Israel - The World's Real Enemy and Tiny Bubbles!

A friend and fellow memo reader's view. I told him not to forget about Carter. (See 1 below.)

In its effort to stop an Israeli attack on Iran, Obama is pulling out all stops according to my 'theorizing' friend Bret Stephens' future scenario which goes as follows:.

Allowing a U.N. resolution to pass requiring Israel to become a signatory to the 1970Nuclear Proliferation Agreement and the Middle East to become a nuclear free zone, undercuts Israel's defensive posture.

This decision reverses a previous understanding between Israel and the U.S.

A U. S. diplomat further noted it was inconsistent for Israel to be given a free nuclear pass while we thwarted Iran in their effort to gain nuclear status. Also, Sec. Gates told Israel's Barak, the U.S. would not stand idbly by in the event of an Israeli attack.

If Stephen's future scenario is right perhaps Obama should pull out of Iran and Afghanistan and attack our and the world's real enemy -Israel! Then , and only then, will peace descend upon the world.

All theory but who knows.(See 2 below.)

Remember that corny old song about: "Tiny Bubbles." (See 3 below.)

The end of Assad or wish begets the thought? (See 4 below.)

Mark Penn comments about three critical decsisons that could define Obama's tenure as president. I believe Penn misses the mark by not listing a fourth decision and that relates to Iran. (See 5 below.)


Dick


1) McChrystal has people dying in Afghanistan while Obama dithers. Obama chose this guy, said he would rely on him and then solicits "ideas" from everyone. Obama does not look like a decision maker. He looks like Clinton.


2)How Israel Was Disarmed
By BRET STEPHENS

Jan. 20, 2010

When American diplomats sat down for the first in a series of face-to-face talks with their Iranian counterparts last October in Geneva, few would have predicted that what began as a negotiation over Tehran's nuclear programs would wind up in a stunning demand by the Security Council that Israel give up its atomic weapons.

Yet that's just what the U.N. body did this morning, in a resolution that was as striking for the way member states voted as it was for its substance. All 10 nonpermanent members voted for the resolution, along with permanent members Russia, China and the United Kingdom. France and the United States abstained. By U.N. rules, that means the resolution passes.

The U.S. abstention is sending shock waves through the international community, which has long been accustomed to the U.S. acting as Israel's de facto protector on the Council. It also appears to reverse a decades-old understanding between Washington and Tel Aviv that the U.S. would acquiesce in Israel's nuclear arsenal as long as that arsenal remained undeclared. The Jewish state is believed to possess as many as 200 weapons.

Tehran reacted positively to the U.S. abstention. "For a long time we have said about Mr. Obama that we see change but no improvement," said Iranian Foreign Minister Manouchehr Mottaki. "Now we can say there has been an improvement."

The resolution calls for a nuclear weapons-free zone in the Middle East. It also demands that Israel sign the 1970 Nuclear Nonproliferation Treaty and submit its nuclear facilities to international inspection. Two similar, albeit nonbinding, resolutions were approved last September by the International Atomic Energy Agency in Vienna.

At the time, the U.S. opposed a resolution focused on Israel but abstained from a more general motion calling for regional disarmament. "We are very pleased with the agreed approach reflected here today," said then-U.S. Ambassador to the IAEA Glyn Davies.

Since then, however, relations between the Obama administration and the government of Israeli Prime Minister Benjamin Netanyahu, never warm to begin with, have cooled dramatically. The administration accused Tel Aviv of using "disproportionate force" following a Nov. 13 Israeli aerial attack on an apparent munitions depot in Gaza City, in which more than a dozen young children were killed.

Mr. Netanyahu also provoked the administration's ire after he was inadvertently caught on an open microphone calling Mr. Obama "worse than Chamberlain." The comment followed the president's historic Dec. 21 summit meeting with Iranian President Mahmoud Ahmadinejad in Geneva, the first time leaders of the two countries have met since the Carter administration.

But the factors that chiefly seemed to drive the administration's decision to abstain from this morning's vote were more strategic than personal. Western negotiators have been pressing Iran to make good on its previous agreement in principle to ship its nuclear fuel to third countries so it could be rendered usable in Iran's civilian nuclear facilities. The Iranians, in turn, have been adamant that they would not do so unless progress were made on international disarmament.

"The Iranians have a point," said one senior administration official. "The U.S. can't forever be the enforcer of a double standard where Israel gets a nuclear free ride but Iran has to abide by every letter in the NPT. President Obama has put the issue of nuclear disarmament at the center of his foreign policy agenda. His credibility is at stake and so is U.S. credibility in the Muslim world. How can we tell Tehran that they're better off without nukes if we won't make the same point to our Israeli friends?"

Also factoring into the administration's thinking are reports that the Israelis are in the final stages of planning an attack on Iran's nuclear installations. Defense Secretary Robert Gates, who met with his Israeli counterpart Ehud Barak in Paris last week, has been outspoken in his opposition to such a strike. The Jerusalem Post has reported that Mr. Gates warned Mr. Barak that the U.S. would "actively stand in the way" of any Israeli strike.

"The Israelis need to look at this U.N. vote as a shot across their bow," said a senior Pentagon official. "If they want to start a shooting war with Iran, we won't have their backs on the Security Council."

An Israeli diplomat observed bitterly that Jan. 20 was the 68th anniversary of the Wannsee conference, which historians believe is where Nazi Germany planned the extermination of European Jewry. An administration spokesman said the timing of the vote was "purely coincidental."


3)How the Fed Can Avoid the Next Bubble: The central bank needs to watch asset prices and raise rates quickly when it decides the time is right.
By IAN BREMMER AND NOURIEL ROUBINI

Ben Bernanke and the Federal Reserve face a number of very difficult challenges in the years ahead. They include:

• Resisting pressure to monetize deficits, which would eventually cause high inflation.

• Implementing an exit strategy from the massive monetary easing of the past year.

• Maintaining the Fed's independence, which has been compromised by the direct and indirect bailout of financial institutions and congressional attempts to micromanage the central bank.

• Properly calculating asset prices and the risk of asset bubbles according to the Taylor rule, an important guideline central banks use to set interest rates.

• Supervising and regulating the financial system more effectively, particularly in the role of "systemic risk" regulator.


Chad Crowe .
The first two tasks are closely related. In order to prevent a persistent monetization of deficits that would lead to inflation, the Fed must implement an exit strategy from the unconventional monetary easing that began in late 2008. If the fiscal and monetary stimulus is taken away too soon, there is the risk of relapsing into deflation. If it is taken away too late, we may eventually face a fiscal crisis and an inflationary recession, or stagflation.

The Fed does not control fiscal policy. But to avoid a game of chicken wherein loose fiscal policy forces the Fed to monetize deficits to prevent a spike in bond yields, the Fed needs to pre-emptively state it won't be buying more Treasury bills.

As for the exit from monetary easing, the Fed must learn from the fateful mistake it made after the 2001 recession. Then, the central bank cut the federal-funds rate too much and kept it too low for too long. It also moved far too slowly when the normalization occurred—in small increments of 0.25% from summer 2004 until the summer of 2006, when it peaked at 5.25%. Normalization took two full years. It was in that period of slow normalization that the housing, mortgage and credit bubbles spiraled out of control. The lesson learned: When you normalize, move rapidly, or prepare for another dangerous bubble.

Of course, this is easier said than done. From 2002 to 2006, the Fed moved slowly because the recovery appeared anemic and because of significant deflationary pressures. This time around, the recession is more severe—unemployment is at 9.8% and is expected to peak above 10%, and we are experiencing actual deflation. Therefore, the incentive not to exit too soon will be greater and the risk of creating another bubble is greater. Indeed, the sharp increase in the stock market and commodities, and narrowing of credit spreads since March, are partly due to a wall of global liquidity chasing assets and already causing asset inflation.

If the conflict between economic growth and financial stability requires that monetary policy remain loose, then it is critical that the supervisors and regulators of the banking sector move aggressively to prevent another bubble from emerging. Thus they should quickly adopt the regulatory reforms agreed to by the G-20—including a new insolvency regime for financial institutions deemed "too big to fail," a serious approach to limiting "systemic risk," and appropriate rules governing incentives and compensation for bankers and traders.

It won't be easy to define systemic regulation and too-big-to-fail. There is a significant risk that doing so will provide an implicit guarantee for large and complex financial institutions. There is also a longer-term risk that actions taken by congressional and regulatory agencies will distort global financial markets. Western financial institutions now depend heavily on state financial backing, and several governments have tweaked rules and regulations to support the large financial institutions that are now at least partially taxpayer-owned. Further, governments could increasingly require domestic financial institutions to lend more at home, which will curtail their foreign operations. Creating a system of effective financial regulation—while resisting the impulse to favor domestic institutions—will be a real challenge for most countries, including the U.S.

Over time, once the fed-funds rate is normalized, incorporating asset prices into monetary policy making is also necessary to ensure financial stability. While it is correct that the fed-funds rates may not be the most effective instrument at controlling asset and credit bubbles, excessively cheap money is always a source of such bubbles. So faster normalization of the fed-funds rate will eventually be important.

The Fed's involvement in quasi-fiscal operations creates other challenges. As long as the Fed remains involved in maintaining financial stability and in preventing other episodes of systemic risk, it will be hard to eliminate the perception that the Fed will be involved as a lender of last resort for too-big-to-fail firms. So far, this Pandora's Box remains open.

The way to prevent future moral-hazard distortions is to create a regulatory regime where too-big-to-fail institutions have much higher capital requirements: a greater liquidity buffer, lower leverage, and lower involvement in risky and illiquid investments if they are depository banks. They should be supervised internationally and must be able to be closed down in an orderly fashion should failure loom.

The Fed is currently resisting a Treasury-led effort to review how it is organized out of concern it might forfeit its independence. Yet the governance structure of the New York and other regional Federal Reserve banks left them effectively controlled by large financial institutions last year, so such a review is necessary. While congressional interference in the Fed's jurisdiction is a danger, the recent quasi-fiscal activities of the Fed bear a review.

The Fed also needs a greater regulatory backbone. The Fed had the power to regulate mortgage markets but failed to use this power out of a misplaced deference to laissez-faire attitudes and Wall Street. Regulating mortgage markets requires a careful balance: short-term regulatory forbearance to avoid a greater credit crunch, along with medium-term countercyclical supervisory actions in order to prevent the emergence of further asset and credit bubbles.

Establishing financial stability—in addition to price stability and growth—is the essential role of the central bank. Achieving this goal in a way that avoids moral-hazard distortions, as with the too-big-to-fail finance institutions, and prevents another bubble in the next years will surely be one of the greatest challenges ever faced by the Fed.

Mr. Bremmer, president of Eurasia Group, is co-author of the "The Fat Tail: The Power of Political Knowledge for Strategic Investing" (Oxford University Press, 2009). Mr. Roubini is a professor of economics at New York University's Stern School of Business and chairman of RGE Monitor.

4)The end of the Assad regime?
By FARID GHADRY

You would not know it if you follow the pro-Assad blogs and the chipper news emanating from Damascus, and you certainly would not know it if you listen to Syrian President Bashar al-Assad himself or see the expediency by which his recent foreign travels have all had a secret economic component seeking foreign investments and aid. The truth is that the Syrian economy is flapping like a dying butterfly.


Between US sanctions, a severe drought in an agrarian-based economy, sustained terror that has caused the migration of over 1 million Iraqis to Syria, political risks promoting "resistance" instead of cooperation, dwindling oil revenues, an alarming increase in Syrian population and a determined new Israeli government, Assad is being squeezed like a Syrian olive for its oil.

Very few people grasp the reality Assad faces now that he has systematically destroyed whatever he inherited from his father through ill-advised policies. Some Middle East analysts are aware of the economic pressure Assad is under, but the extent of the harm his policies have caused the Syrian treasury is largely unknown.

AS IMPORTANT to the piling problems on Assad's shoulders is the latest challenge Iran was confronted with during the G-20 summit last week, regarding the discovery of its secret enrichment plant in Qom. Assad suddenly finds himself burdened by outside forces over which he has no control. Even his most potent tool of terror seems to have gone stale in the face of the overwhelming pressure Iran is facing for its actions.

If Iran catches cold, Assad will sneeze uncontrollably. No other nation provides Syria with the political clout Iran does; not even Turkey's short-lived friendliness, about to expire with the expected ruling party's defeat - an eventuality that the latest Turkish municipal elections show is not far afield.

As such, the pressure mounting on Assad via Iran is yielding far better results for Syrians and the West than the embrace of "dialogue." Assad is about to give under the pressure, and we should, as John Lennon once said, let it be.


As hard-pressed as he is, his illegitimate regime will try to extract some quick concessions in the hope that he continues to rule a country ravaged by structural fault lines Ba'athism decreed to monopolize power. Syrians must hope that the country's 45-year slumber is about to end with the demise of those who knocked the country out.

There is no such thing as a "reformed" violent man or a "reformed" oppressor. Libyan leader Muammar Gaddafi's New York circus tent display, unraveling speeches, and deep satisfaction - quite visible on his face - with how the Lockerbie tragedy ended bear witness to this truth. He may not resort to terror himself, but Libya, through oppression and ignorance, is a breeding ground for a hopeless future generation. I can recite the names of Israeli Nobel Prize winners, but can you imagine one Nobel laureate under the rule of Gaddafi or Assad?

WERE THE international community to alleviate the pressure on Assad today, all we would be doing is resetting the clock for the bomb to explode at a later time. No matter the political arguments made in favor of a Middle East dictatorship, or "stability" as some have the audacity to call it, our moral compass as humans is to help Syrians deliver their country to their people, to introduce governance, accountability and coexistence.

Hate-spewing stability is not the answer to a region already flooded with exclusionary ideologies - which is what the West will be reinforcing if it embraces Assad when history is presenting us with a gift for a permanent and positive change.

Just imagine a Lebanon where Hizbullah's power base could no longer rely on Iran and Syria to provide the incendiary Nasrallah with muscle-flexing, gun-toting missions. Imagine Hamas, looking for Assad in Damascus, finding instead accountable politicians and being forced to become the new PLO's bride or be chastized as a Muslim divorcee. Imagine Israel, for the first time, helping the Syrian and Iraqi democracies without the specter of terror shadowing its successes.

As Orly Halpern wrote in the Jewish Daily Forward, "normalized relations between the countries [Israel and Iraq] are being discussed unofficially." So will relations between Syria and Israel once we establish our own peaceful democracy aided by a willing West.

Will all this come at a price? Certainly. Are we willing to burden ourselves today for a better future for our children? We Syrians are. Our hope is that the Obama administration and the Netanyahu government are, as well.

The writer comes from a prominent Syrian family who emigrated to Lebanon after it clashed with the Ba'ath party. Ghadry, along with other in-country activists, started the Reform Party of Syria (RPS) whose goals are to rebuild the country on the principles of economic and political reforms that will usher in democracy. In 2007, Ghadry, by invitation, addressed the Knesset in support of the vision of RPS.

5)Crossroads to action
By: Mark Penn


We are in the midst of the Obama administration’s most important week to date, as it faces three decisions that, taken together, could very well shape its legacy.

In Round One of the financial crisis earlier this year, the administration made split-second decisions involving hundreds of billions of dollars across the financial and auto sectors. Right or wrong, the administration acted quickly and took the position that it would spend whatever it took to stave off collapse. It was decisive, it was bold and it telegraphed some much-needed confidence in an uncertain time.

But on health care, the administration has seemed notably less assured — buffeted by contentious forces on the left and the right. The likely result of the months of debate is a plan greatly scaled back from the president’s original ambitions.

The president’s best option is to take what he can get on health care and call it a day. This seems to have been the intent of his speech before Congress, in which he asked for a public option but failed to issue a veto threat should Congress decline to deliver one. Anyone listening closely heard the death knell of the public option that night; few swing congressmen or senators would vote for a plan that could cost them next November without the full and unreserved backing of the administration.

The second key decision is whether to send more troops to Afghanistan. The administration has created an aura of profound thought and weighty consideration. The president is on record that this was the “forgotten war on terrorism” and “a war of necessity” as he sought to contrast his position on Afghanistan with Bush’s Iraq policy. And he is facing a detailed request from the commander he appointed to wage a new war with a fresh strategy.

Americans don’t like foreign wars (no matter how necessary), so many of us would breathe a sigh of relief if the president decided to scale back our commitment in Afghanistan. But such a decision will have to prove wise in the long term, or the administration will pay a high price for it. Scaling back means the remaining American soldiers might be seen as being at even greater risk, and this time it won’t be Bush’s responsibility. This war is against the Taliban rulers who knowingly harbored terrorists who struck the United States, killing thousands. And Iran will be watching the decision carefully, gauging America’s strength or weakness.


The third decision the administration will be faced with is whether to launch a new stimulus package. Unemployment continues to creep up and is likely to soon hit the 10 percent tripwire. And while companies have reduced their payrolls, they are not growing on the top line, and the result is worsening job outlook. This is the most devastating result of the economic crisis that started with subprime mortgages and Wall Street arbitrage — persistently high unemployment.

From a strategic standpoint, it is that unemployment and how it is handled that will most likely determine the political fate of the administration. Joblessness is where economics and politics converge; while banking regulation and deficit reduction are certainly significant issues, no statistic is more vital in human or political terms than unemployment. And no decision is more critical for the president’s political future than how he moves to bring it back down — even if the fault rightly lies with the past administration’s neglect of the brewing financial storm.

Having chosen to spend what it takes to get us out of the recession, the president should not diverge from that basic direction at this point unless he wants to jeopardize essentially all the economic capital he has built up. In the polls, he’s losing steam as the one to handle the economy, but if he reasserts his positions and his policies, he can regain momentum, even in the face of higher unemployment.

These three decisions are critical for President Barack Obama: 1) accepting a more incremental approach on health care; 2) setting the Afghanistan war strategy and 3) launching a second job-oriented stimulus. I think the course is clear on all three of these, but no matter what route he chooses to take, the most important element here is that the president make these decisions, communicate them to the public and stand by them.

In campaigns, it is easy to issue policy papers; in government, you have to choose the policies. In Round One, the president chose stimulus, more troops to Afghanistan and a bold vision of health care reform. Now it’s time for the much tougher, and potentially politically costly, decisions of Round Two.

Mark Penn, the CEO of Burson-Marsteller and Penn, Schoen & Berland Associates, has been a pollster and an adviser to President Bill Clinton and Secretary of State Hillary Clinton.