Have A Good 2009
Sorry for the light posting, I'll try to make up for some of it next year.
I am not optimistic about 2009. Only then will the economic downturn really unfold. The worldwide social-political consequences of the crisis will be huge and in some cases violent. It will take more time and social unrest for the people in charge to understand what this is about. Only after that happens the system will start to change.
But that is the sad big picture world. The small picture can be much prettier. My little niece laughing and giggling is giving me a lot of fun and hope for the future. I plan to plant lots of flowers in 2009 and give them away for smiles.
To all of you I simply wish the very best: peace and love.
Lebanon 2006, Gaza 2008 - the same Israeli rational, the same outcome.
Will they ever learn?
Hey, if everyone here puts in a buck, we can buy a MoA house in Detroit.
Thinking of Detroit. GMAC, General Motors Financing Arm, was supposed to become a bank and eligible for TARP money if it was able to restructure debt it has into equity. But some GMAC bondholders did not want to convert the GMAC bonds they own into stocks of lesser value and boycotted that solution. PIMCO being the biggest one of them.
On one side it risked that GMAC would go bankrupt and default on the bonds PIMCO owns. On the other side was the chance that the Treasury would break its own rules and bail out GMAC no matter what and the bonds would be paid for in full.
PIMCO won. The Treasury caved in:
Someone should please explain the next grafs to me.
The deal is lopsided -- such investments are generally proportional to existing ownership stakes -- and it could have the effect of restoring GM to majority ownership of GMAC.
The distinction would be short-lived, however, because the Federal Reserve has required both companies to divest most of their ownership stakes as a condition of allowing GMAC to become a bank holding company.
GM is, by demand from the Fed, supposed to lower its stake in GMAC as a condition for GMAC to become a bank. Now the Treasury lends a billion to GM to buy more of GMAC so GMAC has the equity to become a bank. Something does not compute here.
But this deal might reignite the great credit machinery:
GMAC, the automobile financing company, said Tuesday morning that it would immediately resume financing to a wider range of car buyers, a day after the Treasury Department injected billions of dollars into the lender.
And General Motors said Tuesday that it would begin to offer zero-percent financing on some models as it tries to jump-start sales.
“This is exactly what some of the government money was intended to do — stimulate credit, stimulate business,” Mr. LaNeve said.
That is healing the consequences of the last binge with more hard drinks. That may work as long as the consumer's liver is able to cope with it. I doubt that's still the case.
Israel "Absorbs" Bombs
The Defense Security Cooperation Agency notified Congress of a possible Foreign Military Sale to Israel of GBU-39 Small Diameter Bombs as well as associated equipment and services. The total value, if all options are exercised, could be as high as $77 million.
Israel will have no difficulty absorbing these additional bombs into its armed forces. The proposed sale will not affect the basic military balance in the region.
Defense Security Cooperation Agency - Israel - GBU-39 Small Diameter Bombs, Sept. 9, 2008
The bombs now get "absorbed" by people in Gaza.
The Israel Air Force used a new bunker-buster missile that it received recently from the United States in strikes against Hamas targets in the Gaza Strip on Saturday, The Jerusalem Post learned on Sunday.
The missile, called GBU-39, was developed in recent years by the US as a small-diameter bomb for low-cost, high-precision and low collateral damage strikes.
Israel received approval from Congress to purchase 1,000 units in September and defense officials said on Sunday that the first shipment had arrived earlier this month ...
IAF uses new US-supplied smart bomb, Dec. 29, 2008
Notice the fast, just in time, delivery ...
A Story On Free Trade And "Trustfrei" Marketing
Just back from visiting my brother. He owns and runs the family wholesale business in the fifth generation. For a long time that business also dealt in tobacco products.
While there I came across this artifact.
The thing above is ceramic and about 4 inch long and 1 1/2 inch high. It contains thin pieces of wood.
The artifact is a promotion tool for, obviously, a cigarette brand. These were given to pubs and guesthouse where they were set on the tables. The sticks were used to pick fire from a candle to lighten up cigarettes and cigars.
The company Eckstein & Söhne (Eckstein & Sons) was owned by a well settled Jewish family in Dresden up to 1928 when it was sold. As the front side is emphasized that the company employs about 2,300 workers.
The interesting about this is the use of "Trustfrei" (trust-free) as a product marketing argument. It also allows to date the piece.
Trust here is an economic term:
Trusts gained economic power in the U.S. in the late 19th and early 20th centuries. Some but not all were organized as trusts in the legal sense. They were often created when corporate leaders convinced (or coerced) the shareholders of all the companies in one industry to convey their shares to a board of trustees, in exchange for dividend-paying certificates. The board would then manage all the companies in 'trust' for the shareholders (and minimize competition in the process). Eventually the term was used to refer to monopolies in general.
In the U.S. the American Tobacco Company was one of such trusts. Around the turn of the century it gained a horizontal monopoly with 80% of the tobacco market share in the U.S. and was vertically integrated from tobacco plantation down to its own retail outlets.
The equivalent in Great Britain was the Imperial Tobacco Company which was formed in 1901 out of 13 independent tobacco and cigarette companies in defense against, but in the same spirit as ATC. A year later both of these giants made a contract that excluded each other from their home market and formed a joint venture, British-American-Tobacco to capture and monopolize new markets, especially in continental Europe. Due to anti-trust legislation ATC had to sell its share in BAT in 1911 but Imperial held on to it until 1980.
BAT's attempt to capture the continental market met resistance. While, like in the U.S. and UK, it tried to get market share by bribing wholesalers not to sell any competitors products, the response was less enthusiastic than it had expected.
In 1901/02 the continent was in a deep economic crisis and in Germany there was a long and hefty national discussion for (the industrial side) and against (the agrarian site) free trade. The conservative and nationalistic agrarian side included the tobacco growers and small business like my grandfather's who himself rolled some of the cigars his company sold. There were more than a thousand cigarette factories in Germany in the early 20th century which employed ten-thousands of people. (Until 1918 cigarettes were mostly produced by hand.)
The owners and their workers lobbied hard. They founded an "Association for the Defense Against the Tobacco Trust" and marketed their products as "Trustfrei". Later in 1915 and going with the general nationalistic streams of that era the associated "Committee for Good German Advertising Language" issued a "Germanization Brochure for Commercial Advertising", urging that commercial entities employ "No foreign term for what can well be expressed in German."
"Trust" is not a German word, so the reason why "Trustfrei" on those wooden sticks above is printed in quotes may well be related to the anti-foreign language thrust.As the ceramic does not put quotes around "Trustfrei", but the refill sticks do, I think it was made between about 1910 to 1914.
Their nationalistic push was also reflected in the collection pictures that came with each pack of cigarettes.
There were series with pictures from German colonies, 'heroic' German historic figures (above Henry the Lion) and the German military. Dads smoked and the children collected and exchanged the pictures. They glued them into special albums of which millions were printed: Nationalistic education through product marketing.
One of the original famous Eckstein brands is still available today.
It is a filter-less cigarette and even for this role-your-own addict quite strong stuff.
British-American-Tobacco, which is still conducting dubious business, never got a hand on it. But in 2002 one of BAT's original parents broke the "Trustfrei" spell. Eckstein, Dresden in 1928 sold to Neuhaus, Cologne which was bought by Reemtsma, Hamburg in the 1950s. In 2002 Reemtsma was sold to the British Imperial Tobacco Company which thereby today owns the Eckstein brand.
With the current economic crisis and huge world-wide corporations again overwhelming local markets we may again see "Trustfrei" like campaigns (Private Equity Free?, Hedge-Fund-Free?) as a defense against all-out free trade.
This time, hopefully, without the nationalistic attitude that killed so many in the first half of the 20th century.
For month Israel blocked the Gaza Strip from nearly any supply. No paper for schoolbooks, too little fuel, only little medical stuff. On November 5 it broke the truce [corrected] Hamas had held for nearly five month.
That truce officially ended a few days ago and Hamas as well as other groups started to again to launch ineffective homemade rockets onto Israeli ground.
Yesterday Israel let some 80 trucks with supplies into Gaza. That was not to get relief to 1.5 million prisoners there, but to prepare for the onslaught that started today. Too little supplies in Gaza would let too many people call for a 'premature' stop of the ongoing war against the Palestinian people there.
The first day of a brutal bombing campaign killed at least 195 people, all of them 'militants' and Hamas 'extremists' we are told.
The killing will go on for at least a week and more likely up to February 10 when Israel holds elections. Every politician in Israel seems to run a 'I will hit 'em harder' campaign. This is totally useless violence for the most cynic reason I can think of - to boast the personal egos of Livni, Barak and Netanjahu.
The Yuan Goes To Trade
As the U.S. dollar is likely to sink further relative to other currencies, its status as the main monetary exchange medium in world trade will be looked on unfavorably by a lot of trading partners.
The euro has its own trouble and will not take the dollars role either.
I expect a trade weighted bundle of three currencies to be the future monetary exchange medium. For a start one third dollar, one third euro and one third renminbi/yuan with periodical modifications if trade balances deviate between these anchors.
This was futuristic as China until now used the dollar as exchange medium in external trade and tightly coupled the yuan to the dollar. But now the first steps are taken to use the yuan in foreign trade:
BEIJING, Dec. 25 -- The yuan will be used in transactions with neighboring trade partners as part of a pilot project - in what could be the first step on the road to making it an international currency.
The Guangxi Zhuang autonomous region and Yunnan province will be allowed to use the yuan to settle trade payments with ASEAN (Association of Southeast Asian Nations) members.
The mainland's trade with Hong Kong, Macao and ASEAN nations has been rising rapidly over the past years to reach $402.7 billion last year, or 20 percent of the mainland's total trade volume.
It is a big move and one of the long term adjustments that will follow from the current crisis.
RIP Harold Pinter
"We are actually looking at a never-ending range of reflections. But sometimes a writer has to smash the mirror - for it is on the other side of that mirror that the truth stares at us." - HPBBC obit
Noble Lecture 2005: Art, Truth & Politics
Real Player and MS video here.
Some Wishes Come True
I wish you all some contemplative, hope- and peaceful holidays.
May all walls come down.
Picture courtesy of the Bethlehem Association
"Nobody wants war"
Let me be clear: no one wants war.
If the international community once again shows a lack of resolve, there is no chance that Saddam Hussein will disarm voluntarily or flee - and thus little chance of a peaceful outcome.
17 times the UN has drawn a line in the sand - and 17 times Saddam Hussein has crossed that line. As last week's statement by the eight European leaders so eloquently put it: "If [those resolutions] are not complied with, the Security Council will lose its credibility and world peace will suffer as a result."
Donald Rumsfeld, The Global Fight against Terrorism: Status and Perspectives, Munich, Feb. 8, 2003
"The issue is not war. Nobody wants war," Dr Singh told media persons outside Parliament when asked to comment on the present stand-off with Pakistan over the Mumbai terror attacks.
He said India wanted Pakistan to make 'objective efforts to dismantle terror machine' and added that Islamabad 'knows what it implies'.
'Talk of war, surgical strikes is ill-advised'
Referring to 'many' UN resolutions prohibiting member countries from allowing terrorism to emanate from their territories, Dr Singh said Pakistan should "comply with those resolutions".
At the same time, he said: "The international community should use its power to persuade Pakistan (to end terrorism)."
Nobody wants war with Pakistan: Dr Singh, New Delhi, Dec. 23, 2008
Open Thread 08-44
I am traveling and will likely post little over the next few days.
Open thread ...
India - Pakistan Prepare For War
While the terror assault in Mumbai was still ongoing, I developed a conspiracy theory speculating that it was a diversion to kill anti-terrorism officers that were investigating right-wing terror against Muslims by Hindutva with ties to the opposition BJP party :
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.
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.
Did the Indian minister Antulay read my piece?
Union Minority Affairs Minister A R Antulay today kicked up a political storm when he raised doubts over the circumstances around the killing of Maharashtra Anti-Terrorism Squad chief Hemant Karkare and suggested a link with the Malegaon blasts that the officer and his team were investigating.
Calling for a CBI probe into his death, Antulay said “there is more than what meets the eye” as Karkare was investigating cases in which “there are non-Muslims also” and “somebody wanted Karkare killed”. That “somebody”, Antulay claimed, sent the officer to the place where he was killed.
The ministers remark led to a storm in the Indian parliament, accusations of treason and unpatriotic behavior are raised and he will probably get pushed out of his job.
Meanwhile India and Pakistan prepare to go to war. 120 Indian ambassadors met in New Dehli and were briefed by the foreign affairs minister:
“We have so far acted with utmost restraint and are hopeful that the international community will use its influence to urge Pakistani government to take effective action,” Mr Mukherjee said. “While we continue to persuade the international community and Pakistan, we are also clear that ultimately it is we who have to deal with this problem. We will take all measures necessary, as we deem fit, to deal with the situation.”
India allerted quick reaction forces, is concentrating troops at the border and ups air defense:
"Runways, hangars, main roads, ammunition stores and other sensitive places have been provided with additional cover. Sophisticated radars are installed at a few air bases and we are keeping watch on each and every cross-border activity," said an IAF personnel.
The rhetoric is getting more heated at both sides by each day. India demands that Pakistan hands over 20 people accused of various issues. Pakistan will not do so.
Bad Assets - No Trust
For about a year now, the Fed is pushing more and more money towards banks, but even a trillion and some dollars later, nothing seem to have helped. Sure interbank landing rates came back a bit from the record values we saw before, but they are still much higher than they should be. More important lending to even good real economy companies has slowed to a crawl.
One reason is the counter intuitive Fed policy. To somewhat sterilize the expansion of its balance sheet the Fed is now paying interest on the reserves banks keep with it. The result:
Last week, banks were sitting on about $800 billion in excess reserves with the Fed, doing absolutely nothing with them.
But the real issue is trust. Some banks are insolvent, but we do not know which one is or which one is not. The Fed and the Treasury repeat the mistakes made in the 'lost years' in Japan where insolvent banks were kept alive until, six years into the crisis, then economics minister Heizo Takenaka got one thing right and finally forced them to come clean and write off their bad assets. Sweden did the equivalent when it nationalized the banking system, eliminated the shareholders and forced the banks to write down bad debt and to restructure before returning them to normal business.
As I wrote before when I demanded Declare All Credit Default Swaps Null And Void trust is the important issue and there is only one way to get it back.
As Ilargi says:
All of the money spent so far, all the trillions, every penny of it, will be a complete waste if these [toxic] assets are not forced out of their closets. Everybody talks about the need to restore markets by restoring trust and confidence. Well, Mr. Obama, here is your key to reviving that trust. Find your own Elliott Ness, this one specialized in derivatives, get him the people he wants and needs, and start raiding the banks' vaults, and the hedge funds, and the pension funds. Force it all out into the open. Refuse to give them even one more nickel, until all of it is on the table. All of it, not just some of it. If that doesn't happen, the US economy will not recover, because there will be no trust and no confidence."
Gloomy as s/he is, Ilargi looks at Obama's advisers and does not expect this to happen. Maybe it will take six years?
There is now some prominent support.
Wolfgang Münchau comments in the Financial Times (reg.req.):
I am sceptical about the benefits of the Fed’s new policy of quantitative easing. We do not have a liquidity crisis, but a solvency crisis, which expresses itself in large spreads and dysfunctional money markets. I cannot see how adding more and more liquidity to the system solves this problem.
Instead of propping up each bank, and swamping the market with cash, we need to restructure and shrink the banking system, as a first step to a sustainable solution to this crisis. Quantitative easing without deep structural financial reform could cause lot of trouble in the long run.
In Japan Takenaka was perceived by some as a puppet of 'western' economic advisers because many 'western' economists pushed with him for writing down bad assets and bank restructuring. Now Japanese economists make the same case for the U.S. But I see little push by their 'western' colleagues.Why?
The shiny city upon a hill meme is bread and butter of U.S. politics since the first Puritan colonists arrived and it is asserted by about every modern politician since JFK. Anna missed digs into its variants (1, 2, 3, 4, 5, 6) much deeper than I can. It is an entitlement the U.S. claims to have.
Here is another example, not mentioned in the media, where the U.S. stands out from the world. Where it is truly exceptional:
By a vote of 180 in favour to 1 against (United States) and no abstentions, the Committee also approved a resolution on the right to food, by which the [UN General] Assembly would “consider it intolerable” that more than 6 million children still died every year from hunger-related illness before their fifth birthday, and that the number of undernourished people had grown to about 923 million worldwide, at the same time that the planet could produce enough food to feed 12 billion people, or twice the world’s present population. (See Annex III.)
Approved by a vote of 177 in favour to 1 against (United States), with 2 abstentions (Canada and Israel), the resolution on the right to development would have the Assembly call on the Council to continue to ensure that its agenda promotes and advances sustainable development and the Millennium Development Goals and to lead to raising the right to development as set out in the Vienna Declaration and Programme of Action, to the same level and on a par with all other human rights and fundamental freedoms (Annex IV).
The Committee also approved a draft resolution on the rights of the child by a vote of 180 in favour to one against (United States), with no abstentions. Among other things, that omnibus text would call upon States to create an environment conducive to the well-being of all children, including by strengthening international cooperation in regard to the eradication of poverty, the right to education, the right to the enjoyment of the highest attainable standard of health, and the right to food.
UN Sixty-third General Assembly - Third Committee (via Lenins's Tomb)
And no, I would not bet that this will change under a different president.
More And More Troops To Afghanistan
Chairman of the Joint Chiefs of Staff Admiral Mullen wants to increase U.S. forces in Afghanistan by 30,000 next summer. One wonders where these troops are supposed to come from given that Mullen and other generals are trying to sabotage Obama's plan of retreat there. As the British leave, some troops will now also be needed to cover Basra.
Not everyone seems to be on board though:
U.S. military officers, speaking privately, concede that the bleak outlook in Afghanistan will probably prompt a scaling back of US goals for the country. There is widespread belief in national security circles that the Bush Administration’s goals for Afghanistan were too ambitious. Whether new boots on the ground will bring anything other than short term tactical gains is the big question to which few in Washington have an answer.
But when in Afghanistan, how will those troops get supplies?
On Thursday, more than 10,000 protesters in Peshawar demanded Pakistan prevent Western use of the supply route to Afghanistan, saying the equipment transported was being used for attacks on Pakistani soil.
The U.S. will increase the bribe/protection money it is paying the Pakistani military:
The United States will provide more than $300 million a year in military aid to Pakistan over the next five years, diplomatic sources told Dawn.
[Pentagon Press Secretary Geoff Morrell]said the proposal for new assistance for to Pakistan has come from the Central Command and is at early stages. The proposed funding is in addition to existing programmes, including the coalition support fund and foreign military financing.
This may induce the Pakistani military to do more for convoy protection near the Khyber pass. But that would only move the problem down south to the port of Karachi where the convoys start and where a sizable Pashtun refugee population lives.
NATO is negotiating with Russia over opening a new supply route through Russia, Kazakhstan and Uzbekistan. The U.S. plans a different route through Georgia, Azerbaijan, Turkmenistan and Uzbekistan. There might well be additional ideas behind this plan:
Another dramatic fallout is that the proposed land route covering Georgia, Azerbaijan, Kazakhstan and Turkmenistan can also be easily converted into an energy corridor and become a Caspian oil and gas corridor bypassing Russia. Such a corridor has been a long-cherished dream for Washington. Furthermore, European countries will feel the imperative to agree to the US demand that the transit countries for the energy corridor are granted NATO protection in one form or the other. That, in turn, leads to NATO's expansion into the Caucasus and Central Asia.
I doubt that the effort will succeed. Russia will have a say in this no matter how much bribes the U.S. is willing to pay the dictators of those countries.
Avraham Burg - A Gerechter
A short NYT portrait of Avraham Burg, an Israeli politician who became a gerechter (chassidey, righteous).
[F]our years ago Mr. Burg not only walked away from politics, but also basically walked away from Zionism. In a book that came out last year and has just been translated and released in the United States, he said that Israel should not be a Jewish state, that its law of return granting citizenship to any Jew should be radically altered, that Israeli Arabs were like German Jews during the Second Reich and that the entire society felt eerily like Germany just before the rise of Hitler.
MR. BURG has shifted the title of his book over the years. When he was writing it, he called it “Hitler Won.” When he published it in Hebrew he called it “Defeating Hitler.”
Partly, he said in the interview, his thinking is evolving, and partly his American editors made some smart cuts and suggestions. But it also seems clear that he has modified and adjusted his arguments, especially for a foreign audience. The English version does not have some of his more alarming assertions in the Hebrew one — for example, that the Israeli government would probably soon pass the equivalent of the Nuremberg laws, with provisions like a prohibition on marriage between Jews and Arabs.
So the editors thought that was too much for the foreign audience to take?
The end may be optimistic, but throughout its entire course the book repeatedly equates Israel with Germany. Is that really justified? Is there sufficient basis for the Israel-Germany analogy?
"It is not an exact science, but I will describe to you some of the elements that go into the stew: a great sense of national insult; a feeling that the world has rejected us; unexplained losses in wars. And, as a result, the centrality of militarism in our identity. The place of reserve officers in society. The number of armed Israelis in the streets. Where is this swarm of armed people going? The expressions hurled publicly: 'Arabs out.'"
Are you concerned about a fascist debacle in Israel?
"I think it is already here."
More Weapons To South Sudan
While the capturing of the "Faina", a Ukranian ship loaded with tanks and other military stuff, by the Somali coast guard/pirates was noticed around the world, little has been reported in English about another ship that delivered a load of weapons late last year.
The ship is on long term charter with Beluga Group, a heavy lift shipping company. In November/December 2007 the ship was on secondary charter with ACE Shipping, a company on the British Isle of Man which shortly before was sold to some Ukrainian interest.
The ship then was ordered to the Ukrainian harbor Oktjabrsk in the Black Sea. There the state owned company Ukrinmasch loaded the ship. SPIEGEL says it has documents showing 42 T-72 tanks, 15 anti-air canons, 2 multiple rocket launchers, 2 tons of RPG and 95 tons of Kalashnikov guns and accessories were loaded. The freight was declared to be "general cargo: power generation machinery and vehicles."
From Oktjabrsk the ship went to Israel for unknown purpose and from there to Mombasa, Kenia. Israel is known for upgrading/refurbishing Ukrainian weapons as it did with tanks for Czechia and multiple rocket launchers for Georgia. Note that the "Faina" is owned by an Israeli who is negotiating its release and there are rumors of contacts between the pirates and the Israeli prime minister Olmert.
The load delivery papers refer to "GOSS" as acceptor. This is supposed to stand for Government of South Sudan. Eye witness reported that the weapons did go there.
Neither the Ukranian nor the Kenian government acknowledges the above.
South Sudan gained some autonomy after a long civil war with the north. A referendum is scheduled for 2011 on whether to remain in the greater Sudan or to become an independent nation. There is a UN observer mission in South Sudan which has officially not seen any of the weapons. Weapon delivery to South Sudan is forbidden.
The BBC quoted a Jane's Defence Weekly correspondent who says that more than 100 T-72 and T-55 Russian tanks have been received by the South Sudan in recent months. All together five ship loads were said to be involved.
One wonders who pays for these weapons and how they can escape more scrutiny.
The Carmakers And The TARP Deal
November 12: Will Paulson Spend The Full $700 billion 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.
The conditionality of an auto bailout on releasing the second half of TARP is not made explicit, but that they are announced together is very suspicious:
Citing danger to the national economy, the Bush administration approved an emergency bailout of the U.S. auto industry Friday, offering $17.4 billion in rescue loans in exchange for deep concessions from the desperately troubled carmakers and their workers.
At the same time, Treasury Secretary Henry Paulson said Congress should release the second $350 billion from the financial rescue fund that it approved in October to bail out huge financial institutions.
Only yesterday the White House said it was considering bankruptcy for the automakers. That was certain to build pressure. Only three days ago Paulson said he will not ask for the second TARP tranche at all. Now he does. Now he knows he will get away with it.
I believe there is a deal behind this. Bush pressed Reid and Pelosi to not block TARP part II as a condition for a TARP loan to the automakers.
To formally get the second half of TARP Paulson needs to send a plan to Congress on how he wants to spend it. Congress then has 15 days to block the money. Bush could veto that block. Congress could override that veto.
But what if Reid and Pelosi do not call Congress back to Washington between Christmas and new years eve to stage a difficult fight to block the second $350 billion?
The second TARP tranche will sail through quietly. Congress will aprove it by not convening. And the automakers are safe for now.
Emmanuel Todd on Europe
In 1976 Emmanuel Todd predicted the down fall of the Soviet Union. In After The Empire, first published in French in 2001, he predicted the (relative) decline of the United States. From a 2003 review:
Todd makes the following key points:
3. The United States economy is headed for a crash and is only buoyed up by foreign investments. The United States trade deficit is a disaster that is fed by US firms which push their factory jobs overseas and gut the nation’s industrial base. Some 10% of American industrial consumption depends on foreign goods for which there is no corresponding balance in national exports. America no longer has the economic and financial resources to back up its foreign policy objectives. The United States is becoming a nondemocratic, arch-conservative society split between the very rich and the service sector;
5. The United States is economically dependent on those countries which hold its bonds and debt–China, Japan and Europe. The US needs a certain amount of global disorder to offset this dependence in order to maintain the US political-military presence in the Old World; and,
Seems like he got some things right.
Now Todd published a new book, this time on Europe. I have not yet read it, but this from a Financial Times review sound interesting:
Mr Todd paints a picture of a collusive political-media elite that benefits from globalisation while being disconnected from the people who suffer from it. As arrogant as the aristocracy on the eve of the 1789 revolution, this elite blithely ignores the views of voters whenever it suits them. French voters rejected the European Union’s constitutional treaty, but a modified version was later adopted by parliament. Britain’s voters protested massively against the war in Iraq, but the government sent in the troops regardless.
Ordinary workers blame cheap-wage China for killing jobs and compressing wages. Instead, France’s leaders scapegoat Muslim immigrants and target militant Islam, justifying an unpopular intervention in Afghanistan. Employees want Europe to protect their jobs but, in spite of his increasingly protectionist rhetoric, Mr Sarkozy – and the opposition Socialist party – still adhere to the free-trade dictates of the EU and the World Trade Organisation.
In Mr Todd’s reductionist view, globalisation is simply the exploitation of cheap workers in China and India by US, European and Japanese companies. He is therefore an unabashed champion of European protectionism. Erecting trade barriers would increase European wages which, in turn, would increase demand and boost trade, he argues. The “social asphyxia” that is sucking the breath out of democracy would disappear.
The British, whose very identity is wrapped up in free trade, will never buy protectionism, Mr Todd suggests, but Germany and the rest of the EU could be persuaded.
Hmm ... Possible? Likely? What do you think?
Two Crises - One Depression
The world economy is facing two distinct crises, one in the financial sphere and one in the productive sphere. While interlinked in their creation, they demand different remedies.
The creation of these crises originated in the financial part of the economy:
Over the last 15 years, increased competition (within the industry and increasingly from non-banking institutions) and the reduction of earning from the commoditisation of products forced banks to rely on “voodoo banking” - performance enhancement to boost returns.
Voodoo banking created money out of nothing, pushed it down the throats of gullible consumers and sold the such created debt assets to gullible investors.
The regulators stood by or were even complicit in the gigantomaniac Ponzi scheme. The fictitious financial industry grew ten times bigger than the real one it was betting on.
Driven by brutal marketing the consumers indebted themselves more and more. They used the money to buy more and more stuff. Houses, cars or whatever China could produce for them. This artificial demand created production capacity that under more benign circumstance would never have been created. World wide car building capacity now by far exceeds plausible demand.
But finally the consumer was exhausted. Even at 0% interest and no income questions asked there was no one left to take on another loan to buy another house at astronomic prices. The bubble burst.
The financial pyramid came down first. Investors found out they had been lied to. Banks found they held the toxic stuff they had created in their own portfolios. Lehman crashed and took everyone with it.
The feds and governments of this world try to pump money into the financial industry black hole to reanimate the bubble economics. This will inevitably fail. The financial industry is mostly insolvent. No one will lend to another financial entity unless it knows it will get its money back.
As everyone by now recognizes, no one can trust the statement of a bank CEO, balance sheet numbers, the rating agencies ratings, the regulators neutrality, finance media talking heads or politicians.
No one lends in such an environment no matter how much money is thrown into the game. Bernake's quantitative easing will fail.
In the end all financial business is based on trust. Trust in the system and in counter-parties is gone.
The only way to revive some kind of financial system is to sort out the bad apples, to open the books, to re-regulate to very clear and simple standards. And yes, throw some folks into jail. Unless that gets done, trust will not come back.
The real world has a different problem. The artificial demand created by debt peddled to the consumer has evaporated. The production capacities that were created to satisfy that demand are now standing still. Unless debt gets forgiven the consumers will, for many years to come, not be able to go on another buying binge.
Lots of people will now become unemployed. The production capacity will rot away one way or another just like many of those cheaply build overpriced houses.
There is no way to avoid this now. The government can create some demand and put some people to work with infrastructure investment. But it can not replace all the artificial consumer demand that has withered away. If it tries by pumping up money supply it might well create an immense inflation in the mid of a depression.
My grandfather left me some Reichsmark notes. One has 100 million printed on it. But before it was issued the 100 million got overprinted in red with 1 billion. It may have bought a loaf of bread at that time.
The fixing of the financial realm will come when authorities get real with re-regulation and shutting down zombie institutions.
A fixing of the real economy is not possible. Production capacity has to shrink back to a more realistic demand level. Public programs can help to soften the slump. What can and should be done is to help those who lose their jobs, be that by public works or some payed retraining. To let wages fall, as soon some will argue for, will only decrease demand further.
Such crashes as the current one happen every century or so. Usually after the generation that lived through the last crash is gone. Then people forget and redo the errors their ancestors committed.
Unfortunately the politicians that have the task to find ways out of the crisis also redo the errors their ancestors committed.
Instead of cleaning up the Augean stable that the financial industry is, they feed the animals to produce more dung. Instead of letting over-production capacity decay, they will try to keep it going through subsidies and tariff barriers. It will take years until some sanity will get into their action.
Stable societies can survive such storms. Unstable societies may see large revolts and wars. Some stable societies may join in on those wars as domestic Keynesian programs. To created demand at home, to put unemployed into uniforms and in hope to capture this or that natural resource.
Let's hope that will not happen.
But I am not optimistic anymore. This is not just another recession. This is a depression and a global one. Not a great one, but greater.
On Values, Human Rights and Their Interpretation
The Chinese take a neutral stand on foreign internal issues. Like on Sudan, where China buys oil and does not loudmouth much about remote struggles in Darfur, liberal interventionists and their neocon brethren damn them for such behavior whenever it suits their goals.
There are some basic issues where all nations agree upon, like the UN's Universal Declaration of Human Rights. But even there the interpretation of these rights already varies, and this not only between the 'west' and others, but between each pair of societies. 'Everyone has the right to life,' says the declaration. How does that fit with the death penalty and opinions thereon in Europe and the U.S.?
Then there is the UN's International Covenant on Civil and Political Rights which most parties have signed with the notable exception of a bunch of Arab countries at the Persian Gulf, most of whom are allies to the 'western' countries that ratified the treaty. How can that be?
The International Covenant on Economic, Social and Cultural Rights includes the 'right to work' and the 'right to social security'. It has 159 full parties. The U.S. signed the treaty in 1977 but is one of the very few countries that never ratified it.
Which is to show only that such rights are never really universal, especially when it comes to interpretation of internal issues in other countries.
The French President Sarkozy recently received the Dalai Lama in official capacity. When China expressed concern, Sarcozy cited 'European values'. The Chinese remember those very well.
I like the Chinese stand on this:
China on Tuesday said it doesn't accept the French leader Nicholas Sarkozy using "European values" as a pretext to defend its act that hurts fundamental interests of other countries.
"We will not interfere in the values adopted by other countries. At the same time we cannot accept using these values as an excuse for act that hurts the fundamental interests of other nations and peoples," Foreign Ministry spokesman Liu Jianchao told the regular Tuesday press briefing.
Liu's said this when asked to comment on French President Sarkozy's recent remarks that the French side would like to restart dialogue with China, but "not at the price of renouncing our own European values."
The Chinese spokesman took a traditional stand on Westphalian sovereignty which is some time tested real European valuable consideration.
My personal stand on 'rights' and 'values' discussions between nations was well expressed in a recent interview (in German, my translation) with the former German chancellor Schmidt:
I have great sympathies for human rights, but I am very concerned when, in the name of human rights, political aims, or even strategic aims, are pursued.
Over the last years the U.S. neocons used 'human rights' as a sales argument for their destructive policy aims. The incoming Obama administration will use the argument even more. Whether that will be from genuine conviction or as a tactical argument will be difficult to decipher in the onslaught of propaganda that will accompany it in this or that case of 'needed' military intervention.
I for one will adhere to Schmidt's warning and take the Chinese standpoint. You may not like the 'values' of others. But that is not an argument to force your 'values' onto them, especially not with force.
Your news & views ...
We welcome your comments.
Stimuli And Global Balance
Obama is preparing a bigger stimulus package for the U.S. The rumored size is now $1 trillion. The U.S. already has a huge current account deficit. It consumes more than it produces. The stimulus will likely make that deficit bigger. But Paul Krugman will be happy now because he demanded a bigger package.
Germany, like China, has a large current account surplus. It produces more than it consumes. The German government is dragging its feet over spending more money on stimulus measures. Today Krugman bashes Germany for not launching a bigger stimulus on its own.
We have a group of countries, the U.S. UK, Spain, ... that had a credit induced spending binge and produced little, while others, China, Germany, Japan, ... produced for exports and saved.
There is an imbalance between those groups which will have to be adjusted one way or another.
When Krugman prescribes stimulus for both sides of the game there is something wrong with his thinking. Stimulus on both sides of the scale can not help to regain a balance. It only freezes the current situation.
So should the U.S. do a Keynsian stimulus at all?
As Yves Smith argues it is probably the wrong thing to do:
The US in the 1920s was the world's biggest creditor, exporter, and manufacturer. Our position then is analogous to China's now. Indeed, Keynes in the 1930s urged America to take even more aggressive measures, and argued that it was not reasonable for the US to expect over-consuming, debt-burdened countries like the UK and France to take up the demand slack. So even though most economists are invoking Keynes, it isn't clear he's prescribe such aggressive stimulus for the US and UK now.
The big U.S. stimulus package risks to crash the dollar. That may help to reignite local production, but will make the accumulated debt burden harder to carry as lenders will demand sharply higher interests.
Could China and Germany launch big stimuli programs to create local demand for all the surplus goods they export?
Michael Pettis, Professor for Finance at Peking University, says no:
The problem with this solution is that the scale of the adjustment is beyond the capacity of most countries. A decline in US consumption equal to 5 per cent of US GDP, for example (which is a low estimate), would require an increase in Chinese consumption equal to 17 per cent of Chinese GDP – or a nearly 40 per cent growth in consumption. This is clearly unlikely.
The German current account surplus this year will be some $250 billion. The total German government spending for 2009 is planed to be $400 billion. I doubt that Germany could raise that by 60% for a big stimulus and ignite consumption of that size.
That leaves one other way to adjust – a sharp decline in global production, with massive factory bankruptcies to end overcapacity. The burden of the adjustment will fall on trade-surplus countries, unless trade-deficit countries are willing to absorb a large part of it. But given political realities it is Asian production which is most likely to decline. The economic pain will be high and potentially destabilising.
There seems to be no way out.
Stimulus programs in the U.S. will help to soften the crash a bit, but they will not solve the basic problem of the need to global re-balancing. A controlled dollar decline over time might help in longer terms.
Stimulus in the surplus countries might induce a bit more consumption there, but will not solve the quite huge problems either. Whatever is available in financial means in these countries will be needed for social measures when production shrinks sharply and unemployment rises.
There was and is over-consumption in the U.S. and overproduction elsewhere. Both, global consumption and production, will decline for now to a globally lower level. Over the longer term, a re-balance of production capacity to consumption capability towards a more local level will have to be made.
All the current stimulus talk simply papers over this.
Juan Cole cites some Iraqi weapon purchase:
Then he adds:
These new weapons for the Iraq will be delivered in 2013, and they are sophisticated and difficult to operate and maintain, so will require training and technical help from the US military.
Striking someone with a shoe is a grave insult in Islam.Duh. Is throwing shoes a sign of affection in Christianity? Do Buddhist throw shoes at each other to express gratitude?
To Juan Cole
Juan Cole cites some Iraqi weapon purchase:
• 20 T-6A Texan trainer aircraft.
• 36 AT-6B Texan II Light Attack Aircraft.
• 26 Bell 407 Armed Helicopters, each equipped with a M280 2.75-inch Launcher, a XM296 .50 Cal. Machine Gun, and a M299 Hellfire Guided Missile Launcher. '
Then he adds:
These new weapons for the Iraqi Air Force will be delivered in 2013, and they are sophisticated and difficult to operate and maintain, so will require training and technical help from the US military.
Dear Juan, you obviously think otherwise, but planes, helicopters or whatever else are not really too sophisticated and difficult for Arabs to operate and maintain them on their own.
Madoff And Realistic Returns
In a piece about the fall of Madoff’s $50 billion Ponzi scheme, two NYT writers show a profound misunderstanding of basic economics:
Mr. Madoff’s promised returns were relatively realistic — about 10 percent a year — though they were unrealistically steady.
The quasi risk free return on 10-year U.S. treasuries over the last 10 years was less than some 5 percent. A return of 10 percent per year can then only be relatively realistic if the risk of a loss of the invested capital is relatively high. That is the point Madoff's investors failed to understand too.
On another aspect of that fall: In a comment dan of steele says:
[O]ne possible positive outcome outcome from all this will be a bit less cash available to AIPAC.
That is likely as the NY Times emphasizes the Jewishness of many Madoff investors:
The Wilpon family, the main owners of the New York Mets, and Yeshiva University both confirmed that they had invested with Mr. Madoff, and a Jewish charity in Massachusetts said it would lay off its five employees and close after losing nearly all of its $7 million endowment. Other investors included prominent Jewish families in New York and Florida.
In another piece the Jewish charity from above is specified:
The news was equally devastating for the Robert I. Lappin Charitable Foundation in Salem, Mass., which works to reverse the dilution of Jewish identity through intermarriage and assimilation by sending teenagers to Israel and supporting other Jewish education efforts.
Sound a bit like Lebensborn to me. It is better for all if such stuff loses its financing.
A Missed Faux Pax
It seems that all major U.S. media did not report this faux pax:
Secretary of State Condolezza Rice said Thursday that the establishment of a Jewish state would serve as a solution to national aspirations of American Hebrew citizens.
"Once a Jewish state is established, I can come to the American Hebrews, whom we call American Jews, and say to them 'you are citizens with equal rights, but the national solution for you is elsewhere,'" Rice was quoted by National Public Radio as saying to students at a New Yorker high school.
Rice: American Hebrews should move once Jewish state established
She later took that back - somewhat:
The American secretary of state has backed off from an earlier stance favoring expulsion of American Jews once a Jewish state is created.
"The national aspirations (of the Jews) should be realized elsewhere, but there is no question of carrying out a transfer or forcing them to leave," said Condolezza Rice
Rice retracts racist remarks
Ring The Bells: Iraq Wins - Shrub Shuffles Off
by Debs is dead
lifted and edited from a comment
If you are wondering why the media coverage of Iraq was not amped up after the election as many expected, why the American invaders hadn't gone back to their murdering and thieving ways now an election no longer depended on quiet, the answer is simple, the status of forces agreement which finally draws a line under America's attempted theft of a sovereign nation details such a resounding defeat for the American empire, that the Bushites 'neglected' to release an English language version of the final draft enacted in the Iraqi parliament last week.
Long term Baghdad correspondent Patrick Cockburn provides the inside running on America's full spectrum defeat, news of which was swamped by the Mumbai attacks last week. One wonders why; since despite America's attempt to shift the focus of it's wanton slaughter from Iraq of the Mid East, to Pakistan, West Asia, there can be little doubt that the eventual outcome of that crime will be America getting it's head handed to it there, also.
The Americans have gained nothing and whilst the Iraqis are hurting from the loss of more than a million citizens slaughtered in this inexcusable breach of national sovereignty, they should have an under-lying sense of pride in the fact that they fought the evil empire and won.
So what is in the Sofa that makes it such a win?
- All American troops will be pulled out of all cities by June 2009 and out of the Green Zone within a few weeks.
- All American troops of any sort have to leave within the next three years. There will be no enduring bases. All military operations must have the prior approval of the Iraqi Government. Immunity has gone and the blackwater mercenaries will be tried within Iraq under Iraqi law like the common criminals they are.
- No operations against other nations can be mounted from within Iraq.
Cockburn goes on to say that the last minute hold ups were the result of a recognition by the Sunni and Kurd minorities that the Shia clique will dominate the political elite and they were holding out for as many concessions as possible realising that a lever such as this won't be available once the power shift has occurred.
He also highlights the role that Muqtada al-Sadr played in this great victory, in that the Sadrists outspoken opposition to any 'compromises' by the weak-kneed American owned factions ensured that the parliament was solid in it's opposition to any last minute surrender (IE bribery or extortion by America). The Iraqi citizens of all sects particularly the ruling shia made it plain that any pol who gave in to any of America's demands would be punished politically and probably personally. Sadr's 'extreme' position created the space for the 'moderates' to gather in unanimous opposition to the ceding of Iraqi sovereignty.
Americans will never hear of this great defeat. It's amazing that such a thing could happen but unsurprising really. I mean to say the fact that Americans are queuing up in droves to see "Frost Nixon the movie" rather than watching the original interviews kinda says it all.
Nixon's persona has been re-crafted, his reputation has been salvaged by Ron Howard's revisionist rewrite of history. I mean the original interviews were bad enough. I'm sure many other remember the original with it's evasions and distortions. Over 80% of the interviews were edited out so as to begin the distortions to rehabilitate Nixon. Howard's film is the end of that process. A necessary revamp to re-affirm the fantasy that the American prez is an omniscient, omnipotent being - incapable of error let alone corruption, dishonesty or a callous disregard for his 'subjects'.
In the same way no one will discuss Iraq for the next 5 years - then a revisionist mockumentary/docudrama distortion masquerading as reality will be pushed down the throats of the American population. naturally there will be some disagreement by those wanting to set the record straight.
The makers and the shrub-ites will stonewall making the most absurd denials of facts we know to be correct. They won't care because their assertions that WMD were found in Iraq and that Saddam organised 9/11 will resurface a few years later - all spelled out in banner headlines - news stories right before the empire tries this crap on again.
But we must salute Mesopotamian strength and resolute determination and total sacrifice. (American sacrifice is summed up by the FA-18 pilot who ejected over a suburb leaving his plane to crash into houses killing at least three. When I lived in Darwin where there is a large military airfield bang smack in the centre of town I can remember at least two instances where Oz pilots refused to eject preferring to stay with their fighter so as to ensure it crashed out at see away from other humans. The pilots died - no time to eject if you want to save civilians).
The reality which has evaded many empire's elites is simple. We the people only ever fight hard when it is our own nation in danger. A few gung ho fools whose bicep measurement beats their IQ is all they ever muster keen for these nasty crimes.
From Cooperation To World Threat - Iran And Eritrea Rumors
Two weeks ago an Eritrean opposition site published a rumor about cooperation between Iran and Eritrea to revamp an old refinery in Assab, Eritrea.
That rumor developed into a story on U.S. blogs, news sites and Israeli TV about imminent deployment of Iranian ballistic missiles, troops, submarines, helicopters and UAVs to the city of Assab to control the Red Sea.
Iranian ships and submarines have deployed an undisclosed number of Iranian troops and weapons at the Eritrean port town of Assab at the Horn of Africa in the Arabian Sea just below the Strait of Hormuz.
As such, the port town is in a unique postion its location allows it to control and monitor one of the world's most strategic shipping routes.
Now right-wing sites like Blackfive are concerned:
This is exceptionally bad news as a quick look at the map will show.
One might see this as bad news if it would be true. But the report is totally false.
Below I document how this story developed, grew and proliferated throughout the Internets within a quite short time-frame.
Eritrea is a dirt poor country with some 5.5 million inhabitants at the Red Sea. It is a dictatorship and has border conflicts with Ethiopia and Djibouti. It has a somewhat strategic position at the Bab-el-Mandeb street which connects the Gulf of Aden and the Red Sea.
The harbor city of Assab has some 100,000 inhabitants. In the early 1960s the Soviets built a small refinery there with a capacity (pdf) of 18,000 barrels per day. The refinery was shut down in 1997 for lack of spare parts and money.
Eritrea, a former Italian colony, had good relations with the U.S.until the Bush administration through Assistant Secretary of State for African Affairs Jendayi Frazer took sides with Ethiopia in a UN moderated border resolution and even supported Ethiopia in buying arms from North Korea. Israel uses a former Soviet navy base on the Eritrean Dahlak Archipelago to refuel its sub-marines that patrol in the Arabian sea.
In May the Eritrean president visited Tehran and in the following months several Memoranda of Understanding were signed between the two countries on cultural and economic cooperation. Iran is now also mediating between Djibouti and Eritrea.
Now back to the scare story.
The very first source and the one and only all following reports have been build upon is the Eritrean opposition site selfi-democracy.com of the Eritrean Democratic Party. On November 25 it published this (pdf):
Top Secret Deal?
IRAN TO CONTROL THE ERITREAN PORT OF ASSAB: (source : from inside Eritrea) According to news received from Eritrea, Iran is to revamp the Russian built Assab refinery. Iran will refine its crude in Assab to cover the shortages it faces at home and of course Eritrea benfits from not having to import expensive refined products.
But, the motive behind this deal is believed to be more political and strategic than economic. Iran, due to its conflict with the West and in particular with the US, is under embargo which may be further extended and tightened if it continues with its nuclear programs. Thus, Iran may be trying to find some renegade states to help her break the embargo and who could be a better partner for this than Eritrea’s President Isayas.
Isayas’ personal blind hate of the US administration and everything it stands for is boundless and he will spare no effort to upset the Americans. Strategically Iran and Isayas, with the cooperation of some rebel Somali Islamist groups, are also colliding to control the Bab El Mandeb Straights in case of any escalation of conflict with the United States and Israel. According to our source some high ranking members of the Eritrean regime are saying that the President is playing with fire and that the consequences for Eritrea could be grave.
There is a lot of innuendo in there but not one word about Iranian soldiers, ships or submarines. Iran refines some 2.1 million barrels of oil per day in its own country and is expanding that capacity to 3+ million bl/day. To revamp a small and old 18,000 bl/d refinery in Eritrea would do nothing to help Iran "to cover the shortages it faces at home". There is also no other public record of any cooperation between Iran and Eritrea with regards to the defunct refinery. Iran is usually very eager to publish such cooperation. All that's left is rumor and speculation.
Another Eritrean site, asena-online, picked up the selfi-democracy story on November 26. Its item is in a language I can not read (Tigrinya) but it is less than 80 words long and at the end links back to the selfi-democracy item. I therefore doubt that it adds any additional information.
On November 29 the Sudan Tribune takes the original report and adds some rather fantastic points:
November 29, 2008 (ADDIS ABABA) — An Eritrean opposition website, selfi-democracy.com, said that Iran’s submarines have deployed an undisclosed number of armed Iranian troops and weapons in the Eritrean port town of Assab.
The unconfirmed report claims that Iran recently sent soldiers and also a number of long-range missiles after Iran signed an accord with Eritrea to revamp the Russian-built Assab Oil refinery.
The Eritrean opposition website now reports that Iran will refine its crude oil in Assab to cover shortages it faces at home, which will benefit Eritrea by not having to import expensive refined products.
But the report argued, “The motivation behind this deal is believed to be more political and more strategic than economic.”
The last cited sentence and some others in the full piece are word by word from the selfi-democracy report quoted above. It is the only source given in that article. But the original selfi-democracy report does not include a word about anything military like submarines.The Sudan Tribune writer simply invented those "Iranian submarines" but attributed them to selfi-democracy.
The last sentence of the Sudan Tribune piece adds something unrelated:
Meanwhile, four NATO unmanned surveillance planes were reported to have flown for about half an hour earlier this week in Eritrea’s Red Sea region.
The Sudan Tribune piece was composed by one Tesfa-alem Tekle. Tesfa-alem
is an Ethiopian journalist based in Mekelle, northern Ethiopia. He holds a degree in English from Addis Ababa University and an advanced diploma in Journalism. He has worked as public relation officer for various international organizations in Ethiopia. He has been writing for both local and international media since 2001. He is the currently the Reuters correspondent for northern Ethiopiais
An Ethiopian, arch enemies of Eritreans, picked an Eritrean opposition report about a refinery repair in Abbad, added lots of Iranian weapon nonsense and published that in the Sudan Tribune.
29 November 2008-- An Eritrean website in Tigrigna, asena-online.com, reported on Wednesday that Iran has stationed its troops in Eritrea.
Citing sources from inside Eritrea, same website said that using submarine ships heavily armed units of the Iranian army have landed in the Eritrean sea port of Assab. The Iranian troops are slated to be stationed in the city of Assab reportedly under the pretext of protecting the Russian-built Eritrean Assab Oil Refinary. Earlier, on Tuesday, yet another Eritrean website, selfi-democracy.com, had, quoting also sources from inside Eritrea, reported that Eritrea tyrant Afewerki had granted Iran complete and exclusive control over the Eritrean Oil Refinary with the mandate to revamp, manage, and exercise complete authority over production and maintenance of the facility.
Asena-online further reported that the Iranian troops were loaded with a good number of ballistic and long-range missiles.
Moreover, this same website also submitted that according to reports coming from inside Eritrea, Iran flew surveillance missions over the skies of the Eritrea part of the Redsea using 2 UAV(NATO) accompanied by 4 helicopters for 30 minutes around 4 pm on Tuesday.
This is the first piece that mentions missiles.The last sentence seems to be a garbled and extended version of the last sentence in the Sudan Tribune piece while adding Iranian UAVs from thin air. It is also very doubtful that Iranian submarines would be able to operate at that distance from their home and be able to carry land troops.
The Israeli 'selective translation' propaganda service MEMRI picked up on December 1:
Eritrean opposition websites reported that Eritrea has granted Iran total control of the Red Sea port of Assab, which overlooks the Bab Al-Mandeb straits.
According to the report, Iranian submarines deployed troops, weapons, and long range missiles in the port of Assab, under the pretext of defending the local oil refinery.
MEMRI names selfi-democracy, the Sudan Tribune and Eritrea Daily as its sources.
Eritrean opposition claims Eritrea has provided the Assab base on the Red Sea to Iranian submarines
Iranian ships and submarines have deployed an undisclosed number of Iranian troops and weapons at the Eritrean port town of Assab, according to opposition groups, foreign diplomats, and NGOs in the area.
Using protection of the Eritrean refinery as a pretext, Iran has set up its military operation there, and has been patrolling with unmanned surveillance drones.
President Isayas has granted Iran complete and exclusive control over the Eritrean Oil Refinary with the mandate to revamp, manage, and exercise complete authority over production and maintenance of the facility. Iran will refine its crude oil in Assab to cover shortages it faces at home, which will benefit Eritrea by not having to import expensive refined products.
The Eritrean Democratic Party, an opposition party, pointed to trepidation within the Eritrean regime, indicating that some high-ranking members are saying that the president is playing with fire with Iran and that the consequences for Eritrea could be grave.
The piece is written by one Joseph Grieboski who is the Cutting Edge Foreign Editor, President of the Institute on Religion and Public Policy, which he founded himself and which was "twice nominated for the Nobel Peace Prize" (by whom?), and Secretary General, Interparliamentary Conference on Human Rights and Religious Freedom. In 2007 that conference got a $250,000 earmark through the State Department. One recent conference was in Grieboski's hometown Scranton:
Scranton will enter into a sister-city relationship between Scranton and Mekele, Ethiopia, a city of 169,000. Doherty said he first met officials from Ethiopia during the institute’s diplomatic dinner at the Scranton Cultural Center in July.
Grieboski also lobbied Congress against the 2007 "Ethiopia Democracy and Accountability Act". He is obviously pro-Ethiopia and anti-Eritrea.
During the last few days a lot of blogs and news sites reproduced and discussed the Cutting Edge report.
An Israeli TV station's report on December 9 also seems to be based on the Cutting Edge piece:
According to local reports Iranian troops and a large number of long range ballistic missiles have also been deployed at a military base at the port and Iranian unmanned drones daily patrol the area.
Closing the circle a day later, the Eritrea Daily, one of the original rumor spreaders and the one which added the Iranian UAVs, repeats the Israeli TV report.
Starting from a rumor over some Iranian-Eritrean cooperation on an old refinery, several interested sites add military aspects, submarines, missiles and UAVs, to build a world-threatening scenario. MEMRI, NRO, an Ethiopian lobbyist and Israeli TV spread the rumors. Bloggers take it from there.
This is a bit like the game of telephone or Chinese Whisper played out on the Internets. But here everyone adds a bit of disinformation until a cooperation rumor builds into threat to the world within just 12 days.
Next: The UN Security Council plans to sanction Eritrea for stationing Iranian strategic missiles.
S.&.P. Companies' Divestment
If anyone who wondered why many U.S. companies fell behind in international competition in recent years these S&P numbers via Floyd Norris tell part of the story (last line added):
Over the last four years, since the buyback boom began, from the fourth quarter of 2004 through the third quarter of 2008, companies in the S.&P. 500 showed:Reported earnings: $2.42 trillion
- Stock buybacks: $1.73 trillion
- Dividends: $0.91 trillion
De-capitalization: $0.22 trillion
Over the last four years the S&P 500 companies did not invest one dime of their earnings into additional or new business or increased productivity. Instead they divested and gave $220 billion of their basic equity back to their shareholders.
This was an extremely shortsighted behavior. Sure, these companies used part of their revenue to replace depreciated capital expenditures (machinery and the like). But if anything was spend for additional research or new opportunities at all, it must have been financed by taking on additional debt. This debt will turn out to be poisonous in the downturn.
Most of this can likely be laid on the idiotic practice of paying short term bonuses to CEOs for rising stock prices. A stock buyback will lead to a rising stock price as it increases demand and lowers supply of that stock. Buybacks were just a simple way for greedy CEOs to increase their personal income at the cost of the long term validity of the business.
Behind 'Fighting Piracy'
The guy who probably knows best about piracy around Somali is Andrew Mwangura. He has been involved in many negotiations of ransom payments for captured ships. His view (h/t b real who does a great job in keeping MoA readers informed of the issue):
"Piracy can't be solved by a military solution," Andrew Mwangura, head of the Kenyan branch of the East African Seafarers' Association, told journalists in Nairobi. "We need to go back to the origin. Don't call them criminals ... let's have dialogue, sit down and talk."
"If you are not going to invite the local community, it is not going to work," he said. "We need to come up with a regional piracy information centre, security in Somalia and a regional action plan on illegal fishing and toxic dumping."
Fishermen began targeting ships in the early 90s, saying they were defending their coastline from illegal fishing and boats dumping toxic waste in Somali waters.
The Somali informal coast guard, aka the pirates, seem to be somewhat successful with regards to illegal fishing. David Axe is currently in Mombasa, Kenya. He writes:
Mombasa itself is safe from pirates: the distance is too great, and the Kenyan navy is out in force. But Mombasa-based shippers, mariners, shipping agents and myriad others who depend on regional sea trade have suffered greatly from the steady rise in Somali piracy in the last decade. Habib Hakem operates a deep-sea fishing company whose boats can range as far as the Somali border. But piracy has put a dent in his trade. Last year he had 60 clients. This year, just 15. He pins the decline on fishermen’s fear of kidnapping.
Habib Hakem may "suffer greatly" now that his illegal fishing business is down. But this is a great success for Somalia's informal coast guard. Others have helped. The Indian navy sunk a Thai trawler which was illegally fishing in Somali waters. They thought it was a pirate mother-ship. It was not, but from the Somali point of view, the Indians hit the right target and created a good deterrence effect .
Fighting the pirates does not make sense from an economic standpoint. Of some 20,000 ships going through the area only some 100 have been attacked this year and only some 40 were actually captured. Nobody was killed. Ransom was payed and the ships went back to the oceans.
Galrahn calculates the cost and benefit for the European Union fleet just sent to 'fight the pirates':
[T]he starting point to estimate the cost of the whole operation should be around $129 million. Other costs associated with a heightened operational tempo could increase the cost by another $20 million or more.
As of the first part of October this year, pirates have collected an estimated $30 million in ransoms in 2008.
It is cheaper to pay the toll the pirates demand, than to fight them. But the EU does not care about the cost or about piracy at all. It is happy it finally managed to launch some military action, even if senseless, without a U.S. lead. The whole idea behind this action is to prepare its population for a more military interventionist and imperial EU attitude.
The U.S. would not have that for long. It now presses for a U.N. resolution to intervene on Somali grounds:
It proposes that for a year, nations "may take all necessary measures ashore in Somalia, including in its airspace, to interdict those who are using Somali territory to plan, facilitate or undertake acts of piracy and armed robbery at sea and to otherwise prevent those activities."
That is carte blache for anyone to kill Somalis. The AP is not shy about the U.S. motive:
Without committing more U.S. Navy ships, the Bush administration wants to tap into what officials see as a growing enthusiasm in Europe and elsewhere for more effective coordinated action against the Somali pirates.
Read: The U.S. wants to use the EU as a proxy force to press its own imperial designs on the Horn of Africa.
The pirates are a nuisance, not a danger to world commerce. They have a grievance that pushes them into the business. If one intends to solve the problem helping Somalis to keep foreign illegal fishing and toxic waste dumping away from their coast would be the best approach.
But no one but the pirates themselves seems to have that intention at all. World powers simply use the issue to press their various designs to snap up African resources.
Fabricating A 'First Obama Scandal'
Writes the NYT on its front page:
The Obama team is dealing with its first scandal in an era when media scrutiny and partisan attacks can escalate any flap into a serious political problem.
"Its first scandal," according to the NYT, is that the Obama campaign and transition had hardly any contact with the corrupt governor of Illinois with regards to his selection of a new Senator.
With a new administration to build and a financial crisis worsening by the day, Mr. Obama and his advisers had bigger issues on their plate. Moreover, they wanted to keep their distance from Mr. Blagojevich, who was already known to be under federal investigation into possible corruption.
So the Obama team was not involved at all. But then the NYT goes on to quote two side figures from the Clinton aera:
“This is a huge distraction at the worst possible moment,” said Lanny J. Davis, a former White House special counsel who did damage control for President Bill Clinton.
And it can grow if not handled properly. “It’s like the whirlwind,” said Chris Lehane, another veteran of the Clinton teams. “You get pulled into the vortex more and more.”
The involvement of two Clinton figures pushing the story is ominous.
Yesterday the NYT had similar piece. It first described how Obama pushed, successfully, for an ethics law in Illinois which eventually was helpful to indict Governor Blagojevich. Then it went on:
Beyond the irony of its outcome, Mr. Obama’s unusual decision to inject himself into a statewide issue during the height of his presidential campaign was a reminder that despite his historic ascendancy to the White House, he has never quite escaped the murky and insular world of Illinois politics.
Josh Marshall's summerized that NYT take:
By lobbying for ethics reform, Obama showed he could not escape the murky world of corrupt Chicago pols.
This is a transparent campaign to fabricate a scandal around Obama where none is.It seems to me the NYT is trying to instigate a new Whitewater witch hunt.
That is certainly a good distraction from the currently ongoing gang robbery of taxpayer money camouflaged as bailouts.
In next weekend's NYT edition: "Obama's non-involvement in child porn distribution ruins his education policy agenda."
Protests in Greece
What started as student protests now seems to develop into a general revolution against the unloved conservative government. The unions joined today with a general strike. A $28 billion bailout for banks who do not seem to need it versus half a billion for anti-poverty measures when 20% of the population lives below the poverty line did not go down well with the people.
Talos at EuroTrib summarizes the real social reasons behind the protests:
ubiquitous police brutality against youth, immigrants, the weak - brutality that routinely goes unpunished as it is swept under the rug; deep systemic corruption and perception of corruption; increasing income gaps; entry level monthly wages in specialized jobs < 700 euro that don't visibly lead to something better; precarity for the under 35s; a life suppressing yet utterly ineffective educational system; the death of hope; the break-up of existing social patterns; the decay of public services; a justice system plagued with scandal itself; massive bailouts for the bankers - the same bankers who simply refuse to enact laws that they don't like (no, really). And on top of that the Crisis promising even more immiseration and discomfort... Now that I look at the list, the question really is: why didn't this explosion happen sooner?
There are rumors of a possible declaration of emergency rule. If that comes, this will explode into something bigger than street riots.
There some blogging from Greece at OccupiedLondon (h/t drunkasarule). Please add reliable sources/news in the comments.
An Undeserved Peace Prize
Martti Ahtisaari, a former Finnish president just got a Nobel Peace Prize. But what about this?
Mr. Ahtisaari found himself defending the U.S. invasion, the absence of a nuclear or biological weapons program notwithstanding. "Since I know that about a million people have been killed by the government of Iraq, I do not need much those weapons of mass destruction," he said.
May be Saddam really killed so many people. If he did, it was over some 30 years. The 'western' sanctions nearly killed as many in a much shorter timeframe. The U.S. war on Iraq, supported by Martti Ahtisaari, killed as many in just five years.
As far as I know Martti Ahtisaari never retracted the above. He does not deserve a peace prize.
Open thread ... news & views ...
Another NYT Kremlin Slanders Story
The New York Times runs another of its Putin/Russia slander stories.
A Russian potash mining company, Uralkali, owned by oligarch Dmitri E. Rybolovlev, had some trouble two years ago when its main mine collapsed and opened up a big sinkhole. The damage on the surface is severe and it will cost hundreds of millions to reroute major train tracks and to resettle people. A first investigation found that the company was not to blame. But the government recently reopened the investigation.
The NYT describes this as a raid attempt by the Putin government to take over the company. It rumors of stock manipulation and attempts to crash the companies shares. It leaves out the information that would allow the reader to put this into the real context. Most importantly it leaves out recent news that refutes its whole story.
In late October, one of Vladimir V. Putin’s top lieutenants abruptly summoned a billionaire mining oligarch to a private meeting. The official, Igor I. Sechin, had taken a sudden interest in a two-year-old accident at the oligarch’s highly lucrative mining operations here in Russia’s industrial heartland.
Mr. Sechin, who is a leader of a shadowy Kremlin faction tied to the state security services, said he was ordering a new inquiry into the mishap, according to minutes of the meeting. With a deputy interior minister who investigates financial crime at his side, Mr. Sechin threatened crippling fines against the company, Uralkali.
It seems to me the meeting was not private, but quite official. The mine owner received heads up that the investigation into the accident would be re-opened. The company disclosed as much on November 6.
Mr. Sechin, who the NYT reader might by now see as a shadowy KGB agent who 'abruptly summons' firendly billionaires is a Deputy Prime Minister responsible for:
- development and implementation of state policy in the field of industry development and energy
- state policy regarding nature management and environmental protection
- implementation of ecological, technological and nuclear supervision
That seems to me to be the legitimate position in Putin's government to look into that huge mining accident investigation. But reading the NYT piece, you will never learn that Mr. Sechin is indeed the top government guy for these issues, including mining, and that decisions about the investigation is certainly within his fields of responsibility. Instead you learn of him as a 'leader of a shadowy Kremlin faction tied to the state security services'.
[Mr. Rybolovlev] further sought to fend off the inquiry by saying he would pay for some of the damage to infrastructure from the accident, a mine collapse that injured no one but left a gaping sinkhole.
His offer was rebuffed, and it seemed clear why: the Kremlin was maneuvering to seize Uralkali outright.
The offer was indeed rebuffed. A commission is still assessing the total damage.Why should the state settle when the damage amount is yet unknown?
From there on the NYT writer produces a lot of innuendos, but no fact, that would let one come to the conclusion he presents, that "the Kremlin was maneuvering to seize Uralkali outright."
Here is a typical construct he uses:
Mr. Sechin’s role in the Uralkali inquiry immediately caused analysts and investors to presume that the company was in peril. Uralkali’s stock, once highly prized by fund managers, has plunged more than 60 percent since the inquiry began, far more than the broader Russian stock market.
Could it be possible that not Mr. Sechin's role was what caused a sell off in Uralkali shares, but the simple fact that investors learned from the company disclosure that it might have to pay for several hundred millions of damages its mine caused?
Did the stock really behave much different than the general stock market?
Continues the Times:
Within the context of the Times story, the reader will assume that some Kremlin miscreant shorted the stock. But if Mr. Rybolovlev learned about the new investigation during his meeting with Mr. Sechin, might he not himself have shorted his companies stock?
Mr. Rybolovlev is well know to take advantage of sudden events. When that sinkhole (pictures) at his major mine widened last year, it broke the rail-lines which connected a competitors mine nearby to the world markets. With the competition disabled, Mr. Rybolovlev immediately stopped new sales by his own companies to further push up market prices for his product.
But now the biggest bummer by the NYT.
It published its story on Sunday with the dateline December 7. The whole story construct hangs on the premise that the Kremlin wants to take over Uralkali.
But on December 4 Reuters reported: Russian minister doesn’t blame Uralkali for accident
A Russian minister has said that he believes that Uralkali should not be blamed for a mining accident in 2006, and shares in the firm have soared by 20% in London in response.
That little fact did not make it into the Times story that was published three days later.
It would not have fit the slander the NYT wanted to apply.
Pakistan Did Something - And Now?
According to AP Pakistan nabbed a few people thought by some to be related to the attacks in Mumbai:
Security forces overran a militant camp on the outskirts of Pakistani Kashmir's main city and seized an alleged mastermind of the attacks that shook India's financial capital last month, two officials said Monday.
Backed by a helicopter, the troops grabbed Zaki-ur-Rehman Lakhvi among at least 12 people taken Sunday in the raid on the riverbank camp run by the banned group Laskhar-e-Taiba in Pakistani Kashmir, the officials said.
AFP reports this a bit different:
The 15 arrested in Pakistan-controlled Kashmir were from an Islamic charity closely linked to the Lashkar-e-Taiba group, which India accuses of being behind the 60-hour siege, the intelligence official said.
"Security forces raided a relief camp set up by Jamaat-ud-Dawa," he said.
Writing for Associated Press (May 30, 1999) from Muzafarrabad Mr. Amir Mirza reported that "... in the mountains that divide Kashmir between India and Pakistan, militants are training at dozens of camps on Pakistani territory." He, along with other journalists, interviewed Zaki-ur Rehman Lakhvi, chief of Lashkar-e-Tayyaba, one of the most militant fighting groups. In this interview Mr. Lakhvi claimed that "there is no shortage of recruits."
The man is obviously not unknown. But is he guilty in this case, or just a convinient target?
There were rumors on Saturday, later denied, that Sec.State Rice had given an ultimatum to the Pakistani government do something within 48 hours. Now Pakistan has done something. Whether the people nabbed now are really related to the Mumbai attack is an open question.
And what will be the next step?
It is doubtful that the Pakistani government can and will simply send off the captured folks to India. There are legal reasons against this as no extradition treaty exists between the countries. The internal political situation will also not allow it, as Zaki-ur Rehman is to many Pakistani not a terrorist, but a hero who fought for the freedom of Muslims in Kashmir.
Pakistan could put the nabbed people on trial. But it may have no evidence against them except what Indian 'sources' leaked to Indian media. An then what?
Some Indian TV channel is speculating about military action against Pakistan.
B. Raman, hawk and former chief of India's foreign intelligence
service Research and Analysis Wing, says that is the wrong stuff to do.
Instead he is urging India to copy the U.S. and to not care about
Why would India need to show evidence that Pakistan was behind the attack, he asks:
What evidence did they have before Bill Clinton ordered the Cruise missile attacks on jihadi training camps in Afghan territory in August,1998?
What evidence did they have against Al Qaeda and the Taliban before they bombed Afghanistan from October 7,2001?
What evidence did they have against the Saddam Hussain Government before they invaded and occupied Iraq in 2003?
In every case affecting American nationals and interests, they bombed and then collected evidence. They did not wait till they had collected all the evidence possible before they bombed.
Raman wants the Indian government to reactivate the operational arm of its foreign intelligence service and to get active within Pakistan. Follow the U.S.: Just spread terror in the land of the alleged and perceived enemy.
The objective of the action should be to force Pakistan to act effectively against the LET and its terrorist infrastructure. It should also be to mount a no-holds barred covert operation against the LET through our own resources and methods.
A divided Pakistan, a bleeding Pakistan, a Pakistan ever on the verge of collapse without actually collapsing----that should be our objective till it stops using terrorism against India.
A divided and bleeding Pakistan is of course what Pakistan is already today. Creating more strife in Pakistan would only create more terrorism spreading from Pakistan into India.
Raman knows this:
We should be realistic enough to anticipate that Pakistan will step up terrorism in Indian territory if we adopt such a policy. This should not deter us from embarking on this policy. The policy of active defence against Pakistan should be accompanied by time-bound action to strengthen our counter-terrorism capability at home.
So terrorism from Pakistan in India should not deter it from raising terrorism in Pakistan. Why then does Raman believe that such action by India can deterre Pakistan?
There is some very faulty and dangerous logic behind such thoughts.
That may not prevent their implentation.
Good Signs In The Downturn
These are good signs:
- Laid-Off Workers Occupy Chicago Factory
- Illegal Activism: Moving Homeless People Into Foreclosed Houses in Miami
I hope and expect to see more like this. Such activism is not only morally right, it is needed to change the direction of a capitalist system run wild back to a more social(ist) one.
Obama's stimulus plan includes some good ideas, mostly domestic investment in infrastructure and education.
But more will be needed.
Taxes for rich people need need to go up dramatically. Minimum wages and social spending have to go up too to create more basic demand. (Marc Thoma has a good overview over the various theories behind this.) Demand based on credit has to be replaced with demand based on income.
To reach these steps a movement will have to grow that pressures Washington to take such steps. Such pressure can only come from the streets. As FDR told a reformer group of his own party:
I agree with you, I want to do it, now make me do it.
Unless there is pressure on Congress and Obama, little will be done to change the dynamics that ruled the economic-political fields over the last 30 years. It is good to see the above stepsand we should support them. Even if they are yet small ones, they build the pressure that pushes the politicians into the right direction.
The Road War Moves to Pakistan
Suspected militants attacked a Pakistan transport terminal used to supply NATO and U.S. troops in Afghanistan, killing a guard and burning 106 vehicles on Sunday.
About 30 assailants armed with guns and rockets attacked the Portward Logistic Terminal near the city of Peshawar before dawn Sunday, police official Kashif Alam said.
It seems that the winter campaign of the resistance in Pashtunistan, the area on both sides of the Afghan-Pakistan boarder, will be against U.S./NATO supply convoys. The road war within Afghanistan has been going on for quite a while. The road war now moves into Pakistan.
(Map base via National Geographic)
At least 75% of all NATO/U.S. supply in Afghanistan comes through the Pakistani port of Karachi (1). Most of it goes up to Peshawar (2) and then through the Khyber pass to Kabul (3). A second route is from Karachi (1) through Quetta (5) to Kandahar (4). A part of the Afghan ring road connects Kabul (3) and Kandahar (4).It is constantly under attack.
Karachi is multi-ethnic and a week ago there were deadly gun fights between Pashtun and Punjabi people there. It is not at all a secure place for unloading supplies. Peshawar is the administrative centre for the Federally Administered Tribal Areas of Pakistan. Three days ago a bomb exploded there killing over 30 people. Quetta is said to be the place where Taliban leader Mullah Omar hides. We can conclude that these supply routes are endangered at nearly any point.
The Soviet learned some lessons about this. It was the road war that eventually killed their attempts in Afghanistan.
U.S./NATO supplies are even more endangered because:
- They need much more general supply per man than the Soviets did;
- They do not have a boarder to Afghanistan but have to route the supply through Pakistan;
- Alternative routes are too long and odious.
The additional U.S. troops that will help to occupy Afghanistan next year will, as I estimated, need some 50 additional truck deliveries per day for fuel alone.
With the continued U.S. hostilities against the Pakistani and Pashtun people, one wonders how those are supposed to get through.
Some Oddities in Road Construction in Nuristan
According to a U.S. Government Accountability Office (GAO) report to Congress the Defense Department awarded a contract for road construction in Afghanistan's Nuristan province back in 2004:
Table 1: USAID and Defense's Afghan Road Reconstruction Awards:
Project name--instrument used: CERP-funded road projects--Contracts;
Implementer: USACE or local contractors;
Project description: Provincial and rural roads, including Nangarej- Mandol and Gulum Khan.
Source: GAO analysis of USAID and Defense data.
(CERP is a Commander's Emergency Response Program under which a local U.S. commander spends money on urgent issues. USACE is the US Army Corps of Engineers.)
Still two years later, little seemed to have happened.
In 2006 a 'partnership agreement' was reached over the road project between Nangarej and Mandol. The army reported:
KABUL, Afghanistan - A partnership agreement was reached June 10 on the Nuristan Commander's Emergency Response Program's road projects at the district's headquarters here.
Attending the signing ceremony were Nuristan Governor Tamim Nuristani, Dr. Sayed Noorullah Jalili, chief executive of AMERIFA Construction Company and Col. Christopher J. Toomey, commander of the U. S. Army Corps of Engineers Afghanistan Engineer District/director of engineering for the Combined Forces Command - Afghanistan.
According to the partnership document, the three leaders agreed to "promote a climate of mutual respect, honest and open communication." The document also noted that the Coalition, contractor and government would be committed to proactive problem resolution in order to execute safe and timely construction in support of the infrastructure development of Nuristan on the Nangarej to Mandol and the Chapa Dara to Titan Dara CERP Road Projects.
Why did it take two years from a 'emergency fund' contract award to some actual agreement over building the road? We do not know. Maybe the the 'partnership document' was needed to clear away some stumbling blocks for the prospective road between Nangarej and Mandol.
According to FedSpending.org Amerifa, the Afghan company mentioned above, got contracts for road-building for $17 million in 2006 and $6.8 million in 2007. Wages there are $3-$5 per day, so that's a lot of dough. In November 2007, in an effort to "promote a climate of mutual respect, honest and open communication," the U.S. bombed a worker-camp of Amerifa in Nuristan. At least 14 were killed.
However, despite all these efforts the road-building that was awarded through an 'emergency response program' in 2004 is now back to its start.
A fresh solicitation for the Nangarej to Mandol road in Nuristan province was posted today on FedBizOpps.gov:
The U.S. Army corps of engineers, Afghanistan Engineer District intends to issue a Request fro Proposal (RFP) to award Firm Fixed Price contract to design and construct approximately 60 km of 6 m wide gravel road with 1.5 m gravel shoulder. The project is from Nangarej (70.33266E 35.05905N) to Mandal (70.101976E 35.165549N) in the Nuristan Province of Afghanistan.
Google Earth clip with those coordinates:
(the gray line is a province boarder, not the road)
So according to GAO a contract was awarded in 2004. In 2006 the road was not yet build but some agreement was found. Today the Army Corps of Engineer asks for a proposal on how to build the very same road (Mandal and Mandol are used interchangeably in various sources so it is very likely the same place).
With that speed of action the road will never be build.
That may well be because that road does not make any sense. Professor David Katz, an anthropologist who worked for the State Department and has been in Nuristan in a reconstruction project team, opines in a private lecture (video - start at 9:00min, helpful map (pdf)) that some of the plans for roads in Nuristan are crazy. These do not run along the natural river lines but try to connect independent areas (with quite different tribes and languages) over very rough mountains. Some of these roads are supposed to go over 15,000 feet high passes that are not accessible at all most of the year and there is "not a penny" to do maintenance on these roads once they are build.
Google Earth shows the coordinates given for Nangarej at 4,000 feet elevation, the coordinates for Mandal at some 10,000 feet. The distance as the crow flies is 25 kilometers. The recent solicitation is for 60 kilometers total road length. With that difference in elevation and the rough terrain, I find it unlikely that the project is doable as imagined.
Nuristanis will assess the speed of progress on such 'emergency' projects on their land. They will know that the crazy high-pass roads will immediately fall apart if they ever get build at all.
Why should they support the foreign people who are responsible for this? Indeed why should they tolerate their presence at all?
I was wrong in my prediction made on November 12:
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.
That was clearly wrong, especially in the second sentence, and needs to be corrected. I underestimated Congress' spinelessness and its willingness to hand over taxpayer money to Wall Street.
In the deal now in the making the taxpayer funds for Detroit will be in addition to the TARP funds. Wall Street will get the full $700 billion TARP money without the reduction I anticipated:
Seeking to end a weeks-long stalemate between the Bush administration and House Speaker Nancy Pelosi, senior Congressional aides said that the money would most likely come from $25 billion in federally subsidized loans intended for developing fuel-efficient cars.
By breaking that impasse, the lawmakers could also clear the way for the Treasury secretary, Henry M. Paulson Jr., to request the remaining $350 billion of the financial industry bailout fund knowing he will not get bogged down in a fight over aiding Detroit.
Democrats are hoping Mr. Paulson will use some of that money to help individual homeowners avoid foreclosure.
Democrats are 'hoping' that Paulson will use 'some' of that money for distressed homeowners?
No way. Paulson will laugh at them while he shovels those billions over to his Wall Street friends.
The Real Danger Of A Big Three Default
In light of the possible bankruptcy of one or more of the big three U.S. automakers, we need to again demand to Declare All Credit Default Swaps Null And Void.
Those $65 trillion reasons for the credit market freeze will never go away without a huge crash that then will have worth consequences than the 1929 stock market crash. The only way to eliminate these reasons is internationally concerted action to declare the legal obligations of all CDS' null and void.
What has this to do with automakers? As the folks at Institutional Risk Advisor wrote:
As Bloomberg News reported in August: "A default by one of the automakers would trigger writedowns and losses in the $1.2 trillion market for collateralized debt obligations that pool derivatives linked to corporate debt… Credit-default swaps on GM and Ford were included in more than 80 percent of CDOs created before they lost their investment-grade debt rankings in 2005, according to data compiled by Standard & Poor's."
Any bank with a large derivatives trading book is likely to be mortally wounded as the CDS markets finally collapse. We don't see problems with interest rate or currency contracts, by the way, only the great CDS Ponzi scheme is at issue - hopefully, if authorities around the world act with purpose on rendering extinct CDS contracts as they exist today. Call it a Christmas present to the entire world.
In another piece they report:
We hear from a very well placed Buy Side investor with extensive business interests in the US and EU that three primary banking institutions in Europe, two French and one German, have such significant CDS exposure and other problems that they cannot even begin to fund the payouts anticipated over the next quarter.
Unlike the approach taken by Paulson and Geithner to bailout AIG and JPM (via the Bear Stearns rescue), however, the investor claims that EU officials are considering a moratorium on CDS payments by the three Euroland banks in question. The banks would be given ten years to write down their CDS and hedge fund exposures and would receive additional infusions of capital by their respective governments. The source claims that French banks have such huge exposure to both hedge funds and CDS, sometimes linked together, that the positions are beyond the ability of the EU governments to bail them out without a cessation of CDS payments.
Even a ten years write down will not help. The numbers are just too big. Still, calls to eliminate CDS and other derivatives by IRS or me are regarded as fringe or lunatic.
But now a really big investor joins the small chorus. Gao Xiqing is president of the China Investment Corporation, which manages $200 billion of the country’s foreign assets. James Fellows recently interviewed him for The Atlantic. Gao Xiqing opinion on derivatives (which includes CDS'):
If you look at every one of these [derivative] products, they make sense. But in aggregate, they are bullshit. They are crap. They serve to cheat people.
I think we should do an overhaul and say, “Let’s get rid of 90 percent of the derivatives.” Of course, that’s going to be very unpopular, because many people will lose jobs.
Gao Xiqing has some additional good advice for the U.S. and I recommend that you read it.
But back to the CDS problems. If Congress fails to bailout those three gargantuan hedge funds with the attached car manufacturing and sales departments we will see an unprecedented rout in the financial markets.
There are at least 13,602 CDS contracts with a total dollar value of $100,6 billion written on GMAC LLC, General Motor's finance arm. There are more than 9,683 contracts on GM itself. A GM bankruptcy would trigger a payout demand of the insurance bought with CDS' against such a GM/GMAC default. It is unlikely that those liabilities could be matched by the original writers of these insurances. A chain reaction of huge defaults would follow.
Senator Dodd touched the issue in yesterdays automaker hearing in Congress:
"The domestic auto companies already comprise more than 10 percent of the high-yield bond market and one of the largest sectors in leverage finance for banks," Dodd said at the first of two days of congressional hearings on whether Congress should return next week to provide automakers immediate aid. "A partial or complete failure of the domestic automobile industry would have ramifications far beyond manufacturing and pensions. It would affect virtually every sector of the economy."
A default by one of the big threes would be directly bad for the real economy. But the consequences in financial markets and the indirect damage in the real economy triggered by that financial turmoil are the really grave threat.
A solution to that would be to eliminate the crazy Ponzi scheme that was build with CDS and related derivatives by simply voiding them. But the economic pain seems not yet big enough to make that happen.
The Pentagon's Irregular Wars
The U.S. will Raise 'Irregular War' Capabilities:
The Pentagon this week approved a major policy directive that elevates the military's mission of "irregular warfare" -- the increasingly prevalent campaigns to battle insurgents and terrorists, often with foreign partners and sometimes clandestinely -- to an equal footing with traditional combat.
Of course the U.S. had such capabilities before. The importance of this move is the institutional change that is happening here. During the Cold War the CIA was tasked with such 'irregular warfare':
The US government utilized the CIA in order to remove a string of unfriendly Third World governments and to support others. The US used the CIA to overthrow governments suspected by Washington of turning pro-Soviet, including Iran's first democratically elected government under Prime Minister Mohammed Mosaddeq in 1953 and Guatemala's democratically elected president Jacobo Arbenz Guzmán in 1954 .
The Soviet intervention was a golden opportunity for the CIA to transform the tribal resistance into a holy war, an Islamic jihad to expel the godless communists from Afghanistan. Over the years the United States and Saudi Arabia expended about $40 billion on the war in Afghanistan. The CIA and its allies recruited, supplied, and trained almost 100,000 radical mujahideen from forty Muslim countries including Pakistan, Saudi Arabia, Iran, Algeria, and Afghanistan itself. Among those who answered the call was Saudi-born millionaire right-winger Osama bin Laden and his cohorts.
But now the Pentagon takes over and creates the instruments to do the same. The new Department of Defense directive 3000.07 (pdf) says:
It is DoD policy to:
c. Conduct IW independently of, or in combination with, traditional warfare.
(1) IW can include a variety of steady-state and surge DoD activities and operations: counterterrorism; unconventional warfare; foreign internal defense; counterinsurgency; and stability operations that, in the context of IW, involve establishing or re-establishing order in a fragile state.
The directive defines unconventional warfare as:
A broad spectrum of military and paramilitary operations, normally of long duration, predominantly conducted through, with, or by indigenous or surrogate forces who are organized, trained, equipped, supported, and directed in varying degrees by an external source. It includes, but is not limited to, guerrilla warfare, subversion, sabotage, intelligence activities, and unconventional assisted recovery.
It is DoD policy to conduct independently guerrilla warfare, subversion, sabotage and intelligence activities to establish or re-establish order in a fragile state.
A fragile state is of course whatever the Pentagon defines as such.
While there is now a institutional shift from the CIA to the Pentagon, the personal line is one of continuity. Pentagon chief Gates is a CIA operative who rose through the ranks to become Director of Central Intelligence.
The principal writer of the new DoD directive is Michael G. Vickers, the Assistant Secretary of Defense for Special Operations and Low Intensity Conflict.
In the mid-1980s, Vicker's became involved with Operation Cyclone, the United States Central Intelligence Agency program to arm Islamic mujahideen during the Soviet war in Afghanistan. He was the head military strategist for the U.S., coordinating an effort that involved ten countries and providing direction to forces made up of over 500,000 Afghan fighters.
The move of such 'irregular warfare' policies away from the CIA and towards the Pentagon is dangerous in my view. The Pentagon has much more money, people and capabilities than the CIA. It also has less oversight.
This new policy, just like the similar CIA policies before, will end in huge scandals when the operations planed and executed under it run wild, as they consistently will, and create the inevitable backslashes.
But until then these new policies of 'irregular warfare' will kill a lot of people.
The Mumbai Attack Evidence
Jane Perlez and Somini Sengupta write for the NY Times:
Mounting evidence of links between the Mumbai terrorist attacks and a Pakistani militant group is posing the stiffest test so far of Pakistan’s new government, raising questions whether it can — or wants to — rein in militancy here.
Hmmm - evidence is defined as:
a: an outward sign : indication b: something that furnishes proof : testimony ; specifically : something legally submitted to a tribunal to ascertain the truth of a matter
So what mounting evidence is there? Perlez and Sengupta list three points:
- A former Defense Department official in Washington, who spoke on condition of anonymity, said that American intelligence analysts suspect that former officers of Pakistan’s powerful spy agency and its army helped train the Mumbai attackers.
Someone who is no longer active in the game has heard that some people active within the game suspect something ...Who is this? Wolfowitz? Rumsfeld? Perle?
- According to the Indian police, the one gunman who survived the terrorist attacks, Muhammad Ajmal Kasab, 21, told his interrogators that he trained during a year and half in at least four camps in Pakistan and at one met with Mohammad Hafeez Saeed, the Lashkar-e-Taiba leader.
According to The Australian India uses 'truth serum' on Mumbai gunman (h/t Al):
The method was widely used by Western intelligence agencies during the Cold War, before it emerged that the drugs used – typically the barbiturate sodium pentothal – may induce hallucinations, delusions and psychotic manifestations.
May we then doubt what the alleged Kasab is alleged to have said?
- And according to a Western official familiar with the investigation in Mumbai, another Lashkar leader, Yusuf Muzammil, whom the surviving gunman named as the plot’s organizer, fielded phone calls in Lahore from the attackers.
'A Western official familiar' with Iraq's WMD program ... Oh sorry, strike that, that was just a mistake. The intelligence we are now told to believe is of course very reliable.
The New York Times again gives itself away to some powers in the U.S., who this time, want to incriminate Pakistan over the attacks in Mumbai.
I for one do not believe this evidence. Yes, the attacks might have originated in Pakistan. But there are other possible sources.
There are lots of interests involved in the current rumoring that want to blame Pakistan for this or that purpose. To jump to conclusions on such thin sourced disinformation is irresponsible.
But it is of course not the first time that the NY Times is pitching a war to its readers. That sells well.
Open threat: If you don't comment, the WMD terrorists will win!
News & views ...
The WMD Terror Report Is Crap
The Congress Commission on the Prevention of WMD Proliferation and Terrorism published a report titled The World At Risk.
Google News has some 770 links to news item referring it.
The scaremongering headlines say WMD strike 'likely' in five years and Nuclear, biological terror attack 'likely': US commission.
Indeed the very first graph of the executive summary reads:
The Commission believes that unless the world community acts decisively and with great urgency, it is more likely than not that a weapon of mass destruction will be used in a terrorist attack somewhere in the world by the end of 2013.
"More likely than not" is a chance bigger than 50%.
But nowhere in the report is there any assessment of likelihood.
The 132 pages include not one paragraph or line which makes a calculation, quantitative or qualitative, that would allow one to come to the conclusion that the executive summary asserts.
The assessment of the commission is that some terrorists would rather try to use biological weapons than nuclear stuff. It also assesses that the capacity to make WMD would require a terrorist group to hire, or win over, specialists in that field.
But there is no assessment at all on how big the chance is that some terrorist would try that or why this would be more likely than not to happen.
Essentially the first line of the report is simply crap that is not supported by anything that follows. It makes for scaremongering headlines as the media, like usual, do not care to really look into these issues.
Decent security experts like Bruce Schneider disagree that the WMD likelihood is big. As he remarks on the Mumbai attacks:
Low-tech is very effective. Movie-plot threats -- terrorists with crop dusters, terrorists with biological agents, terrorists targeting our water supplies -- might be what people worry about, but a bunch of trained (...) men with guns and grenades is all they needed.
If the simple and cheap stuff works well to terrorize, why then would anyone who wants to terrorize a bunch of people put a huge effort into some WMD stuff?
And how then can anyone come to the conclusion that the likelihood of such a WMD terrorist attack is above 50%?
It is simply irresponsible scaremongering to assert such. But obviously, scaremongering sells.
War Over Mumbai?
World War I began over a minor assassination in Sarajevo. A big war in Asia may begin over the recent terror act in Mumbai.
There are several plausible culprits for these acts.
Radicalized Indian Muslims are a possible group. Some Pakistani group could be responsible, with or without unofficial support from some shady secret agency. I speculated about a false flag operation by the Indian right.
Now the Indian government demands that Pakistan hands over some 20 people which are sought in India:
"Now, we have in our demarche asked (for) the arrest and handover of those persons who are settled in Pakistan and who are fugitives of Indian law," External Affairs Minister Pranab Mukherjee said on the sidelines of a function to inaugurate the India-Arab Forum.
Islamabad has been in a denial mode but India says it has hard evidence to show Pakistani link.
New Delhi's outrage was voiced by Prime Minister Manmohan Singh who said India will not tolerate use of territories by its neighbours for launching attacks in this country and that there will be a "cost" to it.
The centrist Indian government is under pressure. The rightwing BJP is threatening to win the ongoing (they take several month) elections over the issue.
The demand for those 20 people, which the Pakistani government is unlikely able to fulfill, is an escalation step. More will follow.
The Indians allege that the captured terrorist is one Ajmal Amir Kamal from Faridkot in Pakistan. But a man of that name is unknown there:
Shown a picture of the alleged militant, Daha said: "That's a smart-looking boy. We don't have that sort around here."
So far we have no public evidence of any Pakistani involvement. Only Indian 'senior intelligence officials' leaking this or that factoid which may be correct or not. That is certainly not the case yet to start a war over, but these things get out of control fast.
The Bush administration is stocking the fire by demanding 'complete, absolute, total transparency and cooperation' from Pakistan and leaking to the NYT about some interdicted phone-calls:
According to senior American government officials, satellite intercepts of telephone calls made during the siege directly linked the attackers in Mumbai to operatives in Pakistan working for Lashkar-e-Taiba, a militant Islamist group accused of carrying out terrorist attacks in Indian-administered Kashmir and elsewhere.
What does 'directly linked' mean? And who called whom?
Even while Obama cautioned against immediate action, some people in India read his words as 'tacit endorsement' of possible Indian bombing in Pakistan.
The neocon Washington Post editors certainly give their tacid endorsement:
India, which has the ability to strike terrorist targets in Pakistan, is rightly demanding an end to the threat -- and it's getting harder and harder for Washington to counsel patience.
Maybe it is getting harder for Washington because the WaPo editors have Robert Kagan rejecting Pakistan's sovereignty on just the same page:
Rather than simply begging the Indians to show restraint, a better option could be to internationalize the response. Have the international community declare that parts of Pakistan have become ungovernable and a menace to international security. Establish an international force to work with the Pakistanis to root out terrorist camps in Kashmir as well as in the tribal areas.
Would such an action violate Pakistan's sovereignty? Yes, but nations should not be able to claim sovereign rights when they cannot control territory from which terrorist attacks are launched.
Then why wasn't Germany bombed when Mohamed Atta came from there?
Such a great idea: Have some international force (from where?) pick a fight with 160 million nationalists in nuclear armed Pakistan. And make no mistake, all Pakistani would fight back.
Local Taliban groups in western Pakistan offered a truce in case the Pakistani army needs to defend against India:
Spokesman of the Tehrik-e-Taliban Swat, Haji Muslim Khan, in a statement, said that in case of Indian aggression against Pakistan all the components of the Tehrik including Tehrik-e-Taliban Swat, will follow the decision of Tehrik-e-Taliban. He said if the ongoing operation against Taliban is stopped they will fight the enemy along with the Pakistan army.
Throughout the weekend and yesterday there was fighting with over 30 dead between ethnic groups (mafia clans?) in Karachi, the Pakistani harbor city through which most of the supply for the 'western' troops in Afghanistan runs. That traffic from Karachi was blocked. Additionally 22 NATO supply trucks were burned in an attack in Peshawar.
What does Kagan believe will happen to the supply of the troops in Afghanistan when some foreigners start all out war in Pakistan?
To increase the temperature on Pakistan is the worst thing that can be done right now.
Unfortunately, lots of people seem to want to do just that.
Thailand - The PAD Overreaches Itself
Two month ago I wrote about the Coup Attempt in Thailand:
A 'People’s Alliance for Democracy' (PAD) is demonstrating against the government that was elected last December and is ruling within a six party coalition with two-third of the seats in parliament.
Leader of PAD is the right-wing media mogul Sondhi Limthongkul who's newspapers, websites and TV stations drive the protests. He has support from largely middle class urbanites including a union for well payed government employees and part of the army establishment.
Sondhi's aim is to destroy Thailand's democracy so that policies can be implemented that help him and his mostly well-off supporters instead of the more poor majority.
A few days ago the PAD's (paid?) supporters with their yellow scarfs occupied the airport in Bangkok and they are preventing all air-traffic.
The tourism industry across the country has been dealt a massive blow with the shutdown of Suvarnabhumi, the country's main commercial gateway to the world, as well as Don Mueang airport, which mainly handles domestic flights.
Hotels, restaurants and other tourism-related business owners in key tourist destinations from Satun to Chiang Rai have reported cancellations.
They believe the shutdown of the airports has not only caused difficulties for tourists but has also undermined tourists' confidence in Thailand.
About 50 per cent of the bookings during the Christmas and New Year festivities, mainly by foreign tourists, have been cancelled.
If the democratic forces play this right, they will be able to chop away the support from the PAD.
Color revolutions from the right are to make money for the right, not to prevent business. By hurting big parts of its support base, PAD has neglected that law.
The Wrong Decline In Credit Availability
Lots of people and small businesses is the U.S. depend on credit cards for short term finance.
That ability is to end says Meredith Whitney, one of the analysts that saw the crisis coming:
The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.
The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.
"In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent."
A possible solution is re-localizing credit. Whitney writes in the Financial Times:
First, re-regionalise lending. Since the early 1990s, key bank products, mortgages and credit card lending were rapidly consolidated nationally. Banking went from “knowing your customer” or local lending, to relying on what have proven to be unreliable FICO credit scores and centralised underwriting. The government should now motivate local lenders (many of which have clean balance sheets) to re-widen their product offering to include credit cards and encourage the mega banks to provide servicing and processing facilities to banks that sold off these capabilities years ago.
The Fed is pours lots of money into the big bank bucket in the hope that the bucket will overflow and liquidity will trickle down to where it needs to be. But the big bucket turns out to be bottomless as the big banks use all that money to repair their balance sheets. The Fed should instead help the smaller banks directly. Together with the treasury it could also guarantee small business loans. Instead of buying bonds backed by credit card debt, it could guarantee revolving consumer debt directly.
Why push the money through the fictional economy of the big bank system when it is clearly broken. Instead route the money around to keep the real economy going. There are still local banks that could implement programs that go directly to small businesses and consumers.
One might say people should depend less on credit. That is a fine goal and I agree with it.
But there is a difference between getting there in one big slump or through a gradual decline in credit availability. The big slump will inevitably overshoot and the economy will reach a too low credit level. This will hurt people and businesses who are creditworthy and will unnecessarily lead to a further decline in the real economy.
"If the only tool you have is a hammer ..."
"... you will see every problem as a nail."
The foreign policy persons Obama selected for his cabinet are hawks.
Clinton as Sec State, Gates at Defense, a General as national security advisor and an Admiral as director of national intelligence. (Is there any other democracy that puts so many (ex-)military people into political positions?).
Susan S. Rice at the U.N., the worst choice possible after John R. Bolton. She will argue to bomb this or that country whenever something complicate might happen there. Africom will get a lot of stuff to do.
Obama promised to increase the U.S. troop strength by some 90,000. 20,000 active military will be dedicated to homeland security within the U.S. The hammer will get bigger and the urge to use it even stronger.
What country will he bomb first? We already know of Afghanistan and Pakistan. But where else does he want to kill? Somalia? Sudan? Kenia?
As for Change - why not use some nukes?