Early Warning for 10 May 2019

Good morning. Here’s your Early Warning for Friday, 10 May 2019.

ADMIN NOTE: I apologize for the late reporting today. We’ve had thunderstorms all this week and my internet keeps cutting out. This morning was particularly bad.

RECOMMENDATION: The U.S. military continues to send additional assets to the Middle East/Central Command Area of Responsibility (AOR). And a U.S. navy commander recently said that he could sail an aircraft carrier strike group into the Strait of Hormuz, which would be seen as not only escalatory, but also as a potential target by Iranian forces. That would significantly increase the risk of military confrontation.

Remain cognizant of the risk to fuel prices. Sharp increases in fuel prices will lead to increased costs of goods and services, and spikes have led to economic recessions.

Politics & Governance

Don, Jr: Threats to fine or jail Republicans who don’t comply with Congressional subpoenas continue. After Donald Trump, Jr. was subpoenaed by the Senate Intelligence Committee, Sen. Richard Blumenthal (D-NY) said, “If Donald Trump Jr. defies his subpoena, he ought to be jailed.” In another statement, Sen. Blumenthal doubled down: “The subpoena should be enforced. If he refuses to obey it, he should be locked up.”

Comey: Appearing on CNN last night, former FBI director James Comey warned that President Trump did commit obstruction of justice, and could face legal action after he’s out of office: “The Justice Department will have to take a serious look at that.”

Constitutional crisis: Rep. Jerry Nadler (D-NY) continued to characterize the Trump-Congress showdown as a Constitutional crisis. “We’ve talked for a long time about approaching a constitutional crisis. We are now in it. Now is the time of testing whether we can keep a republic, or whether this republic is destined to change into a different, more tyrannical form of government. We must resist this.”

During a press conference yesterday, House Speaker Nancy Pelosi (D-CA) said she also believes we’re in a Constitutional crisis. “Yes, I do agree with Chairman Nadler because the administration has decided that they’re not going to honor their oath of office.” Pelosi also warned that other Trump officials may be on the docket when the full House holds a vote on contempt of Congress for Attorney General Bill Barr. Expect Democrats to keep pressing the existential dangers posed by a second Trump administration as we enter into election season. Trump is reportedly focusing on the threats to socialism, while Democrats are likely to focus on the threats of fascism and dictatorship.

Treason?: In a recent poll, Scott Rasmussen found that 57 percent of Democrats believe that “President Trump is guilty of treason” for his actions involving contacts with Russian officials. Just seven percent of Republicans and 30 percent of Independents agreed, according to the poll results. [source]

AFL-CIO: In a since-deleted tweet, the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) threatened Delta with an image of a guillotine. Delta warned its workers that unionizing would cost them $700 per year. The AFL-CIO responded by saying that a guillotine only costs $1,200 to build, as if that were the alternative to unionizing.


Economy/Finance

We’re still awaiting China’s response to trade tariffs being raise today from 10 percent to 25 percent on $200 billion worth of goods. Quoted in the Global Times, a former Chinese senior trade official said, “I think China will respond very soon. China will also have to make good on its own words, otherwise it will be at a huge disadvantage to the US team at the negotiations.” [source] Chinese Vice Premier Liu He is in Washington today to continue trade talks, but expect China to soon raise tariffs on U.S. goods.

Worst case scenario: While it seems unlikely, China can always dump their $1.1 trillion holdings of U.S. Treasuries — an action referred to as the “nuclear option”. U.S. markets reacted poorly to the news this week that the trade war was escalating. It’s entirely possible that a reference or threat to pursue the nuclear option could have a deleterious effect on the markets, an event which already happened last year, and that might encourage President Trump to make a deal. A more likely response is cutting back on U.S. soybeans and hurting Trump politically in agricultural, pro-Trump states. This is coming down to an issue of honor and embarrassment for the Chinese Communist Party, and they’ll respond in a significant way. Still, the Chinese are pressured to make a deal as well: the government resorted to the direct purchase of shares yesterday to prop up their stock market, which was spooked by the worsening trade war news.

Core and headline inflation ticked up to 2.1 percent in April, which is just above the Federal Reserve’s desired rate. Inflation is expected to be tempered, but if the rate of inflation continues up, the Fed will be more likely to raise interest rates, putting a damper on both President Trump and U.S. economic growth.


Global/Defense Situational Awareness

U.S. authorities seized a North Korean shipping vessel that the Justice Department accused of violating international sanctions. The ship was being used to export coal and import heavy machinery. The Justice Department received a warrant back in July, which shows that the recent move is likely in response to North Korea’s Thursday test-firing of two short-range ballistic missiles.

Round-Up

Two more B-52s deploy to CENTCOM AOR

U.S. threatens to send aircraft carrier into Strait of Hormuz

Navy, Marine Corps advance new operating concept


Notable Quotable

“We are a nation with a tradition of reining in monopolies, no matter how well intentioned the leaders of these companies may be. Mark’s power is unprecedented and un-American. It is time to break up Facebook.” – Chris Hughes, Facebook co-founder, writing for the New York Times [source]

Samuel Culper is a former military intelligence NCO and contract Intelligence analyst. He spent three years in Iraq and Afghanistan and is now the intelligence and warfare researcher at Forward Observer.

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