Saturday, December 26, 2015

Article from Barron's

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EDITORIAL COMMENTARY
China’s Military: What It Means for Markets
Investors must prepare for the possibility of a Great Power conflict between the U.S. and China.
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December 26, 2015
China’s factories are now rapidly producing military capabilities that will eventually rival those of the U.S. The only remaining debate is whether China will achieve parity by 2020, 2030, or later.
China’s capabilities already include the world’s most diverse missile threat, the fastest-growing diesel-electric submarine fleet, and new nuclear subs capable of striking any city in the world with ballistic missiles. On the wings of stolen American F-22 and F-35 blueprints, China is also flying fifth-generation stealth fighters. And its bold reach for the stars–planning moon and Mars missions and a militarized space station–will increasingly bring the ultimate strategic high ground within Beijing’s reach.
This rise of Chinese militarism portends tectonic shifts—economic, geographic, and political. It also means investors will win or lose fortunes.
Key portfolio decisions will range from the pricing and hedging of geopolitical risk to asset allocations across continents and countries. Bold traders will initiate Soros-style exchange-rate bets in anticipation of conflict-driven currency moves. The most opportunistic will tactically buy and short company stocks and country index funds around major conflict flashpoints. These range from China’s “renegade province” of Taiwan and a nuclearized North Korea, to the resource-rich but dangerous waters of the East and South China Seas.
Looking Ahead
A more sophisticated understanding of geopolitical risk will be an investor’s best friend in a 21st century of authoritarian aggression. Billions have already changed hands since Russia’s Ukraine adventures began in 2014. As the ruble has plunged and partly rebounded, German and U.S. bond prices have gyrated with flights to safety, and volatile European bourses have alternated between fear of reduced trade and hope of peace. A simple anticipatory short on an index fund for the Russian market would have netted a nearly 50% gain.
It is an open question whether a rapidly militarizing China will follow in Russia’s determined footsteps. While some still argue (or hope) for a “peaceful rise,” former Chinese leader Deng Xiaoping’s admonition to “seek truth from facts” quickly leads to a forecast of significant conflict.
Like Russia’s Vladimir Putin, China’s Xi Jinping is aggressively pursuing historical territorial claims unsupported by modern international law. China asserts sovereignty over 80% of the South China Sea–one of the most strategic sea lines of communication, through which a third of all shipping flows.
From Shoals to Islands
To press its expansive claim, China sends flotillas of white-hulled coast guard and commercial fishing vessels backed up over the horizon by gray-hulled Chinese warships. Through such coercion, China has already sliced disputed shoals, petroleum reserves, and islands from the Philippines and Vietnam. Today, as the People’s Liberation Army builds heavily armed garrisons on artificial reefs supporting 10,000-foot runways, U.S. bombers and warships pass close in protest.
The East China Sea is similarly tense as Chinese ships routinely violate the territorial waters surrounding Japan’s Senkakus Islands. In nationalistic backlash, Japan’s electorate has chosen a prime minister remolding Japan’s constitution to facilitate remilitarization. Against this backdrop, the U.S. has publicly reasserted its commitment to defend Japanese territory. Beijing, Tokyo, and Washington could face a Sarajevo moment.
China’s long-running bid to take Taiwan likewise portends conflict: Much of China’s militarization has focused on low-cost “asymmetric weapons” like the DF-21D anti-ship ballistic missile explicitly designed to sink the high-cost capital assets of America’s aircraft-carrier strike groups. Would the next American president risk sending aircraft carriers to the Taiwan Strait as Bill Clinton did in defense of the island democracy in 1996?
Perhaps most dangerously, Chinese and American warships spar frequently over their dueling definitions of freedom of navigation. While the U.S. supports the internationally recognized 12-mile territorial limit, China insists on controlling commercial and military shipping as far as 200 miles from its coast. China’s threat to freedom of navigation must be a clear red line, as a 200-mile limit would constrain access of American commercial interests to some of the most lucrative markets in the world and effectively run the U.S. Navy out of the Asian side of the Pacific.
Defensive Investments
Any significant conflict in Asia would immediately damage the highly interconnected global supply chain and trading network, with all the negative implications for asset prices any such geopolitical shock might entail. The question for money managers is how to exploit tensions and conflicts.
The next several decades should be very bullish for defense industry stocks. Already, China’s aggressive behaviors have triggered an underwater arms race: Japan, South Korea, Vietnam, and even Indonesia are shopping for submarines.
In the face of both Russian and Chinese aggression—and against the backdrop of an emerging Putin-Xi axis—the 2016 presidential campaign will also feature repeated calls for building more ships, more submarines, more planes, and more elaborate air, missile, and cyberdefense systems. The prudent investor seeking magnified returns will follow the fundamentals and technicals of every publicly traded company involved in this potential construction boom.
While there may be a fine line between prudence and war profiteering, no investor should feel guilty about preparing for the contingencies of a Great Power conflict with China. This is a world in which the highest rates of return will be generated by investors and traders with the most sophisticated geopolitical awareness. Understanding the full range and scope of China’s militarism is where such awareness must begin. 
PETER NAVARRO is a professor at the Merage School of Business, University of California-Irvine. He is author of Crouching Tiger: What China’s Militarism Means for the World (Prometheus Books, crouchingtiger.net).
Editorial page editor Thomas G. Donlan receives e-mail at tg.donlan@barrons.com.


Thursday, December 3, 2015

Russia joins China in Space Weapons

Space

Washington Left in the Dust: Russia Flies Strategic Space Warfare Missile

22:15 02.12.2015(updated 23:37 02.12.2015)
Moscow carried out the first successful flight test of its new anti-satellite missile last month, becoming just the second nation to arm its military with space warfare weapons.
Russia's direct ascent anti-satellite missile, known as Nudol, was successfully tested on November 18, according to defense officials familiar with reports of the test. It was the first successful test in three attempts, the Washington Free Beacon reported.
Russia now joins China as the only nations with strategic space warfare weapons. In October, China conducted a flight test of its anti-satellite missile, the Dong Neng-3 direct ascent missile.
Analysts say anti-satellite missiles could cripple US intelligence, navigation, and communications capabilities that are critical for both military operations and civilian infrastructure.
The Russian test is a concern for Washington, Representative Mike Pompeo, a Kansas Republican, told the paper.
'As President Obama cuts our defense budget and seeks to ally with Putin, the Russians continue to develop their technological abilities to weaponize space and to take out our national technical means – kinetically and through cyber,' said Pompeo, a member of the House Permanent Select Committee on Intelligence.
'We can foolishly turn a blind eye to these developments, or acknowledge this threat and develop our own capabilities to ensure that our satellites – military and commercial – are not susceptible to attack or blackmail.'
Former Pentagon official Mark Schneider said the Russian test highlights the failure of the United States to prepare for space warfare.
'There is an enormous asymmetry in play regarding space weapons,' said Schneider, now with the National Institute for Public Policy.
'For decades the Congress has prevented the US from putting weapons in space and even developing a ground-based ASAT capability,' Schneider said. 'There is no such constraint upon the Russians and Russia violates arms control treaties when this is in their interest to do so and they find ample opportunity to do this.'
A February 2015 unclassified Defense Intelligence Agency report to the Congress stated that 'Chinese and Russianmilitary leaders understand the unique information advantages afforded by space systems and are developing capabilities to deny US use of space in the event of a conflict,' Schneider added.
© Sputnik

Wednesday, November 25, 2015

Why is American Police so Lethal

Why do American cops kill so many compared to European cops?

NYC police prepare for Macy’s Thanksgiving Day parade, 2015. Andrew Kelly/REUTERS
Chicago police officer Jason Van Dyke was charged with first degree murder November 24 in the death of Laquan McDonald. A video released by police shows Van Dyke shooting the teenager 16 times.
Van Dyke is an extreme example of a pattern of unnecessary deadly force used by US police. American police kill a few people each day, making them far more deadly than police in Europe.
Historic rates of fatal police shootings in Europe suggest that American police in 2014 were 18 times more lethal than Danish police and 100 times more lethal than Finnish police, plus they killed significantly more frequently than police in France, Sweden and other European countries.
As a scholar of sociology and criminal justice, I recently set out to understand why rates of police lethality in the US are so much higher than rates in Europe.

More guns and aggression

Such massive disparities defy a simple explanation, but America’s gun culture is clearly an important factor. Unlike European nations, most states make it easy for adults to purchase handguns for self-defense and to keep them handy at nearly all times.
Acquiring guns illegally in the US is not much harder. About 57% of this year’s deadly force victims to date were allegedly armed with actual, toy or replica guns. American police are primed to expect guns. The specter of gun violence may make them prone to misidentifying or magnifying threats like cellphones and screwdrivers. It may make American policing more dangerous and combat-oriented. It also fosters police cultures that emphasize bravery and aggression.
Americans armed with less-lethal weapons like knives – and even those known to be unarmed – are also more likely to be killed by police.
Less-lethal weapon holders make up only about 20% of deadly force victims in the US. Yet the rates of these deaths alone exceed total known deadly force rates in any European county.
Knife violence is a big problem is England, yet British police have fatally shot only one person wielding a knife since 2008 – a hostage-taker. By comparison, my calculations based on data compiled by fatalencounters.org and the Washington Post show that US police have fatally shot more than 575 people allegedly wielding blades and other such weapons just in the years since 2013.
Racism helps explain why African Americans and Native Americans are particularly vulnerable to police violence. Racism, along with a prevailing American ideology of individualism and limited government, helps explain why white citizens and legislators give so much support to controversial police shooters and aggressive police tactics and so little to criminals and poor people.

Not racism alone

A German federal police officer in Berlin, November 24 2015. Fabrizio Bensch/REUTERS
But racism alone can’t explain why non-Latino white Americans are 26 times more likely to die by police gunfire than Germans. And racism alone doesn’t explain why states like Montana, West Virginia and Wyoming – where both perpetrators and victims of deadly force are almost always white – exhibit relatively high rates of police lethality.
An explanation may be found in a key distinguishing characteristic of American policing – its localism.
Each of America’s 15,500 municipal and county departments is responsible for screening applicants, imposing discipline and training officers when a new weapon like Tasers are adopted. Some underresourced departments may perform some of these critical tasks poorly.
To make matters worse, cash-strapped local governments like Ferguson, Missouri’s may see tickets, fines, impounding fees and asset forfeitures asrevenue sources and push for more involuntary police encounters.

Dangers in small places

More than a quarter of deadly force victims were killed in towns with fewer than 25,000 people despite the fact that only 17% of the US population lives in such towns.
By contrast, as a rule, towns and cities in Europe do not finance their own police forces. The municipal police that do exist are generally unarmed and lack arrest authority.
As a result, the only armed police forces that citizens routinely encounter in Europe are provincial (the counterpart to state police in the US), regional (Swiss cantons) or national.
What’s more, centralized policing makes it possible to train and judge all armed officers according to the same use-of-force guidelines. It also facilitates the rapid translation of insights about deadly force prevention into enforceable national mandates.
In the US, the only truly national deadly force behavioral mandates are set by the Supreme Court, which in 1989 deemed it constitutionally permissible for police to use deadly force when they “reasonably” perceive imminent and grave harm. State laws regulating deadly force – in the 38 states where they exist – are almost always as permissive as Supreme Court precedent allows, or more so.

A different standard

Annual fatal police shootings per million residents. Data are based on most recent available. US: 2014; France: 1995-2000; Denmark: 1996-2006; Portugal: 1995-2005; Sweden: 1996-2006; Netherlands: 2013-2014; Norway: 1996-2006; Germany: 2012; Finland: 1996-2006; England & Wales: 2014. CC BY
By contrast, national standards in most European countries conform to the European Convention on Human Rights, which impels its 47 signatories to permit only deadly force that is “absolutely necessary” to achieve a lawful purpose. Killings excused under America’s “reasonable belief” standards often violate Europe’s “absolute necessity” standards.
For example, the unfounded fear of Darren Wilson – the former Ferguson cop who fatally shot Michael Brown – that Brown was armedwould not have likely absolved him in Europe. Nor would officers’ fears of the screwdriver that a mentally ill Dallas man Jason Harrison refused to drop.
In Europe, killing is considered unnecessary if alternatives exist. For example, national guidelines in Spain would have prescribed that Wilson incrementally pursue verbal warnings, warning shots, and shots at nonvital parts of the body before resorting to deadly force. Six shots would likely be deemed disproportionate to the threat that Brown, unarmed and wounded, allegedly posed.
In the US, only eight states require verbal warnings (when possible), while warning and leg shots are typically prohibited. In stark contrast, Finland and Norway require that police obtain permission from a superior officer, whenever possible, before shooting anyone.
Not only do centralized standards in Europe make it easier to restrict police behavior, but centralized training centers efficiently teach police officers how to avoid using deadly weapons.
The Netherlands, Norway and Finland, for example, require police to attend a national academy – a college for cops – for three years. In Norway, over 5,000 applicants recently competed for the 700 annual spots.
Three years affords police ample time to learn to better understand, communicate with and calm distraught individuals. By contrast, in 2006, US police academies provided an average of 19 weeks of classroom instruction.
Under such constraints, the average recruit in the US spends almost 20 times as many hours of training in using force than in conflict de-escalation. Most states require fewer than eight hours of crisis intervention training.
Desperate and potentially dangerous people in Europe are, therefore, more likely than their American counterparts to encounter well-educated and restrained police officers.
However, explanations of elevated police lethality in the US should focus on more than police policy and behavior. The charged encounters that give rise to American deadly force also result from weak gun controls, social and economic deprivation and injustice, inadequate mental health care and an intense desire to avoid harsh imprisonment.
Future research should examine not only whether American police behave differently but also whether more generous, supportive and therapeutic policies in Europe ensure that fewer people become desperate enough to summon, provoke or resist their less dangerous police.

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