at time index 33:33 as “Rock” flight—a common callsign used for the alert F-15s stationed at PDX. Alaska 439 asks for an update on the unidentified aircraft and the controller notes they still have nothing on him, saying colloquially that it must be in a kind of “stealth mode or something.” It’s also interesting that the F-15s first went south when it seems as if the object would have been north of PDX by the time they finally launched.

Next, the FOIA request uncovered very interesting recordings demonstrating how FAA officials were in contact with the Western Air Defense sector of NORAD.

 Aside from that, the audio is unedited by us, although we cannot be certain if parts were redacted by the FAA or not. There were a few strange areas where conversations went mute and it’s not clear if this was edited or just an anomaly. The primary person talking in most of these calls is the Operations Manager In Charge for Seattle Center at the time that the incident took place.  

The first call is to Oakland Center, and it occurs early on after the initial radar detection and as pilots began spotting the craft visually. He also mentions that “air defense” is looking for the target now too (on radar), so it shows how early the military was involved in the encounter.

You will notice that the term “DEN” is referred to repeatedly in these recordings. That is the Domestic Events Network, a sort of hotline system that is used to bridge the FAA with federal authorities, namely the military, during a number of circumstances which you can read about here. You will also hear the term “WADS” and the nickname/callsign “Bigfoot.” This refers to the Western Air Defense sector of NORAD that monitors the airspace over a huge swath of territory in the United States and Canada. Based out of McChord AFB in Washington, WADS scrambles the fighters when needed and works to direct them to their targets of interest during domestic air sovereignty missions, among other responsibilities.

When the Manager In Charge is asked if he was asking for military assistance by another FAA controller, the tape goes blank. The same inquiry is heard moments later, and it goes silent again before another call begins. Although it really doesn’t have much impact on the greater mystery, who asked for the F-15s to scramble and when, comes up in the next video in an exchange between the same manager and an FAA official.

In the final set of calls in the video we hear controllers talking about how the Air Force wants to set up an air patrol over Battle Ground, Washington, which is a dozen miles directly north of PDX. We know the F-15s headed south initially, so it isn’t clear if this call came after they initially headed in that direction or before they were even airborne and the plan changed later on for some reason. Once again “Rock” refers to the callsign of the alert fighters.

The next round of audio is from Seattle Center’s Manager In Charge of Operation, in which he investigates the incident minutes after it happened. He is heard talking with airline pilots who had visual contact on the mysterious white aircraft.

First we hear about the big question as to who “requested” the scramble, as according to the call, it has to come from FAA headquarters. The manager floats the idea, in retrospect, of having the airliners keep a visual on the craft instead of allowing them to descending into PDX, at least until the F-15s show up, but the FAA official swats that down as they didn’t know what the aircraft was, “if they are equipped with anything” or its intentions. She reiterates that getting the military involved was a good idea but that it should have come from FAA headquarters over the DEN. The manager reminds her again that he doesn’t know who requested military assistance and that Oakland Center told him to call WADS initially.

Next we hear from Oakland Center again, at first discussing who ordered the scramble, but then the conversation goes into talking about what actually happened. Both agree that there was “definitely something out there” with the Oakland Center controller saying the aircraft first appeared going southbound at high speed before executing an abrupt maneuver and then “took off northbound.” Even figuring out how to report the encounter seems totally foreign to both higher ranking controllers, with one stating “I have a feeling someone is going to go through this with a fine-tooth comb.”

Then we get into the pilot interviews over the phone, with the manager’s intention being for each crew to write up a report detailing their individual perspective of the incident. During the call with United 612 there are some odd dropped moments, but the pilot describes the encounter, stating that he was too far away to make out the type. The next call, with Alaska Airlines 525, also doesn’t reveal much as the crew says they never were able to see it, but the crew of Skywest 3478 did, although he didn’t have much to add.

The call with the pilot of Southwest 4712 was by far the most interesting. He immediately notes how strange the encounter was and how he has never seen an incident like it in nearly 30 years of flying jets. The pilot noted, “if it was like a Lear (private jet) type airframe I probably would not have seen it this clear. This was a white airplane and it was big. And it was moving at a clip too, because we were keeping pace with it, it was probably moving faster than we were… It was a larger aircraft yeah.” He also said they watched the object from Northern California all the way to their descent into Portland.

The manager’s final call, was with the FAA’s Quality Assurance Group, who is taken by surprise by the details surrounding the event, and especially with the fact that nobody still knew what the aircraft was or where it ended up. “Wow that’s weird” is the operative quote by the FAA official, which is insightful to say the least as these people deal with unique incidents that occur in American airspace on a daily basis. The manager agreed with the sentiment and noted that it wasn’t some small aircraft and it was moving fast, outpacing a 737 cruising nearby. The official also says that the incident should be classified as “potentially significant” on reporting documents. She even said that this was “a weird enough thing that there is not a set procedure… It’s not often we hear about an unknown guy up at that altitude.”

And lastly, The War Zone concludes:

Collectively these materials give us incredible insight not only into this incident, but also into how such an event is actually handled in real-time by those who are responsible for the safety of those in the air and those on ground below. What they don’t offer is any sort of an explanation for what happened on that fall evening. But really, the fact that all those involved, from air traffic controllers, to Air Force radar operators, to airline pilots, and even special FAA officials tasked with responding to all types of out of the ordinary incidents that occur in the sky on a daily basis seem just as puzzled with this event as we are makes the story all that much more intriguing.  

The FOIA request of FAA audio and video provides an interesting view of what government officials saw and heard during the incident over the skies of California and Oregon on October 25.

While there is no definitive answer of what and where the mysterious aircraft came from. We should point out that the United States is in a fierce race for hypersonic technologies against China and Russia. Considering Area-51 is some 500-miles away from the incident, it would not of shocked us that the mysterious aircraft is, in fact, a hypersonic airplane from DARPA.

Nevertheless, some speculate the aircraft was likely to be the top-secret B-21 “Raider” of the US Air Force, a next-generation stealth bomber.

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Brandon Smith: Mass Shootings Will Never Negate The Need For Gun Rights

Authored by Brandon Smith via,

Though the media often attempts to twist the gun rights debate into a web of complexity, gun rights is in fact a rather simple issue — either you believe that people have an inherent right to self defense, or you don’t. All other arguments are a peripheral distraction…

Firearms are a powerful epoch changing development. Not because they necessarily make killing “easier;” killing was always easy for certain groups of people throughout history, including governments and organized thugs. Instead, guns changed the world because for the first time in thousands of years the common man or woman could realistically stop a more powerful and more skilled attacker. Firearms are a miraculous equalizer in a world otherwise dominated and enslaved by everyday psychopaths.

The Founding Fathers understood this dynamic very well. Despite arguments from the extreme left falsely insinuating that the founders are essentially barbarians from a defunct era that were too stupid to understand future developments and technology, the fact is that they knew the core philosophical justification for an armed citizenry was always the most important matter at hand. Today’s debates try to muddle meaningful discourse by swamping the public in the minutia of background checks, etc. But the following quotes from the early days of the Republic outline what we should all really be talking about:

“The laws that forbid the carrying of arms are laws of such a nature. They disarm only those who are neither inclined nor determined to commit crimes…. Such laws make things worse for the assaulted and better for the assailants; they serve rather to encourage than to prevent homicides, for an unarmed man may be attacked with greater confidence than an armed man.”
– Thomas Jefferson, Commonplace Book (quoting 18th century criminologist Cesare Beccaria), 1774-1776

“To disarm the people…[i]s the most effectual way to enslave them.”
– George Mason, referencing advice given to the British Parliament by Pennsylvania governor Sir William Keith, The Debates in the Several State Conventions on the Adoption of the Federal Constitution, June 14, 1788

“Before a standing army can rule, the people must be disarmed, as they are in almost every country in Europe. The supreme power in America cannot enforce unjust laws by the sword; because the whole body of the people are armed, and constitute a force superior to any band of regular troops.”
– Noah Webster, An Examination of the Leading Principles of the Federal Constitution, October 10, 1787

“Guard with jealous attention the public liberty. Suspect everyone who approaches that jewel. Unfortunately, nothing will preserve it but downright force. Whenever you give up that force, you are ruined…. The great object is that every man be armed. Everyone who is able might have a gun.”
– Patrick Henry, Speech to the Virginia Ratifying Convention, June 5, 1778

“The right of the citizens to keep and bear arms has justly been considered, as the palladium of the liberties of a republic; since it offers a strong moral check against the usurpation and arbitrary power of rulers; and will generally, even if these are successful in the first instance, enable the people to resist and triumph over them.”
– Joseph Story, Commentaries on the Constitution of the United States, 1833

“On every occasion [of Constitutional interpretation] let us carry ourselves back to the time when the Constitution was adopted, recollect the spirit manifested in the debates, and instead of trying [to force] what meaning may be squeezed out of the text, or invented against it, [instead let us] conform to the probable one in which it was passed.”
– Thomas Jefferson, letter to William Johnson, 12 June 1823

The inborn right to self defense and the ability of the people to maintain individual liberties in the face of tyranny supersedes all other arguments on gun rights. In fact, nothing else matters. This key point is so unassailable that anti-gun lobbyists have in most cases given up trying to defeat it. Instead of trying to confiscate firearms outright (which is their ultimate goal), they attempt to chip away at gun rights a piece at a time through endless flurries of legislation. This legislation is usually implemented in the wake of a tragedy involving firearms, for gun grabbers never let a good crisis go to waste. Exploiting the deaths of innocent people to further an ideological agenda is a common strategy for them.

This leads us to the recent mass shooting at a high school in Parkland, Florida. The narrative being constructed around this event is the same as usual — that stronger “gun control and background checks” are needed to prevent such things from ever happening again.

Of course, Nikolas Cruz, the alleged perpetrator of the shooting, obtained his firearms legally and by passing existing background checks. Being that these background checks have been highly effective in stopping the vast majority of potential criminals from purchasing firearms through legal channels, one wonders what more can be done to make these checks somehow “foolproof.”

Around 1.5 million 4473 forms (background checks) have been rejected by the ATF in the two decades since more stringent background checks were instituted. As many as 160,000 forms are denied each year for multiple reasons, including mental health reasons.

So, the question is, did background checks fail in the case of Nikolas Cruz? And would any suggested amendments to current 4473 methods have made any difference whatsoever in stopping Cruz from purchasing a weapon? The answer is no. No suggested changes to ATF background checks would have made a difference. But there are stop-gaps to preventing mass shootings other than the ATF.

The FBI, for example, had been warned on multiple occasions about Cruz, including his open threats to commit a school shooting. Yet, the FBI did nothing.

Could the FBI have prevented the killings in Parkland by following up repeated warnings on Nikolas Cruz? I would say yes, it is possible they could have investigated Cruz’s threats, verified them and prosecuted for conspiracy to commit a violent crime, or at the very least, they could have frightened him away from the idea.

Was the Parkland shooting then a failure of background checks or a failure of the FBI? And, if it was a failure of the FBI, then shouldn’t anti-gun advocates focus on revamping the FBI instead of pushing the same background check and gun show “loophole” rhetoric they always do?

They aren’t interested in instituting changes at the FBI because this could help solve the problem, and they do not care about solving the problem, they only care about pursuing their ultimate goal of deconstructing the 2nd Amendment for all time.

Gun control advocates will conjure up a host of arguments for diminishing gun rights, but just like the background check issue and Nikolas Cruz, most of them are nonsensical.

They’ll make the claim that guns for self defense are fine, but that high capacity military grade weapons were never protected under the Constitution. “The founding fathers were talking about single shot muskets when they wrote that…” is the commonly regurgitated propaganda meme. This is false. High capacity “machine guns” (like the Puckle gun and the Girandoni rifle) and even artillery were actually common during the time of the founders and were indeed protected under the 2nd Amendment. In fact, the 2nd Amendment applies to all firearms under common military usage regardless of the era.

They’ll claim that high capacity “assault weapons” are not needed and that low capacity firearms are more practical for self defense. They obviously are ignoring the circumstances surrounding any given self defense scenario. What if you are facing off with multiple assailants? What if those assailants are mass shooters themselves and obtained their weapons on the black market as the ISIS terrorists in Paris did in 2015? What if the assailant is a tyrannical government? Who is to say what capacity is “practical” in those situations?

They’ll claim that tougher gun laws and even confiscation will prevent mass shootings in the future, yet multiple nations (including France) have suffered horrific mass shootings despite having far more Orwellian gun laws than the U.S.

Criminals and terrorists do not follow laws. Laws are words on paper backed up by perceived consequences that only law abiding people care about.  The vast majority of successful mass shootings take place in “gun free zones,” places where average law abiding citizens are left unarmed and easy prey.

So, what is the solution that gun grabbers don’t want to talk about? What could have stopped the shooting in Parkland? What is the one thing that the mainstream media actively seeks to avoid any dialogue about?

The solution is simple — abolish all gun free zones. If teachers at the high school in Parkland had been armed the day Nikolas Cruz showed up with the intent to murder, then the entire event could have gone far differently. Instead of acting helplessly as human shields against a spray of bullets, teachers and coaches could have been shooting back, actually stopping the threat instead of just slowing it down for a few seconds. Or, knowing that he might be immediately shot and killed before accomplishing his attack, Cruz may have abandoned the attempt altogether. There is no way to calculate how many crimes and mass shootings have been prevented exactly because private gun ownership acted as a deterrent.

Most gun grabbers are oblivious to this kind of logic because they are blinded by ideological biases. Some of them, however, understand the truth of this completely, and they don’t care. They are not in the business of saving lives; they are in the business of exploiting death. They want something entirely different from what they claim they want. They are not interested in life, they are interested in control.

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U.S. Embassy In Montenegro Attacked, One Dead

The US Embassy in Montenegro came under attack in the early hours of Thursday morning after a group of attackers threw several grenades into the compound at approximately 12:30 a.m.

One of the attackers reportedly died in the explosion. 


The State Department has issued a warning advising citizens to “avoid the embassy until further notice.” 


Location: Podgorica, Montenegro

Event: The U.S. Embassy in Podgorica advises U.S. citizens there is an active security situation at the U.S. Embassy in Podgorica. Avoid the Embassy until further notice.

Actions to Take:

  • Avoid the area around the U.S. Embassy.
  • Monitor local media for updates.
  • Avoid large gatherings and demonstrations, and follow the instructions of local authorities.
  • Employ sound security practices.


The last attack on an U.S. Embassy was in September 2015 when the American office in Uzbekistan was firebombed, leading to the temporary closure of the compound. Prior to that, of course, was the September 11, 2012 attack on two U.S. government facilities in Benghazi, Libya – the origins of which the Obama administration lied about and faced no consequences. 


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FOMC Minutes Preview: Just One Question – 3 Or 4 Hikes In 2018?

In his preview of today’s release of the January FOMC Minutes, which as a reminder were Janet Yellen’s last and took place just before the February market correction, Rafiki Capital’s Steven Englander wrote that “the most likely surprise in the Fed Minutes tomorrow is that they may be leaning to four hikes in 2018, but the biggest surprise would be growing support to aim for above two percent inflation temporarily to make up for previous misses to the downside.”

As a reminder, after tumbling to 4 year lows, the Dollar has been on a steady uptrend in recent days, while rate hike expectations are now at their highest of the cycle – 2.76 hikes in 2018 are priced in (despite stocks still not being anywhere near back to pre-Powell-put-implied levels).

Commenting further on the “most likely surprise”, Englander – the former head of FX at Citi – added the following:

The three versus four hike debate is already in the open with several FOMC participants referring to the possibility of four hikes. About 70bps are now priced in, versus around 65bps just before the meeting. The FOMC meeting occurred before high AHE and inflation prints, but in recent meetings the MInutes’ discussion has become more confident that inflation is picking up.  I think the risk is much greater that they signal growing confidence on inflation moving towards target more quickly than any indication that two hikes might be more appropriate than three.  This would not mean a strong, overt signal of four hikes but it is likely they could convey ‘three, maybe four’ as their stance.  They are unlikely to go full hawkish in the Minutes as there have been only moderate hawkish signals since, and monetary policy was probably discussed in between tinkling champagne glasses at Fed Chair Yellen’s last meeting.

Throwing his 2 cents into the hat, in his latest letter Dennis Gartman also lays out what he will be watching:

there are two words in them that we shall need to pay heed to: “Few” or “several.” That is, will the minutes suggest that there will be “few”… meaning three… rate increases through the remainder of this year or will there be “several” … meaning four. We hold with the latter.

While hardly as simple as that, these two excerpts effectively frame the big unknown behind today’s FOMC minutes, and the linguistic nuances that analysts will look for in the text: 3 or 4 rate hikes.

* * *

Number of rate hike aside, here’s what else to look forward to in today’s minutes, courtesy of RanSquawk.


The last FOMC meeting under Yellen’s tutelage saw the FOMC keep interest rates unchanged at 1.25%-1.50% and pave the way for further gradual rate hikes going forward. The statement was more hawkish than some had anticipated as the Fed altered their language around inflation, removing the phrase that inflation was “to remain somewhat below 2% in the near term.” The other important change was the addition of the word “further”, as in “further gradual increases” will be necessary.

“Given that the January FOMC statement upgraded the inflation language and the characterisation of economic activity, we would not be surprised to see the January Minutes also having a hawkish tone,” writes Société Générale. “Given that market participants are worried about the fact that the Fed may end up hiking four times in 2018 versus the median projection of three hikes, a hawkish tone in the January Minutes would be unsettling.”

The comments on inflation will likely take much of the focus given the language change in the statement as market watchers try to gauge how the much confidence they have in the inflation outlook. The January meeting pre-dates the latest CPI data from the US which saw the Y/Y rate hold at 2.1% despite expectations of a dip to 1.9%.

“It is clear that underlying inflation is accelerating,” said Capital Economics. “There are good reasons to expect this pick up in core inflation to run further in 2018.”

Markets are currently pricing in a near 100% chance of a rate hike at the March meeting and the Minutes will likely reinforce expectations of a 25bps hike if they appear positive on the inflation outlook


Capital Economics question whether there will be any discussion by the Committee on potentially reconsidering the Fed’s policy framework. Currently the Fed’s mandate is achieve 2% inflation and full employment in a balanced manner but recently some Committee members have voiced concern over that approach. Boston Fed’s Rosengren has suggested replacing the 2% target with a target range of between 1.5% and 3.0% while others have suggested targeting an average of 2% or even raising the target to 4%.

Another point to be aware of is the publication of new Fed Chair Powell’s first monetary policy report on Friday (Powell does not testify to Congress until 28th February). Powell’s Fed is widely expected to follow the same path that Yellen’s Fed had undertaken – gradually normalising rates – but this will be one of the first opportunities for Powell to stamp his mark on the Committee. Since the last meeting, US wage and inflation data has been stronger than expected, prompting some volatility in markets but it’s worth noting that the Fed will have another set of labour market data before the next meeting in March, which should show whether the higher than expected earnings in January were an anomaly or the beginning of an upward trend.

The recent market “turmoil” came after the Fed’s January meeting and so there should be no comments on the volatility that was seen in the first weeks of February.


Markets are currently pricing in approximately 65% chance of three hikes in 2018 and 22% chance of four hikes this year. If the FOMC Minutes reaffirm the latest statement and show they are confident in the inflation outlook, markets may begin to fully price in four hikes in 2018 and US yields could continue the meteoric rise seen recently. However, the correlation between rates and the USD has broken recently and higher yields may not necessarily translate into a stronger USD. ING note that as long as the rise in yields is orderly, this is likely to translate into ongoing broad-based USD weakness, while EM FX should retain support.

* * *

We close with an anecdote from Dennis Gartman, highlighting that if the Fed really wants to shock inflation into submission, it will certainly try:

… we’ve all grown far too accustomed of late with rates moving 25 bps when in the past rate changes were many times 50 and 100 bps… or more! Indeed, there were times when the o/n fed funds rate moved 200 bps as happened at the July meeting in ’71 when the funds rate rose from 3.5% to 5.5% and in August of ’73, moving several times from the level prevailing at the April meeting of 7.25% to 11.0%! In ’74, between the February meeting when the funds rate was 9% it rose to 13%, and it fell to 8% by the December meeting.

Further still, there are other examples of such now seemingly “impossible,” material changes in the funds rate. Thus, it is worth remembering that from the  April meeting in ’79 when the funds rate was 10.25% it rose in large increments to 15.5% by the October meeting. Finally and most impressively from the January meeting in ’80 through the March meeting… a scan six weeks… the Fed funds rate soared from 14.0% to 20.0%. We remember it well for it set the stage for an even larger rise between the June meeting when the funds rate had fallen to 8.5% to 20% again at the December meeting.

We bring these “tales” of volatility to the fore this morning for the simple reason that we have all become too complacent when it comes to the Fed’s history. The past decade’s non-volatility is an anomaly… a long one to be certain, but an anomaly nonetheless. When we said several weeks ago for the first time that we thought the o/n fed funds rate would be taken higher four times this year and that it would move in the aggregate by more than 100 bps we were laughed at. We stand by our forecast, laughter be damned.

And with that in mind, it is perhaps time to start worrying about the Fed cutting rates in the not too distant future…

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The Calm Before The Inflationary Storm


The economy has been showing great gains, and that positive trend is fueling fears of a surge in inflation. The Consumer Price Index, the key predictor of inflationary trends, rose .05 percent in January, which greatly exceeded the anticipated rise of 0.2 percent. The market reacted as expected as stocks fell, and government bond yield rose.

The Fed is keeping a close eye on these developments, and that could fuel the inflation fears. The fear of rising prices includes most economic sectors, from gasoline, housing, food, healthcare, to clothing.

Predictably, the market reacted immediately to the CPI rise with a 100-point loss after opening, even though the decline was quickly reversed. Investors are anticipating that the Federal Reserve could raise their interest rates three or more times by year-end.

As the economy continues to grow, unemployment has fallen to a record low and the sale of tangible goods is up. Economists are anticipating the economic upswing to continue as the GDP is expected to grow by 3 percent, faster than anticipated. Since 2009, the GDP has only risen by an annual average of 2.2 percent. As a result, prices for consumer goods have risen predictably and steadily. The Federal Reserve is setting policy with a 2 percent inflation in mind. A higher-than-anticipated inflation rate could raise interest rates, making it more difficult for companies to borrow needed funds. Following the passage of a $300 billion spending package, market-watchers are now convinced of a 62 percent chance that the Feds will raise interest rates three times by December. Rate hikes in March and June are almost a certainty, with the third hike a high possibility. A fourth hike is not out of the question and becoming more likely. This is seen by many as the real problem.

On top of the $300 billion spending package, the government has signed off on a $1.5 trillion tax cut over the next ten years. President Trump has also promised more funding for large and long-overdue infrastructure improvements.

All the signs for economic growth are in place, and economists such as Joel Naroff of Naroff Economic Advisors, Inc. are anticipating the consequences of “too much of a good thing” to be rising costs and rapid inflation.

Between 2000 and 2016, food prices have increased by almost 40 percent. This number is within the norm as it comprised a reasonable 13.1 percent of household income in 2016. For a household in a lower-income bracket, however, this amount jumps to 36.6 percent, making it far more significant to poorer consumers. The chart below from zerohedge depicts the rise in food prices since 2007 and the actual impact of inflation for staples at the dinner table.

Chart by Zerohedge

Only a handful of food items fell in price, with meat prices increasing by an average of 50 percent.

Consumers are also subjected to higher prices due to tariffs on imports. As a matter of fact, tariffs can double the cost of certain items. The price of certain fruits and vegetable, leather goods, chocolate and dairy products, to name a few, are inflated due to import taxes, or tariffs. The government imposes these tariffs to protect local industries and jobs from unbridled foreign competition.

The import of steel and aluminum has some major financial and security implications. The US is a major steel buyer from across the world, while we only export 25 percent of the amount of the steel we produce. That makes the US a major global player in the steel market. President Trump is considering a tariff of up to 25 percent for worldwide steel imports and a 53 percent tariff for steel imported from 12 specific countries. Aluminum will face a general worldwide tariff of around 8 percent and a 23.6 percent tariff from specific countries. Both steel and aluminum imports will also face import quotas, thus raising prices even more.

Global steelmaking capacity is up 127 percent from 2000, but the demand for steel has not kept up with capacity. Currently, the worldwide capacity for steel production is at 700 million tons; however, this number is 7 times the amount of steel used in the US.

China is the world’s major steel exporter. Its monthly steel production equals the US’s entire annual production of steel. This situation has lead to the demand for a 53 percent import tariff and quotas on all major steel producing countries, including China, Vietnam, Brazil, Thailand, Costa Rica, Turkey Malaysia, Russia, Egypt, Republic of Korea, India, South Africa and India. The purpose of these strict new measures is to increase US steel production from its current 73 percent capacity to 80 percent.

During 2013 to 2016, aluminum suffered the loss of 6 smelters in the US as demand fell by 58 percent. New plans for an improved infrastructure should raise demand considerably. Currently, the government is recommending a minimum 7 percent tariff on all aluminum imports, with a 23.6 percent for aluminum imported for Vietnam, China, Russia, Hong Kong and Venezuela. Imports from all countries can expect an import quota.

All these anticipated measures are expected to benefit the US steel and aluminum industries and raise consumer prices for commodities using these materials. While prices drop in the US, the quotas will help decrease aluminum prices in China, thus allowing for cheaper exports of items manufactured with steel and aluminum. Our policies focus on manufactured good rather than raw material, so the US needs to consider that the quota of these materials will result in cheaper products. The usual remedy is higher tariffs to allow competition with locally-produced goods.

These signs of impending inflation have investors taking another look at gold as the historically most reliable hedge against inflation.

We could be facing a major gold bull market soon. This one will be quite different from the bull markets in the 1970s or the post-2000 market. An entirely new factor is being introduced into the global gold markets with potentially huge consequences. This time, it includes the Islamic factor in the gold trade. One-quarter of the world’s population is Islamic, and investing in gold has been against Islamic law. This is changing, and one-quarter of the world’s population could be infusing the gold market with $3 trillion of investments.

In addition, China has opened the Shanghai Gold Exchange. China has huge gold reserves and wants prices set in actual gold value instead of paper futures. Currently, for each physical ounce of gold, there are 252 ounces of contracted futures on paper. This could change drastically if China has its way, and it could create a gold bull market of historic proportions.

Our growing economy, along with anticipated changes in tariff regulations and entries into the gold market make inflation in 2018 almost a certainty.

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Conservatives Furious After Twitter Purges Thousands Of Accounts

One month after Project Veritas revealed that Twitter was indeed “shadow banning” and blocking views critical of Hillary Clinton, the social network appears to have done it again, and overnight Twitter appears to have suspended thousands of accounts overnight, infuriating conservatives on the platform.

As Bloomberg reports, prominent conservative pundits and activists said Wednesday that thousands of their followers had been deleted overnight.  Other users said they received messages from Twitter asking them to confirm they were real people before being allowed to keep using the service.

“The twitter purge is real,” conservative podcast host Dan Bongino said on Twitter. “Twitter blocked me from twitter ads last night and purged thousands of followers.”

Conservatives have long accused – and in retrospect, with reason – Twitter of targeting them specifically. EvenAjit Pai, the chair of the Federal Communications Commission, has said the service discriminates against conservatives. On the flip side, progressive users say Twitter doesn’t do enough to stop harassment against women and people of color. Some argue President Donald Trump, Twitter’s most influential users, should be banned for bullying opponents.

While Twitter has yet to make a public statement about the issue, Gizmodo reports that right-wing users believe that they’re being targeted in a mass purge of suspected conservatives under the guise that they are “Russian bot” accounts.

As Bloomberg adds, Twitter has been seeking out and shutting down automated accounts that pretend to be real people as pressure mounts to purge the service of “bots” that artificially inflate follower counts and advertising metrics.

Other fake accounts have been traced to Russian-backed agents that the U.S. government says are working to sow political discord in the country. Researchers say as many as 15 percent of users could be fake, a number Twitter says is much lower.

It’s unclear if the latest loss of followers is related to bots. A Twitter spokesperson didn’t immediately return a request for comment

In response, a hashtag called #TwitterLockOut was launched by conservatives to talk about the purge, with some claiming that real people (as opposed to bots) were locked out of their accounts. On Wednesday morning The hashtag “TwitterLockOut” was trending in the U.S.

Everyone from well known figures of the alt-right, like neo-Nazi Richard Spencer, to people with Twitter handles like @Isa4031AMP, @DonofJustice, and @Patriotsavior seem to have been impacted by the move—at least when it comes to their follower counts.

As has happened on previous occasions, conservatives claim that they’ve lost hundreds and sometimes thousands of followers overnight.

Bill Mitchell, a popular voice within the community known for his tweets defending President Trump, claims that he lost roughly 4,000 followers overnight.

Many people who are angry with Twitter are advocating for a move to Gab, a competing social media platform that has become the preferred alternative to Twitter among conservatives.

Some Trump supporters have even blamed the Twitter account purge on Russia.

Mike Flynn Jr., son of the former Trump national security advisor, also claims that Twitter is targeting conservatives, though he claims he’s given the company the “benefit of doubt.”

Gizmodo said it has reached out to Twitter and will provide an update if @Jack’s company – whose stock in recent days has soared on the back of its first ever profit and a short squeeze – responds.

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Canada’s Oil Crisis Continues To Worsen

Authored by Irina Slav via,

Canadian oil producers can’t get a break.

First it was the pipelines – there are not enough of them to carry the crude from Alberta’s oil sands to export markets. This pipeline capacity problem has been forcing producers to pay higher rates for railway transportation, which has naturally hurt their margins in no small way.

Now, there is a shortage of rail cars as well.

The situation is going from bad to worse for Canadian producers who can’t seem to catch a break. Canadian railway operators are fighting harsh winter weather and finding it hard to supply enough cars to move both crude oil from Alberta and grain from the Prairies.

The harsh weather is just the latest factor, however. Before that, there was the 45-percent surge in demand for rail cars from the oil industry, Bloomberg reports, citing Canadian National Railway. The surge happened in the third quarter of last year, and Canadian National’s chief executive Ghislain Houle says that it took the company “a little bit by surprise.” This surprise has led to “pinch points” on the railway operator’s network, further aggravating an already bad situation.

As a result, crude oil remains in Alberta and prices fall further because Alberta is where the local crude is priced, Bloomberg’s Jen Skerritt and Robert Tuttle note. In fact, Canadian crude is currently trading at the biggest discount to West Texas Intermediate in four years, at $30.60 per barrel. The blow is particularly severe as it comes amid improving oil prices elsewhere driven by the stock market recovery.

The light at the end of the tunnel is barely a glimmer. Despite federal government support for the Trans Mountain pipeline expansion project, it is still facing obstacles that may result in it never seeing the light of day. The project that would boost the current pipeline’s capacity from 300,000 bpd to 890,000 bpd, accommodating much of the increased Alberta bitumen production, is being challenged in court and Kinder Morgan has yet to collect even half of the necessary permits to proceed with it. There are no other major pipeline projects in Canada that have been approved.

Meanwhile, the news from the research front is not good, either. Back in September, media outlets reported on an accidental discovery that could make transporting bitumen by rail much safer by turning the crude into pellets. This would minimize the danger of a spill but, some said at the time, would increase transportation costs.

Canadian national Railway is also working on its own bitumen pellet technology it calls CanaPux, but for now it has not yet been commercialized, perhaps for the same reason of cost. Yet bitumen pellets, some observers note, could be the best solution to the current conflict between Alberta and British Columbia. The latter is doing everything it can to stall Trans Mountain’s expansion citing environmental concerns.

Alberta stopped importing B.C. wines in retaliation.

But bitumen pellets are safe, their creators say, so B.C. would have nothing to worry about. And yet, like grain, these pellets would need rail cars to transport them should this option be chosen despite cost considerations. Canadian National says it plans to hike its capex to $2.6 billion this year in response to the shortage. The effect of the surprise jump in demand for railcar capacity from the oil industry should also subside eventually. The only question is how much all these factors would hurt Canada’s oil production growth in the meantime.

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