Moon of Alabama Brecht quote
December 31, 2004

2005 First (formerly 2004 Last) Open Thread

Just in time for your predictions for 2005...
(or your opinion on the most significant events of 2004)

[Update]...yes, it's the same thread. In 2005, we will do more to recycle stuff and waste less, won't we?

Posted by Jérôme à Paris on December 31, 2004 at 05:13 AM | Permalink | Comments (139)

December 30, 2004

Asia quake - Why do "we" care this time?

Qom earthquake, Iran, 2003, 31,000 dead
Gujurat earthquake, India, 2001, 25,000 dead
Izmit earthquake, Turkey, 1999, 17,000 dead
Floods, Venezuela, 1999, 9,000 dead

Aid promised to Qom last year: 1 billion dollars. Aid actually delivered to date: 17 million

"We" seem to care more this time. But why? and how long will it last?

This week's catastrophe is getting a lot of attention from our media these days, and this is in turn generating a genuine movement by citizens to try to help in various ways (whether by donating or otherwise). It's also become very political, with behaviors such as India's refusal to accept foreing aid or Bush's attempt to create a new "coalition of the willing" and take the lead of the help the US government is so stingy with.

So what's the real deal?

Let's remember who decides to make this a big deal - the media. so why do they litterally love this catastrophe? I have a few hypotheses that I'd like to try by you:

- the irresistible narrative of the "first global catastrophe". This can neatly be wrapped in a discourse about globalisation, whether you are for (we are all closer and concerned by what happens elsewhere) or against it (the acceleration of travel, tourism and population growth is to be blamed). It of course makes for big headlines and breathless commentary.

- it also helps that none of the victim countries create political problems per se. They are all mostly safe, at least vaguely friendly and poorer enough than us.

- the simple fact that a large enough number of victims are white, and that what was destroyed were the places where "we" go (this "we" - us middle class first worlders), not the usual local habitat which does not really concern us. (Of course, this was also destroyed, but notice how this has had much less play so far than destroyed "paradise" resorts). White deaths count a lot more than brown ones, and scenes of Joe Q Tourist searching for his wife or kids amid the wreckage (alternated with scenes of a grandmother welcoming a beareaved kid back home) are just too irresistible. Add in the symbolism of disaster striking at a time and place of holidays and relaxation and you have immediate good TV drama.

- could it be that many journalists were on holiday on the spot and were able to provide immediate coverage from ground zero, as it were?

- the beast then feeds on itself; the media frenzy is underway, so we have to film as much wreckage and misery as possible (and there is plenty to go around), along with the "feelgood" stories of improbable survival against the odds and the incessant display of our own generosity now.

Reconstruction is again going to be one of the "boring but necessary" tasks that TV does not care for; let's see one year from now if the result is better than for Bam in terms of help actually provided.

Posted by Jérôme à Paris on December 30, 2004 at 03:31 PM | Permalink | Comments (16)

December 29, 2004

Whither fetus?

Not that we don't have more important topics these days, but I see that right wing blogs are all excited about the recent (gruesome) story of a pregnant woman who was killed, whose abdomen was cut off and the 8-months foetus extracted by a deranged woman, but the baby miraculously survived. The argument is, of course, "if it survived, it must have been alive"!

For some background, see this CNN story and this NY Post story about it. The WSJ's Opinion Journal makes a lot of hay of the fact that the baby is alternatively called a "foetus" or a "girl", thus supposedly underlying the moral shallowness of the SCLM (or supporting the fact that they are the same thing).

Am I crazy to think that (i) it was a foetus while in its mother's womb, (ii) it became a baby girl because it survived (and not the other way round) and (iii) the poor father and his baby have lost a wife/mother and this story is tragic and should not be politicised?

Why is the debate on abortion so sterile in the US? Why can't a law be voted on the topic like in most other "civilised" countries, to make it "safe, legal, and rare"?

Posted by Jérôme à Paris on December 29, 2004 at 05:19 PM | Permalink | Comments (14)

US Dispatched Aircraft Carrier

Is US foreign policy exclusively driven by the Pentagon? Are an aircraft carrier, a  Expeditionary Strike Group and P3 submarine hunters the right way to show hearts and minds in a disaster area?

New York Times

Rejecting a United Nations officials suggestion that it had been a "stingy" aid donor, the Bush administration on Tuesday announced another $20 million in relief for victims of the Asian earthquake and tsunamis and dispatched an aircraft carrier and other ships to the region for possible relief operations.

What the NYT calls another $20 million is an addition to $15 million pledged earlier. Yet again a journalist underscores in his SAT. The European Union puts up some $41 million plus individual countries giving to the International Red Cross and sending emergency teams. Australia comes up with $27 million, Japan with $40 million and the UK with $29 million Link.
For comparison: A carrier, without its armada of support ships, costs about $150 million per year in operation and maintenance Link (pdf). The United States has 12 aircraft carriers. But it is not only the carrier the US sends to help:

Kitsupsun

Pacific Command also is assembling small assessment teams that will be dispatched to three countries in the region to assess how U.S. military resources can best be applied in those countries.

Pacific Command spokesman Lt. Col. William Bigelow said he was not authorized to identify the three countries, but other government officials said they were Sri Lanka, Indonesia and Thailand.

FCW.com

Officials for the U.S. Seventh Fleet, headquartered in Yokosuka, Japan, said they had also diverted the six ships in Expeditionary Strike Group 5 to provide assistance to countries struggling to recover from the tsunami, including Indonesia, Sri Lanka and Thailand.

Expeditionary Strike Group 5 ships include USS Bonhomme Richard, a flat-deck helicopter carrier; USS Duluth, a landing platform dock; and USS Rushmore, a landing ship dock. The Abraham Lincoln and the Bonhomme Richard have a wide range of command and control systems, including wideband satellite systems, that can be used to provide communications in devastated areas.

Anderson said the Navy has increased from three to six the number of P-3 patrol planes performing reconnaissance operations in the Indian Ocean. Pacific Command officials said the Air Force has also committed eight C-130 cargo planes to carry relief supplies to the affected areas.

Of course the US is to decide how it may spend the money it lends from China and Japan. But would it not be wiser to use that money to buy some international leverage through real aid instead of sending the useless schoolyard bully's muscles?

What a wasted opportunity.

Posted by b on December 29, 2004 at 06:14 AM | Permalink | Comments (42)

December 28, 2004

Don Quixote meets Wall Street

Let me tell you more about what has kept me so busy at work in the past couple of months.

041228_don_quixote_small


What I have worked on has been the financing of the acquisition of 6 wind farms in Spain, for a total amount of EUR 195 M. (That's the financed portion, the total value of the transaction was approx. EUR 235 M, the rest, about EUR 40 M, being brought by my client). For that kind of money, you buy, in that case, 158 MW of capacity, generating about 350 GWh per year.

I am not sure how familiar most of you are with investment banking and structured finance, so I'll try to make it as clear as possible; I apologise for those of you for whom all this is well known.

For comparison purposes, a typical gas-fired power plant which has the same initial investment cost (EUR 200 M) has a generating capacity of 400 MW and produces about 3500 GWh annually. You need to buy the gas afterwards (which costs 1-2 Eurocents/kWh), so the economics are not so different on a per kWh basis (power typically costs 3-4 cents/kWh for gas plants and 4-6 cents/kWh for wind power plants)

An individual family typically consumes 10 MWh (i.e. 0.01 GWh annually) so my wind farms can service around 35,000 households.


What I do is project finance. Project finance, also known as limited-recourse or non-recourse finance, consists in financing very specific assets or projects, with the repayment coming ONLY from the cash-flow generated by that project or asset, without any claims (with some very specific exceptions) on the companies (our clients) that develop these projects.
Investors like project finance because it provides off-balance sheet financing (they do not borrow the money themselves and thus do not carry the debt, it is the project company that does) and it improves their return on equity (they need less capital to develop the project). The downside is that it is costly to set up and they have to deal with very assertive banks that in a very real sense own the asset until the debt is paid off.

Banks finance a good chunk the project (between 30 and 90%) and generally have first priority rights to revenues generated by the project once it is built (the exact order between debt repayment, operating costs and taxes is usually a topic for lively negotiations...). Banks want to be sure that the project is properly build and then operated, so the investors have to make specific commitments in that respect, and all their plans, designs, and actual work are supervised by independent experts on behalf of the banks. There is a huge amount of contractual and legal work, as the responsibilities and rights of each party must be defined in all possible circumstances (cost overruns, delays, accidents, insufficient performance, etc...). Banks also take a lot of care to make sure that the projects are environmentally and socially sound, but this is not really an issue for wind farms.
The biggest risks banks take in the wind sector are performance risk and regulatory risk, as well as the risk of availability of wind.

Performance risk is the risk that the turbines do not function properly or are not repared quickly enough when something happens, or the electrical lines are not available, or any other technical problem occurs that prevents the electricity from being produced or sold. To prevent such problems, we make sure that contracts are in place for the long term operation and maintenance of all necessary pieces of equipment, and that the people or companies that are responsible for these tasks are able to do them and have an incentive to perform properly (i.e. they are paid enough to do their work, they are penalised if they don't and their reputation is at stake if something goes wrong). This means that (i) we set the terms of what we want to see in the contracts (with the help of technical experts), (ii) we check that our client has signed contracts that fulfill our requirements and (iii) we have the right to step in and take over the project if this is not done. Additionnally, we get the independent experts to go through the project sites and technical data to confirm check that all works properly, that all likely needs and scenarios are covered for, etc... and these experts are responsible towards us for that advice (i.e. if they tell us something patently false about out turbines, we can sue them). We also make sure that the project is properly insured - and again, we define what must be insured and check that it is done and is in place.

In this case, our client was buying the wind farms from the constructor, and he had an incentive to check that everything had been built properly, and that everything would be operated well, so there actually was little conflict of interest between him and us on all the above. The difference is that the investor is closer to the assets than we are and can sometimes be satisfied with less stringent criteria than we do, and the fight is to get formalised things that would likely be done, but in a more haphazard way; sometimes, the fight is with the constructor (who wants to limit its obligations and liabilities), and our client is stuck in the middle between our requirements and what the constructor is willing to give him.
All problems are solved on a case by case basis; clients worry about different things, have different kinds of expertise, access to capital, etc, and the solutions found for two similar financings can be surprisingly different.

Regulatory risk reflects the fact that wind power still relies on some component of subsidy in its revenues, and such subsidies are set by political decisions which can theoretically be reverted. If the subsidy is eliminated in the future, the project could have insufficient revenue to pay off its debt. This is a significant risk as wind power projects are typically financed over 10-15 years, which leaves a lot of time for politicians to interfere...
This is a risk that banks take in full, which means that we have to be convinced either that (i) the subsidy will stay in place for that long or (ii) that the project can withstand its elimination at some point in the future.
We actually are pretty happy about item (i) these days, as the framework for wind power support benefits from very strong support in the countries we operate in, essentially Western Europe, the USA and Australia. The EU has the best support framework thanks to a specific directive on renewable power which has been put into law in most European countries, and there are no reasons to believe that this support will disappear, quite the contrary. Various mechanisms can be used to support wind power:
- a simple fixed tariff (usually set somewhere between retail and wholesale prices for electricity and paid for by the local electricity company to the wind farm) for a number of years;
- "green certificates" provided to renewable energy producers and which can be traded - and which have value because producers of "dirty" electricity are forced by law to purchase growing amounts of such certificates each year to compensate for the polluting nature of their production;
- investment subsidies (a one off amount paid at the onset of the project, or over a number of years) to compensate for higher initial investment costs.
In some cases (mostly with green certificates), this creates an additional uncertainty as these certificates are priced by an untested market and it is hard to predict how such a market will behave over the long run. In some cases, we ask our client to take all or a portion of that risk or to transfer it to someone else by signing long term power sales agreements (whereby they get to sell all of their production to the buyer at a guaranteed minimum price - such guarantee also has a price which means that they get less than the market price).

In the USA, the federal support framework is called "PTC" or production tax credit", which provides for a right to reduce taxes by 1.8c/kWh of electricity produced over 10 years (it enters in the third category above). This generates sufficient revenues in addition to the sale of electricity to make wind projects in the US profitable and financeable. The only problem is that the PTC were extinct in 2001, they only got renewed for 2 years and their renewal got stuck last year in the haggling over the infamous energy bill, which froze most projects for many months earlier this year. It has now been renewed but again, for 2 years only, which will lead to a glut of project before the new deadline at the end of 2005. These boom and bust cycles are not helpful to develop the industry, and many states are stepping in to provide more stable local incentives. Oddly enough, Texas has been the leader in recent years for wind power development...

We always have some margin of safety when we decide how much the project should pay us back each year (and thus how much it can borrow) to cover for the statistical wind risk (the fact that wind is highly predictable in the long run but highly volatile and uncertain in the short term, thus leading to strong comfort that the long term average will be close to predictions, but with an also strong likelihood that some seasons or even some years could see significantly lower production levels). Typically, we want revenues after all operating costs and taxes to be about 50% higher than what we actually need to repay the debt. This means that on any given period, revenues can be a third lower for any reason (whether lower wind, poor operating performance, or lower electricity prices) and we will still have enough money to repay debt.

The important thing in project finance is that if there is a problem, the banks have the right to be involved in their resolution and, if need be, to impose their terms or even to take over the project. In the worst cases, the investors are kicked out and the banks will then try to sell the project or to hire someone else to run it for them. Of course, banks are not utilities and do not have the competence in-house to run such projects, so they are not too keen to do so, but the threat to take the project form the investors (who then lose all of their investment) is a quite potent one to get them to behave in ways that maximise the chances to generate enough revenue for all. Of course, investors only ever get money out of the project if all goes well and banks are happy (on the other hand, if the project goes really well, all the extra revenue go to them and banks get paid the same as before - banks have a fixed, lowish, remuneration and thus want to take less risk; investors want a better remuneration and are ready to take on more risk).

The hardest part of any negotiation is the definitions of the triggers (called "events of default") which allow banks, in theory, to have the right to take the project from the investors. It is not a simple task, as banks want to be able to step in as soon as something fishy appears, but on the other hand, they do not want to get too closely involved in the running of a project and the inevitable hiccups that happen; it also makes sense to step in only if there is a real problem which the investors seems unable or unwilling to solve. Investors emphatically do not want the banks to have the right to stp in the project, but they know that it is the price to pay to get the leverage they want (in the wind sector, banks usually provide 70-80% of the investment amount upfront)

In our case, the main constraint was the very short time frame to conclude the transaction: the buyer absolutely wanted the money before the end of the year, which meant that all commercial contracts and all financial contracts had to be drafted, negotiated and signed in only a couple of months, all experts had to give their opinions on the project and on these same contracts at the same time, so it was many parallel tasks that fed off each other and had all to be pushed forward at the same speed by many different parties. The banks are, in a sense, the coordinator of all these tasks, as we have to be satisfied with the terms of all contracts before we sign and release the funds. We discuss terms with the client, wording with the experts, join efforts with the client to extract information from the seller and commitments from the future operator, and the lawyers slave away to formalise all this (our lead lawyer slept one hour in the 4 days prior to signing...). When the seller is Spanish, some of the documents are negotiated in that language, and with a client based in London but headquartered in Australia, with various instructions and conditions coming over (and discussed) at night, and it makes for lively days.

Anyway, the deal has been made public now, so I am not betraying any secrets here. Do not hesitate to aks for more specific questions on the whole thing if you are interested. I'll cross post this over at Le Speakeasy to keep the thread open longer.

Posted by Jérôme à Paris on December 28, 2004 at 06:17 PM | Permalink | Comments (13)

Susan Sontag Died

One of my idols, Susan Sontag, died today, 71 years old, of cancer in a New York hospital.

Susan Sontag on 9/11 in The New Yorker:

Where is the acknowledgment that this was not a "cowardly" attack on "civilization" or "liberty" or "humanity" or "the free world" but an attack on the world's self-proclaimed superpower, undertaken as a consequence of specific American alliances and actions? How many citizens are aware of the ongoing American bombing of Iraq? And if the word "cowardly" is to be used, it might be more aptly applied to those who kill from beyond the range of retaliation, high in the sky, than to those willing to die themselves in order to kill others. In the matter of courage (a morally neutral virtue): whatever may be said of the perpetrators of Tuesday's slaughter, they were not cowards.

From Susan Sontag's Friedenspreis acceptance speech:

.. what saved me as a schoolchild in Arizona, waiting to grow up, waiting to escape into a larger reality, was reading books, books in translation as well as those written in English.

To have access to literature, world literature, was to escape the prison of national vanity, of philistinism, of compulsory provincialism, of inane schooling, of imperfect destinies and bad luck. Literature was the passport to enter a larger life; that is, the zone of freedom.

Literature was freedom. Especially in a time in which the values of reading and inwardness are so strenuously challenged, literature is freedom.

Related Links:
Official Website
Wikipedia

Posted by b on December 28, 2004 at 01:33 PM | Permalink | Comments (7)

December 27, 2004

It's time for a "War on Catastrophes"

In view of the tragic (and still growing) toll of yesterday's earthquake, and considering the likelihood that it will happen again, possibly on an even larger scale (think Tokyo or San Andreas), it is high time to declare a war on natural catastrophes and take all necessary measures, including military, to prevent another such catastrophe from striking our shores ever again.

more ...

... more seriously:

There will not be a "War on Catastrophes" because we all realize that this is not something we can have any control over (in the foreseeable future) and that it simply makes no sense. There is no enemy as such, all we can do is try to anticipate such events, limit the damage by smart design and planning of the areas most likely to be affected, and have the ability to react quickly to cope with the consequences if it happens.

This all sounds reasonable and smart, so why don't we propose to do the same with "terror"?

  • anticipate such events:
    That means finding out who has the ability to carry out attacks, trying to anticipate their plans, and, if it is possible, trying to understand why they would do that. Intelligence work.
    In the case of terror, it can even be argued that it is possible to act against the root causes of such acts (hate against the West, from cultural alienation or  because of our support for corrupt regimes) and limit the supply of potential terrorists

  • smart design and planning
    That means identifying the most vulnerable - or symbolic - targets and the ways they could be attacked, and organizing their protection against these. It also means getting the right kind of  intelligence about who or what could be targeting them, and planning on ways to limit the damage (starting to design smaller, more decentralized facilities, with sufficient back up for vital functions, etc)

  • ability to react
    That means having sufficient civil security personnel, PD, FD, hospitals, contingency plans, with sufficient supplies for most situations.

That all sounds fine, but the fact is, we don't even do this (or only very partially) for natural events whose likelihood is quite significant over long periods of time, and when the cost-benefit ratio is quite easy to calculate (the likely cost of an earthquake can be estimated, along with a rough probability of it happening within, say, a 50 year period, and that provides a likely cost which in turn suggests amounts that it would make sense to spend each year on preventive measures today). Money spent today on unlikely events is seen as a waste or a chore, there is very limited political benefit to do it, so it does not happen ...

... except for a little while after a large enough catastrophe. Get ready to hear about today about tidal wave detection, coastal areal building planning, and scaremongering about global warming, etc... Same thing after a big train or plane accident, when you suddenly start talking about investing billions to improve whatever little bit of infrastructure happened to be deficient that day (signals, railway crossings, pilot training, airport schedules, etc...). And same thing, of course, after a big terrorist attack.

Strangely enough, events similar in their nature and their consequences do not lead to the same actions:

  • car accidents vs train (or bus, or plane) accidents:
    Car accidents are way more deadly, way more easily preventable, but they do not generate any kind of outrage or even public attention, and therefore mostly go uncured. Train, bus or plane crashes generate big headlines, inquiries and calls for action even though they are much more rare.

  • large scale terrorist attacks vs natural catastrophes:
    Both are essentially random, one-off events. In one case, we spend whatever is needed for clean up, possibly tighten a few planning rules, and that's it. In the other case, 60 years of international policy and civil rights policy are thrown off the window in a righteous quest to root out "terror", a concept...

So, what's the difference?

  • Is it because, when we drive, we feel in control and we believe that it won't happen to us, so no public policy should apply and limit our "rights" (including to kill ourselves)? Do we feel that we are in control of our foreign policy when we wage war, thus we feel that we are doing something?
  • Is it because, when an event is above a certain threshold of deaths/damages, it warrants (i) attention (it plays on TV)  and (ii) cries (from pundits or politicians) to "do something about it"? and that the only way to "do something about it" which fits the same format (i.e. pundit/politicians on TV) is something easy to describe (a nicely sounding law like "The "Free the USA from Catastrophes and Knowledge of catastrophes - Act") and spectacular (a war is ideal)?
  • Is it because some random events appear more likely to apply to us and thus appear more likely threatening to us than they really are? ("Hey, I took the plane last Thanksgiving at that same airport, it could have been me"? "Hey, I was on the roof of the WTC back in 1994, it could have happened then", etc...)
  • Is it because a terrorist attack, being man-made, is seen as less random and more subject to action than a natural catastrophe? But is it actually true?
  • Is it simply because once something becomes too frequent (and thus a real problem), we don't really talk about it because we all "know" it happens and it it thus boring and not worth our attention - and our efforts?

Thus we end up spending a lot of resources on trying (of course, mostly uselessly) to "solve" very rare, very spectacular problems instead of trying to solve the real, boring issues?

Can we declare a War on "real but boring problems"?

Posted by Jérôme à Paris on December 27, 2004 at 08:14 AM | Permalink | Comments (14)

Moral Cowardice

Moral Cowardice Prevents Winning the War
Thursday December 23, 2004

Mosul, Iraq--The blame for the murder of 15 Iraqis in Mosul yesterday lies not only with the American occupation forces who initiated the attack, but also with the Iraqi resistance' suicidal policies, said Mullah Ya Ibn Rand, supervising teacher ot the Mosul Philosphical Accademy. "The American would have been crushed long ago, and yesterday's attacks averted, were it not for Iraqi's altruistic policy of placing the lives of American civilians on American soil above its own self-defense.

"Iraq must competely destroy the American social structures if we are to implement a non-threatening government in America," said Mullah Ya Ibn Rand. "This can be done, but to do so we must make the American government's complicit civilian population--those who harbor and support these structures--pay for the violence that they abet. We must enforce their complete surrender to our will.

"Shamefully, the Iraqi resistance has been unwilling to make hostile American civilians pay for their crimes," said Mullah Ya Ibn Rand. "Time and again, it has treated Amercan lives on American soil as sacrosanct and Iraq's security and resistance fighters as dispensable. It is in the name of sparing civilians that our fighters have been ordered to follow crippling rules of fighting only in Iraq that have cost hundreds of their lives. ...

"To win this war," concluded Mullah Ya Ibn Rand, "we need a fundamental shift in our moral priorities. We need to see the resistance place the lives of Iraqis--including Iraqi fighters--above the lives of civilians in America. To those who insist that we continue to sacrifice for the sake of American civilians, I say that the death of 15 Iraqis yesterday, and the many more to come, are on your heads."

Adopted from: Link

Posted by b on December 27, 2004 at 06:55 AM | Permalink | Comments (22)

December 26, 2004

Tsunami

BBC:

A huge earthquake has triggered surging sea waters across a wide area of south and east Asia, swamping villages and killing more than 500 people.

More than 400 people died in Sri Lanka and at least 150 were killed in India.

Deaths have also been reported in coastal Thailand and on the Indonesian island of Sumatra, believed to be near the centre of the powerful tremor.

The earthquake had a magnitude of 8.9, making it the biggest in 40 years and the fifth strongest since 1900.

There will probably be several thousand more people dead and a whole fleet of ships will be missed. The economic consequences will be huge.

Location Map
Tsunami Information

Posted by b on December 26, 2004 at 04:09 AM | Permalink | Comments (27)

December 25, 2004

Open Holiday Thread

Posted by b on December 25, 2004 at 10:52 AM | Permalink | Comments (36)

December 24, 2004

Merry Christmas

In Germany we do get our presents on Christmas eve. So now here I am - the proud owner of a huge Le Creuset cast iron pan and a Great School of Cooking book from the École de cuisine La Varenne. 

If you happen to pass through Hamburg during the next year or so, please drop by and let me serve you some North German spécialité.

They call Germans Krauts for a reason, but there is much more we serve and, while I am nipping an excellent Bourdaux, let me assure you, we do have some good beer to accompany a solit but delicate meal.

This festivity is said to mark a special guy's birthday.

I personally do not feel a recurring birthday to be a special event. This is more like a winter solstice festivity and that is most probable where this special date originated from.

Important to me are the teachings this one guy did as a grown up. These teachings have been propagated as important parts of three major religious traditions. Other religious-philosophical traditions do acknowledge, if not the guy or his teachings, then their content as right and valuable.

So please lets try to acknowledge these collective wisdoms of humanity and aspire to keep them in mind any day.

To all of you a merry Christmas and may there be peace on earth.

Posted by b on December 24, 2004 at 04:03 PM | Permalink | Comments (28)

150,000

I cannot seem to find this in the English speaking news, so here it is in French, as announced by Rumsfeld in Iraq today: there now are 150,000 US soldiers in Iraq (US, not coalition)

It's more than it's ever been, but will it be enough to make sure that there actually are elections?

And why is this not mentioned - and commented upon - in English-speaking news outlets, as the most significant part of the info provided by Rumsfeld in his trip to Iraq? Troop levels are not enough, but nevertheless inexorably go up. Is that a major case of too little, too late, or what?

Posted by Jérôme à Paris on December 24, 2004 at 01:13 PM | Permalink | Comments (18)

Just Wondering

Right now 1 Euro buys 1.3542 US$: Chart

Will we have a counter trend rally now, or will the US$ just dive through any defense?

Posted by b on December 24, 2004 at 05:44 AM | Permalink | Comments (8)

December 23, 2004

Terrorist007

In another thread barfly Pat (hat tip) pointed to a NBC news report "Web video teaches terrorists to make bomb vest".

Reluctantly using Internet Explorer, one can see the report online. The accompanying text says:

Posted in a militant Islamic chat room three days ago, a stunningly detailed 26-minute video on how to make a sophisticated suicide bomb vest, along with a demonstration of its kill range, using a mannequin.
...
The person who posted the note and video on the Internet called himself "terrorist007."

The 2:40 long report shows a few scenes from the video and has two experts commenting on it.

There are three chunks of thoughts and doubts I have about this report.

The first chunk is through the described posting of the video:

  • You can not post videos in a chatroom, not even in a "militant chatroom". You may, in theory, be able to post videos on messageboards, usenet or website comments. But do you know of any messageboard, usenet or website that would allow an anonymous commentator to post a 25 megabyte binary file?
  • If this was not posted by an anonymous commentator, it must have been posted by someone in contact with that site's owner. That site does have an Internet Protocol address which you can see while downloading the video. Anybody can just ask here who has control of that IP number and site and who is the Internet Service Provider hosting it.
  • So where is that site, who is its owner and who did load up that video? Would this not be a good and easy-to-do story for the by-lined NBC investigative unit? Would not any secret service in this world step on the toes of that site's owner within 24 hours?

Second thoughts go to the experts NBC uses to comment on that video:

  • Rick Francona is ex(?)-CIA and ex-Military. He is a seasoned Middle East culture expert:

Lt Col Francona traveled extensively in combat areas as an observer of Iraqi military operations against Iranian forces, and flew sorties with the Iraqi air force.

and sells a book. A review says:

Francona's best anecdote involves his role as translator during Schwarzkopf's negotiations with the Iraqis at the end of the war:

"Good morning, sir," Francona tells an arriving Iraqi general. "I am Major Francona from General Schwarzkopf's staff. If you will step out of the car, I will take you to meet the general, and we can begin."

The Iraqi just sits there, glowering. So Francona, agitated by his recalcitrance, leans in closer and says, in Arabic slang, "Get out of the car, [expletive]."

  • Evan Kohlmann is a Terror Expert and has published a book and a few pieces for the neocon National Review. He has a certificate (four courses) from Georgetown University, was co-president of the Georgetown Israel Association and now has his own terror consulting shop at GlobalTerrorAlert.com. There he has also posted parts of the video not shown in the CBS news report (see the 12/20/04 entry).
  • Are these experts really experts on Middle East culture, or video making or suicide bomb fabrication? Are these experts CIA assets, or book sellers or NBC paid talking heads? Did Kohlmann, who posted parts of the video two days before NBC published the story, pass the video to them? Where did he get it from?

Third round of thoughts is to the video itself :

  • A man in a US(?) camouflage jacket shows how to put some stuff into a special vest, how to put some glue(?) from a can (with Latin letters on it) on a sheet of explosives(?) and metal balls and how to fix detonators(?) to that vest.
  • Large parts of both video excerpts are showing at least two test explosions with such vests. Each of the test explosions is filmed through at least three cameras. The tests involve some 30 human shaped targets made from metal sheets and a mannequin figure each.
  • Who, in camouflage, has the resources and need to make a video with such extensive, professional tests, with three-camera-test-documentation and special made metal dummy targets? Isn't this more likely a counter-terrorist weapon analysis and damage evaluation video than an easy to distribute "how-to" paper on bomb making?

Could the video be a real terrorist video? Yes, it could be. Would a jihad trainer make a  traceable post of 25 megabytes professional made video with the pseudonym terrorist007? Well ahh, ehemm, may be.

But why is NBC underlying all of the report with some Sowjet sounding marching music? Why, when showing steps the video is alleged to describe, do they "smuggle in" a still picture about “mixing explosives” (the one without Arabic subtext)?

How, if your boss said "ultimately the Wild West [of the Internet] must give way to governance and control." and gave you unlimited resources, would this fit your (Dis)Information Warfare campaign and agenda?

So many questions. Where is my tin foil hat again?

Posted by b on December 23, 2004 at 06:46 PM | Permalink | Comments (13)

December 22, 2004

Stalingrad

Yesterday anti-US-forces in Iraq reported the attack in Mosul killing some 24 and wounding some 60 within a US base was done by a suicide bomber. The news until this morning reported about a rocket or mortar attack. Now ABCnews says suicide bomber.

Citing unnamed sources, ABC reported that investigators at the U.S. base in the northern Iraqi city of Mosul found remnants of a torso and a suicide vest – probably a backpack – meant to carry explosives.

Meanwhile the revenge has started:

U.S. forces sealed off entire districts of the Iraqi city of Mosul on Wednesday, blocking bridges and raiding homes in a hunt for suspects after an attack that killed 18 Americans and four other people.
...
Witnesses said U.S. forces, backed by Iraqi National Guards, sealed off neighborhoods in western and southeastern Mosul and raided homes. "They're looking in the areas that are known hotspots," one resident in the west of the city said.

William Lind sees Fallujah as a Little Stalingrad:

Operationally, Fallujah, like Stalingrad, proved to be a trap. It led us to concentrate so many of our few combat troops in one place that the insurgency was able to make major gains in other, more important places. It again drew a glaring contrast between how America fights – by pouring in firepower – and the stated aim of the American invasion of Iraq, liberating the Iraqi people. You cannot liberate people by destroying their homes, their jobs and their cities. If operational art is the art of linking tactical actions to strategic goals, American generals have once again shown the world that they have no operational skill – a situation that is typical of a Second Generation military.

Will Mosul now become a bigger Stalingrad?  

Posted by b on December 22, 2004 at 02:04 PM | Permalink | Comments (47)

December 21, 2004

Another Open Thread

News + view + opinions

Side note: I would like to post more of your writings at the Moon. Please send anything you feel to be appropriate to my email address on the About page.

Posted by b on December 21, 2004 at 09:52 AM | Permalink | Comments (82)

Executive Order

ACLU, through a FOIA request, has received some more FBI internal emails regarding Department of Defense "interrogation techniques" in Guantanamo and Iraq.

If there were any questions left, where the torture orders originated, these documents do make it clear beyond any doubt.

From: ... (FBI)
To: ... (FBI)
...
This instruction begs the question of what constitutes "abuse". We assume this does not include lawful interrogation techniques authorized by Executive Order. We are aware that prior to the revision in policy last week, an Executive Order signed by President Bush authorized the following interrogation techniques among others sleep "management", use of MWD (military working dogs), "stress positions" such as half squats, "environmental manipulation" such as the use of loud music, sensory deprivation through the use of hoods, etc. We assume the OGC instructions does not include the reporting of these authorized interrogation techniques, and that the use of these techniques does not constitute "abuse".
Email from "On scene Commander--Baghdad.” (pdf)

To better imagine the techniques authorized and signed by President Bush into the Executive Order this report is helpful:

From: ... (FBI)
To: ... (FBI)

As requested, here is a brief summary of what I observed at GTMO

On a couple of occasions, I entered interview rooms to find a detainee chained hand and foot in a fetal position to the floor, with no chair, food, or water. Most times they had urinated or defecated on themselves, and had been left there for 18 - 24 hours or more. On one occasion, the air conditioning had been turned down so far and the temperature was so cold in the room, that the barefooted detainee was shaking with cold. When I asked the MP's what was going on, I was told that interrogators from the day prior had ordered this treatment, and the detainee was not to be moved. On another occasion the A/C had been turned off, making the temperature in the unventilated room probably well over 100 degrees. The detainee was almost unconsciousness on the floor, with a pile of hair next to him. He had apparently been literally pulling his own hair out throughout the night. On another occasion, not only was the temperature unbearably hot, but extremely loud rap music was being played in the room, and had been since the day before, with the detainee chained hand and foot in the fetal position on the tile floor.

Any question, feel free to call or ask via email
E-mail from REDACTED to REDACTED (pdf)

Posted by b on December 21, 2004 at 09:27 AM | Permalink | Comments (6)

December 20, 2004

Plenary Power

Newsweek reports on a September 2001 memo of the Office of the Legal Council that was just Friday silently posted at the Justice Department's website.

The memo, written by "Geneva does not apply" law Professor John Yoo, concludes (emph. added):

.. the President has the plenary constitutional power to take such military actions as he deems necessary and appropriate ...

Military actions need not be limited to those individuals, groups, or states that participated in the attacks on the World Trade Center and the Pentagon: the Constitution vests the President with the power to strike terrorist groups or organizations that cannot be demonstrably linked to the September 11 incidents, but that, nonetheless, pose a similar threat to the security of the United States and the lives of its people, whether at home or overseas.

The footnote to the above sentence says:

But we do not think that the difficulty or impossibility of establishing proof ... bars the President from taking such military measures as, in his best judgment, he thinks necessary or appropriate to defend the United States from terrorist attacks. In the exercise of his plenary power to use military force, the President's decisions are for him alone and are unreviewable.

Is there any need left for an expensive Congress and a Supreme Court if "the President's decisions are for him alone and are unreviewable"?

Posted by b on December 20, 2004 at 10:43 AM | Permalink | Comments (8)

Likudnik Laundry

There is said to be a rift between the Israeli Defense Ministry Director General Amos Yaron and the Pentagon's Doug Feith. Feith calls for the resignation of Yaron because misleading him on (read: lying about) Israeli repair (read: upgrade) of a specific Chinese weapon system with US technology. Air Force Chief of Staff Gen. John Jumper has even canceled a trip to Israel because he would not meet Yaron.

Searching Google News for the story we find reports in Haaretz, Jerusalem Post, Zaman Turkey, Pakistan Daily Times, Asia Times, BBC and many many other non-US media.

In the US only the Moonies Washington Times has a UPI brief on the story. Nothing in the New York Times, Washington Post, USA Today, Los Angeles Times, Knight Ridder, and any TV news site that I can find.

Is this piece of Likudnik laundry too dirty for the US public?

Posted by b on December 20, 2004 at 09:14 AM | Permalink | Comments (10)

December 19, 2004

Dump of the Year

Time
Time

Posted by b on December 19, 2004 at 02:43 PM | Permalink | Comments (19)

December 18, 2004

I am not a ...

Fear factor: 44 percent of Americans queried in Cornell national poll favor curtailing some liberties for Muslim Americans

In a study to determine how much the public fears terrorism, almost half of respondents polled nationally said they believe the U.S. government should -- in some way -- curtail civil liberties for Muslim Americans...
...
Conversely, 48 percent of respondents nationally said they do not believe that civil liberties for Muslim Americans should be restricted.
...
[Professor] Shanahan notes: ".. our findings highlight that personal religiosity as well as exposure to news media are two important correlates of support for restrictions. We need to explore why these two very important channels of discourse may nurture fear rather than understanding."

Also from the study (PDF):

In November, 2004 37% of respondents believe a terrorist attack within the next 12 months is likely, compared to 90% in November 2002.

Nearly half  (47%) of respondents support greater power for the government to monitor Internet activities, while nearly two‐thirds (63%) agree that the government should be able to detain indefinitely suspected terrorists.

As now only 37% expect a terror attack, contrarian thinking lets me believe that there is one right around the corner. Even a small incident, propagandated as Muslim terror through the news media, would put the majority in the US into a very dangerous mood.

Time to recapitulate:

First they came for the Jews
and I did not speak out
because I was not a Jew.
Then they came for the Communists
and I did not speak out
because I was not a Communist.
...

Posted by b on December 18, 2004 at 01:51 PM | Permalink | Comments (175)

No Yes-men

Helmut Schmidt, chancellor of Germany between 1974 and 1982, just published his new book "The Powers of the Future", meant as a global strategic overview. (So far it is only available in German.)

From the covertext:

"In the foreseeable future there is neither a strategic nor a moral reason for the majority of the continental-european nations to willingly subdue to a possible american imperialism ... We shall not degenerate to compliable yes-men. Even if the USA for the next decades may be more capable of acting as the European Union, even if the hegemony of America will endure for a longer time, the European nations must keep their dignity. This dignity is based in holding fast to our responsibility in front of our own conscience."

This will sell like fresh baked bread.

Posted by b on December 18, 2004 at 10:41 AM | Permalink | Comments (6)

December 17, 2004

Open Three

...

Posted by b on December 17, 2004 at 04:16 PM | Permalink | Comments (39)

Gift Ideas

It's the last weekend before Christmas and lots of people will be out to buy, buy, buy. Here are some ideas on possible gifts - please add yours in the comments.

The Financial Times' recent, incredible perverse titled, supplement How to Spend It! featured this nice £70 million villa. For those who like their gifts more rural, my friend Vladi has some decent islands on sale. (You will have to negotiate carefully with him -  he once seriously tried to barter me with beach sand for some help on his computers.)

Back to earth: If you have to go into debt to buy a gift for someone, do not buy one.  If that person does not understand, she/he is not worth to receive one anyhow.

I like to make gifts myself. For friends at the workplace I made some calendars on pentagon dodecahedron on marble paper. A bunch of Origami flowers may have a more personal touch though.

Iraq blogger Raed is collecting money and organizes medicines to Fallujah. You may give some money for that issue and present the receipt as a gift.

You can get a good wine pick and some political advise from Dr. Vino.

For computer geeks USB Mince Pies are reasonable as is gingerbread.

Wired has the first edition of a new magazine Test downloadable. They tested lots of technical gimmicks - you know these must-have-now things that will cost half of today's price next year. Never buy this stuff before Christmas. Make a nice gift certificate and get the real thing later. (I always buy my Lego Technic stuff used or on sale).

If the addressee of your gift is fundamental religious and/or part of that immoral majority that voted for Bush, you may want to give them an urgently needed Wash Away Your Sins Starter Gift Basket.

That store has trademarked What a trend we have in Jesus!. Next thing they will sell is the copyright for the bible. Now that would be a lucrative gift to receive.

Kitchmas aside, I like gifts. What are your ideas of gifts to give and gifts to receive?

Posted by b on December 17, 2004 at 03:59 PM | Permalink | Comments (9)

December 16, 2004

Rumsfeld Execution Continues

William Kristol in WaPo:

Surely Don Rumsfeld is not the defense secretary Bush should want to have for the remainder of his second term.

Tom Donnelly:

Even long time supporters and transformation advocates have begun to recognize that Rumsfeld is now a large part of the problem.

Trent Lott, Loren B. Thompson, Susan Collins, John McCain and Chuck Hagel all call for Rumsfeld to be fired. The White House, for now, defends Rumsfeld:

"The president believes Secretary Rumsfeld is doing a great job, and that's why he asked him to continue serving during this time of war," spokesman Scott McClellan said.

Sure, when the National Guard needs to tripple the enlistment bonus, the Generals finally agree that Iraq insurgents grow 'more effective' and the Air Force starts flying around trucks because driving is too dangerous, there is some serious trouble.

But up-fitting a 6,000 pound vehicle, build for a possible 4,500 pound payload, with 4,000 pound of armour is not effective and more troops are also more targets. Like some on the right recognize, within his frame Rumsfeld is not THAT wrong on this issue.

My take on this, well deserved, assassination:

On one level Rumsfeld is in the crosshair because he doesn't want the draft. Kristol and fellow neocons are on this level and they do need more troops to beat Iran's defense and further their great Middle East plans.

On another level this is aiming at Bush himself. Because his career is over and he has not to campaign again he can now push for unpopular interior pet projects like abolishing Social Security and tilting the tax burden further to the low income side.

People in the House and Senate will have to campaign again and McCain and Hagel are dreaming of further career steps. They now have to show their might over the President and Rumsfeld is an easy surrogate target that will fall anyhow soon after the Iraqi election. Right now Don is already a lame duck.

Who will Cheney choose to replace him? Continuity speaks for Wolfowitz. He fits the neocon’s plans and, together with Cheney, was the only participant in the Project for the New American Century who is on the shortlist. He will agree on the draft and is no candidate for 2008.

Thus I expect a more hawkish policy at the Defense Department and more fights within the Republican tribe. Interesting constellations these are.

Posted by b on December 16, 2004 at 05:43 PM | Permalink | Comments (33)

Law enforcement

Remember the desecration of the Herrlisheim Jewish cemetery back in April?

It was, despite the national outcry of indignation and official protests, yet another sign of France's (and Europe's) growing antisemitism and treasonous behavior...


Well, a suspect has been arrested today, after a long investigation involving graphology and 15 investigators.

As it were, the suspect is a neo-nazi and a member of the Front National.

Of course, this does not fit in the frame of the growing restlessness of Muslim populations in France and their supposedly increasingly aggressive and increasingly tolerated behavior towards Jews, and, unsurprisingly, I have not found a single story about it in the press.

So, had you heard about it? Do you care?

Posted by Jérôme à Paris on December 16, 2004 at 05:18 PM | Permalink | Comments (8)

December 15, 2004

International Jurisdiction

Yukos thinks US civil law should reach from Houston to Moscow:
Yukos files for bankruptcy in the US

The embattled Yukos oil company has filed for bankruptcy in the United States and appealed for an injunction against the auction of its main production unit that is scheduled for Sunday.
...
"Yukos is asking the court for a temporary restraining order halting the planned Sunday auction of its Yuganskneftegaz subsidiary by Russian authorities," said the statement posted on Yukos' Web site.

Others think, even in serious criminal cases, international reach of law and judicary independence should be restricted:

"If you get an adventurous prosecutor who might want to seize onto one of these frivolous lawsuits, it could affect the broader relationship. I think that's probably safe to say,"

says  Lawrence DiRita, the Pentagon's spokesman, about the criminal complaint filed in Germany against American servicemen US Defense Secretary Donald Rumsfeld and other officials over the Abu Ghraib prison scandal.

If the Yukos case is invalid, is the case against Rumsfeld invalid too?

Posted by b on December 15, 2004 at 08:06 AM | Permalink | Comments (4)

Open Two

whatever ...

Posted by b on December 15, 2004 at 06:35 AM | Permalink | Comments (83)

Missile Waste

The Defense Department spends $10 billion per year on Missile Defense.

Some 10 interceptor rockets are already stationed in Alaska, but the system has never been tested successfully. Those tests that occurred were are deemed unrealistic and even then three out of eight attempts failed.

A complete test was planed to take place late 2003.  It was delayed until yesterday and then - the system failed. The interceptor (pdf) did not even take off.

The first test in nearly two years of a multibillion-dollar U.S. anti-missile shield has failed after the interceptor missile shut down as it prepared to launch in the central Pacific, the Pentagon said.
...
The aborted $85 million test appeared likely to set back plans for activation of a rudimentary bulwark against long-range ballistic missiles that could be fired by countries like North Korea.
...
In 2002, President George W. Bush pledged to have initial elements of the program up and running by the end of this year while testing and development continued.
Reuters

Missile Defense

  • is a system that does not function
  • could be easily cheated by fake targets
  • is useless against cheap kind of attacks like 9/11 or from cruise missiles fired from sea
  • is useless against new Russian ICBM developments

It is the most useless way to waste money I can think of.

Posted by b on December 15, 2004 at 06:14 AM | Permalink | Comments (14)

December 14, 2004

The Unbearable Lightness of Bridges

Today was inaugurated a truly spectcular bridge in Southern France, the Viaduc de Millau.

More pictures and plenty of very detailed technical data

Image_21

Sometimes, it is good to also be able to celebrate man's ingenuity and ability to reach for the sky...

Laun

 

3

_40625309_bridge_afp300body

Posted by Jérôme à Paris on December 14, 2004 at 04:20 PM | Permalink | Comments (31)

"Communiqué Number 6"

Iraqi Resistance speech on videotape - December 13 2004
via Information Clearing House

... We have not crossed the oceans and seas to occupy Britain or the U.S. nor are we responsible for 9/11. These are only a few of the lies that these criminals present to cover their true plans for the control of the energy resources of the world, in face of a growing China and a strong unified  Europe. It is Ironic that the Iraqi's are to bear the full face of this large and growing conflict on behalf of the rest of this sleeping world.

We thank all those, including those of Britain and the U.S., who took to the streets in protest against this war and against Globalism. We also thank France, Germany and other states for their position, which least to say are considered wise and balanced, til now.

Today, we call on you again.

We do not require arms or fighters, for we have plenty.

We ask you to form a world wide front against war and sanctions. A front that is governed by the wise and knowing. A front that will bring reform and order. New institutions that would replace the now corrupt.

Stop using the U.S. dollar, use the Euro or a basket of currencies. Reduce or halt your consumption of British and U.S. products. Put an end to Zionism before it ends the world. Educate those in doubt of the true nature of this conflict and do not believe their media for their casualties are far higher than they admit. ...

Posted by b on December 14, 2004 at 11:18 AM | Permalink | Comments (9)

December 13, 2004

Reality Based Scandal

There is an American exile billionaire sitting in Switzerland.  He expects some bad press about his business dealings in the Iraq Oil-for-Food program. A neutral investigation by the estimeed Paul Volker is looking into various, probably illegal, deals.

The billionaire calls up his old lawyer and buddy, who is in a high political position, and asks him to help to divert the developing scandal. The lawyer-buddy discusses the request with his boss.

Having been in the same business as the pressured billionaire, the boss understands the problem and agrees to help. He talks to his old friend, the important Op-Ed writer, and they come up with an operation plan.

As they can not stop the ongoing investigation, they will push for a new investigation going into a different direction and they will project a "bigger scandal" which shall hide the real one.  Creating a new reality is the general, time tested idea.

Billionaire Marc Rich has emerged as a central figure in the U.N. oil-for-food scandal and is under investigation for brokering deals in which scores of international politicians and businessmen cashed in on sweetheart oil deals with Saddam Hussein

"We think he was a major player in this - a central figure," a senior law-enforcement official told The Post.
Link

From Yale, Libby went on to Columbia Law School and then settled down to practice law in Philadelphia. His most famous client was Marc Rich, the fugitive financier and alleged tax evader who was pardoned by President Clinton during the last days of his administration. Clinton's pardon, which at the time drew heavy criticism from Republicans, was largely the result of legal arguments Libby had been making for 15 years.
...
Today what touches Cheney reaches Libby and vice-versa.
Link

CHENEY: "And Bill Safire is an old friend of mine, and I frequently agree with him."
Link

William Safire: U.N. chief getting mired in oil-for-food scandal
Link

Kofi Annan's son, without the senior's knowledge, did get $2,500 per month and it is yet unknown if this has anything to do with Oil-for-Food at all.

"Rich and Pollner would pocket percentages of the profits, worth hundreds of millions of dollars".

Which one is the reality-based scandal?

Posted by b on December 13, 2004 at 02:57 PM | Permalink | Comments (8)

Victory is Near

"There is no question in my mind that the coalition and the Iraqi people are winning."

Lt. General Ricardo Sanchez, Commander, U.S. military forces in Iraq
Press Briefing in Baghdad
December 13, 2003

Posted by b on December 13, 2004 at 08:04 AM | Permalink | Comments (14)

December 12, 2004

Social Security reform for dummies

Behind the discussions about the future of Social Security, the situation of the Trust Fund, the requirement for personal retirement accounts and other such financial instruments, you have some basic reality-based facts that are sometimes forgotten.

Below (the fold) is a simplified description of the social security problems that we face and how not to solve them - in non-financial terms.


Imagine the USA as a big family; with no interaction with the outside world (we'll get to that part later): you have 1 senior citizen, 4 working age people, and 1 kid.

The working age citizens provide all the goods and services needed by everybody:
- 1 provides the basic stuff - food, housing, etc ; let's call him/her the construction sector
- 1 takes care of Senior and Junior; let's call him/her the nurse/teacher
- 2 crank out TVs for everybody's leisure and entertainement; let's call them the TV guys and let's say that they produce 3 TVs each (one per person)

The first important thing to note in this model is that at all times, this group is self-sustaining: all the work needed at any time is done at that moment by someone within the group, and all work done is consumed by someone.
The other important thing to note is that 4 people work to provide for the needs of 6 people. In effect, one third of their work is taken from them at any time to provide for the needs of the non-workers, i.e. Junior and Senior.

In the real world, the same thing happens on a larger scale, and these transfers can take 3 main forms:
- intra-family transfers: you feed your kids, pay for their education, your parents live with you, etc...
- government: you pay taxes and the government either spends it (schools) or redistributes it (social security)
- financial instruments: people can save, or spend their savings (via bonds and shares). Saving means that you store your work for future use. In practice, bonds and shares are a "tax" on your current work: a portion of your work is used to pay off debt or to pay dividends to shareholders. This is still you working and someone else (Senior, usually) enjoying the fruits of that work. "Dividends" sound better, but they still are really a tax on your work.

In any case, whatever form the transfers take, they should not hide that basic fact: 4 people work and 6 people live off that work.

Now take our family 50 years from now. It is now composed of 7 people: 2 seniors, 4 working age people, and 1 kid. 4 people working, 3 not, but all still with needs.
What happens now?
The construction guy still does that. With a little bit of effort, he is still able to make all that's needed for 7 people instead of 6
1 and a half workers are now needed to take care of junior and the 2 seniors (there is little room for productivity improvements there) which leaves:
1 and a half workers to crank out TVs. If there has been no improvement, that's only 4.5 TVs for 7 people. In order to have 1 TV per person, you would need each worker to be able to make 4.66 TVs instead of 3. Over 50 years, that does not sound impossible.

So, if you forget about productivity improvements, this is why you have the cries about social security crisis: either you have fewer TVs, or you find a better way to make more, or you will take less good care of seniors and junior. What should be done?

- the simplest (and pretty realistic) solution is to say that TV production has made such progress that 1,5 workers crank out as much (or more) stuff than 2 guys used to, so there are enough TVs for everybody and there is NO crisis. A larger portion of work goes into caring for the dependents (42% now instead of 33%), but that only reflects changing needs;

- if productivity increases are not enough, you can either take less good care of the dependents (only 1 worker to take care of the 3) and keep on cranking out TVs as you used to (2 workers), or you can decide to take care of your family and reduce your consumption of TVs. A slight variation is to say that you save up one TV today, mothball it and use it in 2050. in that case, you have 5 TVs for 6 people now and 5.5 for 7 in 2050 which might after all be sufficient in both cases.

To get back to the social security debate, the first item is hoping the growth will be strong enough to solve the funding requirements of social security, while the second item amounts to solving the problem by either reducing SS payouts or increasing payroll taxes.

It does not change the fact that 4 people are working to fulfill the needs of 7 people. If you expect to give only one third of your work for the non-workers, they will live less well, relatively. If you give 42%, they will live as they expected to, but you will be relatively worse off. This is the unavoidable reality of an aging population - if less people work, either they are taken care of by those that do, who then have less for themselves, or they are not taken care of (or any combination in between, of course)

Now bring in the outside world into our little model. There are two easy ways the outside world can help improve the situation:

- one is immigration. Bring in one more person of working age into the community, and presto, you can crank out again as many TVs in 2050 as you used to without any increase in productivity AND take care of everybody (including the newbie);

- the other is inter-temporal trade through international investment. You give today one of your TVs to foreigners (you have 5 for 6 people) in exchange for 1.5 TVs in 2050. With no increase in productivity, you can take care ofthe dependents as you'd like (1.5 workers) and with your own production (1.5 workers making 4.5 TVs) you end up with 6 TVs for 7 people, close to what you would get now. You make a small reduction in your living standards now to improve your lot later.
As other countries are at earlier stages of development (and have faster growing population), it makes sense to think that they will be able to crank out 1.5 TVs in the future and give them to you as a fair price for having given them 1 TV a while before. in a more realistic sense, you don't actually give TVs today - you take time to go to other countries to build factories there or to teach them to do it, and get a portion of future production for you as a payment

To keep on consuming as much as you want in the future, you either need to get more workers in the future, or you must save now and invest in a place with more workers. (Getting productivity increase would basically mean that you need to invest in new, smarter ways to build TVs yourself, which means spending some effort now to do that, which will reduce you current TV production in the expectation of increasing your future one - it's still saving to invest).


As you can see, there are two issues: one is the size of the pie, and the other is the sharing of the pie. The size of the pie depends on productivity growth, which in turn, depends on investment, which in turn depends on saving. Saving means working now and storing up that work for future use. Mothballing a TV is the dumb kind of savings; producing fewer TVs but taking the time to invent new, better ways to make TVs (or teaching others to do it for you) is the smart kind of savings.

The claims of the SS privatisers is that they will make the pie grow faster by unleashing market forces that will be able to make those smart investments. But is this true?
First of all, note that private accounts do not provide additional savings if they come instead of the existing public saving so they will not provide MORE investment. Will it be smarter? Smart will come from the people making investment decisions. If you accept the hypothesis that private investments are smarter than government investments, then you should reduce government spending, not reduce government funding.

As I wrote last week about the falling dollar, the current problem of the USA is that they consume too much and rely on foreign lending for their investments. If the solution is to save more now (especially to invest in other countries in order to have the returns when needed, in a few decades' time), this government is worsening the problem rather than helping to solve it, by spending like a drunk sailor and increasing the country's external debt at a time when it should be accumulating foreign assets for future needs.

To get back to our "family" - half the TVs are already being provided by the outside world, and the only reason they are doing it is because the 2 two US "TV workers" are busy - one making guns and shooting them off at or near others, and the other writing IOUs as fast as his hands can do so. Is this sustainable?

(Foreigners might actually welcome SS privatisation, because it will mean that the TV workers will target their guns at their Seniors to get them to work a bit more instead of at them...)

Posted by Jérôme à Paris on December 12, 2004 at 04:26 AM | Permalink | Comments (50)

Lack of Intelligence

When an administration is in dire need of an intelligence service does it mean it lacks intelligent people?

John Bolton, Neocon WMD hunter at the State Department, had the NSA spying on IAEA chief El Baradei's phone calls with Iran (and others).  This is not unexpected, but is it really intelligent to have the spying and its fruitlessness printed in the Washington Post?

The Bush administration has dozens of intercepts of Mohamed ElBaradei's phone calls with Iranian diplomats and is scrutinizing them in search of ammunition to oust him as director general of the International Atomic Energy Agency, according to three U.S. government officials.
...
The intercepted calls have not produced any evidence of nefarious conduct by ElBaradei, according to three officials who have read them. But some within the administration believe they show ElBaradei lacks impartiality because he tried to help Iran navigate a diplomatic crisis over its nuclear programs. Others argue the transcripts demonstrate nothing more than standard telephone diplomacy.
...
The officials said anonymous accusations against ElBaradei made by U.S. officials in recent weeks are part of an orchestrated campaign. One of the most commonly cited accusations is that ElBaradei has purposely concealed damning details of Iran's program from the IAEA board. The charges are unproven and have been staunchly denied by the agency.

After this there is hardly a chance the US will be able have ElBaradei voted out of office. Each of the other 34 countries on the IAEA board will be pissed about the leaks and reluctant to vote against him now.

Meanwhile other administrations also lack intelligence

In 2001, the FBI discovered new, "massive" Israeli spying operations in the East Coast, including New York and New Jersey, said one former senior U.S. government official. The FBI began intensive surveillance on certain Israeli diplomats and other suspects and was videotaping Naor Gilon, chief of political affairs at the Israeli Embassy in Washington, who was having lunch at a Washington hotel with two lobbyists from the American Israel Public Affairs Committee lobby group. Federal law enforcement officials said they were floored when Franklin came up to their table and sat down.

Instead of spending $9.5 billion on useless stealth spy satellites adminstrations should use the money to hire some halfway intelligent people. 

Where can we drop the CVs?

Posted by b on December 12, 2004 at 03:37 AM | Permalink | Comments (10)

December 11, 2004

Open One

News, views, opinions ...

Posted by b on December 11, 2004 at 06:47 AM | Permalink | Comments (49)

December 10, 2004

Poppy Deal

Karzai declares jihad on poppy cultivation and starts digging his grave.

"Poppy cultivation is more dangerous than terrorism, it is more dangerous than civil wars because this crop is not only a source of weakness, dishonour and defeat of Afghanistan, but also an internal danger."

Anti-narcotics agencies say some local warlords, government officials, police commanders and governors are implicated in the trade.

Many small farmers make 10 times as much growing opium than growing other crops. Local warlords do the collecting, processing and smuggling. An international network is  distributing heroin into foreign markets. All have an interest to keep the opium cultivation going and growing.

The value of the opium trade for the local Afghan economy is said to be $4 billion (80%+ of GDP) in 2004. The end consumer market price is normally about 10 times the value of the crops. So now Karzai is betting against people who make up to $40 billion revenue per year and do not care about laws or national interest.

What are his options?

The US told him to start spraying, like in Columbia, and obviously such spraying has taken place, but the UK and the US, in control of the Afghan air space, denied knowing anything. Spraying of course does not only kill the plants, but also the people (either directly or through loss of income) and Karzai is well advised to talk against this. Anyway, just like gene modified Columbian supercoca, herb resistant plants could be expected to be developed pretty quick (Poppy Roundup Ready® anyone?).

One could buy off the farmers by guaranteeing them revenue on different crops. The amount of money needed would be a little more than Afghans make today on opium, spread over some 10 years. These $40 billion would be well invested, but no one expects the international community to come up with such an amount. The heroin is consumed in Afghan border countries, destabilizing them, and some in European markets. The US is so far not a market and may be even interested in some drug induced social chaos in Iran and elsewhere. This may change when US troops in Iraq turn out to be well paying customers.

Karzai could also choose to just look the other way. Make a lot of international noise about those bad drugs and let the local warlords do their deals. Keep the constituency happy and keep the job. Either that, or he needs to dig fast.

Posted by b on December 10, 2004 at 01:00 PM | Permalink | Comments (13)

December 09, 2004

Iraq Thread

"The enemy is operating in smaller cells with every bit as lethal capabilities as we have, but they can turn on a dime," Rumsfeld says in an interview.
Defense secretary shifts his focus to the Pentagon

FY 2005 - Department of Defense Budget (PDF):
Procurement:  US$ 75,905,000,000; R & D: US$ 68,942,000,000 ;

If the enemy has every bit as lethal capabilities without such a budget there is finally proof that this spending is nothing more than buying big toys and company welfare. Ask for your taxes to be returned immediately.

Other news:

Powell asks for European troops in Iraq
Iraq ; Abuse continued in Abu Ghraib even after scandal became public
US appeals Geneva protection for imprisoned bin Laden driver
More U.S. Soldiers Survive War Wounds
Six Iraqi national guards, 10 civilians wounded in Mosul attacks

Posted by b on December 9, 2004 at 12:43 PM | Permalink | Comments (83)

CFO

To be Chief Financial Officer of a big company is a high profile and lucrative job. A CFO  savors respect and of course expects to be handled with dignity.

Suddenly the markets read about rumors floated by company board members and the chairman's staff. The sitting CFO is to be fired as soon as a replacement is found.

With a job description in hand head hunter are out to search for a new CFO. The chairman requires any new CFO to publicly support any of his decisions. Regard for the company's financial position or economic logic is not desired.

As anybody knowledgeable knows, the chairman's economic ideas are nuts and will bankrupt the company. The search team fails to come up with a candidate.

The sitting CFO, already on his way out, is reluctantly asked to stay. He acquiescently accepts.

One senior administration official said Treasury Secretary John W. Snow can stay as long as he wants, provided it is not very long.
WaPo - Monday, Nov.29 - Bush to Change Economic Team

President Bush has decided to replace John W. Snow as treasury secretary and has been looking closely at a number of possible replacements.
NYT - Monday, Dec. 6 - Treasury Secretary Is Likely to Leave Soon

Treasury Secretary John W. Snow woke up yesterday and read in a major newspaper for the second Monday in a row that President Bush has decided to replace him, but the former railroad executive still had not gotten the word directly from the White House.
WaPo - Tuesday, Dec. 7 - Snow's Status Remains Uncertain

President Bush invited Treasury Secretary John W. Snow yesterday to remain on the job after the White House withheld its endorsement for 10 days while aides hinted that he would be replaced.

Snow was kept on only after the White House considered a variety of possible replacements and sounded out at least one top official on Wall Street. That executive turned the White House down, according to financial executives.

.. conservatives realized the remaining candidates were Wall Street executives who might put their concern about rising budget deficits ahead of a push for lower taxes ... Given their options, they decided Snow would be the best Treasury chief to push the partial privatization of Social Security and, especially, a restructuring of the tax code
WaPo - Thursday, Dec. 9 - Treasury Secretary Is Asked To Stay

  • How sympathetic will the markets be towards the company´s chairman?
  • Will anybody ever have trust again in that CFO's public declarations?
  • Will any sane investor think of buying these company's bonds or shares?

Posted by b on December 9, 2004 at 07:14 AM | Permalink | Comments (29)

December 08, 2004

Death of the West

Barfly DM came up with this cite by Pat Buchanan:

Under a global democracy, India and China, with 2.5 billion people, would be the dominant powers, and peoples of color, five-sixths of all mankind, would enter a claim for a more equitable distribution of the world's wealth now held by that shrinking one-sixth of all mankind that is of European descent. Global democracy is the death of the West.
Kofi's not the problem, the United Nations is

Six people in the room and six apples. One person of European descent has 5 apples and 5 persons of color have a fifth apple each. Now introduce democracy and you may have to share more - incredible thought.

DM says:

I fear that (however awkwardly this is put) - that this is the mindset of too many USA/UK plebs and pseudo-intellectuals alike - and that the denoument to this sort of color-conscious thinking will be when they learn that they don’t have the mettle of a master-race.

Posted by b on December 8, 2004 at 07:47 AM | Permalink | Comments (27)

December 07, 2004

Uniform

In the long run, propaganda will reach the broad masses of the people only if at every stage it is uniform.
Will and Way by Joseph Goebbels

Billmon wrote a while ago:

If the t-shirt design catches on, then some other party hack might well develop a proprietary patriotic logo -- something distinctly identifiable as a Republican Party symbol -- to go on those t-shirts.
...
One people, one country, one leader ...

One step following another.

The truly sinister thing -- and the reason why that Slate story made the hair stand up on the back of my neck -- is that even as these people move, like sleepwalkers, towards a distinctly American version of the cult of the leader, most of them honestly appear to have no idea what they're doing, or creating. I'm not even sure the Rovians themselves entirely understand the atavistic instincts they've awakened in Bush's most loyal followers. But the current is running now, fast and strong. And we're all heading for the rapids.

Today another step was taken. The grand leader joined a fashion show to present the new Fans-of-Bush uniform (Made in China). The design will be available for late Christmas shopping in all counties that (were) voted in his favour with a more than 60% moral majority.

Bush Uniform

Posted by b on December 7, 2004 at 05:02 PM | Permalink | Comments (32)

Patent Pending

NYT: Mystery Bidder Obtains Internet Patents

A mystery unfolded this afternoon in Federal Bankruptcy Court when a lawyer for an anonymous bidder acquired a set of patents covering important aspects of commercial Internet transactions for $15.5 million.
...
The patents and patent applications cover basic activities like using standardized electronic documents to automate sales over the Internet. Some intellectual property experts said that the patents could be used to challenge Internet services offered by companies like I.B.M., Microsoft and Sun Microsystems.
...
Mark X. Mullin, a lawyer for a Dallas law firm representing a company identified as JGR Acquisitions, put forth the winning bid. Mr. Mullin said he would file further details as required by the bankruptcy court. He declined further comment and immediately left the courtroom.

There is something seriously wrong with such use of patents and other intellectual property rights.

Some mysterious company buys some patents that cover things any 5 year old could think of and then challenges some big companies. Make no mistake - in the end you, the consumer of the products of these companies, will have to pay.

Why should copyright protection on cartoon characters extend up to 95 years after the author died? Why are patents allowed on genes of existing plants? Why a patent on a business process that was implemented with the technology of electronic networks, but was certainly used in paper shuffling networks before?

"To promote the progress of science and useful arts" as the US constitution says?

These may help the judicial science and the art of fraud, but certainly neither humanity nor the individuals making the giant-leap progresses in technological development. 

(Btw: What are not-useful arts?)

Posted by b on December 7, 2004 at 03:12 PM | Permalink | Comments (8)

December 06, 2004

Open Thread

News, views, opinions ...

Posted by b on December 6, 2004 at 09:19 AM | Permalink | Comments (88)

December 05, 2004

Offshoring, the falling dollar and desindustrialisation

jj kindly provided a link to The China price about the threat to the US's manufacturing capacity from China's ability to be 30-50% cheaper.

Meanwhile, articles such as this NYT piece (A Field Guide to the Falling Dollar) are becoming daily occurences, all warning about the dollar's likely decline and basically saying that the only uncertainty is whether this decline will be rapid (bad) or slow (better).

These issues are inextricably linked and, as I have a little bit of time, I'd like to provide my view on the subject. Some of you here may find these controversial, so remember that I am a finance guy, with no actual links to the real world, and may thus be mistaken - but I am willing to listen and learn otherwise!

What these two things have in common is that they are the simple reflection of the real underlying cause of all the current unbalances in the world economy - the USA consume more than they produce, and they rely on the rest of the world to provide the difference.

The USA have the amazing privilege of having their currency serve as the main currency of international trade and reserve - which means that others are willing to hold dollars even if they do not intend to use them to buy things from the US (which is usually the main reason for buying someone else's currency). This reflects America's economic pre-eminence, as well (and this is often forgotten) as a general trust in the US institutions which means that foreigners expect their dollars to keep their value. This has allowed Americans to borrow money from abroad in pretty much unlimited amounts and at really good terms. This has in turn, mechanically fueled imports (if you have more money than you can spend locally, you spend it elsewhere).

So two first items to remember:
- the USA get a really good deal from the rest of the world
- US industry is not necessarily uncompetitive; it is structurally too small to fulfill all US needs

The rest of the world has been happy with this deal for various reasons:
- for a good part of the world, wracked by inflation, nasty regimes and poor financial institutions, it is simply more convenient, safer and a better deal to keep your savings in dollars than locally;
- for everybody, it is really helpful to have a common currency to set prices and trade internationally, knowing that everybody else also accepts it. This has been compounded by the growing use of (mostly US-created) financial instruments backing commercial transactions that all require a common currency to provide liquidity.

The problem is that the USA have abused the system, and the sheer scale of the unbalances are now threatening to bring down the whole thing.

- one myth is that foreigners get better returns in the US than elsewhere, thus ensuring that they do want to invest there. This is simply false. The US actually generate more income from their foreign investments than foreigners from their US investments, despite these now being significantly larger. Foreigners now own a growing proportion of T-Bills, which pay little, whereas US investors own good productive assets outside the US (which quite often provide for US demand). These low returns on US purchases are not a problem in normal times, but they do not provide an "objective" reason for further investment in the US economy;

- another myth is that it's Europe's "fault" if there are such unbalances, because Europe's economies are too sclerotic, Soviet, rigid, obsolete, etc and thus cannot grow and cannot "pull their weight" (i.e. importing more and "sharing the burden" with the US). Europe is barely a net exporter, but not very far from balance; Europeans live within their means and there is no rational reason to behave differently, so salvation will not come from here. (btw, it's quite a (framing) trick to have managed to call imports a burden, when it really means that others work and you enjoy their labor);

- meanwhile, the Asian economies, having built their prosperity on piggybacking the US economy, and developping their economic base by providing for the US needs and imports, are now stuck in the same vicious circle as the US - as they have a mercantilist approach, they keep their currencies pegged to the US dollar to stay competitive, and the way to do that when you have a large surplus of dollars is to either invest in the US or stock them. Obviously, the Asians do not seem to be interested in investing in the US (being busy investing at home - or in China - as quickly as they can), and they recycle these dollars in low-remuneration T-Bonds (rather than cash). With the current deficits, the pile of T-Bonds they own is becoming precariously high;

In any other country in the world, such a situation would have triggered a currency run and a default, Argentine-style, with the IMF and other such institutions coming to the rescue... The only reason this has not happened (other than the main foreign investors almost everywhere are Americans, and they are obviously not going to treat their own country the same as some godless foreign land) is that the Dollar retains its role as a trading currency, and the US has accumulated such a capital of trust in its currency that it can spend a lot of it before it has spent too much.

The difference now is that, for the first time, there is a credible alternative currency for both international trade and reserve: the Euro. It is backed by an economy and trading partner just as big as the US, and by institutions, despite all the criticism and nitpicking from the business press, that are fundamentally sound (rule of law, sound banking regulation, hawkish central bank, balanced trade, reasonable debt position).
At the same time, the US has gone on an amazing spending binge, fuelled by the dot-com bubble, then the real estate bubble and the Bush deficits. The binge has been made possible by Greespan's astonishingly loose monetary policy (and everybody's joyful embrace of debt) and a lot of it has been wasted in military spending which does not profit many and is certainly not recycled into the economy (the economic equivalent of armies and weapons building is to have the people involved dig holes in the sand and refill them - it does not create any value and it ties up a lot of people that could do better things. Up to a point, you can argue of its value as an insurance policy against trouble from the outside, but it is fair to say that the US are far beyond that point).

So there you have it
- longstanding overconsumption, a good chunk of it unproductive;
- a credible alternative
and you have the result: 4 dollars bought 5 euros in 2001; now they buy 3 euros only.

The ONLY way to solve this crisis is for the US to stop consuming more than it produces. This can come in many ways, of which the falling dollar is only a very indirect one.

A falling dollar, when the US imports twice as much as it exports (yes, double) has initially the following consequences:

- increase the cost of imports, expressed in dollars and decrease the cost, in other currencies of exports for foreigners (which is obvious), which leads to an increased trade deficit as the monetary impact is immediate, as imports are immediately more expensive, but cannot be immediately replaced (and in some cases, like oil or many products not manufactured in the US, cannot be replaced at all). And any change in the value of imports has double the impact of a change in exports, as they are twice as big to start with;

- create potential losses for foreigners holding assets expressed in dollars. If these assets are productive (US factories or companies) this may not be so important, but if these are paper, liquid, assets (stocks and bonds, especially T-bonds), the investors will start worrying about the return on their investment. If they expect a continuing drop in the value of the US dollars, they may sell to cut their losses, thus creating a self-fulfilling peophecy (remember, you don't just need foreigners to hold on to their T-Bonds, you currently need them to buy an extra 2-billion-dollars worth of them EVERY DAY). A devaluation of the dollar is a default by stealth - you take away a portion of the value for all non-US based investors. A default, even if by stealth, is not trust-inducing, and we have seen that trust is the last thing holding the dollar now;

- the likely way to avoid a full scale run on the dollar is then to significantly increase interest rates in the US. This has several effects: (i) it compensates foreigners for the additional risk (from their perspective) of the falling dollar value, (ii) it dampens domestic consumption by making debt more expensive, thus limiting imports and the deficit, thus possibly recreating trust that the US is taking a more sustainable financial path, but (iii) it will have an immediate impact on the real estate market, by making variable-interest mortgages more expensive thus strangling some borrowers (more sellers, including distressed ones) and at the same time reducing the price people are able to pay for houses (less buyers). Real estate being the main source of wealth for most US households, this will have a direct impact on all - no refinancing of your credit card debt by drawing house equity, reduced consumption, more bankruptcies, etc... It will not be pretty.

And when that takes place, the positive effect of a weaker currency will not have had time to kick in, because it takes time to build capacity for export or import substitution, especially if such capacity does not exist at all.

Meanwhile, your weaker currency has the following long term effects:

- oil producers, who currently get paid in dollars, are not happy with the continued erosion of the purchasing power of the dollars they get. They spend most of them in Europe, and thus need Euros. They thus expect their oil to at least keep its purchasing power in euros, which means that, if expressed in dollars, the price must go up as the dollar falls. The Europeans don't really care, because the price for them will stay constant in euros. Americans, who have big gas-guzzlers and do not have heavy taxes that could cushion these movements, will feel the increase very directly at the pump; as an absolutely non substitutable import, this will only increase the deficit with no chance of a reduction other than serious reduction in consumption, which will be a consequence of economic hardship rather than going for substitutes (public transport), which are totally unavailable for most Americans.

- holders of T-Bonds will need to be convinced to hold on to them - and to keep on buying more of them. The thing is that they are so little diversified tday that any move to change the balance of their reserves (inevitably towards the euro) has an immediate impact for the dollar, as we currently see - and for the interest rates required to keep them happy. Asian central banks may want to hold on longer than others, as they have the incentive of protecting their exports, but others (especially the oil producers of the Middle East and Russia) have growing incentives to bolt out before it gets worse. And Asians may decide on day that enough is enough, and you could have a real meltdown.

To avoid such meltdown, they will want to see the following:

- a commitment by the US to live within their means (this needs not mean zero deficit, but at least shrinking ones). This applies both to the government (the federal budget deficit - which need to be cut seriously) and to consumers (an orderly slowdown in consumption - which requires increased interest rates, again). This is purely domestic stuff - foreigners can do nothing to change that.


This gets me back to outsourcing and offshoring. Offshoring is just a new way to import more - except that it's imports of services instead of imports of goods. It was inevitable that the USA's insatiable demand - a growing portion of which is services - would require foreign input. Tradeable services naturally come into this mix (as opposed to non tradeable ones, such as getting a haircut or cleaning your pool). This movement is not a sign that US workers are uncompetitive as a whole, it simply means - again - that they consume more than they produce. Of course, some sectors may see real job destruction and upheaval due to foreign competition, but others are growing and hiring - tradeable services (banking, insurance, IT) is actually one of the few areas where the US has a trade surplus.

A falling dollar will not "solve" outsourcing if it does not lead to a rebalancing of domestic demand/production, and that will come only through massive changes in domestic consumption patterns.

So, the US can go on blaming foreigners all it wants, it's useless and counter productive. Foreigners have fed the massive overconsumption of the Americans over the past years; the smartest of them have managed to use that fact to build their economies, but they have not created it and they have certainly not repaed as many benefits as the Americans have. America has abused the privileges granted by the status of the dollar as the lone world currency beyond all reasonable repair; now it's time to pay back.

Europe will only marginally suffer, as they have balanced trade, limited exposure to the US market relative to their overall size, and a specialisation in high-quality goods that are not so price-sensitive (German exports worldwide increased by 14% this year despite the falling dollar).

non-China Asia will benefit from the increasing size of the Chinese economy (to which they are a massive net exporter) and will hopefully learn to develop more their domestic markets;

China is the most interesting case; they are likely to bear the brunt of falling US imports; on the other hand, a slowdown is probably eaxactly what they need after the overheating of the past few years; It may relieve the tensions on commodity markets that have seen stupendous increases in Chinese demand in a short time - and the corresponding price increases. The balance may not be so easy to find, but one must not forget that Chinese trade is pretty much balanced (exports to the Us being compensated by massive imports from the rest of Asia) and the country itself is not on an unsustainable export-only growth path as it busily develops its internal market and demand.

Again, the adjustment will fall mostly where it has to - US consumers. And again, this says nothing about the competitivity of US workers - only that when consumption is the priority, production cannot be - but this may well change soon...

Posted by Jérôme à Paris on December 5, 2004 at 10:01 AM | Permalink | Comments (39)

AIPAC Probe intensifies

JTA News

FBI agents searched AIPAC’s headquarters here Wednesday, seizing files associated with two senior staffers who were interviewed in August amid allegations that a classified Pentagon document was leaked and passed on to Israel.

The agents also served subpoenas on four other senior staffers to appear before a grand jury later this month. The four were Howard Kohr, the group’s executive director; Richard Fishman, the managing director; Renee Rothstein, the communications director; and Raphael Danziger, the research director.

Though some AIPAC officials and lay leaders in past months sought to portray the investigation as dying down, sources told JTA that federal investigators have interviewed several former AIPAC employees in recent weeks.

This had indeed disappeared from the news completely, and it is interesting to see it popping up again. Any of you have any additional news on the topic? Any expectations on where this may go? Any chance in hell to lead to a real discussion of US-Israeli policies?

Rant away!

Posted by Jérôme à Paris on December 5, 2004 at 03:18 AM | Permalink | Comments (22)

December 04, 2004

TV or no TV

There's something seriously wrong with America. Something, Seriously. Wrong. A recent survey shows that watching TV ranks above money, marriage and job security on the list of things that make us happy.
 
NYT article

(Hat tip - SusanG)

Actually, that's good news - TVs are easier to find (and cheaper) than money, marriage or job security... Buy a pack of Kellogg's corn flakes, get one free, and be happy!

Posted by Jérôme à Paris on December 4, 2004 at 06:02 PM | Permalink | Comments (26)

Travelling Thread

Out of curiosity, which countries (or states) have you travelled to in recent times? Any particular experiences to remember?

Mine below in comments...

Posted by Jérôme à Paris on December 4, 2004 at 02:35 AM | Permalink | Comments (29)

December 02, 2004

Other news from paradise

Cuba releases leading dissident
Last chance saloon for UN?
Methodist jury convicts lesbian minister

Eiffel Tower offers sky-high ice skating
Record lottery winner arrested on DUI, weapons charges
Nearly Half of Britons Unaware of Auschwitz -Poll

So, what news are you following? Anything missing above?

Posted by Jérôme à Paris on December 2, 2004 at 05:36 PM | Permalink | Comments (73)

The School

(Some left-over; for this drink of anti-kool-aid read first and check those 30? links later)

The intro on this public financed schools homepage is showing a spectacular picture of its pompous chapel.

Its principal recently sent a school wide email:

Ask the Lord to give us the wisdom to discover the right, the courage to choose it, and the strength to make it endure. The Lord is in control. He has a plan for each and every one of us. If we seek His will in our lives, we will find the "peace that passes all understanding."

Hallelujah!

Through the Christian News Wire Service a retired teacher of the school is lobbying against the schools forced gender-norm standards:

"I would separate the sexes, separate training, and have different standards"

Its current superintendent may well agree as he himself was educated in a prestigious, at that time "single-gender heterosexual" institution, well known for its fine celebrations, agreeable to God.

The secular schools flag-folding ceremony states that raising the flag at reveille is "a symbol of our belief in the resurrection of the body".

You will have confidence in the quality of their graduates when you know that their  core values are "Integrity First, Service Before Self, Excellence in All We Do". The institutions supervising organization is even promising Global Vigilance, Reach & Power plus the marketing byline "Cross into the blue".

The schools is seated in an area full of other important institutions who take care of the moral and nuclear defense of the United States. The North American Aerospace Defense Command, the World Prayer Center and the Guardians of the High Frontier, as they call the Air Force Space command, are just a few miles away. Next door is also the evangelical Focus of the Family headquarter. When it opened in September 1993, a schools sport team delivered the keys to dog lover James Dobson.

The areas 2004 67% county vote for George W. Bush was healthy but also disappointing. You would expect more trust for The Leader

School football coach Fisher DeBerry was recently asked to take down a football motivation banner claiming: "I am a Christian first and last ... I am a member of Team Jesus Christ.". He may soon join his predecessor who is now making a career as Executive Director for Family Ministries in Focus.

When the schools head chaplain advised against holding Bible studies in dormitories, principal Johnny Weida, a born-again Christian, overruled him in front of 300 teachers, staffers and pupil leaders, saying it is OK to have Bible studies in the dorms.

Other things happen in these churchlike dormitories too. At one point, more than a third of its female attendants reported "unwelcome, deliberate physical contact of a sexual nature".

When such unwelcome contacts, like let's say gang rapes, happen, principle Johnny Weida decides on the issue. But sometimes the numbers get just too big and holy Mary is asked to give outside help for the cover up. We do know Mary from other cases where she demonstrated a strong working relationship with a high valued alumni of the school in question.

This publicly financed, secular school, with strong relations to high ranking officials, is the US Air Force Academy, Building Leaders of Character for the Nation. Its graduates will have their fingers on the buttons that may launch a nuclear war and its alumnis recently re-enacted Guernica in Fallujah.

Who owns their loyality? Can you trust them? What happens if they are part of a plan?

Posted by b on December 2, 2004 at 04:30 PM | Permalink | Comments (13)

More good news from France

The French Socilalists have voten convincingly in favor of the EU Constitution in an internal referendum.

The man leading the "no" campaign within the party, former prime minister and now deputy party leader Laurent Fabius, has accepted defeat.

He had tried to rally supporters by saying he loved Europe too much to let France sign up to a bad treaty.

For him, the European Constitution is too Anglo-Saxon, too much about free markets and competition, too little about workers' rights or full employment, our correspondent says.

But others in the French Socialist Party opposed his campaign.

Socialist leader Francois Hollande agreed the constitution was not perfect, but said a "no" for the party and the country that helped build Europe would be catastrophic.

This internal referendum was called after Fabius called for a "no" vote in the national referendum on the Constitution, due some time in 2005, that will authorise or not the ratification by France of the treaty. Apart from internal politicking (Fabius probably saw this as a last ditch effort to exist in a party where he has been slowly marginalised, by jumping on a hot issue) and the reluctance of some Socialists to vote yet again alongside Chirac after the humiliating 2002 election, the real possibility that the Socialists would vote against ratification is a testimony to France's lost bearings and (unwarranted) lack of confidence in its influence on the European stage.

So this unexpectedly strong showing for the Yes is reinvigorating. It comes in that most legitimate way, after a real, serious, open,  political debate, it improves the chances of France ratifying the Constitution (and thus avoiding a real crisis of confidence in Europe at a time when a functional Europe is more needed than ever), and it acknowledges that Europe's constitution is neither "socialist" nor "liberal" (as each side likes to fear), but a way to describe how decisions are taken together on an expanding swathe of topics of common interests, and it shows that France is not completely hopeless!

So 3 cheers today for French Socialists!

Posted by Jérôme à Paris on December 2, 2004 at 02:04 AM | Permalink | Comments (8)