18 AUG 17 – Executive Intelligence Summary – Forward Observer Shop

18 AUG 17 – Executive Intelligence Summary


[wcm_nonmember]In this EXSUM… (5132 words)

  • Al Qaeda bomb maker publishes instructions for attacks against U.S. transportation systems
  • Access to critical infrastructure being sold on the dark web
  • Russia, China, North Korea, Middle East SITREPs
  • Defense in Brief
  • FBI/DHS publish report on the state of white supremacist lethal threats
  • Seven billionaires concerned about a stock market correction
  • China is on dangerous debt trajectory
  • And more…

Bottom Line Up Front: Forward Observer is not in the business of defending the ideology of neo-Nazis or hate groups, however, ‘thoughtcrimes’ reminiscent of 1984 are becoming normalized and openly punished in attempts to signal virtue.  In fact, the day after a vehicle struck pedestrians in Charlottesville, I received an email from a local liberal politician who, instead of asking for campaign contributions for 2018, asked that readers donate to the Southern Poverty Law Center to fight white extremism.  He attacked his future rival, who is republican, admonishing the Texas senator for not tweeting his condolences to the victim’s family.

What’s more is that even individuals and groups who disavow neo-Nazis, the KKK, and other groups are still being described as hate groups by the mainstream media and actual fascist groups like Antifa.  And that’s been the narrative for decades: unwanted free speech is hate speech.  Leon Trotsky famously quipped, “You may not be interested in war, but war is interested in you.”  We can similarly say that ‘You may not be interested in racial-identity politics, but racial-identity politics is interested in you.’  And unfortunately, the mainstream media, establishment politicians, and violent groups are trying to force Americans to choose a side, and those sides are based on racial identity: pro-white or anti-white.  Identity politics is not the answer to creating a better America, but that seems to be the road we’re going down.  And this is a dangerous road, not just for the future of this nation, but also for freedom and liberty and the civil rights of future generations.  As much as mainstream conservatives have lauded, the 2016 election was not a rejection of identity politics, but an acceptance by white conservatives of identity politics.

Racial-identitarians on the Left want to draw a line and seek social justice, which is inherently unjust.  Class-based or race-based justice seeks to punish or reward on the basis of class or skin color, and not on the basis of any actual wrong doing.  Social justice denies due process of the individual, and that’s why this ideology is so dangerous.  The French Revolution was about class justice during the Reign of Terror in which over 16,000 death sentences were doled out; many more victims were imprisoned.  Robespierre, one of the most influential men of the leftist revolution, said at the time: “Terror is nothing more than speedy, severe and inflexible justice; it is thus an emanation of virtue; it is less a principle in itself, than a consequence of the general principle of democracy, applied to the most pressing needs of the [nation].”  And while I’ve not yet seen this quote in Leftist revolutionary propaganda, many Leftists agree: terror against hate speech is justified, violence against free speech is warranted, and this terror serves the needs of the nation.

On a related note, White House chief strategic Steve Bannon is out as of this afternoon.  He tendered his resignation on 07 August, and today was his last day at the White House.  Bannon, long criticized as the Alt-Right influence at the White House, has packed his bags, but that’s not going to satiate the unquenchable thirst of the Left.  It’s not going to tamp down on perceived injustice.  It’s not going to alleviate the claims that Trump and the White House is racist.  It’s time to face facts: President Trump has chosen to move to the mainstream in order to save his presidency and sell-out his base.  Trump will still be called a racist.  Trump can fire Stephen Miller, a staunchly conservative who is often called a white supremacist despite being Jewish.  Still racist.  Trump can fire anyone remotely accused of racism in his cabinet, to include Attorney General Sessions; still racist.  Trump himself is the ultimate goal: force his resignation or force his impeachment and removal.

I’d to think the Left is at a high water mark in terms of political pressure and their ability to derail Trump’s America First agenda.  But Bannon’s departure from the White House will only embolden the Leftist resistance against Trump.  This is a one-way transaction to appease the globalists in the Trump administration.  Trump gets nothing in return.  The new Trump White House is a globalist White House.  As the saying goes, the more things change… the more they stay the same.

Frankly, the name-calling and the threats of the Left against the White House was a sign that Trump was winning.  Leftwing agitators name-call and threaten when they don’t get their way; when they can’t manipulate or control the opposition into achieving the Left’s goals.  And this is why Steve Bannon (Peace Be Upon Him) loved it so much.  “Just give me more. Tear down more statues. Say the revolution is coming. I can’t get enough of it,” he said in a recent interview.  It’s my sincere hope that Bannon goes on to do greater things outside the White House than he ever could have inside it.  And I think his career isn’t over by a long shot.


Priority Intelligence Requirements:

PIR1: What are the current indicators of systems disruption that could lead to instability, civil unrest, or violence?

Al Qaeda bomb maker publishes instructions for attacks against U.S. transportation systems

The Al Qaeda terrorist organization’s bomb making chief has published a blueprint guide for conducting new attacks on American transportation systems to include planes, rail traffic and ships, all of which the group considers “prime targets.” The lengthy manifesto providing the guidance for would-be terrorists seeking to launch attacks was apparently crafted by Ibrahim al-Asiri, who is also a top al Qaida leader as well as the group’s primary bomb maker. His manifesto details plans to target U.S. passenger and shipping transportation infrastructure; the organization views them as weak and therefore ripe for attack. The manifesto is meant as a guide for so-called “lone wolf” attackers after the organization’s hierarchy and rank-and-file membership has been decimated after years of being targeted by U.S. and Western military and intelligence operations. [source]

(Analyst Comment: By the mid-2000s, al Qaida global had virtually given up on trying to train terrorist operatives overseas and import them into America.  CIA and other allied intelligence agencies around the world, for the most part, made that task far too difficult.  Al Qaida leaders realized that these types of operations required international communication and coordination, and the greater their digital footprint in this coordination, the greater the chance that plots would be uncovered by NSA, GCHQ, and other signals intelligence agencies.  So al Qaida started encouraging “homegrown” terror plots by radicalizing Muslims already in the West.  By removing the step of international travel of its operatives, al Qaida was now just faced with the mission of instructing radicalized Muslims on how to carry out terror attacks where they already lived.  Inspire, which is al-Qaida global’s digital publication, fills this role of reaching disaffected Muslims in the West and ‘inspiring’ them to commit terror.

Right now, authorities are likely trying to identify pre-operational surveillance as early warning of an attack.  Previous communiques from al Qaida leaders encourage would-be terrorists to get to know their targets and get the lay of the land, so to speak.  As is often the case with these attacks, when they do come to fruition, terrorists almost always attack soft targets in an attempt to prove that Westerners are not secure and that they can be attacked anywhere.)


Access to critical infrastructure being sold on the dark web

Access to computer systems that control critical government and private-sector infrastructure such as hospitals, airlines, power plants and financial firms is being sold on a dark web marketplace by cyber criminals, DeepDotWeb reported Monday.  Researchers have revealed in subsequent reports that the principal actor appears to be a state hacker who works for the Chinese Communist Party, and is working on behalf of the government in Beijing. The hacker sells data stolen from companies on behalf of China to various buyers in the dark web. [source]

PIR2: What are the current indicators of an outbreak of global conflict?

The prospects of global conflict continue to revolve five geopolitical actors: Russia, China, North Korea, Iran, and the Middle East. In the event of war with any of these nations, consider domestic systems disruption a distinct possibility.


Is Russia using a cyber weapon to spoof commercial shipping in the Black Sea?

A number of commercial shipping vessels have been reporting problems with their GPS systems in the Black Sea, leading some experts to believe Russia may be using a new cyber weapon to spoof nautical navigation. 

The fear among Western military and national security officials is that if indeed Moscow is deploying a new form of electronic warfare, it could involve technology that may eventually find its way into the hands of rogue states, terrorist organizations or even petty criminals.

In late June, the U.S. Maritime Administration filed what first appeared to be an unremarkable incident report containing details from a ship master sailing off the Russian port of Novorossiysk, in the country’s extreme west located between Ukraine and Georgia. The ship master said that, judging by his GPS signal, he was in the wrong spot — some 32 kilometers (about 20 miles) further inland, at Gelendzhik Airport. After checking to ensure navigational equipment was functioning properly the captain contacted nearby vessels; a check of their AIS traces — signals from the automatic identification system that tracks ships — put them all in the same place, Gelendzhik Airport. At least 20 ships were affected.

If confirmed, this would be a kind of spoofing attack many have warned about but have not seen in practice. Up to this point, the biggest concern for navigators is that GPS signals could be jammed by masking signals with noise. Even though that can cause problems, such attacks are also easy to detect because GPS receivers sound off an alarm when they lose a signal due to jamming. But spoofing involves sending a false signal from a ground station and those are unnoticeable.

Spoofing researchers have been warning for several years that the technique can be used to fool ships at sea. And one of them, Todd Humphries of the University of Texas-Austin, thinks the Black Sea incident, which mimics testing he’s done himself, is the work of Russia testing a new electronic warfare method. [source]

If suspicions that Russia is testing a new cyber weapon in the Black Sea designed to throw ships off course, it comes at a time when the U.S. Army’s commander of Fort Gordon and the Army Cyber Center of Excellence, Maj. Gen. John Morrison, is telling anyone who will listen America’s military is “outgunned” by Russia and China in the area of cyber- and electronic warfare. [source]


South China Sea SITREP

China’s dilemma: Cooperating with the U.S. while continuing to exert influence in the South China Sea

The Chinese will are experiencing a foreign policy dichotomy that will not be easily or quickly resolved involving its relationship with the United States moving forward.

Earlier this week the USS John S. McCain, a destroyer, conducted a Freedom of Navigation Operation (FONOP) within 12 nautical miles of Mischief Reef in the South China Sea as a US P-3 patrol spy plane flew overhead. The mission was part of the Trump administration’s ongoing efforts, begun during the Obama administration, to demonstrate that China’s outsized claims over most of the South China Sea are really international waters that belong to no one — and everyone. The region is home to one of the world’s most lucrative trade routes; $5 trillion a year worth of goods pass through those busy waters. The McCain was shadowed by a pair of Chinese frigates and a Chinese Coast Guard vessel. [source]

Several of the “islands” around the Spratlys and Mischief Reef are man-made, and the region is said to be rich in natural resources — fishing, gas, oil, etc. China wants to dominate terms for retrieving those lucrative resources, as in, it wants Chinese companies mining them.

China routinely protests freedom of navigation operations and most like did again after the McCain sailed through. But the operation took place just days before the top U.S. military commander, Joint Chiefs Chairman Marine Corps Gen. John Dunford signed an agreement with his Chinese counterpart to create a back-channel means of de-escalating tensions in the region — as they pertain to North Korea. In addition, the agreement — which was signed at the Ba Yi, People’s Liberation Army headquarters in Beijing after Dunford broke bread with Chinese troops at the PLA’s northern command HQ earlier in the day — strengthens military-to-military ties, formalizing an effort that was years in the making.

Dunford went to China after first stopping in South Korea; he headed next to Japan. His visit involved the three countries with the most at stake on the Korean peninsula not called North Korea. And the fact that he went himself, and not a subordinate, indicates the importance the Trump administration and the Pentagon put on his visit. That he was met by his Chinese counterpart and that Beijing agreed to finally sign off on a deal to boost military ties after years of balking is equally significant. [source]

But now what? China can’t really press its case in the South China Sea with the United States while at the same time engaging in more extensive bilateral military-to-military exchanges, so that would seem to indicate a shift in thinking and/or strategy in Beijing.

President Trump’s foreign policy is not really clear yet, but it’s beginning to take shape: Bold. After dropping the biggest non-nuclear bomb in Afghanistan and sending 60 cruise missiles to destroy a Syrian base following a suspected government-led chemical weapons attack — without hesitation — it appears that his threat to visit “fire and fury” on North Korea, should it legitimately threaten U.S. security or that of its allies, has been taken seriously. Additionally, the Chinese must believe they have more to gain militarily and economically, for the time being anyway, by softening their approach to the U.S., even as Beijing presses its case in the South China Sea with its smaller, weaker neighbors.

U.S. and Chinese interests converged this week, but in doing so produced a foreign policy dilemma for Beijing moving forward.

Korean Peninsula SITREP:

China has agreed to sanction North Korea — but the question remains, will it?

Earlier this month something amazing happened at the United Nations: Both Russia and China agreed to support a U.S. resolution imposing new economic sanctions on North Korea over its continued development of nuclear weapons and ballistic missiles, as well as its continued belligerence. The 15-0 Security Council vote seemed like a diplomatic coup for the Trump administration, considering that neither Moscow nor Beijing are particularly interested in advancing U.S. foreign policy objectives.

On the surface, at least, the vote to support the U.S. resolution by two veto-wielding permanent members of the UNSC seems to be in the interests of both countries; neither wants to see a U.S.-led preemptive strike on North Korea that could destabilize the entire region, let alone the Korean peninsula.

But below the surface, both Russia and China have every reason not to fully implement the sanctions they voted to support. For Moscow, a disruption in North Korean capital would affect bountiful trade between the two countries, which has surged 73 percent year-to-year in the first two months 2017 after China reportedly imposed some cuts in coal deliveries in June. Russia stepped in to make up for the reduction. In addition, Russian companies and infrastructure officials have also struck new expansion and labor agreements. [source]

China, meanwhile, has also been boosting trade with North Korea — again, despite agreeing to new sanctions, making them (and the Russian sanctions) mostly symbolic. Trade between China and North Korea has risen 37 percent this year; China remains North Korea’s largest trading partner ($6.6 billion worth of goods each year). Chinese coal imports may have fallen off for now, but it is importing more iron ore from Pyongyang than in recent years.

The fact is, both countries’ national interests are served by maintaining North Korea and keeping its government intact, then using it as a buffer between South Korea and a sizable U.S. military presence there. The Chinese are especially keen to keep North Korea from collapsing, not just for economic gain but also because Beijing fears a collapse of North Korea would result in a rush of refugees Beijing does not want to absorb.

There are other indicators that Beijing is not prepared to seriously sanction the North. After the United States deployed its THAAD missile defense system in South Korea, Beijing imposed ~$20 billion worth of economic sanctions of its own against Seoul in March. [source]

Still, Beijing will have to figure out what is more important to its long-term stability and growth: Continued trade with the United States, even as President Trump cracks down on Chinese trade practices [source], or maintaining the North Korean ‘thorn’ in Washington’s side. Russia has made its decision.


Mideast SITREP

Israel preparing for the next round of conflict

This week the Israeli military released a detailed intelligence estimate regarding Hamas’ use of newly built residential structures along the coastal Gaza Strip to cover expansion of underground tunnel and command centers from which Israeli commanders believe will be used to wage urban warfare against the Jewish state. The intelligence was released as a way for the military to make the case it may have to engage in new combat in Gaza, even though it’s not something commanders want to do.

In briefing reporters, Maj. Gen. Eyal Zamir, commander of Israel Defense Forces’ Southern Command, described a pair of homes mapped out by military intelligence analysts that he insisted prove “beyond a shadow of doubt that Hamas is operating within and underneath the cover of civilians, in preparation for the next war.”

The briefing, which was regarded as very unusual, was made primarily for political purposes — to give Israel and the IDF cover for launching preemptive strikes against newly emplaced Hamas command-and-control facilities and, probably, weapons caches. The problem, of course, is that the structures are in densely-populated areas. But that didn’t seem to deter Zamir, who regularly referred to the structures — one of them a six-story building with private parking facilities and the other a family home, both with access to a tunnel network — as legitimate targets.

“I say these are legitimate military targets, and whoever is endangering himself and his family needs to hold Hamas responsible for what happens,” he told reporters. If the IDF is forced to act, it will do so mindful of the population, using technology, tactics, and procedures that are designed to minimize collateral damage and civilian casualties. But he nevertheless said that civilians would be harmed which, of course, is what Hamas wants, along with other Gaza-based terrorist organizations “in order to try to damage Israel’s legitimacy.” [source]

Hamas is supported financially, politically and militarily by Iran, which this week threatened to leave the nuclear deal signed in 2015 with the Obama administration and resume nuclear-related activities, ostensibly in response to new U.S. sanctions imposed by a Trump administration that already believes, probably correctly, that Iran is cheating on the arrangement anyway. [source]

These two events may not seem related but it could turn out they are. Israel knows that Iran is deeply involved in the territories surrounding it, providing aid and comfort to Hamas.  In 2014 the commander of the Revolutionary Guards force, Iranian Maj. Gen. Mohammad Ali Jafaria, pledged “to support the Palestinian resistance in different ways” to “defeat” the “Zionists.” [source] A year later that aid, in part, took the form of tens of millions of dollars in direct aid, specifically to help Hamas “rebuild the network of tunnels in Gaza destroyed by Israel’s invasion last summer,” one report noted. In addition, Iran provided funding for new missile supplies and, probably, additional weaponry. [source]

So, could an Iranian nuclear device find its way into a Hamas tunnel network? Certainly other weapons can — and have. That may seem far-fetched, but considering that Israel is not one to take chances, the odds are better than average Tel Aviv is planning a military operation to take out those new Iranian-financed tunnels.

Speaking to reporters, Israeli Maj. Gen. Zamir cited a new security barrier Israel is building along its entire border with Gaza, as a way to “prevent terrorist infiltrations.” He believes that Hamas may be stepping up its operations and timetable to launch attacks before the barrier is completely. “This barrier is a strategic necessity for the state of Israel to prevent terrorist infiltrations. And in the event there are attack tunnels, we will know how to locate them and neutralize them,” Zamir said. “We really hope they won’t challenge us in this regard.”


Defense in brief

Most of America’s bomber fleet isn’t combat-ready

In terms of raw numbers, the U.S. Air Force has a respectable number of bombers. But in terms of how many B-52s, B-1Bs and B-2s are actually available for combat operations should war break out, that’s a different story. Some 15 years of combat action in two overseas theaters, combined with budget cutbacks and force reductions, have dramatically impacted the U.S. long-range bomber force, and now less than half are ready to fight. Of 75 conventional and nuclear B-52s, just 33 are ready to fly today; of 62 B-1Bs, around 25 are ready; out of 20 nuclear-capable B-2s, just seven or eight are available. “On a nominal basis you don’t have more than single digits of B-2s available to do anything,” said retired Air Force Lt. Gen. Dave Deptula, currently the dean of the Mitchell Institute of Aerospace. “If anything good comes out of the North Korea crisis,” it should be a wake-up call. He says the Air Force is smaller and the least ready it’s been in the history of the service. [source]

Chinese military interests may be attempting to ‘buy’ undue influence at Harvard

A former government analyst who specializes in foreign influence operations is concerned about huge amounts of money being donated to Harvard University by Chinese interests, some of which are connected to Beijing’s military. Anders Corr, in a letter to Vice President Mike Pence, said that a Chinese military-linked firm, JT Capital, wrote a check to Harvard in 2014 for $10 million — the same year the family of Ronnie Chan, a Hong Kong real estate businessman with ties to Beijing, announced he would donate $350 million. Both of the donations were “relatively opaque” and thus raise questions with Corr, who earned a doctorate from Harvard in 2008, about the purpose of the money. He suspects it could be an effort by Chinese interests to unduly influence U.S. policy and/or public opinion in China’s favor. “Allowing such donations does not appear to be in U.S. national security interests, and it does not appear to be necessary for Harvard’s research and teaching (it already has an endowment of $36.7 billion),” he said in his letter. “Perhaps there should be legislation against Chinese-linked money in U.S. politics, including think tanks and universities.” At a minimum, Corr wants Pence to look into whether the donations violate U.S. foreign agent registration statutes. [source]

President Trump officially elevates Cyber Command to its own combatant command

Scheduled to achieve full operating capability next year, Cyber Command (CYBERCOM) is now its own combatant command.  President Trump elevated CYBERCOM today to “streamline command and control of time-sensitive cyberspace operations by consolidating them under a single commander with authorities commensurate with the importance of such operations.”  Previously CYBERCOM conducted offensive cyber operations under US Strategic Command. [source]

PIR3: What are the current indicators of civil unrest, political violence, or insurgency?

FBI/DHS publish report on the state of white supremacist lethal threats

In May 2017, the FBI and DHS published a Joint Intelligence Bulletin (JIB) entitled, “White Supremacist Extremism Poses Persistent Threat of Lethal Violence’. In this JIB, analysts assess that “lone actors and small cells” within the white supremacist community “pose a threat of lethal violence over the next year.”  White supremacist extremists committed 49 homicides in 26 attacks from 2000 to 2016, or on average less than three homicides per year.  Of note: “The WSE movement is experiencing widespread infighting and a lack of charismatic leadership,” which has degraded their ability to organize and sustain membership.  (Read our full report here.)


Political pressure and beliefs of CEOs curb freedom of speech

In the past two weeks, we’ve watched as:

  • AirBnB, the room-sharing app, canceled reservations for users suspected of attending the Unite the Right rally;
  • GoDaddy, Cloudflare, and DigitalOcean canceled service to the Daily Stormer, a legitimate neo-Nazi website;
  • Spotify removed “hate bands” from their music streaming service.

The ironic thing is that while Spotify, with 140 million users around the world, is clamping down on music that “favors hatred or incites violence,” rap artists who regularly brag about violence and drug use, and who use derogatory terms like f*ggot, b*tch and hoe are celebrated with their own playlists and publicity.  Spotify instead created a new playlist called “Patriotic Passion,” which features a “patriotic” song by rapper Lil Wayne entitled, “God Bless Amerika” with lyrics that include:

  • “My country ’tis of thee, Sweet land of kill em all and let em die”
  • “God bless Amerika, This ole’ godless Amerika”
  • “The stars on the flag are never shining”
  • “Shootin’ stars in my pocket, b*tch sit on my rocket”
  • And other crude lyrics that will not be repeated in this report


White people, here are 10 requests from a Black Lives Matter leader

Copy and pasted without comment:

“Some things I’m thinking about that should change (in that Southern, black grandmama voice):

1. White people, if you don’t have any descendants, will your property to a black or brown family. Preferably one that lives in generational poverty.

2. White people, if you’re inheriting property you intend to sell upon acceptance, give it to a black or brown family. You’re bound to make that money in some other white privileged way.

3. If you are a developer or realty owner of multi-family housing, build a sustainable complex in a black or brown blighted neighborhood and let black and brown people live in it for free.

4. White people, if you can afford to downsize, give up the home you own to a black or brown family. Preferably a family from generational poverty.

5. White people, if any of the people you intend to leave your property to are racists assholes, change the will, and will your property to a black or brown family. Preferably a family from generational poverty.

6. White people, re-budget your monthly so you can donate to black funds for land purchasing.

7. White people, especially white women (because this is yaw specialty — Nosey Jenny and Meddling Kathy), get a racist fired. Yaw know what the fuck they be saying. You are complicit when you ignore them. Get your boss fired cause they racist too.

8. Backing up No. 7, this should be easy but all those sheetless Klan, Nazi’s and Other lil’ dick-white men will all be returning to work. Get they ass fired. Call the police even: they look suspicious.

9. OK, backing up No. 8, if any white person at your work, or as you enter in spaces and you overhear a white person praising the actions from yesterday, first, get a pic. Get their name and more info. Hell, find out where they work — Get Them Fired. But certainly address them, and, if you need to, you got hands: use them.

10. Commit to two things: Fighting white supremacy where and how you can (this doesn’t mean taking up knitting, unless you’re making scarves for black and brown kids in need), and funding black and brown people and their work.

#RunUsOurLand #Reparations #YouGonLearnToday #RunUsOurMoney” [source]


Alt-Left Roll-Up

FL: Manatee Co office will close on Monday ahead of planned Confederate protest

FL: Gainesville prepares for protests like Charlottesville

MA: Thousands expected to attend Boston protests of right-wing rally

MO: State senators calls for assassination of President Trump

NC: Offices close as protestors march through Durham, NC

OR: Portland Antifa vows to ‘fight for justice in the streets’

TX: BLM rally scheduled in Houston on Saturday

WV: BLM rally planned this weekend in Charleston

Political violence could increase, experts say

Antifa grows as left-wing faction set to fight the far right

BLM to hire first development director to raise money

BLM floats idea of criminalizing Confederate imagery

Antifa needs a new way to fight the Alt-Right

PIR4: What are the current indicators of economic, financial, or monetary instability that lead to worsening economic conditions or civil unrest?

Seven billionaires concerned about a stock market correction

The last major “correction” in the stock market cost Americans trillions of dollars when the Great Recession devastated accounts that many have yet to recover from. Now seven billionaires are seeing signs that a new correction is approaching. [source] To summarize:

— Jeff Gudlach is advising people to “move toward the exits,” telling investors he is reducing his positions in junk bonds, emerging-market debt and other lower-quality investments over fears they could roll over in the coming months with painful effects.

— Carl Icahn says stocks are overvalued;

— Howard Marks is warning clients of “too-bullish territory,” with too many investors taking too many big risks;

— Warren Buffett is not seeing many buying opportunities;

— George Soros is getting bearish;

— David Tepper is “on guard;”

— Paul Singer is warning of an ETF crisis.


China is on a dangerous debt trajectory

Most of the time when other countries have financial problems they don’t produce more than a ripple in the United States. But China is the world’s No. 2 economy, and if it tanks, there will be more than just a few ripples felt in the U.S. And increasingly, economists and other financial experts are worried about that. The International Monetary Fund is warning that China’s massive debt is on a “dangerous” path and raising substantial risks of a major growth slowdown. The IMF has warned Beijing repeatedly about its ballooning debt, but the Communist Party has done little to correct it. “International experience suggests that China’s credit growth is on a dangerous trajectory, with increasing risks of a disruptive adjustment and/or a marked growth slowdown,” IMF experts wrote. Near-term growth is looking decent, but “further large and continuous increases in private and public debt, and thus increasing downside risks in the medium term,” the report said. Much of China’s debt comes from massive infrastructure and real estate investment, many believe as a way to boost employment and keep the masses happy and unrest to a minimum. [source]

China came close to crisis earlier this year over a shadow banking scandal. [source]

(Analyst Comment: This is a topic we’ve covered several times in this year’s and last year’s EXSUMs.  Beyond the geo-strategic goals China has for the Korean Peninsula, perhaps the greatest reason China doesn’t want a war in North Korea is that a protracted disruption of trade might bring about their debt crisis.)

Jon E. Dougherty is a political, foreign policy and national security analyst and reporter with nearly 30 years of experience in both fields. A U.S. Army veteran of Operation Enduring Freedom, he holds BA in Political Science from Ashford University and an MA in National Security Studies/Intelligence Analysis from American Military University.

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