It is increasingly clear that Russia is taking a prohibitive view of technology, and its latest policy regarding Windows 10 reflects this clearly. The vice speaker of the State Duma has requested that the Russian government bans the use of the Windows 10 operating system among all Russian civil servants, over specific concerns over security provisions. This has centered around the notion that the Russian state is concerned that this American-authored software may provide inadvertent access to classified information and Russian personal data.

Image credit: Windows/YouTube

Windows 10 set to be dumped

MP Nikolai Levichev of the center-left Fair Russia party wrote to Russian Prime Minister Dmitry Medvedev to outline his particular fears regarding the program. Levichev suggested that the service level agreement signed by all Windows 10 uses enables Microsoft to access all passwords, password prompts and other information used for data protection. In addition, it was noted that the Microsoft corporation also receive other types of data from Windows 10 users, including contacts, e-mails and even location.

It is openly stated in the blurb related to Windows 10 that any information received by Microsoft will be stored and processed in the United States. It can also be held in other countries for an indefinite period of time, as well, and ultimately transferred to US state agencies. It is clear that this latter policy that was particularly onerous to Russia, which has recently passed new legislation that fundamentally changes the relationship of the country with the Internet.

Levichev has therefore called on Medvedev to seriously consider a complete ban on the Windows 10 operating system in Russia’s bodies of state power. State-owned corporations and state-sponsored scientific and research institutions are also apparently under consideration. The member of the Russian Parliament has also written to he head of the Russian internet watchdog Roskomnadzor, Aleksander Zharov, questioning whether the service level agreement associated with Windows 10 is in breach of Russian law.

Russia clamps down on the ‘net

It was the Roskomnadzor that recently announced the way that Russia deals with the Internet was to change significantly. According to new legislation which has recently been proposed in Russia, it will be impossible for companies to operate websites in Russia unless they are based in the country. This law was passed in mid-2014, obliging all Internet companies to store the personal information of Russian citizens within the borders of the country. Although the law will not come into effect until Q3 2016, it could hugely alter the landscape of the Internet in Russia.

Other members of the Russian Parliament have supported the initiative of the Russian government, with Senator Aleksander Volkov indicating in an interview that he considered it to be a worthy initiative. It is now considered essential by the Russian government for the country's governmental institutions to develop their own protected operating systems, with the express intention of replacing Microsoft products.

Although Microsoft has little control over Russian internal policy, it has nonetheless not taken this news lying down. The press service of the software giant has publicly replied, stating that the transfer of personal information is impossible without the consent of users. Windows 10 does include privacy settings, but the more sceptical and cynical among us may wonder how effective these are in practice.

Russia blocks Reddit

This is not the first incident that suggests that the way that Russia interacts with modern technology is evolving. Just two weeks ago, Russia blocked access to several parts of the social news site Reddit for what it deemed to be the promotion of the use of banned substances. Several pages on Reddit gave instructions regarding how to produce hallucinogenic ‘magic’ mushrooms, and the Russian government had even signalled its intention to pull the entire social media site if Reddit failed to respond adequately.

And any blogger with an audience of more than 3,000 followers must now register with the Russian government, as the increasingly emboldened Putin-backed Medvedev regime clamps down on free speech in the nation.

Wikipedia threatened with the axe

Meanwhile, in the last couple of days, Wikipedia has also been exposed to threats from the Russian authorities. Again it was drugs-based content that attracted the attention of the Russian state, with the government threatening to ban Wikipedia if the online encyclopedia failed to delete an entry about charas; a hashish form of cannabis.

Westerners will generally be alarmed by this policy of the Russian government, with it being so obviously at odds with the ethos of the Internet in the West. Although there have been massive issues related to privacy on the Internet in both North America and Europe, the principle of free speech has still been very much upheld within these regions. As Russia continues to respond in authoritarian fashion to what would be considered relatively trivial issues in the West, it will be interesting to see how attitudes toward the Internet develop, both at home and abroad.

The post Russian State Agencies Set To Ban Windows 10 appeared first on ValueWalk.

As the relationship between Russia and the United States deteriorates, the chances of war at some point in the future continues to increase. And the increasing tension in the Ukraine underlines the potential for escalation between the two nations. The stand-off between Russia and the EU / NATO establishment in the Ukraine has demonstrated, and increased, the possibility of this unsavory prospect developing in the future.

Vast military forces

Although many political and military analysts will not entertain the possibility of a war between the United States and Russia at present, the fact that such large numbers of military forces are operating in proximity to one another will undoubtedly keep this possibility alive. All that would be required would be some unfortunate form of miscommunication, and the situation between the United States and Russia could become terminal very rapidly.

While many people would not wish to contemplate such an eventuality, it is notable that there is a historical precedent for this occurrence. During the Cuban Missile Crisis, a by now infamous period in US history, Russia and the United States came extremely close to a conflict that could have had phenomenally deadly consequences.

On October 27, 1962, a group of eleven United States Navy destroyers and the aircraft carrier USS Randolph nearly prompted an international incident from which it would have been almost impossible to recover. It was only the intervention of Vasili Alexandrovich Arkhipov, stationed on the Soviet submarine B-59, that prevented soviet submarines from firing nuclear weapons. Had this occurred, a full-scale nuclear conflict was almost inevitable, and indeed former US Defence Secretary Robert McNamara has since recognised that Arkhipov played a major role in saving the world, stating that “we came very close" to nuclear war, "closer than we knew at the time”.

This underlines how feasible it is for conflict between nations to get out of hand, and also how misguided the policy of mutually assured destruction has proved to be. The notion proffered by the authorities of the time, that a nuclear arms race would prevent a war between Russia and the United States owing to the fact that it would result in the inevitable destruction of both nations, has turned out to be somewhat ill-founded.

Immense nuclear powers

It is perhaps somewhat alarming then that the number of nuclear weapons possessed by the United States and Russia remains extremely large in number. As the two nations continue to have a somewhat strained relationship, it is sobering to reflect on the fact that they collectively possess around 15,000 nuclear warheads. Russia has slightly more nuclear weapons than the United States, and could be considered to be legitimately the strongest nuclear power on the planet. But the 7,200 nuclear warheads located in the United States are also capable of doing almost incalculable damage.

It is also informative to consider the nuclear technology utilized by the two superpowers. Both Russia and the United States have mounted nuclear weapons on intercontinental ballistic missiles in protected silos, and also onboard submarines. Both can also utilize weapons by outfitting them via strategic bombers. Although both Russia and the United States have indicated the intention to comply with nuclear disarmament treaties, and the 15,000 figure includes warheads either held in reserve or waiting to be dismantled, it is still an insight into the chillingly destructive capacity of the two nations.

The figure involved was sourced by the Federation of American Scientists in 2015, and suggests that both the United States and Russia have the capabilities to launch tactical nuclear strikes on the battlefield, as well as utilizing strategic nuclear weapons against other cities and larger targets. Despite the protests from both the Russian and American governments that they are phasing out such deadly technology, it is clear that both countries easily have the weaponry required to destroy one another. This naturally brings the recent tensions between Russia and the United States into sharper focus.

Baltic Sea incident

Aside from nuclear tensions, accidents have also occurred in the recent past that have helped spark dysfunction in the relationship between Russia and the United States. One such incident occurred in April, when a Russian SU-27 fighter jet flew within approximately 5 m of a U.S. military surveillance plane over the Baltic Sea.

Whatever the rights and wrongs of this particular incident, it is indicative of the intransigent relationship between the two nations that neither was able to accept the point of view of the other. The US government made an official complaint to Russia about the aggressive behavior of the pilot, but the Russians simply countered by stating that the United States spy plane was flying towards the border with its identification transponder turned off. This succinctly symbolizes the lack of trust between the two nations, and the suspicious relationship between the two superpowers.

If one doubts that the relationship between the United States and Russia is less than rosy, then it is important to note the comments of Latvian Foreign Affairs Minister Edgars Rinkevic. Earlier this year, Rinkevics stated that the relationship between Russia and the West had plummeted to its lowest level since the aforementioned Cuban Missile Crisis. Considering the consequences of this International stand-off that occurred in the 1960s, one can only hope that a more peaceful and acquiescent solution is found on this occasion.

NATO activity

But certainly the activities of NATO suggest that there are concerns on both sides regarding the other’s conduct. NATO vessels regularly patrol the Black Sea region, with Russia closely monitoring their activity. There are a huge amount of United States, Canadian and other NATO troops mssing and training on Russia's doorstep. It has been reported that in October, NATO will run one of the biggest exercises in years, with around 36,000 military personnel involved in wargames inended to communicate the fact that this military alliance is ready to respond to Russian threats if required.

The well-documented history of relations between Russia and the United States suggests that the relationship between the two nations will always be tense. Unfortunately, recent indicators suggest that a physical conflict between these two nuclear powers cannot be discounted completely.

The post US-Russia Tension Suggests Future War Possible appeared first on ValueWalk.

According to some sources, China has become more emboldened in its activities in the South China Sea region. Pentagon reports claim that the reclamation of land mass by China in the area has grown dramatically in recent months, as it attempts to gain control of the artificial islands in the South China Sea. It is also suggested by the United States military organization that the Beijing authorities have overseen an aggressive patrolling of the waters from Chinese forces, with the aim of advancing its territorial claims to the region.

IMAGE: U.S. Pacific Command, Flickr

China accelerates South China Sea land accumulation

According to Pentagon reports, China has already accrued nearly 3,000 acres of land mass across a string of islands in the South China Sea. The region in question is often referred to as the Spratlys, and the amount of land reclaimed by China in the region has increased by nearly 50 percent since May. At this time, it was believed by the Pentagon that Beijing had already claimed around 2,000 acres of the South China Sea region.

There are concerns among the United States authorities that the South China Sea Islands will be utilized by China for military purposes in the future, and there is a fear that this could lead to significant instability in the region. Naturally this is something to be avoided at the best of times, but it is also notable that the South China Sea is one of the most important commercial shipping routes on the planet.

In general terms, this area has been considered one of international waters, but it is clear that China is now laying down a claim of dominance over the region. This is a policy that the United States is unlikely to be acquiescent with, as illustrated by its relatively aggressive stance in the region. But the chances of conflict between the United States, China and the allies of both the nations continues to grow at the same rate.

Washington visit

This latest report follows a high-profile visit to Washington by Chinese President Xi Jinping, with the aim of improving diplomatic relations between the two superpowers. There is no doubting the fact that the United States and China are the two most significant nations on the planet at present, occupying the first and second slots in terms of GDP by nation. It has been interesting to note in recent days that that United States stock market took something of a nosedive on perceived weaknesses in China, and there are now inextricable links between the two countries' economies.

Meanwhile, despite the politically favourable relationship between the United States and China, and the fact that the two have been drawn together magnetically by economic issues, it is increasingly predicted that the two superpowers will come to blows in the foreseeable future. It seems that there is an intrinsic rivalry between China and the United States, and that it is inevitable at some point that this will begin to become somewhat strained.

The rate of growth of the South China Sea Islands from China’s development activity has accelerated considerably, according to the report, as the US military institution continues to monitor Chinese activity in the region. This study, entitled “The Asia-Pacific Maritime Security Strategy”, clearly runs contrary to previous claims made by China. The Chinese government had stated earlier in August that it had completely ceased reclamation operations in the South China Sea, but US officials were sceptical at the time regarding whether this state of affairs would remain permanent.

As US concern grows regarding the South China Sea region, a spokesman for the Chinese Embassy in Washington stated that China had completely ceased any form of reclamation in the South China Sea region. Zhu Haiquan had spoken on behalf of the Chinese government, and suggested that the facilities being constructed on the South China Sea Islands are simply being produced for the general well-being of the public.

While the United States authorities have yet to directly question the role of China in the South China Sea, there is understandable concern among the government regarding the direction of Chinese policy in the region. It was notable that a Pentagon spokesmen recently challenged Beijing to elaborate on its plans in the region, while also explicitly refusing to directly contradict previous Chinese claims about reclamation having ended.

It is clear, if Pentagon reports are to be believed, that China has greatly expanded its activities in the area. Before the beginning of 2015, defense officials from the United States were of the opinion that China had only reclaimed around 500 acres of land mass in the South China Sea region, and that this had been mostly built atop semi-submerged reefs by using dredged material from the seafloor. With the suggested area of reclamation now around 600 percent larger than this, the efforts of China to engage in what could be considered provocative activity in the South China Sea have clearly redoubled over the last 12 months.

China dominating the Spratlys

This is further underlined by the statistic that China has, in fact, reclaimed 17 times more land than any other nation in the past 40 years. The Chinese reclamation has amounted to around 95% of all land in the Spratlys, at least according to Pentagon sources. China has evidently engaged in extremely aggressive conduct in the region, despite the fact that numerous Chinese neighbous also lay claim to the islands. Countries believing that they should have a stake in the South China Sea region include Brunei, Malaysia, the Philippines,Taiwan and Vietnam.

Of these nations, Vietnam has reclaimed the most, around 80 acres, while Taiwan has reclaimed approximately eight acres; succinctly underlining the extent to which China is now dominating the region.

As geopolitics becomes increasingly defined on the rivalry between China and the United States, the development of the South China Sea question will be of increasing interest to the US authorities. Some might consider the US interest in the region to be rather hypocritical considering its own foreign policy, but it is certainly an interest that will continue into the future.

The post South China Sea Tension Escalates Over Chinese Aggression appeared first on ValueWalk.

As the situation in the South China Sea continues to develop, Russia, the United States and China continue to jockey for position. And tension is beginning to brew into what could be a potential conflict, as a prominent analyst has suggested that the United States is taking a hardline approach to Russia and China in both the South China Sea region and the Ukraine.

Tense situation escalates

Bill Jones of Executive Intelligence Review has stated that the situation in both the South China Sea and that Ukraine is incredibly tense at present. And Jones suggested that the conduct of the US administration is certainly not cooling the conflict, with the US instead adopting a posture that could reasonably be described as “playing hardball”.

The Washington government has accused the Beijing administration of carrying out a massive land reclamation program in the Spratley Islands of the South China Sea. Military and intelligence evidence has been provided in order to support this, and based on these documents, it does seem that China has been pursuing a hawkish policy in the region. The United States government contests that the territorial claims of China to the man-made Islands will lead to a militarization of the region, and a hugely increased chance of destabilization.

Ukraine accounts differ

With regard to the Ukraine, this is a highly contentious issue that is seen completely differently by Russian and Western sources. Although the behaviour of Russia in the Ukraine has generally been seen as extremely antagonistic in the West, the issue is often conveyed and communicated completely differently by Russia and its allies. Even Ukrainian sources have completely contradicted the United States administration's version of events in this conflict.

As the United States maintains a key interest in that Ukrainian situation, the US government has invoked a policy that has deliberately provoked unrest in the eastern part of the crisis-stricken nation. Increasingly, the Obama administration has put pressure on Moscow to help implement the terms of a ceasefire deal that was agreed by both sides in the conflict in Minsk, back in February of this year.

Meanwhile, Jones contends that by massing troops in the Ukrainian region that NATO in general, and the United States in particular, is guilty of escalating the situation, and creating unnecessary tension where none need exist.

South China Sea stand-off

Both of these situations are contentious, but the South China Sea issue is particularly complicated. This is not least because numerous nations in East Asia lay claim to the region, and China appears to be taking a particularly prominent role purely due to its military, economic and demographic advantages.

The issue of boundaries in the South China Sea is not resolved, at least according to the opinion of the aforementioned Jones. While the rhetoric from all nations with an interest in the South China Sea is that this issue must be resolved by negotiations, the behaviour of countries with regard to this region provides a counterpoint to this rhetorical claim.

Jones asserts that the pivot by the US to Asia has created a level of tension in the area that hasn’t been seen in decades. That United States administration has been attempting to forge alliances and allegiances in the region with other players in the South China Sea situation, and these alliances that the United States have sought have always been traditionally against both Russia and China. This has contributed to a tension in the region that is becoming a potential powder keg.

As the United States continues to take an explicit interest in the South China Sea situation, every move that they have undertaken are collectively leading to greater conflict, at least in the opinion of Jones. The analyst suggests that the moves made by the United States have actually extended tensions in the region, as China now feels that it doesn't have the negotiating conditions available which are favorable to it, thus sabotaging even the possibility of such diplomacy.

Jones concluded his comments by stating that the strategy of the United States in the region should be considered an extremely bad move. Those concerned with the development of geopolitics in the South China Sea region are currently significantly concerned about it, but unfortunately none of those concerned appear to be present in the White House. While Jones attempted to put his concerns about the region in the most neutral language possible, it was clear that he believed that the possibility for real physical conflict and warfare is escalating significantly.

Geopolitical chess

The situation in the South China Sea region is the latest chapter in an ongoing geopolitical conflict between the old world order dominated by the United States and a new power bloc in East Asia. Although the geopolitical picture is increasingly complex, it's becoming clear that the rivalry between these two competing mindsets, dominated by the United States and China, will be a theme of political manoeuverings all over the planet in the coming decades.

In many ways, this can be seen as a financial rivalry as much as a territorial and military competition. Both China and Russia have indicated the desire to be more proportionally represented in global financial institutions, although their pleas have fallen upon deaf ears thus far. This has led to suggestions that Russia and China could even be essential players in setting up a new central bank system to rival the existing Breton Woods agreement that is exemplified by the Bank for International Settlements.

The situation between the United States and China is further complicated by the fact that the two countries are inextricably linked economically. China owns a huge amount of US debt, and the economic links between the two nations are now extremely well established. Slumps in the Chinese market this week lead to a panic all over the world in global stock prices, and the relationship between China and the United States is certainly indicative of the fact that the world order today is far more complex than a simple bi-polar situation.

As the 21st century unfolds, there will unquestionably be more conflict involving the United States and China, and it seems increasingly likely that the South China Sea region will play a significant role in this relationship.

The post United States Policies Escalating South China Sea Tension appeared first on ValueWalk.

Personal Income and Spending came in about in line with analysts' expectations, with Personal Income up 0.4% month-over-month and Personal Spending up 0.3% month-over-month.

Here's a look at the year-over-year growth pictures for Personal Income (top) and Personal Spending (bottom).  The most recent measurement has Personal Income growth 4% year-over-year and Personal Spending growing 3% year-over-year.

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Here's a look at the difference between Personal Income growth and Personal Spending growth.

Interestingly, the difference between Personal Income growth and Personal Spending growth continues to be stubbornly high.  This is shown by looking at where the difference between the two measures is right now, in the upper quartile of historical experience.  The difference is currently about 1%.

The American Consumer's Fear Periods

For a while now, Personal Income has been growing much quicker than Personal Spending.  This observation has led to some high profile comments from the likes of former Fed chairman Ben Bernanke and others to state that Americans are saving too much.

During periods when income is growing faster than spending, another word to describe the state of the American consumer is that the consumer is in a state of fear.  This fear is brought on by concern about the state of the state of the American (and global) economy.  This causes Americans to be more cautious with their money, taking more in than spending.

The American Consumer's Profligate Periods

On the other end of the consumer mindset is profligacy.  This is the situation when consumers are spending much more than they are making in income, using credit cards and other forms of finance to keep their spending going.

To an extent, the two most recent examples of when the American consumer was acting this way was during the technology and housing booms.

How Does the Picture Look by U.S. Presidents?

Presidential policies can sometimes influence the state of the American consumer.

Which U.S. president would you guess is the fear president?  Which president would you guess is the profligate president?

Here's a look.

A Look at Personal Income

First, here's a look at the two separately.

The following plots the growth or decline in Personal Income by U.S. president since 1960.

The vertical axis is the percentage growth through the given administration.  The horizontal axis is the number of months the given individual was in office.

Interestingly, the Personal Income picture paints Reagan as the king of income growth.

On the other end, Obama come out as the bottom dweller.

A Look at Personal Spending

Here's the Personal Spending picture.

Personal Spending has been quite weak during the Obama Administration, placing him in last place.

On the other end, Reagan comes out on top in American consumers' Personal Spending growth.

Putting the Two Together

It's tough to tell with the two separated which president is the top fear president, and which U.S. president is the profligate president.

Here's the answer.

Interestingly, the fear president is Nixon, where Personal Income grew by, on average, 0.44% more than Personal Spending.

On the other end, Ford is the profligate president, with spending expanding by, on average, 0.96% quicker than income.

Presidents & fear - Conclusion

In looking at the performance of Personal Income and Personal Spending across American presidents, some clear patterns emerge on which presidents' administrations saw profligate consumer experiences, and which presidents saw consumers live in fear.

The president most deserving of the fear president is Richard Nixon.

On the other end of the spectrum, the president more deserving of the profligate president is Gerald Ford.

The post Which U.S. President is the “Fear” President, and Which is the “Profligate” President? appeared first on ValueWalk.

Why Economics Matters by Jeff Deist, Mises Institute

This article is a selection from a June 19 presentation at a lunchtime meeting of the Grassroot Institute in Honolulu at the Pacific Club. The talk was part of the Mises Institute’s Private Seminar series for lay audiences. To schedule your own Private Seminar with a Mises Institute speaker, please contact Kristy Holmes at the Mises Institute.

First let me say that what we today call “Austrian economics” flows from the great legacy of classical economics, with the very important modification economists now call the “marginal revolution.” Austrian economics is also a term that describes a healthy and vibrant (though often oppositional) modern school of economic thought. It originated with intellectual giants like Carl Menger and Ludwig von Mises, names I’m sure many of you are familiar with. These economists were from Austria, hence the term.

There was a landmark conference at South Royalton, Vermont in 1974, attended by the likes of Murray Rothbard and Milton Friedman, that revitalized the Austrian movement and helped it regain prominence in the latter part of the twentieth century. Milton Friedman was in attendance, and that’s when he famously remarked that “There is only good economics and bad economics.”

And of course that’s true. Schools of thought should not be rigid, or dogmatic, or too narrowly defined. But classifying various economists and theories into groups or family trees does indeed help us make sense of economics. It helps us understand how we arrived at a time and place where Ben Bernanke, Paul Krugman, Thomas Piketty, and Christine Lagarde are viewed as modern mainstream thinkers rather than the radicals they are when compared to the whole history of the field.

Image courtesy of Peter Cresswell.

We supplied some photocopies that roughly trace the history of economic thought. Notice the split in the 1930s, not coincidentally during the Great Depression, between Mises and John Maynard Keynes. Up until then, from about 1850 forward, Austrian economics was mainstream economics. But as you can see, most of today’s mainstream economists fall somewhere under the umbrella of Keynes, and they tend to focus on variants of Keynes’s ideas about aggregate demand.

But at least they focus on something!

Ignorance of Economics Is not Bliss

Which leads me to my topic today: “Why Any Economics Matters.” I say “any” because at this point the entire subject appears to be lost on the average American. Economics is not a popular topic among the general population, it would seem. When economics is discussed at all, it’s in the context of politics — and politics gives us only the blandest, safest, most meaningless platitudes about economic affairs.

Bernie Sanders or Hillary Clinton simply are not going to talk much in economic terms or present detailed economic “plans.” On the contrary, they — will assume rightly — that most Americans just don’t have any interest beyond sloganeering like “1%,” “social justice,” “greed,” “paying their fair share,” and the like.

Candidates on the Right won’t be much better. They’d prefer to talk about other subjects, but when they do broach economics they’re either outwardly protectionist like Donald Trump or deadly dull.  Who is inspired by flat tax proposals?

Americans simply aren’t much interested in the details, or even the accuracy, of the economic pronouncements of the political class. We want bread and circuses.

Consider what people talk about on Facebook: lots of posts about family. Lots of posts about celebrities, and sports. Lots of posts about food, health, and exercise. Some posts about politics, culture, race, and sex, but usually only to support one side or bash the other.

Not much, ladies and gentlemen, in the way of economics. And I submit that might be a very healthy thing. After all — we’re rich! Only a wealthy society does not have to focus on the subsistence-level concerns of adequate food and shelter, hot running water, clothing, electricity, and the like.

So let’s not be too hard on people for not spending their free time reading economics. Leisure itself is a very important activity, and represents a form of economic trade-off.

But economics matters very much, and we ignore it at our own peril. Economics is like gravity, or math, or politics — we may not understand it, or even think about it much, but it profoundly affects us whether we like it or not.

Economics as a subject has been captured by academia, and academics like Krugman are not so subtle when they imply that lay persons should leave things to the experts. It’s like team sports — we may be introduced to it when we’re young, but only the professionals do it for a living as adults.

Yet once we understand that all human action is economic action, we understand that we can’t escape or evade our responsibility to understand at least basic economics. To think otherwise is to avoid responsibility for our own lives.

While we shake our heads when twenty year olds can’t read at the college level or do simple algebra, we don’t worry much whether they never take economics. We would be alarmed if our children couldn’t perform basic math to know how much change they should get at a cash register, but we send them out into the world far more susceptible to being cheated by politicians. Why do we want our kids to learn at least basic geography, chemistry, and physics? And grammar, spelling, literature, history, and civics? We want them to know these things so they can navigate their lives properly as adults

But somehow we’ve come to believe economics should be left to academics and policy wonks. And worse yet, we don’t protest when kids grow up to become adults with little or no knowledge of economics, yet still have strong opinions about economic issues.

Ignorance of basic economics is so widespread that we ought to have a specific word for it, like we have for illiteracy or innumeracy.

The aforementioned Murray Rothbard had this to say:

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a “dismal science.” But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

I’m sure we’re all familiar with this phenomenon on social media, which seems perfectly suited to vociferous unfounded opinions.

Let’s consider the minimum wage issue, as one example that’s been in the news lately:

Wages are nothing more than prices for labor services. When the price for something rises, demand drops — and you have more unemployed people than you otherwise would. Pure and simple Econ 101.

Yet what percentage of Americans today have even seen a downward sloping demand chart in a high school or college class?

It is this great and widespread ignorance of economics that plagues our ludicrous

The post Why Economics Matters appeared first on ValueWalk.

China Deserves More Credit than Blame

The visit to the US later this month by China’s President Xi Jinping comes at a politically sensitive time, with volatility in China’s markets—widely attributed to the effect of policy decisions—rippling globally. In our view, however, China deserves more credit than blame for its recent actions.

As China attempts to make the transition to a more open economy, two things are virtually inevitable: market volatility and extremely difficult policy decisions, many of which need to be taken in the heat of the moment.

A case in point is the government intervention that followed the initial correction in the A shares market in July. This was widely interpreted outside China as a panicky reaction. But China’s share market is largely retail driven, and the need to maintain social harmony is of paramount importance to a single-party state. In light of this, the government’s response makes sense.

But what do we make of China’s decision to devalue its currency last month, just weeks before President Xi was due to make his first official visit to the US? The move was widely characterized as an attempt by China to shore up its sputtering export performance. Given that US politicians have for years accused China of keeping the renminbi artificially low, and that bilateral trade will be a key talking point when President Xi meets President Obama, surely the timing of the move was, at the very least, politically inept?

We don’t think so. In our view, the currency adjustment provides another example of how easy it is to misinterpret China’s policy actions.

Devaluation? Or a Step in the Right Direction?

Describing the move as a competitive devaluation ignores a number of facts—such as that China’s exports, while challenged, have largely performed better than those of its regional competitors. For this reason alone, it’s hard to see why a competitive devaluation would be necessary.

Also, China’s trade balance is positive (imports are falling faster than exports) and the country has an embarrassingly large trade surplus. Devaluation would simply exacerbate these issues, and do so at precisely the wrong political moment.

Far more plausible, from our point of view, is the explanation by the People’s Bank of China that the adjustment was intended to close an unusually large gap between the currency fix and the spot price. This made sense given that the central bank lowered the fix by just 1.9% and stepped into the market to support the currency when it came under pressure as the devaluation story took hold.

It also made sense as a reflection of government policy, which is to modernize and diversify the economy using private capital from inside and outside the country. To do this, China needs a more market-oriented currency—hence the move to align the fix more closely with the spot price.

Good News, Mr. President

Our research suggests that China is in fact less focused on its currency than on the need to deliver liquidity into the right parts of the domestic economy so that consumption becomes more of a growth driver alongside the traditional engines of exports and investment.

President Xi can tell President Obama some good news in this respect: recent data show a convergence in fixed-asset investment and retail sales trends, with the former falling and the latter holding steady (Display). While the figures are not particularly exciting in themselves, they suggest that China’s economic rebalancing is under way.

And that will be a welcome development for world trade, as it suggests that China’s consumers—the most affluent of whom are already making their mark in the purchase of international travel and foreign luxury goods—will continue their ascendancy.

This article previously appeared in the Financial Times.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.

The post China Deserves More Credit than Blame appeared first on ValueWalk.

According to reports, five Chinese warships have moved into the Bering Sea near Alaska after participating in a naval exercise with Russia. Yet the consensus of analysts is that the ships are not viewed as a threat by the United States government, even as President Barack Obama is currently travelling in northern Alaska near the Arctic Circle.

Defense Department acknowledges Chinese vessels

White House spokesman Josh Earnest confirmed that the Defense Department had identified a number of Chinese vessels in that region, but that military analysis had revealed that there was no form of threat, or indeed threatening activities, emanating from the naval presence.

Nonetheless, the US military continues to monitor the region, increasingly wary of ships emanating from China in the area. It has been reported that the US authorities have been tracking the movement of vessels in the region for days, as they continue to traverse international waters. Although comments emanating from Washington have been diplomatic, the defense department has also taken what is fundamentally a neutral position.

Earnest stated that the intention of the ships at this time is still unclear, and clearly there is at least some form of suspicion among the US administration. However, despite this suspicion, as long as vessels behave in accordance with international law, it seems certain that that United States will retain its diplomatic distance.

Navy Cdr. Bill Urban, a Pentagon spokesman, indicated that vessels from China have not been spotted in the Bering Sea before, but was also keen to emphasize that the United States viewed the conduct of China as acceptable at the time of writing. Urban stated that the United States respected “the freedom of all nations to operate military vessels in international waters in accordance with international law”.

China ships approach US coast

What particularly caused concern about the behavior of the Chinese vessels was, firstly, the fact that they came within 12 nautical miles of the United States coast. This could have represented a temporary passage into US territorial waters, according to the Pentagon. Secondly, the proximity of Obama to the incident has obviously been of concern to the White House hierarchy, even if there was really no credible threat to the President.

Pentagon officials indeed confirmed that five Chinese navy ships had passed through United States territorial waters as they transited the Aleutian Islands. And this has unquestionably generated headlines in many quarters. But it is important to emphasize that the ships had also completely complied with international law.

Nonetheless, analysts are assessing this incident as a significant chapter in the ongoing diplomatic, economic and covert military battle between the United States and China. The Chinese authorities have long objected to the United States transiting vessels in its territorial waters, or indeed operating in international waters just outside the limits of China. In this context, this latest incident could be seen as very much a retaliatory effort from the Chinese.

Certainly there has been no effort to deny the incident on the behalf of the Chinese authorities. The Chinese defense ministry has confirmed that navy ships had sailed to the Bering Sea for training after joint exercises with Russia, but that the activity was completely routine and certainly not aimed at any particular nation.

Nonetheless, in the wake of a recent report that suggests that Russia and China are collaborating significantly in order to increase China's naval power, the incident does underline the shifting world order. China clearly has expanding naval power and ambitions, as illustrated by its activities in the South China Sea region, and the passage of these vessels on the eve of a lavish military parade in Beijing succinctly illustrates the capabilities of the world's most populous nation.

China-US relations improving

While the diplomatic relationship between the United States and China has improved recently, this could be seen by many analysts as a powerplay ahead of an important state visit. It is just weeks until China’s President, Xi Jinping, begins a state visit to the US, and news of this latest incident will hardly improve relations between the two superpowers. There are already tensions in the United States over alleged Chinese cyber attacks on the US, and of course the Washington government has also taken a keen interest on China's land grabbing in the South China Sea region.

As China becomes increasingly emboldened by its strong alliances and improving military capabilities, it is believed by US officials that the East Asian superpower is currently working on building a so-called blue-water navy. This would ensure that China has the capability of operating a considerable distance from its shores, while simultaneously developing missiles and other naval capabilities designed to prevent that United States navy from intervening in any conflict in the Asian region. This would then cement the imperialistic plans of China in the South China Sea, ensuring that the United States is effectively neutered on the subject.

As Beijing displays its military wares in a parade to mark the surrender of Japanese forces at the end of the Second World War, many new capabilities were on display. Central to these was a new naval-based ballistic missile, which clearly represents a paradigm shift in the naval and military abilities of the East Asian nation.

Yet despite the concern among both US military analysts and the Washington government, many experts in fact view the Chinese transit through the Aleutians as a positive step. Peter Dutton, director of the China Maritime Studies Institute at the U.S. Naval War College, suggested that the operation can be viewed as one of fairness and equity, with the passage of these vessels in fact a large step forward for the United States. The Beijing government now has no rational basis to object to similar passage through Chinese territorial seas by the United States Navy.

So although this is an incident that has generated headlines, and understandably so, in the long run it could help to improve the diplomatic relationship between the two nations. The 21st century will unquestionably be defined by the rivalry between China and the United States, and with the two nations already sharing so much common ground, it would be encouraging to see the two superpowers reach a mutual and peaceful understanding.

The post China Warships Approach U.S. Coast Sparking War Fears appeared first on ValueWalk.

Phishing for Phools

Akerlof &  Shiller, Phishing for Phools: The Economics of Manipulation and Deception

George A. Akerlof and Robert J. Shiller, who previously collaborated to produce Animal Spirits, have joined forces again. Their new book is Phishing for Phools: The Economics of Manipulation and Deception (Princeton University Press, 2015).

Their thesis is simple but powerful: that “competitive markets by their very nature spawn deception and trickery, as a result of the same profit motives that give us our prosperity.” (p. 165) Economies “have a phishing equilibrium in which every chance for profit more than the ordinary will be taken up.” (p. 2) Free-market equilibrium undermines our plans to eat healthily, it makes us pay too much for our cars and houses, it transforms rotten assets into gold.

We have weaknesses that can be exploited (monkeys on our shoulders), weaknesses that free markets by their very nature exploit. Akerlof and Shiller modestly claim to be making only “a small tweak to the usual economics (by noticing the difference between optimality in terms of our real tastes and optimality in terms of our monkey-on-the-shoulder tastes). But that small tweak for economics makes a great difference to our lives. It's a major reason why just letting people be Free to Choose—which Milton and Rose Friedman, for example, consider the sine qua non of good public policy—leads to serious economic problems.” (p. 6)

In 1930 John Maynard Keynes projected what life would be like in 2030. In one respect he was pretty close: real income per capita in the U.S. was 5.6 times higher in 2010 than it was in 1930. (He predicted it would be eight times higher by 2030.) But in the other, he was dead wrong. People aren't worrying about how to use their surfeit of leisure; they're still worrying about how to pay the bills. “[F]ree markets have … invented many more ‘needs' for us, and, also, new ways to sell us on those ‘needs.' All these enticements explain why it is so hard for consumers to make ends meet. … Some say that our predicament is a product of the consumerism of the modern world. … But to our minds, the central problem lies in the equilibrium. The free-market equilibrium generates a supply of phishes for any human weakness. Our real per capita GDP can go up five-and-a-half-fold again, and then do it again; we will still be in the same predicament.” (pp. 21-22)

Akerlof and Shiller devote the bulk of their book to providing examples of phishing. They explain how reputation mining contributed to the financial crisis, why the buyers of the rotten mortgage-backed securities were so gullible, and why the financial system was so vulnerable to the discovery that the securities were rotten. They illustrate how advertisers graft stories of their own onto the mental narratives in our minds. They analyze a study showing that blacks and women are charged more for cars—black men a staggering 9% more. This even when, in the study, the testers were chosen to be as similar as possible in age and education, when “they drove similar rental cars to the dealers; wore similar ‘yuppie' clothes; indicated no need for financing; and gave the same home address.” (p. 61) The authors describe how credit cards entice us to spend a great deal more than we would if we paid with cash. They give examples from the worlds of pharma, food, and lobbying and explore the S&L crisis and junk bonds.

As the campaign season kicks into gear, it's perhaps timely to look at one theme in their critique of the Citizens United decision. They write: “Our view of free speech closely mirrors our view of free markets. We view both as critical for economic prosperity; and free speech as especially critical for democracy. But just as phishing for phools yields a downside to free markets, similarly, it yields a downside to free speech. Like markets, free speech also requires rules to filter the functional from the dysfunctional.” (p. 160) The majority opinion, written by Justice Kennedy, “seems to treat speaking solely as conveyance of information, without consideration of its role of persuasion, inevitably with its phish for fools. … Speech is also a way to convince other people to act in our interests.” (p. 161)

Phishing for Phools forswears technical language, making this book accessible not only to economists but to consumers and policymakers. It should make everyone rethink the unfettered free-market model.

The post Akerlof & Shiller, Phishing for Phools: The Economics of Manipulation and Deception appeared first on ValueWalk.

This article is an excerpt from a previously released Sidoxia Capital Management complementary newsletter (September 1, 2015). Subscribe on the right side of the page for the complete text.

[munger]

Are you an adrenaline junkie? You may be one and not even know it. If you are an investor in the stock market, you may have noticed a sinking feeling in your investment portfolio before a sharp bounce-back, much like a bungee jump. Before the recent drop of -6.6% in the Dow during August, some stock investors got lulled into a state of complacency, considering a tripling in stock prices over the last six years.

Almost any current or future news headline has the capability of potentially triggering a short-term bungee jump in stock prices. Now, worries over the health of the Chinese economy and financial markets, coupled with concerns of an impending rate hike by the Federal Reserve have created some tension for global financial markets. The slowdown in China should not be ignored, but as famed investor Bill Nygren pointed out, its impact should be placed in the proper context. China only represents 15% of global economic activity and U.S. exports to China only account for 0.7% of our GDP.

Although the drop in U.S. prices last month was scary, other major markets were in deeper freefall. For example, the Chinese Shanghai Composite, Japanese Nikkei, and German DAX indexes nosedived -15%, -10%, and -9% last month, respectively.

Successful veteran investors understand alarming volatility is the price of admission to achieve superior, long-term equity returns. In fact, data compiled since 1900 underscores the commonplace of volatility over the decades. For example, during the last 115 years, investors have witnessed the following:

• 5% market corrections, 3 times per year on average (“correction” = price decline);
• 10% market corrections, 1 time per year on average; and
• 20% market corrections, 1 time every 3.5 years on average.

The chart below provides some graphical perspective on volatility over a shorter period of time (i.e., the last six years). As you can see, previous corrections have felt just as uncomfortable in magnitude as the latest dip, but regardless of the endless stream of concerns, prices have repeatedly rebounded.

This type of trading activity does not build a lot of short term investor confidence, but this phenomenon of volatility is nothing new. As I pointed out in my Catching Falling Knives article, we survived quite nicely in the subsequent years post the 2010 “Flash Crash” – thank you for the +36% surge in the S&P 500 index through mid-2011. And if the -588 point drop (-3.6%) last Monday felt horribly for you, the decline actually isn’t that bad if you consider how miserably the -22.6% drop felt for investors on October 19, 1987 (“Black Monday“). That’s right, about one quarter of the entire stock market’s value was wiped away within a 24 hour period. You can see below, “Black Monday” turned out to be a very temporary condition that represented a huge buying opportunity. The Dow Jones Industrial Average has since increased in value by more than 10-fold (1,000%+) since the price crash of 1987 bottomed out.

Market

Surprise, Surprise? No!

Should these sporadic wild short-term swings come as a surprise to anyone? Given the explosion in the number of daily shares exchanging hands, thanks in large part to cutting-edge advancements in networking technology, it’s no wonder we don’t experience these problems more frequently. Over the last five trading days, the U.S. stock market has averaged 10,676,130,293 shares in daily trading volume (see table below). With a computerized tidal wave of panic and greed periodically circulating through the financial markets in nanoseconds, investors will need to become more accustomed to turbulences like the recent one because technology will continue to push the envelope on ever-increasing trading speeds and volumes. Technological glitches played a major role in 1987 on “Black Monday” when computers were overloaded by panicked selling related to derivative trading (portfolio insurance). Similar problems occurred during the “Flash Crash” in the spring of 2010 when dislocations were created by the fragmented number of exchanges and under-regulated high frequency trading (HFT) participants.

Market

If you read the newspaper, watched the evening news, or combed financial blogs, you probably wouldn’t have any difficulty finding any items to worry about on the negative side of the ledger, including China’s difficulties, timing of a Fed Funds interest rate increase, and generally sluggish global economic growth. After last month’s bungee dive in stock prices, much of the underlying positives have been neglected or ignored:

• Economic growth revised higher (Q2 GDP raised to +3.7% from +2.3%)
• Unemployment rate continues to drop ( at 5.3%, a 7-year low)
• Interest rates near historic lows (3.95%, 30-year mortgage rate), which will remain massively stimulative even if the Fed modestly increases short-term rates
• U.S. corporate profits are near record highs (despite dampening effect of the strong U.S. dollar on exports)
• Reasonable valuations (improved after latest index price declines)
• Housing market on a steady recovery (existing home sales at multi-year highs and pricing up +6% vs. July of last year)
• Massively accommodative central banks around the globe (e.g., European Central Bank and People’s Bank of China)

Not everyone wants to go bungee jumping, and not all investors can stomach the adrenaline filled swings of a 100% stock portfolio asset allocation. It’s volatile times like these that remind investors about the importance of diversification, along with staying true to your investment objectives. Too many times investors use their emotions to guide decision making. Living through market drops can be scary, but if your investment plan is securely in place, you can rest assured that this financial bungee ride will eventually bounce back higher.

The post The Bungee Market appeared first on ValueWalk.

As China and Russia continued to collaborate, A new report from the Washington-based Center for Strategic and International Studies (CSIS) suggests that Russian technology is playing a significant role in the development of China’s military. In particular, Russian technology has contributed to the ability of the Chinese government to deliver surface warfare, and these capabilities could now include long-range precision strikes.

Image credit: Xinhua/Li Gang

China expands naval power

Additionally, the CSIS report suggests that the development of Chinese naval capabilities under the auspices of Russian technology has been able to ensure that Chinese naval vessels can fully defend themselves against United States airstrikes and long-range missile attacks. The overall picture painted is one of rapidly developing Chinese proficiency in this area, and of the continuing relationship between Russia and China playing a significant part in the development of both nations military capabilities.

This report is not exactly revolutionary with regard to this assertion, as other sources have previously suggested similar perspectives. However, the CSIS report does give an excellent overview of Chinese and Russian arms and technology sharing, with this process playing a particularly large role in propping up the Chinese naval fleet in particular.

It is asserted by the CSIS report that this collaboration between China and Russia is enabling the world's most populous nation to significantly expand its burgeoning capability in the Western Pacific. China has been particularly emboldened with its military manoeuvres and foreign policy in recent months and years, and this has been particularly succinctly illustrated in hawkish South China Sea policy.

According to reports, the United States is monitoring the situation in the South China Sea extremely closely, as the Washington government becomes increasingly concerned about China's activities in the region. It is suggested by some sources, though, that the US government is not in a particularly strong position to respond assertively to China's conduct in the South China Sea region, even though diplomatic statements from the Washington administration have increasingly veered away from neutrality.

Peaceful coexistence

Although the United States, Russia and China were able to coexist relatively peacefully in drafting the recent nuclear agreement related to Iran, the rivalry between the three nations ensures that there will always be a certain amount of diplomatic tension. Certainly the historic relationship between Russia and the United States is one of extreme terseness, and although the nature of relations between the two nations has thawed somewhat, this trend has certainly reversed in recent years.

Russia's conduct in the Ukraine has been of particular concern to the United States, but by the same token Russia has been extremely critical of the behavior of the US administration in the region, not to mention with regard to several other issues. It seems that that the Russian and United States governments simply cannot see eye-to-eye at the moment, and this report from the CSIS will really exacerbate this process.

It is clear that Russian air-defence technology, such as long-range sensors and anti-ship cruise missile (ASCM) systems have played a crucial role in the ability of China to defend itself, and increasingly go on the offensive as well. This must be seen as part of an overall strategy between the two nations to cement closer ties, as both China and Russia play andinstrumental role in the so-called BRICS nations.

While military endeavours will always generate headlines, that BRICS nations and their collective agenda can in fact be most readily viewed as an economic ethos. Both Russia and China have demanded greater representation in global economic institution such as the International Monetary Fund and World Bank, and China, Russia, India, Brazil and South Africa have even threatened to set up their own central bank to circumnavigate the existing Bank for International Settlements system.

Meanwhile, the CSIS report indicates that both China and Russia now have the ability to deploy offensive weaponry against the United States. New Chinese and Russian-derived ASCM systems, coupled with long-range sensors, can now threaten medium-sized naval U.S. surface ships, and even potentially strike U.S. military installations.

Image source: Wikimedia Commons

Russia-China relationship endures

Although Russian military exports to China have in fact declined steadily since 2006, there is no doubt that they should still be viewed as considerable. The decline in fact can be largely attributed to the expansion of China's proprietary defense industry, but there are also technical issues related to Beijing’s illicit reverse engineering activities that have influenced this figure.

But the importance of the relationship between China and Russia should not be underestimated. The CSIS report indicates that China is increasingly independent from Russia in terms of the manufacturing of cruise missiles, but that the most advanced ASCM missiles contained within the Chinese stock are still manufactured in Russia.

The surface fleet located in China also relies strongly on Russian-manufactured technology in order to provide advanced intelligence, surveillance and reconnaissance. The report emphasizes that were it not for the collaboration between China and Russia then the East Asian superpower would be forced to rely on inferior legacy systems. This could be critical for China, as the nation would be left at a significant disadvantage in the battle for situational awareness that is critical in contemporary naval battlespace.

While China is certainly working on its internal munitions manufacturing capabilities, and thus closing the gap on Russian military technology, there is equally no doubt that the two nations still enjoy something of a symbiotic relationship in this area. And there are still many areas of military endeavors where Beijing could benefit significantly from cooperation with its most obvious ally.

China lags behind in anti-submarine warfare, and this is known to be a historical weakness of the nation. Russia is particularly associated with submarines, and has considerably more experience in conducting such operations against the United States and other advanced targets. It is therefore expected by the writers of the report that Russia and China will continue to extend their military collaboration, as the two allies attempts to provide a buttress to American power in the evolving world order.

The post Russia And China Expanding And Cooperating Militarily appeared first on ValueWalk.

As Russia and China continue to develop militarily, it is suggested that the Russian navy may benefit with a large and powerful destroyer in the near future. Pravda reports that the primary objective of this vessel will be to create a so-called ‘umbrella’ above the sea.

Source: Pravda

Russian ‘Leader’ looms

This project is already underway, with the Russian destroyer referred to internally as the “Leader”, being produced under the secretive Project 23560. It is expected to be the most expensive Russian vessel for over two decades once it is made available to the Russian state, and will truly provide Russia with state-of-the-art naval technology.

This will be considered significant by United States government agencies, as the Washington authorities continue to monitor the build-up of Russian military power. While the US military unquestionably remains the most powerful on the planet, both Russia and China have been working expediently on improving their capabilities in this department.

In addition to the fact that both Russia and China have massively improved their technological capabilities, it is also important to note that the two Eastern nations have collaborated strongly in recent years. Although it is not quite appropriate to view their military machinery as a collective entity, at the same time there is little doubt that the two countries would cooperate in any military endeavors.

Early data related to this Russian vessel suggests that it will feature an ammunition-based around  dozens of long-range anti-aircraft missiles. It is also suggested that the new flagship Russian ship will carry a combination of anti-aircraft missiles, cruise missiles and anti-submarine torpedo tubes. American analysts will already be considering the extent to which this could change the global naval paradigm.

While the United States continues to enjoy a position of military supremacy, the attempts by Russia to develop and build this super vessel indicate that the oil and gas superpower is attempting to close the gap with other nation’s fleets. The vessel is predicted to be 18,000-tonnes in weight by the time that it is constructed, and it will also certainly be nuclear-powered.

Reduced Radar Visibility

Pravda also reports that the design of the ship includes reduced radar visibility technology. This may particularly concern that the United States government, as it suggests a surprise element to the vessel that will naturally be of concern. Although precise data on the Russian destroyer is not available at the time of writing, it is known that missiles will be launched by the ship vertically, and can even turn where necessary. Information is seeping out of Russia also suggesting that the new destroyer will be equipped with gas turbine engines, suggesting that it will be powered by conventional fuel.

Perhaps one of the most fascinating aspects of this new Russian destroyer is the suggestion that its entire fuel policy has been dictated by the need to include 3D printers on board. It is predicted that 3D printing will be a common occurrence on board combat vessels in the foreseeable future, with printers utilized to produce plastic transport reconnaissance vehicles to engage in activities away from vessels. This may sound like a science-fiction future, but it is probably only a few years away. At this point in time, 3D printing remains an expensive technology, but the cost is coming down and will soon no longer be prohibitively priced.

Regardless of any gaps in information, the model of the Russian ‘Leader’ already exists and it seems certain that the new vessel will go live in the foreseeable future. The attempts of Russia to produce this incredibly hi-tech vessel suggests that the powerful country will make a huge effort to improve its military capabilities in the coming years.

The war goes on

This is just part of an overall rivalry between Russia, China and the United States. While military manoeuvres are an obviously tangible facet of this process, in reality this is a multifaceted conflict. Perhaps more important than the military capabilities of the nations is the economic battle that is currently taking place between two competing power blocs.

Both China and Russia form prominent aspects of the so-called BRIC nations, a relatively formal grouping of countries including India, Brazil and South Africa. This new prominent force in the world is challenging the Anglo-American consensus that has been built up over several decades, with the BRIC nations demanding a more pronounced role in international economic affairs.

In particular, the BRIC nations belief that they should be more readily represented in major global economic institutions such as the International Monetary Fund and World Bank. These have been typically dominated by Western representatives in the 20th century and early years of the 21st century, as the institutions which were formed as part of the Breton Woods agreement continue to command world trade.

With the United States in particular extremely unreceptive to arguments that China and Russia should become more prominent in such institutions, the BRICS have even threatened to form their own central bank to challenge the existing economic hierarchy.

The manufacturing of this Russian destroyer is merely part of this process, as the great nations attempt to seriously rival the United States and craft a new world order that is more multi-polar in nature.

The post New Russia Super Destroyer To See Shift In Naval Power appeared first on ValueWalk.

In a world in which people are beginning to take cyberwarfare for granted, the United States remains wary of Russia, China, North Korea and Iran. These four nations are apparently threatening United States security to the greatest extent, at least according to the United States government and intelligence agencies. In particular, a recent report produced by the US Select Committee on Intelligence suggests that the United States faces a wide range of cyber threats, ranging from rival nations to criminals, and outlines the ways in which the US should consider addressing this growing problem.

Clapper report focuses on China

National intelligence expert James Clapper has authored the report in question, and Clapper has placed a particular focus on China. The report suggests that the United States has failed to make it sufficiently difficult enough for China to gather information on the US government.

This comes at rather an inconvenient time for both nations, considering the forthcoming state visit of Chinese supremo Xi Jinping. The  General Secretary of the Communist Party of China, the President of the People's Republic of China, and the Chairman of the Central Military Commission will be visiting the White House in the coming weeks. The date of the visit has not been confirmed publicly, but it is expected to take place on September 24-25.

While publicly both China and the United States retain a diplomatic relationship with one another, in private the two naturally view each other with suspicion. The 21st century will indeed be defined by an increasing rivalry between China and the United States, as the two largest economies on the planet vie for geopolitical supremacy. If the twentieth century was the American century, it has been suggested in some quarters that the twenty-first century will be viewed as the Chinese century by the time that it is completed.

Naturally, the prospect is not particularly fondly welcomed in the US, which has become accustomed to being the hegemonic global power over the last few decades. Fairly recently, officials from the United States government were able to confidently proclaim that the United States was such a superpower that no-one could reasonably stand up to it. Indeed, the history of the United States illustrates the nation utilizing the power of veto at the expense of every other UN nation on numerous occasions.

Chilling warning

So the warning that Clapper made, namely that “although China is an advanced cyber actor in terms of capabilities, Chinese hackers are often able to gain access to their targets without having to resort to advanced capabilities”, will be a chilling one to the United States government. It is perhaps not surprising that China has the capability to hack the United States authorities' information technology systems, but the apparent lack of expertise required will clearly be of concern.

US citizens themselves are no strangers to government hacking, considering the revelations that came out via Edward Snowden. There is no doubt that the activities of the National Security Agency have considerably exceeded that supposed mandate of the organization, and certainly represent an overarching unconstitutional policy. Considering the familiarity of the US public with this behavior, it shouldn't come as a surprise that China is both capable of hacking US systems, and indeed is doing so.

But the ease with which this can apparently take place does make a strong argument for improved US cyber security. Clapper suggests that this would complicate Chinese cyber espionage activities by “addressing the less sophisticated threats, and raising the cost and risk if China persists.”

Meanwhile, Clapper also opines that Russia is currently in the process of developing a government-led program that will ensure that cyberwarfare is a central pillar of its defense strategy. Again, this would not be considered hugely surprising, as Russia and China are forging increasingly strong links with one another. In particular, the two nations play a particularly prominent role in the so-called BRICS nations; a power bloc of growing significance and influence.

According to Clapper, “Russia’s ministry of defense is establishing its own cyber command which, according to senior Russian military officials, will be responsible for conducting offensive cyber activities, including propaganda operations and inserting malware into enemy command and control systems”. Considering the advancement in Russia military technology, it is also notable that the report stated that “Russia’s armed forces are also establishing a specialised branch for computer network operations.”

With focus on both Russia and China central to US government activities, it is also interesting that the report alleges that Russian hackers have already infiltrated at least three industrial control system vendors using specially crafted malware. This shows that nation states are able to utilize similar techniques to those that are often used in so-called ‘black hat’ hacking.

Iran and North Korea concern

In addition to assessing two of the major players in international affairs, the report also examined the behavior of Iran and North Korea. While neither of these two nations can possibly be reasonably categorized with China and Russia, according to Clapper both still pose a threat to US security. This has been underlined with successful attacks on Las Vegas casinos and Sony Entertainment Pictures.

With regard to these two nations, it has been suggested by National Security Agency director Michael Rogers that attacks from Iran have eased off considerably since an agreement was made over the nuclear program in the Middle Eastern nation. Rogers noted that there has been “less activity directed directly” against the United States since then, but that the nation is still very much under surveillance from the US authorities.

Many observers will note that both Iran and North Korea appeared in the United States ‘Axis of Evil’, which has underpinned the US foreign policy in the post-9/11 world, and that Russia and China are obvious rivals of the US as well. While these security documents unquestionably have credibility, and there is no specific reason to disbelieve the contents of them, our viewpoint on them should be colored by a realistic perspective.

The United States has equally carried out cyberattacks on other nations, and indeed the National Security agency that is monitoring the behavior of these countries can hardly be viewed as purer than the driven snow. While it is easy to see such issues in terms of right and wrong, the overall picture is in fact far more complex than this simplistic assessment.

The post US Vulnerable To China, Russia, Iran, N. Korea Cyber Warfare appeared first on ValueWalk.

As tensions continue to build between Russia and the United States, it has been reported that the former is building a drone submarine to deliver large-scale nuclear weapons. It is suggested by the Pentagon that this vessel will have the capability of striking U.S. harbors and coastal cities, complicating what is already a strained and historically tense relationship between the two superpowers.

Russian nuclear plans

According to reports on the subject, the so-called developmental unmanned underwater vehicle will be armed with megaton-class warheads capable of destroying ports on the US coastline. It is thought that Russia will look to particularly target ports utilized by United States nuclear missile submarines, among them Kings Bay, Georgia and Puget Sound in Washington state.

Details of the plans are rather hard to come by at present, as this is top secret information closely guarded by the United States government. But it is suggested by leaks from close to the United States military establishment that the Pentagon has already codenamed the nuclear drone “Kanyon”; giving indication that the weapon is part of an overarching and structured Russian arms program.

US-Russian relations critical

As the geopolitical situation of the 21st century develops, the relationship between Russia and the United States is clearly central to the zeitgeist. Although tensions between Russia and the United States were supposed to have ended when the Cold War reached its conclusion and the Soviet Union disbanded, recent years have seen the two nations resume their suspicions of one another. Russia has risen from the ashes of the Soviet collapse, and rebuilt itself into a major power, not least owing to the rich mineral resources it has at its disposal.

Although the collapse of oil prices has undoubtedly weakened Russian's position - and some have suggested that oil was targeted quite deliberately by US investors with this aim in mind - in the longer-term there is no doubt that the vast nation will retain a position of prominence in the world. Russian oil and gas is simply too important to too many nations for the country to be in the doldrums for a significant period of time, with Russian exports particularly vital for the European continent.

So as Russia becomes more prominent in the world, so the United States military infrastructure retains an ever keener interest in monitoring its strategic manoeuvres. And US officials stated that the supposed production of this nuclear drone submarine is further evidence of the aggressive strategic nuclear forces modernization that is taking place under President Vladimir Putin.

Nuclear non-proliferation complicated

This also goes directly against US foreign policy on this matter, as the Obama administration has explicitly sought to reduce the role of nuclear arms in US defences, instead of relying on a smaller nuclear force for deterrents. This is part of an overall nuclear non-proliferation treaty, which has been a defining element of nuclear policy among the world's great powers in the early years of the 21st century.

The picture with regard to American nuclear defences could also have been influenced this week by events in Britain. The UK is, of course, the United States' greatest ally, and the political situation in the country has just complicated its relationship with the United States, at least potentially.

With the election to the position of the leader of the Labour party of Jeremy Corbyn, Britain’s major opposition party is now headed by someone who has explicitly derided the existence of the Trident nuclear program in the UK. The UK Trident programme encompasses the development, procurement and operation of the current generation of British nuclear weapons, and the means to deliver them, but Corbyn has stated that this program will be discontinued should he ever elevate to the position of Prime Minister.

Should this eventuality occurr, then the position of the United States with regard to strengthening its nuclear defences in line with Russian plans would be seriously weakened. This may be hypothetical at the moment, but the election of Corbyn in Britain could have a significant effect on US policy over a period of time.

Russian nuclear offensive

In the meantime, the opinion among the United States military establishment is that the Kanyon program should certainly be viewed as an offensive initiative. This is considered by the Pentagon to be an autonomous submarine strike vessel that will ultimately be armed with a nuclear warhead equal to approximately tens of megatons in yield. There is no doubt that such a vehicle would be capable of creating a nuclear weapon blast causing considerable damage over wide areas.

As the geopolitical picture continues to develop in the 21st century, this latest attempt by Russia is clearly intended to give the government a stronger hand in negotiation. It is now absolutely inevitable that Russia and the United States will be on opposite sides in geopolitical disputes for the foreseeable future, and it seems that this nuclear vessel is part of attempts to provide Moscow with the ability to counteract the US.

Obama will now come under increasing pressure to delay and possibly eliminate plans to seek further reductions in both US and Russian nuclear forces, following the signing of the recent New START arms treaty. Once again, the relationship between the United States and Russia has been complicated, and the tawdry and terrifying possibility of nuclear conflict must have increased slightly.

The post Russia Secretly Building Underwater Nuclear-Armed Drone Submarine appeared first on ValueWalk.

As military manoeuvres between the United States and China continue, it seems that the East Asian powerhouse is beating the United States in the so-called ‘gray zone’. This may be an obtuse concept to many people, but the term gray zone refers to the attempts of a nation to make military gains at the expense of a strategic competitor via somewhat covert tactics. Although these tactics may be aggressive, they are still ultimately intended to remain below the level that usually constitutes conventional military retaliation.

China's South Sea Strategy

The most notable example of this has been China's South China Sea strategy. In 2012, China began its manoeuvres in the region, establishing a permanent presence on the previously occupied Scarborough Shoal. Since then the Chinese effort in the South China Sea has become increasingly sustained and emboldened, and although the United States is clearly monitoring the region, the chances of any military retaliation at the time of writing seem to be fairly remote.

Officially, the actions of China in the region violate an agreement between Beijing and Manila that was previously brokered by Washington. But Beijing has suffered no real consequences for this breach, with the most serious outcome being diplomatic protests.

As the South China Sea situation develops, it is becoming a key theater in the ongoing geopolitical battle between the United States and China. There is no doubt that these two nations will remain in conflict with one another, at least figuratively, for the remainder of the 21st century, as both China and the United States have established themselves as economic powerhouses.

There is a huge debate regarding the way that this conflict will ultimately work out, but the existence of it is not seriously debated. The coming prominence of China was predicted by Zbgniew Brzezinski in his magnum opus, The Grand Chessboard, and many of the geopolitical themes that Brzezinski floated have indeed come to fruition at the beginning of the 21st century.

Meanwhile, China continues to implement the tactic of ordnance-free naval combat in the South China Sea, as its imperialistic strategy in the region develops. This has been evident for at least 12 months, since back in 2014 a significant flotilla of PRC escort vessels were utilized in order to protect a significant Chinese oil rig in the region. The Chinese policy at this time could certainly be considered hawkish, as it involved ramming Vietnamese boats, ultimately sinking one and forcing others to retire from the area in order to seek repair.

China evades US surveillance

Such activities would naturally attract maritime surveillance, particularly from a major power such as the United States. It has already been reported that the US is monitoring Chinese manoeuvres in the region extremely closely, yet China has warded off this suspicion to a certain extent.

China has utilized cost-exchange ratio as a weapon against the United States. China has implemented a fleet of fishing boats, which have been internationally manoeuvring in order to create the risk of a collision. This previously drove a US surveillance ship by the name of Impeccable out of the region in 2009. China repeated his tactic in 2013, compelling the US cruiser worship Cowpens to abandon its observation of a Chinese naval exercise.

The achievement of China to rapidly construct artificial islands in the disputed Spratlys earlier this year can certainly be seen as the latest Chinese gray zone victory. The audacity of the East Asian superpower to construct what are effectively military bases slap bang in the middle of an international waterway was shocking to the region and the United States administration, yet there have been minimal action against the Chinese policy in the region.

Washington ultimately responded through a statement by Secretary of Defense Ashton Carter, that this was considered a rather limp effort considering the self-proclaimed military power of the US. Once upon a time, it was presumed that the United States could respond militarily to any situation without consideration, but it seems that the military might of China, coupled with its shrewd strategy in the region, has scuppered any US intelligence or ability to intervene.

Additionally, the attempts of China to engage in gray zone activities should not be considered limited to the South China Sea. Cyber attacks can certainly be considered part of this effort, and the Chinese state has sponsored numerous such efforts since the concept of state-sponsored cyber warfare became a mainstream media focus point.

Gray zone response evolving

It is certainly the case that cyber attacks could ultimately result in death and destruction, but although the scale of the cyber warfare can be considered comparable to traditional war, the reality is that governments are still developing responses and expectations to such stratagems. China has taken full advantage of this uncertainty and gray area, with the United States still developing its policy in this arena.

The gray zone strategy of China can be considered particularly important, considering that the nation is probably the only real rival to US supremacy in the world. China and Russia have performed a clear allegiance in the last decade or so, as part of the BRICS grouping, and the two nations are increasingly acting in accordance on geopolitical issues.

While the United States remains an incredible force in the world, there is no doubt that the combination of China and Russia represents a threat to US hegemony. So the US Administration will unquestionably wish to monitor the activities of China very closely, but any ability of the East Asian powerhouse to avoid such surveillance will certainly aid the position of China in the world.

With this in mind, there will be pressure on the United States to respond to China's gray zone activities, not merely with regard to monitoring and understanding them more clearly, but also by developing its own unique strategy. The United States certainly has the potential to leverage its superior capabilities, what remains to be seen is whether strategists in the US are capable of demonstrating the same level of geopolitical cunning and dexterity as their Chinese rivals.

The post China Strategy Designed To Eject United States From Asia appeared first on ValueWalk.

Jesse Felder, a Contrarian Trader Listen to the podcast and explore The Felder Report

Hedge Fund Quiz

The only way to win a date is to become a hedge fund analyst. Your interview process requires you to analyze a real estate/mining company.

You look first at the balance sheet (Thanks Mr. Graham). You notice that this mining company bought claims under a ski resort (Park City, Utah) where it bought acres in 1907 at five dollars an acre.

Then you notice that the company issued 20-year corporate bonds when interest rates were 9% for AA corporates about fifteen years ago. Now similar companies can issue bonds at 5%.

How would you conduct your analysis? Good luck.

Hedge Fund Analyst Quiz

—

The End

So how will it all end? Dollars are created by computer key stroke when the Fed buys bonds, but the dollar is backed only by bonds (and a tiny bit of gold) and the bonds are payable in Federal Reserves Notes (the dollar) or just another form of debt. So debt is created to buy debt which, in turn, is payable in debt. Whoa?! No way this could ever be a problem. It's magic. One thing bothers me, though, why do we need legal tender laws TO FORCE people to use dollars? I got a bad feelin' on this.

But WHAT if more and more debt creates less and less “GDP” (let's pretend it means something–govt spending creates economic growth, Ha Ha.) until each dollar of debt creates 0 or negative GDP growth. The Fed has to print to pay interest on the debt or the tail consumes the tiger.

Hemingway: We go broke slowly, then suddenly!

The post The Secret to Success: Being Ridiculed on Social Media; Hedge Fund Analyst Quiz; The End appeared first on ValueWalk.

Sources claim that the massive exercises will involve a large amount of equipment and troops, with a focus on rapid strike units.

In a move which could increase tensions, India will reportedly carry out military exercises in the western state of Rajasthan, according to INP. Tensions between the two nuclear-armed neighbors are high due to a number of factors, and it seems unlikely that war games in border regions will do anything to defuse the situation.

Rapid strike units to be focus of military exercises

The focus of the exercise is believed to be quick, high-intensity attacks on enemy territory, and will involve armored units, artillery pieces and infantry maneuvers. According to sources quoted by INP, the exercises will be the largest of their kind in recent times.

War games are scheduled for October-November, with a particular emphasis on the 21 Corps, one of three main "strike corps" of the Indian Army. Despite this focus, the exercises will involve nearly all of the Southern Army Command, according to a report in The Times of India. India currently boasts the world's second largest standing army.

“The exercise, which will peak towards end-November, will also include a major airdrop of paratroopers behind (simulated) enemy lines. Such a large exercise is usually held once in four years to validate, fine-tune war-fighting strategies,” said one source cited by INP.

India informs Pakistan of troop movements under protocol

Movements of armored vehicles and infantry units have already been noticed from Jhansi to Hyderabad, and sources claim that the Pakistani government "is being informed" of the scheduled military exercises, in accordance with the "advance notice" protocol in place between the two nations.

The protocol obliges both sides to inform the other of any major movement of military assets when they are not at war. The Pakistani government has revealed that a formal notice of the planned exercises has been received from India.

M.K. Narayanan, former National Security Advisor, believes that when conflict occurs between two neighbors, one of the biggest risk factors is not being able to predict how the situation will escalate. “Both countries are nuclear powers, so both have a lot to lose if the relationship escalates into a conflict," Narayanan told a joint meeting of 10 Rotary Clubs.

High-tech military equipment to be tested

Media reports have claimed that India may test its nuclear weapons, heavy artillery and drones in the exercises. Up to 30,000 troops may also be involved, with activity predicted to peak towards the end of November.

According to Daily Pakistan the drills will involve the use of surveillance images gathered by satellites and drones, in addition to ground and airborne radars. An airdrop of paratroopers behind enemy lines will also be simulated.

Defense analysts in Pakistan do not see the exercises as cause for alarm. India has been undertaking large military exercises around every 4 years for a considerable time. Instead of worrying about Indian war games, they suggest that Pakistan concentrate on improving its own military capabilities.

Many commentators point to Kashmir as the primary source of conflict between the two nations, but the situation is in fact far more complicated. Alongside historical disputes, a number of other geopolitical factors are increasingly affecting relations.

Geopolitical situation complicated in Asia

While India has traditionally maintained close ties with Russia, Pakistan has found an ally in China. This friendship is cause for unease in New Delhi given its historic enmity with Beijing.

China and Pakistan have agreed a huge raft of important deals in recent years, including plans for a huge $46 billion China-Pakistan Economic Corridor. Although Chinese cooperation with Pakistan may be viewed with suspicion in India, the fact that part of the corridor runs through Kashmir has ratcheted up tensions.

India has also accused Pakistan of supporting terrorist groups which have carried out attacks on Indian soil, and contribute to ongoing regional instability. At the same time, Islamabad has signed a number of important defense deals with China, including the purchase of 8 submarines.

Other defense deals are also being discussed with Russia as Pakistan modernizes its armed forces. It had been hoped that the accession of both India and Pakistan to the Shanghai Cooperation Organization would improve relations between the two neighbors, but so far that does not look to be the case.

The regional grouping is dominated by Russia and China, and both nations have expressed an interest in working to end the enmity between India and Pakistan in the interests of regional prosperity. Thus far it seems as though the historic rivalry continues to make normal relations impossible.

The post India Announces Huge Military Drills Along Pakistan Border appeared first on ValueWalk.

John Boehner made an emotional announcement on his future this Friday morning, telling fellow Republicans that he would step down at the end of October.

The House Speaker was first elected to Congress in 1990, but has come under increasing pressure from the conservative wing of the Republican party. That pressure will now see him give up one of the most powerful positions in government, and his House seat, writes Jennifer Steinhauer for The New York Times.

Conservative Republicans bring down Boehner

Congress has been rocked by the decision as it attempts to prevent the U.S. government from shutting down. Boehner struggled to unite the Republican party after taking the speaker's gavel in 2011, with conservative elements becoming increasingly powerful.

The U.S. government may shut down due to row over the funding of non-profit Planned Parenthood. The organization receives $500 million of federal funding for non-abortion related activities, but conservatives have been outraged by secretly recorded videos in which Planned Parenthood officials can be heard discussing the possibility of taking tissue from aborted fetuses to be used in medical research.

Boehner has been attempting to negotiate a deal that would keep the government open, but conservative elements in the Republican party told him they would reject any bill that maintained funding for Planned Parenthood. Some conservative elements had even spoken of trying to remove Boehner as speaker, although it was not clear if they would have been able to.

Boehner quits rather than rely on Democrat support

Conservatives aligned with the Tea Party had threatened to call up a procedural motion to "vacate the chair," as such pressing for the election of a new speaker. That would have meant Boehner turning to the Democrats for the support he would have needed to save his position, and instead he chose to resign.

The Atlantic cites a Boehner aide who told the publication: “The speaker believes putting members through prolonged leadership turmoil would do irreparable damage to the institution,” the aide said. “He is proud of what this majority has accomplished, and his speakership, but for the good of the Republican Conference and the institution, he will resign the speakership and his seat in Congress, effective October 30.”

According to the aide, Boehner was going to leave Congress at the end of last year, but he decided to stay after his likely successor, Majority Leader Eric Cantor, lost his position in a huge electoral upset. Now conservatives have succeeded in taking down Cantor and Boehner in just 15 months.

Speaker goes out on a high after Pope visits Capitol

The race to succeed Boehner is currently led by Majority Leader Kevin McCarthy of California. Boehner has had a colorful political career, starting out as a conservative rabble rouser after his first election to Congress in 1990. He rose to a leadership position but was forced out in 1998, before working his way up through the ranks once again, becoming minority leader and then speaker after the 2010 election.

Washington has been taken by surprise by the announcement, which came the day after Pope Francis visited the Capitol. Boehner has dreamed of having a pontiff speak in Congress for the past 20 years, and the visit also included a private meeting between the pope and Boehner.

Unfortunately for Boehner, conservative Republicans appeared to back him into a corner over Planned Parenthood. During a period of intense political divisions in the House, Boehner finally buckled under pressure from the right-wing of his party.

The post House Speaker John Boehner To Resign From U.S. Congress appeared first on ValueWalk.

As the complex situation between the United States and Russia continues to develop, one controversial cultural and economic commentator suggests that nuclear war is indeed possible. Paul Craig Roberts is famous for being intimately involved with so-called ‘Reaganomics’, having served as an Assistant Secretary of the Treasury for Economic Policy in the Reagan administration. Since spending time in the US government, Roberts who has become increasingly critical of several US administrations, and has floated many outlandish conspiracy theories, recently authored article explores the current dynamic between Russia and the United States.

Russia wrong to rely on diplomacy

Roberts suggests that Russia is banking on diplomacy to improve its relationship with the West. There is no doubt that the relationship between Russia and the United States has deteriorated in recent months and years, as both nations have become increasingly suspicious of one another. As ValueWalk has reported previously, the geopolitical situation continues to be defined by the efforts of Russia and its major ally China to forge a new world order to counteract the global authority exercised by the existing Anglo-American consensus.

However, Roberts believes that Russia's attempts in this arena are completely misguided. Russia has particularly pinned its hopes on a document referred to as the Minsk Agreement, but which should be more accurately named the Minsk Protocol. This agreement effectively halted the war in the Ukraine. But Roberts rightly states that this document has no Western support, and that the only way that Russia can be acceptable to the West in diplomatic terms is to accept vassal status.

Instead, the situation in the Ukraine is far from resolved. There is no doubt that the Western powers still view Russian behavior in the region as completely unacceptable, and indeed NATO has been massing troops in the region since the Minsk Protocol was signed. Yet Robert suggests that there is a radical, yet common sense a solution to the crisis, that would immediately put Russia in a stronger position.

Russia should simply end the Ukraine situation by adhering to the requests of the territories in the nation that were previously formally possessed by Russia to reunite with it. Once this has taken place, there will simply be no further crisis, as there is no possibility of the Ukraine attacking Russia whatsoever. Ultimately, the main players in the region would all have got exactly what they wanted; the people of the Ukraine would have reunited with Russia, and the nation would be stronger in territorial terms.

Naturally, this suggestion would weaken the United States and British position in the region, as it would run the contrary to their public pronouncements of what they believe to be correct. Indeed, Roberts writes that the reason Russia has not gone down this particular road is that the hierarchy of the nation believes that it would be needlessly provocative, and ultimately upset Europe in particular.

Upsetting Europe

However, if Russia is to establish itself in a strong geopolitical position then it is argued that one of the most valid things that it can do is indeed to upset Europe. There is one key reason for this; it would benefit from making Europe understand that being part of a Washington plan against Russia is risky for the continent.

It has often been written that the reliance of Europe on Russian gas and oil will ultimately secure the prominent position of Russia within the world for many years to come. Russia is in the rather invidious position of supplying its declared enemies, whose forces continually conduct provocative flights across Russian borders, with the energy to put those very planes into the air in the first place.

Roberts suggests that this is a massive failure of Russian diplomacy, and that the time for a more aggressive policy has come. Certainly, it is difficult to contest Roberts’ view that only one of the two sides involved in this geopolitical conflict is interested in diplomacy, and it isn't the one led by the United States.

In response to the situation in Russia, Roberts points to the so-called Wolfowitz Doctrine, the neoconservative document that is promoted as being the basis of US foreign and military policy. This particular document suggests that any country with sufficient power to act as a constraint on the unilateral action of Washington should be considered a threat to the United States. This is very much in line with the sort of language that we hear coming from military personnel in the US when other countries develop significant military apparatus.

With this in mind, Russia is certainly a target for the Washington administration at the moment, and it isn't the only country in the world with this unfortunate status. Both China and Iran are also placed firmly in the crosshairs of Washington at present, and Roberts believes that it is impossible to seek a diplomatic solution at this point in time as the desires of the two sides simply contrast completely.

Syrian conflict

For example, with regard to Syria and Iraq, Russia has worked for peace, called for international law to be respected, and stated that the consignment of radical jihadist elements is in the interest of the locality. By contrast, the actions of the American government have made it clear that Washington is far from scared of warfare, considers no legal constraints, and the US government has also openly funded radical jihadist elements. Indeed, a BBC poll conducted this week, intended to prove the complete opposite, found that over 80 percent of Syrians believe that the United States has effectively funded ISIS into existence.

As the geopolitical situation continues to develop between these two diametrically opposed nations, Roberts suggests that Washington stands for only one value, namely world hegemony. He believes that if Russia and Iran let their collective guard down that they will be nuked eventually, and that China could even face nuclear weapon attacks as well. Defending these undoubtedly strong statements, Roberts points to neoconservative documents, and suggest that this mentality is still very much in control of the Washington administration.

These are certainly stronger words from an outspoken critic of the United States and its foreign policy, but a perspective nonetheless well worth considering closely.

The post US Critic Suggests That Washington Could Nuke Russia appeared first on ValueWalk.

As the military battle and manoeuverings between China and the United States continue to expand, the East Asian superpower apparently has big military plans. The top brass of the United States Air Force has been expressing concern about the potential weaponry that China has at its disposal, which should be considered extremely significant.

IMAGE via: TheDailyBeast

Missile worries

The PL-15 air-to-air missile, which has been developed by the Chinese recently, combines a highly sophisticated radar-seeker and powerful rocket motor. This technical jargon has ultimate consequences that are far more comprehensible for the average person. The PL-15 can strike targets from potentially 60 miles away or more, and this is considered to be comparable to American jets, or possibly even superior.

Already there have been comments from the upper echelon of the United States military that such a missile system could provide China with a potential advantage. It is something of a rarity for major United States military personnel to express any form of concern about weaponry possessed by rivals of the nation. The reason for this is quite simple; the United States has been the supreme military power of the 20th century, and the early years of the 21st as well. But China has signalled its intention recently to close the gap on the United States, and the concerns about a new Chinese air-to-air missile underlines the potential of this vast nation.

It had already been reported by Bloomberg earlier this week that a Chinese nuclear submarine has the potential to target the entirety of the United States mainland, and this is not a threat looming in the distant future, but instead a very real one today. Bloomberg believes that the ballistic missile submarine will be able to strike any point in the United States by the end of 2015.

This news comes at an extremely interesting time, with a major Chinese state visit currently taking place in the United States. It has been notable during this event, that the Chinese leader Xi Jinping has made some extremely bold statements, and there is no doubt that China is feeling more self-confident about its place in the world.

China threat

This has been reflected by the fact that the International Monetary Fund now considers China to be the largest economy on the planet. Of course, it is important to emphasize that this statistic is somewhat misleading in itself. The United States has a considerably smaller population than China, and unquestionably remains the most significant economy on the planet. China is closing the gap, developing extremely rapidly militarily, and there is no doubt that this process will exacerbate further in the immediate and longer-term future.

So the reports regarding the missile capabilities of China should certainly be seen in this wider context. According to Gen. Herbert Carlisle, the head of the Air Force’s Air Combat Command, the new Chinese missile has outstanding capabilities, and it should be considered a threat by the United States.

Speaking at the Center for Strategic and International Studies in Washington, DC, Carlisle emphasiszd the fact that the PL-15 missile does represent a genuine threat to the United States. Carlisle questioned how it would be possible for the United States to counter the threat, and what indeed could be done to meet the existing situation appropriately. There are no answers to these questions at the time of writing, but these are the sort of conundrums that the US defense community is ultimately considering at present.

To emphasize the fact that Carlisle was serious about his comments, the general gave an interview the very next day with Flight Global magazine in which he confirmed his view on the subject. Carlisle stated that it is essential for the United States to be able to exceed the capabilities of the Chinese if the nation is to retain its military predominance.

Having said that, it is important to emphasise that there is no clear evidence that the PL-15 is superior to the United States own main air-to-air weapon, the AIM-120. Clearly this is an extremely sophisticated piece of military hardware, but the concerns about this new Chinese product are not really related to its sophistication.

Instead, it has been suggested by Air Combat Command that China may have the capabilities to employ several PL-15s simultaneously. This would significantly up the ante of this Chinese air-to-air system, suggesting that it could become a real game changer in the geopolitical situation.

J-11 vs F-22

Thus, the PL-15 is already receiving a lot of attention from the United States, particularly as China’s J-11 fighters have the capability to carry in the region of 12 missiles of the size of the PL-15. Two additional smaller missiles could also be added to the jets, providing a powerful haul of 14 in total.

This figure really underlines the concern of US military personnel, as the machinery of the U.S. Air Force actually pales in comparison to the capabilities of this jet. The U.S. Air Force’s top-of-the-line F-22 is generally capable of carrying just six AIM-120 missiles and two shorter-range Sidewinders. It is not usual for that United States to be outdone this way, but China is certainly threatening to do so.

When one considers the development of the Chinese military, it is perhaps not surprising that its leader was so bullish on its military plans. Jinping stated while in the US that China indeed intends to expand militarily on a significant scale, although he was keen to emphasize - as leaders of nations always are! - that this was a defensive decision aimed primarily at securing the Chinese border.

But the increasing capabilities of the Chinese military will be of concern to the United States, as the geopolitical supremacy of the world's unquestioned superpower of the 20th century is challenged for the first time in decades. This will be a central theme of the 21st century as it continues to unfold.

Source.

The post New China Missiles Mean Nation Can Outgun The US appeared first on ValueWalk.