Early Warning for 28 November 2018

Good morning. Here’s your Early Warning for Wednesday, 28 November 2018.

 

In Focus: A couple weeks ago, former White House strategist Steve Bannon gave a speech at the Oxford Union, in which he continued to outline the rationale for America’s right wing populist movement. Bannon, a former Goldman Sachs banker and self-described national populist, hammered the financial elite responsible for the 2008 financial crisis and pointed out that none of them had been indicted or punished for their involvement in the crash of the financial system. Speaking about the past decade of central bank policy of low interest rates and cheap loans, Bannon says of younger generations:

“You don’t own anything and you’re not going to own anything. Why do you think it’s so expensive [to live in large cities]? That is the flooding of the zone with liquidity. That’s what’s going to make your generation impoverished. Right now the statistics are brutal. You are twenty percent behind — people in their mid-twenties, late twenties — twenty percent behind their parents’ generation of where they are, and the gap’s only going to increase as far as wages go. And you don’t own any assets, you’re not going to own any assets — only what’s passed down, nothing that you earn yourself. You can’t save because [interest rates] are zero, you can’t own any assets, you can’t buy a house [because it’s so expensive]. Every study shows the number one problem with family formation in the United States and the West, in twenties and thirties, is economic anxiety… They’re two paychecks away from oblivion.” [source]

Fundamentally, Bannon is speaking about wealth inequality. It’s a loaded term, but it’s real and it’s driving — and will continue to drive — social instability the United States. The protests and movements for minimum wage hikes, universal healthcare, universal basic income, and other left wing economic issues are a symptom of growing inequality. And as conditions worsen, we should expect those movements to grow.

In 2014, billionaire investor Nick Hanauer gave a Ted Talk entitled, “Beware Fellow Plutocrats: The Pitchforks are Coming”, in which he warned that wealth inequality will drive social unrest.

“So what do I see in our future today?” Hanauer asks. “I see pitchforks. As in, angry mobs with pitchforks… The problem is that inequality is at historic highs today, and it’s getting worse every day. And if wealth, power, and income continue to concentrate at the very tippy top, our society will change from a capitalist democracy to a neo-feudalist, rentier society like 18th century France. That was, you know, France before the revolution and the mobs with the pitchforks… You show me a highly unequal society and I will show you a police state or an uprising. The pitchforks will come for us if we do not address this. It’s not a matter of if, it’s when.” [source]

In January 2018, Ray Dalio, founder of the world’s most successful hedge fund, spoke to CNBC from the World Economic Forum in Davos, where he warned:

“[W]hat I’m concerned about is what would the next downturn be like? I’m not worried about an immediate downturn. But I would say if we were to look two years forward, okay, probably right before the next presidential election, there is a good chance that you will have a downturn and if you have a downturn for that segment, I’m worried about how we will be with each other in that element of cohesiveness. I mean, basically the formula for having problems, social with political problems, is have a difference between, a lot of difference between rich and poor people…”

And there have been numerous articles written about billionaires in New York and California purchasing “bug out” properties and preparing for what they see as a high risk of social instability. All this is not to say that there’s an imminent threat, but there is absolutely a trend among at least some American financial elites who are clearly concerned about the future of the country. That’s worth noting. – S.C.

 

White House

The President is scheduled to have lunch with New York Governor Andrew Cuomo, and hold a National Christmas Tree Lighting ceremony in the evening.

 

Caravan Watch: The Wall Street Journal reports this morning that due to deteriorating conditions, some 200 migrants have filed for repatriation in Mexico. Another 105 apparently left voluntarily from the Tijuana airport (destination unknown), and 98 have been deported. Mexican officials estimate that 3,000-5,000 migrants remain in Tijuana, although their future is unclear.

 


 

State Department

Secretary Pompeo is expected to appear before the Senate, and then meet with U.S. Agency for International Development officials.


 

Defense Department

Defense Secretary Mattis is scheduled to meet with the Lithuanian defense minister.

 

These are the last publicly reported locations of these ships. Conflict requiring an aircraft carrier/carrier strike group does not appear imminent.

The Carl Vinson (CVN-70) was last reported as having returned to port in San Diego.

The Abraham Lincoln (CVN-72) was last reported as being in port at Norfolk.

* The John Stennis (CVN-74) was last reported as being in port at Changi Naval Base, Singapore.

The Harry Truman (CVN-75) was last reported as being in the Mediterranean Sea.

The Ronald Reagan (CVN-76) was last reported as being in the South China Sea.

The George H. W. Bush (CVN-77) was last reported as having returned to port in Norfolk.

 

* Indicates significant changes to last reported location or other amplifying information.


 

Congress

Significant House Activity:

  • Nothing significant to report.

Significant Senate Activity:

  • The Senate Armed Services Committee (Subcommittee on Cybersecurity) is scheduled to hold a closed-door meeting on Cyber Command’s relationship with the National Security Agency. (Analyst Comment: This hearing could be covering issues surrounding the responsibility for offensive cyber operations.)

* Only events pertinent to national security are listed. Significant reporting will appear in this week’s Strategic and National Intelligence reports.


 

Economy/Finance

While most were interested this week’s announcement from General Motors for political reasons (more Trump drama), there’s a far greater underlying concern. GM announced they’d be closing down several factories in the United States due to lagging sales of specific vehicles manufactured in those plants. Some financial websites have pointed to this development as ‘cracks in the economy,’ but what’s most important hasn’t made the news. Since 2010, automobile loan debt has increased by 64 percent due primarily to low interest rates (and the Obama-era Cash for Clunkers program, which encouraged consumers to take on more debt through the purchase of new vehicles). Total outstanding auto debt is now over a trillion dollars, which has fueled the post-recession auto boom and possibly created another bubble in the U.S. economy. It may well be that General Motors isn’t just shuttering a few plants due to low sales, but preparing for a larger downturn in the auto industry. Even if the auto loan bubble doesn’t pop, higher interest rates will likely lead to lower sales. And that means that similar announcements from other auto manufacturers may follow.

 


 

Weather

HurricaneWatch: The National Hurricane Center reports no cyclonic activity in the Atlantic Ocean. Two days remain in “hurricane season,” which ends on 30 November. [source]

 


 

What I’m Looking at this Morning

Army rapidly grows electronic warfare capabilities

Air Force redrawing playbook for war with China

Recovering the profound divisions that led to the Civil War


 

Notable Quotable

“But we need border security in this country, and if that means a shutdown I would totally be willing to shut it down. And I think it’s a really bad issue for the Democrats.” – President Trump, on fighting for a five billion dollar border wall package

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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