Moon of Alabama Brecht quote
March 31, 2009

April Fools

Some April Fools will meet tomorrow in London. But sadly the G20 meeting is likely to be a bad joke yielding no result.

But first via totoro in comments this:

Factory output is collapsing at the fastest pace ever. Here is the global roundup. The annualised figures for February are as follows: Taiwan - 43 percent, Ukraine - 34 percent, Japan - 30 percent, Singapore - 29 percent, Hungary - 23 percent, Sweden - 20 percent, Korea - 19 percent, Turkey - 18 percent, Russia - 16 percent, Spain - 15 percent, Poland - 15 percent, Brazil - 15 percent, Italy - 14 percent, China - 12 percent, Germany - 12 percent, France - 11 percent, US - 10 percent and Britain - 9 percent. This is a catastrophe.

Yes. This is a catastrophic failure of world markets. But what are the G20 going to do about it? Likely nothing.

At least three groups of countries have very different ideas of what should be the priorities.

The U.S., UK and Japan want a big global stimulus financed by more debt. The continental big-powers France and Germany want global regulation of all financial markets. China and Russia want a new global reserve currency based on a mix of currencies and gold and in the form of IMF special drawing rights.

I am unsure about other demands. What are Brazil and Argentine asking for? What are India's and South Korea's and Indonesia's plans? In case you know please let us all learn of it in the comments.

The likely results as far as I can tell:

  • The IMF will get more money so it can support more countries in dire need.
  • There will be some statement to keep world trade open and against protectionism but all involved will continue to implement some protectionist measures.
  • There will be some symbolic steps to more regulation, but the real steps there will be taken individually.

In summary the G20 will do nothing important or needed. There is disunity on the diagnostic of how we got here, on the state into which we want to get and on the methods of how to achieve a desirable new equilibrium.

It is sad but a probably unavoidable bad joke. Then maybe the real bad joke was globalization and wild running free-market believe. If the world learns from this, we may be better off in future days. My hope for that is not great. There are still to many fools around.

Posted by b on March 31, 2009 at 02:30 PM | Permalink | Comments (19)

Links March 31 09

Please add your remarks and links of the day in the comments.

Posted by b on March 31, 2009 at 02:07 AM | Permalink | Comments (26)

March 30, 2009

Macgregor: Purpose, Method, End-state

Douglas Macgregor is a now retired Colonel of the U.S. Army and one of its few strategic thinkers. (The currently faved COIN folks are mere tactical thinkers.)

Mcgregor just published a provocative piece in the Armed Force Journal arguing against the standard U.S. policy mindset of interventionist wars. Leaving out the ample historic references the gist is this (emph. added):

Despite the seriousness of the present economic crisis, the greatest danger to the future security of the U.S. is Washington’s inclination to impose political solutions with the use of American military power in many parts of the world where Washington’s solutions are unneeded and unsustainable.

After looking at the demise of the British empire after the first world war it did not need to join he concludes:

The lesson is a straightforward one: Will we continue to pursue global hegemony with the use of military power to control and shape development inside other societies? Or will we use our military power to maintain our market-oriented English-speaking republic, a republic that upholds the rule of law, respects the cultures and traditions of people different from ourselves, and trades freely with all nations, but protects its sovereignty, its commerce, its vital strategic interests and its citizens?

Those are either-or questions. The U.S. can not have both. The problem is a too mighty military under direction of too shortsighted politicians:

Far too often, national decision-making has been shaped primarily by the military capability to act, not by a rigorous application of the purpose/method/end-state strategic framework.

Decision-making of this kind explains why Operation Iraqi Freedom never had a coherent strategic design.

Macgregor argues for general conflict avoidance as the best mindset and strategy:

As a declaratory goal of U.S. military strategy, conflict avoidance is not merely a restatement of deterrence or a new affirmation of collective security. It is a policy stance that stems from a decent regard for the interests of others, regardless of how strange and obtuse these interests may seem to Americans. It is an explicit recognition by Washington that no one in Asia, Africa, the Middle East or Latin America wants American troops to police and govern their country, even if American troops are more capable, more honest and provide better security than their own soldiers and police.

How does conflict avoidance work?

First, conflict avoidance requires that America continue to maintain the military power to make a direct assault on U.S. and allied security interests unthinkable and then pursue peaceful relations with the peoples of the world, so the danger of war involving the world’s great military powers is reduced and contained.
...
Second, conflict avoidance balances the need to make the U.S. secure against the danger of making the rest of the world less so. Instead of defining events around the world as tests of American military strength and national resolve, and rather than dissipating American military resources in remote places to pass these alleged tests, the U.S. should define its role in the world without feeling compelled to demonstrate its military power. Otherwise, the U.S. runs the risk that other states, not the U.S., will dictate America’s strategic agenda.
...
Third, when the U.S. confronts crises and conflicts, American armed forces should be committed on terms that favor the U.S. where the use of military power can achieve tangible strategic gains for the nation.

On Iraq and Afghanistan:

Treating conflict avoidance as a declared strategic goal should give pause to those in Washington who think counterinsurgency is something American military forces should seek to conduct. For outside powers intervening in other peoples’ countries as we have done in Iraq and Afghanistan, so-called counterinsurgency has not been the success story presented to the American people. Making cash payments to buy cooperation from insurgent groups to conceal a failed policy of occupation is a temporary expedient to reduce U.S. casualties, not a permanent solution for stability.

The result of the Bush mindset:

The result is an unnecessarily large defense budget of more than $700 billion and military thinking that seeks to reinvigorate the economically disastrous policies of territorial imperialism. Unchecked, the combination of these misguided policies will increase the likelihood the U.S. follows the path of Britain’s decline in the 20th century.
...
A strategy of refusing battle that routinely answers the questions of purpose, method and end-state in the conduct of military operations is the best way for the U.S. to avoid following in the footsteps of the British Empire into ruin.

Maybe needless to say, but I agree. Not only as concept for the U.S., but as a general concept for all countries including mine. 

What is your take on it?

Posted by b on March 30, 2009 at 03:31 PM | Permalink | Comments (13)

Betrayed Awakening

Maliki sent out his army to capture Awakening leaders no longer payed by the U.S.:

The arrest of Raad Ali, who helped the Americans stabilize the west Baghdad neighborhood of Ghazaliya, came to light Sunday, five days after the Iraqi army picked him up in a midnight raid, his aides said.

The U.S. is actively helping in this:

A combined force of American and Iraqi Army troops and National Police descended on Fadhil, a Sunni neighborhood and former insurgent stronghold in central Baghdad, and arrested the head of Fadhil’s Awakening Council, Adil al-Mashhadani, on terrorism charges, according to Maj. Gen. Qassim Atta, spokesman for the Iraqi security forces in Baghdad. He said firefights broke out afterward.

This might well reignite a civil war, but with the Iraqi army now more capable, the chances are against the insurgents.

Parviz thinks that this is part of a U.S.-Iran rapprochement.That is certainly possible. The U.S. may have decided to defer to Iran in Iraq for cooperation in Afghanistan and to generally lower level the hostility level. 

On the other side it seems that the U.S. wants to leave Iraq and that alone is motivation enough. To leave Iraq in even greater chaos is not in U.S. interests. It is better to have a strong government there than a weak government and permanent civil war that could escalate into neighbor countries. 'Cleaning up' the opposition while the U.S. is still there in full force is thereby a necessity on its own.

In Afghanistan the U.S. now tries to repeat some aspects of the 'Awakening' movement by arming and paying local forces at the town level. Those forces should note how the U.S. is now betraying such 'allies' in Iraq. It is likely to happen to them too.

Posted by b on March 30, 2009 at 10:18 AM | Permalink | Comments (49)

Links March 30 09

Please add your remarks and links of the day in the comments.

Posted by b on March 30, 2009 at 02:23 AM | Permalink | Comments (26)

March 29, 2009

Links March 29 09

Matt Taibbi AIG Exec Whines About Public Anger, and Now We're Supposed to Pity Him? Yeah, Right

Only a person with a habitually overinflated sense of self-worth could think he deserves a $700,000 retention bonus, even if it has to be paid by taxpayers, when in reality no one "deserves" that much money.

Financial crisis - NOT a black swan event

An argument against torture confirmed: It doesn't work.
Good, now lets proceed with this: Spanish judge accuses six top Bush officials of torture

U.S. Troops In Iraq Excited To Finally Return To Afghanistan

Sy Hersh gets emails from Syria's president Assad: Syria Calling - The Obama Administration’s chance to engage in a Middle East peace.

Another attack on NATO supplies in Peshawar

Please add your remarks and links of the day in the comments.

Posted by b on March 29, 2009 at 02:01 AM | Permalink | Comments (28)

March 28, 2009

The Right Takes The Crises As An Opportunity

To see Simon Johnson, an ex-IMF functionary with a critical and pessimistic view on recent capitalist excesses in The Atlantic was welcome but not unexpected. To read the first few graphs of an op-ed by another ex-IMF functionary with a similar basic analysis on the neo-conned op-ed pages of the Washington Post was, at first, a surprise. But deeper into the piece it turned out to be as neo-conned/neo-lib as most of the other stuff WaPo publishes.

It is a typical case of using the correct analysis of a crisis to then, in disguise, present a solution that applies the same mindset and tools that brought up the crisis in the first place.

Desmond Lachman: Welcome to America, the World's Scariest Emerging Market

I still recall the shock I felt at a meeting in Russia's dingy Ministry of Finance, where I finally realized how a handful of young oligarchs were bringing Russia's economy to ruin in the pursuit of their own selfish interests ...
...
Over the past year, I've been getting Russia flashbacks as I witness the AIG debacle as well as the collapse of Bear Sterns and a host of other financial institutions. Much like the oligarchs did in Russia, a small group of traders and executives at onetime venerable institutions have brought the U.S. and global financial systems to their knees with their reckless risk-taking -- with other people's money -- for their personal gain.
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We delude ourselves that our banks face liquidity problems, rather than deeper solvency problems, and we try to fix it all on the cheap just like any run-of-the-mill emerging market economy would try to do.
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[W]atching Goldman Sachs's seeming lock on high-level U.S. Treasury jobs as well as the way that Republicans and Democrats alike tiptoed around reforming Freddie Mac and Fannie Mae -- among the largest campaign contributors to Congress -- made me wonder if the differences between the United States and the Asian economies were only a matter of degree.
...

Up to here the argument seems fine - even populist and consistent with (and probably copied from) the Johnson piece and in my view correct.

But now follows the real intend and what the whole piece is constructed to aim for:

[I]nstead of laying out a realistic plan for increasing our national savings, we choose not to face up to the Social Security and Medicare crises that lie ahead, embarking instead on massive spending programs that -- whatever their long-run merits might be -- we simply cannot afford.

The right wingers are using the crisis for an attack on the few basic social programs the U.S. has. They of course never admit that these programs were created in the first place to attenuate the effects of such crises. They also have nothing to offer to replace these programs but deep poverty and early death for all people more poor then themselves.

The saving rate is already increasing quite fast. Social Security in the U.S. is financially well. Better indeed than equal programs in other countries. Alternatives like pension funds are doing much, much worse. Medicare/Medicaid financial problems could be solved with some decent price controls and anti-cartel action towards the pharmaceutical industry combined with a universal insurances scheme where everyone has to pay and gets. A well regulated single-payer health care system would also go a long way to better the international competitive situation of U.S. industries.

But the moneyed class would not like that at all. It would make it harder to fleece that money. Their trick now is to use this crisis as an opportunity to rob the masses even more than they are already doing. Imagine all the money going towards social security today being redirected towards Wall Street and the medicare/medicaid money to private insurance looters.

There have already been several attempts like this. Bush put a lot of energy into his Social Security reform campaign. It did not work back then. But now the crisis gives the wingnuts another chance. Expect many more of such op-eds. The correct analysis, recognizing the crisis for what it is, but with solutions that would only make it bigger. These will not only come from the far 'republican' right but also from the usual death eaters in the democratic caucus.

This WaPo Sunday op-ed is only preparing the ways.

The right sees the crises as an opportunity. They are right to do so. It is one for the left too. Let's use it.

Posted by b on March 28, 2009 at 04:42 PM | Permalink | Comments (9)

Links March 28 09

Please add your remarks and links of the day in the comments.

Posted by b on March 28, 2009 at 03:25 AM | Permalink | Comments (19)

March 27, 2009

Obama Commits Himself To War

Here is Obama's new strategy for his 'campaign against extremists who wish to do us harm'  or CAEWWTDUH: full remarks, white paper (doc).

Short version:

Let's fight all Pashtuns and whoever helps them. This in Afghanistan but especially in Pakistan.

Likely outcome:

The Pashtuns in Afghanistan will continue to fight against the 'western' occupation and each increase in 'western' troops will automatically increase their numbers too. The civilians in the 'Public Protection Force' the U.S. is now arming in Afghanistan (after years of disarmament programs) will take U.S. money by day and turn against the occupiers by night.

Under pressure from U.S. drones many Pashtuns in Pakistan will move from the areas in the tribal lands into the cities and will eventually fight the Pakistani government there. Recent days already saw deadly clashes between internally displaced persons and the police. With the fighting brought into major cities, the Pakistani government will lose even more legitimation. A military coup followed by a compromise with the Pashtuns in Pakistan might end that. An alternative would be the election of some politician that will then have to break the alliance with the U.S.

Meanwhile the costs in life and monies will ever increase. The current plans are for 60,000 U.S. troops in Afghanistan, less than half as much as the 'surge' brought to Iraq. But the costs are projected as $3,2 billion per month, $53,300 per soldier per month and more as double the costs for a U.S. soldier in Iraq.

In the end the U.S. public will again exprience war fatigue and a retreat will become inevitable. But that may take years and a new president as Obama will not be willing to surrender in a war he has now committed himself to.

Posted by b on March 27, 2009 at 02:54 PM | Permalink | Comments (43)

Looting: Is Simon Johnson Right?


bigger


The chart is by James Kwak who writes at The Baseline Scenario.

He is also co-author with Simon Johnson, MIT professor and a former chief economist of the International Monetary Fund, of an important and depressing piece in The Atlantic: The Quiet Coup

In my view, the U.S. faces two plausible scenarios. The first involves complicated bank-by-bank deals and a continual drumbeat of (repeated) bailouts, like the ones we saw in February with Citigroup and AIG. The administration will try to muddle through, and confusion will reign.

Boris Fyodorov, the late finance minister of Russia, struggled for much of the past 20 years against oligarchs, corruption, and abuse of authority in all its forms. He liked to say that confusion and chaos were very much in the interests of the powerful—letting them take things, legally and illegally, with impunity.
...
Our future could be one in which continued tumult feeds the looting of the financial system, and we talk more and more about exactly how our oligarchs became bandits and how the economy just can’t seem to get into gear.

The second scenario begins more bleakly, and might end that way too. ... A dramatic worsening of the global environment forces the U.S. economy, already staggering, down onto both knees. The baseline growth rates used in the administration’s current budget are increasingly seen as unrealistic, and the rosy “stress scenario” that the U.S. Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.

Under this kind of pressure, and faced with the prospect of a national and global collapse, minds may become more concentrated.

The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong. What we face now could, in fact, be worse than the Great Depression ... If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

I am not that pesimistic - yet. What do you think? Is Simon Johnson right?

Posted by b on March 27, 2009 at 11:06 AM | Permalink | Comments (20)

Links March 27 09

Senate voted 90-8: Congress passes wide-ranging bill easing banking laws, NYT, 1999
How finance captured your government: The Quiet Coup, The Atlantic

Obama's War on AfPak: $4,444,444 per hour, WaPo
Minimum wage in Kansas: $2.65 per hour, McClatchy

The consequences of dumb editorials: The Times Plans Temporary Pay Cuts, NYT
More consequences of dumb editorials: Washington Post to Offer New Buyouts to Employees, WaPo

Afraid of getting jailed: Swiss banks ban overseas travel amid global crackdown on secrecy, FT
The return of A.W.Mellon: Republican Road to Recovery, (pdf)

Please add your remarks and links of the day in the comments.

Posted by b on March 27, 2009 at 02:30 AM | Permalink | Comments (20)

March 26, 2009

Charities And Tax-Deduction

Obama proposes to limit the tax deductibility of charitable contributions:

The proposed tax change would apply to married couples with incomes of more than $250,000 (and single people with incomes greater than $200,000). Under the law, such couples can deduct the value of their charitable gifts from their taxable income.
...
The administration's plan would limit the amount that high-income individuals could deduct to 28 percent of their gifts, down from 35 percent, even though their incomes would still be taxed at a higher marginal rate.

Obama should go much further.

To give to a charity fulfills the person goal of the donor. The state is about furthering the goals of the general public, not of specific individuals. While some charities support the general good others, like most religion based charities, often have restricted groups of beneficiaries and want to further their special interests and policies. Some charities even work against the general good and against the declared policy of the state.

As David Ignatius points out today:

[C]ritics of Israeli settlements question why American taxpayers are supporting indirectly, through the exempt contributions, a process that the government condemns. A search of IRS records identified 28 U.S. charitable groups that made a total of $33.4 million in tax-exempt contributions to settlements and related organizations between 2004 and 2007.

My general stand on this that if a charity provides for the general good, it should be supported by all taxpayers. If a charity wants to provide for some special interest, giving to it should not be tax-deductible at all. I recognize that this would be difficult to achieve.

But one should ask why some rich people are able to deduct much more from their taxes than poorer ones even make. That gives the rich an advantage in influencing policies in their class interest while the costs are settled on all others.

A democracy is about one-man-one-vote because we believe that all men are equal and should have an equal say in furthering policies. The amount of charity giving that is tax deductible, if one supports such deductibility at all, should therefore be limited to the same amount for everyone.

A decent limit would probably be 10% of the yearly median income per person. In current U.S. numbers that would be some $2,600 per year everyone could give and get some tax deduction for.

Anybody who wants to give more for a favored cause is of course be free to do so. But there is no sound reason for the state to further that by waiving duly owned taxes for some individual and by spreading their foregone tax load on the shoulders of the rest.

Even if he wanted to Obama would not be able to get rid of tax-deductibility for all charitable contributions. But a limit on each individual's amount that can be given and tax-deducted is a sound aim and he should push into that direction.

Posted by b on March 26, 2009 at 12:30 PM | Permalink | Comments (10)

Israel's Sudan Bombing Report Is Likely Nonsense

Israeli warplanes conducted air strike on arms smugglers in Sudan: CBS headlines Haaretz and Google shows 1,200 related news articles.

I believe these to be nonsense.

From the Jerusalem Post piece on this:

As Israeli troops battled Palestinian gunmen during Operation Cast Lead in an attempt to end the rocket threat to southern Israel, IAF warplanes conducted a mission with similar objectives far from the front in the Gaza Strip, a CBS report revealed on Wednesday.

The report quoted unidentified American officials as saying that in January, Israeli warplanes bombed a convoy of trucks carrying arms destined for Hamas through Sudan.

The CBS report was not really a 'report'. It was this blog post by CBS reporter Dan Raviv about a March 24 piece from the Paris-based non-profit (financed by whom?) Sudan Tribune website which has as its sole source an alleged report by the Egyptian Al-Shurooq newspaper which I do not find on the web. The Sudan Tribune writes:

The Egyptian Al-Shurooq newspaper reported this week that US planes destroyed a convoy heading towards the borders carrying arms believed to be on its way to Gaza strip.

The report said that the convoy consisted of 17 trucks carrying 39 passengers that were all destroyed in the operation. None of the people on board the trucks survived the attack.

Reading the Sudan Tribune piece which alleges that U.S. bombers hit something in Sudan, CBS' Dan Raviv asked the CBS national security correspondent David Martin:

[T]he semi-official American version of the story is very different.

CBS News national security correspondent David Martin has been told that Israeli aircraft carried out the attack. Israeli intelligence is said to have discovered that weapons were being trucked through Sudan, heading north toward Egypt, whereupon they would cross the Sinai Desert and be smuggled into Hamas-held territory in Gaza.

'Has been told' by whom? There is no source named for David Martin's assertion that Israeli air planes did something in Sudan. Were these 'American officials' as the Jerusalem Post asserts? The CBS blog post does not say that at all. It says a 'semi-official American version' whatever that may mean. Was the source that gave the 'semi-official American version' American or from Israel?

Dan Raviv is known to have intelligence contacts:

The start of his on-air career was his assignment in the Tel Aviv bureau, from 1978 to 1980 ... He is also the author of several books, including the 1990 best seller Every Spy a Prince: The Complete History of Israel's Intelligence Community and Friends In Deed: Inside the U.S.-Israel Alliance, both co-authored with journalist Yossi Melman.

Yossi Melman is a Haaretz correspondent.

We proved on a earlier occasion that the Sudan Tribune website is a unreliable source. Back then it invented Iranian submarines and long range missiles at an Eritrean port. Generally it tends to add its own fantasies to reports it picks up from other sites.

So we have a unreliable, non-profit online paper's second hand reporting from an inaccessible Egyptian newspaper. This then gets seasoned with some un-sourced rumor by a CBS blog writer with Israeli intelligence contacts and hyped into "news" reports around the world.

This smells, feels and sounds like some 'information operation' by some interested circles. I believe it is pure propaganda, but like usual probably with some true kernel we may or may not learn about.

UPDATE - AlJazeerah adds some confusion:

A Sudanese minister has told Al Jazeera that the US launched two air raids in the country earlier this year.

Mabrouk Mubarak Salim, the state minister for highways, said on Thursday that Sudanese, Somalis, Ethiopians, and Eritreans were killed in the attacks in January and February.
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However, Deng Alor, the Sudanese foreign minister, said in Egypt on Wednesday that he had no knowledge of any such air raid.

"We have no information about such an attack," he said.
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Ronen Bergman, an investigative journalist, told Al Jazeera that his Israeli and US sources backed up the CBS take on event.

Bergman said that weapons are smuggled to Gaza either from Syria though the Sinai peninsula or from Iran via Sudan.

Take a map and check how to smuggle from Syria through the Sinai to Gaza ...

This is the same Ronen Bergman who has "unprecedented access to extra-ordinary sources from top to bottom in the Mossad and intelligence agencies around the world" and who's sensational book about an alleged Syrian reactor was the base of a plagiarized story we dissected here yesterday.

Could AlJazeerah please find sources that are not Israeli intelligence when looking into such issues?

Posted by b on March 26, 2009 at 09:16 AM | Permalink | Comments (23)

Links March 26 09

PNAC 2.0: Can someone find me a link to the plan William Pfaff writes about?

Thanks to a pro Israeli neo-conservative plan put forward in New York, designed to destroy Pakistan as the only Moslem nation with nuclear weapons, important circles in Pakistan now seem convinced that the United States intends to divide Pakistan into three new states, the largest one being a new Baluchistan in the southwest, where there have always been separatist tendencies.

Don't believe Pfaff? Talibs have direct support from the Pakistani military, according to 'U.S. officials'.

But how does that explain this? Suicide attack kills 11 in NW Pakistan.

Following the tubes: It's all by about Pipelinistan says Pepe Escobar.

Loose mouth: Geither takes $ down 1.3% within 10 minutes.

There is no market for 'toxic assets.' That's a myth used to fleece the taxpayers.

The most moral army of war criminals: Israel accused of indiscriminate phosphorus use in Gaza

Unlikely to be true: Report: IAF struck arms convoy in Sudan in January

Please add your remarks and links of the day in the comments.

Posted by b on March 26, 2009 at 03:30 AM | Permalink | Comments (22)

March 25, 2009

A Bad AIG Bonus Argument

A Executive Vice President of AIG. Financial Products resigned and his resignation letter is printed as on op-ed in today's New York Times.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials.

Wall Street insider Barry Ritholtz at the Big Picture loves the letter as he, like the letter, argues against any bonus-cuts or high bonus taxation.

The resignation letter by Jake DeSantis claims that he is leaving AIG-Financial Products because his bonus was cut and because he finds that unfair as he had nothing to do with the CDS mess that took AIG-FP down. The last part may well be true but it does not matter and we will come back to that in a moment.

First the payment issue:

Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.


One has to be a blatant hypocrite to claim one worked for $1 dollar per year 'out of a sense of duty' when one expected and was assured to get a million or so in bonus payments:

On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands.

So even if the bonus would be taxed at 90% the man would still have made quite a bit above $70,000 per year. Donating that or not is irrelevant. I find $70,000 per year a decent pay especially for someone who in the 11 years before made far, far more money than any normal person will ever make in her lifetime. To lament about that is arrogant and, unlike Barry, I find it obscene. If AIG, without taxpayer money, would have gone bankrupt Mr. DeSantis pay would have been zero.

Now back to the issue of culpability:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G.

That does not matter at all. All parts of A.I.G. have taken part in creating the mess while the persons involved hugely benefiting from it - from the various parts of AIG-FP throughout the insurance business up to the now likely bankrupt AIG. Aircraft Leasing Unit.

Consider what Chris Whalen, the Institutional Risk Analyst finds:

Speaking of poor fundamentals, when AIG released information about the amounts and recipients of roughly $100 billion of its government loans from September to December 2008, almost utterly unreported was the fact that the staid, boring, heavily regulated insurance businesses managed to run up losses on securities lending requiring $44 billion of government support.

By way of contrast, the credit derivatives widely blamed for bringing down the world's financial system were consuming $27 billion of support; municipal investment agreements (essentially, deposits) made by municipalities with AIG Financial Products took another $12 billion, and maturing debt took $13 billion. We wonder, just which unit of AIG lent the securities? What did AIG purchase with the proceeds of the securities loan? Could it be that the big story at AIG is the unsoundness of the insurer, not the credit default swaps? Why the misdirected coverage?

And Barry Ritholz himself pointed to a part of yesterday's Bernanke testimony which hinted at many other problems within AIG. than just the CDS side:

State and local government entities that had lent more than $10 billion to AIG would have suffered losses. Workers whose 401(k) plans had purchased $40 billion of insurance from AIG against the risk that their stable value funds would decline in value would have seen that insurance disappear. In addition, AIG’s insurance subsidiaries had substantial derivatives exposures to AIG-FP that could have weakened them in the event of the parent company’s failure.

All parts of AIG stink and it will take years to find out which parts are not rotten - if any. Mr. Jake DeSantis seems to claim that the commodity and equity division he worked in did not make any losses and was in no way involved in any shady AIG business. That well may be, but unless the whole AIG mess is not cleared up, I will not believe a word of it.

Mr. De Santis, how many commodity and equity deals did your AIG-FP division make with the insurance part of the AIG business?

$70,000+ per years seems fine to me for someone who is already loaded with much more money from prior bonuses in his job than any normal person can think of. If DeSantis does not want to do the job for that - fine. 325,000 financial service jobs have been cut since mid 2007. I am sure more than a few of those unemployed people are well capable to do Mr. De Santis job and will be happy to get a decent pay of $70,000+ after tax per year.

The much lower pay for autoworkers at Chrysler and GM as well as for retirees thereof were recently cut as part of a government loan arrangement. I do not remember Barry Ritholtz howling about that breach of contract or NYT op-eds arguing against that arrangement.

The people in finance seem to have lost any sense of decency and and feel for normal life standards. It is time to pull them down to earth.

Posted by b on March 25, 2009 at 12:26 PM | Permalink | Comments (34)

Another Iran Scare Story Debunked

A week ago the Neue Züricher Zeitung, a major Swiss newspaper, published a piece (in German) on how Iran allegedly financed a Syrian nuclear reactor program. The Associated Press and many others echo-chambered the report:

GENEVA (AP) — An Iranian defector told the West that Iran was financing North Korean moves to transform Syria into a nuclear weapons power, leading to the Israeli airstrike that destroyed a secret reactor, a report said Thursday.

The report, written by Hans Ruehle, former chief of the planning staff of the German Defense Ministry, details an Iranian connection and fills in gaps about Israel's Sept. 6, 2007, raid that knocked out Syria's nearly completed Al Kibar reactor.

Ali Reza Asghari, a retired general in Iran's elite Revolutionary Guards and a former deputy defense minister, "changed sides" in February 2007 and provided considerable information to the West on Iran's own nuclear program, Ruehle said in his article in the Swiss daily Neue Zuercher Zeitung.

I ignored the piece as Rühle has not been in official government service since 1988 and is known to be a publishing tool for far right-wing and often U.S. interests. Whatever he writes on Russia or the Middle East is usually bunkum this or that secret service fed to him.

But this time Rühle did even worse. As Jeffrey Lewis at the Arm Control Wonks finds:

Whatever “inside” information Rühle had dates back more than two decades. His information about Al Kibar, therefore, is second hand. Second, by “second hand,” I mean plagiarized.

Most of Rühle’s article comes straight from Ronen Bergman’s book The Secret War with Iran, mainly the chapter “Ghost Raid.”

The blurb of the Ronen Bergman book Rühle copied from says: "Bergman, one of Israel's top investigative reporters, gained unprecedented access to extra-ordinary sources from top to bottom in the Mossad and intelligence agencies around the world." Bergman is know for other wild assertions like "Iran and Hizballah worked closely with al-Qaeda and other Sunni terrorist groups..." Sure ...

So a German known propagandist plagiarizes from an Israeli journalist who's writing is dictated by the Mossad and other dubious sources. What a poor attempt of misleading the public.

The allege Iranian financing for the Syrian pencil factory so wild that even the U.S. government felt obliged to deny it:

A US Counterproliferation official denied a report saying Iran had funded a Syrian reactor that was bombed by Israel in 2007.

"There is strong reason to believe that only two countries were involved in building the Syrian covert nuclear reactor at Al Kibar - Syria and North Korea," said the official, who spoke on condition of anonymity.

Posted by b on March 25, 2009 at 08:53 AM | Permalink | Comments (2)

Links March 25 09

Please add your remarks and links of the day in the comments.

Posted by b on March 25, 2009 at 02:24 AM | Permalink | Comments (21)

March 24, 2009

Obama Needs To Walk His Talk

Barack Obama today has an OpEd in more than 30 international papers about the economic situation and on steps to take to better it. Headlined A time for global action Obama writes:

My message is clear: The United States is ready to lead, and we call upon our partners to join us with a sense of urgency and common purpose.

I am quite sure that people around the world do not want the U.S. to lead here. Why are those who essentially created the mess believe they are the best capable to solve it?

At home, we are working aggressively to stabilize our financial system. This includes an honest assessment of the balance sheets of our major banks, and will lead directly to lending that can help Americans purchase goods, stay in their homes and grow their businesses.

The Geithner plan is to subsidize the purchase of 'toxic assets'. That subsidy will lead to - again - miss-pricing of those assets. How can that further an honest assessment of balance sheets?

The G-20 should quickly deploy resources to stabilize emerging markets, substantially boost the emergency capacity of the International Monetary Fund and help regional development banks accelerate lending. Meanwhile, America will support new and meaningful investments in food security that can help the poorest weather the difficult days that will come.

Just what Africa and other poor areas need. More IMF pressure to 'open' their economies and more heavily subsidized U.S. agricultural products that destroy their local farming communities.

Rigorous transparency and accountability must check abuse, and the days of out-of-control compensation must end.

Then why does the Senate, under White House pressure, now stalls high taxes on bonuses in bailed out companies?

This G-20 meeting provides a forum for a new kind of global economic cooperation. Now is the time to work together to restore the sustained growth that can only come from open and stable markets that harness innovation, support entrepreneurship and advance opportunity.

"Open and stable markets ..." So why did the U.S. president just signed a law that will, against the letters and intend of an international agreement, no longer allow Mexican truck drivers to ferry loads inside the U.S.?

Obama has lots of great words in that well written OpEd. But where are the actions that support those shiny words? 

Unless Obama walks the talk on this, and there is no sign that intends to do so, the world will not take him seriously.

Posted by b on March 24, 2009 at 03:44 PM | Permalink | Comments (50)

Links March 24 09

Blackmail: Obama Dials Down Wall Street Criticism because the banksters are miffed.

The banks' message: If you want our help to get credit flowing again to consumers and businesses, stop the rush to penalize our bonuses.

The Treasury wants powers to seize non-bank financial companies like AIG and to break their contracts. Maybe time to update your insurances?

Secretary of the Treasury is Timothy Franz Geithner. The name Geithner is of south-German origin. The original spelling is Geissner or Geißner as the English 'th' is the consonance to the German sharp double-s also written as 'ß'. A 'Geiss' or 'Geiß' in south-German dialect is a goat. The 'Geissner' is the one who herds the goats.

Krugman rulez: The NYT editors come out in favor of bank 'nationalization'.

The great hope for democracy, Georgia's Saakashvili, is busy arresting opposition politicians.

Baghdad blogger Salam Pax is posting some of his notes from five years ago in a series of blog flashbacks.

A Pakistani muses about dangerous US plans for Baluchistan: Why aren’t we acting now?

Afghan leaders are condeming corruption. Don't worry folks, Richard Holbrooke will clear up the AfPak mess and especially the corruption problems. He has great experience as former AIG board member, as a former Lehman Brothers managing director and as a recipient of a cheap mortgage through the 'friends of Angelo' program. If that does not qualify ...

Roger Cohen recently wrote a series of NYT columns with a positive view on Iran. Now the Israel lobby is out to get him fired.

The Guardian has a series of videos showing Israeli war-crimes.

Please add your remarks and links of the day in the comments.

Posted by b on March 24, 2009 at 02:29 AM | Permalink | Comments (14)

March 23, 2009

The U.S. Is Losing Its Reserve Currency Privilege

The French president Charles De Gaulle once called the reserve currency status of the U.S. dollar an "extraordinary privilege". Part of the privilege is that the U.S. can borrow in its own currency and later pay back the debt in its own currency even when the dollar by then decreased in value.

China and others are now pressing to end that U.S. privilege.

In 1965 De Gaulle threatened to take the Franc back from a dollar reserve covered currency to a gold reserve status. At that time the U.S. had a persistent trade deficit, small in today's terms, and De Gaulle feared the U.S. would devalue the then gold backed dollar. That indeed happened and when in 1971 Nixon unilaterally stopped the direct convertibility of the U.S. dollar to gold.

The same fear De Gaulle had is again increasing around the world and a new attempt is now made to relieve the dollar of its privileged role. But this time the attackers on the dollar's reserve status are much more powerful than in 1965 when only France and Spain were the troublemakers.

The U.N. Commission of Experts on International Financial Reform will soon recommend a new reserve standard:

Persaud said the panel had been looking at using something like an expanded Special Drawing Right, originally created by the International Monetary Fund in 1969 but now used mainly as an accounting unit within similar organizations.

The SDR and the old Ecu are essentially combinations of currencies, weighted to a constituent's economic clout, which can be valued against other currencies and indeed against those inside the basket.

A new reserve currency was also discussed at a recent meeting of the BRIC countries, Brazil, Russia, India and China:

The Russian source said Moscow was aware that the emergence of the new global currency would not happen overnight and said its goal was to initiate a discussion about it at the G20 summit in London on April 2.

The source said that India did not object to the discussion but was not prepared to take the lead. The source said South Korea and South Africa backed the idea, while developed nations were not "allergic" to it.

Today the Vice Governor of the People's Bank of China was send out to assure the world that China would, for now, continue to buy treasuries. But that was likely only to cover for a quite revolutionary  speech his boss Zhou Xiaochuan gave today. China Daily reports:

China's central bank chief on Monday proposed a sweeping overhaul of the global monetary system, outlining how the dollar could eventually be replaced as the world's main reserve currency by the Special Drawing Right (SDR).

From the speech:

While benefiting from a widely accepted reserve currency, the globalization also suffers from the flaws of such a system. The frequency and increasing intensity of financial crises following the collapse of the Bretton Woods system suggests the costs of such a system to the world may have exceeded its benefits. The price is becoming increasingly higher, not only for the users, but also for the issuers of the reserve currencies. Although crisis may not necessarily be an intended result of the issuing authorities, it is an inevitable outcome of the institutional flaws.

The desirable goal of reforming the international monetary system, therefore, is to create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies.

This HUGE! China will propose the new world 'currency' with reserve status, in fact a basket of major currencies as defined by the IMF Special Drawing Rights, at the G20 meeting on April 2.

It will take a few years until a full fledged SDR based system will become functional. The U.S. and the UK will likely fight against this. The Euro based countries will mostly be indifferent. For China this is now a major official policy goal. With BRIC pressing for a new reserve system and support from others medium weight countries like South Korea and South Africa the new initiative has a lot of momentum.

So far the U.S. could borrow cheaply and pay back less in real value than the original loan. That privilege is now going away. The trillions the U.S. currently needs to borrow from abroad will have to be payed back in full. That is a major change in its global power status and will seriously decrease its influence in international policy questions.

Posted by b on March 23, 2009 at 12:56 PM | Permalink | Comments (17)

The Geithner Plans

The Treasury has now revealed its plans on how to buy up 'bad assets'.

The Treasury believes, or at least claims to believe, that some 'asset' held by banks can not be sold off because there is no market for them. That is of course wrong. There is a market for any asset as long as it has a reasonable price. The banks simply want more money for these assets then anyone is willing to pay for them.

The Treasury further argues that keeping those assets within these banks currently impairs the general credit markets. I find that a dubious claim as a. money supply and credit is still expanding and b. over-indebted households have no reason to take on more debt.

So from my point of view the Treasury is presenting a wrong view of the real problems. I like others believe that the banks are simply insolvent, i.e. they have more debt than fairly valued assets and the Treasury's real plan is to make them whole at the cost of the taxpayers.

Three plans are presented today but only the first one seems to be really determined.

The first one is the "Public-Private Investment Program for Legacy Loans"

Let's just take the sample from the Treasury site for this:

Sample Investment Under the Legacy Loans Program

Step 1: If a bank has a pool of residential mortgages with $100 face value that it is seeking to divest, the bank would approach the FDIC.
Step 2: The FDIC would determine, according to the above process, that they would be willing to leverage the pool at a 6-to-1 debt-to-equity ratio.
Step 3: The pool would then be auctioned by the FDIC, with several private sector bidders submitting bids. The highest bid from the private sector – in this example, $84 – would be the winner and would form a Public-Private Investment Fund to purchase the pool of mortgages.
Step 4: Of this $84 purchase price, the FDIC would provide guarantees for $72 of financing, leaving $12 of equity.
Step 5: The Treasury would then provide 50% of the equity funding required on a side-by-side basis with the investor. In this example, Treasury would invest approximately $6, with the private investor contributing $6.
Step 6: The private investor would then manage the servicing of the asset pool and the timing of its disposition on an ongoing basis – using asset managers approved and subject to oversight by the FDIC.

The private capital in this case is only in the game with 7.15% of the total assets bought under this program.

If the payed price for the legacy assets turns out to be 10% above its real value, the private investor will lose just $6. The bank would have gained $8.40 more than the real value for its legacy asset. In this case how do we know the bank that sold the legacy asset is not in cahoots with the private entity here and will share its gain with it? Both would make a profit while the taxpayer would take a loss. How do we know that the private entity does not have a side-bet of this or another kind?

If the payed price for the legacy assets turns out to be 10% below its real value, the private entity will win half of the profits, i.e. $4.20. That is a return of 70% on its maximum capital at risk while the taxpayer would have a return of 5.4% on its $78 maximum capital at risk. That does not look much like 'partnership' to me.

On to the second plan which is an extension of the Fed financed TALF program that lends to private entities to buy up 'legacy securities' defined as:

non-agency residential mortgage backed securities (RMBS) that were originally rated AAA and outstanding commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) that are rated AAA.

What is the meaning of an "original rating of AAA" if an assets is no longer rated as such? The rating was obviously wrong in the first place and has no relevance to the current real value of the asset. So why is this made a condition?

The details of this program are still totally unclear:

Haircuts will be determined at a later date and will reflect the riskiness of the assets provided as collateral. Lending rates, minimum loan sizes, and loan durations have not been determined. These and other terms of the programs will be informed by discussions with market participants.

Hmmm ...

In the third program the Treasury would partner with private investors as in the first one, but the additional financing would not come from the FDIC, but from the Fed through the TALF program like in the second program.The details are again unclear.

So of relevance in this announcement is only the first program. That has skewed incentives that can either be used to screw the taxpayer or to give a highly unfair and unjustifiable advantage to the private 'partner' in the game.

All that said I am not sure I would like to take part in any of these program as the private entity. The programs will be under high scrutiny from several sides and if problems are detected with it Congress might step in and change the rules retroactively.

The program(s) may therefore fall well short of the Treasury's intended size and scope.

Posted by b on March 23, 2009 at 11:04 AM | Permalink | Comments (14)

Links March 23 09

Krugman really hates the 'new Paulson plan'.

Pimco wants to be one of the 'investors' in 'bad assets' under Geithner's plan. They already own lots of 'bad assets' so artificially lifting their prices with taxpayer money will let them show great artificial profits which in turn will deliver big bonuses to their management.

Cohen likes Obama's Iran approach and says U.S. relations with Israel must change.

Strategy of tension?  A car bomb was found next to a mall in Haifa, Israel. Some in the Palestinian Authority (i.e. Dahlan) say its from Hezbollah and Iran!

Exporting Democracy: The U.S. plans to appoint a Prime Minister in Afghanistan to get around Karzai.

Puppets: The Spanish Defense Minister wants Spanish troops out of Kosovo. The U.S. says no so the troops will stay.

Slobodan Milosevic's intelligence chief was a CIA agent. Lenin has more on this.

Please add your links of the day in the comments.

Posted by b on March 23, 2009 at 04:58 AM | Permalink | Comments (3)

March 22, 2009

Murderers

A LA Times propaganda piece about the 'success' of the killing campaign waged by the U.S. in the tribal areas of Pakistan includes this line:

The offensive has been aided by technological advances and an expansion of the CIA's Predator fleet. The drones take off and land at military airstrips in Pakistan, but are operated by CIA pilots in the United States. Some of the pilots -- who also pull the triggers on missiles -- are contractors hired by the agency, former officials said.

Government officials like soldiers, policemen or even CIA agents have certain immunities when are ordered to kill someone. Civilian contractors do not have these nor should they have them. Civilians pulling the trigger to kill in a non defensive situation are committing first degree murders.

Where is the federal prosecutor going after these?

Posted by b on March 22, 2009 at 06:10 AM | Permalink | Comments (9)

Zionism

Dead babies, mothers weeping on their children's graves, a gun aimed at a child and bombed-out mosques - these are a few examples of the images Israel Defense Forces soldiers design these days to print on shirts they order to mark the end of training, or of field duty.
Dead Palestinian babies and bombed mosques - IDF fashion 2009

---

"Rules of Engagement: Open fire also upon rescue," was handwritten in Hebrew on a sheet of paper found in one of the Palestinian homes the Israel Defense Forces took over during Operation Cast Lead.
...
The other side of the "Situational Assessment" sheet shows that it was written on a letter sent to the troops by a child. "To the Golani soldiers, good luck in the war," the letter reads in the hand of a young child. In the middle of the page there is a drawing of an armed soldier. "Love, the S. family."
IDF soldiers ordered to shoot at Gaza rescuers, note says

---

"At first the specified action was to go into a house. We were supposed to go in with an armored personnel carrier called an Achzarit [literally, Cruel] to burst through the lower door, to start shooting inside and then ... I call this murder ... in effect, we were supposed to go up floor by floor, and any person we identified - we were supposed to shoot."
'Shooting and crying'

---

On Saturday, Channel 10 showed a documentary that included a security briefing by a company commander on the eve of the Gaza invasion.

"We're going to war," he told his soldiers. "We're not doing routine security work or anything like that. I want aggressiveness - if there's someone suspicious on the upper floor of a house, we'll shell it. If we have suspicions about a house, we'll take it down."
Testimonies on IDF misconduct in Gaza keep rolling in

---

We came to annihilate you; Death to the Arabs; Kahane was right; No tolerance, we came to liquidate. This is a selection of graffiti Israeli soldiers left on the walls of Palestinians' homes in Gaza, which they turned into bivouacs and firing positions during Operation Cast Lead.
The writing on the wall

---

Another squad leader from the same brigade told of an incident where the company commander ordered that an elderly Palestinian woman be shot and killed; she was walking on a road about 100 meters from a house the company had commandeered.
IDF in Gaza: Killing civilians, vandalism, and lax rules of engagement

---

The rabbinate brought in a lot of booklets and articles, and ... their message was very clear: We are the Jewish people, we came to this land by a miracle, God brought us back to this land and now we need to fight to expel the gentiles who are interfering with our conquest of this holy land. This was the main message, and the whole sense many soldiers had in this operation was of a religious war.
'Shooting and crying'

---

[T]he defense minister was quick to respond that "the IDF is the most moral army in the world," and the military advocate general said the IDF would investigate.

All these propagandistic and ridiculous responses are meant not only to deceive the public, but also to offer shameless lies. The IDF knew very well what its soldiers did in Gaza. It has long ceased to be the most moral army in the world.
IDF ceased long ago being 'most moral army in the world'

Posted by b on March 22, 2009 at 04:53 AM | Permalink | Comments (24)

March 21, 2009

Scrutiny Starts For The 'New Paulson Plan'

We reviewed the new Geithner plan, which we fairly called the The New 'Paulson Plan, six days ago:

A complicate scheme which will give the investment banks lots of fees, allows overpayment for toxic assets and transfers the risk of the overpayment to the general public. What's not to like with that.

Last year the Paulson plan to heal the banks balance sheets was to buy up toxic assets for too high prices and later Geithner planed similar schemes. Both planed to use treasury money for this and the general scrutiny about these programs prevented their implementation. But now the Fed will be abused to implement this.

Everybody was busy with outrage over AIG bonuses at that time and the plan did not get any real scrutiny. It took until today and a New York Times piece on it for others to look at it.

Yves Smith:

[The plan] appears to be consistent with (low) expectations: a lot of bells and whistles to finesse the fact that the government will wind up paying well above market for crappy paper.

Calculated Risk:

With almost no skin in the game, these investors can pay a higher than market price for the toxic assets (since there is little downside risk). This amounts to a direct subsidy from the taxpayers to the banks.

Krugman:

The Geithner plan has now been leaked in detail. It’s exactly the plan that was widely analyzed — and found wanting — a couple of weeks ago. The zombie ideas have won.
...

This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work.

More Krugman:

It’s basically a thinly disguised version of the same plan Henry Paulson announced way back in September.
...
Why am I so vehement about this? Because I’m afraid that this will be the administration’s only shot — that if the first bank plan is an abject failure, it won’t have the political capital for a second. So it’s just horrifying that Obama — and yes, the buck stops there — has decided to base his financial plan on the fantasy that a bit of financial hocus-pocus will turn the clock back to 2006.

The bold parts are the biggest problem here:

People hate these bailouts and they have said so to their representatives and senators in no uncertain terms. The A.I.G. bonus debacle has shown as much. The Geithner plan, if implemented, will ultimately fail. It is much too small to clear all bad assets, $8 trillion are lost as Dean Baker reminds us. It is prolonging the pain for the real economy. The full risk and costs in trillions are all on the taxpayers while the banks and their bond holders are made whole.

If the plan is implemented it will take a few month until the leaks come out and some enterprising reporter finds out who gets rich through this scheme. Then, when everyone starts to understand what is really happening, Obama will finally have to fire Geithner. But that may not be enough by then to regain any public trust in Obama's capabilities. With a unruly congress then repulsing any new plan, the U.S. will be practically rudderless in very heavy see.

I still hope for much more public discussion on this plan now and hope that the pressure build by that will force Geithner to drop it and force Obama to fire him. It is time to give the Treasury task to someone competent.

Otherwise prepare for some really bleak times. First under Obama and then under a new republican administration.

Posted by b on March 21, 2009 at 02:36 PM | Permalink | Comments (38)

Genuine Change?

Obama addressed the Iranian people and government in a recorded Novruz greating. While this was a change of tone compared to Bush's axis of evil, it was still quite aggressive in my view.

The United States wants the Islamic Republic of Iran to take its rightful place in the community of nations. You have that right -- but it comes with real responsibilities, and that place cannot be reached through terror or arms, but rather through peaceful actions that demonstrate the true greatness of the Iranian people and civilization.

Who is the U.S. to teach anyone about the "terror of arms"? And why do this speech in concert with Israel?

In his answer ayatollah Khamenei responded that a change in tone is not enough to change relations:

"They congratulate Iranians on the New Year but at the same time they accuse Iran of supporting terrorism and seeking nuclear arms," Ayatollah Seyyed Ali Khamenei said on Saturday addressing masses of people in the holy city of Mashhad on the occasion of Nowruz (the Iranian New Year).

"They tell us to come and sit at the negotiating table. Under the slogan of change, they say let's mend the ties. Where is the change? Clarify this for us."

He added several demands:

"Have you released the frozen assets of the Iranian nation? Have you lifted sanctions against us? Have you stopped spreading allegations against us?"

His offer:

"You change. We will change too," the Leader concluded, adding that the US change of policy must be 'genuine'.

Not very diplomatic, but considering the viewpoint of the Iranians after 30 years of hostilities from the U.S., that may be understandable.

A lot will now depend on Obama's next steps. There has been no hint yet what those may be.

It is interesting to see the headlines of the news items that reported Khamenei's response.

One camp is picturing the response as a rebuke:

Others see it more differentiated:

What did the folks in the first camp actually expected Iran to do? To bend over? To kiss Obama's feet?

It is of course not by chance that the first three sources are from U.S. media while the second three are international. There is a well trained aggressive view of U.S. politicians, media and big chunks of its public against Iran, shaped by 30 years of relentless propaganda.

If Obama wants real change in the relations with Iran, he may have to begin with changing the U.S. domestic view first. There is a long list of justified grievance Iran has against the U.S. - the broken Algiers Accord, Iran Air Flight 688 and of cause the Iraq-Iran war in which the U.S. supported Saddam Hussein.

To remember the U.S. public of these could help to form the base for genuine change.

What's your take on this?

Posted by b on March 21, 2009 at 10:44 AM | Permalink | Comments (21)

March 20, 2009

Some Wankish Wanking On Quantitative Easing

The Fed announced this week that it will buy up to $1.250,000 million in treasuries, mortgage backed agency debt (Freddie and Fannie) and other papers. This a week after the Chinese Prime Minister voiced concerns about the value of the $2,000+ million in U.S. assets China holds.

China is especially concerned about agency debt since the U.S. took Freddie and Fannie into receivership but did not formally guarantee their debt. China is also concerned about the value of long term treasuries which would sink if interest rates in the U.S. would increase.

While the last point may be of no immediate concern, with the all the money the U.S. will have to print now eventually the long term interest will rise sharply and treasuries will thereby lose in value.

For some time China is selling agency debt and long term treasuries and instead buying short term treasuries. But the large amounts China has of those unwanted assets can not be sold without some big buyer. So the Fed stepped in and will now buy what China wants to sell.

Of course there are additional reasons for the Fed to buy 'assets' with freshly printed dollars. The U.S. will run $1,000,000+ million deficits per year for the foreseeable future. It has to issue treasuries for that. China may buy a few of those but it seems it would rather like to buy other assets like raw materials or debt and companies denominated in other currencies. The Fed will therefore have to buy the treasuries the U.S. government issues and will have to print additional dollars to finance the purchase.

This is not without costs. In theory the Fed should sell those treasuries when the economy revives and thereby drain the additional liquidity it now provides. But it will likely miss the right point in time out for fear to repeat a mistake FDR made back in the 1930s. In 1937 out of concern for too high deficits FDR pulled back from some of his depression programs just as the economy started to revive. Without the government support it promptly fell back into a recession. So the Fed will miss the right point and will start late to sell its treasury holdings and to drain the market of dollar notes. It will thereby incur high losses and be unable to drain all the money it currently pushes out.

As Kurgman explains:

[T]here will come a time when the Fed wants to withdraw that extra $1 trillion of money it created. It will presumably do this by selling the bonds it bought back to the private sector.

But here’s the rub: if and when the economy recovers, it’s likely that long-term interest rates will rise, especially if the Fed’s current policy is successful in bringing them down. Suppose that the Fed has bought a bunch of 10-year bonds at 2.5% interest, and that by the time the Fed wants to shrink the money supply again the interest rate has risen to 5 or 6 percent, where it was before the crisis. Then the price of those bonds will have dropped significantly.

And this also means that selling the bonds at market prices won’t be enough to withdraw all the money now being created.
...
My back of the envelope calculation looks like this: if the Fed buys $1 trillion of 10-year bonds at 2.5%, and has to sell those bonds in an environment where the market demands a yield to maturity of more than 5%, it will take around a $200 billion loss.

If the Fed now buys $1,000,000 million of Treasuries it will only be able to sell those for $800,000 million when interest rates go back to normal territory. Thereby 20c of any dollar the Fed prints now will stay in the system and will have real inflationary effects.

The government then could print more IOU's, i.e. treasuries, hand them to the Fed for nil so the Fed could sell those and could thereby withdraw the excess money supply. But those additional treasuries would of course add to the debt of the U.S. taxpayer. I therefore find it unlikely that any future U.S. administration will want to add to its debt just to cure inflation.

So however one thinks through this, the effect of the current process of the Fed buying up treasuries will eventually be inflationary. It is not the total $1,000,000 million fresh dollar the Fed is now pushing out by buying treasuries that will have inflationary effects. But maybe 20-40% of that as the Fed will eventually drain the rest. But do not think for a moment that the Fed will stop after buying up the now announce $1,250,000 million in debt issues. This 'quantitative easing' will continue as otherwise there will not be enough buyers for all the deficits and debt the administration is running up.

It usually takes some years for a serious inflation to take a hold. But when it does it is damned hard to erase it. The next year or two or three may look deflationary. But raw materials are already running up again and I for one believe the will continue to do so - at least in US$ terms.World population and demand still grows and raw materials are limited.

This whole process described above is to a certain degree unavoidable. But a lot of the debt the U.S. is taking on now and that is the basic reason for the mechanics described above is taken on to rescue a failed banking system. AIG has so far received $173,000 million, but it's financial arm that wrote all the lunatic CDS contracts still has $1,600,000 million of nominal obligations. There is no plausible reasons for the U.S. taxpayer to back those up. But the current administration does it and the taxpayer will have to bear the consequences.

In the end this could softly devalue the U.S. dollar until some current account balance is found between U.S. exports and imports.  But bthat is benign and unlikely case. More likely is that these trends will overshot and ignite a strong inflation in the U.S. with raw material prices, denominated in US$, going through the roof.

The models used above to describe the dynamics are very simplified. In reality there are multiple and not always rational actors. The relations between money supply, inflation and currency values are not linear and difficult to measure and to simulate and those are only three indicators of a myriad of highly interdependent others. Economics is not a strong science.

Still historic experience confirms most of these relations and trends. Quantitative easing is nice to have as a Keynesian instrument in a temporarily deflationary environment. But two or three years on it usually comes back biting in the form of strong inflation that easily can tip over into a high inflationary environment. 

The world could avoid a big chunk of the now needed quantitative easing if it would consider not to back up some of the irrational contracts that this or that financial entity made. Declare All Credit Default Swaps Null And Void, separate good from bad banks and assets and start over with simpler and cleaner balance sheets.

It would not be simple to do and it will be unjust. But it will be much faster in ending the crisis and thereby in the end be more benevolend for all to go that way.

Posted by b on March 20, 2009 at 04:17 PM | Permalink | Comments (14)

AIG Headlines

Today's headlines:

Funny in its own way, especially the last two.

And a nice distraction from the new TALF program launched today with which the Fed will lend out money to hedge funds and shadow banks while taking about anything, including used photocopiers and cars, as collateral. The funds will use this scheme to get rid of their toxic 'assets' and the taxpayer will have to eat the losses.

Posted by b on March 20, 2009 at 10:32 AM | Permalink | Comments (8)

Populist

Stolen from anna missed


populist
by anna missed
2009, oil on photo copy
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Check anna missed's site for more paintings and pictures.

Posted by b on March 20, 2009 at 09:31 AM | Permalink | Comments (13)

March 19, 2009

Uzi Arad: "We want to relieve ourselves of the burden of the Palestinian populations - not territories."

Yesterday Israel arrested ten Palestinian political leaders in the West Bank:

Among those detained were four Hamas lawmakers, a university professor and a former Hamas deputy prime minister.

They are taking hostage to press Hamas for the release of a prisoner of war, Gilad Shalit, Hamas is holding in Gaza. The weekend negotiations about Shalit's release failed. While Israel agreed to release some of the several thousand of Palestinians it holds without any judicial process in exchange for the release of Shalit, it insisted on deporting those into some foreign country. Hamas could of course not agree with that.

So now Israel increases the pressure by taking more non-militant civilians hostages and a further blockade of the 1.5 million people in Gaza.

Worse is to come. The incoming Netanjahu/Avigor Lieberman government is at the extreme right of the political spectrum. Netanjahu selected as national security adviser Uzi Arad, a former(?) Israeli spy who is currently not allowed to enter the United States for spying against it. Recently Netanjahu snubbed Hillary Clinton when he insisted on Arad's presence in a meeting with her.

Next to being a spy Arad is also a fascist. I am exaggerating? No. Via War in Context a video of an interview a settler friendly TV station did with him.

Uzi Arad on the two-state solution:

I don’t think that one has to go that far because at the end of the day, I don’t think the majority of Israelis want to see themselves responsible for the Palestinians. We do not want to control the Palestinian population. It’s unnecessary. What we do want is to care for our borders, for the Jewish settlements and for areas which are unpopulated and to have our security interests served well. But also to take under our responsibility these populations which, believe me, are not the most productive on earth, would become a burden. We want to relieve ourselves of the burden of the Palestinian populations - not territories. It is territory we want to preserve, but populations we want to rid ourselves of.

The full interview is below the fold. The above quote is at 8:30, but the rest like his perverse understanding of 'democracy' is certainly also of interest.

There was a time when some my ancestors wanted to rid themselves of the "burden" of a certain population they vilified based on race and religion. We know how that ended. Never again? Not if Uzi Arad gets his way.

Posted by b on March 19, 2009 at 10:14 AM | Permalink | Comments (22)

March 18, 2009

The Greater Depression - At Least For Ships

Back in October I asked you for visible signs of the economic slump. For me the first sign were five ships (picture) up-laid in a usually empty part of the Hamburg harbor.

Here is a newer picture of another harbor part with another five pretty new and good ships up-laid because of general lack of trade and load.


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In total I recently counted eighteen up-laid ships in Hamburg alone and I may have missed some. Now Lloyd's List reports:

Just over 11% or 434 ships in the global containership fleet are currently unemployed.

The latest Alphaliner statistics showed that an additional 31 ships have been placed in lay-up since March 2.

To mothball those ships has help to put freight-rates measured in the Baltic Dry Index back up to 2,400. The index had slumped from a very profitable 12,000 level last May to a ruinous 800 in October. But the ships still sailing now are still unlikely to make any money. More of them will have to be placed in lay-up.

In the German version of the Financial Times shipowner Claus Peter Offen, who has more than 130 container ships in his fleet, expects that by the end of 2011, 25% of the world's container-ships fleet will swim idle. Another big German shipowner was reported to have rented a whole fjord in Norway to park his unused ships.

This table I dug up shows that the 25% level would be worse than the idle numbers during the Great Depression.

Up-laid trade-ship tonnage of the most important shipping countries 1930-34
 (midyear numbers, BRT=Gross Register Tonnage)

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Idle world tonnage:

  • 1930:  8.0%
  • 1931: 15.3%
  • 1932: 20.4%
  • 1933: 17.3%
  • 1934: 11.7%

Today's number of 11% is already higher than 1930's midyear 8%.

C.P. Offen estimates 25% by 2011 because he expects a similar trade slump as during the Great Depression but additionally accounts for the high number of new ships which are still on order books or being build right now. They will further clog the freight markets. The current world fleet is also in average unusually young and only few of these ships will get scarped soon.

So I welcome you to The Greater DepressionTM, which it will be at least for shipowners, seamen and harbor workers.

My question again:

What are signs of the downturn you see in your area? How have they changed in the last months? Are things getting worse or better?

Posted by b on March 18, 2009 at 02:44 PM | Permalink | Comments (72)

The Madagascar Drama

The Independent tries to give an answer to What is going on in Madagascar?.

A young, rich and now popular mayor just kicked an older, richer and now unpopular President out of his office. The background is corruption and sell-outs to foreign conglomerates. Madagascar is beautiful and the elite is chronically corrupt with 70% of the people living on less than $2 per day.

So just another post-colonial African play one might think.

But there is something curious about the names of the main characters involved in this drama. Consider:

  • Ravalomanana, Marc: elected President who now quit after protests and a mutiny
  • Rajoelina, Andry: former DJ and mayor who led the protests
  • Ratsiraka, Didier: former President and probably the man behind Rajoelina
  • Ramorosan, Hyppolite: Vice-Admiral and now heading a somewhat ruling military board
  • Rasolofomahandry, Edmond: army chief kicked out by a mutiny of young officers
  • Ranaivoniarivo, Mamy: Vice-Admiral and defense minister kicked out by the mutiny
  • Ndriarijaona, Andre: Colonel, new army chief

I suspect that either the Independent did get the last person's name wrong, or that the writer of this plot still has a special role in mind for him. Maybe as the new President where he then would really stick out?

Posted by b on March 18, 2009 at 08:27 AM | Permalink | Comments (11)

March 17, 2009

More AIG Bonuses Drama

Paul Kedrosky has some Fun with AIG Bonuses. He lists some recipient groups of bonuses at AIG and this one sticks out:

Eleven of the individuals who received "retention" bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 million.

Unfortunately I wasn't one of those eleven. If I were I now would probaqbly invest that "retention" bonus in buying call options on pitchfork producers.

Then again there may be better opportunities. As I pointed out this whole AIG bonuses drama is only a diversion that keeps the public away from talking about the multi-trillion looting scheme these guys are planing to implement with TALF 2.0. Maybe I should invest in that?

Posted by b on March 17, 2009 at 05:16 PM | Permalink | Comments (32)

Killer Commandos In Afghanistan

On the 9th the New York Times reported the the U.S. Halted Some Raids in Afghanistan:

The commander of a secretive branch of America’s Special Operations forces last month ordered a halt to most commando missions in Afghanistan, reflecting a growing concern that civilian deaths caused by American firepower are jeopardizing broader goals there.

The halt, which lasted about two weeks, came after a series of nighttime raids by Special Operations troops in recent months killed women and children, and after months of mounting outrage in Afghanistan about civilians killed in air and ground strikes.
...
Military officials said the halt was ordered in part to allow American commanders time to impose new safeguards intended to reduce the risk of civilian deaths.

If so, the new safeguards do not work. These troops are again out to kill:

A convoy of angry Afghans from Maywand district arrived at the outskirts of Kandahar city yesterday with the bodies of three men in the back of two minibuses and a pickup truck.

They said the men had been shot to death along with two others when U.S. Special Forces swept into the village of China in the eastern part of Maywand early Sunday morning.

The people in the convoy intended to protest the killing to Kandahar Governor Tooryalai Wesa, but were stopped by police before they reached the governor's palace.

The U.S. military says the dead men were anti-government insurgents. The protesters say the men were a local mullah and several farm labourers.
...
The villagers said helicopters swooped into China (which rhymes with Tina) and several homes were raided some time after midnight Saturday.

The five men who were killed, three of whom were elderly, were not related, they said. Two other people are missing, said the Afghans. U.S. Special Forces said they had three people in custody.
...
The group of about 100 protesters who travelled to Kandahar, most of them in Toyotas which are ubiquitous in Afghanistan, got as far as a traffic circle in a suburb on the western edge of the city where they were turned back by police.

They pointed to the gunshot wounds in the dead men's heads.

All three shot in the head. Executed?

The Special Operations troops are sweeping in by helicopter at night without knowledge of the regular Canadian and U.S. troops stationed in the area. They shot three people in the head, kill another two, take other as prisoners maybe never to return and vanish back into the night.

The regular troops on the ground then have to bear the naturally very angry local response. The Special Operation people are not under the same command as the NATO/ISAF troops or the regular U.S. troops in Afghanistan. They have a separate chain of command.

Seymour Hersh made some waves last week when he remarked on the NYT piece quoted above:

It’s an executive assassination ring essentially, and it’s been going on and on and on.

According to Hersh, during the Bush administration these troops were under direct command of Dick Cheney.

Who commands them now? Biden? Obama?

Who ordered them to kill the local mullah and the two farm workers?

And for what reason? They were "anti-government" the Special Operation forces excuse themselves. So those locals did not like Hamid Karzai? Is that now enough reason to deserve a headshot?

Posted by b on March 17, 2009 at 12:11 PM | Permalink | Comments (13)

More Aviation Fuel For Afghanistan

On February 21 I wrote about the U.S. Defense Energy Support Center solicitation for fuel in Afghanistan. That center is the sole supplier of fuel for all U.S. forces. The numbers in that solicitation were:

  • 67,320,000 U.S. Gallons - Turbine Fuel, Aviation
  • 12,240,000 U.S. Gallons - Fuel Oil, Diesel
  •   1,440,000 U.S. Gallons - Gasoline, Automotive, Unleaded

The total was 80 million gallons or 220,000 gallons per day. I pointed out that this number fitted to a Stratfor estimate from November 2008 as the yearly demand for U.S. and NATO forces in Afghanistan.

The solicitation has now been modified and the required numbers changed:

  • 100,776,000 U.S. Gallons - Turbine Fuel, Aviation
  •   11,883,000 U.S. Gallons - Fuel Oil, Diesel
  •    1,438,000 U.S. Gallons - Gasoline, Automotive, Unleaded

Diesel numbers have been lowered a bit and gasoline number stay about constant so no additional requirements for operating ground troops is assumed. But the anticipated need for aviation fuel has now increased by 50%.

I can think of two possible changes that require these higher numbers:

  1. The closing of the U.S. airbase Manas in Kyrgyzstan will require longer air transport into Afghanistan from elsewhere (Bahrain?) and thus require more fuel.
  2. The security situation on inner Afghan roads is now so bad that a decision has been made to now distribute most of the stuff needed by the troops in forward bases by air.

Transport flights from Bahrain to Bagram and back can likely carry enough fuel for both flight legs and would not need refueling Afghanistan. While they would have to fly 'heavy', this could well be cheaper than to fuel up in Afghanistan with fuel trucked in from as far away as Baku.

And here is another recent pre-solicitation for a serious upgrade of an airport at a new U.S. base at Tarin Kowt, a small city in south Afghanistan about 100 miles north of Kandahar. The Dutch garrison there happily used the old Russian dirt-strip runway there as visible in this video. As U.S. troops come in a $100,000,000 project gets started to accommodate their logistic needs:

The airfield pavements shall have paved shoulders, pavement marking, and lighting, markings, and tie-downs as required; as well as supporting facilities including but not limited to, anti-terrorism measures, site improvements, drainage, water, sewer, electric service, paving, walks, curbs and gutters.

Tidy enough to fly in X-gamers and volleyball players to keep the troops entertained.

In other logistic news: Early this month I remarked:

The last news I find of attacks on the route through north Pakistan is from February 7 and the last bad logistic news from the route through Quetta is from February 8 when a truck driver was shot. My assumption is that early in February someone spent real money to buy off the locals in Pakistan who facilitate the earlier attacks - Anbar tactics. But that will not hold for long. You can rent the Pashtuns, but you can not buy them. As soon as someone is willing to pay better, they will again be your enemies.

On Sunday a transport hub in Peshawar was attacked:

In a fresh attack on Nato supplies here on Sunday, suspected militants torched 13 military vehicles and over a dozen containers in a parking lot in Hazarkhwani after torturing three security guards.

A police official said that a group of around 60 militants attacked the Pak-Afghan Container Terminal on the Ring Road near Hazarkhwani, which transships logistics to Nato forces fighting against Taliban in Afghanistan, and set on fire containers and vehicles by firing rockets and hurling petrol bombs at the facility around 3:00am.

and Monday another hit:

In the latest assault, militants barged into a supply depot on the outskirts of the northwestern city of Peshawar at around 1:00 am on Monday, overpowered guards and set fire to vehicles, police said.

‘About 50 gunmen attacked us ... They first disarmed us and then began setting fire to bulldozers and humvees,’ one of he depot’s guards, Raza Khan, told Reuters.

This seems to be a group dedicated to attacks on U.S. and NATO logistics. According to the first report Pakistani police also found and defused two big roadside bombs with cell-phone triggers for convoy attacks. The war is moving along the logistic lines into Pakistan. One wonders how long it will take until such logistic attacks happen in Karachi harbor where the U.S./Nato materials land.

Over the weekend several deadly  convoy attacks also happened in Afghanistan. Earlier reports pointed to the frequent use of road culverts for hiding improvised bombs. The military is asking for special technology to defeat such bombs hidden in culverts under Afghan roads.

---
earlier coverage of Afghanistan logistics at MoA:
An Update On Afghanistan Logistics, March 6, 2009
Iran Should Offer Fuel To DESC, Feb 21, 2009
The New Route Plus Iranian Jet Fuel Supply To Afghanistan, Feb 20, 2009
The Pink Route To Afghanistan, Feb 3, 2009
The Costly New Supply Route To Afghanistan, Jan 26, 2009
New Supply Routes To Afghanistan, Nov 19, 2008
Fuel for War in Afghanistan Aug 20, 2008
The Road War in Afghanistan Aug 16, 2008
Fuel Tanker Attacks in Afghanistan Mar 24, 2008

Posted by b on March 17, 2009 at 11:39 AM | Permalink | Comments (5)

March 16, 2009

Renting Or Owning - Hen And Egg

Just read this piece on how badly foreclosure of rental property can effect U.S. renters. Most of the renter's problems described therein would be legally impossible in Germany.

The property owner, Irvine, Calif.-based Bethany Holdings Group, had abandoned the complex and a dozen other large rental properties in the greater Phoenix area after defaulting on hundreds of millions of dollars in loans.
...
The Bethany Group meltdown highlights how few protections exist for renters caught in the foreclosure crisis.
...
[B]y law, Hoffman said, the receiver is not liable for security deposits from renters who signed leases before the receivership went into effect.

In Germany the security deposits are on a savings bank book and in escrow of the bank. The owner can only access the deposit when he can prove a legal claim against the renter.

[I]n Arizona and at least 30 other states, there is no legal requirement to notify tenants that the property is going through foreclosure

The bankruptcy judge or the receivership manager would have to formally inform a renter in Germany and lay down whereto future rent pays should go.

And only New Jersey and the District of Columbia explicitly preserve tenants’ rights in the lease after a foreclosure.


That is very frightening. In my country leases are not effected by foreclosure at all. The renters contractual rights and obligations always continue through ownership changes.

“These tenants, if they leave, they could be held to the lease if the new owner wants to run it as a rental. If they don’t want to, the landlord could terminate the lease and say you have to get out, very often within five days.”

Five days is a ridiculously short time frame. The legal minimum here is three month, generally for both sides, and the lease is essentially permanent if the owner has no reason to kick one out. As long as one pays the rent and does no harm, the lease can not be terminated. Even if a new owner tries to terminate the lease with the claim to need to live in the leased place her/himself, s/he will have to prove that need.

So the renting laws in my country are much more renter friendly than in the U.S. and looking into why this is the case I find a hen or egg problem, i.e which was first, in homeownership rates.

The historic homeownership rate in the U.S. is some 65% (currently still a bit higher because of the housing boom). That is 65% of households are living in a place they (or their mortgage bank) own. In Europe the homeownership rate varies widely from country to country.

A 2004 paper tries to find the reason for the extreme differences:

The Southern European countries have the highest levels of owner occupation. Among the EU 15 countries Spain, Greece and Italy all have owner occupation rates of 80% or more. And Germany, while a much larger economy than those countries in the South, has an ownership rate of only 42%. ... Hungary has the highest rate of owner occupation at 92%, while the rate in the Czech Republic is only half of this.

The paper does not come to a conclusion but it explores various reasons for the huge differences in homeownership rate - tradition, family patterns, land use etc. It misses two though which I think explain quite a bit.

  1. War damage and a flood of ethnic cleansed refugees after WWII has likely much to do with this. In Germany lots of people arrived from the pre-war east Germany (much of today's Poland which was moved west itself) in today's Germany and that is certainly a reason that led to building large, new and often state financed renting complexes after the second world war. Unlike in Thatcher's Great Britain these were never sold of to private ownership but are still in the hands of public cooperatives.
  2. The legal environment that equalized owners and renters rights removes a lot of incentives to own a home. Why should I own if it is less bothersome and often even cheaper to rent than to own? The 'my home is my castle' mentality is the same for German owner and renters because the renters have a lot of legal security.

The hen-egg problem is that it is difficult to answer whether good legal protection for renters were first and caused a low homeownership rate or if the majority of the people being renters drove a political process that put strong pro-renter laws into the code of law. Did legal protection furthered renting or did renting further legal protection?

To close:

I find the high homeownership rate in the U.S. inefficient. People in the U.S. tend to move more often than in Germany and transaction costs for selling a home and buying a new one are a lot higher than moving from a rental to another rental. More renting would likely be more efficient for the U.S. economy as a whole.

On the other side the homeownership rate in Germany could be higher and still efficient if lease laws would favor renters less, building standard codes would be lowered and zoning laws less restrictive. Then again - do we really want more evictions, sheds and suburbs?

The renter/lease laws in the U.S. are brutal and unjust. If a renter A has a leasing contract with B and C takes over from B due to B's foreclosure or whatever why should A's contractual rights change in that case at all?

On the other side of that argument it is currently demanded by some, including by yours truly, to give some bond owners a haircut, i.e. reduce the value of the contract bondholder A has with bank B because B screwed up and the government, C, foreclosures B and takes over B's assets.

Is there a principled right view in this? Favor small people over big money - yes. But what about the grandma that bought Lehman bonds to finance here retirement? I'll have to think more about this.

Anyway:

The huge variance in homeownership in different countries is a quite interesting phenomenon.

  • How is the situation in your country/place?
  • What homeownership rate do you think is best as a policy goal?
  • How could it be achieved?

Thanks for letting all of us know.

Posted by b on March 16, 2009 at 05:13 PM | Permalink | Comments (34)

A New 'Paulson Plan'

AIG is practically blackmailing the U.S. government to pay out undeserved bonuses and unnecessary retention money. This while still not saying who the $170 billion the taxpayer gave it has been going to. Yes, they revealed some numbers yesterday but those were a. already known and b. make up only some 60% of the total. Where is the rest?

The hapless or nefarious (you decide) bailout of the big banks and bondholders may finally start to create some movement against it.

What's really driving this forward -- and what makes it such a dangerous moment for the White House -- is the jarring image of the administration's impotence.

This will make it very difficult to get any new stimulus or bailout program through Congress even if it would makes sense and may be needed.

Luckily for the administration the public, while watching the AIG show, misses the real robbery.

Most of the money used for the general bailout is coming from the Federal Reserve and is not under control of Congress. The new version of the Term Asset-Backed Securities Loan Facility (TALF) will put another trillion Fed/taxpayer money at risk. The program will lend to banks and hedgefunds to buy up 'asset' backed papers (bundled consumer and loans, commercial real estate loans etc.). It allows for great profits for those bank entities with the Fed taking 90% of the risk (also here):

Through the program, an investment fund can put down $5 to $14 for every $100 it plans to spend, borrowing the remaining $95 to $86 cheaply from the Fed. It agrees to buy highly rated securities issued by lenders that the Fed deems eligible collateral for the loans.

The aim is said to be to create more consumer lending, but I see no signs that consumers are willing to borrow more. Saving rates are going up as people become more frugal.

I suspect the more likely but unspoken real aim of the program seems to move 'toxic' assets from the banks balance sheets by subsidizing the buyers of these assets with the default risk transfered to the  Fed. Consider:

Wall Street dealers, including J.P. Morgan Chase & Co. and Barclays PLC's Barclays Capital, have created vehicles to participate in the TALF that would allow investors in the program to circumvent many of the restrictions laid out by the Fed. The vehicles resemble collateralized debt obligations, or CDOs, and use some of the financial engineering that was partially responsible for the collapse of the credit markets.
...
Under the new proposal, a bank such as Barclays or J.P. Morgan would set up a trust to buy securities with money borrowed from the Fed. The trust would then sell investors securities in the trust. Those securities would give returns similar to the TALF loan, but without the strings attached. The dealers say they could create markets for these derivative securities to trade, and a presentation by Barclays says they may be rated by credit-ratings companies and listed on the Irish Stock Exchange, a home for many CDOs.

It is not yet clear to me how this would work but the instruments used here are the same that created the current mess in the first place - it is insane. Can anyone explain how this is actually to work?

I read it like this:

The asset backed papers bought for a likely too high price with the Fed money will be sliced and diced by 'vehicles' into CDO tranches with each tranche carrying a different default risks. But who will then buy the risky parts of those CDO's and take the first losses? My best guess is that the most risky CDO parts will stay as collateral for the Fed within those 'vehicles' while the less risky parts will be sold off. Eventually the 'vehicles' will default on the Fed loans and the Fed is left with worthless paper as collateral.

A complicate scheme which will give the investment banks lots of fees, allows overpayment for toxic assets and transfers the risk of the overpayment to the general public. What's not to like with that.

Last year the Paulson plan to heal the banks balance sheets was to buy up toxic assets for too high prices and later Geithner planed similar schemes. Both planed to use treasury money for this and the general scrutiny about these programs prevented their implementation. But now the Fed will be abused to implement this.

To be able to subsidize this the Fed will need to create more unsterilized money. The bill for the losses the Fed is sure to take on this scheme will later have to be payed by the taxpayers through massive inflation.

So while the public is now waking up to the sideshow of AIG bonuses, the big money continues to be moved out through the backdoor.

Posted by b on March 16, 2009 at 10:08 AM | Permalink | Comments (45)

OT 09-09

News & views ... another open thread

Posted by b on March 16, 2009 at 05:31 AM | Permalink | Comments (47)

March 15, 2009

When CEOs Speak Like This ...

"There is absolutely no truth to the rumors of liquidity problems."
...
"Bear Stearns's balance sheet, liquidity and capital remain strong."
Alan Schwartz, CEO, Bear Stearns, March 10, 2008

March 16, 2008: Bear Stearn Forced To Sell For $2 Per Share,

---

"Our capital and liquidity positions have never been stronger."
Dick Fuld, CEO, Lehman Brothers, September 10, 2008

September 15, 2008: Lehman bankrupt as crisis engulfs Wall Street

---

"Not just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the United States"
Barack Obama, CEO, United States of America, March 15, 2009

Summer 2009: The US government defaults on its debt

... investors better run away.

Posted by b on March 15, 2009 at 12:32 PM | Permalink | Comments (29)

March 14, 2009

Dennis Ross Launches His Campaign

On March 6 AFP reported on U.S. reactions to the British announcement that it would talk to Hizbullah:

The United States said Friday it "is not ready" to follow its ally Britain in opening low-level contact with the political wing of Lebanon's Hezbollah, called a terrorist group by Washington.

Gordon Duguid, a State Department spokesman, told reporters that President Barack Obama's administration, which has promised to reach out to US foes, had been consulted by Britain before the announcement Friday.
...
However, the United States seemed interested in the results of the British contacts with Hezbollah when Duguid said "we will watch how that proceeds."

Then yesterday we get this:

A senior US official said Thursday he was unhappy with a British decision to open low-level contact with Hezbollah and suggested London only indirectly informed the new administration ahead of time.
...


The senior US government official, speaking on the condition of anonymity to a group of journalists in Washington, clearly expressed discomfort with the British decision.

He said he would like the British to explain to him "the difference between the political, military and social wings of Hezbollah because we don?t see a difference between the integrated leadership that they see."
...
The US government official, when asked if London consulted Washington ahead of time, replied: "I would say informed under a previous administration is a more accurate description."

This is of course a lie as the State Department spokesperson specifically confirmed British consultation with the Obama administration. 

The official also objected to the glorification in the Hezbollah stronghold of south Beirut of Imad Mugnieh, a Hezbollah commander who was killed in a car bombing in February 2008 that the movement blamed on Israel.

No normal State Department or U.S. government official would come up with such a stupid "objection." Hizbullah lost a important person to Israeli terrorists and is mourning him in South Beirut. Why object to that detail? Is that of any U.S. interest?

I bet a case of good German beer that the anonymous 'senior US government official' in this case was one Dennis Ross, Israel's embedded ambassador and watchmen over the U.S. State Department.

The Lobby is very active at implementing its agenda. The public Chas Freeman assassination was only one part. It is now aiming to get the U.S. to bomb Iran instead of doing it themselves:

I really doubt that Israel will bomb Iran in any big way - but I really do think they are trying to get us (US) to do it for them.
...
[W]hat I see is a strong contingent of Israelophiles in the US with great (horrible?) bureaucratic infighting skills, pushing the US into conflict with Iran.

The name is Ross. Dennis Ross.

Posted by b on March 14, 2009 at 03:48 PM | Permalink | Comments (12)

G20 - Pre-meeting

Today the G20 Finance Ministers are meeting to prepare for their bosses come-together early next month.

The U.S. wants West European countries and Japan to spend more 'stimulus' money. The Europeans says that they are already spending enough when 'automatic stabilizers' are taken into account. These are unemployment and other social payments that increase automatically during a recession. In the U.S. many of such measures are not automatic and were put into its 'stimulus' package making it look bigger than the European ones.

The West Europeans want more global regulations for all things financial. The U.S. will fight new global regulations as it sees them as infringements on its sovereignty.

The Chinese? They only want to make sure the U.S. pays their money back.

Nobody at the top wants to admit that the big banks are bankrupt and need to be closed down. Instead they continue to throw taxpayer money into those blackholes.

As there is absolutely no unity on what to do, and not even a common understanding of the problems, the G20 meeting will be without real results. Sure - there will be some agreement on further support for the IMF or another sideshow. But on the real issues nothing will get done.

No developed economy can survive without trust in its financial system. Without clean banks there is no trust. The real economy slump will thereby continue to get deeper and deeper. Over time this will create some political will to push for a real solution. This fall or early next year, another G20 meeting may start to push for some coordinated thorough cleanup of the real mess, the bankrupt banks.

So as sad as it may be -  the situation still needs to get worse before it can even start to get better.

Posted by b on March 14, 2009 at 11:36 AM | Permalink | Comments (14)

Change

Changing the label is all that they do.

U.S. Won’t Label Terror Suspects as ‘Combatants’

The Obama administration said Friday that it would abandon the Bush administration’s term “enemy combatant” as it argues in court for the continued detention of prisoners at Guantánamo Bay, Cuba, in a move that seemed intended to symbolically separate the new administration from Bush detention policies.

But in a much anticipated court filing, the Justice Department argued that the president has the authority to detain terrorism suspects there without criminal charges, much as the Bush administration had asserted. It provided a broad definition of those who can be held, which was not significantly different from the one used by the Bush administration.

Does the slime taste better now?

Emtywheel analyzes the details and writes:

In short, it's a big, fat, cynical game. A word game, like any other parlor game, giving a tired old concept a verbal facelift. Without, however, changing the concept itself.

Posted by b on March 14, 2009 at 02:22 AM | Permalink | Comments (15)

March 13, 2009

The Stewart Cramer Spat

On the Stewart take-down of CNBC's Cramer promoted by the U.S. left here, here and many other places:

This is ridiculous.

At the key point, in the third part at 4:27, Stewart asks Cramer: "What is the responsibility of people who cover Wall Street? Who are you responsible to? The people with the 401ks and the pensions or the general public or the Wall Street traders?"

The simple answers to those simple questions are: 1. To make money. 2. My boss and my wallet. 3. None of these - see 1 and 2.

With the last question a red card is held up and Stewart asks "Is this card blue or green?"

Stewart wants to make us believe that a commercial TV program has an obligation to public causes.

Why would that be?

Cramer works for CNBC and his task is to make a program that is as profitable as possible for his employer and for himself. That is his only task and motivation. To be as profitable as possible the program needs to attract advertising and a public that is big and fatuous enough to make that advertising profitable for the advertiser.

Additionally to that CNBC is required to take its owners other interests into account. CNBC is owned by NBC which is owned by General Electric (GE), a very large hedge fund with an attached industrial and media conglomerate. GE's interest will always trump any other interest aired by CNBC.

Stewart is payed lots of money for attracting profitable advertising for Comedy Channel which is owned by MTV itself owned by VIACOM, a public traded company owned by who knows who but certainly not "the general public".

So Stewart has no interest in saying the obvious: Commercial TV, CNBC as well as Comedy Channel, has no interest in the general public good at all. Their only interest is to make money.

Stewart wants to embarrass Cramer and CNBC over doing exactly the same stuff he himself is doing - albeit in a different market segment.

Ridiculous.

A few days ago I told a friend that the first real sign the current financial crisis is over will be the news about the immediate shutdown of the last financial TV station. "When CNNmoney, CNBC and Bloomberg are gone this crisis will finally end." I should have included the Comedy Channel in that list.

Posted by b on March 13, 2009 at 04:34 PM | Permalink | Comments (48)

Killer Drones Guided By Mobile Phone Locations

Another 24 people were killed in Pakistan today when U.S. drones fired at some houses in the Kurram tribal region.

One wonders how the U.S. gets information about alleged Taliban meetings it fires on. I do not believe that it has significant human intelligence, i.e. spies, on the ground. The video information it gets from observation drones is also not good enough to go after specific people. But there is a third leg of information gathering that I always suspected to be involved - signal intelligence from mobile phone location data.

Indeed at the end of an NYT piece today we learn:

In carrying out missile strikes, the C.I.A. has steadily developed its own network of sources in the tribal areas, and combined with improved information-sharing with Pakistan’s main intelligence agency in recent months, as well as some technical advances like installing more mobile towers to intercept cellphone calls, the agency has been getting much better intelligence on its drone targets than it did just a few months ago, officials said.

Those mobile towers may not be really towers but simply other drones that carry mobile phone base station equipment and catch the movement of cell-phones and their attached human beings:

An IMSI-catcher is a device for forcing the transmission of the International Mobile Subscriber Identity (IMSI) and intercepting GSM mobile phone calls.
..
Every mobile phone has the requirement to optimize the reception. If there are more than one base station of the subscribed network operator accessible, it will always choose the one with the strongest signal. An IMSI-catcher masquerades as a base station and causes every mobile phone of the simulated network operator within a defined radius to log in.

Using one or more mobile and even air-mobile IMSI catchers the CIA can over time register the movement of all mobile phones in an area. If a phone crosses the border from Afghanistan to Pakistan and meets another mobile phone that has been used to make a call to Yemen and another that called some suspicious number elsewhere that would be a possible target.

Of course over time Darwin's law will set in and the smart fighters that avoid to carry or getting near a cell phone will survive and not be detectable by such means. Unfortunately that will be unlikely to stop the CIA or Air Force to blow up people. Everyone needs to make the body-count numbers. As more the Mujaheddin learn, more innocent people will be killed by their adversaries. That will work well for the Mujaheddin cause.

Posted by b on March 13, 2009 at 01:48 PM | Permalink | Comments (6)

March 12, 2009

Smart Grid Scare

Uncle $cam points to a scare story about the Smart Grid: Smart Grid: Government spying targets Rural America

Smart Grid is closely related to the National Animal Identification System (NAIS), and both programs are designed to spy on Americans. Even more disturbing than the purpose of these government-condoned intrusions into our lives is the fact that the Obama Administration feels that Smart Grid is so important that it had to be funded in the stimulus package—which is supposed to be used for emergencies only. What’s the emergency? Why does Smart Grid need to be implemented within 60 days of the bill passing?

Oh boy.

I have been working on 'smart grid' or 'intelligent grid' stuff for this company - a German electricity provider that is a leading force in alternative energy projects. In short: Smart Grid is a system to balance decentralized electricity production with decentralized consumption.

Today big electricity production plants generate electricity and small entities, companies and households, consume it. As daytime usage is far higher than nighttime usage a lot of expensive central generation capacity is only used part time. Another problem is that today's electricity distribution network has significant transport losses due to long distance balancing.

In future we will still have some big electricity production plants but also lots and lots of smaller and decentralized ones - be they from wind generators, photovoltaic systems on single home roofs or biomass generators on farms. We will also see innovations in energy storage especially for cooling, heating and for electric cars.

To optimize such networks one will want to provide some control instance that can coordinate the distributed generation side and, as far as possible, also the consumption side. Additionally local generation should be balanced with local consumption to lower energy transport losses.

Photovoltaic generation only works when the sun shines, peaks and droughts of wind generation are more or less unpredictable. Traditional air cooling needs a lot of electricity over the day, electric heating in the winter too. In average we therefore always keep a lot of overcapacity in electricity generation for which costs all electricity users have to pay.

Now imagine a cooling/heating systems that generates cold or heat over windy nights from wind generated electricity, stores it for some hours and releases it as needed in daytime. Then have a centralized control that manages that to minimize the total peak electricity generation and transport need. Imagine a system that is intelligent enough to control the future 100,000 electric cars in a city plugged in to reload between 10:00pm and 10:15pm in a way that minimizes their peak loading need. Without a control system all cars would start reloading immediately when plugged in and the peak capacity needed to handle that would be quite big. But if 10,000 cars start loading immediately, the next 10,000 half an hour later and so on, the peak need will be much less. With a 4 hour loading period per car at no time more than 50,000 electric cars would load at the same time. The peak capacity need would be halved.The price to load up would be less than otherwise.

To be able to manage that the electricity network will need an additional communication layer (this was my part) that is able to manage the decentralized items according to their needs.

There is nothing nefarious about that - the forming standards to do these things will be open. Of course such a system could get abused to snoop on everyone's electricity consumption habit. Every system can be abused. But we have laws or are at least supposed to have laws which prevent such.

And what has a smart grid to do with the National Animal Identification System which tags livestock animals from birth to death to be able to trace back diseases?

Absolutely nothing.

Europe has such an animal identification system using ear tags for about 20 years. When "mad cows" with BSE were found the system enabled the authorities to find the source herd pretty damn quick. Mandatory animal tags also disable farmers to evade taxes by selling unregistered animals. That is the real reason why some of them hate them. Why pay taxes?

There are many such scare stories out there about useful technology and effective government plans. It's good that Uncle $cam posts such stories here. There are really some issued out there to be paranoid about and he helps us to watch out for them. To sort them out is not always easy. But 'smart grid' and NAIS do not really belong into that category.

Somehow the U.S. seems to have more people concerned with such issues than other countries. I often wonder why that is the case.

Posted by b on March 12, 2009 at 02:34 PM | Permalink | Comments (30)

The Old And New Washington Establishment

Xymphora has a theory of Washington power groups:

There are two American establishments, the WASP Old American Establishment, and the Jewish New American Establishment. You might think there would be a battle for control, but the Old American Establishment just gave up. The Jewish New American Establishment, fronted by people like Rosen and the usual crowd of suspects, but operating in this case through Chuck Schumer and Rahm Emanuel [...] wanted Freeman out, so Freeman is out.

I disagree with naming the second group Jewish New American Establishment. There are lots of gentiles in that neocon/Zionist group and a lot of Jews seem not to support it.

But the basic characterization of an old 'realist' establishment versus a new 'neocon' establishment seems right to me and the fight between these groups for control was very visible in the Freeman case.

Consider today's Washington Post where it is happening within the editorial staff.

On today page A01 veteran reporter Walter Pincus, certainly old establishment, is giving Freeman's statement a lot of airing and he makes it clear that indeed the Israel Lobby was the culprit here:

Only a few Jewish organizations came out publicly against Freeman's appointment, but a handful of pro-Israeli bloggers and employees of other organizations worked behind the scenes to raise concerns with members of Congress, their staffs and the media.

For example, the American Israel Public Affairs Committee (AIPAC), often described as the most influential pro-Israel lobbying group in Washington, "took no position on this matter and did not lobby the Hill on it," spokesman Josh Block said.

But Block responded to reporters' questions and provided critical material about Freeman, albeit always on background, meaning his comments could not be attributed to him, according to three journalists who spoke to him. Asked about this yesterday, Block replied: "As is the case with many, many issues every day, when there is general media interest in a subject, I often provide publicly available information to journalists on background."

Yesterday, the Jewish Institute for National Security Affairs, which tried to derail Freeman's appointment, applauded his withdrawal. ...

On the opinion page, 'the dean' of Washington's press corps David Border does not hold back either. Headlined The County's Loss Broder opines:

The Obama administration has just suffered an embarrassing defeat at the hands of the lobbyists the president vowed to keep in their place, and their friends on Capitol Hill.
...
I know [Freeman's] was a sudden decision because I had breakfast with him that morning.
...
"I think their goal is not to stop me but to keep others from speaking out, and to assure that AIPAC [the American Israel Public Affairs Committee] is part of the vetting process for future nominees," he told me.

But after another visit to members of Congress, Freeman was gone.

It was an ignominious end to one of the most distinguished international careers in American government.

Ignoring the news reported in its own paper the main editorial, likely written by Fred Hiatt himself, refutes the idea of any lobby influence:

Mr. Freeman issued a two-page screed on Tuesday in which he described himself as the victim of a shadowy and sinister "Lobby" whose "tactics plumb the depths of dishonor and indecency" and which is "intent on enforcing adherence to the policies of a foreign government." Yes, Mr. Freeman was referring to Americans who support Israel -- and his statement was a grotesque libel.

For the record, the American Israel Public Affairs Committee says that it took no formal position on Mr. Freeman's appointment and undertook no lobbying against him. If there was a campaign, its leaders didn't bother to contact the Post editorial board.

As if that would have been necessary ...

Who will, over time, win this fight - the WASP establishment or the neocon/Zionist crowd?

The new far-right guys and gals will win. The old guard, Pincus, Broder and many others of those who have spoken out for Freeman will retire soon. What will be left are the small-minded, picayunish trolls like Hiatt and the wanking buffoons like Tom Friedman.

That decline in public intellect will accompany the decline of the empire.

Posted by b on March 12, 2009 at 05:27 AM | Permalink | Comments (33)

March 11, 2009

Coup in Pakistan

No, not (yet) a military coup against the government, but a government coup against the opposition:

Dozens of political activists and lawyers were arrested in Islamabad and across the Punjab Wednesday in a bid to thwart a planned protest march on the capital, police said.
...
Those rounded up include members of Pakistan's most popular opposition party, which is headed by former prime minister Nawaz Sharif, who was last month disqualified from contesting elections.
...
In Lahore police confirmed further arrests after authorities banned protests and ordered paramilitary troops to be on alert in a bid to prevent this week's planned ‘long march’ demanding legal reforms.
...
A government official told AFP he expected ‘hundreds of people’ to be rounded up before the long march and that lists of ‘miscreants’ were being prepared in districts across Punjab province.

Zardari, the current president, broke his election promises, especially on the reinstatement of the supreme court judges Musharraf had fired and replaced with his tools. Last week the supreme court judged against the Sharif brothers and disqualified them from all political positions. Shahbaz Sharif, the brother of the Muslim League's leader, Nawaz Sharif, was the chief minister of Punjab, the most populated state of Pakistan. Instead of allowing the Punjab parliament to vote for a new chief minister, the president selected one of his friends as governor to rule over Punjab. The Sharifs, together with the lawyer movement that supports the fired supreme court judges, called for a long march to Islamabad to protest the president's actions.

Now Zardari, using dubious legal powers, is actively suppressing any opposition.

This might very well lead to a bloody struggle against the Zardari regime. The question then is not if but when the military will again take over to bring some calm into the situation.

Yesterday Juan Cole published a good backgrounder on the troubles. He judges that this conflict will dwarf the trouble with the Taliban problem and the Deobandi fight against Sufism.

One wonders what position the Obama administration will take on this:

  1. Support Zardari?
  2. Support Sharif and the lawyer movement?
  3. Urge for a military coup?

Zardari gives the U.S. practically a free hand to fight the Taliban on Pakistani ground. But keeping him is certain to create a bigger mess in Pakistan with unforeseeable consequences.

While Sharif would probably bring more peace to Pakistan, he is unlikely to play along with the U.S. So I doubt that the U.S. will ever support him even if that would help to calm things down.

Which lets me assume that the U.S. will eventually support another military coup against the civil government of Pakistan. Chief of Army Staff General Kayani has worked well together with the U.S. so far. But up to now Kayani has rejected any kind of interference in the political process. That he is capable to become some accepted leader of an interim government is dubious. 

Most likely the U.S. will follow Churchill's dictum "the United States invariably does the right thing, after having exhausted every other alternative" and first support alternative 1. When the trouble gets bigger it will support alternative 3 and finally it will have to accept alternative 2. Meanwhile the people in Pakistan will have to sustain a unruly and bloody time.

Posted by b on March 11, 2009 at 07:24 AM | Permalink | Comments (21)

Another Victory For The Lobby

Excerpt from Chas Freeman’s statement on the withdrawal of his appointment as chairman of the National Intelligence Council (NIC) (full text available via Jim Lobe):

It is apparent that we Americans cannot any longer conduct a serious public discussion or exercise independent judgment about matters of great importance to our country as well as to our allies and friends.
...
The tactics of the Israel Lobby plumb the depths of dishonor and indecency and include character assassination, selective misquotation, the willful distortion of the record, the fabrication of falsehoods, and an utter disregard for the truth. The aim of this Lobby is control of the policy process through the exercise of a veto over the appointment of people who dispute the wisdom of its views, the substitution of political correctness for analysis, and the exclusion of any and all options for decision by Americans and our government other than those that it favors. There is a special irony in having been accused of improper regard for the opinions of foreign governments and societies by a group so clearly intent on enforcing adherence to the policies of a foreign government – in this case, the government of Israel. I believe that the inability of the American public to discuss, or the government to consider, any option for US policies in the Middle East opposed by the ruling faction in Israeli politics has allowed that faction to adopt and sustain policies that ultimately threaten the existence of the state of Israel. It is not permitted for anyone in the United States to say so. This is not just a tragedy for Israelis and their neighbors in the Middle East; it is doing widening damage to the national security of the United States.

The outrageous agitation that followed the leak of my pending appointment will be seen by many to raise serious questions about whether the Obama administration will be able to make its own decisions about the Middle East and related issues.

For background on this read Max Blumenthal.

Posted by b on March 11, 2009 at 03:09 AM | Permalink | Comments (27)

March 10, 2009

Somalia Thread

b real continues to give us fascinating and disturbing insight into U.S. machinations in Somalia. Skim through this thread's comments and you will learn quite a bit on how the empire manipulates the various parties of the conflict and the media reports on it.

What did the Illyushin 76, operated by Aerolift and chartered by Dynacorp, carry when it went down in the Victoria Lake during a flight from Entebbe, Uganda, to Mogadishu, Somalia? Who financed the 20 or so flights it did this month alone?

b real helps us to first ask, and then to find answers to those questions.

Somalia is not your problem? Well - we pay for these misguided empire policies through our taxes now and we will have to pay when the usual backlash will appear near to us.

Posted by b on March 10, 2009 at 04:39 PM | Permalink | Comments (84)

Citi's Sucker Rally

The stock market rallies today, everything is fine again now:

NEW YORK (Reuters) - U.S. stocks rose about 5 percent on Tuesday after Citigroup said it was profitable in the first two months of 2009 ...

So it seems that Citibank's Pandit is the hero who brought this about:

March 10 (Bloomberg) -- Citigroup Inc. Chief Executive Officer Vikram Pandit said his bank is having the best quarter since 2007, when it last posted a profit. The shares rose as much as 27 percent and helped spur gains for finance company stocks.

Ok - the best quarter since the last one that was profitable. But does that mean that this quarter will turn profitable? Or does that only mean that the loss this quarter will be smaller than the double digit billion losses in each of the five quarters before? Pundit does not tell us:

“I am most encouraged with the strength of our business so far in 2009,” Pandit wrote in an internal memorandum obtained today by Bloomberg.

"Obtained" by Bloomberg? Seems to me it was given to Bloomberg by Pandit's public relation agency.

“I am, like you, disappointed with our current stock price and the broad-based misperceptions about our company and its financial position,” Pandit, 52, said in the memo, adding that the price doesn’t reflect the New York-based bank’s capital strength and earnings potential. The company had $19 billion of revenue in January and February excluding writedowns that have already been disclosed, Pandit said.

Now wait a second - writedowns that have already been disclosed do not count? In reality there were probably  $19 billion of revenue but the writedowns, disclosed or not, are bigger and I bet the quarter will thereby end with another loss.

The Bloomberg piece created a sucker rally. I believe it is a lot of hot air. A last minute pump and dump scheme.

As the Wall Street Journal reports:

Barely a week after the third rescue of Citigroup Inc., U.S. officials are examining what fresh steps they might need to take to stabilize the bank if its problems mount, according to people familiar with the matter.

Federal officials describe the discussions, which are wide-ranging and preliminary, as "contingency planning." Regulators are trying to ensure that they are prepared if Citigroup takes a sudden turn for the worse, which they aren't expecting, these people say.

"Contingency planing" when you do not expect trouble?

Banking regulators and Treasury officials called Citigroup executives over the weekend amid rumors about the discussions, according to people familiar with the matter. They said the talks were geared toward future planning and that no new rescue was imminent.

The discussions include the Treasury Department, Office of the Comptroller of the Currency, Federal Reserve and Federal Deposit Insurance Corp. The FDIC backs many of Citigroup's deposits in the U.S., as well as a large amount of new debt issued by the firm.

Regulators say the planning should be seen as a normal function of government during a financial crisis.

Four important agencies work with Citigroup over the weekend because they do not expect any problem. Is that a normal functioning of government? No, I will not buy that bridge.

Citi is bankrupt. There is no way to rescue it except the taxpayer steps in to cover the $140 billion or likely more of Citi's derivative losses.

Is there the political will to that? Not really, but neither is there political will to let it fail. The powers that be will try to prop Citi up from quarter to quarter and will thereby let the cancer grow that eats at the health of the real economy.

It would be very messy to let Citi aand other big banks go down and woud have a lot of serious international and national political consequences. Still - unless the U.S. wants to go down itself, it might be the only right thing to do.

Posted by b on March 10, 2009 at 01:37 PM | Permalink | Comments (16)

 
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