Afghan Unwind

There's a room where the light won't find you
Holding hands while the wall come tumbling down
When they do, I'll be right behind you
--Tears for Fears

The chaos that has erupted in Afghanistan following the abrupt removal of remaining American forces by Joe Biden has fostered no shortage of finger pointing. Republicans, especially, smell political blood in the water. Their howls range from "America has been completely embarrassed" to "Biden should resign."

These rants may be justified on some levels, particularly in light of what has transpired over the past year and a half. But, as Ron Paul notes in a more or less "I told you so" rant of his own, many of these same politicians created the Afghan mess to start with.

Meanwhile, most Democrats are predictably circling the wagons around Biden. He did the right thing, Dems claim, by taking us out of an unpopular war. And, indeed, prior to the chaos polls had suggested that nearly 70% of American opposed US presence in Afghanistan and wanted us out. 

As a matter of fact, I was one of them.

At the end of the day, I suspect the problem that most Americans, and perhaps many across the globe, have with what is going on is not the intent but the execution. As Ron Paul observes, the 20 year campaign of terrorist fighting and nation-building in Afghanistan had been counterproductive for years. Most people saw the writing on the wall.

The Trump administration seemed to understand this. Trump had begun the process of unwinding in-country military commitments but stopped short of complete withdrawal based on advice that it wasn't quite time to do so yet. 

Reports are circulating that the Biden Administration ignored similar advice. Rather than continuing a measured withdrawal, Biden decided to pull out cold turkey. Unfortunately, the political vacuum created by his hasty action has cost many lives, with more surely to come. It has also cost Biden a pile of political capital.

Which brings me to my main point. There was a time where I might have done things like Biden did here. I used to think that if I were in charge, then I would end every government-sponsored program--immediately. 

But now I know better.

When government intervenes anywhere--overseas in military ops such as Afghanistan, or in domestic affairs such as welfare and healthcare redistribution, it distorts human behavior and interaction. These distortions create dependencies and other commitments that cannot quickly be reversed should those interventionary policies no longer garner political support.

As Biden's actions have demonstrated, trying to reverse these dependencies quickly is likely to create considerable pain. Retrospectively, a more measured phase out may have been more sensible--and more humane. 

Biden might have told his administration, the media, and people in the US and Afghanistan, that the US would be out of Afghanistan in, say, two years. He could have demanded phased withdrawal plans from the military and other advisors in the early days of his administration, and then shared the plans with all stakeholders. Those plans could have included key dates, goals, measures of progress along the way.

And to be fair, Trump could have done the same thing.

Similar measured exits could be designed for every bloated government-sponsored program on the books. Social Security, Medicare, welfare, etc. For example, Social Security payments might be phased out over the course of four, eight, or ten years.

Do measured withdrawals from government programs cost more? Perhaps, but perhaps not given the potential cost associated with chaotic withdrawal. Is it possible that a measured withdrawal never happens--given the proclivity of institutionalized bureaucracies to stifle change? For sure. Will they be politically unpopular with large voting blocs that benefit from the largesse? Without question.

However, I can't help but think that the transparency of a well communicated gradual exit strategy executed by determined leadership would be an effective, and fair, way to back out of trillion$ in government largesse.

Let's also note this. If we don't proactively back out of commitments, particularly those with massively upside down economics, then market forces will do it for us at some point. And when they act, market forces are likely to do so quickly. 

Biden's handling of the Afghan situation therefore serves as a harbinger of the chaos likely to ensue in other domains if we do not learn from mistakes made here and initiate programs of measured reversal.

War Power Patriotism

Friends all tried to warn me
But I held my head up high
All the time they warned me
But I only passed them by
--Mike Curb Congregation

With President Trump authorizing a drone strike last week that killed a high level Iran military official, calls have once again surfaced about restraining presidential authority to act with military force. Typically, these calls come from the opposing party.

It is not surprising, therefore, that Democrats are amassing against Donald Trump, just as it was no shock to see Republicans protesting against Barack Obama's liberal use of drone strikes. Hypocrisy here has been evident for a long time.

Really worth watching the full six minutes of @Senmikelee's comments. He gives a great quick class on the Constitution and War Powers and how failure to follow the Constitution is why we've had a disconnect between the people and the wars we find ourselves in. https://t.co/xN8ZVj3DGm

— Mollie (@MZHemingway) January 8, 2020

On the other hand, it is refreshing to watch a small group of congressmen exhibit what is a rare trait in Washington: consistency. At the forefront of this group has been Rand Paul, accompanied by Mike Lee and Thomas Massie. This trio has been unwavering in their opposition to the clearly unconstitutional practice of ceding war powers to the president. They opposed it under Obama just as they oppose it currently under Trump.

I agree with @RandPaul and @SenMikeLee that the Constitution calls for Congress to debate and decide whether to further escalate the military conflict with Iran. The three of us have been consistent on this point regardless of which party has been in the White House. https://t.co/cILen9foXF

— Thomas Massie (@RepThomasMassie) January 9, 2020

The War Machine reflexively calls this group unpatriotic and claims that they are helping the enemy by the opposing the president. As Kat Timpf notes, however, there is nothing unpatriotic about standing up for the Constitution. Our founding ancestors wrote the Constitution in rejection to the English model--a model which granted a single individual discretionary power to put a country at war.

"Both parties are at fault here," concluded Paul. "It isn't just Republicans. President Obama usurped the war powers. Bush did it. Truman, LBJ, you name it. It's hard to find a president who hasn't done it, but Congress has abdicated that role." https://t.co/R61xijl40X

— Senator Rand Paul (@RandPaul) January 10, 2020

The Constitution clearly places authority for declaring war with Congress. Congress has clearly abdicated its role in a bipartisan manner.

Sanctions Escalate Tension

Hands across the water
Heads across the sky
--Paul and Linda McCartney

People often view economic sanctions as a peaceful deterrent. However, sanctions deny people their natural right to produce and trade with others to better their situation. When voluntary exchange is prohibited, then standard of living falls. When people are starving due to another country's prohibitive policies, they are, as noted below, likely to 'do desperate things.'

Desperate people do desperate things. Like this, and lack of proper crowd control at Soleimani's funeral so 50+ are stampeded to death.

Ukrainian airplane shot down by mistake by Iranian anti-aircraft missile, Pentagon officials believehttps://t.co/kn7JSTuLzT https://t.co/MWAfoc4Img

— Jim Bianco (@biancoresearch) January 9, 2020

From their standpoint, sanctions are acts of aggression. As with any aggression, people have a natural right to defend themselves sanctioned aggression.

Sanctions do not relieve geopolitical tensions. They escalate them. Sometimes to the point of war.

War to Peace

The war machine
It springs to life
Opens up one eager eye
--Nena

Last nite Iran fired missiles at two US military bases in Iraq. US stock futures plunged nearly 2% and gold creased $1600/oz for the first time in about seven years.

Overnight ES futures down 1.7% and recovered to positive BEFORE the NYSE open.

The last example of a 1.6% OVERNIGHT decline and recovering BEFORE the NYSE was the election night 2016.

ES futures were limit down 5% on election night. They recovered to up over 1% BEFORE the NYSE. pic.twitter.com/aT4KlnNczA

— Jim Bianco (@biancoresearch) January 8, 2020

After news circulated that a) damage to the US bases was light and there were no casualties, b) President Trump was not immediately going to respond to the attack, and c) Iran leaders signaled that they were unwilling to escalate the situation further, the fear trade came off and US stock futures were in the green pre-market.

One tiny example of what can happen when a situation moves from war to peace.

Gold's Perfect Storm

Oh, a storm is threating
My very life today
If I don't get some shelter
Oh yeah, I'm gonna fade away
--The Rolling Stones

As these pages have frequently noted, gold is a bet on disorder, whether that disorder be economic or more broadly social in nature. We're witnessing that bet being put on now.

Gold is up another $20 this am as geopolitical tensions with Iran escalated over the weekend. At ~$1575/oz, gold is marking six year highs. All time highs rest ~$300 higher.

Couple the geopolitics with central bank easy money policies, and you create a near perfect storm for gold.

position in gold

Oil Patch Attack

Out where the river broke
The bloodwood and the desert oak
Holden wrecks and boiling diesels
Steam in forty five degrees
--Midnight Oil

Attacks on Saudi Arabian oil fields over the weekend find crude up about 10% this morning. The attacks are thought to have been the work of Iran, although there is no proof as of yet. The Trump administration has signaled that military response is possible if such proof were to surface.

Oil stocks are up in sympathy.

I like US integrated oils like Chevron (CVX) and Exxon Mobil (XOM). Not only are they a hedge on geopolitical instability, but also a play on commodity inflation--a real possibility with $trillions being printed for new rounds of QE.

Sprinkle in 4-5% yields and somewhat so-so sentiment about these names and you have an interesting story.

position in CVX, XOM

You Like 'em, I Hate 'em.

He's got a brand new car
Looks like a Jaguar
It's got leather seats
It's got a CD player, player, player
--Feeder

'The enemy of my enemy is my friend' is a well known strategic posture. In politics, the antithesis--'the friend of my enemy is my enemy--is also popular. If you like 'em, then I must hate 'em.

Had a long and very good conversation with President Putin of Russia. As I have always said, long before the Witch Hunt started, getting along with Russia, China, and everyone is a good thing, not a bad thing....

— Donald J. Trump (@realDonaldTrump) May 3, 2019

During the previous administration, President Obama's friendly overtures toward Cuba and Irann increased opposition animosity toward those countries. During the current administration, President Trump's friendly overtures to (insert foreign country name) has drawn similar ire from political opponents.

Once again, social identity theory in motion.

Does make one wonder how world peace can come about when in two party, winner take all democratic systems. It is politically expedience to detest the friends of your enemies.

Who's the Threat?

"You have murdered our women, and our children, and bombed our cities from afar, like cowards, and dare to call US terrorists?"
--Salim Abu Aziz (True Lies)

Ron Paul's map bids an obvious question:

We're told repeatedly that Iran is a major threat to the United States.

The foreign policy of the United States should be as Thomas Jefferson advised: "Peace, commerce, and honest friendship with all nations-entangling alliances with none." pic.twitter.com/O2HnJOCGpM

— Ron Paul (@RonPaul) February 13, 2019

Who should feel threatened by whom in this situation?

Treaties and Executive Power

See the stone set in your eyes
See the thorn twist in your side
--U2

Article II, Section 2 of the Constitution states:

[The President] shall have Power by and with the Advice and Consent of the Senate, to make treaties, provided two thirds of the Senators present concur.

During his presidency, Barack Obama did not present either the Paris climate accord or the Iranian nuclear deal (a deal that made sense to me) to the Senate. Because he apparently didn't think that either treaties would pass muster in the Senate, Obama unilaterally committed the United States to both agreements using his executive power.

Since he became president, Donald Trump has discontinued those treaties with executive orders of his own. He has used his executive power to get the US out of commitments that were unconstitutionally created in the first place.

Lesson: A president who ignores the law to advance his agenda by using discretionary power reduces the durability of his legacy when a subsequent president uses similar discretionary power in reverse.

Tariffs and Central Planning

Happiness
Is so hard to find
Hey baby
Tell me what is on your mind
--New Shooz

What Thomas Massie is saying here is that tariffs are a form of central planning. Whether the purpose is to protect local industry, to fix prices, or to establish production quotas, tariffs are imposed because government officials think they know better than markets.

This is the opposite of using tariffs to protect American producers. Government induced increases in global production will hurt American energy producers. When governments decide how much to produce (this case), and what prices should be (tariffs), consumers ultimately suffer. https://t.co/hkPRROMpDb

— Thomas Massie (@RepThomasMassie) June 30, 2018

Donald Trump may be pro-business, but that is not the same as being pro-market.

Travel Ban Upheld

Judge McKay: Let's try and keep this from become a personal matter, please.
Ed Hucheson: Well, a newpaper's a very personal matter, sir. Ask the people who let us into their homes. 
Judge McKay: I've read The Day for more than 35 years. Before that, I sold it in the streets. However, here we're only concerned with the legal aspect of the sale and purchase of property.
--Deadline U.S.A.

In a 5-4 decision released yesterday, the Supreme Court upheld President Trump's 'travel ban' affecting several mostly Muslim countries. The ruling essentially reverses several lower court rulings opining that the ban unjustly discriminated on the basis of nationality and religion.

Those lower court opinions, and those among the four dissenting Supremes, are grounded in the argument that statements made by Trump, many of them during his presidential campaign, 'prove' that his motivations for the travel ban were bigoted and racist. However, it does not take a J.D. to sense that such an opinion rests on shaky legal footing.

After reading the Ninth Circuit opinion issued in early 2017, I wondered whether it was the court, not the president, that was overstepping bounds. The central legal issue is whether the president has the authority to issue such an executive order and whether the content of the order is consistent with the rule of law. As long as the order itself is valid, then the motivation behind it matters little.

Otherwise, what the dissenters in this case essentially argue is that the same executive order issued by a different president who used less inflammatory rhetoric would be ok.

.@Judgenap: “Executive orders signed by Donald Trump and any subsequent president will be interpreted only on the basis of the words that are in the order." https://t.co/YJoYrCncJe @AmericaNewsroom pic.twitter.com/pULP5BryRV

— Fox News (@FoxNews) June 26, 2018

As Judge Nap recounts, this is what the majority SCOTUS opinion concluded. It is the text of the order that must be construed from a legal standpoint. The political or rhetorical backdrop have little standing. Stated differently, what matters under the law is what's in the law, not the personalities behind it.

Although it has been suggested that this sets an important legal precedent for interpreting executive orders, it is difficult to see how other approaches would be more consistent with the rule of law.

Our Largest Threat

Wasted
Sacrificed for the new nirvana
Night time sends the sun away
--Icicle Works

What is the largest threat facing the United States? It isn't external. Not China, North Korea, Russia, Iran, nor ISIS.

It is internal, grounded in our proclivity to live beyond our means. As this congressman observes, the largest threat facing the US is our national debt.

A country that can't keep its fiscal house in order is destined for the scrap heap of history.

Meeting North Korea

"There is a saying in Korea. Saying something a hundred times is not as good as living it once."
--Kang (Olympus Has Fallen)

The finest achievements of Barack Obama's presidency were the reopening of friendly talks with Iran and Cuba. Naturally, he caught (and still catches) grief from his detractors for doing so.

Now it is Donald Trump's turn. Trump has been working on a historic meeting with the president of North Korea--something that any proponent of peace and prosperity should support. Unfortunately, but all too predictably, many of those who cheered President Obama's diplomatic efforts are condemning Trump's.

As Ron Paul observes, just as trading is always better than sanctioning, so is talking always better than threatening.

Any effort that gets adversaries together at a table for conversation should be encouraged.

Government and Scapegoats

No message could have been any clearer
If you want to make the world a better place
Take a look at yourself
And make the change
--Michael Jackson

When was the last time a government official stepped up and said that he/she owned a problem? Jacob Hornberger suggests that the answer is never. Government is always looking for scapegoats.

Credit crisis, Iraq/Middle East, Holocaust, immigration, drugs, et al.

While interventionism brings death and suffering, the interventionists avoid the mirror.

Operation Ajax

"There may be honor among thieves, but there's none in politicians."
--T.E. Lawrence (Lawrence of Arabia)

Operation Ajax was a CIA operation to overthrow the government of Iran in 1953. Two years prior, the democratically elected Mohammad Mossadeq had pushed for nationalization of Iran's oil industry, thereby removing it from the clutches of England who had been enjoying a sweetheart oil deal rooted in Sykes-Picot decades earlier.

Reluctant to lose its cheap oil supply, Britain convinced the US that the Iran regime had communist inclinations. The Americans, gripped in Cold War mania, were drawn in.

The CIA op, led by Theodore Roosevelt's grandson Kermit, used classic methods of subterfuge. The CIA hired Iranian goons to pose as communists to instigate riots and vandalize property. The majority of Iranian citizens demanded that the Iranian military intervene. By that time, the CIA had turned many Iranian military leaders into CIA operatives. When the moment came, the military operatives deposed the Mossadeq regime in the name of saving the country from communism.

The corrupted military leadership returned power to the Mohammad Reza Shah Pahlavi, who had previously been king. In exchange for the throne, the Shah was at the service of the US and UK. His dictatorship reigned for the next 25 years.

Although many Iranians suspected US involvement, the coup was kept secret from the American people for many years. The CIA, of course, considered the coup a resounding success.

In 1979 a revolt overthrew the Shah and Islamist forces headed by Ayatollah Khomeini prevailed. Takeover of the US Embassy in Iran and the ensuing 'hostage crisis' punctuated the period. The Islamist Republic of Iran was born, alongside anti-American animosity that has endured for decades.

The lineage of this creation traces straight to Ajax.

Iran and Peace

A cloud appears above your head
A beam of light comes shining down on you
Shining down on you
--A Flock of Seagulls

Little that President Obama has done has been peaceful. Like most modern presidents, Mr Obama believes in expanding government reach. And as government grows, more aggression is applied to social systems.

Welfare and warfare states are both states of violence.

However, there have been two areas were this president's actions have actually removed offensive force from the system: Cuba and, more significantly, Iran.

Primarily, these actions have served to reduce sanctions with these two countries. Sanctions usually restrict trade. Trade between countries improves well being on both sides and reduces incentive for war. To reciprocate a classic truism: "When goods cross borders, armies won't."

There are the usual complaints that Obama's agreement with Iran is too one sided, e.g., Iran can still build nukes, the president hates Israel, these actions threaten national security, etc. None of this matters. In fact, purely unilateral actions to lift all sanctions without demanding anything in return would have been the most peaceful action to take.

Good work, Mr President. If you want to continue to build a legacy of peace rather than of aggression, then there is much more you can do.

Sykes-Picot

Prince Feisal: Well, General, I will leave you. Major Lawrence doubtless has reports to make upon my people and their weakness, and the need to keep them weak in the British interest. And the French interest, of course. We must not forget the French now.
General Allenby: I've told you, sir, no such treaty exists.
Prince Feisal: Yes, General, you have lied most bravely, but not convincingly. I know this treaty does exist.
T.E. Lawrence: Treaty, sir?
Prince Feisal: He does it better than you, General. But then, of course, he is almost an Arab.
--Lawrence of Arabia

The Sykes-Picot Agreement of 1916 was a secret arrangement between Great Britain, France, and Russia about how to divide 'Asia Minor' and portions of the Middle East. The area at the time was controlled by the Ottoman Empire. Part of the thinking of the agreement was that the Ottoman Empire had to be neutralized, lest key resources for trade (shipping routes, oil, etc) would be jeopardized.

Great Britain et al then spent decades trying to make it happen via regime support and other forms of 'nation building,' instigating war (e.g., Ottomans vs Arabs), biased trade policy, and other nefarious action. The US, never shy about meddling in the affairs of others as the 20th century progressed, gradually became involved as well.

Of course, this constitutes more than just awkward intervention. It is outsiders with an interest instigating violence in someone else's territory. A form of war.

It is easy to understand the resentment that native inhabitants have toward outsiders meddling in their affairs. Today's upheaval in the Middle East, and spillover violence elsewhere, can be attributed to arrangements put in motion nearly 100 years ago.

Firming Commodities

Riders on the storm
Riders on the storm
Into this house we're born
Into this world we're thrown
--The Doors

Commodity baskets appear to be firming. Yes, geopolitical tensions in Iraq and elsewhere are boosting the oil complex, but many other commodities, such as gold and silver, appear to be gathering technical strength as well.

Am keeping my eye on some commodity ETFs as proxies. Many are challenging multi-year downtrends. If they break through with authority, then commodity bulls will be riding point.

position in DBC

Iran Progress

"When we're forced to go back in a couple of years, and please quote me on this, we'll be squared off against a shattered Iraq, a hopeless Afghanistan, and a nuclear Iran. How many troops are we going to need then? I guarantee you'll be adding some zeros."
--Senator Jasper Irving (Lions for Lambs)

Although I am critical of the Obama administration on most fronts, I applaud its leadership in brokering an interim deal with Iran regarding its nuclear weapons.

The agreement calls for Iran to curtail high level uranium enrichment and neutralize some rich uranium stockpiles in exchange for a reduction in trade sanctions. If Iran follows through on its promises, then its capacity for developing nuclear weapons will be reduced.

Predictably, hawks from the Right, and Israel, are protesting that the deal goes nowhere far enough. For example, Iran can still enrich uranium under this agreement. In addition, experience with other 'rogue' nations such as North Korea suggests that Iran could simply use this agreement as a smokescreen and proceed with its nuclear build-up.

Such arguments miss the mark. Neither the United States nor any other country or collection of countries has the right to dictate nuclear policy to another sovereign. Even if nuclear capability is directed toward weapon development, owning weapons is not an act of aggression. Weapons can be rightfully used for defensive purposes.

Many Second Amendment proponents hypocritically oppose weapon build-ups in other lands. The right to bear arms is not peculiar to the US. All have the right to build defense capacity as they see fit. The law tells us that perceiving someone else as a threat does not justify pre-emptive force to quell that threat. That other person must attack or must reasonably be perceived as on the cusp of initiating attack before counterforce is justified. If pre-emptive force is applied to neutralize a perceived threat that has not attacked, then that pre-emption is an act of aggression rather than of self-defense.

I would agree that the present deal with Iran does not go far enough--but in ways that both the hawks and this administration would not admit. A truly radical response to Iran's nuclear program would be this: totally withdraw all trade sanctions with Iran today. Encourage free, unhampered trade with Iran--and with all countries for that matter.

As such, from where I sit, the best part of the present deal is that trade sanctions have been reduced.

Perhaps Iran--and the US--and the world--can learn that the best interests of people in all countries are served when individuals engage in voluntary, peaceful exchange.

National Security

"These drug cartels represent a clear and present danger to the national security of the United States."
--President Bennett (Clear and Present Danger)

Jacob Hornberger observes that the federal government rationalizes much of its unconstitutional actions under the ruse of 'national security.' The national security rationale has been particularly popular since the depths of WWII that, it can be argued, birthed the modern national security state in America.

The latest object of the national security state's rath is Edward Snowden. Snowden is being vilified by government and its media lackeys for revealing a massive government spying program on its citizens. Hornberger challenges the reader to provide an example of a totalitarian in regime in the last 100 yrs that has not engaged in large-scale surveillance of its people.

No can do, Jacob.

In addition to enabling internal spy programs, the national security ruse has facilitated covert and para-military operations elsewhere. Hornberger lists example after example--Iran, Guatemala, Chile, South Vietnam, Cuba, etc. No geographic theater has been spared Leviathan's tentacles.

It is easy, yet sad, to imagine what good the vast resources employed for 'national security' could have been, and still could be, used for. There would surely be less hunger, less disease, less homelessness had these resources been entrepreneurially and peacefully employed toward production that satisfies human needs.

The opportunity cost of the national security ruse can be seen as have to settle for lower general standard of living. Stated differently, when we fall for fall for the national security ruse, we sacrifice prosperity.

Hornberger suggests that the case of Edward Snowden offers an chance for all of us to reflect on this question:

Does a national security state apparatus have any place in a genuinely free society?