Moon of Alabama Brecht quote
March 31, 2008

Hobrooke's Afghanistan Conundrum

Some thoughts on Richard Holbrooke's oped in today's Washington Post.

With regards to Afghanistan Holbrooke, a Democrat and possible Clinton SecState, writes:

This affair also highlights the conundrum Afghanistan presents the United States and NATO. There will be more successes like Khost as additional NATO troops, including 3,000 U.S. Marines, arrive later this year. But with each tactical achievement, Afghanistan will become more dependent on international support, which will always be better, faster and more honest than anything the government will be able to supply.
...
The effort in Afghanistan is vital to America's national security interests, and we must succeed -- as the team in Khost has. But even as the United States and its NATO allies move deeper into the cauldron, questions must be asked: When, and how, will the international community hand responsibility for Afghanistan back to its government? Will short-term success create a long-term trap for the United States and its allies, as the war becomes the longest in American history?

Before getting to the gist of that OpEd let me debunk some issues:

  • The "better, faster and more honest" solutions are only such in a "western" view. Afghanis are likely to view these (solutions by indiscriminate bombing) very different. Holbrooke presents no base for his statement other than U.S. puppet Karzai government voices.
  • Afghanistan has nothing to do with "America's national security interests". The guys who did 9/11 where mostly Saudis. The pilots of those planes were not trained to fly in Afghanistan but, guess what, in U.S. flight schools. That the guy who is alleged to have come up with the general 9/11 idea was at some time a paying guest of some Afghan government hostel doesn't make Afghanistan a "vital national security interest." That guy could have lived anywhere else working on the same plans.
  • If U.S. national security interests are in the economic sphere, like access to resources, please Mr Holbrooke, explain to my why China got the contract for that huge copper mine in Afghanistan and the U.S. didn't even bid on it.

That said, Holbrooke has a point in asking the right question.

What is the "western" endgame in Afghanistan?

With each month more "western" forces are injected there, with each month the casualties increase on all sides, with each month the situation there gets worse for the Afghan people.

So what IS the plan for Afghanistan? Is there anyone at all?

The only one I can determine from press reports is to demonstrate NATO's "viability" - the NORTH ATLANTIC(!) treaty organisation. My globe doesn't show the North Atlantic or NATO threatened by Afghanistan ...

So why does NATO have to show up there at all?

Posted by b on March 31, 2008 at 03:35 PM | Permalink | Comments (7)

The "Terrorist" as Peacebroker

To sum it up:

  • Maliki is the U.S. supported puppet in Iraq
  • Maliki starts a war on Sadr
  • Sadr stops the offense against him and successfully attacks Maliki's forces and his backers in the Green Zone
  • Maliki sends folks to Iran to have an Iranian "terrorist supporter" mediate a peace deal with Sadr
  • Sadr sets the terms under which he agrees to stop fighting
  • Maliki agrees (somewhat) to Sadr's terms and the truce
  • The U.S. taxpayer pay $12 billion a month to watch this show

So isn't this a bit absurd?

Designation of Iranian Entities and Individuals for Proliferation Activities and Support for Terrorism
Department of State, Oct 25, 2007

Proliferation Finance – Executive Order 13382 Designations

E.O. 13382, signed by the President on June 29, 2005, is an authority aimed at freezing the assets of proliferators of weapons of mass destruction and their supporters, and at isolating them from the U.S. financial and commercial systems.
...
IRGC Individuals: Treasury is designating the individuals below under E.O 13382 on the basis of their relationship to the IRGC.
...
Brigadier General Qasem Soleimani, Commander of the Qods Force
...
Support for Terrorism -- Executive Order 13224 Designations

E.O. 13224 is an authority aimed at freezing the assets of terrorists and their supporters, and at isolating them from the U.S. financial and commercial systems. Designations under the E.O. prohibit all transactions between the designees and any U.S. person, and freeze any assets the designees may have under U.S. jurisdiction.

IRGC-Qods Force (IRGC-QF): The Qods Force, a branch of the Islamic Revolutionary Guard Corps (IRGC; aka Iranian Revolutionary Guard Corps), provides material support to the Taliban, Lebanese Hizballah, Hamas, Palestinian Islamic Jihad, and the Popular Front for the Liberation of Palestine-General Command (PFLP-GC).

Iranian general played key role in brokering Iraq cease-fire
McClatchy, March 31, 2008

Iraqi lawmakers traveled to the Iranian holy city of Qom over the weekend to win the support of the commander of Iran's Qods brigades in persuading Shiite cleric Muqtada al Sadr to order his followers to stop military operations, members of the Iraqi parliament said.

Sadr ordered the halt on Sunday, and his Mahdi Army militia heeded the order in Baghdad, where the Iraqi government announced it would lift a 24-hour curfew starting early Monday in most parts of the capital.
...
[T]he Iraqi lawmakers held talks with Brig. Gen. Qassem Suleimani, commander of the Qods (Jerusalem) brigades of Iran's Revolutionary Guard Corps and signed an agreement with Sadr, which formed the basis of his statement Sunday, members of parliament said.

Posted by b on March 31, 2008 at 01:21 PM | Permalink | Comments (38)

March 30, 2008

Why do these donors support Clinton's strategy?

Hillary Clinton promises to prolong the primaries, which she has essentially lost, All The Way to Denver

Sen. Clinton gave a pretty astonishing interview to the Washington Post in which she appears to say she will stay in the race till the convention in August, where she will take her fight to the credentials committee to have the delegates from the non-sanctioned Michigan and Florida primaries seated.

That may rip the Democratic party apart. In my view, that alone wouldn't be a big loss. But it seriously increases the chances for McCain to win the bigger race and the chances for more wars in the Middle East.

In a letter to speaker Pelosi major donors support Clinton's strategy and put pressure on the Democratic Party to not force an earlier decision.

Xymphora, Jeffrey St Clair and Nicholas D. Kristof have suggested that a 2008 victory for McCain is what Hillary (and Bill) Clinton now want.

In four years McCain is too old to run again and Clinton could then have another chance to run and win, while a 2012 attempt against a sitting president Barak Obama is likely a guaranteed defeat.

So one can certainly understand Hillary's personal motives to take the fight to the bitter end.

But one wonders what the real aims of these party donors are. Why do they support a strategy that may lead to a devastating loss for their party? Why do they essentially support McCain and his bellicose threats against Iran?

The Jewish Telegraphic Agency finds:

Twelve of the 20 Clinton backers who warned Nancy Pelosi to keep out of the Democratic presidential primaries are Jewish.

The 20 signatories to the letter sent recently to Pelosi (D-Calif.), the speaker of the U.S. House of Representatives, are major donors to the Democratic Party and strong supporters of Sen. Hillary Rodham Clinton (D-N.Y.).

Hmm ... time for some 'conspiracy theories'?

Posted by b on March 30, 2008 at 01:14 PM | Permalink | Comments (48)

March 29, 2008

Z-Big on Iraq

No, I don't like him. He's an imperialist. But he is a realist-imperialist which is something I prefer over a neocon-zionist imperialist any day.

Zbigniew Brzezinski writes in tomorrows WaPo on The Smart Way Out of a Foolish War

The decision to militarily disengage will also have to be accompanied by political and regional initiatives designed to guard against potential risks.
...
The longer [U.S. occupation] lasts, the more difficult it will be for a viable Iraqi state ever to reemerge.
...
It is also important to recognize that most of the anti-U.S. insurgency in Iraq has not been inspired by al-Qaeda. Locally based jihadist groups have gained strength only insofar as they have been able to identify themselves with the fight against a hated foreign occupier.
...
Bringing the U.S. military effort to a close would also smooth the way for a broad U.S. initiative addressed to all of Iraq's neighbors. Some will remain reluctant to engage in any discussion as long as Washington appears determined to maintain its occupation of Iraq indefinitely. Therefore, at some stage next year, after the decision to disengage has been announced, a regional conference should be convened to promote regional stability, border control and other security arrangements, as well as regional economic development -- all of which would help mitigate the unavoidable risks connected with U.S. disengagement.

The last graph is obviously from Pat Lang's Concert of the Middle East paper written in late 2006.

More Z-Big:

[W]e should consider a regional rehabilitation program designed to help Iraq recover and to relieve the burdens that Jordan and Syria, in particular, have shouldered by hosting more than 2 million Iraqi refugees.
...
The "unipolar moment" that the Bush administration's zealots touted after the collapse of the Soviet Union has been squandered to generate a policy based on the unilateral use of force, military threats and occupation masquerading as democratization -- all of which has pointlessly heated up tensions, fueled anti-colonial resentments and bred religious fanaticism.
...
We started this war rashly, but we must end our involvement responsibly. And end it we must. The alternative is a fear-driven policy paralysis that perpetuates the war -- to America's historic detriment.

In the piece I excerpted above Z-Big speaks a lot about the "costs" of the war. While he talks about U.S. money, dead and wounded, he doesn't mention any Iraqi "costs". He only "considers" some vague reparations ...

He still wants a "residual force in Iraq" to prevent against outer "threats", which to him are al-Qaeda and Iran and not the much more likely Saudi-Sunni threat to overthrow any majority Shia government in Iraq.

Z-Big thinks that Iraq somewhat distracts from Afghanistan which is stupid. Afghanistan is a U.S. occupation for a flimsy reason just as much as Iraq is. It has to and will end the same way.

Still, Z-Big is an important voice in U.S. policy and he has international reach. Most of the right European parties are more near to Z-Big than to the Neocons. The piece above will have quite an effect there. In the Middle East he has some credentials to be more "middle ground" than most U.S. politicians.

So while this is far less than I would like, it is also by far the best U.S. position paper I have seen put forward by someone with a "voice" in a major U.S. media for quite some time.

Posted by b on March 29, 2008 at 05:01 PM | Permalink | Comments (16)

Sadr's Personnal Management Lesson

To successfully lead people one has to know what incentives will motivate them and which will not. Here is Sadr giving a lesson to Maliki.

Sadr ordered calm and asked his followers to distribute Korans and olive branches to Iraqi police checkpoints.
Iraqi forces launch major offensive, March 26

---

After a Friday deadline for gunmen to surrender their weapons and renounce violence expired with few complying, al-Maliki's office announced a new deal, offering Basra residents unspecified monetary compensation if they turn over "heavy and medium-size weapons" by April 8.
US warplanes widen airstrikes in Iraq, March 29

---

AP Television News footage showed a group of about a dozen uniformed police, their faces covered with masks to shield their identity, being met by Sheik Salman al-Feraiji, al-Sadr's chief representative in Sadr City.

Al-Feraiji greeted each policeman and gave them a copy of the Quran and an olive branch as they handed over their guns and ammunition.
US warplanes widen airstrikes in Iraq, March 29

Some incentives to help and some don't. Not only in the specific case above, but what Sadr is offering and delivering to the people is in general much more welcome than what Maliki offers and delivers.

So it is a good lesson, but it is unlikely that Maliki will learn from it.

Like many bad managers he assumes that the greed that motivates him is also the driving force within other people.

That's stupid.

---
UPDATE:

AFP differes in the tale from todays AP story above.

A top Sadr aide in eastern Baghdad, Salman al-Afraiji, told AFP several Iraqi soldiers had come to the cleric's Sadr City office and offered to lay down their own weapons.

"We told them they should keep their arms. We gave them a Koran and they went back," he said.
Sadr orders militia to reject PM's call to surrender arms

Posted by b on March 29, 2008 at 01:15 PM | Permalink | Comments (27)

March 28, 2008

Music for a while

There are many kinds of music that have influenced me in my youth. Naturally a lot of weird krautrock and, from the other side of the ocean, Springsteen's Born to Run album with Jungleland and Meeting across the river which somewhat caught my real live experience at that time. Rush's 2112 also deeply touched me.

When those albums were published, next to attending (or not) school, I was smuggling dope from Amsterdam to my home town in north Germany to sell it to GIs who were bored while pretending to guard a bunch of cold-war nukes. The Twilight zone coincided with a short h experience.

But in parallel to these 'growing pains' as my father thought of my tastes, there was a different strain of music I also fell to - Bach, Handel, Wagner and others. That 'schizophrenic' split, which I believe wasn't and isn't one, is still there.

When today I says "I'll go to a Neumeier concert tonight" my friends wonder: Mani Neumeier at the Fabrik or John Neumeier at the Hamburg Opera?

Why not both?

Here is Alfred Deller singing Purcell: 'Music for a while shall all your cares beguile ...'

.

Posted by b on March 28, 2008 at 04:44 PM | Permalink | Comments (20)

Did Maliki Trap the U.S.?

Everyone seems to be musing on why Maliki started this silly war against Sadr and why it was started now.

There is a theory that Cheney gave the order for this skirmish and another theory that this is all an Iranian plot. (See also Marc Lynch's take from a Saudi paper and on other theories.) A third informed opinion argues that this is Maliki's private dirty war to prevent elections in south Iraq.

The assumed motive in the first theory is that the anti-occupation stand of Sadr and his cooperation with nationalist Sunni forces are endangering the permanence of the U.S. occupation in Iraq. In the Iraqi parliament Sadr and Sunni nationalists could vote down any treaty that Cheney and Maliki would like to sign to achieve permanent U.S. backup for his or another puppets rule. Sadr has to be defeated before the end of the year when the UN mandate for U.S. troops runs out. Patrick Cockburn is going into that direction when he asserts that "the Americans must have agreed to the attack."

The Iranian plot theory comes with two different assumed Iranian motives. The first is that Iran ordered Maliki to attack because it wants to keep the U.S. in trouble and thereby prevent an attack on Iran. As Bill Lind layed out in Operation Cassandra a U.S. attack on Iran might well lead to a decisive defeat of the U.S. army in Iraq. With the U.S. army bogged down in Iraq, Iran has less to worry about. A second thought is that Iran would like to have a united southern Iraqi Shia state under Persian influence that over time could be assimilated into Iran. Sadr's nationalist stance and his relative distance to Teheran would hinder that goal.

Billmon, in comments to a recent Lind piece, combines these two theories and muses:

It is just me and my paranoia, or has anyone else noticed that just as the Cheney Misadministration grapples with the question of whether to continue the troop drawdown in Iraq, suddenly all hell breaks loose between the “good” Shia — i.e. our “allies” in the Maliki “government” — and the “bad” Shia in the Mahdi Army?

When I ran that observation by a friend, he immediately assumed I was accusing Team Cheney of stoking the boiler to keep the pressure on Bush/Rice and the troops in country. But I actually don’t have any particular theory of the case — there are so many suspects.

But it does occur to me (repeatedly) that Iranian hardliners of various denominations have a strong, vested interest in keeping the US Army buried up to its neck in the Iraqi sand pit, thereby making a march to Tehran impossible (or at least, even more impossible) and providing lots of ripe targets and potential hostages if the cabal decides to roll the dice with an air campaign against the Iranian nuclear program.

In other words, not for the first time I’m wondering: Are Dick Cheney and Mahmoud Ahmadinejad essentially working the same side of the street?

Good question ...

The third theory, laid out in detail by Fester, is supported by this bite from WaPo:

The clashes suggested that American forces were being drawn more deeply into a broad offensive that Prime Minister Nouri al-Maliki, a Shiite, launched in the southern city of Basra on Tuesday ...

Maliki decided to launch the offensive without consulting his U.S. allies, according to administration officials. With little U.S. presence in the south, and British forces in Basra confined to an air base outside the city, one administration official said that "we can't quite decipher" what is going on. It's a question, he said, of "who's got the best conspiracy" theory about why Maliki decided to act now.

The current government in Iraq was pressured by Cheney to finally agree to pass the law for provincial elections this fall. The Republicans needed the passing of the election law to show some success from the 'surge'. But if the elections really would take place, Maliki's Dawa and his allies from ISCI would likely lose out against Sadr's followers.

Maliki therefore has to prevent the election. He started this civil war with an absurd small number of unreliable troops and no hope of winning against Sadr's Hizbullah like defense strategy. He did so to, successfully, draw the U.S. into a renewed fight over the South, the U.S. troops main supply line, to create chaos that will not allow for an election to take place.

The U.S. is in a bind and Maliki can effectively start wars against this or that faction and always demand to be backed up by U.S. power. The U.S. is now in position where it must fight other peoples civil wars.

Maybe Maliki did believe the Dan Senor spin that Sadr is defeated and thought he really could take over Basra? I doubt it. Maliki now has to extend the 'deadline' he gave to Sadr to lay down arms by more than a week and thereby conceded the obvious defeat. But if the third theory is right and Maliki really started this to draw the U.S. into a renewed fight against Sadr, he has achieved his goal:

U.S. forces in armored vehicles battled Mahdi Army fighters Thursday in Sadr City, the vast Shiite stronghold in eastern Baghdad, as an offensive to quell party-backed militias entered its third day. Iraqi army and police units appeared to be largely holding to the outskirts of the area as American troops took the lead in the fighting.

and

[UK] Maj Holloway said US warplanes had for the first time in the operation carried out bombing raids overnight in Basra, targeting "mortar teams" and "a concentration of militia troops".

Abu Muqawama sees a dangerous historic parallel:

In Lebanon, in September 1983, the U.S. lent direct support to what it assumed was a national institution, the Lebanese Army, in the battle at Souk el-Gharb. By doing so, it became, in the eyes of the rest of the Lebanese population, just another militia. The U.S. history in Iraq is more complicated, obviously, but what's happening now is the U.S. is throwing our lot in with ISCI in the upcoming elections. And all Abu Muqawama is saying is, there better be a whole lot of quid pro quo going on as well.

Spencer Ackerman believes the unfolding chaos is an argument for the U.S. to stay longer, i.e. until a political solution is found. I disagree, the U.S. in Iraq is not the solution, but the source of the problem.

"If there were no Americans, there would be no fighting," said Abu Mustafa al-Thahabi, 38, a senior Mahdi Army member.

Whatever theory is right (I do lean to the third), from here on the war in Iraq will again become hotter.

Posted by b on March 28, 2008 at 09:23 AM | Permalink | Comments (24)

March 27, 2008

The New Totalitarianism of the Market

by DeAnander
lifted from a comment

the walls, the ghettoisation, the collective punishment, the disproprtionate force - these are all lessons straight out of the nazi occupation of the east or rotterdam for example - petraeus is their stroop
r'giap

Random Morning Thoughts ...

I think it is an unbroken historical legacy, a continuous process of the industrialisation of warfare and extermination, a confluence of the ideas of "hygienic" chemistry and nationalist / militarist / masculinist obsessions. That continuity is obfuscated by our nationalist educational systems, which "take sides" and portray e.g. the Nazis as an ahistorical blip, a weird moment of pure Evil, rather than as participants in an historical continuum of refinement and "improvement" of the tools of occupation and control.

The Nazis studied the Boers and British methods in Africa; W Churchill recommended the use of the then-novel "poison gas" on African indigenes; the Nazis practised modern warfare on the Spanish revolutionaries (and the US and UK governments also backed the Franco regime); Guernica was a trial run for the Blitzkrieg theory and modern aerial bombardment, but bright minds on all sides were already thinking about the possibilities as soon as the first dirigibles flew.

The poison gas of WWI trench warfare was based on insecticidal chemistry, and after the war the insecticides were 'improved' based on the vast profitable "experiment" of trench warfare; come the Nazi regime and the gas used to murder Jews en masse in the camps was a pesticide.

Like the revolving door of CEOs becoming senators and senators becoming CEOs, the technology used to slaughter "lower life forms" en masse rotates between deployment against invertebrates and deployment against despised human beings redefined as lower life forms. The basic idea of achieving cleanliness and closure by mass slaughter never changes. Collective punishment, collateral damage -- just another way of describing "bycatch" or "side effects" or "overspray."

The victorious Allies grabbed and studied the notebooks of the Nazi merchants of horror, and gave special postwar protection to Nazi scientists who might be useful in further developing the tools of occupation and liquidation for "the good guys" (as if there were ever any good guys in this filthy business) -- as Tom Lehrer noted in his Ballad of Werner von Braun.

The Israelis studied apartheid South Africa as a textbook example of how a small Euro/White minority could control a larger colonised, indigneous nation... The ironies, the hypocrisies, the tragedies are endless. What goes 'round comes 'round, over and over.

The historical arc of industrial warfare is transnational, supranational. Krupp sold to all sides, as has every arms merchant before and since. The escalation ("arms race" is a classic games theory model) is endemic, structural, inevitable without strong intervention in deliberate, organised opposition to imperialism and profiteering. The walls, the ghettoisation, the collective punishment, the disproportionate force are the face of Taylorism and industrialism as applied to warfare and colonialism, the "improvement" of warfare for "increased efficiency" (and of course, greater profit).

Along with this goes the industrial mindset which increasingly regards the entire biotic realm as a Problem to be exterminated and replaced with controlled, standardised artificial monocrop.

When Israeli wingnut demagogues talk about the Palestinians as "cockroaches" or as a "disease" they are not merely echoing Nazi antisemitic rhetoric in a horrid historical travesty, but hewing to the long cultural tradition that springs from (among others) Pasteur and Liebig, of a hatred and loathing for "microbes" and for the working class, the peasantry, "the masses". Pasteur - staunch royalist - spoke of the masses and of microbes in the same disgusted tone, and of revolutionary ideas as like the corruption in a wound that leads to gangrene and rots the body/social order, causing the death of the brain/soul (the King and royal caste).

There is a cultural continuity between the millions of acres of genetically identical monocultured cropland now disfiguring most of the world's agricultural land, and the Aryan eugenicists' ideal of reducing the human race to one blond, blue eyed archetype of standardised height, weight, and physical fitness. The urge to conformity, uniformity, microcontrol, predictability, repeatability, surely has been in us from the beginnings of militarism and hierarchy; but the industrial revolution was like mixing crack with the baccy.

The success of industrial processes (which from the beginning were driven by military "needs" - the first mass produced assembly line techniques were used to make Remington rifles - Ford's automobiles were the second wave; and the artificial soda process that jumpstarted industrial chemistry was invented in response to a military requirement for munitions materiel, not for soap making) lent the militarist/Taylorist cult of regimentation and uniformity a halo of divine right - if it succeeded so spectacularly at yielding working machines, temporary gluts of resources, "labour savings" and immense profits, how could it be wrong? And besides, it tweaked the human appetite for control and power.

And so the mania for standards, metrics, artificiality, control and conformity spreads and spreads, lending a new and bland acceptability to genocide and the destruction of nations. As one US grunt said of the Iraqis, they are sure backwards and poor, they don't even have a McDonald's or a Carl's Jr. ...

And even as we speak, over the last few years, Proconsul Bremer's fiat laws attempt to wipe out the diversity of Iraqi agriculture and force their farmers to grow GMO strains of patented corporate wheat from US agribiz - standardised monoculture, licensed and controlled, thousands of acres of undifferentiated monocrop binding the farmer to the new feudal order of intellectual property and privatisation of germline...

World without end, the factory and the assembly line and the money economy remodelling every facet of human existence, the new totalitarianism of the market.

It is not possible to unravel the war economy w/o unravelling these memes: 

  • the myth that distance equals cleanliness (what we don't see doesn't concern us, aerial bombardment is "clean" warfare, emissions elsewhere mean "clean" vehicles, dumping our waste on the third world keeps our countries "clean", dumping our sewage and toxic effluent in rivers keeps our homes "clean" and so on);
  • the myth that "efficiency" is a virtuous end in its own right (efficient at what? to benefit whom?);
  • the myth that money is more important than biotic reality;
  • the myth that infinite growth is possible;
  • the myths of race and nation, of taxonomic obsession that flies in the face of the grand symbiosis of biotic systems;
  • and so on...

But I'm raving... 

Posted by b on March 27, 2008 at 03:39 PM | Permalink | Comments (46)

How the Taxpayers Are Carrying the Bailout Risk

When I wrote about Bernanke's 'Non-Standard' Policies I forgot ask an important question.

Who is carrying the risk for the Fed's new policy?

By looking at the normal balance sheet mechanism it is quite simple to determine that the taxpayers are the once who will have to bleed when the Fed's policy runs into problems.

The Federal Reserve is a private company owned by large commercial banks and has a total capital of some $30 billion. The government has given the Fed certain exclusive rights and obligations in exchange for certain services and a chunk of its profits. The profits for the Fed owners are limited by law to 6% of the paid-in capital. The rest goes to the government and gets spend like any taxdollar.

The Fed gives out dollar notes, i.e. money, and uses these to buy Treasuries. On its balance sheet the notes it has given out are a liability, the treasuries it bought are an asset. At the end of 2006 the Fed had $780 billion of outstanding notes and the same amount of U.S. government securities. Its balance sheet was indeed in balance.

The treasuries the Fed purchased generate interest. For the fed this is net income, i.e. profit. A small part of the profit is payed out to its owners, some of the money goes to expand its reserves and the bulk, some $30 billion in 2006, is payed back to the government.

If the Fed would not generate this profit and give it to the government, the 160 million or so U.S. taxpayers would have to make up the difference. If the Fed makes no profit, each U.S. taxpayer will have to pay an additional $190 per year.

If a regulated bank is in trouble the Fed can lend money to the bank in exchange for treasuries as collateral. To do so increases both sides of the Fed's balance sheet and increases the amount of money in circulation. It is an inflationary policy as more money is put into circulation and is chasing an unchanged amount of goods.

Bernanke's new policy to 'help' the banks currently in trouble is 'sterilized'. The Fed does not lend out money, but it lends out treasuries and accepts other interest generating papers as collatoral. The amount on both sides its balance sheet stays unchanged and the policy does not directly generate inflation (An argument can be made that this creates a hidden form of inflation.)

According to the Fed lending rules it now accepts asset backed securities, like mortgage papers, with a 'haircut' of 20%, i.e. for 80% of the nominal value of those papers.

If the papers the Fed accepts as collateral for lending out treasuries is worth less than those 80% and the bank it lent treasuries to goes bankrupt, the Fed will make a loss.

That is not a theoretical case. The Fed so far has committed aboul half of the treasuries it held to the scheme. It has prolonged the lending period from overnight to 28 days. It no longer only lends to the commercial banks it regulates, but also to unregulated financial institutions like BearStearns.

Many of the asset backed securities are worth much less than there face value. Nobody really knows exactly how much because there currently is no real market for such papers - which is exactly the reason for the 'credit crunch'. In a few cases such papers have been sold for only 30% of their face value. The Fed takes such at 80% of face value.

The Fed has given away valuable treasuries for junk and when one of the banks it lent to fails, it will make a loss instead of a profit. Then the government will get less or no money from the Fed and the taxpayer will be asked to come up with more.

The Fed does not carry the risk here, the taxpayers do.

It would be good for them to understand this. That's probably the reason why the media doesn't explain this.

Posted by b on March 27, 2008 at 02:36 PM | Permalink | Comments (18)

March 26, 2008

Rice-McCain - Likely

Posted this in the OT thread some hours ago, but it deserves wider discussion. Steve Clemons says:

Condi Rice Flirts With VP Possibility -- Speaks to Grover Norquist's Wednesday Group Meeting

As one major Republican operative told me yesterday:

Someone like Condi Rice doesn't go to Grover Norquist's den to talk about the Annapolis Middle East peace process. She's going to secure her future in Republican politics and to position herself as a 'potential' VP candidate on the McCain ticket.

A follow up reports:

[Rice] responded by saying that she was not interested in more government service at this point ...
...
Others still argue that one does not talk serious foreign policy matters with the Wednesday Group Meeting without wanting to also telegraph that one might be interested in political futures. In other words, though saying she is not interested in the Vice Presidential slot on a McCain ticket, Condoleezza Rice might be convinced at some point to give up her near California dreams if "necessity" required it.

If Obama wins the Democrats race it makes a lot of sense for McCain to use Rice as VP. Right melanin level - right conviction.

Mr. 'Know-nothing' together with Miss 'Can't-get-anything-done' - a perfect match.

Will the people fall for it? Maybe, or likely - the media will - inevitably.

Posted by b on March 26, 2008 at 04:24 PM | Permalink | Comments (41)

A Failed U.S. Mission to Pakistan

In what looks like an emergency mission, Deputy Secretary of State John Negroponte and Assistant Secretary of State Richard Boucher yesterday descended on Pakistan. Reviewing Pakistani news sources, the mission seems to have failed. It started off with undiplomatic pressure.

According to sources, this particular visit was not planned. Instead, the US side contacted Islamabad expressing a desire for the visit.

"The reaction from Pakistan was that a new government was not yet in place and even the new prime minister had not been sworn in. It was advised that some later date could be arrived at with mutual consultation. However, both the officials insisted on coming," confided one source.

In seperate sessions Negroponte and Boucher met with Musharraf, the leadership of the PML-N party of Nawaz Sharif and the PPP leadership around Bilawal Bhutto Zardari.

Today they will meet the new Prime Minister Syed Yousuf Raza Gillani, who is also a member of the PPP, as well as with heads of other parties. Interestingly Anne W. Patterson, the US ambassador to Pakistan, did not take part in any of the meetings.

The task seems to be twofold:

Political analysts said the US officials’ visit was aimed at defusing a possible confrontation between the new parliament and the presidency.

Another purpose of the visit, they said, was to seek commitment from the new coalition government about Pakistan’s role in the war on terror.

With regard to Nawaz Sharif that mission failed on both issues. On point 1:

Talking to US Deputy Secretary of State John Negroponte and Assistant Secretary of State Richard Boucher here at Punjab House on Tuesday, he made it clear on visiting US authorities that he would not work with President Pervez Musharraf at any cost.

and point 2:

“Pakistan wants to see peace in every country, including the US. However, to ensure peace in other countries, we cannot turn our own country into killing fields,” Mr Sharif said in categorical terms.

The reaction to the U.S. demands from the PPP party, at least on point 2, was slightly friendlier, but essentially the same:

During his talks with the visiting American officials, vice secretary of state John Negroponte and Richard Boucher, co-chairman PPP Asif Ali Zardari has made it clear that he wished to settle disputes with militants through dialogue and not through offensive against them.

A Private TV channel reports that Asif Ali Zardari espoused his views in reaction to the American desire to keep up the previous policies and steps against the militants.

It is very unlikely that the new prime minister Gillani will have a different view on U.S. style War of Terror than the heads of his coaltion parties. With regards to Musharraf, he will not have any friendly word either. Giliani is the scion of a leading landowner family from Punjab.

He was sent to jail by Gen. Musharraf in 2001, serving five years following a conviction over illegal government appointments. After being sentences by the Musharraf regime in 2001 he told reporters that the charges were “concocted and were fabricated to pressurise him to leave the PPP… Since I am unable to oblige them, they decided to convict me so that I could be disqualified and an example set for other political leaders who may learn to behave as good boys.”

The U.S. pressure team came late. The new elected government was swift in taking over. It immediately freed the judges Musharraf had jailed or put under house arrest and it cleaned up the government hierarchy. By now Musharraf has lost most of his allies in the military and in politics.

Chief of Army Staff Gen Pervaiz Ashfaq Kayani has replaced Maj-Gen Mian Nadeem Ejaz with Maj-Gen Mohammad Asif as Director-General of the Military Intelligence (MI). ...
Maj-Gen Nadeem Ejaz has close family relations with President Pervez Musharraf, and was appointed to the position almost two years ago.

Head of Military Intelligence, the infamous Directorate for Inter-Services Intelligence, is a key position in Pakistan. Another key position was held by Syed Sharifuddin Pirzada, the legal mind behind past Pakistani dictators as well as behind Musharraf:

Syed Sharifuddin Pirzada, the legal architect of almost every [Provisional Constitutional Order] which repeatedly subverted the Constitution, has been finally removed from his job along with other advisers and special assistants of the past military regime.
...
With Pirzada's exit, President Musharraf is left with only one key aide outside the presidency – Attorney-General Malik Muhammad Qayyum, who too would be replaced within a few days time.

It looks likely that Musharraf will have to leave his job pretty soon. The U.S. War of Terror in Pakistans North West tribal area will have to stop. U.S. policy on Pakistan has completely failed. As The News editorializes:

[T]he panic in the American camp is no one else's fault but a situation caused by Washington's own acts of omission and commission. The White House and the State Department never listened to advice – often coming from within America – in the last many years telling them not to put all their eggs in one (individual's) basket. Now it is time to face the consequences of a bad policy.

Posted by b on March 26, 2008 at 12:04 PM | Permalink | Comments (13)

March 25, 2008

The New Assault on Sadr

The Iraqi Vice President Adel Abdul Mehdi had blocked the law that would allow for provincial elections this fall. A week ago, under alleged pressure from and negotiations with Cheney, the veto was lifted.

Mehdi is member of the Supreme Islamic Iraqi Council (SIIC) which had won the provincial elections in south Iraq in 2005, when its competitor, the Sadr movement, boycotted the election. New elections would likely be won by Sadr. But allowing the law to pass, does not mean that SIIC, the Iraqi government and the U.S. occupier will allow the Sadr movement to win. If Sadr would win the southern provinces he, together with the Sunni tribal groups he is negotiating with, could set up a nationalist coalition against the government and the occupier.

Instead of holding up the election, the SIIC's new plan seems to be to eliminate its competition by brute force. Dispite Sadr's prolonging of his unilateral truce, there were recently several clashes between government troops and his people in Kut. In Baghdad U.S. troops started house to house searches in Sadr city and accidentally(?) killed a man and his three children in their car. Functionaries from his movement were arrested and allegedly killed by U.S. forces.

Sadr's answer was a call for civil disobedience, "sit-ins" and peaceful protest against the government. But he also threatened a "civil revolt" if the raids continue.

Yesterday the government opened a new front against Sadr by attacking his movement in its stronghold Basra. With U.S. and British air support three brigades of the Iraqi army (certainly under control of U.S. 'advisors') are trying to 'get control' over Basra.

With such an allout onslaught against them, Sadr will not be able to hold his people back much longer. But if he now calls for, or allows, open warfare against the government and occupation troops, his movement might get outlawed and disqualified from taking part in the provincial elections.

If Sadr is smart, he will for now lay low and restrict his groups to deniable commando attacks and guerrilla fighting while continuing to assert social control over the people in the south. But if the provocations against him become unbearable, the Iraqi summer will again be very bloody.

Posted by b on March 25, 2008 at 01:20 PM | Permalink | Comments (43)

Unilateral Sanctions Against Iran

How can I buy something when I am not allowed to pay, even though I have plenty of money? How can I sell something when I am not allowed to cash in the receivable?

Those are the questions Iran's economy is asking itself now. As the Financial Times reported a few days ago:

Washington has called on international financial institutions to steer clear of doing business with Iran’s central bank, in the US’s most wide-ranging attempt yet to isolate Tehran financially.

The Treasury department has issued a warning of the risks of doing business with 51 state-owned and seven privately held Iranian banks – in effect the whole of Iran’s banking sector.

The Treasury makes sure such 'warnings' are followed through by threating foreign international banks dealing with Iran to be sanctioned themselves and to be cut off from the U.S. financial system.

These new 'sanctions' go far beyond what the UN Security Council has agreed upon. This is a unilateral step by the U.S. but will likely be effective if foreign governments allow banks under their jurisdiction to follow such U.S. 'advice'.

The EU has declared such U.S. attempts of extraterriorial jurisdiction illegal (pdf, no. 47), but it is doubtful that it will really push against these. It should do so, if only for principle reasons.

For Iran to be cut off from the international financial system is an economic catastrophy.

John McGlynn calls these new 'sanctions' The March 20, 2008 US Declaration of War on Iran. He explains the (il)legal and economic background of these in detail and concludes:

Iran [..] will become another Gaza or Iraq under the economic sanctions of the 1990s, with devastating impact on economy and society. That Iran’s complete financial and economic destruction is the goal of US policy was spelled out by the State Department the day before the FinCEN announcement.

During a daily press meeting with reporters on March 19, the State Department’s spokesperson was asked about a deal recently signed between Switzerland and Iran to supply Iranian natural gas to Europe. After condemning the deal, the spokesperson explained that the US is opposed to any “investing in Iran, not only in its petroleum or natural gas area but in any sector of its economy” and questioned rhetorically the wisdom of doing business with Iranian “financial institutions that are under UN sanctions or could become under sanctions if it’s found that they are assisting or aiding or abetting Iran’s nuclear program in any way.” A clearer expression of US desires is hardly possible.

The U.S. desire is unchanged since the Iranian revolution - regime change by whatever means.

Posted by b on March 25, 2008 at 09:25 AM | Permalink | Comments (12)

March 24, 2008

Clinton on Housing and Sex Offenders

WHITE PLAINS, New York (RBN) - Hillary Clinton, a presidential candidate and senator from New York, said the Federal Housing Administration should "stand ready" to buy, restructure and resell failed mortgages to strengthen the ailing U.S. economy.

She said a bipartisan group should determine whether that approach was sufficient or whether the U.S. government should step in as a temporary purchaser.

The working group could be led by bipartisan economic heavyweights such as Republican Greenspan, Democratic former Fed Chairman Paul Volcker and Robert Rubin, the treasury secretary under President Bill Clinton.

Clinton also introduced a new initiative to increase mandatory penalties for paedophile sex offenders. Under her proposal repeat offenders would be required to do at least a  year of community work, preferable in orphanages and kindergartens. "That's where the need is the greatest," her spokesperson said.

link

Posted by b on March 24, 2008 at 02:22 PM | Permalink | Comments (23)

Fuel Tanker Attacks in Afghanistan

Cloned Poster rightly says that this current news is 'big':

Up to 65 people were injured when Islamic militants in a Pakistani border town blew up dozens of tankers supplying fuel for US and NATO troops in Afghanistan, officials said today.

The rebels late yesterday destroyed 36 tankers which were parked in Landikotal, the main town of the troubled Khyber tribal district where Taliban and al-Qaeda-linked insurgents have carried out a series of attacks.
...
It was one of the worst attacks of its kind since June last year, when militants blew up at least 13 oil tankers supplying fuel to US bases in eastern and southern Afghanistan.

Such attacks on fuel supply usually do not make it into the 'western' news. They have happened since the U.S. invasion started but currently seem to be more frequent. This could be a concerted Taliban operation to strangle the occupation.

Dec 18, 2007: Afghan security guards 'ambushed'

At least 15 Afghan security guards working for a US firm have been killed in an ambush by Taleban militants in western Afghanistan, police say. They say that nine other guards - responsible for protecting a convoy of fuel tankers driving through the area - were injured in the attack.

February 2, 2008: Oil tankers torched, drivers taken hostage

Suspected Taliban insurgents set alight two oil tankers supplying fuel to US-led coalition forces in the restive eastern province of Kunar, a police chief said on Friday.

March 10, 2008: Oil tanker ‘blown up’ in Landi Kotal

LANDI KOTAL: Militants blew up an oil tanker with dynamite on Sunday, but the political administration said the tanker was safe. The tanker, which was to carry fuel to Afghanistan, was parked near the Michini checkpost.

March 18, 2008: Pakistan: Bomb Hits Afghan-Bound Truck

Pakistan's state news agency says a roadside bomb has struck an oil tanker carrying fuel for U.S.-led coalition forces in neighboring Afghanistan. No one was hurt.

The U.S. and other forces in Afghanistan need some 600,000-700,000 gallons of fuel per day. They have storage capacity for about 8 million gallons, reserves for at least ten days (pdf). 80% of the fuel needed is carried by hundreds of road tankers from three Pakistan refineries. 

The Taliban step up the campaign has two effects. Attacks on fuel tankers do hurt the occupation forces in Afghanistan. But they also put another serious burdon on Pakistan which lacks refining capacity.

Posted by b on March 24, 2008 at 10:07 AM | Permalink | Comments (12)

March 23, 2008

Fate Of An Unregulated System

The fate of this Danish wind turbine with its broken regulator is somewhat related to the current state of financial markets.

Same incident from a different viewpoint

Posted by b on March 23, 2008 at 10:39 AM | Permalink | Comments (7)

March 22, 2008

Open Thread 08-13

I'll be on the road for the next two days to celebrate the first Sunday after the first full moon in spring with some relatives. These are the days to worship the Germanic goddess Eostre, or whatever may fit you, and to her honor we'll light up some big fires.

So I'll be likely unable to post in the next 36 hours. (Still missing a MoA laptop - if you haven't yet, you may want to contribute for one.)

Please use this as an open thread for your news, views and opinions.

Posted by b on March 22, 2008 at 03:06 AM | Permalink | Comments (102)

Taiwan Election and Tibet Protests

The current Tibet rebellion was launched by young monks in Lhasa in coordination with five groups of exiles in India. These groups are sponsored by the U.S. government via the National Endowment for Democracy and other 'western' institutions.

Even though it were the Tibetan who hunted Han-Chinese people through the streets, killed some and burned their shops, the 'western' media is doing all it can to blame the Chinese for this.

This weekend there are elections in Taiwan. Until a few days ago the China friendly Nationalist Party seemed to be able to get a majority. That may have changed due to the current propaganda onslaught.

Meanwhile the U.S. Pacific fleet has put everything it has to sea and ordered two Carrier Strike groups next to Taiwan.

Are we to believe that all of this is uncoordinated?

Posted by b on March 22, 2008 at 02:48 AM | Permalink | Comments (12)

March 21, 2008

A Color Test

An fairly old test, but it was new to me until recently:

Task: "Speak out loud each word's font-color, one after the other, as fast as you can."

YELLOW RED BLUE GREEN GREEN RED BLACK YELLOW GREEN WHITE BLACK YELLOW GREEN YELLOW BLUE YELLOW BLUE BLUE RED GREEN BLUE RED GREEN YELLOW BLUE RED GREEN YELLOW RED GREEN YELLOW BLUE GREEN YELLOW

Not as easy as one would think. It's the Stroop Effect.

But what does this really tell us about perception or cognition?

How does this effect how we read 'news'?

Posted by b on March 21, 2008 at 05:07 PM | Permalink | Comments (9)

US House Speaker slams Saudi 'oppression' in Dammam

QOM, Iran (RBN) - US House Speaker Nancy Pelosi slammed Saudi "oppression" in the Saudi Eastern Province on Thursday as thousands of Shia-Saudi exiles cheered her arrival in this Iranian town to meet Ayatollah Nimr al Nimr.

In a trip that has angered Saudi officials, she flew into Qom, seat of the Shia-Saudi government-in-exile, to pay the first high-level call on the spiritual icon after anti-Sunni riots erupted in Dammam, the capital of the Eastern Province of Saudi Arabia, nearly two weeks ago.

"Speaking for myself, I would say if freedom-loving people throughout the world do not speak out against Saudi Arabia's oppression in the Eastern Province, we have lost our moral authority to speak on behalf of human rights anywhere in the world," said Pelosi, draped in a golden scarf given to her by Ayatollah Nimr al Nimr.

"The situation in the Eastern Province is a challenge to the conscience of the world. What is happening, the world needs to know," she told the Ayatollah, exiled Shia-Saudi leaders and thousands of refugees who roared with approval.

"We are with you to meet that challenge. We are with you in this challenge," she said to deafening applause from the crowd waving Shia-Saudi and US flags.

The northern mountain town was jammed with crowds of refugees, some with children hoisted on their shoulders, and black-turbaned imans. The streets were festooned with banners welcoming US support, proclaiming "American-Shia-Saudi Friendship" and "Free the Eastern Province."

Pelosi's comments drew a sharp response from Saudi-Arabia's ambassador to Iran Osama bin Ahmad Al-Sonosi, who said "no country, organisation or person" should "take any irresponsible act or say irresponsible words."

Background
Source

Posted by b on March 21, 2008 at 12:05 PM | Permalink | Comments (13)

March 20, 2008

Radical Policy Solutions - Yes, but will they come?

Some thoughts on Prof. Roubini's important piece on the Need for Radical Policy Solutions to the Crisis published yesterday. (His site now requires subscription, so I'll quote liberally with bold added.)

It is now clear that the US and global financial markets are experiencing their worst financial crisis since the Great Depression. And in spite of desperate and radical actions by the Fed this crisis is getting worse.

The Fed took extreme action by now lending not only to Fed-regulated banks, but also to unregulated financial institutions and by taking assets (mortgage backed securities - MBS) of dubious value as collateral.

We saw a bailout of Bear Stearns and a gift for JP Morgan as the Fed accepted to carry the risk for $30 billion of Bear Stearns bad assets. This move was similar to actions taken in Japan in the 1990s that led to 10+ years of economic problems.

But despite the Fed's action, says Roubini, all numbers show that the credit-market situation is getting worse and will have severe consequences:

[W]ith [interest] spreads [between treasuries and] even “safe” AAA agency and private label debt and MBS being so wide expect another round of massive writedowns that will lead to the bankruptcies of a wide range of leveraged institutions (hedge funds, broker dealers and other members of the shadow financial system).

Today we are facing a massive margin call on highly leveraged US capital markets and a massive de-leveraging of the financial system following fire sales of marked to market assets in vastly illiquid money markets, credit markets and derivatives markets.

Two weeks ago I explained the De-leveraging Spiral phenomenon in some detail.

There is a run on the 'shadow' financial system, i.e. the unregulated brokers, hedge funds, etc., that will wipe out most of these and some of the regulated institutions too. This run has only barely started.

The lack of trust of financial institutions in their counterparties is surging in spite of all the Fed actions as panic is setting in money markets and credit markets.

Now what to do? The reaction to the Fed's provisions has proven beyond doubt that the Fed is incapibale of stopping this. What is urgently needed is political/policy action. Without it, the meltdown will overshoot. Prices of all financial assets and houses would sink far below their real value and the financial destruction would have even more very severe social consequences then those that are already in the making.

[T]he piecemeal approach to crisis management taken by the Fed, the Treasury and other financial authorities is going to fail miserably. A severe recession and a severe financial crisis cannot be avoided at this point. Only much more radical government action will limit the financial meltdown and start to put a floor on the financial markets collapse. This government intervention would not be aimed to prevent the necessary adjustment of asset prices; it would be aimed at ensuring that the necessary adjustment is not disorderly.

So Roubini calls for the inevitable takeover by the taxpayer, while urging to avoid moral hazard and punishing the guilty. There are three parts to this (underline in the original).

Such radical policy action includes a government plan to purchase – at a significant discount to minimize its fiscal cost – hundreds of billions of dollars – possibly trillions – of mortgages, effectively a nationalization of mortgages. Once purchased by the governments at a significantly discounted price these mortgages could be restructured to reduce their face value, reduce the interest rate on the mortgage and allow distressed but solvent borrowers to avoid foreclosure.
...
This plan also include a formal nationalization Fannie and Freddie as the ongoing farce of pretending that these insolvent institutions are private sector firms is being revealed: [...] if these bankrupt institutions need to be used for public policy purposes – as they may need to – let us formally nationalize Fannie and Freddie – and put transparently on the public sector balance sheet the costs of bailing out the mortgage market.

This plan would also include the closing and/or nationalization of banks and other systemically important financial institutions that will fail in droves during the current financial crisis (they can then be privatized again after proper restructuring as many countries did after their banking crises). Again moral hazard distortions can be minimized by wiping out 100% the shareholders in these institutions and firing – with no sweet severance packages - all the reckless senior management that created this mess.

A agree with Roubini. The government takeover is unavoidable and if it doesn't happen now, it will happen later with much more severe consequences.

It should be pointed out that such a move would increase the federal debt of the U.S., currently at some $9+ trillion, by several trillion dollars. I still have to think through the international financial and political consequences of this. They will likely be very severe.

Roubini closes:

A market solution to this crisis does not exist; those who believe in such markets solutions are deluding themselves as markets left alone will melt down and enter into the mother of all meltdowns, margin calls, cascading collapse of asset prices, massive credit crunch and liquidity seizure and severe economic recession.

Of course the price adjustment in overpriced asset prices should not and cannot be avoided: home prices will have to fall at least 30%; equities will need to sharply correct in a bear market; risk spreads will have to widen sharply; many institutions will go bankrupt as they should. But what we risk today is a systemic financial meltdown where negative feedback loops lead asset prices to collapse much more than justified even by the much lower fundamental value of such assets.

We are facing now the risk of the mother of all financial crises and meltdowns. Moral hazard can be realistically address by wiping out reckless investors and lenders, having the government buying assets that need to be restructured at low prices closer to their fundamental value and limiting the mortgage debt reduction to truly deserving borrowers who were victims of predatory lending practices.  But radical and coherent policy action needs to be taken urgently and without further delay as there is now the risk that the US will experience its most severe recession in decades and that the US and global financial system may melt down.

I completely agree. The nationalization, which must include significant 'haircuts' for everyone involved, should happen immediately.

But it will likely not happen anytime soon.

The political constellation does not allow for such a huge nationalization project. Bush and most Republicans in congress will not agree to it. It will take another year until a new president settles in. Then the government takeover of the system will come. But by then the crisis will be so deep, that even nationalization will not help much.

Therefore the "worst financial crisis since the Great Depression" may well become worse than the Great Depression.

Let's all hope that I am too pessimistic here.

Posted by b on March 20, 2008 at 02:40 PM | Permalink | Comments (30)

March 19, 2008

Five Years in Iraq - A war? An Occupation?

by Tangerine
lifted from a comment
(and slightly editied)

It is understandable but disquieting that calling the Iraq debacle a war, seems somehow to make it (partially) acceptable to the US people. Of course they have been snowed over with the stereotype - an enemy, national defense, islamo-fascisms, cells and secret armies, und so weiter, to make it fit legendary history.

Note that Obama uses the word as well.

However, nobody is using the word peace which usually means the cessation or absence of war. This in contrast to the Israelis, who use and abuse that concept. I suppose that reflects the fact that Israel has managed to convince or show that is has enemies and that it is attacked.

In contrast everyone implicitly agrees that the US is not in that position, either because Iraqis are seen as helpless, or because the very idea of the US being attacked seriously in any way is an unacceptable concept. The ‘attack on America’ of 9/11 had some echo and effects, but was never taken seriously, in that no cause or agents beyond nebulous ‘islamic terror’ were ever identified. La-la-land in defense terms, which at the very least requires the enemy to be identified.

Opponents call the Iraq venture an occupation. Presidential candidates don’t use that dirty word, but act as if it was apt.

Hillary would withdraw troops she says (Bush did too, etc.) and presumably soften or minimize the guns/goons aspect, replacing them with Iraqi arms and other more robust structures of government and economic control, international involvement (see Afghanistan for example) etc. A question of method of managing an occupation, smoothing it over, making it politically correct, etc. (Fat hope.)

McCain prefers the discourse of what power of ten years (I have forgotten) the war shall continue. He prefers to call a spade a machine gun. No doubt Rep-Dem discourse-required differences play a role. (Gritty realism is doomed to failure both on the ground and politically.)

Yet, the term occupation doesn’t really fit either.

What is the US occupying?

The ground?
No. The infrastructure, a viable, working territory: destroyed. It is one thing to have lily pads in Germany or Kosova, another to hold postage stamps in a devastated desert and ‘badlands’.

The economic apparatus?
No. No ‘viable’ modern capitalist economy can exist lacking the material infrastructure (eg. some roads, water, electricity) without some agreed-on law and order, such as contract law, reasonable courts, and even dull stuff like traffic laws. Import-export, to mention only the obvious, has to be smooth: and for that, the ‘country’ has to have some kind of status and stability. Guam, Porto Rico, Afghanistan, aren’t US states, don’t suffer in the same way (to mention very diverse examples.) Vichy France is a counter example. Iraq has no status.

Hearts and minds? Opinion? Cyber space? Teen aspirations? Cultural kinks, core values?
No. For the US, the only only aim of capting these is to control other aspects, and clumsy propaganda efforts are tireless but passing strange and self defeating. (See link below.)

Extractive or ‘productive’ ground based business? Such as agriculture, mining, land manipulations (eg. dams) energy (fossil fuels), sustainable, so called, such as wind, dates, fish farms etc?
No - (see above, which is the easy part.) So that shoe doesn’t fit either.

So what is it?

---
link:
DoD Strategic Communication Plan for Afghanistan (pdf, slow to load properly but worth a read)
via MountainRunner (On public diplomacy and strategic communications in the 21st century)

Posted by b on March 19, 2008 at 03:59 PM | Permalink | Comments (38)

"Iraq War Was Worth It"

Bush Says Iraq War Was Worth It

"Five years into this battle, there is an understandable debate over whether the war was worth fighting ... whether the fight is worth winning ... and whether we can win it. The answers are clear to me:"


5 year chart, Philadelphia Oil Service Sector Index
(via Marketwatch.com)

Cheney's Halliburton Ties Remain

According to Cheney's 2001 financial disclosure report, the vice president's Halliburton benefits include three batches of stock options comprising 433,333 shares.

Posted by b on March 19, 2008 at 11:52 AM | Permalink | Comments (12)

March 18, 2008

Obama's Speech

That Obama sermon was quite impressive.

A few thoughts:

  • may be to interlectual - the media and its public is used to soundbites - I wonder if they'll catch the gist
  • his supporters will love it as it has much more 'favorable' stuff than any of Clinton's talks
  • this is idiotic:

"I have already condemned, in unequivocal terms, the statements of Reverend Wright that have caused such controversy.
...
But the remarks that have caused this recent firestorm weren’t simply controversial.  They weren’t simply a religious leader’s effort to speak out against perceived injustice.  Instead, they expressed a profoundly distorted view of this country – a view that sees white racism as endemic, and that elevates what is wrong with America above all that we know is right with America; a view that sees the conflicts in the Middle East as rooted primarily in the actions of stalwart allies like Israel, instead of emanating from the perverse and hateful ideologies of radical Islam."

AIPAC demanded that Obama pays his due? Well, he did ...

Posted by b on March 18, 2008 at 03:19 PM | Permalink | Comments (54)

Manipulation Operations

Most of you will know about Operation Gladio and the strategy of tension. CIA operations in NATO countries which included the use of terrorism to manipulate public opinion against communism.

There is a new book out that describes how a slightly different operation was used to prop up anti-Soviet public opinion in Sweden:

Following the stranding of a Soviet Whiskey-class submarine in 1981 on the Swedish archipelago, a series of massive submarine intrusions took place within Swedish waters.

However, the evidence for these appears to have been manipulated or simply invented. Classified documents and interviews point to covert Western, rather than Soviet activity. This is backed up by former US Secretary of Defense Caspar Weinberger, who stated that Western 'testing' operations were carried out regularly in Swedish waters. Royal Navy submarine captains have also admitted to top-secret operations.

Ola Tunander's revelations make it clear that the United States and Britain ran a 'secret war' in Swedish waters. The number of Swedes perceiving the Soviet Union as a direct threat increased from 5-10 per cent in 1980 to 45 per cent in 1983. This Anglo-American 'secret war' was aimed at exerting political influence over Sweden. It was a risky enterprise, but perhaps the most successful covert operation of the entire Cold War.

There is no reason to believe that operations like these have stopped or are restricted to those countries you are not living in.

Depending on the 'favorite enemy of the day' such operations might be used to induce anti-Islam, anti-Russian, anti-Chinese public opinion. The best defense against these manipulation is to stay informed and to process all 'news' with a healthy dose of salt.

Posted by b on March 18, 2008 at 01:06 PM | Permalink | Comments (4)

"You can’t feel because you’ll just go crazy"

The New Yorker has a few documentary excerpts with Sabrina Harman, an Army guard who took photographs at Abu Ghraib.

This part catches something people who have never been in such situations have problems to understand:

ERROL MORRIS: Are these kids suspected of being terrorists or just…?

SABRINA HARMAN: No.

ERROL MORRIS: If you could talk about that?

SABRINA HARMAN: I don’t know what all of them were in for. We had so many from age 10 all the way up. I think the youngest one was because his father was passing notes or doing something illegal, but they held him also. I don’t know if the kid was involved, but he, he’s, he’s a little kid. I mean, he could have fit through the bars he was so little.

ERROL MORRIS: So how does this make you feel? I mean, you’re seeing all these kids...

SABRINA HARMAN: Well, you go numb. I mean there’s…You really don’t have any feelings. You can’t feel because you’ll just go crazy, so you just kind of blow it off. You can only make their stay a little bit acceptable, I guess. You give them all the candy from the MREs [“meals ready to eat”] to make their time go by better, I guess, but there’s only so much you can do or so much you can feel.

When I was younger, I worked as a part-time paramedic. When we picked up the pieces of a bunch of drunk kids who had managed to wrap their car around a tree, our reaction was the same. We shut down our feelings. We also took pictures. Later we joked about it.

Moralizing people ask, "how can they be so uncaring." Well, one has to, or it destroys oneself. It is a survival mechanism.

Harman took pictures and was court-martial for her conduct. I am quite sure she could not do much about behaving like she did.

It is not the people that get put into such situations who are guilty (unless they torture or kill someone.) The people who created the situation are the ones that are responsible and must be put into jail.

So far, none of those have been bothered.

Posted by b on March 18, 2008 at 10:34 AM | Permalink | Comments (2)

MoA Needs Money II

Two days ago I asked for financial contributions to Moon of Alabama.

A big thanks to all of you who gave something and to all who would have liked to give, but can not afford to do so. It is the intent that counts not the money.

It seems like this may sum up eventually to afford a new blogging machine, though not a gold plated one.

To those who missed the call and want to contribute, the necessary information is here.

Thanks!

Posted by b on March 18, 2008 at 09:19 AM | Permalink | Comments (7)

March 17, 2008

Tibet Uprising and U.S. Government Grants

China Hand asks if the current protests around Tibet are an Tibetan Intifada. That comparison is pretty nuts in my view. Helena Cobban points out some differences.

But both seem to miss the main point.

There are hints all around that the current action by exile-Tibetans and some folks in Tibet is, at least partly, a U.S. financed attempt of another 'color revolution.' Some of the clues are collected below. Please add to them.

The current protest around Tibet in connection with the upcoming Olympics in China was planed and discussed at a conference in New Delhi in June 2007:

On the concluding second day early morning, over two hundred Indians and Tibetans listened to Jamyang Norbu, noted Tibetan writer and veteran activists for Tibet’s independence, as he explained how the next two years are crucial for Tibet, and how the Olympics could provide the one-chance for Tibetans to come out and protests “like one mighty force”. He noted that unless a mass protest occurs, Tibet would continue to slip out of the world map, leaving very little to protest for.

The strategy calls for world wide protests, a march of exiles from India to Tibet and for protests within Tibet.

While that conference was ongoing the U.S. ambassador to India was confering with the Dalai Lama:

US Ambassador to India David Mulford is on two days visit to Dharamsala beginning yesterday where he met with the exiled Tibetan leader, His Holiness the Dalai Lama and the Tibetan Prime Minister in exile (Kalon Tripa), Prof. Samdhong Rinpoche.

According to a report, the US officials call the trip part of their periodic contacts with the exile Tibetan government, although the primary purpose of the visit could not be ascertained so far.
...
The latest visit by the US official quickly follows the U.S. Undersecretary of State Paula Dobriansky’s similar visit to Dharamsala last November.

Paula Dobriansky is Under-Secretary of State for Democracy & Global Affairs and a member of the neocon PNAC. She has been involved in the color revolutions in eastern Europe and coined the phrase "Cedar Revolution" for the Lebanese quagmire.

In January several organisations announced the currently running protests:

Five leading Tibetan organizations calling on exile Tibetans to take a protest march to Tibet ahead of 2008 Beijing Olympic Games today released a two-page registration-cum-declaration form to formally start registering people taking part in it.
...
When asked about the likely response from Tibetan inside Tibet, Mr Ngawang Woebar, president of the Gu-Chu-Sum Movement of Tibet (Ex-political Prisoners’ Association) said, “Their determination to sacrifice for the freedom of Tibet is unquestionable and even more resolute than us”.

Their declaration does not call for Tibetan autonomy but for independence:

The 2008 Olympics will mark the culmination of almost 50 years of Tibetan resistance in exile. We will use this historic moment to reinvigorate the Tibetan freedom movement and bring our exile struggle for freedom back to Tibet. Through tireless work and an unwavering commitment to truth and justice, we will bring about another uprising that will shake China’s control in Tibet and mark the beginning of the end of China’s occupation.

In further preparation, "training sessions" were given in February by several of the NGOs that called for the protests:

Forty grassroots activists representing twenty-five Tibetan communities all over India were given an Advanced Training on Grassroots Activism and capacity building from February 15-17, 2008 at Lower TCV School, Dharamshala. This workshop strengthened the coordination of the Tibetan People's Uprising Movement organized by five leading Tibetan NGOs; Tibetan Youth Congress, Tibetan Women's Association, Gu-Chu-Sum Movement of Tibet, National Democratic Party of Tibet, and Students for a Free Tibet (India).

Besides the heads of the five Organizations, the 3-day workshop was also deliberated by Mr. Karma Yeshi, Member, Tibetan Parliament in Exile and Editor in Chief, Voice of Tibet, Ven. Lobsang Jinpa, Editor, Sheja (Tibetan Newsletter), Mr. Tendor, Deputy Director, SFT Headquarters, New York and Mr. Lobsang Yeshi, Former Vice President, Tibetan Youth Congress. The training subjects include the Importance of Co-ordinated Movement, Contemporary Chinese Political Scenario, Strategy and Vision, Situation inside Tibet, Olympic politics, Media and Messaging, Non-Violent Direct Action and Fund-Raising Strategy.

We will come back to some of the organisations mentioned above. But note these training sessions and how they seem to be a copy of those done with student movements during the color revolutions. As wikipedia notices:

Activists from Otpor in Serbia and Pora in Ukraine have said that publications and training they received from the US based Albert Einstein Institution staff have been instrumental to the formation of their strategies.

The Albert Einstein Institute has translated its two main 'color revolution' instruction books into Tibetian. One has a foreword by the Dalai Lama.

In 1959 the CIA organised and financed the uprising in Tibet and the Dalai Lama escape. The CIA program ended in the late 60s, but under Reagan a new initiative was started and since then  the U.S. governments sponsors so called Non-Governmental Organizations which have funded many of the Tibetan exile organisations. Most of these efforts are branded as 'humanitarian' or as 'democracy promotion'.

A 2007 report (pdf) by the Congressional Research Service lists various U.S. organisations that currently provide U.S. taxpayer dollars to Tibetan exile organisations. The summary says:

United States foreign operations appropriations for the People’s Republic of China (PRC) primarily support democracy-related programs, particularly rule of law training, and support Tibetan communities. The U.S. Congress has played a leading role in providing funding for such programs, which has grown from $10 million in FY2002 to $23 million in FY2006.

Under Key Actors the report lists the State Departments Bureau of Democracy, Human Rights, and Labor (DRL). That Bureau is part of Paula Dobriansky's organization.

Congress has supported increased funding for DRL’s Human Rights and Democracy Fund (HRDF). Appropriations for HRDF grew from a yearly average of $13 million in FY2001-FY2002 to $33.7 million in FY2003-FY2005. Congress provided $63 million for HRDF in FY2006. China programs account for about 25% of spending from its Democracy Fund. Most DRL funding goes to U.S.-based NGOs, including universities, while some subgrants go to PRC “partner NGOs.”

A footnote explains:

Because of political sensitivities, DRL does not disclose the names of its grant recipients.

Another Key Actor listed is the National Endowment for Democracy (NED):

NED was created by and obtains nearly all of its funding from the United States government. [...] During the FY1999-FY2003 period, about 38% of U.S. government funding for democracy-related programs in China was allocated through the Endowment

It is hard to decipher where all this money is going to. The NED website lists some of the recipients of its 2006 grand programs. These include:

Gu-Chu-Sum Movement of Tibet - $40,000
International Campaign for Tibet - $53,000
Tibetan Women's Association - $30,000
Longsho Youth Movement of Tibet - $15,000
Voice of Tibet - $35,000

Note that these organisations are the same that have called for and organized the current uprising.

(For some additional bits on NED's meddling take a look at this South Asia Analysis Group report).

While these groups seem to differ with the Dalai Lama in that they call for independence while the Dalai Lama offically only calls for autonomy, that may not really be so. All the above organisations claim to be endorsed by the Dalai Lama. They get money from the same sources the Dalai Lama gets his check from.

One of the Dalai Lama's central financial source seems to be the New York based Tibet Fund. In its 2002 report the Fund declared:

In 2002 the Tibet Fund became a registered USAID PVO (Private Voluntary Organization). Since none of the funds appropriated under the U.S. Foreign Assistance Act may be made available to any PVO that is not registered with USAID, this important step makes us now eligible to apply for USAID assistance resources, including grants, cooperative agreements and subventions.

The Funds latest available budget report is from 2005 (pdf). In it the Fund lists $2.5 million of U.S. government grants in total revenues of just $5 million. Most of these grants are from the U.S. State Department’s Bureau of Population, Refugees, and Migration which is also part of Dobriansky's organization. The fund itself spend 2.7 on grants and contracts to other organisations and gave $500,000 to the 'office of the Dalai Lama'.

There is a lot of propaganda involved in the numbers and 'facts' thrown around about Tibet. In 2000 an long Indian magazine piece took much of these apart. I recommend to read it to understand that there is at least an alternative view to what the U.S. financed Tibetan exile NGO hodgepod claims.

The current protests by Tibetan exiles and in Tibet are at least partly financed with U.S. governent money and have similarities with the color revolutions. Unlike those they are likely to fail. The Indian government stopped the exile-march and the Chinese will make sure that any protest in Tibet will be supresses.

The U.S. for many years supports "His Holiness the Dalai Lama", a colorful but theocratic figure. It is one of its trump card to put pressure on China whenever it feels that such is appropriate.

Now explain to me again how that in any way relates to Gaza?

Posted by b on March 17, 2008 at 01:13 PM | Permalink | Comments (51)

Bear Stearns Socialism

On Friday Bear Stern shares closed at $30. Over the weekend it was sold to JP Morgan for $2 a share. To the NYT writer that is "about one-tenth the firm’s market price."

There you have the quality of economic reporting, or should we call it propaganda, that had a big part in building the debt bubble and its now occuring destruction. If 6.6% is "about one-tenth" there is quite some room to fudge the books.

Bear Sterans made its money through arrogant leveraging. They borrowed low-interest short-term money in a volume of 30 times their capital. Then they lend this money out for higher rates and for long term mortgages. The mortgages were decalred 'assets' and pledged as collataral against the borrowing.

When the people who gave money to Bear Stearns found out that many of the mortgages would likely default, they asked for more collateral or early payback of their loans to Bear Stearns. With the missmatch in maturity and a defunctional market of mortgage papers, Bear Stearns could neither give more collatoral, nor pay back what they had borrowed.

That's when the Fed stepped in Thursday and gave them unknown billions for shabby collatoral. It did so again last night.

With $2 a share Bear Stearns now has capital of some $300 million. The Fed yesterday pledged to lend another $30 billion for Bear Stearns.

The company is thereby now leveraged at at least 100 to 1, more likely at 450 to 1, without any of its problems solved. It is bankrupt. I wonder how JP Morgan thinks it can survive the deal it just made.

There are many more candidates out there with the same problem. Lehman, Citibank, Washington Mutal ...

They should be either let fall down or nationalized without paying one cent to the shareowners and with their management fired immediately without compensation. Anything else is socialism for the rich. Taxpayer money pledged to hold up the wealth of billionaires.

Just don't expect the NYT to tell you that.

Posted by b on March 17, 2008 at 03:14 AM | Permalink | Comments (45)

March 16, 2008

Some Links on the U.S. Empire Demise

Currently I am rereading Emmanuel Todd's After the Empire: The Breakdown of the American Order. Written in 2001, Todd's argument predicting the downfall of the U.S. empire is mostly an economic/industrial one. I am not sure yet if he is right or not. The U.S. has a remarkable ability to rebound.

But in the context of rereading the book I collected a few recent links I want to share.

Treasuries Riskier Than Bunds, Default Swaps Show

The risk of losses on U.S. Treasury notes exceeded German bunds for the first time ever amid investor concern the subprime mortgage crisis is sapping government reserves, credit-default swaps prices show.

US economy loses its No 1 spot

The US economy lost the title of "world's biggest" to the euro zone this week as the value of the US dollar slumped in currency markets. Taking the gross domestic product of both economies in 2007, the combined GDP of the 15 countries which use the euro overtook that of the US when the European currency surged to a record high of more than $1.56 per euro overnight.

NASA Wary of Relying on Russia - Moscow Soon to Be Lone Carrier of Astronauts to Space Station

In 2 1/2 years, just as the [international space] station gets fully assembled, the United States will no longer have any spacecraft of its own capable of carrying astronauts and cargo to the station, in which roughly $100 billion is being invested. The three space shuttles will be retired by then, because of their high cost and questionable safety, and NASA will have nothing ready to replace them until 2015 at the earliest.

For five years or more, the United States will be dependent on the technology of others to reach the station, which American taxpayers largely paid for. To complicate things further, the only nation now capable of flying humans to the station is Russia, giving it a strong bargaining position to decide what it wants to charge for the flights at a time when U.S.-Russian relations are becoming increasingly testy.

The reports of the death of the U.S. empire may be exaggerated. But the evidence of some serious illness is piling up.

Posted by b on March 16, 2008 at 03:40 PM | Permalink | Comments (16)

MoA Needs Money

In the 100,000 Comments thread some asked if they could/should contribute money to run MoA.

Here's your chance.

The computer I use for blogging is on the verge of breaking down. The case and drives are some eight years old, the mainboard four and each day the machine is a bit louder than the day before. A sure sign of coming destruction. Additionally the wlan/DSL router went up in smoke last week and needs a replacement.

So if you can spare some money you are welcome to spend it on a blogging-laptop for b.

Of course that laptop shall be gold plated and with ivory keys, so add a zero to that number you just had in mind.

More seriously - blogging does take a lot of time and there are opportunity costs to pay for doing it. Besides of that it's my birthday today and I haven't received any gifts yet.

For your donation use either the PayPal button below or contact me by email at MoonofA @ aol.com for address and/or bank data.

Thanks and kisses. b.

Posted by b on March 16, 2008 at 01:52 PM | Permalink | Comments (21)

The NYT's Experts on Iraq

The New York Times OpEd page asks:

nine experts on military and foreign affairs to reflect on their attitudes in the spring of 2003 and to comment on the one aspect of the war that most surprised them or that they wished they had considered in the prewar debate.

So who are experts on military and foreign affairs?

From the collection the NYT editors assembles, it is obvious that they consider as experts mainly those people who have been wrong again and again.

They collected self lauding words from L. Paul Bremer III, Richard Perle, Kenneth M. Pollack, Danielle Pletka and Frederick Kagan. Certainly all experts in starting illegal wars and foreign policy desasters.

Now why isn't expert Judith Miller on that list?

Posted by b on March 16, 2008 at 08:48 AM | Permalink | Comments (8)

March 15, 2008

Pennies From Heaven

by anna missed


bigger

Pennies From Heaven
by anna missed

8"x15" - rhinestones, oil paint on wood

---

A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. [...] A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money.

Deflation: Making Sure "It" Doesn't Happen Here, Remarks by Governor Ben S. Bernanke before the National Economists Club, Washington, D.C., November 21, 2002

A clean version of the title of Bernanke's speech is:

Inflation: Making Sure "It" Does Happen Here

Hence, helicopter money drops. But not pennies as anna missed assumes, those are now too expensive to make, but cheap dollar notes with the imprint Made in China.

Posted by b on March 15, 2008 at 02:29 PM | Permalink | Comments (11)

March 14, 2008

Protest in Lhasa

There are currently some protests by Buddhist monks in Tibet against the Chinese dominated local government. The western media are running the story as some saintly resistance against a brutal occupation. That view is a bit short of history.

Tibet has for centuries been more or less under Chinese hegemonic rule. Usually the Chinese accepted a local leader to rule over Tibet, but they always demanded tribut and a say in the rulers succession process. In 1789 and 1791 China defended Tibet against an invasion by Gurkhas.

In 1904 Britain invaded Tibet, occupied its capital Lhasa and pressed for a "free trade" treaty. China at that time was weakend through the sino-japanese war but in 1910 the Chinese were back in Lhasa only to lose control a few years later when the Qing dynasty went down in a rebellion. There continued to be constant struggle between Russia, Britain and Nepal over influence in Tibet while China was in a period of warlordism and later under Japanese occupation. After he won control over most of China Mao Tse Tung in 1950 reasserted Chinese rule over Tibet, but allowed the local religious aristocracy and government to carry on.

Then most of the Tibetan people were still working as serfs for the big land owners. These were the thousands of monasteries controlled by various lama lineages, feudal religious ruler clans. Despite the peaceful image of Buddhism the various lamas and monasteries regulary fought over territory and economic benefits.

The most powerful lama lineage is that of the Dalai Lama since it was brought into the top position in the 17th century with the help of Mogul invaders. While the successor of a lama is supposed to be a reincarnation of his predecessor, the selection of the new lineage leader, and his education, was and is always a thoroughly political process.

During the 1950s the Chinese implemented land reform and secular schooling in Tibet. The lamas fought against the loss of their economic, social and political power by sending their monks into the streets. With the active help of the CIA the lamas had some success against the communists, but the movement was crushed when in 1959 the Chinese again occupied the capital and the seat of the Dalai Lama, Lhasa. Financed by the CIA, the Dalai Lama fled to India to set up an exile government.

Other parts of the resistance continued with U.S. support until the late 60s, when Kissinger and Nixon changed the general U.S. policy towards China and the CIA withdrew the financing.

Since he went into exile the Dalai Lama has become a darling of "western" do-gooders and governments who call for his reinstatement in Lhasa.

This week marked the 49th anniversary of Dalai Lama's getaway and there are again some protest by a few hundred monks in Lhasa. The local government in Tibet has put the three main monasteries in Lhasa under lockdown and will certainly quash any bigger attempt of rebellion.

Predictably the "west" is using the situation to put pressure on China.

Supporters of the Dalai Lama ofter praise the professed peacefulness of Buddhism. While at its core Buddhism, like other major religions, is peaceful, it has been abused in Tibet to suppress the many and to enrich the few. The feudal-religious linage of the Dalai Lama is the biggest symbol of this.

Would his re-installation into the Potala Palace in Lhasa really be for the good of the Tibetian people?

Posted by b on March 14, 2008 at 02:22 PM | Permalink | Comments (43)

One down, plenty to follow ...

Bear Stearns Gets Emergency Funds From JPMorgan, Fed (Update1)

Bear Stearns Cos. obtained emergency funding from JPMorgan Chase & Co. and the New York Federal Reserve as the securities firm said its cash position had "significantly deteriorated."

Only two days ago Bear Stearns CEO was on CNBC and denied any cash problems:

"We don't see any pressure on our liquidity, let alone a liquidity crisis," [Alan Schwartz] said.

Bear finished fiscal 2007 with $17 billion of cash sitting at the parent company level as a "liquidity cushion," he said.

"That cushion has been virtually unchanged. We have $17 billion or so excess cash on the balance sheet," he said.

If two days ago Bear Stearns had $17 billion in cash, where did that money go?

Today:

The New York Fed will "provide non-recourse, back-to-back" financing for up to 28 days, JPMorgan said in a statement today.

"non-recourse, back-to-back" means that the Fed will give a cash loan to JPMorgan and JPMorgan will hand the same amount to Bear Stearns. This is a technical process as Bear Stearns is not allowed to borrow directly through the Fed's discount window. If Bear Stearns can not pay back the loan, JPMorgan will have no obligations. The whole risk of this loan is with the Fed or, in the end, the taxpayer. Socialized losses ...

Bear Stearns plummeted $21, or a record 37 percent, to $36 at 10:08 a.m. in New York Stock Exchange composite trading, the lowest level in more than eight years. The shares fell to as low as $26.85 earlier today.
...
"The issue now is whether Bear Stearns customers will stick around," said Bruce Foerster, president of South Beach Capital Markets and a former Wall Street executive. "Some others have gotten through the same kind of troubles, some ended up being shut down or sold. I'm hoping Bear can get past it."

Well, if I would own money to Bear Stearns I would stick around with them. If Bear Stearns would own money to me, I'd grab it as fast as I can and leave immediately.

The bank is toast so to say ... and it will not be the last one in this downturn.

Posted by b on March 14, 2008 at 10:59 AM | Permalink | Comments (20)

March 13, 2008

Above All


Air Force is 'Above All'

The Air Force has a new advertising campaign to recruit the next generation of Airmen as well as better inform people about the Air Force mission:

"Above All."

To me it seems like the design and slogan were stolen from this:


Germany Above All
On meaning and becoming of the German people's hymn

Heinrich Gerstenberg
Munich, German Empire, 1933

Posted by b on March 13, 2008 at 10:22 AM | Permalink | Comments (27)

Sabotaging a Peace Deal

There was a short ceasefire between Hamas in the Gaza strip and the Israeli government.

This cheasefire was initiated through informal talks in Egypt. For a few days no rockets were launched towards Israel and the IDF refrained from further killings in the Gaza strip. Hamas published a list of conditions to formalize and prolong this temporary truce into a longterm armistice.

Hamas's terms mirrored proposals raised by Egyptian mediators trying to piece together a truce deal, which would also end Gaza rocket attacks on Israel by militants from Hamas and other Palestinian groups.

Violence has declined sharply over the past week. A ceasefire could foster progress in U.S.-brokered peace talks between Israel and Palestinian President Mahmoud Abbas, whose Fatah faction lost control of the Gaza Strip to Hamas last June.

So there was a wider deal in the making between Hamas, the Palestinian Authority under Abbas and Israel to reopen the border crossings to Gaza. But some Israelis didn't agree:

Abbas said Monday during a meeting with Jordanian journalists that "a senior figure in the Israeli government is undermining the negotiations for internal reasons and because of personal hostility to me." He was in Jordan to meet with King Abdullah.

A Jordanian journalist who published the story noted that Abbas is referring to Defense Minister Ehud Barak.

Barak and others have no interest in peace. They set out to reignite hostilities and yesterday ordered the assassination of four Palestinians in Bethlehem:

Witnesses confirmed that undercover Israeli forces sprayed the car with bullets once, then moved closer to the car and opened fire again, as if attempting to make sure the men were dead.

Passersby pulled the bodies of the four men from the small red car, which had been parked in front of a bakery when the Israelis opened fire. The men had been waiting for their dinner.

This was not a some necessary action to avert an immediate attack. As Haaretz explains:

The four militants killed in Bethlehem were on the IDF's wanted list for around eight years, and the operation where they were eliminated was a settling of scores by the police anti-terror squad and the Shin Bet security service.

Was it also urgent? Apparently not. The four were not associated with any specific terror alerts. The decision to launch the operation was probably more a matter of opportunity than immediate need.

Opportunity for what?

The killed men belonged to the Islamic Jihad, a group not under control of Hamas. This morning the group responded to the assassinations by launching some 15 rockets towards Sderot. The Israeli army will of course 'retaliate' for these by killing more people.

Meanwhile Barak is bragging about his heroic deed of again sabotaging any attempt for a peaceful solution:

Speaking at a memorial service for slain Israel Defense Forces soldiers whose burial locations are unknown, Barak said Israel had proven its commitment to this goal on Wednesday when troops killed four wanted militants from the Islamic Jihad organization in the West Bank city of Bethlehem.

The ceasefire talks are thereby officially finished before they began in earnest. Barak is hoping to use the renewed violence to unseat Olmert as Prime Minister and take that position for himself.

That attempt will cost more Palestinian and Israeli blood. But such has never stopped Barak who during his career blocked peace deals again and again.

The 'western' media will of course skip over this little episode and again blame Hamas, Iran or whoever they see as the villain of the day for not wanting a peaceful solution.

Posted by b on March 13, 2008 at 09:16 AM | Permalink | Comments (9)

March 12, 2008

Bernanke's 'Non-Standard' Policies

What can a Central Bank do when it can not lower the interest rates anymore, because the rate is already too low or even at zero? Ben Bernanke tried to answer that question in a 2004 paper (pdf).

Central banks usually implement monetary policy by setting the short-term nominal interest rate, such as the federal funds rate in the United States. However, the success over the years in reducing inflation and, consequently, the average level of nominal interest rates has increased the likelihood that the nominal policy interest rate may become constrained by the zero lower bound on interest rates. When that happens, a central bank can no longer stimulate aggregate demand by further interest-rate reductions and must rely instead on “non-standard” policy alternatives.

There is a point where interest rate manipulation is ineffective and for that situation Bernanke looked at three alternative 'non-standard' instruments:

  • (1) using communication to shape public expectations about the future course of interest rates
  • (2) increasing the size of the central bank’s balance sheet, or “quantitative easing”
  • (3) changing the composition of the central bank’s balance sheet through, for example, the targeted purchases of long-term bonds as a means of reducing the long-term interest rate.

The first 'non-standard' policy is just talk. It may influence market expectations but is unlikely to have any real effect in severe situations.

To understand the second and third option we need to take a look at the Fed's balance sheet.

Like any balance sheet the Fed's has two columns of positions that should always sum up to the same amount. One column lists assets and the other one lists liabilities. Assets should be in balance with liabilities, thus the name of the sheet. Currently the Fed has about $925 billion in liabilities and the same amount in assets.

The main liabilities of the Fed are the US-dollar notes in circulation. The main assets the Fed pledges against these liabilities are treasuries, essentially future obligations of the United States' taxpayers to work a certain amount of hours to be able to pay the principal of the treasuries and some interest.

Bernanke's option two is to increase the size of the central bank's balance sheet. When the Fed prints more US-Dollar bills (or the electronic equivilant) and uses these to buy more treasuries both sides of the balance sheet, assets and liabilities, increase. The amount of money in circulation, the Fed's liabilities, increases as well as its assets, i.e. the amount of treasuries it buys for those dollars.

But bringing more money into circulation has a drawback. Here is the simplified case. If there are 1,000 units of money in circulation and 100 units of goods, each unit of goods has a price of 10 units of money. If the units of money increase, for example to 1,100, but the units of goods stays constant, the price for a unit of goods must increase, in this example to 11 units of available money for each unit of goods.

The effect of increasing the size of the Fed's balance sheet is inflation. More money chasing a constant amount of goods.

For people who saved units of money this can be very negative. Their saving's purchase power, the ability to buy a number of goods, decreases with inflation. 100 saved units of money will buy less units of goods if the amount of money inflates.

For people who are in debt, the effects of inflation are welcome. Debt is denominated in units of money. In the above inflationary case, to pay back 100 units of money in debt, will suddenly require less than ten units of goods, i.e. less work.

Higher inflation usually hits the masses more negatively than the privileged and can lead to severe social unrest. It is therefore not welcome. The ability of the central bank to use Bernanke's option 2 is limited.

This leaves option 3 - changing the composition of the central bank’s balance sheet.

The liability side of the Fed's balance sheet are U.S.-Dollar bills. The Fed can not change the composition of those. But it can change the asset side.

The business banks are currently in problems because many of the assets on their balance sheets are frozen. Right now nobody trust the value of the debt obligations (like mortgages) these banks are holding as assets. There is currently no market for these and their value is thereby uncertain.

Who knows if Joe Sixpack will really work, or can work, the hours he promised to do to pay back the mortgage loan he got to buy that big house? He may, or he may not. Unless there is some certainty to this, Joe Sixpack's debt obligation is not marketable.

In option 3 Bernanke suggest that the Fed changes the composition of the asset side of its balance sheet. It may sell treasuries to the business banks in exchange for a number of Joe Sixpack promises to work a certain amount of hours to pay back the loan the Joes borrowed to buy those big houses.

The Fed offers to exchange treasuries for mortgage backed security (MBS).

For the banks this means exchanging currently non marketable papers for ones that are immediately exchangeable for cash, Starbuck's Latte or whatever they want or need to have.

The Fed takes the banks' MBS papers with some 'haircut', i.e. it values the individual promise of Joe less than the general promise of all U.S. taxpayers, a treasury, and leaves the banks with some of the risk. The Fed may calculate that of 100 Joes 10 will not pay back as they promised and leave the risk of those 10 non-payers with the banks.

But what happens if 20 of 100 Joes are unable or unwilling to pay back their mortgage?

The banks' owners may decide that they don't want to take that loss and default. Then the Fed will have 'assets' on its balance sheet that are less in value than assumed. The asset side of its balance sheet, now filled with MBS instead of treasuries, will suddenly shrink and be lower in real value than is assumed for the liability side.

That risk is not small. Merrill Lynch says this is the worst recession since the 1970s, which makes any payment promise dubious. As Steve Waldman calculated, the Fed has committed half(!) of its assets to the risk-exchange scheme. If the Fed has calculated the risk wrong (which I have reason to believe) the exchange of secure treasuries for somewhat dubious MBS papers will have very serious implication for its balance sheet.

At that stage the Fed would have two options to bring the two balance sheet columns back into real balance 

  • decrease liabilities by reducing the float of U.S-Dollar in circulation, i.e. deflate (and increase real value of debts)
  • let people know that a greenback with a $1 imprint is only worth $0.90 of asset equivalent. i.e. inflate the value of the U.S.-Dollar (and decrease real value of debts)

As the U.S. in total is a debtor nation, the second option, inflation, will be preferable. The value of the dollar will sink and thereby devalue any U.S. obligation and any U.S. asset, i.e. your saving or 401k  deposits.

Yesterday the Fed ignited fireworks in the stock market with its announcement to commit another $200 billion of a $800 billion balance sheet to bad debt. But how can that be sustainable?

In my view it can not. So I am betting on an inflationary U.S.-Dollar environment.

Like Marc Faber I expect some imminent technical pull backs in metal and other commodity markets. But these are mere technical reactions and their prices, in U.S.-Dollar terms, will increase much more before there is some kind of resolution to the underlying Fed balance sheet problem.

Posted by b on March 12, 2008 at 05:19 PM | Permalink | Comments (17)

March 11, 2008

War on Iran More Likely

[W]ell-placed observers now say that it will come as no surprise if Fallon is relieved of his command before his time is up next spring, maybe as early as this summer, in favor of a commander the White House considers to be more pliable. If that were to happen, it may well mean that the president and vice-president intend to take military action against Iran before the end of this year and don't want a commander standing in their way.
The Man Between War and Peace, Esquire, March 05, 2008

---

Adm. William Fallon, the top U.S. military commander for the Middle East, is resigning, Defense Secretary Robert Gates said Tuesday.

Gates said Fallon had asked him Tuesday morning for permission to retire and Gates agreed. Gates said the decision was entirely Fallon's and that Gates believed it was "the right thing to do."
Fallon Resigns As Mideast Military Chief, AP, March 11, 2008

---

President Bush is sending Vice President Dick Cheney to the Middle East, following on last week's trip to the region by Secretary of State Condoleezza Rice.
...
The vice president leaves Sunday on a trip that will take him to Israel, the West Bank, Oman, Saudi Arabia and Turkey.
Bush Sending Cheney to Middle East, VOA, March 10, 2008

Posted by b on March 11, 2008 at 04:05 PM | Permalink | Comments (31)

Fed Offers Money for Garbage

The Fed has taken another quite radical step to somehow stop the downward de-leveraging spiral in the banking system.

Previously the Fed had initiated a $100 billion 'TAF' program through which it lended money equivilants to banks for renewable 28 days periods. It allowed as collatoral mortgage-backed securities (MBS) issued by federal chartered agencies, i.e. Fannie Mae and Freddie Mac, which are deamed to be somewhat secure though currently difficult to sale.

That didn't stop the downward spiral but slowed it down for a while only to accelerate again.

Now the Fed initiated another program with a volume of $200 billion. This 'TSLF' program works the same way but accepts an additional type of collatoral, privately issue MBS.

Agency backed MBS and privately, bank issued, MBS seem to be equivilant as both are rated as high quality AAA papers. But while agency-securities may be safe and only temporarily hard to sell, the private AAA rated MBS do look the same but are a different animal in disguise.

As Bloomberg reports:

Even after downgrading almost 10,000 subprime-mortgage bonds, Moody's and S&P have yet to cut the AAA securities in the ABX indexes used to track the debt. Downgrades of those securities would strip bonds valued at an additional $120 billion of their top rankings.

The Fed now starts to lend money to banks while taking as collatoral paper that is likely to be worth much less than what the current rating agency imprint says.

The pawnbroker of last resort started to lend big money against steel rings with glass splinters because some obviously falsificated certificate pretends that those rings are platinum each with a 1 carat diamond.

What will the pawnbroker do when the loan he gave to such collatoral will not be payed back?

The Dow is up 300+ points today using the Fed announcement as a pretense for a relief rally. But how long with such fudging with reality hold? Two days. Three?

Hey Bernanke, may I offer some of my used cloth to lend a few billion bucks? I really promise not to default and my neighbor says that they still look like they are worth trillions.

Posted by b on March 11, 2008 at 03:31 PM | Permalink | Comments (10)

OT 08-12

Your comments on news & views ...

Posted by b on March 11, 2008 at 03:33 AM | Permalink | Comments (137)

March 10, 2008

Someone who is Spitz

The name Spitzer seems to be of German descent. A spitzer is someone who is 'spitz'. 'Spitz' in German translates to 'pointy' or 'pointed' in English. A German slang phrase 'spitz', derived form a male physiological analogy, translates to 'horny'.

Just though you might wanted to know ...

On the actually case I have two points to make:

Why is the press reporting that he was involved in a prostition ring? If I buy at Wal-Mart am I involved in retail sales company?

Spitzer seems to have been a simple customer here, client no 9, who had some problems arranging the nessessary deposit for the appointment and some unknown special wishes. But he seems to have been friendly and well paying. "Kristen" even said that she liked him.

Spitzer's problem is, of course, his hypocrisy and he will resign.

But there is a bigger hypocrisy involved here which is to condemn contracts between consenting adults in a 'free country'.

Posted by b on March 10, 2008 at 04:15 PM | Permalink | Comments (47)

Domestic Spying Program Confirmed (Again)

In December 2005 I wrote without having proof:

Thesis: The U.S. administration is using an automated communication surveillance system to monitor communications between the domestic U.S. and foreign countries.
...
The system listens to and processes communication in realtime. It is preconfigured with specific phone numbers, email addresses and/or keywords.
...
Database mining technologies and automated statistic methods are used to find patterns within and between the recorded communications. The discovery of such patterns may lead to further investigation or may modify the system's sensitivities.

The WSJ now confirms all the above. But there is even more of domestic spying involved than I assumed:

According to current and former intelligence officials, the spy agency now monitors huge volumes of records of domestic emails and Internet searches as well as bank transfers, credit-card transactions, travel and telephone records. The NSA receives this so-called "transactional" data from other agencies or private companies, and its sophisticated software programs analyze the various transactions for suspicious patterns.

This is essentially a new and wider implementation of the 'Total Information Awareness' that was killed by Congress. Like I described before, the system picks a lead and extends from there, eventuall catching all available traffic.

Two former officials familiar with the data-sifting efforts said they work by starting with some sort of lead, like a phone number or Internet address. In partnership with the FBI, the systems then can track all domestic and foreign transactions of people associated with that item -- and then the people who associated with them, and so on, casting a gradually wider net. An intelligence official described more of a rapid-response effect: If a person suspected of terrorist connections is believed to be in a U.S. city -- for instance, Detroit, a community with a high concentration of Muslim Americans -- the government's spy systems may be directed to collect and analyze all electronic communications into and out of the city.

The haul can include records of phone calls, email headers and destinations, data on financial transactions and records of Internet browsing. The system also would collect information about other people, including those in the U.S., who communicated with people in Detroit.

The information doesn't generally include the contents of conversations or emails. But it can give such transactional information as a cellphone's location, whom a person is calling, and what Web sites he or she is visiting. For an email, the data haul can include the identities of the sender and recipient and the subject line, but not the content of the message.

If you believe the last half sentence, you have just won the chance to buy that proverbial bridge in Brooklyn.

I still believe, as I argued before, that such systems are useless for catching terrorists, as they generate too many false positives. But such a system is very useful if the people with access to it want to get information on specific 'persons of interest' - journalists, opposition politicians etc.

If you have wondered about some democratic votes in Congress that supported Bush issues despite their own interest and about a lack of press scrutiny into administration abuses, the answer is right there.

Posted by b on March 10, 2008 at 11:47 AM | Permalink | Comments (9)

Opposing a Bailout is Anti-American

So who is responsible for the economic mess the U.S. finds itself in?

Easy question, says Sebastian Mallaby on the Washington Post opinion page, anti-Americanism is behind this. Especially European anti-Americanism:

Fearing that weapons of mass financial destruction lie hidden inside Wall Street palaces, the United States is mobilizing the big guns: a fiscal stimulus, sharp interest rate cuts, the Fed's promise Friday to pump money into the markets. Meanwhile, Old Europe sits on its hands: The European Central Bank has left interest rates unchanged since June and has lectured governments about budget deficits.

A rightwinger is up in arms because a central bank cares about budget deficits. How could they ...

While, between the lines, Mallaby acknowledges that the U.S. may have been somewhat wrong on Iraq, he is still convinced that pure anti-Americanism let a majority of Europeans oppose the war. Therefore the recent fall of the dollar must have anti-American roots too:

But surely at least some foreigners can see the tragic dimension here. The United States went into Iraq because, even if mistakenly, it wanted to rid the world of a menace. For this, the world hated it. The United States is throwing money at its economic difficulties because it sees a threat to its prosperity and also to the wider world. For this, the world scorns it. Investors are responding to America's economic activism by dumping dollars the way they once dumped dot-com stocks. The would-be saviors of the world economy can no longer afford lunch in Europe.

Mallaby doesn't quote any foreigner to somewhat found his assertions. Europe fighting inflation, while the U.S. heats it up, is just a way to prevent the U.S. from doing something good. Tax rebates in the U.S. are not some selfish act, but the U.S. caring for the "prosperity of the wider world".

... and it is the Europeans' fault that Mallaby the Savior can no longer afford to dine in Paris.

This is whining to the highest degree. But Mallaby is not alone there. Yesterday Jerome deconstructed a Business Week piece titled:

More Fodder for the Yank-Haters - The spreading U.S. credit crisis is turning up the heat on Europe's simmering anti-Americanism

Anti-Americanism was already simmering because of the Iraq war, dislike for President George W. Bush, and mistrust of rampaging buyout firms. Now, Europe's pundits and politicians are feeding public perceptions that ordinary folks will be left paying the bill for the financial missteps of big banks.

Not favoring tax payer bailouts of greedy big U.S. banks is anti-Americanism. It is that simple.

But don't shove that away as just simple lunacy. The real target here are not Europeans, but U.S. progressives. This 'anti-American' concept will be adopted to any opposition against a bailout within the U.S. itself. It is anti-American to NOT socialize losses.

When Congress will act to nationalize a bankrupt Citibank, at a tax payer cost of a few $100 billion half of which will 'compensate' Citibank shareholders, the law will be named "Patriot Act III". To oppose it will constitute treason.

That seems to be the trend here and I suspect it will get worse - much worse. The fall of the U.S. economy into recession must be the result of European anti-Americanism, general anti-Capitalism, the progressives, Move-on.org, the 'left', etc.

It is simply impossible that the system itself is the problem.

Posted by b on March 10, 2008 at 07:25 AM | Permalink | Comments (19)

March 09, 2008

Promises

beq sent this

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Promises
by
beq

Posted by b on March 9, 2008 at 10:41 AM | Permalink | Comments (13)

March 08, 2008

Lectures by Toni Blair

Yale University - Media Information: Prime Minister Blair to Teach at Yale

New Haven, Conn. — Yale University is pleased to announce the appointment of Prime Minister Tony Blair as the Howland Distinguished Fellow for the next academic year.

Mr. Blair will lead a seminar at Yale and participate in a number of events around the campus. The course in which he will participate with Yale faculty will examine issues of faith and globalization. His efforts at Yale relate to the work of the Tony Blair Faith Foundation that he will be launching later this year.

The Deans of the Yale School of Management and Divinity are working with Mr. Blair on finalizing details of the program.
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The foundation will promote understanding between the major faiths and increase understanding of the role of faith in the modern world.

Yale School of Management
and
Yale Divinity School
Fall 2008
YM&D 666 01
Issues of Faith and Globalization
Toni Blair

Within this seminar Mr. Blair will hold eight lectures, each followed by plenary discussions. Topics for four of these lectures were set by Mr. Blair. The community is invited to propose topics for the remaining lectures.

Lecture plan:

  1. From the Spanish Inquisition to Abu Ghraib - Faithful humbleness in the service of discovering divine truth
  2. Jews and Muslim - Solving inter-faith conflicts by submitting to papal guidance
  3. Schism and 'long wars' - Europe's Thirty Years' War: a template for globalizing the Middle East and Africa
  4. (to be selected from submitted topic proposals)
  5. (to be selected from submitted topic proposals)
  6. (to be selected from submitted topic proposals)
  7. (to be selected from submitted topic proposals)
  8. Blessed oil and its use in anoitments - An argument for applying force to liberate Khuzestan

This lecture series is sponsored by the Initiative on Religion and Politics at Yale, Freedom's Watch, Lockheed Martin, Halliburton Inc and British Petroleum.

Posted by b on March 8, 2008 at 07:14 AM | Permalink | Comments (27)

March 07, 2008

The Deleveraging Spiral - Black Friday?

This might become a very interesting day in the financial markets.

New U.S. unemployment numbers will be announced at 8:30 ET. If they are worse than expected, everything might tank. That is, unless the Fed and the Plunge Protection Team step in.

All financial institutions and funds are now deleveraging, i.e. lowering their risk or cutting their losses.

A leveraging factor of 10 means an entity holds assets at a value of 100, but only has a capital of 10 and borrowed the other 90. If the assets of such an entity lose 10% of their value, the capital of the entity is 0. If they lose 20%, the capital of the entity is 0 and its lenders will have to take the rest of the losses.

As lenders do not like to lose money, they watch carefully and as soon as there is a threat of such a situation, they demand immediately repayment of a part of their loans, or more safe collateral for these loans. In finance speech - a margin call.

The entity receiving the margin call has to come up with new capital to bolster the collateral it can give to its lenders or make an emergency-sell of some of its already decreased assets to repay some of the loans and take the loss.

Yesterday Carlyle Capital, a listed hedge fund, received margin calls it could not satisfy. Practically it is bankrupt and its lenders, big banks like Citibank and UBS, will now have to take losses on the  loans they made to CC too.

The fund was leveraged at a lunatic factor of 33 with assets of $22 billion and capital of $670 million. A fall in the value of its assets of just 3.3% wiped out all of its capital. But the assets even fell more (though we don't know how much yet) or were at least perceived to be worth less than 97% of their original value by the banks who lend to CC.

There is one really bothering issue in the CC story. The assets Carlyle Capital was holding were bonds issues by the Congress chartered Fannie Mae and Freddie Mac. These are first class rated bonds which, until a few days ago, were largely perceived to be backed by the U.S. government and as valueable as U.S. Treasuries. But as the Freddie Mac FAQ says:

Freddie Mac's obligations and securities do not constitute government debt and are not guaranteed by the Federal government.

The perceived government guarantee for Freddie and Fanny debt does not exist. The market value of their debt was 'faith based' and that faith has eroded.

Bloomberg headlines Agency Mortgage-Bond Spreads Rise; Markets 'Utterly Unhinged'

Yields on agency mortgage-backed securities rose to a new 22-year high relative to U.S. Treasuries as banks stepped up margin calls and concerns grew that the Federal Reserve may be unable to curb the credit slump.
...
"Everything is telling you the financial system is broken,'' Simon, whose Newport Beach, California-based unit of Allianz SE manages the world's largest bond fund, said in a telephone interview today." Everybody's in de-levering mode.''

Rising yields on a bond is an expression of its loss in value. So now Freddie and Fannie debt is perceived to have less value. This is quite bothering as Fannie and Freddie themselves are leveraged with a factor of about 30.

Their chartered business is to lend to homeowners (indirectly through brokers) and to issue debt bonds on the other side to get loans from investors. They only have $1 of capital for each $30 they borrow and lend to homeowners. As markets now value their debt at less than 97%, Fannie and Freddie are, in theory, bankrupt.

But these entities are 'too big to fail' and the government (taxpayer) will step in and add to their capital to lower their leveraging factor. The government will of course have to borrow the money itself. This will put further pressure on the dollar, increase long term interest rates and feed inflation through higher import prices.

With gas prices going to $5/gal more people will default on their mortgage, more of Freddie and Fannies mortgage holdings will go bad. Their bonds will lose further values. More bond holders will default. Their lenders will eventually default too. Citibank was one of the banks that lend billions to Carlyle Capital. If Citibank has to take more losses of this kind it will be bankrupt too. (It is also too big to fall and will likely be taken over by the government too.)

A deleveraging spiral is in full motion now. It feeds inflation and decreases the value of the dollar.  It has not yet really hit the stock market, but it will when bank shares go down further and hedge funds will panic-sell their share holdings to meet margin calls on their debt.

Today may see the bad-news-trigger that marks the point where the 'faith crisis' hits the stock markets and these turn out to be 'unhinged' too.

Posted by b on March 7, 2008 at 07:28 AM | Permalink | Comments (56)

March 06, 2008

100,000 Comments

Just took this screenshot of the MoA comment administration page and there we are - 100,001 comments.


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A big thank you to all commentators here and to the lurkers too. 1.280 million pageviews and 100,000 comments - quite a decent achievement for all of us.

A special thanks to Uncle $cam for all the good links and remarks he leaves for us. I am really happy that you are the one who broke the hundred-thousand mark.

Cheers!

Posted by b on March 6, 2008 at 12:25 PM | Permalink | Comments (26)

We Have Lost the War of Terror!!!

Small explosion hits New York's Times Square

A small explosion caused minor damage to a U.S. military recruiting center in New York's Times Square area in the early hours of Thursday but there were no injuries, police said.

Police said a small improvised explosive device caused minor damage to the building around 3:45 a.m. (0845 GMT). The thick glass door was cracked and the lower part of its metal frame was twisted.

Apparently an IED went off in the middle of Manhattan and damaged a U.S. government office. By pure luck, no one got hurt. But then this:

Asked whether there were any indications the blast was terrorism-related, White House spokeswoman Dana Perino said: "It doesn't appear to be but again the investigation is still ongoing," she said.

Now please explain to me why this event was NOT 'terrorism-related'?

What the criteria? Number of death and injuried? If the Crysler Building gets blown up without killing or injuring anyone that would not be terrorism? How about Congress? Ms. Perino - please where is your panic button!

Please, why is the Homeland Security Advisory System not above its usual level?

Folks, an IED went off on Times Square!!! It was targeted at a military office!!! They wanted to kill American soldiers!!! Ms. Perino!!!

<silence>

Oh my - 

I'm afraid we have just lost the war of terror.

Posted by b on March 6, 2008 at 11:25 AM | Permalink | Comments (17)

Gaza - From Worst Towards Even Worse

There was a time when I thought Latuff's cartoons where over the top. Not so anymore. This one really catches the combined content of the two news items below.


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Israel's blockade of the Gaza Strip has created the worst humanitarian crisis since the Israeli occupation began in 1967, aid and rights groups said on Thursday.
...
Israel imposed restrictions on the flow of people and goods and virtually froze economic activity last June when Hamas Islamists seized control of Gaza.

It tightened the blockade in January, limiting supplies of fuel and other goods in what it described as a response to cross-border rocket fire by militants.
Gaza humanitarian crisis worst in 40 years-report, Reuters, March 6, 2008

---

Deputy Defense Minister Matan Vilnai told Army Radio earlier that "the more Qassam (rocket) fire intensifies and the rockets reach a longer range, they (the Palestinians) will bring upon themselves a bigger shoah because we will use all our might to defend ourselves."
Senior Israel defense minister warns Palestinians of shoah, Reuters, Feb. 29, 2008

The complete NGO report via Oxfam GB -  The Gaza Strip: A Humanitarian Implosion (pdf).

It does not cover the daily attacks and killings in Gaza. Quite a few snippets of these are copied here in The Daily Palestinian. Take a look. If you browse through those keep in mind that 'militant' is simply the codeword for 'male of possibly military age'.

For mor on Gaza see also yesterdays piece: Bush/Dahlan Putsch against Abbas?

Posted by b on March 6, 2008 at 07:58 AM | Permalink | Comments (6)

 
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