This is from antiwar.com.
The withdrawal is more like a troop reduction plan. Of course the Iraqis themselves may decide that they do not want 50,000 troops staying in the country. Obama is quite flexible in meeting campaign promises. Many of the troops he is withdrawing will no doubt be simply sent to Afghanistan.
I am off to the Philippines for a month and so I may not post too often during March.
US Combat Missions in Iraq Will Continue After ‘Pullout’
Obama Pledge to Withdraw Combat Troops Won't End Combat by Troops
Posted February 25, 2009
Just one day after reports came out regarding the Obama Administration’s 19 month withdrawal plan from Iraq, the Pentagon was detailing the enormous number of troops that would remain on the ground after Obama ostensibly fulfills his promise to remove all combat troops, and all the combat they’ll be engaging in.
After the “pullout,” as many as 50,000 troops will remain on the ground, and despite being touted as a withdrawal of combat troops, Pentagon spokesman Geoff Morrell conceded that some would continue to “conduct combat operations,” and Iraq would still be considered a war zone. The rest would be what he described as “enablers.”
President Obama promised a 16-month pullout from Iraq during the campaign, but backed off the promise under pressure from the military. Since then he has spoken of a “responsible military drawdown,” but even as he is set to officially unveil this new plan the question of when the troops will actually be out of Iraq entirely seems like it will remain unanswered.
',200);
Saturday, February 28, 2009
Friday, February 27, 2009
Galoc Oil Field back on stream in the Philippines
This is from ogj.
The Philippines is almost entirely dependent upon imported oil so any increased production at Galoc will be a positive for the Philippines. The article does not say who owns the companies involved.
Galoc oil field back on stream in the Philippines
Rick WilkinsonOGJ Correspondent
MELBOURNE, Feb. 26 -- Production has resumed from Galoc oil field in the Palawan basin off the Philippines following completion of repairs and enhancements to the mooring and riser systems.
Operator Galoc Production Co. said the Rubicon Intrepid floating production, storage, and offloading vessel has been reconnected and that output would steadily be increased to 13,000-14,000 b/d of oil.
Production from the field was temporarily shut down in late December 2008 after a survey of the mooring and riser systems showed a partially detached component that would need to be reattached before the system could be reconnected to the FPSO.
Galoc holds a 58.29% interest in the field. Other partners include Nido Petroleum 22.28% and Otto Energy, which holds 18.28% indirect interest through its 31.38% stake in Galoc.
The Philippines is almost entirely dependent upon imported oil so any increased production at Galoc will be a positive for the Philippines. The article does not say who owns the companies involved.
Galoc oil field back on stream in the Philippines
Rick WilkinsonOGJ Correspondent
MELBOURNE, Feb. 26 -- Production has resumed from Galoc oil field in the Palawan basin off the Philippines following completion of repairs and enhancements to the mooring and riser systems.
Operator Galoc Production Co. said the Rubicon Intrepid floating production, storage, and offloading vessel has been reconnected and that output would steadily be increased to 13,000-14,000 b/d of oil.
Production from the field was temporarily shut down in late December 2008 after a survey of the mooring and riser systems showed a partially detached component that would need to be reattached before the system could be reconnected to the FPSO.
Galoc holds a 58.29% interest in the field. Other partners include Nido Petroleum 22.28% and Otto Energy, which holds 18.28% indirect interest through its 31.38% stake in Galoc.
Philippines: Business sentiment cautious.
This is from Philstar.
Interesting that smaller businesses are on the whole less pessimistic than the larger ones. I suppose this is because export business in particular will see a drop in demand. Also Mindanao businesses are less pessimistic because many of them produce food which will always be in demand.
Business sentiment cautious in Philippines amid economic crisis Updated February 26, 2009 08:01 PM
MANILA, Philippines (Xinhua) - Most businesses are cautious in the first quarter of 2009, weighed down by concerns on the global economic crisis and slowdown in export growth, the Philippine central bank said today.
The overall Confidence Index slipped to -23.9 percent, the lowest-recorded level since the first quarter of 2002. Most of the 21,410 business respondents surveyed from Jan. 5 to Feb. 11 have a negative outlook, believing that the global economic turmoil will hurt both local and international markets.
Reports that export receipts are falling also weakened business sentiment. The National Statistics Office reported early this month that export earnings in December 2008 dropped by 40.4 percent to $2.672 billion on lower global demand for major exports such as electronics and textiles.
Exporters, retailers and manufacturing firms are the most pessimistic among the sectors surveyed, believing that both local and export demand will slacken further.
Philippine business owners are also concerned that they may experience some liquidity problems this year owing to an expected credit crunch, according to a survey done by the Philippine central bank.
The survey revealed that the credit access index in the first quarter slid to -12.8 percent in the first quarter of 2009.
"Respondents anticipated that the financial turmoil would make banks more risk-averse in the coming months and would likely impose stricter credit standards," the central bank said in its report.
Most business owners also reported a higher incidence of delays inpayment orders. This is why most of them expect to be less liquid in the first quarter of 2009.
The financial condition index dropped to -32.9 percent in the first three months of the year. Lean demand combined with credit tightening have also hindered planned business expansion. Only 17. 8 percent of the respondents said they plan to expand operations in the second quarter of 2009. In the first quarter of 2008, consequently, most respondents said they don't plan to hire new workers this year.
Small and medium business owners, however, are more optimistic than large-scale firms, according to the survey. Small-sized firms, which have less than 100 employees, are expecting better business environment in the second quarter. They registered a Confidence Index of 1.6 percent for the second quarter.
The central bank explained that this is because small-scale firms cater mostly to the domestic market and are less exposed to the "vagaries and downturns of global markets relative to large- sized establishments."
Companies based in Mindanao, the southern Philippines are more bullish than in other parts of the country, as most businesses there are involved in food processing and production of cash crops like pineapple and banana. Demand for food products is expected to remain steady with or without the crisis.
Interesting that smaller businesses are on the whole less pessimistic than the larger ones. I suppose this is because export business in particular will see a drop in demand. Also Mindanao businesses are less pessimistic because many of them produce food which will always be in demand.
Business sentiment cautious in Philippines amid economic crisis Updated February 26, 2009 08:01 PM
MANILA, Philippines (Xinhua) - Most businesses are cautious in the first quarter of 2009, weighed down by concerns on the global economic crisis and slowdown in export growth, the Philippine central bank said today.
The overall Confidence Index slipped to -23.9 percent, the lowest-recorded level since the first quarter of 2002. Most of the 21,410 business respondents surveyed from Jan. 5 to Feb. 11 have a negative outlook, believing that the global economic turmoil will hurt both local and international markets.
Reports that export receipts are falling also weakened business sentiment. The National Statistics Office reported early this month that export earnings in December 2008 dropped by 40.4 percent to $2.672 billion on lower global demand for major exports such as electronics and textiles.
Exporters, retailers and manufacturing firms are the most pessimistic among the sectors surveyed, believing that both local and export demand will slacken further.
Philippine business owners are also concerned that they may experience some liquidity problems this year owing to an expected credit crunch, according to a survey done by the Philippine central bank.
The survey revealed that the credit access index in the first quarter slid to -12.8 percent in the first quarter of 2009.
"Respondents anticipated that the financial turmoil would make banks more risk-averse in the coming months and would likely impose stricter credit standards," the central bank said in its report.
Most business owners also reported a higher incidence of delays inpayment orders. This is why most of them expect to be less liquid in the first quarter of 2009.
The financial condition index dropped to -32.9 percent in the first three months of the year. Lean demand combined with credit tightening have also hindered planned business expansion. Only 17. 8 percent of the respondents said they plan to expand operations in the second quarter of 2009. In the first quarter of 2008, consequently, most respondents said they don't plan to hire new workers this year.
Small and medium business owners, however, are more optimistic than large-scale firms, according to the survey. Small-sized firms, which have less than 100 employees, are expecting better business environment in the second quarter. They registered a Confidence Index of 1.6 percent for the second quarter.
The central bank explained that this is because small-scale firms cater mostly to the domestic market and are less exposed to the "vagaries and downturns of global markets relative to large- sized establishments."
Companies based in Mindanao, the southern Philippines are more bullish than in other parts of the country, as most businesses there are involved in food processing and production of cash crops like pineapple and banana. Demand for food products is expected to remain steady with or without the crisis.
Panetta: Drone Attacks in Pakistan Will Continue.
Obama changes words not reality. There is no longer a war on terror although there is a battle against terrorists and extremism. There are also drone attacks begun by Bush and now continuing with the clear blessing of Obama. Meanwhile, Sharif the opposition leader in Pakistan is disqualified along with his brother from running for office. The Pakistan govt. may be on the verge of toppling if not facing civil war. The US might not mind if a govt. more willing to face casualites in the tribal areas took power but that is not likely. The drone attacks have made the Pakistani populace even more anti-American.
Panetta: Drone Attacks in Pakistan Will Continue
New CIA Director Declares Nothing Has Changed, Nothing Will Change
Posted February 26, 2009
The new Director of the CIA Leon Panetta declared yesterday that the controversial drone attacks against sites in Pakistan would continue, in spite of the growing criticism. Panetta declared that the attacks, which began under the Bush Administration, “have been successful.”
But perhaps more ominous than being the latest in a myriad of officials who have said the attacks would continue, Panetta declared that “nothing has changed our efforts to go after terrorists, and nothing will change those efforts.” After a presidential campaign that centered on the promise of change, the Obama Administration’s appointees seem to be going to great lengths to assure the public that “nothing has changed” and that “nothing will change.”
But not everything remains constant. If anything, Obama has escalated the attacks inside Pakistan. The Pakistani government’s faux-outrage is becoming less and less plausible amid a flurry of reports of their “private” support, and the government’s stability is increasingly in doubt, not only from its failing wars and the unpopular US strikes, but a failing economy and political turmoil. Insisting that nothing will change ignores the decidedly changeable reality on the ground in Pakistan.
Panetta: Drone Attacks in Pakistan Will Continue
New CIA Director Declares Nothing Has Changed, Nothing Will Change
Posted February 26, 2009
The new Director of the CIA Leon Panetta declared yesterday that the controversial drone attacks against sites in Pakistan would continue, in spite of the growing criticism. Panetta declared that the attacks, which began under the Bush Administration, “have been successful.”
But perhaps more ominous than being the latest in a myriad of officials who have said the attacks would continue, Panetta declared that “nothing has changed our efforts to go after terrorists, and nothing will change those efforts.” After a presidential campaign that centered on the promise of change, the Obama Administration’s appointees seem to be going to great lengths to assure the public that “nothing has changed” and that “nothing will change.”
But not everything remains constant. If anything, Obama has escalated the attacks inside Pakistan. The Pakistani government’s faux-outrage is becoming less and less plausible amid a flurry of reports of their “private” support, and the government’s stability is increasingly in doubt, not only from its failing wars and the unpopular US strikes, but a failing economy and political turmoil. Insisting that nothing will change ignores the decidedly changeable reality on the ground in Pakistan.
Pakistan in Turmoil over Sharif Bans
This is from antiwar.com.
This is totally bizarre. Just read the incident upon which the decision was made. It was associated with an attempt by Sharif to stop Musharraf's coup! Of course Sharif left a coalition with Zardari''s govt. because of their refusal to re-instate judges kicked out by Musharraf!
This is the worst sort of political manipulation and it remains to be seen whether the Zardari govt. will even survive.
Pakistan in Turmoil Over Sharif Bans
Protests in Pakistan, Stock Market Tumbles Over Political Confrontation
Posted February 25, 2009
Protests were sparked across Pakistan today when the Supreme Court decided that Nawaz Sharif, former prime minister and opposition leader, as well as his younger brother Shahbaz were ineligible to hold public offices. The ruling brought down the Punjabi Provincial government, which Shahbaz was chief minister of, and placed the province under direct national control.
Enraged supporters of the Pakistani Muslim League-Nawaz (PML-N) burned tires in the streets, and the stock market plummeted over 5% in a single trading session as the ban on some of the most influential opposition figures in the nation.
Sharif’s PML-N was part of a coalition government briefly after the 2008 election, but left in August when the ruling Pakistani Peoples Party (PPP) reneged on a promise to reinstate judges ousted by former President Pervez Musharraf. PML-N officials slammed the ruling as a political move by President Asif Ali Zardari, leader of the PPP.
Zardari spokesman Farhatullah Babar claimed that the PML-N was exploiting the decision to derail national unity, and urged the Sharif brothers to “control their supporters in the interest of democracy.” The ban was connected to an incident during the 1999 coup that brought Gen. Musharraf to power: then Prime Minister Sharif attempted to foil the coup by ordering Musharraf’s aircraft diverted. After Musharraf seized power, he had Sharif convicted of “hijacking” over the incident.
This is totally bizarre. Just read the incident upon which the decision was made. It was associated with an attempt by Sharif to stop Musharraf's coup! Of course Sharif left a coalition with Zardari''s govt. because of their refusal to re-instate judges kicked out by Musharraf!
This is the worst sort of political manipulation and it remains to be seen whether the Zardari govt. will even survive.
Pakistan in Turmoil Over Sharif Bans
Protests in Pakistan, Stock Market Tumbles Over Political Confrontation
Posted February 25, 2009
Protests were sparked across Pakistan today when the Supreme Court decided that Nawaz Sharif, former prime minister and opposition leader, as well as his younger brother Shahbaz were ineligible to hold public offices. The ruling brought down the Punjabi Provincial government, which Shahbaz was chief minister of, and placed the province under direct national control.
Enraged supporters of the Pakistani Muslim League-Nawaz (PML-N) burned tires in the streets, and the stock market plummeted over 5% in a single trading session as the ban on some of the most influential opposition figures in the nation.
Sharif’s PML-N was part of a coalition government briefly after the 2008 election, but left in August when the ruling Pakistani Peoples Party (PPP) reneged on a promise to reinstate judges ousted by former President Pervez Musharraf. PML-N officials slammed the ruling as a political move by President Asif Ali Zardari, leader of the PPP.
Zardari spokesman Farhatullah Babar claimed that the PML-N was exploiting the decision to derail national unity, and urged the Sharif brothers to “control their supporters in the interest of democracy.” The ban was connected to an incident during the 1999 coup that brought Gen. Musharraf to power: then Prime Minister Sharif attempted to foil the coup by ordering Musharraf’s aircraft diverted. After Musharraf seized power, he had Sharif convicted of “hijacking” over the incident.
Thursday, February 26, 2009
Sullenberger: Pay cuts driving out best pilots
This is from AP.
Sullenberger: Pay cuts driving out best pilots
By JOAN LOWY and MICHAEL J. SNIFFEN, Associated Press Writers Joan Lowy And Michael J. Sniffen, Associated Press Writers
AP – US Airways flight 1549 Capt. Chesley B Sullenberger III, second from right, talks with Rep. Vern Buchanan, …
WASHINGTON – The pilot who safely ditched a jetliner in New York's Hudson River said Tuesday that pay and benefit cuts are driving experienced pilots from careers in the cockpit.
US Airways pilot Chesley "Sully" Sullenberger told the House aviation subcommittee that his pay has been cut 40 percent in recent years and his pension has been terminated and replaced with a promise "worth pennies on the dollar" from the federally created Pension Benefit Guaranty Corp. These cuts followed a wave of airline bankruptcies after the Sept. 11, 2001, terrorist attacks compounded by the current recession, he said.
"The bankruptcies were used to by some as a fishing expedition to get what they could not get in normal times," Sullenberger said of the airlines. He said the problems began with the deregulation of the industry in the 1970s.
The reduced compensation has placed "pilots and their families in an untenable financial situation," Sullenberger said. "I do not know a single, professional airline pilot who wants his or her children to follow in their footsteps."
The subcommittee of the House Transportation and Infrastructure Committee heard from the crew of Flight 1549, the air traffic controller who handled the flight and aviation experts to examine what safety lessons could be learned from the Jan. 15 accident which all 155 people aboard survived.
Sullenberger's copilot Jeffrey B. Skiles said unless federal laws are revised to improve labor-management relations "experienced crews in the cockpit will be a thing of the past." And Sullenberger added that without experienced pilots "we will see negative consequences to the flying public."
Sullenberger himself has started a consulting business to help make ends meet. Skiles added, "For the last six years, I have worked seven days a week between my two jobs just to maintain a middle class standard of living."
The air traffic controller who handled Flight 1549 said thought he was hearing a death sentence when Sullenberger radioed that he was ditching in the Hudson.
"I believed at that moment I was going to be the last person to talk to anyone on that plane alive," controller Patrick Harten testified in his first public description of his reactions to last month's miracle landing.
"People don't survive landings on the Hudson River. I thought it was his own death sentence," the 10-year veteran controller testified.
But Sullenberger safely glided the Airbus A320 into the river after it collided with birds and lost power in both engines.
Harten, who has spent his entire career at the radar facility in Westbury, N.Y., that handles air traffic within 40 miles of three major airports, struggled vainly to help get the airliner safely to a landing strip.
Making lightning-quick decisions, Harten communicated with 14 other entities in the three minutes after the bird strike as he diverted other aircraft and advised controllers elsewhere to hold aircraft and clear runways for 1549.
First, Harten tried to return the plane to LaGuardia Airport, asking the airport's tower to clear runway 13. But Sullenberger calmly reported: "We're unable."
Then Harten offered another LaGuardia runway. Again, Sullenberger reported, "Unable." He said he might be able to make Teterboro Airport in New Jersey.
But when Harten directed Sullenberger to turn onto a heading for Teterboro, the pilot responded: "We can't do it .... We're going to be in the Hudson."
"I asked him to repeat himself even though I heard him just fine," said Harten. "I simply could not wrap my mind around those words."
At that moment, Harten said he lost radio contact with flight and was certain it "had gone down."
Afterward, Harten said he told his wife, "I felt like I had been hit by a bus."
NTSB investigators have said bird remains found in both engines of the downed plane have been identified as Canada geese.
Sullenberger and Skiles said anyone who's spent much time in cockpits has encountered bird strikes but that this one was exceptionally severe in knocking out both engines. Some gulls don't even dent the airplane, Skiles said, but this "was a bigger bird than I've ever hit before."
The crew and passengers of a helicopter that crashed en route to an oil platform on Jan. 4 weren't as lucky. The National Transportation Safety Board reported Monday that investigators have found evidence birds were involved in the accident near Morgan City, La., that killed eight of nine people aboard.
___
As if to confirm Sullenberger's observations the crash of a plane near Buffalo just recently had a crew with very little experience in flying the plane that crashed and the auto pilot was on when it would have been more prudent to have been flying the plane manually.
It is certainly true that pilot wages plumetted after deregulation and the bankrupticies after 9/11. The high price of fuel last year put even more pressure on airlines to control expenses. Now the recession will make things bad for airline labor again. Eventually this may very well have a negative effect on passenger safety.
Sullenberger: Pay cuts driving out best pilots
By JOAN LOWY and MICHAEL J. SNIFFEN, Associated Press Writers Joan Lowy And Michael J. Sniffen, Associated Press Writers
AP – US Airways flight 1549 Capt. Chesley B Sullenberger III, second from right, talks with Rep. Vern Buchanan, …
WASHINGTON – The pilot who safely ditched a jetliner in New York's Hudson River said Tuesday that pay and benefit cuts are driving experienced pilots from careers in the cockpit.
US Airways pilot Chesley "Sully" Sullenberger told the House aviation subcommittee that his pay has been cut 40 percent in recent years and his pension has been terminated and replaced with a promise "worth pennies on the dollar" from the federally created Pension Benefit Guaranty Corp. These cuts followed a wave of airline bankruptcies after the Sept. 11, 2001, terrorist attacks compounded by the current recession, he said.
"The bankruptcies were used to by some as a fishing expedition to get what they could not get in normal times," Sullenberger said of the airlines. He said the problems began with the deregulation of the industry in the 1970s.
The reduced compensation has placed "pilots and their families in an untenable financial situation," Sullenberger said. "I do not know a single, professional airline pilot who wants his or her children to follow in their footsteps."
The subcommittee of the House Transportation and Infrastructure Committee heard from the crew of Flight 1549, the air traffic controller who handled the flight and aviation experts to examine what safety lessons could be learned from the Jan. 15 accident which all 155 people aboard survived.
Sullenberger's copilot Jeffrey B. Skiles said unless federal laws are revised to improve labor-management relations "experienced crews in the cockpit will be a thing of the past." And Sullenberger added that without experienced pilots "we will see negative consequences to the flying public."
Sullenberger himself has started a consulting business to help make ends meet. Skiles added, "For the last six years, I have worked seven days a week between my two jobs just to maintain a middle class standard of living."
The air traffic controller who handled Flight 1549 said thought he was hearing a death sentence when Sullenberger radioed that he was ditching in the Hudson.
"I believed at that moment I was going to be the last person to talk to anyone on that plane alive," controller Patrick Harten testified in his first public description of his reactions to last month's miracle landing.
"People don't survive landings on the Hudson River. I thought it was his own death sentence," the 10-year veteran controller testified.
But Sullenberger safely glided the Airbus A320 into the river after it collided with birds and lost power in both engines.
Harten, who has spent his entire career at the radar facility in Westbury, N.Y., that handles air traffic within 40 miles of three major airports, struggled vainly to help get the airliner safely to a landing strip.
Making lightning-quick decisions, Harten communicated with 14 other entities in the three minutes after the bird strike as he diverted other aircraft and advised controllers elsewhere to hold aircraft and clear runways for 1549.
First, Harten tried to return the plane to LaGuardia Airport, asking the airport's tower to clear runway 13. But Sullenberger calmly reported: "We're unable."
Then Harten offered another LaGuardia runway. Again, Sullenberger reported, "Unable." He said he might be able to make Teterboro Airport in New Jersey.
But when Harten directed Sullenberger to turn onto a heading for Teterboro, the pilot responded: "We can't do it .... We're going to be in the Hudson."
"I asked him to repeat himself even though I heard him just fine," said Harten. "I simply could not wrap my mind around those words."
At that moment, Harten said he lost radio contact with flight and was certain it "had gone down."
Afterward, Harten said he told his wife, "I felt like I had been hit by a bus."
NTSB investigators have said bird remains found in both engines of the downed plane have been identified as Canada geese.
Sullenberger and Skiles said anyone who's spent much time in cockpits has encountered bird strikes but that this one was exceptionally severe in knocking out both engines. Some gulls don't even dent the airplane, Skiles said, but this "was a bigger bird than I've ever hit before."
The crew and passengers of a helicopter that crashed en route to an oil platform on Jan. 4 weren't as lucky. The National Transportation Safety Board reported Monday that investigators have found evidence birds were involved in the accident near Morgan City, La., that killed eight of nine people aboard.
___
Dr. Doom: Nationalise the Banks.
This is from the WSJ.
Here is another article by Dr. Doom advocating the nationalisation of some banks. It seems that Obama would rather spend umpteen billion to avoid doing this! Obama seems to be giving the banks a high speed auger to upload bucks into distressed banks bottomless cash bins.
OPINION: THE WEEKEND INTERVIEW
FEBRUARY 21, 2009
Nouriel Roubini
'Nationalize' the Banks
Dr. Doom says a takeover and resale is the market-friendly solution.
By TUNKU VARADARAJAN
New York
Nouriel Roubini is always dressed in black-and-white.
I have known him for nearly two years, and have seen him in a variety of situations -- en route to class at New York University's Stern Business School, where he's a professor; over a glass of wine in his boyish loft in Manhattan's Tribeca; at an academic conference, seated sagely on the dais; at a bohemian party in Greenwich Village, at . . . oh . . . 3 a.m. -- and he always, always wears a black suit with a white linen shirt.
Terry Shoffner
And so, in black-and-white he was, earlier this week, when he rushed into the office of Roubini Global Economics, his consulting firm in downtown Manhattan, and offered a breathless apology to this correspondent, who'd been waiting for half an hour. "Really sorry I'm late! Charlie Rose taped for way longer than he said he would."
Mr. Roubini -- a month short of 50 -- is in huge media demand, the nearest thing to a rock-star among the economists who hold our fate in their hands these days. The peculiar thing, of course, is that he's in demand because he specializes in predictions of gloom. (He has earned himself the sobriquet of "Doctor Doom.") In person, though, he's anything but a downer.
The man has instant impact on public debate. An idea he floated only last week -- that our "zombie banks" be temporarily nationalized -- aired first on Forbes.com, where he writes a weekly column. It has evolved, in the space of just a few days, from radical solution to almost received wisdom.
Last Sunday on ABC, George Stephanopoulos asked Lindsey Graham, the conservative Republican senator, what he thought about all this talk of bank nationalization. Mr. Graham said that he wouldn't take the idea off the table. And on Wednesday, Alan Greenspan told the Financial Times that "it may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring."
Mr. Roubini tells me that bank nationalization "is something the partisans would have regarded as anathema a few weeks ago. But when I and others put it in the context of the Swedish approach [of the 1990s] -- i.e. you take banks over, you clean them up, and you sell them in rapid order to the private sector -- it's clear that it's temporary. No one's in favor of a permanent government takeover of the financial system."
There's another reason why the concept should appeal to (fiscal) conservatives, he explains. "The idea that government will fork out trillions of dollars to try to rescue financial institutions, and throw more money after bad dollars, is not appealing because then the fiscal cost is much larger. So rather than being seen as something Bolshevik, nationalization is seen as pragmatic. Paradoxically, the proposal is more market-friendly than the alternative of zombie banks."
In any case, Republicans must now temper their reactions, he says. "The kind of government interference in the economy that we saw in the last year of Bush was unprecedented. The central bank -- supposed to be the lender of the last resort -- became the lender of first and only resort! With our recapitalizing of financial institutions, and massive government intervention in the markets, we've already crossed a significant bridge."
So, will the highest level of government be receptive to the bank-nationalization idea? "I think it will," Mr. Roubini says, unhesitatingly. "People like Graham and Greenspan have already given their explicit blessing. This gives Obama cover." And how long will it be before the administration goes in formally for nationalization? "I think that we're going to see the policy adopted in the next few months . . . in six months or so."
That long? I ask. "Six months from now," he replies, "even firms that today look solvent are going to look insolvent. Most of the major banks -- almost all of them -- are going to look insolvent. In which case, if you take them all over all at once, you cause less damage than if you would if you took over a couple now, and created so much confusion and panic and nervousness.
"Between guarantees, liquidity support, and capitalization, the government has provided between $7 trillion to $9 trillion of help to the financial system. De facto, the government is already controlling a good chunk of the banking system. The question is: Do you want to move to the de jure step."
Yet another reason why bank nationalization is a good idea, Mr. Roubini continues, is that "we started with banks that were too big to fail, but what has happened, in the process, is that these banks have become even-bigger-to-fail. J.P. Morgan took over Bear Stearns and WaMu. BofA took over Countrywide and then Merrill. Wells Fargo took over Wachovia. It doesn't work! You can't take two zombie banks, put them together, and make a strong bank. It's like having two drunks trying to keep each other standing.
"So if you took over a big bank, and you split the assets in three or four pieces, maybe you create three or four regional or national banks, and they're stronger! Nationalization -- or 'temporary receivership,' if you like, if the N-word is a political liability -- is an occasion to undo the sort of consolidation that has created an even bigger systemic problem. And the only way to do it is by essentially taking them over and breaking them up."
Here, I ask Mr. Roubini whether he has been more right -- more prescient -- in his reading of the economic downturn than all the other famous bears in America. After all, judging by the attention paid to him in the press, it is hard not to conclude that he is the leading guru of the current recession, or "near-depression," as he often calls it. My question, remarkably, induces in him some diffidence. "I don't want to personalize the analysis, you know . . . because, first of all, there were many people who got many of the elements right.
"People like [Robert] Shiller were very worried about the housing bubble. People like Steve Roach were worried about an economy based on asset bubbles leading to consumption bubbles that were unsustainable. People like Ken Rogoff talked about global imbalances in the current account deficit not being sustainable. Nassim Taleb has been worrying for a while about 'fat tail' events . . . . So lots of people signaled concern about things. I was one of those who put the dots together and thus gave a more fleshed-out picture."
To Mr. Roubini, the most interesting question isn't the one of who got it right. Instead, he asks why we "over and over again, get into these periods of irrational exuberance, when not only is there an asset bubble and a credit bubble, but people believe these are sustainable over a long time -- Wall Street, policy makers, rating agencies, academics, journalists . . . ."
What exactly is Nouriel Roubini's economic philosophy? "I believe in market economics," he says, with some emphasis. "But to paraphrase Churchill -- who said this about democracy and political regimes -- a market economy might be the worst economic regime available, apart from the alternatives.
"I believe that people react to incentives, that incentives matter, and that prices reflect the way things should be allocated. But I also believe that market economies sometimes have market failures, and when these occur, there's a role for prudential -- not excessive -- regulation of the financial system. The two things that Greenspan got totally wrong were his beliefs that, one, markets self-regulate, and two, that there's no market failure."
How could Mr. Greenspan have been so naïve, I ask, hoping to get a rise. "Well," says Mr. Roubini, "at some level it's good to have a framework to think about the world, in which you emphasize the role of incentives and market economics . . . fair enough! But I think it led to an excessive ideological belief that there are no market failures, and no issues of distortions on incentives. Also, central banks were created to provide financial stability. Greenspan forgot this, and that was a mistake. I think there were ideological blinders, taking Ayn Rand's view of the world to an extreme.
"Again, I don't want to personalize things, but the last decade was one of self-regulation. But in the financial markets, without proper institutional rules, there's the law of the jungle -- because there's greed! There's nothing wrong with greed, per se. It's not that people are more greedy now than they were 20 years ago. But greed has to be tempered, first, by fear of losses. So if you bail people out, there's less fear. And second, by prudential regulation and supervision to avoid certain excesses."
How does Mr. Roubini think the media has covered the financial crisis? "The problem," he says -- after first stating to me that he intends "no offense!" -- "is that in the bubble years, everyone becomes a cheerleader, including the media. This is the time when journalists should be asking tough questions, and I think there was a failure there. The Masters of the Universe were always on the cover, or the front page -- the hedge-fund guys, the imperial CEO, private equity. I wish there had been more financial and business journalists, in the good years, who'd said, 'Wait a moment, if this man, or this firm, is making a 100% return a year, how do they do it? Is it because they're smarter than everybody else . . . or because they're taking so much risk they'll be bankrupt two years down the line?'
"And I think, in the bubble years, no one asked the hard questions. A good journalist has to be one who, in good times, challenges the conventional wisdom. If you don't do that, you fail in one of your duties."
Mr. Varadarajan, a professor at NYU's Stern School and a fellow at Stanford's Hoover Institution, is executive editor for Opinions at Forbes.
Here is another article by Dr. Doom advocating the nationalisation of some banks. It seems that Obama would rather spend umpteen billion to avoid doing this! Obama seems to be giving the banks a high speed auger to upload bucks into distressed banks bottomless cash bins.
OPINION: THE WEEKEND INTERVIEW
FEBRUARY 21, 2009
Nouriel Roubini
'Nationalize' the Banks
Dr. Doom says a takeover and resale is the market-friendly solution.
By TUNKU VARADARAJAN
New York
Nouriel Roubini is always dressed in black-and-white.
I have known him for nearly two years, and have seen him in a variety of situations -- en route to class at New York University's Stern Business School, where he's a professor; over a glass of wine in his boyish loft in Manhattan's Tribeca; at an academic conference, seated sagely on the dais; at a bohemian party in Greenwich Village, at . . . oh . . . 3 a.m. -- and he always, always wears a black suit with a white linen shirt.
Terry Shoffner
And so, in black-and-white he was, earlier this week, when he rushed into the office of Roubini Global Economics, his consulting firm in downtown Manhattan, and offered a breathless apology to this correspondent, who'd been waiting for half an hour. "Really sorry I'm late! Charlie Rose taped for way longer than he said he would."
Mr. Roubini -- a month short of 50 -- is in huge media demand, the nearest thing to a rock-star among the economists who hold our fate in their hands these days. The peculiar thing, of course, is that he's in demand because he specializes in predictions of gloom. (He has earned himself the sobriquet of "Doctor Doom.") In person, though, he's anything but a downer.
The man has instant impact on public debate. An idea he floated only last week -- that our "zombie banks" be temporarily nationalized -- aired first on Forbes.com, where he writes a weekly column. It has evolved, in the space of just a few days, from radical solution to almost received wisdom.
Last Sunday on ABC, George Stephanopoulos asked Lindsey Graham, the conservative Republican senator, what he thought about all this talk of bank nationalization. Mr. Graham said that he wouldn't take the idea off the table. And on Wednesday, Alan Greenspan told the Financial Times that "it may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring."
Mr. Roubini tells me that bank nationalization "is something the partisans would have regarded as anathema a few weeks ago. But when I and others put it in the context of the Swedish approach [of the 1990s] -- i.e. you take banks over, you clean them up, and you sell them in rapid order to the private sector -- it's clear that it's temporary. No one's in favor of a permanent government takeover of the financial system."
There's another reason why the concept should appeal to (fiscal) conservatives, he explains. "The idea that government will fork out trillions of dollars to try to rescue financial institutions, and throw more money after bad dollars, is not appealing because then the fiscal cost is much larger. So rather than being seen as something Bolshevik, nationalization is seen as pragmatic. Paradoxically, the proposal is more market-friendly than the alternative of zombie banks."
In any case, Republicans must now temper their reactions, he says. "The kind of government interference in the economy that we saw in the last year of Bush was unprecedented. The central bank -- supposed to be the lender of the last resort -- became the lender of first and only resort! With our recapitalizing of financial institutions, and massive government intervention in the markets, we've already crossed a significant bridge."
So, will the highest level of government be receptive to the bank-nationalization idea? "I think it will," Mr. Roubini says, unhesitatingly. "People like Graham and Greenspan have already given their explicit blessing. This gives Obama cover." And how long will it be before the administration goes in formally for nationalization? "I think that we're going to see the policy adopted in the next few months . . . in six months or so."
That long? I ask. "Six months from now," he replies, "even firms that today look solvent are going to look insolvent. Most of the major banks -- almost all of them -- are going to look insolvent. In which case, if you take them all over all at once, you cause less damage than if you would if you took over a couple now, and created so much confusion and panic and nervousness.
"Between guarantees, liquidity support, and capitalization, the government has provided between $7 trillion to $9 trillion of help to the financial system. De facto, the government is already controlling a good chunk of the banking system. The question is: Do you want to move to the de jure step."
Yet another reason why bank nationalization is a good idea, Mr. Roubini continues, is that "we started with banks that were too big to fail, but what has happened, in the process, is that these banks have become even-bigger-to-fail. J.P. Morgan took over Bear Stearns and WaMu. BofA took over Countrywide and then Merrill. Wells Fargo took over Wachovia. It doesn't work! You can't take two zombie banks, put them together, and make a strong bank. It's like having two drunks trying to keep each other standing.
"So if you took over a big bank, and you split the assets in three or four pieces, maybe you create three or four regional or national banks, and they're stronger! Nationalization -- or 'temporary receivership,' if you like, if the N-word is a political liability -- is an occasion to undo the sort of consolidation that has created an even bigger systemic problem. And the only way to do it is by essentially taking them over and breaking them up."
Here, I ask Mr. Roubini whether he has been more right -- more prescient -- in his reading of the economic downturn than all the other famous bears in America. After all, judging by the attention paid to him in the press, it is hard not to conclude that he is the leading guru of the current recession, or "near-depression," as he often calls it. My question, remarkably, induces in him some diffidence. "I don't want to personalize the analysis, you know . . . because, first of all, there were many people who got many of the elements right.
"People like [Robert] Shiller were very worried about the housing bubble. People like Steve Roach were worried about an economy based on asset bubbles leading to consumption bubbles that were unsustainable. People like Ken Rogoff talked about global imbalances in the current account deficit not being sustainable. Nassim Taleb has been worrying for a while about 'fat tail' events . . . . So lots of people signaled concern about things. I was one of those who put the dots together and thus gave a more fleshed-out picture."
To Mr. Roubini, the most interesting question isn't the one of who got it right. Instead, he asks why we "over and over again, get into these periods of irrational exuberance, when not only is there an asset bubble and a credit bubble, but people believe these are sustainable over a long time -- Wall Street, policy makers, rating agencies, academics, journalists . . . ."
What exactly is Nouriel Roubini's economic philosophy? "I believe in market economics," he says, with some emphasis. "But to paraphrase Churchill -- who said this about democracy and political regimes -- a market economy might be the worst economic regime available, apart from the alternatives.
"I believe that people react to incentives, that incentives matter, and that prices reflect the way things should be allocated. But I also believe that market economies sometimes have market failures, and when these occur, there's a role for prudential -- not excessive -- regulation of the financial system. The two things that Greenspan got totally wrong were his beliefs that, one, markets self-regulate, and two, that there's no market failure."
How could Mr. Greenspan have been so naïve, I ask, hoping to get a rise. "Well," says Mr. Roubini, "at some level it's good to have a framework to think about the world, in which you emphasize the role of incentives and market economics . . . fair enough! But I think it led to an excessive ideological belief that there are no market failures, and no issues of distortions on incentives. Also, central banks were created to provide financial stability. Greenspan forgot this, and that was a mistake. I think there were ideological blinders, taking Ayn Rand's view of the world to an extreme.
"Again, I don't want to personalize things, but the last decade was one of self-regulation. But in the financial markets, without proper institutional rules, there's the law of the jungle -- because there's greed! There's nothing wrong with greed, per se. It's not that people are more greedy now than they were 20 years ago. But greed has to be tempered, first, by fear of losses. So if you bail people out, there's less fear. And second, by prudential regulation and supervision to avoid certain excesses."
How does Mr. Roubini think the media has covered the financial crisis? "The problem," he says -- after first stating to me that he intends "no offense!" -- "is that in the bubble years, everyone becomes a cheerleader, including the media. This is the time when journalists should be asking tough questions, and I think there was a failure there. The Masters of the Universe were always on the cover, or the front page -- the hedge-fund guys, the imperial CEO, private equity. I wish there had been more financial and business journalists, in the good years, who'd said, 'Wait a moment, if this man, or this firm, is making a 100% return a year, how do they do it? Is it because they're smarter than everybody else . . . or because they're taking so much risk they'll be bankrupt two years down the line?'
"And I think, in the bubble years, no one asked the hard questions. A good journalist has to be one who, in good times, challenges the conventional wisdom. If you don't do that, you fail in one of your duties."
Mr. Varadarajan, a professor at NYU's Stern School and a fellow at Stanford's Hoover Institution, is executive editor for Opinions at Forbes.
Wednesday, February 25, 2009
Iraq faces a new war as tensions rise in north.
This is from the Independent.
So far the south and central Iraq have remained relatively calm although there are still tensions between Sunni and Shia. In the districts bordering Kurdistan however things are heating up rather than cooling down. These areas are being fought over by the central govt and Kurdish forces. Also, what is left of the Al Qaeda groups in Iraq seems to be concentrating around Mosul.
Iraq faces a new war as tensions rise in north
Violence between Iraqi Kurds and Arabs is threatening an all out conflict that could complicate US plans to withdraw troops
By Patrick Cockburn in Mosul
Monday, 23 February 2009
A new war is threatening Iraq just as the world believes the country is returning to peace. While violence is dropping in Baghdad and in the south of the country, Arabs and Kurds in the north are beginning to battle over territories in an arc of land stretching from Syria to Iranian border.
A renewal of the historic conflict between Arabs and Kurds in Iraq, which raged through most of the second half of the 20th century, would seriously destabilise the country as it begins to recover from the US occupation and the Sunni-Shia civil war of 2005-07.
The crisis between the government of the Iraqi Prime Minister, Nouri al-Maliki, and the Kurds, who make up 20 per cent of the population, is coming to a head now because a resurgent Iraqi army is beginning to contest control of areas which Kurds captured when Saddam Hussein fell in 2003.
There has been a mounting number of clashes between predominantly Arab Iraqi army units and the Kurdish peshmerga forces along a 260-mile line that stretches diagonally across the northern third of Iraq, from Sinjar to Khanaqin in the south.
The tensions underpinning the conflict have always attracted less international attention than the US-Iraqi war or the Shia-Sunni conflict.
Yet if the conflict develops into a full-scale war it will complicate President Barack Obama’s plan to withdraw 142,000 US soldiers from Iraq over 16 months and redeploy many of them to the US military effort in Afghanistan.
In some respects, the Arab-Kurdish war has already started. Kurdish leaders say that in Nineveh province, Sunni Arab gunmen have killed 2,000 Kurds and 127,000 Kurds have turned into refugees over the past six years.
Baghdad and Basra have become safer in the past year but Mosul, the capital of Nineveh and Iraq’s third largest city, remains one of the country’s most violent places.
Khasro Goran, the Kurdish deputy governor of Nineveh province, who operates from heavily-fortified headquarters in Mosul, said it was “not acceptable” for non-Kurdish military units to move into disputed areas. “If they try to do so we will stop them.” On the streets outside Mr Goran’s office, once a Baath party office and now the headquarters of the Kurdistan Democratic Party, an array of competing military forces holds power.
His immediate guards are tough-looking Kurdish peshmerga in uniform. As we left their compound, they fired a shot to deter a driver who got too close. The driver promptly slewed his car across the road.
Two hundred yards further on, we passed a small Iraqi Arab unit covering a crossroads with a light machine gun mounted on a cream-coloured Chevrolet pick-up truck.
Close by, a policeman in a blue uniform held an AK-47 assault rifle. He was part of a mostly Sunni Arab force recruited in Nineveh which changed sides during an insurgent offensive in 2004 and joined the anti-government guerrillas. The rebels captured 31 police stations.
Mosul is majority Sunni Arab but on the east bank of the Tigris river which flows through the city, there are large Kurdish districts that are overlooked by a mosque on a small hill, where the Prophet Jonah is reputedly buried.
Most of the Kurds living west of the Tigris have fled or have been killed. The Christian community was driven out by attacks last year, although some Christians are now returning.
There have been so many bomb attacks in Mosul that in many places damage is no longer repaired. Pieces of smashed concrete lie where they landed after blasts several years ago.
The city is al-Qa’ida’s last stronghold in Iraq. Earlier this month, a bomb killed four US soldiers and an interpreter while gunmen killed two prominent local politicians. The police also come under frequent attack. Shortly before we arrived in Mosul, one officer was killed by a roadside bomb, the sound of which echoed across the city.
Yesterday, US and Iraqi government forces said they had launched a new military campaign to eradicate al-Qa’ida in the province, although US troops were being used only for back-up.
The Kurds in the oil province of Kirkuk and in Diyala province have also often been targeted by suicide bombers. For their part, Arabs in these areas accuse the Kurds of launching a campaign of ethnic cleansing against them.
The Kurdish regional prime minister, Nechervan Barzani, says that if the disputes are not settled by the time the Americans withdraw, “it will be war between both sides.”
Another Kurd, who did not want his name published said: “This is the day the Kurds were always afraid of. As the Americans leave, once again we are left isolated and face to face with Baghdad.”
What makes the situation so explosive in Nineveh and across the north is that over the past year the balance of power has been changing in favour of the Arabs and against the Kurds.
Minority Kurds had dominated the provincial government in Nineveh and Mosul after Sunni Arabs, despite being the majority of the population, boycotted the local elections four years ago. But new polls last month reversed the balance, sweeping an Arab Iraqi party, Al Habda, to dominance in the provincial council.
The Iraqi army is also becoming stronger. It contains both Kurdish and Arab units but it is the non-Kurdish units that are being sent north.
“The 12th division was sent to near Kirkuk without any consultation with us,” said Safeen Dizayee, a senior official of the Kurdistan Democratic Party.
“There is an effort to move away Kurdish officers above a certain rank. Eighty per cent of the army in the north is Arab, including senior staff.”
Iraqi Kurds: Unwilling citizens
*Iraqi Kurds, who speak their own language and have their own identity, did not want to be part of Iraq when its borders were drawn after the collapse of the Ottoman Empire in the First World War. They often rebelled in pursuit of independence or autonomy and suffered terribly under Saddam Hussein. During the Kuwait war they rose up but were defeated. They created an autonomous zone outside Baghdad’s control and since the US invasion have had autonomy through the Kurdistan Regional Government, but they control a much larger area where Kurds are the majority – this is the area now disputed. The Kurds are also an essential part of Iraq’s coalition government.
So far the south and central Iraq have remained relatively calm although there are still tensions between Sunni and Shia. In the districts bordering Kurdistan however things are heating up rather than cooling down. These areas are being fought over by the central govt and Kurdish forces. Also, what is left of the Al Qaeda groups in Iraq seems to be concentrating around Mosul.
Iraq faces a new war as tensions rise in north
Violence between Iraqi Kurds and Arabs is threatening an all out conflict that could complicate US plans to withdraw troops
By Patrick Cockburn in Mosul
Monday, 23 February 2009
A new war is threatening Iraq just as the world believes the country is returning to peace. While violence is dropping in Baghdad and in the south of the country, Arabs and Kurds in the north are beginning to battle over territories in an arc of land stretching from Syria to Iranian border.
A renewal of the historic conflict between Arabs and Kurds in Iraq, which raged through most of the second half of the 20th century, would seriously destabilise the country as it begins to recover from the US occupation and the Sunni-Shia civil war of 2005-07.
The crisis between the government of the Iraqi Prime Minister, Nouri al-Maliki, and the Kurds, who make up 20 per cent of the population, is coming to a head now because a resurgent Iraqi army is beginning to contest control of areas which Kurds captured when Saddam Hussein fell in 2003.
There has been a mounting number of clashes between predominantly Arab Iraqi army units and the Kurdish peshmerga forces along a 260-mile line that stretches diagonally across the northern third of Iraq, from Sinjar to Khanaqin in the south.
The tensions underpinning the conflict have always attracted less international attention than the US-Iraqi war or the Shia-Sunni conflict.
Yet if the conflict develops into a full-scale war it will complicate President Barack Obama’s plan to withdraw 142,000 US soldiers from Iraq over 16 months and redeploy many of them to the US military effort in Afghanistan.
In some respects, the Arab-Kurdish war has already started. Kurdish leaders say that in Nineveh province, Sunni Arab gunmen have killed 2,000 Kurds and 127,000 Kurds have turned into refugees over the past six years.
Baghdad and Basra have become safer in the past year but Mosul, the capital of Nineveh and Iraq’s third largest city, remains one of the country’s most violent places.
Khasro Goran, the Kurdish deputy governor of Nineveh province, who operates from heavily-fortified headquarters in Mosul, said it was “not acceptable” for non-Kurdish military units to move into disputed areas. “If they try to do so we will stop them.” On the streets outside Mr Goran’s office, once a Baath party office and now the headquarters of the Kurdistan Democratic Party, an array of competing military forces holds power.
His immediate guards are tough-looking Kurdish peshmerga in uniform. As we left their compound, they fired a shot to deter a driver who got too close. The driver promptly slewed his car across the road.
Two hundred yards further on, we passed a small Iraqi Arab unit covering a crossroads with a light machine gun mounted on a cream-coloured Chevrolet pick-up truck.
Close by, a policeman in a blue uniform held an AK-47 assault rifle. He was part of a mostly Sunni Arab force recruited in Nineveh which changed sides during an insurgent offensive in 2004 and joined the anti-government guerrillas. The rebels captured 31 police stations.
Mosul is majority Sunni Arab but on the east bank of the Tigris river which flows through the city, there are large Kurdish districts that are overlooked by a mosque on a small hill, where the Prophet Jonah is reputedly buried.
Most of the Kurds living west of the Tigris have fled or have been killed. The Christian community was driven out by attacks last year, although some Christians are now returning.
There have been so many bomb attacks in Mosul that in many places damage is no longer repaired. Pieces of smashed concrete lie where they landed after blasts several years ago.
The city is al-Qa’ida’s last stronghold in Iraq. Earlier this month, a bomb killed four US soldiers and an interpreter while gunmen killed two prominent local politicians. The police also come under frequent attack. Shortly before we arrived in Mosul, one officer was killed by a roadside bomb, the sound of which echoed across the city.
Yesterday, US and Iraqi government forces said they had launched a new military campaign to eradicate al-Qa’ida in the province, although US troops were being used only for back-up.
The Kurds in the oil province of Kirkuk and in Diyala province have also often been targeted by suicide bombers. For their part, Arabs in these areas accuse the Kurds of launching a campaign of ethnic cleansing against them.
The Kurdish regional prime minister, Nechervan Barzani, says that if the disputes are not settled by the time the Americans withdraw, “it will be war between both sides.”
Another Kurd, who did not want his name published said: “This is the day the Kurds were always afraid of. As the Americans leave, once again we are left isolated and face to face with Baghdad.”
What makes the situation so explosive in Nineveh and across the north is that over the past year the balance of power has been changing in favour of the Arabs and against the Kurds.
Minority Kurds had dominated the provincial government in Nineveh and Mosul after Sunni Arabs, despite being the majority of the population, boycotted the local elections four years ago. But new polls last month reversed the balance, sweeping an Arab Iraqi party, Al Habda, to dominance in the provincial council.
The Iraqi army is also becoming stronger. It contains both Kurdish and Arab units but it is the non-Kurdish units that are being sent north.
“The 12th division was sent to near Kirkuk without any consultation with us,” said Safeen Dizayee, a senior official of the Kurdistan Democratic Party.
“There is an effort to move away Kurdish officers above a certain rank. Eighty per cent of the army in the north is Arab, including senior staff.”
Iraqi Kurds: Unwilling citizens
*Iraqi Kurds, who speak their own language and have their own identity, did not want to be part of Iraq when its borders were drawn after the collapse of the Ottoman Empire in the First World War. They often rebelled in pursuit of independence or autonomy and suffered terribly under Saddam Hussein. During the Kuwait war they rose up but were defeated. They created an autonomous zone outside Baghdad’s control and since the US invasion have had autonomy through the Kurdistan Regional Government, but they control a much larger area where Kurds are the majority – this is the area now disputed. The Kurds are also an essential part of Iraq’s coalition government.
The KBR empire doing well during recession!
This is from asiatimes.
This article gives a glimpse of the extent of KBR's contracts with the military.
US MILITARY'S EXPANDING WAISTLINEWhat will Obama do with KBR?
By Pratap Chatterjee
President Barack Obama will almost certainly touch down in Baghdad and Kabul in Air Force One sometime in the coming year to meet his counterparts in Iraq and Afghanistan, and he will just as certainly pay a visit to a United States military base or two. Should he stay for breakfast, lunch, dinner, or midnight chow with the troops, he will no less certainly choose from a menu prepared by migrant Asian workers under contract to Houston-based KBR, formerly Kellogg Brown & Root and once a subsidiary of Halliburton. If Obama takes the Rhino Runner armor-plated bus from Baghdad Airport to the Green Zone, or travels by Catfish Air's Blackhawk
helicopters (the way mere mortals like diplomats and journalists do), instead of by presidential chopper, he will be assigned a seat by US civilian workers easily identified by the red KBR lanyards they wear around their necks. Even if Obama gets the ultra-red carpet treatment, he will still tread on walkways and enter buildings that have been constructed over the last six years by an army of some 50,000 workers in the employ of KBR. And should Obama chose to order the troops in Iraq home tomorrow, he will effectively sign a blank check for billions of dollars in withdrawal logistics contracts that will largely be carried out by a company once overseen by former vice-president Dick Cheney. Questions for the Pentagon If Obama wants to find out why KBR civilian workers can be found in every nook and cranny of US bases in Iraq and Afghanistan, he might be better off visiting the Rock Island Arsenal in western Illinois. It's located on the biggest island in the Mississippi River, the place where Chief Black Hawk of the Sauk nation was once born. The arsenal's modern stone buildings house the offices of the US Army Materiel Command from which KBR's multibillion dollar Logistics Civilian Augmentation Program contract (LOGCAP) have been managed for the last seven years. This is the mega-contract that has, since the September 11, 2001 attacks, generated more than $25 billion for KBR to set up and manage military bases overseas (and resulted, of course, in thousands of pages of controversial news stories about the company's alleged war profiteering). Even more conveniently, Obama could pop over to KBR's Crystal City government operations headquarters in Arlington, Virginia, just a mile south of the Pentagon and five miles from the White House. On Crystal City Drive just before Ronald Reagan National Airport, it's hard to miss the KBR corporate logo, those gigantic red letters on the 11-story building at the far corner of Crystal Park. Many people who know something about KBR's role in Iraq and Afghanistan might want Obama to question the military commanders at Rock Island and the corporate executives in Arlington about the shoddy electrical work, unchlorinated shower water, overcharges for trucks sitting idle in the desert, deaths of KBR employees and affiliated soldiers in Iraq, million-dollar alleged bribes accepted by KBR managers, and billions of dollars in missing receipts, among a slew of other complaints that have received wide publicity over the last five years. But those would be the wrong questions. Obama needs to ask his Pentagon commanders this: Can the US military he has now inherited do anything without KBR? And the answer will certainly be a resounding "no". Keeping a Volunteer Army HappyTim Horton is the head of public relations for Logistical Supply Area Anaconda in Balad, Iraq, the biggest US base in that country. He was a transportation officer for 20 years and has a simple explanation for why the army relies so heavily on contractors to operate facilities today:
What we have today is an all-volunteer army, unlike in a conscription army when they had to be here. In the old army, the standard of living was low, the pay scale was dismal; it wasn't fun; it wasn't intended to be fun. But today we have to appeal, we have to recruit, just like any corporation, we have to recruit off the street. And after we get them to come in, it behooves us to give them a reason to stay in.Even in 2003, the US military was incredibly overstretched. For the Bush administration to go to war then, it needed an army of cheap labor to feed and clean up after the combat troops it sent into battle. Those troops, of course, were young US citizens raised in a world of creature comforts. Unlike American soldiers from their parents' or grandparents' generations who were drafted into the military in the Korean or Vietnam eras and ordered to peel potatoes or clean latrines, the modern teenager can choose not to sign up at all. As Horton points out, the average soldier gets an average of $100,000 worth of military training in four years; if he or she then doesn't re-enlist, the military has to spend another $100,000 to train a replacement. "What if we spend an extra $6,000 to get them to stay and save the loss of talent and experience?" Horton asks. "What does it take to keep the people? There are some creature comforts in this Wal-Mart and McDonald's society that we live in that soldiers have come to expect. They expect to play an Xbox, to keep in touch by e-mail. They expect to eat a variety of foods." A quarter-century ago, when Horton joined the US Army, all they got was a 14-day rotational menu. "We had chili-mac every two weeks, for crying out loud. What is that? Unstrained, low-grade hamburger mixed with macaroni. Lot of calories, lots of fat, lots of starch, that's what a soldier needs to do his job. When you were done, you had a heart attack." Today, says Horton, expectations are different. "Our soldiers need to feel and believe that we care about them, or they will leave. The army cannot afford to allow the soldier to be disenfranchised." When I visited with him in April 2008, Horton took me to meet Michael St John of the Pennsylvania National Guard, the chief warrant officer at one of Anaconda's dining facilities. St John led me on a tour of the facility, pointing out little details of which he was justly proud - like the fresh romaine lettuce brought up from Kuwait by Public Warehousing Corporation truck drivers who make the dangerous 12-hour journey across the desert, so that KBR cooks have fresh and familiar food for the troops. Stopping at the dessert bar St John explained, "We added blenders to make milkshakes, microwaves to heat up apple pie, and waffle bars with ice cream." The "healthy bar" was the next stop. "Here," he pointed out, "we offer baked fish or chicken breast, crab legs, or lobster claws or tails." "Contractors here do all the work," St John added. He explained that he had about 25 soldiers and six to eight KBR supervisors to oversee 175 workers from a Saudi company named Tamimi, feeding 10,000 people a day and providing take-away food for another thousand. "They do everything from unloading the food deliveries to taking out the trash. We are hands off. Our responsibility is military oversight: overseeing the headcount, ensuring that the contractors are providing nutritional meals and making sure there are no food-borne illnesses. It's the only sustainable way to get things done, given the number of soldiers we have to feed." Horton chimes in: "I treat myself to an ice-cream cone once a week. You know what that is? It's a touch of home, a touch of sanity, a touch of civilization. The soldiers here do not have bars; all that is gone. You've taken the candy away from the baby. What do you have to give him? What's wrong with giving him a little bit of pizza or ice cream?" Between a chili-mac military and a pizza-and-ice-cream military, the difference shows - around the waistline. Sarah Stillman, a freelance journalist with the website TruthDig, tells a story she heard about a PowerPoint slide that's becoming popular in Army briefings: "Back in 2003, the average soldier lost fifteen pounds during his tour of Iraq. Now, he gains ten." Stillman says that the first warning many US troops receive here in Baghdad isn't about IEDs (improvised explosive devices), RPGs (rocket-propelled grenades), or even EFPs (explosively formed projectiles). It's about PCPs: "pervasive combat paunches". Privatizing the US ArmyKBR has grossed more than $25 billion since it won a 10-year contract in late 2001 to supply US troops in combat situations around the world. As of April 2008, the company estimated that it had served more than 720 million meals, driven more than 400 million miles on various convoy missions, treated 12 billion gallons of potable water, and produced more than 267 million tons of ice for those troops. These staggering figures are testimony to the role KBR has played in supporting the US military in Iraq, Afghanistan, and other countries targeted in former president George W Bush's "global war on terror". And in the first days of the new Obama administration, the company continues to win contracts. On January 28, 2009, KBR announced that it had been awarded a $35.4 million contract by the US Army Corps of Engineers for the design and construction of a convoy support center at Camp Adder in Iraq. The center will include a power plant, an electrical distribution center, a water purification and distribution system, a waste-water collection system, and associated information systems, along with paved roads, all to be built by KBR. How did the US military become this dependent on one giant company? Well, this change has been a long time coming. During the Vietnam War in the 1960s, a consortium of four companies led by the Texas construction company Brown & Root (the B and R in KBR) built almost every military base in South Vietnam. That, of course, was when Lyndon B Johnson, a Texan with close ties to the Brown brothers, was president. In 1982, two years into Ronald Reagan's presidency, Brown & Root struck gold again. It won lucrative contracts to build a giant US base on the Indian Ocean island of Diego Garcia, a former British colony. In 1985, General John A Wickham drew up plans to streamline logistics work on military bases under what he dubbed the Logistics Civilian Augmentation Program (LOGCAP), but his ideas would remain in a back drawer for several years. In the meantime, Dick Cheney, as secretary of defense in the administration of the elder George Bush, loosed the American military on Iraq in the First Gulf War in 1991, and hired hundreds of separate contractors to provide logistics support. The uneven results of this early privatizing effort left military planners frustrated. By the time Cheney left office, he had asked Brown & Root to dust off the Wickham LOGCAP plan and figure out how to consolidate and expand the contracting system. President Bill Clinton's commanders took a harder look at the new plan that Brown & Root had drawn up and liked what they saw. In 1994, that company was hired to build bases in Bosnia and later in Kosovo, as well as to take over the day-to-day running of those bases in the middle of a war zone.
This article gives a glimpse of the extent of KBR's contracts with the military.
US MILITARY'S EXPANDING WAISTLINEWhat will Obama do with KBR?
By Pratap Chatterjee
President Barack Obama will almost certainly touch down in Baghdad and Kabul in Air Force One sometime in the coming year to meet his counterparts in Iraq and Afghanistan, and he will just as certainly pay a visit to a United States military base or two. Should he stay for breakfast, lunch, dinner, or midnight chow with the troops, he will no less certainly choose from a menu prepared by migrant Asian workers under contract to Houston-based KBR, formerly Kellogg Brown & Root and once a subsidiary of Halliburton. If Obama takes the Rhino Runner armor-plated bus from Baghdad Airport to the Green Zone, or travels by Catfish Air's Blackhawk
helicopters (the way mere mortals like diplomats and journalists do), instead of by presidential chopper, he will be assigned a seat by US civilian workers easily identified by the red KBR lanyards they wear around their necks. Even if Obama gets the ultra-red carpet treatment, he will still tread on walkways and enter buildings that have been constructed over the last six years by an army of some 50,000 workers in the employ of KBR. And should Obama chose to order the troops in Iraq home tomorrow, he will effectively sign a blank check for billions of dollars in withdrawal logistics contracts that will largely be carried out by a company once overseen by former vice-president Dick Cheney. Questions for the Pentagon If Obama wants to find out why KBR civilian workers can be found in every nook and cranny of US bases in Iraq and Afghanistan, he might be better off visiting the Rock Island Arsenal in western Illinois. It's located on the biggest island in the Mississippi River, the place where Chief Black Hawk of the Sauk nation was once born. The arsenal's modern stone buildings house the offices of the US Army Materiel Command from which KBR's multibillion dollar Logistics Civilian Augmentation Program contract (LOGCAP) have been managed for the last seven years. This is the mega-contract that has, since the September 11, 2001 attacks, generated more than $25 billion for KBR to set up and manage military bases overseas (and resulted, of course, in thousands of pages of controversial news stories about the company's alleged war profiteering). Even more conveniently, Obama could pop over to KBR's Crystal City government operations headquarters in Arlington, Virginia, just a mile south of the Pentagon and five miles from the White House. On Crystal City Drive just before Ronald Reagan National Airport, it's hard to miss the KBR corporate logo, those gigantic red letters on the 11-story building at the far corner of Crystal Park. Many people who know something about KBR's role in Iraq and Afghanistan might want Obama to question the military commanders at Rock Island and the corporate executives in Arlington about the shoddy electrical work, unchlorinated shower water, overcharges for trucks sitting idle in the desert, deaths of KBR employees and affiliated soldiers in Iraq, million-dollar alleged bribes accepted by KBR managers, and billions of dollars in missing receipts, among a slew of other complaints that have received wide publicity over the last five years. But those would be the wrong questions. Obama needs to ask his Pentagon commanders this: Can the US military he has now inherited do anything without KBR? And the answer will certainly be a resounding "no". Keeping a Volunteer Army HappyTim Horton is the head of public relations for Logistical Supply Area Anaconda in Balad, Iraq, the biggest US base in that country. He was a transportation officer for 20 years and has a simple explanation for why the army relies so heavily on contractors to operate facilities today:
What we have today is an all-volunteer army, unlike in a conscription army when they had to be here. In the old army, the standard of living was low, the pay scale was dismal; it wasn't fun; it wasn't intended to be fun. But today we have to appeal, we have to recruit, just like any corporation, we have to recruit off the street. And after we get them to come in, it behooves us to give them a reason to stay in.Even in 2003, the US military was incredibly overstretched. For the Bush administration to go to war then, it needed an army of cheap labor to feed and clean up after the combat troops it sent into battle. Those troops, of course, were young US citizens raised in a world of creature comforts. Unlike American soldiers from their parents' or grandparents' generations who were drafted into the military in the Korean or Vietnam eras and ordered to peel potatoes or clean latrines, the modern teenager can choose not to sign up at all. As Horton points out, the average soldier gets an average of $100,000 worth of military training in four years; if he or she then doesn't re-enlist, the military has to spend another $100,000 to train a replacement. "What if we spend an extra $6,000 to get them to stay and save the loss of talent and experience?" Horton asks. "What does it take to keep the people? There are some creature comforts in this Wal-Mart and McDonald's society that we live in that soldiers have come to expect. They expect to play an Xbox, to keep in touch by e-mail. They expect to eat a variety of foods." A quarter-century ago, when Horton joined the US Army, all they got was a 14-day rotational menu. "We had chili-mac every two weeks, for crying out loud. What is that? Unstrained, low-grade hamburger mixed with macaroni. Lot of calories, lots of fat, lots of starch, that's what a soldier needs to do his job. When you were done, you had a heart attack." Today, says Horton, expectations are different. "Our soldiers need to feel and believe that we care about them, or they will leave. The army cannot afford to allow the soldier to be disenfranchised." When I visited with him in April 2008, Horton took me to meet Michael St John of the Pennsylvania National Guard, the chief warrant officer at one of Anaconda's dining facilities. St John led me on a tour of the facility, pointing out little details of which he was justly proud - like the fresh romaine lettuce brought up from Kuwait by Public Warehousing Corporation truck drivers who make the dangerous 12-hour journey across the desert, so that KBR cooks have fresh and familiar food for the troops. Stopping at the dessert bar St John explained, "We added blenders to make milkshakes, microwaves to heat up apple pie, and waffle bars with ice cream." The "healthy bar" was the next stop. "Here," he pointed out, "we offer baked fish or chicken breast, crab legs, or lobster claws or tails." "Contractors here do all the work," St John added. He explained that he had about 25 soldiers and six to eight KBR supervisors to oversee 175 workers from a Saudi company named Tamimi, feeding 10,000 people a day and providing take-away food for another thousand. "They do everything from unloading the food deliveries to taking out the trash. We are hands off. Our responsibility is military oversight: overseeing the headcount, ensuring that the contractors are providing nutritional meals and making sure there are no food-borne illnesses. It's the only sustainable way to get things done, given the number of soldiers we have to feed." Horton chimes in: "I treat myself to an ice-cream cone once a week. You know what that is? It's a touch of home, a touch of sanity, a touch of civilization. The soldiers here do not have bars; all that is gone. You've taken the candy away from the baby. What do you have to give him? What's wrong with giving him a little bit of pizza or ice cream?" Between a chili-mac military and a pizza-and-ice-cream military, the difference shows - around the waistline. Sarah Stillman, a freelance journalist with the website TruthDig, tells a story she heard about a PowerPoint slide that's becoming popular in Army briefings: "Back in 2003, the average soldier lost fifteen pounds during his tour of Iraq. Now, he gains ten." Stillman says that the first warning many US troops receive here in Baghdad isn't about IEDs (improvised explosive devices), RPGs (rocket-propelled grenades), or even EFPs (explosively formed projectiles). It's about PCPs: "pervasive combat paunches". Privatizing the US ArmyKBR has grossed more than $25 billion since it won a 10-year contract in late 2001 to supply US troops in combat situations around the world. As of April 2008, the company estimated that it had served more than 720 million meals, driven more than 400 million miles on various convoy missions, treated 12 billion gallons of potable water, and produced more than 267 million tons of ice for those troops. These staggering figures are testimony to the role KBR has played in supporting the US military in Iraq, Afghanistan, and other countries targeted in former president George W Bush's "global war on terror". And in the first days of the new Obama administration, the company continues to win contracts. On January 28, 2009, KBR announced that it had been awarded a $35.4 million contract by the US Army Corps of Engineers for the design and construction of a convoy support center at Camp Adder in Iraq. The center will include a power plant, an electrical distribution center, a water purification and distribution system, a waste-water collection system, and associated information systems, along with paved roads, all to be built by KBR. How did the US military become this dependent on one giant company? Well, this change has been a long time coming. During the Vietnam War in the 1960s, a consortium of four companies led by the Texas construction company Brown & Root (the B and R in KBR) built almost every military base in South Vietnam. That, of course, was when Lyndon B Johnson, a Texan with close ties to the Brown brothers, was president. In 1982, two years into Ronald Reagan's presidency, Brown & Root struck gold again. It won lucrative contracts to build a giant US base on the Indian Ocean island of Diego Garcia, a former British colony. In 1985, General John A Wickham drew up plans to streamline logistics work on military bases under what he dubbed the Logistics Civilian Augmentation Program (LOGCAP), but his ideas would remain in a back drawer for several years. In the meantime, Dick Cheney, as secretary of defense in the administration of the elder George Bush, loosed the American military on Iraq in the First Gulf War in 1991, and hired hundreds of separate contractors to provide logistics support. The uneven results of this early privatizing effort left military planners frustrated. By the time Cheney left office, he had asked Brown & Root to dust off the Wickham LOGCAP plan and figure out how to consolidate and expand the contracting system. President Bill Clinton's commanders took a harder look at the new plan that Brown & Root had drawn up and liked what they saw. In 1994, that company was hired to build bases in Bosnia and later in Kosovo, as well as to take over the day-to-day running of those bases in the middle of a war zone.
Tuesday, February 24, 2009
Philippines: US urges caution on Philippines defence treaty review
This is from AFP.
The US wonders why there is so much anti-Americanism in the world. This episode is a perfect example. Even though the Philippine Supreme Court has ordered the marine back into Philippine custody he is being retained by the US. Earlier he was more or less snatched from Philippine custody by the US while in a local facility. The claim by the US is that until final appeals are exhausted he can remain in US custody. No matter what interpretation the Philippine Supreme Court makes. The Arroyo govt. must obviously have co-operated with the US in allowing the marine to be removed from local custody originally!
US urges caution on Philippines defence treaty review
1 day ago
MANILA (AFP) — The United States Monday cautioned the Philippines against reviewing their defence treaty, in a row over a US Marine's appeal against a 40-year jail sentence for raping a Filipina.
US envoy Kristie Kenney said it was "premature to talk about reviewing" the Visiting Forces Agreement (VFA) while the case of Lance Corporal Daniel Smith was being scrutinised.
Smith was convicted in 2006 of raping the Filipina after he took part in war games in the Philippines.
He was initially sent to a local jail to start his 40-year sentence, but was later transferred to a facility inside the US embassy in Manila when the case went on appeal, triggering public outrage. The appeal has yet to be heard.
The US embassy has ignored an order by the Philippines' Supreme Court ordering Smith to be returned to Philippine custody.
A number of Philippine senators have called for the VFA to be reviewed or revoked altogether.
"I think we should take guidance," Kenney told reporters Monday, stressing that Washington took all its treaties "very seriously."
"We don't sign them lightly. We pay attention to them and we do our best to comply. So we do take any thought of review very seriously," she said.
Some pro-US officials and legislators have warned that killing the treaty could force Washington to downgrade defence ties with Manila, which the Bush administration considered a key regional ally in the global war on terrorism.
The VFA outlines the rules governing conduct of US troops participating in joint military exercises here.
The treaty's ratification in 1999 provided the legal cover for the resumption of large-scale joint military exercises between the two allies.
The US wonders why there is so much anti-Americanism in the world. This episode is a perfect example. Even though the Philippine Supreme Court has ordered the marine back into Philippine custody he is being retained by the US. Earlier he was more or less snatched from Philippine custody by the US while in a local facility. The claim by the US is that until final appeals are exhausted he can remain in US custody. No matter what interpretation the Philippine Supreme Court makes. The Arroyo govt. must obviously have co-operated with the US in allowing the marine to be removed from local custody originally!
US urges caution on Philippines defence treaty review
1 day ago
MANILA (AFP) — The United States Monday cautioned the Philippines against reviewing their defence treaty, in a row over a US Marine's appeal against a 40-year jail sentence for raping a Filipina.
US envoy Kristie Kenney said it was "premature to talk about reviewing" the Visiting Forces Agreement (VFA) while the case of Lance Corporal Daniel Smith was being scrutinised.
Smith was convicted in 2006 of raping the Filipina after he took part in war games in the Philippines.
He was initially sent to a local jail to start his 40-year sentence, but was later transferred to a facility inside the US embassy in Manila when the case went on appeal, triggering public outrage. The appeal has yet to be heard.
The US embassy has ignored an order by the Philippines' Supreme Court ordering Smith to be returned to Philippine custody.
A number of Philippine senators have called for the VFA to be reviewed or revoked altogether.
"I think we should take guidance," Kenney told reporters Monday, stressing that Washington took all its treaties "very seriously."
"We don't sign them lightly. We pay attention to them and we do our best to comply. So we do take any thought of review very seriously," she said.
Some pro-US officials and legislators have warned that killing the treaty could force Washington to downgrade defence ties with Manila, which the Bush administration considered a key regional ally in the global war on terrorism.
The VFA outlines the rules governing conduct of US troops participating in joint military exercises here.
The treaty's ratification in 1999 provided the legal cover for the resumption of large-scale joint military exercises between the two allies.
End times for New York Times.
It seems that many print media are on the verge of failure. At least their failure will save a lot of trees for posterity! Advertising seems to be migrating to other media and advertising is the life blood of for profit media. As this article points out the decline of newspapers could be precipitous during the present downturn rather than gradual as many others predict.
http://www.theatlantic.com/doc/200901/new-york-times
January/February 2009 The Atlantic
Can America's paper of record survive the death of newsprint? Can journalism? End Times
by Michael Hirschorn
Virtually all the predictions about the death of old media have assumed a comfortingly long time frame for the end of print--the moment when, amid a panoply of flashing lights, press conferences, and elegiac reminiscences, the newspaper presses stop rolling and news goes entirely digital. Most of these scenarios assume a gradual crossing-over, almost like the migration of dunes, as behaviors change, paradigms shift, and the digital future heaves fully into view. The thinking goes that the existing brands--The New York Times, The Washington Post, The Wall Street Journal--will be the ones making that transition, challenged but still dominant as sources of original reporting. But what if the old media dies much more quickly? What if a hurricane comes along and obliterates the dunes entirely? Specifically, what if The New York Times goes out of business--like, this May? It's certainly plausible. Earnings reports released by the New York Times Company in October indicate that drastic measures will have to be taken over the next five months or the paper will default on some $400million in debt. With more than $1billion in debt already on the books, only $46million in cash reserves as of October, and no clear way to tap into the capital markets (the company's debt was recently reduced to junk status), the paper's future doesn't look good. "As part of our analysis of our uses of cash, we are evaluating future financing arrangements," the Times Company announced blandly in October, referring to the crunch it will face in May. "Based on the conversations we have had with lenders, we expect that we will be able to manage our debt and credit obligations as they mature." This prompted Henry Blodget, whose Web site, Silicon Alley Insider, has offered the smartest ongoing analysis of the company's travails, to write: "`We expect that we will be able to manage'? Translation: There's a possibility that we won't be able to manage." The paper's credit crisis comes against a backdrop of ongoing and accelerating drops in circulation, massive cutbacks in advertising revenue, and the worst economic climate in almost 80 years. As of December, its stock had fallen so far that the entire company could theoretically be had for about $1 billion. The former Times executive editor Abe Rosenthal often said he couldn't imagine a world without The Times. Perhaps we should start. Granted, the odds that The Times will cease to exist entirely come May are relatively slim. Many steps could be taken to prolong its existence. The Times Company has already slashed its dividend, a major source of income for the paper's owners, the Sulzberger family, but one that starved the company at precisely the moment it needed significant investments in new media. The company could sell its share of the brilliant Renzo Piano-designed headquarters--which cost the company about $600million to build and was completed in 2007, years after the digital threat to The Times' core business had become clear. (It's already borrowing money against the building's value.) It could sell The Boston Globe--or shutter it entirely, given what the company itself has acknowledged is a challenging time for the sale of media properties. It could sell its share in the Boston Red Sox, close or sell various smaller properties, or off-load About.com, the resolutely unglamorous Web purchase that has been virtually the only source of earnings growth in the Times Company's portfolio. With these steps, or after them, would come mass staffing cuts, no matter that the executive editor, Bill Keller, promised otherwise. It's possible that a David Geffen, Michael Bloomberg, or Carlos Slim would purchase The Times as a trophy property and spare the company some of this pain. Even Rupert Murdoch, after overpaying wildly for The Wall Street Journal, seems to be tempted by the prospect of adding The Times to his portfolio. But the experiences of Sam Zell, who must be ruing the day he waded into the waking nightmare that is the now-bankrupt Tribune Company, would surely temper the enthusiasm of all but the most arrogant of plutocrats. (And as global economies tumble around them, the plutocrats aren't as plutocratic as they used to be.) Alternatively, Google or Microsoft or even CBS could purchase The Times on the cheap, strip it for parts, and turn it into a content mill to goose its own page views. Regardless of what happens over the next few months, The Times is destined for significant and traumatic change. At some point soon--sooner than most of us think--the print edition, and with it The Times as we know it, will no longer exist. And it will likely have plenty of company. In December, the Fitch Ratings service, which monitors the health of media companies, predicted a widespread newspaper die-off: "Fitch believes more newspapers and newspaper groups will default, be shut down and be liquidated in 2009 and several cities could go without a daily print newspaper by 2010."
http://www.theatlantic.com/doc/200901/new-york-times
January/February 2009 The Atlantic
Can America's paper of record survive the death of newsprint? Can journalism? End Times
by Michael Hirschorn
Virtually all the predictions about the death of old media have assumed a comfortingly long time frame for the end of print--the moment when, amid a panoply of flashing lights, press conferences, and elegiac reminiscences, the newspaper presses stop rolling and news goes entirely digital. Most of these scenarios assume a gradual crossing-over, almost like the migration of dunes, as behaviors change, paradigms shift, and the digital future heaves fully into view. The thinking goes that the existing brands--The New York Times, The Washington Post, The Wall Street Journal--will be the ones making that transition, challenged but still dominant as sources of original reporting. But what if the old media dies much more quickly? What if a hurricane comes along and obliterates the dunes entirely? Specifically, what if The New York Times goes out of business--like, this May? It's certainly plausible. Earnings reports released by the New York Times Company in October indicate that drastic measures will have to be taken over the next five months or the paper will default on some $400million in debt. With more than $1billion in debt already on the books, only $46million in cash reserves as of October, and no clear way to tap into the capital markets (the company's debt was recently reduced to junk status), the paper's future doesn't look good. "As part of our analysis of our uses of cash, we are evaluating future financing arrangements," the Times Company announced blandly in October, referring to the crunch it will face in May. "Based on the conversations we have had with lenders, we expect that we will be able to manage our debt and credit obligations as they mature." This prompted Henry Blodget, whose Web site, Silicon Alley Insider, has offered the smartest ongoing analysis of the company's travails, to write: "`We expect that we will be able to manage'? Translation: There's a possibility that we won't be able to manage." The paper's credit crisis comes against a backdrop of ongoing and accelerating drops in circulation, massive cutbacks in advertising revenue, and the worst economic climate in almost 80 years. As of December, its stock had fallen so far that the entire company could theoretically be had for about $1 billion. The former Times executive editor Abe Rosenthal often said he couldn't imagine a world without The Times. Perhaps we should start. Granted, the odds that The Times will cease to exist entirely come May are relatively slim. Many steps could be taken to prolong its existence. The Times Company has already slashed its dividend, a major source of income for the paper's owners, the Sulzberger family, but one that starved the company at precisely the moment it needed significant investments in new media. The company could sell its share of the brilliant Renzo Piano-designed headquarters--which cost the company about $600million to build and was completed in 2007, years after the digital threat to The Times' core business had become clear. (It's already borrowing money against the building's value.) It could sell The Boston Globe--or shutter it entirely, given what the company itself has acknowledged is a challenging time for the sale of media properties. It could sell its share in the Boston Red Sox, close or sell various smaller properties, or off-load About.com, the resolutely unglamorous Web purchase that has been virtually the only source of earnings growth in the Times Company's portfolio. With these steps, or after them, would come mass staffing cuts, no matter that the executive editor, Bill Keller, promised otherwise. It's possible that a David Geffen, Michael Bloomberg, or Carlos Slim would purchase The Times as a trophy property and spare the company some of this pain. Even Rupert Murdoch, after overpaying wildly for The Wall Street Journal, seems to be tempted by the prospect of adding The Times to his portfolio. But the experiences of Sam Zell, who must be ruing the day he waded into the waking nightmare that is the now-bankrupt Tribune Company, would surely temper the enthusiasm of all but the most arrogant of plutocrats. (And as global economies tumble around them, the plutocrats aren't as plutocratic as they used to be.) Alternatively, Google or Microsoft or even CBS could purchase The Times on the cheap, strip it for parts, and turn it into a content mill to goose its own page views. Regardless of what happens over the next few months, The Times is destined for significant and traumatic change. At some point soon--sooner than most of us think--the print edition, and with it The Times as we know it, will no longer exist. And it will likely have plenty of company. In December, the Fitch Ratings service, which monitors the health of media companies, predicted a widespread newspaper die-off: "Fitch believes more newspapers and newspaper groups will default, be shut down and be liquidated in 2009 and several cities could go without a daily print newspaper by 2010."
Lobe: Storm brews between US and Israel
This is from the asiatimes.
It remains to be seen whether Obama can achieve any real agreement with Iran since no less than Bush Obama's aim is to ensure that Iran's nuclear programme does not go ahead. However, Obama has supported the attempt to reconcile Hamas and Fatah. If this is successful and Egypt proposes a peace agreement that the US could support there could be real conflict with Israel as Lobe suggests. We will just have to wait and see. Obama no doubt will be loathe to bring down the wrath of the Israel lobby on his administration when he is already facing multiple serious challenges.
Storm brews between US and Israel
By Jim Lobe WASHINGTON -
After eight years of the closest possible relations, the United States and Israel may be headed for a period of increased strain, particularly as it appears likely that whatever Israeli government emerges from last week's election will be more hawkish than its predecessor. Iran, with which President Barack Obama has pledged to engage in a "constructive dialogue", and the future of its nuclear program will no doubt be the greatest source of tension between the two allies. The new president's commitment to achieving real progress on a two-state solution to the Israel-Palestinian conflict may also provoke serious friction. This will particularly be the case should a reunified Arab League launch a major new push for the adoption of its 2002 peace plan, which provides for Arab recognition of Israel in return for the
latter's withdrawal from all occupied Arab lands. Last week's election produced a clear majority for right-wing parties led by the Likud Party of former prime minister Binyamin Netanyahu, who has repeatedly declared his opposition to a settlement freeze, territorial concessions and the creation of a viable Palestinian state. With the endorsement of Avigdor Lieberman, whose party, Israel Our Home, came a strong third in last week's general elections, Netanyahu appears increasingly likely to become prime minister. Even if the more-centrist Kadima leader, Foreign Minister Tzipi Livni, can patch together a government of national unity, the right-wing parties will be able to effectively block major concessions in any peace talks, in the absence of any external pressure. "Given the philosophical differences between Kadima and Likud on peace issues, such a unity government would be hard-pressed to make the historic decisions needed to reach a deal with the Palestinians," wrote former US Middle East peace negotiator, Aaron David Miller, in the Jewish publication Forward this week. But Obama and his Middle East Special Envoy George Mitchell may indeed be willing to exert pressure on Israel - among other things, by tabling their own views about a final peace agreement and how precisely it might be achieved - especially if ongoing Arab efforts to reconcile Hamas and Fatah in a new coalition government succeed. If all goes well on that front, the Arab League, fortified by a developing rapprochement between Syria and Saudi Arabia, could announce the latest version of its 2002 peace plan at next month's summit in Doha, according to Marc Lynch, a George Washington University specialist on Arab politics. Such a move "could galvanize the situation and put the onus on whatever Israeli government emerges to respond positively", he wrote on his widely read blog on the Foreign Policy website this week. "If you have a unified Palestinian government and a unified Arab move for peace," added Daniel Levy, a former Israeli peace negotiator, "then it's much more likely that Obama will step up his own efforts - ideally, working with an Israeli government that's ready to go along with a serious peace process, but, if not, being willing to make his disagreement [with that government] known." The result could be a serious test between the next Israeli government and its influential US advocates. The Obama administration clearly believes that real progress toward resolving the 60-year-old conflict is critical both to restoring Washington's credibility among the Arab states and curbing the further radicalization of the region's population - particularly in the wake of Israel's recent military offensive in Gaza. A more likely source of tension between the US and Israel, however, will be Iran's nuclear program. "It's very important to realize that Iran is going to be the most likely issue on which Israel and the United States will have a serious difference of opinion, if not a confrontation, in the next year," warned former US ambassador Samuel Lewis after the Israeli elections. Although Netanyahu has been the most outspoken, virtually the entire Israeli political and military establishment has described Iran's alleged nuclear ambitions as an "existential" threat to the Jewish state. They have suggested that Israel should be prepared to unilaterally attack Tehran's key nuclear facilities as early as next year if it cannot persuade Washington to do so. Already last year, Prime Minister Ehud Olmert asked former president George W Bush for bunker-busting bombs, refueling capacity and permission to fly over Iraq for an attack on Iran, according to a new book by New York Times correspondent David Sanger, entitled Inheritance. That request was strongly opposed by Pentagon Chief Robert Gates, who has been retained by Obama, and ultimately rejected by Bush. According to Bush's former top Middle East aide, Elliott Abrams, Bush - who almost never denied the Israelis anything - was worried that any attack on Iran risked destabilizing Iraq. While the violence in Iraq has continued to decline, US military commanders insist that stability there remains "fragile", so Bush's concerns about the implications for Iraq of a US or Israeli attack on Iran are likely to be shared by Obama. Even more important, however, is the new administration's conviction that Afghanistan and Pakistan - which, like Iraq, also border Iran - constitute the true "central front in the war on terror". This assessment was backed up by Obama's announcement this week that he will deploy 17,000 more US troops to Afghanistan over the next few months, bringing the total US and North Atlantic Treaty Organization (NATO) troop strength there to some 80,000. Top US civilian and military officials dealing with "AfPak", as the new administration has dubbed the two countries, have made clear that they hope to enlist Iran, with which Washington cooperated in ousting the Taliban in 2001, in helping to stabilize Afghanistan. ''It is absolutely clear that Iran plays an important role in Afghanistan," Obama's Special Envoy to Afghanistan and Pakistan, Richard Holbrooke, said in Kabul earlier this week in an interview during which he pointedly declined to repeat Bush administration charges that Tehran was aiding the Taliban. "[Iran has] a legitimate role to play in this region, as do all of Afghanistan's neighbors," he insisted. Most regional specialists, including Bruce Riedel, who co-chairs the White House's "AfPak" policy review, and John Brennan, Obama's top counter-terrorism adviser, have long argued that Iran's cooperation would make Washington's effort to stabilize the region and ultimately defeat al-Qaeda markedly easier while, conversely, its active opposition, as in Iraq, is likely to make the task considerably more difficult. That assessment has, if anything, gained strength in just the past few weeks as Washington has scrambled to secure new supply lines into land-locked Afghanistan after a key bridge in Pakistan's Khyber Pass was destroyed by Taliban militants there and Kyrgyzstan threatened to end Washington's access to its Manas air base. While US efforts to compensate have focused so far on the overland route through Russia and the Central Asian "Stans", a growing number of voices have noted that a much less costly and more efficient alternative route would run from Iran's southern ports into western Afghanistan. Although Tehran would no doubt be very reluctant to permit the US military to use its territory at this point, NATO's supreme commander, US General John Craddock, said earlier this month that he had no objection if other NATO members could negotiate an access agreement with Iran. Of course, it is not yet clear whether US success in "AfPak" - and Iran's possible role in securing it - will help trump Washington's concerns about Tehran's nuclear ambitions. But the clear priority stabilizing Southwest Asia is being given by the new administration, and the abrupt change in the rhetoric emanating from Washington about Iran - not to mention abiding concerns regarding Iran's ability to destabilize Iraq - clearly run counter to Israel's efforts to depict Tehran's nuclear program, as in Netanyahu's words, "the greatest challenge facing the leaders of the 21st century ... ". Obama will surely make it more difficult for Netanyahu or anyone else in the next Israeli government to "harness the US administration to stop the threat". Jim Lobe's blog on US foreign policy can be read at http://www.ips.org/blog/jimlobe/. (Inter Press Service)
It remains to be seen whether Obama can achieve any real agreement with Iran since no less than Bush Obama's aim is to ensure that Iran's nuclear programme does not go ahead. However, Obama has supported the attempt to reconcile Hamas and Fatah. If this is successful and Egypt proposes a peace agreement that the US could support there could be real conflict with Israel as Lobe suggests. We will just have to wait and see. Obama no doubt will be loathe to bring down the wrath of the Israel lobby on his administration when he is already facing multiple serious challenges.
Storm brews between US and Israel
By Jim Lobe WASHINGTON -
After eight years of the closest possible relations, the United States and Israel may be headed for a period of increased strain, particularly as it appears likely that whatever Israeli government emerges from last week's election will be more hawkish than its predecessor. Iran, with which President Barack Obama has pledged to engage in a "constructive dialogue", and the future of its nuclear program will no doubt be the greatest source of tension between the two allies. The new president's commitment to achieving real progress on a two-state solution to the Israel-Palestinian conflict may also provoke serious friction. This will particularly be the case should a reunified Arab League launch a major new push for the adoption of its 2002 peace plan, which provides for Arab recognition of Israel in return for the
latter's withdrawal from all occupied Arab lands. Last week's election produced a clear majority for right-wing parties led by the Likud Party of former prime minister Binyamin Netanyahu, who has repeatedly declared his opposition to a settlement freeze, territorial concessions and the creation of a viable Palestinian state. With the endorsement of Avigdor Lieberman, whose party, Israel Our Home, came a strong third in last week's general elections, Netanyahu appears increasingly likely to become prime minister. Even if the more-centrist Kadima leader, Foreign Minister Tzipi Livni, can patch together a government of national unity, the right-wing parties will be able to effectively block major concessions in any peace talks, in the absence of any external pressure. "Given the philosophical differences between Kadima and Likud on peace issues, such a unity government would be hard-pressed to make the historic decisions needed to reach a deal with the Palestinians," wrote former US Middle East peace negotiator, Aaron David Miller, in the Jewish publication Forward this week. But Obama and his Middle East Special Envoy George Mitchell may indeed be willing to exert pressure on Israel - among other things, by tabling their own views about a final peace agreement and how precisely it might be achieved - especially if ongoing Arab efforts to reconcile Hamas and Fatah in a new coalition government succeed. If all goes well on that front, the Arab League, fortified by a developing rapprochement between Syria and Saudi Arabia, could announce the latest version of its 2002 peace plan at next month's summit in Doha, according to Marc Lynch, a George Washington University specialist on Arab politics. Such a move "could galvanize the situation and put the onus on whatever Israeli government emerges to respond positively", he wrote on his widely read blog on the Foreign Policy website this week. "If you have a unified Palestinian government and a unified Arab move for peace," added Daniel Levy, a former Israeli peace negotiator, "then it's much more likely that Obama will step up his own efforts - ideally, working with an Israeli government that's ready to go along with a serious peace process, but, if not, being willing to make his disagreement [with that government] known." The result could be a serious test between the next Israeli government and its influential US advocates. The Obama administration clearly believes that real progress toward resolving the 60-year-old conflict is critical both to restoring Washington's credibility among the Arab states and curbing the further radicalization of the region's population - particularly in the wake of Israel's recent military offensive in Gaza. A more likely source of tension between the US and Israel, however, will be Iran's nuclear program. "It's very important to realize that Iran is going to be the most likely issue on which Israel and the United States will have a serious difference of opinion, if not a confrontation, in the next year," warned former US ambassador Samuel Lewis after the Israeli elections. Although Netanyahu has been the most outspoken, virtually the entire Israeli political and military establishment has described Iran's alleged nuclear ambitions as an "existential" threat to the Jewish state. They have suggested that Israel should be prepared to unilaterally attack Tehran's key nuclear facilities as early as next year if it cannot persuade Washington to do so. Already last year, Prime Minister Ehud Olmert asked former president George W Bush for bunker-busting bombs, refueling capacity and permission to fly over Iraq for an attack on Iran, according to a new book by New York Times correspondent David Sanger, entitled Inheritance. That request was strongly opposed by Pentagon Chief Robert Gates, who has been retained by Obama, and ultimately rejected by Bush. According to Bush's former top Middle East aide, Elliott Abrams, Bush - who almost never denied the Israelis anything - was worried that any attack on Iran risked destabilizing Iraq. While the violence in Iraq has continued to decline, US military commanders insist that stability there remains "fragile", so Bush's concerns about the implications for Iraq of a US or Israeli attack on Iran are likely to be shared by Obama. Even more important, however, is the new administration's conviction that Afghanistan and Pakistan - which, like Iraq, also border Iran - constitute the true "central front in the war on terror". This assessment was backed up by Obama's announcement this week that he will deploy 17,000 more US troops to Afghanistan over the next few months, bringing the total US and North Atlantic Treaty Organization (NATO) troop strength there to some 80,000. Top US civilian and military officials dealing with "AfPak", as the new administration has dubbed the two countries, have made clear that they hope to enlist Iran, with which Washington cooperated in ousting the Taliban in 2001, in helping to stabilize Afghanistan. ''It is absolutely clear that Iran plays an important role in Afghanistan," Obama's Special Envoy to Afghanistan and Pakistan, Richard Holbrooke, said in Kabul earlier this week in an interview during which he pointedly declined to repeat Bush administration charges that Tehran was aiding the Taliban. "[Iran has] a legitimate role to play in this region, as do all of Afghanistan's neighbors," he insisted. Most regional specialists, including Bruce Riedel, who co-chairs the White House's "AfPak" policy review, and John Brennan, Obama's top counter-terrorism adviser, have long argued that Iran's cooperation would make Washington's effort to stabilize the region and ultimately defeat al-Qaeda markedly easier while, conversely, its active opposition, as in Iraq, is likely to make the task considerably more difficult. That assessment has, if anything, gained strength in just the past few weeks as Washington has scrambled to secure new supply lines into land-locked Afghanistan after a key bridge in Pakistan's Khyber Pass was destroyed by Taliban militants there and Kyrgyzstan threatened to end Washington's access to its Manas air base. While US efforts to compensate have focused so far on the overland route through Russia and the Central Asian "Stans", a growing number of voices have noted that a much less costly and more efficient alternative route would run from Iran's southern ports into western Afghanistan. Although Tehran would no doubt be very reluctant to permit the US military to use its territory at this point, NATO's supreme commander, US General John Craddock, said earlier this month that he had no objection if other NATO members could negotiate an access agreement with Iran. Of course, it is not yet clear whether US success in "AfPak" - and Iran's possible role in securing it - will help trump Washington's concerns about Tehran's nuclear ambitions. But the clear priority stabilizing Southwest Asia is being given by the new administration, and the abrupt change in the rhetoric emanating from Washington about Iran - not to mention abiding concerns regarding Iran's ability to destabilize Iraq - clearly run counter to Israel's efforts to depict Tehran's nuclear program, as in Netanyahu's words, "the greatest challenge facing the leaders of the 21st century ... ". Obama will surely make it more difficult for Netanyahu or anyone else in the next Israeli government to "harness the US administration to stop the threat". Jim Lobe's blog on US foreign policy can be read at http://www.ips.org/blog/jimlobe/. (Inter Press Service)
Israel replaces envoy to Egypt talks, Hamas angry
This is from Reuters via antiwar.com.
No doubt Gilad was out of line to criticise his own government's policy justified as the critique might have been. To tie the peace deal with the release of an Israeli soldier captured long ago just complicated matters since there has been a separate negotiation on this matter going on for a long time now. Hamas was bound to reject the inclusion and that has happened.
With an even more hard line govt. being formed in Israel the peace process may very well bog down even more. Perhaps as Jim Lobe claims in another article I have posted, there may be conflict brewing between the US and Israel but we will have to wait and see.
Israel replaces envoy to Egypt talks, Hamas angry
REUTERSReuters North American News Service
Feb 23, 2009 11:56 EST
* Hamas accuses Israel of poor faith
* Dispute reveals fault lines in coalition
(Adds Olmert comment, paragraph 4)
By Dan Williams
JERUSALEM, Feb 23 (Reuters) - Prime Minister Ehud Olmert will replace Israel's lead envoy to Egyptian-brokered truce talks with Hamas after he publicly criticised the government's negotiating strategy, officials said on Monday.
Amos Gilad, an adviser to Defence Minister Ehud Barak, has shuttled to Cairo to try to consolidate the Jan. 18 ceasefire that ended a three-week Israeli assault in Hamas-ruled Gaza.
Progress has been frustrated by renewed violence and a demand by Olmert that an easing of a blockade on the Palestinian territory, sought by Hamas, be preceded by an agreement by Hamas to free a captured Israeli soldier.
Olmert's office said in a statement Gilad's suspension would not hamper efforts to secure the soldier's release.
In a critique quoted by an Israeli newspaper last week, Gilad said the government had an inconsistent approach to the talks that risked insulting the Egyptians.
"It was totally unprofessional and unseemly for a civil servant to publicly attack his boss," an official in Olmert's office said, announcing that Gilad would be replaced as envoy to the negotiations.
A Barak aide hit back, saying Olmert was hurting Israel's interests by deciding "not to avail himself of Amos Gilad's abilities and experience".
The dispute showed political and personal fault lines in the caretaker coalition, where Barak's centre-left Labour party is junior partner to Olmert's centrist Kadima.
Both parties appear to be heading into opposition as a result of Israel's parliamentary election on Feb. 10 and the decision last Friday by President Shimon Peres to ask right-wing Likud leader Benjamin Netanyahu to form a government.
Hamas accused Israel of poor faith and urged Egypt to respond to the reshuffle by opening its own border with Gaza.
"This shows that the Zionist occupation government has no intention of reaching an agreement on the truce or of concluding a prisoner swap," said Fawzi Barhoum, a Hamas spokesman.
In his comments quoted in the newspaper Maariv, Gilad deplored Olmert's attempt to wed the talks on an expanded Gaza truce to efforts to cobble together a deal in which Gilad Shalit, a soldier abducted by Hamas-led Palestinian gunmen to Gaza in 2006, would be freed.
Hamas wants Israel to release 1,400 jailed Palestinians, including senior leaders, in exchange for Shalit. The Olmert government has baulked at some of the names on the roster.
"Until now, the prime minister hasn't involved himself at all," Maariv quoted Gilad as saying in the Feb. 18 article.
"Suddenly, the order of things has been changed. Suddenly, first we have to get Gilad. I don't understand that. Where does that lead, to insult the Egyptians? To make them want to drop the whole thing? What do we stand to gain from that?"
Another Israeli newspaper, Yedioth Ahronoth, said on Sunday Olmert believed Gilad had failed to keep Egypt, which also borders the Gaza Strip and plays a key role in efforts to stem Palestinian arms smuggling, to its truce commitments. (Additional reporting by Nidal al-Mughrabi in Gaza; Editing by Andrew Dobbie)
Source: Reuters North American News Service
No doubt Gilad was out of line to criticise his own government's policy justified as the critique might have been. To tie the peace deal with the release of an Israeli soldier captured long ago just complicated matters since there has been a separate negotiation on this matter going on for a long time now. Hamas was bound to reject the inclusion and that has happened.
With an even more hard line govt. being formed in Israel the peace process may very well bog down even more. Perhaps as Jim Lobe claims in another article I have posted, there may be conflict brewing between the US and Israel but we will have to wait and see.
Israel replaces envoy to Egypt talks, Hamas angry
REUTERSReuters North American News Service
Feb 23, 2009 11:56 EST
* Hamas accuses Israel of poor faith
* Dispute reveals fault lines in coalition
(Adds Olmert comment, paragraph 4)
By Dan Williams
JERUSALEM, Feb 23 (Reuters) - Prime Minister Ehud Olmert will replace Israel's lead envoy to Egyptian-brokered truce talks with Hamas after he publicly criticised the government's negotiating strategy, officials said on Monday.
Amos Gilad, an adviser to Defence Minister Ehud Barak, has shuttled to Cairo to try to consolidate the Jan. 18 ceasefire that ended a three-week Israeli assault in Hamas-ruled Gaza.
Progress has been frustrated by renewed violence and a demand by Olmert that an easing of a blockade on the Palestinian territory, sought by Hamas, be preceded by an agreement by Hamas to free a captured Israeli soldier.
Olmert's office said in a statement Gilad's suspension would not hamper efforts to secure the soldier's release.
In a critique quoted by an Israeli newspaper last week, Gilad said the government had an inconsistent approach to the talks that risked insulting the Egyptians.
"It was totally unprofessional and unseemly for a civil servant to publicly attack his boss," an official in Olmert's office said, announcing that Gilad would be replaced as envoy to the negotiations.
A Barak aide hit back, saying Olmert was hurting Israel's interests by deciding "not to avail himself of Amos Gilad's abilities and experience".
The dispute showed political and personal fault lines in the caretaker coalition, where Barak's centre-left Labour party is junior partner to Olmert's centrist Kadima.
Both parties appear to be heading into opposition as a result of Israel's parliamentary election on Feb. 10 and the decision last Friday by President Shimon Peres to ask right-wing Likud leader Benjamin Netanyahu to form a government.
Hamas accused Israel of poor faith and urged Egypt to respond to the reshuffle by opening its own border with Gaza.
"This shows that the Zionist occupation government has no intention of reaching an agreement on the truce or of concluding a prisoner swap," said Fawzi Barhoum, a Hamas spokesman.
In his comments quoted in the newspaper Maariv, Gilad deplored Olmert's attempt to wed the talks on an expanded Gaza truce to efforts to cobble together a deal in which Gilad Shalit, a soldier abducted by Hamas-led Palestinian gunmen to Gaza in 2006, would be freed.
Hamas wants Israel to release 1,400 jailed Palestinians, including senior leaders, in exchange for Shalit. The Olmert government has baulked at some of the names on the roster.
"Until now, the prime minister hasn't involved himself at all," Maariv quoted Gilad as saying in the Feb. 18 article.
"Suddenly, the order of things has been changed. Suddenly, first we have to get Gilad. I don't understand that. Where does that lead, to insult the Egyptians? To make them want to drop the whole thing? What do we stand to gain from that?"
Another Israeli newspaper, Yedioth Ahronoth, said on Sunday Olmert believed Gilad had failed to keep Egypt, which also borders the Gaza Strip and plays a key role in efforts to stem Palestinian arms smuggling, to its truce commitments. (Additional reporting by Nidal al-Mughrabi in Gaza; Editing by Andrew Dobbie)
Source: Reuters North American News Service
Monday, February 23, 2009
Obama continues Bush policy on detainees at Bagram: indefinite detention, no legal rights.
This is from Rawstory.
So we have a sort of Bush lite in Obama. In fact it is not even very lite. Obama has also retained the practice of rendition while restricting interrogation methods. In fact he is outsourcing torture. Obama has also sided with Bush on use of the state secrets act in a recent case.
Note that even though Guantanamo is in Cuba and Bagram in Afghanistan neither country has anything to say about persons held in their territory by the US.
Despite rhetoric, Obama continues Bush policy on detainees: Indefinite detention, no legal rights
John ByrnePublished: Saturday February 21, 2009
Bagram airbase flies under the radar but will continue to operate without US lawIn a stunning departure from his rhetoric on Guantánamo Bay prison, President Barack Obama signaled Friday he will continue Bush Administration policy with regard to detainees held at a US airbase in Afghanistan, saying they have no right to challenge their detentions in US courts -- and denying them legal status altogether."This Court’s Order of January 22, 2009 invited the Government to inform the Court by February 20, 2009, whether it intends to refine its position on whether the Court has jurisdiction over habeas petitions filed by detainees held at the United States military base in Bagram, Afghanistan," Acting Assistant Obama Attorney General Michael Hertz wrote in a brief filed Friday. "Having considered the matter, the Government adheres to its previously articulated position."The move seems to be a reversal from Obama's much-trumpeted announcement to close the US prison at Guantánamo Bay, Cuba in January, in which he promised to return the United States to the "moral high ground" and "restore the standards of due process"The US Supreme Court previously ruled that it was unconstitutional to hold detainees at Guantánamo Bay without giving them access to US courts. Following that ruling, more than 200 detainees filed suit in the District Court for the District of Columbia.The Obama Administration announcement would appear to fly in the face of that ruling. The Court, while often supportive of previous Bush Administration terror policies, has strongly resisted efforts to curb its role in the legal aspect of US detention systems.Bagram prison, where approximately 600 detainees are being held without charge or even term limits on their stay, is located about 30 miles north of Kabul in a coverted Soviet Union base. The US is mulling a $60 million plan to expand the facility, which would double its current size.It's been closed to journalists and human rights activists, but open to lawyers. The lawyers, however, apparently have no recourse for their potential clients.Bagram has added more than 100 prisoners since 2005, giving it a population more than double that of the current Guantánamo Bay (245).It's uncertain whether the Supreme Court would uphold Obama's position. In the Guantanamo case, "the Court deemed the Bush administration's system for determining whether to continue holding detainees -- akin to a parole board -- was an inadequate substitute for habeas relief," Legal Times wrote Friday. "The Court also recognized that the United States exercised de facto sovereignty over the base, placing Guantánamo within its jurisdiction. But "the Court did not address Bagram, but said in some circumstances noncitizens being held in territories under U.S. control may have limited constitutional rights," Legal Times added."Yesterday's announcement that the Obama administration has not even considered departing from the very same unjust and inhumane policies of his predecessor, is an ominous sign that human rights and the rule of law are simply not a priority of this administration," the International Justice Network, who is counsel in all the cases under review, said to Raw Story in a statement. "We expected more from this President when he promised that we would not trade our fundamental values for false promises of security. Unless there is a serious reconsideration of this issue at the highest levels of the Obama government, America will not be able to put this dark chapter of our history behind us."Another detainee lawyer also bemoaned the filing."The decision by the Obama Administration to adhere to a position that has contributed to making our country a pariah around the world for its flagrant disregard of people’s human rights is deeply disappointing," the International Rights Clinic's Barbara Olshansky, who represents three Bagram detainees, told the paper. "We are trying to remain hopeful that the message being conveyed is that the new administration is still working on its position regarding the applicability of the laws of war -- the Geneva Conventions -- and international human rights treaties that apply to everyone in detention there."
So we have a sort of Bush lite in Obama. In fact it is not even very lite. Obama has also retained the practice of rendition while restricting interrogation methods. In fact he is outsourcing torture. Obama has also sided with Bush on use of the state secrets act in a recent case.
Note that even though Guantanamo is in Cuba and Bagram in Afghanistan neither country has anything to say about persons held in their territory by the US.
Despite rhetoric, Obama continues Bush policy on detainees: Indefinite detention, no legal rights
John ByrnePublished: Saturday February 21, 2009
Bagram airbase flies under the radar but will continue to operate without US lawIn a stunning departure from his rhetoric on Guantánamo Bay prison, President Barack Obama signaled Friday he will continue Bush Administration policy with regard to detainees held at a US airbase in Afghanistan, saying they have no right to challenge their detentions in US courts -- and denying them legal status altogether."This Court’s Order of January 22, 2009 invited the Government to inform the Court by February 20, 2009, whether it intends to refine its position on whether the Court has jurisdiction over habeas petitions filed by detainees held at the United States military base in Bagram, Afghanistan," Acting Assistant Obama Attorney General Michael Hertz wrote in a brief filed Friday. "Having considered the matter, the Government adheres to its previously articulated position."The move seems to be a reversal from Obama's much-trumpeted announcement to close the US prison at Guantánamo Bay, Cuba in January, in which he promised to return the United States to the "moral high ground" and "restore the standards of due process"The US Supreme Court previously ruled that it was unconstitutional to hold detainees at Guantánamo Bay without giving them access to US courts. Following that ruling, more than 200 detainees filed suit in the District Court for the District of Columbia.The Obama Administration announcement would appear to fly in the face of that ruling. The Court, while often supportive of previous Bush Administration terror policies, has strongly resisted efforts to curb its role in the legal aspect of US detention systems.Bagram prison, where approximately 600 detainees are being held without charge or even term limits on their stay, is located about 30 miles north of Kabul in a coverted Soviet Union base. The US is mulling a $60 million plan to expand the facility, which would double its current size.It's been closed to journalists and human rights activists, but open to lawyers. The lawyers, however, apparently have no recourse for their potential clients.Bagram has added more than 100 prisoners since 2005, giving it a population more than double that of the current Guantánamo Bay (245).It's uncertain whether the Supreme Court would uphold Obama's position. In the Guantanamo case, "the Court deemed the Bush administration's system for determining whether to continue holding detainees -- akin to a parole board -- was an inadequate substitute for habeas relief," Legal Times wrote Friday. "The Court also recognized that the United States exercised de facto sovereignty over the base, placing Guantánamo within its jurisdiction. But "the Court did not address Bagram, but said in some circumstances noncitizens being held in territories under U.S. control may have limited constitutional rights," Legal Times added."Yesterday's announcement that the Obama administration has not even considered departing from the very same unjust and inhumane policies of his predecessor, is an ominous sign that human rights and the rule of law are simply not a priority of this administration," the International Justice Network, who is counsel in all the cases under review, said to Raw Story in a statement. "We expected more from this President when he promised that we would not trade our fundamental values for false promises of security. Unless there is a serious reconsideration of this issue at the highest levels of the Obama government, America will not be able to put this dark chapter of our history behind us."Another detainee lawyer also bemoaned the filing."The decision by the Obama Administration to adhere to a position that has contributed to making our country a pariah around the world for its flagrant disregard of people’s human rights is deeply disappointing," the International Rights Clinic's Barbara Olshansky, who represents three Bagram detainees, told the paper. "We are trying to remain hopeful that the message being conveyed is that the new administration is still working on its position regarding the applicability of the laws of war -- the Geneva Conventions -- and international human rights treaties that apply to everyone in detention there."
Sunday, February 22, 2009
US admits Afghan civilian deaths
This follows the predictable pattern. The US claims all casualties or most in an incident are Taliban but the Afghan locals and officials claim many civilian casualties. The US then investigates and changes their tally at least somewhat depending on the particular case. Of course in this instance there is the marvelous spin to the effect that the investigation shows how serious the US takes these instances. Indeed, when their erroneous reporting is taken to task and their is Afghan outrage. However, the policy that produces the casualties is not changed.
US admits Afghan civilian deaths
An investigation into a missile strike carried out by US-led forces in Afghanistan earlier this week has found that 13 civilians were among 16 people killed, the US military has said.
The military made the admission on Saturday, after originally saying that 15 opposition fighters had been killed in the strike in the Gozara district of Herat province.
Afghan officials insisted all along that six women and two children were among those killed.
Following Afghan outrage over the attack, US generals undertook an investigation, travelling to Gozara and talking to locals there.
The generals said some anti-government fighters had also been killed in the strike.
Michael Ryan, a US brigadier general, said that the investigation proved how seriously the US takes civilian casualties.
The US has come under increasing criticism over the past few months over the deaths of civilians in military operations in Afghanistan.
Hamid Karzai, the Afghan president, said that rising civilian deaths was a source of tension between Kabul and Washington.
There are currently 80,000 US and Nato soldiers in Afghanistan, battling Taliban and al-Qaeda fighters.
Barack Obama, the US president, announced last week that an additional 17,000 troops would be sent to the country, in addition to the 38,000 already stationed there.
US admits Afghan civilian deaths
An investigation into a missile strike carried out by US-led forces in Afghanistan earlier this week has found that 13 civilians were among 16 people killed, the US military has said.
The military made the admission on Saturday, after originally saying that 15 opposition fighters had been killed in the strike in the Gozara district of Herat province.
Afghan officials insisted all along that six women and two children were among those killed.
Following Afghan outrage over the attack, US generals undertook an investigation, travelling to Gozara and talking to locals there.
The generals said some anti-government fighters had also been killed in the strike.
Michael Ryan, a US brigadier general, said that the investigation proved how seriously the US takes civilian casualties.
The US has come under increasing criticism over the past few months over the deaths of civilians in military operations in Afghanistan.
Hamid Karzai, the Afghan president, said that rising civilian deaths was a source of tension between Kabul and Washington.
There are currently 80,000 US and Nato soldiers in Afghanistan, battling Taliban and al-Qaeda fighters.
Barack Obama, the US president, announced last week that an additional 17,000 troops would be sent to the country, in addition to the 38,000 already stationed there.
CIA expands its covert war in Pakistan
It sounds as if these extended attacks may have been welcomed by Pakistan since they are aimed at those who are claimed to have assasinated Bhutto. However, such bombings produce collateral damage that often simply recruits more militants.
CIA expands its covert war in Pakistan
By MARK MAZZETTI and DAVID E. SANGERNEW YORK TIMES
LOS ANGELES TIMES
WASHINGTON — Over the past week, the Obama administration has expanded the covert war run by the CIA inside Pakistan, launching attacks against a militant network seeking to topple the Pakistani government.
The two missile strikes on training camps run by Baitullah Mehsud represent a broadening of the American campaign inside Pakistan, which has been largely carried out by unmanned drone aircraft. Under President George W. Bush, the United States frequently attacked militants from al-Qaida and the Taliban involved in cross-border attacks into Afghanistan, but had stopped short of raids aimed at Mehsud and his followers, who have played less of a direct role in attacks on American troops.
Strikes continue
The strikes are another sign that President Barack Obama is continuing Bush administration policy in using the military and intelligence agencies against suspected terrorists in Pakistan, as he had promised to do during his presidential campaign. At the same time, Obama has begun to scale back some of the Bush policies on the detention and interrogation of terror suspects, which he has criticized as counterproductive.
Mehsud was identified early last year by both American and Pakistani officials as the man who orchestrated the assassination of Benazir Bhutto, the former prime minister and the wife of Pakistan’s current president, Asif Ali Zardari. Bush included Mehsud’s name in a classified list of militant leaders whom the CIA and American commandos were authorized to capture or kill.
It is unclear why the Obama administration decided to carry out the attacks, which American and Pakistani officials said occurred last Saturday and again on Monday, hitting camps run by Mehsud’s network. The Saturday strike was aimed specifically at Mehsud, according to Pakistani and American officials. The Monday strike, officials say, was aimed at a camp run by Hakeem Ulah Mehsud, a top aide to the militant.
By striking at the Mehsud network, the United States may be seeking to demonstrate to Zardari that the new administration is willing to go after the insurgents of greatest concern to the Pakistani leader. But American officials may also be prompted by growing concern that the militant attacks are increasingly putting the civilian government of Pakistan, a nation with nuclear arms, at risk.
Mehsud a target
For months, Pakistani military and intelligence officials have complained about Washington’s refusal to strike at Mehsud, even while CIA drones struck al-Qaida figures and leaders of the network run by Jalaluddin Haqqani, a militant leader believed responsible for a campaign of violence against American troops in Afghanistan.
According to one senior Pakistani official, Pakistan’s intelligence service on two occasions in recent months gave the United States detailed intelligence about Mehsud’s whereabouts, but, he said, the United States did not act on the information. Bush administration officials had charged that it was the Pakistanis who were reluctant to take on Mehsud and his network.
The strikes came after a visit to Islamabad last week by Richard Holbrooke, the American envoy to Pakistan and Afghanistan.
On Friday, Holbrooke declined to talk about the attacks on Mehsud. The White House also declined to speak about Mehsud or the decisions that led up to the new strikes.
Tension over truce
Senior Pakistani officials are scheduled to arrive in Washington next week at a time of rising tension over a declared truce between the Pakistani government and militants in the Swat region of Pakistan.
While the administration has not publicly criticized the Pakistanis, several American officials said in recent days that appeasing the militants would only weaken Pakistan’s civilian government. Holbrooke, who returned to Washington earlier this week, said that Secretary of State Hillary Rodham Clinton and others would make clear in private, and in detail, why they were so concerned about what was happening in Swat, the need to send more Pakistani forces to the West, and why the deteriorating situation in the tribal areas added to instability in Afghanistan.
CIA expands its covert war in Pakistan
By MARK MAZZETTI and DAVID E. SANGERNEW YORK TIMES
LOS ANGELES TIMES
WASHINGTON — Over the past week, the Obama administration has expanded the covert war run by the CIA inside Pakistan, launching attacks against a militant network seeking to topple the Pakistani government.
The two missile strikes on training camps run by Baitullah Mehsud represent a broadening of the American campaign inside Pakistan, which has been largely carried out by unmanned drone aircraft. Under President George W. Bush, the United States frequently attacked militants from al-Qaida and the Taliban involved in cross-border attacks into Afghanistan, but had stopped short of raids aimed at Mehsud and his followers, who have played less of a direct role in attacks on American troops.
Strikes continue
The strikes are another sign that President Barack Obama is continuing Bush administration policy in using the military and intelligence agencies against suspected terrorists in Pakistan, as he had promised to do during his presidential campaign. At the same time, Obama has begun to scale back some of the Bush policies on the detention and interrogation of terror suspects, which he has criticized as counterproductive.
Mehsud was identified early last year by both American and Pakistani officials as the man who orchestrated the assassination of Benazir Bhutto, the former prime minister and the wife of Pakistan’s current president, Asif Ali Zardari. Bush included Mehsud’s name in a classified list of militant leaders whom the CIA and American commandos were authorized to capture or kill.
It is unclear why the Obama administration decided to carry out the attacks, which American and Pakistani officials said occurred last Saturday and again on Monday, hitting camps run by Mehsud’s network. The Saturday strike was aimed specifically at Mehsud, according to Pakistani and American officials. The Monday strike, officials say, was aimed at a camp run by Hakeem Ulah Mehsud, a top aide to the militant.
By striking at the Mehsud network, the United States may be seeking to demonstrate to Zardari that the new administration is willing to go after the insurgents of greatest concern to the Pakistani leader. But American officials may also be prompted by growing concern that the militant attacks are increasingly putting the civilian government of Pakistan, a nation with nuclear arms, at risk.
Mehsud a target
For months, Pakistani military and intelligence officials have complained about Washington’s refusal to strike at Mehsud, even while CIA drones struck al-Qaida figures and leaders of the network run by Jalaluddin Haqqani, a militant leader believed responsible for a campaign of violence against American troops in Afghanistan.
According to one senior Pakistani official, Pakistan’s intelligence service on two occasions in recent months gave the United States detailed intelligence about Mehsud’s whereabouts, but, he said, the United States did not act on the information. Bush administration officials had charged that it was the Pakistanis who were reluctant to take on Mehsud and his network.
The strikes came after a visit to Islamabad last week by Richard Holbrooke, the American envoy to Pakistan and Afghanistan.
On Friday, Holbrooke declined to talk about the attacks on Mehsud. The White House also declined to speak about Mehsud or the decisions that led up to the new strikes.
Tension over truce
Senior Pakistani officials are scheduled to arrive in Washington next week at a time of rising tension over a declared truce between the Pakistani government and militants in the Swat region of Pakistan.
While the administration has not publicly criticized the Pakistanis, several American officials said in recent days that appeasing the militants would only weaken Pakistan’s civilian government. Holbrooke, who returned to Washington earlier this week, said that Secretary of State Hillary Rodham Clinton and others would make clear in private, and in detail, why they were so concerned about what was happening in Swat, the need to send more Pakistani forces to the West, and why the deteriorating situation in the tribal areas added to instability in Afghanistan.
Chomsky on Obama and the Israel Palestinian conflict
Chomsky does not mince his words although there are a few places when this transcription of an interview with Chomsky seems to garble the English somewhat.
There are a few signs that things might be changing a little for the better as the US has apparently approved of steps to bring about reconciliation between Hamas and Fatah. With a quite right wing government in the offing for Israel there may very well be some conflict between the US and Israel but as this article points out Obama has so far toed the Israeli line almost completely.
Israel is a Terrorist State by Definition: ChomskyFollowing is an excerpt of Professor Chomsky’s interview with Christiana Voniati, who is head of International News Department POLITIS Newspaper, Nicosia, Cyprus.By Christiana VoniatiFebruary 21, 2009 "Countercurrents" -- Voniati: The international public opinion and especially the Muslim world seem to have great expectations from the historic election of Obama. Can we, in your opinion, expect any real change regarding the US approach to the Israeli-Palestinian conflict?
Chomsky: Not much. Quite the contrary: it may be harsher than before. In the case of Gaza, Obama maintained silence, he didn’t say a word. He said well there’s only one president so I can’t talk about it. Of course he was talking about a lot of other things but he chose not to talk about this. His campaign did repeat a statement that he had made while visiting Israel six months earlier –he had visited Sderot where the rockets hit- and he said “if this where happening to my daughters, I wouldn’t think of any reaction as legitimate”, but he couldn’t say anything about Palestinian children. Now, the attack on Gaza was at time so that it ended right before the inauguration, which is what I expected. I presume that the point was so that they could make sure that Obama didn’t have to say something, so he didn’t. And then he gave his first foreign policy declaration, it was a couple of days later when he appointed George Mitchell as his emissary, and he said nothing about Gaza except that “our paramount interest is preserving the security of Israel”. Palestine apparently doesn’t have any requirement of security. And then in his declaration he said of course we are not going to deal with Hamas -the elected government the US immediately, as soon as the government was elected in a free election the US and Israel with the help of European Union immediately started severely punishing the Palestinian population for voting in the “wrong way” in a free election and that’s what we mean by democracy. The only substantive comment he made in the declaration was to say that the arab peace plan had constructive elements, because it called for a normalization of relations with Israel and he urged the arab states to proceed with the normalization of relations. Now, he is an intelligent person, he knows that that was not what the arab peace plan said. The arab peace plan called for a two state settlement on the international border that is in accord with the long standing international consensus that the US has blocked for over 30 years and in that context of the two state settlement we should even proceed further and move towards a normalization of relations with Israel. Well, Obama carefully excluded the main content about the two state settlement and just talked about the corollary, for which a two state settlement is a precondition. Now that’s not an oversight, it can’t be. That’s a careful wording, sending the message that we are not going to change their (Israel’s) rejectionist policy. We ‘ll continue to be opposed to the international consensus on this issue, and everything else he said accords with it. We will continue in other words to support Israel’s settlement policies- those policies are undermining any possible opportunity or hope for a viable Palestinian entity of some kind. And it’s a continued reliance on force in both parts of occupied Palestine. That’s the only conclusion you could draw.
Voniati: Let us talk about the timing of the assault on the Gaza Strip. Was it accidental or did it purposefully happen in a vacuum of power? To explain myself, the global financial crisis has challenged the almost absolute US global hegemony. Furthermore, the attack on Gaza was launched during the presidential change of guard. So, did this vacuum of power benefit the Israeli assault on Gaza?
Chomsky: Well, the timing was certainly convenient since attention was focused elsewhere. There was no strong pressure on the president or other high officials of the US to say anything about it. I mean Bush was on his way out, and Obama could hide behind the pretext that he’s not yet in. And pretty much the same was in Europe, so that they could just say, well we can’t talk about it now, it’s too difficult a time. The assault was well chosen in that respect. It was well chosen in other respects too: the bombing began shortly after Hamas had offered a return to the 2005 agreement, which in fact was supported by the US. They said, ok, let’s go back to the 2005 agreement that was before Hamas was elected. That means no violence and open the borders. Closing the borders is a siege, it’s an act of war……… not very harmful but it’s an act of war. Israel of all countries insists on that. I mean Israel went to war twice in 1956 and 1967 on the grounds, it claimed, that its access to the outside world was being hampered. It wasn’t a siege, its access through the Gulf of Aqaba was being hampered. Well if that is an act of war then certainly a siege is, and so it’s understood.
So Khaled Mashaal asked for an end of the state of the war, which would include opening the borders. Well, a couple of days later, when Israel didn’t react to that, Israel attacked. The attack was timed for Saturday morning – the Sabbath day in Israel – at about 11:30, which happens to be the moment when children are leaving school and crowds are miling in the streets of this very heavily crowded city… The explicit target was police cadets… Now, there are civilians, in fact we now know that for several months the legal department of the Israeli army had been arguing against this plan because it said it was a direct attack against civilians. And of course, plenty civilians will be killed if you bomb a crowded city, especially at a time like that. But finally the legal department was sort of bludgeoned into silence by the military so they said alright. So that’s when they opened –on a Sabbath morning. Now two weeks later, Israel – on Saturday as well- blocked the humanitarian aid because they didn’t want to disgrace Sabbath. Well, that’s interesting too. But the main point about the timing was that there was an effort to undercut the efforts for a peaceful settlement and it was terminated just in time to prevent pressure on Obama to say something about it. It’s hard to believe that this isn’t conscious. We know that it was very meticulously planned for many months beforehand.
Voniati: In a recent interview with LBC, you said that the policies of Hamas are more conducive to peace than the US’s or Israel’s.
Chomsky: Oh yes, that’s clear.
Voniati: Also, that the policies of Hamas are closer to international consensus on a political peaceful settlement than those of Israel and the US. Can you explain your stance?
Chomsky: Well for several years Hamas has been very clear and explicit, repeatedly, that they favor a two state settlement on the international border. They said they would not recognize Israel but they would accept a two state settlement and a prolonged truce, maybe decades, maybe 50 years. Now, that’s not exactly the international consensus but it’s pretty close to it. On the other hand, the United States and Israel flatly reject it. They reject it in deeds, that’s why they are building all the construction development activities in the West Bank, not only in violation of international laws, US and Israel know that the illegal constructions are designed explicitly to convert the West Bank into what the architect of the policy, Arial Sharon, called bantustan. Israel takes over what it wants, break up Palestine into unviable fragments. That’s undermining a political settlement. So in deeds, yes of course they are undermining it, but also in words: that goes back to 1976 when the US vetoed the Security Council resolution put forward by the arab states which called for a two state settlement and it goes around until today. In December, last December, at the meetings of the UN’s General Assembly there were many resolutions passed. One of them was a resolution calling for recognition of the right of self-determination of the Palestinian people. It didn’t call for a state, just the right of self-determination. It passed with 173 to 5. The 5 were the US, Israel and a few small pacific islands. Of course that can’t be reported in the US. So they are rejecting it even in words, as well as –more significantly- in acts. On the other hand, Hamas comes pretty close to accepting it. Now, the demand which Obama repeated on Hamas is that they must meet three conditions: they must recognize Israel’s right to exist, they must renounce violence and they must accept past agreements, and in particular the Road Map. Well, what about the US and Israel? I mean, obviously they don’t renounce violence, they reject the Road Map – technically they accepted it but Israel immediately entered 14 reservations (which weren’t reported here) which completely eliminated its content, and the US went along. So the US and Israel completely violate those two conditions, and of course they violate the first, they don’t recognize Palestine. So sure, there’s a lot to criticize about Hamas, but on these matters they seem to be much closer to –not only international opinion- but even to a just settlement than the US and Israel are.
Voniati: On the other hand, Hamas has been accused of using human shields to hide and protect itself. Israel insists that the war was a matter of defense. Is Hamas a terrorist organization, as it is accused to be? Is Israel a terrorist state?
Chomsky: Well, Hamas is accused of using human shields, rightly or wrongly. But we know that Israel does it all the time. Is Israel a terrorist state? Well yes according to official definitions. I mean, one of the main things holding up cease fire right now is that Israel insists that it will not allow a cease fire until Hamas returns a captured Israeli soldier Gilad Shalit - he’s very famous in the West everybody knows he was captured. Well, one day before Gilad Shalit was captured, Israeli forces went into Gaza City and kidnapped two Palestinian civilians (the Muamar Brothers) and brought them across the border to Israel in violation of international law and hid them somewhere in the huge Israeli prisons. Nobody knows what happened to them since. I mean, kidnapping civilians is a much worse crime than capturing a soldier of an attacking army. And furthermore this has been regular Israeli practice for decades. They’ve been kidnapping civilians in Lebanon or on the high seas…They take them to Israel, put them into prisons, sometimes keeping them as hostages for long periods. So you know, if the capturing of Gilad Shalit is a terrorist act, well, then israel’s regular practice supported by the US is incomparably worse. And that’s quite apart from repeated aggression and other crimes. I don’t like Hamas by any means, there is plenty to criticize about them, but if you compare their actions with US and Israel, they are minor criminals.
Voniati: Though of Jewish decent, you have been repeatedly accused of anti-Semitism. How do you respond?
Chomsky: The most important comment about that was made by the distinguished statesman Abba Eban, maybe 35 years ago, in an address to the American people. He said that there are two kinds of criticism of Zionism (by Zionism I mean the policies of the state of Israel). One is criticism by anti-Semites and the other is criticism by neurotic self-hating Jews. That eliminates 100% of possible criticism. The neurotic self-hating Jews, he actually mentioned two, I was one and I.F. Stone, a well-known writer was another). I mean that’s the kind of thing that would come out of a communist party in its worst days. But you see, I can’t really be called anti-semite because I’m jewish so I must be a neurotic self-hating Jew, by definition. The assumption is that the policies of the state of Israel are perfect, so therefore any kind of criticism must be illegitimate. And that’s from Abba Eban, one of the most distinguished figures in Israel, the most westernised … praised, considered a dove.
Voniati: How do you comment on the Davos incident concerning Erdogan’s verbal attack against Peres?
Chomsky: It was impolite. You are not supposed to behave like that at Davos. But the idea that Peres was given 25 minutes to justify major atrocities and aggression, that’s what’s shocking. Why have that at Davos? I mean, do you allow Saddam Husein in such a gathering to justify the invasion of Kuwait? So Erdogan reacted, in my view, not in accord with the gentile atmosphere of the collection of the people who but basically appropriate under the circumstances.
Voniati: Have you, by any chance, been informed about the Cypriot-flagged vessel "Monchegorsk" that is docked in Limassol and seems to have been carrying weapons to the Hamas-run Gaza Strip? Israel and the United States requested that the vessel be stopped...
Chomsky: I don’t know about the Iranian vessel but I do know that right in the middle of the Gaza attack, Dignity was blocked in international waters and attacked by the Israeli navy and almost sunk. Now, that’s a major crime. That’s much worse than piracy off the coast of Somalia for example. If the Iranian vessel was stopped in international waters, that’s completely illegitimate. Israel has no authority to do anything in international waters. And the talk about not sending arms to Gaza …I mean, do they stop sending arms to Israel? I mean right in the middle of the Gaza war, the pentagon announced that it was sending a huge shipman of armaments to Israel. Did anybody stop that? They should say that those armaments are not intended for use by the Israeli army. The pentagon also announced that they are being prepositioned, that is, that they re being placed in Israel for the use of the US army In other words what they re saying is –and it’s been true for a long time- is that the US regards Israel as an offshore military base of its own, which they can use for their aggressive acts throughout the region.
Avram Noam Chomsky, 80, is an American linguist, philosopher, cognitive scientist, political activist, author, and lecturer. He is an Institute Professor emeritus and professor emeritus of linguistics at the Massachusetts Institute of Technology. Chomsky is well known in the academic and scientific community as the father of modern linguistics. Since the 1960s, he has become known more widely as a political dissident, and a libertarian socialist intellectual.
Christiana Voniati is head of International News Department POLITIS Newspaper, Nicosia, Cyprus. E-mail: christiana.voniati@politis-news.com - Blogspot: www.voniati.blogspot.com
There are a few signs that things might be changing a little for the better as the US has apparently approved of steps to bring about reconciliation between Hamas and Fatah. With a quite right wing government in the offing for Israel there may very well be some conflict between the US and Israel but as this article points out Obama has so far toed the Israeli line almost completely.
Israel is a Terrorist State by Definition: ChomskyFollowing is an excerpt of Professor Chomsky’s interview with Christiana Voniati, who is head of International News Department POLITIS Newspaper, Nicosia, Cyprus.By Christiana VoniatiFebruary 21, 2009 "Countercurrents" -- Voniati: The international public opinion and especially the Muslim world seem to have great expectations from the historic election of Obama. Can we, in your opinion, expect any real change regarding the US approach to the Israeli-Palestinian conflict?
Chomsky: Not much. Quite the contrary: it may be harsher than before. In the case of Gaza, Obama maintained silence, he didn’t say a word. He said well there’s only one president so I can’t talk about it. Of course he was talking about a lot of other things but he chose not to talk about this. His campaign did repeat a statement that he had made while visiting Israel six months earlier –he had visited Sderot where the rockets hit- and he said “if this where happening to my daughters, I wouldn’t think of any reaction as legitimate”, but he couldn’t say anything about Palestinian children. Now, the attack on Gaza was at time so that it ended right before the inauguration, which is what I expected. I presume that the point was so that they could make sure that Obama didn’t have to say something, so he didn’t. And then he gave his first foreign policy declaration, it was a couple of days later when he appointed George Mitchell as his emissary, and he said nothing about Gaza except that “our paramount interest is preserving the security of Israel”. Palestine apparently doesn’t have any requirement of security. And then in his declaration he said of course we are not going to deal with Hamas -the elected government the US immediately, as soon as the government was elected in a free election the US and Israel with the help of European Union immediately started severely punishing the Palestinian population for voting in the “wrong way” in a free election and that’s what we mean by democracy. The only substantive comment he made in the declaration was to say that the arab peace plan had constructive elements, because it called for a normalization of relations with Israel and he urged the arab states to proceed with the normalization of relations. Now, he is an intelligent person, he knows that that was not what the arab peace plan said. The arab peace plan called for a two state settlement on the international border that is in accord with the long standing international consensus that the US has blocked for over 30 years and in that context of the two state settlement we should even proceed further and move towards a normalization of relations with Israel. Well, Obama carefully excluded the main content about the two state settlement and just talked about the corollary, for which a two state settlement is a precondition. Now that’s not an oversight, it can’t be. That’s a careful wording, sending the message that we are not going to change their (Israel’s) rejectionist policy. We ‘ll continue to be opposed to the international consensus on this issue, and everything else he said accords with it. We will continue in other words to support Israel’s settlement policies- those policies are undermining any possible opportunity or hope for a viable Palestinian entity of some kind. And it’s a continued reliance on force in both parts of occupied Palestine. That’s the only conclusion you could draw.
Voniati: Let us talk about the timing of the assault on the Gaza Strip. Was it accidental or did it purposefully happen in a vacuum of power? To explain myself, the global financial crisis has challenged the almost absolute US global hegemony. Furthermore, the attack on Gaza was launched during the presidential change of guard. So, did this vacuum of power benefit the Israeli assault on Gaza?
Chomsky: Well, the timing was certainly convenient since attention was focused elsewhere. There was no strong pressure on the president or other high officials of the US to say anything about it. I mean Bush was on his way out, and Obama could hide behind the pretext that he’s not yet in. And pretty much the same was in Europe, so that they could just say, well we can’t talk about it now, it’s too difficult a time. The assault was well chosen in that respect. It was well chosen in other respects too: the bombing began shortly after Hamas had offered a return to the 2005 agreement, which in fact was supported by the US. They said, ok, let’s go back to the 2005 agreement that was before Hamas was elected. That means no violence and open the borders. Closing the borders is a siege, it’s an act of war……… not very harmful but it’s an act of war. Israel of all countries insists on that. I mean Israel went to war twice in 1956 and 1967 on the grounds, it claimed, that its access to the outside world was being hampered. It wasn’t a siege, its access through the Gulf of Aqaba was being hampered. Well if that is an act of war then certainly a siege is, and so it’s understood.
So Khaled Mashaal asked for an end of the state of the war, which would include opening the borders. Well, a couple of days later, when Israel didn’t react to that, Israel attacked. The attack was timed for Saturday morning – the Sabbath day in Israel – at about 11:30, which happens to be the moment when children are leaving school and crowds are miling in the streets of this very heavily crowded city… The explicit target was police cadets… Now, there are civilians, in fact we now know that for several months the legal department of the Israeli army had been arguing against this plan because it said it was a direct attack against civilians. And of course, plenty civilians will be killed if you bomb a crowded city, especially at a time like that. But finally the legal department was sort of bludgeoned into silence by the military so they said alright. So that’s when they opened –on a Sabbath morning. Now two weeks later, Israel – on Saturday as well- blocked the humanitarian aid because they didn’t want to disgrace Sabbath. Well, that’s interesting too. But the main point about the timing was that there was an effort to undercut the efforts for a peaceful settlement and it was terminated just in time to prevent pressure on Obama to say something about it. It’s hard to believe that this isn’t conscious. We know that it was very meticulously planned for many months beforehand.
Voniati: In a recent interview with LBC, you said that the policies of Hamas are more conducive to peace than the US’s or Israel’s.
Chomsky: Oh yes, that’s clear.
Voniati: Also, that the policies of Hamas are closer to international consensus on a political peaceful settlement than those of Israel and the US. Can you explain your stance?
Chomsky: Well for several years Hamas has been very clear and explicit, repeatedly, that they favor a two state settlement on the international border. They said they would not recognize Israel but they would accept a two state settlement and a prolonged truce, maybe decades, maybe 50 years. Now, that’s not exactly the international consensus but it’s pretty close to it. On the other hand, the United States and Israel flatly reject it. They reject it in deeds, that’s why they are building all the construction development activities in the West Bank, not only in violation of international laws, US and Israel know that the illegal constructions are designed explicitly to convert the West Bank into what the architect of the policy, Arial Sharon, called bantustan. Israel takes over what it wants, break up Palestine into unviable fragments. That’s undermining a political settlement. So in deeds, yes of course they are undermining it, but also in words: that goes back to 1976 when the US vetoed the Security Council resolution put forward by the arab states which called for a two state settlement and it goes around until today. In December, last December, at the meetings of the UN’s General Assembly there were many resolutions passed. One of them was a resolution calling for recognition of the right of self-determination of the Palestinian people. It didn’t call for a state, just the right of self-determination. It passed with 173 to 5. The 5 were the US, Israel and a few small pacific islands. Of course that can’t be reported in the US. So they are rejecting it even in words, as well as –more significantly- in acts. On the other hand, Hamas comes pretty close to accepting it. Now, the demand which Obama repeated on Hamas is that they must meet three conditions: they must recognize Israel’s right to exist, they must renounce violence and they must accept past agreements, and in particular the Road Map. Well, what about the US and Israel? I mean, obviously they don’t renounce violence, they reject the Road Map – technically they accepted it but Israel immediately entered 14 reservations (which weren’t reported here) which completely eliminated its content, and the US went along. So the US and Israel completely violate those two conditions, and of course they violate the first, they don’t recognize Palestine. So sure, there’s a lot to criticize about Hamas, but on these matters they seem to be much closer to –not only international opinion- but even to a just settlement than the US and Israel are.
Voniati: On the other hand, Hamas has been accused of using human shields to hide and protect itself. Israel insists that the war was a matter of defense. Is Hamas a terrorist organization, as it is accused to be? Is Israel a terrorist state?
Chomsky: Well, Hamas is accused of using human shields, rightly or wrongly. But we know that Israel does it all the time. Is Israel a terrorist state? Well yes according to official definitions. I mean, one of the main things holding up cease fire right now is that Israel insists that it will not allow a cease fire until Hamas returns a captured Israeli soldier Gilad Shalit - he’s very famous in the West everybody knows he was captured. Well, one day before Gilad Shalit was captured, Israeli forces went into Gaza City and kidnapped two Palestinian civilians (the Muamar Brothers) and brought them across the border to Israel in violation of international law and hid them somewhere in the huge Israeli prisons. Nobody knows what happened to them since. I mean, kidnapping civilians is a much worse crime than capturing a soldier of an attacking army. And furthermore this has been regular Israeli practice for decades. They’ve been kidnapping civilians in Lebanon or on the high seas…They take them to Israel, put them into prisons, sometimes keeping them as hostages for long periods. So you know, if the capturing of Gilad Shalit is a terrorist act, well, then israel’s regular practice supported by the US is incomparably worse. And that’s quite apart from repeated aggression and other crimes. I don’t like Hamas by any means, there is plenty to criticize about them, but if you compare their actions with US and Israel, they are minor criminals.
Voniati: Though of Jewish decent, you have been repeatedly accused of anti-Semitism. How do you respond?
Chomsky: The most important comment about that was made by the distinguished statesman Abba Eban, maybe 35 years ago, in an address to the American people. He said that there are two kinds of criticism of Zionism (by Zionism I mean the policies of the state of Israel). One is criticism by anti-Semites and the other is criticism by neurotic self-hating Jews. That eliminates 100% of possible criticism. The neurotic self-hating Jews, he actually mentioned two, I was one and I.F. Stone, a well-known writer was another). I mean that’s the kind of thing that would come out of a communist party in its worst days. But you see, I can’t really be called anti-semite because I’m jewish so I must be a neurotic self-hating Jew, by definition. The assumption is that the policies of the state of Israel are perfect, so therefore any kind of criticism must be illegitimate. And that’s from Abba Eban, one of the most distinguished figures in Israel, the most westernised … praised, considered a dove.
Voniati: How do you comment on the Davos incident concerning Erdogan’s verbal attack against Peres?
Chomsky: It was impolite. You are not supposed to behave like that at Davos. But the idea that Peres was given 25 minutes to justify major atrocities and aggression, that’s what’s shocking. Why have that at Davos? I mean, do you allow Saddam Husein in such a gathering to justify the invasion of Kuwait? So Erdogan reacted, in my view, not in accord with the gentile atmosphere of the collection of the people who but basically appropriate under the circumstances.
Voniati: Have you, by any chance, been informed about the Cypriot-flagged vessel "Monchegorsk" that is docked in Limassol and seems to have been carrying weapons to the Hamas-run Gaza Strip? Israel and the United States requested that the vessel be stopped...
Chomsky: I don’t know about the Iranian vessel but I do know that right in the middle of the Gaza attack, Dignity was blocked in international waters and attacked by the Israeli navy and almost sunk. Now, that’s a major crime. That’s much worse than piracy off the coast of Somalia for example. If the Iranian vessel was stopped in international waters, that’s completely illegitimate. Israel has no authority to do anything in international waters. And the talk about not sending arms to Gaza …I mean, do they stop sending arms to Israel? I mean right in the middle of the Gaza war, the pentagon announced that it was sending a huge shipman of armaments to Israel. Did anybody stop that? They should say that those armaments are not intended for use by the Israeli army. The pentagon also announced that they are being prepositioned, that is, that they re being placed in Israel for the use of the US army In other words what they re saying is –and it’s been true for a long time- is that the US regards Israel as an offshore military base of its own, which they can use for their aggressive acts throughout the region.
Avram Noam Chomsky, 80, is an American linguist, philosopher, cognitive scientist, political activist, author, and lecturer. He is an Institute Professor emeritus and professor emeritus of linguistics at the Massachusetts Institute of Technology. Chomsky is well known in the academic and scientific community as the father of modern linguistics. Since the 1960s, he has become known more widely as a political dissident, and a libertarian socialist intellectual.
Christiana Voniati is head of International News Department POLITIS Newspaper, Nicosia, Cyprus. E-mail: christiana.voniati@politis-news.com - Blogspot: www.voniati.blogspot.com
Don't bet on Obama reining in defense spending.
This is from the CATO institute.
This is a trenchant critique of Obama's defense spending emanating from a writer for the right wing CATO institute. It is the sort of criticism that should be coming from the left rather than the right but when it comes to Obama many on the left can see no evil as far as Obama is concerned. Many on the liberal left actually support the type of idealist imperialism that seems to be emphasised by Obama. Of course even Bush talked about spreading freedom and democracy and rescuing failed states!
Don't Bet on Obama Reining in Defense Spending
by Benjamin H. Friedman
Benjamin H. Friedman is research fellow in defense and homeland security studies at the Cato Institute and a PhD candidate in political science at the Massachusetts Institute of Technology.
Added to cato.org on February 18, 2009
This article appeared in the World Politics Review on February 18, 2009
Many Americans believe that Barack Obama and the Democratic majority in Congress will lower defense spending and restrain the militaristic foreign policy it underwrites. The coming years should destroy that myth. America's overly aggressive and fiscally reckless defense policy will survive the Democratic majority.
The Obama administration inherits runaway defense spending and leadership of a military that wants more. Non-war or base defense spending will be more than $515 billion in fiscal year 2009. Adjusting for inflation, that's 40 percent higher than the defense budget when George W. Bush took office. Add the wars, nuclear weapons research, veterans, and homeland security, and you get about $750 billion. That is more than six times what China spends, 10 times what Russia spends and 70 times what Iran, North Korea and Syria spend combined.
This explosion in spending comes despite a historically benign threat environment. Invasion and civil war, which traditionally justified militaries, are unthinkable here. North Korea and Iran trouble their citizens and neighbors, but with decaying economies, shoddy militaries, and aversion to suicidal behavior, they pose little threat to the United States. Russia and China are incapable of territorial expansion that should worry Americans, unless we put our troops on their frontiers. And unlike us, they are out of the revolution export business. Terrorism is chiefly an intelligence problem arising from a Muslim civil war. Our military has little to do with it.
.Benjamin H. Friedman is research fellow in defense and homeland security studies at the Cato Institute and a PhD candidate in political science at the Massachusetts Institute of Technology.
More by Benjamin H. Friedman
A military posture of restraint -- one focused on U.S. defense rather than quixotic efforts to promote social transformation and dampen all instability -- would allow us to spend half what we do on defense. We'd be safer for it, because lower spending would discourage us from meddling in others' conflicts.
The Pentagon doesn't see things that way, of course. True, Obama's principle defense advisers, Joint Chiefs of Staff Chairman Adm. Michael Mullen and Secretary of Defense Robert Gates, have recently spoken about hard choices ahead. But they support budgets that avoid those choices. Both claim that the United States should devote a minimum of 4 percent of gross domestic product to defense, even in peacetime. Because GDP generally rises, this would ensure an annual increase in defense spending, liberating it from old-fashioned considerations like enemies. Base defense spending is about 3.3 percent of GDP. Getting to 4 percent would require a $94 billion a year increase.
The Pentagon's draft fiscal year 2010 budget, drawn up last year under Gates, set a base of $584 billion -- or $70 billion above FY 2009. Pentagon observers called the request an attempted fait accompli. If Obama held spending level, rejecting the increase, hawks could blast him for "cutting" defense.
To its credit, the Obama administration refused to be bulldozed. With the bailout and stimulus sucking up dollars, the Office of Management and Budget (OMB) recently told the Pentagon to try again, setting the base at $527 billion, a slight increase above fiscal year 2009. Neoconservatives predictably called this a cut and a boon to our enemies.
The administration's appetite for conflict with the Pentagon appears limited, however. According to InsideDefense.com, Gates is still pushing for a base budget of $540 billion, although that might include costs previously covered by supplemental war requests, which have increasingly funded programs barely related to the wars. Moreover, OMB is reportedly planning increases in the Pentagon's out-year spending. The Bush administration's future defense plan saw spending leveling off starting in FY 2009. Obama apparently plans to restore spending growth. Recession and competing demands should limit the increases, but large cuts are unlikely.
Obama will not deliver a humble defense policy.
That shouldn't surprise us. Obama's vision of American security requirements is nearly as grandiose as his predecessor's. He sees security as indivisible, defining all instability as a danger to Americans that requires our management. He wants to preserve and expand our Cold War alliances, which long ago ceased to serve our security. He embraces Washington's hubristic notion that our national security bureaucracy can "fix" failed states. Bush chose to fight "terror" by targeting "evil." Obama plans to do so by attacking "hopelessness."
Obama will hear little official dissent from these ambitions. Vice President Joe Biden and Secretary of State Hillary Clinton tend to agree with neoconservatives on the need for a large military that intervenes in places like the Balkans, Iraq, and Sudan -- as do, in general, the chairmen of the relevant Congressional committees. Republicans, of course, will shout "surrender" at any defense spending cut.
Obama will not deliver a humble defense policy. What we can hope for is better management of our empire. But that, too, will require an enormous military.
This is a trenchant critique of Obama's defense spending emanating from a writer for the right wing CATO institute. It is the sort of criticism that should be coming from the left rather than the right but when it comes to Obama many on the left can see no evil as far as Obama is concerned. Many on the liberal left actually support the type of idealist imperialism that seems to be emphasised by Obama. Of course even Bush talked about spreading freedom and democracy and rescuing failed states!
Don't Bet on Obama Reining in Defense Spending
by Benjamin H. Friedman
Benjamin H. Friedman is research fellow in defense and homeland security studies at the Cato Institute and a PhD candidate in political science at the Massachusetts Institute of Technology.
Added to cato.org on February 18, 2009
This article appeared in the World Politics Review on February 18, 2009
Many Americans believe that Barack Obama and the Democratic majority in Congress will lower defense spending and restrain the militaristic foreign policy it underwrites. The coming years should destroy that myth. America's overly aggressive and fiscally reckless defense policy will survive the Democratic majority.
The Obama administration inherits runaway defense spending and leadership of a military that wants more. Non-war or base defense spending will be more than $515 billion in fiscal year 2009. Adjusting for inflation, that's 40 percent higher than the defense budget when George W. Bush took office. Add the wars, nuclear weapons research, veterans, and homeland security, and you get about $750 billion. That is more than six times what China spends, 10 times what Russia spends and 70 times what Iran, North Korea and Syria spend combined.
This explosion in spending comes despite a historically benign threat environment. Invasion and civil war, which traditionally justified militaries, are unthinkable here. North Korea and Iran trouble their citizens and neighbors, but with decaying economies, shoddy militaries, and aversion to suicidal behavior, they pose little threat to the United States. Russia and China are incapable of territorial expansion that should worry Americans, unless we put our troops on their frontiers. And unlike us, they are out of the revolution export business. Terrorism is chiefly an intelligence problem arising from a Muslim civil war. Our military has little to do with it.
.Benjamin H. Friedman is research fellow in defense and homeland security studies at the Cato Institute and a PhD candidate in political science at the Massachusetts Institute of Technology.
More by Benjamin H. Friedman
A military posture of restraint -- one focused on U.S. defense rather than quixotic efforts to promote social transformation and dampen all instability -- would allow us to spend half what we do on defense. We'd be safer for it, because lower spending would discourage us from meddling in others' conflicts.
The Pentagon doesn't see things that way, of course. True, Obama's principle defense advisers, Joint Chiefs of Staff Chairman Adm. Michael Mullen and Secretary of Defense Robert Gates, have recently spoken about hard choices ahead. But they support budgets that avoid those choices. Both claim that the United States should devote a minimum of 4 percent of gross domestic product to defense, even in peacetime. Because GDP generally rises, this would ensure an annual increase in defense spending, liberating it from old-fashioned considerations like enemies. Base defense spending is about 3.3 percent of GDP. Getting to 4 percent would require a $94 billion a year increase.
The Pentagon's draft fiscal year 2010 budget, drawn up last year under Gates, set a base of $584 billion -- or $70 billion above FY 2009. Pentagon observers called the request an attempted fait accompli. If Obama held spending level, rejecting the increase, hawks could blast him for "cutting" defense.
To its credit, the Obama administration refused to be bulldozed. With the bailout and stimulus sucking up dollars, the Office of Management and Budget (OMB) recently told the Pentagon to try again, setting the base at $527 billion, a slight increase above fiscal year 2009. Neoconservatives predictably called this a cut and a boon to our enemies.
The administration's appetite for conflict with the Pentagon appears limited, however. According to InsideDefense.com, Gates is still pushing for a base budget of $540 billion, although that might include costs previously covered by supplemental war requests, which have increasingly funded programs barely related to the wars. Moreover, OMB is reportedly planning increases in the Pentagon's out-year spending. The Bush administration's future defense plan saw spending leveling off starting in FY 2009. Obama apparently plans to restore spending growth. Recession and competing demands should limit the increases, but large cuts are unlikely.
Obama will not deliver a humble defense policy.
That shouldn't surprise us. Obama's vision of American security requirements is nearly as grandiose as his predecessor's. He sees security as indivisible, defining all instability as a danger to Americans that requires our management. He wants to preserve and expand our Cold War alliances, which long ago ceased to serve our security. He embraces Washington's hubristic notion that our national security bureaucracy can "fix" failed states. Bush chose to fight "terror" by targeting "evil." Obama plans to do so by attacking "hopelessness."
Obama will hear little official dissent from these ambitions. Vice President Joe Biden and Secretary of State Hillary Clinton tend to agree with neoconservatives on the need for a large military that intervenes in places like the Balkans, Iraq, and Sudan -- as do, in general, the chairmen of the relevant Congressional committees. Republicans, of course, will shout "surrender" at any defense spending cut.
Obama will not deliver a humble defense policy. What we can hope for is better management of our empire. But that, too, will require an enormous military.
Saturday, February 21, 2009
Afghanistan an Arab viewpoint
This is from arabnews.
As this article shows Obama seems to pay no attention to the Soviet or British experience in Afghanistan. No doubt the US has a military capability far beyond that of either but this may help little in trying to establish a well functioning pro-US govt. in Afghanistan.
It is rather surprising that in contrast to the Iraq war many Americans consider the Afghan occupation as justified--mainly as a reaction to9/11 and the Taleban hosting Al Qaeda training camps and Bin Laden. However the US led operation to overthrow the Taliban regime was illegal as shown by Michael Mandel among others.
Once casualties increase and costs rise for the US perhaps the US opinion will change. As it is now Obama is simply carrying on the Bush policies and even increasing involvement of the US.
A new Afghan nightmare
Ramzy Baroud Arab News
When US envoy to Afghanistan Richard Holbrooke met with Afghanistan’s “democratically” installed President Hamid Karzai in Kabul on Feb. 14, he may have just learned of the historic significance of the following day. Feb. 15 commemorates the end of the bloody Russian campaign against Afghanistan (August 1978-February 1989)
But it is unlikely that Holbrooke will absorb the magnitude of that historic lesson. Both he and the new US President Barack Obama are convinced that the missing component for winning the war in Afghanistan is a greater commitment, as in doubling troops, increasing military spending, and, by way of winning hearts and minds, investing more in developing the country. That combination, the US administration believes, will eventually sway Afghans from supporting the Taleban, tribal militias, Pashtun nationalists and other groups. The latter is waging a guerrilla struggle in various parts of the country, mostly in the south, to oust Karzai’s government and foreign occupation forces. While Kabul was considered an “oasis of calm” — by Jonathan Steele’s account — during the Soviet rule, it’s nowhere close to that depiction under the rule of the US and its NATO allies, who had plenty of time, eight long years, to assert their control, but failed.
In fact, just as Holbrooke sat within Karzai’s heavily guarded presidential palace, roadside bombs were detonating across the country, in Khost, in Kandahar and elsewhere. Several police officers were killed, the latest addition to the hundreds of soldiers and officers who die each year as they desperately defend the few symbols of the central government’s authority. Aside from its shaky control over Kabul, and a few provincial capitals, the central government struggles to maintain the little relevance it still holds.
This deems most of the country a battleground between Afghan militias, seen by a growing number of Afghans as a legitimate resistance force against an illegitimate occupation — US and NATO forces.
Unlike the unpopular war in Iraq, Afghanistan was widely viewed in the US as a moral war, based on the logic that since Al-Qaeda was responsible for the Sept. 11 terrorist attacks, and since the group is hosted by an equally militant Taleban government, both groups must pay. So far, the people of Afghanistan have paid many times over the price expected. Thousands have been killed, and an entire generation scarred by a new civil war, and a new foreign military occupation.
While mainstream news consumers are inundated with official commentary and occasional news reports on the challenges awaiting the US in Afghanistan to secure democracy, freedom and “national interests,” media reports continue to reduce the battle over Afghanistan to one that is concerned with fighting local corruption, instilling human rights and ensuring gender equality. Little is said of the pertinent reasons behind the war — to control the Eurasian landmass.
But it is perhaps relevant to note that desperate attempts at controlling Afghanistan have failed miserably in the past. If Holbrooke wishes to dig deeper into history, he should learn that the British Empire, which controlled India at the time, was also defeated in Afghanistan in 1842, and again in 1878. Soviet leaders looked for a quick victory as they occupied Kabul in December 1979, only to find themselves engaged in a most bloody war that cost them 15,000 deaths (it goes without saying that the hundreds of thousands of Afghan deaths often go unreported) and an unmitigated defeat.
But then again Holbrooke must have known of the details of the latter period, for after all it was his country that armed and financially sustained the Mujahedeen forces in Afghanistan fearing that the Soviets’ ultimate objective during the Cold War was challenging US dominance in the region and eventually the Middle East. Considering the strategically disastrous toppling of the Shah of Iran to the US, the world’s leading superpower could take no chances. But since then, Afghanistan has grown in significance from a politically strategic landmass, due to its proximity to warm-waters and regional powers, to an energy strategic landmass, inevitable to the exploitation of Caspian oil.
“I cannot think of a time when we have had a region emerge as suddenly to become as strategically significant as the Caspian,” said Dick Cheney in a speech to oil moguls in 1998. In the same year, John Maresca, vice president of international relations of Unocal Corporation, commented before a House committee in February 2008 on ways to transfer Caspian basin oil (estimated between 110 to 243 billion barrels of crude, worth up to $4 trillion): “(One) option is to build a pipeline south from Central Asia to the Indian Ocean. One obvious route south would cross Iran, but this is foreclosed for American companies because of US sanctions legislation. The only other possible route is across Afghanistan.”
Military success in Afghanistan is simply not possible, for numerous logistical, historical and practical reasons. But failure will also come at a price, at least for those who will directly benefit from subduing the rebellious nation.
President Bush and his allies failed to turn Afghanistan into a US-style democracy, easily exploitable for strategic and economic use. By pressing a military solution in Afghanistan, Obama is not only summoning another failed US imperial experiment — as in Iraq — but insists on adding his country’s name to those of Britain and Russia, who had better chances of success, but were squarely defeated.
“It’s like fighting sand. No force in the world can get the better of the Afghans,” Oleg Kubanov, a former Russian officer in Afghanistan told Reuters. “It’s their holy land; it doesn’t matter to them if you’re Russian, American. We’re all soldiers to them.”
It would be timely if Holbrooke takes a few hours from his hectic schedule in the region to brush up on Afghanistan’s history, for he surely needs it.
As this article shows Obama seems to pay no attention to the Soviet or British experience in Afghanistan. No doubt the US has a military capability far beyond that of either but this may help little in trying to establish a well functioning pro-US govt. in Afghanistan.
It is rather surprising that in contrast to the Iraq war many Americans consider the Afghan occupation as justified--mainly as a reaction to9/11 and the Taleban hosting Al Qaeda training camps and Bin Laden. However the US led operation to overthrow the Taliban regime was illegal as shown by Michael Mandel among others.
Once casualties increase and costs rise for the US perhaps the US opinion will change. As it is now Obama is simply carrying on the Bush policies and even increasing involvement of the US.
A new Afghan nightmare
Ramzy Baroud Arab News
When US envoy to Afghanistan Richard Holbrooke met with Afghanistan’s “democratically” installed President Hamid Karzai in Kabul on Feb. 14, he may have just learned of the historic significance of the following day. Feb. 15 commemorates the end of the bloody Russian campaign against Afghanistan (August 1978-February 1989)
But it is unlikely that Holbrooke will absorb the magnitude of that historic lesson. Both he and the new US President Barack Obama are convinced that the missing component for winning the war in Afghanistan is a greater commitment, as in doubling troops, increasing military spending, and, by way of winning hearts and minds, investing more in developing the country. That combination, the US administration believes, will eventually sway Afghans from supporting the Taleban, tribal militias, Pashtun nationalists and other groups. The latter is waging a guerrilla struggle in various parts of the country, mostly in the south, to oust Karzai’s government and foreign occupation forces. While Kabul was considered an “oasis of calm” — by Jonathan Steele’s account — during the Soviet rule, it’s nowhere close to that depiction under the rule of the US and its NATO allies, who had plenty of time, eight long years, to assert their control, but failed.
In fact, just as Holbrooke sat within Karzai’s heavily guarded presidential palace, roadside bombs were detonating across the country, in Khost, in Kandahar and elsewhere. Several police officers were killed, the latest addition to the hundreds of soldiers and officers who die each year as they desperately defend the few symbols of the central government’s authority. Aside from its shaky control over Kabul, and a few provincial capitals, the central government struggles to maintain the little relevance it still holds.
This deems most of the country a battleground between Afghan militias, seen by a growing number of Afghans as a legitimate resistance force against an illegitimate occupation — US and NATO forces.
Unlike the unpopular war in Iraq, Afghanistan was widely viewed in the US as a moral war, based on the logic that since Al-Qaeda was responsible for the Sept. 11 terrorist attacks, and since the group is hosted by an equally militant Taleban government, both groups must pay. So far, the people of Afghanistan have paid many times over the price expected. Thousands have been killed, and an entire generation scarred by a new civil war, and a new foreign military occupation.
While mainstream news consumers are inundated with official commentary and occasional news reports on the challenges awaiting the US in Afghanistan to secure democracy, freedom and “national interests,” media reports continue to reduce the battle over Afghanistan to one that is concerned with fighting local corruption, instilling human rights and ensuring gender equality. Little is said of the pertinent reasons behind the war — to control the Eurasian landmass.
But it is perhaps relevant to note that desperate attempts at controlling Afghanistan have failed miserably in the past. If Holbrooke wishes to dig deeper into history, he should learn that the British Empire, which controlled India at the time, was also defeated in Afghanistan in 1842, and again in 1878. Soviet leaders looked for a quick victory as they occupied Kabul in December 1979, only to find themselves engaged in a most bloody war that cost them 15,000 deaths (it goes without saying that the hundreds of thousands of Afghan deaths often go unreported) and an unmitigated defeat.
But then again Holbrooke must have known of the details of the latter period, for after all it was his country that armed and financially sustained the Mujahedeen forces in Afghanistan fearing that the Soviets’ ultimate objective during the Cold War was challenging US dominance in the region and eventually the Middle East. Considering the strategically disastrous toppling of the Shah of Iran to the US, the world’s leading superpower could take no chances. But since then, Afghanistan has grown in significance from a politically strategic landmass, due to its proximity to warm-waters and regional powers, to an energy strategic landmass, inevitable to the exploitation of Caspian oil.
“I cannot think of a time when we have had a region emerge as suddenly to become as strategically significant as the Caspian,” said Dick Cheney in a speech to oil moguls in 1998. In the same year, John Maresca, vice president of international relations of Unocal Corporation, commented before a House committee in February 2008 on ways to transfer Caspian basin oil (estimated between 110 to 243 billion barrels of crude, worth up to $4 trillion): “(One) option is to build a pipeline south from Central Asia to the Indian Ocean. One obvious route south would cross Iran, but this is foreclosed for American companies because of US sanctions legislation. The only other possible route is across Afghanistan.”
Military success in Afghanistan is simply not possible, for numerous logistical, historical and practical reasons. But failure will also come at a price, at least for those who will directly benefit from subduing the rebellious nation.
President Bush and his allies failed to turn Afghanistan into a US-style democracy, easily exploitable for strategic and economic use. By pressing a military solution in Afghanistan, Obama is not only summoning another failed US imperial experiment — as in Iraq — but insists on adding his country’s name to those of Britain and Russia, who had better chances of success, but were squarely defeated.
“It’s like fighting sand. No force in the world can get the better of the Afghans,” Oleg Kubanov, a former Russian officer in Afghanistan told Reuters. “It’s their holy land; it doesn’t matter to them if you’re Russian, American. We’re all soldiers to them.”
It would be timely if Holbrooke takes a few hours from his hectic schedule in the region to brush up on Afghanistan’s history, for he surely needs it.
Friday, February 20, 2009
Joel Kovell: Jewish Denial Zionism's Bad Conscience.
This is an old but very interesting article by Joel Kovel a professor at Bard College on Zionism. Kovel's writings and Kovel himself have both been roundly criticised by pro-Israel groups. Below the article is a letter by Kovel to the Bard administration which has not renewed his contract. The administration claims the non-renewal is simply due to budget restraints but who knows.
http://www.joelkovel.org/zionism.htmlTikkun Sept/Oct 2002 Jewish DenialZionism's Bad ConscienceJoel KovelLet me begin with some blunt questions, the harshness of which matchesthe situation in Israel/ Palestine. How have the Jews, immemoriallyassociated with suffering and high moral purpose, become identifiedwith a nation-state loathed around the world for its oppressivenesstoward a subjugated indigenous people? Why have a substantial majorityof Jews chosen to flaunt world opinion in order to rally about a statethat essentially has turned its occupied lands into a hugeconcentration camp and driven its occupied peoples to such gruesomeexpedients as suicide bombing? Why does the Zionist community, inraging against terrorism, forget that three of its prime ministerswithin the last twenty years Begin, Shamir and Sharon are openlyrecognized to have been world-class terrorists and mass murderers? Andwhy will these words just written and the words of other Jewscritical of Israel be greeted with hatred and bitter denunciation byZionists and called "self-hating" and "anti-Semitic"? Why do Zionistsnot see, or to be more exact, why do they see yet deny, the brutalreality that this state has wrought?The use of the notion of denial here suggests a psychologicaltreatment of the Zionist community. But in matters of this sort,psychology is only one aspect of a greater whole that includesobdurate facts like forceful occupation of land claimed by and onceinhabited by others. The phenomena of conscience are of courseprocessed subjectively. But they neither originate within the mind norremain limited to thoughts and feelings. Conscience is objective, too,and linked to notions like justice and law that exist outside of anyindividual will. It is also collective, and pertains to what is doneby the group in whose membership identity is formed. These groupphenomena are, we might say, organized into "moral universes," inwhich history, mythology, and individual moral behaviors are broughttogether and made into a larger whole. Such universes may themselvesbe universalizing, wherein that whole is inclusive of others, who areseen as parts of a common humanity (or for non-human creatures,nature). Or, as all too often happens, they may be unified only bysplitting apart of the moral faculties.Now, the situation prevailing in Israel/Palestine is that commonhumanity is denied, the Other is not recognized, and the doublestandard prevails. In such conceptions, which have stained historysince the beginning and comprise one of the chief impediments to themaking of a better world, talion law reigns, violence toward the Otheris condoned, and violence from the Other is demonized. Like the realmsof matter and anti-matter, each such moral universe is paired withthat of its adversary. But such mirroring does not imply moralequivalence; that is settled according to the rules of justice. Inthis instance there should be no doubt that those who havedispossessed others and illegally occupy their national lands have tobear prime culpability. This is not meant to excuse such Palestinianor Arab wrongdoings as have arisen in the course of the strugglewhich would be a denial of moral agency but it provides contextfor understanding the conflict at a deeper level and obliges us tolook with special care at the curious situation of the Jews. Despitethe innumerable variations between different fractions of Judaism,here certain unique historical forces have shaped a common dilemma andplayed a crucial role in the unfolding of Zionism.Jews were supposed to know better, to be better. Suffering persecutionand being eternally on the margins of Europe were supposed to havemade Jews more morally developed. I speak from first-hand experience,having been made to feel as a boy that I had inherited a two-foldsuperiority, by belonging to a people both cleverer and more highlymoral than the non-Jews who surrounded us. We Jews were history'sexceptions.A myth made this belief coherent over the ages and shaped Jewishidentity: A "covenant" existed, a kind of special treaty and promisebetween Jews and God. How Odd of God, ran the title of a book from myboyhood Yeshiva days, to Choose the Jews. There was an unmistakablelift one got from feeling endowed by the Supreme Being and madesuperior to the mere "goyim." The morally dubious implications of thisattitude and the hateful contempt that often accompanied it indeed,one could almost hear the sputum striking the ground as the word,"goyim," was spoken was mitigated by the fact that Jews werespeaking from the position of victim. Jewish exceptionalism was a kindof payback that nullified the centuries of being forced into ghettos,being denied ordinary rights such as land-holding, and being kickedaround, massacred, and expelled, not to mention being constantly inthe cross-hairs of the reigning racist system of anti-Semitism.Living with anti-Semitism, even when its overt violence was latent,contributed to the heightened self-consciousness of the Jewishcharacter and also to its thin skin. Few Jews are able completely toavoid the visceral fear integral to the legacy of Judaism: a drumbeatof blame, with its intimations of the pogrom to follow. The Jew stilllives with the fact that his/her people have been scapegoated forcenturies by Christian Europe we still hear in our heads that Jewswere the killers of Christ, hence responsible for the failures ofChristianity; Jews were the usurers who destroyed the medievalcommunity, not the landlords/barons; Jews were responsible for themisery of the Russian masses, not the Czar. In ways too numerous tolist here, Jews were made to pay for the crimes of the West, and thebetrayal of its ideals. The peculiar exaltation of believing oneselfthe chosen people is both the effect and, to a degree, the cause ofanti-Semitic persecution: They hate us, but we are better than them;and then, they hate us because we are better than them. Exceptionalismreinforced the tribalism imposed upon the Jews; and tribalism playedinto the hands of anti-Semitism even as it defended against it.Within this matrix a great variety of ways of being Jewisharose. These included, especially for Jews in the Western EuropeanDiaspora, the possibility of assimilating or remaining apart from thesocieties they inhabited. Some Jews, of course, embraced theprotection of tribal ways as a defense against a harsh and accusingworld. Others embraced the calculating pecuniary skills which had beenfoisted upon Judaism long before capitalism became the dominant order,and developed these to become masters of finance once capital moved tothe center of the stage. In the West, some Jews saw in the greatideals of universality and enlightenment a means to transcend thestifling tribal role that had been imposed upon them. Having beenpersecuted, brutally denied the elementary rights ofself-determination given to others, Jews of this type adopted theideals of universal human rights that arose with the Enlightenment,and championed the cause of emancipation.Then, toward the close of the nineteenth century, the ancient promiseof the Covenant took the shape of a real Promised Land. Israel gaveEuropean Jews a material opportunity to balance the tensions betweentribalism and enlightenment. Driven by the upswelling of anti-Semitismthat preceded and gave its horrific stimulus to the Third Reich,Israel became the home of the tribe, the safe place where Jews couldbe Jews. At the same time, it offered Jews identifying with theenlightenment a chance to demonstrate their competence in westernliberal ways (including socialism). In this way, a project arose thatsought to combine and synthesize both advanced Western democratic andancient tribal values.The Zionists took from the West the values of liberal democracy, butalso the goals, tactics, and mentality of imperialism that oftenaccompanied these. The convergence between tribalism and imperialismseemed, on the surface, to be a successful alignment of the variousimpulses of the Zionist project. From the first Jewish settlements inPalestine an imperialist mentality enabled Zionists to readilyrationalize their displacement of indigenous Palestinians under thenotion of a civilizing mission, embroidered with a full repertoire ofOrientalist prejudices.Zionism's allegiance to modernity also gave Zionism a high degree oftechnological prowess and organizational ability. During the years ofthe Yishuv, or settlement, this was evidenced by the degree to whichZionists would consistently out-produce and out-perform the indigenouspeoples despite the great numerical superiority of the latter. Later,in the period of the wars leading up to the state of Israel, as wellas the wars carried out by this state, superior organizational abilitycombined with superior weaponry made Israel into a regional juggernautone, moreover, driven by the talion law of tribalism and the racistreduction of one's adversary.It was for some time easy to sympathize with a Jewish state and tooverlook its imperialist tendencies, especially in the crucial periodof the mid- to late 1940s, when evidence of the Holocaust surfaced asa diabolic reminder of Jewish vulnerability to the malignancies ofso-called Western Civilization. I remember well as a youth of twelvethe rush of joy and hope as it became increasingly clear that we wereat last going to have "our state," and I know full well how deeply theJews around me shared that feeling.But neither understanding nor sympathy can nullify the judgment thatin proceeding down this path, Zionism set the stage, as surely ascould an Aeschylus or Euripides, for the present hellish outcome. Andthis has a great deal to do with the fact that the notion of ademocratic Jewish state, despite its allure, is a logicalimpossibility and a trap. It is remarkable that so sophisticated apeople should have so much trouble grasping the impossibility inherentin their notion of a Promised Land: a democracy that is only to be fora certain people cannot exist, for the elementary reason that themodern democratic state is defined by its claims of universality.Modern nation-states are uneasy syntheses of the two terms: thenation, which embodies the lived, sensuous, territorial, andmythologized history of a people; and the state, which is thesuperordinate agency regulating a society and having the capacity, asMax Weber put it, to wield legitimate violence. In its pre-modern,non-democratic form, the nation-state could embrace directly the willof a particular national body. Under these circumstances, state powerwas held by those who controlled the nation. In practice, these were amixture of kings and aristocrats who exerted direct territorialdominion, along with the theocrats of the priest class who controlledsymbolic and mythopoetic production. Between the divine right of kingsand the territorial powers of priests, the legality of pre-modernstates took shape.The democratic nation-state was a mutation of this arrangement, forgedto accommodate the power of the newly emerging capitalist classes, butalso to advance the notion of an universal human right the stirringideal that all human beings are created equally free before thelaw. The subsequent history of this political formation reveals, inall its fragility, the tensions inherent in the fitful development ofhuman rights. But there should be no mistaking that our hopes for aworld beyond tribalist revenge and the arbitrary power of rulersdepend on strengthening and advancing the notion of universal humanright. The legitimacy of modern nation-states the legitimacy ofjustice itself rests upon this right. Of course, not all democraticnation-states are just in practice, nor have they necessarily comeinto being in ways consonant with the universal human rights theyassert. The United States, Canada, Australia, and South Africa arejust a few of the many examples of democratic nation-states that havecome into existence through violence. The various horrors that havemarked the history of these countries, however, have not preventedthem from offering full participation in the polity to those who hadbeen enslaved, expelled, and/or exterminated as the nation-state cameinto existence. Thus Ben Nighthorse Campbell, an American Indian, sitsin the U.S. Senate, while Colin Powell and Condoleezza Rice,descendents of enslaved Africans, run U.S. foreign policy (needless toadd, very cordially to Israel), and may someday be president.None of this denies the racism that blocks the modern democratic statefrom keeping its promise. But there is a big difference between astate that fails to live up to its social contract because of ahistory saturated with racism, and one where the contract itselfgenerates racism, as has been the case for a settler-colonial Israelwhich claims to be both a democracy and an ethnocracy organized by andfor the Jewish people. Under such circumstances, racism is not anhistorical atavism, but an entirely normal, and constantly growing,feature of the political landscape. To have a state created expresslyfor one people constantly eats away and mocks thedemocratic-emancipatory aspects of Zionism. Zionism, in short, isbuilt on an impossibility, and to live in it and be of it is to live alie.In other instances of post settler-colonial states, the democraticpromise, however compromised, confers legitimacy. In the case ofIsrael, the logic of the ethnocratic state rules out an authenticdemocracy and denies legitimacy. All the propaganda about Israel beingthe "only democracy in the Middle East" and so forth, is false at itscore, no matter how many fine institutions are built there, or howmany crumbs are thrown to the Arabs who are allowed to live within itsbounds. This can be shown any number of ways, none more telling thanthe inability of Israel to write a Constitution with a Bill of Rights.As we well know, there are many states in the modern world thatproclaim themselves for a given people and are in many respects moreunpleasant places than Israel, including some of the Islamic states,such as Pakistan or Saudi Arabia. But none of these assert extravagantclaims for embodying the benefits of democratic modernity as doesIsrael. Thus one expects nothing from Pakistan or Saudi Arabia in theway of democratic right, and gets it; whereas Israel groans under thecontradictions imposed by incorporating features of Western liberaldemocracy within a fundamentally pre-modern, tribalist mission.In Israel, Jewish exceptionalism becomes the catalyst of a terriblesplitting of the moral faculties, and, by extension, of the wholemoral universe that polarizes Zionist thought. For God's chosenpeople, with their hard-earned identity of high-mindedness, bydefinition cannot sink into racist violence. "It can't be us," saysthe Zionist, when in fact it is precisely Zionists who are doing thesethings. The inevitable result becomes a splitting of the psyche thatdrives responsibility for one's acts out of the picture. Subjectivelythis means that the various faculties of conscience, desire, andagency dis-integrate and undergo separate paths of development. As aresult, Zionism experiences no internal dialectic, no possibilities ofcorrection, beneath its facade of exceptionalist virtue. The Covenantbecomes a license giving the right to dominate instead of anobligation to moral development. Zionism therefore cannot grow; it canonly repeat its crimes and degenerate further. Only a people thataspires to be so high can fall so low.We may sum these effects as the presence of a "bad conscience" withinZionism. Here, badness refers to the effects of hatred, which is theprimary affect that grows out of the splitting between the exaltedstandards of divine promise and the imperatives of tribalism andimperialism. A phenomenally thin skin and denial of responsibility arethe inevitable results. The inability to regard Palestinians as fullhuman beings with equivalent human rights pricks the conscience, butthe pain is turned on its head and pours out as hatred against thosewho would remind of betrayal: the Palestinians themselves and thoseothers, especially Jews, who would call attention to Zionism'scontradictions. Unable to tolerate criticism, the bad conscienceimmediately turns denial into projection. "It can't be us," becomes"it must be them," and this only worsens racism, violence, and theseverity of the double standard. Thus the "self-hating Jew" is amirror-image of a Zionism that cannot recognize itself. It is thescreen upon which bad conscience can be projected. It is a guilt thatcannot be transcended to become conscientiousness or real atonement,and which returns as persecutory accusation and renewed aggression.The bad conscience of Zionism cannot distinguish between authenticcriticism and the mirrored delusions of anti-Semitism lying ready-madein the swamps of our civilization and awakened by the currentcrisis. Both are threats, though the progressive critique is moretelling, as it contests the concrete reality of Israel and pointstoward self-transformation by differentiating Jewishness from Zionism;while anti-Semitism regards the Jew abstractly and in a demonic form,as "Jewish money" or "Jewish conspiracies," and misses the realmark. Indeed, Zionism makes instrumental use of anti-Semitism, as agarbage pail into which all opposition can be thrown, and a germinatorof fearfulness around which to rally Jews. This is not to discount themenace posed by anti-Semitism nor the need to struggle vigorouslyagainst it. But the greater need is to develop a genuinely criticalperspective, and not be bullied into confusing critique of Israel withanti-Semitism. One cannot in conscience condemn anti-Semitism byrallying around Israel, when it is Israel that needs to befundamentally changed if the world is to awaken from this nightmare.This is not the place to explore what such change would look like. Butthe guiding principle can be fairly directly stated. By forming Israelas a refuge and homeland for Jews from centuries of persecution, andespecially by making the Faustian bargain with imperialism, those Jewswho opted for Zionism negated their past sufferings, and turned theirweakness into strength. But such strength, grounded in the domination,oppression, and expulsion of others, is worthless. Zionism negatedwhat had been done to the Jews but failed to negate the negationitself, and thereby repeated the past with a different set ofmasks. If one doubts this, look at the set of oppressions forced uponJews by Christendom being forced into ghettos, denied ordinaryrights such as land-holding, kicked around, massacred, expelled, andsubjected to a racist system by the oppressors and ask yourselfwhether the same have not been imposed upon Palestinians by theZionist, with the only distinction worth noting being the terms of theracism?It is never too late to remedy this state, and a sizable minority ofpeople of good will are already moving in this direction, againstgreat odds. But it would be irresponsible to gloss over the grimfinding that the journey is conditioned by the fact that the core ofthe problem lies in Zionism itself, with its assumption that there canbe a democratic state for one particular people. So long as thisnotion is held, poisonous contradictions will continue to spill forthfrom the ancient land variously called Palestine or Israel. And as afrankly non-democratic, or even fascist, Israel can scarcely beimagined as an improvement, we are led to the sober conclusion that abasic rethinking of Jewish exceptionalism must be the ground of anylasting or just peace in the region. The implications are many, andneed to be worked out. But the time has come for the Jewish people toresume their striving toward universality.
Here is Joel Kovel's letter to the Bard administration re his contract nonrenewal:
Joel Kovel has now issued a statement:http://www.joelkovel.org/STATEMENT OF JOEL KOVEL REGARDING HIS TERMINATION BY BARD COLLEGE_Introduction_In January, 1988, I was appointed to the Alger Hiss Chair of SocialStudies at Bard College. As this was a Presidential appointmentoutside the tenure system, I have served under a series of contracts.The last of these was half-time (one semester on, one off, with halfsalary and full benefits year-round), effective from July 1, 2004, toJune 30, 2009. On February 7 I received a letter from Michèle Dominy,Dean of the College, informing me that my contract would not berenewed this July 1 and that I would be moved to emeritus status as ofthat day. She wrote that this decision was made by President Botstein,Executive Vice-President Papadimitriou and herself, in consultationwith members of the Faculty Senate.This document argues that this termination of service is prejudicialand motivated neither by intellectual nor pedagogic considerations,but by political values, principally stemming from differences betweenmyself and the Bard administration on the issue of Zionism. There isof course much more to my years at Bard than this, including anothercontroversial subject, my work on ecosocialism (/The Enemy ofNature/). However, the evidence shows a pattern of conflict overZionism only too reminiscentof innumerable instances in this country in which critics of Israelhave been made to pay, often with their careers, for speaking out. Inthis instance the process culminated in a deeply flawed evaluationprocess which was used to justify my termination from the faculty._A brief chronology_• 2002. This was the first year I spoke out nationally about Zionism.In October, my article, "Zionism's Bad Conscience," appeared in/Tikkun/. Three or four weeks later, I was called into President LeonBotstein's office, to be told my Hiss Chair was being taken away.Botstein said that he had nothing to do with the decision, thengratuitously added that it had not been made because of what I hadjust published about Zionism, and hastened to tell me that his viewswere diametrically opposed to mine.• 2003. In January I published a second article in /Tikkun/,"'Left-Anti-Semitism' and the Special Status of Israel," which arguedfor a One-State solution to the dilemmas posed by Zionism. A few weekslater,I received a phone call at home from Dean Dominy, who suggested,on behalf of Executive Vice-President Dimitri Papadimitriou, thatperhaps it was time for me to retire from Bard. I declined. The resultof this was an evaluation of my work and the inception, in 2004, ofthe current half-time contract as "Distinguished Professor."• 2006. I finished a draft of /Overcoming Zionism/. In January, whileI was on a Fellowship in South Africa, President Botstein conducted aconcert on campus of the Jerusalem Symphony Orchestra, which he hasdirected since 2003. In a stunning departure from traditional concertpractice, this began with the playing of the national anthems of theUnited States and Israel, after each of which the audience rose.Except for a handful of protestors, the event went unnoticed. Iregarded it, however, as paradigmatic of the "special relationship"between the United States and Israel, one that has conduced to war inIraq and massive human rights violations in Israel/Palestine. InDecember, I organized a public lecture at Bard (with Mazin Qumsiyeh)to call attention to this problem. Only one faculty person attended;the rest were students and community people; and the issue was nevertaken up on campus.• 2007. /Overcoming Zionism/ was now on the market, arguing for aOne-State solution (and sharply criticizing, among others, MartinPeretz for a scurrilous op-ed piece against Rachel Corrie in the /LosAngeles Times/. Peretz is an official in AIPAC's foreign policythink-tank, and at the time a Bard Trustee—though this latter fact wasnot pointed out in the book). In August, /Overcoming Zionism/ wasattacked by a watchdog Zionist group, StandWithUs/Michigan, whichsucceeded in pressuring the book's United States distributor, theUniversity of Michigan Press, to remove it from circulation. Anextraordinary outpouring of support (650 letters to U of M) succeededin reversing this frank episode ofbook-burning. I was disturbed, however, by the fact that, with theexception of two non-tenure track faculty, there was no support fromBard in response to this egregious violation of the speech rights of aprofessor. When I asked President Botstein in an email why this wasso, he replied that he felt I was doing quite well at taking care ofmyself. This was irrelevant to the obligation of a college to protectits faculty from violation of their rights of free expression—all themore so, a college such as Bard with a carefully honed reputation as abastion of academic freedom, and which indeed defines such freedom inits Faculty Handbook as a "right . . . to search for truth andunderstanding without interference and to disseminate his [sic]findings without intimidation."• 2008. Despite some reservations by the faculty, I was able to teacha course on Zionism. In my view, and that of most of the students, itwas carried off successfully. Concurrently with this, anotherevaluation of my work at Bard was underway. Unlike previousevaluations, in 1996 and 2003, this was unenthusiastic. It was citedby Dean Dominy as instrumental in the decision to let me go._Irregularities in the Evaluation Process_The evaluation committee included Professor Bruce Chilton, along withProfessors Mark Lambert and Kyle Gann. Professor Chilton is a memberof the Social Studies division, a distinguished theologian, and thecampus' Protestant chaplain. He is also active in Zionist circles, aschair of the Episcopal–Jewish Relations Committee in the EpiscopalDiocese of New York, and a member of the Executive Committee ofChristians for Fair Witness on the Middle East. In this capacity hecampaigns vigorouslyagainst Protestant efforts to promote divestment and sanctions againstthe State of Israel. Professor Chilton is particularly antagonistic tothe Palestinian liberation theology movement, Sabeel, and its leader,Rev. Naim Ateek, also an Episcopal. This places him on the other sideof the divide from myself, who attended a Sabeel Conference inBirmingham, MI, in October, 2008, as an invited speaker, where I metRev. Ateek, and expressed admiration for his position. It should alsobe observed thatProfessor Chilton was active this past January in supporting Israeliaggression in Gaza. He may be heard on a national radio program onWABC, "Religion on the Line," (January 11, 2009) arguing from theDoctrine of Just War and claiming that it is anti-Semitic to criticizeIsrael for human rights violations—this despite the fact that largenumbers of Jews have been in the forefront of protesting Israelicrimes in Gaza. Of course, Professor Chilton has the right to hisopinion as an academic and a citizen. Nonetheless, the presence ofsuch a voice on the committee whose conclusion was instrumental in thedecision to remove me from the Bard faculty is highly dubious. Mostdefinitely, Professor Chilton should have recused himself from thisposition. His failure to do so, combined with the fact that thedecision as a whole was made in context of adversity between myselfand the Bard administration, renders the process of my terminationinvalid as an instance of what theCollege's Faculty Handbook calls a procedure "designed to evaluateeach faculty member fairly and in good faith."I still strove to make my future at Bard the subject of reasonablenegotiation. However, my efforts in this direction were rudely deniedby Dean Dominy's curt and dismissive letter (at the urging, accordingto her, of Vice-President Papadimitriou), which plainly asserted thatthere was nothing to talk over and that I was being handed a /faitaccompli/. In view of this I considered myself left with no otheroption than the release of this document._On the responsibililty of intellectuals_Bard has effectively crafted for itself an image as a bastion ofprogressive thought. Its efforts were crowned with being anointed in2005 by the /Princeton Review /as the second-most progressive collegein the United States, the journal adding that Bard "puts the 'liberal'in 'liberal arts.'" But "liberal" thought evidently has its limits;and my work against Zionism has encountered these.A fundamentalprinciple of mine is that the educator must criticize the injusticesof the world, whether or not this involves him or her in conflict withthe powers that be. The systematic failure of the academy to do soplays no small role in the perpetuation of injustice and stateviolence. In no sphere of political action does this principle applymore vigorously than with the question of Zionism; and in no countryis this issue more strategically important than in the United States,given the fact that United States support is necessary for Israel'sbehavior. The worse this behavior, the more strenuous must be thesuppression ofcriticism. I take the view, then, that Israeli human rights abuses aredeeply engrained in a culture of impunity granted chiefly, though notexclusively, in the United States—which culture arises fromsuppression of debate and open inquiry within those institutions, suchas colleges, whose social role it is to enlighten the public.Therefore, if the world stands outraged at Israeli aggression in Gaza,it should also be outraged at institutions in the United States thatgrant Israel impunity. In my view, Bard College is one suchinstitution. It has suppressed critical engagement with Israel andZionism, and therefore has enabled abuses such as have occurred andare occurring in Gaza. This notion is of course, not just descriptiveof a place like Bard. It is also the context within which the criticof such a place and the Zionist ideology it enables becomesmarginalized, and then removed.For further information: www.codz.org; Joel Kovel, "OvercomingImpunity," /The Link/ Jan-March 2009 (www.ameu.org).To write the Bard administration:President Leon Botstein <president@bard.edu.Executive Vice-President Dimitri Papadimitriou <dpapadimitrou@bard.ed
http://www.joelkovel.org/zionism.htmlTikkun Sept/Oct 2002 Jewish DenialZionism's Bad ConscienceJoel KovelLet me begin with some blunt questions, the harshness of which matchesthe situation in Israel/ Palestine. How have the Jews, immemoriallyassociated with suffering and high moral purpose, become identifiedwith a nation-state loathed around the world for its oppressivenesstoward a subjugated indigenous people? Why have a substantial majorityof Jews chosen to flaunt world opinion in order to rally about a statethat essentially has turned its occupied lands into a hugeconcentration camp and driven its occupied peoples to such gruesomeexpedients as suicide bombing? Why does the Zionist community, inraging against terrorism, forget that three of its prime ministerswithin the last twenty years Begin, Shamir and Sharon are openlyrecognized to have been world-class terrorists and mass murderers? Andwhy will these words just written and the words of other Jewscritical of Israel be greeted with hatred and bitter denunciation byZionists and called "self-hating" and "anti-Semitic"? Why do Zionistsnot see, or to be more exact, why do they see yet deny, the brutalreality that this state has wrought?The use of the notion of denial here suggests a psychologicaltreatment of the Zionist community. But in matters of this sort,psychology is only one aspect of a greater whole that includesobdurate facts like forceful occupation of land claimed by and onceinhabited by others. The phenomena of conscience are of courseprocessed subjectively. But they neither originate within the mind norremain limited to thoughts and feelings. Conscience is objective, too,and linked to notions like justice and law that exist outside of anyindividual will. It is also collective, and pertains to what is doneby the group in whose membership identity is formed. These groupphenomena are, we might say, organized into "moral universes," inwhich history, mythology, and individual moral behaviors are broughttogether and made into a larger whole. Such universes may themselvesbe universalizing, wherein that whole is inclusive of others, who areseen as parts of a common humanity (or for non-human creatures,nature). Or, as all too often happens, they may be unified only bysplitting apart of the moral faculties.Now, the situation prevailing in Israel/Palestine is that commonhumanity is denied, the Other is not recognized, and the doublestandard prevails. In such conceptions, which have stained historysince the beginning and comprise one of the chief impediments to themaking of a better world, talion law reigns, violence toward the Otheris condoned, and violence from the Other is demonized. Like the realmsof matter and anti-matter, each such moral universe is paired withthat of its adversary. But such mirroring does not imply moralequivalence; that is settled according to the rules of justice. Inthis instance there should be no doubt that those who havedispossessed others and illegally occupy their national lands have tobear prime culpability. This is not meant to excuse such Palestinianor Arab wrongdoings as have arisen in the course of the strugglewhich would be a denial of moral agency but it provides contextfor understanding the conflict at a deeper level and obliges us tolook with special care at the curious situation of the Jews. Despitethe innumerable variations between different fractions of Judaism,here certain unique historical forces have shaped a common dilemma andplayed a crucial role in the unfolding of Zionism.Jews were supposed to know better, to be better. Suffering persecutionand being eternally on the margins of Europe were supposed to havemade Jews more morally developed. I speak from first-hand experience,having been made to feel as a boy that I had inherited a two-foldsuperiority, by belonging to a people both cleverer and more highlymoral than the non-Jews who surrounded us. We Jews were history'sexceptions.A myth made this belief coherent over the ages and shaped Jewishidentity: A "covenant" existed, a kind of special treaty and promisebetween Jews and God. How Odd of God, ran the title of a book from myboyhood Yeshiva days, to Choose the Jews. There was an unmistakablelift one got from feeling endowed by the Supreme Being and madesuperior to the mere "goyim." The morally dubious implications of thisattitude and the hateful contempt that often accompanied it indeed,one could almost hear the sputum striking the ground as the word,"goyim," was spoken was mitigated by the fact that Jews werespeaking from the position of victim. Jewish exceptionalism was a kindof payback that nullified the centuries of being forced into ghettos,being denied ordinary rights such as land-holding, and being kickedaround, massacred, and expelled, not to mention being constantly inthe cross-hairs of the reigning racist system of anti-Semitism.Living with anti-Semitism, even when its overt violence was latent,contributed to the heightened self-consciousness of the Jewishcharacter and also to its thin skin. Few Jews are able completely toavoid the visceral fear integral to the legacy of Judaism: a drumbeatof blame, with its intimations of the pogrom to follow. The Jew stilllives with the fact that his/her people have been scapegoated forcenturies by Christian Europe we still hear in our heads that Jewswere the killers of Christ, hence responsible for the failures ofChristianity; Jews were the usurers who destroyed the medievalcommunity, not the landlords/barons; Jews were responsible for themisery of the Russian masses, not the Czar. In ways too numerous tolist here, Jews were made to pay for the crimes of the West, and thebetrayal of its ideals. The peculiar exaltation of believing oneselfthe chosen people is both the effect and, to a degree, the cause ofanti-Semitic persecution: They hate us, but we are better than them;and then, they hate us because we are better than them. Exceptionalismreinforced the tribalism imposed upon the Jews; and tribalism playedinto the hands of anti-Semitism even as it defended against it.Within this matrix a great variety of ways of being Jewisharose. These included, especially for Jews in the Western EuropeanDiaspora, the possibility of assimilating or remaining apart from thesocieties they inhabited. Some Jews, of course, embraced theprotection of tribal ways as a defense against a harsh and accusingworld. Others embraced the calculating pecuniary skills which had beenfoisted upon Judaism long before capitalism became the dominant order,and developed these to become masters of finance once capital moved tothe center of the stage. In the West, some Jews saw in the greatideals of universality and enlightenment a means to transcend thestifling tribal role that had been imposed upon them. Having beenpersecuted, brutally denied the elementary rights ofself-determination given to others, Jews of this type adopted theideals of universal human rights that arose with the Enlightenment,and championed the cause of emancipation.Then, toward the close of the nineteenth century, the ancient promiseof the Covenant took the shape of a real Promised Land. Israel gaveEuropean Jews a material opportunity to balance the tensions betweentribalism and enlightenment. Driven by the upswelling of anti-Semitismthat preceded and gave its horrific stimulus to the Third Reich,Israel became the home of the tribe, the safe place where Jews couldbe Jews. At the same time, it offered Jews identifying with theenlightenment a chance to demonstrate their competence in westernliberal ways (including socialism). In this way, a project arose thatsought to combine and synthesize both advanced Western democratic andancient tribal values.The Zionists took from the West the values of liberal democracy, butalso the goals, tactics, and mentality of imperialism that oftenaccompanied these. The convergence between tribalism and imperialismseemed, on the surface, to be a successful alignment of the variousimpulses of the Zionist project. From the first Jewish settlements inPalestine an imperialist mentality enabled Zionists to readilyrationalize their displacement of indigenous Palestinians under thenotion of a civilizing mission, embroidered with a full repertoire ofOrientalist prejudices.Zionism's allegiance to modernity also gave Zionism a high degree oftechnological prowess and organizational ability. During the years ofthe Yishuv, or settlement, this was evidenced by the degree to whichZionists would consistently out-produce and out-perform the indigenouspeoples despite the great numerical superiority of the latter. Later,in the period of the wars leading up to the state of Israel, as wellas the wars carried out by this state, superior organizational abilitycombined with superior weaponry made Israel into a regional juggernautone, moreover, driven by the talion law of tribalism and the racistreduction of one's adversary.It was for some time easy to sympathize with a Jewish state and tooverlook its imperialist tendencies, especially in the crucial periodof the mid- to late 1940s, when evidence of the Holocaust surfaced asa diabolic reminder of Jewish vulnerability to the malignancies ofso-called Western Civilization. I remember well as a youth of twelvethe rush of joy and hope as it became increasingly clear that we wereat last going to have "our state," and I know full well how deeply theJews around me shared that feeling.But neither understanding nor sympathy can nullify the judgment thatin proceeding down this path, Zionism set the stage, as surely ascould an Aeschylus or Euripides, for the present hellish outcome. Andthis has a great deal to do with the fact that the notion of ademocratic Jewish state, despite its allure, is a logicalimpossibility and a trap. It is remarkable that so sophisticated apeople should have so much trouble grasping the impossibility inherentin their notion of a Promised Land: a democracy that is only to be fora certain people cannot exist, for the elementary reason that themodern democratic state is defined by its claims of universality.Modern nation-states are uneasy syntheses of the two terms: thenation, which embodies the lived, sensuous, territorial, andmythologized history of a people; and the state, which is thesuperordinate agency regulating a society and having the capacity, asMax Weber put it, to wield legitimate violence. In its pre-modern,non-democratic form, the nation-state could embrace directly the willof a particular national body. Under these circumstances, state powerwas held by those who controlled the nation. In practice, these were amixture of kings and aristocrats who exerted direct territorialdominion, along with the theocrats of the priest class who controlledsymbolic and mythopoetic production. Between the divine right of kingsand the territorial powers of priests, the legality of pre-modernstates took shape.The democratic nation-state was a mutation of this arrangement, forgedto accommodate the power of the newly emerging capitalist classes, butalso to advance the notion of an universal human right the stirringideal that all human beings are created equally free before thelaw. The subsequent history of this political formation reveals, inall its fragility, the tensions inherent in the fitful development ofhuman rights. But there should be no mistaking that our hopes for aworld beyond tribalist revenge and the arbitrary power of rulersdepend on strengthening and advancing the notion of universal humanright. The legitimacy of modern nation-states the legitimacy ofjustice itself rests upon this right. Of course, not all democraticnation-states are just in practice, nor have they necessarily comeinto being in ways consonant with the universal human rights theyassert. The United States, Canada, Australia, and South Africa arejust a few of the many examples of democratic nation-states that havecome into existence through violence. The various horrors that havemarked the history of these countries, however, have not preventedthem from offering full participation in the polity to those who hadbeen enslaved, expelled, and/or exterminated as the nation-state cameinto existence. Thus Ben Nighthorse Campbell, an American Indian, sitsin the U.S. Senate, while Colin Powell and Condoleezza Rice,descendents of enslaved Africans, run U.S. foreign policy (needless toadd, very cordially to Israel), and may someday be president.None of this denies the racism that blocks the modern democratic statefrom keeping its promise. But there is a big difference between astate that fails to live up to its social contract because of ahistory saturated with racism, and one where the contract itselfgenerates racism, as has been the case for a settler-colonial Israelwhich claims to be both a democracy and an ethnocracy organized by andfor the Jewish people. Under such circumstances, racism is not anhistorical atavism, but an entirely normal, and constantly growing,feature of the political landscape. To have a state created expresslyfor one people constantly eats away and mocks thedemocratic-emancipatory aspects of Zionism. Zionism, in short, isbuilt on an impossibility, and to live in it and be of it is to live alie.In other instances of post settler-colonial states, the democraticpromise, however compromised, confers legitimacy. In the case ofIsrael, the logic of the ethnocratic state rules out an authenticdemocracy and denies legitimacy. All the propaganda about Israel beingthe "only democracy in the Middle East" and so forth, is false at itscore, no matter how many fine institutions are built there, or howmany crumbs are thrown to the Arabs who are allowed to live within itsbounds. This can be shown any number of ways, none more telling thanthe inability of Israel to write a Constitution with a Bill of Rights.As we well know, there are many states in the modern world thatproclaim themselves for a given people and are in many respects moreunpleasant places than Israel, including some of the Islamic states,such as Pakistan or Saudi Arabia. But none of these assert extravagantclaims for embodying the benefits of democratic modernity as doesIsrael. Thus one expects nothing from Pakistan or Saudi Arabia in theway of democratic right, and gets it; whereas Israel groans under thecontradictions imposed by incorporating features of Western liberaldemocracy within a fundamentally pre-modern, tribalist mission.In Israel, Jewish exceptionalism becomes the catalyst of a terriblesplitting of the moral faculties, and, by extension, of the wholemoral universe that polarizes Zionist thought. For God's chosenpeople, with their hard-earned identity of high-mindedness, bydefinition cannot sink into racist violence. "It can't be us," saysthe Zionist, when in fact it is precisely Zionists who are doing thesethings. The inevitable result becomes a splitting of the psyche thatdrives responsibility for one's acts out of the picture. Subjectivelythis means that the various faculties of conscience, desire, andagency dis-integrate and undergo separate paths of development. As aresult, Zionism experiences no internal dialectic, no possibilities ofcorrection, beneath its facade of exceptionalist virtue. The Covenantbecomes a license giving the right to dominate instead of anobligation to moral development. Zionism therefore cannot grow; it canonly repeat its crimes and degenerate further. Only a people thataspires to be so high can fall so low.We may sum these effects as the presence of a "bad conscience" withinZionism. Here, badness refers to the effects of hatred, which is theprimary affect that grows out of the splitting between the exaltedstandards of divine promise and the imperatives of tribalism andimperialism. A phenomenally thin skin and denial of responsibility arethe inevitable results. The inability to regard Palestinians as fullhuman beings with equivalent human rights pricks the conscience, butthe pain is turned on its head and pours out as hatred against thosewho would remind of betrayal: the Palestinians themselves and thoseothers, especially Jews, who would call attention to Zionism'scontradictions. Unable to tolerate criticism, the bad conscienceimmediately turns denial into projection. "It can't be us," becomes"it must be them," and this only worsens racism, violence, and theseverity of the double standard. Thus the "self-hating Jew" is amirror-image of a Zionism that cannot recognize itself. It is thescreen upon which bad conscience can be projected. It is a guilt thatcannot be transcended to become conscientiousness or real atonement,and which returns as persecutory accusation and renewed aggression.The bad conscience of Zionism cannot distinguish between authenticcriticism and the mirrored delusions of anti-Semitism lying ready-madein the swamps of our civilization and awakened by the currentcrisis. Both are threats, though the progressive critique is moretelling, as it contests the concrete reality of Israel and pointstoward self-transformation by differentiating Jewishness from Zionism;while anti-Semitism regards the Jew abstractly and in a demonic form,as "Jewish money" or "Jewish conspiracies," and misses the realmark. Indeed, Zionism makes instrumental use of anti-Semitism, as agarbage pail into which all opposition can be thrown, and a germinatorof fearfulness around which to rally Jews. This is not to discount themenace posed by anti-Semitism nor the need to struggle vigorouslyagainst it. But the greater need is to develop a genuinely criticalperspective, and not be bullied into confusing critique of Israel withanti-Semitism. One cannot in conscience condemn anti-Semitism byrallying around Israel, when it is Israel that needs to befundamentally changed if the world is to awaken from this nightmare.This is not the place to explore what such change would look like. Butthe guiding principle can be fairly directly stated. By forming Israelas a refuge and homeland for Jews from centuries of persecution, andespecially by making the Faustian bargain with imperialism, those Jewswho opted for Zionism negated their past sufferings, and turned theirweakness into strength. But such strength, grounded in the domination,oppression, and expulsion of others, is worthless. Zionism negatedwhat had been done to the Jews but failed to negate the negationitself, and thereby repeated the past with a different set ofmasks. If one doubts this, look at the set of oppressions forced uponJews by Christendom being forced into ghettos, denied ordinaryrights such as land-holding, kicked around, massacred, expelled, andsubjected to a racist system by the oppressors and ask yourselfwhether the same have not been imposed upon Palestinians by theZionist, with the only distinction worth noting being the terms of theracism?It is never too late to remedy this state, and a sizable minority ofpeople of good will are already moving in this direction, againstgreat odds. But it would be irresponsible to gloss over the grimfinding that the journey is conditioned by the fact that the core ofthe problem lies in Zionism itself, with its assumption that there canbe a democratic state for one particular people. So long as thisnotion is held, poisonous contradictions will continue to spill forthfrom the ancient land variously called Palestine or Israel. And as afrankly non-democratic, or even fascist, Israel can scarcely beimagined as an improvement, we are led to the sober conclusion that abasic rethinking of Jewish exceptionalism must be the ground of anylasting or just peace in the region. The implications are many, andneed to be worked out. But the time has come for the Jewish people toresume their striving toward universality.
Here is Joel Kovel's letter to the Bard administration re his contract nonrenewal:
Joel Kovel has now issued a statement:http://www.joelkovel.org/STATEMENT OF JOEL KOVEL REGARDING HIS TERMINATION BY BARD COLLEGE_Introduction_In January, 1988, I was appointed to the Alger Hiss Chair of SocialStudies at Bard College. As this was a Presidential appointmentoutside the tenure system, I have served under a series of contracts.The last of these was half-time (one semester on, one off, with halfsalary and full benefits year-round), effective from July 1, 2004, toJune 30, 2009. On February 7 I received a letter from Michèle Dominy,Dean of the College, informing me that my contract would not berenewed this July 1 and that I would be moved to emeritus status as ofthat day. She wrote that this decision was made by President Botstein,Executive Vice-President Papadimitriou and herself, in consultationwith members of the Faculty Senate.This document argues that this termination of service is prejudicialand motivated neither by intellectual nor pedagogic considerations,but by political values, principally stemming from differences betweenmyself and the Bard administration on the issue of Zionism. There isof course much more to my years at Bard than this, including anothercontroversial subject, my work on ecosocialism (/The Enemy ofNature/). However, the evidence shows a pattern of conflict overZionism only too reminiscentof innumerable instances in this country in which critics of Israelhave been made to pay, often with their careers, for speaking out. Inthis instance the process culminated in a deeply flawed evaluationprocess which was used to justify my termination from the faculty._A brief chronology_• 2002. This was the first year I spoke out nationally about Zionism.In October, my article, "Zionism's Bad Conscience," appeared in/Tikkun/. Three or four weeks later, I was called into President LeonBotstein's office, to be told my Hiss Chair was being taken away.Botstein said that he had nothing to do with the decision, thengratuitously added that it had not been made because of what I hadjust published about Zionism, and hastened to tell me that his viewswere diametrically opposed to mine.• 2003. In January I published a second article in /Tikkun/,"'Left-Anti-Semitism' and the Special Status of Israel," which arguedfor a One-State solution to the dilemmas posed by Zionism. A few weekslater,I received a phone call at home from Dean Dominy, who suggested,on behalf of Executive Vice-President Dimitri Papadimitriou, thatperhaps it was time for me to retire from Bard. I declined. The resultof this was an evaluation of my work and the inception, in 2004, ofthe current half-time contract as "Distinguished Professor."• 2006. I finished a draft of /Overcoming Zionism/. In January, whileI was on a Fellowship in South Africa, President Botstein conducted aconcert on campus of the Jerusalem Symphony Orchestra, which he hasdirected since 2003. In a stunning departure from traditional concertpractice, this began with the playing of the national anthems of theUnited States and Israel, after each of which the audience rose.Except for a handful of protestors, the event went unnoticed. Iregarded it, however, as paradigmatic of the "special relationship"between the United States and Israel, one that has conduced to war inIraq and massive human rights violations in Israel/Palestine. InDecember, I organized a public lecture at Bard (with Mazin Qumsiyeh)to call attention to this problem. Only one faculty person attended;the rest were students and community people; and the issue was nevertaken up on campus.• 2007. /Overcoming Zionism/ was now on the market, arguing for aOne-State solution (and sharply criticizing, among others, MartinPeretz for a scurrilous op-ed piece against Rachel Corrie in the /LosAngeles Times/. Peretz is an official in AIPAC's foreign policythink-tank, and at the time a Bard Trustee—though this latter fact wasnot pointed out in the book). In August, /Overcoming Zionism/ wasattacked by a watchdog Zionist group, StandWithUs/Michigan, whichsucceeded in pressuring the book's United States distributor, theUniversity of Michigan Press, to remove it from circulation. Anextraordinary outpouring of support (650 letters to U of M) succeededin reversing this frank episode ofbook-burning. I was disturbed, however, by the fact that, with theexception of two non-tenure track faculty, there was no support fromBard in response to this egregious violation of the speech rights of aprofessor. When I asked President Botstein in an email why this wasso, he replied that he felt I was doing quite well at taking care ofmyself. This was irrelevant to the obligation of a college to protectits faculty from violation of their rights of free expression—all themore so, a college such as Bard with a carefully honed reputation as abastion of academic freedom, and which indeed defines such freedom inits Faculty Handbook as a "right . . . to search for truth andunderstanding without interference and to disseminate his [sic]findings without intimidation."• 2008. Despite some reservations by the faculty, I was able to teacha course on Zionism. In my view, and that of most of the students, itwas carried off successfully. Concurrently with this, anotherevaluation of my work at Bard was underway. Unlike previousevaluations, in 1996 and 2003, this was unenthusiastic. It was citedby Dean Dominy as instrumental in the decision to let me go._Irregularities in the Evaluation Process_The evaluation committee included Professor Bruce Chilton, along withProfessors Mark Lambert and Kyle Gann. Professor Chilton is a memberof the Social Studies division, a distinguished theologian, and thecampus' Protestant chaplain. He is also active in Zionist circles, aschair of the Episcopal–Jewish Relations Committee in the EpiscopalDiocese of New York, and a member of the Executive Committee ofChristians for Fair Witness on the Middle East. In this capacity hecampaigns vigorouslyagainst Protestant efforts to promote divestment and sanctions againstthe State of Israel. Professor Chilton is particularly antagonistic tothe Palestinian liberation theology movement, Sabeel, and its leader,Rev. Naim Ateek, also an Episcopal. This places him on the other sideof the divide from myself, who attended a Sabeel Conference inBirmingham, MI, in October, 2008, as an invited speaker, where I metRev. Ateek, and expressed admiration for his position. It should alsobe observed thatProfessor Chilton was active this past January in supporting Israeliaggression in Gaza. He may be heard on a national radio program onWABC, "Religion on the Line," (January 11, 2009) arguing from theDoctrine of Just War and claiming that it is anti-Semitic to criticizeIsrael for human rights violations—this despite the fact that largenumbers of Jews have been in the forefront of protesting Israelicrimes in Gaza. Of course, Professor Chilton has the right to hisopinion as an academic and a citizen. Nonetheless, the presence ofsuch a voice on the committee whose conclusion was instrumental in thedecision to remove me from the Bard faculty is highly dubious. Mostdefinitely, Professor Chilton should have recused himself from thisposition. His failure to do so, combined with the fact that thedecision as a whole was made in context of adversity between myselfand the Bard administration, renders the process of my terminationinvalid as an instance of what theCollege's Faculty Handbook calls a procedure "designed to evaluateeach faculty member fairly and in good faith."I still strove to make my future at Bard the subject of reasonablenegotiation. However, my efforts in this direction were rudely deniedby Dean Dominy's curt and dismissive letter (at the urging, accordingto her, of Vice-President Papadimitriou), which plainly asserted thatthere was nothing to talk over and that I was being handed a /faitaccompli/. In view of this I considered myself left with no otheroption than the release of this document._On the responsibililty of intellectuals_Bard has effectively crafted for itself an image as a bastion ofprogressive thought. Its efforts were crowned with being anointed in2005 by the /Princeton Review /as the second-most progressive collegein the United States, the journal adding that Bard "puts the 'liberal'in 'liberal arts.'" But "liberal" thought evidently has its limits;and my work against Zionism has encountered these.A fundamentalprinciple of mine is that the educator must criticize the injusticesof the world, whether or not this involves him or her in conflict withthe powers that be. The systematic failure of the academy to do soplays no small role in the perpetuation of injustice and stateviolence. In no sphere of political action does this principle applymore vigorously than with the question of Zionism; and in no countryis this issue more strategically important than in the United States,given the fact that United States support is necessary for Israel'sbehavior. The worse this behavior, the more strenuous must be thesuppression ofcriticism. I take the view, then, that Israeli human rights abuses aredeeply engrained in a culture of impunity granted chiefly, though notexclusively, in the United States—which culture arises fromsuppression of debate and open inquiry within those institutions, suchas colleges, whose social role it is to enlighten the public.Therefore, if the world stands outraged at Israeli aggression in Gaza,it should also be outraged at institutions in the United States thatgrant Israel impunity. In my view, Bard College is one suchinstitution. It has suppressed critical engagement with Israel andZionism, and therefore has enabled abuses such as have occurred andare occurring in Gaza. This notion is of course, not just descriptiveof a place like Bard. It is also the context within which the criticof such a place and the Zionist ideology it enables becomesmarginalized, and then removed.For further information: www.codz.org; Joel Kovel, "OvercomingImpunity," /The Link/ Jan-March 2009 (www.ameu.org).To write the Bard administration:President Leon Botstein <president@bard.edu.Executive Vice-President Dimitri Papadimitriou <dpapadimitrou@bard.ed
Afghanistan the Next US Quagmire
This is from antiwar.com.
Afghanistan has been from the beginning a quagmire for the US. Obama seems to plan to make it worse by sending in more troops. He has done nothing to stop civilian casualties from bombing and is continuing drone attacks into Pakistan. I find it surprising there is not more resistance to the US dominated occupation within the US itself. The campaign is bound to become more costly in terms of US casualties. It will also be expensive and expand US debt at a time when this is the last thing that the US needs. Of course it will provide a stimulus for the military-industrial complex. Commentators almost never mention the fact that the operation was illegal from the getgo and only given a fig leaf of legality after the fact of occupation, the same as in Iraq.
February 20, 2009
Afghanistan, the Next US Quagmire?
by Thalif Deen
The United States is planning to send an additional 17,000 troops to one of the world's most battle-scarred nations – Afghanistan – long described as "a graveyard of empires."
First, it was the British Empire, and then the Soviet Union. So, will the United States be far behind?
"With his new order on Afghanistan, President (Barack) Obama has given substantial ground to what Martin Luther King Jr., in 1967 called 'the madness of militarism,'" Norman Solomon, executive director of the Washington-based Institute for Public Accuracy, told IPS.
"That madness should be opposed in 2009," said Solomon, author of War Made Easy: How Presidents and Pundits Keep Spinning Us to Death.
The proposed surge in U.S. troops will bring the total to 60,000, while the combined forces from the North Atlantic Treaty Organization (NATO), including troops from Germany, Canada, Britain and the Netherlands, amount to over 32,000.
When in full strength, U.S.-NATO forces in Afghanistan could reach close to 100,000 by the end of this year.
Still, in a TV interview Tuesday, Obama said he was "absolutely convinced that you cannot solve the problem of Afghanistan, the Taliban (insurgency), the spread extremism in that region solely through military means."
"If there is no military solution, why is the administration's first set of decisions to continue drone attacks and increase ground troops?" Marilyn B. Young, a professor of history at New York University, told IPS.
She said the uncertainty around Afghan policy seems to be spreading even while the Obama administration announces an increase in troops.
"This is one of the ways events seem to echo U.S. escalation in the Vietnam War," said Young, author of several publications, including "Iraq and the Lessons of Vietnam: Or, How Not to Learn From the Past."
On Tuesday, the U.N. Assistance Mission in Afghanistan (UNAMA) released a report revealing that in 2008, there were 2,118 civilian casualties in Afghanistan, an increase of almost 40 percent over 2007.
Of these casualties, 55 percent of the overall death toll was attributed to anti-government forces, including the Taliban, and 39 percent to Afghan security and international military forces.
"This is of great concern to the United Nations," the report said, pointing out that "this disquieting pattern demands that the parties to the conflict take all necessary measures to avoid the killing of innocent civilians."
During his presidential campaign last year, Obama said the war in Iraq was a misguided war.
The United States, he said, needs to pull out of Iraq, and at the same time, bolster its troops in Afghanistan, primarily to prevent the militant Islamic fundamentalist Taliban from regaining power and also to eliminate safe havens for terrorists.
But most political analysts point out that Afghanistan may turn out to be a bigger military quagmire for U.S. forces than Iraq.
Solomon of the Institute for Public Accuracy said Obama's moves on Afghanistan have "the quality of a moth toward a flame."
In the short run, Obama is likely to be unharmed in domestic political terms. But the policy trajectory appears to be unsustainable in the medium-run, he added.
"Before the end of his first term, Obama is very likely to find himself in a vise, caught between a war in Afghanistan that cannot be won and a political quandary at home that significantly erodes the enthusiasm of his electoral base while fueling Republican momentum," Solomon argued.
Dr. Christine Fair, a senior political scientist with the RAND Corporation and a former political officer with UNAMA in Kabul, told IPS she is doubtful that more troops will secure Afghanistan.
"Perhaps several years ago more troops would have been welcomed. My fear is that more troops means more civilian losses and further erosion of good will and support for the international presence," Fair said.
"I would personally prefer a move from kinetics and towards using this increased capacity to help build Afghan capacity," she noted.
"I also think greater support from the international community for reconciliation is needed. Afghans need to own this process," said Fair, a former senior research associate with the Center for Conflict Analysis and Prevention at the U.N. Institute of Peace (USIP) in Washington.
However, she said, the international community has legitimate interests in remaining in some capacity to ensure that Afghanistan does not again emerge as a safe haven for al-Qaeda and other international terrorist groups.
Fair also co-authored (along with Seth Jones) a USIP report released early this week, titled "Securing Afghanistan," which spelled out the reasons why international stabilization efforts have not been successful in Afghanistan over the last seven years.
"Security issues in Afghanistan are extraordinarily complex, with multiple actors influencing the threat environment – among them, insurgent groups, criminal groups, local tribes, warlords, government officials and security forces," the report said.
Afghanistan also presents a multi-front conflict that includes distinct security challenges in the northern, central and southern parts of the country, the study declared.
In Afghanistan, Solomon argued, the U.S. president is proceeding down a path that can only be too steep and not steep enough.
The basic contradiction of his current position – asserting that the situation cannot be solved by military means yet taking action to try to solve the problem by military means – signifies that Obama is bargaining for short-term wiggle room at the expense of longer-term rationality, he added.
"In a very real sense, Obama is kicking a bloody can down the road, unable to think of any other way to confront circumstances that will grow worse with time in large measure because of his actions now," he said.
Even while disputing some thematic aspects of the "war on terrorism" at times, Obama is reinvesting his political capital – and re-dedicating the Pentagon's mission – on behalf of a U.S. war effort that is probably doomed to fail on its own terms, Solomon said.
"Reliance on violence is a chronic temptation for a commander-in-chief with the mighty U.S. military under its command. We've seen the results in Iraq – or, more precisely, the people of Iraq and many American soldiers have seen and suffered the results," he added.
(Inter Press Service)
Bad news and good news for the Guantanamo Uighurs
The inane legal wrangling and shirking of responsility re the Uighurs is truly mind-bloggling. Rightfully, the US is wary of sending them back to China-which wants them and as their citizens has a claim upon them. At the same time the US may have tortured them and certainly has held them without valid reason for years.
Groups in the US have offered to help settle them in the US, but without any real grounds the government insists they might be a threat to the US. So they continue in custody a blot upon the reputation of the US.
Bad News and Good News for the Guantánamo Uighurs
by Andy Worthington
First, the good news. Adel Abdul Hakim, one of five Uighurs (Muslims from China's oppressed Xinjiang province), who was released from Guantánamo in May 2006, has had his asylum claim accepted by the Swedish government.
The Uighurs' story
It has been a long journey for Adel. Seized in Pakistan and sold to U.S. forces in December 2001, with 17 of his compatriots, Adel had been living in a run-down hamlet in the Tora Bora mountains, dreaming of rising up against the Chinese government, when the settlement was hit in a U.S. bombing raid. Although it was clear from the very start of their detention that the Uighurs had nothing to do with either al-Qaeda or the Taliban, the Pentagon initially milked them for information about the Chinese government, and then, as a favor to that same government in the run-up to the invasion of Iraq in 2003, obligingly designated the Uighurs' separatist group, the East Turkestan Independence Movement (based on the Uighurs' name for their homeland), as a terrorist organization, and attempted to claim that the Uighurs in Guantánamo were all members.
Even if this had been the case, it was stretching Guantánamo's rationale to suggest that anyone involved in any independence movement anywhere in the world should be held indefinitely as a "terrorist" on the basis of pragmatic deals struck with foreign governments, but it was not, in fact, clear that any of the men had actually been members of the group. Adel was, initially, one of the lucky ones. While the Pentagon squabbled over the verdicts of different tribunals at Guantánamo (the Combatant Status Review Tribunals, convened in 2004-05 to assess whether the prisoners were correctly designated as "enemy combatants"), secretly reconvening at least two when the tribunal members dared to conclude that their own government had failed to establish an adequate case, Adel and four of his companions managed to avoid the "do-over" tribunals, and were declared to be "not enemy combatants," although the Pentagon – ever-inventive and ever-unapologetic – soon decided to label them "No Longer Enemy Combatants" instead.
Adel and his four compatriots then languished in Guantánamo for nearly two years, while State Department officials scoured the world looking for third countries prepared to risk the wrath of China by accepting them. This was because, in an ironic twist that was lost on the Bush administration, it was decided that they could not be sent home to China, where there were legitimate fears that they would be tortured. The irony, of course, worked on two levels: firstly, because the Bush administration, which had painstakingly shredded almost every law and treaty it had come across, had decided to abide by the prohibition on returning foreign nationals to countries where they faced the risk of torture (as prohibited in the UN Convention Relating to the Status of Refugees, and in Article 3 of the UN Convention Against Torture); and secondly, because so much of their treatment since they were first seized – especially at Kandahar, the U.S. prison in Afghanistan that was used to process the majority of the prisoners who ended up in Guantánamo – was saturated with the kind of abuse that many observers identified as torture.
Eventually, Albania was prevailed upon to accept Adel and his compatriots, and in May 2006, just three days before a U.S. appeals court was scheduled to hear a habeas corpus claim on their behalf, they were hastily bundled out of Guantánamo and deposited in a UN refugee camp in the Albanian capital, Tirana. Although grateful to be freed from Guantánamo, the men had difficulty adjusting to life in Albania, which is a Muslim country, but is also one of the poorest countries in Europe, with little opportunities for work and no other Uighurs to provide them with any kind of support network.
Asylum in Sweden
18 months later, in November 2007, Adel secured a visa to visit Sweden, to speak at a human rights conference, and to be reunited with his sister Kavser, a registered refugee and part of a sizeable Uighur community in Stockholm. He then took the opportunity to claim asylum, and was backed up by ten human rights groups, from the U.S. and Europe, who pointed out in a submission last January that Sweden was a more appropriate location for a Uighur refugee than Albania, as it fulfilled many of the UN's requirements for refugees that were not being met in Albania. According to the UNHCR Resettlement Handbook (2004), "resettlement as a durable solution must be accompanied by meaningful prospects for local integration, characterized in part by access to work that provides a living wage; education; fundamental medical (including necessary psychological) services; property; and family support or the support of a similarly situated refugee community."
Last June, however, the Swedish government turned down Adel's asylum application. He promptly appealed, and today's decision therefore marks the end of his seven and a half year journey to find a new home. As the BBC reported, the Swedish migration court accepted that Adel (described in the article as Adel Hakimjan) "was not a terrorist and granted him permanent residency as a refugee." Speaking to the Associated Press, Adel declared, "It feels like I am starting again, a rebirth. It is now that I am alive."
The Uighurs' U.S. court victories
Unfortunately, for the 17 Uighurs still in Guantánamo, today's bad news rather overshadows the successful outcome of Adel's long quest for justice. Ignored for years, they gained an unexpected reprieve last June, when three judges in the Court of Appeals in Washington – noticeably, two Republicans and a Democrat – were finally granted an opportunity to review the government's evidence against Huzaifa Parhat, one of the 17, and decided that the government's attempts to link him to the East Turkestan Independence Movement were thoroughly unpersuasive. As a result, they "held invalid a decision of a Combatant Status Review Tribunal" that Parhat was an "enemy combatant," and "directed the government to release or transfer" him (or to hold a new tribunal "consistent with the Court's opinion").
In the months that followed, the government gave up trying to prove that any of the other 16 Uighurs were "enemy combatants," and last October, when their case was reviewed in a District Court in Washington D.C., Judge Ricardo Urbina ruled that their continued detention in Guantánamo was unconstitutional, and, because no other country had been found that would accept them, ordered their release into the care of communities in the D.C. area and in Tallahassee, Florida, who had prepared detailed plans for their resettlement.
Predictably, the government appealed, insisting, disgracefully, that the men still constituted a threat to the United States because they had received weapons training in Afghanistan, even though it had already abandoned all pretense that this was the case. This was Kafkaesque enough, but it was backed up by a claim that, "under the separation of powers the decision on whether to admit the petitioners into the United States 'rests solely with the political branches,'" and that "immigration laws preclude a habeas court from ordering the release of an inadmissible alien into the United States."
Sadly, for justice, and for the Uighurs, two of the three judges in the appeals court – A. Raymond Randolph and Karen LeCraft Henderson, Bush nominees who will ensure that the Bush administration's peculiarly aberrant approach to justice will live on for years (or decades) – approved the government's request for a stay on the Uighurs' release last October, pending an appeal the following month.
On that occasion, the majority verdict was heavily criticized by the dissenting judge, Clinton nominee Judge Judith W. Rogers, who argued that the government's immigration argument "misstates the law," because "the Supreme Court has made clear that, in at least some instances, a habeas court can order an alien released with conditions into the country despite the wish of the Executive to detain him indefinitely," and "It is thus both inadequate and untrue to assert that the political branches have 'plenary powers over immigration.'"
In particular, however, Judge Rogers was incensed that the government was attempting to undermine the powers granted to the courts in Boumediene v. Bush, the case last June in which the Supreme Court reiterated that the prisoners at Guantánamo had habeas corpus rights (the right to challenge the basis of their detention). These rights had first been granted by the Supreme Court in June 2004, but had then been removed in two disturbing pieces of legislation – the Detainee Treatment Act of 2005 and the Military Commissions Act of 2006.
Insisting that the Supreme Court's intention had been to empower the lower courts to act as they saw fit (rather than to have their teeth removed by the Executive), Judge Rogers noted that the Supreme Court not only granted Guantánamo prisoners "the privilege of habeas corpus to challenge the legality of their detention," but also held that "a court's power under the writ must include 'authority to … issue … an order directing the prisoner's release.'"
Bush's judges deny Uighurs' resettlement in the United States
Yesterday, however, Judges Randolph and Henderson went one step further than they had in November, reversing Judge Urbina's ruling, and concluding, as Judge Randolph declared (PDF),
"Petitioners … invoke the tradition of the Great Writ [habeas] as a protection of liberty. As part of that tradition, they say, a court with habeas jurisdiction has always had the power to order the prisoner's release if he was being held unlawfully. But … petitioners are not seeking 'simple release.' Far from it. They asked for, and received, a court order compelling the Executive to release them into the United States outside the framework of the immigration laws. Whatever may be the content of common law habeas corpus, we are certain that no habeas court since the time of Edward I ever ordered such an extraordinary remedy."
Judge Randolph added, "An undercurrent of petitioners' arguments is that they deserve to be released into this country after all they have endured at [the] hands of the United States. Such sentiments, however high-minded, do not represent a legal basis for upsetting settled law and overriding the prerogatives of the political branches."
Surprisingly, perhaps, Judge Rogers, whose dissenting opinion was remorselessly dissected by her colleagues, also voted to overturn Judge Urbina's order to release the Uighurs into the United States, although she had different reasons for doing so, and, as SCOTUSblog described it, "denounced the majority's reasoning."
Judge Rogers concurred in the judgment not because she agreed with the judges' assertions about the executive branch, but rather because the District Court "has yet to hear from the Executive regarding the immigration laws, which the Executive had asserted may form an alternate basis for detention," and that therefore Judge Urbina had "erred in granting release prematurely." Elsewhere, however, she returned to Boumediene, reiterating that the Supreme Court held that prisoners in Guantánamo are "entitled to the privilege of habeas corpus to challenge the legality of their detentions," and that a "habeas court must have the power to order the conditional release of an individual unlawfully detained," and boldly declaring,
"Today the court nevertheless appears to conclude that a habeas court lacks authority to order that a non-'enemy combatant' alien be released into the country (as distinct from be admitted under the immigration laws) when the Executive can point to no legal justification for detention and to no foreseeable path of release. I cannot join the court's analysis because it is not faithful to Boumediene and would compromise both the Great Writ as a check on arbitrary detention and the balance of powers over exclusion and admission and release of aliens into the United States recognized by the Supreme Court to reside in the Congress, the Executive and the habeas court."
President Obama's problem
Quite where this leaves the Uighurs is difficult to discern. As SCOTUSblog reported, Judges Randolph and Henderson were "not deciding whether the 17 Uighurs could qualify for admission into the U.S. under immigration law." Even though the Bush administration had argued that they could not, the judges declared that they were unable to "resolve that question 'at this stage' since the Uighurs had not applied for admission as immigrants." Furthermore, although the judges' ruling reversed Judge Urbina's release order, they required him to conduct "further proceedings," which were unspecified, and impossible to gauge, as Judge Urbina has already clearly stated his case, and concluded that the Uighurs "no longer may be held legally by the Executive branch under constitutional habeas principles."
In many ways, therefore, Bush's judges have thrown the problem of the Uighurs back into the hands of the Executive – although now, of course, it is Barack Obama who will have to decide whether to find new homes for the Uighurs in the United States, or to keep them imprisoned at Guantánamo until, perhaps, various European countries step forward to relieve him of the burden.
To that end, I can't help wondering if the Swedish announcement, in the case of Adel Abdul Hakim, just happened to fall on the same day as the appeal court ruling, or if it was part of a bigger picture that may enable President Obama not to have to act on the Uighurs' behalf. For many of us, this would be a capitulation to the injustices of the Bush administration, and it would be preferable if the new President were to follow Judge Urbina, Judge Rogers and the Supreme Court, rather than being obliged to support the stance taken by George W. Bush and his Justice Department, as it lingers on in the dubious legal opinions of two of his judges.
Groups in the US have offered to help settle them in the US, but without any real grounds the government insists they might be a threat to the US. So they continue in custody a blot upon the reputation of the US.
Bad News and Good News for the Guantánamo Uighurs
by Andy Worthington
First, the good news. Adel Abdul Hakim, one of five Uighurs (Muslims from China's oppressed Xinjiang province), who was released from Guantánamo in May 2006, has had his asylum claim accepted by the Swedish government.
The Uighurs' story
It has been a long journey for Adel. Seized in Pakistan and sold to U.S. forces in December 2001, with 17 of his compatriots, Adel had been living in a run-down hamlet in the Tora Bora mountains, dreaming of rising up against the Chinese government, when the settlement was hit in a U.S. bombing raid. Although it was clear from the very start of their detention that the Uighurs had nothing to do with either al-Qaeda or the Taliban, the Pentagon initially milked them for information about the Chinese government, and then, as a favor to that same government in the run-up to the invasion of Iraq in 2003, obligingly designated the Uighurs' separatist group, the East Turkestan Independence Movement (based on the Uighurs' name for their homeland), as a terrorist organization, and attempted to claim that the Uighurs in Guantánamo were all members.
Even if this had been the case, it was stretching Guantánamo's rationale to suggest that anyone involved in any independence movement anywhere in the world should be held indefinitely as a "terrorist" on the basis of pragmatic deals struck with foreign governments, but it was not, in fact, clear that any of the men had actually been members of the group. Adel was, initially, one of the lucky ones. While the Pentagon squabbled over the verdicts of different tribunals at Guantánamo (the Combatant Status Review Tribunals, convened in 2004-05 to assess whether the prisoners were correctly designated as "enemy combatants"), secretly reconvening at least two when the tribunal members dared to conclude that their own government had failed to establish an adequate case, Adel and four of his companions managed to avoid the "do-over" tribunals, and were declared to be "not enemy combatants," although the Pentagon – ever-inventive and ever-unapologetic – soon decided to label them "No Longer Enemy Combatants" instead.
Adel and his four compatriots then languished in Guantánamo for nearly two years, while State Department officials scoured the world looking for third countries prepared to risk the wrath of China by accepting them. This was because, in an ironic twist that was lost on the Bush administration, it was decided that they could not be sent home to China, where there were legitimate fears that they would be tortured. The irony, of course, worked on two levels: firstly, because the Bush administration, which had painstakingly shredded almost every law and treaty it had come across, had decided to abide by the prohibition on returning foreign nationals to countries where they faced the risk of torture (as prohibited in the UN Convention Relating to the Status of Refugees, and in Article 3 of the UN Convention Against Torture); and secondly, because so much of their treatment since they were first seized – especially at Kandahar, the U.S. prison in Afghanistan that was used to process the majority of the prisoners who ended up in Guantánamo – was saturated with the kind of abuse that many observers identified as torture.
Eventually, Albania was prevailed upon to accept Adel and his compatriots, and in May 2006, just three days before a U.S. appeals court was scheduled to hear a habeas corpus claim on their behalf, they were hastily bundled out of Guantánamo and deposited in a UN refugee camp in the Albanian capital, Tirana. Although grateful to be freed from Guantánamo, the men had difficulty adjusting to life in Albania, which is a Muslim country, but is also one of the poorest countries in Europe, with little opportunities for work and no other Uighurs to provide them with any kind of support network.
Asylum in Sweden
18 months later, in November 2007, Adel secured a visa to visit Sweden, to speak at a human rights conference, and to be reunited with his sister Kavser, a registered refugee and part of a sizeable Uighur community in Stockholm. He then took the opportunity to claim asylum, and was backed up by ten human rights groups, from the U.S. and Europe, who pointed out in a submission last January that Sweden was a more appropriate location for a Uighur refugee than Albania, as it fulfilled many of the UN's requirements for refugees that were not being met in Albania. According to the UNHCR Resettlement Handbook (2004), "resettlement as a durable solution must be accompanied by meaningful prospects for local integration, characterized in part by access to work that provides a living wage; education; fundamental medical (including necessary psychological) services; property; and family support or the support of a similarly situated refugee community."
Last June, however, the Swedish government turned down Adel's asylum application. He promptly appealed, and today's decision therefore marks the end of his seven and a half year journey to find a new home. As the BBC reported, the Swedish migration court accepted that Adel (described in the article as Adel Hakimjan) "was not a terrorist and granted him permanent residency as a refugee." Speaking to the Associated Press, Adel declared, "It feels like I am starting again, a rebirth. It is now that I am alive."
The Uighurs' U.S. court victories
Unfortunately, for the 17 Uighurs still in Guantánamo, today's bad news rather overshadows the successful outcome of Adel's long quest for justice. Ignored for years, they gained an unexpected reprieve last June, when three judges in the Court of Appeals in Washington – noticeably, two Republicans and a Democrat – were finally granted an opportunity to review the government's evidence against Huzaifa Parhat, one of the 17, and decided that the government's attempts to link him to the East Turkestan Independence Movement were thoroughly unpersuasive. As a result, they "held invalid a decision of a Combatant Status Review Tribunal" that Parhat was an "enemy combatant," and "directed the government to release or transfer" him (or to hold a new tribunal "consistent with the Court's opinion").
In the months that followed, the government gave up trying to prove that any of the other 16 Uighurs were "enemy combatants," and last October, when their case was reviewed in a District Court in Washington D.C., Judge Ricardo Urbina ruled that their continued detention in Guantánamo was unconstitutional, and, because no other country had been found that would accept them, ordered their release into the care of communities in the D.C. area and in Tallahassee, Florida, who had prepared detailed plans for their resettlement.
Predictably, the government appealed, insisting, disgracefully, that the men still constituted a threat to the United States because they had received weapons training in Afghanistan, even though it had already abandoned all pretense that this was the case. This was Kafkaesque enough, but it was backed up by a claim that, "under the separation of powers the decision on whether to admit the petitioners into the United States 'rests solely with the political branches,'" and that "immigration laws preclude a habeas court from ordering the release of an inadmissible alien into the United States."
Sadly, for justice, and for the Uighurs, two of the three judges in the appeals court – A. Raymond Randolph and Karen LeCraft Henderson, Bush nominees who will ensure that the Bush administration's peculiarly aberrant approach to justice will live on for years (or decades) – approved the government's request for a stay on the Uighurs' release last October, pending an appeal the following month.
On that occasion, the majority verdict was heavily criticized by the dissenting judge, Clinton nominee Judge Judith W. Rogers, who argued that the government's immigration argument "misstates the law," because "the Supreme Court has made clear that, in at least some instances, a habeas court can order an alien released with conditions into the country despite the wish of the Executive to detain him indefinitely," and "It is thus both inadequate and untrue to assert that the political branches have 'plenary powers over immigration.'"
In particular, however, Judge Rogers was incensed that the government was attempting to undermine the powers granted to the courts in Boumediene v. Bush, the case last June in which the Supreme Court reiterated that the prisoners at Guantánamo had habeas corpus rights (the right to challenge the basis of their detention). These rights had first been granted by the Supreme Court in June 2004, but had then been removed in two disturbing pieces of legislation – the Detainee Treatment Act of 2005 and the Military Commissions Act of 2006.
Insisting that the Supreme Court's intention had been to empower the lower courts to act as they saw fit (rather than to have their teeth removed by the Executive), Judge Rogers noted that the Supreme Court not only granted Guantánamo prisoners "the privilege of habeas corpus to challenge the legality of their detention," but also held that "a court's power under the writ must include 'authority to … issue … an order directing the prisoner's release.'"
Bush's judges deny Uighurs' resettlement in the United States
Yesterday, however, Judges Randolph and Henderson went one step further than they had in November, reversing Judge Urbina's ruling, and concluding, as Judge Randolph declared (PDF),
"Petitioners … invoke the tradition of the Great Writ [habeas] as a protection of liberty. As part of that tradition, they say, a court with habeas jurisdiction has always had the power to order the prisoner's release if he was being held unlawfully. But … petitioners are not seeking 'simple release.' Far from it. They asked for, and received, a court order compelling the Executive to release them into the United States outside the framework of the immigration laws. Whatever may be the content of common law habeas corpus, we are certain that no habeas court since the time of Edward I ever ordered such an extraordinary remedy."
Judge Randolph added, "An undercurrent of petitioners' arguments is that they deserve to be released into this country after all they have endured at [the] hands of the United States. Such sentiments, however high-minded, do not represent a legal basis for upsetting settled law and overriding the prerogatives of the political branches."
Surprisingly, perhaps, Judge Rogers, whose dissenting opinion was remorselessly dissected by her colleagues, also voted to overturn Judge Urbina's order to release the Uighurs into the United States, although she had different reasons for doing so, and, as SCOTUSblog described it, "denounced the majority's reasoning."
Judge Rogers concurred in the judgment not because she agreed with the judges' assertions about the executive branch, but rather because the District Court "has yet to hear from the Executive regarding the immigration laws, which the Executive had asserted may form an alternate basis for detention," and that therefore Judge Urbina had "erred in granting release prematurely." Elsewhere, however, she returned to Boumediene, reiterating that the Supreme Court held that prisoners in Guantánamo are "entitled to the privilege of habeas corpus to challenge the legality of their detentions," and that a "habeas court must have the power to order the conditional release of an individual unlawfully detained," and boldly declaring,
"Today the court nevertheless appears to conclude that a habeas court lacks authority to order that a non-'enemy combatant' alien be released into the country (as distinct from be admitted under the immigration laws) when the Executive can point to no legal justification for detention and to no foreseeable path of release. I cannot join the court's analysis because it is not faithful to Boumediene and would compromise both the Great Writ as a check on arbitrary detention and the balance of powers over exclusion and admission and release of aliens into the United States recognized by the Supreme Court to reside in the Congress, the Executive and the habeas court."
President Obama's problem
Quite where this leaves the Uighurs is difficult to discern. As SCOTUSblog reported, Judges Randolph and Henderson were "not deciding whether the 17 Uighurs could qualify for admission into the U.S. under immigration law." Even though the Bush administration had argued that they could not, the judges declared that they were unable to "resolve that question 'at this stage' since the Uighurs had not applied for admission as immigrants." Furthermore, although the judges' ruling reversed Judge Urbina's release order, they required him to conduct "further proceedings," which were unspecified, and impossible to gauge, as Judge Urbina has already clearly stated his case, and concluded that the Uighurs "no longer may be held legally by the Executive branch under constitutional habeas principles."
In many ways, therefore, Bush's judges have thrown the problem of the Uighurs back into the hands of the Executive – although now, of course, it is Barack Obama who will have to decide whether to find new homes for the Uighurs in the United States, or to keep them imprisoned at Guantánamo until, perhaps, various European countries step forward to relieve him of the burden.
To that end, I can't help wondering if the Swedish announcement, in the case of Adel Abdul Hakim, just happened to fall on the same day as the appeal court ruling, or if it was part of a bigger picture that may enable President Obama not to have to act on the Uighurs' behalf. For many of us, this would be a capitulation to the injustices of the Bush administration, and it would be preferable if the new President were to follow Judge Urbina, Judge Rogers and the Supreme Court, rather than being obliged to support the stance taken by George W. Bush and his Justice Department, as it lingers on in the dubious legal opinions of two of his judges.
Martin Wolf: Japan's Lessons for a world of balance-sheet deflation
This is from FT.
Note that Wolf sees the public private scheme to purchase toxic assets as doomed. So far the project is about as clear as mud. It seems to be have been a last minute addition and not worked out. Even the business community was not at all impressed. Geithner blew it on this one.
Japan’s lessons for a world of balance-sheet deflation
By Martin Wolf
Published: February 17 2009 19:51 Last updated: February 17 2009 19:51
What has Japan’s “lost decade” to teach us? Even a year ago, this seemed an absurd question. The general consensus of informed opinion was that the US, the UK and other heavily indebted western economies could not suffer as Japan had done. Now the question is changing to whether these countries will manage as well as Japan did. Welcome to the world of balance-sheet deflation.
I have noted before, the best analysis of what happened to Japan is by Richard Koo of the Nomura Research Institute.* His big point, though simple, is ignored by conventional economics: balance sheets matter. Threatened with bankruptcy, the overborrowed will struggle to pay down their debts. A collapse in asset prices purchased through debt will have a far more devastating impact than the same collapse accompanied by little debt.
Most of the decline in Japanese private spending and borrowing in the 1990s was, argues Mr Koo, due not to the state of the banks, but to that of their borrowers. This was a situation in which, in the words of John Maynard Keynes, low interest rates – and Japan’s were, for years, as low as could be – were “pushing on a string”. Debtors kept paying down their loans.
How far, then, does this viewpoint inform us of the plight we are now in? A great deal, is the answer.
First, comparisons between today and the deep recessions of the early 1980s are utterly misguided. In 1981, US private debt was 123 per cent of gross domestic product; by the third quarter of 2008, it was 290 per cent. In 1981, household debt was 48 per cent of GDP; in 2007, it was 100 per cent. In 1980, the Federal Reserve’s intervention rate reached 19–20 per cent. Today, it is nearly zero.
When interest rates fell in the early 1980s, borrowing jumped (see chart below). The chances of igniting a surge in borrowing now are close to zero. A recession caused by the central bank’s determination to squeeze out inflation is quite different from one caused by excessive debt and collapsing net worth. In the former case, the central bank causes the recession. In the latter, it is trying hard to prevent it.
Second, those who argue that the Japanese government’s fiscal expansion failed are, again, mistaken. When the private sector tries to repay debt over many years, a country has three options: let the government do the borrowing; expand net exports; or let the economy collapse in a downward spiral of mass bankruptcy.
Despite a loss in wealth of three times GDP and a shift of 20 per cent of GDP in the financial balance of the corporate sector, from deficits into surpluses, Japan did not suffer a depression. This was a triumph. The explanation was the big fiscal deficits. When, in 1997, the Hashimoto government tried to reduce the fiscal deficits, the economy collapsed and actual fiscal deficits rose.
Third, recognising losses and recapitalising the financial system are vital, even if, as Mr Koo argues, the unwillingness to borrow was even more important. The Japanese lived with zombie banks for nearly a decade. The explanation was a political stand-off: public hostility to bankers rendered it impossible to inject government money on a large scale, and the power of bankers made it impossible to nationalise insolvent institutions. For years, people pretended that the problem was downward overshooting of asset price. In the end, a financial implosion forced the Japanese government’s hand. The same was true in the US last autumn, but the opportunity for a full restructuring and recapitalisation of the system was lost.
In the US, the state of the financial sector may well be far more important than it was in Japan. The big US debt accumulations were not by non-financial corporations but by households and the financial sector. The gross debt of the financial sector rose from 22 per cent of GDP in 1981 to 117 per cent in the third quarter of 2008, while the debt of non-financial corporations rose only from 53 per cent to 76 per cent of GDP. Thus, the desire of financial institutions to shrink balance sheets may be an even bigger cause of recession in the US.
How far, then, is Japan’s overall experience relevant to today?
The good news is that the asset price bubbles themselves were far smaller in the US than in Japan (see charts below). Furthermore, the US central bank has been swifter in recognising reality, cutting interest rates quickly to close to zero and moving towards “unconventional” monetary policy.
The bad news is that the debate over fiscal policy in the US seems even more neanderthal than in Japan: it cannot be stressed too strongly that in a balance-sheet deflation, with zero official interest rates, fiscal policy is all we have. The big danger is that an attempt will be made to close the fiscal deficit prematurely, with dire results. Again, the US administration’s proposals for a public/private partnership , to purchase toxic assets, look hopeless. Even if it can be made to work operationally, the prices are likely to be too low to encourage banks to sell or to represent a big taxpayer subsidy to buyers, sellers, or both. Far more important, it is unlikely that modestly raising prices of a range of bad assets will recapitalise damaged institutions. In the end, reality will come out. But that may follow a lengthy pretence.
Yet what is happening inside the US is far from the worst news. That is the global reach of the crisis. Japan was able to rely on exports to a buoyant world economy. This crisis is global: the bubbles and associated spending booms spread across much of the western world, as did the financial mania and purchases of bad assets. Economies directly affected account for close to half of the world economy. Economies indirectly affected, via falling external demand and collapsing finance, account for the rest. The US, it is clear, remains the core of the world economy.
As a result, we confront a balance-sheet deflation that, albeit far shallower than that in Japan in the 1990s, has a far wider reach. It is, for this reason, fanciful to imagine a swift and strong return to global growth. Where is the demand to come from? From over-indebted western consumers? Hardly. From emerging country consumers? Unlikely. From fiscal expansion? Up to a point. But this still looks too weak and too unbalanced, with much coming from the US. China is helping, but the eurozone and Japan seem paralysed, while most emerging economies cannot now risk aggressive action.
Last year marked the end of a hopeful era. Today, it is impossible to rule out a lost decade for the world economy. This has to be prevented. Posterity will not forgive leaders who fail to rise to this great challenge.
Note that Wolf sees the public private scheme to purchase toxic assets as doomed. So far the project is about as clear as mud. It seems to be have been a last minute addition and not worked out. Even the business community was not at all impressed. Geithner blew it on this one.
Japan’s lessons for a world of balance-sheet deflation
By Martin Wolf
Published: February 17 2009 19:51 Last updated: February 17 2009 19:51
What has Japan’s “lost decade” to teach us? Even a year ago, this seemed an absurd question. The general consensus of informed opinion was that the US, the UK and other heavily indebted western economies could not suffer as Japan had done. Now the question is changing to whether these countries will manage as well as Japan did. Welcome to the world of balance-sheet deflation.
I have noted before, the best analysis of what happened to Japan is by Richard Koo of the Nomura Research Institute.* His big point, though simple, is ignored by conventional economics: balance sheets matter. Threatened with bankruptcy, the overborrowed will struggle to pay down their debts. A collapse in asset prices purchased through debt will have a far more devastating impact than the same collapse accompanied by little debt.
Most of the decline in Japanese private spending and borrowing in the 1990s was, argues Mr Koo, due not to the state of the banks, but to that of their borrowers. This was a situation in which, in the words of John Maynard Keynes, low interest rates – and Japan’s were, for years, as low as could be – were “pushing on a string”. Debtors kept paying down their loans.
How far, then, does this viewpoint inform us of the plight we are now in? A great deal, is the answer.
First, comparisons between today and the deep recessions of the early 1980s are utterly misguided. In 1981, US private debt was 123 per cent of gross domestic product; by the third quarter of 2008, it was 290 per cent. In 1981, household debt was 48 per cent of GDP; in 2007, it was 100 per cent. In 1980, the Federal Reserve’s intervention rate reached 19–20 per cent. Today, it is nearly zero.
When interest rates fell in the early 1980s, borrowing jumped (see chart below). The chances of igniting a surge in borrowing now are close to zero. A recession caused by the central bank’s determination to squeeze out inflation is quite different from one caused by excessive debt and collapsing net worth. In the former case, the central bank causes the recession. In the latter, it is trying hard to prevent it.
Second, those who argue that the Japanese government’s fiscal expansion failed are, again, mistaken. When the private sector tries to repay debt over many years, a country has three options: let the government do the borrowing; expand net exports; or let the economy collapse in a downward spiral of mass bankruptcy.
Despite a loss in wealth of three times GDP and a shift of 20 per cent of GDP in the financial balance of the corporate sector, from deficits into surpluses, Japan did not suffer a depression. This was a triumph. The explanation was the big fiscal deficits. When, in 1997, the Hashimoto government tried to reduce the fiscal deficits, the economy collapsed and actual fiscal deficits rose.
Third, recognising losses and recapitalising the financial system are vital, even if, as Mr Koo argues, the unwillingness to borrow was even more important. The Japanese lived with zombie banks for nearly a decade. The explanation was a political stand-off: public hostility to bankers rendered it impossible to inject government money on a large scale, and the power of bankers made it impossible to nationalise insolvent institutions. For years, people pretended that the problem was downward overshooting of asset price. In the end, a financial implosion forced the Japanese government’s hand. The same was true in the US last autumn, but the opportunity for a full restructuring and recapitalisation of the system was lost.
In the US, the state of the financial sector may well be far more important than it was in Japan. The big US debt accumulations were not by non-financial corporations but by households and the financial sector. The gross debt of the financial sector rose from 22 per cent of GDP in 1981 to 117 per cent in the third quarter of 2008, while the debt of non-financial corporations rose only from 53 per cent to 76 per cent of GDP. Thus, the desire of financial institutions to shrink balance sheets may be an even bigger cause of recession in the US.
How far, then, is Japan’s overall experience relevant to today?
The good news is that the asset price bubbles themselves were far smaller in the US than in Japan (see charts below). Furthermore, the US central bank has been swifter in recognising reality, cutting interest rates quickly to close to zero and moving towards “unconventional” monetary policy.
The bad news is that the debate over fiscal policy in the US seems even more neanderthal than in Japan: it cannot be stressed too strongly that in a balance-sheet deflation, with zero official interest rates, fiscal policy is all we have. The big danger is that an attempt will be made to close the fiscal deficit prematurely, with dire results. Again, the US administration’s proposals for a public/private partnership , to purchase toxic assets, look hopeless. Even if it can be made to work operationally, the prices are likely to be too low to encourage banks to sell or to represent a big taxpayer subsidy to buyers, sellers, or both. Far more important, it is unlikely that modestly raising prices of a range of bad assets will recapitalise damaged institutions. In the end, reality will come out. But that may follow a lengthy pretence.
Yet what is happening inside the US is far from the worst news. That is the global reach of the crisis. Japan was able to rely on exports to a buoyant world economy. This crisis is global: the bubbles and associated spending booms spread across much of the western world, as did the financial mania and purchases of bad assets. Economies directly affected account for close to half of the world economy. Economies indirectly affected, via falling external demand and collapsing finance, account for the rest. The US, it is clear, remains the core of the world economy.
As a result, we confront a balance-sheet deflation that, albeit far shallower than that in Japan in the 1990s, has a far wider reach. It is, for this reason, fanciful to imagine a swift and strong return to global growth. Where is the demand to come from? From over-indebted western consumers? Hardly. From emerging country consumers? Unlikely. From fiscal expansion? Up to a point. But this still looks too weak and too unbalanced, with much coming from the US. China is helping, but the eurozone and Japan seem paralysed, while most emerging economies cannot now risk aggressive action.
Last year marked the end of a hopeful era. Today, it is impossible to rule out a lost decade for the world economy. This has to be prevented. Posterity will not forgive leaders who fail to rise to this great challenge.
Thursday, February 19, 2009
Robert Fitch on the Global Financial Crisis
This is from punj.edu.
This is a long interesting article analysing the causes of the global economic crisis. Ironically as he points out it is successors of Mao in China who have made possible the high rate of exploitation of China that encouraged the huge leap in Chinese economic growth possible and also the huge trade surplus. As the article notes Marx had something relevant to say about bailing out financial swindlers:
Marx wouldn't have been surprised at the failure of the once highly touted $700 billion Troubled Asset Relief Program. "The entire artificial system of forced expansion of the reproduction process cannot, of course, be remedied by having some bank, like the Bank of England, give to all the swindlers the deficient capital by means of its paper and having it buy up all the depreciated commodities at their old nominal values."34 Making the swindlers whole does nothing to restore profitability in the real sector.
In Defense of Washington and Wall Street
Robert Fitch
1. The Crisis of 2007-2008
THE VERY ELDERLY ARE PRONE TO FALL. And unlike infants who also tumble frequently, each time seniors stumble, they risk a disabling or even a fatal injury. On August 9th 2007, after an unparalleled quarter century long expansion, which had been checked in the developed countries only mildly and briefly, capitalism finally tripped and lost its balance with predictable results: banks tottered, while credit and commercial paper markets writhed in paralysis.
After about a month, though, notwithstanding the failure of the markets to unfreeze, the crisis was declared over. The palsied patient was deemed well enough to resume normal activity -- a diagnosis apparently confirmed when two months later, on October 9th, the Dow Jones Industrial Average reached 14,164, an all time high.
The March 2008 meltdown of two hedge funds belonging to Bear, Stearns suggested otherwise. A pillar of the "shadow banking system" that had emerged over the last two decades, Bear was forced into liquidation, sold to J.P. Morgan for $256 million. Scarcely more than a year earlier it was said to be worth $68.7 billion. Yet this stunning write-down barely moved Wall Street's needle. The market continued to move choppily until September 14th 2008, when Mr. FIRE (as in finance, insurance and real estate) fell again, with even more dire consequences. That Sunday, Lehman Brothers filed for bankruptcy. Later in the day, Merrill, Lynch announced its liquidation. Just two days later, AIG, the world's largest insurance company, was taken over by the government. This time, Wall Street had suffered the equivalent of a broken neck.
Even in the immediate aftermath of the 1929 Crash, the biggest Wall Street banks didn't fail. They continued to lend. (The wave of failures by thousands of heartland banks came later.) But in 2008, it was precisely the big banks which formed the leading vector of the collapse. Within a period of 200 days, the five biggest U.S. investment banking houses -- the institutions that since the Reagan era had given Wall Street its swagger and identity -- had either gone bankrupt, or forced to find a merger partner or re-organized themselves as bank holding companies.
Whenever the spinal cord is severed at the top two vertebrae, i.e., at the neck, the greatest immediate peril is that the victim stops breathing. The September 2008 crisis was marked by increasingly desperate measures to keep big FIRE from asphyxiation. The measures taken included flooding the system with liquidity -- almost unlimited loans and loan guarantees. The Bush Administration came up with a $700 billion plan to deleverage the banks (i.e., raise their dangerously low ratio of equity to debt) by buying their bad mortgage-backed securities. And when that didn't work, passed legislation which amounted to a semi-nationalization of the remaining big banks -- the equivalent of cutting a hole in the patient's trachea.
By October's end FIRE was breathing, albeit with a tube provided by the U.S. guarantee of inter bank loans. But breathing is not walking. A financial system in which banks lend only to other banks refusing to act as intermediaries to the non-financial sector-- is still non-functional.
In the midst of the anarchy, the headline "Capitalism in Convulsion" appeared not in The Militant or The People's World, but in the August, salmon colored pages of The Financial Times.1 Unlike the Long Term Capital Management (LTCM) crisis or the dot.com bust which were more or less confined to the G-7 countries, or the Asian, Mexican, Argentinean crises -- which remained localized within the Third World -- the crisis of 2007-8 was truly global. It spread from America to Europe to Latin America to Asia and even to remote Iceland which was all but officially bankrupt and forced to await rescue from the IMF. Nor was the crisis confined to capitalism's financial sub-system. Production was shrinking, consumption was off. Even foreign trade, the main driver of the world economy, was contracting. "There is a real possibility of a real, deep, international depression," said one senior monetary official at a G20 meeting in Dubai who spoke on the condition of anonymity, calling the crisis "the worst in 100 years."2
2. The Meaning of the Meltdown
IN 1989, THE FALL OF THE BERLIN WALL was widely interpreted as a failure of the Communist system. But not by its supporters. They favored minimalist interpretations. Liberal Stalinists saw it as a reaction to certain overzealous GDR officials in the security apparatus; conservatives as the failure of those same officials to contain the illegal exodus. Still others blamed Soviet Premier Gorbachev's blundering efforts to deregulate the Soviet system, which they insisted was still fundamentally sound.
Similarly, the present crisis can be interpreted in various ways. Not as the result of inherent, structural, repeated, and irredeemable tendencies within the capitalist system. But as altogether something more surmountable. Democrats have pointed to a failure of capitalism's financial sub-system, i.e., of Wall Street -- where greed ran amok -- and in Washington where officials refused to rein in the Street's wildest propensities. By repealing the depression era Glass-Steagall Act in 1999, the argument runs, Congress demolished the pillar of the old regulatory architecture. And it declared off limits any supervision of the new, escalating trade in opaque forms of over-the-counter derivatives.3
Republicans, while not immune to the widely popular "greedy" banker trope, tended mostly to blame capitalism's regulators -- above all blundering by Fed Chairman Alan Greenspan, who allegedly, in the aftermath of the 2001 dot.com collapse, held interest rates "too low, too long." He should have kept his hands off the monetary joystick.
The implosion interrupted what might be called "The Big Sleep of the American Left": our failure to exert a detectible influence on working class institutions or on American political life as a whole. The sleepy time coincides roughly with the quarter century long boom which began in 1983 with the recovery from the stagflation crisis of the seventies. Throughout the period, as the global economy continued its unparalleled dizzying ascent, 19th century supply side economics experienced a revival. Not just the napkin version preached by Arthur Laffer, who argued that if you want to increase tax revenues, cut tax rates. But an over-arching argument about the nature of capitalism and its powers of adjustment.
The 19th century classic writers -- James Mill, J.B. Say, David Ricardo -- taught that market failures or "gluts" were impossible. Temporary over-supply in this or that market for shoes or hats or handkerchiefs, yes. A generalized over-supply, of shoes, hats and handkerchiefs all at the same time, no.4 So absent meddling by government authorities, depressions were not a possibility. Markets would always self-adjust because market agents -- suppliers of labor and capital -- would behave rationally. Workers, seeing that they had priced themselves out of the market, would work harder and lower their wages. Holders of capital would lower interest rates, which would reduce saving and spur investment.
Acceptance of the simple supply side formula, "supply creates its own demand" bred confidence among the believers. The concerns of Keynes, who worried about "effective demand," and the notions of Marx, who argued that the scramble for profits created its own barrier, could be dismissed as groundless. And as America's ruined central cities sprang back to life from the arson and abandonment of the seventies and the stores filled up with cheap Asian goods and American designed microchips powered a global technoboom, with unemployment falling to record lows, a lite version of supply side economics quietly permeated the Left -- in the assumption that "post-industrial" capitalism was more or less impregnable in its First World stronghold.
Perhaps understandably, sections of the Left began to lose interest in the struggles going on in the material world around them, re-grouping around the priority of culture wars and even for some science wars. And while economic radicalism didn't disappear, the burden of its critique lay in the idea of an unequal exchange between first and third world countries, which prevented less developed raw material producing nations from industrializing. The idea of class wars within nations gave way to the notion of "proletarian nations."5 Socialism became strictly a Third World option. The Left could try to assist the special victims of First World capitalism -- blacks, women, minorities, immigrants. But not American workers. As Michael Kazin observed, very few American leftists invoked the link between labor and the creation of wealth and capital and the appropriation of that wealth which had been at the core of American radicalism from the 19th century to the 1940s.6 Speculation about transforming first world capitalist institutions became about as respectable as spoon bending.
One consequence of the 2007-8 economic tsumani is to wash away the foundations of the intellectual world of the sensible center.7 But much of the Left's outlook rested tacitly on those same foundations. As well as its secret sense that it had no genuine vocation for politics except on the margins of American life.
Perhaps the collapse of financial markets hasn't yet produced a mass market for ideas about democratic control of the economy. Yet there appears at least to be a niche. Are markets always wiser than majorities? Would the majority of Americans have voted in a plebiscite for deindustrialization? At a minimum, now that a Republican administration has ordered a semi-nationalization of banks and insurance companies, the supply side era is over, creating the potential for a Left socialist revival. But not without challenging the minimalist interpretations of the great meltdown put forward by the two mainstream political parties.
3. Three Things I Learned About Crises From Marx
THE DEPTH AND SCOPE OF THE MELTDOWN have made Marx fashionable once again at least in Europe, the BBC reports.8 But acquiring the intellectual resources for the challenge is not simply a matter of mining Marxian texts. If there is a Marxian road to understanding the crisis, it's a cloverleaf highway - with many ways to get on and get off, and each turn-off resulting in a different political direction. There are many Marxist schools. And each explains crises in different ways - as the result of underconsumption; of overproduction; in terms of the falling rate of profit; or as a consequence of the disproportionality between growth rates in consumer and producer good sectors.9
Notwithstanding the impossibility of establishing a true Marxist interpretation of the crisis, his powerful, suggestive, but mostly undeveloped crisis analysis contains three contentious insights which provide a scaffold for grasping the present events. The first might be called the "universal dynamism" thesis. Supply-siders accept it but most modern Marxists don't. Marx portrayed capitalism as an inexorable accumulation machine whose dynamism is fed by the behavior of multiple competitive capitalists all forced to consume productively rather than personally, all relentlessly recycling their profits back into the enterprise. All searching for a way to reduce costs. This feature turned capitalism into a uniquely dynamic and expansive system: one whose dynamism could not be confined to its Western countries of origin. The spread of English commerce, he argued, albeit restricted at first to opium, would "lay the material foundations of Western society in Asia."10
At the same time -- and here's where supply siders get off the bus and neo- Marxists get back on -- Marx recognized capitalist development traced no smooth, upward, untroubled arc. Growth was achieved only through system shattering crises -- "business cycles" -- which proved comprehensively destructive.11 In the abrupt swing from world prosperity to world depression, tens of millions were doomed to unemployment and the dole; economic upheaval would shatter normal trade relations, freeze immigration and promote economic nationalism and political dynamite -- in the form of left/right polarization leading to dictatorship, fascism and war.
Finally, there's the least accepted Marxian argument about crises: his claim that they have their origin in the "real" sector of the economy - where commodities were produced -- not in the financial sector where the crisis almost invariably breaks out. "At first glance," Marx writes, "the whole crisis seems to be merely a credit and money crisis." But look again, he advises, and you see that the unsaleable securities represent unsaleable commodities. Or in our own immediate case the oversupply of mortgage backed securities represents the oversupply of houses, and ultimately an oversupply of capital in general. In this way, the crisis expresses in a violent way capitalism's fundamental conflict: Capitalism develops awesomely large productive forces whose limits are checked by the requirement that production be profitable.12 To avoid depressing the profit rate, productive capital saves instead of investing, transferring its saving from the productive sphere, seeking shelter in the financial system where productive capital is turned into credit or financial capital. Indeed, too much. "But credit," Marx wrote, only "accelerates the violent outbreaks of the crisis."13 To accelerate something is not to cause it.14
4. Explaining The Meltdown
THE PROXIMATE CAUSE OF THE 2007-8 CRISIS was the imploding of what Yale Professor Robert Shiller called the greatest real estate bubble in U.S. history or possibly even world history. Between 1996 and 2005, house prices nationwide increased about 90 percent. In the five years between 2000 to 2005 alone, house prices increased by roughly 60 percent.15 That hadn't happened even in the real estate boom of the 1920s, whose premonitory bust in 1926 gestured wildly but vainly at the still greater collapse to come in 1929. While the inner mechanics of the individual parts that make up the self-destructive bubble apparatus are famously complex -- the SPVs SIVs, the CDOs, CDSs and other "financial dark matter" -- the mechanics of the collapse itself are fairly straightforward.
It's not necessary to understand quantum mechanics to grasp why an apple falls to the ground. Newtonian mechanics will suffice. Nor do we need to study the structure of DNA to know why old people fall -- they take slower and shorter steps. Similarly, by concentrating on the intricacies of frenzied finance on Wall Street and faulty regulatory mechanisms in DC, we lose perspective on the ultimate as opposed to the proximate causes of the world crisis.
The ultimate cause of the 2007-8 crisis was not the pricking of the real estate bubble in the United States, but the implosion of the greatest and longest global expansion in the history of capitalism going back to the first industrial revolution (1760-1830). The rapid transformation, particularly of the Chinese and Indian economies, produced a super boom that blew away all norms for economic expansion.16 World GDP rates rose to unprecedented levels - peaking at 6 percent in 2007, six times higher than the rate during the first industrial revolution.
And what drove the boom? Notwithstanding the core claim of the sensible center that the nature of the period was defined by the rise of post-industrialism and the fall of the blue collar worker who would go the way of the peasant, the boom was shaped by record rates of manufacturing growth and even higher rates of growth in manufacturing trade. The increase in manufacturing itself was fed by a world-reshaping, mass migration of manufacturing capital from the more developed to the less developed countries. Capital was attracted by appalling, but ultimately ravishingly high rates of labor exploitation -- to India, which was emerging as the world's back office, but above all to China, which became the world's workshop, employing 109 million manufacturing workers. (Versus 53 million in the G7 countries.)17 In the United States, median hourly manufacturing wage was $17.85 an hour.18 In China, manufacturing workers in the coastal provinces earned 91 cents an hour at productivity rates increasingly converging with those in the United States19 (inland workers earned 57 cents an hour.)20
The long boom that began in 1983 saw astonishing reversals of economic structure -- particularly in the United States where the FIRE industry displaced manufacturing and all others -- as the leading industry by GDP share. In 1983, at the beginning of the boom, manufacturing was still larger than FIRE. By 2007, the FIRE sector had become 1.8 times the size of the manufacturing sector.21 There were equally bizarre reversals of economic fortune, as the United States once the world's prime creditor nation, became its greatest debtor nation, with poor nations -- most prominently China -- among its largest creditors.
Yet despite these startling novelties, the present boom has ended in overproduction and over-consumption just like the classic booms of the past. Consider the world depressions that began in 1837, 1873 and 1929. For these crises, like the implosion of 2007-08, the following seven stage sequence can serve as a model:
A fall in the rate of accumulation, or at least a fall in the rate of acceleration; actual profit rates may even rise just before the collapse; but the high rates are sustained by a slowing down of accumulation rates.
Formation of surplus capital hoards. Unable to return "home" for productive re-investment, the surplus seeks to preserve itself by moving into financial channels.
Capital over-supply forces down interest rates, clearing the way for asset inflation and financial excess. First because low interest rates automatically increase the value of fictitious capital in land and in securities; and second because low interest rates cause risk premiums to fall, promoting riskier behavior as rentiers chase yield.
Asset bubbles form as speculators are attracted by the seemingly inexorable rise in asset prices. Prices accelerate further because of rampant bubble psychology.
The chain letter snaps. Housing prices burst the bounds of household incomes. Stock prices soar far beyond historic price/earnings ratio. Prices collapse. A local financial crisis breaks out among the most vulnerable borrowers, who can no longer re-finance, leaving the most recent round of developers and mortgage holders unable to pay off their loans, and/or stock speculators can't cover margin calls from their brokers. Asset prices collapse, taking down credit suppliers.
A spreading of the financial ripples outward from their point of origin, as asset deflation produces a global panic. And finally -- but not yet of course in 2007-08:
Protracted economic stagnation; widespread double-digit unemployment rates; falling wages and commodity prices; growing economic nationalism and a tendency towards "organized capitalism."
There are two main differences between this seven step scenario and the mainstream accounts. Regulatory and monetary explanations see the problem as U.S. centered. Obviously the United States can't be ignored -- the meltdown began here. But the emphasis must be on global imbalances. True, the United States is over-consuming. But the rest of the world is over-producing. The second difference is the emphasis on how excesses in the real sector -- the capital glut and the resulting low interest rates -- produce wilding in the FIRE sector. By contrast, mainstream models reverse the causal arrow so that financial and real estate excess bring down an essentially healthy real sector.
Except for the wrongheadedness of Greenspan or the antics of a comparative handful of hedge fund operators, mainstreamers then see no reason why the expansion should not go on indefinitely. They don't look at a twenty-five year expansion as being the equivalent of a twenty-five year old dog. The bubble simply erupted. But whence? Either exogenously -- outside the system -- by dodgy regulators who disrupted the economy's natural path towards self-correction -- in the Republican version; or in the Democratic version the bubble is produced endogenously -- in the FIRE sector -- aided by dodgy regulators who look the other way at speculative excess.
The Democrats cite a whole host of regulatory failures. There's the problem of fragmented regulation -the Fed regulates banks; the SEC stocks; the states insurance companies. They point to de-regulatory measures like the repeal of Glass-Steagall. Then there's the embarrassment of private regulation -- ceding securities rating to the conflict-of-interest laden private rating agencies. Even more serious perhaps is the absence of new regulation for new institutions -- e.g., failure to bring Over -the-Counter derivative trading under control; ditto the emergence of a shadow banking system, which created "a de facto assembly line for purchasing, packaging, and selling unregistered, high- risk securities."22
The Republicans -- along with their economic mentors in academia -- supply-siders, monetarists, Austrians and Chicagoans -- often talk about too stringent regulation -- like the passage of the Community Reinvestment Act of 1978. The Democratic Administration, they allege, allowed community groups like ACORN to coerce giant banks into making hundreds of billions of dollars in loans to unqualified minority borrowers. But mostly they focus on the interest rate activism of Alan Greenspan. The "too low too long" mantra -- the fed funds rate, they point out, remained below two percent from 2002-2004.
One problem with the explanation is that the bubble didn't start in 2002. It was already underway in 1996. As Robert Shiller points out, it lasted three times longer than the period of monetary laxity. Bubble growth continued to accelerate even in 1999 when the Fed was tightening. Moreover, 30 year mortgage rates were mostly unresponsive to Fed moves at the short term end of the interest curve.23
What's more, if the U.S. bubble was simply the result of a Fed policy error -- why did real estate bubbles form all around the world? Bubbles in Spain, Ireland, U.K. and perhaps the mother of all bubbles in Shanghai, where 1 million apartments were built in a single year -- as opposed to 2 million in the peak year for the entire United States. And the average apartment was $300,000 in a city where the median household income is $2,000.24 By comparison, the median household income in Queens is $42,000. If the same income to housing price ratio obtained in Queens, the average housing price would be $6.3 million.
Perhaps even more challenging to the Greenspan as the Grinch Who Stole Prosperity model is the comparable behavior of German bank regulators. Roughly speaking between 2002-4, overnight interest rates charged by German banks were only about a percent higher than the federal funds rate. German rates were kept low for longer than in the United States. Yet there was no German real estate bubble. The same could be said for Switzerland and Austria: very low interest rates, no real estate bubble.
What German banks, along with their Swiss, Austrian and west European counterparts, do have instead is an emerging market nations bubble: $4.7 trillion in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom. It's a sum, according to a Bank for International Settlements reckoning, that "vastly exceeds the scale of both the U. S. sub- prime and Alt-A debacles."25
There are many ways to build a bubble. Different countries have different architectural styles. America, with the most advanced entreprenurial culture, has the most complex: a financial engineering industry -- the United States invented such financial gimmicks as securitization, the Special Purpose Vehicles (SPVs), and the Collateralized Debt Obligations (CDOs). But the central European method, while more traditional, works just as well. Austrian bankers simply lend huge amounts to their favorite clients, the Hungarians. Lending money to Hungarians who can't pay them back is an Austrian tradition that goes back to the early 19th century when the Rothschild Creditanstalt no sooner financed the Hungarian railway system when it abruptly failed. Hungarian loans were a major factor in the collapse of Creditanstalt again in 1931 which took down an estimated 60- 80 percent of Austrian industry triggering the European great depression.26 This time Austrian banks have lent 85 percent of their GDP to Hungarians, who have an external debt worth about 100 percent of their GDP.
Ideally, strict, comprehensive, incorruptible regulation could have stopped all this over-lending to under- qualified borrowers dead in its tracks. But in what world do regulatory bureaucrats, barking and snapping like Welsh corgis herding cattle, determine the moves of bankers? Certainly not in ours, where the relevant laws that create the framework for regulation are passed by legislatures influenced not by concerns for macro-economic stability, but by the strength of relevant lobbies. In our world, the FIRE lobby is the largest by far.27
Even if the regulators had more power, and there were a lot more of them, it's not clear how they could be so effective as to prevent another Long Term Capital Management (LTCM) from happening. LTCM showed that one renegade hedge fund, is all it takes to ignite a crisis when the fields of capital are very dry. What regulator would second guess a team of Nobel Prize winners or fathom their formulas for risk or even decipher their complex trades?28 And even if legislators and regulators somehow summoned up the political will and financial sophistication to tame rogue genius lenders, why wouldn't the traders who like to discount risk simply de-camp for some less regulated place? As Chairman Bernanke observed in the immediate aftermath of the Bear Stearns collapse: "The oversight of these firms must recognize the distinctive features of investment banking and take care neither to unduly inhibit efficiency and innovation nor to induce a migration of risk-taking activities to institutions that are less regulated or beyond our borders."29
Historically, the influence of regulators is pro-cyclical, least evident when it's most needed. Regulations are strictest in the aftermath of a collapse, weakest during the manias. Glass Steagall, comprehensive legislation taming the securities behavior of big banks, passed in 1933; it was repealed in 1999 at the height of the dot.com boom.
Evidently, what chiefly regulates bankers' behavior is not regulators but conditions in the money market. What the great depressions of 1837, 1873, and 1929 share with the present crisis is a huge inflow of surplus capital into financial centers which drives down interest rates and alters banking standards and norms.
That such a surplus formed prior to the 2007-8 crisis there is little doubt. A big policy debate broke out in 2005 involving Bernanke, and critics of U.S. monetary policy over its provenance and meaning.30 Both pointed to the U.S. current account deficit as proof of the surplus. But Fed critics called it a "liquidity glut." The hundreds of billions flowing uphill each year from poor Asian countries to wealthy America were driven by the hydraulics of U.S. monetary policies. Overly stimulative U.S. policies enabled the U..S. to over consume and over borrow. Martin Wolf, editor of the Financial Times, noted that the United States had absorbed 70 per cent of the rest of the world's surplus capital, while its consumption accounted for 91 percent of the increase in gross domestic product in this decade.31
Bernanke, who in 2005 was just a Fed governor, defended U.S. posture and policies. He took note of the bizarre role reversal -- Scrooge borrowing from Tiny Tim -- but argued that the surplus took the form of a "savings glut." And the Chinese were its agents. The United States was just reacting to the Chinese decision to save so great a portion of their income. Well over a trillion was now mostly invested in U.S. Treasuries and government sponsored enterprises. China's savings rate -- managed by the state -- had reached a staggering 50 percent. Even Chinese households on their comparatively tiny incomes saved 30 percent. The U.S. private households, which at the beginning of the superboom were saving nearly 10 percent, now have negative savings. But Americans were making the best of a situation not of their making, acting as Stakhanovite consumers in order to promote the continuation of global expansion. U.S. borrowing was necessary to protect the world from imminent collapse.
A striking feature of Bernanke's account -- as well as that of his adversaries who assert the liquidity thesis -- is that neither think trade has anything to do with the trade deficit. Explains Bernanke, "The U.S. trade balance is the tail of the dog; for the most part, it has been passively determined by foreign and domestic incomes, asset prices, interest rates, and exchange rates, which are themselves the products of more fundamental driving forces."
For the economists, the financial markets determine the markets for commodities. Any nation could have a giant trade surplus; it's ultimately just a policy choice about savings behavior. The country with the giant surplus just happened to be China. Utterly ignored is the fact that trade surplus/ capital glut could never have formed without staggeringly high rates of labor exploitation in the strict Marxian sense: the ratio of value added by labor divided by wages.32 As far as what drove the boom and what caused the bust, it's the rate of exploitation that's the dog. The savings rate is the tail.
Conclusion
MARX TALKS FREQUENTLY about the capitalist's "wolfish hunger" for profit and his ravenous appetite for capital accumulation. It's no small irony that the most wolfish and ravenous capitalists in history should turn out to be Chinese Communist Party officials trained to revere Marx. But that doesn't detract from the serviceability of Marxian premises about capitalist dynamics. Whose fault is the crisis? Chinese over-exporting or American over-importing? "It should be noted in regard to imports and exports," Marx observes, "that one after another, all countries become involved in a crisis and that it then becomes evident that all of them with few exceptions, have exported and imported too much. So that they all have an unfavorable balance of payments."33
Marx wouldn't have been surprised at the failure of the once highly touted $700 billion Troubled Asset Relief Program. "The entire artificial system of forced expansion of the reproduction process cannot, of course, be remedied by having some bank, like the Bank of England, give to all the swindlers the deficient capital by means of its paper and having it buy up all the depreciated commodities at their old nominal values."34 Making the swindlers whole does nothing to restore profitability in the real sector.
The global rupture that's taken place over the last 15 months suggests a pattern of growth -- a global division of labor -- that has grown not just increasingly unwieldy, but probably unsustainable. How can the "imbalances" be fixed unless the United States becomes a producer as well as a consumer of commodities? But how can the United States become a producer on the world market given the vast disparity in rates of exploitation? Only in a post-industrial world which never existed. How can the United States continue to consume Chinese products without Chinese credit -- which is dependent on unsustainable American consumption? No doubt adjustments can be made -- both China and the United States can de-globalize. But such necessarily wrenching transformations take time, more like decades than years.
No doubt there is something comforting about the world of the sensible center where greedy bankers, bad regulators or too much regulation brings doom and disaster. At least we remain masters of our fate. At least the virtues still count -- if we can only renew our commitment to them. In the capitalist world as described by Marx -- and this is perhaps the insight most in need of refurbishing -- we think we're actors but we're not. Capitalism is the form of society that must ruthlessly develop the productive forces, but it develops them in a form that turns their agents into passive victims of the process.
The reassuring side of Marx's view of capital expansion and collapse is the opportunity it offers for a revival of the spirit of resistance among the working people:
"Without the great alternative phases of dullness, prosperity, over-excitement, crisis, and distress, which modern industry traverses in periodically recurring cycles…with the up and down of wages resulting from them …the working class… would be a heart-broken, a weak- minded worn-out unresisting mass whose self-emancipation would prove as impossible as that of the slaves of ancient Greece and Rome."35
Class struggle is the best stimulus package.
Notes
John Plender,"Capitalism in Convulsion," Financial Times, September 18, 2008. return
Thomas Atkins, "Depression overshadows G20 summit," Reuters, November 10, 2008. return
See for example Joseph Stiglitz. return
See Capital, III, 251-2 for Marx's definition of "absolute overproduction" and its cause. return
A core notion of Mussolini and various fascist intellectuals like Corradini, re-cycled by Mao and filtering down to the Third Worldist Left in the 70's. return
The Populist Persuasion, (New York: Basic Books, 1995). 273 return
A self-referential term used by such as The Brookings Institution, the Democratic Leadership Council and Colin Powell. return
BBC, "Marx popular amid credit crunch," Oct. 20, 2008. return
Michael Bleaney, Underconsumption Theories (New York: International Publishers, 1976), esp. ch.6. return
"Future Results of British Rule in India," Portable Marx, 337; see also Capital, III, 333-334. return
Mainstream economics -- particularly "supply side" economics which flourished during the Long Boom -- was able to grasp #1 but not #2. While acknowledging problem of inequality, they maintained that people were still better off than before; And insisted that true system-shattering crises were impossible. Economists influential on the American Left rejected both #1, and #2. They saw capitalism sunk in protracted stagnation; and argued, just like the Russian 19th century populists that the only way to develop productive forces in third world was some form of de-linkage. return
Capital, Vol III (Moscow: Progress Publishers, 1966), p.490. return
Vol. III, Ch.27, p. 441. return
A point made by an anonymous blogger who insists that Marx is obsolete because he fails to realize that the crisis really is caused by machinations of the financial sector. return
Ben S. Bernanke, "Remarks on the economic outlook," At the International Monetary Conference, Barcelona, Spain (via satellite), June 3, 2008. return
A genuine boom, marked by unprecedented growth in productivity, and not a super-bubble, as George Soros argues. See The New Paradigm for Financial Markets (New York: Public Affairs, 2008) esp. ch.5 "The Super-Bubble Hypothesis" return
Judith Bannister, "Manufacturing Employment in China," BLS, Monthly Review, July, 2005. return
BLS, "Earnings." return
RIETI, "Benchmarking Industrial Competitiveness by International Comparison of Productivity," Dec. 26, 2006. return
Judith Banister, "Manufacturing Earnings and compensation in China," BLS Monthly Labor Review, November 2005. return
BEA, Gross Domestic Product by Industry Accounts, 1947-2007. Between 1983 and 2007 financial profits rose from 17 percent to nearly 40 percent of all corporate profits ERP, Table B-91, 2008. return
Christopher Whalen, "Expanding Fed's Power is Wrong Plan," American Banker, April 4, 2008. return
The Subprime Solution, 49. return
Don Lee, "A Home Boom Busts," Los Angeles Times, Jan. 8, 2006. return
"Alt -A" stands for Alternative A. It's a euphemism for mortgages slightly less dodgy than sub-prime mortgages. See here. return
Niall Fergusson, The House of Rothschild 1849- 1999. 465. return
Opensecrets.org credits FIRE with approximately $2.76 in lobbying expenditures between 1996 and 2008. return
Roger Lowenstein, When Genius Failed, (New York: Random House, 2000), 187. return
Ben S. Bernanke, "Financial Regulation and Financial Stability, July 8, 2008. return
For savings glut thesis see here. For the liquidity glut view see StanleyRoach. return
Martin Wolf, "Villains and victims of global capital flows," Financial Times June 12 2007 return
In Marxian terminology, the ratio of surplus value(s) over variable capital (v) or s/v., which is also the ratio of paid to unpaid labor. return
Vol. III, ch. 30, p. 491. return
Vol III, ch.30. p. 490. return
New York Daily Tribune, July 14, 1853, cited in Lezek Kolakowski, Main Currents of Marxism, (New York: W.W.Norton, 2005), 248 return
BOB FITCH studied economic history at Berkeley in the 1960s where he also co-founded the Vietnam Day Committee with Jerry Rubin. His latest book is Solidarity For Sale (Public Affairs, 2006).
Contents of No. 46
New Politics home page
This is a long interesting article analysing the causes of the global economic crisis. Ironically as he points out it is successors of Mao in China who have made possible the high rate of exploitation of China that encouraged the huge leap in Chinese economic growth possible and also the huge trade surplus. As the article notes Marx had something relevant to say about bailing out financial swindlers:
Marx wouldn't have been surprised at the failure of the once highly touted $700 billion Troubled Asset Relief Program. "The entire artificial system of forced expansion of the reproduction process cannot, of course, be remedied by having some bank, like the Bank of England, give to all the swindlers the deficient capital by means of its paper and having it buy up all the depreciated commodities at their old nominal values."34 Making the swindlers whole does nothing to restore profitability in the real sector.
In Defense of Washington and Wall Street
Robert Fitch
1. The Crisis of 2007-2008
THE VERY ELDERLY ARE PRONE TO FALL. And unlike infants who also tumble frequently, each time seniors stumble, they risk a disabling or even a fatal injury. On August 9th 2007, after an unparalleled quarter century long expansion, which had been checked in the developed countries only mildly and briefly, capitalism finally tripped and lost its balance with predictable results: banks tottered, while credit and commercial paper markets writhed in paralysis.
After about a month, though, notwithstanding the failure of the markets to unfreeze, the crisis was declared over. The palsied patient was deemed well enough to resume normal activity -- a diagnosis apparently confirmed when two months later, on October 9th, the Dow Jones Industrial Average reached 14,164, an all time high.
The March 2008 meltdown of two hedge funds belonging to Bear, Stearns suggested otherwise. A pillar of the "shadow banking system" that had emerged over the last two decades, Bear was forced into liquidation, sold to J.P. Morgan for $256 million. Scarcely more than a year earlier it was said to be worth $68.7 billion. Yet this stunning write-down barely moved Wall Street's needle. The market continued to move choppily until September 14th 2008, when Mr. FIRE (as in finance, insurance and real estate) fell again, with even more dire consequences. That Sunday, Lehman Brothers filed for bankruptcy. Later in the day, Merrill, Lynch announced its liquidation. Just two days later, AIG, the world's largest insurance company, was taken over by the government. This time, Wall Street had suffered the equivalent of a broken neck.
Even in the immediate aftermath of the 1929 Crash, the biggest Wall Street banks didn't fail. They continued to lend. (The wave of failures by thousands of heartland banks came later.) But in 2008, it was precisely the big banks which formed the leading vector of the collapse. Within a period of 200 days, the five biggest U.S. investment banking houses -- the institutions that since the Reagan era had given Wall Street its swagger and identity -- had either gone bankrupt, or forced to find a merger partner or re-organized themselves as bank holding companies.
Whenever the spinal cord is severed at the top two vertebrae, i.e., at the neck, the greatest immediate peril is that the victim stops breathing. The September 2008 crisis was marked by increasingly desperate measures to keep big FIRE from asphyxiation. The measures taken included flooding the system with liquidity -- almost unlimited loans and loan guarantees. The Bush Administration came up with a $700 billion plan to deleverage the banks (i.e., raise their dangerously low ratio of equity to debt) by buying their bad mortgage-backed securities. And when that didn't work, passed legislation which amounted to a semi-nationalization of the remaining big banks -- the equivalent of cutting a hole in the patient's trachea.
By October's end FIRE was breathing, albeit with a tube provided by the U.S. guarantee of inter bank loans. But breathing is not walking. A financial system in which banks lend only to other banks refusing to act as intermediaries to the non-financial sector-- is still non-functional.
In the midst of the anarchy, the headline "Capitalism in Convulsion" appeared not in The Militant or The People's World, but in the August, salmon colored pages of The Financial Times.1 Unlike the Long Term Capital Management (LTCM) crisis or the dot.com bust which were more or less confined to the G-7 countries, or the Asian, Mexican, Argentinean crises -- which remained localized within the Third World -- the crisis of 2007-8 was truly global. It spread from America to Europe to Latin America to Asia and even to remote Iceland which was all but officially bankrupt and forced to await rescue from the IMF. Nor was the crisis confined to capitalism's financial sub-system. Production was shrinking, consumption was off. Even foreign trade, the main driver of the world economy, was contracting. "There is a real possibility of a real, deep, international depression," said one senior monetary official at a G20 meeting in Dubai who spoke on the condition of anonymity, calling the crisis "the worst in 100 years."2
2. The Meaning of the Meltdown
IN 1989, THE FALL OF THE BERLIN WALL was widely interpreted as a failure of the Communist system. But not by its supporters. They favored minimalist interpretations. Liberal Stalinists saw it as a reaction to certain overzealous GDR officials in the security apparatus; conservatives as the failure of those same officials to contain the illegal exodus. Still others blamed Soviet Premier Gorbachev's blundering efforts to deregulate the Soviet system, which they insisted was still fundamentally sound.
Similarly, the present crisis can be interpreted in various ways. Not as the result of inherent, structural, repeated, and irredeemable tendencies within the capitalist system. But as altogether something more surmountable. Democrats have pointed to a failure of capitalism's financial sub-system, i.e., of Wall Street -- where greed ran amok -- and in Washington where officials refused to rein in the Street's wildest propensities. By repealing the depression era Glass-Steagall Act in 1999, the argument runs, Congress demolished the pillar of the old regulatory architecture. And it declared off limits any supervision of the new, escalating trade in opaque forms of over-the-counter derivatives.3
Republicans, while not immune to the widely popular "greedy" banker trope, tended mostly to blame capitalism's regulators -- above all blundering by Fed Chairman Alan Greenspan, who allegedly, in the aftermath of the 2001 dot.com collapse, held interest rates "too low, too long." He should have kept his hands off the monetary joystick.
The implosion interrupted what might be called "The Big Sleep of the American Left": our failure to exert a detectible influence on working class institutions or on American political life as a whole. The sleepy time coincides roughly with the quarter century long boom which began in 1983 with the recovery from the stagflation crisis of the seventies. Throughout the period, as the global economy continued its unparalleled dizzying ascent, 19th century supply side economics experienced a revival. Not just the napkin version preached by Arthur Laffer, who argued that if you want to increase tax revenues, cut tax rates. But an over-arching argument about the nature of capitalism and its powers of adjustment.
The 19th century classic writers -- James Mill, J.B. Say, David Ricardo -- taught that market failures or "gluts" were impossible. Temporary over-supply in this or that market for shoes or hats or handkerchiefs, yes. A generalized over-supply, of shoes, hats and handkerchiefs all at the same time, no.4 So absent meddling by government authorities, depressions were not a possibility. Markets would always self-adjust because market agents -- suppliers of labor and capital -- would behave rationally. Workers, seeing that they had priced themselves out of the market, would work harder and lower their wages. Holders of capital would lower interest rates, which would reduce saving and spur investment.
Acceptance of the simple supply side formula, "supply creates its own demand" bred confidence among the believers. The concerns of Keynes, who worried about "effective demand," and the notions of Marx, who argued that the scramble for profits created its own barrier, could be dismissed as groundless. And as America's ruined central cities sprang back to life from the arson and abandonment of the seventies and the stores filled up with cheap Asian goods and American designed microchips powered a global technoboom, with unemployment falling to record lows, a lite version of supply side economics quietly permeated the Left -- in the assumption that "post-industrial" capitalism was more or less impregnable in its First World stronghold.
Perhaps understandably, sections of the Left began to lose interest in the struggles going on in the material world around them, re-grouping around the priority of culture wars and even for some science wars. And while economic radicalism didn't disappear, the burden of its critique lay in the idea of an unequal exchange between first and third world countries, which prevented less developed raw material producing nations from industrializing. The idea of class wars within nations gave way to the notion of "proletarian nations."5 Socialism became strictly a Third World option. The Left could try to assist the special victims of First World capitalism -- blacks, women, minorities, immigrants. But not American workers. As Michael Kazin observed, very few American leftists invoked the link between labor and the creation of wealth and capital and the appropriation of that wealth which had been at the core of American radicalism from the 19th century to the 1940s.6 Speculation about transforming first world capitalist institutions became about as respectable as spoon bending.
One consequence of the 2007-8 economic tsumani is to wash away the foundations of the intellectual world of the sensible center.7 But much of the Left's outlook rested tacitly on those same foundations. As well as its secret sense that it had no genuine vocation for politics except on the margins of American life.
Perhaps the collapse of financial markets hasn't yet produced a mass market for ideas about democratic control of the economy. Yet there appears at least to be a niche. Are markets always wiser than majorities? Would the majority of Americans have voted in a plebiscite for deindustrialization? At a minimum, now that a Republican administration has ordered a semi-nationalization of banks and insurance companies, the supply side era is over, creating the potential for a Left socialist revival. But not without challenging the minimalist interpretations of the great meltdown put forward by the two mainstream political parties.
3. Three Things I Learned About Crises From Marx
THE DEPTH AND SCOPE OF THE MELTDOWN have made Marx fashionable once again at least in Europe, the BBC reports.8 But acquiring the intellectual resources for the challenge is not simply a matter of mining Marxian texts. If there is a Marxian road to understanding the crisis, it's a cloverleaf highway - with many ways to get on and get off, and each turn-off resulting in a different political direction. There are many Marxist schools. And each explains crises in different ways - as the result of underconsumption; of overproduction; in terms of the falling rate of profit; or as a consequence of the disproportionality between growth rates in consumer and producer good sectors.9
Notwithstanding the impossibility of establishing a true Marxist interpretation of the crisis, his powerful, suggestive, but mostly undeveloped crisis analysis contains three contentious insights which provide a scaffold for grasping the present events. The first might be called the "universal dynamism" thesis. Supply-siders accept it but most modern Marxists don't. Marx portrayed capitalism as an inexorable accumulation machine whose dynamism is fed by the behavior of multiple competitive capitalists all forced to consume productively rather than personally, all relentlessly recycling their profits back into the enterprise. All searching for a way to reduce costs. This feature turned capitalism into a uniquely dynamic and expansive system: one whose dynamism could not be confined to its Western countries of origin. The spread of English commerce, he argued, albeit restricted at first to opium, would "lay the material foundations of Western society in Asia."10
At the same time -- and here's where supply siders get off the bus and neo- Marxists get back on -- Marx recognized capitalist development traced no smooth, upward, untroubled arc. Growth was achieved only through system shattering crises -- "business cycles" -- which proved comprehensively destructive.11 In the abrupt swing from world prosperity to world depression, tens of millions were doomed to unemployment and the dole; economic upheaval would shatter normal trade relations, freeze immigration and promote economic nationalism and political dynamite -- in the form of left/right polarization leading to dictatorship, fascism and war.
Finally, there's the least accepted Marxian argument about crises: his claim that they have their origin in the "real" sector of the economy - where commodities were produced -- not in the financial sector where the crisis almost invariably breaks out. "At first glance," Marx writes, "the whole crisis seems to be merely a credit and money crisis." But look again, he advises, and you see that the unsaleable securities represent unsaleable commodities. Or in our own immediate case the oversupply of mortgage backed securities represents the oversupply of houses, and ultimately an oversupply of capital in general. In this way, the crisis expresses in a violent way capitalism's fundamental conflict: Capitalism develops awesomely large productive forces whose limits are checked by the requirement that production be profitable.12 To avoid depressing the profit rate, productive capital saves instead of investing, transferring its saving from the productive sphere, seeking shelter in the financial system where productive capital is turned into credit or financial capital. Indeed, too much. "But credit," Marx wrote, only "accelerates the violent outbreaks of the crisis."13 To accelerate something is not to cause it.14
4. Explaining The Meltdown
THE PROXIMATE CAUSE OF THE 2007-8 CRISIS was the imploding of what Yale Professor Robert Shiller called the greatest real estate bubble in U.S. history or possibly even world history. Between 1996 and 2005, house prices nationwide increased about 90 percent. In the five years between 2000 to 2005 alone, house prices increased by roughly 60 percent.15 That hadn't happened even in the real estate boom of the 1920s, whose premonitory bust in 1926 gestured wildly but vainly at the still greater collapse to come in 1929. While the inner mechanics of the individual parts that make up the self-destructive bubble apparatus are famously complex -- the SPVs SIVs, the CDOs, CDSs and other "financial dark matter" -- the mechanics of the collapse itself are fairly straightforward.
It's not necessary to understand quantum mechanics to grasp why an apple falls to the ground. Newtonian mechanics will suffice. Nor do we need to study the structure of DNA to know why old people fall -- they take slower and shorter steps. Similarly, by concentrating on the intricacies of frenzied finance on Wall Street and faulty regulatory mechanisms in DC, we lose perspective on the ultimate as opposed to the proximate causes of the world crisis.
The ultimate cause of the 2007-8 crisis was not the pricking of the real estate bubble in the United States, but the implosion of the greatest and longest global expansion in the history of capitalism going back to the first industrial revolution (1760-1830). The rapid transformation, particularly of the Chinese and Indian economies, produced a super boom that blew away all norms for economic expansion.16 World GDP rates rose to unprecedented levels - peaking at 6 percent in 2007, six times higher than the rate during the first industrial revolution.
And what drove the boom? Notwithstanding the core claim of the sensible center that the nature of the period was defined by the rise of post-industrialism and the fall of the blue collar worker who would go the way of the peasant, the boom was shaped by record rates of manufacturing growth and even higher rates of growth in manufacturing trade. The increase in manufacturing itself was fed by a world-reshaping, mass migration of manufacturing capital from the more developed to the less developed countries. Capital was attracted by appalling, but ultimately ravishingly high rates of labor exploitation -- to India, which was emerging as the world's back office, but above all to China, which became the world's workshop, employing 109 million manufacturing workers. (Versus 53 million in the G7 countries.)17 In the United States, median hourly manufacturing wage was $17.85 an hour.18 In China, manufacturing workers in the coastal provinces earned 91 cents an hour at productivity rates increasingly converging with those in the United States19 (inland workers earned 57 cents an hour.)20
The long boom that began in 1983 saw astonishing reversals of economic structure -- particularly in the United States where the FIRE industry displaced manufacturing and all others -- as the leading industry by GDP share. In 1983, at the beginning of the boom, manufacturing was still larger than FIRE. By 2007, the FIRE sector had become 1.8 times the size of the manufacturing sector.21 There were equally bizarre reversals of economic fortune, as the United States once the world's prime creditor nation, became its greatest debtor nation, with poor nations -- most prominently China -- among its largest creditors.
Yet despite these startling novelties, the present boom has ended in overproduction and over-consumption just like the classic booms of the past. Consider the world depressions that began in 1837, 1873 and 1929. For these crises, like the implosion of 2007-08, the following seven stage sequence can serve as a model:
A fall in the rate of accumulation, or at least a fall in the rate of acceleration; actual profit rates may even rise just before the collapse; but the high rates are sustained by a slowing down of accumulation rates.
Formation of surplus capital hoards. Unable to return "home" for productive re-investment, the surplus seeks to preserve itself by moving into financial channels.
Capital over-supply forces down interest rates, clearing the way for asset inflation and financial excess. First because low interest rates automatically increase the value of fictitious capital in land and in securities; and second because low interest rates cause risk premiums to fall, promoting riskier behavior as rentiers chase yield.
Asset bubbles form as speculators are attracted by the seemingly inexorable rise in asset prices. Prices accelerate further because of rampant bubble psychology.
The chain letter snaps. Housing prices burst the bounds of household incomes. Stock prices soar far beyond historic price/earnings ratio. Prices collapse. A local financial crisis breaks out among the most vulnerable borrowers, who can no longer re-finance, leaving the most recent round of developers and mortgage holders unable to pay off their loans, and/or stock speculators can't cover margin calls from their brokers. Asset prices collapse, taking down credit suppliers.
A spreading of the financial ripples outward from their point of origin, as asset deflation produces a global panic. And finally -- but not yet of course in 2007-08:
Protracted economic stagnation; widespread double-digit unemployment rates; falling wages and commodity prices; growing economic nationalism and a tendency towards "organized capitalism."
There are two main differences between this seven step scenario and the mainstream accounts. Regulatory and monetary explanations see the problem as U.S. centered. Obviously the United States can't be ignored -- the meltdown began here. But the emphasis must be on global imbalances. True, the United States is over-consuming. But the rest of the world is over-producing. The second difference is the emphasis on how excesses in the real sector -- the capital glut and the resulting low interest rates -- produce wilding in the FIRE sector. By contrast, mainstream models reverse the causal arrow so that financial and real estate excess bring down an essentially healthy real sector.
Except for the wrongheadedness of Greenspan or the antics of a comparative handful of hedge fund operators, mainstreamers then see no reason why the expansion should not go on indefinitely. They don't look at a twenty-five year expansion as being the equivalent of a twenty-five year old dog. The bubble simply erupted. But whence? Either exogenously -- outside the system -- by dodgy regulators who disrupted the economy's natural path towards self-correction -- in the Republican version; or in the Democratic version the bubble is produced endogenously -- in the FIRE sector -- aided by dodgy regulators who look the other way at speculative excess.
The Democrats cite a whole host of regulatory failures. There's the problem of fragmented regulation -the Fed regulates banks; the SEC stocks; the states insurance companies. They point to de-regulatory measures like the repeal of Glass-Steagall. Then there's the embarrassment of private regulation -- ceding securities rating to the conflict-of-interest laden private rating agencies. Even more serious perhaps is the absence of new regulation for new institutions -- e.g., failure to bring Over -the-Counter derivative trading under control; ditto the emergence of a shadow banking system, which created "a de facto assembly line for purchasing, packaging, and selling unregistered, high- risk securities."22
The Republicans -- along with their economic mentors in academia -- supply-siders, monetarists, Austrians and Chicagoans -- often talk about too stringent regulation -- like the passage of the Community Reinvestment Act of 1978. The Democratic Administration, they allege, allowed community groups like ACORN to coerce giant banks into making hundreds of billions of dollars in loans to unqualified minority borrowers. But mostly they focus on the interest rate activism of Alan Greenspan. The "too low too long" mantra -- the fed funds rate, they point out, remained below two percent from 2002-2004.
One problem with the explanation is that the bubble didn't start in 2002. It was already underway in 1996. As Robert Shiller points out, it lasted three times longer than the period of monetary laxity. Bubble growth continued to accelerate even in 1999 when the Fed was tightening. Moreover, 30 year mortgage rates were mostly unresponsive to Fed moves at the short term end of the interest curve.23
What's more, if the U.S. bubble was simply the result of a Fed policy error -- why did real estate bubbles form all around the world? Bubbles in Spain, Ireland, U.K. and perhaps the mother of all bubbles in Shanghai, where 1 million apartments were built in a single year -- as opposed to 2 million in the peak year for the entire United States. And the average apartment was $300,000 in a city where the median household income is $2,000.24 By comparison, the median household income in Queens is $42,000. If the same income to housing price ratio obtained in Queens, the average housing price would be $6.3 million.
Perhaps even more challenging to the Greenspan as the Grinch Who Stole Prosperity model is the comparable behavior of German bank regulators. Roughly speaking between 2002-4, overnight interest rates charged by German banks were only about a percent higher than the federal funds rate. German rates were kept low for longer than in the United States. Yet there was no German real estate bubble. The same could be said for Switzerland and Austria: very low interest rates, no real estate bubble.
What German banks, along with their Swiss, Austrian and west European counterparts, do have instead is an emerging market nations bubble: $4.7 trillion in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom. It's a sum, according to a Bank for International Settlements reckoning, that "vastly exceeds the scale of both the U. S. sub- prime and Alt-A debacles."25
There are many ways to build a bubble. Different countries have different architectural styles. America, with the most advanced entreprenurial culture, has the most complex: a financial engineering industry -- the United States invented such financial gimmicks as securitization, the Special Purpose Vehicles (SPVs), and the Collateralized Debt Obligations (CDOs). But the central European method, while more traditional, works just as well. Austrian bankers simply lend huge amounts to their favorite clients, the Hungarians. Lending money to Hungarians who can't pay them back is an Austrian tradition that goes back to the early 19th century when the Rothschild Creditanstalt no sooner financed the Hungarian railway system when it abruptly failed. Hungarian loans were a major factor in the collapse of Creditanstalt again in 1931 which took down an estimated 60- 80 percent of Austrian industry triggering the European great depression.26 This time Austrian banks have lent 85 percent of their GDP to Hungarians, who have an external debt worth about 100 percent of their GDP.
Ideally, strict, comprehensive, incorruptible regulation could have stopped all this over-lending to under- qualified borrowers dead in its tracks. But in what world do regulatory bureaucrats, barking and snapping like Welsh corgis herding cattle, determine the moves of bankers? Certainly not in ours, where the relevant laws that create the framework for regulation are passed by legislatures influenced not by concerns for macro-economic stability, but by the strength of relevant lobbies. In our world, the FIRE lobby is the largest by far.27
Even if the regulators had more power, and there were a lot more of them, it's not clear how they could be so effective as to prevent another Long Term Capital Management (LTCM) from happening. LTCM showed that one renegade hedge fund, is all it takes to ignite a crisis when the fields of capital are very dry. What regulator would second guess a team of Nobel Prize winners or fathom their formulas for risk or even decipher their complex trades?28 And even if legislators and regulators somehow summoned up the political will and financial sophistication to tame rogue genius lenders, why wouldn't the traders who like to discount risk simply de-camp for some less regulated place? As Chairman Bernanke observed in the immediate aftermath of the Bear Stearns collapse: "The oversight of these firms must recognize the distinctive features of investment banking and take care neither to unduly inhibit efficiency and innovation nor to induce a migration of risk-taking activities to institutions that are less regulated or beyond our borders."29
Historically, the influence of regulators is pro-cyclical, least evident when it's most needed. Regulations are strictest in the aftermath of a collapse, weakest during the manias. Glass Steagall, comprehensive legislation taming the securities behavior of big banks, passed in 1933; it was repealed in 1999 at the height of the dot.com boom.
Evidently, what chiefly regulates bankers' behavior is not regulators but conditions in the money market. What the great depressions of 1837, 1873, and 1929 share with the present crisis is a huge inflow of surplus capital into financial centers which drives down interest rates and alters banking standards and norms.
That such a surplus formed prior to the 2007-8 crisis there is little doubt. A big policy debate broke out in 2005 involving Bernanke, and critics of U.S. monetary policy over its provenance and meaning.30 Both pointed to the U.S. current account deficit as proof of the surplus. But Fed critics called it a "liquidity glut." The hundreds of billions flowing uphill each year from poor Asian countries to wealthy America were driven by the hydraulics of U.S. monetary policies. Overly stimulative U.S. policies enabled the U..S. to over consume and over borrow. Martin Wolf, editor of the Financial Times, noted that the United States had absorbed 70 per cent of the rest of the world's surplus capital, while its consumption accounted for 91 percent of the increase in gross domestic product in this decade.31
Bernanke, who in 2005 was just a Fed governor, defended U.S. posture and policies. He took note of the bizarre role reversal -- Scrooge borrowing from Tiny Tim -- but argued that the surplus took the form of a "savings glut." And the Chinese were its agents. The United States was just reacting to the Chinese decision to save so great a portion of their income. Well over a trillion was now mostly invested in U.S. Treasuries and government sponsored enterprises. China's savings rate -- managed by the state -- had reached a staggering 50 percent. Even Chinese households on their comparatively tiny incomes saved 30 percent. The U.S. private households, which at the beginning of the superboom were saving nearly 10 percent, now have negative savings. But Americans were making the best of a situation not of their making, acting as Stakhanovite consumers in order to promote the continuation of global expansion. U.S. borrowing was necessary to protect the world from imminent collapse.
A striking feature of Bernanke's account -- as well as that of his adversaries who assert the liquidity thesis -- is that neither think trade has anything to do with the trade deficit. Explains Bernanke, "The U.S. trade balance is the tail of the dog; for the most part, it has been passively determined by foreign and domestic incomes, asset prices, interest rates, and exchange rates, which are themselves the products of more fundamental driving forces."
For the economists, the financial markets determine the markets for commodities. Any nation could have a giant trade surplus; it's ultimately just a policy choice about savings behavior. The country with the giant surplus just happened to be China. Utterly ignored is the fact that trade surplus/ capital glut could never have formed without staggeringly high rates of labor exploitation in the strict Marxian sense: the ratio of value added by labor divided by wages.32 As far as what drove the boom and what caused the bust, it's the rate of exploitation that's the dog. The savings rate is the tail.
Conclusion
MARX TALKS FREQUENTLY about the capitalist's "wolfish hunger" for profit and his ravenous appetite for capital accumulation. It's no small irony that the most wolfish and ravenous capitalists in history should turn out to be Chinese Communist Party officials trained to revere Marx. But that doesn't detract from the serviceability of Marxian premises about capitalist dynamics. Whose fault is the crisis? Chinese over-exporting or American over-importing? "It should be noted in regard to imports and exports," Marx observes, "that one after another, all countries become involved in a crisis and that it then becomes evident that all of them with few exceptions, have exported and imported too much. So that they all have an unfavorable balance of payments."33
Marx wouldn't have been surprised at the failure of the once highly touted $700 billion Troubled Asset Relief Program. "The entire artificial system of forced expansion of the reproduction process cannot, of course, be remedied by having some bank, like the Bank of England, give to all the swindlers the deficient capital by means of its paper and having it buy up all the depreciated commodities at their old nominal values."34 Making the swindlers whole does nothing to restore profitability in the real sector.
The global rupture that's taken place over the last 15 months suggests a pattern of growth -- a global division of labor -- that has grown not just increasingly unwieldy, but probably unsustainable. How can the "imbalances" be fixed unless the United States becomes a producer as well as a consumer of commodities? But how can the United States become a producer on the world market given the vast disparity in rates of exploitation? Only in a post-industrial world which never existed. How can the United States continue to consume Chinese products without Chinese credit -- which is dependent on unsustainable American consumption? No doubt adjustments can be made -- both China and the United States can de-globalize. But such necessarily wrenching transformations take time, more like decades than years.
No doubt there is something comforting about the world of the sensible center where greedy bankers, bad regulators or too much regulation brings doom and disaster. At least we remain masters of our fate. At least the virtues still count -- if we can only renew our commitment to them. In the capitalist world as described by Marx -- and this is perhaps the insight most in need of refurbishing -- we think we're actors but we're not. Capitalism is the form of society that must ruthlessly develop the productive forces, but it develops them in a form that turns their agents into passive victims of the process.
The reassuring side of Marx's view of capital expansion and collapse is the opportunity it offers for a revival of the spirit of resistance among the working people:
"Without the great alternative phases of dullness, prosperity, over-excitement, crisis, and distress, which modern industry traverses in periodically recurring cycles…with the up and down of wages resulting from them …the working class… would be a heart-broken, a weak- minded worn-out unresisting mass whose self-emancipation would prove as impossible as that of the slaves of ancient Greece and Rome."35
Class struggle is the best stimulus package.
Notes
John Plender,"Capitalism in Convulsion," Financial Times, September 18, 2008. return
Thomas Atkins, "Depression overshadows G20 summit," Reuters, November 10, 2008. return
See for example Joseph Stiglitz. return
See Capital, III, 251-2 for Marx's definition of "absolute overproduction" and its cause. return
A core notion of Mussolini and various fascist intellectuals like Corradini, re-cycled by Mao and filtering down to the Third Worldist Left in the 70's. return
The Populist Persuasion, (New York: Basic Books, 1995). 273 return
A self-referential term used by such as The Brookings Institution, the Democratic Leadership Council and Colin Powell. return
BBC, "Marx popular amid credit crunch," Oct. 20, 2008. return
Michael Bleaney, Underconsumption Theories (New York: International Publishers, 1976), esp. ch.6. return
"Future Results of British Rule in India," Portable Marx, 337; see also Capital, III, 333-334. return
Mainstream economics -- particularly "supply side" economics which flourished during the Long Boom -- was able to grasp #1 but not #2. While acknowledging problem of inequality, they maintained that people were still better off than before; And insisted that true system-shattering crises were impossible. Economists influential on the American Left rejected both #1, and #2. They saw capitalism sunk in protracted stagnation; and argued, just like the Russian 19th century populists that the only way to develop productive forces in third world was some form of de-linkage. return
Capital, Vol III (Moscow: Progress Publishers, 1966), p.490. return
Vol. III, Ch.27, p. 441. return
A point made by an anonymous blogger who insists that Marx is obsolete because he fails to realize that the crisis really is caused by machinations of the financial sector. return
Ben S. Bernanke, "Remarks on the economic outlook," At the International Monetary Conference, Barcelona, Spain (via satellite), June 3, 2008. return
A genuine boom, marked by unprecedented growth in productivity, and not a super-bubble, as George Soros argues. See The New Paradigm for Financial Markets (New York: Public Affairs, 2008) esp. ch.5 "The Super-Bubble Hypothesis" return
Judith Bannister, "Manufacturing Employment in China," BLS, Monthly Review, July, 2005. return
BLS, "Earnings." return
RIETI, "Benchmarking Industrial Competitiveness by International Comparison of Productivity," Dec. 26, 2006. return
Judith Banister, "Manufacturing Earnings and compensation in China," BLS Monthly Labor Review, November 2005. return
BEA, Gross Domestic Product by Industry Accounts, 1947-2007. Between 1983 and 2007 financial profits rose from 17 percent to nearly 40 percent of all corporate profits ERP, Table B-91, 2008. return
Christopher Whalen, "Expanding Fed's Power is Wrong Plan," American Banker, April 4, 2008. return
The Subprime Solution, 49. return
Don Lee, "A Home Boom Busts," Los Angeles Times, Jan. 8, 2006. return
"Alt -A" stands for Alternative A. It's a euphemism for mortgages slightly less dodgy than sub-prime mortgages. See here. return
Niall Fergusson, The House of Rothschild 1849- 1999. 465. return
Opensecrets.org credits FIRE with approximately $2.76 in lobbying expenditures between 1996 and 2008. return
Roger Lowenstein, When Genius Failed, (New York: Random House, 2000), 187. return
Ben S. Bernanke, "Financial Regulation and Financial Stability, July 8, 2008. return
For savings glut thesis see here. For the liquidity glut view see StanleyRoach. return
Martin Wolf, "Villains and victims of global capital flows," Financial Times June 12 2007 return
In Marxian terminology, the ratio of surplus value(s) over variable capital (v) or s/v., which is also the ratio of paid to unpaid labor. return
Vol. III, ch. 30, p. 491. return
Vol III, ch.30. p. 490. return
New York Daily Tribune, July 14, 1853, cited in Lezek Kolakowski, Main Currents of Marxism, (New York: W.W.Norton, 2005), 248 return
BOB FITCH studied economic history at Berkeley in the 1960s where he also co-founded the Vietnam Day Committee with Jerry Rubin. His latest book is Solidarity For Sale (Public Affairs, 2006).
Contents of No. 46
New Politics home page
European think tank doubts peace with MILF under Arroyo regime.
This is from the Tribune.
The Arroyo govt. seems to have botched things so badly that one wonders whether it was ever bargaining in good faith. The govt. was supposed to sign a memorandum of agreement but never did so. Anyway the Supreme Court found the agreement unconstitutional and no matter who gets into power it is going to be a challenge to arrive at an agreement that is consistent with the constitution. Also, Arroyo did not bother to consult non-Muslims in the areas the would come under Moro control.
The failure of the agreement led several MILF commanders to begin attacks and this in turn led Arroyo to demand they be turned over to government authorities for punishment. This just made matters worse.
Peace seems to be a long way off but at the article says at least there can be some progress äround the edges" even though at this stage no overarching agreement.
European think tank doubts peace with MILF under GMA
By Michaela P. del Callar
02/18/2009
A prominent Brussels-based think tank has ruled out the prospect of any peace settlement with the separatist Moro Islamic Liberation Front (MILF) under the Arroyo government as her officials called on Muslim separatist rebels to return to the negotiating table to end six months of large-scale hostilities.
The International Crisis Group (ICG) said in its Feb. 16 policy report on the Philippines that the Arroyo administration lacked political will and sincerity in forging an accord that would end decades-old Muslim rebellion in Mindanao.
“Certainly, no settlement is likely during the remaining tenure of President Arroyo, the two sides are too far apart, the potential spoilers too numerous, and the political will too weak. The best that can be hoped for is progress around the edges,” the ICG said.
Talks between the government and the MILF collapsed in August 2008 after the failed signing of an expanded Muslim homeland agreement.
But Presidential Adviser on the Peace Process Avelino Razon Jr. said the government will work toward putting “confidence-building measures” on the ground, including reactivating a joint task force that goes after criminals and terrorists.
“There’s no alternative to peace, that is why I’m calling (on) the MILF (Moro Islamic Liberation Front) leadership to go back to
the negotiating table to resolve our differences peacefully,” Razon said in a statement.
After the accord was aborted, rogue MILF rebels led by its three commanders forcibly occupied mostly Christian southern Mindanao towns, killed civilians, looted and burned their homes. More than 300,000 civilians were rendered homeless.
Late last year, the government offered to sign a Memorandum of Agreement on ancestral domain (MoA-AD) with the MILF in Malaysia that would have practically created a separate Muslim state but the Supreme Court intervened and ordered a suspension in the signing of the agreement.
After the SC blocked proposed land deal was blocked, at least three MILF commanders led attacks across several towns and provinces on Mindanao island.
President Arroyo subsequently cut off peace talks, and demanded that the MILF surrender two of its commanders. That demand was rejected by the MILF.
Last Monday, the government said 124 people, mostly children, had also died in squalid evacuation camps.
The ICG noted that even if Manila has expressed willingness to return to the negotiating panel, “none of the political obstacles that killed the Memorandum of Agreement on Ancestral Domain have been removed.”
It also cited the government’s failure to consult non-Muslim groups in Mindanao with no desire to come under Moro control so they could raise their concerns on the issue and feed it into the negotiations for the agreement.
ICG also scored the Arroyo government for not making any efforts to defend the agreement reached by its own peace panel.
The group also believes that the task of reaching a formal agreement is “daunting.”
ICG stressed that negotiations are unlikely to move forward because none from the government or even its critics, referring to contenders for the 2010 presidential elections, seem to consider peace process a priority.
“Peace is not around the corner in Mindanao,” the ICG said. “No one should have illusions that the government’s move toward re-establishing its negotiating team presages a new political will to address the complex issues that scuttled the MoA.”
“But if a settlement seems unlikely during the Arroyo administration, there is still much to be done now that might help make a future peace stronger,” it added.
In the meantime, the ICG said all parties should concentrate on finding a formula for ending the military operations in Mindanao should both sides finally decide to resume talks.
“If a negotiated peace agreement, for the moment at least, is not possible, the focus , should be instead on a solution that will address the issue of renegade commanders, halt displacement and allow hundreds of thousands to return home,” the ICG said.
Recently, the MILF reported that it did not disband its peace panel and ready to resume the stalled peace talks but wants many questions answered related to the botched MoA-AD.
Khaled Musa, deputy chairman of the MILF committee on information, said that the MILF questions if left unanswered would lead to the repeat of the fiasco in Malaysia on Aug.5, 2008 where the MoA-AD was not signed by the Philippine Government on the very eve of the signing ceremony.
The Arroyo govt. seems to have botched things so badly that one wonders whether it was ever bargaining in good faith. The govt. was supposed to sign a memorandum of agreement but never did so. Anyway the Supreme Court found the agreement unconstitutional and no matter who gets into power it is going to be a challenge to arrive at an agreement that is consistent with the constitution. Also, Arroyo did not bother to consult non-Muslims in the areas the would come under Moro control.
The failure of the agreement led several MILF commanders to begin attacks and this in turn led Arroyo to demand they be turned over to government authorities for punishment. This just made matters worse.
Peace seems to be a long way off but at the article says at least there can be some progress äround the edges" even though at this stage no overarching agreement.
European think tank doubts peace with MILF under GMA
By Michaela P. del Callar
02/18/2009
A prominent Brussels-based think tank has ruled out the prospect of any peace settlement with the separatist Moro Islamic Liberation Front (MILF) under the Arroyo government as her officials called on Muslim separatist rebels to return to the negotiating table to end six months of large-scale hostilities.
The International Crisis Group (ICG) said in its Feb. 16 policy report on the Philippines that the Arroyo administration lacked political will and sincerity in forging an accord that would end decades-old Muslim rebellion in Mindanao.
“Certainly, no settlement is likely during the remaining tenure of President Arroyo, the two sides are too far apart, the potential spoilers too numerous, and the political will too weak. The best that can be hoped for is progress around the edges,” the ICG said.
Talks between the government and the MILF collapsed in August 2008 after the failed signing of an expanded Muslim homeland agreement.
But Presidential Adviser on the Peace Process Avelino Razon Jr. said the government will work toward putting “confidence-building measures” on the ground, including reactivating a joint task force that goes after criminals and terrorists.
“There’s no alternative to peace, that is why I’m calling (on) the MILF (Moro Islamic Liberation Front) leadership to go back to
the negotiating table to resolve our differences peacefully,” Razon said in a statement.
After the accord was aborted, rogue MILF rebels led by its three commanders forcibly occupied mostly Christian southern Mindanao towns, killed civilians, looted and burned their homes. More than 300,000 civilians were rendered homeless.
Late last year, the government offered to sign a Memorandum of Agreement on ancestral domain (MoA-AD) with the MILF in Malaysia that would have practically created a separate Muslim state but the Supreme Court intervened and ordered a suspension in the signing of the agreement.
After the SC blocked proposed land deal was blocked, at least three MILF commanders led attacks across several towns and provinces on Mindanao island.
President Arroyo subsequently cut off peace talks, and demanded that the MILF surrender two of its commanders. That demand was rejected by the MILF.
Last Monday, the government said 124 people, mostly children, had also died in squalid evacuation camps.
The ICG noted that even if Manila has expressed willingness to return to the negotiating panel, “none of the political obstacles that killed the Memorandum of Agreement on Ancestral Domain have been removed.”
It also cited the government’s failure to consult non-Muslim groups in Mindanao with no desire to come under Moro control so they could raise their concerns on the issue and feed it into the negotiations for the agreement.
ICG also scored the Arroyo government for not making any efforts to defend the agreement reached by its own peace panel.
The group also believes that the task of reaching a formal agreement is “daunting.”
ICG stressed that negotiations are unlikely to move forward because none from the government or even its critics, referring to contenders for the 2010 presidential elections, seem to consider peace process a priority.
“Peace is not around the corner in Mindanao,” the ICG said. “No one should have illusions that the government’s move toward re-establishing its negotiating team presages a new political will to address the complex issues that scuttled the MoA.”
“But if a settlement seems unlikely during the Arroyo administration, there is still much to be done now that might help make a future peace stronger,” it added.
In the meantime, the ICG said all parties should concentrate on finding a formula for ending the military operations in Mindanao should both sides finally decide to resume talks.
“If a negotiated peace agreement, for the moment at least, is not possible, the focus , should be instead on a solution that will address the issue of renegade commanders, halt displacement and allow hundreds of thousands to return home,” the ICG said.
Recently, the MILF reported that it did not disband its peace panel and ready to resume the stalled peace talks but wants many questions answered related to the botched MoA-AD.
Khaled Musa, deputy chairman of the MILF committee on information, said that the MILF questions if left unanswered would lead to the repeat of the fiasco in Malaysia on Aug.5, 2008 where the MoA-AD was not signed by the Philippine Government on the very eve of the signing ceremony.
Failure to save East Europe will lead to worldwide meltdown
This is from the Telegraph (UK).
The US is naturally enough concerned about its own financial crisis but as this article shows Europe is also facing a financial crisis and one that is being exacerbated by loans in Eastern Europe which is itself in an economic and financial meltdown and in dire need of rescue. Just as exposure to bad US financial paper impacts European banks they are now faced with new challenges because of loans to Eastern Europe.
Failure to save East Europe will lead to worldwide meltdown
The unfolding debt drama in Russia, Ukraine, and the EU states of Eastern Europe has reached acute danger point.
By Ambrose Evans-PritchardLast Updated: 2:05AM GMT 15 Feb 2009
If mishandled by the world policy establishment, this debacle is big enough to shatter the fragile banking systems of Western Europe and set off round two of our financial Götterdämmerung.
Austria's finance minister Josef Pröll made frantic efforts last week to put together a €150bn rescue for the ex-Soviet bloc. Well he might. His banks have lent €230bn to the region, equal to 70pc of Austria's GDP.
"A failure rate of 10pc would lead to the collapse of the Austrian financial sector," reported Der Standard in Vienna. Unfortunately, that is about to happen.
The European Bank for Reconstruction and Development (EBRD) says bad debts will top 10pc and may reach 20pc. The Vienna press said Bank Austria and its Italian owner Unicredit face a "monetary Stalingrad" in the East.
Mr Pröll tried to drum up support for his rescue package from EU finance ministers in Brussels last week. The idea was scotched by Germany's Peer Steinbrück. Not our problem, he said. We'll see about that.
Stephen Jen, currency chief at Morgan Stanley, said Eastern Europe has borrowed $1.7 trillion abroad, much on short-term maturities. It must repay – or roll over – $400bn this year, equal to a third of the region's GDP. Good luck. The credit window has slammed shut.
Not even Russia can easily cover the $500bn dollar debts of its oligarchs while oil remains near $33 a barrel. The budget is based on Urals crude at $95. Russia has bled 36pc of its foreign reserves since August defending the rouble.
"This is the largest run on a currency in history," said Mr Jen.
In Poland, 60pc of mortgages are in Swiss francs. The zloty has just halved against the franc. Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this story. As an act of collective folly – by lenders and borrowers – it matches America's sub-prime debacle. There is a crucial difference, however. European banks are on the hook for both. US banks are not.
Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks. En plus, Europeans account for an astonishing 74pc of the entire $4.9 trillion portfolio of loans to emerging markets.
They are five times more exposed to this latest bust than American or Japanese banks, and they are 50pc more leveraged (IMF data).
Spain is up to its neck in Latin America, which has belatedly joined the slump (Mexico's car output fell 51pc in January, and Brazil lost 650,000 jobs in one month). Britain and Switzerland are up to their necks in Asia.
Whether it takes months, or just weeks, the world is going to discover that Europe's financial system is sunk, and that there is no EU Federal Reserve yet ready to act as a lender of last resort or to flood the markets with emergency stimulus.
Under a "Taylor Rule" analysis, the European Central Bank already needs to cut rates to zero and then purchase bonds and Pfandbriefe on a huge scale. It is constrained by geopolitics – a German-Dutch veto – and the Maastricht Treaty.
But I digress. It is East Europe that is blowing up right now. Erik Berglof, EBRD's chief economist, told me the region may need €400bn in help to cover loans and prop up the credit system.
Europe's governments are making matters worse. Some are pressuring their banks to pull back, undercutting subsidiaries in East Europe. Athens has ordered Greek banks to pull out of the Balkans.
The sums needed are beyond the limits of the IMF, which has already bailed out Hungary, Ukraine, Latvia, Belarus, Iceland, and Pakistan – and Turkey next – and is fast exhausting its own $200bn (€155bn) reserve. We are nearing the point where the IMF may have to print money for the world, using arcane powers to issue Special Drawing Rights.
Its $16bn rescue of Ukraine has unravelled. The country – facing a 12pc contraction in GDP after the collapse of steel prices – is hurtling towards default, leaving Unicredit, Raffeisen and ING in the lurch. Pakistan wants another $7.6bn. Latvia's central bank governor has declared his economy "clinically dead" after it shrank 10.5pc in the fourth quarter. Protesters have smashed the treasury and stormed parliament.
"This is much worse than the East Asia crisis in the 1990s," said Lars Christensen, at Danske Bank.
"There are accidents waiting to happen across the region, but the EU institutions don't have any framework for dealing with this. The day they decide not to save one of these one countries will be the trigger for a massive crisis with contagion spreading into the EU."
Europe is already in deeper trouble than the ECB or EU leaders ever expected. Germany contracted at an annual rate of 8.4pc in the fourth quarter.
If Deutsche Bank is correct, the economy will have shrunk by nearly 9pc before the end of this year. This is the sort of level that stokes popular revolt.
The implications are obvious. Berlin is not going to rescue Ireland, Spain, Greece and Portugal as the collapse of their credit bubbles leads to rising defaults, or rescue Italy by accepting plans for EU "union bonds" should the debt markets take fright at the rocketing trajectory of Italy's public debt (hitting 112pc of GDP next year, just revised up from 101pc – big change), or rescue Austria from its Habsburg adventurism.
So we watch and wait as the lethal brush fires move closer.
If one spark jumps across the eurozone line, we will have global systemic crisis within days. Are the firemen ready?
The US is naturally enough concerned about its own financial crisis but as this article shows Europe is also facing a financial crisis and one that is being exacerbated by loans in Eastern Europe which is itself in an economic and financial meltdown and in dire need of rescue. Just as exposure to bad US financial paper impacts European banks they are now faced with new challenges because of loans to Eastern Europe.
Failure to save East Europe will lead to worldwide meltdown
The unfolding debt drama in Russia, Ukraine, and the EU states of Eastern Europe has reached acute danger point.
By Ambrose Evans-PritchardLast Updated: 2:05AM GMT 15 Feb 2009
If mishandled by the world policy establishment, this debacle is big enough to shatter the fragile banking systems of Western Europe and set off round two of our financial Götterdämmerung.
Austria's finance minister Josef Pröll made frantic efforts last week to put together a €150bn rescue for the ex-Soviet bloc. Well he might. His banks have lent €230bn to the region, equal to 70pc of Austria's GDP.
"A failure rate of 10pc would lead to the collapse of the Austrian financial sector," reported Der Standard in Vienna. Unfortunately, that is about to happen.
The European Bank for Reconstruction and Development (EBRD) says bad debts will top 10pc and may reach 20pc. The Vienna press said Bank Austria and its Italian owner Unicredit face a "monetary Stalingrad" in the East.
Mr Pröll tried to drum up support for his rescue package from EU finance ministers in Brussels last week. The idea was scotched by Germany's Peer Steinbrück. Not our problem, he said. We'll see about that.
Stephen Jen, currency chief at Morgan Stanley, said Eastern Europe has borrowed $1.7 trillion abroad, much on short-term maturities. It must repay – or roll over – $400bn this year, equal to a third of the region's GDP. Good luck. The credit window has slammed shut.
Not even Russia can easily cover the $500bn dollar debts of its oligarchs while oil remains near $33 a barrel. The budget is based on Urals crude at $95. Russia has bled 36pc of its foreign reserves since August defending the rouble.
"This is the largest run on a currency in history," said Mr Jen.
In Poland, 60pc of mortgages are in Swiss francs. The zloty has just halved against the franc. Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this story. As an act of collective folly – by lenders and borrowers – it matches America's sub-prime debacle. There is a crucial difference, however. European banks are on the hook for both. US banks are not.
Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks. En plus, Europeans account for an astonishing 74pc of the entire $4.9 trillion portfolio of loans to emerging markets.
They are five times more exposed to this latest bust than American or Japanese banks, and they are 50pc more leveraged (IMF data).
Spain is up to its neck in Latin America, which has belatedly joined the slump (Mexico's car output fell 51pc in January, and Brazil lost 650,000 jobs in one month). Britain and Switzerland are up to their necks in Asia.
Whether it takes months, or just weeks, the world is going to discover that Europe's financial system is sunk, and that there is no EU Federal Reserve yet ready to act as a lender of last resort or to flood the markets with emergency stimulus.
Under a "Taylor Rule" analysis, the European Central Bank already needs to cut rates to zero and then purchase bonds and Pfandbriefe on a huge scale. It is constrained by geopolitics – a German-Dutch veto – and the Maastricht Treaty.
But I digress. It is East Europe that is blowing up right now. Erik Berglof, EBRD's chief economist, told me the region may need €400bn in help to cover loans and prop up the credit system.
Europe's governments are making matters worse. Some are pressuring their banks to pull back, undercutting subsidiaries in East Europe. Athens has ordered Greek banks to pull out of the Balkans.
The sums needed are beyond the limits of the IMF, which has already bailed out Hungary, Ukraine, Latvia, Belarus, Iceland, and Pakistan – and Turkey next – and is fast exhausting its own $200bn (€155bn) reserve. We are nearing the point where the IMF may have to print money for the world, using arcane powers to issue Special Drawing Rights.
Its $16bn rescue of Ukraine has unravelled. The country – facing a 12pc contraction in GDP after the collapse of steel prices – is hurtling towards default, leaving Unicredit, Raffeisen and ING in the lurch. Pakistan wants another $7.6bn. Latvia's central bank governor has declared his economy "clinically dead" after it shrank 10.5pc in the fourth quarter. Protesters have smashed the treasury and stormed parliament.
"This is much worse than the East Asia crisis in the 1990s," said Lars Christensen, at Danske Bank.
"There are accidents waiting to happen across the region, but the EU institutions don't have any framework for dealing with this. The day they decide not to save one of these one countries will be the trigger for a massive crisis with contagion spreading into the EU."
Europe is already in deeper trouble than the ECB or EU leaders ever expected. Germany contracted at an annual rate of 8.4pc in the fourth quarter.
If Deutsche Bank is correct, the economy will have shrunk by nearly 9pc before the end of this year. This is the sort of level that stokes popular revolt.
The implications are obvious. Berlin is not going to rescue Ireland, Spain, Greece and Portugal as the collapse of their credit bubbles leads to rising defaults, or rescue Italy by accepting plans for EU "union bonds" should the debt markets take fright at the rocketing trajectory of Italy's public debt (hitting 112pc of GDP next year, just revised up from 101pc – big change), or rescue Austria from its Habsburg adventurism.
So we watch and wait as the lethal brush fires move closer.
If one spark jumps across the eurozone line, we will have global systemic crisis within days. Are the firemen ready?
Wednesday, February 18, 2009
Greenspan backs bank nationalisation
So the free market guru and admirer of Ayn Rand now supports bank nationalisation. Obama however the new darling of the liberal left in the US stands firm against taking this course. The world is really turning upside down.
Financial Times - February 18, 2009
Greenspan backs bank nationalisation
By Krishna Guha and Edward Luce in WashingtonThe US government may have to nationalise some banks on a temporary basis to fix the financial system and restore the flow of credit, Alan Greenspan, the former Federal Reserve chairman has told the Financial Times.In an interview with the FT Mr Greenspan, who for decades was regarded as the high priest of laisser-faire capitalism, said nationalisation could be the least bad option left for policymakers.”It may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring,” he said. “I understand that once in a hundred years this is what you do.”Mr Greenspan’s comments capped a frenetic day in which policymakers across the political spectrum appeared to be moving towards accepting some form of bank nationalisation.“We should be focusing on what works,” Lindsey Graham, a Republican senator from South Carolina, told the FT. “We cannot keep pouring good money after bad.” He added, “If nationalisation is what works, then we should do it.”Speaking to the FT ahead of his speech to the Economic Club of New York last night, Mr Greenspan said that “in some cases, the least bad solution is for the government to take temporary control” of troubled banks either through the Federal Deposit Insurance Corporation or some other mechanism.The former Fed chairman said temporary government ownership would ”allow the government to transfer toxic assets to a bad bank without the problem of how to price them.”But he cautioned that holders of senior debt - bonds that would be paid off before other claims - might have to be protected even in the event of nationalisation.”You would have to be very careful about imposing any loss on senior creditors of any bank taken under government control because it could impact the senior debt of all other banks,” he said. “This is a credit crisis and it is essential to preserve an anchor for the financing of the system. That anchor is the senior debt.”Mr Greenspan’s comments came as President Barack Obama signed into law the $787bn fiscal stimulus in Denver, Colorado. Mr Obama will announce on Wednesday a $50bn programme for home foreclosure relief in Phoenix, Arizona. Meanwhile, the White House was working last night on the latest phase of the bailout for two of the big three US carmakers.In his speech after signing the stimulus, which he called the “most sweeping recovery package in our history”, Mr Obama set out a vertiginous timetable of federal decisions in the coming weeks that included fixing the US banking system, submission next week of the 2009 budget and a bipartisan White House meeting to address longer-term fiscal discipline.“We need to end a culture where we ignore problems until they become full-blown crises,” said Mr Obama. “Today does not mark the end of our economic troubles … but it does mark the beginning of the end.”
Financial Times - February 18, 2009
Greenspan backs bank nationalisation
By Krishna Guha and Edward Luce in WashingtonThe US government may have to nationalise some banks on a temporary basis to fix the financial system and restore the flow of credit, Alan Greenspan, the former Federal Reserve chairman has told the Financial Times.In an interview with the FT Mr Greenspan, who for decades was regarded as the high priest of laisser-faire capitalism, said nationalisation could be the least bad option left for policymakers.”It may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring,” he said. “I understand that once in a hundred years this is what you do.”Mr Greenspan’s comments capped a frenetic day in which policymakers across the political spectrum appeared to be moving towards accepting some form of bank nationalisation.“We should be focusing on what works,” Lindsey Graham, a Republican senator from South Carolina, told the FT. “We cannot keep pouring good money after bad.” He added, “If nationalisation is what works, then we should do it.”Speaking to the FT ahead of his speech to the Economic Club of New York last night, Mr Greenspan said that “in some cases, the least bad solution is for the government to take temporary control” of troubled banks either through the Federal Deposit Insurance Corporation or some other mechanism.The former Fed chairman said temporary government ownership would ”allow the government to transfer toxic assets to a bad bank without the problem of how to price them.”But he cautioned that holders of senior debt - bonds that would be paid off before other claims - might have to be protected even in the event of nationalisation.”You would have to be very careful about imposing any loss on senior creditors of any bank taken under government control because it could impact the senior debt of all other banks,” he said. “This is a credit crisis and it is essential to preserve an anchor for the financing of the system. That anchor is the senior debt.”Mr Greenspan’s comments came as President Barack Obama signed into law the $787bn fiscal stimulus in Denver, Colorado. Mr Obama will announce on Wednesday a $50bn programme for home foreclosure relief in Phoenix, Arizona. Meanwhile, the White House was working last night on the latest phase of the bailout for two of the big three US carmakers.In his speech after signing the stimulus, which he called the “most sweeping recovery package in our history”, Mr Obama set out a vertiginous timetable of federal decisions in the coming weeks that included fixing the US banking system, submission next week of the 2009 budget and a bipartisan White House meeting to address longer-term fiscal discipline.“We need to end a culture where we ignore problems until they become full-blown crises,” said Mr Obama. “Today does not mark the end of our economic troubles … but it does mark the beginning of the end.”
Tuesday, February 17, 2009
Philippines: More sh*t hits the fan about fertilizer scam
This is from Malaya (Manila)
It seems that there may finally be some charges laid against Bolante the former agriculture undersecretary who seems to have masterminded the scheme although no doubt higher ups were also indirectly involved. Those higherups may still be able to quash any action.
Gordon tags Palace in fertilizer scam
BY JP LOPEZ
THE Senate Blue Ribbon committee is expected to come out with a preliminary report on the P728-million fertilizer fund mess either today or tomorrow containing a strong statement against Malacañang for its crime by omission or commission.
"You commit crimes by omission or commission, and the omission is very glaring. It amounts to passive commission," Blue Ribbon chair Sen. Richard Gordon said yesterday.
He said the report is specific on the acts committed, either by omission or commission, by all parties involved.
He said the report "is more specific and hard-hitting than the committee report during the 13th Congress by the committees on Blue Ribbon and Agriculture."
Senators Joker Arroyo and Ramon Magsaysay Jr. released a final report in December 2005 recommending the filing of graft charges against former agriculture undersecretary Jocelyn "Joc Joc" Bolante for masterminding the illegal diversion of fertilizer funds that found their way into the campaign kitty of President Arroyo in the 2004 elections.
Gordon said the fertilizer fund mess "is a very, very big case because there are killings involved."
"With an issue this big, their (Palace) silence is deafening," he said.
He recalled that the deaths of former DA employees Marlene Esperat and Teofilo Mojica had been linked to their attempts to expose irregularities in the department.
He said he would recommend filing of charges against personalities involved in the mess.
Gordon said the committee would no longer hold hearings unless there is new evidence.
Gordon has said the Senate is readying the transmittal of testimonial and documentary evidence to help the Office of the Ombudsman in filing plunder charges against Bolante and other key personalities implicated in the fertilizer fund mess.
Gordon said evidence gathered by his panel is sufficient.
"We have enough (evidence) to bring this (case) to the Ombudsman. There is a ton of evidence, and we have heard testimony among witnesses that were presented by way of checks and reports. We warn the Ombudsman that there is enough evidence," he said.
"We will serve hard evidence in a silver platter," he said.
It seems that there may finally be some charges laid against Bolante the former agriculture undersecretary who seems to have masterminded the scheme although no doubt higher ups were also indirectly involved. Those higherups may still be able to quash any action.
Gordon tags Palace in fertilizer scam
BY JP LOPEZ
THE Senate Blue Ribbon committee is expected to come out with a preliminary report on the P728-million fertilizer fund mess either today or tomorrow containing a strong statement against Malacañang for its crime by omission or commission.
"You commit crimes by omission or commission, and the omission is very glaring. It amounts to passive commission," Blue Ribbon chair Sen. Richard Gordon said yesterday.
He said the report is specific on the acts committed, either by omission or commission, by all parties involved.
He said the report "is more specific and hard-hitting than the committee report during the 13th Congress by the committees on Blue Ribbon and Agriculture."
Senators Joker Arroyo and Ramon Magsaysay Jr. released a final report in December 2005 recommending the filing of graft charges against former agriculture undersecretary Jocelyn "Joc Joc" Bolante for masterminding the illegal diversion of fertilizer funds that found their way into the campaign kitty of President Arroyo in the 2004 elections.
Gordon said the fertilizer fund mess "is a very, very big case because there are killings involved."
"With an issue this big, their (Palace) silence is deafening," he said.
He recalled that the deaths of former DA employees Marlene Esperat and Teofilo Mojica had been linked to their attempts to expose irregularities in the department.
He said he would recommend filing of charges against personalities involved in the mess.
Gordon said the committee would no longer hold hearings unless there is new evidence.
Gordon has said the Senate is readying the transmittal of testimonial and documentary evidence to help the Office of the Ombudsman in filing plunder charges against Bolante and other key personalities implicated in the fertilizer fund mess.
Gordon said evidence gathered by his panel is sufficient.
"We have enough (evidence) to bring this (case) to the Ombudsman. There is a ton of evidence, and we have heard testimony among witnesses that were presented by way of checks and reports. We warn the Ombudsman that there is enough evidence," he said.
"We will serve hard evidence in a silver platter," he said.
US proposal doesn't fly in Russia
This is from presstv.ir
Russia for its part has refrained from placing missiles in Kalliningrad as a response to the US missiled defence system. Obama is reviewing the whole program. It is quite possible that he may decide that it will not work or is not worth all the trouble independently of what happens between Iran and Russia. However using the issue as a bargaining chip is worth a try I suppose!
US proposal pops no eyes out in Russia Sun, 15 Feb 2009 10:52:47 GMT
The Russian flag flies at half mast at the Kremlin where the prevailing belief is that the idea of Iran posing a missile threat is a fairy tale.Russia promises not to change its stance on Iran in spite of US efforts to reach a compromise with the Kremlin over its missile shield. In an exclusive interview on Sunday, Russian Deputy Foreign Minister Alexei Borodavkin asserted that under no circumstances would Moscow agree to jeopardize its constantly improving economic, industrial, nuclear and technical cooperation with Tehran. "The Kremlin sees no reason to change its policy toward Iran," IRNA quoted Borodavkin as saying. His claims come amid Washington efforts to employ plans to deploy a missile defense system in Europe as a bargaining chip to woo Russia against Iran. A senior US officials speaking on condition of anonymity had touched on the issue on Friday, saying that Washington would slow down its missile plans on the condition that Moscow joins the White House in pressuring Tehran over its nuclear activities. Washington has spearheaded accusations that Iran, a signatory to the nuclear Non-Proliferation Treaty (NPT), is pursuing a military nuclear program. Iran, however, says it enriches uranium for civilian applications and that it has a right to the technology already in the hands of many others. "If we are able to work together to dissuade Iran from pursuing a nuclear weapons capability, we would be able to moderate the pace of development of missile defenses in Europe," Reuters quoted the US official as saying on the issue. "The impetus for the deployment of the missile defense systems is the threat from Iran. If it is possible to address that then that needs to be taken into consideration as you look at the deployment of the system," the official said. The Bush administration strived to portray Iran's uranium enrichment program, missile development and space quest as threats to world stability in an attempt to justify its plans to station 10 silo-based missiles in Poland and a missile-tracking radar in the Czech Republic. Russia has remained stoutly opposed to the US missile bid, threatening to respond by installing short-rage Iskander-M missiles in Kaliningrad -- a small strategic exclave near Poland. Moscow has refused to follow Washington's lead in isolating Iran, criticizing the US pursuit as a "creeping American strategy of dragging the global community into a large-scale crisis around Iran." The Kremlin has also dismissed contentions that Tehran should be considered as a threat. "No sensible person believes in fairy tales about the Iranian missile threat, and that thousands of kilometers from Tehran on the coast of the Baltic Sea, it is necessary to station a missile interceptor system," Russia's NATO envoy Dmitry Rogozin said on Nov. 6.
Russia for its part has refrained from placing missiles in Kalliningrad as a response to the US missiled defence system. Obama is reviewing the whole program. It is quite possible that he may decide that it will not work or is not worth all the trouble independently of what happens between Iran and Russia. However using the issue as a bargaining chip is worth a try I suppose!
US proposal pops no eyes out in Russia Sun, 15 Feb 2009 10:52:47 GMT
The Russian flag flies at half mast at the Kremlin where the prevailing belief is that the idea of Iran posing a missile threat is a fairy tale.Russia promises not to change its stance on Iran in spite of US efforts to reach a compromise with the Kremlin over its missile shield. In an exclusive interview on Sunday, Russian Deputy Foreign Minister Alexei Borodavkin asserted that under no circumstances would Moscow agree to jeopardize its constantly improving economic, industrial, nuclear and technical cooperation with Tehran. "The Kremlin sees no reason to change its policy toward Iran," IRNA quoted Borodavkin as saying. His claims come amid Washington efforts to employ plans to deploy a missile defense system in Europe as a bargaining chip to woo Russia against Iran. A senior US officials speaking on condition of anonymity had touched on the issue on Friday, saying that Washington would slow down its missile plans on the condition that Moscow joins the White House in pressuring Tehran over its nuclear activities. Washington has spearheaded accusations that Iran, a signatory to the nuclear Non-Proliferation Treaty (NPT), is pursuing a military nuclear program. Iran, however, says it enriches uranium for civilian applications and that it has a right to the technology already in the hands of many others. "If we are able to work together to dissuade Iran from pursuing a nuclear weapons capability, we would be able to moderate the pace of development of missile defenses in Europe," Reuters quoted the US official as saying on the issue. "The impetus for the deployment of the missile defense systems is the threat from Iran. If it is possible to address that then that needs to be taken into consideration as you look at the deployment of the system," the official said. The Bush administration strived to portray Iran's uranium enrichment program, missile development and space quest as threats to world stability in an attempt to justify its plans to station 10 silo-based missiles in Poland and a missile-tracking radar in the Czech Republic. Russia has remained stoutly opposed to the US missile bid, threatening to respond by installing short-rage Iskander-M missiles in Kaliningrad -- a small strategic exclave near Poland. Moscow has refused to follow Washington's lead in isolating Iran, criticizing the US pursuit as a "creeping American strategy of dragging the global community into a large-scale crisis around Iran." The Kremlin has also dismissed contentions that Tehran should be considered as a threat. "No sensible person believes in fairy tales about the Iranian missile threat, and that thousands of kilometers from Tehran on the coast of the Baltic Sea, it is necessary to station a missile interceptor system," Russia's NATO envoy Dmitry Rogozin said on Nov. 6.
Once a star, Afghan president now on the defensive
This is from AFP via Yahoo.
This is interesting in that Karzai has not changed very much. All that has changed is US and western perception of him. The one respect in which Karzai has changed is in his criticism of US and NATO policy particularly of bombing that produces many civilian casualties. He has become more critical of the policy of those who had earlier promoted him as a star. There will be attempts to launch a new star but so far we do not know who exactly this new star will be. Earlier it seemed that Zalmay Khalilzad would be the new star but there is no mention of him since Obama took over the presidency.
Once a star, Afghan president now on the defensive
by Jim Mannion
Jim Mannion Sun Feb 15, 10:37 am ET
WASHINGTON (AFP) – Once the toast of Washington, Afghan President Hamid Karzai now finds himself on the defensive, dogged by charges of government corruption and questions about whether he still has friends in the White House.
With problems mounting in Afghanistan, officials, commentators and, most importantly, US President Barack Obama are taking a sharper look at the man who has been the public face of the faltering Afghan project seven years on.
"They've got elections coming up, but effectively, the national government seems very detached from what's going on in the surrounding community," Obama said this week in a comment that has set the tone for the new US skepticism.
Karzai responded in kind in an interview with CNN to air Sunday, saying he was "surprised to hear that statement."
"Perhaps it's because the administration has not yet put itself together. Perhaps they have not been given the information yet. And I hope as they settle down, as they learn more, we will see better judgment," he said.
The pre-recorded interview was to air after US envoy Richard Holbrooke held talks in Kabul with Karzai, who vowed to send a delegation to Washington headed by Afghan Foreign Minister Rangeen Dadfar Spanta to take part in a major US review of the "war on terror."
It's not just Obama, though, who is pointing fingers at Karzai's tenure.
A US intelligence assessment delivered this week by retired admiral Dennis Blair, the new director of national intelligence, warned that Karzai's government was losing legitimacy because of endemic corruption and an inability to deliver basic services.
"Corruption has exceeded culturally tolerable levels and is eroding the legitimacy of the government," Blair's report said.
"The Afghan drug trade is a major source of revenue for corrupt officials, the Taliban and other insurgent groups operating in the country and is one of the greatest long-term challenges facing Afghanistan."
US Defense Secretary Robert Gates recently warned: "If we set ourselves the objective of creating some sort of a Central Asian Valhalla over there, we will lose, because nobody in the world has that much time, patience or money, to be honest."
To all of this, Karzai, who is running for re-election this year, pointed to the schools and roads and healthcare services introduced in Afghanistan, one of the world's poorest country.
"The engagement with the Afghan population is so wide and so widely spread that we've never had in our history," he told CNN.
Asked about allegations that his brother was involved in drug trafficking, Karzai said he had asked US authorities for evidence but it was never forthcoming.
Instead, he suggested that the rumors about his brother were floated in response to disputes with the Americans over aerial spraying of poppy fields and his strong public denunciation of civilian casualties in US air strikes.
"My conclusion is, yes, this was part of a political pressure tactic, unfortunately," Karzai said.
He said there was corruption in Afghanistan as in any developing country, exacerbated by a flood of aid money in a country devastated by years of war.
"Corruption is there, and it's in different levels -- there's petty corruption, there's corruption in contracting," he said. "Part of it is our problem, part of it is the problem of the international community and the way they make contracts."
In the interview, Karzai signaled other potential differences with Washington as it increases the size of its forces in Afghanistan,
The additional forces should focus on stopping the infiltration of Al-Qaeda and Taliban fighters across the country's porous borders, especially from Pakistan, rather than in Afghan communities, he said.
"Definitely the war on terrorism is not in the Afghan villages. It never was," he said.
Karzai said he could work "very positively" with Obama.
"But... people in our part of the world, they also have sensitivities, we also have morality. Some of us stand on a very high platform of morality in this part of the world," he said.
"When I complain about civilian casualties, it's because I expect that our American friends, who I'm sure are standing on a very high platform of morality, will understand it's a human concern and it has to be responded to by our friends in the United States."
Copyright © 2009 Agence France Presse. All rights reserved. The information contained in the AFP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of Agence France Presse.
Copyright © 2009 Yahoo! Inc. All rights reserved.
This is interesting in that Karzai has not changed very much. All that has changed is US and western perception of him. The one respect in which Karzai has changed is in his criticism of US and NATO policy particularly of bombing that produces many civilian casualties. He has become more critical of the policy of those who had earlier promoted him as a star. There will be attempts to launch a new star but so far we do not know who exactly this new star will be. Earlier it seemed that Zalmay Khalilzad would be the new star but there is no mention of him since Obama took over the presidency.
Once a star, Afghan president now on the defensive
by Jim Mannion
Jim Mannion Sun Feb 15, 10:37 am ET
WASHINGTON (AFP) – Once the toast of Washington, Afghan President Hamid Karzai now finds himself on the defensive, dogged by charges of government corruption and questions about whether he still has friends in the White House.
With problems mounting in Afghanistan, officials, commentators and, most importantly, US President Barack Obama are taking a sharper look at the man who has been the public face of the faltering Afghan project seven years on.
"They've got elections coming up, but effectively, the national government seems very detached from what's going on in the surrounding community," Obama said this week in a comment that has set the tone for the new US skepticism.
Karzai responded in kind in an interview with CNN to air Sunday, saying he was "surprised to hear that statement."
"Perhaps it's because the administration has not yet put itself together. Perhaps they have not been given the information yet. And I hope as they settle down, as they learn more, we will see better judgment," he said.
The pre-recorded interview was to air after US envoy Richard Holbrooke held talks in Kabul with Karzai, who vowed to send a delegation to Washington headed by Afghan Foreign Minister Rangeen Dadfar Spanta to take part in a major US review of the "war on terror."
It's not just Obama, though, who is pointing fingers at Karzai's tenure.
A US intelligence assessment delivered this week by retired admiral Dennis Blair, the new director of national intelligence, warned that Karzai's government was losing legitimacy because of endemic corruption and an inability to deliver basic services.
"Corruption has exceeded culturally tolerable levels and is eroding the legitimacy of the government," Blair's report said.
"The Afghan drug trade is a major source of revenue for corrupt officials, the Taliban and other insurgent groups operating in the country and is one of the greatest long-term challenges facing Afghanistan."
US Defense Secretary Robert Gates recently warned: "If we set ourselves the objective of creating some sort of a Central Asian Valhalla over there, we will lose, because nobody in the world has that much time, patience or money, to be honest."
To all of this, Karzai, who is running for re-election this year, pointed to the schools and roads and healthcare services introduced in Afghanistan, one of the world's poorest country.
"The engagement with the Afghan population is so wide and so widely spread that we've never had in our history," he told CNN.
Asked about allegations that his brother was involved in drug trafficking, Karzai said he had asked US authorities for evidence but it was never forthcoming.
Instead, he suggested that the rumors about his brother were floated in response to disputes with the Americans over aerial spraying of poppy fields and his strong public denunciation of civilian casualties in US air strikes.
"My conclusion is, yes, this was part of a political pressure tactic, unfortunately," Karzai said.
He said there was corruption in Afghanistan as in any developing country, exacerbated by a flood of aid money in a country devastated by years of war.
"Corruption is there, and it's in different levels -- there's petty corruption, there's corruption in contracting," he said. "Part of it is our problem, part of it is the problem of the international community and the way they make contracts."
In the interview, Karzai signaled other potential differences with Washington as it increases the size of its forces in Afghanistan,
The additional forces should focus on stopping the infiltration of Al-Qaeda and Taliban fighters across the country's porous borders, especially from Pakistan, rather than in Afghan communities, he said.
"Definitely the war on terrorism is not in the Afghan villages. It never was," he said.
Karzai said he could work "very positively" with Obama.
"But... people in our part of the world, they also have sensitivities, we also have morality. Some of us stand on a very high platform of morality in this part of the world," he said.
"When I complain about civilian casualties, it's because I expect that our American friends, who I'm sure are standing on a very high platform of morality, will understand it's a human concern and it has to be responded to by our friends in the United States."
Copyright © 2009 Agence France Presse. All rights reserved. The information contained in the AFP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of Agence France Presse.
Copyright © 2009 Yahoo! Inc. All rights reserved.
James Galbraith: Due Diligence Damn it.
Although part of this article deals with the New Deal, the latter parts deal with lessons for the present situation. According to Galbraith the Geithner plan does not include due diligence and thus could very well cost the taxpayer whopping losses without showing much benefit in terms of getting banks to loan more money.
From: TPMCafe Book Club
Due Diligence, Damn It
By James K. Galbraith - February 13, 2009, 6:14PM
Rauchway's book is an exceptionally valuable pocket summary of the major actions of the New Deal. It solves a big problem for those with small pockets: how to keep enough facts at close hand to answer, with authority, all the anti-Roosevelt nonsense and disinformation in circulation these days.
But Rauchway is also very good on Hoover. He is especially good on the illusions and self-delusions of the Depression's first years. Chief among these was the optimism, the ritual statements that things would soon get better, that prosperity is "just around the corner." This false optimism we don't hear expressed so much today; President Obama knows to avoid it.
But false optimism is, nevertheless, still present. It has become a mental habit. It is institutionalized and embedded in the professional economic forecasts, notably the official baselines of the Congressional Budget Office. These cannot admit the possibility that we are at the start of a new Depression, because there is no similar experience in the statistical record on which they draw. It will take time, grim experience, and determined argument, before the President and Congress come to grips with this.
A second feature of the Hoover years was his desire to revive credit, lending and the operations of the banks. There was a touching faith in the institutions that had brought so much prosperity in the 1920s. And the people who had enabled the boom were in no position, mentally or politically, to admit their errors and change their views.
So it is today, obviously. The new Treasury, like the old one, remains in a Hoover mind-set, fixed on the chance of a top-down solution that would, in a phrase we hear constantly, "get credit flowing again." The idea is to stuff the banks with money, in the hope that they will burst and the manna will rain down.
But banks are not moneylenders! They do not need money, in order to lend! Banks create money. And they do it, when they want to. They lend, in other words, when there is a reason to lend. And not otherwise. The testimony of the bank chiefs yesterday made this very clear.
Or to put it another way, credit is not a flow. It is a contract. It requires a borrower as well as a lender. And the borrower must be both optimistic and solvent. These are the conditions that are not met today, and that cannot be met by stuffing money into the banks.
FDR realized two things. First, that the banks were bust. They had to be closed, reorganized and rebuilt. And second, that credit would revive only if the balance sheets and business prospects of the borrowers -- that is to say, of the American population -- were restored. The first he accomplished immediately. The second took through World War II, which (through victory bonds) massively recapitalized the American family. Meanwhile, for nine years New Deal spending kept Americans fed and economic activity alive.
What Secretary Geithner needs to do is, is assign teams to examine the banks. He must do this, before taking the fatal step of guaranteeing their assets. Examination, as in, look at the loan tapes underlying the mortgage-backed securities. Look at them. This is called "due diligence." Or, not buying a pig in a poke.
It will become clear that the banks either (a) do not have the loan tapes, and hence can say nothing about the quality of the underlying mortgages, or (b) where they do have the loan tapes, that sub-prime securities are deeply infected by fraud and misrepresentation.
We know this, because of the losses already incurred, and some evidence from inspections that have actually occurred.
When this becomes plain, it will be clear that there is no upside to these assets. They cannot recover. They are, essentially and for the most part, doomed to default. Therefore it is wrong to speak of the taxpayer "assuming the risk." The Treasury is proposing to take on a sure loss, thus to make a massive transfer to bank stockholders and incumbent management. With no effect on the balance sheets of the American public - and therefore no chance that credit and credit-fueled economic activity will revive.
That, so far as I understand it, is the economics of the Geithner plan.
Perhaps the Treasury has a clear and persuasive answer to this argument. But if they do, they have not made it. And their constant use of a bad metaphor - "credit flow" - raises grave doubts. Does the Treasury team really understand, in a way that clearly separates the public interest from that of the bankers, the situation we are in?
From: TPMCafe Book Club
Due Diligence, Damn It
By James K. Galbraith - February 13, 2009, 6:14PM
Rauchway's book is an exceptionally valuable pocket summary of the major actions of the New Deal. It solves a big problem for those with small pockets: how to keep enough facts at close hand to answer, with authority, all the anti-Roosevelt nonsense and disinformation in circulation these days.
But Rauchway is also very good on Hoover. He is especially good on the illusions and self-delusions of the Depression's first years. Chief among these was the optimism, the ritual statements that things would soon get better, that prosperity is "just around the corner." This false optimism we don't hear expressed so much today; President Obama knows to avoid it.
But false optimism is, nevertheless, still present. It has become a mental habit. It is institutionalized and embedded in the professional economic forecasts, notably the official baselines of the Congressional Budget Office. These cannot admit the possibility that we are at the start of a new Depression, because there is no similar experience in the statistical record on which they draw. It will take time, grim experience, and determined argument, before the President and Congress come to grips with this.
A second feature of the Hoover years was his desire to revive credit, lending and the operations of the banks. There was a touching faith in the institutions that had brought so much prosperity in the 1920s. And the people who had enabled the boom were in no position, mentally or politically, to admit their errors and change their views.
So it is today, obviously. The new Treasury, like the old one, remains in a Hoover mind-set, fixed on the chance of a top-down solution that would, in a phrase we hear constantly, "get credit flowing again." The idea is to stuff the banks with money, in the hope that they will burst and the manna will rain down.
But banks are not moneylenders! They do not need money, in order to lend! Banks create money. And they do it, when they want to. They lend, in other words, when there is a reason to lend. And not otherwise. The testimony of the bank chiefs yesterday made this very clear.
Or to put it another way, credit is not a flow. It is a contract. It requires a borrower as well as a lender. And the borrower must be both optimistic and solvent. These are the conditions that are not met today, and that cannot be met by stuffing money into the banks.
FDR realized two things. First, that the banks were bust. They had to be closed, reorganized and rebuilt. And second, that credit would revive only if the balance sheets and business prospects of the borrowers -- that is to say, of the American population -- were restored. The first he accomplished immediately. The second took through World War II, which (through victory bonds) massively recapitalized the American family. Meanwhile, for nine years New Deal spending kept Americans fed and economic activity alive.
What Secretary Geithner needs to do is, is assign teams to examine the banks. He must do this, before taking the fatal step of guaranteeing their assets. Examination, as in, look at the loan tapes underlying the mortgage-backed securities. Look at them. This is called "due diligence." Or, not buying a pig in a poke.
It will become clear that the banks either (a) do not have the loan tapes, and hence can say nothing about the quality of the underlying mortgages, or (b) where they do have the loan tapes, that sub-prime securities are deeply infected by fraud and misrepresentation.
We know this, because of the losses already incurred, and some evidence from inspections that have actually occurred.
When this becomes plain, it will be clear that there is no upside to these assets. They cannot recover. They are, essentially and for the most part, doomed to default. Therefore it is wrong to speak of the taxpayer "assuming the risk." The Treasury is proposing to take on a sure loss, thus to make a massive transfer to bank stockholders and incumbent management. With no effect on the balance sheets of the American public - and therefore no chance that credit and credit-fueled economic activity will revive.
That, so far as I understand it, is the economics of the Geithner plan.
Perhaps the Treasury has a clear and persuasive answer to this argument. But if they do, they have not made it. And their constant use of a bad metaphor - "credit flow" - raises grave doubts. Does the Treasury team really understand, in a way that clearly separates the public interest from that of the bankers, the situation we are in?
Hamas: 18 month Gaza Truce to be announced in 2-3 days
This sounds rather optimistic given that Israel has yet to form a new government and this truce is supposed to have no relationship to releasing an Israel soldier long held by Hamas. Israel using its usual technique of collective punishment refuses to open the border until the soldier is released. Perhaps there will be a separate deal now for that since Hamas formerly made the opening of the borders a condition of the truce.
Hamas: 18 Month Gaza Truce to Be Announced in 2-3 Days
No Word on Israeli Support for Deal
Posted February 12, 2009
The Hamas government has announced that the agreement for an 18-month truce agreement in the Gaza Strip has been agreed to, and will be announced by the Egyptian government within the next two or three days. Taher al-Nono, a member of their Cairo delegation, says the agreement would ensure the end of cross-border violence.
Hamas official Moussa Abu Marzouk says that the deal will have no relations to an exchange deal to free captured Israeli soldier Gilad Shalit. The Israeli government had previously linked the soldier’s release to opening the Gaza borders, which was a key requirement of Hamas for the truce.
None of the details have been released, and the Israeli government has yet to confirm that it is going along with the ceasefire. Still, the Hamas announcements show considerable confidence that a deal will be struck before the next Israeli government takes power.
Copyright 2008 Antiwar.com
setTimeout('showLayer();',200);
Monday, February 16, 2009
At least 31 killed as US drones attack Kurram
Obama is not only continuing drone attacks he is increasing them and attacking new areas. This is his new policy on drone attacks it would seem. Holbrooke is in Pakistan and has just been told that the attacks are counter-productive but no one seems to listen from the Obama administration. Within three days there have been two major drone strikes.
At Least 31 Killed as US Drones Attack Kurram
Taliban Commander Reported Killed in Latest Attacks
Posted February 16, 2009
Three US Predator drones attacked a building in the Kurram Agency of Pakistan’s Federally Administered Tribal Areas (FATA) today, killing at least 31 people. The site was reportedly being used by the Tehreek-e Taliban Pakistan (TTP), the militant faction with whom the Pakistani government has recently been coming to terms in the Swat Valley. A commander named Bahram Khan Kochi was reportedly killed in the strike.
This is the second major US air strike against Pakistani targets in the past three days, and the fourth since President Obama took office. It is also the first strike in Kurram: so far the attacks have centered almost exclusively around neighboring North and South Waziristan.
The Pakistani government has not yet commented on the latest attack, but Foreign Minister Makhdoom Shah Mahmood Qureshi denied claims made by Senator Feinstein last week that the US drones were using Pakistani bases for the attacks. Qureshi also denied that any understanding exists regarding the repeated US attacks.
Copyright 2008 Antiwar.com
At Least 31 Killed as US Drones Attack Kurram
Taliban Commander Reported Killed in Latest Attacks
Posted February 16, 2009
Three US Predator drones attacked a building in the Kurram Agency of Pakistan’s Federally Administered Tribal Areas (FATA) today, killing at least 31 people. The site was reportedly being used by the Tehreek-e Taliban Pakistan (TTP), the militant faction with whom the Pakistani government has recently been coming to terms in the Swat Valley. A commander named Bahram Khan Kochi was reportedly killed in the strike.
This is the second major US air strike against Pakistani targets in the past three days, and the fourth since President Obama took office. It is also the first strike in Kurram: so far the attacks have centered almost exclusively around neighboring North and South Waziristan.
The Pakistani government has not yet commented on the latest attack, but Foreign Minister Makhdoom Shah Mahmood Qureshi denied claims made by Senator Feinstein last week that the US drones were using Pakistani bases for the attacks. Qureshi also denied that any understanding exists regarding the repeated US attacks.
Copyright 2008 Antiwar.com
US Pakistan drone strikes
This is from antiwar.com.
More of Obama's new beginnings, the same old policies as Bush. The Pakistani govt. is being put in an embarassing position just when it is already weak and attacked for being in the pocket of the US. However, a deal with the Taliban in the SWAT area was reached just recently. This will make the US angry no doubt. If the US pays now attention to Pakistan in what they do it stands to reason that Pakistan may return the compliment. Pakistan probably feels it is better to annoy the US than to start a civil war or be thrown out of power by its own people.
US Drone Strike Kills At Least 30 in South Waziristan
Official Says More Buried Under Rubble of Destroyed House
Posted February 14, 2009
A US drone launched two missiles at a large house in South Waziristan this morning, killing at least 30 and wounding seven others. A Pakistani intelligence official is quoted as saying more people are believed to be buried under the rubble.
At least 50 people were in the house at the time of the attacks, mostly Uzbeks and Arabs believed to be fighters for the Taliban and al-Qaeda. The compound reportedly was frequented by Baitullah Mehsud, a top Tehreek-e Taliban Pakistan (TTP) leader, though he does not appear to have been present during the attack.
The timing of the attack sends a clear message to the Pakistani government, which had been hoping yesterday that President Obama would reveal his “new strategy” with respect to the drones soon.
The large death toll will likely also bring uncomfortable attention to the comments by Senator Dianne Feinstein, who claimed that the drones were being “flown out of a Pakistani base”. With the Pakistani government officially complaining about the attacks amid public outrage, such a revelation would likely further destabilize an already floundering Pakistani government.
Copyright 2008 Antiwar.com
More of Obama's new beginnings, the same old policies as Bush. The Pakistani govt. is being put in an embarassing position just when it is already weak and attacked for being in the pocket of the US. However, a deal with the Taliban in the SWAT area was reached just recently. This will make the US angry no doubt. If the US pays now attention to Pakistan in what they do it stands to reason that Pakistan may return the compliment. Pakistan probably feels it is better to annoy the US than to start a civil war or be thrown out of power by its own people.
US Drone Strike Kills At Least 30 in South Waziristan
Official Says More Buried Under Rubble of Destroyed House
Posted February 14, 2009
A US drone launched two missiles at a large house in South Waziristan this morning, killing at least 30 and wounding seven others. A Pakistani intelligence official is quoted as saying more people are believed to be buried under the rubble.
At least 50 people were in the house at the time of the attacks, mostly Uzbeks and Arabs believed to be fighters for the Taliban and al-Qaeda. The compound reportedly was frequented by Baitullah Mehsud, a top Tehreek-e Taliban Pakistan (TTP) leader, though he does not appear to have been present during the attack.
The timing of the attack sends a clear message to the Pakistani government, which had been hoping yesterday that President Obama would reveal his “new strategy” with respect to the drones soon.
The large death toll will likely also bring uncomfortable attention to the comments by Senator Dianne Feinstein, who claimed that the drones were being “flown out of a Pakistani base”. With the Pakistani government officially complaining about the attacks amid public outrage, such a revelation would likely further destabilize an already floundering Pakistani government.
Copyright 2008 Antiwar.com
Pakistan Govt. Makes Deal with Islamic Militants
This deal will outrage the Obama government. Pakistan is supposed to be eliminating the Taliban not making peace. The US could care less that in taking on the militants Pakistan has lost heavily not to mention the displaced people and the civilian casualty. No doubt Obama will continue or even expand the Bush drone policy now. It would seem that Obama's foreign policy in the area is in some disarray.
Pakistani Govt Makes Deal With Islamic Militants
Formal Deal to Be Announced Monday
Posted February 15, 2009
As President Asif Ali Zardari warned CBS that the Tehreek-e Taliban Pakistan (TTP) were trying to take over Pakistan, his government was putting the finishing touches on a deal that may end the ongoing fight in the Swat Valley, and will also place the NWFP division of Malakand under Islamic law.
Pakistani forces have been engaged in military operations in the Swat Valley since 2007, killing large numbers of civilians and displacing hundreds of thousands. The operations did little to return the region to government control, and many local officials had been pressing for a settlement. That settlement is expected to be announced as soon as Monday.
The TTP freed a Chinese hostage as a sign of good will, and has announced a 10-day ceasefire pending the formal announcement of the deal. President Zardari has ordered compensation be paid to all those affected by the NWFP violence.
Related Stories
Pakistani Govt Makes Deal With Islamic Militants
Formal Deal to Be Announced Monday
Posted February 15, 2009
As President Asif Ali Zardari warned CBS that the Tehreek-e Taliban Pakistan (TTP) were trying to take over Pakistan, his government was putting the finishing touches on a deal that may end the ongoing fight in the Swat Valley, and will also place the NWFP division of Malakand under Islamic law.
Pakistani forces have been engaged in military operations in the Swat Valley since 2007, killing large numbers of civilians and displacing hundreds of thousands. The operations did little to return the region to government control, and many local officials had been pressing for a settlement. That settlement is expected to be announced as soon as Monday.
The TTP freed a Chinese hostage as a sign of good will, and has announced a 10-day ceasefire pending the formal announcement of the deal. President Zardari has ordered compensation be paid to all those affected by the NWFP violence.
Related Stories
Large U.S. Banks on Brink of Insolvency: Experts
As this article shows there are still plenty of problems in the financial system. It is not clear that short of more drastic steps such as outright nationalisation as Roubini recommends the crisis can be solved. The Geithner plan is not at all clear. It is more like the general outline of a plan.
Large U.S. Banks on Brink of Insolvency, Experts Say
By Steve Lohr
February 13, 2009 "IHT" -- Some of the large banks in the United States, according to economists and other finance experts, are like dead men walking.A sober assessment of the growing mountain of losses from bad bets, measured in today's marketplace, would overwhelm the value of the banks' assets, they say. The banks, in their view, are insolvent.None of the experts' research focuses on individual banks, and there are certainly exceptions among the 50 largest banks in the country. Nor do consumers and businesses need to fret about their deposits, which are insured by the U.S. government. And even banks that might technically be insolvent can continue operating for a long time, and could recover their financial health when the economy improves.But without a cure for the problem of bad assets, the credit crisis that is dragging down the economy will linger, as banks cannot resume the ample lending needed to restart the wheels of commerce. The answer, say the economists and experts, is a larger, more direct government role than in the Treasury Department's plan outlined this week.The Treasury program leans heavily on a sketchy public-private investment fund to buy up the troubled mortgage-backed securities held by the banks. Instead, the experts say, the government needs to plunge in, weed out the weakest banks, pour capital into the surviving banks and sell off the bad assets.It is the basic blueprint that has proved successful, they say, in resolving major financial crises in recent years. Such forceful action was belatedly adopted by the Japanese government from 2001 to 2003, by the Swedish government in 1992 and by Washington in 1987 to 1989 to overcome the savings and loan crisis."The historical record shows that you have to do it eventually," said Adam Posen, a senior fellow at the Peterson Institute for International Economics. "Putting it off only brings more troubles and higher costs in the long run."Of course, the Obama administration's stimulus plan could help to spur economic recovery in a timely manner and the value of the banks' assets could begin to rise.Absent that, the prescription would not be easy or cheap. Estimates of the capital injection needed in the United States range to $1 trillion and beyond. By contrast, the commitment of taxpayer money is the $350 billion remaining in the financial bailout approved by Congress last fall.Meanwhile, the loss estimates keep mounting.Nouriel Roubini, a professor of economics at the Stern School of Business at New York University, has been both pessimistic and prescient about the gathering credit problems. In a new report, Roubini estimates that total losses on loans by American financial firms and the fall in the market value of the assets they hold will reach $3.6 trillion, up from his previous estimate of $2 trillion.Of the total, he calculates that American banks face half that risk, or $1.8 trillion, with the rest borne by other financial institutions in the United States and abroad."The United States banking system is effectively insolvent," Roubini said.For its part, the banking industry bridles at such broad-brush analysis. The industry defines solvency bank by bank, and uses the value of a bank's assets as they are carried on its books rather than the market prices calculated by economists."Our analysis shows that the banks have varying degrees of solvency and does not reveal that any institution is insolvent," said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, a trade group whose members include the largest banks.Edward Yingling, president of the American Bankers Association, called claims of technical insolvency "speculation by people who have no specific knowledge of bank assets."Roubini's numbers may be the highest, but many others share his rising sense of alarm. Simon Johnson, a former chief economist at the International Monetary Fund, estimates that the United States banks have a capital shortage of $500 billion. "In a more severe recession, it will take $1 trillion or so to properly capitalize the banks," said Johnson, an economist at the Massachusetts Institute of Technology.At the end of January, the IMF raised its estimate of the potential losses from loans and other credit securities originated in the United States to $2.2 trillion, up from $1.4 trillion last October. Over the next two years, the IMF estimated, United States and European banks would need at least $500 billion in new capital, a figure more conservative than those of many economists.Still, these numbers are all based on estimates of the value of complex mortgage-backed securities in a very uncertain economy. "At this moment, the liabilities they have far exceed their assets," said Posen of the Peterson institute. "They are insolvent."Yet, as Posen and other economists note, there are crucial issues of timing and market psychology that surround the discussion of bank solvency. If one assumes that current conditions reflect a temporary panic, then the value of the banks' distressed assets could well recover over time. If not, many banks may be permanently impaired."We won't know what the losses are on these mortgage-backed securities, and we won't until the housing market stabilizes," said Richard Portes, an economist at the London Business School.Raghuram Rajan, a professor of finance and an economist at the University of Chicago graduate business school, draws the distinction between "liquidation values" and those of calmer times, or "going concern values." In a troubled time for banks, Rajan said, analysts are constantly scrutinizing current and potential losses at the banks, but that is not the norm."If they had to sell these securities today, the losses would be far beyond their capital at this point," he said. "But if the prices of these assets will recover over the next year or so, if they don't have to sell at distress prices, the banks could have a new lease on life by giving them some time."That sort of breathing room is known as regulatory forbearance, essentially a bet by regulators that time will help heal banking troubles. It has worked before.In the 1980s, during the height of the Latin American debt crisis, the total risk to the nine money-center banks in New York was estimated at more than three times the capital of those banks. The regulators, analysts say, did not force the banks to value those loans at the fire-sale prices of the moment, helping to avert a disaster in the banking system.In the current crisis, experts warn, banks need to get rid of bad assets quickly. The Treasury's public-private investment fund is an effort to do that.But many economists and other finance experts say that the government may soon have to move in and take on troubled assets itself to resolve the credit crisis. Then, they say, the government could have the patience to wait for the economy to improve.Initially, that would put more taxpayer money on the line, but in the end it might reduce overall losses. That is what happened during the savings and loan crisis, when the troubled assets, mostly real estate, were seized by the Resolution Trust Corporation, a government-owned asset management company, and sold over a few years.The eventual losses, an estimated $130 billion, were far less than if the hotels, office buildings and residential developments had been sold immediately."The taxpayer money would be used to acquire assets, and behind most of those securities are mortgages, houses, and we know they are not worthless," Portes said.Eric Dash contributed reporting.
Large U.S. Banks on Brink of Insolvency, Experts Say
By Steve Lohr
February 13, 2009 "IHT" -- Some of the large banks in the United States, according to economists and other finance experts, are like dead men walking.A sober assessment of the growing mountain of losses from bad bets, measured in today's marketplace, would overwhelm the value of the banks' assets, they say. The banks, in their view, are insolvent.None of the experts' research focuses on individual banks, and there are certainly exceptions among the 50 largest banks in the country. Nor do consumers and businesses need to fret about their deposits, which are insured by the U.S. government. And even banks that might technically be insolvent can continue operating for a long time, and could recover their financial health when the economy improves.But without a cure for the problem of bad assets, the credit crisis that is dragging down the economy will linger, as banks cannot resume the ample lending needed to restart the wheels of commerce. The answer, say the economists and experts, is a larger, more direct government role than in the Treasury Department's plan outlined this week.The Treasury program leans heavily on a sketchy public-private investment fund to buy up the troubled mortgage-backed securities held by the banks. Instead, the experts say, the government needs to plunge in, weed out the weakest banks, pour capital into the surviving banks and sell off the bad assets.It is the basic blueprint that has proved successful, they say, in resolving major financial crises in recent years. Such forceful action was belatedly adopted by the Japanese government from 2001 to 2003, by the Swedish government in 1992 and by Washington in 1987 to 1989 to overcome the savings and loan crisis."The historical record shows that you have to do it eventually," said Adam Posen, a senior fellow at the Peterson Institute for International Economics. "Putting it off only brings more troubles and higher costs in the long run."Of course, the Obama administration's stimulus plan could help to spur economic recovery in a timely manner and the value of the banks' assets could begin to rise.Absent that, the prescription would not be easy or cheap. Estimates of the capital injection needed in the United States range to $1 trillion and beyond. By contrast, the commitment of taxpayer money is the $350 billion remaining in the financial bailout approved by Congress last fall.Meanwhile, the loss estimates keep mounting.Nouriel Roubini, a professor of economics at the Stern School of Business at New York University, has been both pessimistic and prescient about the gathering credit problems. In a new report, Roubini estimates that total losses on loans by American financial firms and the fall in the market value of the assets they hold will reach $3.6 trillion, up from his previous estimate of $2 trillion.Of the total, he calculates that American banks face half that risk, or $1.8 trillion, with the rest borne by other financial institutions in the United States and abroad."The United States banking system is effectively insolvent," Roubini said.For its part, the banking industry bridles at such broad-brush analysis. The industry defines solvency bank by bank, and uses the value of a bank's assets as they are carried on its books rather than the market prices calculated by economists."Our analysis shows that the banks have varying degrees of solvency and does not reveal that any institution is insolvent," said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, a trade group whose members include the largest banks.Edward Yingling, president of the American Bankers Association, called claims of technical insolvency "speculation by people who have no specific knowledge of bank assets."Roubini's numbers may be the highest, but many others share his rising sense of alarm. Simon Johnson, a former chief economist at the International Monetary Fund, estimates that the United States banks have a capital shortage of $500 billion. "In a more severe recession, it will take $1 trillion or so to properly capitalize the banks," said Johnson, an economist at the Massachusetts Institute of Technology.At the end of January, the IMF raised its estimate of the potential losses from loans and other credit securities originated in the United States to $2.2 trillion, up from $1.4 trillion last October. Over the next two years, the IMF estimated, United States and European banks would need at least $500 billion in new capital, a figure more conservative than those of many economists.Still, these numbers are all based on estimates of the value of complex mortgage-backed securities in a very uncertain economy. "At this moment, the liabilities they have far exceed their assets," said Posen of the Peterson institute. "They are insolvent."Yet, as Posen and other economists note, there are crucial issues of timing and market psychology that surround the discussion of bank solvency. If one assumes that current conditions reflect a temporary panic, then the value of the banks' distressed assets could well recover over time. If not, many banks may be permanently impaired."We won't know what the losses are on these mortgage-backed securities, and we won't until the housing market stabilizes," said Richard Portes, an economist at the London Business School.Raghuram Rajan, a professor of finance and an economist at the University of Chicago graduate business school, draws the distinction between "liquidation values" and those of calmer times, or "going concern values." In a troubled time for banks, Rajan said, analysts are constantly scrutinizing current and potential losses at the banks, but that is not the norm."If they had to sell these securities today, the losses would be far beyond their capital at this point," he said. "But if the prices of these assets will recover over the next year or so, if they don't have to sell at distress prices, the banks could have a new lease on life by giving them some time."That sort of breathing room is known as regulatory forbearance, essentially a bet by regulators that time will help heal banking troubles. It has worked before.In the 1980s, during the height of the Latin American debt crisis, the total risk to the nine money-center banks in New York was estimated at more than three times the capital of those banks. The regulators, analysts say, did not force the banks to value those loans at the fire-sale prices of the moment, helping to avert a disaster in the banking system.In the current crisis, experts warn, banks need to get rid of bad assets quickly. The Treasury's public-private investment fund is an effort to do that.But many economists and other finance experts say that the government may soon have to move in and take on troubled assets itself to resolve the credit crisis. Then, they say, the government could have the patience to wait for the economy to improve.Initially, that would put more taxpayer money on the line, but in the end it might reduce overall losses. That is what happened during the savings and loan crisis, when the troubled assets, mostly real estate, were seized by the Resolution Trust Corporation, a government-owned asset management company, and sold over a few years.The eventual losses, an estimated $130 billion, were far less than if the hotels, office buildings and residential developments had been sold immediately."The taxpayer money would be used to acquire assets, and behind most of those securities are mortgages, houses, and we know they are not worthless," Portes said.Eric Dash contributed reporting.
Obama goes to bat for secrecy
This is from sfgate.
Read this and weep. Obama now is in effect a program he fought against as a candidate. Bush of course was lambasted for his policy but Obama is treated like a lamb. The state secrets doctrine seems to justify refusing to give out anything that might embarass the administration. Now the govt. is democratic there is certainly bipartisanship in supporting the Bush doctrine! Another example of new beginnings no doubt.
Obama administration goes to bat for secrecy
Bob Egelko, Chronicle Staff Writer
Friday, February 13, 2009
(02-12) 18:16 PST SAN FRANCISCO -- For the second time this week, the Obama administration has gone to court in San Francisco to argue for secrecy in defending a terrorism policy crafted under George W. Bush - in this case, wiretapping that President Obama denounced as a candidate.
In papers filed Wednesday night, the new Justice Department asked a federal judge to suspend action on a suit challenging the wiretapping program, arguing that proceedings would jeopardize national security. Government lawyers also said the administration, not the courts, controls access to classified material at the heart of the case.
In combative tones, the lawyers told Chief U.S. District Judge Vaughn Walker that they would ask a federal appeals court to put the case on hold unless he acts by 3 p.m. today.
The dispute involves Walker's Jan. 5 order to allow plaintiffs who say the government illegally wiretapped their phones to read a classified surveillance document that could confirm the assertion and avoid dismissal of their suit. Lawyers for the Obama administration say the judge's decision "presents a clear-cut conflict between the court and the executive branch."
Jon Eisenberg, lawyer for Al-Haramain Islamic Foundation, which filed the suit, said, "They have drawn a line in the sand between the executive and the judiciary, saying, 'You do not control these documents, we do.' "
The government inadvertently sent the classified document to Al-Haramain in 2005. It reportedly showed that the now-defunct Islamic charity had been wiretapped before the government designated it a terrorist organization.
Al-Haramain returned the document at the request of the government, which then argued in court that without the document, the group could not prove it had been wiretapped.
Numerous groups brought similar cases after Bush acknowledged that he had ordered the National Security Agency in late 2001 to intercept phone calls and e-mails between U.S. citizens and suspected foreign terrorists without congressional or court approval. But only Al-Haramain's case survives.
Obama attacked the surveillance program as a presidential candidate, promising "no more illegal wiretapping of American citizens" in an August 2007 speech. His future attorney general, Eric Holder, said in June 2008 that Bush had defied federal law by authorizing the program.
The new Justice Department filing, which elaborated on arguments by the same lawyers under the Bush administration, addressed only the need to freeze the lawsuit and keep information secret and did not discuss the legality of the surveillance program. But if the department's position is upheld, Al-Haramain's suit will be dismissed.
Department spokesman Charles Miller confirmed that the brief represented the views of the new administration and its attorney general.
On Monday, a Justice Department lawyer told the Ninth U.S. Circuit Court of Appeals in San Francisco that the Obama administration endorsed a Bush argument that a suit over the CIA's rendition program endangers state secrets and should be dismissed. The five plaintiffs in that suit say a San Jose subsidiary of Jeppesen Dataplan, a flight-planning company, helped the CIA transport them to foreign nations for torture.
In Al-Haramain's case, the appeals court ruled last year that the organization could not use any information it had seen in the classified document to prove it had been wiretapped. But Walker, an appointee of former President George H.W. Bush, said in his Jan. 5 ruling that the Islamic organization had presented enough evidence from public statements to show that it had probably been a target of the surveillance program.
The judge said he would examine the document in private, then make it available to Al-Haramain lawyers with security clearances so they could oppose dismissal.
The Justice Department contends Walker was wrong on two counts: that the material can be safely disclosed, even in private, and that an alleged surveillance victim can sue without government acknowledgement that wiretapping occurred. The department asked Walker to put the case on hold while it asks the court to consider those issues.
Failing to do so could cause "grave harm to national security," the lawyers wrote.
Eisenberg, Al-Haramain's lawyer, said the filing was "disappointing to a great many people who have had much hope for change."
E-mail Bob Egelko at begelko@sfchronicle.com.
Read this and weep. Obama now is in effect a program he fought against as a candidate. Bush of course was lambasted for his policy but Obama is treated like a lamb. The state secrets doctrine seems to justify refusing to give out anything that might embarass the administration. Now the govt. is democratic there is certainly bipartisanship in supporting the Bush doctrine! Another example of new beginnings no doubt.
Obama administration goes to bat for secrecy
Bob Egelko, Chronicle Staff Writer
Friday, February 13, 2009
(02-12) 18:16 PST SAN FRANCISCO -- For the second time this week, the Obama administration has gone to court in San Francisco to argue for secrecy in defending a terrorism policy crafted under George W. Bush - in this case, wiretapping that President Obama denounced as a candidate.
In papers filed Wednesday night, the new Justice Department asked a federal judge to suspend action on a suit challenging the wiretapping program, arguing that proceedings would jeopardize national security. Government lawyers also said the administration, not the courts, controls access to classified material at the heart of the case.
In combative tones, the lawyers told Chief U.S. District Judge Vaughn Walker that they would ask a federal appeals court to put the case on hold unless he acts by 3 p.m. today.
The dispute involves Walker's Jan. 5 order to allow plaintiffs who say the government illegally wiretapped their phones to read a classified surveillance document that could confirm the assertion and avoid dismissal of their suit. Lawyers for the Obama administration say the judge's decision "presents a clear-cut conflict between the court and the executive branch."
Jon Eisenberg, lawyer for Al-Haramain Islamic Foundation, which filed the suit, said, "They have drawn a line in the sand between the executive and the judiciary, saying, 'You do not control these documents, we do.' "
The government inadvertently sent the classified document to Al-Haramain in 2005. It reportedly showed that the now-defunct Islamic charity had been wiretapped before the government designated it a terrorist organization.
Al-Haramain returned the document at the request of the government, which then argued in court that without the document, the group could not prove it had been wiretapped.
Numerous groups brought similar cases after Bush acknowledged that he had ordered the National Security Agency in late 2001 to intercept phone calls and e-mails between U.S. citizens and suspected foreign terrorists without congressional or court approval. But only Al-Haramain's case survives.
Obama attacked the surveillance program as a presidential candidate, promising "no more illegal wiretapping of American citizens" in an August 2007 speech. His future attorney general, Eric Holder, said in June 2008 that Bush had defied federal law by authorizing the program.
The new Justice Department filing, which elaborated on arguments by the same lawyers under the Bush administration, addressed only the need to freeze the lawsuit and keep information secret and did not discuss the legality of the surveillance program. But if the department's position is upheld, Al-Haramain's suit will be dismissed.
Department spokesman Charles Miller confirmed that the brief represented the views of the new administration and its attorney general.
On Monday, a Justice Department lawyer told the Ninth U.S. Circuit Court of Appeals in San Francisco that the Obama administration endorsed a Bush argument that a suit over the CIA's rendition program endangers state secrets and should be dismissed. The five plaintiffs in that suit say a San Jose subsidiary of Jeppesen Dataplan, a flight-planning company, helped the CIA transport them to foreign nations for torture.
In Al-Haramain's case, the appeals court ruled last year that the organization could not use any information it had seen in the classified document to prove it had been wiretapped. But Walker, an appointee of former President George H.W. Bush, said in his Jan. 5 ruling that the Islamic organization had presented enough evidence from public statements to show that it had probably been a target of the surveillance program.
The judge said he would examine the document in private, then make it available to Al-Haramain lawyers with security clearances so they could oppose dismissal.
The Justice Department contends Walker was wrong on two counts: that the material can be safely disclosed, even in private, and that an alleged surveillance victim can sue without government acknowledgement that wiretapping occurred. The department asked Walker to put the case on hold while it asks the court to consider those issues.
Failing to do so could cause "grave harm to national security," the lawyers wrote.
Eisenberg, Al-Haramain's lawyer, said the filing was "disappointing to a great many people who have had much hope for change."
E-mail Bob Egelko at begelko@sfchronicle.com.
Sunday, February 15, 2009
Americans Want Torture Inquiry, Obama Doesn't
Interesting that the American people by a considerable majority want an inquiry. Obama is not only not trying to initiate an inquiry but he is actively following the same policy as Bush in preventing transparency by invoking the state secrets defence against revealing what happened.
Americans Want Torture Inquiry, Obama Doesn’t
Written by Thomas R. Eddlem
Friday, 13 February 2009 13:48
A Gallup Poll released February 12 revealed that 62 percent of Americans want to investigate or criminally prosecute Bush administration officials who authorized torture in the so-called “war on terror.” But even though President Obama has said numerous times that “nobody's above the law,” on February 10 he used the Bush administration’s “state secrets” gambit to quash a lawsuit attempting to penalize some of those involved in renditioning torture subjects.
That lawsuit sought damages against a private airline used by the CIA to rendition low-value suspects for torture by dictatorial regimes abroad. One of the five plaintiffs, Benyam Muhammed (a British and Ethiopian citizen), alleged he was renditioned to Morocco where torturers made razor cuts on his penis. The lawsuit alleges that San Jose-based Jeppesen DataPlan Inc. should have known that its planes were being used to ferry suspects for torture and is therefore liable for damages.But because the Obama administration invoked the “state secrets” policy at the Ninth U.S. Circuit Court of Appeals in San Francisco, the lawsuit’s likelihood of revealing felony torture on the part of Bush officials is now remote.“This is not change,” ACLU Executive Director Anthony Romero correctly told the Associated Press. “Candidate Obama ran on a platform that would reform the abuse of state secrets, but President Obama's Justice Department has disappointingly reneged on that important civil liberties issue.”
The Obama policy in San Francisco also drew a rare condemnation of a Democrat from the New York Times editorial page. The Gallup Poll came just two weeks after it was revealed that the Obama administration’s Justice Department has dispatched several government lawyers to defend Bush-era Justice Department official John Yoo from a lawsuit by torture victim Jose Padilla. Jordan Paust of the University of Houston Law Center calls giving Justice Department lawyers to alleged international war criminals “an outrage and constitute an embarrassing embrace of international criminal conduct that the international community has demanded must result in absolutely no form of impunity.” Paust says that alleged criminals should bear the costs of their own defense, and notes there is a long historical case for this. At “a 1781 Resolution of the Continental Congress, the Founders expected that 'the author of ... injuries [that are “offenses against the law of nations”] should compensate the damage out of his private fortune.'”President Obama’s actions are fast diverging from his public rhetoric.
Americans Want Torture Inquiry, Obama Doesn’t
Written by Thomas R. Eddlem
Friday, 13 February 2009 13:48
A Gallup Poll released February 12 revealed that 62 percent of Americans want to investigate or criminally prosecute Bush administration officials who authorized torture in the so-called “war on terror.” But even though President Obama has said numerous times that “nobody's above the law,” on February 10 he used the Bush administration’s “state secrets” gambit to quash a lawsuit attempting to penalize some of those involved in renditioning torture subjects.
That lawsuit sought damages against a private airline used by the CIA to rendition low-value suspects for torture by dictatorial regimes abroad. One of the five plaintiffs, Benyam Muhammed (a British and Ethiopian citizen), alleged he was renditioned to Morocco where torturers made razor cuts on his penis. The lawsuit alleges that San Jose-based Jeppesen DataPlan Inc. should have known that its planes were being used to ferry suspects for torture and is therefore liable for damages.But because the Obama administration invoked the “state secrets” policy at the Ninth U.S. Circuit Court of Appeals in San Francisco, the lawsuit’s likelihood of revealing felony torture on the part of Bush officials is now remote.“This is not change,” ACLU Executive Director Anthony Romero correctly told the Associated Press. “Candidate Obama ran on a platform that would reform the abuse of state secrets, but President Obama's Justice Department has disappointingly reneged on that important civil liberties issue.”
The Obama policy in San Francisco also drew a rare condemnation of a Democrat from the New York Times editorial page. The Gallup Poll came just two weeks after it was revealed that the Obama administration’s Justice Department has dispatched several government lawyers to defend Bush-era Justice Department official John Yoo from a lawsuit by torture victim Jose Padilla. Jordan Paust of the University of Houston Law Center calls giving Justice Department lawyers to alleged international war criminals “an outrage and constitute an embarrassing embrace of international criminal conduct that the international community has demanded must result in absolutely no form of impunity.” Paust says that alleged criminals should bear the costs of their own defense, and notes there is a long historical case for this. At “a 1781 Resolution of the Continental Congress, the Founders expected that 'the author of ... injuries [that are “offenses against the law of nations”] should compensate the damage out of his private fortune.'”President Obama’s actions are fast diverging from his public rhetoric.
Obama drone policy and Pakistan
This is from the dailytimes(Pakistan)
As can be seen in other posts below the Obama policy is just a continuing of the Bush policy even though Pakistan apparently expected Obama to stop the attacks when he took power.
US strategy on drone attacks soon: Qureshi
LAHORE: US President Barack Obama will soon tell Pakistan about a new American strategy on drone attacks, Foreign Minister Shah Mehmood Qureshi said on Friday. According to a private TV channel, the foreign minister told a British radio station that Pakistan had already demanded that the United States stop drone attacks in the Tribal Areas. He said Pakistan had fully cooperated with the US in the war on terror. daily times monitor
This is from the LATimes.
It is rather surprising that Feinstein has revealed this. It can only be trouble for the Pakistan govt. You would almost think that the US might want a wider civil war in Pakistan. Perhaps it wants to be invited in to help security but if so that shows that Obama is even more clueless than Bush. Maybe a reinvigorated military Keynesianism that both stimulates the economy and appeals to patriotism and the war against the terror is supposed to deflect anger from Wall street to Islamic terrorism. On the other hand perhaps Feinstein is just a genuine Dumbocrat.
From the Los Angeles Times
Feinstein comment on U.S. drones likely to embarrass Pakistan
The Predator planes that launch missile strikes against militants are based in Pakistan, the senator says. That suggests a much deeper relationship with the U.S. than Islamabad would like to admit.By Greg MillerFebruary 13, 2009Reporting from Washington — A senior U.S. lawmaker said Thursday that unmanned CIA Predator aircraft operating in Pakistan are flown from an air base in that country, a revelation likely to embarrass the Pakistani government and complicate its counter-terrorism collaboration with the United States.The disclosure by Sen. Dianne Feinstein (D-Calif.), chairwoman of the Senate Intelligence Committee, marked the first time a U.S. official had publicly commented on where the Predator aircraft patrolling Pakistan take off and land.At a hearing, Feinstein expressed surprise over Pakistani opposition to the campaign of Predator-launched CIA missile strikes against Islamic extremist targets along Pakistan's northwestern border. "As I understand it, these are flown out of a Pakistani base," she said.The basing of the pilotless aircraft in Pakistan suggests a much deeper relationship with the United States on counter-terrorism matters than has been publicly acknowledged. Such an arrangement would be at odds with protests lodged by officials in Islamabad, the capital, and could inflame anti-American sentiment in the country.The CIA declined to comment, but former U.S. intelligence officials, speaking on condition of anonymity because of the sensitivity of the information, confirmed that Feinstein's account was accurate. Philip J. LaVelle, a spokesman for Feinstein, said her comment was based solely on previous news reports that Predators were operated from bases near Islamabad."We strongly object to Sen. Feinstein's remarks being characterized as anything other than a reference" to an article that appeared last March in the Washington Post, LaVelle said. Feinstein did not refer to newspaper accounts during the hearing. Many counter-terrorism experts have assumed that the aircraft take off from U.S. military installations in Afghanistan and are remotely piloted from locations in the United States. Experts said the disclosure could create political problems for the government in Islamabad, which is considered relatively weak.The attacks are extremely unpopular in Pakistan, in part because of the high number of civilian casualties inflicted in dozens of strikes.The use of Predators armed with Hellfire antitank missiles has emerged as perhaps the most important tool of the U.S. in its effort to attack Al Qaeda in its sanctuaries along the Pakistani-Afghan border. A New Year's Day strike killed two senior Al Qaeda operatives who were suspected of involvement in the bombing of Islamabad's Marriott Hotel.They were among at least eight senior Al Qaeda figures reportedly killed in Predator strikes over the last seven months as part of a stepped-up missile campaign.Bruce Hoffman, a terrorism expert at Georgetown University, said Feinstein's comments put Pakistan's government on the spot."If accurate, what this says is that Pakistani involvement, or at least acquiescence, has been much more extensive than has previously been known," he said. "It puts the Pakistani government in a far more difficult position [in terms of] its credibility with its own people. Unfortunately it also has the potential to threaten Pakistani-American relations."As chairwoman of the Senate Intelligence Committee, Feinstein is privy to classified details of U.S. counter-terrorism efforts. The CIA does not publicly acknowledge a campaign against Pakistan-based extremists using remotely piloted planes, making Feinstein's comment all the more unusual.Feinstein's disclosure came during testimony before the Senate Intelligence Committee by U.S. Director of National Intelligence Dennis C. Blair on the nation's security threats. Blair did not respond directly to Feinstein's remark, except to say that Pakistan was "sorting out" its cooperation with the United States.Pakistani officials have long denied that they have even granted the U.S. permission to fly the Predator planes over Pakistani territory, let alone to operate the aircraft from within the country. The civilian leadership that took over from an unpopular former general, Pervez Musharraf, last year, has gone to significant lengths to distance itself from the Predator strikes.The Pakistani government regularly lodges diplomatic protests against the strikes as a violation of its sovereignty, and officials said the subject was raised with Richard C. Holbrooke, a newly appointed U.S. envoy to the region, who completed his first visit to the country Thursday.But a former CIA official familiar with the Predator operations said Pakistan's government secretly approves of the flights because of the growing militant threat.Feinstein prefaced her comment about the Predator basing Thursday by noting that Holbrooke "ran into considerable concern about the use of the Predator strikes in the FATA areas," a reference to what Pakistan calls its Federally Administered Tribal Area along the border with Afghanistan. Many Pakistanis believe that the civilian leadership, despite public anger, has continued Musharraf's policy of giving the United States tacit permission to carry out the strikes.The CIA has been working to step up its presence in Pakistan in recent years. It has deployed as many as 200 people to the country, one of its largest overseas operations besides Iraq, current and former agency officials have estimated. That contingent works alongside other U.S. operatives who specialize in electronic communications and spy satellites.In his prepared testimony Thursday, Blair said that Al Qaeda had "lost significant parts of its command structure since 2008."
Copyright 2009 Los Angeles Times
Here comes the official contradiction of Feinstein. However the Pakistani population may believe Feinstein rather than Mukhtar. In any event the attacks continue wherever the drones are based and supposedly against the express wishes of the Pakistana government.
This is from the Daily Times.
Pak bases not being used, says Mukhtar
LAHORE: Defence Minister Ahmad Mukhtar has denied that US drone attacks in the Tribal Areas are being carried out from Pakistani airbases. “We do have the facilities from where they can fly, but they are not being flown from Pakistani territory. They are being flown from Afghanistan,” he told a private TV channel. About comments by the US Senate Intelligence Committee chairwoman, Mukhtar said, “I do not know on what she based all this.” daily times monitor
As can be seen in other posts below the Obama policy is just a continuing of the Bush policy even though Pakistan apparently expected Obama to stop the attacks when he took power.
US strategy on drone attacks soon: Qureshi
LAHORE: US President Barack Obama will soon tell Pakistan about a new American strategy on drone attacks, Foreign Minister Shah Mehmood Qureshi said on Friday. According to a private TV channel, the foreign minister told a British radio station that Pakistan had already demanded that the United States stop drone attacks in the Tribal Areas. He said Pakistan had fully cooperated with the US in the war on terror. daily times monitor
This is from the LATimes.
It is rather surprising that Feinstein has revealed this. It can only be trouble for the Pakistan govt. You would almost think that the US might want a wider civil war in Pakistan. Perhaps it wants to be invited in to help security but if so that shows that Obama is even more clueless than Bush. Maybe a reinvigorated military Keynesianism that both stimulates the economy and appeals to patriotism and the war against the terror is supposed to deflect anger from Wall street to Islamic terrorism. On the other hand perhaps Feinstein is just a genuine Dumbocrat.
From the Los Angeles Times
Feinstein comment on U.S. drones likely to embarrass Pakistan
The Predator planes that launch missile strikes against militants are based in Pakistan, the senator says. That suggests a much deeper relationship with the U.S. than Islamabad would like to admit.By Greg MillerFebruary 13, 2009Reporting from Washington — A senior U.S. lawmaker said Thursday that unmanned CIA Predator aircraft operating in Pakistan are flown from an air base in that country, a revelation likely to embarrass the Pakistani government and complicate its counter-terrorism collaboration with the United States.The disclosure by Sen. Dianne Feinstein (D-Calif.), chairwoman of the Senate Intelligence Committee, marked the first time a U.S. official had publicly commented on where the Predator aircraft patrolling Pakistan take off and land.At a hearing, Feinstein expressed surprise over Pakistani opposition to the campaign of Predator-launched CIA missile strikes against Islamic extremist targets along Pakistan's northwestern border. "As I understand it, these are flown out of a Pakistani base," she said.The basing of the pilotless aircraft in Pakistan suggests a much deeper relationship with the United States on counter-terrorism matters than has been publicly acknowledged. Such an arrangement would be at odds with protests lodged by officials in Islamabad, the capital, and could inflame anti-American sentiment in the country.The CIA declined to comment, but former U.S. intelligence officials, speaking on condition of anonymity because of the sensitivity of the information, confirmed that Feinstein's account was accurate. Philip J. LaVelle, a spokesman for Feinstein, said her comment was based solely on previous news reports that Predators were operated from bases near Islamabad."We strongly object to Sen. Feinstein's remarks being characterized as anything other than a reference" to an article that appeared last March in the Washington Post, LaVelle said. Feinstein did not refer to newspaper accounts during the hearing. Many counter-terrorism experts have assumed that the aircraft take off from U.S. military installations in Afghanistan and are remotely piloted from locations in the United States. Experts said the disclosure could create political problems for the government in Islamabad, which is considered relatively weak.The attacks are extremely unpopular in Pakistan, in part because of the high number of civilian casualties inflicted in dozens of strikes.The use of Predators armed with Hellfire antitank missiles has emerged as perhaps the most important tool of the U.S. in its effort to attack Al Qaeda in its sanctuaries along the Pakistani-Afghan border. A New Year's Day strike killed two senior Al Qaeda operatives who were suspected of involvement in the bombing of Islamabad's Marriott Hotel.They were among at least eight senior Al Qaeda figures reportedly killed in Predator strikes over the last seven months as part of a stepped-up missile campaign.Bruce Hoffman, a terrorism expert at Georgetown University, said Feinstein's comments put Pakistan's government on the spot."If accurate, what this says is that Pakistani involvement, or at least acquiescence, has been much more extensive than has previously been known," he said. "It puts the Pakistani government in a far more difficult position [in terms of] its credibility with its own people. Unfortunately it also has the potential to threaten Pakistani-American relations."As chairwoman of the Senate Intelligence Committee, Feinstein is privy to classified details of U.S. counter-terrorism efforts. The CIA does not publicly acknowledge a campaign against Pakistan-based extremists using remotely piloted planes, making Feinstein's comment all the more unusual.Feinstein's disclosure came during testimony before the Senate Intelligence Committee by U.S. Director of National Intelligence Dennis C. Blair on the nation's security threats. Blair did not respond directly to Feinstein's remark, except to say that Pakistan was "sorting out" its cooperation with the United States.Pakistani officials have long denied that they have even granted the U.S. permission to fly the Predator planes over Pakistani territory, let alone to operate the aircraft from within the country. The civilian leadership that took over from an unpopular former general, Pervez Musharraf, last year, has gone to significant lengths to distance itself from the Predator strikes.The Pakistani government regularly lodges diplomatic protests against the strikes as a violation of its sovereignty, and officials said the subject was raised with Richard C. Holbrooke, a newly appointed U.S. envoy to the region, who completed his first visit to the country Thursday.But a former CIA official familiar with the Predator operations said Pakistan's government secretly approves of the flights because of the growing militant threat.Feinstein prefaced her comment about the Predator basing Thursday by noting that Holbrooke "ran into considerable concern about the use of the Predator strikes in the FATA areas," a reference to what Pakistan calls its Federally Administered Tribal Area along the border with Afghanistan. Many Pakistanis believe that the civilian leadership, despite public anger, has continued Musharraf's policy of giving the United States tacit permission to carry out the strikes.The CIA has been working to step up its presence in Pakistan in recent years. It has deployed as many as 200 people to the country, one of its largest overseas operations besides Iraq, current and former agency officials have estimated. That contingent works alongside other U.S. operatives who specialize in electronic communications and spy satellites.In his prepared testimony Thursday, Blair said that Al Qaeda had "lost significant parts of its command structure since 2008."
Copyright 2009 Los Angeles Times
Here comes the official contradiction of Feinstein. However the Pakistani population may believe Feinstein rather than Mukhtar. In any event the attacks continue wherever the drones are based and supposedly against the express wishes of the Pakistana government.
This is from the Daily Times.
Pak bases not being used, says Mukhtar
LAHORE: Defence Minister Ahmad Mukhtar has denied that US drone attacks in the Tribal Areas are being carried out from Pakistani airbases. “We do have the facilities from where they can fly, but they are not being flown from Pakistani territory. They are being flown from Afghanistan,” he told a private TV channel. About comments by the US Senate Intelligence Committee chairwoman, Mukhtar said, “I do not know on what she based all this.” daily times monitor
Saturday, February 14, 2009
Jollibee in NY: Fast Food for the Filipino soul.
Jollibee is fast food for the Filipino soul only in the sense that MacDonald's is fast food for the US soul. Both are popular and representative of fast food chains in their respective countries. Jollibee might be called MacDonald's with Filipino characteristics! Jollibee already exists in California I gather. As I recall when Jollibee first arrived on the West Coast it tried to mimic US menus too closely and were successful only when they switched to more of the items that one would find in their Philippine outlets.
February 15, 2009
Woodside
Fast Food for the Filipino Soul
By MARK FOGGIN
IT’S the rare neighborhood of mom-and-pop shops that actually welcomes a fast-food joint. But for months, the Filipino-American community centered in Woodside, Queens, has been eagerly awaiting the opening of a Filipino food-chain restaurant called Jollibee, and describing its dishes in breathless, almost reverent tones.
“This is the taste of my childhood,” said Emma Ilagan, a 36-year-old customer service representative for Verizon Wireless who left the Philippines when she was 21.
“Until now, you have to go to California for Chickenjoy,” she added, referring to the chain’s popular dish of fried chicken, gravy and rice.
Or as Natasha Starkey, a conservatory student, said last month when she dropped off an application for a part-time job, “This is Filipino soul food.”
Jollibee, the dominant fast-food chain in the Philippines, where it has more than 600 outlets, is opening the restaurant, its first on the East Coast, this weekend. Its fare is a mix of fast-food staples like burgers and Chickenjoy, along with more regional dishes like smoked bangus, or milkfish — a national symbol of the Philippines — served with vinegar and pepper.
While Filipino-Americans on the West Coast can enjoy these dishes at two dozen Jollibee locations, those in New York have been able to only reminisce about such items. But in late December, an image of the chain’s cheery mascot, a smiling bumblebee sporting a toque, was mounted over the doorway of a former Mexican restaurant at 63rd Street and Roosevelt Avenue, in the shadow of the No. 7 elevated.
The chain’s impending arrival has had Woodside excited for months.
On Friday, some workers were labeling the menu boards with calorie counts while others were breading dozens of pieces of chicken in the sleek, new kitchen.
“We’re expecting a line outside at 7 a.m.,” said Iyoh Villamayor, Jollibee’s vice president for operations. “I notified the local police precinct.”
Even local business owners, who might be expected to view Jollibee’s arrival with trepidation, especially as the economy sags, said they were excited.
“I think it’s a positive thing for Filipinos,” said Jacqueline Bacani, who manages a family-style Filipino restaurant called Ihawan a few blocks away. “It demonstrates an expansion of the Filipino community.”
Emmanuel Castillo, who owns the Phil-Am grocery just across the street and serves Filipino shoppers who come to the neighborhood from throughout the region, was even more direct. “It will be good for business here,” Mr. Castillo said firmly.
February 15, 2009
Woodside
Fast Food for the Filipino Soul
By MARK FOGGIN
IT’S the rare neighborhood of mom-and-pop shops that actually welcomes a fast-food joint. But for months, the Filipino-American community centered in Woodside, Queens, has been eagerly awaiting the opening of a Filipino food-chain restaurant called Jollibee, and describing its dishes in breathless, almost reverent tones.
“This is the taste of my childhood,” said Emma Ilagan, a 36-year-old customer service representative for Verizon Wireless who left the Philippines when she was 21.
“Until now, you have to go to California for Chickenjoy,” she added, referring to the chain’s popular dish of fried chicken, gravy and rice.
Or as Natasha Starkey, a conservatory student, said last month when she dropped off an application for a part-time job, “This is Filipino soul food.”
Jollibee, the dominant fast-food chain in the Philippines, where it has more than 600 outlets, is opening the restaurant, its first on the East Coast, this weekend. Its fare is a mix of fast-food staples like burgers and Chickenjoy, along with more regional dishes like smoked bangus, or milkfish — a national symbol of the Philippines — served with vinegar and pepper.
While Filipino-Americans on the West Coast can enjoy these dishes at two dozen Jollibee locations, those in New York have been able to only reminisce about such items. But in late December, an image of the chain’s cheery mascot, a smiling bumblebee sporting a toque, was mounted over the doorway of a former Mexican restaurant at 63rd Street and Roosevelt Avenue, in the shadow of the No. 7 elevated.
The chain’s impending arrival has had Woodside excited for months.
On Friday, some workers were labeling the menu boards with calorie counts while others were breading dozens of pieces of chicken in the sleek, new kitchen.
“We’re expecting a line outside at 7 a.m.,” said Iyoh Villamayor, Jollibee’s vice president for operations. “I notified the local police precinct.”
Even local business owners, who might be expected to view Jollibee’s arrival with trepidation, especially as the economy sags, said they were excited.
“I think it’s a positive thing for Filipinos,” said Jacqueline Bacani, who manages a family-style Filipino restaurant called Ihawan a few blocks away. “It demonstrates an expansion of the Filipino community.”
Emmanuel Castillo, who owns the Phil-Am grocery just across the street and serves Filipino shoppers who come to the neighborhood from throughout the region, was even more direct. “It will be good for business here,” Mr. Castillo said firmly.
The Obama visit: Networking
This is from the Globe and Mail.
This is a real fluff puff piece full of gossipy factoids signifying very little. Cognitive content: Ignatieff has personal connections to some people connected to Obama. Oh wow!
Seems the Fraser institute crowd clap when he speaks too. Well hardly surprising. Most audiences even right wing ones are on the whole polite and Ignatieff probably said little to upset them. Ho Hum!
THE OBAMA VISIT: NETWORKING
Ignatieff rides wave of interest in his Obama connections
New Liberal Leader's links to President affording him the kind of positive attention Dion could only dream of
JANE TABER
February 12, 2009
SENIOR POLITICAL WRITER
Michael Ignatieff is just weeks into his leadership, enjoying a honeymoon period, holding parties to make nice with Liberals still in recovery from the Dion era and fighting off American news media clamouring for interviews about his strong connections to Barack Obama.
There is a buzz around the new Liberal Leader, who several weeks ago was the subject of a huge spread in the Sunday New York Times and is awaiting the arrival of a PBS television crew that is coming to Ottawa to do a documentary on him. He is garnering the kind of attention his predecessor, Stéphane Dion, could only dream of.
Meanwhile, national opinion polls continue to put Mr. Ignatieff in a favourable light and the Conservatives under Prime Minister Stephen Harper are shying away from attacking him in the way they attacked Mr. Dion through a series of negative ads.
"Canadians are concerned about the economy right now, they don't want to see politicians playing political games at the moment," the Prime Minister's communications director, Kory Teneycke, said, explaining why they haven't done to Mr. Ignatieff what they did to Mr. Dion. "But we're not focused on politics right now. We're not planning to go to a campaign right now."
And in contrast to Mr. Harper, the new Liberal Leader, who is well-travelled and well-known in Britain and the United States, even has an advantage when it comes to Mr. Obama, who is visiting Ottawa next week.
"I just pick up the phone to some of my friends in his administration ...," Mr. Ignatieff said on CTV's Question Period earlier this year when discussing how close his ties are with the Obama White House.
And although their paths never crossed at Harvard, where Mr. Ignatieff taught and Mr. Obama studied, the President has read several of Mr. Ignatieff's books, according to an Ignatieff insider.
The two politicians, who will meet for the first time next Thursday, have several close friends in common: Lawrence Summers, head of the White House's National Economic Council, is the former president of Harvard. He and his wife and Mr. Ignatieff and his wife, Zsuzsanna Zsohar, travel together, having spent part of a summer in the south of France.
Samantha Power and Cass Sunstein, the Obama power couple, are also friends with the Ignatieffs.
Ms. Power, a Pulitizer Prize winning author and Harvard professor, served on the Obama transition team and now has a senior job with the National Security Council. Her husband is the administrator of the Office of Information and Regulatory Affairs.
Ms. Power visited with the Ignatieffs last summer when she was in the country promoting a new book.
And while Mr. Ignatieff says he can pick up the phone to call the White House, his senior staffers say that his MPs can pick up the phone to call him. In fact, about 300 Liberal staffers, MPs and senators showed up to partake of Canadian wine and cheese at his office Tuesday night where he thanked them for being the "real guts of the organization."
Earlier that afternoon, he met with a group from the right-wing Fraser Institute - including former Alberta premier Ralph Klein - who applauded after he spoke to them. So surprised was a senior Ignatieff staffer that he called over a colleague to witness the right-wingers clapping for the left-leaning Liberal Leader.
This is a real fluff puff piece full of gossipy factoids signifying very little. Cognitive content: Ignatieff has personal connections to some people connected to Obama. Oh wow!
Seems the Fraser institute crowd clap when he speaks too. Well hardly surprising. Most audiences even right wing ones are on the whole polite and Ignatieff probably said little to upset them. Ho Hum!
THE OBAMA VISIT: NETWORKING
Ignatieff rides wave of interest in his Obama connections
New Liberal Leader's links to President affording him the kind of positive attention Dion could only dream of
JANE TABER
February 12, 2009
SENIOR POLITICAL WRITER
Michael Ignatieff is just weeks into his leadership, enjoying a honeymoon period, holding parties to make nice with Liberals still in recovery from the Dion era and fighting off American news media clamouring for interviews about his strong connections to Barack Obama.
There is a buzz around the new Liberal Leader, who several weeks ago was the subject of a huge spread in the Sunday New York Times and is awaiting the arrival of a PBS television crew that is coming to Ottawa to do a documentary on him. He is garnering the kind of attention his predecessor, Stéphane Dion, could only dream of.
Meanwhile, national opinion polls continue to put Mr. Ignatieff in a favourable light and the Conservatives under Prime Minister Stephen Harper are shying away from attacking him in the way they attacked Mr. Dion through a series of negative ads.
"Canadians are concerned about the economy right now, they don't want to see politicians playing political games at the moment," the Prime Minister's communications director, Kory Teneycke, said, explaining why they haven't done to Mr. Ignatieff what they did to Mr. Dion. "But we're not focused on politics right now. We're not planning to go to a campaign right now."
And in contrast to Mr. Harper, the new Liberal Leader, who is well-travelled and well-known in Britain and the United States, even has an advantage when it comes to Mr. Obama, who is visiting Ottawa next week.
"I just pick up the phone to some of my friends in his administration ...," Mr. Ignatieff said on CTV's Question Period earlier this year when discussing how close his ties are with the Obama White House.
And although their paths never crossed at Harvard, where Mr. Ignatieff taught and Mr. Obama studied, the President has read several of Mr. Ignatieff's books, according to an Ignatieff insider.
The two politicians, who will meet for the first time next Thursday, have several close friends in common: Lawrence Summers, head of the White House's National Economic Council, is the former president of Harvard. He and his wife and Mr. Ignatieff and his wife, Zsuzsanna Zsohar, travel together, having spent part of a summer in the south of France.
Samantha Power and Cass Sunstein, the Obama power couple, are also friends with the Ignatieffs.
Ms. Power, a Pulitizer Prize winning author and Harvard professor, served on the Obama transition team and now has a senior job with the National Security Council. Her husband is the administrator of the Office of Information and Regulatory Affairs.
Ms. Power visited with the Ignatieffs last summer when she was in the country promoting a new book.
And while Mr. Ignatieff says he can pick up the phone to call the White House, his senior staffers say that his MPs can pick up the phone to call him. In fact, about 300 Liberal staffers, MPs and senators showed up to partake of Canadian wine and cheese at his office Tuesday night where he thanked them for being the "real guts of the organization."
Earlier that afternoon, he met with a group from the right-wing Fraser Institute - including former Alberta premier Ralph Klein - who applauded after he spoke to them. So surprised was a senior Ignatieff staffer that he called over a colleague to witness the right-wingers clapping for the left-leaning Liberal Leader.
Coming to a court near you: the court- prison complex!
This is from the BBC.
Here is something for Fox News or Lou Dobbs to chew on! The go hard on criminals from the get go has been a great stimulus package for private prisons.
US judges admit taking kickbacks
Two US judges charged with taking more than $2m (£1.4m) in kickbacks from a privately-run detention centre have pleaded guilty to fraud.
Prosecutors say Judges Mark Ciavarella and Michael Conahan took the money in return for giving young offenders long sentences to serve in the centre.
The deal allowed PA Child Care LLC and a sister company to receive extra government funds, they say.
The judges in Luzerne County, Pennsylvania, have both been suspended.
They have pleaded guilty to honest services fraud and tax fraud.
The plea agreements provide for prison sentences of more than seven years.
Mr Conahan had shut down a county detention centre in 2002 and signed a deal with PA Child Care LLC to send offenders to its new centre, prosecutors say.
They said Mr Ciavarella sent youths to the detention centre while taking money in return, though the judge has specifically denied sending youths to jail for cash, the Associated Press news agency reports.
'Disgraced'
Campaigners have complained that Mr Ciavarella gave out overly harsh sentences for minor offenses.
A spokeswoman for the non-profit Juvenile Law Center said 1,000-2,000 juveniles who came before the judge between 2003 and 2006 received excessively harsh sentences.
Many of the children were first-time offenders and had no lawyers to defend them.
The judge sent a quarter of his juvenile defendants to detention centres from 2003 to 2006, compared with a state average of one in 10, the AP reported.
"Your statement that I have disgraced my judgeship is true," Mr Ciavarella wrote in a letter to the court, Reuters news agency reports.
"My actions have destroyed everything I worked to accomplish and I have only myself to blame."
Mr Conahan made no comment.
Here is something for Fox News or Lou Dobbs to chew on! The go hard on criminals from the get go has been a great stimulus package for private prisons.
US judges admit taking kickbacks
Two US judges charged with taking more than $2m (£1.4m) in kickbacks from a privately-run detention centre have pleaded guilty to fraud.
Prosecutors say Judges Mark Ciavarella and Michael Conahan took the money in return for giving young offenders long sentences to serve in the centre.
The deal allowed PA Child Care LLC and a sister company to receive extra government funds, they say.
The judges in Luzerne County, Pennsylvania, have both been suspended.
They have pleaded guilty to honest services fraud and tax fraud.
The plea agreements provide for prison sentences of more than seven years.
Mr Conahan had shut down a county detention centre in 2002 and signed a deal with PA Child Care LLC to send offenders to its new centre, prosecutors say.
They said Mr Ciavarella sent youths to the detention centre while taking money in return, though the judge has specifically denied sending youths to jail for cash, the Associated Press news agency reports.
'Disgraced'
Campaigners have complained that Mr Ciavarella gave out overly harsh sentences for minor offenses.
A spokeswoman for the non-profit Juvenile Law Center said 1,000-2,000 juveniles who came before the judge between 2003 and 2006 received excessively harsh sentences.
Many of the children were first-time offenders and had no lawyers to defend them.
The judge sent a quarter of his juvenile defendants to detention centres from 2003 to 2006, compared with a state average of one in 10, the AP reported.
"Your statement that I have disgraced my judgeship is true," Mr Ciavarella wrote in a letter to the court, Reuters news agency reports.
"My actions have destroyed everything I worked to accomplish and I have only myself to blame."
Mr Conahan made no comment.
Willem Buiter on Good Bank/New Bank versus Bad Bank: a rare example of a no-brainer
This is from this site.
This article shows why the existing bank bailout system is both unfair and failing. Willem suggests setting up new "good banks" by the state. Buiter's ideas are echoed to some extent in proposals by Soros, Stiglitz, and Romer. There are useful links to their proposals.
Back to Willem Buiter's Maverecon homepage
Good Bank/New Bank vs. Bad Bank: a rare example of a no-brainer
February 8, 2009 8:41pm
The truth of a proposition is independent of how many people believe it to be correct. The merits of a proposal are likewise not enhanced by the number of people supporting it or making similar proposals. Still, humans, like other pack animals, thrive on companionship. It is therefore comforting that the logic behind my proposal (January 29, 2009) for one or more new ‘good banks’ to be established, capitalised with public money and with additional financial support from the state for new lending and new funding, while the toxic assets of the old banks are left with the owners and creditors of the ‘legacy banks’, is being echoed in proposals from Joseph Stiglitz (February 2, 2009), George Soros (February 4, 2009) and Paul Romer (February 6, 2009), to name but a few. I claim no authorship or originality for the ‘good bank’ proposal. The idea is obvious and no doubt was floating around the blogosphere and elsewhere as soon as the magnitude of the insolvency disaster in the banking sector became apparent.
The various proposals differ in detail. Romer’s proposal is essentially the same as my own. Stiglitz argues, according to the British Daily Telegraph that “the government should allow every distressed bank to go bankrupt and set up a fresh banking system under temporary state control rather than cripple the country by propping up a corrupt edifice”.
Soros proposes not to remove the toxic assets from the banks’ balance sheets (which would require them to be valued, which is not possible) but instead put them into a “side pocket”. The necessary amount of capital - equity and unsecured debentures - would be sequestered in the side pocket. Soros’ ‘side pocket’ is effectively the same as my ‘legacy bad banks’. Soros notes that about $1.5 trillion is likely to be required to recapitalise the existing banks properly. This money could be leveraged a lot more effectively if most of it were injected into the new good banks, unencumbered with the toxic waste of the existing banks.
Under the Soros proposal, some additional capital might have to be injected into the ‘side pockets’, presumably by the state. Under my new good banks proposal, the new good banks would take on the (guaranteed or insured) deposits of the legacy bad banks (which would lose their banking licenses) and would buy the good assets of the legacy banks. Should deposits exceed good assets, the state would have to make up the difference initially with government debt on the balance sheet of the new good banks. Should deposits be less than good assets, the new good banks would be able to borrow from the sovereign to finance the acquisition of the good assets from the legacy bad banks. This would cleanse bank balance sheets and transform them into good banks but leave them undercapitalized. Soros suggests that $1 trillion of the estimated $1.5 trillion required to recapitalise the existing banking system should be directed to the cleansed banks. Soros believes or hopes that some of the money required to capitalise the new, cleansed banks could come from the private sector. Under my proposal, and that of Stiglitz, the state would initially capitalise the new banks on its own.
A common logicThe logic is simple. Many (probably most, possibly all but a handful) high-profile, large border-crossing universal banks in the north Atlantic region are dead banks walking - zombie banks kept from formal insolvency only through past, present and anticipated future injections of public money. They have indeterminate but possibly large remaining stocks of toxic - hard or impossible to value - assets on their balance sheets which they cannot or will not come clean on.
This overhang of toxic assets acts like a tax on new lending. Banks are required, by regulators or by market pressures, to hoard capital and liquidity rather than engaging in new lending to the real economy. The public financial support offered in the form of capital injections (in the US mainly through preference shares and other non-voting equity), guarantees for assets and for liabilities (old and new), insurance of toxic assets (as provided to Citigroup by the US sovereign) and possibly in the future through direct purchases by the state of toxic assets (using TARP money in the US) and the creation of one or more publicly owned ‘bad banks’ has been a complete failure.
The bad bank proposals the Obama administration and other governments are considering are non-starters, for the simple reason that they require the valuation of assets whose true value (even on a hold-to-maturity basis) can only be guessed at. The good bank proposal only requires the valuation of those assets on the balance sheets of the existing banks that are easy to value: transparently valued assets. The toxic stuff is left on the balance sheet of the existing banks, which become the legacy bad banks.
Offering to pay enough to the existing owners of the toxic assets to induce these owners to sell them would require paying over the odds. That might not leave enough fiscal resources to support the new lending activities that are so urgently needed. It would also be an unfair and moral-hazard-maximising bail out of the existing owners and creditors of the banks. Nationalising the dodgy banks (or even the entire cross-border universal banking sector) would only solve the valuation problem of the new owner (the state) after nationalisation. The toxic assets could be transferred into a bad bank at any valuation, including zero. The owner of the bad bank and of the cleansed bank are the same. Nationalising the dodgy banks would not solve the problem of how much to pay for the banks, however, because that would depend in part on the valuation of the toxic assets. The good bank proposal creates new, publicly owned banks which only purchase good assets from the legacy bank. There is no valuation issue involving toxic assets for the tax payer.
Crisis fighting, moral hazard and fairnessThe existing packages of support measures in the US, the UK and elsewhere have failed to get lending to the real economy going again. In the US especially, but also to some extent in the UK, It has been a shameful boondoggle for the banks that are at the heart of the financial mess - bank CEOs and other top managers, bank shareholders, holders of unsecured bank bank debt (subordinated, junior and senior) and other creditors.
The US, the UK and several other continental European countries are at risk of emulating Ireland, where the government first guaranteed all the liabilities of the banks (other than equity) and only after that began to nationalise the banks. This leaves the Irish government today in the not too enviable position of having to choose between sovereign default and bleeding the tax payer and the beneficiaries of normal public spending to make whole all the creditors of the banks.
Bailing out the holders of existing bank debt and other bank creditors would be outrageously unfair: they did the lending and made the investments, they should eat the losses. In addition, many of the creditors are likely to be much better off, even after they write down/off their claims on the banks, than most of the tax payers and public expenditure beneficiaries that pay for the bail out. Bailing out the existing creditors would also create dreadful incentives for excessive future risk-taking by banks.
Especially in the US, the disdain for moral hazard displayed since the beginning of the crisis by regulators and by the fiscal and monetary authorities has been shocking. It has been justified with the claim that you cannot afford to worry about medium- and long-term incentives for appropriate risk taking when your house is on fire. That argument is logically flawed.
Two things are systemically important. The first is to restore the operation of key financial markets that have become illiquid. The Fed is doing a reasonable job in that regard. The second is to restore bank lending to the real economy. Neither objective requires that the existing banks be saved, let alone that their existing shareholders and creditors receive any financial support from the state. We can save banking without saving the banks or the bankers. The ‘good bank’ proposal demonstrates how to do this.
Regulators, central bankers and policymakers should be pursuing three key objectives. The first is to get lending by the banks to the real economy, especially to the non-financial enterprise sector, going again. The second is to minimize moral hazard by creating the right incentives for future risk taking by banks, their creditors and their customers, by ensuring that the losses incurred by the failed banking system are born first and foremost by those who invested in the banks in any capacity. For reasons that are partly sensible (protecting small unsophisticated savers from financial ruin and forestalling inefficient attempts by financial illiterates to monitor complex financial institutions) and partly populist pandering, most retail deposits have ended up insured or guaranteed by the state (often at least in part ex-post). Moral hazard should be stopped, however, beyond the magic circle the state has drawn around retail depositors. The third objective is to pursue justice in burden sharing.
The legacy bad banks would, under their existing ownership and with whatever balance sheet they end up with after shedding their insured/guaranteed deposits and after selling their good, easily valued assets, have as their sole activity the management of their existing assets. No new investments would be undertaken, no new loans made and no other new exposures incurred. Their liabilities and other funding decisions would be managed in the interests of the existing shareholders. No doubt many of them would fold. Chapter 11 or Chapter 7 would be ready and waiting for them.
ConclusionBy focusing scarce fiscal resources on supporting flows of new lending and new funding to support new lending, rather than on supporting stocks of existing bad assets and/or toxic assets assets and on guaranteeing or insuring stocks of existing liabilities, the state meets its three key objectives. First, its short-run economic stabilisation and crisis-fighting objective; second, its medium and long-term banking sector incentive-enhancing, moral-hazard-minimising objective; and third, its fairness objectives: the polluter pays or, you break it, you own it.
Establishing legal and institutional clear water between the legacy bad banks and the new good banks is a necessary condition for fulfilling the economic imperative to support flows of new lending and borrowing rather than to protect existing stocks of toxic assets and their owners.
This article shows why the existing bank bailout system is both unfair and failing. Willem suggests setting up new "good banks" by the state. Buiter's ideas are echoed to some extent in proposals by Soros, Stiglitz, and Romer. There are useful links to their proposals.
Back to Willem Buiter's Maverecon homepage
Good Bank/New Bank vs. Bad Bank: a rare example of a no-brainer
February 8, 2009 8:41pm
The truth of a proposition is independent of how many people believe it to be correct. The merits of a proposal are likewise not enhanced by the number of people supporting it or making similar proposals. Still, humans, like other pack animals, thrive on companionship. It is therefore comforting that the logic behind my proposal (January 29, 2009) for one or more new ‘good banks’ to be established, capitalised with public money and with additional financial support from the state for new lending and new funding, while the toxic assets of the old banks are left with the owners and creditors of the ‘legacy banks’, is being echoed in proposals from Joseph Stiglitz (February 2, 2009), George Soros (February 4, 2009) and Paul Romer (February 6, 2009), to name but a few. I claim no authorship or originality for the ‘good bank’ proposal. The idea is obvious and no doubt was floating around the blogosphere and elsewhere as soon as the magnitude of the insolvency disaster in the banking sector became apparent.
The various proposals differ in detail. Romer’s proposal is essentially the same as my own. Stiglitz argues, according to the British Daily Telegraph that “the government should allow every distressed bank to go bankrupt and set up a fresh banking system under temporary state control rather than cripple the country by propping up a corrupt edifice”.
Soros proposes not to remove the toxic assets from the banks’ balance sheets (which would require them to be valued, which is not possible) but instead put them into a “side pocket”. The necessary amount of capital - equity and unsecured debentures - would be sequestered in the side pocket. Soros’ ‘side pocket’ is effectively the same as my ‘legacy bad banks’. Soros notes that about $1.5 trillion is likely to be required to recapitalise the existing banks properly. This money could be leveraged a lot more effectively if most of it were injected into the new good banks, unencumbered with the toxic waste of the existing banks.
Under the Soros proposal, some additional capital might have to be injected into the ‘side pockets’, presumably by the state. Under my new good banks proposal, the new good banks would take on the (guaranteed or insured) deposits of the legacy bad banks (which would lose their banking licenses) and would buy the good assets of the legacy banks. Should deposits exceed good assets, the state would have to make up the difference initially with government debt on the balance sheet of the new good banks. Should deposits be less than good assets, the new good banks would be able to borrow from the sovereign to finance the acquisition of the good assets from the legacy bad banks. This would cleanse bank balance sheets and transform them into good banks but leave them undercapitalized. Soros suggests that $1 trillion of the estimated $1.5 trillion required to recapitalise the existing banking system should be directed to the cleansed banks. Soros believes or hopes that some of the money required to capitalise the new, cleansed banks could come from the private sector. Under my proposal, and that of Stiglitz, the state would initially capitalise the new banks on its own.
A common logicThe logic is simple. Many (probably most, possibly all but a handful) high-profile, large border-crossing universal banks in the north Atlantic region are dead banks walking - zombie banks kept from formal insolvency only through past, present and anticipated future injections of public money. They have indeterminate but possibly large remaining stocks of toxic - hard or impossible to value - assets on their balance sheets which they cannot or will not come clean on.
This overhang of toxic assets acts like a tax on new lending. Banks are required, by regulators or by market pressures, to hoard capital and liquidity rather than engaging in new lending to the real economy. The public financial support offered in the form of capital injections (in the US mainly through preference shares and other non-voting equity), guarantees for assets and for liabilities (old and new), insurance of toxic assets (as provided to Citigroup by the US sovereign) and possibly in the future through direct purchases by the state of toxic assets (using TARP money in the US) and the creation of one or more publicly owned ‘bad banks’ has been a complete failure.
The bad bank proposals the Obama administration and other governments are considering are non-starters, for the simple reason that they require the valuation of assets whose true value (even on a hold-to-maturity basis) can only be guessed at. The good bank proposal only requires the valuation of those assets on the balance sheets of the existing banks that are easy to value: transparently valued assets. The toxic stuff is left on the balance sheet of the existing banks, which become the legacy bad banks.
Offering to pay enough to the existing owners of the toxic assets to induce these owners to sell them would require paying over the odds. That might not leave enough fiscal resources to support the new lending activities that are so urgently needed. It would also be an unfair and moral-hazard-maximising bail out of the existing owners and creditors of the banks. Nationalising the dodgy banks (or even the entire cross-border universal banking sector) would only solve the valuation problem of the new owner (the state) after nationalisation. The toxic assets could be transferred into a bad bank at any valuation, including zero. The owner of the bad bank and of the cleansed bank are the same. Nationalising the dodgy banks would not solve the problem of how much to pay for the banks, however, because that would depend in part on the valuation of the toxic assets. The good bank proposal creates new, publicly owned banks which only purchase good assets from the legacy bank. There is no valuation issue involving toxic assets for the tax payer.
Crisis fighting, moral hazard and fairnessThe existing packages of support measures in the US, the UK and elsewhere have failed to get lending to the real economy going again. In the US especially, but also to some extent in the UK, It has been a shameful boondoggle for the banks that are at the heart of the financial mess - bank CEOs and other top managers, bank shareholders, holders of unsecured bank bank debt (subordinated, junior and senior) and other creditors.
The US, the UK and several other continental European countries are at risk of emulating Ireland, where the government first guaranteed all the liabilities of the banks (other than equity) and only after that began to nationalise the banks. This leaves the Irish government today in the not too enviable position of having to choose between sovereign default and bleeding the tax payer and the beneficiaries of normal public spending to make whole all the creditors of the banks.
Bailing out the holders of existing bank debt and other bank creditors would be outrageously unfair: they did the lending and made the investments, they should eat the losses. In addition, many of the creditors are likely to be much better off, even after they write down/off their claims on the banks, than most of the tax payers and public expenditure beneficiaries that pay for the bail out. Bailing out the existing creditors would also create dreadful incentives for excessive future risk-taking by banks.
Especially in the US, the disdain for moral hazard displayed since the beginning of the crisis by regulators and by the fiscal and monetary authorities has been shocking. It has been justified with the claim that you cannot afford to worry about medium- and long-term incentives for appropriate risk taking when your house is on fire. That argument is logically flawed.
Two things are systemically important. The first is to restore the operation of key financial markets that have become illiquid. The Fed is doing a reasonable job in that regard. The second is to restore bank lending to the real economy. Neither objective requires that the existing banks be saved, let alone that their existing shareholders and creditors receive any financial support from the state. We can save banking without saving the banks or the bankers. The ‘good bank’ proposal demonstrates how to do this.
Regulators, central bankers and policymakers should be pursuing three key objectives. The first is to get lending by the banks to the real economy, especially to the non-financial enterprise sector, going again. The second is to minimize moral hazard by creating the right incentives for future risk taking by banks, their creditors and their customers, by ensuring that the losses incurred by the failed banking system are born first and foremost by those who invested in the banks in any capacity. For reasons that are partly sensible (protecting small unsophisticated savers from financial ruin and forestalling inefficient attempts by financial illiterates to monitor complex financial institutions) and partly populist pandering, most retail deposits have ended up insured or guaranteed by the state (often at least in part ex-post). Moral hazard should be stopped, however, beyond the magic circle the state has drawn around retail depositors. The third objective is to pursue justice in burden sharing.
The legacy bad banks would, under their existing ownership and with whatever balance sheet they end up with after shedding their insured/guaranteed deposits and after selling their good, easily valued assets, have as their sole activity the management of their existing assets. No new investments would be undertaken, no new loans made and no other new exposures incurred. Their liabilities and other funding decisions would be managed in the interests of the existing shareholders. No doubt many of them would fold. Chapter 11 or Chapter 7 would be ready and waiting for them.
ConclusionBy focusing scarce fiscal resources on supporting flows of new lending and new funding to support new lending, rather than on supporting stocks of existing bad assets and/or toxic assets assets and on guaranteeing or insuring stocks of existing liabilities, the state meets its three key objectives. First, its short-run economic stabilisation and crisis-fighting objective; second, its medium and long-term banking sector incentive-enhancing, moral-hazard-minimising objective; and third, its fairness objectives: the polluter pays or, you break it, you own it.
Establishing legal and institutional clear water between the legacy bad banks and the new good banks is a necessary condition for fulfilling the economic imperative to support flows of new lending and borrowing rather than to protect existing stocks of toxic assets and their owners.
Friday, February 13, 2009
Philippines: More ruckus over US soldier rape case
This is from the Tribune(Manila)
This case has long been a focus of protest in the Philippines. It seems that the Arroyo govt. has now caved in to US pressure. Arroyo is courting even more trouble in ignoring her own government's court order. It seems as the article points out that the US is a sovereign govt. as Corpus notes but that the Philippines is not! Why is Arroyo not implementing the decision of her own court. The answer is simple. Corporal Smith is under US custody not the Philippines. The US position is that Smith will not be turned over until all legal appeals are exhausted. Perhaps by then he will have disappeared!
For shame, for shame
Ninez Cacho-Olivares
02/13/2009
What was done is now being undone by the Arroyo government, that is proving to be utterly subservient to the US government.
The Supreme Court (SC) has already spoken, upholding the sovereignty of the Philippines by ruling that Lance Cpl. Daniel Smith, who has been convicted of raping a Filipina, should be placed in a facility that is under Philippine authorities.
But there went Interior Undersecretary, Marius Corpus, in a radio interview saying that the Philippine government can’t do anything if the US government refuses to comply with the order and cannot even pursue charges against Smith because the US is a sovereign state.
Good grief! And the Philippines is not?
Was not the crime of rape committed in the Philippines and outside of the military joint exercises time frame?
If a Filipino commits a crime in the US, does not the US government charge and try the Filipino offender in their courts, and even detains the offender?
Ah, but the Arroyo government will argue that the case of Smith is rooted in diplomatic agreements and is therefore to be treated differently. Granted. But that agreement between Foreign Affairs Secretary Alberto Romulo and US Ambassador to the Philippines Kristie Kenney precisely is supposed to be aligned with what the Visiting Forces Agreement, where it states that the Philippines should have custody of the American offender. And our SC has already ruled that it should be Philippine authorities who should take custody of Smith.
Yet there went Malacañang saying that the US is studying it and is subjecting this ruling to US legal interpretation.
And there went Corpus, less than 24 hours after the ruling was issued, already on radio saying that the Philippine government can’t force the US to hand over Smith because it is a sovereign state.
If the US refuses to comply, he said, we cannot force the US to comply or prosecute.
Corpus explained that the US authorities had “assured” him that they will turn over Smith to Philippine authorities after the “termination of all judicial proceedings,” adding that the US interprets the “all judicial proceedings” as all legal processes including a final ruling by the SC.
Hasn’t he realized the consequence of what he has said?
What it means is that the US government does not have to respect and abide by the laws of the Philippines and can even dismiss rulings by the SC. It means that the Arroyo government believes it is the US that will interpret Philippine laws, to its advantage, naturally. It means that the US does what it wants in a host country that is just as much a sovereign as the US.
Therefore, any frigging American soldier — or for that matter, any foreign soldier — participating in the joint military exercises in the country can rape, maul and kill any Filipino after military exercise hours and merely say that, despite the SC ruling, the Arroyo government is so helpless that it cannot uphold the ruling of the highest court in the land? But isn’t that also saying that the US interpretation of our laws is superior to the interpretation of the sovereign country’s highest court of the land?
This is an insult not only to the SC and the Filipinos as a nation, but the sovereignty of the Phlippines. Whose laws and their interpretation are to be followed? The US? We are not bound by US laws or their US government’s interpretation of these laws. And it is a treasonous government that refuses to protect the interest of a sovereign country while bowing to the demands of a foreign government that insults it and its laws by refusing to comply with the SC ruling.
An American soldier raped a Japanese and was held by the Japanese police. It is the Japanese authorities that have custody of this rapist. If Japan can do this, why not the Philippine government? Why is there a different US interpretation for the same crime in Japan, and in the Philippines?
If the US government refuses to comply, this is clearly an insult to the Filipino nation. The least this American puppet government, to keep its face, if not the Filipino’s pride, is to cancel the Visiting Forces Agreement. The US can pull out all its troops in the joint military exercise. And good riddance!
This case has long been a focus of protest in the Philippines. It seems that the Arroyo govt. has now caved in to US pressure. Arroyo is courting even more trouble in ignoring her own government's court order. It seems as the article points out that the US is a sovereign govt. as Corpus notes but that the Philippines is not! Why is Arroyo not implementing the decision of her own court. The answer is simple. Corporal Smith is under US custody not the Philippines. The US position is that Smith will not be turned over until all legal appeals are exhausted. Perhaps by then he will have disappeared!
For shame, for shame
Ninez Cacho-Olivares
02/13/2009
What was done is now being undone by the Arroyo government, that is proving to be utterly subservient to the US government.
The Supreme Court (SC) has already spoken, upholding the sovereignty of the Philippines by ruling that Lance Cpl. Daniel Smith, who has been convicted of raping a Filipina, should be placed in a facility that is under Philippine authorities.
But there went Interior Undersecretary, Marius Corpus, in a radio interview saying that the Philippine government can’t do anything if the US government refuses to comply with the order and cannot even pursue charges against Smith because the US is a sovereign state.
Good grief! And the Philippines is not?
Was not the crime of rape committed in the Philippines and outside of the military joint exercises time frame?
If a Filipino commits a crime in the US, does not the US government charge and try the Filipino offender in their courts, and even detains the offender?
Ah, but the Arroyo government will argue that the case of Smith is rooted in diplomatic agreements and is therefore to be treated differently. Granted. But that agreement between Foreign Affairs Secretary Alberto Romulo and US Ambassador to the Philippines Kristie Kenney precisely is supposed to be aligned with what the Visiting Forces Agreement, where it states that the Philippines should have custody of the American offender. And our SC has already ruled that it should be Philippine authorities who should take custody of Smith.
Yet there went Malacañang saying that the US is studying it and is subjecting this ruling to US legal interpretation.
And there went Corpus, less than 24 hours after the ruling was issued, already on radio saying that the Philippine government can’t force the US to hand over Smith because it is a sovereign state.
If the US refuses to comply, he said, we cannot force the US to comply or prosecute.
Corpus explained that the US authorities had “assured” him that they will turn over Smith to Philippine authorities after the “termination of all judicial proceedings,” adding that the US interprets the “all judicial proceedings” as all legal processes including a final ruling by the SC.
Hasn’t he realized the consequence of what he has said?
What it means is that the US government does not have to respect and abide by the laws of the Philippines and can even dismiss rulings by the SC. It means that the Arroyo government believes it is the US that will interpret Philippine laws, to its advantage, naturally. It means that the US does what it wants in a host country that is just as much a sovereign as the US.
Therefore, any frigging American soldier — or for that matter, any foreign soldier — participating in the joint military exercises in the country can rape, maul and kill any Filipino after military exercise hours and merely say that, despite the SC ruling, the Arroyo government is so helpless that it cannot uphold the ruling of the highest court in the land? But isn’t that also saying that the US interpretation of our laws is superior to the interpretation of the sovereign country’s highest court of the land?
This is an insult not only to the SC and the Filipinos as a nation, but the sovereignty of the Phlippines. Whose laws and their interpretation are to be followed? The US? We are not bound by US laws or their US government’s interpretation of these laws. And it is a treasonous government that refuses to protect the interest of a sovereign country while bowing to the demands of a foreign government that insults it and its laws by refusing to comply with the SC ruling.
An American soldier raped a Japanese and was held by the Japanese police. It is the Japanese authorities that have custody of this rapist. If Japan can do this, why not the Philippine government? Why is there a different US interpretation for the same crime in Japan, and in the Philippines?
If the US government refuses to comply, this is clearly an insult to the Filipino nation. The least this American puppet government, to keep its face, if not the Filipino’s pride, is to cancel the Visiting Forces Agreement. The US can pull out all its troops in the joint military exercise. And good riddance!
Problems in East European Economies.
Media reports tend to concentrate upon economic problems in countries such as the US and west European countries. However, some media have reported the collapse in Iceland. East Euroope however also faces great difficulties as this article points out. However whoever wrote it should look at a map. Kazahstan is not in Eastern Europe.
Tuesday, February 10, 2009
A Glance At The Upcoming Eastern European Cataclysm
Posted by Tyler Durden at 12:43 PM
As most eyes are glued to CNBC and the exploration of the huge financial problem at home, few follow just how bad the situation is at fledgling developing economies. With news of potential defaults out of Russia, Kazahstan devaluing its currency and begging for handouts, and Baltic states (Lithuania and Estonia) on the verge of downgrade, things in Eastern Europe are getting from bad to worse. This is most obvious when looking at the foreign currency exchange rates of countries in the region: since September 2008 the Ruble has lost 32%, the Polish Zloty 37%, the Hungarian Forint 29% and Ukraninian Hryvna 42%.
What are the immediate observable impacts of currency devaluation (this may also be relevant for the U.S. soon):
1. Speeds up asset quality deterioration and write-downs as unhedged corporate and retail customers that have borrowed in foreign currency face a relative increase in their debt burden.
2. Borrowers may chose to withdraw local currency savings to transfer them into a more stable foreign currency, which would shrink banks' funding base.
3. The capital ratio of banks with large foreign currency exposure will fall as a consequence of currency devaluation-related issues.
So as the vicious cycle of risk aversion accelerates in more countries, it results in domestic economies becoming worse off, thereby making traditional international commerce impossible, and impacting larger beneficiaries of globalization such as the G7.
But that is not all: in addition to sovereign risk, external investors also have creditor, liquidity and cash repatriation risk. The is because many West European banks acquired East European banks in the course of of privatization of state-owned banks during the transition from planned to market economies. According to the Bank for International Settlements, claims of West European banks on Eastern Europe amounted to €1.3 trillion in the first quarter of 2008, which depending on the degree of contraction and asset write-downs could be significantly impaired.
Tuesday, February 10, 2009
A Glance At The Upcoming Eastern European Cataclysm
Posted by Tyler Durden at 12:43 PM
As most eyes are glued to CNBC and the exploration of the huge financial problem at home, few follow just how bad the situation is at fledgling developing economies. With news of potential defaults out of Russia, Kazahstan devaluing its currency and begging for handouts, and Baltic states (Lithuania and Estonia) on the verge of downgrade, things in Eastern Europe are getting from bad to worse. This is most obvious when looking at the foreign currency exchange rates of countries in the region: since September 2008 the Ruble has lost 32%, the Polish Zloty 37%, the Hungarian Forint 29% and Ukraninian Hryvna 42%.
What are the immediate observable impacts of currency devaluation (this may also be relevant for the U.S. soon):
1. Speeds up asset quality deterioration and write-downs as unhedged corporate and retail customers that have borrowed in foreign currency face a relative increase in their debt burden.
2. Borrowers may chose to withdraw local currency savings to transfer them into a more stable foreign currency, which would shrink banks' funding base.
3. The capital ratio of banks with large foreign currency exposure will fall as a consequence of currency devaluation-related issues.
So as the vicious cycle of risk aversion accelerates in more countries, it results in domestic economies becoming worse off, thereby making traditional international commerce impossible, and impacting larger beneficiaries of globalization such as the G7.
But that is not all: in addition to sovereign risk, external investors also have creditor, liquidity and cash repatriation risk. The is because many West European banks acquired East European banks in the course of of privatization of state-owned banks during the transition from planned to market economies. According to the Bank for International Settlements, claims of West European banks on Eastern Europe amounted to €1.3 trillion in the first quarter of 2008, which depending on the degree of contraction and asset write-downs could be significantly impaired.
Thursday, February 12, 2009
Obama on Nationalization of Banks
Obama is obviously worried about the political fallout from nationalising the banks. He wants to give the impression that private capital is fulfilling the core investment role in the US. However, it is precisely because private capital is not doing this that the govt. must intervene. It seems that ideology must prevail over facts and logic. Kedrosky refutes Obama's arguments against nationalization in his comments.
Obama on Nationalization
by CalculatedRisk on 2/10/2009 05:34:00 PM
Terry Moran at ABC News interviewed President Obama today (airs tonight). Here are some excerpts: (hat tip Paul Kedrosky)
TERRY MORAN: There are a lot of economists who look at these banks and they say all that garbage that's in them renders them essentially insolvent. Why not just nationalize the banks? PRESIDENT OBAMA: Well, you know, it's interesting. There are two countries who have gone through some big financial crises over the last decade or two. One was Japan, which never really acknowledged the scale and magnitude of the problems in their banking system and that resulted in what's called "The Lost Decade." They kept on trying to paper over the problems. The markets sort of stayed up because the Japanese government kept on pumping money in. But, eventually, nothing happened and they didn't see any growth whatsoever. Sweden, on the other hand, had a problem like this. They took over the banks, nationalized them, got rid of the bad assets, resold the banks and, a couple years later, they were going again. So you'd think looking at it, Sweden looks like a good model. Here's the problem; Sweden had like five banks. [LAUGHS] We've got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the problems in terms of managing and overseeing anything of that scale, I think, would -- our assessment was that it wouldn't make sense. And we also have different traditions in this country. Obviously, Sweden has a different set of cultures in terms of how the government relates to markets and America's different. And we want to retain a strong sense of that private capital fulfilling the core -- core investment needs of this country. And so, what we've tried to do is to apply some of the tough love that's going to be necessary, but do it in a way that's also recognizing we've got big private capital markets and ultimately that's going to be the key to getting credit flowing again.
Kedrosky comments:
[S]aying that Sweden had five banks and the U.S. has thousands, so nationalization can’t happen here, is misleading. It ignores the relative GDPs of the two countries. ...[and] the problem is chiefly in the six largest U.S. banks ...On the issue of "cultural differences" between the U.S. and Sweden, I've joked that we should call taking over the banks "preprivatization" to avoid the stigma of "nationalization".But stop and think about what Obama is saying. We know the correct answer, but we are afraid to do it - because of our "culture" - so we are going to follow the Japanese plan.We should definitely stress test the banks. My suggestion: announce when this will be complete (within 30 days), make the results public, and preprivatize the insolvent ones.Update: Roubini: It Is Time to Nationalize Insolvent Banking Systems. Excerpt:
[W]hy is the US government temporizing and avoiding doing the right thing, i.e. take over the insolvent banks? There are two reasons. First, there is still some small hope and a small probability that the economy will recover sooner than expected, that expected credit losses will be smaller than expected and that the current approach of recapping the banks and somehow working out the bad assets will work in due time. Second, taking over the banks – call is nationalization or, in a more politically correct way, “receivership” – is a radical action that requires most banks be clearly beyond pale and insolvent to be undertaken. Today Citi and Bank of America clearly look like near-insolvent and ready to be taken over but JPMorgan and Wells Fargo do not yet. But with the sharp rise in delinquencies and charge-off rates that we are experiencing now on mortgages, commercial real estate and consumer credit in a matter of six to twelve months even JPMorgan and Wells will likely look as near-insolvent (as suggested by Chris Whalen, one of the leading independent analysts of the banking system).Thus, if the government were to take over only Citi and Bank of America today (and wipe out common and preferred shareholders and also force unsecured creditors to take a haircut) a panic may ensue ... Instead if, as likely, the current fudging strategy - of temporizing and hoping that things will improve for the economy and the banks - does not work and in 6-12 months most banks (the major four and the a good part of the remaining regional banks) all look like clearly insolvent you can then take them all over, wipe out common shareholders and preferred shareholders and even force unsecured creditors to accept losses ( in the form of a conversion of debt into equity and/or haircut on the face value of their bond claims) as the losses will be so large that not treating such unsecured creditors would be fiscally too expensive.So, the current strategy – Plan A - may not work and the Plan B (or better Plan N for nationalization) may end up the way to go later this year. Wasting another 6-12 months to do the right thing may be a mistake but the political constrains facing the new administration – and the remaining small probability that the current strategy may by some miracle or luck work – suggest that Plan A should be first exhausted before there is a move to Plan N. Wasting another 6-12 months may risk turning a U-shaped recession into an L-shaped near depression but currently Plan N is not yet politically feasible.
Obama on Nationalization
by CalculatedRisk on 2/10/2009 05:34:00 PM
Terry Moran at ABC News interviewed President Obama today (airs tonight). Here are some excerpts: (hat tip Paul Kedrosky)
TERRY MORAN: There are a lot of economists who look at these banks and they say all that garbage that's in them renders them essentially insolvent. Why not just nationalize the banks? PRESIDENT OBAMA: Well, you know, it's interesting. There are two countries who have gone through some big financial crises over the last decade or two. One was Japan, which never really acknowledged the scale and magnitude of the problems in their banking system and that resulted in what's called "The Lost Decade." They kept on trying to paper over the problems. The markets sort of stayed up because the Japanese government kept on pumping money in. But, eventually, nothing happened and they didn't see any growth whatsoever. Sweden, on the other hand, had a problem like this. They took over the banks, nationalized them, got rid of the bad assets, resold the banks and, a couple years later, they were going again. So you'd think looking at it, Sweden looks like a good model. Here's the problem; Sweden had like five banks. [LAUGHS] We've got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the problems in terms of managing and overseeing anything of that scale, I think, would -- our assessment was that it wouldn't make sense. And we also have different traditions in this country. Obviously, Sweden has a different set of cultures in terms of how the government relates to markets and America's different. And we want to retain a strong sense of that private capital fulfilling the core -- core investment needs of this country. And so, what we've tried to do is to apply some of the tough love that's going to be necessary, but do it in a way that's also recognizing we've got big private capital markets and ultimately that's going to be the key to getting credit flowing again.
Kedrosky comments:
[S]aying that Sweden had five banks and the U.S. has thousands, so nationalization can’t happen here, is misleading. It ignores the relative GDPs of the two countries. ...[and] the problem is chiefly in the six largest U.S. banks ...On the issue of "cultural differences" between the U.S. and Sweden, I've joked that we should call taking over the banks "preprivatization" to avoid the stigma of "nationalization".But stop and think about what Obama is saying. We know the correct answer, but we are afraid to do it - because of our "culture" - so we are going to follow the Japanese plan.We should definitely stress test the banks. My suggestion: announce when this will be complete (within 30 days), make the results public, and preprivatize the insolvent ones.Update: Roubini: It Is Time to Nationalize Insolvent Banking Systems. Excerpt:
[W]hy is the US government temporizing and avoiding doing the right thing, i.e. take over the insolvent banks? There are two reasons. First, there is still some small hope and a small probability that the economy will recover sooner than expected, that expected credit losses will be smaller than expected and that the current approach of recapping the banks and somehow working out the bad assets will work in due time. Second, taking over the banks – call is nationalization or, in a more politically correct way, “receivership” – is a radical action that requires most banks be clearly beyond pale and insolvent to be undertaken. Today Citi and Bank of America clearly look like near-insolvent and ready to be taken over but JPMorgan and Wells Fargo do not yet. But with the sharp rise in delinquencies and charge-off rates that we are experiencing now on mortgages, commercial real estate and consumer credit in a matter of six to twelve months even JPMorgan and Wells will likely look as near-insolvent (as suggested by Chris Whalen, one of the leading independent analysts of the banking system).Thus, if the government were to take over only Citi and Bank of America today (and wipe out common and preferred shareholders and also force unsecured creditors to take a haircut) a panic may ensue ... Instead if, as likely, the current fudging strategy - of temporizing and hoping that things will improve for the economy and the banks - does not work and in 6-12 months most banks (the major four and the a good part of the remaining regional banks) all look like clearly insolvent you can then take them all over, wipe out common shareholders and preferred shareholders and even force unsecured creditors to accept losses ( in the form of a conversion of debt into equity and/or haircut on the face value of their bond claims) as the losses will be so large that not treating such unsecured creditors would be fiscally too expensive.So, the current strategy – Plan A - may not work and the Plan B (or better Plan N for nationalization) may end up the way to go later this year. Wasting another 6-12 months to do the right thing may be a mistake but the political constrains facing the new administration – and the remaining small probability that the current strategy may by some miracle or luck work – suggest that Plan A should be first exhausted before there is a move to Plan N. Wasting another 6-12 months may risk turning a U-shaped recession into an L-shaped near depression but currently Plan N is not yet politically feasible.
Wednesday, February 11, 2009
Nouriel Roubini: Time to Nationalize Insolvent Banking Systems.
This is part of an article at rgemonitor.
Roubini is predicting losses in US financial firms at a whopping 3.6 trillion. Obama is doing everything possible to avoid nationalisation. He seems to fear that he will be branded a socialist but he will be branded that anyway by the likes of Rush Limbaugh and his admirers. He surely knows that nationalising the banks is not socialism but hospitalisation of sick corporations which he will duly privatise when government funds and an improving economy nurse the banks back to health. Horror of horror though the govt. might even privatize them at a profit!
Nouriel Roubini's Global EconoMonitor
It Is Time to Nationalize Insolvent Banking Systems
Nouriel Roubini Feb 10, 2009
A year ago I predicted that losses by US financial institutions would be at least $1 trillion and possibly as high as $2 trillion. At that time the consensus such estimates as being grossly exaggerated as the naïve optimists had in mind about $200 billion of expected subprime mortgage losses. But, as I pointed out then, losses would rapidly mount well beyond subprime mortgages as the US and global economy would spin into a most severe financial crisis and an ugly recession. I then argued that we would then see rising losses on subprime, near prime and prime mortgages; commercial real estate; credit cards, auto loans, student loans; industrial and commercial loans; corporate bonds; sovereign bonds and state and local government bonds; and massive losses on all of the assets (CDOs, CLOs, ABS, and the entire alphabet of credit derivatives) that had securitized such loans. By now writedowns by US banks have already passed the $1 trillion mark (my floor estimate of losses) and now institutions such as the IMF and Goldman Sachs predict losses of over $2 trillion (close to my original expected ceiling for such losses).
But if you think that $2 trillion is already huge, our latest estimates RGE Monitor (available in a paper for our clients) suggest that total losses on loans made by U.S. financial firms and the fall in the market value of the assets they are holding will be at their peak about $3.6 trillion. The U.S. banks and broker dealers are exposed to half of this figure, or $1.8 trillion; the rest is borne by other financial institutions in the US and abroad. The capital backing the banks assets was last fall only $1.4 trillion, leaving the U.S. banking system some $400 billion in the hole, or close to zero even after the government and private sector recapitalization of such banks. Thus, another $1.4 trillion will be needed to brink back the capital of banks to the level they had before the crisis; and such massive additional recapitalization is needed to resolve the credit crunch and restore lending to the private sector. So these figures suggests that the US banking system is effectively insolvent in the aggregate; most of the UK banking system looks insolvent too; and many other banks in continental Europe are also insolvent.
Roubini is predicting losses in US financial firms at a whopping 3.6 trillion. Obama is doing everything possible to avoid nationalisation. He seems to fear that he will be branded a socialist but he will be branded that anyway by the likes of Rush Limbaugh and his admirers. He surely knows that nationalising the banks is not socialism but hospitalisation of sick corporations which he will duly privatise when government funds and an improving economy nurse the banks back to health. Horror of horror though the govt. might even privatize them at a profit!
Nouriel Roubini's Global EconoMonitor
It Is Time to Nationalize Insolvent Banking Systems
Nouriel Roubini Feb 10, 2009
A year ago I predicted that losses by US financial institutions would be at least $1 trillion and possibly as high as $2 trillion. At that time the consensus such estimates as being grossly exaggerated as the naïve optimists had in mind about $200 billion of expected subprime mortgage losses. But, as I pointed out then, losses would rapidly mount well beyond subprime mortgages as the US and global economy would spin into a most severe financial crisis and an ugly recession. I then argued that we would then see rising losses on subprime, near prime and prime mortgages; commercial real estate; credit cards, auto loans, student loans; industrial and commercial loans; corporate bonds; sovereign bonds and state and local government bonds; and massive losses on all of the assets (CDOs, CLOs, ABS, and the entire alphabet of credit derivatives) that had securitized such loans. By now writedowns by US banks have already passed the $1 trillion mark (my floor estimate of losses) and now institutions such as the IMF and Goldman Sachs predict losses of over $2 trillion (close to my original expected ceiling for such losses).
But if you think that $2 trillion is already huge, our latest estimates RGE Monitor (available in a paper for our clients) suggest that total losses on loans made by U.S. financial firms and the fall in the market value of the assets they are holding will be at their peak about $3.6 trillion. The U.S. banks and broker dealers are exposed to half of this figure, or $1.8 trillion; the rest is borne by other financial institutions in the US and abroad. The capital backing the banks assets was last fall only $1.4 trillion, leaving the U.S. banking system some $400 billion in the hole, or close to zero even after the government and private sector recapitalization of such banks. Thus, another $1.4 trillion will be needed to brink back the capital of banks to the level they had before the crisis; and such massive additional recapitalization is needed to resolve the credit crunch and restore lending to the private sector. So these figures suggests that the US banking system is effectively insolvent in the aggregate; most of the UK banking system looks insolvent too; and many other banks in continental Europe are also insolvent.
David Harvey: Why the Stimulus Package is Bound to Fail
This long analytical article goes far beyond discussing the problems with the Obama stimulus package. It traces the growth of US global hegemony and explains why that hegemony is being challenged at present and what the future will look like. Harvey thinks that the power of China will increase but that it will not itself become a new hegemon. Rather there may arise regional blocks that will challenge US hegemony.
This article is from this site.
WHY THE U.S. STIMULUS PACKAGE IS BOUND TO FAIL
DAVID HARVEY
Much is to be gained by viewing the contemporary crisis as a surface eruption generated out of deep tectonic shifts in the spatio-temporal disposition of capitalist development. The tectonic plates are now accelerating their motion and the likelihood of more frequent and more violent crises of the sort that have been occurring since 1980 or so will almost certainly increase. The manner, form, spatiality and time of these surface disruptions are almost impossible to predict, but that they will occur with greater frequency and depth is almost certain. The events of 2008 have therefore to be situated in the context of a deeper pattern. Since these stresses are internal to the capitalist dynamic (which does not preclude some seemingly external disruptive event like a catastrophic pandemic also occurring), then what better argument could there be, as Marx once put it, "for capitalism to be gone and to make way for some alternative and more rational mode of production." I begin with this conclusion since I still find it vital to emphasize if not dramatize, as I have sought to do over and over again in my writings over the years, that failure to understand the geographical dynamics of capitalism or to treat the geographical dimension as in some sense merely contingent or epiphenomenal, is to both lose the plot on how to understand capitalist uneven geographical development and to miss out on possibilities for constructing radical alternatives. But this poses an acute difficulty for analysis since we are constantly faced with trying to distill universal principles regarding the role of the production of spaces, places and environments in capitalism's dynamics, out of a sea of often volatile geographical particularities. So how, then, can we integrate geographical understandings into our theories of evolutionary change? Let us look more carefully at the tectonic shifts. In November 2008, shortly after the election of a new President, the National Intelligence Council of the United States issued its delphic estimates on what the world would be like in 2025. Perhaps for the first time, a quasi-official body in the United States predicted that by 2025 the United States, while still a powerful if not the most powerful single player in world affairs, would no longer be dominant. The world would be multi-polar and less centered and the power of non-state actors would increase. The report conceded that US hegemony had been fading on and off for some time but that its economic, political and even military dominance was now systematically waning. Above all (and it is important to note that the report was prepared before the implosion of the US and British financial systems), "the unprecedented shift in relative wealth and economic power roughly from West to East now under way will continue." This "unprecedented shift" has reversed the long-standing drain of wealth from East, Southeast and South Asia to Europe and North America that had been occurring since the eighteenth century (a drain that even Adam Smith had noted with regret in The Wealth of Nations but which accelerated relentlessly throughout the nineteenth century). The rise of Japan in the 1960s followed by South Korea, Taiwan, Singapore and Hong Kong in the 1970s and then the rapid growth of China after 1980 later accompanied by industrialization spurts in Indonesia, India, Vietnam, Thailand and Malaysia during the 1990s, has altered the center of gravity of capitalist development, although it has not done so smoothly (the East and South-East Asian financial crisis of 1997-8 saw wealth flow briefly but strongly back towards Wall Street and the European and Japanese banks). Economic hegemony seems to be moving towards some constellation of powers in East Asia and if crises, as we earlier argued, are moments of radical reconfigurations in capitalist development, then the fact that the United States is having to deficit finance its way out of its financial difficulties on such a huge scale and that the deficits are largely being covered by those countries with saved surpluses – Japan, China, South Korea, Taiwan and the Gulf states – suggests this may be the moment for such a shift to be consolidated. Shifts of this sort have occurred before in the long history of capitalism. In Giovanni Arrighi's thorough account in The Long Twentieth Century, we see hegemony shifting from the city states of Genoa and Venice in the sixteenth century to Amsterdam and the Low Countries in the seventeenth before concentrating in Britain from the late eighteenth century until the United States eventually took control after 1945. There are a number of features to these transitions that Arrighi emphasizes and which are relevant to our analysis. Each shift, Arrighi notes, occurred in the wake of a strong phase of financialization (he cites with approval Braudel's maxim that financialization announces the autumn of some hegemonic configuration). But each shift also entailed a radical change of scale, from the small city states at the origin to the continent-wide economy of the United States in the latter half of the twentieth century. This change of scale makes sense given the capitalist rule of endless accumulation and compound growth of at least three per cent for ever. But hegemonic shifts, Arrighi argues, are not determined in advance. They depend upon the emergence of some power economically able and politically and militarily willing to take on the role of global hegemon (with its costs as well as its advantages). The reluctance of the United States to assume that role before World War II meant an interregnum of multi-polar tensions that could not halt the drift into war (Britain was no longer in a position to assert its prior hegemonic role). Much also depends on how the past hegemon behaves as it faces up to the diminution of its former role. It can pass peaceably or belligerently into history. From this perspective the fact that the United States still holds overwhelming military power (particularly from 30,000 feet up) in a context of its declining economic and financial power and increasingly shaky cultural and moral authority, creates worrying scenarios for any future transition. Furthermore, it is not obvious that the main candidate to displace the United States, China, has the capacity or the will to assert some hegemonic role, for while its population is certainly huge enough to meet the requirements of changing scale, neither its economy nor its political authority (or even its political will) point to any easy accession to the role of global hegemon. Given the nationalist divisions that exist, the idea that some association of East Asian Powers might do the job also appears unlikely as does the possibility for a fragmented and fractious European Union or the so-called BRIC powers (Brazil, Russia, India and China) to stay on a common path for long. For this reason, the prediction that we are headed into another interregnum of multi-polar and conflictual interests and potential global instability appears plausible. But the tectonic shift away from United States dominance and hegemony that has been under way for some time is becoming much clearer. The thesis of both excessive financialization and "debt as a principal predictor of leading world powers' debilitation" has found popular voice in the writings of Kevin Phillips. Attempts now under way to re-build US dominance through reforms in the architecture of both the national and the global state-finance nexus appear not to be working while the exclusions imposed on much of the rest of the world in seeking to re-shape that architecture are almost certain to provoke strong oppositions if not overt economic conflicts. But tectonic shifts of this sort do not come about as if by magic. While the historical geography of a shifting hegemony as Arrighi describes it has a clear pattern and while it is also clear from the historical record that periods of financialization precede such shifts, Arrighi does not provide any deep analysis of the processes that produce such shifts in the first place. To be sure, he cites "endless accumulation" and therefore the growth syndrome (the three per cent compound growth rule) as critical to explaining the shifts. This implies that hegemony moves from smaller (i.e. Venice) to larger (e.g. the United States) political entities over time. And it also stands to reason that hegemony has to lie with that political entity within which much of the surplus is produced (or to which much of the surplus flows in the form of tribute or imperialist extractions). With total global output standing at $45 trillion as of 2005, the US share of $15 trillion made it, as it were, the dominant and controlling share-holder in global capitalism able to dictate (as it typically does in its role as the chief shareholder in the international institutions such as a the World Bank and the IMF) global policies. The NCIS report in part based its prediction on loss of dominance but maintenance of a strong position on the falling share of global output in the US relative to the rest of the world in general and China in particular. But as Arrighi points out, the politics of such a shift are by no means certain. The United States bid for global hegemony under Woodrow Wilson during and immediately after World War I was thwarted by a domestic political preference in the United State for isolationism (hence the collapse of the League of Nations) and it was only after World War II (which the US population was against entering until Pearl Harbor occurred) that the US embraced its role as global hegemon through a bi-partisan foreign policy anchored by the Bretton Woods Agreements on how the post-War international order would be organized (in the face of the Cold War and the spreading threat to capitalism of international communism). That the United States had long been developing into a state that in principle could play the role of global hegemon is evident from relatively early days. It possessed relevant doctrines, such as "Manifest Destiny" (continental wide geographical expansion which eventually spilled over into the Pacific and Caribbean before going global without territorial acquisitions) or the Monroe Doctrine which warned European Powers to leave the Americas alone (the doctrine was actually formulated by the British Foreign Secretary Canning in the 1820s but adopted by the US as its own almost immediately). The United States possessed the necessary dynamism to account for a growing share of global output and was quintessentially committed to some version of what can best be called "cornered market" or "monopoly" capitalism backed by an ideology of rugged individualism. So there is a sense in which the US was, throughout much of its history, preparing itself to take on the role of global hegemon. The only surprise was that it took so long to do so and that it was the Second rather than the First World War that led it finally to take up the role leaving the inter-war years as years of multipolarity and chaotic competing imperial ambitions of the sort that the NCIS report fears will be the situation in 2025. The tectonic shifts now under way are deeply influenced, however, by the radical geographical unevenness in the economic and political possibilities of responding to the current crisis. Let me illustrate how this unevenness is now working by way of a tangible example. As the depression that began in 2007 deepened, the argument was made by many that a full-fledged Keynesian solution was required to extract global capitalism from the mess it was in. To this end various stimulus packages and bank stabilization measures were proposed and to some degree taken up in different countries in different ways in the hope that these would resolve the difficulties. The variety of solutions on offer varied immensely depending upon the economic circumstances and the prevailing forms of political opinion (pitting, for example, Germany against Britain and France in the European Union). Consider, however, the different economic political possibilities in the United States and China and the potential consequences for both shifting hegemony and for the manner in which the crisis might be resolved. In the United States, any attempt to find an adequate Keynesian solution has been doomed at the start by a number of economic and political barriers that are almost impossible to overcome. A Keynesian solution would require massive and prolonged deficit financing if it were to succeed. It has been correctly argued that Roosevelt's attempt to return to a balanced budget in 1937-8 plunged the United States back into depression and that it was, therefore, World War II that saved the situation and not Roosevelt's too timid approach to deficit financing in the New Deal. So even if the institutional reforms as well as the push towards a more egalitarian policy did lay the foundations for the Post World War II recovery, the New Deal in itself actually failed to resolve the crisis in the United States. The problem for the United States in 2008-9 is that it starts from a position of chronic indebtedness to the rest of the world (it has been borrowing at the rate of more than $2 billion a day over the last ten years or more) and this poses an economic limitation upon the size of the extra deficit that can now be incurred. (This was not a serious problem for Roosevelt who began with a roughly balanced budget). There is also a geo-political limitation since the funding of any extra deficit is contingent upon the willingness of other powers (principally from East Asia and the Gulf States) to lend. On both counts, the economic stimulus available to the United States will almost certainly be neither large enough nor sustained enough to be up to the task of reflating the economy. This problem is exacerbated by ideological reluctance on the part of both political parties to embrace the huge amounts of deficit spending that will be required, ironically in part because the previous Republican administration worked on Dick Cheney's principle that "Reagan taught us that deficits don't matter." As Paul Krugman, the leading public advocate for a Keynesian solution, for one has argued, the $800 billion reluctantly voted on by Congress in 2009, while better than nothing, is nowhere near enough. It may take something of the order to $2 trillion to do the job and that is indeed excessive debt relative to where the US deficit now stands. The only possible economic option, would be to replace the weak Keynesianism of excessive military expenditures by the much stronger Keynesianism of social programs. Cutting the US defense budget in half (bringing it more in line with that of Europe in relation to proportion of GDP) might technically help but it would be, of course, political suicide, given the posture of the Republican Party as well as many Democrats, for anyone who proposed it. The second barrier is more purely political. In order to work, the stimulus has to be administered in such a way as to guarantee that it will be spent on goods and services and so get the economy humming again. This means that any relief must be directed to those who will spend it, which means the lower classes, since even the middle classes, if they spend it at all, are more likely to spend it on bidding up asset values (buying up foreclosed houses, for example), rather than increasing their purchases of goods and services. In any case, when times are bad many people will tend to use any extra income they receive to retire debt or to save (as largely happened with the $600 rebate designed by the Bush Administration in the early summer of 2008). What appears prudent and rational from the standpoint of the household bodes ill for the economy at large (in much the same way that the banks have rationally taken public money and either hoarded it or used it to buy assets rather than to lend). The prevailing hostility in the United States to "spreading the wealth around" and to administering any sort of relief other than tax cuts to individuals, arises out of hard core neoliberal ideological doctrine (centered in but by no means confined to the Republican Party) that "households know best". These doctrines have broadly been accepted as gospel by the American public at large after more than thirty years of neoliberal political indoctrination. We are, as I have argued elsewhere, "all neoliberals now" for the most part without even knowing it. There is a tacit acceptance, for example, that "wage repression" - a key component to the present problem - is a "normal" state of affairs in the United States. One of the three legs of a Keynesian solution, greater empowerment of labor, rising wages and redistribution towards the lower classes is politically impossible in the United States at this point in time. The very charge that some such program amounts to "socialism" sends shivers of terror through the political establishment. Labor is not strong enough (after thirty years of being battered by political forces) and no broad social movement is in sight that will force redistributions towards the working classes. One other way to achieve Keynesian goals, is to provide collective goods. This has traditionally entailed investments in both physical and social infrastructures (the WPA programs of the 1930s is a forerunner). Hence the attempt to insert into the stimulus package programs to rebuild and extend physical infrastructures for transport and communications, power and other public works along with increasing expenditures on health care, education, municipal services, and the like. These collective goods do have the potential to generate multipliers for employment as well as for the effective demand for further goods and services. But the presumption is that these collective goods are, at some point, going to belong to the category of "productive state expenditures" (i.e. stimulate further growth) rather than become a series of public "white elephants" which, as Keynes long ago remarked, amounted to nothing more than putting people to work digging ditches and filling them in again. In other words, an infrastructural investment strategy has to be targeted towards systematic revival of three percent growth through, for example, systematic redesign of our urban infrastructures and ways of life. This will not work without sophisticated state planning plus an existing productive base that can take advantage of the new infrastructural configurations. Here, too, the long prior history of deindustrialization in the United States and the intense ideological opposition to state planning (elements of which were incorporated into Roosevelt's New Deal and which continued into the 1960s only to be abandoned in the face of the neoliberal assault upon that particular exercise of state power in the 1980s) and the obvious preference for tax cuts rather than infrastructural transformations makes the pursuit of a full-fledged Keynesian solution all but impossible in the United States. In China, on the other hand, both the economic and political conditions exist where a full-fledged Keynesian solution would indeed be possible and where there are abundant signs that this path will likely be followed. To begin with, China has a vast reservoir of foreign cash surplus and it is easier to debt finance on that basis than it is with a vast already existing debt overhang as is the case in the US. It is also worth noting that ever since the mid 1990s the "toxic assets" (the non performing loans) of the Chinese Banks (some estimates put them as high as 40 per cent of all loans in 2000) have been wiped off the banks' books by occasional infusions of surplus cash from the foreign exchange reserves. The Chinese have had a long-running equivalent of the TARP program in the United States and evidently know how to do it (even if many of the transactions are tainted by corruption). The Chinese have the economic wherewithal to engage in a massive deficit-finance program and have a centralized state-financial architecture to administer that program effectively if they care to use it. The banks, which were long state owned, may have been nominally privatized to satisfy WTO requirements and to lure in foreign capital and expertise, but they can still easily be bent to central state will whereas in the United States even the vaguest hint of state direction let alone nationalization creates a political furor. There is likewise absolutely no ideological barrier to redistributing economic largesse to the neediest sectors of society though there may be some vested interests of wealthier party members and an emergent capitalist class to be overcome. The charge that this would amount to "socialism" or even worse to "communism" would simply be greeted with amusement in China. But in China the emergence of mass unemployment (at last report there were thought to be some 20 million unemployed as a result of the slow-down) and signs of widespread and rapidly escalating social unrest will almost certainly push the Communist Party to massive redistributions whether they are ideologically concerned to do so or not. As of early 2009, this seemed to be directed in the first instance to revitalizing the lagging rural areas to which many unemployed migrant workers have returned in frustration at the loss of jobs in manufacturing areas. In these regions where both social and physical infrastructures are lagging, a strong infusion of central government support will raise incomes, expand effective demand and begin upon the long process of consolidation of China's internal market. There is, secondly, a strong predilection to undertake the massive infrastructural investments that are still lagging in China (whereas tax reductions have almost no political appeal). While some of these may turn into "white elephants" the likelihood is far less since there is still an immense amount of work to be done to integrate the Chinese national space and so to confront the problem of uneven geographical development between the coastal regions of high development and the impoverished interior provinces. The existence of an extensive though troubled industrial and manufacturing base in need of spatial rationalization, makes it more likely that the Chinese effort will fall into the category of productive state expenditures. For the Chinese, much of the surplus can be mopped up in the further production of space, even allowing for the fact that speculation in urban property markets in cities like Shanghai, as in the United States, is part of the problem and cannot therefore be part of the solution. Infrastructural expenditures, provided they are on a sufficiently large scale, will go a long way to both mopping up surplus labor and so reducing the possibility of social unrest, and again boosting the internal market. These completely different opportunities to pursue a full-fledged Keynesian solution as represented by the contrast between the United States and China have profound international implications. If China uses more of its financial reserves to boost its internal market, as it is almost certainly bound to do for political reasons, so it will have less left over to lend to the United States. Reduced purchases of US Treasury Bills will eventually force higher interest rates and impact US internal demand negatively and, unless managed carefully, could trigger the one thing that everyone fears but which has so far been staved off: a run on the dollar. A gradual move away from reliance on US markets and the substitution of the internal market in China as a source of effective demand for Chinese industry will alter power balances significantly (and, by the way, be stressful for both the Chinese and the United States). The Chinese currency will necessarily rise against the dollar (a move that the US authorities have long sought but secretly feared) thus forcing the Chinese to rely even more on their internal market for aggregate demand. The dynamism that will result within China (as opposed to the prolonged recession conditions that will prevail in the United States) will draw more and more global suppliers of raw materials into the Chinese trade orbit and lessen the relative significance of the United States in international trade. The overall effect will be to accelerate the drift of wealth from West to East in the global economy and rapidly alter the balance of hegemonic economic power. The tectonic movement in the balance of global capitalist power will intensify with all manner of unpredictable political and economic ramifications in a world where the United States will no longer be in a dominant position even as it possesses significant power. The supreme irony, of course, is that the political and ideological barriers in the United States to any full-fledged Keynesian program will almost certainly hasten loss of US dominance in global affairs even as the elites of the world (including those in China) would wish to preserve that dominance for as long as possible. Whether or not true Keynesianism in China (along with some other states in a similar position) will be sufficient to compensate for the inevitable failure of reluctant Keynesianism in the West is an open question, but the unevenness coupled with fading US hegemony may well be the precursor to a break up of the global economy into regional hegemonic structures which could just as easily fiercely compete with each other as collaborate on the miserable question of who is to bear the brunt of long-lasting depression. That is not a heartening thought but then thinking of such a prospect might just awaken much of the West to the urgency of the task before it and get political leaders to stop preaching banalities about restoring trust and confidence and get down to doing what has to be done to rescue capitalism from the capitalists and their false neoliberal ideology. And if that means socialism, nationalizations, strong state direction, binding international collaborations, and a new and far more inclusive (dare I say "democratic") international financial architecture, then so be it. David Harvey is Distinguished Professor in the CUNY Graduate Center in New York. He is author of A Brief History of Neoliberalism. _______________________________________________ Radical-europe mailing list Radical-europe@listes.agora.eu.org http://listes.agora.eu.org/listinfo/radical-europe ----- Final da mensagem encaminhada ----- ---------------------------------------------------------------- Universidade Federal da Bahia - http://www.portal.ufba.br
Posted by ihering
Comments (0)
Leave a comment...
To leave a comment on this posterous, please login.
Click here to login or sign up
This article is from this site.
WHY THE U.S. STIMULUS PACKAGE IS BOUND TO FAIL
DAVID HARVEY
Much is to be gained by viewing the contemporary crisis as a surface eruption generated out of deep tectonic shifts in the spatio-temporal disposition of capitalist development. The tectonic plates are now accelerating their motion and the likelihood of more frequent and more violent crises of the sort that have been occurring since 1980 or so will almost certainly increase. The manner, form, spatiality and time of these surface disruptions are almost impossible to predict, but that they will occur with greater frequency and depth is almost certain. The events of 2008 have therefore to be situated in the context of a deeper pattern. Since these stresses are internal to the capitalist dynamic (which does not preclude some seemingly external disruptive event like a catastrophic pandemic also occurring), then what better argument could there be, as Marx once put it, "for capitalism to be gone and to make way for some alternative and more rational mode of production." I begin with this conclusion since I still find it vital to emphasize if not dramatize, as I have sought to do over and over again in my writings over the years, that failure to understand the geographical dynamics of capitalism or to treat the geographical dimension as in some sense merely contingent or epiphenomenal, is to both lose the plot on how to understand capitalist uneven geographical development and to miss out on possibilities for constructing radical alternatives. But this poses an acute difficulty for analysis since we are constantly faced with trying to distill universal principles regarding the role of the production of spaces, places and environments in capitalism's dynamics, out of a sea of often volatile geographical particularities. So how, then, can we integrate geographical understandings into our theories of evolutionary change? Let us look more carefully at the tectonic shifts. In November 2008, shortly after the election of a new President, the National Intelligence Council of the United States issued its delphic estimates on what the world would be like in 2025. Perhaps for the first time, a quasi-official body in the United States predicted that by 2025 the United States, while still a powerful if not the most powerful single player in world affairs, would no longer be dominant. The world would be multi-polar and less centered and the power of non-state actors would increase. The report conceded that US hegemony had been fading on and off for some time but that its economic, political and even military dominance was now systematically waning. Above all (and it is important to note that the report was prepared before the implosion of the US and British financial systems), "the unprecedented shift in relative wealth and economic power roughly from West to East now under way will continue." This "unprecedented shift" has reversed the long-standing drain of wealth from East, Southeast and South Asia to Europe and North America that had been occurring since the eighteenth century (a drain that even Adam Smith had noted with regret in The Wealth of Nations but which accelerated relentlessly throughout the nineteenth century). The rise of Japan in the 1960s followed by South Korea, Taiwan, Singapore and Hong Kong in the 1970s and then the rapid growth of China after 1980 later accompanied by industrialization spurts in Indonesia, India, Vietnam, Thailand and Malaysia during the 1990s, has altered the center of gravity of capitalist development, although it has not done so smoothly (the East and South-East Asian financial crisis of 1997-8 saw wealth flow briefly but strongly back towards Wall Street and the European and Japanese banks). Economic hegemony seems to be moving towards some constellation of powers in East Asia and if crises, as we earlier argued, are moments of radical reconfigurations in capitalist development, then the fact that the United States is having to deficit finance its way out of its financial difficulties on such a huge scale and that the deficits are largely being covered by those countries with saved surpluses – Japan, China, South Korea, Taiwan and the Gulf states – suggests this may be the moment for such a shift to be consolidated. Shifts of this sort have occurred before in the long history of capitalism. In Giovanni Arrighi's thorough account in The Long Twentieth Century, we see hegemony shifting from the city states of Genoa and Venice in the sixteenth century to Amsterdam and the Low Countries in the seventeenth before concentrating in Britain from the late eighteenth century until the United States eventually took control after 1945. There are a number of features to these transitions that Arrighi emphasizes and which are relevant to our analysis. Each shift, Arrighi notes, occurred in the wake of a strong phase of financialization (he cites with approval Braudel's maxim that financialization announces the autumn of some hegemonic configuration). But each shift also entailed a radical change of scale, from the small city states at the origin to the continent-wide economy of the United States in the latter half of the twentieth century. This change of scale makes sense given the capitalist rule of endless accumulation and compound growth of at least three per cent for ever. But hegemonic shifts, Arrighi argues, are not determined in advance. They depend upon the emergence of some power economically able and politically and militarily willing to take on the role of global hegemon (with its costs as well as its advantages). The reluctance of the United States to assume that role before World War II meant an interregnum of multi-polar tensions that could not halt the drift into war (Britain was no longer in a position to assert its prior hegemonic role). Much also depends on how the past hegemon behaves as it faces up to the diminution of its former role. It can pass peaceably or belligerently into history. From this perspective the fact that the United States still holds overwhelming military power (particularly from 30,000 feet up) in a context of its declining economic and financial power and increasingly shaky cultural and moral authority, creates worrying scenarios for any future transition. Furthermore, it is not obvious that the main candidate to displace the United States, China, has the capacity or the will to assert some hegemonic role, for while its population is certainly huge enough to meet the requirements of changing scale, neither its economy nor its political authority (or even its political will) point to any easy accession to the role of global hegemon. Given the nationalist divisions that exist, the idea that some association of East Asian Powers might do the job also appears unlikely as does the possibility for a fragmented and fractious European Union or the so-called BRIC powers (Brazil, Russia, India and China) to stay on a common path for long. For this reason, the prediction that we are headed into another interregnum of multi-polar and conflictual interests and potential global instability appears plausible. But the tectonic shift away from United States dominance and hegemony that has been under way for some time is becoming much clearer. The thesis of both excessive financialization and "debt as a principal predictor of leading world powers' debilitation" has found popular voice in the writings of Kevin Phillips. Attempts now under way to re-build US dominance through reforms in the architecture of both the national and the global state-finance nexus appear not to be working while the exclusions imposed on much of the rest of the world in seeking to re-shape that architecture are almost certain to provoke strong oppositions if not overt economic conflicts. But tectonic shifts of this sort do not come about as if by magic. While the historical geography of a shifting hegemony as Arrighi describes it has a clear pattern and while it is also clear from the historical record that periods of financialization precede such shifts, Arrighi does not provide any deep analysis of the processes that produce such shifts in the first place. To be sure, he cites "endless accumulation" and therefore the growth syndrome (the three per cent compound growth rule) as critical to explaining the shifts. This implies that hegemony moves from smaller (i.e. Venice) to larger (e.g. the United States) political entities over time. And it also stands to reason that hegemony has to lie with that political entity within which much of the surplus is produced (or to which much of the surplus flows in the form of tribute or imperialist extractions). With total global output standing at $45 trillion as of 2005, the US share of $15 trillion made it, as it were, the dominant and controlling share-holder in global capitalism able to dictate (as it typically does in its role as the chief shareholder in the international institutions such as a the World Bank and the IMF) global policies. The NCIS report in part based its prediction on loss of dominance but maintenance of a strong position on the falling share of global output in the US relative to the rest of the world in general and China in particular. But as Arrighi points out, the politics of such a shift are by no means certain. The United States bid for global hegemony under Woodrow Wilson during and immediately after World War I was thwarted by a domestic political preference in the United State for isolationism (hence the collapse of the League of Nations) and it was only after World War II (which the US population was against entering until Pearl Harbor occurred) that the US embraced its role as global hegemon through a bi-partisan foreign policy anchored by the Bretton Woods Agreements on how the post-War international order would be organized (in the face of the Cold War and the spreading threat to capitalism of international communism). That the United States had long been developing into a state that in principle could play the role of global hegemon is evident from relatively early days. It possessed relevant doctrines, such as "Manifest Destiny" (continental wide geographical expansion which eventually spilled over into the Pacific and Caribbean before going global without territorial acquisitions) or the Monroe Doctrine which warned European Powers to leave the Americas alone (the doctrine was actually formulated by the British Foreign Secretary Canning in the 1820s but adopted by the US as its own almost immediately). The United States possessed the necessary dynamism to account for a growing share of global output and was quintessentially committed to some version of what can best be called "cornered market" or "monopoly" capitalism backed by an ideology of rugged individualism. So there is a sense in which the US was, throughout much of its history, preparing itself to take on the role of global hegemon. The only surprise was that it took so long to do so and that it was the Second rather than the First World War that led it finally to take up the role leaving the inter-war years as years of multipolarity and chaotic competing imperial ambitions of the sort that the NCIS report fears will be the situation in 2025. The tectonic shifts now under way are deeply influenced, however, by the radical geographical unevenness in the economic and political possibilities of responding to the current crisis. Let me illustrate how this unevenness is now working by way of a tangible example. As the depression that began in 2007 deepened, the argument was made by many that a full-fledged Keynesian solution was required to extract global capitalism from the mess it was in. To this end various stimulus packages and bank stabilization measures were proposed and to some degree taken up in different countries in different ways in the hope that these would resolve the difficulties. The variety of solutions on offer varied immensely depending upon the economic circumstances and the prevailing forms of political opinion (pitting, for example, Germany against Britain and France in the European Union). Consider, however, the different economic political possibilities in the United States and China and the potential consequences for both shifting hegemony and for the manner in which the crisis might be resolved. In the United States, any attempt to find an adequate Keynesian solution has been doomed at the start by a number of economic and political barriers that are almost impossible to overcome. A Keynesian solution would require massive and prolonged deficit financing if it were to succeed. It has been correctly argued that Roosevelt's attempt to return to a balanced budget in 1937-8 plunged the United States back into depression and that it was, therefore, World War II that saved the situation and not Roosevelt's too timid approach to deficit financing in the New Deal. So even if the institutional reforms as well as the push towards a more egalitarian policy did lay the foundations for the Post World War II recovery, the New Deal in itself actually failed to resolve the crisis in the United States. The problem for the United States in 2008-9 is that it starts from a position of chronic indebtedness to the rest of the world (it has been borrowing at the rate of more than $2 billion a day over the last ten years or more) and this poses an economic limitation upon the size of the extra deficit that can now be incurred. (This was not a serious problem for Roosevelt who began with a roughly balanced budget). There is also a geo-political limitation since the funding of any extra deficit is contingent upon the willingness of other powers (principally from East Asia and the Gulf States) to lend. On both counts, the economic stimulus available to the United States will almost certainly be neither large enough nor sustained enough to be up to the task of reflating the economy. This problem is exacerbated by ideological reluctance on the part of both political parties to embrace the huge amounts of deficit spending that will be required, ironically in part because the previous Republican administration worked on Dick Cheney's principle that "Reagan taught us that deficits don't matter." As Paul Krugman, the leading public advocate for a Keynesian solution, for one has argued, the $800 billion reluctantly voted on by Congress in 2009, while better than nothing, is nowhere near enough. It may take something of the order to $2 trillion to do the job and that is indeed excessive debt relative to where the US deficit now stands. The only possible economic option, would be to replace the weak Keynesianism of excessive military expenditures by the much stronger Keynesianism of social programs. Cutting the US defense budget in half (bringing it more in line with that of Europe in relation to proportion of GDP) might technically help but it would be, of course, political suicide, given the posture of the Republican Party as well as many Democrats, for anyone who proposed it. The second barrier is more purely political. In order to work, the stimulus has to be administered in such a way as to guarantee that it will be spent on goods and services and so get the economy humming again. This means that any relief must be directed to those who will spend it, which means the lower classes, since even the middle classes, if they spend it at all, are more likely to spend it on bidding up asset values (buying up foreclosed houses, for example), rather than increasing their purchases of goods and services. In any case, when times are bad many people will tend to use any extra income they receive to retire debt or to save (as largely happened with the $600 rebate designed by the Bush Administration in the early summer of 2008). What appears prudent and rational from the standpoint of the household bodes ill for the economy at large (in much the same way that the banks have rationally taken public money and either hoarded it or used it to buy assets rather than to lend). The prevailing hostility in the United States to "spreading the wealth around" and to administering any sort of relief other than tax cuts to individuals, arises out of hard core neoliberal ideological doctrine (centered in but by no means confined to the Republican Party) that "households know best". These doctrines have broadly been accepted as gospel by the American public at large after more than thirty years of neoliberal political indoctrination. We are, as I have argued elsewhere, "all neoliberals now" for the most part without even knowing it. There is a tacit acceptance, for example, that "wage repression" - a key component to the present problem - is a "normal" state of affairs in the United States. One of the three legs of a Keynesian solution, greater empowerment of labor, rising wages and redistribution towards the lower classes is politically impossible in the United States at this point in time. The very charge that some such program amounts to "socialism" sends shivers of terror through the political establishment. Labor is not strong enough (after thirty years of being battered by political forces) and no broad social movement is in sight that will force redistributions towards the working classes. One other way to achieve Keynesian goals, is to provide collective goods. This has traditionally entailed investments in both physical and social infrastructures (the WPA programs of the 1930s is a forerunner). Hence the attempt to insert into the stimulus package programs to rebuild and extend physical infrastructures for transport and communications, power and other public works along with increasing expenditures on health care, education, municipal services, and the like. These collective goods do have the potential to generate multipliers for employment as well as for the effective demand for further goods and services. But the presumption is that these collective goods are, at some point, going to belong to the category of "productive state expenditures" (i.e. stimulate further growth) rather than become a series of public "white elephants" which, as Keynes long ago remarked, amounted to nothing more than putting people to work digging ditches and filling them in again. In other words, an infrastructural investment strategy has to be targeted towards systematic revival of three percent growth through, for example, systematic redesign of our urban infrastructures and ways of life. This will not work without sophisticated state planning plus an existing productive base that can take advantage of the new infrastructural configurations. Here, too, the long prior history of deindustrialization in the United States and the intense ideological opposition to state planning (elements of which were incorporated into Roosevelt's New Deal and which continued into the 1960s only to be abandoned in the face of the neoliberal assault upon that particular exercise of state power in the 1980s) and the obvious preference for tax cuts rather than infrastructural transformations makes the pursuit of a full-fledged Keynesian solution all but impossible in the United States. In China, on the other hand, both the economic and political conditions exist where a full-fledged Keynesian solution would indeed be possible and where there are abundant signs that this path will likely be followed. To begin with, China has a vast reservoir of foreign cash surplus and it is easier to debt finance on that basis than it is with a vast already existing debt overhang as is the case in the US. It is also worth noting that ever since the mid 1990s the "toxic assets" (the non performing loans) of the Chinese Banks (some estimates put them as high as 40 per cent of all loans in 2000) have been wiped off the banks' books by occasional infusions of surplus cash from the foreign exchange reserves. The Chinese have had a long-running equivalent of the TARP program in the United States and evidently know how to do it (even if many of the transactions are tainted by corruption). The Chinese have the economic wherewithal to engage in a massive deficit-finance program and have a centralized state-financial architecture to administer that program effectively if they care to use it. The banks, which were long state owned, may have been nominally privatized to satisfy WTO requirements and to lure in foreign capital and expertise, but they can still easily be bent to central state will whereas in the United States even the vaguest hint of state direction let alone nationalization creates a political furor. There is likewise absolutely no ideological barrier to redistributing economic largesse to the neediest sectors of society though there may be some vested interests of wealthier party members and an emergent capitalist class to be overcome. The charge that this would amount to "socialism" or even worse to "communism" would simply be greeted with amusement in China. But in China the emergence of mass unemployment (at last report there were thought to be some 20 million unemployed as a result of the slow-down) and signs of widespread and rapidly escalating social unrest will almost certainly push the Communist Party to massive redistributions whether they are ideologically concerned to do so or not. As of early 2009, this seemed to be directed in the first instance to revitalizing the lagging rural areas to which many unemployed migrant workers have returned in frustration at the loss of jobs in manufacturing areas. In these regions where both social and physical infrastructures are lagging, a strong infusion of central government support will raise incomes, expand effective demand and begin upon the long process of consolidation of China's internal market. There is, secondly, a strong predilection to undertake the massive infrastructural investments that are still lagging in China (whereas tax reductions have almost no political appeal). While some of these may turn into "white elephants" the likelihood is far less since there is still an immense amount of work to be done to integrate the Chinese national space and so to confront the problem of uneven geographical development between the coastal regions of high development and the impoverished interior provinces. The existence of an extensive though troubled industrial and manufacturing base in need of spatial rationalization, makes it more likely that the Chinese effort will fall into the category of productive state expenditures. For the Chinese, much of the surplus can be mopped up in the further production of space, even allowing for the fact that speculation in urban property markets in cities like Shanghai, as in the United States, is part of the problem and cannot therefore be part of the solution. Infrastructural expenditures, provided they are on a sufficiently large scale, will go a long way to both mopping up surplus labor and so reducing the possibility of social unrest, and again boosting the internal market. These completely different opportunities to pursue a full-fledged Keynesian solution as represented by the contrast between the United States and China have profound international implications. If China uses more of its financial reserves to boost its internal market, as it is almost certainly bound to do for political reasons, so it will have less left over to lend to the United States. Reduced purchases of US Treasury Bills will eventually force higher interest rates and impact US internal demand negatively and, unless managed carefully, could trigger the one thing that everyone fears but which has so far been staved off: a run on the dollar. A gradual move away from reliance on US markets and the substitution of the internal market in China as a source of effective demand for Chinese industry will alter power balances significantly (and, by the way, be stressful for both the Chinese and the United States). The Chinese currency will necessarily rise against the dollar (a move that the US authorities have long sought but secretly feared) thus forcing the Chinese to rely even more on their internal market for aggregate demand. The dynamism that will result within China (as opposed to the prolonged recession conditions that will prevail in the United States) will draw more and more global suppliers of raw materials into the Chinese trade orbit and lessen the relative significance of the United States in international trade. The overall effect will be to accelerate the drift of wealth from West to East in the global economy and rapidly alter the balance of hegemonic economic power. The tectonic movement in the balance of global capitalist power will intensify with all manner of unpredictable political and economic ramifications in a world where the United States will no longer be in a dominant position even as it possesses significant power. The supreme irony, of course, is that the political and ideological barriers in the United States to any full-fledged Keynesian program will almost certainly hasten loss of US dominance in global affairs even as the elites of the world (including those in China) would wish to preserve that dominance for as long as possible. Whether or not true Keynesianism in China (along with some other states in a similar position) will be sufficient to compensate for the inevitable failure of reluctant Keynesianism in the West is an open question, but the unevenness coupled with fading US hegemony may well be the precursor to a break up of the global economy into regional hegemonic structures which could just as easily fiercely compete with each other as collaborate on the miserable question of who is to bear the brunt of long-lasting depression. That is not a heartening thought but then thinking of such a prospect might just awaken much of the West to the urgency of the task before it and get political leaders to stop preaching banalities about restoring trust and confidence and get down to doing what has to be done to rescue capitalism from the capitalists and their false neoliberal ideology. And if that means socialism, nationalizations, strong state direction, binding international collaborations, and a new and far more inclusive (dare I say "democratic") international financial architecture, then so be it. David Harvey is Distinguished Professor in the CUNY Graduate Center in New York. He is author of A Brief History of Neoliberalism. _______________________________________________ Radical-europe mailing list Radical-europe@listes.agora.eu.org http://listes.agora.eu.org/listinfo/radical-europe ----- Final da mensagem encaminhada ----- ---------------------------------------------------------------- Universidade Federal da Bahia - http://www.portal.ufba.br
Posted by ihering
Comments (0)
Leave a comment...
To leave a comment on this posterous, please login.
Click here to login or sign up
France gives US 8.5 billion lifeline to carmakers
This article shows that protectionism is not confined to the US with its Buy American strategy but is surfacing in France, Italy, Germany and the UK. In Europe this trend is straining relationships with smaller and poorer members of the European Union who cannot compete with bigger members' bailouts.
In France the unions have considerable influence still as is shown by the fact that carmakers agree not to close plants or even restructure during the period of the loans and also they are to avoid layoffs as far as possible. All US unions get is a chance to bargain for lower wages!
This is from IHT.
France gives €6.5 billion lifeline to its carmakers
By Matthew Saltmarsh
Monday, February 9, 2009
PARIS: France on Monday announced a sweeping plan to support its automobile industry as concern intensified in Europe that the economic downturn was exacerbating protectionist tendencies among trading partners.
As the €6.5 billion, or $8.5 billion, plan was announced in Paris, ambassadors to the World Trade Organization were meeting in Geneva to try to counter the increasing evidence of economic nationalism on the part of major industrial countries.
"The fragile economic prospects of every WTO member have become especially vulnerable to the introduction of any new measure that closes off market access or distorts competition," Pascal Lamy, director general of the international trade body, said at the opening session of the meeting. "We must remain vigilant."
And European Union finance ministers, meeting Monday in Brussels, decried protectionist tendencies, which are already causing tension between wealthy EU member states, like France, that have enacted bailout plans and those, like the Czech Republic, that do not have access to the same resources to prop up their native industries.
The concerns, analysts say, revolve around the fear that anti-competitive measures have been worked into the recent state financial rescue packages, the bailouts of the auto industry and even the official reaction in labor disputes.
"The free market rule book is being thrown out of the window," said Jean-Pierre Lehmann professor of international political economy at the International Institute for Management Development in Lausanne, Switzerland. "We can only hope that it is recovered when things improve in the economy."
Europeans have expressed alarm recently about the "Buy America" provisions - especially those favoring U.S. steel producers - that were included in the more than $800 billion U.S. economic stimulus bill.
The Europeans also have criticized American support for General Motors and Chrysler, but it may be harder for them to press that case internationally when their own countries are pursuing similar policies.
Last week the U.S. Senate, at the urging of the White House, agreed to weaken some of those provisions, but their mere inclusion raised concerns about the consequences for Washington and the rest of the world.
As part of the French plan announced Monday, PSA Peugeot Citroën and Renault, the two largest French carmakers, will each get a five-year loan of €3 billion at an interest rate of 6 percent, while Renault Trucks, which is owned by Volvo of Sweden, will receive €500 million.
President Nicolas Sarkozy of France said that the funds should be used to invest in clean technology, and that "Renault and PSA have also committed to not to close any production sites for the duration of their loan and to do whatever they can to avoid layoffs."
"It's a commitment that I applaud because it ensures that this acute but temporary crisis will not destroy our industrial base and automotive know-how."
The auto sector has reported slumping sales and thousands of job cuts in the past year not only in France, but also across Europe and beyond. On Monday, Nissan, the Japanese automaker controlled by Renault, announced 20,000 job cuts and forecast its first annual loss in nine years.
Carlos Ghosn, chief executive of Renault and of Nissan, tied the French automaker's troubles directly to the global credit crunch.
"In light of the exceptional crisis impacting our entire industry, access to credit was indispensable for supporting our activity and that of the automotive industry," he said.
Renault added that over the short term it would "do everything it can to maintain jobs and skills, at production sites as well as research, engineering and test centers" and that it would "not implement restructuring programs at its automotive plants in France in 2009."
Officials in Brussels will now study the French plan to see whether it contravenes EU rules on state aid.
"The commission will need to scrutinize very carefully details of the subsidies, the conditions attached to make sure of their compliance with state aid and single market rules," the EU's competition spokesman, Jonathan Todd, said, according to Reuters.
The German finance minister, Peer Steinbrück, said as he arrived at the EU finance minister meeting that protectionism had to be a part of the discussion of how to help banks take toxic assets off their books, rescue carmakers and bring the euro region economy out of a recession.
"Everybody is in the process of conducting policies that help their country as a business location," Steinbrück said, according to Bloomberg News. "One has to be very careful" not to sink into protectionism, he said.
French support for its auto sector has already drawn sharp criticism from the Czech Republic, the country that currently holds the rotating presidency of the European Union.
Prime Minister Mirek Topolanek of the Czech Republic was quoted on Monday as saying that the ratification of the EU's planned Lisbon treaty has been threatened by comments made by Sarkozy.
Sarkozy suggested last week during an interview that French car companies should locate plants at home rather than in countries like the Czech Republic, Reuters reported.
"What Nicolas Sarkozy said is unbelievable," Topolanek said during an interview for the daily Hospodarske Noviny. "If somebody wanted to seriously threaten ratification of the Lisbon treaty, they couldn't have picked a better means or time."
Chancellor Angela Merkel of Germany has also inveighed against anticompetitive state aid. "We must not allow market forces to be completely distorted," Merkel said last month. "For instance, I am very wary of seeing subsidies injected into the U.S. auto industry. That could lead to distortion and protectionism."
A German official, who was not permitted to speak publicly on the issue, said Monday: "We're watching developments in France closely in the light of the measures that the German government has agreed on to strengthen the auto sector here."
France is far from alone in helping its automakers. Berlin itself announced last month a €1.5 billion aid plan for the auto sector largely focused on consumer demand and including incentives worth €2,500 for new car purchases.
Italy on Friday announced $1.7 billion of measures to help its struggling car industry. The plan, includes a payment of up to €1,500 for trading in an old car to buy a new, greener one. Carmakers in turn have been told to maintain their plants in Italy and pay auto parts suppliers, Prime Minister Silvio Berlusconi said. Fiat which dominates Italy's car industry, had warned 60,000 jobs could be at stake if the government did not act and has closed plants across the country for short periods to cope with savage falls in demand.
Last month, Britain offered auto manufacturers and suppliers access to £1.3 billion, or $1.9 billion, in loan guarantees from the European Investment Bank, topped up with an additional £1 billion from the Treasury, the business secretary, Peter Mandelson, said.
He also said that the government would increase its funding for retraining workers who had lost their jobs.
The British auto industry adds about £10 billion a year to the economy and employs more than 800,000 people. But government aid to automakers is more controversial in Britain than in other countries because most of the British manufacturers are foreign-owned. For example, Jaguar Land Rover, which employs 15,000 people in Britain, is owned by Tata Motors of India. General Motors of the United States owns Vauxhall.
Washington announced late last year a $14 billion plan to help General Motors and Chrysler, although Ford Motor, which is in better shape than its competitors, had said that it would not seek the emergency loans.
But it is not just in the auto sector that there has been concern about protectionism. British workers recently pressured Total, the French oil company, to agree to hire domestic workers at a refinery after a series of strikes protesting the use of Italian and Portuguese workers.
Protesters reminded Prime Minister Gordon Brown of Britain of his previous commitment hat he had made to offer "British jobs for British voters."
A report drawn up by Lamy before the WTO meeting Monday pointed out the protectionist risks inherent in the string of financial bailouts that have been enacted by governments across the world in recent months.
Protectionist impulses "would only worsen the economic situation for all and diminish prospects for an early recovery in activity. Protectionism could also provide retaliatory action by others that would compound the damage caused," the report said.
"Some of the measures at least, which in most cases constitute some form of state aid or subsidy, may eventually have negative spillover effects on other markets or introduce distortions to competition between financial institutions."
At the meeting, Lamy pledged closer scrutiny of national trade policies to guard against new barriers that he said would hit developing countries hardest.
Lehmann, the professor, said the world could see a rerun of the "car wars" of the 1980s, when companies tried to limit imports.
But this time, he warned, there is the additional backdrop of a global downturn. At the same time, he said, some emerging economies might be deprived of the chance to move up the value-added industrial chain if they were not able to sell to the advanced economies.
Still, Lehmann expressed skepticism about what the WTO could do to counteract the trend.
"Lamy says it's a member-driven organization," he said. "He has limited power" especially as the WTO's Doha round on freeing global trade is going nowhere at the moment.
Analysts meanwhile expressed some skepticism about how far the auto bailouts will help that sector.
"The main issue is still overcapacity - we estimate it's at about 35 percent in Europe - and how that is addressed," said David Arnold, an auto analyst in London for Credit Suisse. "And the key here is scrapping incentives and the reopening of credit markets."
The main victim of plans to keep production in France could be Spain, rather than Eastern Europe, Arnold said, where the auto plants are "less efficient than the newer plants in the east and it would be easier to repatriate production from there."
Paul Nieuwenhuis, director of the Center of Automotive Industry Research at the Cardiff Business School, said most European automakers were in better shape than their U.S. rivals because they had entered the recession in "leaner" shape.
"This will tide them over for a period," he said. But he added, if the recession endured, other approaches would be required.
In a report on the European auto sector last month, Credit Suisse said the current predicament stems from a history of state and family support, together with political opposition to capacity closure or consolidation.
"Further consolidation may ultimately be the healthy outcome of the current economic downturn, but the degree to which this is allowed to happen will depend heavily on the degree and form of any government intervention."
Peugeot-Citroën reports its 2008 results Wednesday followed by Renault on Thursday.
Correction:
Notes:
Copyright © 2009 The International Herald Tribune www.iht.com
In France the unions have considerable influence still as is shown by the fact that carmakers agree not to close plants or even restructure during the period of the loans and also they are to avoid layoffs as far as possible. All US unions get is a chance to bargain for lower wages!
This is from IHT.
France gives €6.5 billion lifeline to its carmakers
By Matthew Saltmarsh
Monday, February 9, 2009
PARIS: France on Monday announced a sweeping plan to support its automobile industry as concern intensified in Europe that the economic downturn was exacerbating protectionist tendencies among trading partners.
As the €6.5 billion, or $8.5 billion, plan was announced in Paris, ambassadors to the World Trade Organization were meeting in Geneva to try to counter the increasing evidence of economic nationalism on the part of major industrial countries.
"The fragile economic prospects of every WTO member have become especially vulnerable to the introduction of any new measure that closes off market access or distorts competition," Pascal Lamy, director general of the international trade body, said at the opening session of the meeting. "We must remain vigilant."
And European Union finance ministers, meeting Monday in Brussels, decried protectionist tendencies, which are already causing tension between wealthy EU member states, like France, that have enacted bailout plans and those, like the Czech Republic, that do not have access to the same resources to prop up their native industries.
The concerns, analysts say, revolve around the fear that anti-competitive measures have been worked into the recent state financial rescue packages, the bailouts of the auto industry and even the official reaction in labor disputes.
"The free market rule book is being thrown out of the window," said Jean-Pierre Lehmann professor of international political economy at the International Institute for Management Development in Lausanne, Switzerland. "We can only hope that it is recovered when things improve in the economy."
Europeans have expressed alarm recently about the "Buy America" provisions - especially those favoring U.S. steel producers - that were included in the more than $800 billion U.S. economic stimulus bill.
The Europeans also have criticized American support for General Motors and Chrysler, but it may be harder for them to press that case internationally when their own countries are pursuing similar policies.
Last week the U.S. Senate, at the urging of the White House, agreed to weaken some of those provisions, but their mere inclusion raised concerns about the consequences for Washington and the rest of the world.
As part of the French plan announced Monday, PSA Peugeot Citroën and Renault, the two largest French carmakers, will each get a five-year loan of €3 billion at an interest rate of 6 percent, while Renault Trucks, which is owned by Volvo of Sweden, will receive €500 million.
President Nicolas Sarkozy of France said that the funds should be used to invest in clean technology, and that "Renault and PSA have also committed to not to close any production sites for the duration of their loan and to do whatever they can to avoid layoffs."
"It's a commitment that I applaud because it ensures that this acute but temporary crisis will not destroy our industrial base and automotive know-how."
The auto sector has reported slumping sales and thousands of job cuts in the past year not only in France, but also across Europe and beyond. On Monday, Nissan, the Japanese automaker controlled by Renault, announced 20,000 job cuts and forecast its first annual loss in nine years.
Carlos Ghosn, chief executive of Renault and of Nissan, tied the French automaker's troubles directly to the global credit crunch.
"In light of the exceptional crisis impacting our entire industry, access to credit was indispensable for supporting our activity and that of the automotive industry," he said.
Renault added that over the short term it would "do everything it can to maintain jobs and skills, at production sites as well as research, engineering and test centers" and that it would "not implement restructuring programs at its automotive plants in France in 2009."
Officials in Brussels will now study the French plan to see whether it contravenes EU rules on state aid.
"The commission will need to scrutinize very carefully details of the subsidies, the conditions attached to make sure of their compliance with state aid and single market rules," the EU's competition spokesman, Jonathan Todd, said, according to Reuters.
The German finance minister, Peer Steinbrück, said as he arrived at the EU finance minister meeting that protectionism had to be a part of the discussion of how to help banks take toxic assets off their books, rescue carmakers and bring the euro region economy out of a recession.
"Everybody is in the process of conducting policies that help their country as a business location," Steinbrück said, according to Bloomberg News. "One has to be very careful" not to sink into protectionism, he said.
French support for its auto sector has already drawn sharp criticism from the Czech Republic, the country that currently holds the rotating presidency of the European Union.
Prime Minister Mirek Topolanek of the Czech Republic was quoted on Monday as saying that the ratification of the EU's planned Lisbon treaty has been threatened by comments made by Sarkozy.
Sarkozy suggested last week during an interview that French car companies should locate plants at home rather than in countries like the Czech Republic, Reuters reported.
"What Nicolas Sarkozy said is unbelievable," Topolanek said during an interview for the daily Hospodarske Noviny. "If somebody wanted to seriously threaten ratification of the Lisbon treaty, they couldn't have picked a better means or time."
Chancellor Angela Merkel of Germany has also inveighed against anticompetitive state aid. "We must not allow market forces to be completely distorted," Merkel said last month. "For instance, I am very wary of seeing subsidies injected into the U.S. auto industry. That could lead to distortion and protectionism."
A German official, who was not permitted to speak publicly on the issue, said Monday: "We're watching developments in France closely in the light of the measures that the German government has agreed on to strengthen the auto sector here."
France is far from alone in helping its automakers. Berlin itself announced last month a €1.5 billion aid plan for the auto sector largely focused on consumer demand and including incentives worth €2,500 for new car purchases.
Italy on Friday announced $1.7 billion of measures to help its struggling car industry. The plan, includes a payment of up to €1,500 for trading in an old car to buy a new, greener one. Carmakers in turn have been told to maintain their plants in Italy and pay auto parts suppliers, Prime Minister Silvio Berlusconi said. Fiat which dominates Italy's car industry, had warned 60,000 jobs could be at stake if the government did not act and has closed plants across the country for short periods to cope with savage falls in demand.
Last month, Britain offered auto manufacturers and suppliers access to £1.3 billion, or $1.9 billion, in loan guarantees from the European Investment Bank, topped up with an additional £1 billion from the Treasury, the business secretary, Peter Mandelson, said.
He also said that the government would increase its funding for retraining workers who had lost their jobs.
The British auto industry adds about £10 billion a year to the economy and employs more than 800,000 people. But government aid to automakers is more controversial in Britain than in other countries because most of the British manufacturers are foreign-owned. For example, Jaguar Land Rover, which employs 15,000 people in Britain, is owned by Tata Motors of India. General Motors of the United States owns Vauxhall.
Washington announced late last year a $14 billion plan to help General Motors and Chrysler, although Ford Motor, which is in better shape than its competitors, had said that it would not seek the emergency loans.
But it is not just in the auto sector that there has been concern about protectionism. British workers recently pressured Total, the French oil company, to agree to hire domestic workers at a refinery after a series of strikes protesting the use of Italian and Portuguese workers.
Protesters reminded Prime Minister Gordon Brown of Britain of his previous commitment hat he had made to offer "British jobs for British voters."
A report drawn up by Lamy before the WTO meeting Monday pointed out the protectionist risks inherent in the string of financial bailouts that have been enacted by governments across the world in recent months.
Protectionist impulses "would only worsen the economic situation for all and diminish prospects for an early recovery in activity. Protectionism could also provide retaliatory action by others that would compound the damage caused," the report said.
"Some of the measures at least, which in most cases constitute some form of state aid or subsidy, may eventually have negative spillover effects on other markets or introduce distortions to competition between financial institutions."
At the meeting, Lamy pledged closer scrutiny of national trade policies to guard against new barriers that he said would hit developing countries hardest.
Lehmann, the professor, said the world could see a rerun of the "car wars" of the 1980s, when companies tried to limit imports.
But this time, he warned, there is the additional backdrop of a global downturn. At the same time, he said, some emerging economies might be deprived of the chance to move up the value-added industrial chain if they were not able to sell to the advanced economies.
Still, Lehmann expressed skepticism about what the WTO could do to counteract the trend.
"Lamy says it's a member-driven organization," he said. "He has limited power" especially as the WTO's Doha round on freeing global trade is going nowhere at the moment.
Analysts meanwhile expressed some skepticism about how far the auto bailouts will help that sector.
"The main issue is still overcapacity - we estimate it's at about 35 percent in Europe - and how that is addressed," said David Arnold, an auto analyst in London for Credit Suisse. "And the key here is scrapping incentives and the reopening of credit markets."
The main victim of plans to keep production in France could be Spain, rather than Eastern Europe, Arnold said, where the auto plants are "less efficient than the newer plants in the east and it would be easier to repatriate production from there."
Paul Nieuwenhuis, director of the Center of Automotive Industry Research at the Cardiff Business School, said most European automakers were in better shape than their U.S. rivals because they had entered the recession in "leaner" shape.
"This will tide them over for a period," he said. But he added, if the recession endured, other approaches would be required.
In a report on the European auto sector last month, Credit Suisse said the current predicament stems from a history of state and family support, together with political opposition to capacity closure or consolidation.
"Further consolidation may ultimately be the healthy outcome of the current economic downturn, but the degree to which this is allowed to happen will depend heavily on the degree and form of any government intervention."
Peugeot-Citroën reports its 2008 results Wednesday followed by Renault on Thursday.
Correction:
Notes:
Copyright © 2009 The International Herald Tribune www.iht.com
Egypt hinders investigations into Gaza war.
This is from PressTV.
This is not too surprising since Egypt has an intense fear and dislike of radical Islam. The ICC will never be able to bring Israel to court in any event. As the article notes Egypt has co-operated with Israel in keeping the border closed. However, there is a clandestine traffic through tunnels that bring supplies and no doubt weapons as well into Gaza.
Egypt hinders investigations into Gaza war Mon, 09 Feb 2009 09:48:46 GMT
Egypt has refused entry into the Gaza Strip to members of an international committee in charge of investigating Israeli war crimes. The prosecutor of the International Criminal Court (ICC) set up the committee. Four French and Norwegian lawyers comprise the committee. The ICC had earlier started preliminary analysis into alleged Israeli war crimes in the Gaza war. French and Norwegian lawyers from Amnesty International on Thursday had attempted to enter the impoverished Palestinian sliver through Egypt's Rafah crossing with Gaza. Amnesty International, Human Rights Watch, as well as B'Tselem, and the Palestinian Center for Human Rights, have filed a lawsuit with the International Criminal Court (ICC) against alleged Israeli war crimes in Gaza. The criminal case is expected to focus on the Israeli atrocities, including charges of using disproportionate force, white phosphorous bombs and depleted uranium in the densely populated area. The group intended to collect evidence and testimonials on "Operation Cast Lead" which killed over 13,00 Palestinian and wounded nearly 5,500 others, a large number of them women and children. The evidence was to be submitted to the International Court before Sunday, February 8th. Egyptian authorities, however, prevented the four member group from crossing the border, arguing that for now only displaced Palestinians can enter the territory thought the crossing. Egypt has been cooperating closely with Israel in closing the Rafah border crossing in the past 19 months and particularly during the three week long Gaza offensive. Hamas has also sharply criticized Cairo for refusing to keep the crossing open to wounded Palestinian people despite the dire humanitarian situation in the heavily bombarded coastal strip. The country has won Israel's praise for not allowing people's basic needs and arms from reaching the Palestinian government in Gaza. "There is an accumulation of weapons and equipment meant for Hamas in Sinai, but Egypt is preventing it from getting into the Strip," Israel's Defense Minister Ehud Barak said.
This is not too surprising since Egypt has an intense fear and dislike of radical Islam. The ICC will never be able to bring Israel to court in any event. As the article notes Egypt has co-operated with Israel in keeping the border closed. However, there is a clandestine traffic through tunnels that bring supplies and no doubt weapons as well into Gaza.
Egypt hinders investigations into Gaza war Mon, 09 Feb 2009 09:48:46 GMT
Egypt has refused entry into the Gaza Strip to members of an international committee in charge of investigating Israeli war crimes. The prosecutor of the International Criminal Court (ICC) set up the committee. Four French and Norwegian lawyers comprise the committee. The ICC had earlier started preliminary analysis into alleged Israeli war crimes in the Gaza war. French and Norwegian lawyers from Amnesty International on Thursday had attempted to enter the impoverished Palestinian sliver through Egypt's Rafah crossing with Gaza. Amnesty International, Human Rights Watch, as well as B'Tselem, and the Palestinian Center for Human Rights, have filed a lawsuit with the International Criminal Court (ICC) against alleged Israeli war crimes in Gaza. The criminal case is expected to focus on the Israeli atrocities, including charges of using disproportionate force, white phosphorous bombs and depleted uranium in the densely populated area. The group intended to collect evidence and testimonials on "Operation Cast Lead" which killed over 13,00 Palestinian and wounded nearly 5,500 others, a large number of them women and children. The evidence was to be submitted to the International Court before Sunday, February 8th. Egyptian authorities, however, prevented the four member group from crossing the border, arguing that for now only displaced Palestinians can enter the territory thought the crossing. Egypt has been cooperating closely with Israel in closing the Rafah border crossing in the past 19 months and particularly during the three week long Gaza offensive. Hamas has also sharply criticized Cairo for refusing to keep the crossing open to wounded Palestinian people despite the dire humanitarian situation in the heavily bombarded coastal strip. The country has won Israel's praise for not allowing people's basic needs and arms from reaching the Palestinian government in Gaza. "There is an accumulation of weapons and equipment meant for Hamas in Sinai, but Egypt is preventing it from getting into the Strip," Israel's Defense Minister Ehud Barak said.
Tuesday, February 10, 2009
Henwood Doug: Rant on the TARP overhaul.
This is from Henwood's blog. It remains to be seen what the public will get out of all this risk taking. Given the connections of some of Obama's advisors it is not surprising that the overhaul is in the interest of hedge funds more than the public.
<http://doughenwood.wordpress.com/2009/02/09/rant-on-the-tarp-overhaul/>
Rant on the TARP overhaul
Tomorrow will bring the unveiling of the Obama administration’s overhaul of the Henry “Hank” Paulson bank bailout, the Troubled Asset Relief Program (TARP). [Apply for funds here.] From the leaks emerging, it looks like a significant portion of the scheme will amount to this: the government will lend money to hedge funds and the like at subsidized rates to buy toxic assets - and the gov will guarantee the investors against losses. From the hedgies point of view, it’s all reward, no risk. What the public gets out of this is impossible to specify, aside from the risk of massive losses.I hope this isn’t really what will emerge. But if it is, the Obama administration will have broken new ground in awfulness. The same formula that brought us this mess, an indulgent government encouraging reckless operators playing with other people’s money, will be applied towards solving it. It makes no damned sense.Well, maybe it does in the most cynical way. Hedge funders like Chicago’s Kenneth Griffin wrote Obama big checks during the campaign season. (For some details, see here and here.) Obama’s top economic advisor, Larry Summers, worked for a hedge fund after he got fired from Harvard. And no doubt Treasury Secretary Tim Geithner would like a multimillion dollar job on Wall Street after he leaves public service, just like Robert Rubin did at Citigroup after engineering the repeal of Glass-Steagall.Can things really be this bad? We report; you decide.
<http://doughenwood.wordpress.com/2009/02/09/rant-on-the-tarp-overhaul/>
Rant on the TARP overhaul
Tomorrow will bring the unveiling of the Obama administration’s overhaul of the Henry “Hank” Paulson bank bailout, the Troubled Asset Relief Program (TARP). [Apply for funds here.] From the leaks emerging, it looks like a significant portion of the scheme will amount to this: the government will lend money to hedge funds and the like at subsidized rates to buy toxic assets - and the gov will guarantee the investors against losses. From the hedgies point of view, it’s all reward, no risk. What the public gets out of this is impossible to specify, aside from the risk of massive losses.I hope this isn’t really what will emerge. But if it is, the Obama administration will have broken new ground in awfulness. The same formula that brought us this mess, an indulgent government encouraging reckless operators playing with other people’s money, will be applied towards solving it. It makes no damned sense.Well, maybe it does in the most cynical way. Hedge funders like Chicago’s Kenneth Griffin wrote Obama big checks during the campaign season. (For some details, see here and here.) Obama’s top economic advisor, Larry Summers, worked for a hedge fund after he got fired from Harvard. And no doubt Treasury Secretary Tim Geithner would like a multimillion dollar job on Wall Street after he leaves public service, just like Robert Rubin did at Citigroup after engineering the repeal of Glass-Steagall.Can things really be this bad? We report; you decide.
Anger confronts Holbrooke in Pakistan
This is from IHT.
It remains to be seen if Obama pays any more attention to complaints about the drone strikes than did Bush. I doubt it somehow. The drone attacks generate absolutely no US casualties while no doubt killing some militants. The collateral damage may do exactly what Pakistan claims namely generate sympathy for the militants but it seems the US could care less. No doubt the drone manufacturers are happy as well. They will not need to worry about the global recession.
Anger confronts Holbrooke in Pakistan
By Jane Perlez
Monday, February 9, 2009
ISLAMABAD: When Richard Holbrooke, the U.S. special representative to Pakistan and Afghanistan, holds talks with Pakistani leaders on ways to stop a runaway Islamist insurgency that is destabilizing Pakistan, he will find a pro-American but weak civilian government, and a powerful army unaccustomed and averse to fighting a domestic enemy.
In a nuclear-armed nation regarded as an ally of the United States and considered pivotal by the administration of President Barack Obama to ending the war in neighboring Afghanistan, Holbrooke will face a surge of anti-American sentiment on clear display by private citizens, public officials and increasingly potent television talk shows.
Some remedies offered by his hosts in Pakistan, where he was scheduled to begin a regional tour on Monday, are likely to be unappealing. On almost every front, the country's leaders are calling for less U.S. involvement, or at least the appearance of it.
The main reason for the swell in resentment here is the very strategy that the U.S. government considers its prime success against Al Qaeda: missile strikes delivered by remotely piloted aircraft against militants in Pakistani tribal areas.
To the surprise of many Pakistanis, who had been promised by their leaders that the new administration in Washington would be different, U.S. drone aircraft fired missiles at two areas in the tribal belt just three days after Obama's inauguration. According to the Pakistanis, as many as 21 civilians were killed by the strikes, in North and South Waziristan.
Fury at the continued airstrikes is considered one of the reasons for the poor showing of the Pakistani president, Asif Ali Zardari, in public opinion surveys.
Many Pakistanis view Zardari as too close to his American patrons. He is widely believed in Pakistan to have agreed to a request from President George W. Bush for a widening of the drone strikes, which had been conducted far more sparingly before Zardari came to power last September.
In an effort on Saturday to assuage an angry public, Zardari told an audience in Peshawar, a city in the North-West Frontier Province, that he would argue against the drone attacks during Holbrooke's visit. According to the Pakistani state press agency, Zardari said that the drone attacks were "counterproductive" and that the "day was not far away when these attacks will be stopped."
Zardari's sudden appearance, in Peshawar, a city virtually under siege from the Taliban, just two days before Holbrooke's arrival, was his first since he became president.
He was reported to have said that the visit by Holbrooke would give him the opportunity to educate the administration.
"We will tell them fighting was no solution to the imbroglio," Zardari was quoted as having said, "and let us handle it in our own way, as we know better than them as to how best the issue could be tackled."
Pakistani officials said they agreed with the U.S. assessment that the airstrikes had killed some of the senior leadership of Al Qaeda.
But the civilian casualties that have accompanied the attacks have accelerated anti-American feelings and made the Pakistani military appear feeble, they said. They argued that short-term tactical gains were likely to be outstripped by long-term strategic losses.
"Even when the real militants get killed, there is also a high probability that unarmed civilians get killed," said Farhatullah Babar, the spokesman for Zardari. "People get galvanized and become sympathetic to the militants."
The best alternative, Babar and former and current military officials said, was for the Americans to share their intelligence with the Pakistanis, and for the Pakistanis to carry out the attacks. If Pakistan conducted the air raids, they said, the militants could not contend that the battle against them was "America's war."
At the very least, the Pakistanis say, they will drive home to Holbrooke the need for U.S. military aid to help fight the insurgents - in particular, helicopters, as well as night-vision gear.
In a startling example of its shortcomings in counterterrorism, the Pakistani Army has been unable to thwart the FM radio signal of the leading Islamic militant in the Swat Valley, an area just 160 kilometers, or 100 miles, from this capital city. There, an army division of about 12,000 men has lost ground to the roughly 3,000 Taliban. The radio programs of the militant leader, Maulana Fazlullah, have proved a virulent weapon, forcing landowners to flee, terrorizing the police and spreading hatred of the government.
A spokesman for the army, General Athar Abbas, said the militants' radio broadcasts were difficult to track because they "shifted from one place to another." The army is trying to get the technology to jam the transmissions but has so far been unable to do so, he said. In a recent briefing of Pakistani journalists, the army said it had acquired a strong transmitter from China but had not yet installed it.
Those kinds of failures, and that none of the top leadership of the Pakistani Taliban have been killed, have prompted sharp criticism of the army from politicians aligned with Zardari. In an interview on television, one such politician, Hasham Baber, a member of the Awami National Party - which controls the North-West Frontier Province - accused the powerful Inter-Services Intelligence agency and the army of being allies of the militants.
Even if the United States increases military assistance for fighting the insurgency, it will be difficult to coax a better counterterrorism performance from the Pakistani Army, in part because deep suspicion about U.S. intentions has penetrated it.
Obama said last week that a central goal would be to prevent nuclear-armed Pakistan from destabilizing Afghanistan. By that, he is widely understood to have meant that the jihadists who use the tribal area as a base to attack American troops in Afghanistan, and to sweep down elsewhere in Pakistan, must be conquered.
Some Pakistani strategic planners, however, interpret Obama's plan to send more troops to Afghanistan as a direct threat to Pakistan, and in particular to its nuclear arsenal.
The belief, according to a senior Pakistani military officer, is that additional forces in Afghanistan would spill over into Pakistan.
"Afghanistan is irrelevant," said the officer, who spoke on the condition of anonymity. "The American troops are designed to create a mess in the tribal areas and in Pakistan, and take the nukes."
Another major irritant in the bilateral relationship that could hamper cooperation from the Pakistani military stems from the decision by the Bush administration to complete a nuclear deal with India, Pakistan's archenemy. The deal permits civilian nuclear trade between India and the United States, even though India has not signed the Nuclear Nonproliferation Treaty.
This enhanced relationship was interpreted as a serious snub to Pakistan, said Maleeha Lodhi, who served twice as the Pakistani ambassador to the United States.
"The Indo-U.S. deal," she said, "signified to the Pakistani military that while Washington saw its ties with Pakistan in tactical terms, the strategic relationship was forged with India."
To overcome qualms in Pakistan about the United States, Holbrooke is likely to emphasize Washington's plans for a drastic increase in aid to the country's educational, health and judicial systems, all areas that the United States has supported in the past, but to little effect because of deep corruption.
In line with legislation for the assistance written by Vice President Joseph Biden Jr. when he was in the Senate, Holbrooke will insist that the flow of aid depends on Pakistan's determination to act against terrorism.
Pakistanis see that condition, too, as demeaning. "An approach that treats Pakistan from the paradigm of 'hired help,' rather than valued ally," Lodhi wrote in a Pakistani daily paper, The News, "should be unacceptable to Islamabad."
Correction:
Notes:
Copyright © 2009 The International Herald Tribune www.iht.com
It remains to be seen if Obama pays any more attention to complaints about the drone strikes than did Bush. I doubt it somehow. The drone attacks generate absolutely no US casualties while no doubt killing some militants. The collateral damage may do exactly what Pakistan claims namely generate sympathy for the militants but it seems the US could care less. No doubt the drone manufacturers are happy as well. They will not need to worry about the global recession.
Anger confronts Holbrooke in Pakistan
By Jane Perlez
Monday, February 9, 2009
ISLAMABAD: When Richard Holbrooke, the U.S. special representative to Pakistan and Afghanistan, holds talks with Pakistani leaders on ways to stop a runaway Islamist insurgency that is destabilizing Pakistan, he will find a pro-American but weak civilian government, and a powerful army unaccustomed and averse to fighting a domestic enemy.
In a nuclear-armed nation regarded as an ally of the United States and considered pivotal by the administration of President Barack Obama to ending the war in neighboring Afghanistan, Holbrooke will face a surge of anti-American sentiment on clear display by private citizens, public officials and increasingly potent television talk shows.
Some remedies offered by his hosts in Pakistan, where he was scheduled to begin a regional tour on Monday, are likely to be unappealing. On almost every front, the country's leaders are calling for less U.S. involvement, or at least the appearance of it.
The main reason for the swell in resentment here is the very strategy that the U.S. government considers its prime success against Al Qaeda: missile strikes delivered by remotely piloted aircraft against militants in Pakistani tribal areas.
To the surprise of many Pakistanis, who had been promised by their leaders that the new administration in Washington would be different, U.S. drone aircraft fired missiles at two areas in the tribal belt just three days after Obama's inauguration. According to the Pakistanis, as many as 21 civilians were killed by the strikes, in North and South Waziristan.
Fury at the continued airstrikes is considered one of the reasons for the poor showing of the Pakistani president, Asif Ali Zardari, in public opinion surveys.
Many Pakistanis view Zardari as too close to his American patrons. He is widely believed in Pakistan to have agreed to a request from President George W. Bush for a widening of the drone strikes, which had been conducted far more sparingly before Zardari came to power last September.
In an effort on Saturday to assuage an angry public, Zardari told an audience in Peshawar, a city in the North-West Frontier Province, that he would argue against the drone attacks during Holbrooke's visit. According to the Pakistani state press agency, Zardari said that the drone attacks were "counterproductive" and that the "day was not far away when these attacks will be stopped."
Zardari's sudden appearance, in Peshawar, a city virtually under siege from the Taliban, just two days before Holbrooke's arrival, was his first since he became president.
He was reported to have said that the visit by Holbrooke would give him the opportunity to educate the administration.
"We will tell them fighting was no solution to the imbroglio," Zardari was quoted as having said, "and let us handle it in our own way, as we know better than them as to how best the issue could be tackled."
Pakistani officials said they agreed with the U.S. assessment that the airstrikes had killed some of the senior leadership of Al Qaeda.
But the civilian casualties that have accompanied the attacks have accelerated anti-American feelings and made the Pakistani military appear feeble, they said. They argued that short-term tactical gains were likely to be outstripped by long-term strategic losses.
"Even when the real militants get killed, there is also a high probability that unarmed civilians get killed," said Farhatullah Babar, the spokesman for Zardari. "People get galvanized and become sympathetic to the militants."
The best alternative, Babar and former and current military officials said, was for the Americans to share their intelligence with the Pakistanis, and for the Pakistanis to carry out the attacks. If Pakistan conducted the air raids, they said, the militants could not contend that the battle against them was "America's war."
At the very least, the Pakistanis say, they will drive home to Holbrooke the need for U.S. military aid to help fight the insurgents - in particular, helicopters, as well as night-vision gear.
In a startling example of its shortcomings in counterterrorism, the Pakistani Army has been unable to thwart the FM radio signal of the leading Islamic militant in the Swat Valley, an area just 160 kilometers, or 100 miles, from this capital city. There, an army division of about 12,000 men has lost ground to the roughly 3,000 Taliban. The radio programs of the militant leader, Maulana Fazlullah, have proved a virulent weapon, forcing landowners to flee, terrorizing the police and spreading hatred of the government.
A spokesman for the army, General Athar Abbas, said the militants' radio broadcasts were difficult to track because they "shifted from one place to another." The army is trying to get the technology to jam the transmissions but has so far been unable to do so, he said. In a recent briefing of Pakistani journalists, the army said it had acquired a strong transmitter from China but had not yet installed it.
Those kinds of failures, and that none of the top leadership of the Pakistani Taliban have been killed, have prompted sharp criticism of the army from politicians aligned with Zardari. In an interview on television, one such politician, Hasham Baber, a member of the Awami National Party - which controls the North-West Frontier Province - accused the powerful Inter-Services Intelligence agency and the army of being allies of the militants.
Even if the United States increases military assistance for fighting the insurgency, it will be difficult to coax a better counterterrorism performance from the Pakistani Army, in part because deep suspicion about U.S. intentions has penetrated it.
Obama said last week that a central goal would be to prevent nuclear-armed Pakistan from destabilizing Afghanistan. By that, he is widely understood to have meant that the jihadists who use the tribal area as a base to attack American troops in Afghanistan, and to sweep down elsewhere in Pakistan, must be conquered.
Some Pakistani strategic planners, however, interpret Obama's plan to send more troops to Afghanistan as a direct threat to Pakistan, and in particular to its nuclear arsenal.
The belief, according to a senior Pakistani military officer, is that additional forces in Afghanistan would spill over into Pakistan.
"Afghanistan is irrelevant," said the officer, who spoke on the condition of anonymity. "The American troops are designed to create a mess in the tribal areas and in Pakistan, and take the nukes."
Another major irritant in the bilateral relationship that could hamper cooperation from the Pakistani military stems from the decision by the Bush administration to complete a nuclear deal with India, Pakistan's archenemy. The deal permits civilian nuclear trade between India and the United States, even though India has not signed the Nuclear Nonproliferation Treaty.
This enhanced relationship was interpreted as a serious snub to Pakistan, said Maleeha Lodhi, who served twice as the Pakistani ambassador to the United States.
"The Indo-U.S. deal," she said, "signified to the Pakistani military that while Washington saw its ties with Pakistan in tactical terms, the strategic relationship was forged with India."
To overcome qualms in Pakistan about the United States, Holbrooke is likely to emphasize Washington's plans for a drastic increase in aid to the country's educational, health and judicial systems, all areas that the United States has supported in the past, but to little effect because of deep corruption.
In line with legislation for the assistance written by Vice President Joseph Biden Jr. when he was in the Senate, Holbrooke will insist that the flow of aid depends on Pakistan's determination to act against terrorism.
Pakistanis see that condition, too, as demeaning. "An approach that treats Pakistan from the paradigm of 'hired help,' rather than valued ally," Lodhi wrote in a Pakistani daily paper, The News, "should be unacceptable to Islamabad."
Correction:
Notes:
Copyright © 2009 The International Herald Tribune www.iht.com
Newsweek article: We are All Socialists Now
This article from Newsweek is symptomatic of the degeneration of US (and other western countries) political discourse. Socialism is used simply as a boo word with little cognitive content. Insofar as it has any meaning it is used to refer to govt. involvement in the economy or government programs. It never refers to the huge govt. expenditure on the military or police or intelligence services! Often it also refers to what is popularly called "lemon socialism" bailing out losers in defiance of the free market command to let them creatively destruct!
However socialism has nothing to do with government involvement in the economy or socialising risk while privatising profit. Such moves are all essential to contemporary capitalism and it is only in that sense that we are all socialists. But socialism is the socialisation through public, worker, or some other collective ownership of the means of production distribution and exchange and production on the basis of need not profit. What this article calls socialism are simply modalities by which capitalism tries to solve some of the contradictions within the capitalist system.
We Are All Socialists Now
In many ways our economy already resembles a European one. As boomers age and spending grows, we will become even more French.
Jon Meacham and Evan ThomasNEWSWEEK
From the magazine issue dated Feb 16, 2009
The interview was nearly over. on the Fox News Channel last Wednesday evening, Sean Hannity was coming to the end of a segment with Indiana Congressman Mike Pence, the chair of the House Republican Conference and a vociferous foe of President Obama's nearly $1 trillion stimulus bill. How, Pence had asked rhetorically, was $50 million for the National Endowment for the Arts going to put people back to work in Indiana? How would $20 million for "fish passage barriers" (a provision to pay for the removal of barriers in rivers and streams so that fish could migrate freely) help create jobs? Hannity could not have agreed more. "It is … the European Socialist Act of 2009," the host said, signing off. "We're counting on you to stop it. Thank you, congressman."
There it was, just before the commercial: the S word, a favorite among conservatives since John McCain began using it during the presidential campaign. (Remember Joe the Plumber? Sadly, so do we.) But it seems strangely beside the point. The U.S. government has already—under a conservative Republican administration—effectively nationalized the banking and mortgage industries. That seems a stronger sign of socialism than $50 million for art. Whether we want to admit it or not—and many, especially Congressman Pence and Hannity, do not—the America of 2009 is moving toward a modern European state.
We remain a center-right nation in many ways—particularly culturally, and our instinct, once the crisis passes, will be to try to revert to a more free-market style of capitalism—but it was, again, under a conservative GOP administration that we enacted the largest expansion of the welfare state in 30 years: prescription drugs for the elderly. People on the right and the left want government to invest in alternative energies in order to break our addiction to foreign oil. And it is unlikely that even the reddest of states will decline federal money for infrastructural improvements.
If we fail to acknowledge the reality of the growing role of government in the economy, insisting instead on fighting 21st-century wars with 20th-century terms and tactics, then we are doomed to a fractious and unedifying debate. The sooner we understand where we truly stand, the sooner we can think more clearly about how to use government in today's world.
As the Obama administration presses the largest fiscal bill in American history, caps the salaries of executives at institutions receiving federal aid at $500,000 and introduces a new plan to rescue the banking industry, the unemployment rate is at its highest in 16 years. The Dow has slumped to 1998 levels, and last year mortgage foreclosures rose 81 percent.
All of this is unfolding in an economy that can no longer be understood, even in passing, as the Great Society vs. the Gipper. Whether we like it or not—or even whether many people have thought much about it or not—the numbers clearly suggest that we are headed in a more European direction. A decade ago U.S. government spending was 34.3 percent of GDP, compared with 48.2 percent in the euro zone—a roughly 14-point gap, according to the Organization for Economic Cooperation and Development. In 2010 U.S. spending is expected to be 39.9 percent of GDP, compared with 47.1 percent in the euro zone—a gap of less than 8 points. As entitlement spending rises over the next decade, we will become even more French.
This is not to say that berets will be all the rage this spring, or that Obama has promised a croissant in every toaster oven. But the simple fact of the matter is that the political conversation, which shifts from time to time, has shifted anew, and for the foreseeable future Americans will be more engaged with questions about how to manage a mixed economy than about whether we should have one.
The architect of this new era of big government? History has a sense of humor, for the man who laid the foundations for the world Obama now rules is George W. Bush, who moved to bail out the financial sector last autumn with $700 billion.
Bush brought the Age of Reagan to a close; now Obama has gone further, reversing Bill Clinton's end of big government. The story, as always, is complicated. Polls show that Americans don't trust government and still don't want big government. They do, however, want what government delivers, like health care and national defense and, now, protections from banking and housing failure. During the roughly three decades since Reagan made big government the enemy and "liberal" an epithet, government did not shrink. It grew. But the economy grew just as fast, so government as a percentage of GDP remained about the same. Much of that economic growth was real, but for the past five years or so, it has borne a suspicious resemblance to Bernie Madoff's stock fund. Americans have been living high on borrowed money (the savings rate dropped from 7.6 percent in 1992 to less than zero in 2005) while financiers built castles in the air.
Now comes the reckoning. The answer may indeed be more government. In the short run, since neither consumers nor business is likely to do it, the government will have to stimulate the economy. And in the long run, an aging population and global warming and higher energy costs will demand more government taxing and spending. The catch is that more government intrusion in the economy will almost surely limit growth (as it has in Europe, where a big welfare state has caused chronic high unemployment). Growth has always been America's birthright and saving grace.
The Obama administration is caught in a paradox. It must borrow and spend to fix a crisis created by too much borrowing and spending. Having pumped the economy up with a stimulus, the president will have to cut the growth of entitlement spending by holding down health care and retirement costs and still invest in ways that will produce long-term growth. Obama talks of the need for smart government. To get the balance between America and France right, the new president will need all the smarts he can summon.
URL: http://www.newsweek.com/id/183663
© 2009
However socialism has nothing to do with government involvement in the economy or socialising risk while privatising profit. Such moves are all essential to contemporary capitalism and it is only in that sense that we are all socialists. But socialism is the socialisation through public, worker, or some other collective ownership of the means of production distribution and exchange and production on the basis of need not profit. What this article calls socialism are simply modalities by which capitalism tries to solve some of the contradictions within the capitalist system.
We Are All Socialists Now
In many ways our economy already resembles a European one. As boomers age and spending grows, we will become even more French.
Jon Meacham and Evan ThomasNEWSWEEK
From the magazine issue dated Feb 16, 2009
The interview was nearly over. on the Fox News Channel last Wednesday evening, Sean Hannity was coming to the end of a segment with Indiana Congressman Mike Pence, the chair of the House Republican Conference and a vociferous foe of President Obama's nearly $1 trillion stimulus bill. How, Pence had asked rhetorically, was $50 million for the National Endowment for the Arts going to put people back to work in Indiana? How would $20 million for "fish passage barriers" (a provision to pay for the removal of barriers in rivers and streams so that fish could migrate freely) help create jobs? Hannity could not have agreed more. "It is … the European Socialist Act of 2009," the host said, signing off. "We're counting on you to stop it. Thank you, congressman."
There it was, just before the commercial: the S word, a favorite among conservatives since John McCain began using it during the presidential campaign. (Remember Joe the Plumber? Sadly, so do we.) But it seems strangely beside the point. The U.S. government has already—under a conservative Republican administration—effectively nationalized the banking and mortgage industries. That seems a stronger sign of socialism than $50 million for art. Whether we want to admit it or not—and many, especially Congressman Pence and Hannity, do not—the America of 2009 is moving toward a modern European state.
We remain a center-right nation in many ways—particularly culturally, and our instinct, once the crisis passes, will be to try to revert to a more free-market style of capitalism—but it was, again, under a conservative GOP administration that we enacted the largest expansion of the welfare state in 30 years: prescription drugs for the elderly. People on the right and the left want government to invest in alternative energies in order to break our addiction to foreign oil. And it is unlikely that even the reddest of states will decline federal money for infrastructural improvements.
If we fail to acknowledge the reality of the growing role of government in the economy, insisting instead on fighting 21st-century wars with 20th-century terms and tactics, then we are doomed to a fractious and unedifying debate. The sooner we understand where we truly stand, the sooner we can think more clearly about how to use government in today's world.
As the Obama administration presses the largest fiscal bill in American history, caps the salaries of executives at institutions receiving federal aid at $500,000 and introduces a new plan to rescue the banking industry, the unemployment rate is at its highest in 16 years. The Dow has slumped to 1998 levels, and last year mortgage foreclosures rose 81 percent.
All of this is unfolding in an economy that can no longer be understood, even in passing, as the Great Society vs. the Gipper. Whether we like it or not—or even whether many people have thought much about it or not—the numbers clearly suggest that we are headed in a more European direction. A decade ago U.S. government spending was 34.3 percent of GDP, compared with 48.2 percent in the euro zone—a roughly 14-point gap, according to the Organization for Economic Cooperation and Development. In 2010 U.S. spending is expected to be 39.9 percent of GDP, compared with 47.1 percent in the euro zone—a gap of less than 8 points. As entitlement spending rises over the next decade, we will become even more French.
This is not to say that berets will be all the rage this spring, or that Obama has promised a croissant in every toaster oven. But the simple fact of the matter is that the political conversation, which shifts from time to time, has shifted anew, and for the foreseeable future Americans will be more engaged with questions about how to manage a mixed economy than about whether we should have one.
The architect of this new era of big government? History has a sense of humor, for the man who laid the foundations for the world Obama now rules is George W. Bush, who moved to bail out the financial sector last autumn with $700 billion.
Bush brought the Age of Reagan to a close; now Obama has gone further, reversing Bill Clinton's end of big government. The story, as always, is complicated. Polls show that Americans don't trust government and still don't want big government. They do, however, want what government delivers, like health care and national defense and, now, protections from banking and housing failure. During the roughly three decades since Reagan made big government the enemy and "liberal" an epithet, government did not shrink. It grew. But the economy grew just as fast, so government as a percentage of GDP remained about the same. Much of that economic growth was real, but for the past five years or so, it has borne a suspicious resemblance to Bernie Madoff's stock fund. Americans have been living high on borrowed money (the savings rate dropped from 7.6 percent in 1992 to less than zero in 2005) while financiers built castles in the air.
Now comes the reckoning. The answer may indeed be more government. In the short run, since neither consumers nor business is likely to do it, the government will have to stimulate the economy. And in the long run, an aging population and global warming and higher energy costs will demand more government taxing and spending. The catch is that more government intrusion in the economy will almost surely limit growth (as it has in Europe, where a big welfare state has caused chronic high unemployment). Growth has always been America's birthright and saving grace.
The Obama administration is caught in a paradox. It must borrow and spend to fix a crisis created by too much borrowing and spending. Having pumped the economy up with a stimulus, the president will have to cut the growth of entitlement spending by holding down health care and retirement costs and still invest in ways that will produce long-term growth. Obama talks of the need for smart government. To get the balance between America and France right, the new president will need all the smarts he can summon.
URL: http://www.newsweek.com/id/183663
© 2009
Philippines prepares for return of foreign workers.
This is from mb.com.
This is just an example of what is expected in terms of the return of foreign workers who will loose their overseas jobs due to the recession. The return of OFWs will only exacerbate unemployment in the Philippines itself and cause hardship for many families dependent upon their remittances home.
RDC readies plan for OFWs displaced by economic crisis
By FREDDIE G. LAZAROSAN FERNANDO CITY, La Union — The Region 1 Development Council (RDC) chaired by Ilocos Sur Gov. Deogracias Victor B. Savellano is preparing a contingency plan to cushion the impact of the global economic crisis on displaced workers.
It was feared that many overseas Filipino workers (OFWs) might lose their jobs due to the economic crisis hounding several foreign countries.
Meanwhile, it was announced that the regional executives of national line agencies and leaders of non-government organizations (NGOs) and private sector will meet in a conference set on Feb. 11, 2009 in the social hall of the Saint Louis College in this city.
The participants in the conference will formulate strategies to address the problems caused by the global economic slowdown, loss of jobs and income, and protection of marginal groups.
The prepared programs will be funded with the regular fund of the government agencies, NGOs, private sector and other sources.
Among the strategies listed for discussion during the forum are an economic resiliency program, comprehensive livelihood and emergency employment program, and intensified social protection program.
Leonardo N. Quitos Jr., regional director of the National Economic Development Authority (NEDA), said all inputs and action plans subjected for each strategy will be presented and will be analyzed during the plenary session of the conference.
"The conference will be an avenue to validate the specific actions, programs, and projects with other stakeholders to include NGOs and the private sector. It will also be a venue to identify additional areas of concern and corresponding intervention and responsible entities," Quitos said.
"The output of the consultative conference will be the "Region 1 Detailed Action Plan on Contingency Measures for the Global Economic Crisis," he said.
Quitos said that expected to be hard hit by the global economic crisis in Region 1 are laid-off Ilocano and Pangasinense OFWs, particularly those who are working in the US under temporary working visas, seafarers in cruise ships, factory workers in South Korea, Taiwan, and Macau, domestic helpers in Singapore, Macau, and Hong Kong, and skilled workers in Japan.
This is just an example of what is expected in terms of the return of foreign workers who will loose their overseas jobs due to the recession. The return of OFWs will only exacerbate unemployment in the Philippines itself and cause hardship for many families dependent upon their remittances home.
RDC readies plan for OFWs displaced by economic crisis
By FREDDIE G. LAZAROSAN FERNANDO CITY, La Union — The Region 1 Development Council (RDC) chaired by Ilocos Sur Gov. Deogracias Victor B. Savellano is preparing a contingency plan to cushion the impact of the global economic crisis on displaced workers.
It was feared that many overseas Filipino workers (OFWs) might lose their jobs due to the economic crisis hounding several foreign countries.
Meanwhile, it was announced that the regional executives of national line agencies and leaders of non-government organizations (NGOs) and private sector will meet in a conference set on Feb. 11, 2009 in the social hall of the Saint Louis College in this city.
The participants in the conference will formulate strategies to address the problems caused by the global economic slowdown, loss of jobs and income, and protection of marginal groups.
The prepared programs will be funded with the regular fund of the government agencies, NGOs, private sector and other sources.
Among the strategies listed for discussion during the forum are an economic resiliency program, comprehensive livelihood and emergency employment program, and intensified social protection program.
Leonardo N. Quitos Jr., regional director of the National Economic Development Authority (NEDA), said all inputs and action plans subjected for each strategy will be presented and will be analyzed during the plenary session of the conference.
"The conference will be an avenue to validate the specific actions, programs, and projects with other stakeholders to include NGOs and the private sector. It will also be a venue to identify additional areas of concern and corresponding intervention and responsible entities," Quitos said.
"The output of the consultative conference will be the "Region 1 Detailed Action Plan on Contingency Measures for the Global Economic Crisis," he said.
Quitos said that expected to be hard hit by the global economic crisis in Region 1 are laid-off Ilocano and Pangasinense OFWs, particularly those who are working in the US under temporary working visas, seafarers in cruise ships, factory workers in South Korea, Taiwan, and Macau, domestic helpers in Singapore, Macau, and Hong Kong, and skilled workers in Japan.
The Destructive Center: Krugman on the Stimulus Plan.
This article shows how Obama has watered down and wrecked his stimulus plan by giving in to the center and trying to obtain bipartisan support for his measures. The result is diluted medicine for the economy that will take longer to cure the patient if it works at all.
The Destructive Center
By Paul KrugmanFebruary 09, 2009 "New York Times"
-- -What do you call someone who eliminates hundreds of thousands of American jobs, deprives millions of adequate health care and nutrition, undermines schools, but offers a $15,000 bonus to affluent people who flip their houses?A proud centrist. For that is what the senators who ended up calling the tune on the stimulus bill just accomplished.Even if the original Obama plan — around $800 billion in stimulus, with a substantial fraction of that total given over to ineffective tax cuts — had been enacted, it wouldn’t have been enough to fill the looming hole in the U.S. economy, which the Congressional Budget Office estimates will amount to $2.9 trillion over the next three years.Yet the centrists did their best to make the plan weaker and worse.One of the best features of the original plan was aid to cash-strapped state governments, which would have provided a quick boost to the economy while preserving essential services. But the centrists insisted on a $40 billion cut in that spending.The original plan also included badly needed spending on school construction; $16 billion of that spending was cut. It included aid to the unemployed, especially help in maintaining health care — cut. Food stamps — cut. All in all, more than $80 billion was cut from the plan, with the great bulk of those cuts falling on precisely the measures that would do the most to reduce the depth and pain of this slump.On the other hand, the centrists were apparently just fine with one of the worst provisions in the Senate bill, a tax credit for home buyers. Dean Baker of the Center for Economic Policy Research calls this the “flip your house to your brother” provision: it will cost a lot of money while doing nothing to help the economy.All in all, the centrists’ insistence on comforting the comfortable while afflicting the afflicted will, if reflected in the final bill, lead to substantially lower employment and substantially more suffering.But how did this happen? I blame President Obama’s belief that he can transcend the partisan divide — a belief that warped his economic strategy.After all, many people expected Mr. Obama to come out with a really strong stimulus plan, reflecting both the economy’s dire straits and his own electoral mandate.Instead, however, he offered a plan that was clearly both too small and too heavily reliant on tax cuts. Why? Because he wanted the plan to have broad bipartisan support, and believed that it would. Not long ago administration strategists were talking about getting 80 or more votes in the Senate.Mr. Obama’s postpartisan yearnings may also explain why he didn’t do something crucially important: speak forcefully about how government spending can help support the economy. Instead, he let conservatives define the debate, waiting until late last week before finally saying what needed to be said — that increasing spending is the whole point of the plan.And Mr. Obama got nothing in return for his bipartisan outreach. Not one Republican voted for the House version of the stimulus plan, which was, by the way, better focused than the original administration proposal.In the Senate, Republicans inveighed against “pork” — although the wasteful spending they claimed to have identified (much of it was fully justified) was a trivial share of the bill’s total. And they decried the bill’s cost — even as 36 out of 41 Republican senators voted to replace the Obama plan with $3 trillion, that’s right, $3 trillion in tax cuts over 10 years.So Mr. Obama was reduced to bargaining for the votes of those centrists. And the centrists, predictably, extracted a pound of flesh — not, as far as anyone can tell, based on any coherent economic argument, but simply to demonstrate their centrist mojo. They probably would have demanded that $100 billion or so be cut from anything Mr. Obama proposed; by coming in with such a low initial bid, the president guaranteed that the final deal would be much too small.Such are the perils of negotiating with yourself.Now, House and Senate negotiators have to reconcile their versions of the stimulus, and it’s possible that the final bill will undo the centrists’ worst. And Mr. Obama may be able to come back for a second round. But this was his best chance to get decisive action, and it fell short.So has Mr. Obama learned from this experience? Early indications aren’t good.For rather than acknowledge the failure of his political strategy and the damage to his economic strategy, the president tried to put a postpartisan happy face on the whole thing. “Democrats and Republicans came together in the Senate and responded appropriately to the urgency this moment demands,” he declared on Saturday, and “the scale and scope of this plan is right.”No, they didn’t, and no, it isn’t.
Paul Krugman is professor of Economics and International Affairs at Princeton University and a regular columnist for The New York Times. On October 13, 2008, it was announced that Mr. Krugman would receive the Nobel Prize in Economics. He is the author of numerous books, including The Conscience of A Liberal, and his most recent, The Return of Depression Economics.
The Destructive Center
By Paul KrugmanFebruary 09, 2009 "New York Times"
-- -What do you call someone who eliminates hundreds of thousands of American jobs, deprives millions of adequate health care and nutrition, undermines schools, but offers a $15,000 bonus to affluent people who flip their houses?A proud centrist. For that is what the senators who ended up calling the tune on the stimulus bill just accomplished.Even if the original Obama plan — around $800 billion in stimulus, with a substantial fraction of that total given over to ineffective tax cuts — had been enacted, it wouldn’t have been enough to fill the looming hole in the U.S. economy, which the Congressional Budget Office estimates will amount to $2.9 trillion over the next three years.Yet the centrists did their best to make the plan weaker and worse.One of the best features of the original plan was aid to cash-strapped state governments, which would have provided a quick boost to the economy while preserving essential services. But the centrists insisted on a $40 billion cut in that spending.The original plan also included badly needed spending on school construction; $16 billion of that spending was cut. It included aid to the unemployed, especially help in maintaining health care — cut. Food stamps — cut. All in all, more than $80 billion was cut from the plan, with the great bulk of those cuts falling on precisely the measures that would do the most to reduce the depth and pain of this slump.On the other hand, the centrists were apparently just fine with one of the worst provisions in the Senate bill, a tax credit for home buyers. Dean Baker of the Center for Economic Policy Research calls this the “flip your house to your brother” provision: it will cost a lot of money while doing nothing to help the economy.All in all, the centrists’ insistence on comforting the comfortable while afflicting the afflicted will, if reflected in the final bill, lead to substantially lower employment and substantially more suffering.But how did this happen? I blame President Obama’s belief that he can transcend the partisan divide — a belief that warped his economic strategy.After all, many people expected Mr. Obama to come out with a really strong stimulus plan, reflecting both the economy’s dire straits and his own electoral mandate.Instead, however, he offered a plan that was clearly both too small and too heavily reliant on tax cuts. Why? Because he wanted the plan to have broad bipartisan support, and believed that it would. Not long ago administration strategists were talking about getting 80 or more votes in the Senate.Mr. Obama’s postpartisan yearnings may also explain why he didn’t do something crucially important: speak forcefully about how government spending can help support the economy. Instead, he let conservatives define the debate, waiting until late last week before finally saying what needed to be said — that increasing spending is the whole point of the plan.And Mr. Obama got nothing in return for his bipartisan outreach. Not one Republican voted for the House version of the stimulus plan, which was, by the way, better focused than the original administration proposal.In the Senate, Republicans inveighed against “pork” — although the wasteful spending they claimed to have identified (much of it was fully justified) was a trivial share of the bill’s total. And they decried the bill’s cost — even as 36 out of 41 Republican senators voted to replace the Obama plan with $3 trillion, that’s right, $3 trillion in tax cuts over 10 years.So Mr. Obama was reduced to bargaining for the votes of those centrists. And the centrists, predictably, extracted a pound of flesh — not, as far as anyone can tell, based on any coherent economic argument, but simply to demonstrate their centrist mojo. They probably would have demanded that $100 billion or so be cut from anything Mr. Obama proposed; by coming in with such a low initial bid, the president guaranteed that the final deal would be much too small.Such are the perils of negotiating with yourself.Now, House and Senate negotiators have to reconcile their versions of the stimulus, and it’s possible that the final bill will undo the centrists’ worst. And Mr. Obama may be able to come back for a second round. But this was his best chance to get decisive action, and it fell short.So has Mr. Obama learned from this experience? Early indications aren’t good.For rather than acknowledge the failure of his political strategy and the damage to his economic strategy, the president tried to put a postpartisan happy face on the whole thing. “Democrats and Republicans came together in the Senate and responded appropriately to the urgency this moment demands,” he declared on Saturday, and “the scale and scope of this plan is right.”No, they didn’t, and no, it isn’t.
Paul Krugman is professor of Economics and International Affairs at Princeton University and a regular columnist for The New York Times. On October 13, 2008, it was announced that Mr. Krugman would receive the Nobel Prize in Economics. He is the author of numerous books, including The Conscience of A Liberal, and his most recent, The Return of Depression Economics.
Monday, February 9, 2009
Hello Obama this is Gloria Arroyo calling!
Poor Gloria she can't seem to get herself noticed by Obama. She even attends a prayer meeting. Probably she prayed that Obama would give her a phone call. Maybe she should try getting an invite to George Bush's Texas ranch instead.
Miriam says Gloria erred in attending US prayer meet
02/09/2009
A strong ally of President Arroyo yesterday criticized the Chief Executive’s attendance in the national day of prayer in Washington D.C. where she risked being perceived as desperately trying to seek an audience with US President Barack Obama after reportedly being “snubbed” several times already.
“If you’re a president, you should not be made a mere part of the audience. You shouldn’t be made part of the three thousand-strong audience of a president of another
country,” Sen. Miriam Defensor-Santiago said.
The administration senator and chair of the Senate committee on foreign relations, in a radio interview over at dzBB, noted that in such events, someone of Arroyo’s stature should have been given participation.
“Or at least she should be recognized as a head of state and not just be made to sit beside the (US) Speaker of the House of Representatives. She outranks him and even their secretary of state whose position does not equate with that of the President,” she said.
“Our President should be treated like a president by the other country,” she added.
It has been reported that Obama, who delivered a speech in the said event, made no mention or did not recognize the presence of Arroyo. Opposition Sen. Francis “Chiz” Escudero was also in the audience.
The lady senator practically berated the so-called handlers of Arroyo, pointing out that in such a gathering where the invitation came from Congress, an ambassador should have been sent to attend instead.
Santiago disagreed with the decision of Malacanang allowing Arroyo to attend it, especially as she was perceived to be pining for a meeting or a one-on-one with Obama.
There were reports that when Obama got elected in November last year, Arroyo tried at least twice to reach him by phone to personally congratulate him.
“If their Congress extended the invitation, our ambassador to Washington D.C. should have been sent. Our president should have been treated as a (head of state),” she said.
Santiago said that such was not humiliating at all, as far as Ar
Miriam says Gloria erred in attending US prayer meet
02/09/2009
A strong ally of President Arroyo yesterday criticized the Chief Executive’s attendance in the national day of prayer in Washington D.C. where she risked being perceived as desperately trying to seek an audience with US President Barack Obama after reportedly being “snubbed” several times already.
“If you’re a president, you should not be made a mere part of the audience. You shouldn’t be made part of the three thousand-strong audience of a president of another
country,” Sen. Miriam Defensor-Santiago said.
The administration senator and chair of the Senate committee on foreign relations, in a radio interview over at dzBB, noted that in such events, someone of Arroyo’s stature should have been given participation.
“Or at least she should be recognized as a head of state and not just be made to sit beside the (US) Speaker of the House of Representatives. She outranks him and even their secretary of state whose position does not equate with that of the President,” she said.
“Our President should be treated like a president by the other country,” she added.
It has been reported that Obama, who delivered a speech in the said event, made no mention or did not recognize the presence of Arroyo. Opposition Sen. Francis “Chiz” Escudero was also in the audience.
The lady senator practically berated the so-called handlers of Arroyo, pointing out that in such a gathering where the invitation came from Congress, an ambassador should have been sent to attend instead.
Santiago disagreed with the decision of Malacanang allowing Arroyo to attend it, especially as she was perceived to be pining for a meeting or a one-on-one with Obama.
There were reports that when Obama got elected in November last year, Arroyo tried at least twice to reach him by phone to personally congratulate him.
“If their Congress extended the invitation, our ambassador to Washington D.C. should have been sent. Our president should have been treated as a (head of state),” she said.
Santiago said that such was not humiliating at all, as far as Ar