31 March, 2009

The problem with buying friends is they are hard to keep.

The key to the so-called surge was the “awakening,” and the key to that was putting insurgents on the payroll. Various groups—mostly Sunni, often associated with the old regime—were paid to maintain the peace, with the promise that most of them would eventually be integrated into the new Iraqi Army.

At first glance, this looks like paying for protection, but what else is new. Thomas Schelling pointed out years ago that state-making can be thought of as a variety of organized crime.

(Can’t you see it now? Sunni militant enters a government building. “Nice government you have here,” he says. “It would would be a shame is something were to…happen to it…)

Now that the US is moving to pull out, and the oil revenues aren’t up to expectations (and the money there is is being taken by friends of the Shi’as), the government—with US help—is starting to round up leaders and forces of the awakening. I doubt they’ll be happy about that.

Oh, well. The whole thing was meant to buy the US a “decent interval,”* anyway.

*The rumor goes that Henry Kissinger defined the “decent interval” after the withdrawl of US forces from Vietnam as the clear gap between when the last American soldier leaves and the the first virgin is raped.

Iraq's Militia Clash Could Bode Ill for Afghanistan | Danger Room from Wired.com

Update: as of April 2nd, the Iraqi government is still paying the Sunni paramilitaries.

25 March, 2009

State suicide

A long and fascinating post from Defense and the National Interest makes some important points, and raises some questions that need to be addressed.  The connection to current events is obvious, but the trend is much larger.  A relevant section:

The greatest threat facing states in the world today is not invasion by other states — although that may happen from time to time — but, as Bill Lind suggests, a crisis in the legitimacy of the state itself. This does not imply, however, that the focus should be placed on non-state actors such as narco-gangs, ethnic militias or ‘terrorists’.

Consider: if a person dies, their body will be consumed by maggots. However, healthy people cannot be infected by maggots. Trying to save lives by declaring war on maggots is a logical fallacy. By the same token, healthy states can easily deal with criminal elements using conventional police procedures. Non-state actors can only threaten a centralized state after the state has already crippled itself. Tactical brilliance in dealing with terrorists is ultimately as useless in maintaining the legitimacy of the state as a nuclear-powered aircraft carrier would be in combating drug gangs in Tijuana.

So how does the state kill itself? By the tried and true method of crushing the people into hopeless poverty so as to enrich the lords and princes at the top. When the average person can, without superhuman effort, live a reasonably decent life and raise a family with some degree of security, then the state has basically won. The people have a stake in the system, they have something important to lose should it fail, and they will, for the most part, play by the rules. But when people are crushed into the dirt, when they have no prospect for any kind of life at all, then the state has for them no legitimacy, and they will turn to gangs or ethnic militias in a quite understandable attempt to survive. Additionally, low-wage societies tend to be capital-starved and poor overall. This means that the security forces are underpaid, poorly equipped, and corrupt. An increasingly desperate and rebellious population coupled with increasingly ineffective and dishonest state forces is the typical death of states.

I can’t do the whole thing justice.  If you have the time, it’s worth a long and thoughtful look.

Defense and the National Interest » Fourth Generation War and the Death of the State: Suicide not Murder

The strong become weak

Here’s an example of Martin van Crevald’s observation that “when the strong fight the weak, the strong become weak,” 

Since Gaza, more and more accounts are coming out of actions that put innocents in unnecessary risk—or perhaps were targeting those innocents as a matter policy.


During its war with Hamas, the Israeli military pursued a strategy of deliberately blasting crowded buildings — including a school and a hospital — with incendiary white phosphorus rounds. It was part of a concerted effort to scorch terror hideouts in and around Gaza City, Human Rights Watch senior military analyst Marc Garlasco tells Danger Room.

"The attitude was: When in doubt, burn it down," says Garlasco, who spent weeks in Gaza after the fighting to conduct forensic research.

Of all the controversial things the Israeli military did during the conflict, firing off white phosphorus (WP) may have been the most divisive. When exposed to oxygen, phosphorous catches fire, throwing up thick clouds of smoke — which makes it both good for illumination and for concealing troop or tank movements. But WP can also burn people, quickly and horribly, sticking to the skin as it singes. So firing phosphorus weapons carelessly in a civilian area is problematic, at best — and possibly illegal.

Garlasco says the Israeli Defense Forces were more than careless with WP, however. Troops repeatedly targeted Hamas hideouts in crowded urban areas where civilians would almost certainly get caught in the cross-fire. It was part of a larger Israeli effort to use maximum force to protect its troops during the Gaza campaign.

Amnesty International called the Israeli use of WP in Gaza a "war crime"; the Israeli human rights group B'tselem was only marginally more careful, saying it was "impossible to use in a legal sense." In response, the Israeli Defense Forces at first denied it used WP. Then it defended its phosphorus use as proper — while launching an internal investigation into potential abuses.

Danger Room - Wired Blogs

24 March, 2009

Fabius Maximus: it’s time it get angry

Fabius Maximus (referring to a great article by Matt Taibbi) argues that this is the time to rise up and be counted.  From Taibbi:

The crisis was the coup de grĂ¢ce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve - “our partners in the government,” as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.

The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron - a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers. …

He asks, are we sheep or men?  Citizens or serfs?

Now is the time for America to get angry « Fabius Maximus

17 March, 2009

Why do so many utopias look so sterile?

Tough times call for visionaries. Pity too many of them have a vision that looks like a cover of Amazing Science Fiction, circa 1950: big machines, perfect systems, the ideal of the technocratic society.

In his goatee and mustache and tieless in a brown suit, Mr. Joseph had been lecturing for nearly 90 minutes on the unsustainable nature of the money-based economy — on cyclical consumption, planned obsolescence, corporate malfeasance and piles of poisonous waste. “It’s time that we wake up,” he intoned, speaking solemnly through a wireless clip-on mike. “The doomsday scenario, the big contraction, might be happening right now. The system of monetary exchange is — in the face of advancing technology — completely obsolete.”

This drew wild applause from the sold-out crowd, a patchwork of perhaps 900 people who paid $10 a head on Sunday night to sit in a packed auditorium at the Borough of Manhattan Community College on Chambers Street near the West Side Highway. Z-Day events were taking place from New England to New Zealand, but this was the big one: the marquee happening with the marquee names.

There, in the crowd, was Jacque Fresco, an industrial designer and the engineering guru of what people unironically called “the movement.” Mr. Fresco, an elfin 93-year-old, sat beside his partner, Roxanne Meadows, smiling self-effacingly.

Mr. Joseph, back on stage, waited patiently as some of the crowd, still cheering, refused to leave their feet.

If the election of Barack Obama was supposed to denote the gradual demise of churlish, corporate governance and usher in a new, sustainable era of visionary change, there was little sign of it at the second annual meeting of the Worldwide Zeitgeist Movement, which, its organizers said, held 450 sister events in 70 countries around the globe.

“The mission of the movement is the application of the scientific method for social change,” Mr. Joseph announced by way of introduction. The evening, which began at 7 with a two-hour critique of monetary economics, became by midnight a utopian presentation of a money-free and computer-driven vision of the future, a wholesale reimagination of civilization, as if Karl Marx and Carl Sagan had hired John Lennon from his “Imagine” days to do no less than redesign the underlying structures of planetary life.

Where are the people who live in this?  What if they don’t fin in to the vision?  It’s one more example of the way in which so many “progressives” of one stripe or another try to impose an artificial order, an end-state that is simple enough that a planner (be it human or computer) can comprehend it.  For all the talk of change, it’s stasis.

Peter Joseph and Jacque Fresco Critique the Monetary Economy - NYTimes.com

12 March, 2009

The music stops

Some apt metaphors here.  Not much in the way of practical advice.


The $700 trillion elephant

Commentary: Gargantuan derivatives market weighs on all other issues

By Thomas Kostigen, MarketWatch

Last update: 12:01 a.m. EST March 6, 2009

SANTA MONICA, Calif. (MarketWatch) -- There's a $700 trillion elephant in the room and it's time we found out how much it really weighs on the economy.

Derivative contracts total about three-quarters of a quadrillion dollars in "notional" amounts, according to the Bank for International Settlements. These contracts are tallied in notional values because no one really can say how much they are worth.

But valuing them correctly is exactly what we should be doing because these comprise the viral disease that has infected the financial markets and the economies of the world.

Try as we might to salvage the residential real estate market, it's at best worth $23 trillion in the U.S. We're struggling to save the stock market, but that's valued at less than $15 trillion. And we hope to keep the entire U.S. economy from collapsing, yet gross domestic product stands at $14.2 trillion.

Compare any of these to the derivatives market and you can easily see that we are just closing the windows as a tsunami crashes to shore. The total value of all the stock markets in the world amounts to less than $50 trillion, according to the World Federation of Exchanges.

To be sure, the derivatives market is international. But much of the trouble we're in began with contracts "derived" from the values associated with U.S. residential real estate market. These contracts were engineered based on the various assumptions tied to those values.

Few know what derivatives are worth. I spoke with one derivatives trader who manages billions of dollars and she said she couldn't even value her portfolio because "no one knows anymore who is on the other side of the trade."

Derivatives pricing, simply put, is determined by what someone else is willing to pay for the contract. The value is based on an artificial scenario that "X" will be worth "Y" if "Z" happens. Strip away the fantasy, however, and the reality of the situation is akin to a game of musical chairs -- without any chairs.

So now the music has finally stopped.

That's why stabilizing the housing market will do little to take the sting out of the snapback we are going through on Wall Street. Once people's mortgages were sold off to secondary buyers, and then all sorts of crazy types of derivative securities were devised based on those, and those securities were in turn traded on down the line, there is now little if any relevance to the real estate values on which they were pegged.

We need to identify and determine the real value of derivatives before we give banks and institutions a pass-go with more tax dollars. Otherwise, homeowners will suffer as banks patch up the holes left in their balance sheets by the derivatives gone poof; new credit won't be extended until the raff of the old credit is put behind.

It isn't the housing market devaluation, or the sub-prime mortgage market defaults that have us in real trouble. Those are nice fakes to sway attention away from the place where greed truly flourished -- trading phony instruments to the tune of $700 trillion.

Let's figure how to get out from under that. Then maybe the capital will begin to flow again through the markets. Right now, this elephant isn't just in the room, it's sitting on us.

Thomas M. Kostigen is the author of You Are Here: Exposing the Vital Link Between What We Do and What That Does to Our Planet (HarperOne). www.readyouarehere.com End of Story

What now?  Could we (internationally, remember...) simply call off the game, return the bets (that were backed by real money, and not just promises) to the original bettors?  It would be very hard to do.  How about declaring a "floor" and backing it up with cash?  Even worse.  Whatever happens will require international cooperation on a scale beyond anything seen thus far, and will involve some the "wealthiest" (on paper) and powerful constituencies of states around the world.  No matter how you do it, when the music stops there's a scramble for the remaining chairs--and there may not be many chairs available--and people who are willing to do anything to be one of the survivors.

The $700 trillion elephant in the room - MarketWatch

03 March, 2009

Obama administration releases Bush anti-terror memos

It's too late for impeachment.  It's not too late for prosecution.  These people took an oath to preserve and defend the Constitution of the United States--and proceeded to gut it.

How far should the prosecution go? 

How far should the punishment go? 


The Raw Story | Obama administration releases secret Bush anti-terror memos

02 March, 2009

The booming money supply

At the moment, money is being hoarded (especially by the banks).  That's a natural response, at the level of the individual and the firm, to a financial crisis of confidence.  But what happens if and when people begin to spend again?  Take a look at an indicator of the growth in the money supply:


Note the unprecedented spike in 2008 (which will continue through 2009).  Either there will be a lot of new, real, wealth to match the expansion of the money supply (which I consider unlikely), or we could see an inflation the likes of which we've never seen before.

I hope I'm wrong about this.  Where's my mistake?

St. Louis Fed: Series: AMBNS, St. Louis Adjusted Monetary Base

01 March, 2009

Where do I go to buy stock in this?

From Bloomberg, January 30th:

Revenue raked in by Italy’s mob surged 40 percent last year, turning crime into the nation’s No. 1 business, Eurispes said in its annual report.

Income increased to 130 billion euros ($167 billion), up from about 90 billion euros in 2007, according to figures supplied by Eurispes and SOS Impresa, an association of businessmen to protest against extortion. Drug trafficking remains the primary source of revenue, bringing in about 59 billion euros, and the mob earned 5.8 billion euros from selling arms, the Rome-based Eurispes research group said today.

“During a crisis, people lower their guard,” Roberto Saviano, who wrote the bestseller “Gomorrah” about the Camorra crime bosses, said in an interview. “Studies show the criminal market never suffers during a crisis. I’m convinced that this crisis is bringing huge advantages to criminal syndicates.”

Organized crime groups siphon 92 billion euros, about 6 percent of Italy’s gross domestic product, from Italian businesses a year through protection payments, usurious interest rates on loans and other forms of extortion, Eurispes estimates. That works out to 250 million euros a day and 10 million euros an hour, Eurispes said. Italians are struggling to make mortgage payments and support their families as the worst recession since 1975 threatens jobs and makes banks more reluctant lenders.

“With people more desperate, loan sharks thrive,” Amedeo Vitagliano, an Italian crime expert at Eurispses, said in a telephone interview. “While the country is on its knees, the mob rejoices.”

Bloomberg.com: Europe

Poverty pushes states to libertarianism

All in the name of raising tax revenues.  It's hard to tax marijuana, or porn, or prostitution, unless you decriminalize it. 

Struggling States Look to Unorthodox Taxes - NYTimes.com