Battlefield America: The War On The American People

Submitted by John Whitehead via The Rutherford Institute,

“A government which will turn its tanks upon its people, for any reason, is a government with a taste of blood and a thirst for power and must either be smartly rebuked, or blindly obeyed in deadly fear.”—John Salter

We have entered into a particularly dismal chapter in the American narrative, one that shifts us from a swashbuckling tale of adventure into a bone-chilling horror story.

As I document in my new book Battlefield America: The War on the American People, “we the people” have now come full circle, from being held captive by the British police state to being held captive by the American police state. In between, we have charted a course from revolutionaries fighting for our independence and a free people establishing a new nation to pioneers and explorers, braving the wilderness and expanding into new territories.

Where we went wrong, however, was in allowing ourselves to become enthralled with and then held hostage by a military empire in bondage to a corporate state (the very definition of fascism). No longer would America hold the moral high ground as a champion of freedom and human rights. Instead, in the pursuit of profit, our overlords succumbed to greed, took pleasure in inflicting pain, exported torture, and imported the machinery of war, transforming the American landscape into a battlefield, complete with military personnel, tactics and weaponry.

To our dismay, we now find ourselves scrambling for a foothold as our once rock-solid constitutional foundation crumbles beneath us. And no longer can we rely on the president, Congress, the courts, or the police to protect us from wrongdoing.

Indeed, they have come to embody all that is wrong with America.

For instance, how does a man who is relatively healthy when taken into custody by police lapse into a coma and die while under their supervision? What kind of twisted logic allows a police officer to use a police car to run down an American citizen and justifies it in the name of permissible deadly force? And what country are we living in where the police can beat, shoot, choke, taser and tackle American citizens, all with the protection of the courts?

Certainly, the Constitution’s safeguards against police abuse means nothing when government agents can crash through your door, terrorize your children, shoot your dogs, and jail you on any number of trumped of charges, and you have little say in the matter. For instance, San Diego police, responding to a domestic disturbance call on a Sunday morning, showed up at the wrong address, only to shoot the homeowner’s 6-year-old service dog in the head.

Rubbing salt in the wound, it’s often the unlucky victim of excessive police force who ends up being charged with wrongdoing. Although 16-year-old Thai Gurule was charged with resisting arrest and strangling and assaulting police officers, a circuit judge found that it was actually the three officers who unlawfully stopped, tackled, punched, kneed, tasered and yanked his hair who were at fault. Thankfully, bystander cell phone videos undermined police accounts, which were described as “works of fiction.”

Not even our children are being spared the blowback from a growing police presence. As one juvenile court judge noted in testimony to Congress, although having police on public school campuses did not make the schools any safer, it did result in large numbers of students being arrested for misdemeanors such as school fights and disorderly conduct. One 11-year-old autistic Virginia student was charged with disorderly conduct and felony assault after kicking a trashcan and resisting a police officer’s attempt to handcuff him. A 14-year-old student was tasered by police, suspended and charged with disorderly conduct, resisting arrest and trespassing after he failed to obey a teacher’s order to be the last student to exit the classroom.

There is no end to the government’s unmitigated gall in riding roughshod over the rights of the citizenry, whether in matters of excessive police powers, militarized police, domestic training drills, SWAT team raids, surveillance, property rights, overcriminalization, roadside strip searches, profit-driven fines and prison sentences, etc.

The president can now direct the military to detain, arrest and secretly execute American citizens. These are the powers of an imperial dictator, not an elected official bound by the rule of law. For the time being, Barack Obama wears the executioner’s robe, but you can rest assured that this mantle will be worn by whomever occupies the Oval Office in the future.

A representative government means nothing when the average citizen has little to no access to their elected officials, while corporate lobbyists enjoy a revolving door relationship with everyone from the President on down. Indeed, while members of Congress hardly work for the taxpayer, they work hard at being wooed by corporations, which spend more to lobby our elected representatives than we spend on their collective salaries. For that matter, getting elected is no longer the high point it used to be. As one congressman noted, for many elected officials, “Congress is no longer a destination but a journey… [to a] more lucrative job as a K Street lobbyist… It's become routine to see members of Congress drop their seat in Congress like a hot rock when a particularly lush vacancy opens up.”

As for the courts, they have long since ceased being courts of justice. Instead, they have become courts of order, largely marching in lockstep with the government’s dictates, all the while helping to increase the largesse of government coffers. It’s called for-profit justice, and it runs the gamut of all manner of financial incentives in which the courts become cash cows for communities looking to make an extra buck. As journalist Chris Albin-Lackey details, “They deploy a crushing array of fines, court costs, and other fees to harvest revenues from minor offenders that these communities cannot or do not want to raise through taxation.” In this way, says Albin-Lackey, “A resident of Montgomery, Alabama who commits a simple noise violation faces only a $20 fine—but also a whopping $257 in court costs and user fees should they seek to have their day in court.”

As for the rest—the schools, the churches, private businesses, service providers, nonprofits and your fellow citizens—many are also marching in lockstep with the police state. This is what is commonly referred to as community policing. After all, the police can’t be everywhere. So how do you police a nation when your population outnumbers your army of soldiers? How do you carry out surveillance on a nation when there aren’t enough cameras, let alone viewers, to monitor every square inch of the country 24/7? How do you not only track but analyze the transactions, interactions and movements of every person within the United States? The answer is simpler than it seems: You persuade the citizenry to be your eyes and ears.

It’s a brilliant ploy, with the added bonus that while the citizenry remains focused on and distrustful of each other, they’re incapable of focusing on more definable threats that fall closer to home—namely, the government and its militarized police. In this way, we’re seeing a rise in the incidence of Americans being reported for growing vegetables in their front yard, keeping chickens in their back yard, letting their kids walk to the playground alone, and voicing anti-government sentiments. For example, after Shona Banda’s son defended the use of medical marijuana during a presentation at school, school officials alerted the police and social services, and the 11-year-old was interrogated, taken into custody by social workers, had his home raided by police and his mother arrested.

Now it may be that we have nothing to worry about. Perhaps the government really does have our best interests at heart. Perhaps covert domestic military training drills such as Jade Helm really are just benign exercises to make sure our military is prepared for any contingency. As the Washington Post describes the operation:

The mission is vast both geographically and strategically: Elite service members from all four branches of the U.S. military will launch an operation this summer in which they will operate covertly among the U.S. public and travel from state to state in military aircraft. Texas, Utah and a section of southern California are labeled as hostile territory, and New Mexico isn’t much friendlier.

Now I don’t believe in worrying over nothing, but it’s safe to say that the government has not exactly shown itself to be friendly in recent years, nor have its agents shown themselves to be cognizant of the fact that they are civilians who answer to the citizenry, rather than the other way around.

Whether or not the government plans to impose some form of martial law in the future remains to be seen, but there can be no denying that we’re being accustomed to life in a military state. The malls may be open for business, the baseball stadiums may be packed, and the news anchors may be twittering nonsense about the latest celebrity foofa, but those are just distractions from what is really taking place: the transformation of America into a war zone.

Trust me, if it looks like a battlefield (armored tanks on the streets, militarized police in metro stations, surveillance cameras everywhere), sounds like a battlefield (SWAT team raids nightly, sound cannons to break up large assemblies of citizens), and acts like a battlefield (police shooting first and asking questions later, intimidation tactics, and involuntary detentions), it’s a battlefield.

Indeed, what happened in Ocala, Florida, is a good metaphor for what’s happening across the country: Sheriff’s deputies, dressed in special ops uniforms and riding in an armored tank on a public road, pulled a 23-year-old man over and issued a warning violation to him after he gave them the finger. The man, Lucas Jewell, defended his actions as a free speech expression of his distaste for militarized police.

Translation: “We the people” are being hijacked on the highway by government agents with little knowledge of or regard for the Constitution, who are hyped up on the power of their badge, outfitted for war, eager for combat, and taking a joy ride—on taxpayer time and money—in a military tank that has no business being on American soil.

Rest assured, unless we slam on the brakes, this runaway tank will soon be charting a new course through terrain that bears no resemblance to land of our forefathers, where freedom meant more than just the freedom to exist and consume what the corporate powers dish out.

Rod Serling, one of my longtime heroes and the creator of The Twilight Zone, understood all too well the danger of turning a blind eye to evil in our midst, the “things that scream for a response.” As Serling warned, “if we don't listen to that scream – and if we don't respond to it – we may well wind up sitting amidst our own rubble, looking for the truck that hit us – or the bomb that pulverized us. Get the license number of whatever it was that destroyed the dream. And I think we will find that the vehicle was registered in our own name.”

If you haven’t managed to read the writing on the wall yet, the war has begun.


ECB Prepares To Sacrifice Greek Banks With 50% Collateral Haircut

In what seems like a coincidental retaliation for Greece's pivot to Russia (and following Greece's initiation of capital controls), the supposedly independent European Central Bank has decided suddenly that – after dishing out €74 billion of emergency liquidity to the Greek National Bank to fund its banks – as The NY Times reports, the value of the collateral that Greek banks post at their own central bank to secure these loans be reduced by as much as 50%, and the haircut scould increase if negotiations with Europe remain at an impasse. As we detailed earlier, this is about as worst-case-scenario for Greece as is 'diplomatically' possible currently, and highlights an increasingly hard line by The ECB toward The Greeks as the move will leave banks hard-pressed to survive.

Why An American And A Russian General Are Suddenly Very Worried About Nuclear War

Over the past several years, there has been an alarming escalation of two very disturbing trends: an increasing preponderance of cyberattacks on complex infrastructure (whether domestic or abroad and whether instigated by external sources or internally, in a false falg attempt to evolve the issue to the benefit of various military-industrial complex benficiaries) as well as around the globe, and a largely unexpected return to a Cold War footing, one catalyzed by the violent US-sponsored overthrow of the former Kiev government and the eagerness to escalate the resultant conflict exhibited by the Kremlin.

If one extends said trends, one would arrive at a very unpleasant conclusion: due to the porous nature of modern technology and the increasing prevalence of cyberattacks, coupled with Cold War-era nuclear doctrines and rising tensions between the two superpowers who are now back to a Cold War regime, a nuclear war has suddenly emerged yet again as a very real threat.

At least such is the opinion of two high-ranking military commanders, American James E. Cartwright, a former Marine Corps general, vice chairman of the Joint Chiefs of Staff and commander of the United States Strategic Command, and Russian Vladimir Dvorkin, a retired major general who headed the research institute of Russia’s Strategic Rocket Forces. Both are members of the Global Zero Commission on Nuclear Risk Reduction, and both are very concerned about the future of the world if the current nuclear status quo between the US and Russia is left unchanged.

The two express their joint concern in a NYT Op-Ed, in which they warns of the dangers of old nuclear strike doctrines at a time when relations between the two superpowers are at such a low point. As a result, they call on Moscow and Washington to prevent possible provocations.

In the Op-Ed, the authors state that there are three Cold War legacy strategic options at the two countries’ disposal: i) a first strike; ii) retaliation after an attack and iii) launch on warning. The generals opine that the latter is the riskiest scenario, “since provocations or malfunctions can trigger a global catastrophe. Since computer-based information systems have been in place, the likelihood of such errors has been minimized. But the emergence of cyberwarfare threats has increased the potential for false alerts in early-warning systems. The possibility of an error cannot be ruled out.

And while one can be skeptical that in the current environment of renewed animosity between East and West the two countries will sit down and amicably discuss nuclear disarmament, the reality of a nuclear strike threat should a “hacker” find their way into either the US or Russian launch system and bypass the launch codes, is indeed all too real, as is the assured response by the adversary, giving way to a global nuclear holocaust.

Which, in this day and age when a new war seemingly starts every month in a desperate neo-con boost to stimulate this (military industrial complex) economy or that, does not sound too far fetched at all…

Finally, those cynical enough can say that what the two generals have done is simply lay out the blueprint for the next steps in what with every passing day appears to be a increasingly truncated global future.

From the NYT:

* * *

How to Avert a Nuclear War

We find ourselves in an increasingly risky strategic environment. The Ukrainian crisis has threatened the stability of relations between Russia and the West, including the nuclear dimension — as became apparent last month when it was reported that Russian defense officials had advised President Vladimir V. Putin to consider placing Russia’s nuclear arsenal on alert during last year’s crisis in Crimea.

Diplomatic efforts have done little to ease the new nuclear tension. This makes it all the more critical for Russia and the United States to talk, to relieve the pressures to “use or lose” nuclear forces during a crisis and minimize the risk of a mistaken launch.

The fact is that we are still living with the nuclear-strike doctrine of the Cold War, which dictated three strategic options: first strike, launch on warning and post-attack retaliation. There is no reason to believe that Russia and the United States have discarded these options, as long as the architecture of “mutually assured destruction” remains intact.

For either side, the decision to launch on warning — in an attempt to fire one’s nuclear missiles before they are destroyed — would be made on the basis of information from early-warning satellites and ground radar. Given the 15- to 30-minute flight times of strategic missiles, a decision to launch after an alert of an apparent attack must be made in minutes.

This is therefore the riskiest scenario, since provocations or malfunctions can trigger a global catastrophe. Since computer-based information systems have been in place, the likelihood of such errors has been minimized. But the emergence of cyberwarfare threats has increased the potential for false alerts in early-warning systems. The possibility of an error cannot be ruled out.

American officials have usually played down the launch-on-warning option. They have argued instead for the advantages of post-attack retaliation, which would allow more time to analyze the situation and make an intelligent decision. Neither the Soviet Union nor Russia ever stated explicitly that it would pursue a similar strategy, but an emphasis on mobile missile launchers and strategic submarines continues to imply a similar reliance on an ability to absorb an attack and carry out retaliatory strikes.

Today, however, Russia’s early warning system is compromised. The last of the satellites that would have detected missile launches from American territory and submarines in the past stopped functioning last fall. This has raised questions about Russia’s very ability to carry out launch-on-warning attacks.

Partly to compensate for the loss of its space-based system, Russia has deployed prefabricated radar units that can be set up quickly along its borders. Some of these are already operational; some are still being tested. Unlike satellite networks, radar can provide accurate information about the scale and targeting of a missile attack — but only once a missile has entered its vicinity, which would most likely be 10 to 15 minutes after launch.

The upside of radar reporting is more information. The downside of having to wait is that it cuts the time for deciding whether to launch on warning. That in turn increases the likelihood of mistaken retaliation. For a submarine missile fired from the Norwegian Sea, Russia’s radar network would give its nuclear decision makers just 10 minutes to respond. America’s early warning systems can be expected to provide about twice as much time.

Clearly, for either side, these timelines are very compressed and the opportunities for ill-considered decisions very real. Launch-on-warning puts enormous strain on the nuclear chains of command in both countries.

In theory, no sensible head of state would authorize a launch-on-warning strike after receiving information that just one missile, or a small number of missiles, were inbound, on the assumption that this was not an intentional, full-scale attack. But the launch-on-warning doctrine still rules in both Russia and the United States — in which case the risk, however small, of cataclysmic error remains.

This risk should motivate the presidents of Russia and the United States to decide in tandem to eliminate the launch-on-warning concept from their nuclear strategies. They should reinstitute military-to-military talks, which were suspended over the Ukraine crisis, to pursue this stand-down as an urgent priority. (A joint decision on this would not destabilize nuclear deterrence: Both countries still have nuclear forces designed to withstand a first-strike attack, guaranteeing retaliatory strikes.)

To reinforce this accord, both countries should refrain from conducting military exercises that involve practicing missile launches based on information from early warning systems. Even if this restraint cannot yet be fully verified, it would be a valuable contribution to strategic stability — and, of course, to preventing an inadvertent nuclear war. This would be a positive step ahead of the Non-Proliferation Treaty Review Conference that the United Nations will host later this month.

Detailed verification measures can come later, once better Russian-American relations are restored. The technical implementation of a decision to abandon the launch-on-warning concept would fall within the framework of the New Start treaty. A phased reduction of the combat readiness of the strategic nuclear forces would provide a safer time buffer for nuclear decision making.

In periods of heightened tensions and reduced decision times, the likelihood of human and technical error in control systems increases. Launch-on-warning is a relic of Cold War strategy whose risk today far exceeds its value. Our leaders urgently need to talk and, we hope, agree to scrap this obsolete protocol before a devastating error occurs.


Who Is Saudi Arabia Really Targeting In Its Price War?

Submitted by Arthur Berman via OilPrice.com,

Saudi Arabia is not trying to crush U.S. shale plays. Its oil-price war is with the investment banks and the stupid money they directed to fund the plays. It is also with the zero-interest rate economic conditions that made this possible.

Saudi Arabia intends to keep oil prices low for as long as possible. Its oil production increased to 10.3 million barrels per day in March 2015. That is 700,000 barrels per day more than in December 2014 and the highest level since the Joint Organizations Data Initiative began compiling production data in 2002 (Figure 1 below). And Saudi Arabia’s rig count has never been higher.

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Figure 1. Saudi Arabian crude oil production and Brent crude oil price in 2015 U.S. dollars. Source: U.S. Bureau of Labor Statistics, EIA and Labyrinth Consulting Services, Inc.

Market share is an important part of the motive but Saudi Minister of Petroleum and Mineral Resources Ali al-Naimi recently emphasized that “The challenge is to restore the supply-demand balance and reach price stability.” Saudi Arabia’s need for market share and long-term demand is best met with a growing global economy and lower oil prices.

That means ending the over-production from tight oil and other expensive plays (oil sands and ultra-deep water) and reviving global demand by keeping oil prices low for some extended period of time. Demand has been weak since the run-up in debt and oil prices that culminated in the Financial Collapse of 2008 (Figure 2 below).

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Figure 2. World liquids demand (consumption) as a percent of supply (production) and WTI crude oil price adjusted using the consumer price index (CPI) to real February 2015 U.S. dollars, 2003-2015. Source: EIA, U.S. Bureau of Labor Statistics, and Labyrinth Consulting Services, Inc.

(click to enlarge image)

Since 2008, the U.S. Federal Reserve Board and the central banks of other countries have further increased debt, devalued their currencies and kept interest rates at the lowest sustained levels ever (Figure 3 below). These measures have not resulted in economic recovery and have helped produce the highest sustained oil prices in history. They also led to investments that are not particularly productive but promise higher yields that can be found otherwise in a zero-interest rate world.

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Figure 3. U.S. Federal Funds rates and WTI oil prices in January 2015 U.S. dollars. Source: U.S. Bureau of Labor Statistics, EIA and Labyrinth Consulting Services, Inc.

(Click image to enlarge)

The quest for yield led investment banks to direct capital to U.S. E&P companies to fund tight oil plays. Capital flowed in unprecedented volumes with no performance expectation other than payment of the coupon attached to that investment.
This is stupid money. These capital providers are indifferent to the fundamentals of the companies they invest in or in the profitability of the plays. All that matters is yield.
The financial performance of most companies involved in tight oil plays has been characterized by chronic negative cash flow and ever-increasing debt. The following table summarizes year-end 2014 financial data for representative tight oil-weighted E&P companies.

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Table 1. Summary of 2014-year end financial data for tight oil-weighted U.S. E&P companies. Money values in millions of U.S. dollars. FCF=free cash flow (cash from operations plus capital expenditures); CF=cash flow; CE=capital expenditures. Source: Google Finance and Labyrinth Consulting Services, Inc.

Some rationalize the negative free cash flow as an expansion of capital base that will result in future profits. The following table shows that over the past 4 years, tight oil negative cash flow increased and has reached a cumulative of more than -$21 billion for the representative companies. Almost half of that negative cash flow took place in 2014.

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Table 2. Summary table of cash from operations and capital expenditures for tight oil-weighted U.S. E&P companies. Values in millions of U.S. dollars. Source: Google Finance and Labyrinth Consulting Services, Inc.

(Click image to enlarge)

The average U.S. oil price from January 2011 through year-end 2014 was $95 per barrel. First quarter 2015 performance at $48.50 WTI will be a disaster that makes the previous 4 years look good.

How long do the losses continue before the cheerleaders of shale plays admit that the enterprise is not profitable? Only the more diversified integrated companies like ConocoPhillips, Marathon, and OXY show meaningful long-term positive cash flow. If companies could not show positive cash flow at $95 per barrel, what price is necessary and what will that do to the world economy?

Some of my readers dispute the poor economics of these plays based on incorrect notions of break-even profitability–some believe that tight oil plays are profitable at $35 per barrel oil prices (see comments from my last post).

Following are two slides taken from Schlumberger CEO Paal Kibsgaard’s recent presentation at the Scotia Howard Weil 2015 Energy Conference held in New Orleans. These slides present a well-informed and objective view of how tight oil plays compare to other plays.

In my Figure 4, Mr. Kibsgaard shows that the average break-even price for tight oil plays is about $75 per barrel. By comparison, Middle East OPEC break-even prices are less than $10 per barrel. Other conventional oil plays break even at less than $20 per barr

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Figure 4. Slide from Schlumberger CEO Paal Kibsgaard’s presentation at the Scotia Howard Weil 2015 Energy Conference.

(Click image to enlarge)

In my Figure 5, Mr. Kibsgaard shows Schlumberger’s assessment of drilling intensity or efficiency. For nearly equal oil-production volumes of about 11 million barrels per day, U.S. oil producers drilled more than 35,000 wells and 297 million feet of hole compared to 399 wells and 3 million feet of hole for Saudi Arabia.

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Figure 5. Slide from Schlumberger CEO Paal Kibsgaard’s presentation at the Scotia Howard Weil 2015 Energy Conference.

U.S. companies drilled almost 100 times more wells to reach the same daily production as Saudi Aramco. Strident claims of increased efficiency by tight oil producers sound absurd in this context.

Prolonged low oil prices will prove that tight oil plays need at least $75 per barrel to break even. When oil prices recover to that level, only the best parts of the tight oil core areas will be competitive in the global market. As production declines from expensive tight oil, oil sand and ultra-deep-water plays, inexpensive Saudi oil will gain market share.

Saudi Arabia is not trying to crush tight oil plays, just the stupid money that funded the over-production of tight oil. Too much supply combined with weak demand created the present oil-price collapse. Saudi Arabia hopes to prolong low prices to benefit their long-term needs for market share and higher demand.


Warning: This Measure Of Credit Is At Its Worst Level Since The Crisis

As we’ve pointed out on a number of occasions, there’s been no shortage of corporate debt issuance this year as high grade supply in the US hit a record $348 billion in Q1 helped by a blockbuster month in March which saw $143 billion in deals price. Meanwhile, high yield issuance came in at more than $90 billion for the period. Despite goldilocks (to use a financial market cliche) conditions characterized by the interplay between yield-starved investors, rock-bottom borrowing costs, and companies’ propensity to leverage their balance sheet in order to inflate earnings and underwrite their stock price, at least one leading indicator is flashing red.