There isn’t much room for chance…
Not only are things getting out of hand, they seem to be spiraling out of control. We have discussed this at length this week with the latest from Harley Schlanger and Paul Craig Roberts. The situation has deteriorated twice in less than 24 hours, and it just took a turn for the worse. Here is a 2-for-1 post because there are no winners in thermo-nuclear war.
First, Zero Hedge reports on what in the Russian PM’s eyes is President Trump’s Declaration of Trade War:
Russian PM: “The U.S. Just Declared Full-Scale Trade War On Russia”
Several hours after President Trump officially signed the new Russian sanctions into law – despite his reservations and his statement that while he favors “tough measures to punish and deter aggressive and destabilizing behavior by Iran, North Korea, and Russia, this legislation is significantly flawed” – Russia responded when moments ago Russian Prime Minister Dmitry Medvedev said on his FaceBook page that any hopes of improving Russian relations with the new US administration are dead, that the Trump administration demonstrated complete impotence by transferring executive power to Congress “in the most humiliating manner”, and most notably, that the US just declared a full-scale trade war on Russia.
From Medvedev’s facebook page:
The signing of new sanctions against Russia into law by the US president leads to several consequences. First, any hope of improving our relations with the new US administration is over. Second, the US just declared a full-scale trade war on Russia. Third, the Trump administration demonstrated it is utterly powerless, and in the most humiliating manner transferred executive powers to Congress. This shifts the alignment of forces in US political circles.
What does this mean for the U.S.? The American establishment completely outplayed Trump. The president is not happy with the new sanctions, but he could not avoid signing the new law. The purpose of the new sanctions was to put Trump in his place. Their ultimate goal is to remove Trump from power. An incompetent player must be eliminated. At the same time, the interests of American businesses were almost ignored. Politics rose above the pragmatic approach. Anti-Russian hysteria has turned into a key part of not only foreign (as has been the case many times), but also domestic US policy (this is recent).
The sanctions codified into law will now last for decades, unless some miracle occurs. Moreover, it will be tougher than the Jackson-Vanik law, because it is comprehensive and can not be postponed by special orders of the president without the consent of the Congress. Therefore, the future relationship between the Russian Federation and the United States will be extremely tense, regardless of the composition of the Congress or the personality of the president. Relations between the two countries will now be clarified in international bodies and courts of justice leading to further intensification of international tensions, and a refusal to resolve major international problems.
What does this mean for Russia? We will continue to work on the development of the economy and social sphere, we will deal with import substitution, solve the most important state tasks, counting primarily on ourselves. We have learned to do this in recent years. Within almost closed financial markets, foreign creditors and investors will be afraid to invest in Russia due to worries of sanctions against third parties and countries. In some ways, it will benefit us, although sanctions – in general – are meaningless. We will manage.
Separately, Russia’s foreign minister Sergey Lavrov said that Russia retains the right to impose new counter-measures, adding the US sanctions are short-sighted, and risk harming global stability. He concludes that and attempts to pressure Russia will not make it change course.
The Kremlin also chose not to escalate the situation further. “This changes nothing. There is nothing new here,” Vladimir Putin’s press secretary, Dmitry Peskov, told the media in Moscow. “Counter-measures have already been taken.”
And now we await a similar announcement from the European Union.
Surreal headline of the day pic.twitter.com/CsIMNBI49O
— Gap Spotter (@GotfrydKarol) August 2, 2017
Also from Zero Hedge:
Mueller Impanels Grand Jury In Russia Probe, Donald Trump Jr. Subpoenaed
Update: Reuters adds that Grand Jury subpoenas have been issued in connection with the June 2016 meeting between Donald Trump Jr., Russian Lawyer and others.
Stocks slumped, and VIX spiked following news that Special Counsel Robert Mueller has impaneled a grand jury in Washington to investigate Russia’s interference in the 2016 elections, the WSJ reports, adding that “this is a sign that his inquiry is growing in intensity and entering a new phase.” The grand jury is said to have begun work in recent weeks, suggesting Mueller’s inquiry is ramping up and “that it will likely continue for months.”
“This is yet a further sign that there is a long-term, large-scale series of prosecutions being contemplated and being pursued by the special counsel,” said Stephen I. Vladeck, a law professor at the University of Texas. “If there was already a grand jury in Alexandria looking at Flynn, there would be no need to reinvent the wheel for the same guy. This suggests that the investigation is bigger and wider than Flynn, perhaps substantially so.”
Speaking to the WSJ, Ty Cobb – special counsel to the president – said he wasn’t aware that Mueller – who is investigating Russia’s efforts to influence the 2016 election and whether President Donald Trump’s campaign or associates colluded with the Kremlin – had started using a new grand jury. “Grand jury matters are typically secret,” Mr. Cobb said. “The White House favors anything that accelerates the conclusion of his work fairly.…The White House is committed to fully cooperating with Mr. Mueller.
The WSJ adds that prior to Mueller’s assignment as special counsel, federal prosecutors had been using at least one other grand jury, located in Alexandria, Va., to assist in their criminal investigation of Michael Flynn, a former national security adviser. That probe, which has been taken over by Mr. Mueller’s team, focuses on Mr. Flynn’s work in the private sector on behalf of foreign interests.
A grand jury in Washington is also more convenient for Mr. Mueller and his 16 attorneys—they work just a few blocks from the U.S. federal courthouse where grand juries meet—than one that is 10 traffic-clogged miles away in Virginia.
Does this mean the worst is coming for Trump? Thomas Zeno, a federal prosecutor for 29 years before becoming a lawyer at the Squire Patton Boggs law firm, said the grand jury is “confirmation that this is a very vigorous investigation going on.”
“This doesn’t mean he is going to bring charges,” Mr. Zeno cautioned. “But it shows he is very serious. He wouldn’t do this if it were winding down.”
Another sign the investigation is ramping up: Greg Andres, a top partner in a powerhouse New York law firm, Davis Polk & Wardwell LLP, has joined Mr. Mueller’s team. Mr. Andres, a former top Justice Department official who also oversaw the criminal division of the U.S. attorney’s office in Brooklyn, wouldn’t leave his private-sector job for a low-level investigation, Mr. Zeno said.
Notably, in March Andres supported a Democratic lawmaker donating $2,700 to Kirsten Gillibrand, a New York senator.
The grand jury news comes following a report that Congress is seeking to protect Mueller’s independence after Sens. Thom Tillis (R., N.C.) and Chris Coons (D., Del.) introduced legislation Thursday making it harder for Trump to fire Mueller. Under the legislation, a special counsel could challenge his or her removal, with a three-judge panel ruling within 14 days on whether the firing was justified.
As a reminder, Mueller has assembled a team of prosecutors and lawyers specializing in criminal and national security law. Twelve attorneys are on temporary assignment to the special counsel’s office from the Justice Department or FBI, and three came from Mr. Mueller’s firm of WilmerHale.
Trump has repeatedly questioned the neutrality of Mr. Mueller’s office, telling Fox News he is concerned that Mueller’s prosecutors are “Hillary Clinton supporters” and that Mueller and Comey are friends. Comey was a top Justice official in the George W. Bush administration when Mr. Mueller was the FBI director; both are Republicans.
Adding some credence to Trump’s allegations is that at least eight members of Mr. Mueller’s team have given to Democratic candidates, including the presidential campaigns of Obama and Clinton, according to Federal Election Commission records, although at least one, James Quarles, an original member of the Watergate Special Prosecution Force, donated to politicians in both parties.
While we await Trump’s response, this is how the market reacted to the news:
And while advocates of sound money salute Zero Hedge for not just reporting the stock market reaction, but also the fear that goes along with it. Suffice to say that the Original Hedge against uncertainty is doing its job: