Tuesday, December 1, 2015

Singapore Story 2.0: Strengthening the Core

RSIS Commentary is a platform to provide timely and, where appropriate, policy-relevant commentary and analysis of topical issues and contemporary developments. The views of the authors are their own and do not represent the official position of the S. Rajaratnam School of International Studies, NTU. These commentaries may be reproduced electronically or in print with prior permission from RSIS and due recognition to the author(s) and RSIS. Please email: RSISPublications@ntu.edu.sg for feedback to the Editor RSIS Commentary, Yang Razali Kassim. 


No. 260/2015 dated 30 November 2015
Singapore Story 2.0:
Strengthening the Core
By Ong Weichong

Synopsis


The Prime Minister has just unveiled a new dialogue series, SGfuture, to forge a vision for the next 50 years, towards SG100. The national narrative will evolve to reflect the aspirations of its future architects. Additional layers and voices are sinews that give the core strength.

Commentary


2015 HAS been a significant year for Singapore. It marked the 50th year of Singapore’s independence and the passing of the country’s founding Prime Minister, Mr Lee Kuan Yew. Indeed, the first 50 years of Singapore’s history as a sovereign nation-state can be read as “Singapore Story 1.0” - where Mr Lee Kuan Yew and the PAP Old Guard led Singapore “From Third World to First” in a single generation.

Amid the launch of the new dialogue series SGfuture, it is worth bearing in mind that this story of ‘national struggle’ amidst trying times, however, is far removed from the personal experience of young Singaporeans. The structural geostrategic and physical vulnerabilities faced by Singapore at the outset of independence in 1965 have not gone away, but the narrative of ‘national struggle’ that underscores much of Singapore Story 1.0 may be losing its resonance with a generation that has known only stability and economic prosperity.

Need for a new national narrative


If the Singapore Story is to endure for the next 50 years, it is imperative to start piecing together a Singapore Story 2.0. The crafting of Singapore Story 2.0 is more than an intellectual exercise. It is an inclusive conversation amongst Singaporeans that provides the Singapore ‘tribe’ with a sense of identity, belonging and cohesion. Thus, the importance of having a Singapore Story that resonates with younger Singaporeans cannot be overstated. Going forward, the next edition of the Singapore Story should be built upon the firm foundations of version 1.0, but at the same time broadened to include additional layers and voices.

This can be done in at least three different ways. Firstly, the national narrative should be pluralised and strengthened by adding layers around its core – layers beyond the realm of ‘great men’ that connect with the lives of the average Singaporean. Secondly, beyond the local, Singapore Story 2.0 should bear cognisance that the fortune of Singapore is inextricably linked to that of its immediate neighbourhood. Finally, Singapore Story 2.0 should reflect the aspirations of a generation that will take the nation-building project beyond SG50.

Why the national narrative matters

Some academic historians of the ‘New History’ school would argue that there is no place for a master narrative, but as Kumar Ramakrishna points out in his book Original Sin? Revising the Revisionist Critique of Operation Coldstore: “For relatively young, globalised nations like multi-cultural, multi-religious Singapore…a master narrative is absolutely essential to provide overall structure and coherence to the ongoing nation-building project.”

Indeed, it would be hubristic to believe that the nation-building project in Singapore is complete and immune to the forces of radical ideologies – particularly religious extremism of all forms. Surely, the foundation of Singapore, a nation-state built on the principles of a secular multiracial meritocracy is a story worth remembering. More importantly, the national narrative serves as a more credible aspirational ideal against other ideologies that might threaten the social cohesion of Singapore.

As the Singapore Story evolves, additional strands drawn from a shared social and cultural past are the ones that give voice to the identity of Singaporeans – a shared consciousness of what makes them Singaporean. For example, stories of growing up in HDB estates with celebrations of community functions, void deck weddings and funerals, of Singaporean hawker food culture and other rites of passage unique to Singapore are their shared experiences as Singaporeans. In short, these additional layers give the national narrative added resonance, reality and resilience - for these are stories of their lives that are told.

“A Shining Red Dot”: Singapore at the Crossroads

From pre-modern Temasek to modern Singapore, this island has served as the crossroads where various cultures meet and blend, but this has not always been so. Temasek declined to insignificance when it was no longer integral to the wider fortunes of Maritime Southeast Asia. Indeed, the Singapore Story framed through the lens of the Long Duree is very much intertwined with that of Maritime Southeast Asia – and the Indo-Pacific world.

In his recent 8th S Rajaratnam Lecture, PM Lee Hsien Loong emphasised: “In the end both our external influence, and our domestic unity and success, comes down to our conviction as individual citizens of Singapore. We must be determined that we want to be Singaporean, to stand up in the world, and to be a shining red dot.” The story of Singapore’s place within the larger world - on which the survival and success of this “Shining Red Dot” depends, needs to be reiterated in Singapore Story 2.0.

Lest we fall for the hubris that Singapore’s relevance to the world is a given, Thucydides reminds us of the fate of the ancient city-state of Athens:

So thoroughly had the present prosperity persuaded the Athenians that nothing could withstand them, and that they could achieve what was possible and what was impracticable alike, with means ample or inadequate it mattered not. The reason for this was their general extraordinary success, which made them confuse their strength with their hopes.

Globally, the eastward swing in economic and possibly political power is well underway. That said, many bright young Singaporeans would be more familiar with the works of William Shakespeare than the Sejarah Melayu or Southeast Asian variants of the Ramayana.

Indeed, despite the massive improvement in global rankings of Chinese universities such as Tsinghua and Beida, most of Singapore’s best and brightest tend to go for the safer route of Oxbridge and Ivy League universities rather than those of the Chinese C-9. If predictions of the 21st Century as the ‘Asian Century’ do come to pass, Singapore’s future leaders would do well to look east to broaden their horizons.

Singapore Story 2.0: “That is What Makes us Singaporeans”

What will the Singapore Story be 50 years from SG50?  Will there be a SG100 to tell and celebrate? The ‘national struggle’ of Singapore’s founding generation cannot be replicated in terms of personal experience. It can only exist in the theoretical and conceptual space for succeeding generations. However, the heart and core of Singapore Story 1.0 – a city-nation-state built on the principles of a secular multiracial meritocracy is a vision that future generations can still aspire to.

As envisioned by Mr S Rajaratnam – "Being Singaporean is a matter not of ancestry, but of choice and conviction". It is indeed a choice that has been taken, lived, experienced and shared by fellow Singaporeans from all walks of life – a vision worth protecting and fighting for. Singapore Story 2.0 will have a software update that reflects the aspirations of its future architects, but its ‘heartware’ will still be one that makes us Singaporeans.


Ong Weichong is Assistant Professor with the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.


Click HERE to read this commentary online.

CIA: We Should Not Bomb Certain ISIS Targets Because it May Harm Environment

CIA: We Should Not Bomb Certain ISIS Targets Because it May Harm Environment

Justin Holcomb

11/28/2015 7:50:00 PM - Justin Holcomb
Former CIA director Michael Morell said last week that the White House has hampered the intelligence community's ability to attack oil fields and oil trucks controlled by ISIS.  Morell said that, “we didn’t go after oil wells, actually hitting oil wells that ISIS controls, because we didn’t want to do environmental damage, and we didn’t want to destroy that infrastructure."  He went on to say that there was a pretentious feeling in the war room that bombing ISIS oil targets would indeed cause environmental damage.
On November 18th, Colonel Steve Warren said that striking oil trucks owned by ISIS may cause harm to the drivers who may be innocent.
So, this is a decision that we had to make. We have not struck these trucks before. We assessed that these trucks, while although they are being used for operations that support ISIL, the truck drivers, themselves, probably not members of ISIL; they're probably just civilians. So we had to figure out a way around that.
An entire script of Colonel Steve Warren's press briefing can be viewed here.

Disturbing: 57 Paris Airport Workers Are On Terror Watch List


Disturbing: 57 Paris Airport Workers Are On Terror Watch List

Leah Barkoukis

11/29/2015 6:08:00 PM - Leah Barkoukis
The Nov. 13 terror attacks in Paris has forced France to examine its security policies, including at the Charles de Gaulle Airport, where it was recently discovered that 57 employees who had access to airplanes and runways were on a terror watch list.
Now, the security passes of 86,000 workers at the Paris airport will be reviewed, according to a report by the Sunday Times of London.
Police carried out extensive searches of the airport under state-of-emergency powers after the Nov. 13 Paris attacks in which 130 people were killed and 350 injured by Islamic State militants.
Belgium, where several of the Paris attackers had lived, also has pulled security badges from several airport workers after discovering that some had links to jihadis who had traveled to Syria.
Meanwhile, anxiety has been brewing about radicalism among bus, Metro and railroad workers.
Samy Amimour, who blew himself up in the Bataclan concert hall in Paris, managed to get a job as a bus driver while on a watch list.
The recent finding of Arabic graffiti on four planes at two French airports, including one that had “Allahu Akbar” written on a fuel tank hatch, has only increased security concerns. While the graffiti in and of itself is not harmful, it raises serious questions about who has access to restricted airport locations.

ISIS Oil - The Root Of The Turkey/Russia Crisis

ISIS Oil - The Root Of The Turkey/Russia Crisis
November 30, 2015  
Share this article

At this point, is there anyone that still doesn’t know that ISIS is selling hundreds of millions of dollars of stolen oil in Turkey? As you will see below, this is very much an open secret, but the mainstream media in the United States is being strangely silent about this. Why?

Well, because if the truth came out Turkey would have to be kicked out of NATO and Barack Obama would probably be facing impeachment proceedings. He claims to be fighting ISIS, and yet an endless parade of trucks carrying oil that ISIS has stolen goes back and forth over the Turkish border with his full knowledge and approval.

Barack Obama is very much aware that Turkey is buying oil from ISIS and he refuses to do anything about it. If the Republicans are looking for a scandal which could completely wreck Obama’s presidency and essentially secure the 2016 election for them, this is it.

Do you want to know why the Turkish government ordered the shooting down of a Russian Su-24 bomber on Tuesday?

It is because the Russians have been bombing the trucks that transport oil from ISIS into Turkey.

The Turks claim that the Russian aircraft violated their airspace for approximately 17 seconds. But as Paul Craig Roberts has pointed out, in order for the SU-24 to fly only 1.15 miles in 17 seconds would mean that it was flying at stall speed the entire time, which is ridiculous. Clearly there is something very fishy with the official story, and the Russians say that they never violated Turkey’s airspace at any time.

But no matter who was right and who was wrong, normally countries go out of their way to avoid an international incident. Instead, it appeared that the Turks were quite eager to shoot down the SU-24, and since that time Turkish President Tayyip Erdogan has refused to apologize. In fact, he has warned Russia “not to play with fire” and he insists that it is the Russians that need to apologize…

“Those who violated our airspace are the ones who need to apologize. Our pilots and our armed forces, they simply fulfilled their duties, which consisted of responding to … violations of the rules of engagement. I think this is the essence.”

Is he insane?

What in the world would cause Erdogan to behave so irrationally?

Well, the truth is that Erdogan has been very upset these days because the Russians have been interfering with the illegal oil smuggling that his family has been conducting.

One of the ways that Russian President Vladimir Putin has responded to the downing of the SU-24 has been to drop “truth bombs” on Turkey. Just check out some of the comments that he made this week following a meeting with French President Francois Hollande…

Commercial-scale oil smuggling from Islamic State controlled territory into Turkey must be stopped, Putin said after meeting Hollande in Moscow.

“Vehicles, carrying oil, lined up in a chain going beyond the horizon,” said Putin, reminding the press that the scale of the issue was discussed at the G20 summit in Antalya earlier this month, where the Russian leader demonstrated reconnaissance footage taken by Russian pilots.

The views resemble a “living oil pipe” stretched from ISIS and rebel controlled areas of Syria into Turkey, the Russian President stressed. “Day and night they are going to Turkey. Trucks always go there loaded, and back from there – empty.”

“We are talking about a commercial-scale supply of oil from the occupied Syrian territories seized by terrorists. It is from these areas [that oil comes from], and not with any others. And we can see it from the air, where these vehicles are going,” Putin said.

If the Russians can see this very clearly, do you think that the U.S. military and U.S. intelligence agencies can see this too?

Of course we can. We have even better surveillance capabilities than the Russians do.

Without a doubt, Obama knows exactly what is going on.

The SU-24 was shot down over an area that is used to transport ISIS oil into Turkey. This is a point that Russian Foreign Minister Sergei Lavrov has been careful to highlight. The following comes from Sputnik News…

Lavrov also pointed to Turkey’s role in the propping up the terror network through the oil trade.

“The Russian Minister reminded his counterpart about Turkey’s involvement in the ISIS’ illegal trade in oil, which is transported via the area where the Russian plane was shot down, and about the terrorist infrastructure, arms and munitions depots and control centers that are also located there,” the statement read.

“Sergei Lavrov specifically said that this act by Turkey will have serious consequences for Russian-Turkish relations and will not go unanswered.”

It would be one thing if everyone was just finding out now that ISIS is selling oil in Turkey.

But the truth is that this has been known about for quite a long time.

For instance, the U.S. uncovered “undeniable” evidence that Turkey was buying oil from ISIS back in July…

Western officials have long harbored suspicions about Turkey’s links to the Islamic State, also known as ISIS, ISIL, or Daesh. One official told The Guardian’s Martin Chulov in July that a US-led raid on the compound housing ISIS’ “chief financial officer” produced “undeniable” evidence that Turkish officials directly dealt with ranking ISIS members, mainly by purchasing oil from them.

So why didn’t Barack Obama do anything about it?

Why has he continued to allow oil trucks to go back and forth between ISIS and Turkey “day and night” ever since then?

We have clearly been betrayed by Obama. Even our top military commanders know what is happening. Just this week, former NATO Supreme Allied Commander General Wesley Clark went on television and admitted that oil from ISIS is “probably going through Turkey”…

Asked whether he agreed with Vladimir Putin that Turkey was aiding ISIS, Clark responded, “All along there’s always been the idea that Turkey was supporting ISIS in some way,” before going on to accuse Ankara of funneling ISIS terrorists through Turkey and buying ISIS’ stolen oil in the black market.

“Someone’s buying that oil that ISIS is selling, it’s going through somewhere, it looks to me like it’s probably going through Turkey,” said Clark, before also going on to accuse Putin of supporting terrorists through his allegiance with Bashar Al-Assad.

So why is Barack Obama completely silent about this?

And it isn’t as if the Turkish government is just turning a blind eye to what is going on.

No, the truth is that the Turkish president’s own son is the one buying and exporting the oil. The following comes from Sputnik News…

Turkey downed the Russian Su-24 Fencer bomber over Syria in response to the destruction of hundreds of semi-truck oil tankers sent to Turkey from Syria by the Islamic State, Syrian Information Minister Omran al-Zoubi said.

The information minister said that oil smuggled into Turkey was bought by the Turkish president’s son, who owns an oil company.

“All of the oil was delivered to a company that belongs to the son of Recep [Tayyip] Erdogan. This is why Turkey became anxious when Russia began delivering airstrikes against the IS infrastructure and destroyed more than 500 trucks with oil already. This really got on Erdogan and his company’s nerves. They’re importing not only oil, but wheat and historic artefacts as well,” al-Zoubi told RIA Novosti in an interview.

It is Bilal Erdogan that is the head of the company that is buying oil from ISIS, and he is shipping much of it to Japan. BMZ Ltd. is described as a “family business”, and many of President Erdogan’s “close relatives” hold shares in the company. The following is an excerpt from an excellent article by F. William Engdahl…

The prime source of money feeding ISIS these days is sale of Iraqi oil from the Mosul region oilfields where they maintain a stronghold. The son of Erdogan it seems is the man who makes the export sales of ISIS-controlled oil possible.

Bilal Erdogan owns several maritime companies. He has allegedly signed contracts with European operating companies to carry Iraqi stolen oil to different Asian countries. The Turkish government buys Iraqi plundered oil which is being produced from the Iraqi seized oil wells. Bilal Erdogan’s maritime companies own special wharfs in Beirut and Ceyhan ports that are transporting ISIS’ smuggled crude oil in Japan-bound oil tankers.

Gürsel Tekin vice-president of the Turkish Republican Peoples’ Party, CHP, declared in a recent Turkish media interview, “President Erdogan claims that according to international transportation conventions there is no legal infraction concerning Bilal’s illicit activities and his son is doing an ordinary business with the registered Japanese companies, but in fact Bilal Erdo?an is up to his neck in complicity with terrorism, but as long as his father holds office he will be immune from any judicial prosecution.” Tekin adds that Bilal’s maritime company doing the oil trades for ISIS, BMZ Ltd, is “a family business and president Erdogan’s close relatives hold shares in BMZ and they misused public funds and took illicit loans from Turkish banks.”

Does Barack Obama know all of this?

Of course he does.

Our intelligence agencies would have to be blind, deaf and dumb not to have uncovered all of this by now.

The president of Turkey’s own family is working directly with ISIS, and Obama is doing nothing.

In fact, President Erdogan’s own daughter is even helping to provide “extended medical care” for wounded ISIS militants in Turkish hospitals…

A discontented nurse working clandestinely for a covert medical corps in Şanlıurfa—a city in south-eastern Turkey, close to the border with neighboring Syria— divulges information about the alleged role which Sümeyye Erdoğan plays in providing extended medical care for ISIS wounded militants transferred to Turkish hospitals. Living in a dilapidated apartment in Istanbul’s outskirts along with her two children, a 34-year- old emaciated nurse who spoke on the condition of anonymity for fear of retribution, disclosed her seven-week agonizing ordeal of working in secret military hospital in Şanlıurfa, 150 km (93 miles) east of Gaziantep and 1,300 km (808 miles) southeast of Istanbul. “Almost every day several khaki Turkish military trucks were bringing scores of severely injured, shaggy ISIS rebels to our secret hospital and we had to prepare the operating rooms and help doctors in the following procedures.”

Clearly, the Turkish government is on the same side as ISIS. It has also been documented that ISIS fighters have trained in Turkey and that the Turkish government has been funneling weapons into Syria.

But desperate attempts have been made to keep this information away from the public. In fact, two Turkish journalists that were working to expose the funneling of weapons into Syria have just been arrested and could be facing life in prison…

Two journalists from an opposition Turkish newspaper have been arrested, accused of spying by an Istanbul court following reports that Turkey’s intelligence agency sent weapons to Islamist rebel groups in Syria.

In another case of journalists facing criminal charges and censorship, editor-in-chief Can Dundar and Erdem Gul, the newspaper’s Ankara bureau chief, were taken into custody on Thursday night, Turkish media reported.

The two men are accused of spying and “divulging state secrets”, according to reports, as well as being members of a terror organisation. Another charge included the violation of state security after the release of the footage.

Such charges could see the men face life imprisonment.

And the Turkish government even got Joe Biden to apologize for comments that he made that exposed Turkey’s role in supplying the jihadists in Syria. The following comes from CNN…

“They poured hundreds of millions of dollars and thousands of tons of weapons into anyone who would fight against Assad. Except that the people who were being supplied were al-Nusra and al-Qaeda and the extremist elements of jihadis coming from other parts of the world,” Biden told students.

“We could not convince our colleagues to stop supplying them,” he said.

On Turkey’s alleged role, Biden said, “President (Recep Tayyip) Erdogan told me, he’s an old friend, said, ‘You were right. We let too many people (including foreign fighters) through.’ Now they are trying to seal their border,” he said, according to transcripts.

Biden later “apologized” for saying those things, but were they true?

Of course what Biden said was true.

The government of Turkey desperately wants to see the Assad regime toppled, and so they are training ISIS militants, funneling weapons to them, buying their oil, and tending to their wounded in Turkish hospitals.

This is being done with the full knowledge and complicity of the Obama administration, and it is a betrayal on a level that is almost unspeakable.

Deflation: Good, bad and ugly …

Deflation: Good, bad and ugly …

Martin D. Weiss, Ph.D. | Monday, November 30, 2015 at 7:30 am
Martin Weiss
Martin Weiss with his father, Irving Weiss, studying the causes of deflation in 1980.
Deflation challenges the most brilliant minds at the Fed, defies the smartest traders on Wall Street, and threatens to rip through the strategies of millions of investors.
And yet, among all those now making the decisions that could forever change our future, no one has personal experience with a prolonged period of deep deflation.
I don’t either. I was born in 1946, just as we were leaving the final vestiges of America’s deflation decade behind. I’ve studied that historic period with books, charts, and numbers, but that’s not the same thing. I’ve lived in Japan during deflationary times, but that, too, is different.
What truly brings me close to a visceral understanding of deflation is the half century I shared with my father, J. Irving Weiss, one of the few economists who not only advised investors during America’s 1930s deflationary period, but actually predicted it.

Dad was so proud of that unusual feat that he began telling me stories about it when I was old enough to blow up a balloon and make it go “pop.”
I even remember talking about balloons, inflation and deflation while walking down the beach in Brazil at the age of six.
Vicariously, I lived through America’s great deflation of that era, and from that education alone (plus a few years of research since), I can point out seven common fallacies about deflation:
Fallacy #1. Deflation (declining prices) is not the same thing as a depression (a falling economy). Sometimes the two go hand in hand, sometimes they don’t.
Fallacy #2. Most people think deflation is bad for gold. But Dad witnessed personally how the 1930s was good for the yellow metal and even better for mining shares.
Homestake, for instance, went from a bottom of $65 per share after the crash to $130 and change in 1931. From there, it doubled again to more than $350 a share by 1933. By the time it peaked in 1936, it had climbed to $540 a share — an astronomical gain of more than $470 per share. That was a sevenfold increase.
The dividends also doubled, redoubled, and doubled again, reaching $56 per share in 1935. Think about it. The dividends earned in one year alone almost paid back the entire purchase price of the stock.
Dome, another great gold producer, did even better. You could have bought its shares for as little as $6 after the crash. But in the next seven years, it paid $16.60 per share in dividends. The dividends alone were equal to more than 2.5 times the cost of the stock.
As the Dow Doubles …
We are on the cusp of the most profitable bull market of our lifetime. Stocks will be driven higher by powerful global undercurrents that Wall Street will either ignore or fail to understand. As the Dow doubles, some stocks will see explosive gains of 300%, 400%, 500% and more. Savvy investors who make the right moves will become very rich! Click here for my free report and to find out how it could make you rich beyond your dreams. -Larry
Internal Sponsorship
Meanwhile, the price of Dome rose to $61 a share. A person who put $10,000 into Dome could have walked away with more than $100,000, while nearly everything else remained mired in deflation.
Fallacy #3. The deflation of that era didn’t begin in 1929 with the stock market crash. It actually began in the early 1920s and continued for most of that decade. Likewise, the first fortune-busting crash of the 1920s didn’t happen in New York. Nor was it in the Dow. It was the Florida real estate crash of 1925-26.
Fallacy #4. The so-called Roaring Twenties did not roar for everyone. Even while Wall Street and industrial elites were making fortunes, rural families were plunging into poverty. 
Fallacy #5. The Roaring Twenties didn’t even lift up national consumer prices. Quite to the contrary, the U.S. consumer price index, which had already suffered one big plunge in the late 1910s and early 1920s, began to slide again in July of 1926. Then, it continued going down virtually nonstop until May of 1929.
That wasn’t just low inflation like we’re seeing today in consumer prices. It was outright deflation.
Fallacy #6. Inflation is not necessarily “the norm” of history. Yes, it may be more common than deflation. But in addition to the 1920s and 1930s, there were major, deep, prolonged deflations in the 14th century, throughout the 1860s, during the 1870s; and, as I said, in the late 1910s to early 1920s.
Fallacy #7. These deflations were not caused mostly by fatal policy mistakes or unique geo-political events. They were all natural economic phenomena that occurred in different eras, under different political conditions, and with different triggers. Some prime examples …
Deflation of the 14th Century
In the decades following the Great Famine of 1315-17, the UK experienced a severe deflation accompanied by a dramatic plunge in English mint outputs.
Researchers cite a few possible reasons:
  • Major European silver mines had been seriously depleted, making it physically difficult to coin money. In other words, a forced contraction in the money supply.
  • The English Crown had overspent on troops overseas, which led to excessive outflows of bullion. And in Florence, early 14th century banks had gone overboard in expanding credit, especially to England.
England went broke, the Florentine government defaulted on its bonds, Italian banks went bust, and credit dried up almost entirely. That “mancamento della credenza” (shortage of credit) triggered a 50% crash in real estate prices along with massive wage-and-price deflation.
Deflation of 1658-1669
This episode was closely tied to political crisis: The year 1658 brought the death of Oliver Cromwell, Lord Protector of the Commonwealth of England, Scotland and Ireland … then abdication of his son, Richard, just eight months later … and, soon, financial chaos.
In 1665, England was devastated again by the plague. A year later, much of the capital was destroyed in the Great Fire of London. And in 1667, the Dutch raid on Chatham was, according to historians “one the most humiliating military reverses England had ever suffered.”
End result: Massive deflation as the purchasing power of gold jumped by 42%.
But not all deflations are caused by disasters …
Deflation of the Late 19th Century
In this case, deflation was driven primarily by two factors — (1) a boom in productivity thanks to sweeping technological advances in industry, plus (2) fiscal and monetary discipline as several major countries joined the gold standard.
Between 1870 and 1890, iron production in the five largest producing countries more than doubled from 11 million tons to 23 million tons, while the price of iron fell in half. And steel production increased twentyfold — from half a million tons to 11 million tons, while steel prices sank.
The declines spread to grain prices, which, by 1894, had plunged to just one-third of their 1867 peaks … and to cotton, which fell by nearly 50% in five years.
In response, France, Germany, and the United States threw up major import tarrifs, which in turn, triggered major economic declines and mass emigration from Italy, Spain, Austria-Hungary, and Russia.
Deflation of 1919-1921
World War I ended.
Suddenly, the primary impetus behind an inflationary commodity boom simply ceased to exit. And commodity prices collapsed.
This wasn’t just a drawn-out period of falling prices; it was a massive rout in nearly all commodity prices, accompanied by a sudden plunge in the world’s leading economies.
From peak to trough, GNP shrunk by 18% in the United States, 20% in Germany, 24% in Canada and, worst of all, 29% in the United Kingdom. In fact, the impact on the UK was so severe, its “Roaring Twenties” were barely more than a whimper; and it stayed mostly depressed until World War II.
Lessons Learned
First, they’re all quite different. So never assume the next deflation is going to be like the last one. Aside from the self-evident fact that all deflations come with falling prices, each deflation follows a trajectory that’s unique in many ways.
According to five authors writing for the National Bureau of Economic Research (Bordo, Landon-Lane, Redish, Borio and Filardo), deflations can be roughly divided into three groups — the good, the bad and the ugly.
  • “Good deflations” are those that arise from sharp increases in supplies — “supply shocks” not only bring on lower product prices, but also higher profits, rising real wages, rising stock prices and good news for Wall Street.
  • “Bad deflations” are those associated with recessions as the demand for goods falls sharply. And …
  • “Ugly deflations” come with the collision of (a) big price declines and (b) big debts. That’s when you typically see corporate failures, bond market crashes, and even debt defaults by entire nations.
Later, historians may try to blame the bad and ugly deflationary busts on policy blunders, such as the Fed tightening credit or raising interest rates at precisely the wrong time. But the true cause is usually too much easy money and too much debt during the prior period of inflationary boom.
Second, sometimes deflation is the prelude to a big bear market in stocks (as it was in the 1920s and 1930s); sometimes it’s not (as we’ve seen so far in the 2010s.)
My father explains his 1929 experience this way …
“The main reason I didn’t invest in stocks in the late 1920s was because I couldn’t afford to. But there was also another reason: I saw how Florida real estate had crashed in 1925. I saw how commodity prices were still falling and how the nation’s farms were so devastated. I couldn’t imagine risking our family’s money in stock market speculation.
“I didn’t break that rule until 1930 when I borrowed $500 from my mother to invest in the market — but to play the decline by selling stocks short. I didn’t catch the exact top of the market in 1929. Instead, I waited until April of the following year, when the market had enjoyed a big post-crash rally. That’s when I started selling short, targeting shares in U.S. subsidiaries of British companies. I figured they were the most vulnerable because the British pound was so vulnerable.”
Sure enough, the Crash of ‘29 was just the opening act of the greatest market decline in modern history. From its peak, the Dow Jones Industrials Average fell 89 percent. But never forget: The commodity deflation started way back in 1919. The stock market crash didn’t begin until a full ten years later.
And needless to say, what the NBER researchers call “good deflation” often comes with continuing bull markets in stocks as a whole, or at least in major sectors of the stock market.
Finally, the most important lesson (and question): What kind of deflation are we experiencing — or most likely to see — this time around?
Strangely, it looks like a rare combination of the good and the ugly …
  • The good: As Tech Trend Trader’s Jon Markman explains, we are witnessing sweeping technological innovations that promise to make almost everything we do or buy more efficient and cheaper.
  • The ugly: As I told you here two weeks ago, and as Supercycle Trader’s Larry Edelson has warned, we could see a major collision between debt and deflation in Europe, then in Japan, and ultimately in the United States as well.
That implies major dangers in bonds and stock market sectors that are being hurt by debts and deflation (such as energy majors), plus major buying opportunities in those that stand to benefit (such as technology innovators).
Some experts have argued that deflation is impossible nowadays because massive QE (quantitative easing, or money printing), is designed to be inflationary.
In theory, that made sense. But in practice, it’s been dead wrong: Despite the biggest-ever QE by the world’s five most powerful central banks — the U.S. Fed, the European Central Bank, the Bank of England, the Bank of Japan and Bank of China — oil prices have crashed and most other commodities have followed suit.
Larry Edelson is one of the few in the world who predicted this unique convergence of events. And Credit Lyonnais Southeast Asia’s Christopher Wood explains why:
“The best way to illustrate that quantitative easing is not working is the continuing decline in velocity and the resulting lack of a credit multiplier since the unorthodox monetary regime was introduced. In America, Japan and the eurozone, velocity has continued to decline since the financial crisis in 2008 …
“Indeed, US money velocity is now at a six-decade low. This is why those who have predicted a surge in inflation in recent years caused by the Fed “printing money” have so far been proven wrong. Inflation, as defined by conventional economists like Bernanke in the narrow sense of consumer prices and the like, will not pick up unless the turnover of money increases.”
As you can see in the chart below, money velocity not only plunged in 2009, but it has also continued on a long-term decline that began in the late 1990s.
All deflationary! All helping to explain why QE didn’t work. And all leading to the conclusion that more deflation is still in the works as the Fed tries to back out from its money-printing madness.
My advice: Learn from history. But don’t be its prisoner. Avoid the big dangers by maintaining a big stash of cash. Then, be ready to invest in extreme high quality companies with the brightest business models and most innovative technology.
Good luck and God bless!
Martin
P.S. Did you miss Larry Edelson’s NEW report? In Larry’s opinion, “Mulitiply Your Money in The Great Commodity Supercycle of 2015-2021” could prove to be the most profitable report you read all year.
It’s free. There’s no obligation, no strings attached — and it could make you very, very rich.
Hurry- click this link to read it now!

Martin D. Weiss, Ph.D.Dr. Weiss founded Weiss Research in 1971 and has dedicated the past 40 years to helping millions of average investors find truly safe havens and investments. He is president of Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. And he is the chairman of the Sound Dollar Committee, originally founded by his father in 1959 to help President Dwight D. Eisenhower balance the federal budget. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recesssion and Depression.

Multi-Millionaire Businessman: "It's going to be quite catastrophic"



Multi-Millionaire Businessman: "It's going to be quite catastrophic"

by Sean Goldsmith / 11-30-2015
Most Americans have no idea what really happens when a currency collapses, let alone how to prepare…

But global economist, multimillionaire businessman, and New York Times best-selling author Doug Casey does. In fact, he might be the single most knowledgeable person in the world on the subject.

Dubbed the 'International Man,' roughly 4 decades ago, Casey has not only established residency in nearly a dozen countries, he's visited 145 nations (he recently got back from Mauritania where he inked a new TV deal), and has been a major investor in over 1,000 businesses across the globe…

Not only that, Casey was in Argentina in 2001 when the government defaulted on nearly $100 BILLION in debt, the single largest debt default the world has ever seen. Click here to see what a currency collapse really looks like.

It's safe to say that there's probably not another American alive today who has been to as many foreign lands, done as many international deals, and learned as much about global economies, currencies, and the inner workings of foreign governments.

Now, Casey is coming forward with a stern warning to the American public.

Casey says – although few people realize it – America is on the brink of a major and unprecedented currency collapse, similar to what happened in Argentina in 2001, except on a much grander scale.

In the attached presentation, Doug Casey reveals not only what really happens in a currency collapse (99% of Americans have no idea), he shows you the simple, but critical steps every American must take to weather the coming storm.

Click here to see.


This email was sent to you because you signed up for The Daily Caller news alerts. If you would like to update your preferences or unsubscribe please click here.

Did the Yuan Really Pass the IMF Currency Test? You'll Know Soon

Did the Yuan Really Pass the IMF Currency Test? You'll Know Soon

Updated on
What Could Reserve Currency Status Mean for China?
  • Fund executive board will vote Monday on including yuan in SDR
  • Staff paper may give more details on rankings of yuan's usage
International Monetary Fund Managing Director Christine Lagarde and some two dozen officials on the fund’s executive board will gather Monday at headquarters in Washington for one of the most-anticipated decisions outside of actually approving loans for nations in crisis.
The question inside the 12th-floor, oval boardroom: whether to grant China’s yuan status as a reserve currency by adding it to the fund’s Special Drawing Rights basket. The SDR, created in 1969, gives IMF member countries who hold it the right to obtain any of the currencies in the basket -- currently the dollar, euro, yen and pound -- to meet balance-of-payments needs.
QuickTake The People’s Currency
While there’s little suspense in the main thrust of the expected approval -- Lagarde already announced that fund staff had recommended the yuan be included and that she supported the finding -- the IMF is likely to give more details on how it arrived at the decision.
The IMF’s highest decision-making body is its board of governors, a group of mostly finance ministers and central bankers from its 188 member countries. The board of governors has delegated most of its powers to the executive board, made up of 24 executive directors who represent the membership. The meeting Monday has been classified as “restricted,” meaning no support staff will be allowed to attend.
China’s yuan has weakened against the dollar over past two years
China’s yuan has weakened against the dollar over past two years
The executive board, which meets more than 200 times a year, usually makes decisions based on consensus, rather than formal votes. Mark Sobel, the U.S. executive director who answers to the Obama administration, wields the most power, with a 17 percent voting stake. Together, the Group of Seven countries control 43 percent of the vote, making them a formidable bloc. China, which holds a 3.8 percent voting share, is represented by former People’s Bank of China official Jin Zhongxia.
Here’s what to look for in Monday’s decision and its immediate aftermath:

Whether Yuan Deserved It

In her Nov. 13 statement, Lagarde said staff determined the yuan is “freely usable,” the test for inclusion. But five months ago, the currency appeared to fall short of the mark. Following Monday’s decision, the IMF will probably release a detailed staff report on the review, shedding more light on how the fund’s economists arrived at the new conclusion.
According to the fund, freely usable currencies must be widely used to make payments in global transactions, and widely traded in major exchange markets. Key indicators include the share a currency makes up of official reserves, international banking liabilities and global debt securities, as well as the volume of use in foreign-exchange markets.
In a July report, IMF officials found the yuan ranked seventh among currencies as a share of official reserves, behind the four SDR members as well as the Australian and Canadian dollars. The yuan constituted 1.1 percent of official reserves, compared with 63.7 percent for the U.S. dollar. The yuan also ranked outside the top five in terms of debt securities and currency trading, according to the report.
It’s unlikely the currency’s use has surged enough to put it in the top five of the IMF’s key statistics, according to Ted Truman, a former Federal Reserve and U.S. Treasury official. China’s actions to address deficiencies mentioned in the earlier report represent “progress, but these new procedures have no established track record,” Truman, a senior fellow at the Peterson Institute for International Economics, said in a Nov. 17 blog post.
A working group that includes former Treasury secretaries Henry Paulson and Timothy Geithner hopes to build a framework for the trading and clearing of the Chinese currency in the U.S., the Wall Street Journal reported Monday, citing a statement from Michael Bloomberg, who will chair the group. Michael Bloomberg is the founder and majority owner of Bloomberg LP, the parent of Bloomberg News.
“SDR status could be a catalyst for central bank foreign-exchange reserve managers, sovereign wealth funds and other major money managers to shift funds into yuan,” Tom Orlik, Bloomberg Intelligence’s chief Asia economist, said in a note.

Weighting in Basket

The board’s decision should include the weighting the yuan will be assigned within the basket, and the staff paper may explain the basis for the proportion. The dollar currently accounts for 41.9 percent of the basket. The euro accounts for 37.4 percent, the pound 11.3 percent and the yen 9.4 percent.
In the preliminary report in July, IMF staff estimated the yuan would have a weight of about 14 percent to 16 percent.
The weighting will affect the interest countries pay when they borrow from the IMF.

Political Reaction

The reaction to the decision by governments and politicians will show how much of a flash point China’s economic and political rise remains in the world.
The U.S., in particular, will have to walk a fine line. The Obama administration initially insisted China implement more financial reforms to win America’s support for the yuan’s inclusion in the SDR basket.
But after presidents Barack Obama and Xi Jinping met at the White House in September, the administration softened its position, saying the U.S. would support inclusion as long as the yuan meets the IMF’s criteria.
An overly enthusiastic U.S. response could inflame politicians on both sides of the aisle. Republican presidential candidate Donald Trump has said he would declare China a currency manipulator on “day one” if elected. Democratic Senator Charles Schumer of New York has pushed for Congress to pass measures to discourage currency manipulation by the Chinese.

More Reform Conditions

To give SDR users the time to adjust, the IMF has decided any changes to the basket will wait until the end of September.
In their July report, fund staffers highlighted a range of operational challenges of adding the yuan to the basket. Countries that hold SDRs, for example, need to have access to yuan-dominated securities to manage their reserves and hedge risks. Also, the IMF will need to identify a reliable interest-rate benchmark to calculate the rate paid by SDR borrowers.
China has addressed some of these issues, committing to issue three-month treasury bills every week and opening its onshore bond and currency markets to foreign central banks.
But the IMF will probably require more conditions to smooth the transition, said Domenico Lombardi, director of the global economy program at the Centre for International Governance Innovation in Waterloo, Ontario. The IMF will likely seek further assurance that benchmark exchange and interest rates for the yuan will be available, he said.
Lombardi said the fund may also seek a commitment from the People’s Bank of China to refrain from currency interventions -- a pledge that will make support for the yuan’s inclusion in the SDR more politically acceptable for other countries.
“The IMF membership have come to grips with the fact the renminbi has capital controls, but the PBOC’s commitment will be key,” Lombardi said, referring to the currency’s official name.