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VIDEO: Brazil Arrests ‘Defenders of the Shariah’ Terror Cell Ahead of Olympic Games

Cooperating with the U.S. Brazil beefs up counter-terror forces after police arrested an ‘amateur’ cell of 12 terrorists planning an attack.

Brazil has enhanced its security cooperation on counter-terrorism with the United States ahead of the Olympic Games, which begin in Rio de Janeiro Friday, August 5.

Brazilian police have been training alongside the FBI and specialized American counter-terrorism units in order to ensure the country is prepared for the security challenges of the games. Brazil has so far not suffered any major terrorist threat and, as a consequence,its security forces were underprepared for the scale of the Olympics, which jihadist groups have threatened to attack.

Dozens of Brazilian officials flew to the United States to train with American forces and to observe how the U.S. guards major sporting events such as the Super Bowl, according to the New York Times.

In late July, Brazilian counter-terror police arrested a cell of 12 would-be terrorists who were plotting to mount an attack against the games, as reported by CNN. Ten were reportedly arrested initially followed by two later arrests.

Police were able to catch the cell by monitoring communications on the messaging service WhatsApp. The group called  itself the “Defenders of the Shariah.”

“It was an amateur cell without any planned preparation,” Justice Minister Alexandre de Moraes said of the cell.

The group reportedly attempted to purchase weapons online, something Moraes said no professional group would do and had not got beyond the early planning stage when they were arrested.

The arrests followed the discovery of an Islamic State (ISIS, ISIL) affiliated group in Brazil also in July, which was disseminating ISIS propaganda using the encrypted messaging service Telegram.

One such message distributed by the group read, “Lone Wolf from anywhere in the world can move to Brazil now. Visas and tickets and travel to Brazil will be very easy to get inshallah.”

Another message read, “If the French police cannot stop attacks on its territory, training given to the Brazilian police will not do anything.”

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Why do we have an Oil Glut?

The world is awash in oil and gas. Amazing.  Less than two decades ago in 1998, the predictions were by this time in 2016 oil production would be past its peak. In fact the gloom and doom experts were called Oil Peakists. Note this from Science magazine back in 1998:

From Science magazine’s “The Next Oil Crisis Looms Large—and Perhaps Close,” Aug. 21, 1998:

This spring . . . the Paris-based International Energy Agency (IEA) of the Organization for Economic Cooperation and Development (OECD) reported for the first time that the peak of world oil production is in sight. Even taking into account the best efforts of the explorationists and the discovery of new fields in frontier areas like the Caspian Sea . . . sometime between 2010 and 2020 the gush of oil from wells around the world will peak at 80 million barrels per day, then begin a steady, inevitable decline, the report says.

However, technology, especially here in the U.S., relegated that prediction to the proverbial dust bin of history. With the private developments of  revolutionary shale fracking and horizontal drilling technology, vast new energy resources were opened up in places like North Dakota, Ohio, Pennsylvania and even in the older Permian field in West Texas. The U.S. is now pumping 9 million barrels of oil a day, and trillions of cubic yards of gas. We are no longer dependent on importing Middle East oil. In fact much of the oil that we import comes from our neighbors Canada and Mexico.

In the wake of lifting sanctions against nuclear Iran, oil is beginning to flow again to the European Union from Tehran which says it could add another 500,000 barrels in production this year.  U.S. oil is also flowing to Europe now that the 43 year old ban on oil exports was lifted and signed in law late in 2015. The first shipment of sweet crude drawn from the Eagle Ford Shale field in South Texas left the port of Corpus Christi, Texas on New Year’s eve and landed at the port of Marseilles on Friday. Another shipment out of Houston made it to Rotterdam on Thursday. A third one out of Houston is on its way to Marseilles. The oil is the equivalent of the so-called Saudi light or sweet crude which doesn’t require as much refining producing profit margins for the refiners.

So, why do we have this glut? 

The world’s economies are not growing as fast or rather slowing down, especially in the big consumer of raw materials and energy, China.  China’s economy and trade is impacting on those exporters of commodities like oil, gas,  copper, aluminum  and  iron ore like Australia,  Brazil, Canada,  Russia, Venezuela  and African countries. Where China was growing at a purported 10 percent plus, annually, the evidence is it has fallen to less than a third of that towering inflated level. We have come to realize those growth estimates were based on questionable figures  prepared by the Chinese government.  Some economic experts suggest the annual growth in GDP may be less than three percent.  So with that news came the sudden plummeting in the world trading markets for commodities, especially oil.

There is  also the great geo-resource political game in the Middle East going on between Saudi Arabia and Iran, and let’s not forget Russia.  Saudi Arabia as the keystone in the OPEC oil Cartel is not listening to the complaints of the other members of the group at meetings in Vienna demanding that it reduce domestic production. It is pumping oil and still making money, because it costs less than $5 a barrel. This despite a yawning budget deficit of $98 billion. The Saudis have an estimated $600 billion in hard currency reserves, which provides a cushion to ride out the geo-political storm. They are using the oil weapon to beat back competitors including Iran across the Persian Gulf, Russia which  has military in Syria supporting the Assad regime, and  the newly resurgent producer, the US.   Russia, as Shoshana Bryen of the Washington, D.C.-based Jewish Policy Center pointed out in a recent interview, mispriced its budget at $119 a barrel of oil, then redid the numbers at $87 dollars only to see it plummet to less than $30 at one point.

So what is the impact here in the U.S.?

When was your last trip to fill up your car at the gas station?  Here on the Gulf Coast in the U.S., regular unleaded gas is currently selling for less than $1.80 a gallon.  That means savings to consumers who appear to be putting away the difference awaiting a return to a more confident economy.   Diesel that at one point was priced at nearly $1 dollar a gallon above gasoline has shrunk to less than ten cents a gallon differential. That means that the cost for moving shipments via long haul truckers has gotten cheaper. It means that jet fuel cost is less reflected in the huge profits being declared by the major airlines. Some of that may be due to the lagging airline ticket surcharges that remain in place.  However, the drop in oil production is also impacting the profit margins of rail carriers who minted money from train loads of combustible leaving the Bakken formation in North Dakota. The drop in oil prices occasioned by the glut also means that the cost of petro chemical feed stocks is enhancing profit margins for plastics,.

Remember, the discussion about lifting the 43 year old oil export ban?

One of the by-products of that was the convergent pricing of U.S. crude has converged with world pricing.  If you went onto the COMDEX oil trading floor in lower Manhattan, you would see traders vying for futures contracts in West Texas Intermediate (WTI) versus Brent-the so-called North Sea crude oil benchmark. The lifting of the oil export ban in the U.S. virtually eliminated the difference making Brent the world standard.  As of Friday, January 22, 2016 WTI was $32.19 per barrel for March 2016 deliveries, a 9.0 % jump, and Brent priced out of the London ICE was $32.18. Heavier grades like Canadian Tar sands or Venezuelan heavy sulfur crude require more refining to produce various products. These grades actually sell at discounts from those benchmarks by as much as five dollars.

Can we expect the oil glut to last? Hardly. The current excess supply will work itself off and oil futures will gradually begin to rise again. That will bring rigs on stream here in the U.S. to start producing again, it may cause Iran to produce more than the declared 500,000 barrels  annually and the Saudis would just be minting more billions to add to its hard currency reserves. However, by mid century those fabled Saudi sweet crude reserves may likely begin to tail off. Energy, whether oil or gas will reflect the cyclical demands of the world economies.  The U.S. stands in pretty good shape to weather the current volatility in trading markets; thanks to technology, entrepreneurial prowess and the lifting of the oil export embargo. Don’t panic and consider investing in contrarian values in the equity and debt markets. That is what the long term value investors do. They buy when values are relatively cheap compared to long term returns.

EDITORS NOTE: This column originally appeared in the New English Review. An earlier version was published in the Newsletter of the Lisa Benson Show National Security Task Force Newsletter, January 23, 2016.

Brazil Is the New Greece by Tyler Cowen

At 70% of GDP, public debt is worryingly large for a middle-income country and rising fast. Because of high interest rates, the cost of servicing it is a crushing 7% of GDP. The Central Bank cannot easily use monetary policy to fight inflation, currently 10.5%, as higher rates risk destabilising the public finances even more by adding to the interest bill. Brazil therefore has little choice but to raise taxes and cut spending.

Too often, at the popular level, there is a confusion between “austerity is bad” and “the consequences of running out of money are bad.”

Sophisticated analysts of fiscal policy do not make this mistake.

By the way, here is a long study of how Brazilian fiscal policy has been excessively pro-cyclical.

And how is Brazilian output doing you may wonder?

By the end of 2016 Brazil’s economy may be 8% smaller than it was in the first quarter of 2014, when it last saw growth; GDP per person could be down by a fifth since its peak in 2010, which is not as bad as the situation in Greece, but not far off.

Two ratings agencies have demoted Brazilian debt to junk status. Joaquim Levy, who was appointed as finance minister last January with a mandate to cut the deficit, quit in December.

Any country where it is hard to tell the difference between the inflation rate — which has edged into double digits — and the president’s approval rating — currently 12%, having dipped into single figures — has serious problems.

Don’t forget this:

Since the constitution’s enactment, federal outlays have nearly doubled to 18% of GDP; total public spending is over 40%. Some 90% of the federal budget is ring-fenced either by the constitution or by legislation.

Constitutionally protected pensions alone now swallow 11.6% of GDP, a higher proportion than in Japan, whose citizens are a great deal older. By 2014 the government was running a primary deficit (ie, before interest payments) of 32.5 billion reais ($13.9 billion).

Brazilian commodity prices have fallen 41% since their 2011 peak, so I say Ed Prescott has earned his Nobel Prize right there.

The first underlying article/op-ed also is from the Economist. Without intending any slight to their other recent issues, the January 2-8 issue is one of their best in a long time. (I am very pleased to have bought it in advance at the airport rather than waiting to get to my copy back at home.)

This post first appeared at Marginal Revolution.

Tyler CowenTyler Cowen

Tyler Cowen is an American economist, academic, and writer. He occupies the Holbert C. Harris Chair of economics, as a professor at George Mason University, and is co-author, with Alex Tabborak, of the popular economics blog Marginal Revolution.