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Wednesday, August 31, 2016

Risk of war between US and China is reaching crisis point
By Roger Boyes
The Times

It’s still August, month of victoria plums, grouse shooting and doomsday scenarios. Right on cue comes a report from Rand, the US think tank, into the odds of a war between the US and China which concludes: it’s worth worrying about.

A future Sino-American bust-up, say the forecasters, could be short and bloody or long and devastating. Take your pick. “Sensors, weapon guidance, digital networking and other information technologies used to target opposing forces have advanced to the point where both US and Chinese military forces seriously threaten each other,” say the authors. That doesn’t mean either country wants a war, nor would such a war necessarily turn nuclear. The brute force that is accumulating, however, “creates the means as well as the incentive to strike enemy forces before they strike one’s own”. Use it or lose it, as Dr Strangelove might have put it.

As long as there are supposedly rational arguments for shooting first, there is a risk, the risk inherent in all deterrence theory. And as long as there is ambiguity about the other side’s intentions there is the risk of an unintentional war. Accidental wars are actually quite rare — there was a catastrophic combination of events and misperceptions in August 1914 but the war was nonetheless ultimately the consequence of state policies. They are likely to erupt when leaders do not have full control over their military organisations, or when leaders fail to appreciate what a potential enemy thinks about the costs and benefits of war.

The latter goes some way to explaining the last near-miss: 1983, when the Kremlin convinced itself that Ronald Reagan was gunning for Moscow. An accumulation of apparently hostile actions suggested to the Soviets that America was planning a nuclear winter: Reagan’s Star Wars program, the stationing of Pershing 2 missiles in Europe, and the big Able Archer exercise that was supposed to try out nuclear drills. The KGB and co-opted east European spooks went into overdrive. Declassified documents from that time suggest there was a real prospect of a pre-emptive war being triggered by a nervous Soviet leadership.

No one outside the bubble really knew what was up. In 1983 Margaret Thatcher won by a landslide, there was a heatwave in July, there was a new Michael Jackson album. Now we could be missing something again. Vladimir Putin could get up to no good — he has already flouted international law, snatched territory and aided and abetted the shooting down of a civilian airliner. His fighters continue to buzz our coastlines.

It’s China though that is concerning defence planners. Emerging commercial empires are jealous of their trade routes and feel easily threatened. China has just opened its first overseas base in Djibouti at the mouth of the Red Sea, not only to spy on the US and Japanese but to keep a watch over the passage of oil. It has developed formidable cyberweapons. And it has this month launched a quantum satellite into space, part of a $100 billion program to create uncrackable encryption keys. This has all the makings of a space arms race. Any power that can be sure of absolutely secure information has an important military edge.

Add to that the increasing tensions in the South and East China Seas and it’s plain we might be heading for a spectacular misjudgment. It could be that Beijing misreads US willingness to intervene on behalf of Japan or the Philippines and goes a step too far in the intimidation campaign against its neighbours. And there is North Korea. What would China do if the US and South Korea struck at Kim Jong-un, suspecting that he was about to unleash a nuclear attack on Seoul? Would it passively accept the loss of face, the prospect of US influence stretching to its frontier?

The Rand analysts assume a war between the US and China would be non-nuclear. Beijing’s likely preference would be for a limited regional war. The Chinese temptation to act, the analysts reckon, will be in the coming eight years as Beijing narrows the conventional arms gap with the US to a point where winning such a regional conflict would be feasible. That seems to be the working premise not only of think tankers thinking the unthinkable but also the US defence establishment.

That’s overly optimistic. China is boosting its air defences to such an extent that the new US F35 stealth fighter might have problems getting through. The US might thus threaten the use of long-range nuclear-armed cruise missiles and signal a readiness to wage a “tactical nuclear war”. The mere suspicion of this happening will change Beijing’s calculations.

There is thus an urgent case for creating a military and political channel of communication between Beijing and Washington. A clear need for vigilance when China invests in American and European strategic assets. And it’s time to reassure Japan and South Korea that the US security shield still holds. The great western pivot to Asia prompted an anxious question: how far was the US willing to go to protect its perceived interests in the east? Both China and its cowed neighbours would like an answer.

The idea that China and the West have become so interdependent that armed conflict is off the table is no more than a lazy assumption. It doesn’t take into account the advances in military technology, the speed now required to make decisions in an escalating crisis, the fuzziness about political intentions. We have managed despite multiple flashpoints to avoid war with Russia and with China. That’s beginning to look more and more like a fluke.

The Times 

China's Military Gears up for Missile Warfare with U.S.
By Bill Gertz

China’s military is developing offensive and now defensive missiles in preparation for a future missile-dominated conflict with the United States.

Beijing’s arsenal of ballistic and cruise missiles has been growing steadily for decades as new systems were fielded in an array of ranges – short, medium and intercontinental. Several long-range cruise missiles, capable of carrying nuclear or conventional payloads also are deployed.

And one of China’s most secret missile programs is a revolutionary hypersonic strike vehicle that skims the upper atmosphere and can maneuver in a bid to defeat U.S. strategic defenses.

China for years has denounced U.S. missile defenses as destabilizing. But for the first time last month, the Chinese Defense Ministry confirmed the military is developing a new long-range anti-missile system.

Ministry spokesman Sr. Col. Yang Yujun, in what appeared to be part of a carefully choreographed disclosure, was asked at a briefing about Chinese state media publicizing a six-year-old flight test and intercept of a Chinese version of the U.S. ground-based, mid-course anti-missile defense system.

“To develop suitable capabilities of missile defense is necessary for China to maintain national security and improve defense capabilities,” Yang said July 28. “It is not targeting any other country or target nor is it jeopardizing the international strategic equilibrium.”

The comment contrasts sharply with official Chinese views of the pending deployment of the American Terminal High-Altitude Area Defense (THAAD) missile defense system in South Korea.

Yang repeated the Chinese propaganda theme that Beijing is “deeply dissatisfied” and opposes the deployment of the defensive missile system, despite U.S. and South Korean assurances that THAAD system has no capabilities against nearby Chinese offensive missiles.

“We will pay close attention to relevant actions of the U.S. and the [South Korea] and will take necessary measures to maintain national strategic security as well as regional strategic equilibrium,” the ministry spokesman added.

Yang provided no details on what measures are being planned in response.

THAAD is one of the most effective ground-based U.S. missile defenses capable of knocking out a variety of medium- and short-range missiles. Its radar is said to be wide-ranging and capable of detecting missile launches hundreds of miles away.

When THAAD – also deployed on Guam — is combined with sea-based Aegis ship-based missile defenses that can be linked together through what the Pentagon calls cooperative engagement, the combination provides U.S. and allied nations in Asia with formidable defenses capable of protecting large areas against missile attack.

Chinese state-run media zeroed in on Yang’s comments on missile defense this week highlighting what it called China’s “spear and shield” of offensive and defensive missiles.

A report in China Military Online, affiliated with the official PLA Daily newspaper, said the recent disclosure of the video showing China’s first strategic missile defense test to intercept a target missile coincided with the propaganda campaign against THAAD deployment in South Korea.

“The problem is not whether the war will break out, but when,” the report stated. “Our task is to develop the ‘trump card’ weapon for China before the war.” 

Japanese military asks for record $50bn defense budget to oppose China, N. Korea

Japanese Ground Self-Defense Force tanks © Kim Kyung-Hoon

Japan is poised to hike its defense spending again, breaking the record for the fifth year in a row. The money would boost Tokyo’s ability to oppose Beijing in the South China Sea and protect itself from a possible missile attack by North Korea.

Prime Minister Shinzo Abe’s cabinet will require 5.17 trillion yen (US$50 billion) from parliament, the Japanese Defense Ministry announced Wednesday. If approved, it would translate into a 2.3 percent boost in the country’s defense spending. The Finance Ministry is yet to check the request before it is potentially sent to legislators.

One of the biggest portions of the military budget, about $1 billion, would go on upgrading Japan’s PAC-3 Patriot surface-to-air missile defense systems to increase range and accuracy for deployment in 2020, the submitted proposal stated.

The Japanese military also wants to develop a new submarine with advanced surveillance capabilities, work with the US on next-generation missile interceptors, station a 2,000-strong mobile amphibious unit near Nagasaki, and dispatch extra personnel in the Philippines and other Asian nations.

Tokyo may also purchase additional F-35 fighters jets from the US and develop better anti-ship missiles.

After coming to power in 2012, Abe overturned a decade of defense cuts and steered the country away from its post-World War Two pacifist stance by pushing for a larger role for the military. The increasing militarization is opposed by large sections of Japanese society, but the mood appears to be changing amid growing tension with North Korea and China.

Pyongyang recently demonstrated progress in its missile program, successfully launching a ballistic missile from a submarine earlier in August. Tokyo’s standoff with Beijing is focused on a chain of islands in the South China Sea, which both nations claim sovereignty over.

The Chinese claims are being challenged by Japan’s key military ally, the US, which has been sending warships and warplanes through the area. Earlier this month Beijing warned that if Tokyo joined the American “freedom of navigation” missions, it would “cross a red line.”

Japanese Foreign Minister Fumio Kishida last week told his Chinese counterpart Wang Yi during talks in Tokyo that Chinese vessels must stop violating Japanese territory around the disputed islands.

Japanese govt seeks further increase in military spending

Japanese Defense Ministry seeks record $51 billion budget
By: The Associated Press

TOKYO — Japan's Defense Ministry is seeking a record-high 5.17 trillion yen ($51 billion) budget for the 2017 fiscal year to bolster missile defense capability amid an escalating North Korean threat and to better protect disputed islands also claimed by China in the East China Sea.

If approved by parliament, the budget request submitted Wednesday would be the fifth annual increase under Prime Minister Shinzo Abe, who ended a decade of defense budget cuts after taking office in late 2012. Military spending would rise 2.3 percent for the fiscal year beginning April 1.

Japan is particularly concerned about North Korea's recent nuclear and missile development, saying it has increased tensions on the Korean Peninsula and poses a threat to regional and global security.

The budget request includes: 

Japan’s military seeks record spending to counter N Korea, China moves

Japan’s defense ministry on Wednesday asked for a hike in spending to record levels, as it juggles its responses to a growing ballistic missile threat from North Korea and China’s assertive moves in the East China Sea.

If approved, the hike of 2.3% will take the defense budget to 5.17 trillion yen ($51.47 billion) in the year starting April 1, for a fifth consecutive increase as Prime Minister Shinzo Abe bolsters Japan’s military.

The nation’s Self Defense Forces are pivoting away from guarding the north against a diminished Russian threat to reinforce an island chain stretching 1,400 km (870 miles) along the southern edge of the East China Sea.

That means opting for fewer tank divisions as they build a mobile amphibious force from scratch.

The costly rejig comes as Japan is also forced to spend more to guard against ballistic missiles being developed by North Korea capable of striking most areas.


The single biggest expenditure is 99 billion yen to upgrade Japan’s warhead-killing Patriot batteries, a last line of defence against missile strikes.

The improvements will double their range to around 30 km (19 miles) and sharpen targeting to hit arriving ballistic warheads.

They will take five years to complete, with the first four enhanced Patriots expected to be ready for the 2020 Tokyo Olympics.

In June, North Korea test-fired what appeared to be two mobile Musudan rockets, one of which climbed to 1,000 km (600 miles), or enough to fly more than 3,000 km (1,800 miles) down range.


WAR "IS" coming to Asia!!!!!!!!!!!!!!!!!!!!!! 

Taiwan Releases Chinese Military Study

WONG: On Tuesday Taiwan’s Ministry of Defense released new findings of exactly how much military equipment the CCP has in the Taiwan Strait. The Taiwanese government alleges that anti-satellite weapons, aircraft carriers and more are in place for a possible attack on the democratic island. But what’s most concerning to Taiwan is that the shear amount of the munitions is much more than is actually needed for an invasion.

CCP defense expenditures are almost 2-3 times larger than publicly released figures figured, which has people like Colonel Jianhua Gong worried.

[Colonel Jianhua Gong, Taiwanese Ministry of Defense]: 2nd quote gender unknown

“The CCP had made use of the Taiwan Strait issue to actively develop anti-satellite weapons, missiles, and aircraft carriers. The developed force has in fact exceeded the need of dealing with the Taiwan issue. This seriously affects the military balance in the Asia-Pacific region and even threatens the security of the whole world including many important countries.”

We will continue to follow this important story and will bring you the latest updates as they become available. 

China's military capable of taking offshore islands: report
The China Post news

TAIPEI, Taiwan -- China's military has the capability to seize Taiwan's offshore islands and is looking to complete deployments by 2020 to ready its troops for cross-strait war at any time, according to the Ministry of National Defense.

The ministry made the revelations in its annual report to parliament on China's military. The paper was sent to lawmakers Wednesday along with the ministry's plan for adjusting Taiwan's armed forces and its policies for the next five years.

The report, which contains analyses of the Chinese military's strategies, spending and deployments against Taiwan, says that China has never reduced its efforts in conducting drills targeting the island.

The People's Liberation Army (PLA) is now able to blockade and land on Taiwan-held offshore islands, the report says.

China has reiterated its goal to complete by 2020 the buildup of its troops' combat capabilities for a full-blown war against Taiwan, according to the report.

The report adds that China could wage war on Taiwan under certain circumstances, including if Taiwan declared independence or if Taiwan were clearly heading toward independence.

The PLA could launch attacks when Taiwan sees internal turmoil, obtains nuclear weapons, delays cross-strait unification talks, sees foreign intervention in its internal affairs or has foreign troops stationed in the country, the report says.

China capable of blockading, taking Taiwan's outlying islands: MND

Taipei, Aug. 31 (CNA) China's military has the capability to blockade and seize Taiwan's outlying islands and has not cut back on military exercises targeting Taiwan, Taiwan's Ministry of National Defense (MND) said in a report Wednesday.

In its report to the Legislature on China's military power, the ministry said an invasion by China could be triggered by developments such as Taiwan declaring or moving toward independence, Taiwan acquiring nuclear weapons, and foreign powers deploying forces in Taiwan or intervening in its domestic affairs.

The Chinese military continues to formulate plans for an all-out attack on Taiwan by 2020, while Chinese vessels have been venturing near Taiwan to collect intelligence under the guise of conducting marine research, the MND said in its report.

It said Chinese government vessels have been refurbished to resemble military vessels and are often dispatched to waters near Taiwan for "scientific research" and other purposes.

In another report Wednesday to the Legislature on Taiwan's military policy, the MND said there is a growing threat from China, which has the military capability to blockade and seize Taiwan's outlying islands.

The ministry said it will step up its information warfare efforts and the development of stealth, unmanned and precision weapons systems and ballistic missiles, with the goal of building a self-reliant defense capability. 

China asks PLA to be militarily ready for using force against Taiwan by 2020: MND report
By George Liao

The Ministry of National Defense (MND) states in a report to the Legislature on Wednesday that China has never diminished its military exercise targeting at Taiwan and that China has required its People's Liberation Army (PLA) to be comprehensively ready for using military force against Taiwan by 2020.

The MND says in its “Five-year Force Construction Plan and Administration Plan” that China now has the capability to blockade and take over Taiwan’s off-shore islands.

In “Military Power of the People's Republic of China 2016,” another report to the Legislature, the MND said that the circumstances under which the PLA is likely to invade Taiwan include formal declaration of Taiwan independence, undefined moves toward Taiwan independence, internal unrest on Taiwan, Taiwan’s acquisition of nuclear weapons, indefinite delays in the resumption of cross-Strait dialogue on unification, foreign intervention in Taiwan’s internal affairs, and foreign forces stationed on Taiwan.

These circumstances are identical with those the Pentagon listed in its annual report to Congress, “Military and Security Developments Involving the People’s Republic of China 2016,” under which China could attack Taiwan.

Taiwan's Military Conscription Dilemma

Taiwan’s temporary extension of conscription shows that the new administration is also struggling with the issue.
By Shang-su Wu

After the former Kuomintang (KMT, also known as the Chinese Nationalist Party) administration’s two failed attempts to transform Taiwan’s military into an all-volunteer force (AVF) in 2013 and 2015, the landslide victory of Tsai Ing-Wen and her Democratic Progressive Party (DPP) in the 2016 general election presented a great opportunity to reverse the AVF policies. The DPP’s majority in the legislative yuan, Tsai’s high popularity in the polls, as well as the “honeymoon” period between a new administration and the people could together form the political capital necessary to resume conscription for Taiwan’s various defense needs.

In the face of China’s rising military capability, conscription would arguably greatly contribute to Taiwan’s defense in term of both finance and deterrence. The AVF’s high human costs are a trade-off with funding for military investment, logistics, and training; conscription would leave more financial capacity in the defense budget. At the same time, conscription with a mobilization mechanism can multiply the size of the armed forces in a short time, creating certain regional superiority in an island defense scenario and a wider margin for bearing losses during battle. Conscripts with proper training would have better knowledge and physical strength than civilians, allowing them to be reorganized for guerrilla or other kinds of warfare, which could pose higher costs for the invader and thus serve the purpose of deterrence. All in all, conscription could demonstrate the general resolve of defense, sending a strong message of deterrence to China because of the people’s broad involvement in defense.

However, conscription in Taiwan has been unpopular in the country for decades. There are numerous reasons for the public’s poor impression of conscription: the economic opportunity costs, cases of improper training and obsolete equipment, an inadequate link between training routines and defense, and the different characteristics of young generations, as well as the considerable loopholes for escaping military service. Ideally, the government should fix these problems through comprehensive military reform in order to restore popular confidence and respect for conscription, but that’s easier said than done. Such large reforms cannot be completed in a few years, not to mention the high budgetary and management requirements of initiating such a project.

Taiwan’s Military Reforms and Strategy: Reset Required

Publication: China Brief
By: Kevin McCauley
The Jamestown Foundation

According to recently inaugurated President Tsai Ing-wen, Taiwan’s military is in need of “drastic” reforms to address a number of problems including military officers’ lack of strategic guidance, limited resources, and issues with force structure, training, morale and discipline (Taipei Times, July 5). President Tsai and her administration face serious defense reform issues requiring new and innovative solutions to counter PLA threats and overcome serious problems within the Taiwan military. Under former President Ma Ying-jeou and with the backing of the Chinese Nationalist Party (KMT), Taiwan moved toward an all-volunteer force which has encountered serious obstacles that are reducing operational readiness and the capability to defend Taiwan (China Brief, August 23, 2013).

Military Reforms and Reductions

A centerpiece of Taiwan’s military reforms is the transition to an all-volunteer force, a goal that has now been pushed back to beyond 2017. This planned “all-volunteer” military would actually serve as the peacetime core of a larger wartime military that would mobilize reserve units as well as integrate reservists into active-duty units during a crisis. Under the current system, more than 140,000 reservists are subject to only 5–7 days of training in disaster relief and basic training including administrative tasks every two years, with a maximum of two call-ups in every eight year period, but Taiwanese military officials noted frequent abuse of even this minimal mobilization—as many as 21 percent of reservists in 2016 exploited loopholes, such as booking trips overseas before their mobilization, to avoid being called up.

The reforms included a planned force reduction from 400,000 to 215,000 personnel. However, the inability to attract the necessary quality and quantity of volunteers is forcing reductions below what the military had considered essential to execute the national defense strategy. Failure to recruit volunteers has forced the military to continue supplementing the force with conscription past 2015 when it was planned to have ended, forcing the MND to continue conscription into 2017 (FocusTaiwan, August 16). The revised reform plan launched in 2015 will reduce the military below 200,000 by the end of 2019 in order to match the numbers of volunteers recruited. Some estimates project the military’s end strength will be around 170,000 (China Post , June 8; China Post, May 27).

The inability of the military to meet the quota of volunteers has left active duty units understrength, putting the transition to an all-volunteer force in doubt. Many issues contribute to low recruitment rates, including inadequate compensation and benefits, a general low regard for military service, better opportunities in the civilian economy, and falling birth rates. The Republic of China Military Academy is facing declining numbers of applicants, with enrollment falling short by 210 students in 2016 in part due to qualified applicants deciding instead to enroll in civilian universities. President Tsai has publicly acknowledged the effect of staff and personnel shortages on combat readiness. Fewer bodies means more stress and additional burdens for troops who must perform multiple tasks (Taipei Times, June 18; China Post, June 8).

There are additional indications of morale problems. Taiwan legislators have recently criticized the military over personnel leaving service by questionable means, particularly officers. An unusually large number of officers are reportedly being treated for psychiatric disorders at military hospitals, with legislators calling for an investigation of officers claiming mental health issues to enable them to retire early with pensions. On the other hand, volunteer soldiers claiming an inability to adapt to military life are forced to fulfill their service (Taipei Times, June 1).

The 2009 Quadrennial Defense Review published during President Ma’s administration stated that the minimum level of defense expenditure was no less than 3 percent of GDP to support a force of 215,000. However, during his presidency the defense budget continued to decline to about 2 percent of GDP. The lack of urgency on defense issues during Ma’s administration is no doubt tied to his assessment that a conflict is not likely. President Ma’s administration also failed to assess the high cost associated with the transition from a conscript to a volunteer military requiring higher pay and benefits to attract qualified personnel. The defense budget under the new DPP (Democratic Progressive Party) administration is not scheduled to reach 3 percent of GDP in 2017 due to Taiwan’s current financial situation, despite urging by Senator John McCain and others that Taiwan’s 2.1 percent of GDP defense spending is inadequate. The increasing amount of the defense budget that is devoted to personnel, 50 percent of the 2013 defense budget, is limiting weapons procurement, 25 percent of the defense budget in 2013, as well as training and readiness (China Brief, June 7, 2013; Taipei Times, May 8, 2015; Focus Taiwan, June 21; Taipei Times, June 11). [1]

Combat Training versus Disaster Relief

Taiwan’s military has a number of training problems that need to be addressed in order to enhance wartime operational capabilities. Recently a supersonic Hsiung-feng II anti-ship missile was accidentally fired from a corvette at Zuoying Navy Base. The missile traveled approximately 75 km and hit a Taiwan fishing trawler in waters near Penghu killing the boat’s captain and injuring three crew. A Taiwan Navy NCO, a second class petty officer and the weapon systems operator, mistakenly fired the missile during a training drill when he switched from simulation to combat mode, exhibiting poor training with no officer present. This incident is the most recent symptom of poor training and lack of discipline within the Taiwan military. The military also experiences a lack of realistic combined arms and joint training that reduces operational capabilities. The anti-ship missile accident, combined with public criticism of a recent incident of Marines torturing and killing a dog at a military base, has raised questions in Taiwan about military morale and discipline, as well as a need to improve operational guidelines (China Post, July 2).

Since Taiwan was hit by the deadly Typhoon Morakot in 2009, the Taiwanese military has emphasized disaster relief training. As President Ma put it, “There is little chance of war breaking out, but natural disasters happen almost every year.” He announced that the military should purchase “weapons systems” that could be employed during wartime and peacetime to enhance disaster relief (China Post, January 12). The Taiwan Army in particular spends substantial training time each year conducting disaster relief exercises with civil authorities to prepare to respond to frequent natural disasters such as typhoons and earthquakes (Military News Agency, April 18). President Ma also diverted 15 UH-60 Black Hawk helicopters from the 60 purchased for the Taiwan Army to the National Airborne Service Corps (NASC) to boost the organizations disaster relief capabilities. His administration was criticized for the move since the Black Hawks were originally purchased to replace aging UH-1 Iroquois helicopters. The Army Aviation and Special Forces Command’s 601st Army Aviation Brigade (3rd Theater of Operations) and 602nd Army Aviation Brigade (5th Theater of Operations) are key units supporting the two field armies in northern and central Taiwan. Critics believed that Eurocopter AS365 Dauphins should have been purchased for NASC as a less expensive alternative that still met the requirements of rescue missions (China Post, March 24). The time allocated to disaster relief training takes valuable time away from combat oriented training and lowers operational readiness to respond to PLA threats.

Military training is hampered by terrain in built-up areas or mountainous regions that forces the Army to rely on small training areas that cannot accommodate realistic combined arms training. For example, the single Joint Operations Training Base in Pingtung County in southern Taiwan is relatively small, and has been on the receiving end of protests from local residents over environmental concerns, and fines from the local government over damages caused by live fire at the base. In fact, this training area is actually designated as a joint live fire range rather than as a training area for conducting joint operations and maneuver. Military exercises also have been reduced elsewhere in response to public protests or disruptions (Taipei Times, September 10, 2015; China Post, December 15, 2015; China Post, September 11, 2014). Limited space and extensive restrictions on training areas further degrade the Taiwan military’s capability to execute combat missions in a crisis.

Military Strategy and the PLA Threat

President Ma initiated a “Hard ROC” defense strategy based on the strategic concept of “resolute defense and credible deterrence,” and a military reform and reduction plan intended to build a “small but smart and strong” modern force. The strategic intent was to build an “impregnable defensive force that …could not be dislodged, shattered or breached by a numerically superior enemy….” [2] However, invasion is not the only method mentioned in PLA discussions of Taiwan. The PLA threat facing Taiwan includes the following: the “Three Warfares” (public opinion, psychological, and legal warfare); information warfare; joint blockade; joint firepower strike, and joint island landing campaign.

Mainland coercive threats to Taiwan include the “Three Warfares,” information and cyber operations. The MND’s 2015 National Defense Report concludes that China has been conducting the “Three Warfares,” integrated into the PLA Political Work Regulation, against Taiwan since 2003. [3] Taiwan plans to establish a cyberwarfare force proposed by the DPP in 2015. A cyber headquarters would employ some 6,000 personnel and integrate communications, electronics and information; intelligence and surveillance; digital warfare; and the Communications Development Office responsible for signals intelligence (SIGINT). The MND intends to recruit information technology experts from the civilian sector to upgrade the military’s capabilities (Taipei Times, May 27; Taipei Times, June 12). However, the significant number of documented mainland espionage cases and cyber intrusions indicates a serious level of infiltration of the military and hemorrhaging of sensitive information on operational planning and capabilities that could prove fatal during a conflict. The Ministry of Transportation and Communications (MOTC) reported a scale of mainland cyber-attacks reaching the level of a “quasi-war,” noting that mainland actors have infiltrated key national defense, diplomatic, utilities, air traffic control and telecommunications systems (China Post, May 12; Taipei Times, March 18; China Post, April 28; VOA News, April 28).

A PLA air and maritime blockade could be initiated to coerce Taipei or to gain air and sea dominance in preparation for island landing operations. The PLA is currently capable of successfully blockading Taiwan held outer islands with a combination of PLA Navy (PLAN), PLA Air Force (PLAAF), PLA Rocket Force (PLARF) and PLA Army (PLAA) conducting maritime and air interdiction, joint fire strikes, mining, and information dominance or information blockade operations. Taiwan and the U.S. Department of Defense currently assess that the PLA can impose a partial blockade against Taiwan. Alternatively, the PLA could attempt to impose a virtual blockade against Taiwan by declaring exercise or missile closure areas on approaches to Taiwan. [4]

PLA joint fire strikes could support blockade or island landing operations, or represent a stand-alone campaign to coerce Taipei. PLA joint fire strike capabilities threaten to overwhelm Taiwan air defenses including early warning and radar systems, disrupt command and control, destroy or neutralize air and naval bases, and critical infrastructure, as well as neutralize Taiwan’s leadership or break the population’s will to resist. The Taiwan 2013 Quadrennial Defense Review assessed the PLA Rocket Force as deploying ballistic and cruise missiles with greater accuracy and maneuverability capable of striking Taiwan with the intent to block or disable Taiwan forces and deny intervention by the U.S. [5]

The PLA could successfully conduct a joint island landing against Taiwan held outer islands. The U.S. Department of Defense (DoD) assesses that the PLA could accomplish an invasion of a small Taiwan held island with little or no warning. An amphibious landing against Taiwan would represent a complex, phased joint operation. Sea, air and information superiority would be initial requirements, followed by joint fire strikes to neutralize or destroy key Taiwan forces and capabilities. Logistics support for the operation including landed ground and airborne forces would be complex and difficult. DoD assesses that the PLA is not currently capable of a full scale invasion of Taiwan without a multiyear ramp up in capabilities and most importantly construction of additional amphibious landing ships. [6]

The Way Forward

President Tsai and the DPP have serious defense issues to address, with no easy solutions. An immediate problem is the military reform and reduction plan the DPP inherited. The all-volunteer system is not working, placing stress on an understrength military which is leading to discipline, morale and operational problems. Taiwan demographics make a return to conscription problematic, but a combination of volunteers supplemented by conscription to meet minimum required force levels could provide a solution to maintaining the necessary force. Reaching a fully manned active duty force could reduce stress on personnel, raise morale, and increase discipline within a force experiencing disturbing problems.

The MND has identified 3 percent of GDP as the minimum requirement of the defense budget to meet assigned military missions. Inadequate assessment of the pay and benefit requirements for the transition to the all-volunteer force has exacerbated the problem by further reducing available funds for equipment modernization, training and operations as the defense budget has declined since 2008. It is clear that the DPP will not be able to meet the 3 percent of GDP minimum defense budget in the 2017. President Tsai’s administration will need to rethink Taiwan’s national security strategy and prioritize mission requirements in response to inadequate funding for the military.

Improved training is necessary to increase combat capabilities. Combined arms and joint training need to be increased. Enhanced combined arms training for the Army will be difficult without expansion of key training facilities or establishment of a national training center with adequate size for combined arms battalion training. Joint training, particularly by the Taiwan Air Force and Navy, should be increased, supplemented by joint simulation training. Reserve training should be increased, as the current call-up twice during an 8-year period for 5–7 days is inadequate to provide a minimal requirement for combat training. Disaster relief training currently takes time away from active duty and reserve combat training, reducing wartime readiness and capabilities. Resolving the competing demands of disaster relief units and the military should be the new administration’s top priority.

President Tsai and her advisors need to seriously rethink and reprioritize the ROC’s military plans and modernization to meet the most immediate mainland threats. The PLA is currently capable of conducting several operations that present serious challenges to the ROC, in particular information warfare, blockade, and joint firepower strikes. Current PLA amphibious and airborne landings represent a threat against Taiwan held islands, but not against Taiwan proper due to the lack of amphibious and air transport lift required to land and sustain an invasion force, although this could change in the future. Taiwan military missions and limited modernization resources should therefore focus on the more immediate threats. Taiwan is beginning to address the information warfare threat. PLA joint fire strikes that could destroy or neutralize air and naval bases, and air defenses, and growing blockade capabilities that could isolate the ROC require inexpensive solutions capable of surviving and countering this threat. The ROC needs to address military manning, training, strategy, and modernization priorities in the face of budget constraints that have weakened combat effectiveness in the face of Beijing’s military reforms and increasingly assertive posture toward territorial issues.

A Taiwan Plan for the Next U.S. President

How to shore up U.S. interests without sparking war.
By J. Michael Cole

The future U.S. president should also green-light further U.S. technical assistance for indigenous defense programs initiated by Taiwan (e.g., submarines) and would also be advised to refrain from punishing Taiwan for deploying, within reason, “counterforce” or “offensive” weapons systems that have a deterrent value against the People’s Liberation Army (PLA).

Reluctance to cross Beijing’s “red lines” on arms sales should not prevent a deepening of U.S. assistance in other areas. The future U.S. president should therefore increase joint training opportunities for Taiwanese military and law enforcement personnel (e.g., Urban Shield), as well as civilian search-and-rescue teams. Existing military training programs for Taiwanese personnel in the United States should continue and while other areas of cooperation (e.g., inviting Taiwan to participate in/observe RIMPAC) should be explored. More American cadets should be involved in exchange and language programs with Taiwan through the Fulbright program or others, and those should be appropriately funded via the Department of Defense.

Intelligence sharing—human and electronic—should continue and be increased as appropriate, including the bolstering of information that contributes to Taiwan’s situational awareness.

To reduce the risks of miscalculation and adventurism, the future U.S. president would also be advised to move away from strategic ambiguity on Taiwan and reinforce the notion that any unwarranted move by the PLA against Taiwan would not be countenanced and would immediately prompt a response from the international community. Rather than provoke China, drawing lines in the sea would help reduce the risks of war by increasing the costs of any move in that direction. Nothing would be more dangerous at this point than for Beijing to convince itself, out of hubris or frustration, that it can quickly resolve the Taiwan “question” by resorting to force.

Beyond military cooperation, the future U.S. president should prioritize efforts that contribute to Taiwan’s ability to be actively involved in global efforts. The future administration should therefore demonstrate leadership in ensuring that Taiwan is allowed to join multilateral organizations such as Interpol, the World Health Assembly and the International Civil Aviation Organization, all organizations where Beijing has increased its influence and sought to punish Taiwan by denying it the ability to join, if only as an observer. Proactive endeavors by the United States and influential allies to counter Beijing on this front will be necessary, especially amid signs of deteriorating ties between Taipei and Beijing following the return of the Taiwan-centric Democratic Progressive Party in government. Besides considerations of justice, plugging the Taiwan “blind spot” will fulfill the U.S. president’s responsibility to ensure the safety of U.S. citizens worldwide, including those who are in Taiwan or transiting through its airspace. 

The U.S.-China Military Scorecard
Forces, Geography, and the Evolving Balance of Power, 1996–2017

Cover: The U.S.-China Military Scorecard

READ Online

by Eric Heginbotham, Michael Nixon, Forrest E. Morgan, Jacob Heim, Jeff Hagen, Sheng Li, Jeffrey Engstrom, Martin C. Libicki, Paul DeLuca, David A. Shlapak, David R. Frelinger, Burgess Laird, Kyle Brady, Lyle J. Morris

Over the past two decades, China's People's Liberation Army has transformed itself from a large but antiquated force into a capable, modern military. Its technology and operational proficiency still lag behind those of the United States, but it has rapidly narrowed the gap. Moreover, China enjoys the advantage of proximity in most plausible conflict scenarios, and geographical advantage would likely neutralize many U.S. military strengths. A sound understanding of regional military issues — including forces, geography, and the evolving balance of power — will be essential for establishing appropriate U.S. political and military policies in Asia. This RAND study analyzes the development of respective Chinese and U.S. military capabilities in ten categories of military operations across two scenarios, one centered on Taiwan and one on the Spratly Islands. The analysis is presented in ten scorecards that assess military capabilities as they have evolved over four snapshot years: 1996, 2003, 2010, and 2017. The results show that China is not close to catching up to the United States in terms of aggregate capabilities, but also that it does not need to catch up to challenge the United States on its immediate periphery. Furthermore, although China's ability to project power to more distant locations remains limited, its reach is growing, and in the future U.S. military dominance is likely to be challenged at greater distances from China's coast. To maintain robust defense and deterrence capabilities in an era of fiscal constraints, the United States will need to ensure that its own operational concepts, procurement, and diplomacy anticipate future developments in Chinese military capabilities.

US Military's Worst Nightmare: A War with Russia and China (""at the Same Time"")

What would happen?
By Robert Farley

The United States discarded its oft-misunderstood “two war” doctrine, intended as a template for providing the means to fight two regional wars simultaneously, late last decade. Designed to deter North Korea from launching a war while the United States was involved in fighting against Iran or Iraq (or vice versa,) the idea helped give form to the Department of Defense’s procurement, logistical and basing strategies in the post–Cold War, when the United States no longer needed to face down the Soviet threat. The United States backed away from the doctrine because of changes in the international system, including the rising power of China and the proliferation of highly effective terrorist networks.

But what if the United States had to fight two wars today, and not against states like North Korea and Iran? What if China and Russia sufficiently coordinated with one another to engage in simultaneous hostilities in the Pacific and in Europe?

Political Coordination

Could Beijing and Moscow coordinate a pair of crises that would drive two separate U.S. military responses? Maybe, but probably not. Each country has its own goals, and works on its own timeline. More likely, one of the two would opportunistically take advantage of an existing crisis to further its regional claims. For example, Moscow might well decide to push the Baltic States if the United States became involved in a major skirmish in the South China Sea.

In any case, the war would start on the initiative of either Moscow or Beijing. The United States enjoys the benefits of the status quo in both areas, and generally (at least where great powers are concerned) prefers to use diplomatic and economic means to pursue its political ends. While the U.S. might create the conditions for war, Russia or China would pull the trigger.


On the upside, only some of the requirements for fighting in Europe and the Pacific overlap. As was the case in World War II, the U.S. Army would bear the brunt of defending Europe, while the Navy would concentrate on the Pacific. The U.S. Air Force (USAF) would play a supporting role in both theaters.

Russia lacks the ability to fight NATO in the North Atlantic, and probably has no political interest in trying. This means that while the United States and its NATO allies can allocate some resources to threatening Russia’s maritime space (and providing insurance against a Russian naval sortie,) the U.S. Navy (USN) can concentrate its forces in the Pacific. Depending on the length of the conflict and the degree of warning provided, the United States could transport considerable U.S. Army assets to Europe to assist with any serious fighting.

But What about a Russia China and ""North Korea"" Nightmare???????????????????
The 5,000-Year Government Debt Bubble

Should investors buy the most expensive bonds in recorded history?
By James Freeman

Politicians playing by their own rules is an old story. But it should count as news that politicians have lately been rewriting a rule in place since 3,000 B.C.

This rule of history is that savers deserve to be compensated when they loan money. Not anymore. In much of the developed world lenders are the ones paying for the privilege of letting governments borrow their cash. Through the magic of modern central banking, countries in Europe and elsewhere have managed to drive their borrowing rates not just to historic lows but all the way into negative territory. As of Monday almost $16 trillion of government bonds world-wide were offering yields below zero.

Amazingly, governments have managed this feat even as they have become more indebted and even as slow economic growth undermines their ability to repay. Such conditions normally suggest a less creditworthy borrower and therefore a higher interest rate to compensate investors for the risk. But sovereign debt has become more expensive. Governments have succeeded in making their bonds more expensive in part by printing money and buying the bonds themselves via their central banks. Commercial banks are all but required to buy them too.

In the new political economy—or alchemy—the more unsustainable a government’s finances, the less it pays to borrow. Japan’s government debt amounts to more than 200% of its economy. The yield on Japan’s 10-year bonds recently clocked in at negative 0.06%.

What does history have to say about this? In the Swiss financial publication Finanz und Wirtschaft, James Grant notes that as far as he can tell it’s never happened before. He cites the work of New York University Prof. Richard Sylla, who wrote “The History of Interest Rates” along with Sidney Homer. Mr. Sylla tells me there are “precious few minus signs before any rates” in his book. The only ones he can recall were on U.S. Treasury bills around 1941, just before Pearl Harbor. But “later research showed that anomaly might be explained by an option value embedded in bills then, so the negative yields may have been an artifact.” Mr. Sylla sums it up: “There were no negative bond yields in 5,000 years of recorded history.”

Put another way, government bonds have never been so expensive. Paul Singer, founder of hedge fund Elliott Management, isn’t expecting a happy ending. He believes that because of massive entitlement promises plus huge debt, “the entire developed world is insolvent.” He says that a negative rate on a government bond is “crazier than zero, and zero was crazy enough.” 

Check out this map to see where the housing bubble is biggest
By Diana Olick

June marked 50 consecutive months of annual national home price appreciation, with prices up 33 percent from the post-recession bottom in 2012, according to a new report from Black Knight Financial Services. It measured the average national home price in June at $265,000, which is within just 1.1 percent of a record high.

Some markets, however, have surpassed their previous price height. These include cities where tech jobs are driving population growth. Seattle and Portland, Oregon, top the list, as workers migrate north from pricey San Francisco. Denver, Austin, Texas, and Pittsburgh are also seeing a heavy influx of tech-sector jobs, pushing demand for housing higher and pulling prices along. 

6 States With the Biggest Real Estate Bubbles
By Andrew DePietro

The typical American might hear the phrase “housing bubble” and pretend to know what it means. They might know it had something to do with the 2007-08 financial crisis, but probably not much else.

The way a housing bubble, or real estate bubble, works is less complicated than it seems. In a bubble, the price of an asset — be it housing, stocks or Beanie Babies — is high because investors believe the selling price will be high or higher tomorrow. So, demand and price for the asset both increase. The problem? Eventually, the supply increases as demand decreases, leading to a decrease in prices and POP — the bubble bursts.

If you’re wondering why you should care about what a real estate bubble is, just take a look at the damage the last major housing bubble caused. Bloomberg reports the housing downturn from 2006 to 2009 decreased wealth by $7 trillion.

Fortunately today, most experts would agree that on a national level, we’re not in a housing bubble. But the absence of nationwide or statewide housing bubbles doesn’t mean they’re not forming — or that they don’t already exist within some states on the city level.

So if you’re thinking about buying a home in one of these states, you might want to find out if your city is at risk for a potential bubble. Based on analysis of housing markets and some key economic indicators, here are six states that could be experiencing the effects of the next housing bubble.

Political Calculations
August 30, 2016
Decelerating Median New Home Sale Prices

Four years ago, in July 2012, an influx of investors in the U.S. real estate market began buying up homes at an accelerated rate, which prompted a sharp rise in median new home sale prices, which lasted for a year.

During that time, the trailing twelve month average of median new home sale prices rose at a rate of $2,476 per month. After July 2013 however that phase of rapid inflation in median new home sale prices came to an end and the trailing year average of median new home sale prices then began escalating at the slower rate of $1,511 per month as the investor activity that had fueled the previous escalation in prices began to abate. That amount is about 39% slower than what was recorded in the year from July 2012 through July 2013.

Going by data that has been revised over the past nine months, that appears to have generally continued through September 2015. Since then, it now appears the the pace of escalation of the trailing twelve month average of median new home sale prices has slowed again, this time to about $934 per month. Coincidentally, that figure is about 38% slower than the typical pace that was seen between July 2013 and September 2015.

Let The Viewer Beware – Case Shiller Lags and Understates the Housing Bubble
By Lee Adler

Here’s how the Case Shiller Index (CSI) press release spun the data on the state of the US single family housing market today:

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.1% annual gain in June, unchanged from last month. The 10-City Composite posted a 4.3% annual increase, down from 4.4% the previous month.The 20-City Composite reported  a year-over-year gain of 5.1%, down from 5.3% in May.

The problem is that Case Shiller’s methodology causes price suppression and severe lag. That gives the impression that the US housing market isn’t in a bubble. It’s a misimpression, considering that market prices on average are actually above the 2006 bubble peak. If 2006 was the top of the most extreme bubble in US history, what does that make today’s higher prices?

China Might Be Blowing a Gigantic Global Housing Bubble
By Antonia Oprita

It's the perfect example of a circular stimulus: the U.K. is facing a shortage of bricks so bad it has to import them from countries like China to build houses to try to solve its worsening housing crisis. And what is one of the main reasons for the housing crisis? Very likely, it's the Chinese government's stimulus for its own economy.

Chinese buyers flush with cash are bidding up house prices in many of the world's big cities, creating shortages of properties for local buyers and worries that they are fueling a massive real estate bubble. They are also creating a construction boom in the process, which is boosting imports of Chinese building materials, so the question is whether this is a deliberate policy or not.

The National Association of Estate Agents (NAEA) of the U.K. released a report on Thursday arguing that a shortage of bricks has contributed to poor housing supply over the past decade in Britain. In it, it said the British construction sector would require a total of 1.4 billion bricks in order to resolve the country's housing shortage, enough to build 40 Tower Bridges -- that's the iconic twin-towered bridge over the Thames you see in lots of postcards from London.

The report said two thirds of small and medium-size construction companies in the U.K. had to wait two months for an order for bricks to be filled, with a quarter of them facing a four-month wait and 16% even waiting for half a year.

Brick imports by the U.K. from non-EU countries (of which China makes a big part -- separate data were not available) jumped last year by almost 40% from 2014, as did imports of other building materials, data from the Department for Business, Energy & Industrial Strategy show.

It is of course difficult if not outright impossible to calculate exactly how much of the rise in home prices is due to Chinese stimulus money pouring into property in the U.K. and elsewhere, and then how much of that money goes back to China in the form of imports of construction materials for an expanding real estate sector. 

U.S. Housing..................Now Comes the Correction!!!!!!!!!!!!!!!!!!!!!!!!
Africa's biggest economy officially enters recession

Nigeria's economy nosedived into a recession official data revealed Wednesday with oil production hammered by militant attacks on pipelines and foreign investment at a "record" low. Output in the three months to the end of June was -2.06 percent with the oil sector reporting a double-digit decline following a wave of attacks by rebels in the oil-producing south.

The slowdown was recorded across many sectors in a sign that Africa's largest economy is wrestling with deeper structural issues than just the low price of crude. Foreign investors, wary of the Nigerian government's controversial currency peg, avoided putting money into the country leading to a "record" decline in capital importation, reported Nigeria's National Bureau of Statistics. The $647.1 million worth of capital imported into Nigeria in the second quarter represented a "fall of 75.73 per cent" compared to 2015.

"This provisional figure would be the lowest level of capital imported into the economy on record, and would also represent the largest year on year decrease," said the statistics agency.

"There was considerable uncertainty surrounding future exchange rate policy which may have deterred investors," added the statistics agency. Nigerian President Muhammadu Buhari's government finally devalued the naira in June after upholding the currency peg for months, yet experts say the negative impact of the controversial monetary policy will still be felt in months to come. 

A Collapse in Crude Oil Prices Will make the HELL in Brazil Even Worse than it already "IS"!!!!!!!!!!!!!!!!!!!!!!! 

Dilma Rousseff Is Ousted as Brazil’s President in Impeachment Vote

BRASÍLIA — The Senate on Wednesday impeached Dilma Rousseff, Brazil’s first female president, and removed her from office for the rest of her term, the capstone of a power struggle that has consumed the nation for months and toppled one of the hemisphere’s most powerful political parties.

The Senate voted 61 to 20 to convict Ms. Rousseff on charges of manipulating the federal budget in an effort to conceal the nation’s mounting economic problems.

But the final removal of Ms. Rousseff, who was suspended in May to face trial, was much more than a judgment of guilt on any charge. It was a verdict on her leadership and the slipping fortunes of Latin America’s largest country.

The impeachment puts a definitive end to 13 years of governing by the leftist Workers’ Party, an era during which Brazil’s economy boomed, lifting millions into the middle class and raising the country’s profile on the global stage.

But sweeping corruption scandals, the worst economic crisis in decades and the government’s tone-deaf responses to the souring national mood opened Ms. Rousseff to withering scorn, leaving her with little support to fend off a power grab by her political rivals.

Brazil impeaches president just as recession deepens
By Patrick Gillespie

Brazil's week just went from bad to worse.

The country's Senate voted on Wednesday to impeach President Dilma Rousseff, ending a bitter political fight.

The bad news didn't stop there. Brazilian officials announced on Wednesday that the economy's historic recession deepened.

In the second quarter, Brazil's economy contracted 3.8%, after shrinking 5.4% in the first three months of the year. It's the longest recession since the 1930s for Brazil, Latin America's largest economy.

Rousseff was suspended in May after both houses of Brazil's Congress voted to begin the impeachment trial against her. Many considered Wednesday's vote a foregone conclusion.

She was accused of messing with Brazil's fiscal budget to make it look better than it was right before Brazil's elections in 2014. It's important to note that some of her critics in Congress have been accused of more serious crimes, such as bribery.
Port of Virginia will refuse inbound cargo from Hanjin following bankruptcy

Effective immediately, The Port of Virginia will not be accepting any inbound Hanjin cargo -- freight for export -- at any of the port’s marine or intermodal terminals.

The decision follows South Korea-based Hanjin’s announcement that it has filed for bankruptcy protection. Hanjin, South Korea’s largest shipping firm, has filed for receivership and requested that Seoul Central District Court freeze its assets.

In a Wednesday afternoon news release, the port said it will still accept empty Hanjin containers at the Pinners Point Container Yard in Portsmouth and that it is developing plans for how to handle Hanjin cargo that is already on-terminal.

“Those plans will be communicated to all port customers, users and stakeholders as soon as they have been finalized,” the port’s statement said.

The Seoul court is expected to grant Hanjin's bankruptcy protection request, according to the Port of Virginia's news release. 
Image result for rotflmao

Hanjin Shipping Files for Bankruptcy
By Paul Eakins

Hanjin Shipping Co. Ltd. filed for bankruptcy protection Wednesday after negotiations with creditors failed, sinking the seventh-largest cargo container carrier in the world and one of the largest shippers at the Port of Long Beach.

According to a report by Reuters, the South Korean company’s assets were being frozen around the world and in some cases its ships were being turned away at ports for fear they wouldn’t be able to pay docking fees, but so far that didn’t appear to be the case in Long Beach.

“So far it’s still business as usual. We haven’t heard anything yet,” said an employee who didn’t want to provide his name at Total Terminals International, which operates the port’s largest terminal, Pier T.

Hanjin owns a majority share in TTI, and its terminal is the Long Beach’s largest, handling about one-third of all cargo there. Other shippers pay to use Pier T as well, while Hanjin’s vessels make up about one-third of the pier’s traffic, according to port officials.

The TTI employee said two ships were scheduled to arrive today, one from Greece and another from Montevideo, Uruguay.

Whether vessels will continue to arrive for now, or be able to leave for their destinations, remains to be seen. Reuters reported that vessels in China, Spain, and Savannah, Georgia, have been blocked from docking.

The long-term impact raises bigger questions about Hanjin’s presence in Long Beach. Port officials have said if Hanjin leaves Pier T, they should be able to find a replacement carrier because the terminal is large, modern, and in-demand.

Hanjin’s parent company, Hanjin Group, also owns Korean Air, but representatives of the company said Tuesday that neither the airline nor its downtown Los Angeles skyscraper that’s under construction, the Wilshire Grand Center, should be affected because they are separate business entities.

Hanjin’s court receivership filing seemed a strong possibility after Hanjin’s creditors on Tuesday rejected its restructuring plan, which required the company to come up with $1.1 billion in liquidity. While the shipping industry has struggled with low demand and prices, this would be the largest carrier to go under in recent memory.

Reuters reported that a South Korean judge said it could take up to a couple of months to determine whether Hanjin should remain in some form or be dissolved. 

Hanjin shipping line files for bankruptcy
By Elliot Njus

Hanjin Shipping Co., the South Korean shipping company that once provided most of the Port of Portland's container cargo service, filed for bankruptcy protection Wednesday.

The Wall Street Journal reported the filing came a day after the company's creditors ended financial assistance that amounted to $896 million. The Seoul Central District Court will determine whether the troubled shipping line should be liquidated or restructured.

Hanjin and shipping companies like it have suffered from a worldwide decline in trade in recent years. It came after the companies, expecting growth to continue, over-invested in ships and terminals.

The Port of Portland has pointed to trouble in the international shipping industry, along with a continuing labor dispute, as part of the reason it won't be able to attract new service in the short term. 

Planet EARTH...................YOU Have a Serious Problem that can NO LONGER be Ignored..............""GLOBAL RECESSION""................DEAD Ahead!!!!!!!!!!!!!!!!!!!!!!!!!!! 
Image result for head in the sand

Global Supply Chains Paralyzed After World's 7th Largest Container Shipper Files Bankruptcy, Assets Frozen

After years of relentless decline in the Baltic Dry index... 

Baltic Dry Index!!!!!!!!!!!!!!!!!!!!!!!!!!! 

Transportation Freight Index!!!!!!!!!!!!!!!!!!!!!!! 

The Truth Emerges: EIA Admits It "Overestimated" Crude, Gasoline Demand In The First Half By 16%

One of the recurring peculiarities of oil complex data as reported by the EIA was how, during a time of an unprecedented crude glut by OPEC and pronounced economic weakness in the US, was overall US demand of various petrochemical products as strong as the DOE reported on a weekly basis. To be sure, the alleged increase in demand was one of the major catalysts that prompted rising oil prices together with relentless jawboning by OPEC members about a "production freeze" that would never materialize, in turn spurring not one but two record short squeeze across the commodity complex.

We now know the answer.

In a note released moments ago by the EIA, whose bias to keeping prices as high as possible is no secret, admitted that "over the first six months of 2016, EIA weekly estimates underestimated total crude oil, petroleum, and biofuel exports by an average of 16%, compared with final data published in the PSM." 

Oil Prices In Freefall As Fundamentals Worsen
By Matt Smith

Crude prices are softening for a third consecutive day thus far, as a decent ADP employment report out in the U.S. has boosted expectations from Friday's official employment report, as well as for an interest rate hike. The dollar is looking higher again, while oil market digest the build to crude stocks from the weekly EIA report. Hark, here are five things to consider in oil markets today:

1) Surging product exports from China are pressuring refining margins lower across Asia, as refiners from India to South Korea and Singapore roll up their sleeves to do battle. Even though Chinese product exports continue to rise as they make inroads into countries such as the Philippines and Australia, impending maintenance and increased regulation / scrutinization of independent teapot refiners in the north of the country is set to stymie their refining activity. This is already being reflected in their import data; with August data nearly complete, imports are down over 20 percent from their peak in March:


2) Conjecture continues to swirl relating to China's strategic stockpiling. The latest statement from the National Bureau of Statistics was in December, which stated that its SPR was up to 191 million barrels by mid-last year.

According to the chart below, there appears to have been another 250 million barrels accrued since; all the while, the Chinese government say it has pushed back its completion deadline to beyond the current 2020 deadline.

Oil Slammed After EIA Reports Significant Crude Build
By Irina Slav

Crude oil inventories in the U.S. rose by 2.3 million barrels to 525.9 million barrels last week, remaining at historically high levels for this time of year, the Energy Information Administration reported.

The figure exceeded the 942,000-barrel build reported by the American Petroleum Institute yesterday, which rattled markets yet again.

Refineries last week processed an average of 16.6 million barrels daily, down by 64,000 barrels on the week. Gasoline production averaged 10 million barrels, basically flat on the week. The stockpiles of the most popular fuel went down by 700,000 barrels, still remaining considerably above the average for the season.

Gasoline prices have been climbing up over the last three weeks, according to the EIA. This, however, may very well change next week, as Labor Day marks the end of the driving season and higher demand. This year’s driving season saw the lowest gasoline prices for the last 12 years, reflecting the glut in crude and fuels.

Last week, the EIA reported a build of 2.5 million barrels in crude oil inventories, balancing out the previous week’s draw of the same size. Gasoline inventories were flat on the previous week, when they shed 2.7 million barrels, raising hopes of an end to the excess supply.

Oil prices are still on the seesaw, with market sentiment ranging from eager expectations for any data that may suggest a decline in the oversupply to skepticism. A greenback that’s been going up since Friday has not helped prop up crude prices: the dollar jumped after Fed chair Janet Yellen hinted in a speech that interest rates could be raised soon. Neither have comments from Iran that it’s on track to bump up its output to 4 million bpd by the end of the year.

Oil Plunges After API Reports Significant Distillates, Crude Build
By Zainab Calcuttawala

This week’s report from the American Petroleum Institute (API) estimates a 942,000 barrel build in U.S. crude supplies, in line with expectations.

S&P Global Platts polled analysts, leading to the prediction that crude supplies would rise by 600,000 barrels for the week ending August 26th.

The API predicted a 1.6-million barrel draw in domestic natural gas supplies. Distillates rose by three million barrels, according to API figures, despite forecasts saying supplies would remain unchanged.

Oil prices fell for a second straight day on Tuesday, due to worries about an extended oil supply glut and the strength of the American dollar in currency markets.

Brent crude futures declined by 89 cents, or 1.8 per cent, and settled at $48.37 per barrel.

U.S. West Texas Intermediate (WTI) crude futures fell 63 cents, or 1.3 per cent, and closed at $46.35.

Last week, the API report estimated that crude supplies would rise by 4.464 million barrels, despite expert consensus that inventories would drop by 0.5 million, according to a Reuters survey.

However, last Wednesday, the Energy Information Administration (EIA) reported a 2.5-million-barrel increase in crude oil inventories for the week ending August 19th, following a draw of the same amount reported by the authority in the week prior. Total inventories stood at 523.6 million barrels last week--still at record-high levels for August.

Data from the API and the EIA are often contrasting, which adds to the volatility of the market, especially amid other developments such as the coming OPEC meeting in September where a production freeze will be discussed.

Oil prices resume downturn

Benchmarks lower by 1 percent at the start of the day as markets brace for U.S. market report.
By Daniel J. Graeber

NEW YORK, Aug. 31 (UPI) -- A discount of any bullish sentiments in the market for crude oil helped push benchmark prices lower to start the trading day on Wednesday.

Crude oil prices started the day Tuesday in positive territory as producers in the U.S. Gulf of Mexico pulled back their operations due to a major storm system there. The situation reversed later in the day after a report on U.S. consumer confidence made it appear more likely the Federal Reserve would take action on interest rates later this year, pressuring both the value of the dollar and the price for oil.

While still a threat, meanwhile, storm systems in the southern United States appear to be moving away from Gulf installations.

Oil moved sharply lower in the hours before the start of trading in New York, but the downturn eased up somewhat by the opening bell. The price for Brent crude oil, the global benchmark, was down 1.2 percent to $48.12 per barrel in New York. The U.S. benchmark, West Texas Intermediate, lost 1percent to start the day at $45.89 per barrel.

Market watchers may still be searching for clues on what possible meaningful action members of the Organization of Petroleum Exporting Countries may take during a summit in September in Algeria. Most major producers, however, are sparring over market share, with each looking to the other to curb output. 

Mystery of Oil Held on Chinese Islands Puzzles Crude Markets

China’s got the world puzzling over its oil hoard.

From underground caverns by the Yellow Sea to a scattering of islands in the Yangtze River delta, the government has been stockpiling crude for emergencies in a network of storage sites dotted around the country. Record purchases this year by the world’s biggest energy consumer have helped oil prices recover from the worst crash in a generation. What the country plans to do next could determine where they go from here.

The difficulty is that nobody outside China really knows for certain. The government won’t say how much it’s holding or when the tanks will be full. Energy Aspects Ltd. says the country will probably keep buying and fill up commercial tanks if it has to, while the likes of JPMorgan Chase & Co. say the purchases may soon stop. The difference in opinion is equivalent to about 1.1 million barrels a day, or more than the Asian country buys from Saudi Arabia.

“China seems to feel no obligation to report on its strategic stocks, and that might confer a genuine advantage in its favor,” said John Driscoll, the chief strategist at JTD Energy Services Pte, who has spent more than 30 years trading crude and petroleum in Singapore. “The scope of their purchases can dramatically affect fundamentals and prices. However, since they will likely be shrouded in secrecy, it will remain challenging to quantify the impact.”


China outlined in 2009 its plans to build reserves equivalent to 100 days of net imports. But since then it’s only provided sporadic scraps of detail on its strategic petroleum reserves, or SPR. That stands in contrast to the U.S., where the Energy Department has been detailing data on American inventories for more than three decades.

The Asian country had about 191 million barrels of crude in its SPR as of the middle of last year, according to a statement on the website of the National Bureau of Statistics in December. But it also said at the time that total combined capacity of seven above-ground sites and one location with underground caverns was the equivalent of only 180 million barrels. The figures haven’t been updated since.

A Chinese "Mystery" Has Become The Biggest Wildcard For The Price Of Oil

At the end of July, we wrote an article titled "Oil Bulls Beware: Crude Demand Is About To Slide As China's SPR Is "Close To Capacity"" which explained why what until recently had been a record hoarding of oil by China, was starting to fade. The reason: according to JPM China's Strategic Petroleum Reserve was filling up.

As we said then, "as many speculated, a big source of China's demand in the past 5 months was Beijing's decision to stockpile oil for its SPR. However, that is now over as China is likely close to filling its strategic petroleum reserves after doubling purchases for it this year as prices plunged. JPM estimates that China's SPR demand was equivalent to approximately 1mm bpd. More importantly, stopping shipments for the reserve would wipe out about 15 percent of the country’s imports, according to the bank."

Oil futures end at 3-week low, but gain 7.5% on month

EIA: U.S. crude supplies up 2.3 mln barrels, output down
By Myra P. Saefong

Oil futures marked their lowest finish in nearly three weeks Wednesday after a U.S. government report revealed a bigger-than-expected weekly increase in crude inventories.

Domestic production, meanwhile, showed a decline and with some in the market holding out hope that major oil producers will take action to stabilize the market, oil prices managed to keep a sizable gain for the month.

October West Texas Intermediate crude CLV6, -3.30%  fell $1.65, or 3.6%, to settle at $44.70 a barrel on the New York Mercantile Exchange. The settlement was the lowest since Aug. 12. Tracking the most-active contracts, prices saw a monthly gain of roughly 7.5%, according to FactSet data—the largest since April.

“This month’s gains are likely to be fleeting over subsequent months,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. “Fundamental data is pointing to a well-supplied market which has risks of further supply growth.”

EIA now using near-real-time export data to improve weekly petroleum consumption data


Starting with today's release of the Weekly Petroleum Status Report (WPSR), EIA is now publishing weekly petroleum export and consumption estimates based on near-real-time export data provided by U.S. Customs and Border Protection (Customs). EIA previously relied on weekly export estimates based on monthly official export data published by the U.S. Census Bureau roughly six weeks following the end of each reporting month. This new methodology is expected to improve weekly estimates of petroleum consumption (measured as product supplied) by improving estimates of weekly exports of crude oil, petroleum products, and biofuels, which increased from 1 million barrels per day (b/d) in 2004 to nearly 5 million b/d in 2015.

The use of near-real-time export data should reduce differences between EIA's weekly data, as presented in the WPSR, and monthly data, as presented in the Petroleum Supply Monthly (PSM). The monthly data that EIA publishes 60 days after the end of each month are based on EIA's comprehensive monthly survey data and the actual Census Bureau export data for that month.

Export data are an important component for the calculation of EIA's weekly estimates of U.S. consumption of petroleum products. EIA calculates U.S. consumption (using product supplied as a proxy for consumption) for petroleum products as: 

Monthly Crude Oil and Natural Gas Production

Notes: Crude oil includes lease condensate. The sum of individual states may not equal total U.S. volumes due to independent rounding. A zero may indicate volume of less than 0.5 thousand barrels per day. Previous months' production volumes may have been revised for all states/areas.

Sources: Data for Arkansas, California, Colorado, Federal Offshore Gulf of Mexico, Kansas, Louisiana, Montana, New Mexico, North Dakota, Ohio, Oklahoma, Texas, Utah, West Virginia, and Wyoming are from the EIA-914 survey. Data for states/areas not individually surveyed on the EIA-914 (Alabama, Arizona, Federal Offshore Pacific, Florida, Illinois, Indiana, Kentucky, Michigan, Mississippi, Missouri, Nebraska, Nevada, New York, South Dakota, Tennessee, and Virginia) are from EIA estimates published in the Petroleum Supply Annual and Petroleum Supply Monthly reports, based on crude oil production data from state government agencies and the U.S. Department of the Interior, Bureau of Safety and Environmental Enforcement (and predecessor agencies), and first purchase data reported on Form EIA-182, Domestic Crude Oil First Purchase Report.

IEA Lowers Global Oil Demand Forecast

And with increasing OPEC production-in combination with the most recent United States data-it remains obvious that the global oil market remains oversupplied.

"The downgrade to demand by the IEA has raised concerns that lower oil prices could well be with us for a little while longer", said Michael Hewson, chief market analyst at CMC Markets UK.

According to the International Energy Agency's (IEA) recently-released IEA Oil Market Report (OMR) for August, global oil demand growth is expected to slow down in 2017.

The West Texas Intermediate for September delivery added 1.00 USA dollars to settle at 44.49 US dollars a barrel on the New York Mercantile Exchange, while Brent crude for October delivery increased 0.93 USA dollars to close at 46.97 USA dollars a barrel on the London ICE Futures Exchange.

Markets were supported as Saudi Arabia's energy minister Khalid al-Falih said in a statement late on Thursday that oil producers would discuss during a meeting next month in Algeria potential action to stabilize oil prices.

U.S. West Texas Intermediate (WTI) crude futures were at $43.71 a barrel, up 22 cents, or 0.51 percent, from their last close.

In London, North Sea Brent for October delivery rose 93 cents to US$46.97 a barrel on the Intercontinental Exchange.

""Falling Crude Oil Prices""..............................More PAIN "IS" Coming!!!!!!!!!!!!!!!!!!!!!!!!!!!