Deutsche Bank Confirms That the Global Economy Must Collapse, Before It Can Be Fixed

[Whenever a major European bank, like Deutsch Bank confirms what many of us in the alternative universe have been saying for so many years, it feels somewhat like validation, except for the apocalyptic undercurrents driving that conclusion.  I wrote the following articles, at this link, in 2007, but I only spoke of truths which the authorities and their think tanks had already understood for decades—that an American economic collapse was inevitable, but they chose to let it happen, without doing anything to forestall the event.  Much like the previous revelations which were strained from the Benghazi hearings by Judicial Watch, revealing Obama Admin. documents that predicted the rise of the Islamic State “Caliphate” along the Syrian/Iraqi border but they just let it happen, or the 911 attacks before that, when they also just let happen (in order to reap the police state opportunities therein)…the “Powers That Be,” who have made all of these previous bad decisions for us, do not see things the way normal humans do. In disaster they see opportunity, human suffering is simply motivation.  Where normal humans seek an end to all preventable suffering, the monsters who secretly rule over us want human suffering to multiply, in order to serve as a “force multiplier,” a tool to guide the human herd (the part which survives) to acceptable, profitable outcomes. 

A Just God, if He exists at all, would NOT put His children into chains and march them lockstep into the abyss…but He might also overlook our suffering, if it were only a temporary phase through which the human race had to pass.  He too, might understand the power of suffering to bend human nature into a necessary direction, a direction which the entire race must learn to accept, if most of us are to survive.  The power of massive suffering can force us all to enter the same path together, at least for a while. 

Let us hope that the leaders, who are forcing suffering upon the world, in order to better organize the world, have learned from their mistakes and the plan is to make that common path for us, the one which moves us all closer to the end of most human-caused suffering.]

A Stunning Admission From Deutsche Bank Why A Shock Is Needed To Collapse The Market, And Force A Real Panic

zero hedge

Tyler Durden's picture

In what may be some of the best, and most lucid, writing on everyone’s favorite topic, namely “what happens next” in the evolution of the financial system, Deutsche Bank’s Dominic Konstam, takes a look at the current dead-end monetary situation, and concludes that in order for the system to transition from the current state of financial repression, which has made a mockery of all asset values due to central bank intervention, to a semi-credible system driven by fiscal stimulus, there will have to be a crash, one which jolts policymakers out of their stupor that all is well simply because stocks are at all time highs.

And since a legitimate fiscal stimulus is what is needed to re-ignite the economy, US and global GDP will continue declining, even as stocks keep rising to new all time highs, not on fundamentals (which are all pointing in the opposite direction), but due to even more central bank intervention and financial repression, thus a Catch 22, which ultimately – according to DB – ends in the only possible way: with a major crash.

As Konstam puts it, “the status quo could continue for several years yet – if nothing “breaks” in the system” but “without an external economic shock it is hard to see policymakers being prepared to take dramatic, fiscal action to jumpstart the global economy and bounce it out of a financial repression defined by low and falling real yields to one that at least initially is defined by rising nominal yields through higher inflation expectations.”

As for the conclusion, or why a financial shock is long overdue, KOnstam says that “ironically the shock that is needed would require a collapse in risk assets for policymakers to then really panic and attempt dramatic fiscal stimulus.

This is critical – and inevitable – as only a shock can lead to an “unwind of the falling yield/rising equity market where all financial assets trade badly.

In other words the end of financial repression will see price levels fall so that yields once again look attractive, or said otherwise, there will be a demand for Treasuries, even without the perpetual implicit backstop of central bank purchases.

For such a move to be sustainable itself requires the economic fundamentals to shift – inflation needs to be more secure against an underlying backdrop of robust real growth. Most people now understand that this is not a job for monetary policy alone. Yet the current reach for yield simply prolongs the status quo for policy disappointment.

Which brings us full circle: recall that over the past few months virtually every prominent investment bank, from JPMorgan to Goldman Sachs have warned clients that a selloff is coming. Now, Deutsche Bank has taken it to a whole new level, explaining why a financial crash has to happen to purge the system from the toxic aftereffects of 7 years of financial repression, and to kickstart a fiscal stimulus that will not happen unless markets tumble in the first place.

And while Konstam’s line of reasoning is absolutely correct, we doubt just how his employer would look upon a market plunge that wipes out 30%, 40%, or even 50% of global equity values: would Deutsche Bank even survive such a crash? As such we doubt that the strategist’s analysis and forecast, correct as it may be, will be endorsed by his employer, even if by now it is clear to all that only a major crash, i.e. a global reset, can kick start the world out of its zombie-like, centrally-planned existence, into the long overdue phase of whatever it is that comes next.

* * *

Below is Konstam’s full must read analysis:

Stocks must fall for yields to rise – but unlikely to happen anytime soon

It is pretty much understood that we are in full on financial repression mode, as witnessed by super benign core yields lead by lower real yields with more recently the further downward drift in euro peripheral yields, including the UK. The new high in equities is consistent with our view of financial repression that necessarily has yield returns on all assets being incrementally replaced by price returns – stretched relative valuations follow already increasingly stretched absolute valuations. The last round of economic data does little to suggest any change in this dynamic. As we highlighted last week the conundrum for the US is how an overly strong labor market without meaningful wage inflation resolves itself against markedly weak productivity data with a GDP cake that if anything seems to be stagnating.

With the current status quo, it is clear to us that US yields if anything are still too high – we think they are near the upper bound of a range that pivots closer to 1.25 percent with real yields in particular too high. This probably still reflects a reluctance of investors to get meaningfully long the market although much of the short base has been covered and this in turn reflects a still fairly strong consensus on the economics front that the labor market strength can still resolve itself through higher wages and a virtuous circle of rising demand and productivity – a scenario we would not rule out but not our central view.

More importantly however are what prospects there may be to jolt us out of this financial repression and to what extent regardless of proactive policy, is there a natural end to financial repression – at some point does something have to break in the system. On the former the most likely candidate is obviously some form of global fiscal stimulus. Despite optimism around this in early July we have not exactly had the green light on either helicopter money in Japan or Italian bank bailout. It is still too early to call the US election and stimulus prospects here but the general sense is that it is still difficult to sense the urgency when equities make new highs. Policymakers aren’t used to dealing with financial repression and that unfortunately is one of the defining characteristics of stagnation.

We suspect the fall will be defined by markets looking for dramatic policy news that somehow “responds” to super low bond yields and underwrites rising risk asset prices but only to be disappointed precisely because policymakers don’t bide the urgency. The result is that yields can fall still further even with risk assets still trading well – hanging onto their relative valuation rationale.

The failure of a policy response allows for more financial repression. We are anyway already beyond the point of preemptive policy since preemption is supposed to recognize and avoid looming problems beforehand. It is clear that the nature of those problems are already material including squeezed interest margins for banks, insurance solvency issues etc. But to be fair, the lack of a fiscal response itself bears witness to the perceived fiscal stress during the 2008 crisis and the need to insulate taxpayers. Additional fiscal burdens can be thought of as a variant of financial repression where future inflation and negative real rates do the redistribution as opposed to the structure of the fiscal regime. Helicopter money fuses financial repression from the money side with the fiscal response in a potentially dramatic way whereby the would be spenders get to spend a lot more directly at the expense of the ongoing savers. And while it may have its own political hurdles that ultimately are insurmountable, it offers a perfectly reasonable alternative equilibrium option where the goal is to raise the price level as well as improve the real growth outlook by overcoming excess savings. The fusion of fiscal with monetary policy can also be appreciated in the context of the fiscal theory of price where monetary policy can offer infinite paths for money growth and potential nominal growth but fiscal policy effectively selects which path is realized based on an equilibrium condition that the NPV of all future budget deficits needs to sum to zero.

* * *

The status quo could continue for several years yet – if nothing “breaks” in the system. There are ways of course for either avoiding breaks or at least patching them – mitigating the impact of negative rates on banks is now in vogue with subsidized bank loans for on lending. And we may yet see soft forms of bank bailout still being allowed. This is similar to the use of alternative yield curves for discounting insurance liabilities.

The conclusion is that without an external economic shock it is hard to see policymakers being prepared to take dramatic, fiscal action to jumpstart the global economy and bounce it out of a financial repression defined by low and falling real yields to one that at least initially is defined by rising nominal yields through higher inflation expectations. Ironically the shock that is needed would require a collapse in risk assets for policymakers to then really panic and attempt dramatic fiscal stimulus.

The logic would also fit with the same correlation structure for financial assets – an unwind of the falling yield/rising equity market where all financial assets trade badly. In other words the end of financial repression will see price levels fall so that yields once again look attractive. For such a move to be sustainable itself requires the economic fundamentals to shift – inflation needs to be more secure against an underlying backdrop of robust real growth. Most people now understand that this is not a job for monetary policy alone. Yet the current reach for yield simply prolongs the status quo for policy disappointment.

German intelligence agency records Islamists recruiting refugees

German intelligence agency records Islamists recruiting refugees






Hans-Georg Maassen, Head of Germany’s Federal Office for the Protection of the Constitution, said on Sunday in Berlin that there are more than 340 incidences on record. Germany’s domestic intelligence agency says it has recorded hundreds of attempts by radical Islamists to recruit immigrants hosted in the country’s refugee centres.

Hans-Georg Maassen, Head of Germany’s Federal Office for the Protection of the Constitution, said on Sunday in Berlin that there are more than 340 incidences on record.
Maassen said: “But these are the only the cases known to us. Presumably there are even more.”
Maassen said workers at German refugee centres have already been made aware of the situation.
He said: “It worries us that Salafists and other Islamists are promoting their cause in asylum centres.
“We know that there are very many young men of the Sunni denomination among asylum seekers.”
The intelligence agency chief said such often come from a conservative Islamic background and want to go to an Arabic-speaking mosque every Friday.
Maassen also noted that there were also numerous radical Salafist mosques in Germany.
He said the Arabic-speaking mosques in Germany are not regulated and from the perspective of the state, there is very little the agency can influence.
Maassen said Islamist-motivated attacks had also taken place before a recent spate of violence in the past month in Germany, and that a policeman in the city of Hanover as well as a Sikh temple in Essen had also been targeted.
He said: “The lesson to learn from this is that we should not concentrate only on Islamic State, which may be sending terrorist units to Europe, as with Paris or Brussels.
“Instead it could be that individuals that are radicalized on their own or are given orders.”
Dpa/NAN. Copyright The Eagle Online.

Permission to use quotations from this article is granted subject to appropriate credit being given to as the source.

US Drone Killing of Mansour Made Taliban Unification Possible, For Good Or For Bad

[Mullah Zakir/Rasoul was arrested by Pakistan in March, leaving his deputies in charge of the opposition.  The American killing of Akhtar Mansour opened the door to this reconciliation of the Afghan Taliban, evidently the result the CIA/Pentagon was looking for.]

Powerful jihadist faction reconciles with the Taliban

Long war journal

Dadullahs Daddy Haji Abdullah“DADULLAH’S DADDY”Haji Abdullah, the father of Mullah Dadullah Akhund and Mullah Mansour Dadullah. Image from Voice of Jihad.

A powerful Taliban faction that broke away from the main group has reconciled and swore allegiance to the Taliban’s new emir, Mullah Haibatullah. The reunion of the faction, known as the Mullah Dadullah Mahaz or Mullah Dadullah Front, is the latest success in the Taliban’s effort to bring wayward groups and commanders back into the fold after divisions over the death of its founder and first emir, Mullah Omar.

The Taliban announced that family of Mullah Dadullah Akhund, a revered commander, and his brother, Mullah Dadullah Mansour, as well as a group of commanders and fighters rejoined the so-called Islamic Emirate of Afghanistan late last week, according to a statement released on Voice of Jihad. The reconciliation was spearheaded by Mullah Abdul Manan Akhund, a brother of Mullah Omar.

“On Thursday [Aug. 12], the respected father (Haji Abdullah), sons and brothers (Sher Agha and Gran Agha), nephew (Mullah Ihsanullah), family members, commanders (Mullah Muhammad Dawood Akhund, Mullah Muhammad Sadiq Akhund) and a number of fighters of the hero of Islamic Emirate, the martyr Mullah Dadullah Akhund and Mansoor Dadullah pledge their allegiance to the leader of Islamic Emirate, Amirul Mumineen Sheikhul Hadith Mawlawi Haibatullah Akhundzada (HA) after coming to an understanding with the officials of Islamic Emirate and brother of the late Amirul Mumineen Mullah Muhammad Umar Mujahid (RA).

“The family pledged that they shall completely obey and continue their services in the sacred united ranks of the Islamic Emirate and will strive to the best of their abilities to all plots of the enemies of Islam and motherland,” the statement continued.

US intelligence officials contacted by The Long War Journal said that the Dadullah family and commanders mentioned in the statement effectively make up the senior leadership of the Mullah Dadullah Front.

The Mullah Dadullah Front (also known as the Mullah Dadullah Mahaz and Mullah Dadullah Lang Allegiance) is named after Mullah Dadullah Akhund, a popular but brutal and effective commander who was killed by British special forces in Helmand province in May 2007. Dadullah was responsible for embracing al Qaeda’s ideology of waging global jihad, and incorporated al Qaeda tactics, including the use of suicide bombers, on the battlefield.

After Mullah Dadullah Akhund was killed in 2007, his brother, Mullah Mansour Dadullah, and Mullah Adbul Qayoum Zakir assumed top leadership roles in the group.  Mullah Adbul Qayoum Zakir is a former Guantanamo Bay detainee who has served as the Taliban’s military commander and is now a member of the executive council, which is better known as the Quetta Shura. The Mullah Dadullah Front operates largely in the southern Afghan provinces of Kandahar, Helmand, and Uruzgan, as well as in Zabul, and is considered one of the most effective and dangerous Taliban groups in the region. It has sabotaged negotiations between the Afghan government and both lower-level Taliban leaders and fighters in the south.

Mullah Mansour Dadullah has always had a rocky relationship with the Taliban’s top leadership. After his brother was killed, he was named as the Taliban’s military commander. But within seven months after taking command of forces in the south, Mullah Omar expelled Dadullah for violating the group’s rules and barred him from the Taliban. Months after he was ousted from the Taliban, Pakistan’s Inter-Services Intelligence Directorate detained him up until his release in 2013. [See LWJ report, Dissident Taliban commander claims Pakistani intel ordered him to conduct assassinations, attacks in Afghanistan.]

Just prior to the announcement of the death of Mullah Omar in July 2015, the Mullah Dadullah Front publicly questioned whether the Taliban’s leadership was hiding Mullah Omar’s death. After it was revealed that the Taliban hid Omar’s death from April 2013 until July 2015 (he apparently died of natural causes in a hospital in Quetta), the Taliban appointed Mullah Akhtar Mohammad Mansour as its emir. He had effectively served as the Taliban’s emir after Omar died in 2013. While the Mullah Dadullah Front remained rebellious, Mullah Zakir and a cadre of his followers remained loyal to the Quetta Shura.

Mullah Dadullah Front and the Dadullah family reconciled with Mullah Haibatullah and the Taliban despite the fact that the Taliban killed Mullah Mansour Dadullah. In September 2015, Mullah Mansour Dadullah rejected Mansour’s leadership of the Taliban, and joined with Mullah Rasul, another influential Taliban commander who created the rival High Council of Afghanistan Islamic Emirate. Mullah Mansour Dadullah’s opposition to the established Taliban was short lived. Taliban fighters loyal to Mullah Akhtar Mohammad Mansour killed him and a number of his followers during fighting in Zabul province in November 2015.

The Taliban have had a string of successes in bringing recalcitrant leaders back into the fold. In April 2016, Mullah Omar’s brother, Mullah Abdul Manan Akhund, and son, Mullah Mohammad Yaqoub, were given senior leadership positions after swearing allegiance to Mullah Akhtar Mohammad Mansour. They were handsomely rewarded. Mullah Manan was named the chairman of the influential Dawat wal Irshad,” or the Preaching and Guidance Commission, while Mullah Yacoub was given a seat on the Quetta Shura, “as well as the military chief of 15 provinces” within the structure of the Taliban’s Military Commission. And after the US killed Mullah Akhtar Mohammad Mansour in a drone strike in Pakistan in May 2016, Yacoub was named one of the two deputy emirs of the Taliban. This puts him in the running to eventually succeed Mullah Haibatullah. [See LWJ report, Taliban appoints Mullah Omar’s brother, son to key leadership positions.]

Earlier last week, the Taliban announced that Mullah Baz Mohammad, who served as a deputy to Mullah Rasul, Mullah Akhtar Mohammad Akhond, a commander in Uruzgan, and their followers had reconciled.

Ironically, the US military’s killing of Mullah Akhtar Mohammad Mansour, the Taliban’s last emir, may have paved the way for rebellious Taliban commanders to rejoin the group. Mullah Akhtar Mohammad Mansour was resented for the way he assumed the leadership of the Taliban in the wake of Mullah Omar’s death as well as his maneuverings while leading the Taliban before Omar’s death was announced. However, the Taliban have deftly leveraged influential leaders, such as Sirajuddin Haqqani (he was named one of Haibatullah’s two deputy emirs), Zakir, Manan, Yacoub, and others to woo disaffected leaders.

Bill Roggio is a Senior Fellow at the Foundation for Defense of Democracies and the Editor of The Long War Journal.

Syria’s “Revolution/Civil War” Actually An International Conflict Arranged By US State Dept/CIA

There are so many foreign backers in the Syrian war that nothing is changing

– rebels hope that Hillary Clinton could change that

the independent

Patrick Cockburn

Since the end of 2012, little has changed on the ground in western Syria. But the east, it’s a different story, with Isis, and later the Syrian Kurds, making huge advances

rebels lose 500Rebel fighters are reported to have lost as many as 500 lives in their recent offensive Reuters

The Syrian army and its militia allies from the Shia world are preparing a counter-offensive to cut the recently-opened corridor connecting East Aleppo to rebel territory. Syrian and Russian aircraft pound the ruins of this corner of Aleppo through which also runs the main supply road to the government-held west side of the city.

The strengths and weaknesses of all sides in the Syrian war are on show in the present battle. First there was a victory by President Bashar al-Assad’s forces, which cut the enemy’s supply line to East Aleppo on 28 July. But this was balanced within a few days by a rebel success in another part of the city, which shows how equally the two sides are balanced. Claims of decisive victories in local offensives dribble away because neither side can keep up the momentum after initial advances. Each side has a limited number of effective combat soldiers of which they cannot afford to lose too many. The rebels are reported to have lost 500 individuals in their recent offensive.

Each side responds to any setback on the battlefield by asking and getting greater support from foreign backers. In this case, the Syrian government is looking to Russia, Iran and Shia militias from Lebanon and Iraq for reinforcements and air strikes. As they have shown repeatedly since 2011, none of these allies can afford to see Assad defeated and have a great deal riding on his staying in power. They were caught by surprise on 1 August when the rebel umbrella group Jaish al-Fatah, of which the main fighting component is the salafi-jihadi al-Nusra Front, broke through government lines in south west Aleppo. Rebel fighters, numbering between 5,000 and 10,000 men, are supported by Saudi Arabia, Qatar and Turkey. The Syrian army, battered by suicide bombers, retreated and their commander has been sacked.

UN pushes for pause in fighting as battle for Aleppo ramps up

We have seen this before. The Syrian army has enough combat troops to launch successful offensives backed by airstrikes. But it does not have the manpower to hold fixed position, often manned by soldiers who do little aside from manning checkpoints, harassing civilians and keeping out of danger. This has been a feature of the war since 2012: it is striking how few military units one sees on the roads or even in the front line. This makes each side vulnerable to surprise attack.

Pro-Assad forces are reported to have been reinforced by 2,000 fighters from Lebanese Hezbollah and the Iraqi Shia militias – their military experience, training and morale often making them superior to the regular army. If these units backed by heavy airstrikes cannot regain the small but crucial piece of territory lost earlier this month, it will show that the Assad government is weaker than was thought, but it does not mean that it is anywhere near defeat.

The stalemate in the war is demonstrated by the fact that both East Aleppo and government-held West Aleppo are now under siege. Water supplies are scant and little food can get in from the outside. UNICEF said on 11th August that “two million people in Aleppo are left with no access to running water as fighting intensifies.” Nobody quite knows how many people remain in Aleppo, but there are probably around 250,000 in the rebel half of the city and the rest on the government side.

It is striking how little real change there has been on the ground in western Syria since the end of 2012. This contrasts with the vast but under-populated spaces of eastern Syria where Isis and later the Syrian Kurds have made sweeping advances.

A further factor reinforcing the stalemate in the war is that much of the fighting in Iraq and Syria is conducted on all aides by criminalised warlords with no interest in the well-being or even survival of the civilian population. But such cynicism, while usually realistic, can also be deceptive because it fosters a belief that nobody has a core of firm believers who will fight to the end.

Every fight in Syria takes place in political, sectarian, ethnic and social landscapes so distinct that they falsify generalisations about the course of the conflict. Fabrice Balanche of the Washington Institute for Near East Policy makes the point that “in Aleppo, the major divide between rebels and pro-government factions is not based on sectarian opposition – except for the pro-government Christian minority – but mainly on social class divisions and the historic urban-rural cleavage. Therefore, the chances for an anti-Assad uprising in western Aleppo are non-existent. If the rebels want to conquer the government-held portion of Aleppo, it will be with a hard fight.”

But Balanche remarks that any siege of East Aleppo by the government will be more difficult and prolonged than the eighteen month-long siege of the Old City of Homs. This was held by about one thousand rebel fighters occupying half a square mile of shattered buildings, while in East Aleppo there are an estimated 10,000 rebel fighters holding eight square miles. Moreover, “Aleppo is located in an Arab Sunni area very hostile to the Assad regime” while in Homs the surrounding rural areas were mostly loyal to the regime because they were Christian, Alawite or Shiah and because Hezbollah was able to close the border with Lebanon.

Indigenous factions in Syria are not going to bring an end to the war except by victory on the battlefield and this is a long way off. But the conflict has become progressively internationalised with the US starting its air campaign against Islamic State in September 2014 and Russia doing the same in defence of Assad a year later. Could the geopolitical environment be turning against the rebels after a rapprochement between Russia and Turkey? Turkish support or tolerance has always been crucial for the rebel cause. The meeting between Turkish President Recep Tayyip Erdogan and Vladimir Putin on 9 August sparked speculation that Turkey might do a U-turn in Syria, reconcile itself to Assad staying in power and abandon its anti-Assad rebel protégés.

It is not very likely. It is true that Turkey’s policy in Syria since 2011 has been a disaster. It has failed to displace Assad and establish a Sunni regime, but it has opened the door to a Syrian Kurdish de facto state ruled by the local branch of the Kurdistan Workers Party (PKK) against whom Ankara has been fighting a guerrilla war since 1984. Worse, the Syrian Kurds are the main military ally of the US in Syria.

Turkey is likely to be absorbed by its domestic affairs in the aftermath of the failed coup of 15 July. But switching sides in Syria, even if politically feasible, would not necessarily win Erdogan many friends while alienating Saudi Arabia and Qatar. It may be, however, that Turkish capacity and willingness to help the anti-Assad rebels will be more limited in future. The rebels will hope this does not happen and wait to see if they will be rescued by a Hillary Clinton Presidency. More hawkish towards Assad than President Obama, she might shift from giving priority to destroying Islamic State, but more likely she will stick with his policies.