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Debt Ceiling Drama Rubber-Necking

Debt Ceiling Drama Rubber-Necking

By Peter Tchir of Academy Securities

Rubber Necking

Markets did little last week as bond and stocks seemed to get caught “rubber necking” the Debt Ceiling “drama” for lack of a better word. 2-year treasuries moved a few bps higher, along with a slightly increased probability of a hike at the next meeting. The 10-year, the S&P 500 and Nasdaq barely budged on the week, as Debt Ceiling discussions sucked up all of the oxygen.

The “interesting” part is that despite all the Debt Ceiling chatter and analysis, virtually no one thinks we will default. So why all the rubber necking? Unless, just maybe, there is a nagging doubt that this time around, the “inevitable” passing of legislation raise the debt ceiling, could run into complications.

We discuss this, and our thoughts on how any default might play out, in Debt Shilling. We also got to discuss this subject, the issues facing banks and the transition from Made in China to Made by China on Bloomberg TV on Friday.

While I hope the U.S. does not default, the CDS market is pricing in around a 5% chance, which may even be low. In any case, if we do default, I hope it is on June 16th, as Academy will be a guest host from 6 am to 7 am on Bloomberg Surveillance that morning, and it would make for one heck of a show!

On the other hand, maybe we make some progress, and we can stop the rubber necking and move on to what major theme will drive markets and the economy next.

CONsumer CONfidence was the Anti-Goldilocks

CONsumer CONfidence has never been a report I take a lot of stock in (from 2021). More often than not it seems to track some combination of the S&P 500 (for conditions) and gas prices (for inflation).

Friday’s numbers were quite interesting as sentiment plummeted (57.7 was a drop from 63 and pulls us back to levels from last autumn). Current conditions and expectations also fell, continuing a trend. Given the historical correlations with the equity market, that move was a bit surprising.

On the other side of the coin, 1-year inflation expectations remain at 4.5% (well above where the Fed would like to see them) and the longer dated inflation expectations increased to 3.2%. The last time expectations for 5-10 year inflation was that high was back in May 2008!

This data is quite literally the anit-Goldilocks. Rising inflation with weak growth has a name – stagflation. While there were far too many mentions of stagflation on Friday, for my tastes, it does seem to fit a theme of an economy that is weakening while many continue to raise prices on almost anything they can. Danger Will Robinson.

Again, CONsumer CONfidence isn’t something I rely on, but this one caught my eye, because it spun a negative story (and I remain bearish, so who doesn’t love some confirmation bias), but because it wasn’t accompanied by lower stock prices and higher energy prices, which likely means something.

Life Nor Markets Are Like a Video Game

Last weekend, we cautioned that the market seemed to be in a mood where we can “solve” complex issues in a very short period. That we could find and solve a “banking crisis” in a week was just one example raised in Life in a Video Game.

Last week (I think it was just last week, though it seems like longer), the market was focused on the SLOOS report, which I can readily admit, is one of the few times I can remember anyone even mentioning SLOOS, let alone focusing on it as a potential market moving event.

The most important part of that report, from my perspective, was the decline in loan demand.

Sure, the willingness to lend might be shrinking, but there are alternatives to borrowing from banks. The drop in demand for lending seems more problematic as it reflects companies (and individuals) seeing either a smaller opportunity sets or increasing concern about their ability to pay off such debt.

Ultimately, I still think this is the most important chart for the banking sector. (please see I Know what You Did Last Summer, for more analysis in this vein).

Banks deposits grew at a steady pace of $500 billion a year. Then in less than 2 years, banks took in $5 trillion. While that could be a positive, it came during the midst of ZIRP (large scale asset purchases (or QE), low interest rates, stimulus up the wazoo, etc.).

This flood of deposit money came during a period of extremely low yields.

It should surprise absolutely no one, that some institutions would make bad decisions when it came to navigating the 5 Circles of Bond Investor Hell.

Banks, like any other investor base, will behave on a continuum, with some chasing yield and NIM by taking on excessive risk, while others would be more cautious and patient.

The risk, as I see it, is that as banks that made the worst decisions have their portfolios scrutinized, it lowers prices, potentially shining a light on the next level of least prudent investors. The “tail risk” is that occurring which we tease in “Mommy, Where Do Bond Losses Come From?” which is all about forced selling and almost nothing about default.

This will take time to play out and will be a headwind of markets and the economy!

China and the Yuan

We are having more and more conversations about China where “Reserve Currency” is addressed.

This does warrant a full T-Report, which will come later this week, as I’m on the road seeing a lot of clients with multiple members of Academy’s Geopolitical Intelligence Group.

Ahead of those meetings we can make three quick statements (some of which were highlighted in Locking in Some Themes and were discussed in our “China’s Increasing D.I.M.E. Prowess” webinar.

  • The “Re-opening”. Overhyped as China didn’t go from 0 to 100, more like 70-90. Also, China’s focus is increasingly domestic focused and working with the resource rich nations of the world, limiting the impact on the global economy.

  • From Made In China to Made by China. Increasingly look for China to exercise their levers of power (primarily Diplomatic and Economic) to shift from merely being the manufacturing hub for goods made on behalf of multi-national corporations to trying to make goods to sell on behalf of China Inc. (for lack of a better word, since it is difficult to separate the country from the companies).

  • More Like a “Dark Web” than Reserve Currency. I don’t see the status of the dollar as the world’s reserve currency as being threatened, but more trade will occur outside of the dollar sphere of influence and some countries will shift to a system that gives the yuan some elements of reserve currency. Increasingly, I’m concerned that I’m too sanguine on this matter. China is showing great skill at starting to “roll up” some of the weaker global players and I can’t help but frame this in military terms. While they may not be close to launching a frontal assault, they are taking out some units that may let them outflank us, if we are not careful.

Bottom Line

Still bearish on credit and equities on a -4 out of a scale of -10 to 10. Largely neutral on rates, in a relative on rates, though there is potentially increased risk of a short squeeze.

The “new” thoughts are:

  • Don’t expect a big relief rally from stocks if the debt ceiling is raised without too much pain as, for all the chatter, little actual fear is priced in.

  • If you need to issue debt, issue now. Summer and the debt ceiling will likely dry up liquidity at least for a few weeks at the start of the summer.

Happy Mother’s Day and celebrate friends and family today, but remember, we should really celebrate friends and family every day!

Tyler Durden
Sun, 05/14/2023 – 12:30

Wedding Parties, Homeless Vets Booted From NY Hotels To Make Room For Migrants

Wedding Parties, Homeless Vets Booted From NY Hotels To Make Room For Migrants

Two soon-to-be-wed couples and 20 homeless veterans are no longer welcome at New York hotels, as their planned or in-progress stays were cancelled so the properties could be used to house migrants instead — with a higher payoff for the hotel operators. 

The New York Post reports that a Florida couple that’s originally from New York has had a wrench thrown in their June wedding plans. Deanna Mifsud and Gary Moretti’s wedding party had reserved 30 rooms at the Crossroads Hotel in Newburgh, about 20 minutes from the ceremony site. Friends and relatives coming from California, Florida, Arizona, Minnesota, Connecticut, New Jersey, Long Island and Westchester were all booked, with shuttle service arranged to ferry them safely from and back to the hotel.

The hotel has been in the news amid controversy over New York City’s scheme to store excess migrants in suburban Orange and Rockland Counties. The Florida couple called the hotel, and were told their reservations had been trashed. The hotel told them to contact Choice Management, which operates the hotel. 

“We were on hold for 45-plus minutes and were ultimately told, ‘We can’t do anything for you, bye bye,’ and we were hung up on,” says Mifsud. Only one guest had been proactively notified of the cancellation. 

“It’s complete chaos. We do not feel like they are housing the migrants out of the kindness of their heart. It’s just for the money,” adds Mifsud. 

Gary Moretti and Deanna Mifsud are scrambling to put their wedding plans back together (Deanna Mifsud photo via New York Post)

That’s not a random accusation. Reports suggest that hotels involved in the migrant program are being paid rents that are a substantial premium to rates typically paid by citizens and others in the country legally.  

That includes 20 homeless U.S. military veterans who were already in suburban New York City hotels but were given the boot to make room for migrants. The vets’ rooms were being covered by the Yerik Israel Toney Foundation, which was founded by a disabled military vet. Fifteen of them were staying at the same hotel as the victimized Florida engaged couple. 

The foundation had negotiated an $88 nightly rate to house the veterans, but some reports indicate New York City is paying upwards of $190 a night to house migrants. “That’s so unfair, because at the end of the day, we are a small nonprofit,” the foundation’s Sharon Toney-Finch told the Post

A similar wedding nightmare struck a couple from Queens, but with even less notice. They’d reserved 37 rooms at the Crossroads Hotel for a May wedding, only to have them taken away and redistributed to the migrants. “What we feel right now is…we feel very cast aside,” groom Sean Plunkett told CBS News

Tyler Durden
Sun, 05/14/2023 – 12:00

Polls Closed & Vote Counting Underway In Turkey: Erdogan In Early Surge

Polls Closed & Vote Counting Underway In Turkey: Erdogan In Early Surge

(Update 11:53ET): Polls are closed and vote counting is underway across Turkey as President Erdogan’s political future hangs in the balance after two decades in power. Al Jazeera has compiled the following notes of what to expect in the hours and days ahead

  • Polls closed at 5pm (14:00 GMT) and counting is under way.
  • Preliminary results are expected later on Sunday, but the official results may take up to three days to be confirmed. There are no exit polls.
  • A candidate needs more than 50 percent of votes in the first round to win outright. If no one crosses the 50-percent mark, the top two candidates will go head to head in a run-off two weeks later, with this year’s vote set for May 28.
  • Pre-election polls gave a slight lead to Kilicdaroglu, 74, the joint candidate of a six-party opposition alliance who leads the centre-left, pro-secular Republican People’s Party, or CHP.
  • Some have expressed concerns over whether Erdogan would cede power, if he lost. Erdogan, however, said in an interview with more than a dozen Turkish broadcasters on Friday that he came to power through democracy and would act in line with the democratic process.

So far no major security incidents or irregularities have been reported by either side.

Interactive coverage is here as results come in. With about 10% of the votes counted, here’s where things stand at this early stage…

Analysts believe Erdogan’s numbers will likely to drop as more ballots are counted.

Emerging numbers out of Istanbul: 

* * *

Polls are nearing closure in Turkey on Sunday late afternoon (local) in what is shaping up to be the biggest challenge to President Recep Tayyip Erdogan’s two-decade grip over the country, by his main rival Kemal Kilicdaroglu of the Kemalist and secular Republican People’s Party (CHP).

Over 64 million people are eligible to vote in this election, which also will decide the next parliament for a five-year term. By all accounts voter turnout has been high even into the final two hours before polling stations close at 5pm local time (14:00 GMT). No results are expected to trickle in for many hours, as Turkish law prevents releasing any results until 9pm (18:00 GMT, or 2pm Eastern US).

Middle East Eye observes that “Schools, where voters have been casting their ballots, were noticeably more crowded by midday in Turkey than in previous elections, MEE correspondent Yusuf Selman Inanc reported.”

“Experts predict that this election will see one of the highest voter turnouts in Turkey’s history,” the report continues. In this first round if no candidate secures over 50%, the vote heads to a run-off two weeks later. Any potential runoff would he held on May 28. The CHP’s Kilicdaroglu is representing six different parties as a unity candidate who are desperate to see Erdogan booted from power.

Among the issues driving public anger, which could result in an upset ousting the incumbent, includes worsening economic conditions and especially the devastating Feb. 6 earthquake and its aftermath – and the subsequent scandals which have since been exposed related to Erdogan’s AK Party officials overseeing years of shoddy construction of buildings across central and southern Turkey and cutting corners. It’s widely perceived that this greatly exacerbated the death and destruction, in a natural disaster which took over 50,000 lives across southern Turkey.

Yesterday, as a final campaign message, Erdogan lashed at Washington while hoping to whip up anti-US fervor and passion among his conservative Islamist supporters.

Speaking Saturday in Istanbul’s Umraniye district, Erdogan referenced comments made by President Joe Biden in 2020 when he was on the campaign trail which said the US should encourage Erdogan’s opponents to defeat him at the polls.

“Biden gave the order to topple Erdogan, I know this. All my people know this,” said Erdogan “If that is the case, then the ballots tomorrow will give a response to Biden too.”

Polls on the eve of Sunday’s vote revealed a tight race: “Polls show Erdogan trailing the main opposition candidate Kemal Kilicdaroglu a day ahead of one of the most consequential elections in Turkey’s modern history.” According to regional analyst Hakan Akbas, managing director of consulting firm Strategic Advisory Services:

“There is so much at stake for President Erdogan and his AKP (Justice and Development Party) for the first time, as his 20-year rule over Türkiye may come to an end given the unified opposition has managed to maintain a strong alliance and stay on a hope-building positive campaign.”

Akbas told CNBC: “The next president of Türkiye will face the challenge of restoring economic stability and state institutions such as the central bank, treasury, and wealth fund and rebuild investor confidence.” He described further, “The country suffers from historically low FX reserves, widening current account deficit, artificially overvalued local currency, undisciplined fiscal balance and persistent, high inflation.

Turkey has been notorious for blocking US-based social media, particularly at sensitive moments impacting the country and domestic politics. That’s certainly the case when it comes to national elections like this. 

This gave way to some weekend controversy centered on Elon Musk regarding Turkish censorship of Twitter and the company’s reaction…

* * *

Below is a note from BofA Global Research: Who is exposed to Turkiye?

Companies exposed to Türkiye In the light of the upcoming Turkish general elections, in our Screen of the Week we focus on those companies with exposure to the country (Exhibit 1). Our Turkish economist highlights that, regardless of the election outcome, she expects a weaker TRY and tightening economic conditions to address imbalances in the economy (see: Türkiye Viewpoint: Elections in May: is Türkiye heading towards orthodoxy? 30 March 2023). The Turkish exposure of European companies is limited, only 0.14% directly reported revenue exposure in 2021 and they show 284 links from Türkiye in the supply chain, of which 40% are suppliers.

8th consecutive weekly outflow from Europe

Europe-focused equity funds recorded the eighth consecutive weekly outflow of $2.34bn last week, with a net -17.8% of funds seeing net inflows. Active funds saw outflows of $1.36bn and passive funds of $0.98bn. Europe-focused funds have seen $8.3bn of outflows YTD: $21.7bn of outflows from active funds and $13.4bn of inflows into passive funds. Growth stocks ($0.2bn) and Spain ($0.03bn) recorded the largest inflows last week, while Switzerland ($0.8bn), Financials ($0.4bn) and Size stocks ($0.3bn) posted the largest outflows. No sector recorded inflows last week.

BofA ERR: Europe improves after upgrades in Healthcare

The Global BofA four-week EPS Revision Ratio (ERR) increased to 0.93, led by improvements in Europe and North America. The European BofA four-week ERR rose the most across regions over the week to 1.18, the highest level in the past 4 weeks. This uplift was driven mainly by Healthcare, Italy and Low Risk, whose ratios improved the most last week, while Utilities, Switzerland and Rising Momentum ratios dropped the most.

* * *

Below is a snapshot summary of the two main candidates we previously featured in this analysis

Erdogan: The Islamic Populist

Recep Erdogan, 69, has led Turkey since 2003, first as Prime Minister, then as a ceremonial President, and then as a powerful President. Erdogan grew up in a working class family in the rough Kasimpasa neighborhood in the European part of Istanbul, though he spent some of his childhood in his family’s ancestral hometown of Rize, on the east coast of the Black Sea. Erdogan’s father was a Coast Guard officer. As a young man he played semi-professional football; he remains an avid fan of Istanbul’s Fenerbahce football club and is regularly seen wearing a football scarf with his fashionable suits. In 1994 Erdogan became the Mayor of Istanbul running with the pro-Islamic Welfare party. In 1999, Erdogan was sentenced to four months in prison for reading a poem in 1997 that was said to violate Turkiye’s secularism laws. A man of many talents, Erdogan released an album of lyric poetry before going to prison; it became a best-seller in Turkey. As part of his sentence, Erdogan was banned from running for Parliament, but it was annulled after the AKP, which he founded despite not being allowed to run for office, won the 2002 elections. After the rules were changed to allow him to run for office, Erdogan ran in a special election in 2003 and became Prime Minister days after winning.

When Erdogan first took power, he was seen as someone that the West could “work with.” In an article for Politico Christian Oliver writes,

It’s now easy to forget that Turkish President Recep Tayyip Erdoğan was once hailed as the paragon of a ‘Muslim democrat,’ who could serve as a model to the entire Islamic world…Finally, there was a master-juggler, who could balance Islamism, parliamentary democracy, progressive welfare, NATO membership and EU-oriented reforms.

I certainly had forgotten that, if I ever knew it in the first place. I did remember that it was Turkey’s priority to join the European Union, something which faded over the years until the process was suspended over Turkey’s record on human rights, media freedoms, and other such matters. After taking power Erdogan quickly got a reputation in the West for being difficult to work with when he would not allow US troops to be stationed in Turkish or Iraqi Kurdistan during the Iraq War. Over the years Erdogan consolidated power, first through a 2010 referendum which made the President directly elected instead of selected by Parliament. Erdogan became the first directly elected President of Turkiye in 2014. Then there was the 2017 referendum making the Presidency a position with many legal powers. In 2016 there was a coup attempt, allegedly by supporters of US-based exiled cleric Fethullah Gulen. Many have been highly skeptical of the Erdogan regime’s story about the coup, with some suggesting it was entirely staged. What is undeniable is that Erdogan used the coup attempt to remove an enormous number of political opponents; the 2017 referendum took place under a state of emergency.

Over the past several years, especially since the Russian invasion of Ukraine, Erdogan has been taking Turkey on an increasingly independent course. Tensions had already been high due to the war in Syria, where Turkiye had been fighting a sort of proxy war against its own NATO allies. Currently, the West opposes reconciliation with Syria, something both Turkish candidates want to pursue. The continued presence of Syrian refugees has become deeply unpopular in Turkey, and both candidates are looking to send them home. However, Assad has been hesitant to work with Erdogan, both because Turkey continues to occupy much of northern Syria and further Assad has expressed concern about giving Erdogan a “win” in the lead-up to the elections.

Last May, I wrote about the many moves which Erdogan had been making, all of which indicated a newly empowered Turkey. However, in the last year Turkey has worked to improve relations not only with Syria but also with Greeceparticularly following the earthquake. Further, Turkey accepted Finland’s NATO membership, though continues to hold out on Sweden; Kilicdaroglu intends to immediately approve Sweden’s membership if elected. Erdogan has also continued to employ diplomacy regarding the Russia-Ukraine War, though maintaining the Turkey-brokered grain deal has proven tenuous. All of these things have infuriated the United States and Europe and their scribbling class, who continue to view NATO as a sort of “Gentleman’s Club of liberal democracies” and ignore Turkey’s incredible geopolitical importance and enormous military. The clumsy foreign policy of the Western liberal internationalists plays into Erdogan’s hands, who has claimed his opponents are, “in hock to terrorists, the imperialist West, murky international high-finance and LGBTQ+ organizations.” One is left wondering if a publication such as The Economist publishing that they “warmly endorse” Kilicdaroglu does more to help Erdogan than it does Kilicdaroglu; besides the terrorist part, it appears to be factually accurate that the latter three prefer the opposition.

For all he has done to consolidate power and restore the nation’s pride, Erdogan remains at serious risk due to economic issues. Though many support his modernizing the military, you cannot eat fighter jets. The President using a religious justification to ignore “mainstream” economic advice during an ongoing inflation crisis must be maddening to educated, secular Turks. However, what matters more to the public than economic ideas are what we call “bread and butter” issues in the United States [though perhaps “onion and potato” issues is more appropriate for this election.] It is very bad for an incumbent when the price of staple vegetables becomes a major campaign issue. One Erdogan supporter went so far as to write a song saying, “We will eat dry bread and onions but we will not abandon Erdogan.” That is perhaps true of his devotees, but many will abandon a political leader if he must eat his bread without oil. For his part, Erdogan has vacillated between denying the problem and downplaying it’s significance, saying “you wouldn’t sacrifice your leader for onion and potato.” In Erdogan’s defense, exports have gone up a substantial amount, which is a goal of his economic policies, and average wages and the legal minimum wage have gone up a healthy amount. Unfortunately, none of this is enough to balance out the severe inflation. Still, there is a plausible argument to be made that this is just a sort of economic growing pains. However, being as it is considered that the earthquake response was badly mismanaged, it is difficult to sell the narrative that Erdogan has things under control.

Kilicdaroglu: the Secular Liberal

The opposition candidate Kemal Kilicdaroglu, 74, is everything that Erdogan is not: conventional, polite, professional, and secular. He has a sort of humble professorial demeanor in contrast to Erdogan’s bombastic flair. He has been described as “soft-spoken” and “low key.” One international diplomat with experience in Turkey, speaking to Time on the condition of anonymity, called Kilicdaroglu the “anti-Erdogan,” and further said, “There are points… when a grayer personality is exactly what people want.” This certainly can be true of politics, especially if the public has grown tired of a large personality like Erdogan who has held power for many years. Kemal Kilicdaroglu is appropriately named: he is a staunch Kemalist, who wants to return Turkey to the secular parliamentary democracy envisioned by its founder Ataturk. He is pledging to be a less powerful President than Erdogan- somewhat unusual for a politician- and has said he will only serve one term and then retire to spend time with his grandchildren. An accountant by trade, he intends to follow the economic advice of experts, and certainly would not set financial policies based on his religious views. He is on message, talking about inflation and returning to a more pluralistic political system. Further, Kilicdaroglu wants to have much more NATO-friendly policies, but Western analysts are warning that he won’t make the West’s “dreams come true.” The reality is that though he will be more measured in his speech and behavior, Kilicdaroglu will most likely continue to pursue a largely independent foreign policy which includes resisting the Western sanctions regime against Russia, immediate normalization with Syria, and working to deport Syrian refugees from the country. It is not clear how possible it is to implement Kilicdaroglu’s Syria policies.

Few articles mention Kilicdaroglu’s personal background and upbringing, in large part because he is almost intentionally uninteresting and does not talk about his personal life. His wife once said he is so soft spoken “You can’t even have a decent argument with him.” [I personally find that untrustworthy, as some of the most sociopathic people can always maintain pleasant demeanor.] According to a profile in Time magazine [the only of several I consulted for this article to contain the story of his childhood] Kilicdaroglu was “born into a family of 9” [so the 8th child?] in a the remote mountain village of Ballica in eastern Anatolia. His family raised goats and he walked to school without shoes. Later, his father got low-level civil service postings which caused them to move to different towns. He was a studious child who played an instrument called the saz and dreamed of becoming a teacher. In college, he got involved in left wing protests and graduated to become a tax inspector. He married a cousin from his hometown, an ancient tradition in that region. While raising his family he worked his way up to the director of the national social security institution [he was, after all, one of the nation’s top rated bureaucrats.] Kilicdaroglu is from a family which follows a minority sect of Islam known as Alevi, which is considered to be a non-mainstream branch of Shia Islam with similarities to Syria’s Alawites. Alevis have been historically oppressed in the Anatolia; it was considered to be breaking a major taboo for him to publicly discuss this religious background.

Kilicdaroglu entered politics in 2002 at age 53, in what has been referred to as a “retirement hobby.” He began to rise up the ranks of the CHP by using his tax inspection skills to expose corruption in the AKP. In 2010 he became the leader of the party after the head of the party had a sex tape scandal– this was probably an example of the party wanting a “grayer personality.” Though Kilicdaroglu has been unsuccessful at increasing CHP’s parliamentary seats, he has raised his personal profile through a series of non-violent protests, such as a “March for Justice” from Ankara to Istanbul in 2017. Kilicdaroglu models himself after Gandhi, and is sometimes called “Turkiye’s Gandhi.” Further, he has been successful in making in-roads into the nation’s large Kurdish community, who one politician said used to consider the CHP “non-votable,” due to Ataturk’s Turkish nationalism.

Kilicdaroglu finds himself in a difficult position. He is backed by a disparate coalition while trying to increase parliamentary power. Further, though Kilicdaroglu has been polling ahead in the first round polls, the AKP alliance is ahead in parliamentary polling. The opposition wants to revert back to the old system of governance, or at least make wide-ranging reforms empowering the parliament, but there is no real way to do that without an strong parliamentary majority. Even if the coalition can hold together in the legislature, there is no expectation they will have a large majority. As an anonymous opposition official told journalist Ragip Soylu, the opposition may end up in an ironic position where the only way they can rule and try to reduce the unitary Presidential power is by Presidential decree.

Kilicdaroglu may not be the most dynamic man, but he can win if enough of the public wants less “exciting” government than they have had from Erdogan. Further, while this sort of constitutional reform may not seem like a campaign issue that will connect with the public, Erdogan’s consolidation of power is unprecedented in modern Turkey and the public has noticed. Since Erdogan has taken so much power it makes it easy to blame all of the country’s problems on him. İlke Toygür of the Universidad Carlos III de Madrid said, “Parliament has a very strong symbolic value in Turkey…One of the biggest complaints now is that people lost their links to decision-making candidates.” In this election, it is in some ways true that “democracy is on the ballot.”

Tyler Durden
Sun, 05/14/2023 – 11:53

Taibbi Fact-Check: Nina Jankowicz v. Fox News

Taibbi Fact-Check: Nina Jankowicz v. Fox News

Authored by Matt Taibbi via Racket News (subscribe here),

Nina Jankowicz, who was to have run the now “paused” project of the Department of Homeland Security called the Disinformation Governance Board, is suing Fox News. Since I do not want to be sued by Nina Jankowicz, this article will be built around direct quotes of official sources, and her own writings and statements.

First, from the complaint, a list of insults, not to be read for amusement:

By turns, Fox described Jankowicz as moronic, an embarrassment to her parents and employers, and a “self-obsessed social media neophyte.” Hosts and commentators referred to Jankowicz as, inter alia, “low I.Q,” “illiterate,” “Miss TikTok meets America’s Got No Talent,” “disinfo overlord,” “disinformation czaress,” “minister of truth,” “Scary Poppins,” a “useful idiot,” “janko-half-witz,” a “lunatic,” and “the wicked witch.”

In case you were unable to grasp that text clearly, here is an audio version, read by a machine with a pleasant British accent:

If you’re still left wanting, here is my video interpretation of the text, read with a mouthful of jellybeans:

Further down, the complaint read:

The story Fox fabricated about Jankowicz sprang from the creation of a government entity—the Disinformation Governance Board (the “Board”)— nested in the Department of Homeland Security (“DHS”), and from Jankowicz’s appointment as the Board’s Executive Director. But the Board was an internal working group with no operating authority or capability. The Board had no ability to intervene, respond to, or prevent the spread of disinformation

On June 7, 2022, Senators Chuck Grassley of Iowa and Josh Hawley of Missouri sent a letter to Homeland Security Secretary Alejandro Mayorkas, requesting information about the Disinformation Governance Board. As a result of that letter, the charter of the DGB was made public.

With both the complaint and the charter in hand, we can compare some statements:

From the complaint:

The Board had no ability to intervene, respond to, or prevent the spread of disinformation.

From the DGB Charter:

The Board will focus on… (3) responding to these MDM threats (“Response”)

From the complaint:

[The Board] had nothing to do with “governing disinformation” outside of the Department.

So, the “Disinformation Governance Board” had nothing to do with “governing disinformation.”

Outside of the Department, that is. Does that mean it would have been concerned with governing disinformation inside the Department?

Confusing. Perhaps the Charter sheds light:

The Board will serve as the departmental forum for governance of DHS policies, plans, procedures, standards, and activities pertaining to MDM that threatens homeland security.

Lastly, the complaint reads:

Any amount of investigation would have revealed that Jankowicz’s published writings avow that even in the context of a disinformation war, she believes censorship is ineffective and dangerous. In her book, How to Lose the Information War, Jankowicz explicitly makes that point, which is echoed and attributed to her in a Wilson Center policy paper, readily accessible online.

It is true that Jankowicz wrote a paper that is highly critical of counter-disinformation efforts in Singapore (she calls the Protection from Online Falsehoods and Manipulation Act or POFMA a “cover for censorship”) and in Ukraine (where a draft Law on Disinformation had “unclear guidelines” that pose a “threat to freedom of expression”).

However, she was not so down on Germany’s “Act to Improve Enforcement of the Law in Social Networks” or “NetzDG” law, which forces social media companies to remove large quantities of material under a Code of Conduct that previously had been voluntary. This extremely ambitious law “obliges large social media companies… to enforce 21 statutes in the German Criminal Code related to hate speech in the online spaces they manage and delete any illegal content.”

What does the person who believes “censorship is ineffective and dangerous” say about a German law that requires private companies to “manage and delete” content in accordance with 21 different statutes?

NetzDG is a fundamentally imperfect law, but Germany’s robust protections for political rights and civil liberties equip the country to mitigate its adverse domestic effects. However, implementation of laws similar to NetzDG in states with fewer protections could result in severe consequences for users’ digital rights.

In other words, NetzDG is imperfect, but its imperfections are tolerable in a country like Germany. Are we such a country? I looked for an answer both in the paper, and in her book.

I was not able to find a passage in Jankowicz’s How to Lose the Information War describing censorship as ineffective and dangerous. Possibly it’s in there in spirit, just not using any of the terms ineffective, dangerous, or even censorship:

In the absence of that discovery, I did find two passages that may be pertinent.

Read the rest here…

Tyler Durden
Sun, 05/14/2023 – 11:30

Despite IMF Rebuke, Zimbabwe Sells $14 Million Gold-Backed Digital Tokens In First Issue

Despite IMF Rebuke, Zimbabwe Sells $14 Million Gold-Backed Digital Tokens In First Issue

Two weeks ago we described Zimbabwe’s latest effort to stabilize the local currency from continued depreciation against the U.S. dollar – The Reserve Bank of Zimbabwe introduced a gold-backed digital currency to serve as legal tender in the country.

By way of background, Zimbabwe has been fighting against currency volatility and inflation for over a decade.

In 2009, the country adopted the U.S. dollar as its currency after an episode of hyperinflation.

In 2019, the Zimbabwean dollar was reintroduced in an effort to revive the country’s struggling economy.

Last year, the government decided to use the U.S. dollar again in a bid to curb surging prices in the country.

And now, The central bank’s latest plan will allow small amounts of Zimbabwean dollars to be exchanged for the digital gold token, enabling more Zimbabweans to hedge against currency volatility.

Of course, this greatly annoyed The IMF (who may lose their debt-driven control over the country should this plan be successful):

A careful assessment should be conducted to ensure the benefits from this measure outweigh the costs and potential risks including, for instance, macroeconomic and financial stability risks, legal and operational risks, governance risks, cost of forgone FX reserves

The Washington-based lender urged authorities in the southern African nation to rather use conventional measures to address economic challenges (i.e. borrow from us and bend the knee ‘economic hitman’-style).

Nevertheless, the central bank started selling digital tokens to investors on Monday for a minimum price of $10 for individuals and $5,000 for corporates and other entities, as part of efforts to reduce demand for US dollars that now supersede the local unit as the preferred currency for transactions. 

And now the results are in.

Zimbabwe used nearly 140 kilograms of gold reserves to back the first sale of its digital money.

Source: TechZim

The central bank received 135 applications valued at 14 billion Zimbabwe dollar ($12 million) to purchase the gold-backed digital tokens, it said in an emailed statement on Friday. It plans a second auction on May 18.

It appears the market is testing out the process before committing to converting significant Zim$ reserves into gold tokens, But still, it was a respectable first week.

Finally, as we noted previously, crypto adoption has grown in many African countries as a result of economic challenges.

According to Chainalysis, the Middle East and North Africa is the fastest-growing region for crypto adoption thanks to cross-border remittances, with over $566 billion in crypto transactions between July 2021 and June 2022, up 48% from the previous year.

Tyler Durden
Sun, 05/14/2023 – 09:55

Immense Turnout In Turkey’s Knife-Edge Election As Erdogan Risks Defeat

Immense Turnout In Turkey’s Knife-Edge Election As Erdogan Risks Defeat

Polls are nearing closure in Turkey on Sunday late afternoon (local) in what is shaping up to be the biggest challenge to President Recep Tayyip Erdogan’s two-decade grip over the country, by his main rival Kemal Kilicdaroglu of the Kemalist and secular Republican People’s Party (CHP).

Over 64 million people are eligible to vote in this election, which also will decide the next parliament for a five-year term. By all accounts voter turnout has been high even into the final two hours before polling stations close at 5pm local time (14:00 GMT). No results are expected to trickle in for many hours, as Turkish law prevents releasing any results until 9pm (18:00 GMT, or 2pm Eastern US).

Middle East Eye observes that “Schools, where voters have been casting their ballots, were noticeably more crowded by midday in Turkey than in previous elections, MEE correspondent Yusuf Selman Inanc reported.”

“Experts predict that this election will see one of the highest voter turnouts in Turkey’s history,” the report continues. In this first round if no candidate secures over 50%, the vote heads to a run-off two weeks later. Any potential runoff would he held on May 28. The CHP’s Kilicdaroglu is representing six different parties as a unity candidate who are desperate to see Erdogan booted from power.

Among the issues driving public anger, which could result in an upset ousting the incumbent, includes worsening economic conditions and especially the devastating Feb. 6 earthquake and its aftermath – and the subsequent scandals which have since been exposed related to Erdogan’s AK Party officials overseeing years of shoddy construction of buildings across central and southern Turkey and cutting corners. It’s widely perceived that this greatly exacerbated the death and destruction, in a natural disaster which took over 50,000 lives across southern Turkey.

Yesterday, as a final campaign message, Erdogan lashed at Washington while hoping to whip up anti-US fervor and passion among his conservative Islamist supporters.

Speaking Saturday in Istanbul’s Umraniye district, Erdogan referenced comments made by President Joe Biden in 2020 when he was on the campaign trail which said the US should encourage Erdogan’s opponents to defeat him at the polls.

“Biden gave the order to topple Erdogan, I know this. All my people know this,” said Erdogan “If that is the case, then the ballots tomorrow will give a response to Biden too.”

Polls on the eve of Sunday’s vote revealed a tight race: “Polls show Erdogan trailing the main opposition candidate Kemal Kilicdaroglu a day ahead of one of the most consequential elections in Turkey’s modern history.” According to regional analyst Hakan Akbas, managing director of consulting firm Strategic Advisory Services:

“There is so much at stake for President Erdogan and his AKP (Justice and Development Party) for the first time, as his 20-year rule over Türkiye may come to an end given the unified opposition has managed to maintain a strong alliance and stay on a hope-building positive campaign.”

Akbas told CNBC: “The next president of Türkiye will face the challenge of restoring economic stability and state institutions such as the central bank, treasury, and wealth fund and rebuild investor confidence.” He described further, “The country suffers from historically low FX reserves, widening current account deficit, artificially overvalued local currency, undisciplined fiscal balance and persistent, high inflation.

Turkey has been notorious for blocking US-based social media, particularly at sensitive moments impacting the country and domestic politics. That’s certainly the case when it comes to national elections like this. 

This gave way to some weekend controversy centered on Elon Musk regarding Turkish censorship of Twitter and the company’s reaction…

* * *

Below is a note from BofA Global Research: Who is exposed to Turkiye?

Companies exposed to Türkiye In the light of the upcoming Turkish general elections, in our Screen of the Week we focus on those companies with exposure to the country (Exhibit 1). Our Turkish economist highlights that, regardless of the election outcome, she expects a weaker TRY and tightening economic conditions to address imbalances in the economy (see: Türkiye Viewpoint: Elections in May: is Türkiye heading towards orthodoxy? 30 March 2023). The Turkish exposure of European companies is limited, only 0.14% directly reported revenue exposure in 2021 and they show 284 links from Türkiye in the supply chain, of which 40% are suppliers.

8th consecutive weekly outflow from Europe

Europe-focused equity funds recorded the eighth consecutive weekly outflow of $2.34bn last week, with a net -17.8% of funds seeing net inflows. Active funds saw outflows of $1.36bn and passive funds of $0.98bn. Europe-focused funds have seen $8.3bn of outflows YTD: $21.7bn of outflows from active funds and $13.4bn of inflows into passive funds. Growth stocks ($0.2bn) and Spain ($0.03bn) recorded the largest inflows last week, while Switzerland ($0.8bn), Financials ($0.4bn) and Size stocks ($0.3bn) posted the largest outflows. No sector recorded inflows last week.

BofA ERR: Europe improves after upgrades in Healthcare

The Global BofA four-week EPS Revision Ratio (ERR) increased to 0.93, led by improvements in Europe and North America. The European BofA four-week ERR rose the most across regions over the week to 1.18, the highest level in the past 4 weeks. This uplift was driven mainly by Healthcare, Italy and Low Risk, whose ratios improved the most last week, while Utilities, Switzerland and Rising Momentum ratios dropped the most.

* * *

Below is a snapshot summary of the two main candidates we previously featured in this analysis

Erdogan: The Islamic Populist

Recep Erdogan, 69, has led Turkey since 2003, first as Prime Minister, then as a ceremonial President, and then as a powerful President. Erdogan grew up in a working class family in the rough Kasimpasa neighborhood in the European part of Istanbul, though he spent some of his childhood in his family’s ancestral hometown of Rize, on the east coast of the Black Sea. Erdogan’s father was a Coast Guard officer. As a young man he played semi-professional football; he remains an avid fan of Istanbul’s Fenerbahce football club and is regularly seen wearing a football scarf with his fashionable suits. In 1994 Erdogan became the Mayor of Istanbul running with the pro-Islamic Welfare party. In 1999, Erdogan was sentenced to four months in prison for reading a poem in 1997 that was said to violate Turkiye’s secularism laws. A man of many talents, Erdogan released an album of lyric poetry before going to prison; it became a best-seller in Turkey. As part of his sentence, Erdogan was banned from running for Parliament, but it was annulled after the AKP, which he founded despite not being allowed to run for office, won the 2002 elections. After the rules were changed to allow him to run for office, Erdogan ran in a special election in 2003 and became Prime Minister days after winning.

When Erdogan first took power, he was seen as someone that the West could “work with.” In an article for Politico Christian Oliver writes,

It’s now easy to forget that Turkish President Recep Tayyip Erdoğan was once hailed as the paragon of a ‘Muslim democrat,’ who could serve as a model to the entire Islamic world…Finally, there was a master-juggler, who could balance Islamism, parliamentary democracy, progressive welfare, NATO membership and EU-oriented reforms.

I certainly had forgotten that, if I ever knew it in the first place. I did remember that it was Turkey’s priority to join the European Union, something which faded over the years until the process was suspended over Turkey’s record on human rights, media freedoms, and other such matters. After taking power Erdogan quickly got a reputation in the West for being difficult to work with when he would not allow US troops to be stationed in Turkish or Iraqi Kurdistan during the Iraq War. Over the years Erdogan consolidated power, first through a 2010 referendum which made the President directly elected instead of selected by Parliament. Erdogan became the first directly elected President of Turkiye in 2014. Then there was the 2017 referendum making the Presidency a position with many legal powers. In 2016 there was a coup attempt, allegedly by supporters of US-based exiled cleric Fethullah Gulen. Many have been highly skeptical of the Erdogan regime’s story about the coup, with some suggesting it was entirely staged. What is undeniable is that Erdogan used the coup attempt to remove an enormous number of political opponents; the 2017 referendum took place under a state of emergency.

Over the past several years, especially since the Russian invasion of Ukraine, Erdogan has been taking Turkey on an increasingly independent course. Tensions had already been high due to the war in Syria, where Turkiye had been fighting a sort of proxy war against its own NATO allies. Currently, the West opposes reconciliation with Syria, something both Turkish candidates want to pursue. The continued presence of Syrian refugees has become deeply unpopular in Turkey, and both candidates are looking to send them home. However, Assad has been hesitant to work with Erdogan, both because Turkey continues to occupy much of northern Syria and further Assad has expressed concern about giving Erdogan a “win” in the lead-up to the elections.

Last May, I wrote about the many moves which Erdogan had been making, all of which indicated a newly empowered Turkey. However, in the last year Turkey has worked to improve relations not only with Syria but also with Greeceparticularly following the earthquake. Further, Turkey accepted Finland’s NATO membership, though continues to hold out on Sweden; Kilicdaroglu intends to immediately approve Sweden’s membership if elected. Erdogan has also continued to employ diplomacy regarding the Russia-Ukraine War, though maintaining the Turkey-brokered grain deal has proven tenuous. All of these things have infuriated the United States and Europe and their scribbling class, who continue to view NATO as a sort of “Gentleman’s Club of liberal democracies” and ignore Turkey’s incredible geopolitical importance and enormous military. The clumsy foreign policy of the Western liberal internationalists plays into Erdogan’s hands, who has claimed his opponents are, “in hock to terrorists, the imperialist West, murky international high-finance and LGBTQ+ organizations.” One is left wondering if a publication such as The Economist publishing that they “warmly endorse” Kilicdaroglu does more to help Erdogan than it does Kilicdaroglu; besides the terrorist part, it appears to be factually accurate that the latter three prefer the opposition.

For all he has done to consolidate power and restore the nation’s pride, Erdogan remains at serious risk due to economic issues. Though many support his modernizing the military, you cannot eat fighter jets. The President using a religious justification to ignore “mainstream” economic advice during an ongoing inflation crisis must be maddening to educated, secular Turks. However, what matters more to the public than economic ideas are what we call “bread and butter” issues in the United States [though perhaps “onion and potato” issues is more appropriate for this election.] It is very bad for an incumbent when the price of staple vegetables becomes a major campaign issue. One Erdogan supporter went so far as to write a song saying, “We will eat dry bread and onions but we will not abandon Erdogan.” That is perhaps true of his devotees, but many will abandon a political leader if he must eat his bread without oil. For his part, Erdogan has vacillated between denying the problem and downplaying it’s significance, saying “you wouldn’t sacrifice your leader for onion and potato.” In Erdogan’s defense, exports have gone up a substantial amount, which is a goal of his economic policies, and average wages and the legal minimum wage have gone up a healthy amount. Unfortunately, none of this is enough to balance out the severe inflation. Still, there is a plausible argument to be made that this is just a sort of economic growing pains. However, being as it is considered that the earthquake response was badly mismanaged, it is difficult to sell the narrative that Erdogan has things under control.

Kilicdaroglu: the Secular Liberal

The opposition candidate Kemal Kilicdaroglu, 74, is everything that Erdogan is not: conventional, polite, professional, and secular. He has a sort of humble professorial demeanor in contrast to Erdogan’s bombastic flair. He has been described as “soft-spoken” and “low key.” One international diplomat with experience in Turkey, speaking to Time on the condition of anonymity, called Kilicdaroglu the “anti-Erdogan,” and further said, “There are points… when a grayer personality is exactly what people want.” This certainly can be true of politics, especially if the public has grown tired of a large personality like Erdogan who has held power for many years. Kemal Kilicdaroglu is appropriately named: he is a staunch Kemalist, who wants to return Turkey to the secular parliamentary democracy envisioned by its founder Ataturk. He is pledging to be a less powerful President than Erdogan- somewhat unusual for a politician- and has said he will only serve one term and then retire to spend time with his grandchildren. An accountant by trade, he intends to follow the economic advice of experts, and certainly would not set financial policies based on his religious views. He is on message, talking about inflation and returning to a more pluralistic political system. Further, Kilicdaroglu wants to have much more NATO-friendly policies, but Western analysts are warning that he won’t make the West’s “dreams come true.” The reality is that though he will be more measured in his speech and behavior, Kilicdaroglu will most likely continue to pursue a largely independent foreign policy which includes resisting the Western sanctions regime against Russia, immediate normalization with Syria, and working to deport Syrian refugees from the country. It is not clear how possible it is to implement Kilicdaroglu’s Syria policies.

Few articles mention Kilicdaroglu’s personal background and upbringing, in large part because he is almost intentionally uninteresting and does not talk about his personal life. His wife once said he is so soft spoken “You can’t even have a decent argument with him.” [I personally find that untrustworthy, as some of the most sociopathic people can always maintain pleasant demeanor.] According to a profile in Time magazine [the only of several I consulted for this article to contain the story of his childhood] Kilicdaroglu was “born into a family of 9” [so the 8th child?] in a the remote mountain village of Ballica in eastern Anatolia. His family raised goats and he walked to school without shoes. Later, his father got low-level civil service postings which caused them to move to different towns. He was a studious child who played an instrument called the saz and dreamed of becoming a teacher. In college, he got involved in left wing protests and graduated to become a tax inspector. He married a cousin from his hometown, an ancient tradition in that region. While raising his family he worked his way up to the director of the national social security institution [he was, after all, one of the nation’s top rated bureaucrats.] Kilicdaroglu is from a family which follows a minority sect of Islam known as Alevi, which is considered to be a non-mainstream branch of Shia Islam with similarities to Syria’s Alawites. Alevis have been historically oppressed in the Anatolia; it was considered to be breaking a major taboo for him to publicly discuss this religious background.

Kilicdaroglu entered politics in 2002 at age 53, in what has been referred to as a “retirement hobby.” He began to rise up the ranks of the CHP by using his tax inspection skills to expose corruption in the AKP. In 2010 he became the leader of the party after the head of the party had a sex tape scandal– this was probably an example of the party wanting a “grayer personality.” Though Kilicdaroglu has been unsuccessful at increasing CHP’s parliamentary seats, he has raised his personal profile through a series of non-violent protests, such as a “March for Justice” from Ankara to Istanbul in 2017. Kilicdaroglu models himself after Gandhi, and is sometimes called “Turkiye’s Gandhi.” Further, he has been successful in making in-roads into the nation’s large Kurdish community, who one politician said used to consider the CHP “non-votable,” due to Ataturk’s Turkish nationalism.

Kilicdaroglu finds himself in a difficult position. He is backed by a disparate coalition while trying to increase parliamentary power. Further, though Kilicdaroglu has been polling ahead in the first round polls, the AKP alliance is ahead in parliamentary polling. The opposition wants to revert back to the old system of governance, or at least make wide-ranging reforms empowering the parliament, but there is no real way to do that without an strong parliamentary majority. Even if the coalition can hold together in the legislature, there is no expectation they will have a large majority. As an anonymous opposition official told journalist Ragip Soylu, the opposition may end up in an ironic position where the only way they can rule and try to reduce the unitary Presidential power is by Presidential decree.

Kilicdaroglu may not be the most dynamic man, but he can win if enough of the public wants less “exciting” government than they have had from Erdogan. Further, while this sort of constitutional reform may not seem like a campaign issue that will connect with the public, Erdogan’s consolidation of power is unprecedented in modern Turkey and the public has noticed. Since Erdogan has taken so much power it makes it easy to blame all of the country’s problems on him. İlke Toygür of the Universidad Carlos III de Madrid said, “Parliament has a very strong symbolic value in Turkey…One of the biggest complaints now is that people lost their links to decision-making candidates.” In this election, it is in some ways true that “democracy is on the ballot.”

Tyler Durden
Sun, 05/14/2023 – 09:35

US Plans Hybrid War Vs Wagner In Africa

US Plans Hybrid War Vs Wagner In Africa

Authored by Andrew Korybko via The Automatic Earth blog,

Politico published a very detailed piece on Sunday about how “To counter Russia in Africa, Biden deploys a favored strategy”, which cites four unnamed US officials with knowledge of their country’s plan for waging Hybrid War against Wagner in Africa.

Just like the French one that was reported by Axios last October, which was analyzed at the time here, the US’ also focuses a lot on information warfare.

Taken together, they prove that the West intends to turn Africa into a major battleground in the New Cold War.

According to Politico’s sources, “The aim (of the latest effort) is to highlight for African officials how working with Wagner is likely to sow chaos in the long term despite its promises to bring peace and security to countries facing political turmoil and violence…it underscores the degree to which the Biden administration believes Wagner — and the Kremlin — pose a long term threat to U.S. interests on the continent.”

In other words, it builds upon the French’s fearmongering about Wagner’s “Democratic Security” services (counter-Hybrid War tactics and strategies that were earlier elaborated upon here), but openly acknowledges that these narratives are being spread in pursuit of the US’ own interests. This candid admission inadvertently discredits one official’s claim that “they create more terrorists than they actually eliminate”, which the Central African Republic (CAR) and Mali know for a fact isn’t true.

The only terrorists “created” in those countries after their cooperation with Wagner are the ones clandestinely armed by America and France on the pretext of them supposedly being ‘freedom fighters’, but who in reality function as the West’s anti-Russian proxies there. Once again, the CAR authorities know this for a fact, which makes one wonder why the US would waste its time spewing this information warfare narrative to them like Politico reported that they’ve already attempted to do.

This curious question is answered when it’s later revealed in the article that “The idea is that if Wagner is seen as disrupting the flow of trade and investment, it could drive a wedge between Beijing, a long-time investor in Africa, and Moscow — an alliance that has only strengthened in recent months and continues to concern Washington.” Of relevance, the West ridiculously claimed in late March that Wagner allegedly slaughtered Chinese miners in the CAR, which was analyzed here right after it started circulating.

This adds crucial context to the US’ Hybrid War on Wagner in Africa since it shows that disinformation is being relied upon in a desperate attempt to divide the Sino-Russo Entente. That’s a wishful thinking fantasy if there ever was one since these two’s efforts on the continent complement one another: China’s game-changing Belt & Road Initiative investments can actually be protected from Western-connected Hybrid War threats via Russia’s “Democratic Security” services provided by Wagner.

The other countries that have been on the receiving end of this propaganda campaign are Burkina Faso, Chad, the Democratic Republic of the Congo (DRC), and Rwanda, each of which is unlikely to bite the West’s bait. Regarding the first, its interim leader declared last week that his country is in a “strategic alliance” with Russia, while the second expelled the German Ambassador for meddling instead of the Russian one early last month after the US falsely claimed that Wagner was plotting a coup there.

As for the DRC and Rwanda, those two are presently engaged in their own Hybrid War with one another over the former’s resource-rich eastern region whose rebels are allegedly backed by the latter, with the case compellingly being made here that France is exploiting their conflict for divide-and-rule purposes. Furthermore, Russian-Congolese ties have only strengthened in recent months despite the US’ reported sharing of anti-Wagner disinformation, while Russia and Rwanda defended the CAR’s capital in late 2020.

Although Politico didn’t report that related falsehoods were shared with Sudan, they nevertheless devoted part of their article to discussing Wagner’s alleged activities there, which aims to advance America’s latest fake news campaign attempting to pin the blame for its ongoing conflict on Russia. The motivations behind them doing so were recently explained here, which touched on the intent to have Sudan cut Russia/Wagner off from the CAR together with assembling a regional coalition against it.

The abovementioned assessment of the US’ motivations was just confirmed in Politico’s piece after they admitted that “American officials have shared intelligence specifically related to Wagner’s business operations in the [CAR] and shared it not only with local officials but also officials from neighboring countries with an interest in removing Wagner from the region.” Considering the military context and prior disinformation provocation, it’s likely that Chad is the primary target of this influence operation.

Its envisaged role as the vanguard of the West’s Hybrid War on Wagner in Africa was analyzed in the hyperlink that was shared a few paragraphs above regarding that country’s expulsion of the German Ambassador instead of the Russian one after the US falsely claimed that Wagner was plotting a coup there. Intrepid readers should review it if they’re interested since repeating the pertinent points in this piece would be redundant, but it’s enough for casual readers to simply know that this is the US’ goal.

All told, while America is ramping up its operations to counter Wagner’s growing popularity across Africa, it lacks the credibility to advance its goal through information warfare alone as proven by its cited failures in Burkina Faso, the CAR, Chad, the DRC, Rwanda, and Sudan. This observation strongly suggests that it’ll therefore increasingly resort to kinetic measures like arming terrorist groups under the pretext of them supposedly being ‘freedom fighters’, which could even result in a false flag attack against Chad.

This regional power is the primary target of the US’ efforts since it urgently requires someone on the continent to serve as the vanguard of its campaign. Chad’s expulsion of the German Ambassador instead of the Russian one after the US claimed that Wagner was plotting a coup there, however, shows that N’Djamena doesn’t believe a word that Washington says about Russia. In a desperate last-ditch attempt to trick Chad into playing this proxy role, it might thus launch a false flag attack against it from the CAR.

That wouldn’t be too difficult to do either since large parts of this country still remain outside the control of the Russian-backed authorities, with those lawless regions being the realm of jointly supported American-French terrorists who masquerade as rebels. Having already preconditioned the public to expect a supposedly Wagner-driven coup against Chad from the CAR via the false report that the US previously shared and just reminded everyone of in Politico’s piece, this scenario cannot be discounted.

To be clear, this doesn’t mean that it will definitely happen, nor that Chad would fall for this provocation. Even so, there’s still a chance that this sequence of events unfolds, in which case this regional military power would be manipulated into serving as the US’ vanguard in its Hybrid War on Wagner in Africa. This could take the form of Chad intervening in CAR and/or against the allegedly Wagner-aligned Rapid Security Forces in Sudan’s “deep state” war, both possibilities of which would be very destabilizing.

Observers should therefore closely monitor this latest front of the New Cold War for any signs that events are moving in this direction, while Russian and Chadian military-security officials should immediately enter into close contact in order to preemptively avert the US’ divide-and-rule plot against them. It would be mutually detrimental if America’s potential provocation succeeds, which could plunge this part of Africa into a protracted conflict that risks reversing its multipolar progress of the past year.

*  *  *

Support the Automatic Earth via Patreon.

Tyler Durden
Sun, 05/14/2023 – 09:20

“We Are Grunt Workers”: The Lowly Humans Helping Run ChatGPT Make Just $15 Per Hour

“We Are Grunt Workers”: The Lowly Humans Helping Run ChatGPT Make Just $15 Per Hour

In what is likely a harbinger as to how AI will one day all enslave us, it was reported this week that the extremely popular ChatGPT artificial intelligence chatbot is being “guided” by lowly humans making just $15 per hour.

The company that owns ChatGPT, OpenAI, is reportedly “paying droves of U.S. contractors to assist it with the necessary task of data labelling—the process of training ChatGPT’s software to better respond to user requests”, according to Gizmodo

The article says they are making just $15 per hour for the task of data labeling, wherein data samples are parsed and labeled to help AI “learn” quicker. The task was described as “pivotal” for ChatGPT’s AI processes. 

Worker Alexej Savreux said: “We are grunt workers, but there would be no AI language systems without it. You can design all the neural networks you want, you can get all the researchers involved you want, but without labelers, you have no ChatGPT. You have nothing.”

Sonam Jindal, the program lead for AI, labor and the economy at the Partnership on AI told NBC: “A lot of the discourse around AI is very congratulatory. But we’re missing a big part of the story: that this is still hugely reliant on a large human workforce.” 

Due to the work’s “unsteady, on-demand nature, with people employed by written contracts either directly by a company or through a third-party vendor that specializes in temp work or outsourcing”, NBC noted that some tech companies are starting to publicly commit to fair compensation:

The Partnership on AI warned in a 2021 report that a spike in demand was coming for what it called “data enrichment work.” It recommended that the industry commit to fair compensation and other improved practices, and last year it published voluntary guidelines for companies to follow. DeepMind, an AI subsidiary of Google, is so far the only tech company to publicly commit to those guidelines.

Jindal concluded: “A lot of people have recognized that this is important to do. The challenge now is to get companies to do it. This is a new job that’s being created by AI. We have the potential for this to be a high-quality job and for workers who are doing this work to be respected and valued for their contributions to enabling this advancement.” 

OpenAI had previously outsourced work to Africa, where it could get away with paying workers as low as $2 per hour, Gizmodo wrote. 

Tyler Durden
Sun, 05/14/2023 – 08:45

Oxford Union To Set Up “Welfare Spaces” For Students To Cope With Gender Debate

Oxford Union To Set Up “Welfare Spaces” For Students To Cope With Gender Debate

Authored by Jonathan Turley,

The Oxford Union bills itself as “the most prestigious debating society in the world” based on the values of free speech.

It is a well-earned reputation for one of the world’s oldest forums for debating the great issues of the day. However, Oxford students are outraged that the Union will allow a debate over transgender ideology.

In response, as reported by the The Times UK, the Union has promised to provide a “non-student support team that will remain in a separate welfare space to offer counseling and advice.”

This is to deal with the trauma of free speech in simply allowing Dr. Kathleen Stock to speak about her views that biological sex is real and “gender identity” should not alter certain biological truths.

Stock is a feminist who has joined those (like the author J.K. Rowling) in raising concerns over transgender ideology. Her book, “Material Girls: Why Reality Matters for Feminism,” explores the subject and calls for a reaffirming of fixed biological realities.

At the same time, Stock has stressed her support for trans rights generally, writing that trans people “deserve to be safe, to be visible throughout society without shame or stigma, and to have exactly the same life opportunities as non-trans people do.”

Nevertheless, Oxford’s LGBTQ+ society called for censorship of the debate society and objected to her being allowed to be heard on campus as a “transphobic and trans-exclusionary speaker.” They alleged that the union was ignoring the welfare of the society’s members under the guise of free speech.

It really is not a “guise” but the very essence of free speech.

Stock was previously a faculty member at University of Sussex, but was effectively forced out due to protests. She is now a Founding Faculty Fellow of the University of Austin, a school founded on free speech principles.

The Oxford Union deserves considerable credit for maintaining its commitment to free speech in the face of yet another cancel campaign. What is most notable about the campaign is the objection to “letting Stock bring her campaign of hate and misinformation to Oxford [and] allowing her to stoke fear against trans people without challenge or opposition.”

This is a debating society. Stock will be challenged and questioned. That is the point. What the LGBTQ+ society is advocating is the cancellation of such speakers to bar “challenge or opposition” to its own views.

The creation of “welfare spaces” is a bit difficult to square with the free speech foundation of the Union. It is also unlikely that emotional support teams are available when writers and professors are denounced as Trans Exclusionary Radical Feminists (TERFs).

There has long been an anti-free speech movement based on the notion of free speech as harmful. This dangerous trend in academia is discussed in my law review article, Jonathan Turley, “Harm and Hegemony: The Decline of Free Speech in the United States”, Harvard Journal of Law and Public Policy.

The Union reinforces this view by promising to have emotional support ready and safe spaces set aside for those traumatized by hearing opposing views.

I have previously written of my pride as an alumnus of The University of Chicago in how the school has led the fight for free speech in higher education.  It is also ranked as the number one free speech school in the country. (I will be speaking at UChicago next week on Friday and Saturday, including one event on free speech).

UChicago shocked many in 2016 when it sent a letter to incoming students that promised an unfettered and uncensored education without the protection from disturbing or offensive ideas. While most schools are actively curtailing free speech, its letter warned the students that they will not be protected against ideas or given “safe spaces.”

Again, Oxford Union has remained faithful to its noble commitment to free speech inviting Stock. I can also understand the desire to be responsive and understanding to the deep-felt sense of injury by some. However, universities do not have to protect people from the trauma of hearing opposing views. They need to empower everyone to speak freely and to associate with others who share their values.

I may be naive, but I also hope that a few critics might also want to hear Stock and engage in a productive and civil debate at the Oxford Union.

Tyler Durden
Sun, 05/14/2023 – 08:10

Justice For NordStream Attack? Highly Unlikely

Justice For NordStream Attack? Highly Unlikely

Authored by Julianne Geiger via OilPrice.com,

The chances of finding and bringing the Nord Stream attack perpetrators to justice are negligible, according to Russian Security Council Deputy Chairman Dmitry Medvedev, who added that Russia would nevertheless continue to work towards holding them accountable.

“Of course, we will continue to employ all available legal tools to hold those responsible to account, but the chances of doing this in international judicial institutions are negligible,” Medvedev said at the International Legal Forum today. At the same time, Medvedev blasted Europe for its lack of progress in the investigation.

“The European countries, as if by design, have forgotten about their obligations under the UN Convention on the Law of the Sea and the Convention for the Suppression of Terrorist Bombings,” Medvedev charged.

In March, Russia said it expected to mothball the Nord Stream natural gas pipelines that were damaged in an act of sabotage last fall, because there were no plans to use or repair them anytime soon due to its sour relations with the West.

Originally, Germany’s Uniper had said the pipeline could be repaired in a year, although it is unclear whether Germany is even interested in purchasing Russian gas at this point.

The Nord Stream pipelines were sabotaged in late September in still unexplained circumstances.

Nord Stream 1 was carrying gas from Russia to Germany via the Baltic Sea, while Nord Stream 2 was never put into operation after Germany axed the certification process following the Russian invasion of Ukraine.

Russia, for its part, shut down Nord Stream 1 indefinitely in early September, claiming an inability to repair gas turbines because of the Western sanctions. 

Russia has called for an international investigation into the Nord Stream sabotage after a U.S. investigative journalist wrote in February that the United States had planted explosives on the bottom of the Baltic Sea to blow up the pipelines.

Tyler Durden
Sun, 05/14/2023 – 07:00