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Friday, February 8, 2013

The Department of Homeland Security is set to purchase a further 21.6 million rounds of ammunition to add to the 1.6 billion bullets it has already obtained

The Department of Homeland Security is set to purchase a further 21.6 million rounds of ammunition to add to the 1.6 billion bullets it has already obtained over the course of the last 10 months alone, figures which have stoked concerns that the federal agency is preparing for civil unrest.

A solicitation posted yesterday on the Fed Bid website details how the bullets are required for the DHS Federal Law Enforcement Training Center in Artesia, New Mexico.

The solicitation asks for 10 million pistol cartridge .40 caliber 165 Grain, jacketed Hollow point bullets (100 quantities of 100,000 rounds) and 10 million 9mm 115 grain jacketed hollow point bullets (100 quantities of 100,000 rounds).

The document also lists a requirement for 1.6 million pistol cartridge 9mm ball bullets (40 quantities of 40,000 rounds).

An approximation of how many rounds of ammunition the DHS has now secured over the last 10 months stands at around 1.625 billion. In March 2012, ATK announced that they had agreed to provide the DHS with a maximum of 450 million bullets over four years, a story that prompted questions about why the feds were buying ammunition in such large quantities. In September last year, the federal agency purchased a further 200 million bullets.

To put that in perspective, during the height of active battle operations in Iraq, US soldiers used 5.5 million rounds of ammunition a month. Extrapolating the figures, the DHS has purchased enough bullets over the last 10 months to wage a full scale war for almost 30 years.

Such massive quantities of ammo purchases have stoked fears that the agency is preparing for some kind of domestic unrest. In 2011, Department of Homeland Security chief Janet Napolitano directed Immigration and Customs Enforcement to prepare for a mass influx of immigrants into the United States, calling for the plan to deal with the “shelter” and “processing” of large numbers of people.

The federal agency’s primary concern is now centered around thwarting “homegrown terrorism,” but information produced and used by the DHS to train its personnel routinely equates conservative political ideology with domestic extremism.

A study funded by the Department of Homeland Security that was leaked last year characterizes Americans who are “suspicious of centralized federal authority,” and “reverent of individual liberty” as “extreme right-wing” terrorists.

In August 2012, the DHS censored information relating to the amount of bullets purchased by the federal agency on behalf of Immigration & Customs Enforcement, citing an “unusual and compelling urgency” to acquire the bullets, noting that there is a shortage of bullets which is threatening a situation that could cause “substantial safety issues for the government” should law enforcement officials not be adequately armed.

As we highlighted last month, the DHS’ previous ammunition solicitation was awarded to Evian Group, an organization that was formed just five days before the announcement of the solicitation and appeared to be little more than a front organization since it didn’t have a genuine physical address, a website, or even a phone number.

While Americans are being browbeaten with rhetoric about the necessity to give up semi-automatic firearms in the name of preventing school shootings, the federal government is arming itself to the teeth with both ammunition and guns. Last September, the DHS purchased no less than 7,000 fully automatic assault rifles, labeling them “Personal Defense Weapons.”


Assassin in Chief?

Exercising a power that no prior president ever thought he possessed -- a power that no prior president is known to have exercised -- President Obama admitted that he ordered the execution of American citizens, not on a battlefield, based on his belief that they were involved in terrorist activities. It is known that at least three U.S. citizens, including a 16-year old boy, were killed on the president's order in drone strikes in Yemen in 2011.

As the worldwide drone program ramps up, there have been increasing calls for the president to reveal the basis for his claimed authority. Only a few weeks ago, U.S. District Court Judge Colleen McMahon denied both the ACLU's and New York Times' requests under the Freedom of Information Act to obtain any and all legal documents prepared in support of the president's claim of unilateral powers. While Judge McMahon was concerned that the documents "implicate serious issues about the limits on the power of the Executive Branch under the Constitution and laws of the United States, and about whether we are indeed a nation of laws not of men," she felt constrained by precedent to withhold them. Now, a bipartisan group of 11 senators has written a letter to president Obama asking for "any and all legal opinions" that describe the basis for his claimed authority to "deliberately kill American citizens."

However, not until the Senate began gathering information for hearings on John Brennan's confirmation as CIA director, to begin February 7, has public attention finally been focused on this remarkable presidential usurpation of power.

On the night of February 4, the walls of secrecy were breached when NBC News released a leaked U.S. Justice Department White Paper entitled "Lawfulness of a Lethal Operation Directed Against a U.S. Citizen Who is a Senior Operational Leader of Al-Qa'ida or An Associated Force." Now we can see why the Department of Justice has been so reluctant to share the basis for its legal analysis. It is deeply flawed -- based on a perverse view of the Fifth Amendment Due Process Clause. Additionally, the white paper completely ignores the procedural protections expressly provided in the Constitution's Third Article -- those specifically designed to prohibit the president from serving as prosecutor, judge, jury, and executioner.

The white paper does not seek to delimit the federal power to kill citizens, but simply sets out a category of "targeted killing" of American citizens off the battlefield on foreign soil which it deems to be clearly authorized. Moreover, this power is not vested exclusively in the president, or even the secretary of defense, or even officials within the Department of Defense -- rather, it can be relied on by other senior officials of unspecified rank elsewhere in government.

According to the white paper, there are only three requirements to order a killing. First, "an informed high-level official of the U.S. government has determined that the targeted individual poses an imminent threat of violent attack against the United States." Second, capture is "infeasible." And third, the " operation would be conducted in a manner consistent with the applicable law of war principles." Indeed, from the white paper, it is not clear why killings of U.S. citizens on American soil would be judged by a different standard.

Mimicking a judicial opinion, the White Paper employs pragmatic tests developed by the courts to supplant the plain meaning of the Fifth Amendment Due Process and Fourth Amendment Search and Seizure texts. Balancing away the constitutionally protected interests of the citizen in life, liberty, and property against the more important "'realities' of the conflict and the weight of the government's interest in protecting its citizens from an imminent attack," the Justice Department lawyers have produced a document worthy of the King Council's Court of Star Chamber -- concluding that the U.S. Constitution would not require the government to provide notice of charges, or a right to be heard, "before using lethal force" on a U.S. citizen suspected of terrorist activity against his country. How very convenient. The Obama administration lawyers appear to have forgotten that the Star Chamber was abolished by the English Parliament in 1641 in order to restore the rule of law adjudicated by an independent judiciary, terminating the rule of men administered by the king's courtiers.

Also, conspicuously missing from the Justice Department's constitutional analysis is any recognition that the Founders already balanced the life, liberty, and property interests of an American citizen suspected of "levying war against [the United States], or in adhering to their enemies, giving them aid and comfort," and provided them the specific procedural protections in Article III of the Constitution. When a U.S. citizen is suspected of treason, the constitutional remedy is not to invent new crimes subject to the summary execution at the pleasure of the president and his attorneys. In Federalist No. 43, James Madison proclaimed that the Treason Clause would protect citizens "from new-fangled and artificial treasons ... by inserting a constitutional definition of the crime, fixing the proof necessary for conviction of it[.]" To that end, the Constitution does not permit the Obama lawyers to invent an elastically defined offense of "an imminent threat of violent attack against the United States," in substitution for the constitutionally concrete definition of "levying war against [the United States], or in adhering to their enemies, giving them aid and comfort."

Moreover, Article III, Section 3 of the Constitution requires trial in "open court" -- not in some secret "war room" in an undisclosed location. That same section of Article III requires proof by "the testimony of two witnesses to the same overt act, or on confession" -- not by a unilateral "determin[ation] that the targeted individual poses an imminent threat of an attack against the United States." Finally, as is true of "all crimes," Article III, Section 2 requires "trial ... by jury" on a charge of treason, not trial by some unidentified "high-level official of the U.S. government[,]" no matter how well-"informed" he may be. In short, the Constitution provides that an American citizen must be tried and punished according to the judicial process provided for the crime of treason, not according to some newfangled and artificial executive "process" fashioned by nameless collection of lawyers.

These nameless lawyers have also ignored the Justice Department's own venerable precedents. The White Paper relies on the "laws of war" -- but laws of war do not control here. On August 21, 1798, U.S. Attorney General Charles Lee -- serving under President John Adams -- directed to the U.S. secretary of state an official opinion in which he determined that in the undeclared state of war between France and the United States, "France is our enemy; and to aid, assist, and abet that nation in her maritime warfare, will be treason in a citizen[, who] may be tried and punished according to our laws[, not like a French subject, who must be] treated according to the laws of war."

It is a measure of how far we have fallen as a nation -- not only that President Obama asserts and exercises such a terrible power, but that only 11 U.S. senators would be willing to affix their names to a letter to ask the Obama administration to provide its legal reasoning. If John Brennan is confirmed as CIA director, and the killings of U.S. citizens continue based on this whitewash of a white paper, then the U.S. Senate will have yielded up to the president without even a fight the power to kill citizens without judicial due process -- a power that has been unknown in the English-speaking world for at least 370 years.

Read more: http://www.americanthinker.com/2013/02/assassin_in_chief.html#ixzz2KJikgDDw

Is America The Next War Zone?

Iran releases images of drone production line

Iran has for the first time released images of the production line of an unmanned aerial vehicle (UAV) which is manufacturing copies of the US ScanEagle drone.

The domestically-manufactured drones have been put into service by the Iranian Armed Forces.

On December 17, 2012, Commander of the Islamic Revolution Guards Corps (IRGC) Navy Rear Admiral Ali Fadavi said Iran launched the production line of ScanEagle drones, adding the IRGC Naval and Aerospace Division has been employing the UAVs.

Fadavi announced on December 4 that a US ScanEagle drone had been captured by Iranian forces over the Persian Gulf upon the aircraft’s intrusion into the Iranian airspace.

Iran has already released footage of the captured drone, which has a 10ft (3m) wingspan and is a long-endurance aircraft built by Insitu, a subsidiary of Boeing.

Iranian experts have successfully decoded data extracted from the unmanned aircraft.

The US is using its fleet of drones in the Persian Gulf for spying operations.

The images were publicized after Iran released decoded video recordings obtained from a US RQ-170 Sentinel stealth drone downed and captured by the Islamic Republic in December 2011.

The recordings have been made by the drone’s underbelly camera, and include views from the area surrounding the Kandahar base, about 420 kilometers from Iran’s eastern borders in Afghanistan, as the drone is about to land.

The US RQ-170 Sentinel stealth aircraft was downed with minimal damage by the Iranian Army's electronic warfare unit on December 4, 2011, while flying over the Iranian city of Kashmar, some 140 miles (225 km) from the Afghan border.

Press TV

North Korea set for test launch of new mobile ICBM with upcoming nuclear test

U.S. intelligence agencies monitoring North Korea for signs of a third underground nuclear test recently reported that the isolated communist state appears set to conduct the first test launch of a new road-mobile ICBM built with Chinese technology.

U.S. officials with access to intelligence reports said the North Koreans are expected to test fire either a new KN-08 road-mobile ICBM—capable of reaching parts of the United States—or a new medium-range advanced missile called the Musudan, also built on hard-to-detect mobile launchers.

New intelligence on the KN-08, which was showcased for the first time last April during a North Korean military parade atop a Chinese-made mobile transporter-launcher, indicates the North Koreans are preparing to launch one or more of the missiles around the time they conduct a future nuclear test.

Six of the missiles were shown during the parade. The range of the missile is not known because it has not yet been flight-tested. However, intelligence agencies believe it can range Alaska and Hawaii and possibly the U.S. West Coast.

The missile test preparations coincide with new intelligence indicating the North Koreans could conduct a third underground nuclear test at a remote facility in the northern part of the country called Kilju. Earlier nuclear tests were conducted in 2006 and 2009.

“All the signs are there” for an impending nuclear test blast, said one intelligence official.

The next test may involve a new type of weapon core for the North Koreans: highly enriched uranium. Two earlier tests are believed to have used plutonium as the weapon’s fuel. It is also possible North Korea could conduct two tests, one based on enriched uranium and one fueled by plutonium, the official said.

A second official said the timing of dual nuclear and missile tests could come any time between now and Feb. 25 and likely will coincide with a political event on the Korean peninsula or in the United States.

According to the officials, recent intelligence reports revealed last month that North Korea had moved some KN-08 missiles around the country. The new ICBM has not yet been test launched and the actual missile has been kept under wraps.

Components of the missile system, however, have been tested.

A flight test by the KN-08 would be a sign the new missile is close to deployment and would represent a new level of threat to the United States, the officials said.

Bruce E. Bechtol, a specialist on North Korea and professor at Angelo State University, said a key to the next test will be whether high enriched uranium is used.

“If they test an HEU device, it means that they are very close to having a weapon that they can put on a missile, likely the Nodong,” Bechtol said. “We know this because they have the design for a 500 kilogram warhad (HEU) that can go on a missile which they received from the Pakistanis.”

On the KN-08, Bechtol said a test would be very significant. “It will drastically impact the warning time for U.S, and allied intelligence and make a preemptive strike much more of a difficult endeavor,” he said.

A Musudan test also would be the first official test of that mobile missile, he said.

Then-Defense Secretary Robert Gates said in a June 2011 speech that, as a result of the new missile development, “North Korea is in the process of becoming a direct threat to the United States.”

Following a speech to Georgetown University, outgoing Defense Secretary Leon Panetta warned on Wednesday about “the threat of missile proliferation, particularly in North Korea, and the threat that that represents to the security of that region.”

Officials said one likely date for the North Korean tests is Feb. 25, the day South Korea’s new President Park Geun-hye will be inaugurated.

Another possible date is near Feb. 12, when President Barack Obama is scheduled to give the State of the Union address before a joint session of Congress.

Another date that intelligence agencies believe is a target for North Korean nuclear and missile tests is Feb. 16, the birthday of the late North Korean leader Kim Jong-il, father of current leader Kim Jong-un.

Officials said the upcoming missile test could also include a test firing of the new Musudan intermediate-range mobile missile, which intelligence agencies believe is a variant of the KN-08.

According to a State Department cable from 2009, the Musudan is a road-mobile intermediate-range missile based on Soviet SS-N-6 submarine-launched ballistic missile technology. It has a range of up to 2,480 miles, distance enough to hit U.S. bases in Okinawa and Guam.

It is not known if North Korea has fashioned a nuclear warhead small enough to fit on its missiles.

However, North Korea was a recipient of the covert Pakistani nuclear supplier network headed by A.Q. Khan that supplied nuclear weapons secrets to Libya, Iran, and North Korea in the early 2000s.

Documents obtained by the United States in Libya after the Khan network was exposed in 2004 revealed that the network transferred Chinese-language documents that included designs for a small nuclear warhead that could be mounted on a missile.

Concerns about a new military provocation by North Korea were highlighted by the release of a propaganda video showing a simulated missile attack on the United States.

The video, accompanied by the song “We are the World,” shows simulated missile strikes on buildings in what appears to be New York City. It ends with the launch of North Korea’s Taepodong-2 launch in December that the Pentagon described as a long-range missile.

The Obama administration has sought China’s help in dissuading North Korea from conducting the missile and nuclear tests.

However, China has taken an ambiguous public posture toward North Korea, considered a close fraternal communist ally.

Chinese Foreign Ministry spokeswoman Hua Chunying was asked onMonday if China would discourage North Korea from carrying out a nuclear test.

“Properly dealing with the Korean Peninsula nuclear issue and safeguarding peace and stability of the peninsula and Northeast Asia serves the common interests and is also the shared responsibility of all relevant parties,” she said.

“China is committed to the realization of denuclearization as well as peace and stability on the peninsula,” Hua said. “This position is clear and consistent. We call on parties concerned to refrain from taking actions that may escalate the tension in the region, and hope more could be done to ease the tension so as to jointly safeguard peace and stability on the peninsula.”

The United Nations Security Council passed its latest resolution again condemning North Korea for a Dec. 12 test of a long-range missile on Jan. 22.

The resolution said the world body would take further “significant action” if additional tests were carried out.

North Korea’s National Defense Commission (NDC) issued a statement two days later denouncing the world body for the “illegal” resolution, and asserted the missile launch was a space launcher for a satellite.

The statement promised “all-out action” in response to the resolution.

The NDC statement concluded: “We do not hide that a variety of satellites and long-range rockets which will be launched by [North Korea] one after another and a nuclear test of higher level which will be carried out by it in the upcoming all-out action, a new phase of the anti-U.S. struggle that has lasted century after century, will target against the U.S., the sworn enemy of the Korean people.”

“Settling accounts with the U.S. needs to be done with force, not with words as it regards jungle law as the rule of its survival,” the statement said.
Washington Free Beacon

Fed Has Bought More U.S. Gov’t Debt This Year Than Treasury Has Issued

(CNSNews.com) - So far this calendar year, the Federal Reserve has bought up more U.S. government debt than the U.S. Treasury has issued.

On Dec. 31, the total debt of the U.S. government was $16.4327 trillion and then-Treasury Secretary Tim Geithner announced that the government had hit what was then the legal debt limit. Last week, however, Congress enacted a law to suspend the federal government debt limit until May 18, 2013, and allow the administration to resume increasing the debt.

By the close of business on Wednesday, Feb. 6, according to the U.S. Treasury, the total federal debt had climbed to $16.4799 trillion—an increase of $47.2 billon for the calendar year.

At the close of business on Jan. 2, the Federal Reserve had owned $1.661 trillion in U.S. Treasury securities. By the close of business on Feb. 6, it owned $1.7172 trillion—an increase of $51.1 billion for the calendar year.

Thus, the Federal Reserve’s purchases of U.S. government debt in this calendar year have exceeded the Treasury’s net debt issues by about $3.9 billion.

Also last week, the Federal Reserve announced that it “will continue purchasing additional … longer-term Treasury securities at a pace of $45 billion per month.”

If the Fed continues to purchase $45 billion in additional federal debt each month in 2013 it will buy up another $540 billion in federal debt this year alone.

The CBO currently estimates that the federal deficit for fiscal 2013 will be $845 billion. If the Fed were to buy debt at a pace of $540 billion a year, and the Treasury were to issue it at $845 billion per year, the Fed would be buying the equivalent of about 64 percent of all debt the government issued.

As recently as calendar year 2007, the total debt of the United States increased by only about $549 billion, or roughly equal to the amount of debt the Fed plans to buy this year.


Russia enters Japan's air space

TWO Russian fighters have violated Japanese air space, Tokyo's defence ministry says, prompting Japan to scramble its own warplanes in what is reported to be the first such incident in five years.

The planes were detected off the northern island of Hokkaido for just over a minute yesterday, shortly after Japan's new prime minister said he wanted to find a "mutually acceptable solution" to a decades-old territorial row between the two.

Japan's foreign ministry lodged a formal protest over what it said was an incursion by a pair of Russian Su-27 fighters. Four Japanese F-2 fighters were sent up to visually confirm the Russian planes, according to Kyodo news.

"Today, around 3pm (1700 AEDT), military fighters belonging to Russian Federation breached our nation's airspace above territorial waters off Hokkaido's Rishiri island," the foreign ministry said.

If confirmed, it would be the first breach of Japanese airspace by Russia since February 2008, according to Japanese media reports.

However, Moscow denied any incursion had taken place, in a statement by the spokesman for the military command's eastern district, Roman Martov, given to Russian news agencies.

"Flights by the air force of the Pacific Fleet take place regularly in this region, in strict adherence to the international rules, without violation of state borders," it said.

The alleged incident came hours after hawkish Japanese Prime Minister Shinzo Abe - who swept to power in December with pledges to get tough on diplomacy - offered apparently conciliatory comments toward Moscow over the Russian-administered Southern Kurils, known in Japan as the Northern Territories.

Mr Abe's tone was in marked contrast to his uncompromising stance on a dispute with Beijing over the sovereignty of a different set of disputed islands.

"There is no change in my resolve to do everything I can towards sealing a peace treaty with Russia after resolving the issue of the Northern Territories," Mr Abe said.

In December, Mr Abe and Russian President Vladimir Putin agreed to restart talks on signing a peace treaty formally ending the hostilities of World War II that has been stymied by the dispute.

"In the telephone talks, I told President Putin I would make efforts to find a mutually acceptable solution so as to ultimately solve the issue of the Northern Territories," Mr Abe told a government-backed rally of about 2000 former islanders and their descendants in Tokyo.

Soviet forces seized the isles, which stretch out into rich fishing waters off the northern coast of Hokkaido, in the dying days of WWII and drove out Japanese residents.

The Australian

Northeast snowstorm could be among the worst of all time

A crippling and potentially historic winter storm barreled toward the Northeast on Thursday, threatening tens of millions of people with 2 feet of snow. Boston canceled school and braced for one of its worst blizzards of all time.

Airlines encouraged fliers to change their plans and get out of the way. There were already delays of more than two hours at O’Hare International Airport in Chicago, where tangles can snarl air traffic across the country. More than 2500 flights had been cancelled by early Friday, according to flightstats.com.

“When this hits, it’s going to come down very hard,” said Tom Niziol, a meteorologist for The Weather Channel. “This is something we haven’t seen in a while, particularly in New England.”The culprits were a so-called clipper system moving through the Upper Midwest and a low-pressure system headed for the waters off New England. When they converge, probably late Friday, they are expected to sock the region with its heaviest snow in at least two years, and perhaps much longer.

The National Weather Service put the New York City area and Long Island under a blizzard warning and said those areas could get more than a foot of snow. Earlier in the day, the weather service warned that travel in Massachusetts, Connecticut and Rhode Island could become nearly impossible.

Full coverage from The Weather Channel

Forecasts called for as much as 9 inches of snow across central Michigan, a foot and a half in the Hudson Valley region of New York, and 2 feet or more across coastal New England. Possible hurricane-force winds off Massachusetts and Rhode Island also made flooding a threat.

In Boston, the storm had the potential to take out century-old records. The city’s biggest snowstorms since 1892 were a 27.5-inch blast in February 2003 and a 27.1-inch dumping exactly 35 years ago, in 1978. Mayor Thomas Menino closed city schools for Friday and pleaded for common sense.

Light to moderate snow is expected to spread through the Great Lakes on Thursday and could reach as far east as parts of New England and New York City by Thursday night, according to forecasters for The Weather Channel.“Stay off the streets of our city,” he said. “Basically, stay home.”

Snow should begin Friday in Boston and Hartford, Conn., and grow heavy at times during the day in New York, New England and parts of Pennsylvania, the forecasters said.

The most intense part of the storm was expected to hit Friday night and Saturday, with as much as 3 inches of snow falling per hour in coastal New England, including Boston, Hartford and Portland, Maine.

By Saturday evening, snow should taper off in Boston and the storm is forecast to pull off the coast of Maine by Sunday morning, The Weather Channel said.


Lessons From The 1930s Currency Wars

With Abe picking his new dovish playmate, and Draghi doing his best to jawbone the EUR down without actually saying anything, it is becoming very clear that no matter what level of bullshit histrionics is used by the politicians and bankers in public, the currency wars have begun to gather pace. Japan's more open aggressive policy intervention is the game-changer (and increasingly fascinating how they will talk around it at the upcoming G-20), as if a weaker JPY is an important pillar of the strategy to make this export-oriented economy more competitive again, it brings into the picture something that was missing from earlier interactions among central banks of the advanced economies –competitive depreciationThe last time the world saw a fully fledged currency war was in the early 1930s. Morgan Stanley's Joachim Fels looks at what it was like and what lessons can be drawn for the sequence of events - there are definite winners and losers and a clear first-mover advantage.

Via Morgan Stanley, Back to the 1930s? What Would a Currency War Look Like?
What did the currency war of the 1930s look like?
The backdrop for the currency war of the 1930s was the Gold Standard and the Great Depression (many economists blame the former for the latter). By fixing the value of the currency to the price of gold, the Gold Standard prevented a country from printing too much money. If it did, people would simply exchange it for gold (or for other currencies pegged to gold). Yet, this rigid ‘rule’ also denied policy-makers any flexibility to deal with shocks to their economies. This was the reason why the UK abandoned this regime, setting off a volatile chain of events:
  • On September 19, 1931, sterling was taken off the Gold Standard. It was devalued against gold and hence against the ‘gold bloc’ currencies (currencies that remained pegged to gold). The run-up to this event and its fallout was felt throughout the world.
  • Prior to the devaluation, in June and July 1931, one prominent bank in both Austria and Germany failed, which led to capital controls being imposed in both places. Capital controls protected these economies in the near term, but exacerbated fears about the future of sterling and the Gold Standard itself.
  • Following the devaluation of sterling, Norway and Sweden went off the Gold Standard on September 29. A day later, Denmark followed.
  • The US economies, like other countries of the gold bloc, lost competitiveness and exports turned down. Eventually, in January 1934, the US Congress passed the ‘Gold Reserve Act’ to nationalize gold held by banks and monetized it by giving banks gold certificates that they could use as reserves at the Fed. More importantly, it also forced a devaluation of the US dollar against gold.
  • Like the US economy, the remaining gold bloc countries (France, Germany and some smaller economies) also suffered a loss of competitiveness and poor export and industrial production growth. By 1936, they gave up and abandoned the Gold Standard as well.
What lessons can we draw from the events of the 1930s?
 We draw three pertinent lessons from that episode:
Lesson 1: As in every crisis, events were and will always be highly non-linear, with domestic conditions the most likely cause: It was painfully high unemployment that was the main driver of the devaluation of sterling.2 Although unemployment had been painfully high for a while, it was only a few months prior to the devaluation that market fear really ratcheted up.

Lesson 2: Markets punish policy uncertainty: Needless to say, there were dramatic movements in the exchange rate of the countries that devalued. However, with the devaluation out of the way, market and economic pressure as well as policy uncertainty shifted to the ‘gold bloc’ economies. For investors, it became a matter of when, rather than whether, the gold bloc economies would be forced to respond.

Lesson 3: Early movers benefited at the expense of the gold bloc, a ‘beggar-thy-neighbor’ outcome: From an economic standpoint, the sharp improvement in competitiveness of the early movers stood them in good stead against the gold bloc economies who stuck to the regime. Exhibit 1 shows that the UK and the Scandinavian economies saw a significant improvement in industrial production by 1935, whereas the ‘gold bloc’ economies (France and Germany – even though the latter employed capital controls) suffered. By the time the gold bloc economies capitulated, they had lost significant ground on this front to the early movers.

Could it happen again? Like any historical precedent, there are differences and similarities that must be accounted for.
What’s different this time? Unlike the Gold Standard era, most major currencies are now part of a flexible exchange rate regime, which should make such large currency moves less likely. Further, extreme tail risks that might well have precipitated such dramatic policy responses only a few years ago have also receded.
What’s similar? Domestic origins and ‘beggar-thy-neighbor’ effects: Even though policy-makers battled using exchange rates, the events of the 1930s had their origins in domestic issues. As mentioned above, it was painfully high unemployment in England that led sterling off the Gold Standard. The competitive devaluations that followed were also reactions by policy-makers to protect their domestic economies.
Similarly, it is the domestic agenda that could drive competitive depreciation today. In this vein, the desire of Japan’s policy-makers to revive investment in their export-oriented economy likely means that the yen will likely play an important role. However, since global demand is likely to remain sluggish, a revival of Japan’s export sector on the back of yen weakness is likely to eat into the market share of other exporters – something that could well invite measures to curb significant weakening of the yen. These negative spillovers are identical in nature to the ‘beggar-thy-neighbour’ policies of the 1930s.
If it did happen, what could an improbable but not implausible sequence of events look like?
In what follows, we create a plausible sequence using events that have both a reasonable probability of occurring and are already on investors’ radar screens:
  • The starting point: Japan’s policy-makers initially follow a concerted plan of reflating the Japanese economy, with a weak yen as an important pillar of strengthening the export sector.
  • Further easing from the major central banks... The ECB and/or the Fed ease further due to a deterioration in financial conditions. In the case of the euro area, euro strength or an idiosyncratic increase in risks might be responsible for a tightening in financial conditions. In the US, the obvious candidate is the risk surrounding the fiscal cliff and the debt ceiling confronting the US Congress.
  • ...and/or capital controls from EM economies: Uncomfortable with the combination of further capital inflows and yen weakness, some AXJ and LatAm economies impose capital controls.
  • Japanese policy-makers react to yen strength: In order to ensure export competitiveness, Japanese policy-makers take further measures to weaken the yen.
There isn’t much in the ‘timeline’ above that is news, yet the combination serves well to illustrate how a currency war could plausibly play out.
Where are we now?
The key variable in the sequence of events above is the reaction of Japan’s policy-makers. If a weaker yen is indeed an integral part of their plans and if they have a strong intent to make sure it remains so, the risk of a currency war is higher now than it has been in the past. Investors have moved beyond questioning whether EM economies will have a response and are now wondering at what point such a response is likely. At the same time, near-term risks in the US and euro area economies remain in play, as does the prospect of prolonged or even enhanced monetary stimulus.
In the EM world, Japan’s export competitors in AXJ could respond with some combination of verbal intervention, FX intervention, capital controls and, with a much lower likelihood, policy rate cuts. In the particularly interesting cases of Korea and Taiwan, our economist Sharon Lam believes that verbal intervention (already under way to some extent), intervention in the foreign exchange markets and capital controls represent the most likely policy reactions. Rate cuts at a time when both economies are already expanding may serve to accelerate domestic growth and perversely cause even more capital inflows and currency appreciation rather than depreciation. For moderate moves in the yen’s value, the effects on China are likely to be limited since it does not compete head-to-head with Japan’s high-end electronics and car exports.However, in a currency war situation, the slow-moving USDCNY exchange rate may make restoring competitiveness tricky.
However, even as we discuss AXJ, let us not forget that other parts of the EM world are also concerned about currency appreciation. For all the talk about potential policy action in AXJ, we have already seen some of it come out of Latin America. In contrast to AXJ, Latin America is slowing, which puts rate cuts firmly on the agenda. Indeed, Colombia’s recent rate cut was likely influenced by the peso’s strength. Luis Arcentales, our Mexico economist, believes that concerns about the currency war have also probably been an influencing factor in Banxico’s u-turn towards a dovish stance from a hawkish one just a few weeks ago. In an innovative twist to the usual FX intervention, Peru has announced that it will buy back its international bonds and issue ones denominated in its domestic currency instead. Even Chile, one of the most advanced and stable EM economies, is discussing structural reforms to address the strength of its currency.
In summary, while a currency war is not our base case, the new-found commitment of Japan’s policy-makers does raise the risk of retaliatory action to keep the yen weak, and brings us a step closer to a currency war.The experience of the 1930s suggests to us that such large currency crises are likely triggered by domestic issues, and that they do create distinct winners and losers. EM policy-makers are already gearing up to make sure they remain on the winning side, but the balance of power for now rests with Japan.
Zero Hedge

The legalization of gay marriage in the UK and France reduces the possibility for them to adopt children from Russia

GOD bless Russia for protect those kids!!!!

The legalization of gay marriage in the UK and France reduces the possibility for British and French families to adopt children from Russia, Konstantin Dolgov, the commissioner for human rights, democracy and the rule of law of the Russian Foreign Ministry said Wednesday.

The diplomat wrote on his Twitter: "British and French parliaments have legalized gay marriage. This reduces the possibility for the citizens of those countries to adopt Russian children."

The parliaments of the two countries approved the bills to legalize same-sex marriage with an interval of less than a week. In France, hundreds of thousands of people took to the streets to protest against the law. However, the protests did not show any effect on the National Assembly.

In the UK, there were no mass protests against the legalization of same-sex marriage. In fact, the British Parliament has not made a revolution: in the United Kingdom, people do not treat such unions as something extraordinary. The Brits have nothing against the adoption of children by same-sex families.

Konstantin Dolgov's statement can hardly be called Moscow's official position. At least, for the time being, because the official is not alone in his judgments.

For example, Presidential Commissioner for Children's Rights Pavel Astakhov believes that the adoption of children by same-sex couples is out of the question.

"Russia's position is expressed in our basic laws, in the Constitution and in the Family Code. It is clearly stated there that, first of all, a marriage is a union between a man and a woman. Secondly, our children can be adopted by family couples only," he told the Russian Newspaper.

The Ombudsman also reminded that the UN Convention on the Rights of the Child does not say that adults have a right for a child. "It says that a child is eligible for a mother and a father, and there should not be anything else," says Pavel Astakhov.

In late January, the State Duma adopted the bill to ban the propaganda of homosexuality among minors. One shall assume that the debate around it is far from being over. As for the reaction of European countries and the U.S., it was predictably negative.

It is worthy of note that the issue of the total ban on the adoption of Russian children by foreigners has already been raised in Russia before. United Russia deputy Yevgeny Fyodorov was one of the initiators of adequate amendments to the Family Code. He explained the need for such a step by saying that "it was wrong to sell children and people in general."

"Because, unfortunately, during the 1990s, we entered into a series of agreements that do not allow Russia not to export its children, then we should minimize this process at least gradually. The first stage is a law related to the U.S.. The second stage is to leave only the countries, with which agreements have been concluded (France is among those - ed.). And the third stage is to terminate the agreements, when it can be legally possible. As a result of these actions, exports of children from the Russian Federation must be stopped completely," Yevgeny Fyodorov earlier told Pravda.Ru.

Other deputies at the Russian parliament, however, were skeptical about the idea of ​​the total ban of adoptions. Olga Batalina, first deputy chairman of the Duma Committee on Family, Women and Children, a member of United Russia, said that such a bill would have no prospects whatsoever.

According to her, "in the countries, where this process is conducted openly, in the interests of children, where children's safety is guaranteed, where officials are ready to work actively to create a comfortable environment for adopted children, and where they do not accept any acts of aggression against children, I believe international adoption can work there," she said.

It should be noted that European countries are very different from the U.S. at this point. To put it in a nutshell, in Europe, there are no records of violent acts committed against the children adopted from Russia.

However, Russian officials openly say that the legalization of same-sex marriage will become an additional obstacle for the adoption of children from Russia. For the time being, it goes about restrictions only, although one shall assume that if it comes to practical steps, the controversy will be highly severe.

Anton Kulikov


Ali Khamenei shuts door on direct nuclear talks with US

Iran’s supreme leader Ayatollah Ali Khamenei turned down the US offer of one-on-one talks on its nuclear program Thursday, Feb. 7, just 24 hours after US Defense Secretary Leon Panetta announced that due to budgetary constraints, the US could only keep one, not two, US aircraft carrier strike groups in the Persian Gulf, and had cancelled the departure of a second carrier, the USS Harry S. Truman.

The ayatollah in a speech posted on his web site accused the US of proposing talks while "pointing a gun at Iran.”

On Saturday, US Vice-President Joe Biden suggested direct talks – separate from the wider international discussions scheduled for Feb. 26 in Kazakhstan between the five permanent members of the UN Security Council plus Germany. No previous negotiations in this format over the years have ever produced a breakthrough.

Biden said Washington was prepared for direct talks with Iran "when the Iranian leadership, supreme leader, is serious". "That offer stands,” he said later, “but it must be real and tangible and there has to be an agenda that they are prepared to speak to. We are not just prepared to do it for the exercise," he said.

But the ayatollah said such negotiations "would solve nothing.” He added: "You are holding a gun against Iran saying you want to talk. The Iranian nation will not be frightened by threats."

Wednesday, the US widened sanctions on Iran for tightening the squeeze on Tehran's ability to spend oil cash.

The cancellation of the Harry Truman’s departure for the Gulf leaves a single US aircraft carrier in the vast naval region of the Persian Gulf, Mediterranean and southern part of the Indian Ocean bordering on Africa, DEBKAfile's military sources report, and no US fleet presence opposite Syria.

Khamenei’s rejection of Washington’s latest offer of direct talks followed the new US ban imposed Wednesday on the transfer of revenues from Iranian oil exports to its coffers. The money will henceforth be available only for the purchase of goods in the countries of destination for Iranian oil.
Senior American officials said that this sanction would significantly restrict Iran's freedom to use its oil income at will.

Khamenei did not say so specifically, but his rejection of dialogue with Washington was undoubtedly influenced by President Barack Obama’s forthcoming visit to Israel. By the metaphor of “holding a gun against Iran,” the Iranian leader was not just reacting to the new sanctions; he was also hitting back at the White House announcement’s stress that the president’s talks with Prime Minister Binyamin Netanyahu would focus on Iran and Syria - asDEBKAfile reported Wednesday.
The expectation is that Obama and Netanyahu will confer on the military option both governments have reserved for dealing with Iran’s nuclear program.

Khamenei's rejection of face-to-face talks does not cancel the international negotiations scheduled to take place in Kazakhstan. It does, however, render them more pointless than ever.