What the IMF’s Yuan Decision Will Mean for China – and Global Markets
This week’s decision by the International Monetary Fund (IMF) to include the Chinese renminbi, or RMB, as an international reserve currency beginning in October 2016 may have limited market impact in a world dominated by the U.S. dollar. The move would have a bigger geopolitical impact in providing China a voice in international monetary decisions; in enabling China to create a money transfer system to compete with the widely used “Swift” system; and in limiting the dollar’s use in enforcing political sanctions, experts say. It could also encourage China to accelerate its financial sector reforms, in turn depreciating the RMB to levels the U.S. may not relish.
The IMF decision came after its annual meeting on November 30 to review the composition of the basket of five currencies that make up the “special drawing right,” or SDR. The IMF allocates SDR quotas to supplement the reserves of its member countries. The other currencies in that basket are the U.S. dollar, the Euro, the pound sterling and the Japanese yen. IMF managing director Christine Lagarde justified the inclusion of the RMB in that elite club saying it recognized the integration of the Chinese economy into the global financial system, and the progress China has made in recent years in reforming its monetary and financial systems.
On balance, the IMF decision appears to be on the right track, according to Marshall W. Meyer, Wharton emeritus professor of management and a long-time China expert. “China’s commercial expansion depends on internationalization of the RMB,” he said. “The IMF decision is welcome even if it complicates the immediate problem of managing the RMB downward gradually, rather than precipitously, to buoy the domestic economy.”
With the RMB as a reserve currency, “[China] will be part of the center of any kind of discussions about monetary reform,” said Steve Hanke, professor of applied economics at The Johns Hopkins University in Baltimore and co-director of its Institute for Applied Economics, Global Health, and the Study of Business Enterprise. “The Chinese will be able to get more leverage in the international markets; that is how they see themselves positioned to challenge the U.S. dollar.” Hanke is also a senior fellow and director of the Troubled Currencies Project at the Cato Institute in Washington, D.C.
The inclusion of the renminbi as a reserve currency is definitely positive news for China, as other countries may accept it as a trade currency in the future, said Wharton management professor Minyuan Zhao. However, the longer-term impact of that will depend on how China uses the opportunity, she added. “Whether it is a positive or a negative in the long run depends on how China acts. Will it take it as incentive to bring in transparency and reform the financial system, which is not in good shape now?”
“If the U.S. does not like the market outcome, will it muscle in and [try to] influence the system, which the Chinese will not like?” –Minyuan Zhao
Hanke and Zhao discussed the implications of the renminbi’s newly elevated status on the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111.
Hanke explained why the renminbi’s inclusion as a reserve currency is important in the geopolitical realm, and not as it relates to the market. “The dollar is king. It dominates all trading, all pricing, all invoicing, all reserves held by central banks, etc.,” he said. “That is always the case. If you go back 2,000 years, there [has] always [been] one dominant currency that is preferred by the markets. He noted that the British pound sterling dominated the markets before World War I, after which the U.S. dollar took over. Having a dominant currency worldwide for financial transfers and trading brings economies of scale and helps lower transaction costs, he explained.
Hanke did not expect the renminbi to edge out the U.S. dollar in the global financial marketplace. He noted that the dollar controls more than 90% of all global foreign exchange transactions. “In the market, the RMB is not really a challenger. The market test was that it was a big flop; no one was interested in using it, which is still the case.”
However, “it is a different ball game” in the geopolitical sphere, Hanke said. “China is a big, powerful country; it has been the biggest adder to incremental world growth over the last 20 years.”
According to Zhao, countries around the world have amassed $80 billion worth of RMB in their foreign reserves. Putting that in context, China had about $3.5 trillion in foreign reserves at last count, according to a Wall Street Journal report.
China’s Economic Station
“We’re at an unusual juncture in China’s economic trajectory,” said Meyer. “Investment-driven growth has reached its limit and China must find a new growth model. In the interim there’s a lot of uncertainty. China’s top economists acknowledge this.”
Meyer outlined the major themes economists agreed on at a Xinhuanet-sponsored conference on the next stage of China’s economy last month, where he was a speaker. “One, China’s economy has been in decline for four to five years. The best indicator of decline is the producer price index or PPI, which has dropped for 44 consecutive months; the CPI (consumer price index), though positive, hasn’t broken 2%, effectively zero, in the same period. Two, the main cause of decline is excess capacity spurred by stimulus measures, and further stimulus will only protract the decline. Excess capacity is greatest in industries like coal, petro and steel where state-owned enterprises (SOEs) dominate. Three, unless and until the government permits the normal economic cycle to operate and liquidation of excess capacity, the decline will continue. Four, among other effects, some of which are positive, the anti-corruption campaign has delayed the liquidation of excess capacity since sales of state-owned assets are suspect.”
Dealing with Surplus Capacity
Meyer put those themes against the backdrop of a broader context. “Not only is China awash in capacity, but it is also awash in currency,” he said. He noted that the ratio of M2 (a measure of money supply that includes cash; checking, saving and time deposits; and money market funds) to GDP (gross domestic product) for China is double that of the U.S. “That’s a lot of liquidity. You’d expect inflation with this level of liquidity. But capacity has outrun liquidity, hence there’s deflation.”
China doesn’t have easy options to deal with its surplus capacity. “If China tries to liquidate excess capacity, social unrest will erupt,” said Meyer. He pointed to the worker riots that followed the shutdown last month of Tangshan Songting Iron & Steel, a private firm in the country’s northeastern city of Tangshan. According to a Reuters report, Tangshan produces more steel than the entire U.S.
“Long-run, the capacity of the U.S. to isolate rogue nations using financial sanctions could be crimped.” –Marshall W. Meyer
Hanke said the key reform China must undertake is “to get rid of the SOEs that are complete back holes; most of them are almost zombie enterprises sucking up all the credit.” Private enterprises in China are facing a credit crunch as a result, he added.
Zhao felt the shadow of the anti-corruption crackdown would fall on China’s efforts to privatize some of its SOEs as well. “A lot of SOE managers are scared of privatizing because [with] anything you sell, you would be accused of mispricing the assets,” she said. “The possibility of being involved in any kind of investigation is scary.”
Swift vs. ChIPS
Of all the likely scenarios that could unfold, the one with the greatest possibility appears to be the emergence of a parallel global money transfer system. Most international transfers today use the so-called “Swift” system (Society for Worldwide Interbank Financial Transfers), which is denominated in U.S. dollars.
China is keen on setting up a competing system called ChIPS (China International Payment System) with the renminbi. “That would be good in the sense that now with Swift, the U.S. Treasury has an army of people waiting to impose sanctions and restrictions on countries they don’t like,” said Hanke. That makes it the RMB’s elevation as a reserve currency a geopolitical factor “because sanctions are political.”
The case for including the RMB in the SDR basket was actually the opposite, according to Zhao. “One argument for including China in the [SDR] system is to discourage China from creating a parallel system,” she said. By including the renminbi as a reserve currency, the IMF can put pressure on China to shoulder the responsibilities that come along with that status, such as increased transparency in the valuation of its currency.
In that spirit, China would be expected to deliver on its commitment to make the RMB fully convertible by 2020, Zhao explained. “If it acts as an incentive to make the currency more transparent and more tradable, then that is a positive move to prevent another parallel system from being introduced.”
That situation leads to a “paradox the world is facing,” said Zhao. She noted that China has been facing a “capital flight” with many investors taking out their money to safer havens. If, after the renminbi joins the SDR club, it depreciates significantly, “will the U.S. take it as a market outcome?” she asked. “If the U.S. does not like the market outcome, will it muscle in and [try to] influence the system, which the Chinese will not like? So it becomes a geopolitical outcome rather than a market outcome.” If China is able to liberalize more and more of its economy as it has done since 1978, it would attract more capital flows, added Hanke.
Outlook for the RMB
China also cannot easily depreciate the RMB. “If China tries to coax the RMB downward to make their industry more competitive, the rest of the world may remonstrate due to job losses and increased pollution,” Meyer said. The pollution concerns arise because of China’s substitution of coal (which China has in abundance) for oil (Chinese domestic oil fields are past peak production), he explained.
“The Chinese will be able to get more leverage in the international markets; that is how they see themselves positioned to challenge the U.S. dollar.” –Steve Hanke
Meyer expected the impact on the renminbi to be carefully managed. “The RMB will subside gradually and China will manage the subsidence,” he said. He cited comments made by Yi Gang, a deputy governor of the People’s Bank of China, the country’s central bank, that China will maintain a “managed-float” system before it gradually transitions to a “clean float” of the yuan, as The Wall Street Journal reported. A clean float is a long-term goal that would mean the central bank stays out of trying to control the currency’s value, the report explained. “In terms of whether the renminbi will depreciate after its inclusion in SDR, there is no need for such a worry,” Gang said.
One could read Yi Gang’s comment in several ways, according to Meyer. “Call this manipulation if you will. Or call it prudence. Your choice,” he said. “If there weren’t some management of outflows, such as limits on foreign exchange transactions, then the hot money would leave China ASAP given prospective if incremental devaluation of the RMB.”
U.S. vs. China
The growing importance of the renminbi could also test U.S. influence on China, said Hanke.
He recalled that after the U.S. moved the dollar from a fixed exchange rate system to a freely floating system in 1973, it began pressuring Japan to let the yen appreciate. That was to protect U.S. goods from cheaper imports from Japan, especially the U.S. automotive industry. With “tremendous pressure” from the U.S., the yen appreciated from 360 to the dollar to 80-85 by 1990, he noted. “There was an ever-appreciating yen, because the U.S. was muscling Japan and forcing it to do this, through all kinds of trade conflicts and so on,” he said.
On that front, China will be different for the U.S., Hanke said. “China is not going to be muscled around by the U.S., and we won’t have an ever-appreciating RMB. The Chinese will do what they think is in the interest of China.”
According to Meyer, the IMF move does not erode the dollar’s strength immediately. “Long-run, however, the capacity of the U.S. to isolate rogue nations using financial sanctions could be crimped,” he said. In any event, such a situation was anticipated, and the U.S. is developing alternatives to financial sanctions.
At the same time, “while China gains international clout, the IMF decision ultimately erodes Chinese government control of the RMB,” said Meyer. “The big and unanswered question is what happens if China backslides should the RMB spin out of control. Would, for example, the IMF temporarily suspend China’s SDRs?”
What the Paris Attacks Tell Us about IS Strategy
The biographies of those behind the Paris attacks offer deep insight into the structures and organization of Islamic State in Europe. And they confirm what experts have long warned about: The new jihadists have our cities in their sights. By SPIEGEL Staff
On the horrific evening in Paris that only ended after 130 people had been slaughtered in jihadist attacks, something strange happened at 10:28 p.m., a development that only came to the attention of investigators much later. On the upper end of Boulevard Voltaire, where the Bataclan concert hall is located, three terrorists were in the process of gunning down people with their Kalashnikovs and exchanging salvos with the police, who were closing in on them. At the lower end of the street, another man exited from the Metro -- Abdelhamid Abaaoud, the suspected leader behind the attacks.
He had just been a part of the group that had killed 39 people at La Belle Équipe, Le Carillon and Le Petit Cambodge. For a while afterwards, he had driven around aimlessly in a black SEAT through the neighborhood's streets, before parking it in the Montreuil suburb. He was then caught on CCTV cameras at 10:14 p.m. inside the Croix de Chavaux Metro station, as he jumped the turnstile to avoid paying and traveled back to the scene of the crime.
Over the next two hours, Abaaoud apparently went for a walk through the 10th and 11th arrondissements, the area where he had just unleashed a bloodbath. Investigators later used the geolocation data from his mobile phone to trace his movements that evening. At 12:28 a.m., as anti-terror units were entering the concert hall, the phone was just next to Bataclan. It's as if Abaaoud wanted to convince himself of his own success and view firsthand the inferno he had helped unleash. It wasn't much later that French President François Hollande arrived at the scene.
It's a disturbing thought, but one that also seems fitting for a terrorist as vain and brutal as Abaaoud. This, after all, was not the first time he had outfoxed security forces.
In terms of media coverage, Abaaoud had been Belgium's best-known jihadist, and yet he nevertheless managed to travel back and forth between Syria and Europe without raising attention and would ultimately conduct the Paris attacks together with an entire group of other jihadists. Few others have reported as openly on social media about their adventures in Syria as Abaaoud. In Dabiq magazine, an official propaganda organ of Islamic State (IS), he had boasted in January that he could "plan operations" and come and go as he pleased despite the fact that "my name and my picture have been all over the news."
Is the Worst Yet to Come?
With Abdelhamid Abaaoud and his men, Islamist terror in Europe has reached a new level. It's the first time that a major European city has experienced such a complex attack at the hands of the Islamic State, which resulted in 130 deaths and 350 wounded. In the week that followed, Brussels, another major European city, announced a state of emergency, a rare occasion in the postwar era. The city shut down its Metro system and closed schools. Local authorities said they took the dramatic steps in order to prevent attacks like the ones committed in Paris the previous weekend.
For years, terror experts had been warning about their fears of terrorist attacks in Europe and, in recent days, they appear to have become reality. The attacks on Charlie Hebdo in Paris and Copenhagen at the beginning of 2015 weren't isolated cases, Peter Neumann, a professor of security studies at King's College London, warned in his new book "The New Jihadists," published in September in German. He believes what we have just witnessed are the "first, very dramatic warnings of what will play out on the streets of Europe in the next decades." Europe, he cautions, is standing "at the precipice of a new wave of terror that will still occupy us for a generation to come."
French journalist and jihad expert David Thomson offers a similarly bleak assessment.
"Attacks like this will no longer be something completely extraordinary," he warns. "I can't say whether something like this will happen every six months or every year."
Thomson says that, according to his research, an Islamic State unit led by a Frenchman is currently preparing attacks in Europe. After the terrorist attacks in Paris, Western intelligence agencies intercepted communications between Abaaoud and Islamic State leadership in Syria.
There had been similar clues after the attack in Beirut the day before and also after IS brought down a Russian jet carrying vacationers over Egypt's Sinai Peninsula. When IS issued a claim of responsibility for the Paris attacks a few hours later, it provided no information about the perpetrators. But German authorities say this is standard practice for IS: The order is issued by the leadership, but it is then carried out solely by the terrorist cell.
'Islamic State Is Acting in Europe'
"We must assume that this was the first coordinated series of attacks," an internal government paper dating from Nov. 23 states. "The Islamic State is acting in Europe. The concerted action and the means used in the crime point to very well-trained perpetrators prepared to do anything, as well as longer and highly conspiratorial planning of the attack."
It's a disturbing development. In contrast to al-Qaida before it, terror attacks on the West had not previously been a part of Islamic State strategy. Instead, the group had limited itself to expanding its territories in Iraq and Syria and establishing state-like structures.
"Islamic State conceives itself as a state, it acts like a state -- and it employees bureaucrats whose jobs do not differ much from those in the West," writes terror expert Neumann. It provides five to seven million people with food, child care, heating oil and electricity and is seeking to be the "perfect welfare state," he says. Observers say that IS covers up to $2 billion in annual financial needs through oil sales, donations, taxes and the seizure of assets. Neumann refers to it as a "loot economy."
Under Osama bin Laden, al-Qaida sought to bring about the West's downfall, but it never had the declared goal of creating its own state. Islamic State, on the other hand, has pursued the goal of establishing its own state from the very beginning and it initially showed no interest in international terrorism.
Shortly after the US-led coalition began attacking IS in Iraq in August 2014 and later in Syria, however, Islamic State propaganda minister Abu Mohammed al-Adnani called on Muslims in the West to perpetrate attacks. "If you can, kill a disbelieving American or European -- especially the spiteful and filthy French -- or an Australian or Canadian," the video address stated. The attacks in Paris demonstrate the threat wasn't an empty one.
Is Attacking Europe Part of Their DNA?
For years, experts have worried that the up to 4,000 young men and women from Western Europe who are believed to have gone to Syria and Iraq to either fight with Islamic State or live inside it might one day return and conduct attacks here. European IS fighters have long been using social media platforms to openly discuss their dreams of attacks on their home countries.
"Attacking Europe is in the DNA of many of those who have traveled from Europe to Syria," says jihad expert Wassim Nasr of French international news channel France 24. Still, he argues, it is very unlikely that individual members like Abaaoud made the decision to actually carry out the attacks on their own. He see it is "an issue of such strategic importance that it has been directed from the highest level of IS." And it appears that the decision was taken months ago.
It's not surprising that IS chose France as the target of its first attack in Europe. With around 1,200 current and former fighters, the largest number of IS jihadist from Western Europe originate from France. With its numerous military deployments in Africa and the Middle East, France is very much in the terrorists' crosshairs. Measured against its overall population, the only country in Europe with a greater per capita number of IS fighters is Belgium. Germany also has several hundred residents who have gone to the region as jihadists.
The Europeans tended to play a relatively minor role in combat for the IS in recent years, but they have an important function in terms of recruitment. And under Islamic State's new strategy, they are also in charge of bringing the war to Europe. The terrorists who struck in Paris may have spent some time in Syria, but they are the product of our society. In that respect, fighting in Syria to prevent Islamic State terror in the West can only have a limited effect.
Germany's IS Shill
One of the most prominent German jihadists fighting for IS in Syria is Deso Dogg, whose real name is Denis Cuspert. He grew up in Berlin and became radicalized in Germany's Rhineland region before taking off for the Middle East in 2012. In many respects, Cuspert is a German incarnation of Abdelhamid Abaaoud.
His death has been reported many times, but it appears he's still alive. He appears in videos heading to massacres in an SUV with a smile on his face. And he has repeatedly appeared in videos in which he disparages those he left behind in Germany as cowards and reminds them of their duty to travel to Syria. Deso Dogg is Islamic State's shill for luring new supporters from Germany.
In his videos, Cuspert can be seen kneeling in front of a waterfall shouting, "Jihad is fun." And there are videos showing him in the desert as IS fighters slit the throats of their bound prisoners. Cuspert then takes a decapitated head in his hand and announces, "They fought against the 'Islamic State' and we imposed the death penalty." Sometimes he also sings nasheeds, religious songs.
The propaganda is effective. It lures young men from places like Berlin, Hamburg and Dinslaken in the Ruhr region. They come from all social strata, including underdogs from socio-economically disadvantaged areas in addition to mechanical engineers. Hardly a case against suspected terrorists is heard in German courts without the name Deso Dogg being mentioned.
But what exactly is drawing young people who grew up in France, Belgium and Germany into the war? Why do they want to commit attacks in their home countries?
There's no simple answer to these questions, particularly given that that the young jihadists don't necessarily come from the same social class or religion. Many are immigrants or the children of migrants, but had little previous knowledge of religion before joining up with the Islamic State. Most seem to be fascinated not by Islam, but by jihad and a sense of "adventure."
20,000 Foreign Fighters
Currently, IS counts fighters from more than 90 countries among its ranks. Extremism expert Neumann estimates this figure includes more than 20,000 foreigners who have traveled to Syria and Iraq. He uses three different categories to classify the foreign fighters. First there are the "defenders," who traveled to the region early on -- mostly to fight on the side of the Sunnis against dictator Bashar Assad. Second, there are those "searching for meaning." Politics and religion aren't the primary motivator for these people. Instead, they are seeking to fulfil their need for community, identity, power and masculinity through weapons and the use of force.
The third group is comprised of the "tag-alongs," who follow their clique of friends when they leave Europe.
Only a small percentage is actually assessed as being prepared to carry out attacks. Neumann calculates that there are around 300 "dangerous" IS returnees in Europe who "are motivated, networked and have learned the trade from the most brutal terrorist group that ever existed."
Abdelhamid Abaaoud, the suspected chief planner behind the Paris attacks, was born on April 8, 1987, in the Anderlecht district of Brussels. Life seemed to start out on the right track for him. His father had emigrated from Morocco during the 1970s to work in a mine. He later opened a clothing store in the city's Molenbeek-Saint-Jean district. His father wanted the best for Abdelhamid and he sent him to the elite private Collège Saint-Pierre high school in Uccle, one of the richest areas in the Belgian capital. But Abdelhamid quit after a year, preferring to hang around in his old neighborhood.
Authorities first took notice of Abaaoud on one evening in 2006. He had drunk too much with friends and began impersonating a police officer in order to lure and then threaten his victims.
After getting caught, police initially detained him for several days. Thereafter, he was frequently involved in violent fist fights resulting in bodily injury -- often the product of drunkenness. One time, he tried breaking into a car repair shop while stoned together with Salah Abdeslam, the suspect in the Paris terror attacks who is still at large and is currently Europe's most-wanted man.
When he was released in September 2012 from an additional, this time significantly longer, stint in jail, he had changed. Now, the confused, disoriented thug from Molenbeek was wearing a beard and began looking for a job -- and criticizing the Western world. Abaaoud told his lawyer that he had become religious. This would become the starting point of his career as a terrorist. Shortly afterward, Abaaoud traveled to Syria for the first time.
Those biographical details can be found in a 245-page court file dating from July 2015 that SPIEGEL reviewed in the reporting of this story. The file provides detailed insights into how Abdelhamid Abaaoud became radicalized and it describes his ties to the Belgian jihadist scene, one of Europe's most dangerous. It also shows how key figures in Belgian terror cells use Europe as a base for their operations. The documents indicate that the Belgian jihadist movement is the product of an interplay between people in charge of indoctrination, logisticians and fighters seeking to destroy the "infidels."
During the years after his first trip to Syria, Abaaoud cultivated contact with people close to Khalid Zerkani, one of the more notorious figures in the Belgian Islamist scene. Investigators believe the two had mutual acquaintances.
Zerkani, 42, a native of Morocco, is considered by officials to be a kind of Islamist brainwasher in Molenbeek, dispatching young men to Syria without ever having traveled to the country himself. The example of Zerkani shows that the recruitment of future jihadists is no longer undertaken exclusively by radical imams inside mosques. After conducting raids on Zerkani and people connected to him, police uncovered unambiguous documents with headings like, "16 Things One Needs When Traveling to Syria" or "38 Ways to Participate in Jihad." The titles are so mundane that one could be forgiven for thinking they might be chapters in some "Jihad for Dummies" guide.
On July 29, 2015, a court convicted Abaaoud in absentia and sentenced him to 20 years in prison.
The judges came to the conclusion Abaaoud had "acted as if he were the head of a terrorist group." In their verdict, the judges held that "some elements gave cause for suspicion that he, from either near or afar, was a member of a cell that was preparing to commit an attack or attacks in Belgium."
The legal proceedings against the Islamist group document a solid logistical network between Belgium and Syria. According to a court document, one of the plotters was responsible, among other things, for "taking care of travel costs, accompaniment during the trip, contact to a smuggler who helps with the border crossing, reception at the border, a residence on site, training of fighters, assistance in leaving Syria, the transportation of personal objects and money belonging to the jihadists, conveyance of news to the family, purchase and transportation of Belgian goods to Syria and the collection of donations."
Raising Money for the Jihad
Abaaoud too apparently raised money. Behind a door in his apartment on the main street of Molenbeek, officials in January 2014 found a dagger, pepper spray, burglary tools and stolen license plates. Homages to Islamic State were scrawled on the door. The court presumed that Abaaoud had "probably" been involved in criminal activity in Belgium to raise money for the jihad in Syria.
In January 2014, Abaaoud's radicalization reached a new level: He kidnapped his 13-year-old brother Younes from school and secretly took him to Germany. Together, they flew to Istanbul from the Cologne-Bonn airport with a friend. On Jan. 21, their father Omar received a telephone call from Syria. "You will never see Younes again," Abaaoud told his father, adding that, as a parent, he had been doing everything wrong with the boy. "It isn't acceptable for me that you are raising him in such a European manner." The account comes from Nathalie Gallant, the father's lawyer.
At the beginning of February 2014, images on the Internet show Younes, 13, posing with a Kalashnikov that is almost as big as he is. Underneath the pictures is the caption: "Mashallah, a real man."
Once they arrive on the Turkish side of the border, jihadists are received by smugglers and brought across into Syria. Islamic State then subjects the newcomers to a security check in order to uncover possible spies. In the past, the procedure has often required newcomers to name a contact person within Islamic State.
Michael Flynn, the former head of the US Defense Intelligence Agency, says of Islamic State: "They document everything. These guys are terrific about it. In their recruiting and in interviews, they ask, 'What's your background? Are you good with media? With weapons?' It's this kind of well-structured capability they have that then evolves into a very, very unconventional force."
A Trove of Mobile Phone Photos
For German jihadists, that included questioning from a German-speaking IS fighter about motivation, ancestry and acquaintances. Former jihadist Ayoub B., from Wolfsburg, likens such units to a kind of Islamic State domestic intelligence agency. Upon arrival, he was interviewed by Mustafa K. and Nils D., two men belonging to a group from Dinslaken who were involved in almost all relevant activities undertaken by Islamic State troops. After questioning, Islamic State divides foreigners into two groups: suicide bombers and fighters. Thus far, German officials have identified more than 20 German suicide bombers.
The life of Abdelhamid Abaaoud of Belgium is better documented than almost any other jihadist. In spring 2014, the French journalist Étienne Huver came into possession of photos and videos that had been saved on Abaaoud's mobile phone. Huver had traveled to the Syrian city of Azaz, just a few kilometers from the border with Turkey, not long after Syrian rebels had finally managed to push the Islamic State out following an extended occupation. In Azaz, Huver was contacted by Syrian rebels who offered him photos of European IS fighters. "They told us: You have to publish them. People are coming from you to us and killing Syrians," Huver says.
The rebels had managed to copy the data with the help of a supporter who worked in an Internet café that Abaaoud frequented. When Abaaoud connected his mobile phone to a computer to share his photos with friends via Facebook, the Internet café employee made a secret copy. All of the photos were taken between Jan. 7 and Feb. 26, 2014.
An image taken on Feb. 1 shows him in Syria for the first time, wearing a wool vest and an oversized Afghan pakol cap and posing for selfies with a Kalashnikov. In one photo, he has his head thrown back and the morning sun shines onto his face. He sent the photo to friends and acquaintances back home in Belgium -- and also to young women he wanted to impress.
The photos and videos Abaaoud made during the ensuing four weeks were for his own private use.
They consistently show him with the same group of people: Eight young men who speak accent-free French and broken Arabic with a North African accent. All of them are Frenchmen or French-speaking Belgians. It almost seems as though they were a group of friends enjoying a bit of adventure in Syria.
Francophone Fighting Unit
Abaaoud gave himself the nom de guerre "Abu Omar al-Soussi" -- Abu Omar from the Souss Massa, a region in Morocco where his parents are from. Islamic State, however, dubbed him "Abou Omar Al-Beljiki," transforming him back into the Belgian he was.
Some of those in the group already knew each other from Brussels. Others likely only met in Syria when they joined the French-speaking unit that Belgians and French fighters were assigned to for matters of simplicity. It was deemed too problematic to put them in Arabic-speaking units because they wouldn't have been able to understand the orders given.
German security officials believe that the plans for the Paris attacks were likely developed within this Francophone fighting unit. German Islamic State fighters, by contrast, are spread out among several different units.
During his first days in Azaz, it has become clear, Abaaoud had close contact with notorious German Islamists; in spring 2014, his group lived in the same house with the "Lohberger Brigade," a group of young men from the Lohberg neighborhood of the Ruhr Valley city of Dinslaken who joined the jihad in 2013. During the time they lived together, the two groups posed with decapitated heads in front of the same statue in the center of Azaz.
Early on, Abaaoud seemed fascinated by the violence perpetrated by the Islamic State fighters and documented it on his mobile phone. "They fought for democracy and secularism, and thus, against us," Abaaoud narrates in one video of dead rebel fighters -- a comment that had little to do with the power struggle underway between the Syrian rebels of Azaz and Islamic State.
Abaaoud was notable even then, a natural leader because of his charisma. He instructed his comrades to speak into the camera or told them to take a picture of him next to a foreign IS fighter. He seemed to have a clear goal in mind with his photos and videos: that of encouraging more young people from Europe to join Islamic State.
'Sham Is Better!'
"What is life like here in comparison to Europe?" Abaaoud asks a friend in one of the videos.
"Life in Europe is nothing," comes the response, half-Arabic and half-French. "Al-Sham is better!" Abaaoud responds, using the old Arabic name for the region along the Mediterranean coast.
The young men from the banlieues were discovering a life that they could never have lived back home. In Syria, they could mostly take what they wanted, justifying it as the confiscation of enemy property. As members of Islamic State, they belonged to those who held power. Others had to obey.
There is little in the videos about religion and faith. Abaaoud seemed more intent on documenting his grand adventure.
It becomes clear from the material that Abaaoud, in February 2014, was but a small gear in the larger machine. One image shows him lightly armed lying behind a wall with friends, an old Kalashnikov, a GPS device and a walkie-talkie next to him. He was on guard duty in a city where IS had long since established control. The real fighters were at the front.
But that apparently changed soon thereafter. In May 2015, the death of Abu Shaheed was announced, a Frenchmen who had most recently lived in Brussels and who was also seen in Abaaoud's group photos. Apparently, the group had joined the notorious Libyan fighting unit Katibat al-Battar.
Social networks play an important role in recruitment. In contrast to the period when al-Qaida was predominant, when becoming affiliated with a jihadist group was a long and difficult process, IS propaganda largely takes place on the web. Initially, Facebook was the network of choice, until the company improved its vigilance. Today, IS propaganda largely takes place on Twitter. There too, accounts are constantly being deleted and banned, but new ones are immediately created to replace them.
Loyal and Compliant
Western recruits belong to the Islamic State elite. They receive privileged treatment and are allotted homes, women and higher salaries. Militarily, they are mostly useless at the beginning, but they are beneficial from a propaganda standpoint because they offer clear proof that IS also has supporters among its enemies, in America, Britain, France and elsewhere.
"We know from debriefings that they have actually broken Raqqa down into international zones because of language barriers," former Defense Intelligence Agency head Flynn says.
"The Australians alone have about 200 people. There's even an Australian sector in Raqqa and they're tied into the other English speakers because not everybody shows up speaking Arabic.
This requires a military-like structure with military-like leadership."
Because they are far from home, the foreigners are also Islamic State's most loyal and compliant troops. They are used for propaganda purposes, as cannon fodder or deployed to commit atrocities.
According to one estimate, 70 percent of IS suicide attacks have been committed by foreign fighters. "Such fighters are indispensable for IS: They project clout, strength and ideological determination," writes terror expert Neumann. And they can be used for attacks in the West.
The investigation into the secret IS cell network in Europe is still in its early stages. In November, the American journalist Michael Weiss -- one of the best known analysts of IS and co-author of the book "ISIS: Inside the Army of Terror" -- interviewed a local IS intelligence head who had fled to Turkey.
The man, identified only by a pseudonym in the series of articles published in the Daily Beast, spoke of the Kafkaesque interrelationships of various IS security services -- and revealed how the organization is reacting to the fact that it has become more difficult for foreign fighters to join IS.
"The most important thing," he said, "is that they are trying to make sleeper cells all over the world." ISIS leadership has "asked people to stay in their countries and fight there, kill citizens, blow up buildings, whatever they can do. You don't have to come."
All of those Paris attackers who have been identified spent at least some time in Syria, but they were all citizens of EU countries. They were radicalized in the societies where they grew up.
Often, their own parents tried to prevent them from going down the Islamist path, which shows that modern-day jihadism is also a generational problem.
That's not just true of Abaaoud, but also of Samy Amimour, one of the Bataclan attackers. He's from a family with Algerian roots that lives in the Paris banlieue of Drancy. Back when he was just sitting around at home, watching Islamist videos and insisting that his mother cover herself, his father became concerned that Samy was slipping away. Because his son hardly spoke any Arabic, the father translated religious texts into French because he had the impression that his son had a misguided interpretation of Islam.
Nowhere to Be
When Samy Amimour took off for Syria, his father went after him and tried to convince him to come back home. To no avail.
Olivier Roy, a French expert on Islamism, writes in Le Monde: "Almost all French radicals belong to one of two categories: They either come from the second generation of immigrants or they are converts." What do the two groups have in common? "They break with their parents, or, to be more precise, with that which their parents represent when it comes to culture and religion."
IS divides the younger generation from the older: That can also be seen at the Tawhid Mosque on Avenue Danielle Casanova in Le Blanc-Mesnil, which neighbors Darcy. Samy Amimour is thought to have visited the unremarkable, green-painted building a couple of times. Most of those who can be seen at the mosque, though, are elderly men. The younger ones can be found a hundred meters away, hanging out in front of a food stand and a café. There are perhaps a dozen of them, in their twenties and wearing sweat suits or sarwal, the baggy pants with the low-hanging crotch that Salafists prefer. It is just before noon on a workday, but none of those present have anywhere to be.
A young Frenchman with Moroccan roots who only identifies himself as Mohammed says he didn't know Amimour, adding that he only goes to the mosque to pray. "This is a mosque for the old ones.
It is full of state spies, especially now," Mohammed says. When he talks about "the old ones," Mohammed is referring to those of his parents' generation. "They came here and only worked.
They made themselves small and forgot their true religion."
Mohammed rejects the attacks of Nov. 13 as "criminal." But he also says things like: "When the French kill women and children in Syria, they shouldn't be surprised if the same thing happens to them."
He says he has no desire to go to Syria, but adds that he is thinking about moving to Morocco.
Europe is becoming increasingly "mean spirited," he says -- anti-Muslim hostility, airstrikes against IS and now, following the attacks, an uptick in the number of police raids without search warrants in France.
He also admits to watching the newest Islamic State videos on his smartphone every day -- "out of pure curiosity," he says. "It's not like the media portrays it." He clicks on a propaganda video showing bombed-out houses and claiming that French warplanes had been responsible for the bombardment, which allegedly killed several civilians. No proof for the claims is offered.
Jihad in Germany
There are many like Mohammed in France, young men who live in housing projects on the outskirts of the city. Young men who feel oppressed as Muslims and who hate the country they live in. In Germany, there are no real ghettos of the kind found in France and there is also a lack of the historical rage that some French immigrants hold for the former colonial power.
But in Germany, too, there is a new generation of radicals. And here too, they aren't imports from the Arab world, but young Germans who say everything they want to say in the German language. Of the Germans who traveled to the Middle East to join the jihad, one-third have since returned home -- to Berlin, Hamburg, Frankfurt or Dusseldorf. They are received by state prosecutors, who open investigations into the returnees on suspicion of terrorist activities.
The probe encompasses everyone around them, including wives, friends and relatives. They are accused of financing terror, membership in a foreign terror group and are often suspected of having fought and even killed. Most of all, though, German judges these days are trying to determine if the returnees in the docket in front of them are disillusioned fighters who regret having joined the jihad in the first place. Or whether they could be potential sleepers who might commit attacks in the future.
How should a state react to the danger? Is the solution to shut down entire cities, as happened in Brussels last weekend? Former French President Nicolas Sarkozy is demanding the introduction of ankle monitors for those returning from Syria. President François Hollande wants to revoke French citizenship for convicted terrorists who possess dual citizenship. But there are more than 10,000 people in France with "Fiche S" files, which means they are seen as a potential danger to the state.
There may not be as many in Germany, but officials here are also wondering what to do about them.
Those who organize terror attacks have often long been on the radar of law enforcement officials, but it is difficult to convict them. The state of emergency recently authorized by French parliament now allows officials to disregard many legal safeguards -- they have been granted the ability to conduct arbitrary searches, for example. That, though, often serves to magnify the stigmatization already felt by many Muslims -- because it is primarily the doors of Muslim families that are kicked in, and their sons that are pressed up against the wall by heavily armed gendarmes.
On Tuesday of this week, in the bucolic landscape south of Toulouse, all hell broke loose.
Around 100 police officers stormed a run-down house on the edge of a ravine. The place is the home of Olivier Corel, who is also known as the "white emir." Investigators believe him to be one of the most dangerous Islamists in France, a preacher who is thought to have turned several young men into murderers and terrorists. He is considered to be the spiritual leader of a strong terror cell in southern France.
The Spiritual Leader
Investigators and intelligence officials have had him on their radar for years, but have thus far been unable to prove anything against him. But on Tuesday, police found an old hunting rifle that Corel had failed to register.
Just one day later, his trial was held in the new courthouse in the department capital of Foix. It was a farce that showed just how uneasy France is and how eager officials are to produce successes in the battle against terror. Corel, 69, was sitting in a glass box in the courtroom.
With his mottled gray hair, gray beard and worn jacket, he looked like a French farmer. But Corel came to France from Syria in 1973, his name back then was Abdulilah Qorel.
During the proceedings, one of the three judges asked him about alleged contacts with known terrorists: to Fabien Clain, whose voice was identified on the audio message in which Islamic State claimed responsibility for the Paris attacks, and to Mohamed Merah, who attacked French soldiers and Jewish civilians in a trio of shootings in March 2012. Corel claimed that he had nothing to do with any of it.
The public prosecutor then held a rather odd final argument, beginning by noting that a state-of-emergency was in effect. "We have 130 dead in Paris. The judiciary must provide a clear answer. We have to show vigilance." Corel's court-appointed defender shyly noted that the indictment was actually only about an old hunting rifle. Ultimately, Corel was sentenced to two years of probation, the first six months of which are to be accompanied by strict constraints.
The police commander, Christophe Rouget, says Corel is the "spiritual leader" of the terror cell surrounding Toulouse. "But he is very clever" -- too clever to publicly call for acts of terror to be committed. His group, Rouget goes on, is like a sect. "Young men from the margins of society come to him. They have no direction and don't know what to do with their lives." People like Corel, Rouget says, give such men a direction, and send them into jihad.
There are hundreds of Islamists in the region, from three generations, says a criminal defense lawyer in describing the region's Islamist scene. The lawyer is familiar with several cases, but prefers to remain anonymous out of fear. At the end of the 1990s, he says, many Islamists came to Toulouse from Algeria. Starting in 2000, a second generation joined them, men like Clain and Merah and radicalized by preachers such as Corel. They are the predecessors of the ones who are now being attracted by Islamic State.
A Shoot Out in Saint-Denis
It was only four days after the attacks in Paris that officials were able to track down Abdelhamid Abaaoud, who spent the evening of the attacks near the Bataclan. Together with two other members of his cell, Abaaoud had barricaded himself in an apartment in Saint-Denis. One of them was his alleged cousin, Hasna Ait Boulahcen.
Officials believe they were planning another attack, this time on the La Défense quarter of Paris. In Saint-Denis, he and his accomplices engaged in a seven-hour battle with the hundreds of police, anti-terror officers and soldiers who deployed to capture him. The operation ended with their deaths.
French security officials knew soon after the operation that Abaaoud was among the dead, but kept the information quiet for quite some time. The police had found several mobile phones in the possession of the now dead terror suspects and hoped to use them to find Abaaoud's contacts.
Still, two weeks after the attacks in Paris, many questions remain open. Not all of the perpetrators have yet been identified and investigations continue into several suspects.
Most of all, though: Nobody knows if the next Abdelhamid Abaaoud has long-since set up shop in Europe.
By Maik Baumgärtner, Sven Becker, Jörg Diehl, Matthias Gebauer, Özlem Gezer, Clemens Höges, Katrin Kuntz, Juliane von Mittelstaedt, Peter Müller, Christoph Reuter, Mathieu von Rohr, Raniah Salloum, Fidelius Schmid, Samiha Shafy, Holger Stark, Andreas Wassermann and Wolf Wiedmann-Schmidt
Paris Attacks Legitimize a New Wave of Counter-Terrorism and Emergency Laws
By: Claudio Grass
Looking back, it seems obvious that, going through the 20th century and into the 21st, wars went, from being about nationalism, to ideological wars (communism versus democracy or what we would call 'state capitalism disguised in democracy'), to becoming about religion, which sort of takes us back to the dark ages. Since the Berlin wall came down, back in 1989, and communism was defeated, it has been replaced by the "Muslim world". We could see this change in Hollywood movies and in our media coverage. Audiences, who are not aware of political contexts, easily link Islam to terrorism. As a result, they have wrongfully become two sides of the same coin. In our coverage of the Charlie Hebdo attacks, we talked a lot about freedom of the press. However, at this point I would like to take the opportunity to look at the greater picture of the Paris attacks.
"They hate us because we are free!"
Since 9/11, western governments have conveniently used the "war on terror" to launch military attacks on the Middle East. Whenever an attack occurred on western soil, they came up with the same statement that "they hate us because we're free". Ryan McMaken from the Mises Institute wrote the following a few days ago:
"that this slogan has been especially effective among very ignorant sectors of the population who seemed to be under the impression that the United States had been engaged in non-interventionist foreign policy prior to the 9/11 attacks. "Why we were just minding our own business", came the shocked and exasperated claims of the know-nothings. "These Arabs just attacked us for no reason, so they must just hate us because we're so doggone free."The problem is that there is a large segment of western society that believes these statements, and even supports this viewpoint. As a result, military involvement in the Middle East has grown out of proportion. Now, 13 years after the beginning of the second war in Iraq, the West can't get itself out of the mess that it created with its bare hands. History tells us some important facts: the U.S. used rebel groups in Afghanistan to fight the Soviet Union. These groups were led by Osama Bin Laden, back then hailed by the Americans as a hero, who later formed Al-Qaeda that became the synonym for terror. But since Bin Laden was killed, terror needed a new face: ISIS.
ISIS is an off-shoot of Al-Qaeda. However, the reason why it gained power so quickly is due to the U.S. presence in Iraq. Not only did it topple a government, it wrecked a whole country, destabilized an entire region and left behind a power vacuum. This power vacuum allowed armed groups to emerge and to gain a foothold in the region. ISIS managed to find its way to Syria by manipulating the war between Bashar Al Assad and the Free Syrian Army. This war meant the destruction of Syria and its infrastructure, instability, and a massive flow of refugees into the Middle Eastern countries that now began to shift to Europe. In his remark to American journalist Ben Swann in his documentary "Origin of Isis", Daniel Mc Adams (Executive Director of the Ron Paul Institute) described ISIS as the best-funded armed group, since they secured oil from fields in Syria that is now being sold in the black market. All of this comes down to the direct action of the U.S. and Europe in the Middle East - they were not just "minding their own business" at all now, were they?
ISIS is not a coincidence - it is the logical result of western policies since the Cold War
This goes even further than 9/11, since the emergence of armed Islamist groups like the Taliban, Al-Qaida and ISIS are the logical consequence of the massive interventions that have occurred since the 1950s. Even politicians don't deny that they have contradictory policies.
When asked about the sanctions on Iraq up to 2003 that led to the death of an estimated 500'000 children (more than those that died in Hiroshima), Madeleine Albright said the price was worth it. It is clear even to those who are not afraid to recognize their own "cognitive dissonance", that the Islamist armed groups, whether the Taliban, Al-Qaida or ISIS have all been financed and armed by the same powers that are responsible for waging war on the Third World for decades.
So why was Paris attacked? Daniel Mc Adams stated that the U.S. is "hostage to its own regime-change philosophy". However, the rest of the western world is also a hostage in one way or another. The fact that Paris was targeted for another catastrophe could be linked to France's intensive meddling in Africa and the Middle East in recent years. The French government alone conducted more than 200 bombing raids in the Middle East in little over one year. They also have a colonial history of more than 100 years in the Middle East and still deploy several thousand troops to West Africa. They were also involved in NATO's war against the Libyan government in 2011.
However, there is another side to the story, since some facts about the Paris attacks were strange and raised red flags. First, there was a multi-site simulation of a terrorist attack planned involving first responders, police, emergency services and other personnel in the morning hours of November 13th (as confirmed by Patrick Pelloux, EMT and chronicler at Charlie Hebdo, to France Info radio on the following day). This was similar to the government exercises conducted in the advent of the bombings in London, Madrid and Boston. I find this quite disturbing. When something repeats itself, it usually is no longer a coincidence. Second, the directors of the CIA and French intelligence held a meeting a few days before the attack. Could this be just another coincidence? These "coincidences" reminded me of 1990, when Italian Prime Minister Giulio Andreotti officially revealed information on 'Operation Gladio'. Gladio was a secret 'stay-behind' operation created by NATO with the help of the Pentagon, the CIA and MI6. It orchestrated bombings in Italy and other European countries. Their goal was to rally people's support for their governments in Europe in their fight against communism. The Swiss historian and peace researcher, Dr. Daniele Ganser, and others wrote about this dark form of government oppression. He quotes right-wing extremist Vincenzo Vinciguerra, who had ties to the Gladio branch of the Italian military secret service, as saying:
"You had to attack civilians, the people, women, children, innocent people, unknown people far removed from any political game. The reason was quite simple. They were supposed to force these people, the Italian public, to turn to the state to ask for greater security. This is the political logic that lies behind all the massacres and the bombings which remain unpunished, because the state cannot convict itself or declare itself responsible for what happened."Don't get me wrong, I am not claiming that Paris was a false flag attack, because I really don't know. Nevertheless, what can be said is that many terror attacks/incidents in the past were conducted by the "deep state" and its servants, the secret agencies, with the aim to shape the people's perception towards certain groups or countries. Therefore, I believe it would be naïve to take the official story for granted without even asking a few questions. Gladio, amongst others, is just a perfect example of how governments used oppression against their own citizens to shape the mindset of the public to unify them towards a common goal and objective, which in our case is: counter-terrorism. The problem, however, is that by giving this support, the public indirectly relinquishes many freedoms and liberties.
After the siege: closing on the home front
The aftermath of the attack will also have repercussions at home. Now, that the pretext is created, the state can justify limiting freedoms and liberties, as well as monitor and coerce. In our interview with Prof. Ing. Václav Klaus, former President of the Czech Republic, shortly after the Charlie Hebdo incident, he warned us that we will see new waves of attempts to limit our freedoms, under the banner of fighting terrorism. This is exactly what we are seeing today.
By the time this article was written, France had announced it will derogate from the European Convention on Human Rights during its state of emergency!
But what truly astonishes, is the fact that governments seem to have little regard for their people. I have the feeling that some people in power just believe that we are completely ignorant. Of course, they have also created the mechanisms to be able to indoctrinate us. Just look at our public education system. Wilhelm Wundt, father of experimental psychology (and his proponents John Dewey and Edward Thorndike in the U.S.), who was the scientist that shaped today's public educational system explained it in this way: "man is devoid of spirit and self-determinism. He set out to prove that man is the summation of his experience, of the stimuli which intrude upon his consciousness and unconsciousness." Similarly, H. L. Mencken, a German-American journalist, who wrote in the April 1924 issue of The American Mercury that the aim of public education is not:
"...to fill the young of the species with knowledge and awaken their intelligence... Nothing could be further from the truth. The aim... is simply to reduce as many individuals as possible to the same safe level, to breed and train a standardized citizenry, to put down dissent and originality. That is its aim in the United States... and that is its aim everywhere else."Our public education system is based on methods that show we can grow up based on a stimulus-response compatibility. Our way of thinking and mindset are based on conditioning and not on logical thinking. Therefore, Wundt and his associates believed that, through its education system, the state seeks to indoctrinate us to believe that the right of the individual is secondary (at best) to the greater good. The renowned psychoanalytic Arno Gruen says that we enter the world as individuals but leave it as copies. This means that our education system discourages the development of independent thought. If you don't fit into the preset mold then you are wrong. We have lost our free will.
Stop fighting symptoms - think independently and look for the cause and effect!
I hope you are not offended by my words and will forgive me because I'm a freedom and liberty loving Swiss. I have been raised in a political environment of neutrality with no foreign intervention for 500 years and a political system that allows less centralization of power than any other form of government. Therefore, we have never experienced nationalistic or even racist propaganda campaigns or presidents telling us to wage a war against another country for one cause or another. To believe that peace can be created through bombing and killing millions of civilians, is something I fail to understand. This is because I personally prefer to think independently and to investigate and explore instead of prematurely taking positions or adopting the views of others.
We have to think in terms of cause and effect and not like the mainstream media, or public intellectuals and politicians who only tackle the symptoms. For example, I find that the cause of high crime rates is an unsound society that is negatively impacted by the state that legitimizes the use of coercive measures (including the use of force). Similarly, an overwhelming state that uses force against foreigners will always use coercion against its own people, both physically and psychologically. It is intended to have people not think independently.
The western governments (aided by mainstream media) don't recognize that the cause of the refugee waves was due to their management of the situation in the Middle East. It was a cause of direct and deliberate action. The irony is that Western governments that sent bombs and drones to the Middle East are now asking their citizens to embrace the refugees and to live side-by-side in the same villages and towns, even though society has been conditioned not to accept them. When I look at Paris and the absurd western politics promoting 'universalism', I'm not sure if I should laugh or cry - insanity among the rulers is just inexpressible. On the other hand, the ignorance of the masses is quite unsettling.
Our political economy reinforces state control and our education system is designed for our indoctrination! No one knows the future but we can identify trends. My personal opinion is that the powers are accelerating a religious war, which will make Islam the opponent of the rest of the world. This is being reinforced by politicians who, by definition should be serving the people, yet self-preservation leads them to serve the state; their true master. These circumstances create a dangerous conflict of interest.
This political context, combined with our economy, which is not based on production and savings, but is based on printing money to finance the welfare/warfare state, and that also relies on bribing politicians who bail out too-big-to-fail companies, who impoverish the middle class through inflation and higher taxes, will lead us to total dependency on governments. When we further add the factor of terror attacks, the military response of western governments is to intensify their attacks in the Middle East. This has only one logical consequence: that hatred between western countries and the Muslim people will intensify and that the parallel society in western nations and radicalization on a global scale will increase further. More terror attacks will follow, and governments will grow all the more coercive as they steer towards totalitarianism. People won't be able to flee because they are trapped in a system that controls everything and everyone.
This is what is happening right now. This is what our political leaders are enforcing and we are all just looking to see what's going to happening next. The pretext is clear: "they hate us because we are free". This is simply just another way of using Hegelian Dialectic to fool the masses! From this system of Hegelian philosophy comes the historical dialectic or as per Anthony C. Sutton, that all historical events emerge from a conflict between opposing forces.
How so? Any idea or implementation of an idea may be seen as a thesis. This thesis will encourage the emergence of opposing forces, known as the antithesis. The final outcome will be neither thesis nor antithesis, but a synthesis of the two forces in conflict. Hegel described the function of a Parliament or a Congress as merely to allow individuals to feel that their opinions have some value. Hegel wrote:
"By virtue of this participation, subjective liberty and conceit, with their general opinion, (individuals) can show themselves palpably efficacious and enjoy the satisfaction of feeling themselves to count for something."War, the organized conflict of nations for Hegelians, is only the visible outcome of the clash between ideas. As John Dewey, the Hegelian darling of the modern education system, puts it:
"War is the most effective preacher of the vanity of all merely finite interest, it puts an end to that selfish egoism of the individual by which he would claim his life and property as his own or as his family's."Dialectic in praxis can come as follows: Create a problem (bomb the Middle East), provoke a reaction (refugee streams), come up with a solution (universalism) and then start over again.
Create a problem (terror attacks), provoke a reaction (people start mistrusting and fighting each other), come up with solution (enforce state control and deprive the public of their liberties)... it goes on and on.
Is there a light at the end of the tunnel? I believe that we always have a choice but we also have to make it. The first thing we need to do is undo the current situation with our military involvement in the Middle East and Africa. If we favor war over peace, it will destroy our culture, our traditions, our freedom and our liberties. As a result, humanity is going to become a borrowed word. This is why I strongly believe that people one day will open their eyes and will refuse to let the media or politicians impose their reality on them. Only independent thinking leads directly to the cause and shift the focus away from its symptoms. I'm still convinced that people in the future will understand what Murray Rothbard wrote a few years ago that peace is the solid foundation for a society to live in liberty:
"Libertarianism holds that the only proper role of violence is to defend person and property against violence, that any use of violence that goes beyond such just defense is itself aggressive, unjust, and criminal."
The Fed’s Lift-Off: Keep Calm and Carry On
Some bond traders were teenagers the last time the Fed increased interest rates.
By Alan S. Blinder
Gold And Silver - Hope And Change From Last Week? Little Hope, Little Change
By: Michael Noonan
Was last week the start of something big? You be the judge of what the market is saying.
Lower, intra day time frames are more problematic. One's frame of reference is occupied with faster moves that require quicker decisions and often result in more losses than profits. Quite frankly, many traders lack the discipline necessary, and even more importantly, do not have a detailed set of rules of engagement. It may seem tedious that we keep saying to wait for confirmation before making a buy/sell decision, yet the futures markets are dominated by highly skilled professionals and, just as often, cartels or even governments that control activity.
The daily fiat "dollar" chart serves as an example. Recent support was decisively broken with a wide range bar and on very strong volume. Typically, this is how trends undergo change.
However, the FX markets are strictly controlled by the primary central banks, and very little trading information is provided by them, yet they see all buy/sell orders from all participants providing a huge advantage for the "house," as it were.
No one can be certain of insipid Draghi's impact on the market last Thursday that generated a huge increase in volume activity and equally huge losses for many traders. Is that volume a legitimate break of support that will change the trend, or is the volume climatic to the downside, over-extending the sell-off through support, triggering weak hands to exit, even some professionals caught on the wrong side, as well as resting stops being hit and new selling by computerized programs? If the latter, then last week could be nothing more than a bear trap where sellers will have to pay up to cover short positions.
By having a set of rules and a game plan, and a solid plan always incorporates stops to protect positions at all times, one can minimize risk exposure. Any well-developed set of rules would not be buying recent highs because the risk exposure is too great. Last Thursday proves that kind of exposure from imprudent buying.
What impact will last week have? Looking only at a daily chart, it looks rather ominous, as we purposefully described. When one shifts perspective by looking at higher time frame charts, the results are quite different, as the monthly chart will show.
We get a totally different "look" and sense of expectation concerning the trend. There does not appear to be much change, if any, in the stronger monthly trend. Price is still well above most of the activity for all of 2015. In fact, when you compare the volume for the month, to date, and the small size of the range, the month being still young, it looks like sellers did not make much of a dent in the up trend.
Then, compare the volume spike in March and how much larger the trading range was relative to current December. Firstly, the volume spike from last March was a red flag for longs because it suggested sellers were just as active in high numbers as buyers at the then top of a rally. Smart money buys low, on increased volume, and sells high, also on increased volume. That is why the high volume was a red flag denoting strong seller presence at a high area.
The fact that the market traded lower-to-sideways for the next nine months confirms the observation about sellers. What the sideways activity says is that the impact of sellers may have stopped price from going higher, they had little ability to push the market lower. We have commented that the reaction since the March high has been weak, and weak reactions tend to lead to higher prices, and higher prices were evident since October.
There is no clear answer on the "dollar" topping here, or not, but the monthly chart is telling a much different "story" from the daily. There is much more to how one could have read this market activity, but these two charts show how easily one can miscalculate a market by not being aware of all time frames and not having a defined set of rules.
The chart comments set out the facts from the chart as it exists today. Gold is still in a weak market condition. Is a bottom forming? Like we said last week, we keep getting closer without knowing how close the anticipated bottom will be.
There is reason to be on an alert for continued near-term strength in this nascent rally, really just one week. The outside reversal following the prior week's sharply higher volume can be positively construed. The same could have been said of the swing low in December 2013, October 2014, and the shorter live rally that started in March 2015. None led to a change in trend.
Based on this factual history, you can better understand why confirmation is so vital. It takes more patience than many want to exercise, wanting immediacy and clarity, but that is not how markets function, especially like in PMs that are being overtly suppressed by the globalist's Federal Reserve, for the most part.
If one wanted to presume that a bottom is in for gold, [and we are not making such a presumption], then one can see the layers of resistance above current prices that would impede "normal market rallies" in a not so normal market. Whatever the potential for a turnaround may be, at this point, it will take some time to break through the layers of built-up resistance to change the existing trend.
Trend changes are noted sooner on lower time frames, like this daily v the above weekly chart.
Look how far away even a 50% retracement is on the daily chart. Friday's strong rally may have been encouraging, but last October's wide range strong rally was greater than Friday's, and all that resulted was another lower swing high. No change in trend was confirmed.
Therefore, there has been no reason to position trade from the long side of the futures paper market.
The case for a potential change developing on the weekly gold chart is more compelling on the weekly silver chart by virtue of how the support line has been persistently holding. Gold, by contrast, has been a series of consistent lower swing lows.
We say the watchword is caution because the current activity has to be confirmed by future activity. Hoping for change will not do. What we are saying is the daily silver chart becomes more important to watch for a potential change in market character for any change will show up there, first.
As with gold, the daily silver chart is not that encouraging for anticipating a change in trend.
The EDM [Ease of Downward Movement], since the late October swing high, making a new recent low, does not auger for an immediate change in trend. The weekly chart shows a possible framework for change, but the daily says there is a lot of work required to shore up that framework.
Stay with the physical, and add as one can or feels comfortable. There is no sense in complaining about where the price of silver is, [and gold], for the price is artificial, but still a reality, and at some point that does not appear to be soon, the reality of demand will kick in, but not before the reality of how the globalists are playing this out to the bitter end.
Like it or not, patience will be required, still, going in to 2016.
The risks mean investors have to take climate change seriously
FEW people place great store in the ability of negotiators to reach a meaningful deal during the conference on climate change that began in Paris this week. One problem is that some politicians refuse to admit the problem is real. But those who work in the financial markets have to take the issue seriously: ever since being hit by losses from Hurricane Andrew in 1992, insurance companies have been modelling climate risks. Bank of America Merrill Lynch (BAML) just weighed in with a 332-page report on their economic and financial impact.
A changing climate, and the eventual efforts of governments (however reluctant) to deal with it, could have a big impact on investors’ returns. Companies that produce or use large amounts of fossil fuels will face higher taxes and regulatory burdens. Some energy producers may find it impossible to exploit their known reserves, and be left with “stranded assets”—deposits of oil and coal that have to be left in the ground. Other industries could be affected by the economic damage caused by more extreme weather—storms, floods, heatwaves and droughts. “Investors have to worry about a material and unexpected loss of capital,” says Ewen Cameron Watt, chief investment strategist at BlackRock, a fund-management group.
Moody’s, a rating agency, has tried to quantify the impact for bond markets. It puts three industries (deregulated power generation, coal mining and coal terminals) at “immediate and elevated” risk from climate change; between them, these sectors have $512 billion in rated debt.
Another eight sectors (including carmakers, miners and oil refiners), with $1.5 trillion of rated debt, have “emerging, elevated” risk. A further 18, with $7 trillion of debt, face risks over the medium term, defined as more than five years ahead. That leaves the vast majority of the corporate-bond market, encompassing $59 trillion of rated debt, in the low-risk category.
Broadly speaking, investors who are concerned about the issue follow three approaches. The first is an outright boycott of the dirtiest industries. The latest example is Allianz, a German insurance group, which said it would no longer invest in companies that “derive more than 30% of revenue from coal mining or generate over 30% of their energy from coal.” The result will be a divestment of €225m ($238m) in the shares of coal groups; Allianz will continue to hold its €3.9 billion of bonds in such companies, but not buy any more. More than 400 investment institutions have made similar commitments, according to 350.org, a green lobby group.
The second approach is to maintain stakes in carbon-producing firms but to try to engage with their management in an attempt to change their behaviour. Research by BlackRock shows that companies that have reduced their carbon intensity (defined as emissions divided by sales) have outperformed the market since March 2012, when proper data on corporate emissions first began to be collected.
A third approach is to skew portfolios towards the companies that will do well out of attempts to curb carbon emissions. Some low-energy technologies have already had success. Light-emitting diode (LED) bulbs consume less than 15% of the energy of incandescent bulbs. They had just 1% of the lighting market in 2010. This year their market share is 28%; Goldman Sachs forecasts it will be 95% by 2025. Then there is renewable energy. So far, it generates only a small proportion of global power. But BAML says that, globally, wind and solar power made up nearly half of the additional energy-generating capacity installed in 2014 and may comprise 70-80% of new capacity between now and 2030.
There is little evidence that following these strategies has had a big positive impact on returns so far. Standard & Poor’s has identified the 100 highest and lowest emitters in its index of 1,200 global stocks. As the chart shows, the highest emitters have done marginally better since 1999.
That reflects the strong performance of energy companies during the period of rising commodity prices; in recent years, as the oil price has dropped, the low emitters have caught up. But falling energy prices have also hit the shares of renewable energy producers, many of which need high power prices to be competitive: over the past five years, S&P’s Global Clean Energy Index has suffered an annual return of -9%.
Picking the right strategy will not be easy, therefore. But all investments have their pitfalls. Ignoring the climate issue altogether looks like the biggest risk of all.
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
Pensamos que solo comprendiendo cabalmente el presente, es que podemos proyectarnos acertadamente hacia el futuro.
Gonzalo Raffo de Lavalle
Las convicciones son mas peligrosos enemigos de la verdad que las mentiras.
Quien conoce su ignorancia revela la mas profunda sabiduría. Quien ignora su ignorancia vive en la mas profunda ilusión.
“There are decades when nothing happens and there are weeks when decades happen.”
Vladimir Ilyich Lenin
You only find out who is swimming naked when the tide goes out.
No soy alguien que sabe, sino alguien que busca.
Only Gold is money. Everything else is debt.
Las grandes almas tienen voluntades; las débiles tan solo deseos.
Quien no lo ha dado todo no ha dado nada.
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We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.
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