Moon of Alabama Brecht quote
April 30, 2005

Barfly Art: Transhumanity

The Evanescence of Things
by beq

pastels with sumi ink
on paper from Thailand
(fullsize, uncompressed - 600 KByte)

There is more ...

The Full Moon was Quick to Rise
by beq

pastels with sumi ink
on paper from Thailand
(fullsize, uncompressed 600 KByte)

Generally, the primary purpose of transhumanism is to increase the efficiency of human functioning by modifying the human genome of zygotes, which I assume means eliminating the countless rare, common, and omnipresent genetic flaws, not excluding age-induced degeneration, and to increase human desirability, ability, versatility, and resilience. Other technologies that serve a similar purpose are also considered.
A Proposed End-Goal: Justice Maximism (suggested by the artist)

Posted by b on April 30, 2005 at 07:54 AM | Permalink | Comments (13)

Billmon: Rush to Judgment

R.L.: "Compassion is no substitute for justice."

Posted by b on April 30, 2005 at 04:10 AM | Permalink | Comments (40)

April 29, 2005

Flag-Draped Anniversary

Short after the Abu Ghraib pictures became public knowledge one year ago, Rumsfeld said:

Judge us by our actions. Watch how Americans, watch how a democracy deals with wrongdoing and scandal and the pain of acknowledging and correcting our own mistakes and weaknesses.

Powell added:

Watch how we deal with this. Watch how America will do the right thing. Watch what a nation of values and character, a nation that believes in justice, does to right this kind of wrong. Watch how a nation such as ours will not tolerate such actions.

The Army's whitewash

ignores centuries of norms within the military profession and undermines the legal doctrine of command responsibility

says Phillip Carter. The responsible civilists have been promoted, Congress ignores its responsibility, the media show interrogations as a laudable act and in Iraq torture continues.

Some newsshows, set to re-broadcast some Abu Ghraib torture pictures today, will cancel these plans and show flag-draped coffins instead. Pictures that conveniently were released today. Threehundertandsixty perfect illuminated photographs of neatly flag-draped coffins published -incidently???- on this special day. Nice try - the Iraqis will love their anniversary cake! How much was Ketchum paid for the job?

Mr. Rumsfeld, Mr. Powell - we are still watching. Waterboarding Abu Ghraib pictures on flag-draped coffins may work on Faux News. It doesn´t work around the world - not yet at least.

Billmon asked a year ago:

So how much deeper into the sewer are we collectively going to climb before we finally admit defeat?

Still climbing deeper, still climbing deeper ...

Posted by b on April 29, 2005 at 08:35 AM | Permalink | Comments (49)

Billmon: Down Time

What the U.S. bubble economy needs, then, is for even more speculators to take even larger unhedged positions in the bond market financed with borrowed yen. And the best way to persuade them to do that is to convince them short-term yen rates will remain close to zero; that the ODIC cartel will defend the dollar to the death; and that long-term U.S. bond prices are unlikely to fall dramatically. It also helps to make alternative uses of speculative capital look less appealing.
.. As I told a friend the other day, the supply side hag may be aging rapidly, but she may still have a few more, um, carnal moments left in her yet. And at this late date, that may be about the best we can expect.

Down Time

Posted by b on April 29, 2005 at 03:34 AM | Permalink | Comments (27)

April 28, 2005

Bush Not Putting Enough People in Jail

Despite real efforts in 2003 and 2004, the US prison population has been mostly stagnant under Bushco, as compared to previous periods:



Is Bush soft on crime?

Of course, I am being snarky. The recent news (linked to above) about the renewed growth of the prison population in the past 2 years have not been mentioned widely in the blogosphere as far as I have been able to ascertain, and I thought I would provide these numbers and a few others below.

The scandal is the sheer size of the prison population in the US, and its becoming another chunk of the militaro-industrial complex - or another "complex" on its own right.



With an inflation of around 265% for the period, this means that police and justice budgets were flat or growing very slightly, the corrections budget doubled in real terms, and the prison population tripled. (of course, the Dow Jones was multiplied by 16 during the period)

It's also interesting to note that this is a fairly recent trend:


Source: The Sentencing Project (pdf, 17 pages).

The result is that the US now have the highest incarceration rate in the world, by very far if compared to other Western countries (2002 numbers):


This graph comes again from The Sentencing Project, which thus analyzes these numbers:

The high rate of imprisonment in the United States can be explained by several factors:

  • A higher rate of violent crime than other industrialized nations.
  • Harsher sentencing practices than in other nations, particularly for property and drug offenses.
  • Sentencing policy changes over a period of three decades, particularly the shift toward mandatory and determinate sentencing, restrictions on judicial discretion, and a greater emphasis on imprisonment as a preferred sanction.
  • Policy changes adopted as part of the “war on drugs,” leading to a vastly increased use of the criminal justice system as a means of responding to drug problems.
  • An even more terrifying statistic, provided in the first Yahoo link above, is that

    An estimated 12.6 percent of all black men in their late 20s were in jails or prisons, as were 3.6 percent of Hispanic men and 1.7 percent of white men in that age group

    That's one in 8 in prison, which means that, with those that have been and those that will fall at some other point in the future, one black man in 3 or so will know jail in his twenties. How is that not a major scandal bringing real action? One man in three?

    (Note that I am not claiming that minorities are treated any better in other countries: the Sentencing Project notes that the relative ratio of incarceration for minorities is similar or worse in other countries; but, combined with the high absolute level of incarceration, only the US sees such a high proportion of its young men go to jail)

    Note also that with 2.1 million people in jail (and another 5 million under the control of the penal system), most of them of working age, the US unemployment rate is artificially lowered by at least 1.5 points (if not 5 points, depending on how you evaluate the employment prospects of ex convicts or people on probation).

    The other scandal of course, is the way these people are treated while in jail. Abu Ghraib was not news to US inmates.

    Abu Ghraib .... Shocking? What Happened There Is Commonplace at U.S. Prisons

    in the typical American prison, designed and run to maximize degradation, brutalization, and punishment, overt torture is the norm. Beatings, electric shock, prolonged exposure to heat and even immersion in scalding water, sodomy with riot batons, nightsticks, flashlights, and broom handles, shackled prisoners forced to lie in their own excrement for hours or even days, months of solitary confinement, rape and murder by guards or prisoners instructed by guards--all are everyday occurrences in the American prison system.

    The use of sex and sexual humiliation as torture in Abu Ghraib and the other American prisons in Iraq is endemic to the American prison. Psychological and physical sexual torture is exacerbated by the underlying policy of denying prisoners any volitional sex, making the only two forms of sexual activity that are physically possible--homosexuality and masturbation--both offenses subject to punishment. Strip searches, including invasive and often intentionally painful examination of the mouth, anus, testicles or vagina, frequently accompanied by verbal or physical sexual abuse, are part of the daily routine in most prisons. A 1999 Amnesty International report documented the commonplace rape of prisoners by guards in women's prisons.[2]

    Each year, numerous prisoners are maimed, crippled, and even killed by guards. Photographs could be taken on any day in the American prison system that would match the photographs from Abu Ghraib that shocked the public

    Some US Prisons as Bad as Abu Ghraib

    Prisoner Abuse: How Different are U.S. Prisons? (Human Rights Watch)

    Abu Ghraib, USA (Anne-Maris Cusac, The Progressive - many more links in that article)

    When I first saw the photo, taken at the Abu Ghraib prison, of a hooded and robed figure strung with electrical wiring, I thought of the Sacramento, California, city jail.

    When I heard that dogs had been used to intimidate and bite at least one detainee at Abu Ghraib, I thought of the training video shown at the Brazoria County Detention Center in Texas.

    When I learned that the male inmates at Abu Ghraib were forced to wear women's underwear, I thought of the Maricopa County jails in Phoenix, Arizona.

    And when I saw the photos of the naked bodies restrained in grotesque and clearly uncomfortable positions, I thought of the Utah prison system.

    Donald Rumsfeld said of the abuse when he visited Abu Ghraib on May 13, "It doesn't represent American values."

    But the images from Iraq looked all too American to me.

    I've been reporting on abuse and mistreatment in our nation's jails and prisons for the last eight years. What I have found is widespread disregard for human rights. Sadism, in some locations, is casual and almost routine.

    Reporters and commentators keep asking, how could this happen? My question is, why are we surprised when many of these same practices are occurring at home?

    A Visit to Valley State Prison for Women (Amnesty International, 1999)

    Recommendations to address human rights violations in the USA (Amnesty, 2004)

    But of course, inmates cannot vote. So maybe it is a good thing that prison populations have not grown so much in recent years...

    Posted by Jérôme à Paris on April 28, 2005 at 10:15 AM | Permalink | Comments (18)

    Billmon: The Grand Delusion

    To the Straussians, rationality does not provide an adequate basis for a stable social order. To the contrary, the Age of Enlightenment has ushered in the crisis of modernity, in which nihilism – the moral vacuum left behind by the death of God – inevitably leads to decadence, decline and, ultimately, genocide.

    That logical leap from Jefferson to Hitler might seem like the intellectual equivalent of Evel Knieval’s outlandish attempt to jump the Snake River canyon on a rocket-powered motorcycle. But it’s essential to the Straussian world view – just as it provides the crucial angst that gives neo-conservatism such sharp political edges.

    The Grand Delusion

    Posted by b on April 28, 2005 at 03:45 AM | Permalink | Comments (346)

    April 27, 2005

    News, Views, Opinions ...

    An open threatd ...

    Posted by b on April 27, 2005 at 01:58 PM | Permalink | Comments (85)

    Bye-bye 747

    The latest tool for the most inconvenient way to travel comes down at a list price of some $270 million.

    On your flight to that "lonely spot" the travel agent envisioned, you will be joined by up to 839 fellows in being immobilized, dehydrated and deprived of oxygen.

    Having arrived you will just forget about peak oil, global warming, uncontrolled development and all the other menaces your unreasonable fellow humans bring about.

    Okay, apart from that depression, congrats to the Airbus folks who did get this hydrocarbon eating bird up and down without trouble.

    Posted by b on April 27, 2005 at 01:26 PM | Permalink | Comments (13)

    It's Too Late

    For those of you that have followed my previous economic stories, this should not come out as a surprise, but the Financial Times publishes yet another pessimistic article about the US economy.

    Today's installment is quite explicit: Property could fall like a house of cards

    Nout Wellink, president of the Dutch central bank, last month warned that a hangover from the property boom could well exacerbate the next downturn. Both the Dutch experience and the history of housing booms suggest that this counsel deserves to be taken seriously. However, it is probably already too late for the leading Anglo-Saxon economies to escape lightly from the consequences of their property bubbles.

    In the late 1990s, the Netherlands had one of the most successful economies in Europe. At the time, both Dutch house prices and household credit growth were rising at double-digit rates. As homeowners cashed in on their burgeoning home equity, the Dutch savings ratio collapsed (from more than 13 per cent of income in 1997 to less than 7 per cent three years later).

    The Dutch housing market cooled after interest rates began climbing in 1999. The following year, house-price inflation came to a halt. Household credit growth slowed simultaneously - mortgage equity withdrawal fell from €10bn ($13bn) in 1999 to €5bn in 2002. This had an adverse effect on consumption. As consumer confidence dipped and unemployment climbed, the Dutch began to save more. Three years after the end of the housing boom, the economy contracted.


    Contrary to popular perception it is not necessary for house prices to fall to create a serious problem for the economy at large. When house prices merely cease rising, the rate of credit growth normally slows, inducing householders to save more and spend less. At best, this produces a mild drag on the economy, as has been the case in the Netherlands. At worst, the economy undergoes a severe slowdown with soaring unemployment and a painful recession - as occurred in Japan, the UK and Scandinavia in the early 1990s.

    Note this - you need perpetually increasing housing prices to support consumption when such consumption is not based on growing wages (stagnant in the US for the past 2 years) but on increasing asset prizes being monetized through equity withdrawals and mortgage refinancing on increasingly aggressive terms.

    Even if prices stop increasing, you get economic pain: consumption slowdown, stagnant economic growth, with all the usual consequences: higher unemployment, bankruptcies, higher budgetary deficits as tax revenues decrease.

    But it is not just borrowers who are hurt by a housing market collapse. Rising levels of bad debt inflict damage on lenders' balance sheets. This often leads to a credit crunch and sometimes to a full-blown banking crisis. The failure of the Bank of United States in 1930, for instance, during the Great Depression, was due largely to losses on property lending. Furthermore, as over-indebted households cling tenaciously to their homes and lenders delay the politically unpopular and costly process of foreclosure, the banking system may have to deal with the aftermath of a housing crash for many years.

    Remember also that houses represent the biggest share of US assets. For most people, their home is their single biggest asset; and their mortgage their single largest financial commitment. Should a serious economic crisis hit, banks will be seriously hit along with many of their clients, especially when they have provided highly leveraged financing (like the 30-year, no principal repayment, interest-only-in-the-first-few-years loans provided in some markets). And banking crises cost a lot of money in bailouts, and always have the risk of a systemic crisis (when there are bank runs or at least a massive loss of trust in the financial system). Furthermore, many of the recently invented financial instruments (like CDOs) have NEVER been tested through an economic downturn.

    Government finances commonly deteriorate after housing booms end, as fiscal policy is employed aggressively to prevent the economy from slumping further. Since the end of the property bubble in the early 1990s, Japanese government debt as a percentage of gross domestic product has more than doubled and currently exceeds 160 per cent of national income.

    That's actually the worst part: housing market slowdowns have massive negative consequences for government budgets, which suffer mightily form the downturn. If you think that the budget deficit is bad, think what it will be like after that... The Bush administration has used up all reserves and spent recklessly despite benefiting from a supposedly strong economy.

    It's REALLY a house of cards. The recent apparent economic growth has been obtained by throwing massive amounts of money at an economy increasingly unable to absorb it (to invest) - that money has thus been spent, either in the total waste that the Iraqi war is, or on a growing volume of imports from China and other places. It's not growth, it's binging on plastic - and it leaves no room for maneuver when the bad times actually come, as they will.

    The end of housing bubbles in other countries has been associated with periods of prolonged economic weakness, increasing financial fragility, rising government deficits and the appearance of monetary instability.

    We already have this before the end of the bubble, what will it be after?

    Again, the blame goes to both Bush for his reckless budgetary policies and to Greenspan for his amazingly lax monetary policy. Call him "Bubbles" Greenspan each time you write and talk about him, because that's the only way to put it. Stephen Roach, the markedly bearish chief economist of Morgan Stanley, which I quote often, has another piece this week where he wonders if there could actually be some kind of conspiracy in Greenspan's act, in view of their obvious recklessness:

    Morgan Stanley's Global Economic Forum (25 April 2005)

    I am not a believer in conspiracy theories.   But the Fed’s behavior since the late 1990s is starting to change my mind.

    In all my years in this business, never before have I seen a central bank attempt to spin the debate as America’s Federal Reserve has over the past six or seven years.   From the New Paradigm mantra of the late 1990s to today’s new theories of the current-account adjustment, the US central bank has led the charge in attempting to rewrite conventional macroeconomics and in making an effort to convince market participants of the wisdom of its revisionist theories.  The problem is that this recasting of macro is very self-serving.  It is a concentrated effort on the part of the Fed to exonerate itself from the Original Sin of failing to address asset bubbles.  The result is an ever-deepening moral hazard dilemma that poses grave threats to financial markets.

    Go read the whole piece, it provides more in-depth explanations of how the Fed has dug itself deeper at every turn, by inflating a new, bigger bubble whenever the previous one threatened to burst. The housing one is likely to be the last (unless, as Sterling Newberry suggests over at dKos, the Bushistas manage to raid the Social Security Trust fund for one last binge), and it will have consequences in the real world that are known, as they have been experienced many times in many countries.

    I'll let Edward Chancellor, the author of the Financial Times piece, conclude:

    The head of the Dutch central bank now regrets what he calls the "artificial stimulus" provided to the economy by the housing boom. With the housing markets in the UK and the US vulnerable to rising interest rates, officials at the Federal Reserve and the Bank of England may shortly be forced to learn the same painful lesson.

    Posted by Jérôme à Paris on April 27, 2005 at 06:40 AM | Permalink | Comments (28)

    April 26, 2005

    Friendly Fire 2

    by Vauro, Il Manifesto

    Details released in Washington on Monday by a US army official said the soldiers "were not culpable of dereliction of duty in following their procedures."


    [Sgrena said:] "They're saying they were only following the rules of engagement. But if you fire on a passing car which you were warned about, and follow the rules of engagement, you have to ask what those rules really were?"

    US-Italian talks after report clears soldiers in friendly-fire shooting

    Posted by b on April 26, 2005 at 01:22 PM | Permalink | Comments (37)

    April 25, 2005

    Building Sand Castles


    As you  can see, I am on holiday and enjoying the Atlantic beaches in the spring, keeping myself busy building sand castles and trying to get them to resist the onslaught of the rising tide.

    I love building sand castles; I did that as a kid, and now as a father I have a great excuse to have a go at it again. It's utterly pointless, it's tiring and it's not even always successful. And yet it usually brings about a peaceful kind of satisfaction, of fulfillment that makes it all worthwhile.

    As I've been cut off from the internets most of the time in the past few days, I've been thinking about politics, and about what I've been doing on MoA, and what we are all doing, and while I was fighting the tide it felt that it was not so different from what we are all doing on MoA.

    When I think about it, a lot about life is pointless. You grow up, do stuff, work, possibly have a family and kids, and die, without changing the world around you in any noticeable way other than a more or less wide circle around you. We do it because we're there. But this is a bit like the sand castles, isnt it? That's the whole point. You do it because you're there, and while you're at it you do your best, even if you know that it will eventually be run over by the tide. Precisely because it is fleeting, the effort and the heart you put into it as just as important, if not more, than what you build. Same with your life: you try to live it as well as you can, behaving throughout in the way that you think if the most appropriate. If you have any perspective, you may decide that how you do things is more important than the result, which will be meaningless in the end.

    Taking the image a notch down, you get to the level of our current political situation, where I think we all feel that we are fighting against a rising tide of seemingly unstoppable right wing assertiveness and arrogance, capturing power, defacing language, polluting many supposedly neutral institutions, and generally showing little respect for those that do not think like them. That's where my sand castle came in initially in my thoughts - we are an island or resistance, fragile, always in danger of being overwhelmed, and yet also, precisely, a symbol of resistance, of not giving up, of making a stand. And it is also a sign of hope: after all, sand is available, all is takes is enough effort to build it high enough to withstand the force of the waves, and to start again and again as the walls are being sapped, to reinforce the weakest parts, to focus on the most urgent when required but take the time to build stronger foundations when the threat is more remote, to build new front lines that protect your main asset by moving the fight elsewhere.

    Writing on blogs in general and here in particular is a bit like that. It's a small effort against a relentless adversary, it's probably not going to have any long term effect but it offers us many important things:

    - the ability to make a stand, to identify oneself clearly with a set of values and policy choices (in the immortal words of Bridget Jones: "we stand for the principle of sharing, kindness, gays, single mothers and Nelson Mandela as opposed to braying bossy men having affairs with everyone shag-shag-shag left, right and center and going to the Ritz in Paris then telling off all the presenters in the Today programme");

    - the provision of ammunition (shovels and buckets) to fight our fights - information, a lot of information, to argument, to act or simply to feel more confident in the essential rightness of our opinions;

    - the feeling of community, that we are not alone in that fight, that many energies are focused on the same goal and that their strength - our strength -  could very well be enough and that we will be able to outlast the tide.

    Because that's also the lesson here: the tide will go back out. The only thing that matters is - will we still be around when it goes out, and will the flag on out castle still be there to be raised? Will we have sold out? Will we have been utterly defeated? Or will the sand walls have withstood the onslaught?


    I remember growing up, learning the history of my country (France) during this century, and wondering often: what would I have done during WWII? Would I have been brave enough to be in the Resistance? Or would I have been opportunistic and risen in the Collaboration Vichy administration? Or would I have been in the majority, all the people that remained silent, did not choose sides and waited for the fight to play itself out? I have been very grateful, for many years, that there have been no wars or no conflicts in my country that would have pushed me to make such a choice. I did my military service, but did not have to face real combat. I respect men (and women) who serve in the army to protect us, risking their lifes for us, but I hate their job which is to kill and destroy and I grieve the fact that we still have not managed to make peace without them.

    I loathe violence and selfishness but see these as part and parcel of human nature; they are not to be fought as such, but to be channelled into innocuous, harmless or even productive uses, and that's what institutions do. Institutions are essentially sets of rules that we all decide to believe in, and which are then formalised into laws and administrations and big buildings, but at the core they are that - rules that we all believe in ,and that thus become true because we all follow them. Such institutionalised rules are extremely strong and self-sustaning, as deviant behavior is not tolerated, but they are also very difficult to bring about, as you need everybody to accept them and to believe that everybody else accepts them.

    We are again lucky to have been born at a time, and in countries, where we have pretty good institutions, based on the rule of law, a strong State with mostly honest civil servants able to makes rules and to enforce them and to control the monopoly of force in legitimate ways. We also sense that the situation is fragile today, that these institutions are under unprecedented attack, and that we have to choose sides to protect our institutions. This is not a fight of left against right, although most of the left is on our side; it is a fight against fundamentalism, obscurantism and the simplistic "might is right" which has been the default option for mankind since its inception. It is résistance vs collaboration; it is action vs the easy slope of silence and low expectations. At least today I know what side I will be on with all my strength.

    This is also why this is not just a domestic US fight, as the perverted values of the current US administration and its fundamentalist friends threaten not only US democracy but also peace and stability in many parts of the world, either directly as in Iraq or indirectly by fuelling resentment and the rise of fundamentalism inside Arab countries led by Western-supported corrupt dictators. I fear that I will not continue the blessed life of an European of today, with peace and prosperity, for very long, as a long fight, possibly another war, threatens to engulf us all. Hopefully this fight will remain at the political level, but it seems unlikely in view of the extreme objectives of the fundamentalists and the lack of consciousness of that threat in the population.

    Sometimes it seems to me that our peoples are yearning for such strong leadership. We are dominated by individualism and selfishness, forces for collective organisation of society, like Churches, ideologies or States, are corroded and discredited by such individualism, and the only thing that thrives in that atomised environment are mediocre politicians and numbless media/entertainement and it seems that everybody yearns for higher meaning and sense, most people not having enough discipline and personal standards to find these on their own or on this site... And opportunists rush into this flaw to try to take advantage of this situation for their benefit.We must not let them.

    Thus our institutions are in danger, our freedoms are in danger, our political sand castles are in danger.

    But, as I spend these few days by the sea reflecting on all this,  I can say that I am ready to fight for these with you guys. It's pointless in the large scheme of things, but it is essential, and it is worth it. For now, I train myself on real sand castles, and I enjoy it. Both fights keep me alive and in good spirits!



    Posted by Jérôme à Paris on April 25, 2005 at 06:03 PM | Permalink | Comments (35)

    Bush Meats Crown Prince Abdullah

    Christians detained for illegal praying in Saudi Arabia

    RIYADH, Saudi Arabia -- Saudi Arabia has detained 40 Pakistani Christians for holding prayers at a house in the Muslim kingdom, where practicing any religion other than Islam is illegal, newspapers said yesterday.

    A group of men, women and children were attending the service in the capital Riyadh when police raided the house, Al Jazirah newspaper said.

    It said authorities also found Christian tapes and books.


    There are hard reasons for Bush to behave this way despite the above news.
    Oil prices, business connections, proselytize Abdullah, manly exuberance needs - he certainly has to set persuasive priorities.

    Posted by b on April 25, 2005 at 04:26 PM | Permalink | Comments (37)

    April 24, 2005

    Fallen Angels

    Fallen Angels, in financial language, are companies that used to have an investment grade rating and have been downrated to "junk". In normal language, they are companies which used to be a good risk as borrowers but are now considered by the rating agencies to be a poor risk (with a much higher chance that it will default on its debt).

    (Yes, yet another graph of things improving under Clinton and falling apart under Bush)

    GM is likely to become a Fallen Angel this year, and I would argue that the US economy is not far behind.

    Well, GM has been put by Standard & Poor's, one of the three main rating agencies, into a list of 50 companies (pdf, 10 pages) likely to become "fallen angels" this year. This came from S&P's decision on March 16 to revise GM's outlook from "stable" to "negative", i.e. announcing that the next likey change in rating was downwards. 291 billion dollars of debt were thus put into a twilight zone, sending jitters through the markets on various occasions, especially following its latest bad news (a quarterly loss of 1.1 billion $) last week.

    The interesting thing to note here is that the market is already behaving in some ways as if the downgrade had taken place: the interest rate required on GM bonds has shot up in recent weeks and is firmly in junk territory, i.e. it is becoming more and more expensive for GM to borrow money:

    What has not changed yet is that, thanks to the fact that it still keeps its investment grade rating, GM can still have its bunds purchased by most fund managers, many of which have strict rules on what they can and cannot purchase, and "junk" bonds being a very frequent exclusion. Mant fear what would happen if 300 billion dollar worth of bonds switched turned into junk and a number of fund managers were forced to sell. That amount would constitute around 10% of the junk bond market and would be quite hard to absorb.

    Despite soothing headlines in the US press (GM won't face Cash Crisis If Ratings Get Cut, in the WSJ), you sense that the financial press is getting itchy, noting that GM's financial costs amounted to 12 billion dollars in 2004, up 26% from 2003, and likely to increase significantly again this year.

    Standard & Poor's expect why you should worry: "fallen angels" are twice as likely (pdf, 29 pages) to default as companies that were rated "junk" (or "high yield" if you want to look at it with a positive spin) from the start.

    British business papers put it more directly: How much worse can it get? in the Economist, and Rotten cars, not high costs, are driving GM to ruin in the Financial Times.

    These two articles focus on what's wrong with US car companies:

    For the past two years the threat of collapse has hung in the Detroit air as America's car firms have wrestled with falling sales, unprecedented competition at home and soaring retirement and health-care costs for current and former employees. No one really expects either GM or Ford to seek Chapter 11 bankruptcy protection this year or next, but the likelihood is growing fast that they will do so eventually.

    GM's cash outflow from its car business was $3 billion in the first quarter, 50% more than it had forecast for the whole year.


    And the more that Detroit's finest retrench, the greater the burden of their "legacy" retirement and health-care costs will become proportionately: GM now has 2.5 pensioners for every current employee. In 1999, a deal between Detroit's big three carmakers and the United Auto Workers Union (UAW) included generous healthcare benefits for pensioners as well as workers. These are locked into labour deals that run until 2007.

    The Economist focuses on the "legacy costs", i.e. healthcare and pensions. Predicatbly in view of that paper's laisser-faire ideology, they blame that fact on the Unions, which have made the car manufacturers unprofitable:

    But at least they point to a real problem: companies are not very good at providing health care and pensions for their employees: either they do a decent job at a high cost, or they do a bad job.

    The Financial Times is even more scathing and to the point: the companies are losing money and being downgraded because they make bad cars and no amount of financial engineering (the usual solution) will help here. Unions or pensions are just side shows, hiding the core problems:

    GM's problems stem not from its spiralling healthcare costs but from its inability to build cars worth buying.

    The Grand Prix is a case in point: cheap plastics, uncomfortable seats, bone-jarring suspension, the exterior dimensions of a large car combined with the interior space of a small car.

    The US car-buying public agrees.


    Is lack of resources to blame for this procession of disappointing products? It does not help. Healthcare costs add $1,500 to the cost of each new GM vehicle, putting pressure on design engineers to use lower-grade materials and off-the-shelf components. Yet resource allocation remains by far a bigger problem. For example, while Toyota and Honda were investing in gasoline-electric "hybrid" engines, GM pumped research and development dollars into hydrogen-powered vehicles that remain years away from mass production. The result is that the world's biggest carmaker has nothing to compete against the new breed of hybrid vehicles led by Toyota's Prius.

    Similarly, while the Japanese companies were investing in their core products, GM squandered capital on the acquisition of Saab, the niche Swedish car company, and a questionable investment in Fiat.


    Yes, GM needs to find a way to reduce pensions and healthcare costs. But this is a necessary, not sufficient, condition for a turnround. A company happy to inflict the Pontiac Grand Prix on its customers does not deserve to thrive.

    To be frank, this sounds just like the US economy as a whole: with an increasing, and increasingly worrying, debt burden (which, had it be borne by any Third World country in would have brought the IMF in), distractions about pensions, while the country's competitivity keeps on going down.

    Would you have guessed that France and the Netherlands together export as much as the US, with little over a quarter of the population and "sick" economies? Not to mention Germmany's performance, of course...

    What was good was GM was good for the US. What is wrong with GM is also what's wrong with the US economy.

    - when the business/economy slows down, flood it with cheap credit ("keeping America rolling") and generally rely on financial tools and generous debtors to keep going;

    - fragilised by the increasingly heavy burden of pensions and healthcare;

    - most of all, totally dependent on the availability of cheap oil (fuelling SUVs, sprawl, McMansions and outsourcing to faraway suppliers)

    As I wrote in recent diaries, these are not going to improve soon, and both GM and the US economy are likely to get into even direr straits in the near future.


    Posted by Jérôme à Paris on April 24, 2005 at 05:24 PM | Permalink | Comments (28)

    Armitage's Revenche

    This should break the Senates Foreign Relation Committee deadlock about the John Bolton nomination.

    Newsweek reports:

    Colin Powell plainly didn't like what he was hearing. At a meeting in London in November 2003, his counterpart, British Foreign Secretary Jack Straw, was complaining to Powell about John Bolton, according to a former Bush administration official who was there. Straw told the then Secretary of State that Bolton, Powell's under secretary for arms control, was making it impossible to reach allied agreement on Iran's nuclear program. Powell turned to an aide and said, "Get a different view on [the Iranian problem]. Bolton is being too tough."

    The very best US puppy Jack Straw had to intervened against Bolton to get a solution on Iran,

    Perhaps the most dramatic instance took place early in the U.S.-British talks in 2003 to force Libya to surrender its nuclear program, NEWSWEEK has learned. The Libya deal succeeded only after British officials "at the highest level" persuaded the White House to keep Bolton off the negotiating team. A crucial issue, according to sources involved in the affair, was Muammar Kaddafi's demand that if Libya abandoned its WMD program, the U.S. in turn would drop its goal of regime change. But Bolton was unwilling to support this compromise. The White House agreed to keep Bolton "out of the loop," as one source puts it.

    and the puddle himself had to bark out loud to keep Bolton away from messing up the successful negations with Lybia. The only success this administration had on WMD proliferation so far.

    The Bolton case should now finally move away from the fruitless discussion about bullying subordinates - an issue that can not be a serious ground for Republicans to deny Bush their consent on the nomination. But the heavyhanded attempts to mess up foreign relation policy are very good reason. Additionaly

    the committee is examining fresh allegations that Bolton misused or hyped flawed intelligence against Syria, China and Iran.

    Add to this the already proven Bolton WMD lies on Iraq and Cuba and you can tell that no future word this man may utter would be taken as serious fact or likely intelligence by friends or foes.

    Bolton is a uncontrollable firebrand who throws lighted matches at any gas station he passes. He can not be trusted to run any responsible foreign relations position.

    The grownup Republicans in the SFRC must now ask Bolton to step away from the UN job.

    They should offer him an ambassadorship in McMurdo. Thinking again - the possible  consequences of accelerated glacier melting should raise serious concerns on even that nomination.

    Posted by b on April 24, 2005 at 10:30 AM | Permalink | Comments (11)

    April 23, 2005

    MediCare Claim Hearing

    WASHINGTON (NYT/RBN), April 23 - A new federal policy will make it significantly more difficult for Medicare beneficiaries to obtain hearings in person before a judge when the government denies their claims for home care, nursing home services, prescription drugs and other treatments.

    For years, hearings have been held at more than 140 Social Security offices around the country. In July, the Department of Health and Human Services will take over the responsibility, and department officials said all judges would then be located at just four sites - in Bucharest; Bangladore; Manila; and Antananarivo.

    Under the new policy, Medicare officials said, most hearings will be held with videoconference equipment or by telephone. A beneficiary who wants to appear in person before a judge must show that "special or extraordinary circumstances exist," the rules say.

    But a beneficiary who insists on a face-to-face hearing will lose the right to receive a decision within 90 days, the deadline set by statute.

    All beneficiaries are 65 or older or disabled. About 5 million of the 41 million beneficiaries are 85 or older, and some are so sick they die while pursuing appeals.

    The Department of Health and Human Services defended its new policy, saying the use of videoconference equipment would enable judges to "complete more cases" within the 90-day deadline, because they would not have to spend time traveling to remote sites. In a summary of its plans, the department said it was "not economically or administratively feasible" to station judges around the country.

    Posted by b on April 23, 2005 at 07:19 PM | Permalink | Comments (9)

    Open Again

    News, views and visions ...

    Posted by b on April 23, 2005 at 06:46 PM | Permalink | Comments (58)

    April 22, 2005

    Cost-Effective, Humane, Even Thrilling

    The counter on Helena Cobban's site says

    82 days since Iraqis elected an Assembly with a UIA-list majority, without a government accountable to that Assembly being allowed to take power.

    Meanwhile longtime CIA asset's Allawi list refuses to join Iraq cabinet without five posts

    Allawi's Iraqiya list took just 40 of the 275 seats in parliament in landmark elections on January 30. The Shiite-led United Iraqi Alliance took 146 seats, while the main Kurdish bloc took 77.

    You are free to guess who gave the advice to Allawi to further block the creation of an Iraqi government with his ridicules request. It is time for Sistani to call for some impressive peaceful demonstrations or for Al Sadr to induce some other forms of mass protest.

    The military situation of the U.S. forces is getting worse day by day. In a Washington Post report by an embedded reporter we find this scene from a Forward Operating Base only 25 miles from Baghdad:

    Capt. Ryan Seagreaves, of Allentown, Pa., told [his commander] McMaster that he needed engineers to reinforce and expand his austere base so that there would be room for more Iraqi forces. He said he also needed dirt to fill protective barriers. Iraqi contractors are so terrified to work in the area that a convoy of 10 earth-filled dump trucks recently refused to travel south to McMaster's base. One driver fainted when told the destination, he said.

    USA Today writes about another FOB:

    Unable for safety reasons to patrol the city on foot and in vehicles, troops are limited in their ability to gain important street-level intelligence. So the Marines primarily mount counterattacks on insurgents and criminals who fire into the camp. Last week, the Marines averted disaster when three car bombers backed by 30 insurgents assaulted the camp.

    May I suggest that situations where you are "unable to get dirt" and you are "restricted to counterattack" are exactly those, that tell you it is game-over and to get your ass out of there. These under supplied FOBs are ready to be run over. One of them will inevitably be annihilated by the insurgents within the next weeks. I do not expect them to allow for survivors.

    In this context an important book by Andrew J. Bacevich has been released and excerpts are available at Mother Jones and elsewhere. From the The Normalization of War:

    The American public's ready acceptance of the prospect of war without foreseeable end and of a policy that abandons even the pretense of the United States fighting defensively or viewing war as a last resort shows clearly how far the process of militarization has advanced.
    The old twentieth-century aesthetic of armed conflict as barbarism, brutality, ugliness, and sheer waste grew out of World War I, as depicted by writers such as Ernest Hemingway, Erich Maria Remarque, and Robert Graves. World War II, Korea, and Vietnam reaffirmed that aesthetic, in the latter case with films like Apocalypse Now, Platoon, and Full Metal Jacket.

    The intersection of art and war gave birth to two large truths. The first was that the modern battlefield was a slaughterhouse, and modern war an orgy of destruction that devoured guilty and innocent alike. The second, stemming from the first, was that military service was an inherently degrading experience and military institutions by their very nature repressive and inhumane. After 1914, only fascists dared to challenge these truths. Only fascists celebrated war and depicted armies as forward-looking -- expressions of national unity and collective purpose that paved the way for utopia. To be a genuine progressive, liberal in instinct, enlightened in sensibility, was to reject such notions as preposterous.

    As it is convenient (and profitable) for the established media not to show the real aesthetic of war, you can watch some videos made by the legitimate resistance to get some sense of what is going on. Here are some links form the Oxford Antiwar site:

    Mercenary chopper shot down - no prisoners taken (RealMedia)
    Vehicle born IED on convoi (RealMedia)
    Secondary IED attack on US troops (RealMedia)
    IED on Stryker vehicle (mpeg)
    Kid gets shoot by US(?) sniper (Windows media player)


    In the right circumstances, for the right cause, it now turned out, war could actually offer an attractive option--cost-effective, humane, even thrilling. Indeed, as the Anglo-American race to Baghdad conclusively demonstrated in the spring of 2003, in the eyes of many, war has once again become a grand pageant, performance art, or a perhaps temporary diversion from the ennui and boring routine of everyday life.

    War has not changed, but the people and the ruling class of the United States. As Bacevich says: "only fascists celebrated war."

    Posted by b on April 22, 2005 at 04:46 PM | Permalink | Comments (13)

    Billmon: 04/22

    V.  End Game


    IV.  Stormy Weather


    III.  The Good German


    II.  Unintentional Irony


    I.  Indecent Exposure

    .. So it occurred to me that maybe the media megamonsters are trying to deposit some journalistic capital in the First Republican Bank of Congress, in hopes of being able to write checks on it when and if the FCC launches its crackdown. Who knows? Sucking up to the Bible fedayeen with a little prime time rapture might also pay dividends down the road. ..

    Posted by b on April 22, 2005 at 02:18 AM | Permalink | Comments (86)

    April 21, 2005

    On Pain, Addiction, and Powerlessness

    by lorraine

    My name is Lorraine and I am an addict.

    These simple words, and a hell of a lot of hard work, have saved my life--hell, given me a life, a life that was lost to me for several years while I struggled with the effects of a debilitating neck injury that caused incessant pain. In part one of this diary, I want to talk about personal addiction. In part ii, I want to talk about the politics of addiction. 

    I remember what the pain felt like, because I wrote about it one night, while in its toxic embrace:

    On a bad pain day, she felt locked in Spock's Vulcan grip, only for her there was no relief of unconsciousness, just a throbbing at the top of her shoulder that was relentless. But that wasn't the worst of it. The pain leaked forward, down her arms, as if someone had poured molten steel along the nerve paths, down her biceps, through her elbow, and then, like a train at a switching yard, changing path, and following the ulnar nerve along the edge of her arm. Where her wrist met her palm, that knob of bone directly below her pinkie, someone had stationed a big, beefy construction worker with a jackhammer, and he rat-a-tatted his drill so that her hand burned. And finally, at the end of the road, the tips of her pinkie and ring finger, a buzz of electricity constantly arced--as if between two diodes in a mad scientist's laboratory.

    The injury was simple, really. A severely ruptured disc in my cervical spine. It was complicated by a pregnancy that made surgery impossible, and so, for months, I lived with crushed nerves in my neck, which eventually led to nerve damage.

    The first course of treatment was medication. Here is what the early days of meds were like:

    Different pain medications had different effects and she sought to match pain intensity to analgesic, and then to titrate the dose, so that the buzzing yellow of her pain could become a gentle green, changed by the soporific blue of the narcotic capsules. On days that weren't too bad, she took tylenol with codeine-- 30 to 60 mg as she needed it. Codeine's effects were like that of a doily on an old coffee table--it covered the stain but couldn't remove it. When she took codeine, she was smoke wafting through her house. On days that were slightly worse, she turned to Vicodin. She secretly admitted to herself that Vicodin could become a vice if she let it. Stronger than codeine, one of the lovely side-effects was the euphoria that accompanied it. The sense of well being that made the world a vivid, inviting, invigorating place where she had visions of herself as victor of the world--a Valkyrie swooping down from the heavens. But Vicodin was a selfish master, needing her flesh more and more. It was the one she rationed to protect herself from addiction. The final option, which she did not like to take except on those occasions when pain had brought her to her knees, was morphine. Morphine replaced the blood in her veins with pudding, making her heart beat sluggishly against her ribs, suffusing her with an unpleasant heat and rendering her helpless. It frequently made her throw up, so she only took it when there was no alternative to pain. Pain had held her in its toxic embrace for three years now. It was a cruel lover, but battered and hurting, she had no place to go. She was pain's prisoner on some days, but occasionally, on rare mornings, she awoke to find herself pain-free and she reveled in those days like a kid at a carnival--eager to do everything at once before all the prizes had been given away on the midway.

    What followed was labor and delivery, major spinal surgery, more pain, more drugs, acupuncture, chiropractics, hypnotism, more epidural steroid injections, counseling, applied kinesiology, more drugs, surgery to implant a dorsal column stimulator, and more drugs. By the time I realized that I was in trouble (okay. strike that. By the time I accepted that I was in trouble) I was on Fentanyl patches and was taking enough supplemental OxyIR and Vicodin to supply an opium den.

    I went into detox. On February 19, 2001, I emerged for the first time in several years, drug-free. Should have been gravy from there, right? Nope. Ask any addict or alcoholic. Recovery is damn hard work.

    I started hanging out with other people who were trying to stay clean and sober. I started intensive therapy. I got a divorce. I made a new life for myself.

    My pain was real. But my pain was exacerbated by the fact that my life was out of control. I took drugs to kill the pain in my body, but a fair portion of that physical pain was caused by the pain in my life. By my unmanageable feelings. By my sense of worthlessness. By my inability to connect to the things that were really important. By my feelings of inadequacy. But mostly, my life was ruled by fear. Fear of everything, that despite my big mouth, turned me into a person who was deathly afraid to stand up for herself. Afraid she would get hurt. And this is my segue into American politics. If you're still reading, I thank you for your patience.

    Part II
    The politics of addiction.
    Hello. My name is America, and I am sitting in this meeting because my friend Lorraine suggested I should come.

    I'm not sure really when my addiction began. I look back over the past two-hundred odd years of my history and I see all sorts of psychic wounds. I had a tyrannical father, and I rebelled against him. Took up arms against him, and drove him out. I thought that would take care of my problems, but I wasn't done hurting myself. Even when I had the chance, I chose to cut myself off from parts of my body--Africans, women, those without property--told myself that those parts of me were less important, and that I didn't need to pay attention to the discomfort those parts of me caused.

    Since then, those parts of me keep getting hurt, but I don't want to go back to that original wound and deal with it. That would require feeling some things that I'd prefer not to feel. I'm in pain now, but I've developed a whole host of ways of dealing with my pain. I know some of you think that qualifies as addiction. But I'm not ready to admit I have a problem yet.

    I've got ways of dealing with my pain, however. They're called distractions. There's war, which is always good for taking my mind off whatever's bothering me. If I focus my attention on getting control over other people's lands and cultures, I don't have to think about the unmanageablility of my own culture. I've got plenty of women and poor people and racism, but I don't to focus on that right now. That would hurt.

    If I can't shoot someone, maybe I can buy something. I like to spend money. Buying things makes me think I can be happy. I'll go out and buy a new gas-guzzling car that lets me sit high up on the road, or I'll buy the newest gadget or the newest pair of shoes from Nike. I know people suffer who make those products, but I don't want to think about those things. That would make me uncomfortable.

    I'm not very comfortable with my sexuality, either. Too many feelings attached to that, too. But if I tell homosexuals and women how to conduct their private lives, then maybe I can exert some control over this stuff that makes me feel bad. I think about my body and it makes me feel icky. But if I make someone else feel icky about their body, perhaps they'll shut up. And I won't have to deal.

    I'm really not comfortable with what's happening to the color of my skin, either. It used to be pale white, but now, it's starting to darken up; parts of me are speaking a language I can't understand. Makes me feel out of control. I think I'll tell everyone they have to keep to their own kind. Speak English, damnit. I can't stand feeling uncomfortable.

    The hallmark of addiction is an inability to deal with one's feelings. I could go on and on about why I think we're a nation of addicts. I think we need a major intervention, but I'm not sure we've hit bottom yet. The only problem I have is that until we collectively hit bottom, some of us are going to wind up falling a hell of a lot farther than others.

    Posted by Jérôme à Paris on April 21, 2005 at 02:18 PM | Permalink | Comments (41)


    by beq
    (fullsize, 500kbyte)

    O, what a tangled web we weave,
    When first we practise to deceive!
    Sir Walter Scott,
    Marmion, (canto vi, stanca xvii)

    Posted by b on April 21, 2005 at 02:14 PM | Permalink | Comments (18)

    Billmon: 04/21

    II.  Under the Spreading Chestnut Tree


    I. In the land of Pinocchio: Liar Liar, Pope on Fire

    Posted by b on April 21, 2005 at 02:12 PM | Permalink | Comments (12)

    Nike, Wal-Mart, Corporate Responsibility and Activism

    An article yesterday in the Financial had an interesting take on the recent evolution of corporate responsibility  (Nike ushers in a new age of corporate responsibility), following Nike's publication of a detailed report on all of its subcontractors:

    Scepticism is usually in order when companies boast how socially responsible they are, but Nike's decision to publish its entire list of contract manufacturers on the internet is harder to dismiss. Nike's move opens a new front in companies' efforts to engage with their critics.

    See below for more details and some comments.

    The article goes on to describe what is published, what kind of impact it will have, and what's Nike policy in publishing this. It then proposes that Nike is bring in a "third stage of corporate responsibility" as follows:

    - the first stage is corporate philanthropy - companies donating money to various community projects. That's the stage where Wal-Mart is, and the article nicely blasts them to pieces.

    - the second stage is reputation management and risk avoidance. Second-age corporate responsibility advocates say knowing what is on campaigners' minds is as important to a company's health as protecting it from fraud. This means that the company accepts some form of accountability towards critics and tries to avoid behaviors or policies which are seen as controversial.

    - the third stage is corporate responsibility as a way of improving performance rather than just protecting reputation.

    Factories that ensure workers are registered for social security benefits often become more productive as a result. Attention to one aspect of staff management often leads to improvement in others.

    If other companies publish supplier lists, they can together devise common standards that help contract manufacturers cut costs, Nike says.
    All this points to a strong element of self-interest in Nike's new openness - but practitioners of third age corporate responsibility see nothing wrong with that.

    The logic is that, if you're going to make efforts to protect your reputation, it might as well be "positive" efforts (i.e. changing your practices altogether in order to anticipate issues and gain a competitive or marketing advantage out of it) instead of "negative" efforts (scrambling to react to outside criticism).

    My question to you: how can companies be encouraged to move to that "positive" approach instead of the "negative"? Shaming companies is necessary if, like Walmart, they have aggressive practices and little reactivity to criticism, but it becomes counter-productive in the next phase, where a mixture of verification and encouragement is needed.

    Activists need to be able to make the difference between corporations that make an effort only when forced (these should be shamed for their inappropriate practices) and those that are genuinely trying to behave differently (these will also require some positive feedback). Corporations per se should not be seen as evil, only their actual behavior. If the behavior shows improvements or actually brings about genuine goods, it should not be lambasted because they "do it for profit". Profit is not bad in itself. Profit generated by cutting corners is bad.

    Also, remember that activists often only represent themselves or very small constituencies. As activism against corporates grows, the legitimacy of such actions will be assessed more carefully by bystanders and NGOs and activists will need to choose their targets with more care.

    Nothing is worse than activists going on dead-end fights which obviously not supported by the majority, and allow all activists to be labelled "extremist". Also, corporates are slick and if the criticism directed against them is not obviously fair, they will fight back and they will win and discredit their opponents easily.

    With some companies genuinely improving their acts, I think it is important to acknoweldge such efforts and to monitor them, rather than dismissing them, and to shift the focus of action on laggards.

    To provide some background on my position:
    As you know, I work in a bank, in relation with the oil sector, where the relationship with NGOs is a big issue. Oil companies and banks have made efforts to make sure that big projects have a less damaging impact on the environment and the local populations. Some NGOs have acknowledged these efforts and prod us in good faith to make more, and we do try to acomodate them; others are simply interested in blocking oil projects in any way they can, and after some point, you simply ignore what they are saying; in which case, it is quite possible that less care will be taken because no effort can satisfy them, so why bother making any?

    If you want to compare versions on recent projects, go see the following websites:

    Sakhalin Energy, the official site of a big oil&gas project in Russia led by Shell;
    Equator Principles the site of the banks that have committed themselves to certain guidelines in the financing of big projects (such a Sakhalin energy);
    Banktrack the site for the umbrella organisation of NGOs which acts as watchdog of the banks with respect to the Equator Principles.

    As you can see, some common ground can be found through dialogue (in this case, on the definition of imporved standards), but some elements remain contentious (on the valuation of whether the standards are properly applied).

    As I imagine that there are a number of activists on the site, I imagine that my position is less aggressive than many of you with respect to corporates, so I'd be interested on your feedback on the above...

    Posted by Jérôme à Paris on April 21, 2005 at 11:05 AM | Permalink | Comments (3)

    Billmon: 04/20

    II. Debt to Society

    "Bankruptcy should always be a last resort in our legal system. If someone does not pay his or her debts, the rest of society ends up paying them."

    I. The Lessons of Munich

    The Fuehrer thanked Chamberlain for his words and told him that he had similar hopes. As he had already stated several times, the Czech problem was the last territorial demand which he had to make in Europe.

    Posted by Jérôme à Paris on April 21, 2005 at 01:36 AM | Permalink | Comments (13)

    April 20, 2005

    For Sale


    Mercedes 320 CDI, 2002 model, only 400 km, full panoramic roof.

    (Isn't the new guy from Munich, thus a Beemer guy?)

    Use as another B 2squaresquare thread.

    Posted by Jérôme à Paris on April 20, 2005 at 06:42 PM | Permalink | Comments (18)

    Open Thread

    Link to the forerunner

    Posted by b on April 20, 2005 at 07:59 AM | Permalink | Comments (63)

    Left vs Right and the Economy

    Graphs speak louder than words:



    (From the Financial Times - behind subscription wall)

    Thatcher and Blair are pretty good proxies for Republicans and Democrats, as they examplify respectively the hard "laisser-faire" deregulated economy of Reagan and Bush Jr and the centrist left policies of focusing more on inequality while fully accepting market mechanisms.

    A third graph also shows how moderate Republicans do:


    The conclusion: the left is much better for the economy overall. It provides increasing incomes to all, including the rich, but with a slight emphasis on the poor.

    By contrast, Thatcherism is clearly class warfare: the richer get a lot richer, and the poor stay poor.

    Moderate Republicans are actually the worst: they are not unfair, but they are pretty bad for eveybody.

    Similar numbers for US presidents can be found in this article from Forbes. (with all the detailed statistics here):


    It should be very easy to prepare similar graphs for the US economy (they probably already exist) and distribute them as widely as possible, as they show exactly what the differences between the two parties are, in an easily understandable way.

    Borrow and Squander Republicans:

    The rich get richer while you take on more debt.

    They try to distract you from that fact by focusing on Schiavo.

    Responsible, Fair Democrats:

    Everybody gets richer and the economy grows for all.

    One more thing - Extreme Republican policies have consequences that remain with you for a LONG time:


    The inequality created by Republicans does not go away.

    As a post scriptum, here are a few choice words from Martin Wolf, the senior economics editorialist of the Financial Times, about the unbalances with China, but which relates closely to this issue of economic competence:

    If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has." John Maynard Keynes

    If Keynes was right, the world's creditor countries have a huge problem and the US none at all. Yet the assumption that the creditors should be more terrified than the debtor is wrong if the latter needs to continue borrowing. If creditors face an endless stream of additional borrowing and a good chance of default at the end of it, they should refuse to throw good money after bad. They will then impose huge costs on the debtor.

    This balance of financial terror, as it has been called, characterises the current huge flows of finance to the US. Carefully thought through economic policy is needed if the world is to extricate itself from this predicament. Alas, we can rely on the administration of George W. Bush not to provide it.


    100 per cent of the fiscal deficit has been financed from abroad and about 80 per cent of the current account deficit has been financed by foreign central banks.* Biting the hand that feeds one is folly.

    According to the International Monetary Fund, the US general government fiscal deficit this year will be 4.4 per cent of gross domestic product, while the current account deficit is forecast to be 5.8 per cent of GDP. At present, therefore, the American people are able to consume and invest as if the fiscal deficits did not exist. The treasury secretary of what is arguably the most fiscally irresponsible US administration since the second world war should fall down on his knees in thanks rather than indulge in complaints.

    Republicans are incompetents. Bush is the MOST incompetent of all Republicans. He is a threat to the well-being of a majority of Americans, and he actually is a national security risk.

    Posted by Jérôme à Paris on April 20, 2005 at 06:22 AM | Permalink | Comments (28)

    Billmon: 04/19 (2)

    III. Scoundrel Time

    Ann may think her cover photo was unflattering (a crime against humanity would be my term for it) but the write up was pure journalistic cunnilingus – and John Cloud appears to have a very long tongue.

    Posted by b on April 20, 2005 at 02:01 AM | Permalink | Comments (23)

    April 19, 2005

    Financial Scare of the Week: CDOs

    In the past few days, the Financial Times has run several stories, including a full page article today, on CDOs (collateralised debt obligations) and the potential risks they present to the financial system.

    CDOs are a way to repackage a portfolio of existing financial assets (usually bonds or loans) into new tranches, which are built so as to have different riskiness. (see more explanations below)

    Last year alone, the cash value of all CDOs issued and sold to investors in Europe and America reached $120bn - nearly equivalent to all European corporate bond issuance in 2004.

    The CDO market has been tested on a small scale by market jolts before - and come out relatively well - but it has never suffered a serious upheaval while so many investors hold so many highly leveraged instruments.

    "We are in uncharted territory," admits one policymaker. "If a crisis hits, we think the market will absorb shocks smoothly - but the truth is that no one knows for sure."


    Clouds sighted off CDO asset pool (Financial Times, today, subscription required)
    A manager running a CDO borrows money from investors, via a special purpose vehicle, and buys debt-linked assets. Whether the liabilities can be repaid depends on the performance of these assets and the skill of the manager.



    Unlike a mutual fund, however, the risks assumed by investors are not always equal. There is usually a tranche of equity, which can produce high returns but also carries high risk since it is exposed to any losses resulting from underlying asset defaults. A separate `senior debt' tranche carries less risk, since it gets repaid first, but offers less potential return. Between those are tranches of `mezzanine' debt.

    The assets inside a CDO can be corporate loans (when it is usually called a collaterised loan obligation, or CLO). However, they can also be bonds, asset-backed securities or credit default swaps (derivative instruments that bet on the risk of corporate default). The fastest growing segment of the market is for `synthetic' CDOs (sometimes called CSOs). These are composed of credit default swaps, without cash bonds, and may not have full investor funding.

    Synthetic CDOs allow investors much greater leverage and flexibility. They also solve a practical problem: demand for CDOs is growing so fast that managers are running out of cash assets to put into the funds. Another innovation, the `CDO squared', is a CDO composed of multiple synthetic CDOs. Some banks even offer a `CDO cubed' - a CDO of CDOs of CDOs.

    To explain a bit, credit default swaps are instruments whereby a bank gets someone else to bear the risk on a loan it makes: it pays that counterparty a predetemined margin annually in exchange for that counterparty to cover any losses under the initial loan. Such instruments can be taylored to specific risks - the counterparty can be required to pay only if certain specific events have triggered the loss. The counterparty needs not lend money to receive its remuneration, it only has to be able to make a payment in the case of loan default. Insurance companies or fund managers in search of extra income are typical counterparties for these.


    The cash value of all CDOs issued and sold to investors in Europe and America reached $120bn - (the value was $445bn if the notional value of all derivatives in these instruments is included). That lower figure is nearly equivalent to all European corporate bond issuance in 2004.

    In some respects, this startling growth is a potentially positive step for global markets. After all, an instrument such as a CDO takes forms of corporate debt and repackages it to spread the risk among multiple investors - rather like a mutual fund allows many investors to share equity investment. That creates more liquidity and flexibility in financial markets, which should, in theory, help the financial system to withstand shocks.
    Yet the very same traits of CDOs that can be so benign also carry potential risks. (...) The fact that CDOs disperse credit among multiple investors means that, if a nasty accident did ever occur with CDOs, it could richochet through the financial system in unexpected ways. [Also], the CDO boom has taken place amid extraordinarily benign credit conditions. And, as Mr Gibson [head of trading risk analysis at the US Federal Reserve] notes, a recent study by international investors suggests "that there is a minority of investors - perhaps 10 per cent - who do not fully understand what they are getting into". (see also Fed official warns on structured credit market)

    The CDO boom has several causes:

    • tightening banking regulations (known as Basel II) are forcing banks to hold thus risk; CDO are a good way to tranfer risk off their balance sheets into the hands of other investors;
    • easy money and strong competition have eroded margins in most traditional activities. CDOs offer better returns to investors (who take the riskier tranches) and nice arbitrage (trading) opportunities to banks;
    • it's trendy and sophisticated, and thus attracts hedge funds and other new players.


    But with demand increasing, prices have also gone up, thus reducing returns (yields go down when prices go up, just like for bonds). This has led to increasingly complex products (using synthetic instruments as described above) which have an increasingly tenuous link to the underlying assets and harder to understand risks.

    And that's the problem: these instruments have been created in a fairly benign financial period (no crisis, a lot of money and investors), and it is not clear (i) how they will behave if things turn sour, and (ii) what kind of consequences this will have on the financial markets and financial institutions in a time of crisis.


    The CDO market has been tested on a small scale by market jolts before - and come out relatively well - [but] it has never suffered a serious upheaval while so many investors hold so many highly leveraged instruments.

    "We are in uncharted territory," admits one policymaker. "If a crisis hits, we think the market will absorb shocks smoothly - but the truth is that no one knows for sure."

    No one knows for sure. That's nice to know...

    Banks are full of people who worry about whether the previous crisis will happen again. They never seem to catch the guys who take new kinds of risks, make tons of money while the going is good (for the banks and for themselves), think they have found a new Graal - until some new circumstances bring these risks to the fore and wipe out all the gains previously made. The banks clean it up more or less painfully, tighten their controls over these risks, and the cycle starts somewhere else...

    Further references:

    A selection of articles on CDOs

    Bankers are dangerous people (a diary from a few months back)

    Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb

    Posted by Jérôme à Paris on April 19, 2005 at 07:00 PM | Permalink | Comments (5)

    Bendictus XVI

    Cardinal Ratzinger of Germany Is New Pope

    Thank god for him already being 78.


    also Billmon's post: Heil Ratzinger

    Posted by b on April 19, 2005 at 01:01 PM | Permalink | Comments (115)

    Billmon: 04/19

    II. Heil Ratzinger (discussion on Ratzinger in the above thread)


    I. A Falling Out Among Thieves

    Posted by b on April 19, 2005 at 12:44 PM | Permalink | Comments (5)

    "The Real Fight"

    The Nelson Report is a Washington D.C. political insider brief written by Chris Nelson. Yesterdays brief includes a strong essay copied on the blogs of Steve Clemons and Laura Rozen.

    It is frightening and deserves a serious bar discussion:

        BOLTON BATTLE...the real fight

        If the fight over John Bolton's UN nomination were just about John Bolton, he'd be history already. But this isn't about Bolton, it's about the exercise of power. Same thing with House Majority Leader Tom DeLay.

        If this was even 5 years ago, hed be toast.

        We are at the point now where the Republican Leadership refuses to allow the possibility of a loss on anything, regardless of the merits. This renders "debate" meaningless, since nothing said actually matters, so truth is irrelevant.

        "Science" depends on faith; everything is a test of power. Oppose something the President wants, and you aren't just wrong, you are betraying the Party. The underlying message is that you are also offending a very particular definition of God.

        The sad, sorry Bolton/DeLay spectacles are about total war, the kill-the-prisoners exercise of power that national US politics has become since the 2000 election. If it were merely about power, it wouldn't be so terrifying. Washington is used to that. . .it's what we exist for. But the fear, the self-loathing, the pathetic, cowardly, sniveling, excuse-making drivel from such "leaders" as Lugar, Hagel, Chafee, the entire House Republican Leadership under DeLay. . .and the ever-so-very carefully expressed angst of the Democrats. . .is about something far more dangerous to the Republic than mere political power.

        What we are seeing is a fight for the political soul of the nation. We've had these before, in the existential sense. . .in my political lifetime, the civil rights movement, the anti-Vietnam war movement, the women’s rights versus, to a certain extent, the right to life movement. But this time it's totally and completely a fight about God. . .specifically, whether God is going to rule in the United States.

        The Constitution says that would be illegal, and any serious expert can tell you that not only were the Founders liberal in their interpretation of the Deity, but they intentionally enshrined a purely secular civic government, including the courts. They didn't think that Jesus had an official plan for us, much less did they think that politicians who defined their duties in secular terms were defying the word of God.

        Tom Delay manifestly believes this, and it sounds like any number of Senate Republicans either agree, or lack the imagination or moral courage to disagree. . .why else would some endorse threats against Republican-appointed judges who dare to interpret the law in secular terms? This is what the Bolton fight is really about: you can't dump him, because that lets the Democrats win on both the facts and principle. . .fatal notions to a desire to pack the courts with religious and secular policy extremists.

        Why else would there be the constant drumbeat of attacks on the "liberal media", except to undermine public trust in the Constitutionally provided mediator between the politicians and the people?

        The Founders knew how to protect what they intended; this crowd has figured out how to undermine the very rule of law in the United States. Listen to what DeLay is arguing...that his excesses have nothing to do with his "persecution", interesting choice of word, by the Democrats and their "liberal press allies". If a majority of Congressional Republicans don't, in their hearts, see the hypocrisy of all this, the Republic is doomed.

        The real story behind Bolton and DeLay is obvious, to anyone not already seduced by the dark side.

        Connect the dots. There's still time.

    Posted by b on April 19, 2005 at 05:30 AM | Permalink | Comments (20)

    April 18, 2005

    Billmon: 04/17-04/18

    III. Eva Braun - Woman of the Year


    II.  Playing for Keeps

    Frist and DeLay and the rest of the Rove gang may not have any kind of grand design for a GOP Thousand Year Reich, but rather may be acting like the Easter Islander I talked about in an earlier post -- the one who cut down the last remaining tree on the island.


    I.  See the thread below on the Billmon piece: Fuel Shortage

    Posted by b on April 18, 2005 at 01:31 PM | Permalink | Comments (28)

    After a Sherry

    by diogenes (lifted from a recent comment)

    I will provide you with a very rare glimpse into my personal life and experience. I usually reserve such digressions for more intimate audiences, but but this is a very good bar and the topic demands it. So I will abandon the academic I am now and part time humorist to tell you of Diogenes the preacher of many years ago. After a sherry, of course.

    In the early 1970's, ...

    ... at the odd cross roads of the free love and Jesus movements, that I came of age with an undying curiosity about spiritual things. A nun at my church tried to convince my I was a psychic, my older sister had me send a month at a commune of American Sufi Movement, and I began reading the Bible. The Bible (and a pile of, at that time, very convincing tracts) won my young soul and I became a solo Christian (there are solo Wiccans, so why not?), unsure of any church or movement and very much interested in developing my faith. I bounced from prayer group to church as a 19 or 20 year old. taking it all in and I was as ignorant as the day was long. For example, convinced that I needed to be baptized, I stopped at a Baptist Church in New Hampshire I had never been to before because "that's what you guys do, it says so on the door!" Believe it or not the elderly pastor baptized me that night. I was as innocent as any Christian Candide in a very confusing world and there were plenty of Panglossses to help me along, especially the Pentecostals!

    I was as sincere as naitivity can make me with the intellectual power of a high school education and a year of college (where I watched at least two professors sleep with the one girl I had a consistent crush on). But a Christian I was now. I read the Bible through numerous times (It takes around 15 hours to read the New Testament). The Old Testament/Hebrew Bible I took on one book at a time. I was a pest at all family gatherings. And I explored almost every kind of church from fundamentalist to Greek Orthodox, trying to understand how this faith worked.

    So at the ripe old age of 21, I settled on a non-denominational church that had a pastor as young as I was and stayed there for almost 8 years. Now why share this with you? Well for one thing I got to meet many of these religious right bigshots back when they were little shots and more importantly, I witnessed the afterbirth of the Religious Right early in the Reagan Years.

    Back then we met at Yale University in one of the lecture halls. And this church grew. Rare in the inner city. Rarer still was the amazing mix. Rich folks from Woodbridge and Hamden, Blacks from Congress Ave and Dixwell Ave who were burned out of the Cadillac cult and needed something different, Hispanics, old Catholic ladies from a Charismatic Catholic church, recovering drug addicts, Muslims from various countries curious about Chritianity, gays and lesbians, the mentally ill seeking exorcisms (my claim to fame: I led George Bush's cousin in a exorcism where we all coughed out our demons in paper bags back in 1979!)and a host of folks in various stages of drug and alcohol recovery or relapses. It was slice of the whole world and about 350 people meet twice a week to figure out what it meant to be a Christian (Oh yes, and a number of Yale Divinity School students and undergraduates). I often wonder if Bush was around Yale at that time.

    The thing that characterized this church and fascinated me was the complete lack of condemnation towards those who were different. Lesbians embraced men during the greeting part of the service. Blacks hugged Hispanics. We all knew that no one was perfect, that all lives were characterized by struggle and that the goal of a Christian was to help others along the Way. We were politically inactive, having concluded that voting and prayer were two personal matters best left to individuals and that politics, being the pandering profession that it was, was too "carnal" or "of the flesh" (yes, those were the words we and many others used back then)for a Christian to get involved with. It required deception as well and that was dangerous.

    That ended early in 1982, when our young pastor was invited to a three day Ronald Reagan "prayer breakfast and conference" in Washington D.C. He was flattered and went with the church's blessing.

    The Sunday after he returned, the world turned upside down. No one expected it. A usually kind hearted (if not long winded) pastor turned into a right wing hate machine, repeating in his sermon (several times in case we missed them) the most outlandish and insulting language I ever heard. I remember portions well. I didn't hear things like this again until the early days of Rush Limbaugh and Ann Coulter.

    "God has called us as a church to destroy the evils of the liberal welfare state and its hand outs for laziness."

    "God has annointed this church to stand as a wall and defense against the evil manipulations of the hairy legged lesbo-feminists of the teachers unions and the secular humanist educators."

    There were then cracks about blacks being on welfare, welfare laziness, the ungodliness of Democrats in general, and "taking the country back for God." And within two weeks, almost every black, Latino, homosexual (though they were not singled out in the sermons), poor person, and student was gone. For good. The church split two or three more times in the next few years, leaving me a lost and stranded soul. My view of the church was increasingly assaulted by demands of 1000% loyalty, shameless pandering and financial matters that I will not elaborate upon. When I think of the turning points of my life (and there have been many), nothing determined the course of the next 23 years as that one out of the blue offensive right wing sermon.

    From there I drifted from church to church over the next few years and then decided to sell my businesses and continue my education (I thank God for women who push you on to do this (my late mother) and bear the consequences of that decison (one hell of a mate). Though I originally considered studying for the ministry I soon declared a double then triple major (theology, history, linguistics). And I did well. Then I got talked into grad school and a Ph.D program. I progressively moved to the left (contrary to Horowitz, I was a Republican grad student and never encountered discrimination in grad school. We all got our asses kicked by professor after professor). I completed my Ph.D in 1998. I now teach Ancient History (primarily Church and Roman history and World History. Once in a while when I get the bug I teach a Greek or Coptic class for fun.

    I didn't become a Democrat until I was teaching at a fairly well known southern institution in 2000 and George Bush's goons roughed up two of my students who simply brought a sign into an open meeting that read, "Mr Bush: What is your position on the Environment?" It was one of two dozen questions on signs that students brought in. They were knocked to the ground, their sign was ripped up and they were ejected. There was quite an uproar since me department had invited the chimp to campus. I am now a moderate Democrat, but anger is moving me further to the left. It is not the best motivation, but it has made me politically active.(Sherry #3 now). I now teach in a northern state hard hit by Bushanomics and very happy as a liberal Methodist in an open and affirming church.

    Why am I writing this? I think because I enjoy the illusion of the bar and miss the many good conversations and stories of grad school. But more seriously the idea of Frist's "Judgement Sunday" has brought flooding back into me that sea of faces shocked by the relentless right wing semonizing/demonizing back when the religious right was young and Sun Myung Moon wasn't funding it. That shock and my reaction to it defined my life to this point more than other personal event. I can only hope that when this travesty of both government and faith is perpetrated upon congregations across America that honest people will react with the kind of revulsion and disgust that I felt two decades ago. Good night friends and bar keep. Say hi to Billmon.

    Posted by b on April 18, 2005 at 05:22 AM | Permalink | Comments (78)

    Billmon: Fuel Shortage

    A big picture economy review: Fuel Shortage

    For the financial markets, last week had a ugly feel to it, both on Wall Street and globally. It wasn't a crash, certainly, but also more than just a garden-variety correction. It felt like the preliminary stages of a sea change in sentiment -- the kind that either accompanies the popping of a bubble, or causes it, depending on your economic point of view.

    Posted by b on April 18, 2005 at 04:12 AM | Permalink | Comments (59)

    April 17, 2005

    Your News, Views and Visions

    Open thread and a link to the elder one

    Posted by b on April 17, 2005 at 01:16 PM | Permalink | Comments (43)

    Frist They Came for the Jews

    I see a theme in the following diaries read on dKos or elsewhere:

    Forced Confessions: Third Time The Charm (by bellatrys on why the Salem Witch Trials hold a key to our present disaster)

    Bush Administration tells girls to sit down and shut up (by lorraine, one of the more thoughtful diarists on dKos)

    An Ex-Theocrat Speaks: They're Crazy Like Foxes (by bellatrys, this link was posted in one of the threads but the discussion was then focusing on unions)

    all summed up by Bob Johnson's post (Bob Johnson is one of dKos's official clowns, so a fully humorless post from him is really striking...)

    It's the Jews

    Do you worry? Are you scared? Or are "they" overreaching? Or is it that "It can't happen here"?
    But go read the links anyway.

    Posted by Jérôme à Paris on April 17, 2005 at 03:48 AM | Permalink | Comments (30)

    April 16, 2005

    Mike Moore is Wrong

    The title is an obvious wink and a nod to our barkeep, but the topic is probably not the one you'll expect (although, coming from me, you won't really be surprised...)

    This is about a story that comes up again every now and then (and of course in the Michael Moore movie) and I try to shoot it down each times in a few lines, usually met with skepticism or mockery: the Trans-Afghanistan Pipeline.

    So here is the long version, once in for all, for future reference whenever this topic comes up.

    Why it will not be built can be explained by having a detailed look at how pipelines are financed and paid for, and looking at how this applies to this project.

    Just to be clear, the TAP (Trans-Afghan-Pipeline or Turmenistan-Afghanistan-Pakistan) is a proposed natural gas pipeline which would go from the gas fields of Turkmenistan to Pakistan through Afghanistan. All that follows below applies to both oil and gas pipelines, but I'll focus on the gas case as it is what concerns us here.

    A pipeline is very literally like a chain - all links must be in place for the whole chain to have any value at all. In the case of a pipeline, the links include a gas field to provide the throughput, the construction of the pipeline, the continued operation of the pipe, and a purchase of the gas on the other side.

    What is essential to note is that to get any revenue from a pipeline, you need the whole chain to be in place - you cannot have two thirds of a pipeline, and you need the gas production and the gas consumption. That means that all the investments must come upfront and all the revenues will come only after all the spending has been made. As the tag price for a pipeline usually runs in billions of dollars (the typical price can be around 1-3 millions dollars per kilometer, depending on its size and the ground it covers), this means that financing such an investment is a fundamental question:

    if you cannot say who is able AND willing to put 2 billion dollars on the table UPFRONT, and explain how they will get paid back, then your project will not fly.

    Let me explain how this is usually done.

    A pipeline is usually built by a gas producer who wants to gain access to the market or to a specific customer, by a customer needing access to gas reserves (think big customers like a power plant, a chemical factory or an aluminium producer), by a third party (usually, a specialised pipleine operator acting on behalf of the producer or the customer), or by any combination of the 3.

    A gas producer wants to bring its gas to a market at the lowest cost possible. It has a good idea of how much gas he can produce and thus ship, and can determine a cost per unit of gas, which it can compare to the price it expects to sell the gas and its own cost of production. If the producer is reasonably confident to be able to sell its gas over the requisite duration (typically 15-20 years or more), it will invest in the pipeline, on a cost basis (i.e. the pipeline will effectively part of the cost of production of the gas from its perspective).

    A gas purchaser is in a symetrical situation. It needs to connect to the site where gas is available (whether an individual gas field or a place where the gas grid already exists); it know how much gas it needs over the life of its industrial asset (again, 20-30 year periods are fairly standard) and the cost that this adds to the purchase price of gas over the long term.

    A third party will build a pipeline if it can profit from it, as it is not involved in either gas production or consumption and cannot make a profit from the rest of the chain. It is possible to build "merchant" projects, i.e. "build it and they will come" - you build the infrasturcture and charge for its use. This is possible only in places where there is a lot of suply and a lot of demand and not enough transport capacity, which does not happen very often. In most cases, the third party is a pipeline operator acting on behalf of the gas producer or consumer, and the ownership is shared between them in various combinations (everything is possible); the only important thing in that configuration is that the pipeline is an independent entity which must make a profit.

    In that situation, there are several ways to remunerate the pipeline company:

    • a simple tariff, proportional to the volume of gas shipped
    • a "capacity" charge: i.e. the user pays for the right to use a given fraction of the pipeline capacity, whether it actually uses this capacity or not
    • or any combination of the two.

    A typical situation is a capacity charge which is high enough to guarantee a minimum level of revenues (ideally, enough to pay off the initial investment on its own), and a low tariff which reflects operational costs for the use of the pipeline and provide potential profit for the pipeline operator (a minimum level of use will provide a small profit, a full utilisation will yield a nicer, but never extravagant, profit).

    Another way to materialise such arrangements are "ship-or-pay" contracts, whereby there is only a tariff proportional to the volume, but with an obligation to pay it anyway, up to a certain value, even if the corresponding volume is not shipped (the shipper then getting "make up" rights - i.e. it can ship more without paying for it again if it exceeds the requisite volumes in future periods.

    The essence of all these arrangements is that someone has to commit to provide a minimum level of revenues to the pipeline operations in order to pay off the initial capital investment. Such commitment is what makes a project economic and usually makes it financeable as well.

    For someone to commit to paying such tariff - and remember, a pipeline usually requires 15 years of operations for the tariff to make economic sense - it has to have a pretty good certainty that (i) it will need the capacity for such a period, ((ii) it will have use for it and (iii) it will be able to afford it. Such a commitment to pay can be a major financial drain if the corresponding revenues (from selling the gas or from using it) are not there.

    So we're back to our initial questions, but with more details:

    • are there enough gas reserves to fill up the pipeline capacity for the requisite 15-20 years?
    • is the gas producer able to produce the requisite volume for 15 years? (has he invested enough to produce the gas?; is the production profile compatible with the transport infrastructure? are all the permits, authorisations, etc... necessary to exploit the gas fields available, and can they be expected to remain in place? do the production costs - including all taxes - make sense in view of the whole chain?)
    • is the gas producer committed to delivering these volumes through ths pipeline?
    • are the proposed construction costs for the pipeline realistic, and will the construction schedule be met?
    • is the pipeline operator experienced and able to keep it functioning for the required duration at the required capacity?
    • has the pipeline obtained all the necessary permits, licences, authorisations from all relevant authorities?
    • will there be a market or a buyer to take all the gas for the requisite 15-20 years?
    • are the purchasers able to pay for the gas for the period?

    which can also be identified as follows:

    • reserve and production risk
    • producer commitment risk
    • construction and operation risk
    • market and price risk
    • political risk
    • buyers' counterparty risk

    ALL these risks must be acceptable for the project to make sense. Any major issue in any of these categories is sufficient to kill the project. Banks and investors look at it the same way, with the simple difference that, as banks' revenues are imited at most to the interrst income, theyt alos want to limit their risk. As a result, they usually get a first dip in the revenue, after operating costs but before investor revenues.

    So, what about our Afghani project? Let's look at all the above points in turn:

    - gas reserves and production
    That's clearly the strong point of such a project: Turkmenistan has massive gas reserves (the fourth in the world) and it already has significant production capacity (including inutilised capacity since the break up of the Soviet Union). So the requisite gas is there and could be produced and shipped in the required volumes.

    - gas delivery commitment
    Unfortunately, this is the biggest hurdle for the project: you need to trust the Turkmens to deliver their gas to the pipeline for the next 15 years. The risk is especially important as Turkmenistan is the only possible source of gas for the pipeline and their continued participation in the scheme is therefore essential. The risk is two-fold:

    • the political risk is extremely high, with Turkmenistan ruled by a crazy dictator with absolute powers. He has shown that he was not necessarily rational and could change his mind very easily; if he does that about the project, there is no recourse. Being a dictator, should he fall, it is not clear that his successors would honor a commitment that he made. Over 15 years, these risks are significant.
    • the second item, and more important one, is that Turkmenistan already has an available route to export its gas via the pipelines going North to Russia. These pipelines have been built a while ago (during Soviet times) and do not have to be paid for anymore. They are thus available immediately, and at a very low cost (operating costs, which are usually low for pipelines). That means that it is quite easy for the buyer of gas at the end of these pipelines (currently, the Russian monopoly Gazprom) to offer at any time a higher net price for Turkmen gas than they can get on the other side.
    The fact that the Afghan pipeline would not be competitive is thus a major obstacle to its economic rationality, as it threatens the availability of the Turkmen gas volumes.

    - construction and operations
    This is not an dealkiller, as pipelines have been built in many difficult or harsh places, but it is clearly a challenge. Building a pipeline requires bringing massive quantities of steel (count a few hundred tons per kilometer) - and the workers to put them in place to locations out of reach of roads and other transportation modes. Afghanistan has few roads, a harsh climate, and it would thus be a complex logistical exercise. The risks are thus both high as regards the cost of construction and its time schedule. and any delay has major economic implications as interest costs run on the full amount of the initial investment and are compounded as delays mount.

    - market and price risk
    The proposed market for the gas to be shipped is the Pakistani market, and possibly (but after additional investments are made), the Indian market (requiring a pipeline between the two countries) or the international market (requiring the construction of a liquefaction plant on the Pakistani coast). The Pakistani market is likely to grow over the coming years, but it is a hard market to assess. In any case, the pipeline company would not want to distribute the gas itself and would thus rely on a local counterparty, in all lielihood the national gas company (Pakistan Petroleum Ltd, PPL). The project thus requires this company to commit to take the requisite volumes for the requisite period, and to pay for it over the duration - in hard currency. This is a risk that the banking market will NOT bear and that international oil & gas companies are unlikely to take themselves except if they have a natural hedge through local production, which is incompatible with a pipeline import project. Multilateral institutions like the Asian Development Bank or the World Bank might be able to do it, as well as export credit agencies (government agencies from the rich countries which subsidise exports from their countries by guaranteeing payment risk), but they usually require commercial banks to share a part of the risk in such big projects.
    The recent experiences of Dabhol  (a big power plant in India) and Argentina further show that ven if the demand is there and the price (in dollar terms) is guaranteed by a public body, the commitment to pay these amounts in situations when there is a currency devaluation but no significant increase of domestic prices for gas or electricity is very weak, and investors end up being paid in worthless local currency - starkly insufficient to repay dollar debt.

    - political risk
    This is also a major obstacle. This is a 3-country project, and these are extremely rare. As far as I know, the BTC pipeline from Azerbaijan to Turkey via Georgia is the only recent example, and it's taken the combined might of BP and a dozen other oil majors with 5 billion barrels of oil on their hands and no other way to bring them to the market, the full support of the US government (fighting against Russia and Iran), the presence of the World Bank, the EBRD and 6 Western government export credit agencies to pull it through - and it's taken 10 years.
    In this case, you can argue that you probably have the worst combination imaginable - a crazy dictator, a country with warring local warlords and almost no centralised government, and a highly unstable country - and you need each of them to be happy at all times for a full 15 years, not renege on ANY of their commitments, and not try at any time to get a better deal (with each being absolutely indispensable to the project). Hard to imagine, even with 15,000 US soldiers on the ground...

    - counterparty risk
    as all counterparties in the 3 countries are public entities, this is fairly similar here to political risk with the price risk added in Pakistan. There are no majors involved in gas production in Turkmenistan, and none in gas consumption in pakistan, so you rely in each case on the local actors. The pipeline would likely be built by a consortium including an oil major, and you could expect that part to be at least manageable, but that's not enough.

    So, you're going to tell me, if this project is as impossible as I claim, why do we keep hearing about it? And why do we find these suspicious connections between senior political figures in Afghanistan and oil companies?

    Fair questions, but with relatively simple to answer in fact.

    The 3 countries would like this project to exist. Turkmenistan would like to have an alternative to Russia to sell its gas to, Afghanistan would like the transit revenues it would bring, and Pakistan does need gas and this is one of the options. A lot of people are going to tell the authorities of these countries the things they want to hear, i;e. that this project can be built in a painless way. Some institutions may have other interests (the ADB would like to show that it can do a major oil&gas project, some of the oil producers have operations in Pakistan that they may want to protect or expand, and various countries in and out of the region have various interests involved and want to support their allies and their pet projects). The question, as stated above is - who will put 2 billion dollars upfront in this project? Putting a few million to conduct feasibility studies, naming a roving ambassador that makes speeches, etc... costs nothing to an oil major or a big country, and brings various diplomatic or relationship advantages, but it does not finance or build a project.

    So, please, please, do not use the Afghan pipeline as an axample of nasty oilmen conspiracies. There are enough of these going on not to focus on those that have no serious basis in reality. It just makes you lose credibility with those that know anything about the sector.

    Remember, oil is a mutli-hundred-billion dollar business. Spending a few million here or there to make or keep friends and make them believe you are their friend is a small investment in the larger scheme of things. Making big announcements is a way of life for politicians and it costs oil companies to flatter them by letting them having their ways and the positive PR even if there is nothing behind the announcements.

    It's not because Halliburton does evil stuff (mostly scamming the US government by the way) that everything that any oil company does is evil or suspicious...

    please bring up your questions or suspicious quotes and I will try to answer them as best as I can.

    Posted by Jérôme à Paris on April 16, 2005 at 02:06 PM | Permalink | Comments (12)

    Tough Love

    I am worried that this weeks downleg in the financial markets will go on longer and deeper than most people expect. The dark clouds have been hanging around for month, last week saw some rain and higher winds. The financial storm is rising.

    From Doug Nolands weekly Credit Bubble Bulletin:

    The developing financial crisis took a major leap forward this week, with equity and risk markets in sharp retreat across the globe. Here at home, the Dow was hit for 3.5% and the S&P500 for 3%.  Economically sensitive issues were in liquidation. The Transports were clobbered for 6% and the Morgan Stanley Cyclical index for 7%. Even the Utilities were down 1%, about the same as the Morgan Stanley Consumer index. The broader market was under heavy selling pressure. The small cap Russell 2000 dropped 5%, and the S&P400 Mid-cap index was down 4%. The NASDAQ100 sank 4% and the Morgan Stanley High Tech index fell 6%. The Semiconductors were hit for 8%. The Internet index fell 5%, and the NASDAQ Telecommunications index declined 4%. Led higher by Genentech, the Biotechs gained 1%. The Broker/Dealers dropped 4%, and the Banks declined 2%. While bullion declined only $2.20, the HUI gold index sank 9%.

    Sounds quite bad, but well - the week was profitable for me. I am short the NASDAQ100 index and some semiconductor stocks for some time now and the week gave me a chance to add some cheap silver options.

    The U.S. consumption binge is coming to an end and the hangover will be, like usual, of a proportional size to the binge. In this case this means, it will be gigantic. But it is healthy this way. It will keep at least some folks from drinking too much the next time cheap liquid(ity) is offered.

    As Stephen Roach sums up in his Friday piece:

    For a US economy that is living dangerously beyond its means, the tough love of fiscal and monetary discipline is the only way America will ever make lasting progress on the road to rebalancing.

    Posted by b on April 16, 2005 at 12:41 PM | Permalink | Comments (11)

    April 15, 2005

    Billmon: 04/15 (2)

    V: The One True Frist


    IV: Man of the Hour

    But now they're going after the Progressive Era -- first the inheritance tax (1916), then the income tax (1913) to be followed, no doubt in the fullness of time, the Food and Drug Act, the Interstate Commerce Act and the Sherman Act ... .

    So many laws, so much repealing to do before the Lord returns. And at this point it isn't too hard to imagine what the Republican Jesus will look like.

    Posted by b on April 15, 2005 at 02:14 PM | Permalink | Comments (56)

    Open Thread 05-38

    Your news, views and visions  -  and a link to the forerunner

    Posted by b on April 15, 2005 at 03:00 AM | Permalink | Comments (84)

    Billmon: 04/15

    III. Apocalypse Now and Then


    II. Life Imitates the Whiskey Bar


    I. Kulturkampf

    I'd rather try to persuade the voters that progressives will defend those values than promise them phony remedies for problems that ... are beyond government's power to solve.

    Posted by b on April 15, 2005 at 02:32 AM | Permalink | Comments (19)

    April 14, 2005

    Billmon: Tom Turtle

    Meet Tom, a Chelydra serpentina -- the common snapping turtle.

    Posted by b on April 14, 2005 at 03:09 PM | Permalink | Comments (53)

    Billmon: Moon of Alabama

    A big THANKS to Billmon for promoting this site with his piece: Moon of Alabama

    A warm WELCOME to everyone who passes by for the first time. Feel free to poke around and to comment. Bookmark the site and come back.

    You may want to check some recent posts here like Jérôme's Energy Return On Energy Invested, Condoleezza's Evidence by Bernhard or some great artwork by commentator anna missed.
    There is also always an Open Thread around for otherwise off topic comments and -most important- there are threads for all Billmon posts.

    Now why the f... IS this place named Moon of Alabama? Check here.

    Posted by b on April 14, 2005 at 01:17 PM | Permalink | Comments (37)

    China's $ Problem or $'s China Problem?

    An article in the FT today puts the US-Chinese economic/trade relation in an interesting perspective, i.e. from the Chinese point of view.

    China's leaders are preparing their people for an end to the policy of pegging the renminbi to the US dollar, the bedrock of economic policy for a decade. [This] would have big implications for China's economic management and, some in Beijing think, for its development strategy predicated on foreign direct investment inflows and export-led growth.

    China's exchange rate is also central to the growing debate over whether the current imbalances in the global economy - whereby the US has a large current account deficit while other countries accumulate dollar assets - can be sustained. Pressure on China to alter its exchange rate is particularly strong from Washington. The US Congress may force President Bush's administration to take more aggressive steps to curb the trade deficit with China, which this week ballooned to a new record.

    This is another look at global imbalances and their domestic implications both in China and in the US, and some suggestions for the Us domestic politics.

    China's dollar dilemma (Financial Times, 14 April)
    Some economists wonder if US lawmakers know what they are wishing for. China and other Asian countries have - because of massive dollar purchases to prevent their currencies appreciating - emerged as the financiers of the US's current account and fiscal deficits, providing cheap capital that has kept the dollar's decline orderly and helped bring economic growth and low interest rates.

    Sooner or later these countries may decide this is no longer in their interests. They face capital losses on their reserves as the dollar declines, while running the economy according to an exchange rate target means abandoning control of domestic policy. Market rumours of possible slower accumulation of dollar reserves, or diversification into other currencies, by smaller Asian countries have caused volatility in financial markets in recent months. A shift in China's exchange rate policy could have a far greater effect.

    China's current policies are to the advantage of the US (and obviously in the interest of China's export-led growth), but they also have some downsides for the Chinese:

    There would be capital losses if the renminbi appreciated. Economists estimate three-quarters of China's foreign reserves of more than $600bn are held in US dollar assets.

    Yu Yongding, a member of the monetary committee of the People's Bank of China, the central bank, acknowledges that it is difficult to calculate an ideal level for foreign exchange reserves. But he says of the current level: "There is no doubt whatsoever that it is too high, entirely unnecessary and a waste of financial resources."

    A shift in exchange rate policy would also allow the government to use monetary policy for domestic goals, rather than subordinating interest rate decisions to the management of the renminbi. This might be very useful at a time when, according to many economists, the Chinese economy is in danger of overheating.
    Exchange rates are subservient to China's overarching aim of maintaining annual economic growth of about 7 per cent to 8 per cent, creating the 15m to 20m jobs a year that the government believes are needed to maintain social stability and meet expectations of higher living standards.

    Indeed, the debate over the renminbi goes to the heart of the way China has built its economy since Deng Xiaoping lifted it out of its post-Maoist torpor in the late 1970s. Foreign investment has produced jobs but has in some eyes turned China into little more than a processing centre for goods that are sent on to the US and Europe.

    Guo Shuqing, formerly head of the State Administration of Foreign Exchange, said in a recent interview with a state-run newspaper that "indiscriminate support of exports" and "fake foreign investment" had begun to cause problems for the economy. "We should gradually reduce the preferential treatment to exports and seriously review our foreign investment policy," he argued.

    The current global arrangements are really like a drug:

    • they have provide a boost to the parties - the US gets to consume cheap goods on credit, the Chinese get export-led growth and standards of living;

    • many constituencies are now  "hooked" and cannot function without it: Chinese exporters (including a number of Western investors), the US authorities, happy to be able to have spending power at no apparent cost (just print more money), and Chinese authorities who have found an easy way to avoid social unrest.

    But there are growing nasty side effects, both on a global scale and domestically:

    • the global unbalances have been discussed in other threads, so I won't go back into them, but there is a growing worry that they are unsustainable and that there is a real risk of a "hard landing";

    • in the US, the trade deficit with China is causing politicians to push for corrective measures, the most frequent ones being protectionism; there is also the fear that outsourcing the industrial base of the country to China is hollowing out the country and leaving it with bad jobs at Wal-Mart in a self-feeding vicious circle. But China is only the symptom of the above unbalances, and blaming the symptoms will not cure the underlying problems;

    • in China, more interestingly; there are growing voices to say that the current model of growth is no so advantageous for China, as it unduly favors exporters (which are not really Chinese) and does not help to develop a domestic market so much; also, the scale of the monetary unbalances is having a toll internally as the country struggles with towering reserves on which it bears a risk that they will lose value and which are becoming increasingly hard to "sterilize" as the capacity of the domestic bond market is saturated. The threat of inflation is becoming very real again and this is a risk that Chinese authorities really want to avoid.

    And like with Iran, US pressure is counter-productive:

    If China's policymakers are in accord on one issue, it is that the exchange rate system should not be used as a tool to assuage US ire over the bilateral trade imbalance. "No country can base its currency policy on bilateral trade imbalances," says one senior Chinese official. "If that was the case, then Washington should be pressuring Saudi Arabia to revalue its currency."

    Bert Keidel, a former economist at the World Bank in China and former Treasury official who is now with the Carnegie Endowment for Peace, a Washington-based think-tank, says pressure from the US is not helpful. However much sense it might make for China to change its currency regime sooner rather than later, US pressure is likely to produce the opposite result: "There is one constituency which says, if this is what the Americans really want, then screw them."

    As with all drugs, addiction makes it hard to stop, and all parties are hoping that a "soft landing" can be found. And who knows, it might be possible if you did not have reckless spenders in the White House (Stirling Newberry's latest diary - go read it) keen on making the bubble ever bigger to blow it in favor of the narrowest of constituencies, the ultra-rich and the big corporate bosses.

    Rather than blaming the Chinese for what are mostly homegrown problems, the Democrats should focus on the following:

    • the main culprit is Bush's reckless deficits which forces the country to rely on foreign capital and creates a nasty dependency (Irresponsible - and dangerous for national security);

    • the debt thus generated additionally is used to give money to the ultra rich (as previous tax cuts and the latest repeal of the estate tax show) and to the greedy corporates that would rather invest in China than in the US (policy hijacked by narrow interest groups);

    • meanwhile some of the underlying  reasons why firms are not investing in the USA (out of control health care costs, stagnant purchasing power) are not being addressed (they don't care about the average American's economic situation)

    Posted by Jérôme à Paris on April 14, 2005 at 08:14 AM | Permalink | Comments (26)

    Billmon: 04/13 bis

    Gunga Din

    about the Coalition Formerly Known as the Coalition of the Willing...

    Posted by Jérôme à Paris on April 14, 2005 at 01:23 AM | Permalink | Comments (15)

    April 13, 2005


    Energy Return on Energy Invested - Public Relations

    During the research for my nuclear energy post, I came across this graph:


    It shows a highly favorable EROEI for nuclear plants. Of course, as it comes from the World NuclearAssociation, hardly a neutral party, I took it with a grain of salt and chose not to include it in my post.

    The funny thing is that I received the following press release yesterday:

    The press release is from Vestas, the (Danish) largest manufacturer of wind turbines today (with more than a third of the world market):

    A V90-3.0 MW offshore wind turbine has to produce electricity for just 6.8 months, before it has produced as much energy as used throughout its design lifetime. In other words this turbine model earns its own worth more than 35 times during its design lifetime.

    Furthermore, compared to the V80-2.0 MW offshore wind turbine, the 6.8 months constitutes an improvement of approximately 2.2 months.

    If installed on a good site, the V90-3.0 MW wind turbine will generate approximately 280,000 MWh in 20 years - thus sparing the environment the impact of a net volume of approximately 230,000 tons of CO2, as compared to the figures for energy generated by a coal-fired power station.

    The above-mentioned are two of the results from a life cycle assessment (LCA), which Vestas completed of a V90-3.0 MW wind turbine in 2004. The calculations prove the environmental advantages of Vestas turbines also when taking the whole life cycle into consideration.

    A life cycle assessment is both a mapping and an evaluation of the potential impact of the wind turbine on the external environment throughout its lifetime. The life cycle assessment for the V90-3.0 MW wind turbine is divided into four phases.

    - The production phase, which covers the period from obtaining the raw materials to the completion of the wind turbine

    - Transport of the wind turbine components and erection of the wind turbine

    - Operation and maintenance throughout the 20-year design lifetime of the wind turbine

    - Disposal of the wind turbine.

    Vestas provides a more detailed summary of the life cycle assessments as well as more detailed reports (see the links in that page); I'll just steal one graph:


    But the nucleocrats also provide some detailed studies, summarised in this document which regroups a number of findings which I have no way to assess but which look well-researched. The graph above summarises the main finding, i.e. that nuclear energy supposedly has a great EROEI.

    So, who will help me to make sense of these numbers?

    Posted by Jérôme à Paris on April 13, 2005 at 09:25 AM | Permalink | Comments (51)

    Billmon: 04/13


    He may be a demented old war criminal, but he's a funny demented old war criminal. And in my book, that still counts for something.

    Gin Rummy


    (Scene: A somewhat seedy looking diner somewhere outside of Houston, Texas. A line of nattily dressed corporate vice presidents -- looking distinctly out of place in such a dive -- sit at the counter reading menus. Behind the counter, Jack Abramoff, in apron and paper cap, is taking orders. There's a pass through in the wall behind him, and in the kitchen we see a sweaty Tom DeLay, in a greasy apron and paper cap, working the grill.) ...

    Order Up (you wil love this meal)

    Posted by b on April 13, 2005 at 05:57 AM | Permalink | Comments (8)

    April 12, 2005

    Euro (de)Population

    The EU has just released its new demographic projections (pdf, 4 pages)

    The conclusion is simple: France and the UK are the next power couple of Europe.


    faute de combattants, as they say in France (for lack of fighters - elsewhere)...

    So will they fight or will they talk?

    Over the next two decades the total population of the EU25 is expected to increase by more than 13 million inhabitants, from 456.8 million on 1 January 2004 to 470.1 million on 1 January 2025. Population growth in the EU25 until 2025 will be mainly due to net migration, since total deaths in the EU25 will outnumber total births from 2010. The effect of net migration will no longer outweigh the natural decrease after 2025, when the population will start to decline gradually. The population will reach 449.8 million on 1 January 2050, that is a decrease of more than 20 million inhabitants compared to 2025. Over the whole projection period the EU25 population will decrease by 1.5%, resulting from a 0.4% increase for the EU15 and a 11.7% decrease for the ten new Member States.


    This will be the first time ever that you have a peace time decline in the population of a significant polity, so it is an event with fairly unpredictable consequences.

    It is usually addressed either by people who worry about the financial balance of the pensions plans, as the number of older people grows in absolute and relative terms, and by demagogues who fuel the fears about immigration.

    Isn't it time that we had a real debate about what kind of society we want? How will we care for our elders? Who will care for them? Will they even need to be cared for (as all studies show that people live older AND healthier until the last few months of their lifes)? And what kind of politics will that bring?

    And as far as France and the UK are concerned, the fact that they will be the only two large countries in Europe (possibly with Turkey) with populations still growing will give them a lot more clout then the declining powers like Germany, and it is going to lead to interesting realignments of interests within the union. We'll see, especially as I am doubtful of the population growth of the UK in virw of their recent natality rates, which have declined significantly in the past 5-10 years. We'll see.

    Posted by Jérôme à Paris on April 12, 2005 at 06:17 PM | Permalink | Comments (28)

    Billmon: 04/12

    Music for F-you boys and virile females: High Fidelity


    Straight From the Ass's Mouth

    Breaking the Senate filibuster on judicial nominees not only would make it easier to obtain lifetime appointments for fellow wing nuts, it would also be the opening wedge for getting rid of the filibuster entirely -- making it easier for a slender GOP majority to pass all kinds of fun stuff, maybe even the Constitution Restoration Act. Or perhaps some sort of Emergency Enabling Act. . .

    Posted by b on April 12, 2005 at 12:55 PM | Permalink | Comments (18)

    WaPo Self-censors Report on Bolton Hearing

    An Associated Press piece is available at the Guardian and the Washington Post website in different versions suggesting that the Washington Post is self censoring.

    The piece by Anne Gearan, AP Diplomatic Writer, is titled 'Senators May Have Blown Cover of CIA Agent' and refers to yesterdays hearing of John R. Bolton at the Senate Foreign Relations Committee.

    During the hearing, Senators Lugar and Kerry referred to a National Intelligence Officer by the name Fulton Armstrong. The Washington Post version (also in print on A10) of the AP piece does not name Mr. Armstrong like AP does, but inserts instead the phrase '[the person in question]'.

    The full transcripts of the public hearing are available through the New York Times and do include the full name of Mr. Armstrong.

    The AP piece itself is dubious. Mr. Armstrong is known to be a National Intelligence Officer working on Latin America issues. In the summarize of a Council of Foreign Relations discussion available here he is referred to as "Fulton Armstrong/National Intelligence Officer for Latin America". More information on his career is available through There are reports available on Cuban-Exile sites that do mention Bolton and Armstrong in the discussion about alleged, overblown Cuban bio warfare preparations.

    Two questions to ask:
    - Why is the Associate Press suggesting "Senators May Have Blown Cover of CIA Agent" when a simple Google search turns out that there was no cover to blow on the person in question in the first place?
    - Why does the Washington Post believe it has to edit the AP piece and to hide the full name, mentioned in a public hearing, from its readers by printing '[the person in question]'?

    What is your take?

    UPDATE: Jeffrey Lewis, the Arms Control Wonk, has additional bits


    The Washington Post's version of the AP piece:

    During a hearing on John R. Bolton's nomination to be ambassador to the United Nations, Bolton and members of the Senate Foreign Affairs Committee referred to the analyst as "Mr. Smith." They were discussing one of the officials involved in a dispute over what Democrats said was Bolton's inappropriate treatment of an intelligence analyst who disagreed with him.

    "We referred to this other analyst at the CIA, whom I'll try and call Mr. Smith here," Bolton said at one point.

    But the committee chairman, Richard G. Lugar (R-Ind.), and Sen. John F. Kerry (D-Mass.) mentioned a name that had not previously come up in public accounts of the intelligence flap.

    In questioning Bolton, Kerry read from a transcript of closed-door interviews that committee staffers conducted with State Department officials before yesterday's hearing.

    "Did Otto Reich share his belief that [the person in question] should be removed from his position? The answer is yes," Kerry said, characterizing one interview. "Did John Bolton share that view?"

    The Guardian version:

    During questioning on John R. Bolton's nomination to be President Bush's ambassador to the United Nations, Bolton and members of the Senate Foreign Affairs Committee referred to "Mr. Smith" as one official among several who were involved in a dispute over what Democrats asserted was Bolton's inappropriate treatment of an intelligence analyst who disagreed with him.

    "We referred to this other analyst at the CIA, whom I'll try and call Mr. Smith here, I hope I can keep that straight," Bolton said at one point.

    Committee Chairman Richard Lugar, R-Ind., and Sen. John Kerry, D-Mass., both mentioned a name, Fulton Armstrong, that had not previously come up in public accounts of the intelligence flap.

    It is not clear whether Armstrong is the undercover officer, but an exchange between Kerry and Bolton suggests that he may be.

    In questioning Bolton, Kerry read from a transcript of closed-door interviews that committee staffers conducted with State Department officials prior to Monday's hearing.

    "Did Otto Reich share his belief that Fulton Armstrong should be removed from his position? The answer is yes," Kerry said, characterizing one interview. "Did John Bolton share that view?"

    Posted by b on April 12, 2005 at 04:16 AM | Permalink | Comments (10)