Quote of the Day: Is War What Makes a President 'Great'?

“War is seen as a great challenge,” Bueno de Mesquita reflects, “so people don’t really question how we got into it unless it fails. All people like winning. Winning is a good thing. Therefore presidents who defeated the ‘evil enemy’—always demonized—are seen as heroic, and so are known as great presidents. That a president avoided getting into a big war is quickly forgotten.” 

This is from Ms. Eileen Reynolds from the article, Is War What Makes a President 'Great'? Published by the New York University September 23, 2016

From the behavioral perspective, such would be called as the survivorship bias.

Infographics: The Middle East Arms Race

One of the reason for today's massive use of inflationism by governments have been to finance the war economy.

Yet when governments massively expand on their military capabilities, there have always been the itch to use it. In other words, the greater the direction of resources spent by the state for military capability buildup, the greater the risk of war or at least increased military 'violence' (either internal-domestic or external).

Of course, ongoing wars spur entities involved to acquire manpower and armaments to support their activities. This means that at the end day, war is fundamentally economics more than it is about politics

The Visual Capitalist has an interesting infographics on the militarization of the Middle East.

The global arms trade is huge.

While it’s hard to pin down an exact value of arms transfers, the Stockholm International Peace Research Institute estimates that the number was at least $76 billion in 2013, with the caveat that it is likely higher.

The volume of transfers have been trending upwards now for roughly 15 years now.

Volume of Arms Transfers

World Arms Trade

Courtesy of: SIPRI

But where are these arms going?

The answer is that they are increasingly going to militarize the Middle East, which has increased imports of arms by 61% in 2011-2015, compared to the previous five year period.

The Syrian Civil War now entering its sixth year, and it’s clear that conflict is stopping no time soon in the Middle East. As a result of this and the various proxy wars, complicated relationships, and a continuing threat from ISIS, neighboring countries in the region have loaded up on arms.

That’s why Saudi Arabia, Qatar, and the UAE have increased imports of arms by 275%, 279%, and 35% respectively compared to the 2006-2010 time period. Saudi Arabia is now the second largest importer of arms in the world.

Rounding out the Top 20 largest arms importers are other countries in the general region, such as the UAE, Turkey, Pakistan, Algeria, Egypt, India, and Iraq:

Largest arms importers

Courtesy of: SIPRI

How are these arms flowing to these countries?

Here’s a diagram showing the top three suppliers to each of the biggest arm importers:

Arms Flow Chart

Original graphics by: MEE and AFP

When the global recession hits, it will be interesting to see if these governments will use their accumulated arms to escalate geopolitical conflict.

Graphics: 67 Countries which the US Government is Obliged to go to War for

The policeman of the world has defense treaties with 67 countries, which means US government is obliged to go to war to defend them during conflicts.

Writes the Mental Floss (hat tip Lew Rockwell )

The United States has entered a lot of treaties over the years, especially after the complicated network put in place after World War II. The Myth of Entangling Alliances by Michael Beckley sought to figure out a hard number for just how many countries the United States has agreed to defend in war. Thanks to NATO, ANZUS, OAS, and bilateral agreements, the U.S. has promised 67 countries protection. Here's a look at the list included in Beckley's paper:

Some insights from the above. First, there is a big probability for the US to be drawn into (needless) wars. Second, the US government military have been spread too thin. Third, this represents great business for the military industrial complex. Fourth, this also represents expanded US political influence on nations with which the US has defense treaties. Fifth, expanded political influence also translates to monetary and economic influence (US dollar standard)

Geopolitical Risk Theater Links: Russia joins Arms Race?, ISIS gets Modern Weaponry, A Russia-US arms deal? and more…

1 Russia joins Space arms race? Object 2014-28E – Space junk or Russian satellite killer? Financial Times November 7, 2014

For the past few weeks, amateur astronomers and satellite-trackers in Russia and the west have followed the unusual manoeuvres of Object 2014-28E, watching it guide itself towards other Russian space objects. The pattern appeared to culminate last weekend in a rendezvous with the remains of the rocket stage that launched it.

The object had originally been classed as space debris, propelled into orbit as part of a Russian rocket launch in May to add three Rodnik communications satellites to an existing military constellation. The US military is now tracking it under the Norad designation 39765.

Its purpose is unknown, and could be civilian: a project to hoover up space junk, for example. Or a vehicle to repair or refuel existing satellites. But interest has been piqued because Russia did not declare its launch – and by the object’s peculiar, and very active, precision movements across the skies.

2 Cold war rhetoric deepens: Merkel of Germany Issues Rebuke to Russia, Setting Caution Aside New York Times November 17, 2014

Tit-for-tat expulsions of diplomats. Russian naval ships showing up as world leaders meet in Australia. Chancellor Ang ela Merkel of Germany telling Russia sternly to play by 21st-century rules — and President Vladimir V. Putin practically spitting fury over Western reaction to his annexation of Crimea.

As relations between Russia and the West increasingly resemble the bygone days of the Cold War, Ms. Merkel abandoned her traditionally cautious tone on Monday, castigating Russia for its actions in Ukraine, for intimidating sovereign states in Eastern Europe and for threatening to spread conflict more broadly across Europe.

3 Mounting risk of a nuclear standoff? The nuclear gun is back on the table Financial Times November 17, 2014

FT’s Gideon Rachman expresses his concerns: (bold mine)

Thirty years on and the nuclear peace is still holding. But I am becoming a little less secure in my belief that nukes will never be used.

There are three reasons for my anxiety. First, the spread of nuclear weapons to unstable countries such as Pakistan and North Korea. Second, the growing body of evidence about how close the world has come, at various times, to nuclear conflict. My third reason for worry is more immediate: a significant increase in threatening nuclear talk from Russia…

Mr Putin seems to adhere to what Richard Nixon called the “madman theory” of leadership. The former US president explained: “If the adversary feels that you are unpredictable, even rash, he will be deterred from pressing you too far. The odds that he will fold increase greatly.” President Putin may be right in calculating that, by putting the nuclear gun on the table, he can always out-madman Barack Obama, the coolly rational US president.

Nonetheless, even assuming that the Russian nuclear talk is a bluff, it is still dangerous – since to make the bluff intimidating, the Russians have to raise tensions and take risks. Last week, General Philip Breedlove, commander of Nato forces in Europe, said that Russia had “moved forces that are capable of being nuclear” into Crimea. As fighting in Ukraine continues, the danger of Russia and Nato misreading each other’s intentions increases.

I see the danger of brinkmanship geopolitics from one of an accident or a mis-encounter from the current provocative stunts by both parties. From here, one thing may lead to another.

4 Russia in Isolation? : Russia, Turkey Inch Toward Improved Relations usnews.com November 17, 2014

5 Emerging Markets flex their military muscles?: India-China military exercise begins in Pune Indian Express.com November 18, 2014

6 Selective perception? Shock over ISIS beheadings but silence over Saudi Arabia beheadings, Janine di Giovanni says oil prevents criticism CBA.ca November 12, 2014

7 Pawns get hurt while leaders bask in vanity: Paralyzed Iraq War Veteran Tomas Young Has Died – Here’s His Final Letter to George W. Bush and Dick Cheney LibertyBlitzkreig.com November 12, 2014

Tomas Young: 

The Iraq War is the largest strategic blunder in U.S. history. It obliterated the balance of power in the Middle East. It installed a corrupt and brutal pro-Iranian government in Baghdad, one cemented in power through the use of torture, death squads and terror. And it has left Iran as the dominant force in the region. On every level—moral, strategic, military and economic—Iraq was a failure. And it was you, Mr. Bush and Mr. Cheney, who started this war. It is you who should pay the consequences.

8 The European participants of ISIS; Briton and Frenchman Tentatively Identified in Islamic State Execution Video New York Times November 17, 2014

9 Using threats to get a better deal in the coming US-Iran nuclear negotiations? : Cleric: Iran Will Use ‘Suicide Operations to Send its Message to the World’ Freebeacon November 17, 2014

10 ISIS gains more sophisticated weaponry for every advance: As ISIS Continues To Gain Ground, Here's What The Militants Have In Their Arsenal Business Insider November 17, 2014

11 A Russia-US nuclear deal? Really? How about all the posturing from both sides? Theatrics for negotiation leverage?: U.S.-Russia Nuclear Cooperation Drawing to a Close Freebeacon November 17, 2014

China to US: America is a disgusting thief spying over his neighbor’s fence, The Role of Inflationism

A recent dangerous aerial close encounter between a US government Navy P-8 surveillance craft and a Chinese Chinese interceptor at the Hainan Islands has prompted two countries to hurl accusations at each other. 

Sovereign Man’s Simon Black gives the Chinese interpretation of the event (bold original):

As for the rest of the article– I present it below with only one comment– it should be obvious to anyone paying attention that the US is no longer the world’s dominant superpower. It’s certainly obvious to the Chinese.

——–

Stop thief: China rejects the U.S. government calling our aircraft “dangerously close”
 

(Source: Sina News, http://mil.news.sina.com.cn/2014-08-23/1620797098.html)

Sure enough, it is the American government who stamps its foot first after a similar event.

First the famous anti-China military scholar Bill Gertz played his “danger close” speech for the Washington Free Beacon.

And then the Pentagon also followed and said that it was a “dangerous intercept”. The White House called it “deeply worrying provocation”.

Adm. John Kirby, the Defense Department spokesman, said Washington protested to the Chinese military through diplomatic channels, and called the maneuvers “unsafe and unprofessional.”

Deputy National Security Adviser Ben Rhodes said it was “obviously a deeply concerning provocation and we have communicated directly to the Chinese government our objection to this type of action.”

Such remarks are laughable. As we all know, the United States is the world’s largest hegemonic force and biggest rogue country.

Their various reconnaissance aircraft have been wandering around foreign airspace for decades and watching the military secrets of other countries like a disgusting thief spying over his neighbor’s fence.

However, when the neighbor comes back with a big stick, the thief will turn tail and run away, blaming the neighbor.

When you show people weakness, they will bully you. When you show people strength, they will respect you.

We [the newspaper] believe the Chinese Air Force and Naval aviation should maintain a high level of vigilence and morale in southeast coastal region to prevent the further US action.

Mr. Black concludes (bold original)…

 America has lost face and does not want to show the world they are sick. They have been lording over other countries for so long, and they will never let it go after they eat this loss.

The US government has sent a second carrier into the area. So more signs of escalations or potential risks of war.

It is interesting to see that of heightened geopolitical pressures amidst soaring stock markets in the backdrop of the massive central bank interventions.

As I previously wrote all these brinkmanship politics have been intertwined with monetary policies, the ramifications of which are vented into the political spectrum

Today’s interventionism has become more pronounced through central bank inflationism. And war financing has intrinsically been tied with inflationism…

War has always been used as opportunities to exploit society through financial repression)8 and suppress internal political opposition in order to advance the interests of the ruling political class whose interest are interlinked with the politically favored banking class, the welfare and the warfare class.

Political insider and analyst Dr. Pippa Malmgrem has an insightful discussion  on how inflationism by both the FED and the Chinese government has been driving a chasm in between them (source international-economy.com)

Here are some slices: (bold mine)

There will be more such problems given that China’s shadow banking system seems to have grown by the size of the entire U.S. financial system in last year alone. In the main, the fast-growing, highly leveraged financial system has been used to fund more and more building and infrastructure projects with dubious cash flow-generating ability. With all this bad news, and given China’s inability to provide sufficient food, energy, or raw materials at tolerable prices to its public, it starts to become apparent to Chinese leaders that there is a need to shift blame abroad and do whatever is necessary to protect the national interest. As Oscar Wilde said, “It is not whether you win or lose but how you place the blame.” It is worth dissecting the ways in which blame is being allocated today in China. The United States is a prime target. It is perceived to have “caused” the crisis through mismanagement of not only its own economy, but the world economy. Now it is said that the United States threatens the world by attempting to foment and export inflation…

From a Chinese point of view, it is argued that America always defaults on its debts through inflation. That’s how America paid for the American Revolution, the Civil War, and the war in Vietnam, when the currencies of each era—the consols, the continentals and greenbacks—became devalued or worthless. And, some Chinese are quick to note, such inflation is not a victimless crime…

For China, and many other emerging market governments, a default by the United States and other industrialized economies is not just an economic event. It is a national security issue. The problem is not simply that these investors are going to be paid back in pieces of paper hat are losing value… 

Inflation is occurring. It is just occurring in the weakest, poorest part of a highly integrated world economy: the emerging markets. As the Chinese saying goes, “Wars are fought with silver bullets.” The opening salvo in this new war has been fired, in their view, by the export of inflation from the United States and other industrialized economies to emerging markets. So access to food and energy at the right price has now become a national security requirement. It is not only about averting an Arab Spring..

It is all too human, and especially easy for politicians, to look for ways to divert attention from domestic pressures to externally imposed disruptions, especially when the cauldron of domestic pressure is intensifying. After all, the more China bails out domestic institutions and stimulates the domestic economy, the more they risk stoking the very inflation that would further foment social protest. China has a finer line to tread than many other places. Too much inflation and too little growth can also inflame the public. The Fed’s view, in theory, is right. China and many other emerging markets should just let their currencies appreciate to offset any inflationary impulses. But the political reality is that you cannot expect policymakers to hit the public when they are already down 

Dr Malmgren’s conclusion…

To the emerging markets, it is deeply ironic that the U.S. authorities expect China to raise interest rates and to revalue when U.S. officials deny U.S. monetary policy has any spillover effects, especially when many emerging markets experienced historic capital outflows and devaluations once U.S. monetary policy began to reverse. Similarly, the Chinese cannot be blamed for being suspicious that the United States and the West might be choosing inflation as a means of defaulting on debt, especially given that U.S. policymakers seem committed to avoiding any risk of deflation—which implies taking all the risk with inflation. And they wonder, what if the inflation rate the industrialized world needs to resolve its debt kills or severely damages emerging markets along the way? China cannot be blamed for fearing the normal consequences of inflation: higher prices. Nor can they be blamed for being paranoid. By one measure, China is being defaulted upon, encircled, and threatened on multiple levels. One cannot really be surprised that China may respond to their rising duress using whatever means necessary.

Ernest Hemingway was right when he wrote, The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists. And this applies to both the US government and the Chinese government.

 

Ron Paul: What Have We Accomplished in Iraq?

Ron Paul on the US Government’s favorite battleground: (from Ron Paul Institute) [bold mine]

We have been at war with Iraq for 24 years, starting with Operations Desert Shield and Storm in 1990. Shortly after Iraq’s invasion of Kuwait that year, the propaganda machine began agitating for a US attack on Iraq. We all remember the appearance before Congress of a young Kuwaiti woman claiming that the Iraqis were ripping Kuwaiti babies from incubators. The woman turned out to be the daughter of the Kuwaiti ambassador to the US and the story was false, but it was enough to turn US opposition in favor of an attack.

This month, yet another US president – the fifth in a row – began bombing Iraq. He is also placing in US troops on the ground despite promising not to do so.

The second Iraq war in 2003 cost the US some two trillion dollars. According to estimates, more than one million deaths have occurred as a result of that war. Millions of tons of US bombs have fallen in Iraq almost steadily since 1991.

What have we accomplished? Where are we now, 24 years later? We are back where we started, at war in Iraq!

The US overthrew Saddam Hussein in the second Iraq war and put into place a puppet, Nouri al-Maliki. But after eight years, last week the US engineered a coup against Maliki to put in place yet another puppet. The US accused Maliki of misrule and divisiveness, but what really irritated the US government was his 2011 refusal to grant immunity to the thousands of US troops that Obama wanted to keep in the country.

Early this year, a radical Islamist group, ISIS, began taking over territory in Iraq, starting with Fallujah. The organization had been operating in Syria, strengthened by US support for the overthrow of the Syrian government. ISIS obtained a broad array of sophisticated US weapons in Syria, very often capturing them from other US-approved opposition groups. Some claim that lax screening criteria allowed some ISIS fighters to even participate in secret CIA training camps in Jordan and Turkey.

This month, ISIS became the target of a new US bombing campaign in Iraq. The pretext for the latest US attack was the plight of a religious minority in the Kurdish region currently under ISIS attack. The US government and media warned that up to 100,000 from this group, including some 40,000 stranded on a mountain, could be slaughtered if the US did not intervene at once. Americans unfortunately once again fell for this propaganda and US bombs began to fall. Last week, however, it was determined that only about 2,000 were on the mountain and many of them had been living there for years! They didn’t want to be rescued!

This is not to say that the plight of many of these people is not tragic, but why is it that the US government did not say a word when three out of four Christians were forced out of Iraq during the ten year US occupation? Why has the US said nothing about the Christians slaughtered by its allies in Syria? What about all the Palestinians killed in Gaza or the ethnic Russians killed in east Ukraine?

The humanitarian situation was cynically manipulated by the Obama administration --  and echoed by the US media -- to provide a reason for the president to attack Iraq again. This time it was about yet another regime change, breaking Kurdistan away from Iraq and protection of the rich oil reserves there, and acceptance of a new US military presence on the ground in the country.

President Obama has started another war in Iraq and Congress is completely silent. No declaration, no authorization, not even a debate. After 24 years we are back where we started. Isn’t it about time to re-think this failed interventionist policy? Isn’t it time to stop trusting the government and its war propaganda? Isn’t it time to leave Iraq alone?

The US government can’t seem to get enough of Iraq. (hat tip zero hedge)

This video may perhaps explain why. The video shows the US Centcom blowing up a US made Humvee held by the ISIS. 

The US government provide weapons then they blow them up. Who pays for this? Naturally the average Americans. Who benefits from this? The military industrial complex.

The late Major General Smedley Butler, USMC is right: War is a racket

US Finances Israel’s Gaza War via Foreign Aid

The Israel Central Bank estimates the cost of the Gaza War to the Israel at $1.4 billion

From Reuters: The month-long Gaza war cost Israel's economy some $1.44 billion (855.51 million British pound), its central bank governor Karnit Flug said on Thursday, citing interim assessments. "The assessment is that it can reach up to around 0.5 percent of GDP, which is up to 5 billion shekels," Flug told Israel's Channel Ten television.

The CCTV has higher projections. They see that the costs of the war to Israel’s economy will accrue to $3 billion.

For Gaza the assessed cost has been at $ 6 billion, according to Haaretz.com

 

I’ll apply Murphy’s law here where “anything you try to fix will take longer and cost you more than you thought.”

Why? Because of the political economic dimension behind the war.

Of course, wars haven’t just been about damage to property or cost of armaments, the most important costs are people’s lives.

Nonetheless for Israeli politicians “costs” will likely be a less important consideration, why?

Well, because the “costs” to Israel have been financed by the US government via foreign aid.

2015 Foreign Aid has been appraised at $ 3.1 billion, which seems higher than those "cost" assessments.

As the Vox.com reports: (bold mine)

Even Egypt and Pakistan are not, in the grand scheme of things, particularly poor countries. It's just that American foreign aid mostly isn't economic assistance to needy people or needy countries. If it were, India would get more aid than Israel and Haiti would get more aid than Egypt.

Instead, the bulk of the money is spent on buying American military equipment, serving as a kind of indirect subsidy to the military-industrial complex. That's part of how a country like Israel that isn't objectively hard-up for money winds up getting more assistance than anyone else. Israel does have a healthy appetite for advanced military hardware, and it's considered a geopolitically reliable nation that can be trusted with it. So American foreign policy is committed to helping Israel maintain a qualitative military advantage vis-à-vis other Middle Eastern countries. Meanwhile, part of the Carter-era Camp David Accords is a guarantee of a lot of money to the Egyptian military to keep it favorably disposed to a pro-American foreign policy and détente with Israel.

The incentive to go to war is there because of subsidies provided to the Israel government. Consequently, such subsidies enriches the highly influential US military industrial complex. Take away those phony "foreign aid" and the incentive to go to war will most likely diminish. Perhaps the warring parties will learn how to use the markets and trade in order to develop cooperation instead of destroying each other.

And you can also see, foreign aid "flows" reveal that the US hasn’t been helping the poor, but rather helping nations allied to their goals of promoting their role as de facto “global policeman” regardless of their economic conditions.

And it could even be interpreted that the Gaza war could signify a proxy-surrogate war by the US channeled through Israel.

War is indeed a racket

Read more about the modern roots of Israel-Arab conflict from the dean of the Austrian school of economics Murray N. Rothbard here

Breaking: US President Obama Authorizes Air Strikes in Iraq, Global Equity Markets Convulses

The US government (and vested interest groups) has been itching to get involved in wars. So the 2009 Nobel Prize for Peace awardee US President Barack Obama found justification to get into one, thereby authorizing airstrikes in Iraq.

From CNN:

U.S. President Barack Obama said Thursday that he's authorized "targeted airstrikes" in Iraq to protect American personnel and help Iraqi forces.

"We do whatever is necessary to protect our people," Obama said. "We support our allies when they're in danger."

A key concern for U.S. officials: American consular staff and military advisers working with the Iraqi military in Irbil, the largest city in Iraq's Kurdish region.

Obama said Thursday he'd directed the military to take targeted strikes against Islamist militants "should they move towards the city."

Rapid developments on the ground, where a humanitarian crisis is emerging with minority groups facing possible slaughter by Sunni Muslim extremists, have set the stage for an increasingly dire situation.

It’s not farfetched where ground forces will be next. Besides, after all these years money spent and lives lost, the US government can't seem to get enough of Iraq

Oh, don’t forget there is the Ukraine crisis in the pipeline. So far, the Ukraine crisis has been a ‘civil war’. But this localized war may mutate into an international war or even World War III very soon.

As I explained here War has almost always been associated with inflationism: 

War has always been used as opportunities to exploit society (through financial repression) and suppress internal political opposition in order to advance the interests of the ruling political class whose interest are interlinked with the politically favored banking class, the welfare and the warfare class.

American Novelist Ernest Hemmingway said it best: 

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.

Stocks have been taking a drubbing, as of this writing Japan’s Nikkei are off nearly 3%

Asian markets have been mostly bloodied (Bloomberg).

So as with US futures (CNN)

But for the bulls, such would represent a 'buying opportunity'. That's because for the "don't worry be happy" crowd, stocks are bound to go up forever....until it won't.

Showbiz Politics: The Myth of US-Philippine Defense Pact Promoting Regional Peace

As I said yesterday, showbiz has practically consumed most of social affairs in the Philippines.

More evidence of showbiz in the context of the bilateral military agreement between the heads of state of the US and the Philippines. 

From the Philippine Inquirer:

“The Philippines-U.S. Enhanced Defense Cooperation Agreement (EDCA) takes our security cooperation to a higher level of engagement, reaffirms our countries’ commitment to mutual defense and security, and promotes regional peace and stability,” Aquino said during their joint press conference.

Hours after the EDCA was signed, Aquino said the two countries’ defense alliance, even before the agreement, served as a “cornerstone of peace and stability in the Asia-Pacific region for more than 60 years.”

The populist model for attaining "peace and stability" can be summarized as: the “bullied” should get a “big backer” to ward off the “bully”.

This may work perhaps if the object of contention has been about the bullied. But what if it isn’t? What if the target has been instead the “backer”, where the “bullied’ is really just a pawn in their rivalry?

[As a side note, the reason why the "bully" behaves this way maybe due to the actions of the "backer" or the "rivalry". That's one aspect offered to us by US political insider K. Philippa Malmgren, who observed that "access to the shipping lanes in and out of China has become an increasingly high-priority issue. After all, that's how 90 percent of critical food and energy supplies arrive in China and also how most things leave China. Yet all China sees is the ever-increasing presence of the U.S. Navy encircling them and rendering sea access less certain. Let's not forget that 10 percent of the world's fish supply comes from "near seas". (bold mine)]

History shares us some lessons here

Philippine participation in World War II according to the Wikipedia.org (bold mine)

The Commonwealth of the Philippines was invaded by the Empire of Japan in December 1941 shortly after Japan's declaration of war upon the United States of America, which controlled the Philippines at the time and possessed important military bases there.

Let us put on the military tactician’s thinking hat on. Let’s say the opposite side has decided to go to war with the “backer”.  Which would the military planners of the aggressing nation attack first? Nations allied to the enemy with bases or without bases? Well, world War 2 has provided the answer; The Philippines was bombed a day after Pearl Harbor in December 8, 1941

I rightly predicted that the Philippine political trend has been headed towards this direction in early 2012. Sell nationalism to get popular approval to justify the defense agreement.  But then I wrote about the treaty, the recently concluded agreement is reportedly a “pact”—between the two executive offices—without congressional approval.

Yet despite the ”pact”, the peace and stability model—the “bullied” should get a “big backer” to ward off the “bully”—unfortunately seem to have fallen through.

From today’s headlines at the Inquirer. (bold mine)

Obama gave no categorical commitment whether the 62-year-old Mutual Defense Treaty (MDT) between the two countries—the backbone of the Enhanced Defense Cooperation Agreement (Edca) signed by Defense Secretary Voltaire Gazmin and US Ambassador Philip Goldberg—would apply in case the Philippines’ territorial dispute with China escalates into an armed confrontation.

Steering clear of the question, Obama instead pointed to Beijing’s “interest” in abiding by international law, saying “larger countries have a greater responsibility” to do so.

“Our goal is not to counter China; our goal is not to contain China,” he said in a joint press conference with President Aquino in Malacañang, reflecting a delicate balancing act throughout his weeklong trip that earlier took him to Japan, South Korea and Malaysia.

So the “pact” turns out to be a noncommittal military agreement which reveals of the extent of its lopsidedness in favor of the US. The US President Obama seem to have stiffed the Philippine administration and their mainstream supporters when he said that the US had no "specific position on the disputes between nations". Ouch. The Philippine government and the mainstream seem to have heavily been expecting a "big backer" role the US should have supposedly assumed.

Why the noncommittal stance? Most possibly because the US cannot commit to fight each, and engage in, every conflict of her allies. The US has already had her hands full in Afghanistan, Libya, Iraq, Mali, Somalia, Yemen and etc. The Washington Blog estimates 74 different wars which the US has been engaged in. Ukraine may now be in the pipeline. 

You see, to expect the US to make a full commitment and yet deliver her promises with overstretched resources and personnel…well, that’s entertainment! Aside from the dozens of wars, the US has hundreds of bases around the world (estimates vary: Ron Paul 900, Charlmes Johnson 737) if not more than a thousand (Aljazeera, Global Research). The US budget for military spending in 2014 has been estimated at US$ 630 billion

And the non-committal stance by the US essentially debunks the one of the many impossible things believed by domestic populist politics, particularly Nationalism (and Nationalism based spending) is BEYOND the scope of economics and economic reasoning.  The lesson here is Economics drives politics.

The US President may have also been aware that an explicit support could have raised the risks of moral hazard, where the Philippine goverment may become more adversarial in her relationship with China.

With the base pact, I expect that the political trend, as I wrote in 2012, will now revolve around...

In reality, military bases have mostly been used as a staging point for political interventions in local affairs and for justifying the maintenance and or growth of the defense budget for the US federal government.

Promoting regional peace? Hardly. Maybe more of amplifying risks of geopolitical instability. 

And this “pact” looks more like a validation of the 2 time war medal the late Major General Smedley Butler’s claim that “war is a racket”

Quote of the Day: War is a Racket

War is just a racket. A racket is best described, I believe, as something that is not what it seems to the majority of people. Only a small inside group knows what it is about. It is conducted for the benefit of the very few at the expense of the masses.

I believe in adequate defense at the coastline and nothing else. If a nation comes over here to fight, then we'll fight. The trouble with America is that when the dollar only earns 6 percent over here, then it gets restless and goes overseas to get 100 percent. Then the flag follows the dollar and the soldiers follow the flag.

I wouldn't go to war again as I have done to protect some lousy investment of the bankers. There are only two things we should fight for. One is the defense of our homes and the other is the Bill of Rights. War for any other reason is simply a racket.

There isn't a trick in the racketeering bag that the military gang is blind to. It has its "finger men" to point out enemies, its "muscle men" to destroy enemies, its "brain men" to plan war preparations, and a "Big Boss" Super-Nationalistic-Capitalism.

It may seem odd for me, a military man to adopt such a comparison. Truthfulness compels me to. I spent thirty- three years and four months in active military service as a member of this country's most agile military force, the Marine Corps. I served in all commissioned ranks from Second Lieutenant to Major-General. And during that period, I spent most of my time being a high class muscle- man for Big Business, for Wall Street and for the Bankers. In short, I was a racketeer, a gangster for capitalism.

I suspected I was just part of a racket at the time. Now I am sure of it. Like all the members of the military profession, I never had a thought of my own until I left the service. My mental faculties remained in suspended animation while I obeyed the orders of higher-ups. This is typical with everyone in the military service.

I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefits of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912 (where have I heard that name before?). I brought light to the Dominican Republic for American sugar interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested.

During those years, I had, as the boys in the back room would say, a swell racket. Looking back on it, I feel that I could have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.

(bold mine)

This excerpt is from a speech delivered in 1933, by two time medal of honor the late Major General Smedley Butler, USMC. (hat tip Marc Faber/Daily Reckoning). War is a racket has been transcribed by Mr. Butler into a book you can read it here. And you can see a video of his speech here.

Quote of the Day: War fever feeds on ignorance

Ignorance is a primary fuel of nationalism and aggression. Patriotism is the last refuge of scoundrel, as Dr . Johnson observed, and the first platform of fools.

Three professors from Princeton, Dartmouth and Harvard University just did a poll that found only 16% of Americans queried could find Ukraine on the world map. Actually, that’s better than I expected, given American’s notorious geographical illiteracy. Seeing Ukraine’s map on TV every night no doubt helped.

Worryingly, but hardly surprisingly, the poll also found that the further a poll respondent thought Ukraine was from its real location, the more likely he was to support US military intervention in Ukraine. Few Americans could find Iraq (Eye-raq to most), Afghanistan, or Iran (Eye-ran) on the map.

“Let’s get those dirty Commies,” goes the latest wave of war fever to sweep the US, “if we can only find them!” Some respondents put Ukraine in Australia, or South America…

War fever feeds on ignorance. If mobs in Paris had known in August, 1914, that they would die on the mud of Flanders few would have been so eager for war. All sides in World War One mistakenly believed in a short, sweet military victory. The great French voice against the folly of war, Jean Juares, was assassinated by nationalists.

“The proportion of collage grads who could correctly identify Ukraine (20%) is only slightly higher than the proportion of Americans who told Pew (the respected polling outfit) that President Obama was Muslim in August, 2010,” found the Ivy League professors.

About the same percentage of Americans believe that Elvis is still alive, or that an Islamic Caliphate will shortly rule America. Ever since the Bush administration, stupidity and ignorance have become fashionable.

This is from historian Eric Margolis—commenting on the controversial poll published at the Washington Post Blog, where the less Americans know about Ukraine’s location, the greater the desire to intervene—at the LewRockwell.com. 

I find the observation of the relationship between ignorance (which should not be limited to geography) and militancy highly relevant. And this applies everywhere, not just to American's perception to the Ukraine geopolitcal conundrum.

I’ve noticed that for the many who agitate and pine for war are mostly those with hardly any inkling of war’s horrors. Their conception of war seem to emanate from the movies or shows they’ve watched or from games that they have played—as third party or from the audience perspective.  They perhaps expect somebody to do the fighting for and in behalf of them, while like in sport games, they cheer from the sidelines. They hardly seem to grasp that in war, the lives of their treasured family, relatives, friends or their neighbors may be at stake while their homes devastated and ravaged. They also seem to see wars as cost—free (I mean economic aside from social costs).

And mostly the same group usually serve as unwitting instruments or mouthpieces of the major beneficiaries of war: the political class—who pitch the war fever amplified by media to gain popularity via the herding effect to justify the imposition of taxes, inflationism and economic repression in order to expand their control over society and their resources. Wars after all are not only about politics, but about business too.

So the other beneficiaries or the cohorts of the political class are the defense industry and their financiers aside from mainstream media.  And all it takes to push for war is to rile up on the emotions of the unthinking electorates. As a saying goes, if all you have is a (emotional) hammer, everything looks like a nail.

China Buys Record US Treasuries; Keeps Financing US military

The Chinese government and the private sector bought record amounts of US treasuries last October.

From the Wall Street Real Time Economic Blog

China scooped up more Treasury debt in October than any other foreign investor, a sign recent U.S. fiscal troubles haven’t tainted the Treasury bond market’s status as a global safe harbor.

China boosted its Treasury debt holdings by $10.7 billion in October to $1.3045 trillion, according to the latest monthly capital flows data released by the Treasury Department on Monday. Foreign investors overall added $24.4 billion in Treasury debt holdings in October. China primarily bought T-bills due in one year or less, known as T-bills with $8.4 billion added in October.

China’s overall holdings of Treasurys at the end of October marks the second highest level following a record high of $1.3149 trillion set in July 2011, according to Ian Lyngen, senior government bond strategist at CRT Capital Group LLC. China is the largest foreign owner of Treasury debt.

The Chinese accumulation of USTs has now reached $1.3045 trillion. 

The US government has earmarked $633 billion for her defense budget in 2014. This can be as interpreted as the Chinese government partially financing the US military.

Here is the 2012 global budget on military spending

US defense budget has been projected to keep rising.

Question is why does the Chinese government continue to finance America’s budget (or military spending) if both countries have been really at odds with each other?

Of course, the report is as of October, which is prior to the PBoC’s announcement last November that their accumulation of USTs may be put on hold.

Could the PBoC’s threat to decrease funding of the US debt be reason behind the recent political brinkmanship by the US on China’s declared Air Zone?

Chinese buying of USTs has also helped in keeping the bond vigilantes at bay last October. Yields of 10 year UST notes fell in October.

So the American government significantly depends on the foreign buying, particularly from China and Japan, to keep her debt musical chairs ongoing, yet media and politicians try to camouflage on these.

This becomes even more accentuated as US banks have been reported to have been reducing their holdings of USTs. 

And in the absence of US banks and foreign buying, USTs will become almost entirely a US Federal Reserve dynamic.  The FED now owns 33% of the outstanding 10 year USTs, according to the Zero Hedge. Fed holdings of USTs will significantly affect the capital standards required for the banking and financial system

So it has been a Dr.Jekyll and Mr. Hyde when it comes to the bilateral relationship between China and the US, as geopolitics and financing appear to be worlds apart.

As I have been saying, the theatrics in arguing and posturing over uninhabited islands seem to be meant at justifying more military spending (through inflationism) by the incitation of nationalism.

And nationalism based rationalization of defense spending it has been. The Japanese government recently approved an increase to her military spending budget… 

From Reuters:

Japan will boost its military spending in coming years, buying early-warning planes, beach-assault vehicles and troop-carrying aircraft, while seeking closer ties with Asian partners to counter a more militarily assertive China.

The planned 2.6 percent increase over five years, announced on Tuesday, reverses a decade of decline and marks the clearest sign since Prime Minister Shinzo Abe took office a year ago that he wants a bigger military role for Japan as tension flares with China over islands they both claim…

The policies, including a five-year military buildup and a 10-year defense guideline, call for stronger air and maritime surveillance capabilities and improved ability to defend far-flung islands through such steps as setting up a marine unit, buying unarmed surveillance drones and putting a unit of E-2C early-warning aircraft on Okinawa island in the south.

Japan will budget 23.97 trillion yen ($232.4 billion) over the coming five years for defense, up from 23.37 trillion yen from the previous five years.

Who will benefit?  No other than the US military complex…

U.S. contractors would be major beneficiaries of Abe's increased spending. These include V22 Osprey maker Boeing Co, lead F-35 fighter-jet contractor Lockheed Martin Corp, missile-fabricator Raytheon Corp, and Northrop Grumman Corp, which builds the Global Hawk unarmed drone.

Another corporate winner could be Britain's BAE Systems PLC, which through its American subsidiary, U.S. Combat Systems, is a major supplier of "amtrack" assault amphibious vehicles to the U.S. Marines.

You see, wars signify as good business, particularly for the politicians and their private sector allies. All that is needed is public approval. And to do this governments drum up nationalism by creating conflicts.

Of course governments also use wars as diversion from economic malaise.

The risk is that when the pantomine transmogrify into reality.