America’s Deep State players have tied down President Trump on Russian sanctions and other foreign and economic policies but that doesn’t mean the struggle is over, writes ex-British diplomat Alastair Crooke.

By Alastair Crooke

President Trump has had his foreign policy hands and feet tied by the Russia (and Iran) Sanctions Act. He now has been rendered “helpless”: in respect to détente with Russia — gulliverized, spitefully, by his own party, working with the Democrats, to empty Trump’s constitutional prerogatives in foreign policy – and to seize them for Congress.

And in a further humiliation, Trump has been “rolled” by his military minders (Generals James Mattis, H.R. McMaster and John Kelly) on his Afghan policy: he has relinquished civilian oversight of this military expedition in Afghanistan to McMaster and Mattis — the former being the presumed author of the “new” Afghan policy. The President was “rolled” on his foreign military prerogatives too – as Commander in Chief – by his triumvirate of military minders in the White House. The “civilian” leadership has given place to the “military.”

The question is whether these humiliating concessions will appease his opponents sufficiently to allow the President to “live on,” albeit as an incapacitated President, or is this just the hors d’oeuvre? It seems that the entrée may be being planned as the complete discrediting of Trump’s base – ordinary Republicans being lashed to the Trump “Titanic” – to be sunk along with its captain – as “white-supremacists, white bigots and Nazis.”

Professor Walter Russell Mead – and he should know – tells us that “President Trump’s highest officials remain committed, one way or another, to defending the global order the U.S. has been building since the Truman era. That includes [Secretary of State RexTillerson, Mattis, Kelly and McMaster]: These men share a disdain for the Obama administration’s retrenchment and retreat. … They want to check the ambitions of America’s rivals, while restoring the foundations, both military and economic, of U.S. world power.”

Ok – that is clear: they want to “grasp” America as world order. They have been trying that for some time now, but have not yet succeeded in seizing “her.” With all “her” allure and riches, their quarry remains frustratingly elusive, and her very unattainability seems to madden “ego” even more – so that which cannot be “had,” must be despoiled.

What else accounts for the new Afghan plan? Almost nobody (outside of the U.S. élites) believes it will do other than prolong an unwinnable war (or worse, push Pakistan and India into confrontation). Yet the further despoliation of Afghanistan must go on, for the sake of the myth of this America – of Trump’s “highest officials” – that America is always victorious, if only it wills it sufficiently, and is persistent – “defeat” as heresy.

It is a familiar story of inflated ego. But the sense of power and wanting to “grasp at something unattainable” is so compelling, that the U.S. élites desire both to crush the “infuriating” Trump, and his “deplorables” – to thrust them down into the irrecoverable depths – while weakening any external rival that might hinder the way to their “having” America, as world order.

A Frenzied Deep State

It seems that the American deep state is so frenzied in this way that its inhabitants can no longer see straight: they are ready to risk despoiling not just the “recalcitrant” abroad, but America herself. And the way they are going about trying to “have her,” may well ruin the deep state too, as collateral damage.

The Russia Sanctions Act may have been conceived both to paralyze President Trump, and to validate the “Putin-stole-the-Election” narrative, but it precisely removes any chance of Messrs Mattis, McMaster, Kelly and Tillerson to succeed with seizing America as world proconsul.

Russia, China and Iran, now linked by again being threatened by sanctions, are now firmly embedded into a strategic coalition – and they are determined to resist.

Incredibly, as one commentator put it: “During the ramp up to new UN sanctions on North Korea, the Trump administration threatened to sanction China if it did not commit to further pressure [on N. Korea] … Trump himself implied that he was willing for a quid pro quo: ‘If China helps us, I feel a lot differently toward trade, a lot differently toward trade’, [Trump] told reporters …

“A deal was made, and the UN Resolution 2371 passed … China did its part of the deal: It helped pass the UN resolution against North Korea – and it immediately implemented it, even though that caused a significant loss for Chinese companies which trade with North Korea. [But …]

“Now Trump is back at sanctioning Chinese (and Russian) companies: The Trump administration on Tuesday imposed sanctions on 16 mainly Chinese and Russian companies and people for assisting North Korea’s nuclear and ballistic missile programs and helping the North make money to support those programs …

“Among those sanctioned are six Chinese companies, including three coal companies; two Singapore-based companies that sell oil to North Korea and three Russians that work with them; a Russian company that deals in North Korean metals and its Russian director; a construction company based in Namibia; a second Namibia-based company, and its North Korean director, that supplies North Korean workers to build statues overseas to generate income for the North.

“These are ‘secondary sanctions’ which block financial transactions and make it nearly impossible for those companies and people to run an international business. Moreover – China had already banned all coal imports from North Korea. It had sent back North Korean coal ships, and instead bought coal from the United States. [And] now, Chinese companies are getting sanctioned over North Korean coal that they no longer buy? Furthermore, selling fuel oil to North Korea is explicitly allowed under the new UN sanctions…”

The alliance of these three states and their “partner forces” no longer believe that America is capable of serious diplomacy, or that it enjoys any real capacity to “seize” the world. On the contrary, they see Europe drifting away from the U.S., the Gulf Cooperation Council in disarray, and even Israel is despairing of its Washington ally. They do remain concerned about North Korea, but the fear of U.S. pre-emptive military action against North Korea is tempered by the knowledge that North Korea effectively holds 30,000 U.S. servicemen hostage in the de-militarized zone.

The primary focus is now shifting to how these states might protect themselves, if the two sides in the U.S. internal conflict succeed in each despoiling one another, and thereby throw the world into financial turmoil (hence the flurry of activity in arranging local currency contracts and currency swaps):

“When Steve Bannon was ejected from the White House, last week,” the New Yorker quotes Bannon as citing “his frustrations with the coming tax bill, as one of the reasons he believed that the Trump nationalist agenda had been hijacked by the so-called globalists, such as Cohn and the other members of the Big Six.”

Yes, Trump has been “rolled” in the economic sphere, too: The “big six” consist of four members of Congress (including Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan), plus economic adviser Gary Cohn and Treasury Secretary Steve Mnuchin – both of Goldman Sachs.

“They’re not populists, they’re not nationalists, they had no interest in his [i.e. Trump’s] program – Zero”, Bannon told the Weekly Standard, “On what element of Trump’s program, besides tax cuts — which is going to be the standard marginal tax cut — where have they rallied to Trump’s cause? They haven’t.”

The Power of Cohn

“In the Bannon-era, factionalized Trump White House, Cohn was not just the head of the National Economic Council but the leader of the group of officials whom Bannon derided as ‘New York.’ (Breitbart stories called Cohn and his companions at the N.E.C. ‘Globalist Swampsters’)”, notes the New Yorker.

Cohn, who is 56, was brought into the Administration by Jared Kushner, the President’s son-in-law, who once interned for Cohn at Goldman Sachs. Cohn is a long-time donor to Democratic candidates.

So, Trump’s “reflation trade” is being “normalized” by the “big six” – more of the usual D.C. politics.

But, why be concerned if the U.S. stock market is hitting new highs every day? Indeed, the “market” has ridden an “ascending curve for 101 months since March 2009, during which the S&P 500 rose by 270% and rarely dropped by more than 2-4%, without [its members] coming to believe that nothing mattered except hitting the bid [button] during the more than 50 intervals when the stock market momentarily faltered. Virtually without exception, each shallow dip was accompanied by easy money ‘buy’ signals from the central banks, or selective ‘green shoots’ [releases] among the in-coming data.”

As David Stockman writes: “After 101 months of dip buying … the headline reading algos [robot computer traders] have become programmed in a completely asymmetrical manner. They are triggered to ‘buy’ on economic/policy good news (because it implies more profits); but also to ‘buy’ on bad news (because it means more [liquidity] accommodation, and market-support/price keeping actions by the Fed and other central banks.

“But this beneficent arrangement also encourages even prudent gamblers to minimize the amount of downside hedging insurance they purchase to protect their often heavily leveraged (through options and derivatives) book of longs.”

Stockman is warning that markets already are trading at historic highs, and that no one is paying attention to these extreme valuations or the economic or political fundamentals – simply because the latter has become utterly irrelevant, if every small market dip, is immediately followed by the unbroken elevation of all asset classes (thanks to Central Bank interventions).

“That is, the gamblers and robo-machines have become so hard-wired to the expectation that the central banking and fiscal branches of the state will do ‘whatever it takes’ to keep the stock averages rising, that it has become irrational to waste time and resources on parsing ‘whatever is going on,’” Instead, writes Stockman, “it’s all about the chart points, money flows, next in rotation sectors, ETF buying power, momentum trades and technical arbitrages, such as embodied in the currently massive risk parity trades.”

In short, all sensibility to risk (political or credit or any other) has been expunged by the determination of the Central Banks to keep asset prices inflating higher. The financial system precisely is looking the other way — intent on making money “when the going is easy” – and consequently, any crisis now will create a disproportionate impact on those levered asset values, magnified by the trades today being all one-way.

A Zombiefied Trump

Here is the point: Will the political zombiefication of President Trump satisfy the two party Establishments? Are they mollified enough, to come together to agree on a budget and a new “clean” debt ceiling (the “ceiling” arrives on Sept. 29)? And, even if achieved, will so-called “normalization” of Trump policies really take the U.S. back to the nirvana of “how things used to be”?

Ostensibly, “normalization” of Trump’s economic policy should be manageable: Ryan and McConnell would need only to line up a modest number of Democratic votes (together with Republican foot-soldiers), to enact a debt ceiling increase. But it may be more complicated – much more complicated than that: Should the Democrats cooperate (and they will want to appear that they are co-operating in order to avoid blame for any subsequent Federal shut-down), it will be only on the basis of “an onerous quid pro quo that requires Trump to give up the Mexican Wall; tax cuts for the wealthy; his proposed deep domestic spending cuts, and also to fund the insurance company bailouts that are needed to forestall drastic premium increases and coverage cancellations during the 2018 insurance (and election) year.”

Certainly, the Democrats will present a public face of co-operation, but such is the angry temper of Washington today (with both sides looking for a fight), that almost certainly they will require their revenge pound of flesh cut from Trump’s side. The Freedom Caucus group of Republicans (which is linked to Bannon) might then jump ship, leaving the Big Six with either “no ceiling deal” or a “Democratic”-shaped budget.

Trump tweeted: “I requested that Mitch M & Paul R tie the Debt Ceiling legislation into the popular V.A. Bill (which just passed) for easy approval. They didn’t do it so now we have a big deal with Dems holding them up (as usual) on Debt Ceiling approval. Could have been so easy-now a mess!”

Axios reports that “top White House and GOP leadership officials tell us [Axios], the chances of a market-rattling government shutdown are rising by the day — and were [such] even before Trump threatened at his raucous Phoenix rally on Tuesday night, to use a shutdown as leverage to get funding for the [Mexican] border wall.”

Quoting a “top Republican source” who puts the chance as high as 75 percent, Axios adds that “the peculiar part is that almost everyone I talk to on the Hill, agrees that it is more likely than not.”

The Democrats seem determined to remove any provision for “the wall,” and Trump seems to be spoiling for a fight with the Democrats (and Ryan and McConnell) on this issue. He has had to acquiesce to being “rolled” in foreign and defense policy — might he turn, and dig in his heels? He is already channeling the blame onto the Republican Establishment leadership.

If so, what price the continuation of a market historic “high” and brimming with complacency?

Russia and China are right to be thinking “worst case” and how to minimize their exposure to any American cataclysmic descent into political turmoil – and possible violence.

Alastair Crooke is a former British diplomat who was a senior figure in British intelligence and in European Union diplomacy. He is the founder and director of the Conflicts Forum.