Moon of Alabama Brecht quote
November 29, 2008

Mumbai: What Follows?

by Debs is Dead
lifted from a comment

Going on from what Giap wrote about State actors in many large 'terrorist' operations, it seems from where I sit that the states most likely to benefit from the action in Mumbai are USuk/BJPIndia/Israel.

The prez elect of America has given a firm commitment to move troops from Iraq where he imagines they are no longer needed, to Afghanistan where they are required, he claims. The problem is that the people America has declared war on the Pashtu, are spread across two nation states so war in Afghanistan of itself cannot truly subjugate these people and turn them away from the ancient culture into dumbed down consumerists.

Therefore USuk must wage war against those Pashtu who live in Pakistan as well but the Pakistani government stands ready and willing to do that themselves, repeatedly advising USuk that their presence on Pakistan soil is not required, not wanted and certainly not gonna be tolerated.

That dichotomy of belligerence could have worked with the BushCo administration who had no interest in the Pashtu other than shooting or bombing any head which appeared over the parapet, but Obama appears to want more.

As I said the total subjugation of the Pashtu seems to be the primary aim of the new American administration. Obama and his crew of washed up dem party hacks (on sale now - two wars for the price of one - highest bid not necessarily accepted - must check with AIPAC) have spoken about the need to take the war into Pakistan.

As shanks pointed out above if India moves all it's forces up to the Pakistani border, Pakistan will have no choice other than to respond by moving the bulk of it's forces down to the India/Pakistan border. If they don't India will almost certainly launch so called 'punitive raids' into Pakistan killing Pakistani citizens.

So the Pakistani military war against the Pashtu will stop for the time being and that will create the perfect excuse for USuk to invade Pakistan from the north.

It will be presented to western eyes much as shanks is trying to present it comments here. That Pakistan would have some sort of a choice in whether or not they went eyeball to eyeball with the Indian forces on their Southern border. There could be no choice, if Pakistan fails to man their southern border sufficiently India who as one can see here is forever getting into boundary disputes with it's neighbours, will at the very least re-kindle one of the many border disputes between the two nations claiming back some territory that they have previously agreed was Pakistan.

More likely the new BJP controlled government will decide Pakistan needs to be 'punished' for Mumbai. Read some of the comments in the piece shanks linked to and you will see a thirst for blood on the part of the usual loons, rednecks and crazies that every country has and which the BJP panders to.

If India mans up it's border, Pakistan must do the same in which case Obama will have the perfect excuse (in his eyes and the eyes of the somnolent American people) to invade Pakistan.

If war is like chess and this particular conflict is playing out like a chess match, I would be interested to see what strategy Pakistan could construct where the Mumbai attacks were instigated by them and they benefited from the attacks.

I can't think of one maybe someone else can.

There may be several intermediate steps in the invasion of Pakistan which I outlined above. The Pakistan strategists aren't fools and they may be persuaded to try to spread their forces between the NW frontier and the Indian border. Or even attempt a counter strategy of not fronting down South.

If they don't go South or even split their forces to cover both fronts, you can be sure that India will be receiving 'advice' from it's new ally amerika, to initiate some conflict, perhaps to settle the Kashmir 'problem once and for all, by moving the border further into Pakistan thereby cutting off the 'terror supply line'.

If Pakistani forces do move South as conventional strategy suggests they will have to since the danger to the Pakistani state from an Indian invasion is far worse than anything the Pashtu who are basically just reacting to provocation, could cook up, then we can be sure that American special forces plus drones, will provoke the Pakistani Pashtu.

They will probably react, of course understanding the danger they may be disciplined enough not to do anything at first, but the provocations with be ramped up until the the Pashtu do hit back. Whereupon USuk have the 'excuse' to invade. Game over.

Posted by b on November 29, 2008 at 06:39 PM | Permalink | Comments (56)

Afghanistan: Merging News and Psy-Ops

This will likely get lost in future news from Afghanistan, so let us make sure we note it:

Press And "Psy Ops" to Merge At NATO Afghan HQ: Sources

KABUL (Reuters) - The U.S. general commanding NATO forces in Afghanistan has ordered a merger of the office that releases news with "Psy Ops," which deals with propaganda, a move that goes against the alliance's policy, three officials said.

The move has worried Washington's European NATO allies -- Germany has already threatened to pull out of media operations in Afghanistan -- and the officials said it could undermine the credibility of information released to the public.
...
U.S. General David McKiernan, the commander of 50,000 troops from more than 40 nations in NATO's International Security Assistance Force (ISAF), ordered the combination of the Public Affairs Office (PAO), Information Operations and Psy Ops (Psychological Operations) from December 1, said a NATO official with detailed knowledge of the move.

"This will totally undermine the credibility of the information released to the press and the public," said the official, who declined to be named.
...
The new combined ISAF department will come under the command of an American one-star general reporting directly to McKiernan, an arrangement that is also against NATO policy, the NATO official said.

Unfortunately the unnamed 'official' is wrong. This will not 'undermine the credibility of the information released to the press and the public'.  The public will not take note of this.

Sure, while news from Afghanistan was already often propaganda,  spoon fed to embedded journalists, this will make absolutely sure that nothing will be believable unless it comes from multiple independent sources.

But the mainstream media will continue to report from Afghanistan whatever that new combine operation will feed them. They will soon forget to mention the above, if they will mention it at all.   They will deliver  "The TruthTM" straight from McKiernan's propaganda shop without flagging its dubiousness.

"What we are seeing is a gradual increase of American influence in all areas of the war," the NATO official said. "Seeking to gain total control of the information flow from the campaign is just part of that."

NATO troops as auxiliaries of the U.S. empire - what is not to like with that?

Posted by b on November 29, 2008 at 05:00 AM | Permalink | Comments (15)

November 28, 2008

Mumbai And The War Of Terror

by Debs is Dead
lifted from a comment

The only interesting part of this horror of people killing each other for entertainment, for that is what this sort of attack aimed at generating publicity must be considered as, is the inability of the mainstream media to construct a durable, credible meme on the fly. Oh they will eventually decide that this is 'Muslim terror' whatever the real causes were, but in the meantime it is interesting to watch them make a mess of out of their hastily constructed collection of sparse facts, half truths and outright lie.

The bitter and twisted man/woman that was screeching about the ultra-orthodox Jewish centre missed a great piece of reportage on the BBC last night. The BBC showed one commentator who was enthusing about the cheers from the crowd as the Israeli commandos arrived and how pleased the audience was to see the Israelis arrive, that the commandos despite their masked faces were giving deprecating waves to the crowd.

The reporter emphasised several times about how pleased the people of Mumbai were to see help from the elite Israeli anti terror unit. That must have been recorded some time earlier because then we cut to another beeb reporter mournfully describing that at least 5 hostages possibly more had died in the 'liberation' of the centre by an "Indian Anti Terror Squad" and this morning (NZ time) the papers said:

Israel's ambassador to India, Mark Sofer, said they believed there were up to nine hostages inside. Their fate was not clear. Sofer denied reports that Israeli commandos were taking part in the operation.

That was the interim line later we learn that all the hostages are dead. The two year old child which we were told was released by the hostage takers, before the attack, is now deemed to have been 'rescued'. And the denials of Israeli commando involvement have become considerably more emphatic.

Oh well shit happens can't cheapen the brand by having it associated with fuck-ups.  Remember Entebbe, not Munich.

All night the BBC commentators were harping on about the Pakistan connection and the Pakistani authorities were denying that Pakistan either officially, or 'unofficially' had anything to do with it. The BBC commentators completely ignore what is said and then hammer on as if the Pakistani Foreign Minister has claimed responsibility for the attack.
Pakistan officials' comments like, "Sadly India now knows first hand the type of horror we confront daily" are treated with contempt by the English paid liars.

Later on it surfaces that one of the dead fighters may have a Pakistani connection whatever than means - perhaps his great uncle moved to Karachi in 48. The bulk of those identified thus far are Indian nationals. Then we cop the kicker.

Some of the dead fighters hold english passports. Oops!
What can that mean?

The BBC quickly skip over the implication that if one dead fighter having vague links to Pakistan is a possible trigger for an Indo-Pakistani war, does that mean some of the dead being English is going to trigger the great retribution for the Raj?

Of course not - England is one of India's biggest markets for their mass produced crap. Still the look of a rabbit caught in the headlights from senior BBC liar and propagandist Nik Gowing was about the only light moment in the hours of tedious anti-Pakistan innuendo.

There are insufficient facts to speculate on the real source of the attacks but one thing we can be sure of is that the inevitable result of this will that by invasion or 'invitation', big mobs of foreign troops are gonna be occupying Pakistan by the end of '09.

Silly silly India hasn't thought this through. This war on terror spreads in a manner much like the fallacious 'domino theory' America claimed would cause all of IndoChina to 'go communist' in the 1960's.

The invasion of Pakistan by America, England, Nato or even some mercenary outfit out of a tame Islamic regime will inevitably lead to increase violence by some of India's Muslim population.

As I said in another post India has 140 million Islamic citizens, if even a tiny percentage of them decide that they must help save Pakistan, India would descend into a chaos that would make Mumbai 09 seem minor in comparison.

Posted by b on November 28, 2008 at 03:27 PM | Permalink | Comments (72)

Konsumterrorism

A German word with no real English equivalent is Konsumterror.  The verbal translation is consuming-terror. A English definition of the sense might be: a fear that one is missing out by not buying something.

This person then could be called a casualty of Konsumterrorism:

A worker died after being trampled and a woman miscarried when hundreds of shoppers smashed through the doors of a Long Island Wal-Mart Friday morning, witnesses said.

The unidentified worker, employed as an overnight stock clerk, tried to hold back the unruly crowds just after the Valley Stream store opened at 5 a.m.
...
"He was bum-rushed by 200 people," said Jimmy Overby, 43, a co-worker. "They took the doors off the hinges. He was trampled and killed in front of me. They took me down too...I literally had to fight people off my back."

Link via Atrios

Ain't there laws against inciting terrorism? Who should be punished for this?

Posted by b on November 28, 2008 at 10:42 AM | Permalink | Comments (22)

November 27, 2008

The Attack in Mumbai II

The cleanup operation in Mumbai are still ongoing as the police and army search and fight through two big hotels that were attacked. The latest casualties numbers are 125 dead, 327 injured.

As said before, there is something weird about these attacks.

There was no clear target.

The major attacks were on a railway station, two big hotels, a multiplex movie theater and a bar. Two taxis were blown up. Two terrorists allegedly were at a hospital.

Of the dead only 6 were foreigners, of the wounded 7. While those hotels and the bar frequently have foreigners those numbers and the attack on the railway station and the cinema do not fit to an "attack on foreigners" scheme.

There also seams to be no special religious anti-Muslim or anti-Hindi scheme in this as no place of worship was attacked.

The attacks, even while there were a lot of casualties, seem not designed to cause the maximum number of dead. One would do that with explosives within the crowded railway station. Not by  shooting into the masses or by blowing up a random taxi.

There were no suicide bombings. Apparently there was no hostage taking either. But the attackers did not care or prepare to get away either. Instead they waited for the police and then had a shootout at each place.

The group that allegedly claimed the attack has never been heard of. For maximum international media attention thanksgiving is not a good day.

This coordinated attack brought out all anti-terror units in Mumbai. That, I think, might have well been the intended aim. The attacks seem to have been designed to do and to create direct battle situations with the anti-terror forces.

Here is my conspiracy theory:

The right-wing, Hindu-nationalist  BJP party is competing with the ruling Congress party for upcoming elections. A big election theme is Islamic terrorism.

On September 28 a bomb blast in Malegaon, some 150 miles north of Mumbai, killed four and injured 80.

Two years before in a series of bombings at a Muslim cemetery in Malegaon 31 were killed and over 100 wounded. Most were Muslim, but the local police then pointed to some people from the Student Islamic Movement of India as the culprits.

The investigation of this years blast in Malegaon was carried out by the Anti Terrorism Squad from the state capitol Mumbai under its chief Hemant Karkare. It figured that a right-wing nationalist Hindu groups, which included some former higher ranking military and had some ties to the BJP, was the culprit.

It is an ongoing huge investigation which has had loud echoes in the parliament and the election campaigns.

A week ago Hemant Karkare was in a tussle with the nationalist BJP:

The Anti-Terrorism Squad (ATS) on Thursday invoked the stringent Maharashtra Control of Organised Crime Act (MCOCA) against the ten accused arrested so far in the September 29 Malegaon blast case.

One more suspect would be arrested soon, ATS chief Hemant Karkare said at a press conference.
...
Rebutting senior BJP leader L K Advani's charge, Maharashtra Anti-Terrorism Squad said there was no political pressure on it in handling the Malegaon blast probe nor was there any substance in the charge that accused Lt Col P S Purohit was tortured in custody.

"There is zero political pressure and we are working professionally. Purohit has said in open court that ATS has not ill treated him," ATS head Hemant Karkare said.

Two days ago Karkare received death threats:

The Pune cyber cell officer on Tuesday received a call from an unknown caller who issued death threat to Mumbai's Anti-Terrorism Squad (ATS) chief Hemant Karkare, TV channels reported.

Yesterday Hemant Karkare was killed when he responded to the attack on the Taj hotel (video showing him preparing to go in).

All together four top anti-terror policemen were killed.

Mumbai Police Anti-Terrorism Squad (ATS) chief Hemant Karkare was among the dead. Two Indian Police Service (IPS) officers, additional police commissioners Ashok Kamte and Sadanand Date, were killed in separate gun battles with terrorists, the authorities said.

Mumbai Police "encounter specialist" Vijay Salaskar were also shot dead in another gun battle. Karkare was heading investigations into several recent cases of terrorist attacks here.

All four were in the first response wave against the attacks. Salaskar was a Mumbai top response officer with 75 criminals killed on his list. Kamte was the key officer in the state police and known to be 'in the thick of it'.

Karkare died when he tried to enter the Taj hotel. Kamte and Salaskar died at the multiplex.(I could find out about Date.)

In total 14 police were killed and 26 wounded.

These are high numbers. How many of them were ambushed?

With Karkare dead, the investigation into the Malegaon explosions and their backers will likely be postponed until after the election.

Meanwhile BJP leader Advani is milking the attacks as good as he can:

The BJP's prime minister-in-waiting's remarks makes it clear that the party is going to ratchet up its "soft-on-terror'' campaign against the Manmohan Singh government in the coming days. While the latest serial attacks are likely to boost its prospects in the ongoing assembly polls, it is expected to add more strength to its anti-terror tirade. The party is certain to spare no effort to bring the issue towards the centre of the country's political discourse in the run-up to the general election.
...
While the party stated that the priority was "to bring the seize to a close with the least amount of casualty", the larger questions were not far behind. "Such a well-orchestrated attack could not have taken place without a long and large scale conspiracy, we hope that the political establishment, security agencies, and the country as a whole would draw the right lessons from the incident. We need to strengthen our intelligence network and have a strong legal and security mechanism to fight terror," BJP general secretary Arun Jaitley stated.

From asking "Qui bono?" I arrive at the BJP's door.

The attack, designed to created fight-outs with police, killed the man who was the biggest danger for the BJP as he was revealing Hindu terrorism and made the BJP campaign against Muslim terrorism seem bigot. The current attack, which will reliably be charged on some Muslim entity, will help the BJP win against the Congress party.

But me arriving at that door does not mean that the BJP really is responsible here, I only find it possible to likely.

Posted by b on November 27, 2008 at 01:04 PM | Permalink | Comments (62)

The FT's Understanding of Beggar Thy Neighbour

What does beggar thy neighbour mean?

After reading yesterday's Financial Times editorial, Fiscal fairness, not fiscal prudence, I was in serious doubt over that. I looked it up:

Beggar thy neighbour, or beggar-my-neighbour, policies are those that seek benefits for one country at the expense of others.
 

That is exactly what I thought it would mean. But somehow the FT has a different concept of that phrase.

According to the FT, you are a serious beggar-thy-neighbour case when you are unwilling to pay down the debt your neighbor made by spending too much. That is, if your neighbor can not live off your expense. Seriously:

Europe finds itself at a crossroads. The economic malaise will not only test institutions of the European Union, but more importantly the commitment of member states.
...
A substantial fiscal stimulus is needed across the continent and particularly in Germany, the EU’s largest economy, to counter an economic crisis. Announcements made so far by the European Commission and individual states do not go far enough.
...
EU officials should name and shame countries not pulling their weight, such such as Germany and the Netherlands.

Without serious contributions from these governments it is not obvious where more money could come from.

Maybe London and others should raise serious taxes on banker bonuses and FT editorial writer income? But no:

Most major member states entered the downturn with large budget deficits, ... Several, such as Italy and Greece, cannot afford much extra spending without risking concern about national solvency.

Yes, some countries have over-spend and under-taxed for far too long. But why are the countries who managed to achieve a positive balance of payment supposed to pay up for that?

Europe’s political institutions are not ideally suited to managing economic crises. They are useful platforms for exchanging views, but remain weak relative to individual countries. In negotiating monetary union, Germany advocated political union. That would have provided the eurozone with institutions equipped to push co-ordinated responses and burden-sharing.

Ironically, it is Germany that is effectively engaged in beggar-thy-neighbour policies, waiting for other less well-placed countries to do most of the work and reaping the benefits once exports pick up. But if Germany does not uphold ideals of European unity, who will?

Political union was pushed for by Germany and would have equipped the EU with some valuable institutions. But such institutions would then have regulated far stricter than was done without them. They would have prevented the big housing bubble in Spain and Ireland and the totally irresponsible borrowing and flat-tax lunacies in Eastern Europe. But unfortunately such European political institutions were opposed by the FT's editorial staff and there likes.

Still - political union is not what the FT is now calling for. The only 'ideal of European unity' the FT seems to knows, is that the Germans have to pay. If they do not, they beggars their neighbors.

Germans will be hit hard by this crisis. Others might get hit even more because they banked on the financial industry like Great Britain, bought overvalued London real estate like some FT editors, or did not take care of their deficits in better times.

Why should German taxpayer money now be invested in some more or less senseless spending programs? To pull the irresponsible people out of their mess?

I certainly do not like the German chancellor's policies, but once a while she has a thing right:

"Excessively cheap money in the US was a driver of today's crisis," the chancellor told the German parliament. "I am deeply concerned about whether we are now reinforcing this trend through measures being adopted in the US and elsewhere and whether we could find ourselves in five years facing the exact same crisis."

It does not make sense to simply throw money at the problem.

But for the sake of European unity, let me make an an offer to the FT.

Germany will pay $50 billion into a European alternative energy investment program if the FT and Britain support an all-mighty independent European Financial Regulator that will be headed by the most prudent German we can find.

Oh, and Germany will pay his/her earnings. If only to not get accused to beggar its neighbors.

Posted by b on November 27, 2008 at 09:28 AM | Permalink | Comments (10)

The Attack in Mumbai

Somewhat weird.

This seems to be a botched attack on a target we yet do not know.

There have been shootings at a police station, a main railway station, a multiplex cinema, a hospital, a bar and two luxury hotels. Only the last three have some concentration of foreigners. Additionally two taxis blew up in different locations. Over a hundred people are dead and many more wounded.

Which of these diverse places were real targets?

The attackers are said to have come by boat. My first hunch is that they separated into several groups on their way to some place. Some of these smaller groups were then challenged by security forces and then went on a rampage. The locations and high number of random victims do not make any sense. If so many attackers were involved, a real operation with one or two targets would be much more likely to lead to some 'success'.

So what was the real target?

As for who they are. They could be from any group. As Debs is Dead remarks:

Funny the papers here which have been reporting it since about 8.00pm Wednesday GMT initially put the attacks down to Assamese separatists, but it could just as easily have been Gorkhaland separatists, Sikh separatists or any of the myriad other nationalist movements within India known to have used violence against citizens and tourist spots.

The phone call from a previously unknown 'muslim terror group' is as convenient as it is unlikely to be genuine.

Additional possible groups are Kashmiris, Thais in revenge of the Indian attack on a Thai trawler near Somalia (though I think that is unlikely) or Hindu rightwingers near to the BJP party in a false flag operation. I would not exclude any Muslim group with official, unofficial or no Pakistani support, but it is just one of many possibilities.

Posted by b on November 27, 2008 at 12:29 AM | Permalink | Comments (39)

November 26, 2008

OT 08-41

Comment or perish ... another open threat ...

Posted by b on November 26, 2008 at 03:16 PM | Permalink | Comments (37)

Georgia: Coming Clean on Saakashvili's War

The former Georgian ambassador to Russia and once follower of Saakashvili, Erosi Kitsmarishvili, testified in front of a Georgian parliament commission. Major points:

# In the second half of April, 2008, I have learnt from the President's inner circle that they have received a green light from the western partner to carry out a military operation;

# When asked to specify “the western partner” Kitsmarishvili said: after a meeting with the U.S. President George W. Bush [the meeting between Bush and Saakashvili took place in Washington on March 19], our leadership was saying that they had the U.S. support to carry out the military operation;
...
# The military operation should have been undertaken in direction of Abkhazia; military instructors from Israel were brought here in order to prepare that military operation;

# [Defense Minister] Kezerashvili also said at that meeting that the operation should have started in early May, or at least before the snow melted on the mountain passes;

# This decision was not materialized;
...
# On August 7, at 4pm I again had a phone conversation with Saakashvili; he told me that war was starting; I do not want to go further into details of that conversation;

This account is, of course, much more believable than Saakashvili's lies.

At 6:10pm local time on August 7 Saakashvili announced a ceasefire in skirmishes with South Ossetia. But as Kitsmarishvili confirms, his troops had already orders to attack and were moving into place.

How long will it take until the Georgians finally take this guy to the prison where he belongs?

Posted by b on November 26, 2008 at 10:47 AM | Permalink | Comments (16)

Three SOFA Versions - But What About The SFA?

There are now several version available of the Status of Force Agreement (SOFA) the U.S. is pursuing with Iraq.

There are two translations from the Arab version. One from Iraq blogger and activist Raed downloadable here. The other one is by McClatchy's Baghdad Bureau available here. So far the U.S. keeps the official English version secret. But McClatchy obtained a copy (pdf). Its team reports:

The Bush administration has adopted a much looser interpretation than the Iraqi government of several key provisions of the pending U.S.-Iraq security agreement, U.S. officials said Tuesday — just hours before the Iraqi parliament was to hold its historic vote.

These include a provision that bans the launch of attacks on other countries from Iraq, a requirement to notify the Iraqis in advance of U.S. military operations and the question of Iraqi legal jurisdiction over American troops and military contractors.

To illustrate the differences lets compare the three editions. For obvious reasons we pick article twenty four.

Raed's translation:

Article Twenty Four
Withdrawal of U.S. forces from Iraq

Recognizing the improvement of the Iraqi security forces and their increased capabilities, and the fact that they are in charge of all security operations, and based on the strong relationship between the two sides, both sides have agreed on the following:

1- All U.S. forces must withdraw from all Iraqi territories no later than December 31st 2011.

2- All U.S. combat forces must withdraw from all cities, towns, and villages as soon as the Iraqi forces take over the full security responsibility in them. The U.S. withdrawal from these areas shall take place no later than June 30th, 2009

Raed marked the changes from an earlier version he obtained. The "all"s marked above were added in the more recent one. The "must" in 1 was changed from "shall" the "must" in 2 was changed from "will".

The English version obtained by McClatchy seems to include most of the changes Raed marked throughout the agreement text. But article twenty four is different in the English version:

Article Twenty Four
Withdrawal of the United States Forces from Iraq.

Recognizing the performance and increasing capacity of the Iraqi Security Forces, the assumption of full security responsibility by those Forces, and based upon the strong relationship between the Parties, an agreement on the following has been reached:

1 - All the United States Forces shall withdraw from all Iraqi territory no later than December 3, 2001.

2 - All United States combat forces shall withdraw from Iraqi cities, villages and localities no later than the time at which Iraqi Security Forces assume full responsibility for security in an Iraqi province, provided that such withdrawal is completed no later than June 30, 2009.

Notice that the English version still includes "shall" where the Arabic one included "will". In 2 the English version seems a bit more ambivalent too.

The English translation of the Arabic text as provide by McClatchy reads:

Admitting to the performance of Iraqi forces, their increased capabilities and assuming full responsibility for security and based upon the strong relationship between the two parties the two parties agreed to the following:

All U.S. forces are to withdraw from all Iraqi territory, water and airspace no later than the 31st of December of 2011.

All U.S. combat forces are to withdraw from Iraqi cities, villages, and towns not later than the date that Iraqi forces assume complete responsibility of security in any Iraqi province. The withdrawal of U.S. forces from the above-mentioned places is on a date no later than the 30 June 2009.

I will let you decide how important these differences are. I for one believe that some lawyers could argue a lot about them. There are also, likely false, rumors of secret SOFA articles. How would those pass the Iraqi parliament?

What still bothers me the most is that the Strategic Framework Agreement (SFA) that was signed by Maliki and U.S. ambassador Crocker together with the SOFA has still not officially been made public and that everyone is mute about it. Imad Khadduri provides a link to an Arabic version. At his site Badger translates a short part of that in a comment and muses:

Notice that according to this (1) the close cooperation in defence and security arrangements has been inserted into the long-term strategic framework agreement; and (2) while the cooperation is in defence and security arrangements, what is contemplated at the end of this section is the takeover by the Iraqi forces of full responsibility for security, the word defence being missing there. It is enough to make you wonder, and particular in the light of the fact that the final version of this seems to be something of a secret.

I continue to believe that The Iraq SOFA Is A Shiny Object that is supposed to keep our eyes away from the problematic text of the SFA.

How much sovereignty does Iraq have when the U.S. is issuing solicitations for ammunition for the Republic of Iraq? What does the SFA say about that? Will the U.S. keep control over Iraqi arm purchases?

Posted by b on November 26, 2008 at 06:09 AM | Permalink | Comments (16)

November 25, 2008

World Trade Collapse

Last month I reported on ships laying idle in Hamburg harbor: Visually Noticing The Downturn

The Baltic Dry Index measures cost for cargoes of raw materials by sea.  It was around 2,000 points in the beginning of 2006. It jumped to 12,000 in mid 2008. Since then it fell to 925. That is an unprecedented collapse of freight rates.

It is now down to 824.

Oversea goods from and to the Americas and Asia go to Rotterdam, Felixstowe, Bremerhaven and Hamburg on ships carrying up to 10,000 standard 20 feet container (teu). From there smaller ships of mainly two cooperatives service northern Europe. Unifeeder (~38 vessels) and Teamlines (~30 vessels) ships have 500 to 900 teu. They 'feed' the oversea ships with goods to and from all of northern Europe, including the Baltic countries and Russia.

As I was told today Unifeeder now has eight ships idle, more than 20 percent of its total capacity, and is planing to idle more. I do not know the total Teamline numbers but at least three of their ships were laying in idle mooring in Hamburg harbor today.

The news from the big shipping lines is even worse:

Coscon, K Line, Yang Ming and Hanjin Shipping had already announced cuts on 13 November, but are now swinging the axe again to cope with the “traditional slack season” from early December to the end of March next year.
...
These cuts will slash existing capacity to northern Europe by 30% or 16,000 teu.

It is a worldwide problem as trade is collapsing even without the disastrous protectionist measures we can still expect to be legislated soon:

It had already suspended its AWE (All Water East Coast) China to US central loop from early October and reduced the total capacity in the trade by around 18.5%.

Earlier this month it also suspended the EMX (East Med Express) service in the Asia-East Mediterranean trade from the middle of October.

And it decided on reducing capacity by 18% in its TAS -1 (North Trans Atlantic) service connecting the US and Europe from the middle of this month. Port calls will be unchanged, but smaller ships will be used.

Capacity on its PSW (Pacific South West) trade will also be chopped and it will scrap the MAP (Mediterranean – Asia – America Pendulum) service connecting Mediterranean, Asia and the US from early 2009, cutting capacity in this trade by 13% to 15%.

Hyundai Heavy Industries, the biggest shipbuilder in the world, has 57% less orders than a year ago. A lot of jobs in transport and all related industries will be lost. It will take many years to revive the trade.

Like a month ago I want to ask you:

What are signs of a downturn you see in your area? What are they? Are the signs getting worse or better?

Posted by b on November 25, 2008 at 02:43 PM | Permalink | Comments (30)

Auto Industry Bailout Scam

by Debs is Dead
lifted from a comment

Well I was interested by Mike Whitney's comments on the seeming dissonance on the support the banks and financials are getting and the complete lack of support for the auto industry bailout.
Yeah yeah I know the American auto industry is a basket case completely captured by the myth of infinite and cheap hydrocarbons, their inability to change has stranded them on the beach like an old whale who doesn't realise he will die before a tide big enough to float him off comes again.
But the same can be said of the banks and all the rest of Wall St. They used outmoded inflexible solutions to an ever-changing environment and consequently got beached too.

Whitney maintains that the auto industry will be bailed out alright but not until the big two have been chapter 11'd and the unions broken along with worker's entitlements:

So why would GMAC want to become a bank holding company if General Motors is headed for the chopping block? Could it be that the government is working out a secret deal with management to put the company through Chapter 11 (reorganization) just so it can crush the union and eliminate their pension and health care benefits in one fell swoop?

You bet. Car workers will be reduced to slave wages just like they are in sunny Alabama where sharecropping has moved indoors. And--no surprise--the Democrats are right on board with this labor-busting charade. The auto industry isn't going to be shut down. That's just more fear-mongering like the blather about martial law and WMD. Detroit is going to be transformed into a workers gulag; Siberia on Lake Michigan, which is why Paulson is withholding the $25 billion. It's plain old class warfare.

The ultimate sellout by the dems. Those of us who live in nations where a 'leftist' party finally won government during the great depression where government then introduced the safety nets and Keynsian economics and a more friendly attitude towards labour unions; are probably unaware of the horrors introduced by the likes of Ramsay McDonald as a labour PM in England when the depression hit.

A roundabout way of saying many of us have been brought up to believe that the pale pink leftish political parties that appeared to be aligned with ordinary workers during the depression, only became so aligned against their natural instincts. After they had seen ersatz socialist political parties like the English labour party crack down on workers just as bad if not worse than the right wing conservative parties, but the great recovery promised by the capitalist mouthpieces never eventuated. So the likes of FDR and Mickey Savage had no choice but to go left, as much as it went against their natural instincts.

Barack Obama and Joe Biden are not the workers' friends. Neither are any of the other pseudo working class champions in Congress. They may have come from the working class although really both Biden and Obama are products of the bourgeoisie, and even those dem pols who did come outta housing projects or other extreme poverty, couldn't wait to get away from it.

They wear the title "champions of the ordinary people" simply because the sort of petite bourgeois scaredy cats who hang round the lower echelons of the rethug party would have chased them off had the 'working class heroes' tried to get ahead with the party of one man against the world (ie extreme selfishness) that more properly suited their personal ethos, the rethugs. Sure the rethugs do let a few tokens in but only if the tokens touch their forelocks and don't scare them, and don't try and push Johnny Governorson offa his reserved spot.

Shit sorry bout the digression - the dem party hacks mostly have the values of the class enemy and will destroy American workers' entitlements in a heartbeat while claiming this is necessary to keep the auto industry 'globally competitive'.

Complete lies- utter bullshit - total distortion - check out how well car company employees are looked after in Germany or Japan. Even Korea where auto industry wages rose an average of 15% a year for the 15 years between 87 and 02 and where Kia attempted the same sort of Chapter 11 scam, the auto workers are much better looked after than other similar industries. They have strong unions in the other car manufacturing nations too. Why? Because these fork tongued under snakes belly high jumpers will never admit it but the success of such a complex industry such as vehicle manufacturing depends upon a good working relationship between management and workers. A good formalised relationship. Formalised by using the democratic structure of the labour union to facilitate effective consultation.

The lack of competitive car products outta Detroit has nothing to do with pension plans or dental benefits and everything to do with shit-house management.

The auto industry executives and their lackeys in Congress along with old school chums in treasury, figure if they can scare the workers, then slice and dice their working conditions, while paying off key unionists with cash or political favours to ensure the auto industry unions have the balls of a gelded racehorse, then management will be able to stay in it's nice little comfort zone safe from the exigencies of peak oil reality because American auto industry workers will be the cheapest on the planet.

Who cares if Detroit can only make 'yank tanks' if the much lower labour costs mean the ignorant can justify the relatively high cost of gas due to inefficient energy usage by offsetting it against the cheaper purchase price.

Everyday we see items that have a much higher running cost outsell far cheaper to maintain items. This by citizens who consider themselves value oriented, because the initial upfront cost of the expensive to run item is lower than that of the more efficient product.

That is the 'niche' the marketers hope to be steering Detroit product into.

Only if ordinary Americans, particularly ordinary members of the dem party, let their representative 'freckle punch' them.

Posted by b on November 25, 2008 at 05:04 AM | Permalink | Comments (25)

November 24, 2008

The Value of the Financial Industry

Yves Smith has some good remarks on how Finance Has Lost Sight of Its Role

In 1980, financial firms accounted for 8% of S&P earnings. During the peak of our last stock market cycle, their profits were over 40% of the total.

Now consider: finance is a necessary function, but is represents a tax, a drain on the productive economy, just as defense and lawyers do ...

Instead being a utility that supports the real productive industry, the financial industry has turned into a cult.

Willem Buiter has chastised the Fed for what he calls "cognitive regulatory capture," that is, that they identify far too strongly with the values and world view of their charges. But it isn't just the Fed. The media. and to a lesser degree, society at large has bought into the construct of the importance, value, and virtue of the financial sector, even as it is coming violently apart before our eyes. Why, for instance, the vituperative reaction against a GM bailout, while we assume Citi has to be rescued?

Why indeed? Why this?

The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.

As I wrote last month:

Where is the social benefit?

Can we please have a plan for a financial system that is a service to the economy and not a drag -  not a monster that depends on over-leveraged quant strategies nobody really understands?

While now bank after bank gets nationalized, possibly all of them within the next 12 month, we get the once in a lifetime chance to cut the financial system back to the boring utility service that it should be: Collecting savings and distributing them as loans for productive means while maybe making a small profit.

That is the only social and economic value the financial industry has. Everything else is obfuscation of robbery driven by greed.

 

Posted by b on November 24, 2008 at 09:56 AM | Permalink | Comments (28)

Rubin's Citigroup Bailout

The U.S. taxpayer will now take most losses on a $300 billion package of bad debt Citigroup is holding:

Under the agreement, Citigroup and regulators will back up to $306 billion of largely residential and commercial real estate loans and certain other assets, which will remain on the bank’s balance sheet. Citigroup will shoulder losses on the first $29 billion of that portfolio.

Any remaining losses will be split between Citigroup and the government, with the bank absorbing 10 percent and the government absorbing 90 percent. The Treasury Department will use its bailout fund to assume up to $5 billion of losses. If necessary, the Federal Deposit Insurance Corporation will bear the next $10 billion of losses. Beyond that, the Federal Reserve will guarantee any additional losses.

In the deal the government will get some likely worthless equity in Citigroup.

The question I don't see anybody touching is for what percentage of the notional value of the loans this deal was done. The deal terms (pdf) say:

Up to $306 bn in assets to be guaranteed (based on valuation agreed upon between institution and USG).

So who will set those values? Who will supervise those who set these values? There are billions of taxpayer dollars at risk in each percentage difference of these evaluations. Where is the reporting on that?

Instead we are subjected to such nonsense:

Government officials fear taking over Citigroup would create a precedent: Unlike AIG, Citigroup's balance sheet is relatively healthy, with relatively strong levels of capital particularly compared to most of its competitors.

Ahem, does the Citigroup official balance sheet matter at all?

In addition to $2 trillion in assets Citigroup has on its balance sheet, it has another $1.23 trillion in entities that aren't reflected there. Some of those assets are tied to mortgages, and investors have worried they could cause heavy losses if they are brought back on the company's books.

Citigroup is dead. There is no way the company can survive without a massive default. It will not be the only one. Others are lining up:

Government officials could face requests from other banks for similar help shoring up their balance sheets. Banks, hedge funds, and private equity firms have urged Capitol Hill and government officials to restart the asset-purchase program in recent weeks.

"The problem is that other banks would want to get in line" for such government support, says Thomas B. Michaud, a vice chairman of investment bank Keefe, Bruyette & Woods Inc. "Is there enough money to do that?"

Only if you print it ...

And who is pulling the strings behind all this?

Inside Citigroup’s Park Avenue headquarters, the mood was tense. Through the weekend, Robert E. Rubin, the former Treasury secretary and an influential executive and director at Citigroup, held several discussions with Treasury Secretary Henry M. Paulson Jr.

Still hoping for change in the next administration?

It is testament to former Treasury Secretary Robert E. Rubin’s star power among many Democrats that as President-elect Barack Obama fills out his economic team, a virtual Rubin constellation is taking shape.  

The president-elect’s choices for his top economic advisers — Timothy F. Geithner as Treasury secretary, Lawrence H. Summers as senior White House economics adviser and Peter R. Orszag as budget director — are past protégés of Mr. Rubin, who held two of those jobs under President Bill Clinton. Even the headhunters for Mr. Obama have Rubin ties: Michael Froman, Mr. Rubin’s chief of staff in the Treasury Department who followed him to Citigroup, and James P. Rubin, Mr. Rubin’s son.

All three advisers — whom Mr. Obama will officially name on Monday and Tuesday — have been followers of the economic formula that came to be called Rubinomics: balanced budgets, free trade and financial deregulation, a combination that was credited with fueling the prosperity of the 1990s.

The correct version of the last sentence would have been: "a combination that was credited with fueling busts and bailouts of 2008, 2009 and 2010".

With this Citigroup bailout and the prospect of the incoming team of Wall Street gangsters, the chance of a default of the U.S. government on its debt are now higher than ever.

Posted by b on November 24, 2008 at 03:47 AM | Permalink | Comments (13)

November 22, 2008

Obama Change Is Unchanged Policy

Obama announces a big infrastructure program:

With the worsening economic turmoil certain to mark Mr. Obama’s first year in office, his advisers say they are intent on trying to use the crisis as an opportunity to act on many of the issues he emphasized in his campaign, including tax cuts for lower- and middle-class workers, addressing neglected public infrastructure projects like roads and schools and creating new “green jobs” through federal business incentives for energy alternatives and environmentally friendly technologies.

That is a pretty standard Keynesian reaction in a recession.

But the program lacks real initiatives. Why spend on roads when better public transport would be much more effective in reducing dependency on hydrocarbons?

The best policy for energy alternatives is to make carbon-energy more expensive by introducing a gas tax and to guarantee an (over time decreasing) extra amount per kilowatt for wind energy.

These are recipes known to work. Federal business incentives will simply end up as pork.

So far I have yet to see any change from standard U.S. policy approches.

As Jereme Scahill points out (h/t r'giap), the Obama team looks more and more like a Clinton team sprinkled with some CIA torture advocates and arch-republicans like Gates in important position.

Why was there such a long primary at all when the people who lost that ride end up in the front seats of the presidency?

Posted by b on November 22, 2008 at 03:44 PM | Permalink | Comments (40)

November 21, 2008

Jana Shakarian or How to Bomb for a Ph.D.

Some weird terror scare is constructed in this:  Somali Pirates' Successful Business Model, Trade with Terrorists: UM Researcher

The Somali pirates are growing their business - expanding their area of operation, managing public relations, reinvesting in the enterprise - and appear to have a growing relationship with militant Islamic groups, says University of Maryland researcher, Jana Shakarian, who monitors political, social and security conditions in Africa.
...
Al-Shabaab is suspected to entertain relations with Al-Qaeda. ... Al-Shabaab seems to profit from the piracy business ...

Shakarian makes up a six degree relation between the Somali coast guard/pirates and Al-Qaeda. But there is not one tiny bit of proof for any of the those relations.

David Axe, who has at least been on the grounds in Somalia, finds such relations very unlikely.

b real points us to the real news:

MOGADISHU (Reuters) - Dozens of Somali Islamist insurgents stormed a port on Friday hunting the pirates behind the seizure of a Saudi supertanker that was the world's biggest hijack, a local elder said.

and:

MOGADISHU (AFP) — A hardline Islamist alliance controlling Somalia's main southern port of Kismayo on Wednesday promised tough measures to protect ships and traders from marauding pirates.

The pirates/Somali coast guardians have so far only demanded money for returning the ships they captured. They have no political demands and use as little violence as possible. The have no connection to any of the Islamic movements there.

So who is this Jana Shakarian who is asserting this nonsense relation between the pirates and terrorists?

Her sole academic record is (scroll down) a master in sociology and ethnology from a German university. In 2005 she was several weeks in Ethiopia. Certainly a great place to learn about the sociological configuration of Ethiopia's archenemy Somalia.

Jana Shakarian is now working at the Laboratory for Computational Cultural Dynamics at the University of Maryland. What is that lab doing ?

The purpose of the laboratory is to develop the theory and algorithms required for tools to support decision making in cultural contexts.

The 'Computational Cultural Dynamics' tool:

Will_cultivate_poppies(F):[0.7,1] if debt-level(F,D) & D > d.
(hostile_foreigners(F) and Will_cultivate_poppies(F)):[0.6,1] if debt-level(F,D) & D > d.

Great stuff! Guess who is interested in such 'quant' nonsense form of social science. Yes. Since 2006 the laboratory is working on a $6 million contract/grand project for the U.S. Air Force.

The lab's 'latest news' list shows two of its members' publications in Science. It also shows three publications by them in National Review Online, one in the New York Sun and one publication as a Wall Street Journal Op-Ed.

A right-wing oriented, military financed pseudo-research shop.

Shakarian must be a recent acquisition as she is not on the staff list which was last updated in February. She seems to have been hired fresh from her master thesis as the 'expert' on the Horn of Africa to expand the labs 'expertise' from Pakistan/Afghanistan to the next area where it can make a nice profit and earn some additional pseudo-science credentials.

Now the first task for the new lady is to construct a threat where none is. That is a hard task when the facts, Reuters and AFP are refuting that construct the very same day. But it may well work. She will only need to 'build' the story a bit more scary and repeat it over and over. Publish it on National Review Online? Sure, eventually someone might use it.

When that 'threat' is established, her next task will be to convince some military dudes to chip over a seven digit amount of money to lab to forecast group behavior in Somalia. With a bit of personal commitment and some ambition, the young lady should have no problem with that task.

She can then work on her well financed Ph.D. thesis by computing some senseless stochastic probability model on group behavior in Somalia which, in reality, is driven by a myriad of factors she does not know and has never experienced in her own life. To test her thesis the Air Force will drop some bombs on the vigilantes her false models will reliably identify as Al-Qaeda affiliates.

Her professor will rake in some money, Jana Shakarian will get her Ph.D. and some people in Africa will die.

"Isn't that the way it should be?" she may ask.

Posted by b on November 21, 2008 at 03:17 PM | Permalink | Comments (52)

Next Steps on Tibet

There is currently a meeting of Tibetan exiles in Dharamsala, India, to discuss the future of their movement.

In March several Han Chinese were killed by violent Tibetan protesters in Lhasa. As the 'western' media misrepresented the issue, I wrote a small piece on the history of the Tibet conflict:

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 regularly fought over territory and economic benefits.
...
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.

The people behind the uprising in March were trained in 'color revolution' techniques and are financed with million dollar grands from the U.S. government.

Under international public relation pressure due to the Olympics and to avoid further strife, the Chinese government agreed to more negotiation with the Tibetan exiles. It asked them to write down their demands.

The exiles did so and a memorandum was presented to the Chinese officials. The demands therein were rejected as going much too far. The public relation fight about these demands and their rejection is now made in English language.

The exiles' MEMORANDUM ON GENUINE AUTONOMY FOR THE TIBETAN PEOPLE is quite expansive. It assures that the demands therein can be fulfilled within the current Chinese laws and constitution - if those are bend and some changes are applied (emph. added):

To a very considerable extent Tibetan needs can be met within the constitutional principles on autonomy, as we understand them. On several points, the Constitution gives significant discretionary powers to state organs in the decision-making and on the operation of the system of autonomy. These discretionary powers can be exercised to facilitate genuine autonomy for Tibetans in ways that would respond to the uniqueness of the Tibetan situation. In implementing these principles, legislation relevant to autonomy may consequently need to be reviewed or amended to respond to the specific characteristics and needs of the Tibetan nationality.

The Chinese will not change their constitution and laws to appease the Tibetan elite that fled in the 1960s. It would open a can of worms for them as other minorities would come up with similar demands.

The Chinese news agency Xinhua's Tibet writer is one Yi Duo. He today published a 'signed article', which can be read as the official Chinese refutation of the Dalai Lama's memorandum.

Yi Duo writes that the demands in the memorandum are not, as claimed, supported by the Chinese constitution, but are contrary to it as the Dalai Lama demands the 'genuine autonomy' of a lose federal state while China has a non-federal, unitary constitutional system.

There are already many provisions for autonomous regions within China's laws, Yi Duo says, and many such regions are already established, including an autonomous Tibet region. There is no need to expand the system.

In his (official Chinese) reading these are the issues the exiles' memorandum includes:

  • Demand for an independent, uncontrolled "right of legislation"
  • Seeking for a "Greater Tibet" Without any Historic, Realistic and Legal Basis
  • Trying to create isolation among ethnic groups
  • Trying to stop promotion and use of Putonghua [the unified Mandarin language]
  • Strongly opposing government's management of religious affairs in line with laws
  • Completely ignoring fact that Tibet is always part of China
  • Claiming "Tibet government-in-exile" as representative of Tibetan people

Yi Duo ends:

The door of the central government for the Dalai Lama to return to the patriotic stance has always been open and will remain open in the future. However, the door for "Tibet independence," "half independence" or "covert independence" has never been open, nor will it be open in the future.

After the rejection of his demands, the Dalai Lama called for a meeting of all exile groups in Dharamsala in India and, as McClatchy reports, it's debate by day, party by night.

The meeting is supposed to debate how to go on with the struggle. The Dalai Lama so far represented a peaceful political struggle. He still has support but there are some harsh voices that call for terrorism against China:

[Lhasang Tsering, a former head of the Tibetan Youth Congress,] said he hoped that Tibetan exiles would return to a policy of demanding independence and using, if necessary, a campaign "to target their industries, their power supply and communications inside China through acts of sabotage."

The Tibetan Youth Congress was one of the U.S trained groups behind the violence in Lhasa in March.

The exile meeting may decide to reduce the demands and find a compromise to return to their homeland or it may decide to struggle on peacefully. But some of the groups involved are likely to part way with that and will create more bloody riots or other violent acts as soon as the recent meeting is over.

I therefore expect and increase in terrorist incidents within China.

---
Official Chinese government Tibet site: China Tibet Information Center
The Tibetan exile page: Central Tibetan Administration

Posted by b on November 21, 2008 at 12:31 PM | Permalink | Comments (10)

The Double Top

Two quotes from:

Technical Analysis of Stock Trends
Robert D. Edwards and John Magee,
8th edition, CRC Press, 2001

A Double Top is formed when a stock advances to a certain level with, usually, high volume at and approaching the Top figure, then retreats with diminishing activity, then comes up again to the same (or practically the same) top price as before with some pickup in turnover, but not as much as the first peak, and the finally turns down a second time for a Major or Consequential Intermediate Decline.
(page 134)


Standard & Poors 500 index (SPX weekly), 1970-2008, via bigcharts.com
bigger

If prices on their recession from the second peak, drop through the Bottom level of the valley, a Reversal of Trend from up to down is signaled. And it is usually a sign of major importance. Fully confirmed Double Tops seldom appear at turns in the Intermediate Trend; they are characteristically a Primary Reversal phenomenon. Hence, when you are sure you have one do not scorn it. Even though prices may have already receded 20%, the chances are they have very much further to go befor they reach bottom.
(page 140)

Posted by b on November 21, 2008 at 08:25 AM | Permalink | Comments (15)

November 20, 2008

IAEA And The Media On Iran And Syria

Yesterday the IAEA released its latest report (pdf) on Iran and one on Syria's 'Box on the Euphrates'.

As expected there is nothing new on Iran. It produces low enriched Uranium, as is its right, and refutes murky U.S. allegations of a nuclear weaponization program.

On the Box of the Euphrates, the building Israel bombed in Syria a year ago, the IAEA found that the size of the building would allow for a reactor and the pipeline from the river for enough reactor cooling.

So the demolished building could have been for a reactor. But it could also have been for a myriad of other purposes. Of the ground samples the IAEA took, one(!) included a tiny bit of chemically altered Uranium which was neither enriched nor depleted.

The usual suspects in the 'western' media are of course trying to twist the facts to let Iran and Syria look guilty of whatever. This is a campaign, initiated by Israel with the help of the U.S., to simply put independent regional competitors of Israel under international pressure.

A few examples of the false news reporting which often is quite subtle, but effective.

On the Iran report the Financial Times asserts this nonsense:

IAEA officials said relations between the organisation and Iran had deteriorated so much there had been no contact between them for over two months, UN officials said on Wednesday. [sic!]

No contact for two month? Hmm. The IAEA report says:

On 29 September 2008, the Agency conducted a physical inventory verification (PIV) at the Pilot Fuel Enrichment Plant (PFEP), ...
On 26 October 2008, Iran provided updated Design Information Questionnaires (DIQs) ...
The Agency has continued to monitor the use and construction of hot cells ...

 

The Agency has been able to continue to verify the non-diversion of declared nuclear material in Iran. Iran has provided the Agency with access to declared nuclear material and has provided the required nuclear material accounting reports in connection with declared nuclear material and activities.

No contact?

In Haaretz Yossi Melman writes:

The International Atomic Energy Agency report stresses that Syria refuses to produce documents in relation to the site as it is required to do.

Syria is not 'required' to provide any documents on non-nuclear sites. Only four days ago Melman asserted:

The report will state that IAEA inspectors discovered traces of enriched uranium at the site on the bank of the Euphrates River.

The report did not state that. In his writeup today Melman does not mention that the Uranium particles found were not enriched at all. He did not mention his recent false report either.

The Wall Street Journal prints:

The IAEA, however, said the chemical makeup of the uranium detected at Al Kibar wasn't consistent with uranium from a bomb, but from a reactor.

Again, the IAEA says nothing like that. It was natural Uranium chemically altered is all the IAEA says. How it was altered and for what purpose is not in the report at all. The report would for example be consistent with metallic Uranium used in an Israeli bomb, or residues from Syria's legitimate phosphate fertilizer production which also provides for chemical altered natural Uranium as a by-product.

The Washington Post tells its readers:

Officials with the United Nations' atomic agency stopped short of declaring the wrecked facility a nuclear reactor, but they said it strongly resembled one. And they noted that Syria had gone to great lengths -- including elaborate "landscaping" with tons of freshly imported soil -- to alter the site before admitting outsiders.

The IAEA does not mention any 'landscaping' with regard to the bombed and IAEA visited site at all. Recent landscaping, not tons of fresh soil, is mentioned only with regard to the three site the U.S. wants the IAEA to visit (spy on) in Syria:

As indicated above, the Agency requested access to the three locations on 2 May 2008. Analysis of satellite imagery taken of these locations indicates that landscaping activities and the removal of large containers took place ...

While all of the 'western' media emphasize that the IAEA wrote:

a significant number of natural uranium particles

were found on the ground, none of them mentions this part:

It is necessary to draw attention also to the fact that the result of the analysis of one sample points to three uranium particles, whereas the results of four other samples taken from the same place within a 30 meter range contained no uranium particles.

Three particles on one spot are significant. That is one more than normaly would be found on my not-mopped kitchen floor. Unless of course I recently came back from a visit to a fertilizer plant. Than three or even four Uranium particles might be found on my kitchen floor just like some other quite icky stuff.

Together with the microwave oven right next to them and exaggerated 'western' media reporting, it would be likely enough to come under serious suspicion and maybe even UN sanctions.

But only if such would be in the interest of one specific country. Otherwise  noone would ever care, as it should be.

Posted by b on November 20, 2008 at 03:17 PM | Permalink | Comments (22)

The Deflation Scare

Does this graph show deflation?

No and yes.

That Google-trends graph shows an inflationary use of the word deflation in search terms and news references.

My personal theory about what the Fed and the Treasury are trying to engineer is this:

  • Push the claim that the U.S. is on the border of or in deflation
  • Use that claim to propose serious inflationary measures
  • Inflate the U.S. out of its debt

Alan Greenspan used a similar deflation-scare scheme to reignite the debt-driven economy in the last half of 2002 to justify a lower Fed rate at 1% and to keep it there for much too long time. The media helped a lot in that by generating "deflation" talk. Greenspan's policy ignited the housing bubble and led to serious commodity inflation.

While the housing bubble grew and commodity prices exploded, the government and the attached media did their best to obfuscate that the money supply expanded too fast and created serious price-inflation. That was often observable in the reporting when the Bureau of Labor Statistics released the monthly consumer price index (CPI).

When the CPI went up, the media emphasized "core-inflation", the consumer price increase which neglects "volatile" oil and food prices. Now as the relative high inflation decreases a bit, and just like back in late 2002, the media emphasis is on the "headline inflation" number.

CNN Money in July 2007: Inflation tame in June

Government's key measure in line with expectations, despite higher food prices.

NEW YORK (CNNMoney.com) -- Prices paid by consumers rose in June, but when food and energy prices were stripped out the government's key inflation measure was in line with Wall Street expectations.

CNN Money yesterday: Consumer prices in record decline

Inflation falls by a record 1% in October, worrying economists that falling prices will become a disturbing trend.

NEW YORK (CNNMoney.com) -- Consumer prices fell by a record amount in October, another worrisome sign about the contracting economy, the government reported Wednesday.

Only the 16th paragraph of the current piece mentions core inflation, which was - 0.1% compared to last month prices, but the word "deflation" occurs nine times.

In July 2007 the year- over-year consumer price increase, which was downplayed as 'tame' by CNN, was 2.7%. The October 2008 y-o-y price increase, that now is used as a deflation scare, was 3.7%, coming down from a high of 5.6% just four month ago. In other words, inflation is still too high. There is no price-deflation (yet).

While inflation was on its way up, CNN played it down. As it is now decreasing a bit, but still high, CNN talks of deflation. (I use CNN simply as an example here. All mainstream media do just the same.)

Edward Harrison at RGE Monitor provides graphs of the y-o-y CPI and concludes:

From where I sit, this information reinforces the idea that falling oil prices are going to bring down inflation for some time to come as comparisons to year ago levels will continue to be favorable. However, there has not been a similar move in underlying core inflation as yet. Consumer price deflation is a completely oil-relate phenomenon to date.

Again what I see going on here is an engineered campaign to talk of deflation where inflation is only decreasing from too high levels.

The Fed, in my theory, will then uses this deflation-scare to lower the Fed rate to zero and to adopt "unusual" measures like quantitative easing which is the method the Bank of Japan used to prop up the bankrupt Japanese banking system.

Indeed the chief economist of the Bank of America is already urging for such measures:

The Federal Reserve should buy mortgage securities in the open market to loosen up the mortgage market, said Mickey Levy, the chief economist at Bank of America on Wednesday. The move would be a form of so-called "quantitative easing" undertaken by the Bank of Japan in the early 2000s to fight deflation. Under this approach, the Fed would ignore its normal policy of targeting short-term interest rates. The idea appears to be on the Fed's radar screen. Earlier Wednesday, Fed vice chairman Donald Kohn said quantitative easing measures were under review at the central bank as normal contingency planning.

Japan used such measures because it saw a bit of real deflation. It really had a falling consumer price index. The deflation was good for consumers. Prices fell stronger than wages, giving the people more money in real terms.

But the U.S. has yet to see any deflation. Using the Japanese policies while there is still serious inflation in the U.S. economic system will lead to higher inflation, possibly much higher inflation.

For all the above I'll stick to my theory for now.

But there are other theories on what that powers-that-be are engineering here. Dude, where's the Dharma? (via BP) muses about The TARP Fund? and Empire.

His theory:

  • The p-t-b want to save the U.S. empire status at all cost
  • The US-dollar as the vehicle of empire is therefore not allowed to fall as it should
  • Inflation would help out of the current crisis but tank the dollar
  • The p-t-b prop up the U.S. dollar via the TARP and Fed lending
  • Thereby the p-t-b are engineering a deflation which will lead to a depression but save the empire.

Dude expands on that here.

It is an interesting (possible?) theory, but too far fetched for me. But it would explain the secrecy around the use of the TARP money and the trillions of mysterious Fed lending.

Anyway, how do you interpret what is happening now?

Posted by b on November 20, 2008 at 12:49 PM | Permalink | Comments (7)

November 19, 2008

OT 08-40

Open thread - news and views ...

Posted by b on November 19, 2008 at 04:15 PM | Permalink | Comments (96)

New Supply Routes To Afghanistan

"[In Afghanistan] a small army would be annihilated and a large one starved."
Duke of Wellington (1769-1852) (source)

With recent attacks on convoys through the Khyber pass, the line of communications through Pakistan to Afghanistan is in deep trouble. WaPo reports:

Security restrictions forced customs officials to slow the flow of traffic to 25 trucks every few hours. Before the Taliban raid and border closure last week, an average of 600 to 800 tractor-trailers moved through Torkham a day, according to Afghan customs officials. Customs officials said they hoped at best to see 200 trucks pass through on Tuesday.

The U.S. military asking suppliers to evaluate alternatives:

The first option is to move cargo between Northern Europe and various destinations in Afghanistan through Caucus’ and Central Asia. The second option is to move cargo between CONUS and Afghanistan through Asia and Central Asia.

Some European countries have arranged transport via railroad through Russia and Uzbekistan to Afghanistan. The U.S. seems not be willing to depend on Russian goodwill. That leaves the red and the green lines as the only possible transport routes. Both are much longer than the current blue route through Pakistan.



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The request for information to suppliers says the new route's capacity should eventual be some 75,000 twenty foot container equivalent units (TEU) per year. Those would be some 200 medium truck loads every day on roads build for much less traffic.

That is certainly not enough to replace the 600 to 800 daily trucks passing through Torkham, but it would certainly relief that line. Unless more troops are needed.

Lt. Col. John Nagl, who works for General Petraeus on a new Afghanistan plan, wants more troops:

Nagl says he believes the U.S. needs to double its American troops from 30,000 to 60,000 in Afghanistan. He also says the Afghan National Army needs to grow from 70,000 to 250,000. That may mean getting more help from the international community.

Double the U.S. troops will need double as much in supplies. The Afghan troops will also need lots of ammunition, fuel, food and other materials. (So many Afghan troops would cost much more than the Afghanistans total GDP. Who will finance them how long?)

And who will finance the logistics for U.S. troops?

The troops in Iraq also had a transport problem. But the road from Kuwait to Baghdad is much shorter than the one from Bremerhaven or Shanghai to Kabul. And while fuel to Iraq could come from refineries in Kuwait, where will the fuel for the additional troops in Afghanistan come from? It does not seem to be included in the above TEU calculation.

A retreat from Iraq would relief the U.S. from some costs. But to supply a soldier in Afghanistan might easily cost double or triple as much as to supply a soldier in Iraq. Has Obama thought about how he will finance that war?

While a large U.S. army in Afghanistan may not starve these days, what about children in the U.S.?

---
older coverage:
Fuel for War in Afghanistan Aug 20, 2008
The Road War in Afghanistan Aug 16, 2008
Fuel Tanker Attacks in Afghanistan Mar 24, 2008

Posted by b on November 19, 2008 at 01:57 PM | Permalink | Comments (27)

On Obama Chasing Osama

The last relatively reliable bin Laden sighting was in late 2001.

Robert Baer, former CIA field officer assigned to the Middle East

Posted by b on November 19, 2008 at 10:32 AM | Permalink | Comments (12)

November 18, 2008

The Iraq SOFA Is A Shiny Object

There is lots of reaction in 'western' media to the Iraqi cabinet passing the Status of Force Agreement (SOFA). Even an English translation (.doc) (h/t Helena) of the SOFA, including version changes, is available. Article 24/1 now says (red = newly inserted, 'must' replaced 'shall'):

All U.S. forces must withdraw from all Iraqi territories no later than December 31st 2011.

While there are still ambiguities, the SOFA seems to be not as bad as it was.

But from the beginning of the negotiations the talk was about TWO agreements, the SOFA and a Strategic Framework Agreement (SFA) and in fact, two agreement have been signed:

Apart from the troops pact, the two men signed a long-term strategic framework, which Crocker said would define relations between the countries for years in "economy, culture, science, technology, health and trade, just to name a few."

"It reminds us all that, at a time when U.S. forces will continue to withdraw from Iraq in recognition of the superlative security gains over the last few years, our relationship will develop in many other important ways."

Next to Crocker's words we only have this slightly expanded but similar talking point from Maliki's spokesperson Ali al-Dabbagh repeated by :

“The second agreement frames the principles of cooperation between the two countries in the fields of politics, diplomacy, culture, health, environment, economy, and power, in addition to information and communication technology and implementing law and judiciary,” he explained.

Why did Crocker avoided to mention the 'implementing law and judiciary' point in that new  U.S-Iraq agreement? Hmmm ...

And what is the agreement's status? The SOFA will have to pass the Iraqi parliament. How about the SFA? Will the parliament get a vote on that treaty or will it not?

Somehow the SOFA seems to be a shiny object held out to keep our eyes away from the piece of work that might well be the real 'long-term strategic' sell out of Iraq.

Even the imperial Council of Foreign Relation in its backgrounder seems to have no idea what that second document includes. The experts it asks are simply guessing.

Both the SOFA and the SFA are based on the quite vague Declaration of Principles signed by Bush and Maliki a year ago. One 'principle' included therein is:

Facilitating and encouraging the flow of foreign investments to Iraq, especially American investments, to contribute to the reconstruction and rebuilding of Iraq.

That point could mean that the U.S. will get some exclusiveness or special preference in buying up certain Iraqi assets.

Or what about this one:

Supporting the building of Iraq's economic institutions and infrastructure with the provision of financial and technical assistance to train and develop competencies and capacities of vital Iraqi institutions.

Will there be U.S. 'trainers' in every ministry of the Iraqi government 'developing competencies and capacities' of the nominal minister?

If such points are now more specifically laid out in the Strategic Framework Agreement, as they should be, the SFA certainly deserves some serious scrutiny from the Iraqi and the U.S. people.

But there is zero information available about its real content. 

All the media seem concerned with is that shiny SOFA object held out to them. But what is in that paper the other hand of the various con artists in DC and the Green Zone are holding back?

That Crocker and al-Dabbagh have so little to say about it means that it is important.

Posted by b on November 18, 2008 at 01:08 PM | Permalink | Comments (17)

Abandoning Exceptionalism as National Identity

Anna missed muses about the demise of american exceptionalism:

[S]ince the Nixonian era of red-baiting, [..] the republicans have become the standard bearers of American exceptionalism - in that they have consolidated under them methods that have eventually led to the demise of said exceptionalism, while at the same time still appearing to idealize it.

American exceptionalism, as anna missed sees it, is build on a few certain specific conditions:

The three main pillars of which would be 1) a laissez-fare economy, 2) an equitable and apolitical judicary & legal system, and 3) a system that favors individualism over state power structures [..] which as an end result produces a meritocratic but egalitarian society that highly values individual initiative over statism.

Take those away, as the Republicans did, exceptionalism is a hollow shell and will die.

But exceptionalism as a common identity is a necessity for such a diverse country as the U.S. is. Without exceptionalism it might fall apart in ethnic and  social sectarianism.

In a second piece anna missed looks at political implications:

In the present climate of economic jeopardy its hard to say what happens when such an arrangement, is faced with the prospects of failing to deliver the promised goods, and the all expectations that go with achieving a better material life.
...
If the democrats fail to heed the Republican example, and proceed in undermining the social and economic arrangements of exceptionalism and neglect shoring up [a]nd maintaining those foundations with FDR type programs, choosing instead to proceed feeding the corporatist giant - American exceptionalism will finally be dead enough to ferment its own, but very unexceptional in the world of such things, popular leftist revolution.

I don't think that a popular leftist revolution would be the inevitable outcome. Some form of authoritarian rule  seems more likely to me. Authoritarian rule combined with corporatism is the classic definition of fascism ...

I also wonder if reinstalling American exceptionalism by reviving the egalitarian individualism on which it is based is the way to go and if the democrats should really pursue such an aim at all.

Why not end exceptionalism once and for all?

In a recent book-club event at firedogleg, Andrew Bacevich argued for that:

I’ve come to believe that American Exceptionalism is the root of all evils. Once you decide that you’re God’s new Chosen People, self-awareness becomes very difficult.

We need to shed our sense of uniqueness and our sense of entitlement. We need to become a normal nation.

Of course, that’s akin to saying that we should abandon our identity — which isn’t likely to happen.

Hence, my pessimism.

 If the basic agreements that underlie 'the root of all evil' have been eroded, is it really a good idea to, if possible at all, revive them?

Probably not.

But if exceptionalism is a necessity to define and keep the U.S. together as one nation, unless some other common theme can be found, abandoning the 'root of all evil' might well dissolve that nation.

As the USSR has shown such dissolving because of inner contradictions is possible under extreme economic pressure. Ethnographic trends in the south-western U.S. may already point into such a direction.

Posted by b on November 18, 2008 at 08:20 AM | Permalink | Comments (30)

November 17, 2008

On Satire

by Rick

Often being too naïve to understand what is satire, and often the butt of sarcasm in my youth, I am not a huge fan of satirical humor.  In this particular Friedman satire, I again was naïve, but was fortunate to have biklett #6, ndahi #8, annie #13, DM #33, and finally b #41 spell it out for me and maybe for some others here. 

Besides such personal psychological hang-ups, there is an additional uneasiness when satire makes light of a serious situation, or when it seems to attribute personal characteristics that are most likely untrue.  In these situations, the full embarrassing, uncomfortable and hurt of feelings of my youth return.

Many years ago, there was a weekly TV comedy series called “Hogan’s Heroes.  In case anyone doesn’t know, it was about a supposedly cool bunch of American prisoners held in a German prison camp in WWII.  Lots of entertaining satire, but even as a kid, I was overly scrupulous and somewhat uncomfortable about a comedy constructed from a scene of war and prisoners. 

More recently, hearing any jokes about the Iraq war and torture are never that funny to me.  An even more timely and stark example was hearing a satire of Al Sharpton singing “Barack the Magic Negro” on Rush Limbaugh’s syndicated radio show during the campaign.  No doubt, many ‘ditto heads’ thought it was very funny.  It was a good enough imitation of Sharpton’s voice.  I bet Sharpton was pissed, and I’m sure the attitude of the ‘ditto heads’ was simply “so what?”

With Limbaugh’s pathetic satire, everyone knew who the joke teller was, and since it was on commercial radio, everyone knew what corporation helped sponsor it.  The Friedman satire here on MOA was introduced bluntly and if one ignored the first hyperlink of the (fake) NY Times, then the Friedman article could be perceived as genuine.

Examining this fake NY Times website further, I wondered, ‘who is’ this guy named Harold Schweppes?  After further research, it was amazing to find so much more to the background story behind this satire. Printing and distributing 1.2 million copies of a fake NY Times is no small task.

Perhaps the real NY Times will be easier going regarding their intellectual property rights abused by some ’joker’ (hmmm…. registrar threatened with termination by ICANN for 10 inaccurate domain registrants out of 600,000 of their hosted domains?), compared to, for example, musical artists’ complaints about McCain ripping off popular recordings during his campaign.  I realize the latter was not satire but neither was it personal criticism of the artist.  Sometimes, imitation of another person or of his/her intellectual works is not comedy nor is it flattery.  Such a conclusion depends a lot on the awareness of the intended personal audience and his/her/their current frame of mind.

Well the NY Times charade/Friedman masquerade was quite a success.  Maybe hoaxes are what’s needed to sell newspapers nowadays.  The method has worked extremely well for Limbaugh, and he excuses any negatives by claiming his show is entertainment with an emphasis on humor.

I realize I should lighten up, at least a little.  Heck, I get upset when an anonymous blog poster debates, and even more so, if he/she delivers a personal attack anonymously.  And I suppose others here think I should be delighted with this latest satire, especially with me being no fan of Friedman, the NY Times, or the current over-protection of Intellectual Property.

I’m not, but so what?

Posted by b on November 17, 2008 at 01:23 PM | Permalink | Comments (26)

A Coming Pound Sterling Crisis?

A few days ago Willem Buiter asked How likely is a sterling crisis or: is London really Reykjavik-on-Thames?. He found it possible as Great Britain, though bigger than Iceland, has the same problems:

The risk of a triple crisis - a banking crisis, a currency crisis and a sovereign debt default crisis - is always there for countries that are afflicted with the inconsistent quartet identified by Anne Sibert and myself in our work on Iceland: (1) a small country with (2) a large internationally exposed banking sector, (3) a currency that is not a global reserve currency and (4) limited fiscal capacity.

Over the last year the pound sterling already went down from €1.50 per pound to €1.15 and from $2.00 per pound to $1.50. Could that slump be only the beginning of a currency rout?

Following a funny rant on why he blogs in such long and winded posts, Buiter today adds a long and winded post to analyzes the possibility of a Sterling crisis.

Great Britain's taxpayers will soon be owners of 60% of the Royal Bank of Scotland (RBS). With that ownership comes a lot of debt, about £2 trillion, and assets of unknown value. The additional net debt on Britain's asset sheet could be huge.

At the same time Gordon Brown plans tax cuts, which, as the recent tax rebate in the U.S. has shown, are an ineffective, costly way of providing stimulus. As they will also increase Britain's debt the markets might start to doubt Britain's solvency and the value of the pound sterling.

Writes Buiter:

If there is doubt in the markets about whether the solvency gap of the banking system is smaller than the fiscal spare capacity of the government, we could have a UK public debt crisis.  Fear of default would cause an across-the-board rush of out sterling assets.

[..] much of the debt of the banking system is foreign-currency-denominated rather than sterling-denominated (total foreign currency liabilities and assets of the banking system are each over 200 percent of annual GDP). With the foreign currency liabilities of the banking system likely to have shorter remaining maturity and more liquid than its foreign currency assets (these are banks, after all), the UK would be likely to face a (partial) sovereign debt crisis as well as a foreign exchange liquidity crisis, even if the government tried to inflate its way out of trouble.

Because the Bank of England cannot issue foreign currency reserves, and because sterling is no longer a serious global reserve currency, the lender of last resort has to fall back on the deep pockets of last resort: the creditworthiness of the British state.  That creditworthiness, I would argue, is now in worse shape than it has been since the days of the Stewarts.  The reason is the fact that the UK authorities have effectively underwritten the balance sheet of the over-sized UK banking sector.

The tax cuts Brown is planing add to the above problematic situation.

To avoid a currency crisis there are two things, Buiter says, Britain needs to do immediately:

Introduce a Special Resolution Regime to avoid the nationalization of banks. This would probably be comparable to a Chapter 11 reorganization bankruptcy in the U.S., where a company keeps operating but shareholders and creditors have to take haircuts. Currently the UK only knows a Chapter 7 comparable liquidation bankruptcy where a company stops operating. As RBS is of systemic importance the lack of a Chapter 11 solution requires nationalization where the taxpayers take on all the risks, debt and assets.

The second point is to prepare the way to join the euro, though it is not clear if the criteria for that can be met. A pound sterling, officially bound to the euro in preparation for a currency change would make the sterling's value defensible.

Wolfgang Münchau in his FT column sees additional reasons for Britain to join the Euro. Keeping the sterling has costs as it would likely result in higher interest rates and the loss of financial center status for London.

While there is tremendous public resistance to adopting the euro, as was in Iceland until a few weeks ago, the now imminent costs of monetary independence may push the British public into that direction.

But rather then join the euro and thos pesky French and Germans, could the Brits vote to join the U.S. dollar? Aren't they already the 51St State?

Anyway - a sterling crisis may well be in the making. MoA readers in Britain should prepare for that while they still can.

Posted by b on November 17, 2008 at 08:05 AM | Permalink | Comments (38)

November 16, 2008

Olmert The Liar

Interim Israeli Prime Minister Ehud Olmert accused the Islamist Hamas movement on Sunday of "shattering" the Gaza truce after two rockets hit Israel, prompting an air strike which killed four Palestinian militants.
...
"The responsibility for the shattering of the calm and the creation of a situation of prolonged and repeated violence in the south of the country is entirely on Hamas and the other terror groups in Gaza," Olmert told ministers.
Israel accuses Hamas of 'shattering' Gaza truce

The truce was broken by Israel twelve days ago. As the Guardian reported on November 5:

A four-month ceasefire between Israel and Palestinian militants in Gaza was in jeopardy today after Israeli troops killed six Hamas gunmen in a raid into the territory.

Hamas responded by firing a wave of rockets into southern Israel, although no one was injured.

Since then Palestinian rockets have lightly injured two Israelis, the Israeli military has killed 17 people in Gaza and blocked any transfer of oil and food into the strip. The sole power-plant in Gaza can not operate and people go hungry.

Olmert is again lying to justify the slow suffocating of the people in the big concentration camp that Gaza has become.

Posted by b on November 16, 2008 at 01:51 PM | Permalink | Comments (17)

Friedman Talks His Book

Thomas Friedman has written a number of books and likes to talk about them for $50,000 per speaking engagement. But today he talks his book in a different sense.

In his column Friedman writes:

Now is when we need a president who has the skill, the vision and the courage to cut through this cacophony, pull us together as one nation and inspire and enable us to do the one thing we can and must do right now:

Go shopping.
...
If you are going to fight a global financial panic like this, you have to go at it with overwhelming force — an overwhelming stimulus that gets people shopping again and an overwhelming recapitalization of the banking system that gets it lending again.

'Overwhelming force' - shock and awe at Walmart. Does Friedman wants Bush back? After all, to go shopping was Bush's advice after 9/11.

Maybe, but this Friedman call for shopping is rather directly related to the likely bankruptcy of General Growth Properties Inc.

GGP.N shares fell 64 percent on Tuesday after the second-largest U.S. mall owner expressed doubts it could keep operating due to looming near-term debt.

General Growth shares closed down 88 cents at 49 cents after reaching an intraday low of 33 cents on the New York Stock Exchange. Nearly a year ago, the shares traded as high as $51.24.


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The direct relation:

Friedman's wife, Ann, is a graduate of Stanford University and the London School of Economics. Her father, Matthew Bucksbaum, is the chairman of the board of General Growth Properties, the real estate development group that he co-founded with his brother in 1954. The Bucksbaums helped pioneer the development of shopping centers in the United States. As of 2007, Forbes estimated the Bucksbaum family's assets at $4.1 billion, including about 18.6 million square meters of mall space.

Dear Thomas, why not just wait six month? That seemed to be your preferred solution on other major issues.

And if you really want a big consumption orientated stimulus program, how about financing it with a 90% income tax on every dollar of the millions you make by giving bad advice?

Posted by b on November 16, 2008 at 03:58 AM | Permalink | Comments (26)

November 15, 2008

NYT Is Misreporting That Russia Is "Backing Off"

Under the headline Russia Backs Off on Europe Missile Threat, the NYT's Stephen Castle hawks several misconceptions. He writes:

President Dmitri A. Medvedev of Russia retreated Friday from his threat to deploy missiles on Europe’s borders, but only if President-elect Barack Obama joined Russia and France in calling for a conference on European security by next summer.

- Russia did not retreat on any missile deployment.
- Russia did not threaten to deploy missiles on 'Europe's borders'.

At a meeting in Nice hosted by President Nicolas Sarkozy of France, Mr. Medvedev backed away from the bellicose speech he gave last week, just hours after Mr. Obama won the United States presidential election. On Friday, the Russian leader argued instead that all countries “should refrain from unilateral steps” before discussions on European security next summer.

- The speech referred to was not bellicose.
- The speech was not related to Obama's election.

Mr. Sarkozy, who presided over the meeting between Russia and the 27 European Union nations in his capacity as the union’s president, helped ease the way for Mr. Medvedev’s retreat. The French leader supported the idea of talks on a new security architecture for Europe and suggested that they could be held by the Organization for Security and Cooperation in Europe in June or July.

- There was nothing taken back by Medvedev in relation to a European security conference.
- By achieving Sarkozy's support for such a conference Russia won a major point.

Let us start with that 'bellicose speech':

Each year the Russian president has to make a 'state of the nation' speech to the parliament. This years speech was supposed to be held on October 23 but was postponed twice:

Speculation surfaced that quickly changing world economic conditions were forcing Medvedev to rewrite his remarks, forcing its delay.

It was pure coincident that the speech was held shortly after the U.S. election and it has nothing to do with the U.S. election or Obama.

Neither was the speech bellicose. Ninety percent of it was on economic, social and inner-Russian political issues. With regard the U.S. 'missile defense' plans Medvedev said:

"An Iskander missile system will be deployed in the Kaliningrad Region to neutralize if necessary the anti-ballistic missile system in Europe," Medvedev said in his first state of the nation address to parliament.

The conditional stationing of Iskander's in Kalinigrad had already been announced back in July. Medvedev's statement was thereby nothing new. It was clearly a conditioned statement and up to today that condition has not changed one bit. So where is the Russian 'retreat'?

Castle and his editors could, by the way, use some geographic lessons. Kaliningrad clearly lies deep within Europe's borders.

There was another part in Medvedev's speech that should concern U.S. citizens much more than short-range missiles in Kalinigrad but went, to my knowledge, unreported in any U.S. media. Medvedev announced:

"We earlier planned to remove three missile regiments of a missile division deployed in Kozelsk [Kaluga Region] from combat duty and disband the division by 2010. I have made a decision to withdraw these plans," Medvedev said, noting that Russia had been forced to take this measure.

The division has RS-18 Stiletto intercontinental ballistic missiles with a range of 10,000 kilometers (6,200 miles).

The distance from Kaluga Region to New York is 4,700 miles. Because of the so called 'missile defense' the U.S. hawks want to install in Poland and Czechia, Russia reversed plans for a unilateral reduction of intercontinental missiles. The potential threat to the U.S. mainland will now be bigger than necessary. Why is this not discussed in any U.S. media?

The call for a new security architecture in Europe is a Russian idea and again nothing new:

Russian President Dmitry Medvedev used his visit to Berlin on June 5 for proposing an all-European security pact with Russia’s participation, inherently in opposition to NATO (Interfax, Itar-Tass, June 5, 6).
...
Once approved, the pact would be legally binding, in the form of a second edition of the OSCE’s 1976 Helsinki Final Act. The Kremlin wants a new pact to be approved at an all-European summit.

So far Medvedev's calls for such a security pact had been left without official answer from 'western' leaders. The U.S. has informally opposed any such conference. To now have French and EU support for such a conference is a major diplomatic win for Russia.

The NYT clearly has a warped view on Russia. It sees a threat where there is a conditional answer to U.S. aggression. It sees a Russian retreat and loss when there is a big diplomatic victory and the real loser here is bellicose U.S. policy.

The NYT fails to report that Sarkozy thinks the U.S. plans for 'missile defense' in Europe are nuts. Even the Wall Street Journal does a better job here:

"Deployment of a missile-defense system would bring nothing to security in Europe … it would complicate things, and would make them move backward." Mr. Sarkozy said many European leaders shared his assessment, ...

This is the real news from the EU-Russia conference, and it is very good news. Russia 'backing off' from a response to U.S. aggression is pure fantasy.

Such fantasies are dangerous as the can lead to wrong decisions in very serious matters.

Posted by b on November 15, 2008 at 01:09 PM | Permalink | Comments (12)

For My Beloved

by remembereringgiap
lifted from a comment

for my beloved/is a lamb/climbing the step/in eisensteins film
alluding to synthesis/that never came/or  resolution/of  thesis
initiated by lenin/in railway carriage/funded by germans/to end war
& lenin read/aloud to companion/while drinking tea/from isiah certainly
it was reference/to some things/or other matter/he’d prefer/not to discuss
with central committee/the wolf also/shall dwell with/lamb & leopard
shall lie down/with the kid/& the calf/& young lion/& fatling together
& little child/shall lead them/referring to jerusalem/but lenin leant
from this passage/that we need/messiah to motivate/desire to change
circumstances as described/in the eighteenth/brummairre of louis
bonaparte marx’s essay/still read somewhere/in latin america/perhaps some canton
in new china/where distinguished emporers/turn tianemen square/into endless circle

themselves into ogres/occident can understand/such measures usefull
in the south/of united states/not long ago/in los angeles/even more recently
interpretation of events/still support thesis/capitalism hasn’t soul
this precise fact/an ancient truth/endowed with emptiness/now we yearn
for another metamorphosis/something less primitive/all factors considered
we’re no longer/volatile or veangefull/but sublimated species

precipitated by longing/in a psyche/that barely functions
substitute for salt/in our chemistry/another constellation entirely
altering all absolutes/in imperial order/above this abyss/we are consuming
like midwestern americans/who follow pattern/& a mold/that’s already been
engraved with name/they can recognise/valour destructive form/of a ressurection
that isn’t symmetrical/nor is anchored/in any salvation/worth the cost
so they’re prudent/depending on duality/of our architecture
becoming sacred hermaphrodites/searching for love/in forbidden locations
where apostles announce/on the hour/at every hour/tome of second/coming to this
fisherman that carpenter/near home/by  shores/sea of galilee
where supreme conquest/occurring by magic/this elusive treasure/has long gone
on endurance run/with another theology/you can throw/dice into dam
we are excavating/our sins here/for good measure/we leave yours/out in cold
there is eternity/encrusted with emeralds/where they say redemption is possible
if you’re prepared/to degrade yourself/like thirties star/in a film
frank capra certainly/source of illumination/to that paradise
where frances farmer/goes after being/in an asylum/reading clifford odets
confession before committee/where he asks/where is garfield/when you need
him on drunk/in new york/playing it brave/with italian boys/who know source
happiness or hell/depends on numbers/you can carry/in your pocket
when you walk/towards a monastery/where they have/set up screening/of  movie
plato  directed/possibly for discourse/that couldn’t be/explained with words
consuming clarity/as an aesthetic/lead you nowhere/heidegger found out
much too late/to repent except/in the pages/of new york/review of books
where testimonies given/by bioethic boys/from unknown universities
where they molest/students & forget/to mark papers/except in bed
another fury born/& i know/this most perfect/moment to mime
the great work/is not redeemed/nor is it/ressurected perhaps rejected
out of hand/weapons of heaven/come to clear/ties that bind/for  heroes
there is another/kind of splendour/there is another/kind of solace
because historical agents/dress very well/for  ceremony
together we are/pulling these thorns/from my flesh
leaving terrible texture/to enrich tale/i’m not telling/but you will
in a cave/when you’re hiding/from  dragon/who has face/you will recognise
in due time/you will inherit/an oak tree/or perhaps fig/some sacred scenery
where you can/cast into abyss/that which lies/heavily upon you
let man forget/divine is art/of forgetting fully/if you would
raise yourself up/if you yourself/would dwell upon/the heights cast
into the sea/that which lies/heavily upon you/pursue a protection
from the sirens/who’re singing out/your name clearly/for all hearing
when we stand/on  edge/of a lake/& witness torrents
nreaking around you/& we are/already in mourning/for another loss
on a river/so long ago/before i reached/an imagined coast
i have discovered/charity in chest/i have thrown/off  jetty
& this build/my noble reputation/attributing all alchemy
to what’s human/do not go/to any intellect/for its volcano
where everything burns/& vultures descend/to do business/they’re equipped for
all our lamentations/have been heard/at some time/or other rime
we can speak/of resistance certainly/but it is/not a cure
i would sell/on street corner/of any city/ancient or modern/here & now
i am conducting/an absent orchestra/wanting to play/a little music

Posted by b on November 15, 2008 at 02:43 AM | Permalink | Comments (23)

November 14, 2008

Rahm Emanuel (Re-)Engaged

On November 6 this blog picked up echos from Israeli media about Rahm Emanuel as Obama's Chief of Staff. One was from the Jerusalem Post and it included this:

In an interview with Ma'ariv, Emanuel's father, Dr. Benjamin Emanuel, said he was convinced that his son's appointment would be good for Israel. "Obviously he will influence the president to be pro-Israel," he was quoted as saying. "Why wouldn't he be? What is he, an Arab? He's not going to clean the floors of the White House."

The next day Helena Cobban took that up and wrote a (re-)engaged piece: R. Emanuel: Repudiate this disgusting racist comment.

The Jewish Telegraphic Agency reported the remarks in a longer Emanuel piece on November 9.

By the time JTA reached the elder Emanuel, a physician, it was clear his son had asked him to keep away from reporters. Picking up the phone, he said, "This is Benjamin Emanuel, the plumber," and asked a reporter to call back in a week, after he’d spoken in person to Rahm – "if I’m still alive then."

On November 11 the American-Arab Anti-Discrimination Committee wrote (pdf) to Congressman Emanuel and cc'ed Obama:

The American‐Arab Anti‐Discrimination Committee (ADC) views this characterization of an Arab as an unacceptable smear. One can readily imagine the justifiable outcry if someone made a similar remark about African‐Americans, Jews, or Hispanics, concerning cleaning the floors of the White House. Do the normal standards of decency and civility not apply when talking about Arabs? ADC asks you to disavow and repudiate these remarks publicly.

Yesterday Emanuel phoned up the ADC President and fomer Rep. (D-Ohio) Mary Rose Oakar and declared:

From the fullness of my heart, I personally apologize on behalf of my family and me. These are not the values upon which I was raised or those of my family.

We are left to wonder on who's values, if not his father's, Rahm Emanuel was raised and why he marks his father as someone outside of his family.

---
Voluntary advertisement:

Buy Re-Engage! American and the World after Bush; An Informed Citizen's Guide by Helena Cobban

Posted by b on November 14, 2008 at 01:53 PM | Permalink | Comments (28)

What Is Up in North Korea?

North Korea has changed a lot over the last years.

[T]he market has shaken up previously rigid social hierarchies.   One's place in the pecking order was once determined by proximity to the leadership,   distance from a compromising past, or ability to work in strategic industries.   With a money economy now shaping a new social hierarchy, however, it is not   uncommon for former untouchables to pull together a bit of capital and rise   through the new economic ranks.

The North Korean elite, too, has changed over the last decade. Knowledge of   English has become a desirable asset. Travel and market training have become   indispensable. The rich have   enough disposable income to buy luxury goods from China.

But no it is going back into isolation. On December 1 it will close down the border crossings with South Korea and will close the industrial zone where North Koreans produce export products in factories  financed by South Korean companies.

North Korea is also restricting Chinese travel within the country and has closed the border to its big neighbor to nearly all passenger travel. China is said to have moved additional troops to the boarder. This could be out of fear of a wave of refugees.

The North Korean ruler Kim Jong-il had a stroke recently and may have had a second one. The above may be some kind of retreat to provide for a more seamless change on the top. Or is it a power struggle between the military the ruling Kim family?

The close off could also be intended to not let out news of some catastrophe like a famine.

Or it could be in preparation of a war. But what could be reason for one?

Revenge if on Sunday the North Korean team loses against the U.S. team in the U-17 women's World Cup final?

Something is up and in times of heighten alert and little available information a miscalculation on either site could start something bad nobody really wants to happen.

Posted by b on November 14, 2008 at 12:10 PM | Permalink | Comments (12)

Reserve Requirement As Monetary Policy Tool

A central bank can manipulate the total money supplied in an economy by setting a short term interest rate target. To make market rates comply with the target rate, the central bank lends or borrows to/from banks in the open market. 

In a fractional-reserve banking system a bank can use the central bank money to create a multiple amount of that as commercial money. The multiplier is defined by the reserve rate (or capital adequacy ratio) the bank is supposed to hold. The central bank has the authority to set the required reserve rate.

In principal a central bank has thereby two possible means to influence the money supply. It can change the interest rate target and/or it can change the reserve requirement of major banks and thereby the multiplier that transfers central bank money supply into total money supply.

The reserve requirement tool has been weakened in recent years with the Basel accords and in the U.S. other regulatory measures which allow banks to a certain extend to define their effective reserve rate themselves.

Therefore the current 'western' mainstream central banks tend to not change the required reserve rate but do rely on interest rate setting to induce changes the total money supply.

If the economy slumps, they lower interest rates to supply more money, make credit cheaper and allow for more economic expansion. If the economy runs too hot, creating the danger of inflation, the central banks increase the interest target rate and thereby lower the money it supplies through the banking system.

To solely rely on the interest rate target has some problematic consequences. While a low interest rate may be intended to increase industrial production, it also lessens the saving rates as saving at low interest rates becomes unprofitable. Low interest rates encourage to take on debt. While that can be healthy if a loan is used for productive activity, buying overvalued unproductive assets or consuming from debt has negative economic effects.

The Chinese central bank takes a different approach. The Shanghai stock index was around 1,000 in early 2006. It increased to 6,000 in late 2007. This was obviously a overheating market bubble. The Chinese central bank pricked the bubble not by changing its interest rate target as the u.S. Fed would have done, but by increasing the reserve requirement for the major banks step by step from 7.5% in June 2006 to over 11.5% in June 2007. The ability of Chinese banks to make loans to people to buy more overvalued stocks was thereby lowered. With the usual time delay such measures take, the policy was effective and at the end of 2007 the overheated Shanghai index started to decline.

I have long thought that the Chinese way may be better in setting money supply targets because, in my view, it has less negative side effects. But I have to admit that I am no expert in that field and should be careful to argue for a dual central bank policy approach of active use of interest rate targets AND reserve requirement settings.

But the recent market turbulence seems to give the reserve requirement approach some new life.

If central banks decide to again use reserve requirements for monetary policy such requirements must be binding for all financial entities including hedge funds and other parts of the shadow banking system. Via Eurointelligence we learn that some knowledgeable folks start to argue in that direction:

The report was written by group headed by Otmar Issing, and includes Bill White, formerly of BIS, Jan Pieter Krahnen of Frankfurt University, as well Jorg Asmussen, deputy finance minister, and Jens Weidmann, Merkel’s economic adviser.
...
The most important is that all financial companies, whether banks, hedge funds, or banking departments in companies, have to come under a supervisory umbrella, as do all financial products, including CDS, CDO etc. The Issing group also proposes that each bank should hold capital of at least 5% of all its lending (bringing back the spirit of Basle I into Basle II.

Via Yves Smith the proposal of a Japanese expert:

First, adjust capital adequacy ratios to restrain the lending cycle. For example, the 4 per cent target for the tier one capital ratio for banks might be raised to 8 per cent in booms but lowered to 3 per cent in recessions. Cycle-dependent capital ratios would reduce the tendency of banks to lend too generously in booms and too timidly in recessions.
...
Fourth, impose leverage limits to counter the funding cycle. In recent years, some financial institutions became overleveraged as a result of competitive pressures on regulators to lift leverage limits. Such limits should be reinstated on an internationally consistent basis. When times are good, the leverage limits should be lowered in order to prevent overshooting. When times are bad, the limits should be raised in order to spur recovery.

Bush continues his "free market" sham while using $5 trillions to prop up the private banking system. It is unlikely that he will allow the G20 meeting this weekend from to be successful and to introduce better regulation and monetary instruments.

But as the problems induced by adverse effects from interest rate target setting continue to haunt people, the reintroduction of reserve requirements as a monetary tool is likely to gain favor.

Could Obama  find a Secretary of Treasury who supports such a policy?

Posted by b on November 14, 2008 at 09:50 AM | Permalink | Comments (11)

November 13, 2008

Hedge Fund Hearings

Just saw a House hearing on hedge fund regulation. The second panel were all hedge fund managers with their own skin in the game. George Soros, James Simons, John Alfred Paulson, Philip A. Falcone and Kenneth C. Griffin.

In 2007 each of those people made more than a billion.

The first four of the five mostly agreed to a need of more regulation and leverage control for hedge funds. Griffin was vehemently against it. Soros and Simons agreed on taxing hedge fund manager income at real income tax rates and not at capital gain rates like it is currently the case.  Paulson and Falcone where ambivalent on that, Griffin, the CEO of Citadel Investment Group, did not like the idea at all.

That split scheme with either 4 to 1 or 2, 2, 1 towards more center-left policies was clear through all the panels answers to questions put to them. The first two more on the left, two at the center and one guy, Griffin, on the far right.

The funny thing - this year the first four folks made profits or at least did not lose any money in their funds. Griffin lost a huge bunch.

Two of Griffin's main Citadel funds are down by 35% this year, his fund of funds closed down and a reinsurance scheme he build up in Bermuda is currently getting dissolved.

But he still claims that zero regulation is in the best interest of investors in hedge funds.

Now I wonder how his clients might feel about that.

Posted by b on November 13, 2008 at 02:17 PM | Permalink | Comments (7)

OT 08-39

Everybody read the new New York Times? For once Tom Friedman wrote a good column: The End of the Experts.

Open thread ...

Posted by b on November 13, 2008 at 11:58 AM | Permalink | Comments (98)

GE's FDIC Insurance - Imagination at Work

GE is an international industrial conglomerate with a triple A rating. It has had very profitable years and is well able to cover some losses should they occur. While it also owns a Savings & Loans, that is only a very small part of its total business. GE has hardly any deposits but is a big debt issuer.

What then is the justification of giving GE the full backing of federal deposit insurance, i.e. risking saver and taxpayer dollars?

How can one reconcile A, B and C?

A:

The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $250,000; by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails.
The Federal Deposit Insurance Corporation: Who is the FDIC?

B:

GE is Imagination at Work - a diversified technology, media and financial services company focused on solving some of the world's toughest problems. With products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, media content and industrial products, we serve customers in more than 100 countries and employ more than 327,000 people worldwide.
...
GE's financial results highlight our ability to deliver. In 2007, GE generated double-digit earnings and revenue growth ($173 billion in revenues and $22.5 billion of earnings). Also in 2007, GE generated $23.3 billion in cash, which has given us flexibility to invest in our businesses, return more than $25.4 billion to shareowners through a dividend increase and stock buyback. Over the past four years, GE's average earnings growth rate has been 14 percent per year.
GE: Factsheet

C:

BOSTON (Reuters) - General Electric Co has secured the temporary backing of the Federal Deposit Insurance Corp for up to $139 billion of the debt of its finance arm, a spokesman said on Wednesday.
GE says gets FDIC backing for $139 billion in debt

Posted by b on November 13, 2008 at 06:12 AM | Permalink | Comments (22)

November 12, 2008

The New Baghdad Bombing Campaign

Last week I highlighted a string of bombing in Baghdad. The series continued and today:

In Baghdad, the first car bomb ripped through a bustling section of downtown Baghdad during the Wednesday morning rush hour, killing four people and injuring 15. The blast occurred off Nasir Square in the heart of the city — a busy neighborhood of shops, pharmacies and photography stores.

A second car bomb exploded near a secondary school in the Shiite-dominated neighborhood of Shaab in north Baghdad. Iraqi police said five people were killed and 12 wounded.

Two bombs blew up within moments of each other in the Shiite district of New Baghdad, with the second explosion occurring just after police arrived to investigate the first.

One wonders why this surge in bombings occurs now.

The Bush administration is continuing to press for a Status of Force Agreement with Iraq, while all available polls and accounts say most Iraqis and most Iraqi politicians want the U.S. to leave.

One argument for the need to keep  U.S. forces in Iraq to provide security for Iraqis. The recent bombings by whomever may reinforce that argument.

As does the AP coverage linked above by quoting this representative Iraqi voice:

Hassan Rahim, a 42-year-old barber who lives in the neighborhood, heard the blasts as he fixed his rooftop satellite dish.

"I do not know why Iraqi officials keep talking about the improving security in Baghdad everyday. We are fed up with such lies and we will hope that the security file in the capital will not be handed over to Iraqi government," he said.

Hmm - who in the discussion about a SOFA will mention the bombings and will quote this genuine and eloquent barber voice in the further argument?

There is specialist in the U.S. government known for the ability to creating tense situations in foreign countries. When was the last time John Negroponte visited Iraq? And when did this fresh string of bombing in Baghdad start?

Negroponte it seems visited Iraq in early October and after a short stopover in Baghdad he went to Sulaimaniya the Kurdish part of Iraq. Why did he discuss the SOFA with the Kurds? Or did he discuss something else?

Though I am not sure about the validity of this account,  but it may well be that Negroponte threatened Maliki and the central government should the SOFA not get passed. Are the bombings and the information campaign we are seeing right now part of that threat against Maliki, the adversary in SOFA negotiations?

Does this fit the new September 2008 Field Manual FM 3-05.130 (pdf) - Army Special Operations Forces Unconventional Warfare? (thx b real)

Page 72:

5-31. During the employment phase, SF units support indigenous or other irregular forces conducting operations against the common adversaries of irregular organizations and the United States. Such operations may involve any or all components of the irregular organization. The classic conception of UW employment is SF Soldiers advising and assisting guerrilla forces to raid, ambush, sabotage, and otherwise interdict the adversary in ways designed to drain that hostile power’s morale and resources through military activities up to and including combat.
...
5-33. Regardless of the type of operation employed, the overall purpose is to achieve strategic political-military objectives. The U.S. Army specially selects, trains, equips, and prepares SF Soldiers to persuade irregular forces to act in concert with such U.S. strategic political-military objectives.

Bod Woodward quotes Bush on the Joint Special Operations Command:

Asked in an interview about the intelligence breakthroughs in Iraq, President Bush offered a simple answer: "JSOC is awesome."

What are current "U.S. strategic political-military objectives" in Iraq under Bush?

Posted by b on November 12, 2008 at 03:34 PM | Permalink | Comments (23)

Will Paulson Spend The Full $700 billion TARP?

Screaming "systemic failure, systemic failure" Paulson ran to congress to ask for lots of money to bail out his friends. He got $350 billion with no strings attached and a promise of $350 billion more, if needed.

The Democrats expected that the first tranche would be sufficient until a new administration steps in and directs a better program. But Lucy Paulson is now pulling that ball away.

Of the $350 billion $290 billion are already committed for unconditioned capital injection into big banks. Like most of the money spend so far, the latest bailout for A.I.G. is really a bailout for Paulson's old company Goldman Sachs, for JP Morgan and other biggies which would take losses should A.I.G. go down. American Express just changed itself into a bank to be also entitled to taxpayer money. What is the systemic importance of Amex? Zero. But that seems not to matter anymore. Whoever asks for money, and has the right friends, is getting it.

Lots of other folks stand in line and wait for their turn on the trough:

The lobbying frenzy worries many traditional bankers — the original targets of the rescue program — who fear that it could blur, or even undermine, the government’s effort to stabilize the financial system after its worst crisis since the 1930s.

Among the most rattled are community bankers.

“By the time they get to the community banks, there may not be enough money left,” said Edward L. Yingling, the president of the American Bankers Association. “The marketplace is looking at this so rapidly that those who have the money first may have some advantage.”

Those who came first certainly have an advantage. That was the reason why Paulson pushed the first big giveaway to only a few big banks. For an investment banker like Paulson, community banks are competition and competition is by definition bad. The big companies that get Fed financing and gifts from the Treasury can refinance themselves much cheaper now and will, over time, push all smaller players out of the markets.

While those who got called first hauled away huge sums of unconditioned money, the Treasury is now planing to attach conditions to further capital injections. Too bad if those community banks will not be able to meet these and will have to sell themselves for pennies by the big ones. Paulson is orchestrating the oligarchization of the U.S. financial system.

But back to the $350 billion. The three bankrupt car-makers in Detroit are asking for a big gift that would them allow to survive another six month. For political reasons, the Democrats want to give it to them and, if possible, through the TARP program which was marketed as an emergency fond to prevent a systemic financial crisis.

With the auto companies reeling and Mr. Bush sending no signal that he would act, Ms. Pelosi said she had asked Representative Barney Frank, Democrat of Massachusetts and chairman of the Financial Services Committee, to begin drafting legislation directing that part of the $700 billion bailout be used to help the automakers.

Now here is my prediction. Paulson will spend full TARP.

As the first tranche of the $700 billion is nearly gone, the Treasury will tell Congress that help to Detroit through the TARP program can only be given if Congress immediately and unconditionally hands over the full second tranche. Of those $350 billion maybe $50 billion will then be handed to Detroit and on January 21 a new administration will discover that Paulson has given the rest down to the last dollar to his friends.

Why would he not do so?

Posted by b on November 12, 2008 at 09:58 AM | Permalink | Comments (17)

November 11, 2008

How Will The U.S. Finance Itself?

An interesting piece from Barrons: Uncle Sam's Credit Line Running Out?

The Treasury is set to borrow $550 billion in the current quarter alone and $368 billion in the first quarter of 2009. "Near-term pressures on Treasury finances are much more intense than we had thought," Goldman Sachs economists commented when the government announced its borrowing projections last week.
...
Backshall is not alone in this dire assessment. Scott Minerd, the chief investment officer for fixed income at Guggenheim Partners, a Los Angeles money manager, estimates that total Treasury borrowing for fiscal 2009 will total $1.5 trillion-$2 trillion. That was based on $700 billion for TARP, a $500 billion-$750 billion "cyclical deficit," an additional $500 billion stimulus program and some uncertain amount for the Federal Deposit Insurance Corp.

Minerd doubts that private savings in the U.S. and foreign purchases of Treasury debt will be sufficient to meet those government cash. That leaves the Fed to take up the slack; that is, monetization of the debt.
...
Cutting through the technical jargon, the yield curve and the credit-default swaps market both indicate the markets are exacting a greater cost to lend to Uncle Sam. And it's not because of anticipated recovery, which would reduce, not increase, the cost of insuring Treasury debt against default.

All of which suggests America's credit line has its limits.

Every credit-card has a limit, and the U.S. has stretched its own for some years now. Overdrawn credit cards tend to to require higher interest payments.

Printing money and inducing high inflation is a possible way out of the debt. But there are consequences. If the U.S. inflates too much, the status of the U.S. Dollar as the dominant currency in the world  would come into doubt. If that happens people would sell the dollar which could move an inflation scenario into a hyperinflation one and leave, in the end, no other way out than default.

This would somewhat be consistent with GAEB's prediction that the U.S. will default on its debt in 2009. (Can someone please send me the full GAEP report?).

Is this likely? I do not yet think so. But it is now a genuine possibility. To discuss such, or even a serious inflation scenario, would have been seen as pretty much out of wack by the mainstream just a few month ago. But today Barrons, one of the leading Wall Street papers, is printing the above.

Even with a decent background in economics I have now too little trust in the various models to predict the outcome of this crisis. There are myriad factors to consider. The yield curve and CDS spreads the Barrons piece emphasizes are more the result of opinions than of efficient markets and they may be quite wrong.

No model I know of fits anymore. Depression, deflation, stagflation, inflation, hyperinflation, default - all seem possible now.

What are you expecting?

Posted by b on November 11, 2008 at 04:20 PM | Permalink | Comments (39)

On What The Presidency Requires

by Malooga

lifted from a comment

@Copeland:

BO's qualities as a human being are irrelevant.

As Arthur Silber has pointed out numerous times, the office of the Presidency -- Commander-in-Chief of the greatest, fastest collapsing, Empire in History -- requires a level of pathological violence which no one here would countenance in a family member, and which instantly would land you in jail, or worse, if you were a member of the underclass and stole one billionth of what any President does, or were responsible for one billionth of the death, destruction, violence, and mayhem.

It requires misstating, or perpetrating non-existent threats, in Iran, Venezuela, Russia, Pakistan, Sudan, Somalia, Congo, Cuba, Bolivia, North Korea, and a dozen other places around the globe, as BO already has done, in the murderous interest of said Empire. It requires terrorizing and subduing populations of those countries so that ostensibly US-based corporations can appropriate the resources and wealth of those lands. It requires the use of CIA, special-ops, death squads, aerial bombing, remote bombing, drones and surveillance aircraft, spraying of toxic chemicals, radiological poisoning, killing of union leaders, economic suasion (starvation, destruction of critical infrastructure, destruction of drug manufactories, economic embargos, etc.), proxy wars, wars on drugs, wars with drugs, wars funded by drugs, humanitarian wars, concentration camps (1 1/2 M in Gaza), spying, data-mining, eavesdropping, propaganda, fear-mongering, threats, lying, duplicity, fear, subversion, etc. in pursuit of those goals.

It requires starving -- and growing -- the underclass of your own country so that the wealthiest, most pathological, most environmentally destructive, banksters can be rewarded with 700 Billion dollars -- the single largest transfer of wealth upwards in the history of this country since the land grants the railroads received 140 years ago – a program BO is in favor of. It requires telling the lower and middle class of your country that there is no money for healthcare, social security, infrastructure, etc. while we spend over one trillion dollars (9% of GDP, 6th largest consumer of petroleum resources if it were its own country, which in effect it is) -- more than the rest of the world combined -- on offensive warfare. (Combined, warfare, its subsequent amelioration, and corporate profits, account for close to 25% of GDP -- enough to wipe out all want and poverty in this and many other countries)

It requires support for the planet-destroying nuclear energy industry, for the use of DU weapons, for Uranium mining and radioactive tailings blowing in the glowering western winds, for the irradiation of our planet for hundreds of millions of years -- which BO is in favor of.

It requires supporting the nefarious, deadly GMO conspiracy -- ADM, Cargill, Monsanto, Con-Agra, Syngenta, etc. -- which together with Buffett and Gates, seek to OWN and control the food supply of the entire world, regardless of the murder that causes, or the health and environmental effects of such a policy, and having already shamelessly and criminally contaminated mankind’s several heritage crops – corn, for one, while pushing peasants, through so-called “free-trade” agricultural export policies, into starvation, undercutting and destroying local producers in the name of corporate profits.

It requires support of a media system, educational system, and cultural industry -- a vast propaganda apparatus dwarfing any the former Soviet Union ever had -- which keeps the vast majority of our country completely distracted and entertained, while completely ignorant of the violence our country causes; of the ecological consequences of our daily life; of how, where, and under what labor conditions resources are extracted, and subsequently assembled into the ephemeral consumer products of our capitalist existence; of basic issues of cause and effect; of even the most elementary level of critical thinking, all the while eternally testing (No Child Left Behind) and forcing the rote memorization of trivia, lies, distortions, and propaganda; and continuously instilling a pathologically destructive belief in American Exceptionalism -- a cultish religion which is capable of excusing any level of violence, genocide (Iraq, nuking Japan, firebombing Dresden) and destruction because "we mean well." It requires vocal public support for the cult belief in endless growth which is cutting out the support systems necessary for life on this planet exponentially faster. It requires vocal public support for the murderous ideology that people should service capital, rather than capital servicing human needs, that is to say, Capitalism – an ideology based upon individual greed and societal atomization, which even most here on this blog believe COULD SOMEHOW (????) be properly regulated and restrained before it consumes the entire planet, ouroboros-like, including the proverbial final noose. All of the above, by definition, is supported by BO categorically, wholeheartedly, and without precondition.

It requires support for the continued socially unsustainable upward redistribution of wealth -- albeit, with a few Clintonite sops thrown in to quell the masses (Almost one trillion in combined profits for the energy giants -- oil, coal, nuclear), while perhaps several billion will be very publicly spread around (mostly to large corporations) for "renewables" and coal gasification, etc. It requires support for Insurance company based, privately afforded and purchased, donut-riddled, safety-net catastrophic illness systems; no health care system; uncritical support for the vampirish drug and cancer industry, which encourages the upward redistribution of wealth and impoverishment of the underclass by the creation of all manner of narrow-minded, blindered, complicit specialists, often paid upwards of half a million dollars a year (as if dispensing drugs were really more difficult than fixing brakes on a car, both of which are “life-affecting”), to dispense drugs, radiation, and surgery, to what has exploded from one-in-thirteen to one-in-three, projected to reach one-in-two of our population within my lifetime, all the while ostrich-like sticking their educated, pampered heads in the sand to the obvious causes to this epidemic, amelioration of which would be “politically unacceptable.” It requires support for a universal soma-like national medication system, involving up to one in three of the population, so that they don’t completely freak-out by whatever small bits of actual reality of our situation actually does creep in; so that they don’t feel personal or collective pain, but can still feel jingoistic national frenzy; while heedlessly polluting our waterways with their drug-laden urine, causing havoc among fish and wildlife .

It requires all of this, and more -- infinitely more than I care to detail in this short post -- and none of the corporations which invested over half a billion dollars in BO’s selection have any doubt in his (or his running mates, should he falter as JFK did) ability to continue to perpetrate these crimes against humanity and life itself. (Strange how little interest in voting irregularities the left suddenly has now that their side has won.)

Pravda recently stated that compared to the Bush regime, only the devil could be worse. Perhaps they are right. But there is a remarkable continuity of violence in support of the perpetration of empire ("Our way of life," if you will) from Presidency to Presidency. Every single President has supported all of what I have described above, unwaveringly, as will BO. All of them have worked ceaselessly to expand economic influence, kill off peasants and natives, and spread around the girdle of the globe as fast as possible -- like some sort of out-of-control human yeast infection, laying claim to every thing, concept, and idea they have come across. All of them have come up with pitifully puerile, and pathologically violent, "Doctrines," excusing or justifying all of this for State Historians and Public Intellectuals to analyze, normalize, natter over on talk shows, and otherwise drool over for the edification of the masses.

Not even the most hysterical person I have encountered has expected BO to continue, or exceed, Bush's level of overt confrontation. But not even the most optimistic, most Kool-Aid-inebriated groupie expects BO to reverse all of the damage done by Bush -- to be able to miraculously bring us back to the exalted, whistfully reminisced year, 2000, when only two-thirds of Iraq was being bombed daily.

The "Ratchet Effect" is the operative metaphor here. We will get a troop drawdown in Iraq, and the closing of Gitmo. (These items are elite planner consensus, and would have happened even if McCain had magically been selected won. We will not get a cessation of violence world-wide, in any way. The Empire is a shark which consumes all in its path and it will continue to be so. We will not get the closing of the many other Gulags of Empire beside Gitmo, many in other "friendly" countries, most unknown to all but a few who monitor CIA plane landings world-wide, and unpublicized. We will not get a redefinition of torture, nor will we get a restoration of the constitutional rights taken away from us. Instead, we will get another faux-terrorist 9-11, a further crack-down on our freedoms (small as they are), further monitoring of all behavior, the introduction and normalization of a new family of offensive weapons: so-called "non-violent" crowd control technologies, of which tasers are merely the first public launching, continued spying, filming, data-mining of all of our actions, resulting in the public culling of a vocal few to great calmative effect upon the many. Under Holbrooke, Albright, Ross, Powers, and Rice (and Soros), we will get fewer "offensive" wars, and more "humanitarian" ones, and, of course, a huge ratcheting up of economic ones (begun already by the IMF and commodities price manipulation). (Yugoslavia and Rwanda have been adequately discussed here. The violence inflicted upon civilian life and structure is identical regardless of the justifications of Empire.) We will get more NGO intervention (read your Arundhati Roy on this pernicious weapon) to "aid" the afflicted.

The style of this administration will be much better, easier on the eye and the ear: We will be treated to the intelligent (if equally deceitful) disquisitions of a Clinton, along with the now ubiquitous (hollow) national self-congratulatory Afro-American, Horatio Alger story -- four years from State Senator to President -- and to the Kennedy-like Camelot cult fairy tale of a young couple steering a nation towards a new, even greater, America. We’ll feast our eyes on better clothes, savor over better meals being prepared in the White House, and proudly watch as all manner of liberal Public Intellectuals fawn over the new power couple at Affairs of State. Perhaps Maya Angelou will even write a poem:

Here on the pulse of this new day
You may have the grace to look up and out
And into your sister's eyes, into
Your brother's face, your country
And say simply
Very simply
With hope
Good morning.

(She wrote those lines before NAFTA, before welfare reform, before the US abetted bloody coups in Rwanda, and Haiti, and before the half million dead children in Iraq -- which not a single member of the ruling elite sought to contradict the bi-partisan sentiment that it was all, somehow, in Albright’s dark wording, “worth it.”)

And the symbolizism will be much softer. We will hear talk about humanity’s needs, and nation’s struggles against bad leaders and violent renegade movements, who must be overthrown for the welfare of the people. But nothing I’ve detailed above will change in the least. The vast bi-partisan death juggernaut will miss nary a beat. If our President appears less extreme, the climate (in more ways than one) will become even more extreme. And yet, perhaps the Cubs will finally go all the way one of these next four years. So we do have hope and there is much to look forward too.

But, seriously: In light of the vast, bi-partisan, undiscussed but universally accepted narrative and agenda, and the monstrous destruction it causes world-wide, focusing on BO’s purported, public-image manipulated, personality traits – his “decency as a human being”; or as NPR does in support of the cult-of-personality of the President, eternally filling dead air time with endless chipper-voiced stories of BO’s poker playing aptitude and strategy, his version of manhood compared to the hip-hop model, and anything else that the thirty-something, well-adjusted, metrosexual, young producers can mine from the cartoon-addled recesses of their normalized imaginations – imaginations which can dream up anything imbued with diaphanous “hope,” but are repulsed by “downers” like death and destruction – is, as I said above – completely irrelevant.

Posted by b on November 11, 2008 at 11:57 AM | Permalink | Comments (52)

November 10, 2008

Uranium Traces in Syria - Laughable Nonsense

Reuters wants us to react to this:

U.N. investigators have found traces of uranium at a Syrian site Washington says was a secret nuclear reactor almost built before Israel bombed the target last year, diplomats said on Monday.
...
"It isn't enough to conclude or prove what the Syrians were doing but the IAEA has concluded this requires further investigation," said one diplomat accredited to the IAEA.

"It was a man-made component, not natural (ore). There is no sign there was already nuclear fuel or (production) activity there," another diplomat told Reuters.

Let's determine the validity of this.

This news is obviously not an IAEA finding but something someone planted with Reuters. The information was leaked by diplomats and  "The International Atomic Energy Agency and Syria had no immediate comment."

The IAEA has such fine instruments that it can detect artificially altered, i.e. man-made, Uranium atoms about everywhere in the world. Thanks to the two nuclear bombs the U.S. dropped on Japan in 1945 and lots of open air nuke testing in the following years the existence of man-made components of uranium is inevitable and meanwhile provable anywhere on this planet.

The alleged reactor in Syria was supposed to be a copy of the North Korean Yongbon type which is a copy of the UK's Magnox reactor.

That type uses natural uranium to breed bomb-quality U235 and plutonium. To moderate the process such a reactor needs tons of graphite. If the alleged Syrian whatever was loaded with natural uranium or graphite, lots of such would have been found in detectable traces in the nearby environment.

As there is no leak or factual report that points to increased levels of natural uranium or graphite in the samples the IAEA took around the site after the Israelis bombed it, one can only conclude that the Syrian installation, if it was a reactor at all, was not a filled reactor near operational capability.

Instead some diplomats, i.e. Israeli, U.S. and U.K. operatives accredited to the IAEA in Vienna, now leak that the IAEA found some traces of man-made Uranium around the site.

That might well be correct. They would have found such in my living room too. But that fact would neither prove that my toaster is a nuclear something nor does it prove that my TV was build with the intend of converting it into a reactor.

There is so far nothing, zero, nada that would prove that Syria had one or another kind of nuclear program at all. There was a "Box on the Euphrades" that some Israeli bombers hit for whatever reason. There is zero believable prove that the site had to do with WMDs or other nefarious things.

The Reuters story will sell well. The journalist who was used as propaganda tool by some diplomats will be lauded by his bosses because the news s/he created will be printed everywhere. There is no reason for Reuters to verify the basic physics as it will make a nice profit with the involved scare-mongering. 

The whole motive behind this scare is an Israeli plot to maneuver Syria into a corner where it is seen as a WMD proliferation danger. That tactic, bare of facts, has worked well with regard to Iran.

Iran has an open and IAEA supervised civil nuclear program to create energy on a self sustained basis. Such a program could at a point be abuse for some tiny nuclear weapons program as could similar programs in the Netherlands, Japan, Brazil and elsewhere.

But Syria does not even have the rudimentary infrastructure for a civil nuclear energy program and certainly not for a military one.

Asserting otherwise may help the Zionist racist cause and Reuter's profits. Don't fall for it.

Posted by b on November 10, 2008 at 05:51 PM | Permalink | Comments (21)

How To Ruin A Retail Company

A prime case study on how to ruin a retail company:

  • Profits from sales were down a bit, because some retail sales changed to the Internets.
  • Management switched salespersons from commission based pay to meager hourly wages.
  • Sales droped further.
  • Management fired long-term, experienced and expensive salespersons and hires unqualified but cheaper people instead.
  • Sales drop further.
  • Overpaid management gets fired.
  • New management finds the company is bankrupt.

Circuit City Fires 2,000 Workers to Cut Costs, Feb. 6, 2003
Circuit City Stores Inc. has fired 2,000 people, including salespeople at its outlet near Gateway Mall in Springfield, in a move to cut costs.

The electronics retailer announced it is firing 5 percent of its work force and also converting commissioned sales people to hourly pay.

Circuit City to Fire 3,400, Hire Less Costly Workers, March 28, 2007
Circuit City Stores Inc., the second-largest U.S. electronics retailer after Best Buy Co., fired 3,400 of its highest-paid hourly workers and will hire replacements willing to work for less.
...
"Firing 3,400 of arguably the most successful sales people in the company could prove terrible for morale," Colin McGranahan, an analyst with Sanford Bernstein & Co., wrote in a note today. "The question remains as to whether Circuit City can rebuild in time for the all-important holiday season."
...
Circuit City shares rose 35 cents to $19.23 at 4:18 p.m. in New York Stock Exchange composite trading.
...
In 2003, Circuit City switched employees from commission- based pay to hourly pay, matching an earlier move by Best Buy. That switch had a "dramatically negative impact on sales," McGranahan said today.

Circuit City, Electronics Retailer, Seeks Bankruptcy , Nov. 10, 2008
The petition for Chapter 11 protection in U.S. Bankruptcy Court in Richmond, Virginia, listed $3.4 billion in assets and $2.32 billion in liabilities, driving the shares down 56 percent before the New York Stock Exchange halted trading.
...
Circuit City fell 14 cents to 11 cents at 9:30 a.m. before the start of trading on the New York Stock Exchange. The NYSE halted buying and selling of the shares after the stock's early plunge.
...
On Sept. 29, Circuit City reported a loss of $239.2 million that was more than triple from a year earlier after sales fell for the sixth straight quarter.

Without well motivated sales-persons any specialized retailer can only lose.

Here the shareholders lost too. No tears for them. Why did they not stop the disastrous management plans? 

Only long term Circuit City CEO Philip Schoonover, who was only fired six weeks ago, made a fortune by ruining the company. He got more than twice per year of what successful retail chain CEO's got. From the second link:

Chief Executive Officer Philip Schoonover was paid $8.52 million in fiscal 2006, including a salary of $975,000. Best Buy CEO Brad Anderson received $3.85 million, including a $1.17 million salary.

Under-payed salespersons are bad for any company. Overpaid management is much worse.

Posted by b on November 10, 2008 at 12:03 PM | Permalink | Comments (10)

More Taxpayer Rip-Offs

The U.S. government will invest additional $40 billion into the bankrupt insurer A.I.G. The company will use the money to buy up more or less worthless Collateral Debt Obligations and Mortgage Backed Securities who's value A.I.G. originally insured. Two off-balance-sheet vehicles will be created to hold these papers. Losses in those off-balance-sheet entities will mostly have to be carried by the government.

The NYT writer trying to explain the issue falls for the sales-pitch. He has been told that the government would get something tangible for its investment in form of more A.I.G. shares. But the numbers do not add up:

The Treasury Department and the Federal Reserve were near a deal to abandon the initial bailout plan and invest another $40 billion in the company, these people said.
...
At the same time, the government, using part of the $700 billion fund, would buy $40 billion in preferred shares in A.I.G.
...
A.I.G. negotiated the original $85 billion revolving credit line with the Federal Reserve after its efforts to raise money from private lenders failed in the panic of mid-September.
...
In exchange for making the loan, the Fed was promised a 79.9 percent stake in A.I.G.

The $40 billion of preferred shares will not change the size of the government’s stake in A.I.G., people briefed on the plans said.

How is this supposed to work?

The government already owns 80% of A.I.G.'s shares. It will get more shares now for handing over more money. But the size of the government stake in A.I.G. will not increase?

The WaPo version is not enlightening either. But it contains a morsel of information that the NYT seems to have missed. The NYT writes:

The government created an $85 billion emergency credit line in September to keep A.I.G. from toppling and added $38 billion more in early October when it became clear that the original amount was not enough.

When the restructured deal is complete, taxpayers will have invested and lent a total of $150 billion to A.I.G., ...

But according to WaPo, the government already spend much more on A.I.G.:

After the Federal Reserve of New York first extended the $85 billion loan to AIG on Sept. 16, the company quickly began burning through the funds. Twice, the government had to increase the sum -- to $123 billion in early October, then to $143 billion at the end of last month.

Somehow the NYT (and I) missed the news of an additional $20 billion put into A.I.G. at the end of last month. But how do the WaPo numbers add up? Starting with the $143 billion at the end of October we read this:

First, under this arrangement, the original $85 billion loan would shrink to $60 billion and could be repaid over five years, two sources said.
...
Second, and most critically, the government has now agreed to spend $30 billion buying troubled real estate investments that AIG had guaranteed and that were the cause of the company's near-failure. AIG would contribute another $5 billion to this pool.
...
A third component of the new deal would entail the government buying $40 billion in preferred shares of AIG as securities for taxpayers. The AIG board was considering the plan last night.

Somehow the $85 billion will shrink by $25 billion. But another $30 billion and another $40 billion will be added: 143-25+30+40=188. But the WaPo piece says with the new plan the total government aid to A.I.G will be a $150 billion. It makes no attempt to reconcile these numbers.Where do the additional $38 billion come from?

The Wall Street Journal's version as well as the Financial Times' report do not add clarity to this.

The deal is supposed to be announced this morning. But from what leaked out so far, expect this to be another major rip-off from taxpayers.

Meanwhile the Washington Post reports in a different piece on an illegal Treasury move in late September that will cost the tax-payer another big chunk of money:

In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention.

But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion.
...
The guidance issued from the IRS caught even some of the closest followers of tax law off guard because it seemed to come out of the blue when Treasury's work seemed focused almost exclusively on the bailout.
...
More than a dozen tax lawyers interviewed for this story -- including several representing banks that stand to reap billions from the change -- said the Treasury had no authority to issue the notice.

Congress is unlikely to undo the illegal changes. Concludes one expert:

"It's just like after September 11. Back then no one wanted to be seen as not patriotic, and now no one wants to be seen as not doing all they can to save the financial system," said Lee A. Sheppard, a tax attorney who is a contributing editor at the trade publication Tax Analysts. "We're left now with congressional Democrats that have spines like overcooked spaghetti. So who is going to stop the Treasury secretary from doing whatever he wants?"

Indeed.

Posted by b on November 10, 2008 at 03:48 AM | Permalink | Comments (29)

November 09, 2008

OT 08-38

Your news & views ...

Posted by b on November 9, 2008 at 06:17 AM | Permalink | Comments (93)

November 08, 2008

Loans For Car Manufacturers And Structural Changes

GM, Ford and Chrysler are on the brink of bankruptcy and may run out of money by the end of the year.

Should they get taxpayer money in an attempt to keep them alive?

The big three are said to have four major structural problems:

  • uncompetitive products
  • customers depend on debt to buy cars
  • the dealership structure
  • high cost due to health care and pension obligations

It is not true that GM and Ford do not have the products that are more environment friendly, have low mileage and would probably sell better. Ford Europe and GM's Opel/Vauxhall in Europe offer attractive small  and medium size cars with low mileage. It should be no problem to transfer production lines for these to the U.S. under U.S. brands. But the U.S. management seems to be unwilling to do so. They believe that such cars do net sell and push them into niche brands. GM has a total of thirteen brands, Toyota has three. Who is doing better?

The basic idea that car manufacturers should offer producer finance to car buyers seems wrong to me. Companies and their management usually make either good products or are good in banking operation. Partnering with local banks for car finance might be a better way to do that business. And why do consumer finance cars at all? It is quite expensive if you include the full insurance that is demanded.

The dealership structure in the U.S. is a consequence of the historic buying/selling habits that are no longer justified. The manufacturers send cars to the dealers in various colors and with various features independent of real customer demand. The dealers are supposed to sell the cars they get upfront, not the cars the customers really want. A different selling system would provide the dealers with one car of each type. The customer could test-drive that car, smell it, feel it and check the possible variants. The buyer could then decide what features and color s/he exactly wants. A clever produce-on demand system could deliver the individualized car within one or two weeks. And why not sell such individually configured cars through the internet?

Health care is an issue where the government could really help the car companies. Single payer universal health care in a regulated government provided system would do a lot to lower health care costs in the U.S. while providing, in average, much better service. For companies like the car manufacturers the effective hourly wage cost would sink and make them more competitive.

Many of the pension obligations companies and cities, counties and states have are already under-financed. Many of their pension funds will go bust and the Pension Benefit Guaranty Corp will have to take care of them. The PBGC is backstopped by the federal government. One can argue that the under-financed pension funds are already a form of silent socialization of risk and losses and in effect a scam. Socialize the companies' and other pension funds now by putting their money and their obligations into an extended social security system. The effects will be the same than with universal health care.

In my view the government could and should help the car manufacturers. But just to provide loans now when it is obvious that without deep structural changes more loan requests will follow before the inevitable bankruptcy, does not help.

Band aid is not sufficient now. The debt bubble busted and there is deep need for structural changes to get back to some healthy economy. The government can provide some of these structural changes, especially in health care and pensions. The other structural changes have to be in the mindset of the car manufacturers and their management. Any loan to these companies should be conditioned on such changes taking place.

Posted by b on November 8, 2008 at 02:43 PM | Permalink | Comments (22)

November 07, 2008

Doubleplusungood Economy News

A hefty unemployment report was released to day by the Labor Department:

Nonfarm payroll employment fell by 240,000 in October, and the unemployment rate rose from 6.1 to 6.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today.  October's drop in payroll employment followed declines of 127,000 in August and 284,000 in September, as revised.

The headline number is the U3 measurement of unemployment which not very inclusive. The realistic number measured as U6 includes "Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers" is at a seasonal adjusted 11.8%.

Average hours of those employed are down while seasonal and inflation adjusted hourly wages are up a bit.

Notice that the original number for September 2008 was a drop of 159,000. It was now revised to 284,000. The original August number was a drop of 84,000, now revised to 127,000. The October number published today will likely need a huge correction.

On October 27 the Dow was at a low of 8,175. It rallied from there to 9,625 on November 4. Since then it is down to 8,800 and I expect it to at least retest the 2002 low of 7,528. It could go down much lower though because current earning expectations are still much too high.

Posted by b on November 7, 2008 at 09:41 AM | Permalink | Comments (56)

Who Ordered The Slow News On Georgia

It took the New York Times three month, four reporters and lots of expenses to provide news that I provided here within hours after the war over South Ossetia started.

One wonders why the Times needed so long.

Who gave the orders to hold the truth back and who allowed it to be printed today?

The New York Times sells this news today, November 7 2008:

Newly available accounts by independent military observers of the beginning of the war between Georgia and Russia this summer call into question the longstanding Georgian assertion that it was acting defensively against separatist and Russian aggression.

Instead, the accounts suggest that Georgia’s inexperienced military attacked the isolated separatist capital of Tskhinvali on Aug. 7 with indiscriminate artillery and rocket fire, exposing civilians, Russian peacekeepers and unarmed monitors to harm.

Moon of Alabama provided this news for free on August 8 2008, 8:00am est:

Despite yesterday's announced ceasefire, the government of Georgia today launched an all out military attack on the breakaway South Ossetia region in northern Georgia.

NYT on Nov 7:

Two senior Western military officers stationed in Georgia, speaking on condition of anonymity because they work with Georgia’s military, said that whatever Russia’s behavior in or intentions for the enclave, once Georgia’s artillery or rockets struck Russian positions, conflict with Russia was all but inevitable. This clear risk, they said, made Georgia’s attack dangerous and unwise.

MoA on Aug 8, 8:00am est (headlined: Saakashvili Wants War - He Will Get It)

For internal reasons as much as on foreign policy ground Russia will not allow Saakashvili to take over South Ossetia. It will either support the Ossetians with weapons which may lead to a prolonged guerrilla war, or it may even invade on its own.

NYT on Nov 7:

[A]ccording to observations of the [O.S.C.E] monitors, documented Aug. 7 and Aug. 8, Georgian artillery rounds and rockets were falling throughout the city at intervals of 15 to 20 seconds between explosions, and within the first hour of the bombardment at least 48 rounds landed in a civilian area. The monitors have also said they were unable to verify that ethnic Georgian villages were under heavy bombardment that evening, calling to question one of Mr. Saakashvili’s main justifications for the attack.

MoA analysis on Aug 12:

On the evening of August 7 the Georgian President Saakashvili went on TV and announced a cease-fire. This came after some small tit for tat fire exchanges on the border between Georgia and South Ossetia. A few hours later Georgia launched a massive artillery barrage against the South Ossetian city of Tskhinvali. It used Grad multiple-launch rocket systems. Such weapons are effective against area targets, like large infantry clusters, not against pinpoint aims.

NYT on Nov 7:

Civilians repeatedly reported resting at home after the cease-fire broadcast by Mr. Saakashvili. Emeliya B. Dzhoyeva, 68, was home with her husband, Felix, 70, when the bombardment began. He lost his left arm below the elbow and suffered burns to his right arm and torso. “Saakashvili told us that nothing would happen,” she said. “So we all just went to bed.

MoA on Aug 12:

The attack hit people at sleep in their homes.

NYT on Nov 7:

At 12:15 a.m. on Aug. 8, Gen. Maj. Marat M. Kulakhmetov, commander of Russian peacekeepers in the enclave, reported to the monitors that his unit had casualties, indicating that Russian soldiers had come under fire.
...
Col. Gen. Anatoly Nogovitsyn, a spokesman for the Russian Defense Ministry, said that by morning on Aug. 8 two Russian soldiers had been killed and five wounded.

MoA on Aug 12:

The Russian peacekeepers in South Osssetia had less than a battalion of mechanized infantry between the border and Tskhinvali. This batallion was attacked by a multi battalion Georgian tank and armored infantry forces.

and so on ...

Posted by b on November 7, 2008 at 08:37 AM | Permalink | Comments (28)

November 06, 2008

The People Voted For A Liberal

Politico does a wrap up piece on the McCain campaign. In it Mark Salter, the co-writer of McCain's books, says:

“Our polling showed that more than 60 percent of voters identified Obama as a liberal. Typically, a candidate is not going to win the presidency with those figures. But I think the country just disregarded it. People didn’t care. They just wanted the biggest change they could get.”

That is a wrong, but typical Washington inside talk.

"People do not want liberals," the elite in DC says. How do they know?

Could the fact that lots of people voted for someone they (falsely?) perceived as liberal be explained by their will to put a liberal into the White House? Yes, it could and it is the most logical explanation.

But the Washington elite is full of this nonsense. "The country must be ruled from the center," they now say. What bullshit. Did Bush ever ruled from the center?

Now give the people what they asked and voted for.

Posted by b on November 6, 2008 at 02:04 PM | Permalink | Comments (18)

This Week In Baghdad

Today the Washington Post reports:

Gen. David H. Petraeus has decided to reduce the number of U.S. combat brigades in Iraq from 15 to 14 about six weeks earlier than planned, as a result of dramatically lower violence there, Pentagon officials said yesterday.
..
The departing brigade has served in Baghdad, where attack levels have plunged.
Combat Brigade Is Cut 6 Weeks Early in Iraq

Petraeus is right to withdraw troops from Iraq. He is wrong in asserting 'dramatically lower violence there.' That is simply a lie to justify moving troops to Afghanistan as his new Commander in Chief demands.

There are 150,000 U.S. soldiers and ten thousands of security-contractors in Iraq. But they seem to make little difference to the ongoing violence.

There were at some twenty bomb explosions in Baghdad in just the last four days. The civil war is back in Iraq and there is nothing the U.S. can do about it. The war will stop only after the U.S. has left.

Monday:

One of the explosions hit the busy Karrada district, damaging many shops.
...
One bomb was detonated outside a police building in eastern Baghdad, and then as people ran away, a second bomb was set off in their path.

Police appeared to have been the target in the most serious attack, but it claimed the lives of six civilians.

In the third explosion, the deputy oil minister of Iraq escaped a bomb attack on his convoy with minor injuries but a bodyguard was seriously hurt.

One policeman was killed in a bombing north of Baghdad, while another bomb exploded near a police patrol in west Baghdad, injuring one policeman and a civilian, police said.
Seven dead in Baghdad bomb blasts

Tuesday:

Seven people were killed and 18 wounded when a bomb exploded in the depot in the eastern Baghdad neighbourhood of Al-Mashda, the officials said.

In a similar attack, four people were killed and eight wounded when a roadside bomb went off in Al-Qahira in the north of the capital, they said.

One person was killed and seven wounded when a bomb planted in their car, part of a government convoy, exploded in the central Karrada district.

A civilian was killed and five wounded when a bomb blew up in a car near the University of Technology in Baghdad, the security officials said.

In another attack, a policeman was killed and three others wounded when they were shot at by gunmen driving in a vehicle in the the southeastern Baghdad district of Al-Gadhir.

An Iraqi police major was also wounded along with his two sons when a bomb planted in their car exploded in Al-Wahda in the centre of the capital.
String of Baghdad bombings kill 14

Wednesday:

A car bomb near a checkpoint on the road to Baghdad's airport killed four people and wounded nine on Wednesday, police said.

Two policemen were among the dead and three policemen were among the wounded in the blast, which took place by a statue near a major checkpoint outside the heavily guarded airport, police said.
Four killed in Baghdad airport road blast

Thursday:

The deadliest attack Thursday came near a checkpoint in central Baghdad when two bombs exploded during the morning rush hour, police said. Four people were killed and seven wounded in the blasts.

Another bomb targeting a government convoy injured six people, police and hospital officials said. Police said the convoy was carrying city workers. The police spoke on condition of anonymity because they were not supposed to release information.

The twin blasts in the capital's Sunni enclave of Sheik Omar happened at a checkpoint manned by members of an Awakening Council, the mostly Sunni groups that have joined forces with the Americans against al-Qaida in Iraq.

Another two Awakening Council members was killed in a bombing just before noon in southeastern Baghdad. The councils come under frequent attacks by insurgents because they have sided with U.S. forces.

Roadside bombs targeting two separate convoys carrying Baghdad city officials injured eight people, the mayor's office said in a statement. The municipal officials were not hurt in the attacks.

Nine other people were wounded in a roadside bomb attack in Baghdad's sprawling Shiite slum of Sadr City, police said.
Blasts in Baghdad kill 4, wound more than 20

Posted by b on November 6, 2008 at 09:39 AM | Permalink | Comments (16)

 
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