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THIS Is How China Is Increasing Global Power

By Chris at

In the movie “The International” Clive Owen plays the part of Louis Salinger, an Interpol agent trying to bring down the world’s largest bank.

In this clip a banker explains things to him:

Umberto Calvini: [In explaining the “true” nature of banking in the world]

“The IBBC is a bank. Their objective isn’t to control the conflict, it’s to control the debt that the conflict produces. You see, the real value of a conflict, the true value, is in the debt that it creates. You control the debt, you control everything. You find this upsetting, yes? But this is the very essence of the banking industry, to make us all, whether we be nations or individuals, slaves to debt.”

Debt is much like a baseball bat: neither good nor bad. You can use it to hit the ball out of the park or you can get beaten into a bloody pulp by it. How we use (or abuse it) is the determiner. Read my article on the easy and uncomplicated way to get rich to ensure you go about it the smart way.

Certainly debt can – and has been used – to control people, assets, and entire societies ever since we crawled out of the cave and began covering our bits with fur. Just ask your neighbour Billy, who’s always complaining about his sh*tty job, why he won’t shut up and just quit? The answer typically is because his mortgage and car payments won’t let him.

I’ve been thinking a lot about debt lately. Not the consumer driven silliness highlighted by Billy but specifically how debt is used as a tool on an international and political level and how it affects currencies and geopolitics.

I then looked at the unfolding trends present today. Trying to see how they all fit together is, I believe, a valuable exercise, even though there’s more moving parts to this than a silo full of Swiss watches.

To begin with, let’s revisit some recent history of debt, currency, and deficits and how they’ve interacted. George Soros articulates it very well in his book The Alchemy of Finance when describing what he called “Reagan’s Imperial Circle:”

Keep this concept in mind as we’ll revisit it in a minute.


Fast forward to today, and there are some dramatic shifts taking place in the world:

  • Bureaucrats in Brussels, who specialise in overpriced corporate lunches and finding new ways of spending their unjustifiable annual bonuses, continue to berate the “PIGS” for not doing more about austerity. Ironic but the truth is Brussels controls the PIGS much in the same way the bankers in the movie The International controlled the world
  • Across the Atlantic we have the sexiest first lady in forever elected, and now we enjoy her orange husband bring a whole new level of ridiculous to Twitter, a space previously owned by the Kardashian’s posteriors. I’m still undecided which is worse
  • On the shores of the murky isles, Brits marched boldly towards independence only to realise in shock that they had a completely inept leadership and not a single able minded option available to them. And so they did what any pissed off aggravated person would do: they began voting for Jeremy Corbyn. Not because anyone wanted him in power. Hell no! Purely in protest
  • And so, while much of the West increasingly looks dysfunctional, lost, and confused, China are embarking on the most ambitious project ever since I tried to convince my now wife that a hot girl should marry me. The project? One belt one road (OBOR), which impacts many industries and countries such as Greece.

In many ways China has many elements in their favour whereby they can use their increasing economic prowess, large trade surplus, and existing overcapacity to control the debt of trading partners, and in so doing slowly but surely influence politics and economics in a self reinforcing cycle.

Incidentally, if they’re successful in their OBOR endeavours, they can hope to mitigate some of the fallout from an impending and overdue domestic non-performing loan cycle.

Commentators on OBOR seem to fall into those who are bullish… and those who poke fun at it and either don’t like it or question China’s ability to pull it all off. On the face of it the idea seems simple enough. OBOR promises to open up markets for Chinese exports. This is, I think, somewhat simplistic and naive.

The more I’ve researched the topic the more I think there is much much more to OBOR than meets the eye. The Chinese are many things but stupid is not one of them.

Let’s take a look at some of their problems, their ambitions, and how and why OBOR really is front and centre for Xi.


We know that too much of anything is bad for us. Just ask Chris Christie’s arteries.

China suffer from too much capacity as well as too much domestic debt in their banking system. OBOR may provide a means for China to deflate this debt while exporting overcapacity.

What’s more is that they can do so while providing credit (at the state level) to countries who are in desperate need of it. Greece, as I mentioned last week, fits this picture particularly well.

Deflating the Domestic Credit Bubble

China has a domestic credit problem, and they’re going to have to deal with that in some way or another. Certainly a harsh non-performing loan cycle can punish GDP growth but consider this…

What if China essentially moved this domestic debt problem onto the balance sheets of OBOR partners?


By the Chinese government lending these partners money for large infrastructure projects (as they’ve already been doing). When those infrastructure projects get built, a decent amount of the project works go to Chinese companies which provides them the ability to both export overcapacity all the while deflating some of the domestic credit bubble.

A pretty damn smart move if you can pull it off!

China has some $3 trillion of paper which they can trade for power and influence.

Think about it, which would you rather have: a pile of greenbacks (with the Fed at the helm who have shown in no uncertain terms that, when push comes to shove, they’ll forego monetary stature for domestic political security) or political and economic leverage globally?

The Most Powerful Weapon Brought to Bear

China’s answer is pretty clear based on what they’ve begun to do.

They have already been making huge loans to strategically placed and often poor countries. These loans provide jobs and infrastructure, both of which are desperately needed by these countries.

That they’re structured on onerous terms and under conditions whereby Chinese materials and labour are often used is easily overlooked when one is broke and desperate (in the private investment world we call it distressed investing). And in case you’ve not realised it, there are a lot of desperate governments littering the planet right now.

And just like in the movie referenced, China need not have these projects even be successful. In fact, there’s a case to be made to say that they’d prefer them NOT to be successful. Having the debt repaid eliminates political and economic leverage.

Case in point: Sri Lanka’s Mattala Rajapaksa International Airport, which opened in 2013, is still largely idle and empty. What does Sri Lanka now get? An empty airport and a massive debt to China which they can’t repay. Pakistan’s multibillion dollar Gwadar port and Greece’s Piraeus port are two more.

China controls all of this debt, and by controlling this debt they can, and will, begin using this power for… ahem, “concessions”.

The world should not be surprised when military submarines with Chinese symbols start using these ports and Beijing begins having a say in how these partner countries’ “assets” are used and by whom, because, after all, China controls the debt.

Neither should we be surprised when Chinese warships begin providing “security” to these ports, or when “security and surveillance” aircraft belonging to the Chinese military begin providing “services” to the airports, gas pipelines, and so forth.

Realise that it’s in China’s interests for these countries to never ever be able to repay these debts. This provides them with extraordinary leverage at what is really a very cheap cost.

Now, I’m not that cynical that I think China doesn’t want this infrastructure to help trade. I’m sure they do. But there is likely a strong political incentive here which really amounts to a bait and switch loan sharking game where countries will be forced to make all sorts of concessions in order to defray debt payments.

My readers are a sharp bunch so don’t need me to point out that this is a far cheaper method than the “normal” alternatives.

Consider that the cruise missiles Trump rained down on Syria just 3 months ago cost an estimated $60 million, and the Iraq war has already cost the US government, I mean US taxpayer, $2.4 trillion.

I began doing the math on the total amount of money spent by the US government on gaining or maintaining geopolitical dominance via military interventions but my calculator started smoking and promptly blew up. But it’s definitely safe to say it’s a lot higher than these two numbers.

As I mentioned before, the economics of war have changed, and OBOR represents a vastly cheaper method of acquiring power and influence than does bombing the sh*t out of sand.

China, as mentioned a few weeks ago, is:

  • Asia’s largest trading partner
  • US largest trading partner
  • Germany’s largest trading partner
  • Australia’s largest trading partner
  • Russia’s second largest trading partner (after Germany)
  • Africa’s largest trading partner
  • South America’s largest trading partner

OBOR is much, much more than simply establishing trading routes for Chinese goods as the MSM will have you believe. It is THE most ambitious geopolitical play of our lifetimes, and it’s well worth understanding what’s taking place here.

Xi’s Imperial Circle?

So the question that I have for you to ponder today is this: is China able to create a self-reinforcing mechanism whereby they export excess capacity, deflate a domestic credit buildup, build an infrastructure for future export and trade all the while having many of the participants beholden (via debt) to China allowing for unsurpassed geopolitical power… and be able to do so because, in large part, the rest of the world has their own problems to wrestle with?

Does the world wake up a couple decades later when the dollar debt has been converted (another concession) to renminbi and marvel at what an amazing chess manoeuvre was played as we all realise we have Xi’s imperial circle?

What do you think?


Cast your vote here and also see what others think

– Chris

“Happiness does not fall out of the blue and dreams will not come true by themselves. We need to be down-to-earth and work hard. We should uphold the idea that working hard is the most honourable, noblest, greatest and most beautiful virtue.” — Xi Jinping


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DNC Server: Most Critical Evidence To Proving “Russian Hacking” Is Being Withheld From Mueller, Why?

If there were any actual crimes committed during the 2016 presidential election, then the origin of those crimes can be traced back to a single piece of hardware sitting at the DNC which housed the emails that were stolen and subsequently shared with WikiLeaks.  Ironically, despite the fact that they’re apparently sitting on perhaps the most critical evidence available to prove that Russia “hacked the election,” an allegation that has been hammered 24/7 on CNN for the better part of a year now despite a lack of actual tangible evidence to support the allegation, the DNC has completely refused to cooperate with the FBI, the Department of Homeland Security and/or Robert Mueller’s independent investigation.  Which begs one very simple question, why?

As the Washington Times points out, a cybersecurity firm called CrowdStrike, is the only organization that has been allowed by the DNC to inspect their email server…an inspection which quickly resulted in the very ‘convenient’ conclusion that Russia was the culprit of the hack…even though minimal details supporting that conclusion were ever revealed to authorities.

It is perhaps the key piece of forensic evidence in Russia’s suspected efforts to sway the November presidential election, but federal investigators have yet to get their hands on the hacked computer server that handled email from the Democratic National Committee.


Indeed, the only cybersecurity specialists who have taken a look at the server are from CrowdStrike, the Irvine, California-based private cybersecurity company that the DNC hired to investigate the hack — but which has come under fire itself for its work.


Some critics say CrowdStrike’s evidence for blaming Russia for the hack is thin. Members of Congress say they still believe Russia was responsible but wonder why the DNC has never allowed federal investigators to get a look at the key piece of evidence: the server. Either way, a key “witness” in the political scandal consuming the Trump administration remains beyond the reach of investigators.


“I want to find out from the company [that] did the forensics what their full findings were,” Sen. Lindsey Graham, a South Carolina Republican who is leading the Judiciary Committee’s inquiry, told The Washington Times.

As you may recall, CrowdStrike is the very same ‘cybersecurity’ firm that attributed the Sony hack to North Korea…

In 2014, it investigated the Sony Pictures leak, the disclosure of a trove of sensitive and embarrassing internal emails and executive salary data apparently orchestrated by hackers sympathetic to North Korea, and who objected to Sony’s comic depiction of North Korean leader Kim Jong-un.

Unfortunately, that ‘hack’ was subsequently revealed to have been perpetrated by a Sony insider.

But, Crowdstrike’s hacking attribution analyses have been questioned before, as have their ties to Ukranian funders and the Clinton Foundation.

Mr. Alperovitch is also a senior fellow at the Atlantic Council, a Washington-based think tank focused on international issues that is partially funded by Ukrainian billionaire Victor Pinchuk, who reportedly has donated at least $10 million to the Clinton Foundation.


Late last year, the International Institute for Strategic Studies, a respected British think tank, disputed CrowdStrike’s analysis of a Russian hack during Ukraine’s war with Russian-backed separatists. CrowdStrike later revised and retracted portions of its analysis.

Meanwhile, the ultimate publisher of the DNC emails, WikiLeaks, has very publicly confirmed on numerous occasions that their source was, in fact, not a state actor.

HANNITY: Can you say to the American people, unequivocally, that you did not get this information about the DNC, John Podesta’s emails, can you tell the American people 1,000 percent that you did not get it from Russia or anybody associated with Russia?


ASSANGE: Yes. We can say, we have said, repeatedly that over the last two months that our source is not the Russian government and it is not a state party… Obama is trying to say that President-elect Trump is not a legitimate President.


Not surprisingly, all of the above has raised some very valid concerns on both sides of the aisle.

Both Republicans and Democrats say the DNC’s reaction to the hacking is troubling.


Jeh Johnson, who served as homeland security secretary under President Obama, told the House Permanent Select Committee on Intelligence last month that his department offered to assist the DNC during the campaign to determine what was happening, but Mr. Johnson said he was rebuffed.


“The DNC,” Mr. Johnson said at the time, “did not feel it needed DHS’ assistance at that time. I was anxious to know whether or not our folks were in there, and the response I got was the FBI had spoken to them, they don’t want our help, they have CrowdStrike.”


In January, Mr. Comey told the Senate Select Committee on Intelligence that the FBI issued “multiple requests at different levels” to assist the DNC with a cyberforensic analysis. Those requests were also denied.

All of which brings us back to our original question: If the DNC is in possession of actual tangible evidence that could prove once and for all that Russians hacked their servers and attempted to undermine the campaign of Hillary Clinton, why not share that evidence with investigators and enjoy the blissful vindication that its public release would provide?

Might it have something to do with this “purely coincidental’ meeting on a tarmac in Phoenix and/or Loretta Lynch’s ‘assurances’ that the FBI’s investigation (or, “matter” if you prefer) of Hillary Clinton “wouldn’t go too far“?

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Silver Flash-Crashes As Japan Opens

First it was gold last week, then it was half of Nasdaq on July 4th, and now it’s silver that is taking it’s turn in the ‘glitch’ camp. As Japanese markets opened tonight, spot silver prices crashed around 6% in a few seconds only to instantly rip back higher



It appears someone was in a hurry to dump over $450 million worth of silver futures…

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Saudi Arabia accuses Qatar of using Twitter to stoke dissent

Fri, 2017-07-07 03:00

JEDDAH: Saudi Arabia, which is part of the Anti-Terror Quartet (ATQ), on Thursday accused Doha of being behind over 23,000 Twitter accounts trying to stoke dissent in Saudi Arabia.
“We found over 23,000 Twitter accounts driven by Qatar, some of them linked to accounts calling for ‘revolution’ in Saudi Arabia,” Information Minister Awwad Saleh Al-Awwad told AFP during a visit to Paris.
They included the @mujtahidd account, which claims to have the inside track on the Saudi royal household and has over 1.8 million followers, he said.
The account, which has backed Qatar, claimed that Saudi Arabia, Egypt, Bahrain and the UAE had set out to overthrow Qatari Emir Sheikh Tamim bin Hamad Al-Thani but decided against it after coming under pressure from the US, an ally of both Riyadh and Doha.
Al-Awwad accused a London-based Saudi dissident, Saad Al-Faqih, of being behind the account, “together with Qatar.”
Some of the accounts identified by Riyadh as being Qatari proxies were behind calls for protests by the jobless on April 21, he said.
According to one study, 32 percent of the fake accounts come from Qatar, 28 percent from Lebanon, 24 percent from Turkey and 12 percent from Iraq.
The study found links, in the forms of re-tweets and likes, between these accounts and others that call for revolution, stir public opinion or spread rumors about Saudi Arabia, said Saud Al-Qahtani, adviser to the Saudi Royal Court and general supervisor of the Center for Studies and Information Affairs.
Al-Qahtani added that 82 percent of these accounts use false pseudonyms, and about 18 percent of the others cannot be verified.
Recently, the Gulf Association for Rights and Freedoms appealed to two international rights organizations for an urgent intervention over Qatar’s move to ban expat workers taking their annual leave.
The association has sent an “urgent appeal” to the International Labour Organization and the UN High Commissioner for Human Rights in Geneva, asking them to “intervene urgently regarding the grave violation” the Qatari government is committing against citizens and expats, according to the UAE state news agency WAM.
Approximately 2.2 million expats work in Qatar, the majority from countries in Asia.
The ban on Qatari nationals and expat workers taking annual leave may endanger their working conditions, according to Mohammed Hayef, the rights association’s spokesperson.
Hayef warned that such a decision is likely to increase rates of serious and fatal work accidents, “due to depriving workers and placing them under harsh working conditions and physical, psychological and social pressures.”
Qatar’s decision “contradicts the conventions of the International Labour Organization and the Universal Declaration of Human Rights, and violates the basic human right to enjoy annual leave,” Hayef said.
“By this unjust decision, Qatar has violated the most important universal and humanitarian provision in the International Labour Organization’s constitution,” which clearly condemns working conditions “involving injustice, hardship and privation to large numbers of people as to produce unrest so great that the peace and harmony of the world are imperilled.”
Hayef referred to construction workers on the 2022 FIFA World Cup project, who are also negatively affected by the ban.
According to a previous report, more than 1,200 construction workers died while building stadiums for the 2022 World Cup in Qatar.
“One human rights agency estimates more than 4,000 construction workers will die building World Cup-related infrastructure,” the previous report said.

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Record temperature in central, eastern parts of Kingdom

Author: ARAB NEWSFri, 2017-07-07 04:24ID: 1499385798048233000JEDDAH: The temperature in central and eastern parts of the Kingdom has reached 53 degrees Celsius for the first time. Surpassing 50 degrees is rare; in Jeddah, the temperature reac…

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New expat fee includes newborns

Fri, 2017-07-07 04:27

JEDDAH: The Passport Department on Wednesday said it has completed modifications to its electronic portal to cope with the new requirement that private-sector, non-Saudi residents pay a fee for each of their dependents and escorts (those under the resident’s sponsorship, but not a wife or son younger than 18).
It said the fee include newborns, and is required to be paid when requesting visa and residency services online.
The monthly fee is SR100 ($26.67) in 2017, SR200 in 2018, SR300 in 2019 and SR400 in 2020.
The fee came into effect on July 1, and is aimed at increasing state revenues to offset the impact of low oil prices.
The Passport Department said the fee should be paid before renewal of a residency permit or issuance of an exit/re-entry visa for expat workers of all nationalities.

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Saudi education venture Noon attends US investment conference

Fri, 2017-07-07 04:22

RIYADH: The Noon Educational Platform, supported by the King Abdul Aziz City for Science and Technology (KACST), has become the first Saudi or Arab entity to participate in the ASU+GSV conference on investment in education technology, held recently in the US.
Chief Executive Mohammed Al-Dhelaan said that Noon was the only Arab body invited to speak to investors from all over the world at the annual conference.
He praised the role of KACST’s Badir Program in supporting and facilitating the participation of the Noon in this important conference.
The Noon Educational Platform — which specializes in social learning, artificial intelligence and the knowledge revolution — was given the opportunity to showcase its work and business insights to a host of potential investors and technology enthusiasts from Silicon Valley.
“Our participation in this conference comes after we recently concluded a successful investment tour at Noon Educational Platform which was (attended) by several local and regional investors, led by Mudassir Sheikha, co-founder and CEO of Careem, the cab-booking (service) in the Middle East and North Africa,” said Al-Dhelaan.
With more than 900,000 students enrolled in Noon, the educational platform aims to revolutionize the private-tutoring market and improve the education of millions in the Arab world. Noon aims to reformulate the concept of private tutoring by combining learning with pleasure and artificial intelligence.
Through Noon, a high school student is just a click of a button away from getting a private tutor on his phone, whenever needed, at a cost of about 70 percent less than when booked in person.
Noon is one of the most prominent projects of the Badir Program at KACST.

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Ray Dalio: The Central Bank Era Is Ending “So Let’s All Thank Them”

For some inexplicable reason, Ray Dalio still thinks the the world not only underwent a deleveraging, but that it was “beautiful.” Not only did McKinsey prove that to be completely false two years ago, but for good measure the IIF confirmed as much last week when it revealed that global debt has hit a record $217 trillion, or 327% of GDP:

And now, replacing one delusion with another, the Bridgewater head has penned an article in which he points that as the “punch bowl” era is ending – an era which made Dalio the world’s manager of the world’s largest hedge fund, and richer beyond his wildest dreams – he would like to take the opportunity to “thanks the central bankers” who have ‘inexplicably’ been “more maligned than appreciated” even though their aggressivey policies have, and here is delusion #1 again, “successfully brought about beautiful deleveragings.”

“In my opinion, at this point of transition, we should savor this accomplishment and thank the policy makers who fought to bring about these policies. They had to fight hard to do it and have been more maligned than appreciated. Let’s thank them.”

They fought hard to print $15 trillion in new money? Now that is truly news to us.

That said, we can see why Dalio would want to thank “them”: he wouldn’t be where he is, and his fund would certainly not exist today, if it weren’t for said central bankers who came to rescue the insolvent US financial system by sacrificing the middle class and burying generations under unrepayable debt. Still, some who may skip thanking the central bankers are hundreds of millions of elderly Americans and people worldwide also wouldn’t be forced to work one or more jobs well into their retirement years because monetary policies lowered the return on their savings to zero (or negative in Europe), as these same “underappreciated” central bankers created three consecutive bubbles, and the only reason the world is in its current abysmal socio-political and economic shape is due to the cumulative effect of their disastrous policies which meant creating ever greater asset and debt bubbles to mask the effects of the previous bubble, resulting in unprecedented wealth and income inequality, and which have culminated – most recently – with Brexit and Trump.

Thanks guys.

In fact, the only thing of substance in Dalio’s note is the realization that the era of musical chairs is almost over: “our responsibility now is to keep dancing but closer to the exit and with a sharp eye on the tea leaves.”

Dalio leaves off by, what else, echoing Yellen: “no big debt bubble bursting any time soon” (wait, wasn’t he just thanking them moments ago for fixing things?) although mercifully he doesn’t say “in our lifetimes”, however he at least realizes that a “big squeeze” is coming. We hope, for Bridgewater’s sake, that Dalio knows how to navigate capital markets as skillfully when there are no central banks to hold his hand.

His full LinkedIn letter below:

Central Banks’ Reversals Signal the End of One Era and the Beginning of Another


For the last nine years, central banks drove interest rates to nil and pumped money into the system creating favorable carries and abundant cash. These actions pushed up asset prices, drove nominal interest rates below nominal growth rates, pushed real interest rates on cash negative, and drove real bond yields down to near zero percent, which created beautiful deleveragings, brought about balance sheet repairs, and led to more conventional economic conditions in which credit growth and economic growth are growing in relatively good balance with debt growth. That era is ending.


Central bankers have clearly and understandably told us that henceforth those flows from their punch bowls will be tapered rather than increased—i.e., that the directions of policy are reversing so we are at a) the end of that nine-year era of continuous pressings down on interest rates and pushing out of money that created the liquidity-fueled moves in the economies and markets, and b) the beginning of the late-cycle phase of the business/short-term debt cycle, in which central bankers try to tighten at paces that are exactly right in order to keep growth and inflation neither too hot nor too cold, until they don’t get it right and we have our next downturn. Recognizing that, our responsibility now is to keep dancing but closer to the exit and with a sharp eye on the tea leaves.


Wonderful Monetary Policies


Generally speaking (depending on the country), it is appropriate for central banks to lessen the aggressiveness of their unconventional policies because these policies have successfully brought about beautiful deleveragings. In my opinion, at this point of transition, we should savor this accomplishment and thank the policy makers who fought to bring about these policies. They had to fight hard to do it and have been more maligned than appreciated. Let’s thank them.


As you know, looking ahead, we don’t project a big debt bubble bursting any time soon (because of the balance sheet repairs that have taken place), though we do see an increasingly intensifying “Big Squeeze” (see the Big Picture).

PS: We look forward to Dalio’s letter when the current tightening episode ends in a global recession and the biggest crash yet, and wonder if he will still be in the same grateful mood.

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Ohio man pleads guilty to trying to provide support to Daesh

An Ohio man pleaded guilty on Thursday to trying to provide material support to Daesh, the US Justice Department said. Aaron Travis Daniels, 20, of Columbus, was arrested 7 November as he tried to leave his city to travel to Libya to join the militant group, the department said in a statement. A criminal complaint against him said Daniels sent $250 in January 2016 to an Daesh operative and had communicated his commitment to violent overseas jihad. Daniels, known also as Harun Muhammad or Abu Yusef, pleaded guilty in US District Court in Columbus and faces up to 20 years in prison when he is sentenced, officials said. “This case demonstrates how terrorist activities abroad can reach into our local […]