A Glimmer Of Hope? Russia, US Officials Revive Dialogue On Arms Control

Authored by Andrei Akulov via The Strategic Culture Foundation,

The New Start Treaty was in focus of the talks held in Helsinki between Russian Deputy Foreign Minister Sergei Ryabkov and US Undersecretary of State Thomas Shannon on September 11-12. The parties agreed that the treaty should be implemented without exception. It was revealed that expert consultations on the future of the agreement had begun. A meeting of the US-Russian bilateral commission on implementing the New START would take place in the near future so that the two sides could continue their discussion of the technical aspects of implementation.

In force since 2011, New START foresees the reduction of both countries' nuclear arsenals to 1,550 warheads and 700 operationally deployed launch systems by 2018. The treaty also obliges Moscow and Washington to exchange information about their nuclear weapon stockpiles. It is one of the few nuclear agreements still being honored amid the current strained relations between Washington and Moscow. The treaty is set to expire in 2021 and stipulates that the parties may agree to extend it for a period of no more than five years.

With no negotiations in sight on a new strategic arms reduction agreement, it would be prudent to extend the treaty till 2026. True, it would be even more beneficial to have a new treaty, if possible, but there are obstacles on the way. At this level of reductions, other nuclear powers should join. This prospect is hardly feasible at present, and yet step-by-step progress toward constructive consultations on nuclear arms reductions and transparency measures is possible. The US program of creating a global missile defense is also a hindrance. There is also a problem of mistrust against the background of the relationship at its lowest ebb.

An agreement to extend the landmark treaty is the way to stabilize the ties and prevent a competition. It would revive the hopes for saving the arms control regime, which is being eroded, to put the world back to the brink of nuclear war where it had been before the Partial Nuclear Test Ban Treaty was signed in 1963. The mutual limits and the robust verification and compliance regime, including satellites, on-site inspections, required notifications, and data exchanges enhance stability and reduce incentives for engaging in an arms race. With no verification procedures in place, the leaderships of both countries would lose a critical source of intelligence, hampering policymakers’ ability to make informed decisions. By extending New START, the parties could add stability at the time of increasing tensions.

In February, President Trump decried the New START Treaty. He said it was one-sided and «Just another bad deal that the country made, whether it's START, whether it's the Iran deal … We're going to start making good deals», he said in an interview with Reuters. He also responded negatively to Russian President Putin’s suggestion to extend that treaty in a January phone call.

The military leaders appear to have a different view. Gen. John Hyten, the head of US Strategic Command, told Congress in March that he is a “big supporter” of the treaty. According to him, “bilateral, verifiable arms control agreements are essential to our ability to provide an effective deterrent.” Secretaries of Defense and State, support New START. The Federation of American Scientists supports the treaty. European allies also back the idea of keeping New START in force. According to Federica Mogherini, European Union High Representative for Foreign Affairs and Security Policy, “The right path is the one marked by the New START Treaty and its implementation. This is the kind of cooperation between Russia and the United States that we Europeans like to see.”

The United States is currently pursuing a near-complete overhaul of all elements of its strategic nuclear potential. Over the next 30 years, it plans to have a new ICBM, a new strategic submarine, a new bomber, and a new nuclear cruise missile. However, none of the plans are inhibited by New START. Russia is going through modernization of its nuclear triad. It’s absolutely important to keep the limitations and verification procedures in place to ensure adequate planning.

Extending New START could help create a positive atmosphere for improving the US-Russia relationship.

It would help head off unconstrained nuclear arms race and global security. Failing to pursue an extension would be a major missed opportunity.

Nobody expects spectacular breakthroughs, but it’s good news the issue of strategic stability was at last addressed during a high level Russia-US meeting. It was abnormal that the nuclear arms reductions were not part of the bilateral agenda for such a long period of time. It’s hard to overestimate the importance of the fact that the dialogue is revived at the time when the entire arms control and non-proliferation regime is unraveling. Looks like at last a glimmer of light appeared at the end of the tunnel.

Fearful Californians Prepare For A Nuclear Attack: “A Lot Of People Will Be Killed”

With each passing day and each new ICBM launch from a seemingly unhinged North Korean dictator, the fears of an attack on the U.S. mainland, though faint, increasingly weigh on the hearts and minds of Americans, particularly those in California.  As The Guardian points out today, those fears have even prompted a group of California public health officials and emergency responders to gather for a strategy session with Hal Kempfer, a retired marine lieutenant colonel, to discuss which areas are the most likely targets and how citizens should respond to an attack.

Hal Kempfer, a noted international security expert, is getting a roomful of California public health officials and emergency responders to think about the unthinkable – a nuclear bomb exploding at the port of Long Beach, about four miles away.

 

“A lot of people will be killed,” he said, “but a large percentage of the population will survive. They will be at risk and they will need help.”

 

“If you want to mess up southern California, if you want to mess up the west coast, if you want to mess up our country – where do you attack?” Kempfer asks. “If I’m sitting in North Korea and looking at possible targets, I’m going to be looking at Long Beach very closely.”

 

He talks about the port and downtown Long Beach being “toast” – no exaggeration, since the blast wave is likely to vaporize everything in its immediate path. But the city health department, the Long Beach airport and fire department might not be; they are all somewhat protected by a hilly area that is likely to halt the initial blast wave. And so the city can, tentatively, think about setting up a center of emergency operations.

 

Of course, the radioactive fallout created as the explosion gathers up tremendous quantities of dust and ocean water and spits them into the atmosphere would represent a secondary grave risk, especially in the first hours after an attack.

 

Not to mention the electromagnetic pulse that is likely to knock out electronic systems including phones and computers, the pile-ups expected on the freeways as drivers are blinded by the flash of the explosion, the rush for food, water and gasoline as millions of Angelenos attempt to drive out of the region, and the terror triggered by even the idea of a second, follow-up attack.

Meanwhile, lest you think this was all just a creative way for some public employees to skip work for a day, Ventura County, located just northwest of Los Angeles, has even taken the unusual step of prepping a 250-page plan on how to respond to the humanitarian crisis that would result from a nuclear attack in Los Angeles. 

In fact, their efforts even include this truly bizarre public service announcement that instructs folks to shelter in place and cover windows with plastic.

Of course, as we pointed out back in August, while a global nuclear confrontation is generally viewed as a bad thing, for Ron Hubbard, President of Atlas Survival Shelters in Los Angeles, it has resulted in an economic windfall as a staggering number of Californians have suddenly turned into doomsday preppers.

“It’s crazy, I’ve never seen anything like it,” Ron Hubbard, president of Atlas Survival Shelters, told Fox11. “It’s all over the country. I sold shelters today in North Carolina, Tennessee, Texas, Oklahoma, Louisiana, Oregon, Washington, Arizona, California.”

 

The company, based in Montebello in eastern Los Angeles, sells shelters priced from $10,000 to $100,000. Hubbard told the station that the shelters are designed to be buried 20 feet below ground and can sustain survivors for up to one year, depending on the size and model.

 

He told the station he had sold more than 30 units in recent days, including to customers in Japan.

 

All that said, Kempfer points out that there is a silver lining here because any attack from North Korea likely wouldn’t result in “your traditional nuclear apocalypse scenario” because Kim Jong-Un probably only has weapons capable of destroying about 1 square mile at a time.

Rather, it’s likely to be a Hiroshima-sized bomb – large enough to obliterate everything within a square-mile radius and kill tens of thousands of people, either immediately or through the lingering effects of radiation. But still leaving millions of survivors across the region who would need help.

 

“We’re talking about smaller North Korean things,” Kempfer emphasized, though the word “smaller” sounds very far from reassuring. “This is not your traditional nuclear apocalypse scenario.”

So, Californians at least have that going for them, which is nice.

Jim Rickards’ “Golden Solution” To America’s Debt Crisis

Authored by Jim Rickards via DailyReckoning.com,

Right now, the United States is officially $20 trillion in debt. Over half of that $20 trillion was added over the past decade.

And it looks like annual deficits will be at the trillion dollar level sooner than later when projected spending is factored in.

Basically, the United States is going broke.

I don’t say that to be hyperbolic. I’m not looking to scare people or attract attention to myself. It’s just an honest assessment, based on the numbers.

Now, a $20 trillion debt would be fine if we had a $50 trillion economy.

The debt-to-GDP ratio in that example would be 40%. But we don’t have a $50 trillion economy. We have about a $19 trillion economy, which means our debt is bigger than our economy.

When is the debt-to-GDP ratio too high? When does a country reach the point that it either turns things around or ends up like Greece?

Economists Ken Rogoff and Carmen Reinhart carried out a long historical survey going back 800 years, looking at individual countries, or empires in some cases, that have gone broke or defaulted on their debt.

They put the danger zone at a debt-to-GDP ratio of 90%. Once it reaches 90%, they found, a turning point arrives…

At that point, a dollar of debt yields less than a dollar of output. Debt becomes an actual drag on growth.

What is the current U.S. debt-to-GDP ratio?

105%.

We are deep into the red zone, that is. And we’re only going deeper.

The U.S. has a 105% debt to GDP ratio, trillion dollar deficits on the way, more spending on the way.

We’re getting more and more like Greece. We’re heading for a sovereign debt crisis. That’s not an opinion; it’s based on the numbers.

How do we get out of it?

For elites, there is really only one way out at this point is, and that’s inflation.

And they’re right on one point. Tax cuts won’t do it, structural changes to the economy wouldn’t do it. Both would help if done properly, but the problem is simply far too large.

There’s only one solution left, inflation.

Now, the Fed printed about $4 trillion over the past several years and we barely have had any inflation at all.

But most of the new money was given by the Fed to the banks, who turned around and parked it on deposit at the Fed to gain interest. The money never made it out into the economy, where it would produce inflation.

The bottom line is that not even money printing has worked to get inflation moving.

Is there anything left in the bag of tricks?

There is actually. The Fed could actually cause inflation in about 15 minutes if it used it.

How?

The Fed can call a board meeting, vote on a new policy, walk outside and announce to the world that effective immediately, the price of gold is $5,000 per ounce.

They could make that new price stick by using the Treasury’s gold in Fort Knox and the major U.S. bank gold dealers to conduct “open market operations” in gold.

They will be a buyer if the price hits $4,950 per ounce or less and a seller if the price hits $5,050 per ounce or higher. They will print money when they buy and reduce the money supply when they sell via the banks.

The Fed would target the gold price rather than interest rates.

The point is to cause a generalized increase in the price level. A rise in the price of gold from $1,350 per ounce to $5,000 per ounce is a massive devaluation of the dollar when measured in the quantity of gold that one dollar can buy.

There it is — massive inflation in 15 minutes: the time it takes to vote on the new policy.

Don’t think this is possible? It’s happened in the U.S. twice in the past 80 years.

The first time was in 1933 when President Franklin Roosevelt ordered an increase in the gold price from $20.67 per ounce to $35.00 per ounce, nearly a 75% rise in the dollar price of gold.

He did this to break the deflation of the Great Depression, and it worked. The economy grew strongly from 1934-36.

The second time was in the 1970s when Nixon ended the conversion of dollars into gold by U.S. trading partners. Nixon did not want inflation, but he got it.

Gold went from $35 per ounce to $800 per ounce in less than nine years, a 2,200% increase. U.S. dollar inflation was over 50% from 1977-1981. The value of the dollar was cut in half in those five years.

History shows that raising the dollar price of gold is the quickest way to cause general inflation. If the markets don’t do it, the government can. It works every time.

But what people don’t realize is that there’s a way gold can be used to work around a debt ceiling crisis if an agreement isn’t reached in the months ahead.

I call it the weird gold trick, and it’s never seen discussed anywhere outside of some very technical academic circles.

It may sound weird, but it actually works. Here’s how…

When the Treasury took control of all the nation’s gold during the Depression under the Gold Reserve Act of 1934, it also took control of the Federal Reserve’s gold.

But we have a Fifth Amendment in this country which says the government can’t seize private property without just compensation. And despite its name, the Federal Reserve is not technically a government institution.

So the Treasury gave the Federal Reserve a gold certificate as compensation under the Fifth Amendment (to this day, that gold certificate is still on the Fed’s balance sheet).

Now come forward to 1953.

The Eisenhower administration actually had the same debt ceiling problem we have today. And Congress didn’t raise the debt ceiling in time. Eisenhower and his Treasury secretary realized they couldn’t pay the bills.

What happened?

They turned to the weird gold trick to get the money. It turned out that the gold certificate the Treasury gave the Fed in 1934 did not account for all the gold the Treasury had. It did not account for all the gold in the Treasury’s possession.

The Treasury calculated the difference, sent the Fed a new certificate for the difference and said, “Fed, give me the money.” It did. So the government got the money it needed from the Treasury gold until Congress increased the debt ceiling.

That ability exists today. In fact, it is exists in much a much larger form, and here’s why…

Right now, the Fed’s gold certificate values gold at $42.22 an ounce. That’s not anywhere near the market price of gold, which is about $1,330 an ounce.

Now, the Treasury could issue the Fed a new gold certificate valuing the 8,000 tons of Treasury gold at $1,330 an ounce. They could take today’s market price of $1,330, subtract the official $42.22 price, and multiply the difference by 8,000 tons.

I’ve done the math, and that number comes fairly close to $400 billion.

In other words, tomorrow morning the Treasury could issue the Fed a gold certificate for the 8,000 tons in Fort Knox at $1,330 an ounce and tell the Fed, “Give us the difference over $42 an ounce.”

The Treasury would have close to $400 billion out of thin air with no debt. It would not add to the debt because the Treasury already has the gold. It’s just taking an asset and marking it to market.

If the debt ceiling isn’t raised, this gold certificate trick could finance the government for almost an entire year, because we have about a $400 billion deficit.

It’s not a fantasy. It was done twice. It was done in 1934 and it was done again in 1953 by the Eisenhower administration. It could be done again. It doesn’t require legislation.

Is the government working on this gold trick I just described? I don’t know.

But it’s suspicious that Treasury Secretary Mnuchin recently went to inspect the Fort Knox gold. He was only the third Treasury secretary in history to visit Fort Knox, and the first since 1948. The visit was highly, highly unusual.

I’ll be keeping an eye on this space, but the real message is that the solutions to current debt levels are inflationary.

They involve a dollar reset, or a dollar reboot. That means revaluing the dollar either through a higher gold price or marking the gold to market and giving the government money.

There’s a lot of moving parts here, but they all point in one direction, which is higher inflation. It’s the only way to keep America from going broke. Unfortunately, it will also make your money worth less.