A woman had fifty yard line tickets for the Super Bowl. As she sat down, a
man came along and asked her if anyone is sitting in the seat next to her.
"No," she said, "the seat is empty."
"This is incredible," said the man. "Who in their right mind would have a
seat like this for the Super Bowl, the biggest sporting event in the world,
and not use it?"
Somberly, the woman says, "Well... the seat actually belongs to me. I was
supposed to come here with my husband, but he passed away. This is the first
Super Bowl we have not been to together since we got married in 1967."
"Oh I'm sorry to hear that, that's terrible. But couldn't you find someone
else - a friend or relative or even a neighbor to take the seat?"
The woman shakes her head, "No, they're all at the funeral."
And why so many Jews choose to become physicians:
Subject: Dueling In The 21st Century
The Israelis and Arabs realized that, if they continued fighting, they would someday end up destroying the whole world. So they decided to settle their dispute with an ancient practice: a duel of two, like David and Goliath. This "duel" would be a dog fight.
The negotiators agreed each side would take 5 years to develop the best fighting dog they could. The dog that won the fight would earn its people the right to rule the disputed areas. The losing side would have to lay down its arms for good.
The Arabs found the biggest, meanest Dobermans and Rottweilers in the world. They bred them together and then crossed their offspring with the meanest Siberian wolves.
They selected only the biggest, strongest puppy of each litter, fed it the best food and killed all the other puppies. They used steroids and trainers in their quest for the perfect killing machine. After the 5 years were up, they had a dog that needed steel prison bars on its cage. Only expert trainers could handle this incredibly nasty and ferocious beast.
When the day of the big dog-fight finally arrived, the Israelis showed up with a very strange-looking animal, a Dachshund that was 10 feet long!
Everyone at the dogfight arena felt sorry for the Israelis. No one there seriously thought this weird, odd-looking animal stood any chance against the growling beast over in the Arab camp. All the bookies took one look and predicted that the Arab dog would win in less than a minute.
As the cages were opened, the Dachshund slowly waddled toward the center of the ring.
The Arab dog leaped from its cage and charged the giant wiener-dog. As he got to within an inch of the Israeli dog, the Dachshund opened its jaws and swallowed the Arab beast whole in one bite. There was nothing left but a small puff of fur from the Arab killer dog's tail floating to the ground.
The stunned crowd of international observers, bookies and media personnel let out a collective gasp of disbelief and surprise.
The Arabs approached the Israelis, muttering and shaking their heads in disbelief. "We do not understand," said their leader, "Our top scientists and breeders worked for 5 long years with the meanest, biggest Dobermans, Rottweilers and Siberian wolves, and they developed an incredible killing machine of a dog!"
The Israelis replied. "Well, for 5 years, we have had a team of Jewish plastic surgeons working to make an alligator look like a Dachshund.
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Edited thoughts from John Mauldin. (See 1 below.)
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I recently sent video pictures of the flash flooding in Australia (see site below) and copied Australian relatives who are coming to visit in May of this year.
Flash flood in Toowoomba, Queensland, Australia
on January 10, 2011
Click: Flash flood !
This is her response: "Just amazing to watch the rate at which it comes up!!!
We were out to dinner last night at our local Chinese Restaurant when the rains came. The winds were at such a force and the rains so fierce that within minutes water was raining down through the ceiling lights above each table so that we and our fellow diners appeared to be in a communal shower room. Our Chinese hosts scuttled around with buckets to catch the water and we beat a hasty retreat. Well...as hasty as was possible considering the roads were already flooded and we waded knee deep in water to get to our cars. Then when we finally reached home we found the same scenario. Water had gushed through all our ceiling lights and the house was flooded. Fortunately we have tiled floors and the dogs are good swimmers. Such is life!!!!!!!! XxxxE."
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I just came across this and urge all who believe it is liberal media and press blasphemy to associate Obama with Reagan to watch by clicking on PJTV.Com -"Trifecta: The Little Gipper?!? Why Obama is No Ronald Reagan
Time Magazine would like us to think that Obama is the next Ronald Reagan, an assertion that makes Bill Whittle violently ill. Hear Whittle, Ott and Green tell you why Obama has nothing in common with the Great Communicator, on this edition of Trifecta."
Apparently they will stop at nothing to right the sinking "Good Ship Lollybama."
If anything good comes of all of this it is that Obama will take Hillary down with him.
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Why should Israel be shocked at Obama's betrayal of Mubarak? Obama has been throwing 'friends' under the bus for years - even family members
Even if Mubarak and Egypt execute a relatively peaceful transition, and that is a stretch, if you were the Saudi's, Kuwaiti's etc., would you not believe America's word and commitment now lie on the cutting floor of the White House Movie Theatre.
Obama has insured the world that America's word and support is meaningless and that we will sacrifice everything and anyone. Iran's Ayatollahs must be gloating because even if their own people take to the streets again their rulers can take comfort knowing Obama will simply read banality from a teleprompter. (See 2 and 2a below.)
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I have been investing in American and Canadian shale producing companies for years but I never thought government bureaucrats would help me.
Now Obama may even help as his anti-Mubarak quick fix policies could create more instability and hasten the rise in the price of oil. (See 3 below.)
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Bubbles everywhere and dominoes near the tipping point. (See 4 and 4a below.)
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The forthcoming war has begun in my humble opinion. First pipelines then The Suez Canal.
Iran seeks a nuclear bomb to intimidate its neighbors, raise the price of oil and cripple developed Western nations.
Once again Obama is being challenged by those with whom he sympathizes and it will, in my view, eventually lead to war caused by Western fecklessness.(See 5 below.)
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Dick
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1)An Excerpt from Endgame
By John Mauldin
"My best guess is that we’ll have a continued recovery, but it won’t feel terrific. Even though technically we’ll be in recovery and the economy will be growing, unemployment will still be high for a while and that means that a lot of people will be under financial stress."
— Benjamin Bernanke, Chairman of the Federal Reserve in a Q&A at the Woodrow Wilson International Center for Scholars
I am flying to Thailand and will “lose” my normal Friday writing day, so I am going to give you a preview of my new book, Endgame, out and in the bookstores next month. This is the beginning of chapter four, and it stands alone quite nicely. It will print out a little longer than normal, as there are a lot of graphs. My co-author Jonathan Tepper and I deal with why there will be slower growth, more volatility, and more frequent recessions in our future.
And now, let’s look at the first half of chapter four of my book Endgame.
The Burden of Lower Growth and More Frequent Recessions
We’re optimists by nature. The natural order of the world is growth. Trees tend to grow, and economies do, too. Real economic growth solves most problems and is the best antidote to high deficits, but the problems that we have now won’t be solved by growth. They’re simply too big. Unless we have another Industrial Revolution or another profound technological revolution like electrification in the 1920s or the IT revolution in the 1990s, we will not be able to grow enough to pull ourselves out of our debt hole.
After the dot-com bust in 2000, the phrase “the muddle through economy” (a term coined by John) best described the U.S. economic situation. The economy would indeed be growing, but the growth would be below the long-term trend (which in the United States is about 3.3 percent) for the rest of the decade. (Indeed, growth for the decade was an anemic 1.9 percent annualized, the weakest decade since the Great Depression. Muddle through, indeed.)
The muddle through economy would be more susceptible to recession. It would be an economy that would move forward burdened with the heavy baggage of old problems while facing the strong headwinds of new challenges. The description of the world was accurate then, and it is even more accurate now. In March 2009, when almost everyone was predicting the apocalypse, it was hard to see how things could improve. The GDP turned around, industrial production has shot up, retail sales have bounced back, and the stock market rebounded strongly. Everything has turned upward. However, GDP growth is slowing in the United States as we write in November 2010. Compared with previous recoveries, growth does not look that great, and people don’t feel the recovery. This is unlikely to change.
The muddle through economy is the product of a few major structural breaks in the world’s economies that have important implications for growth, jobs, and when we might see a recession again. The U.S. and most developed economies are currently facing many major headwinds that will mean that going forward, we’ll have slower economic growth, more recessions, and higher unemployment. All of these are hugely important for endgame since they vastly complicate policy making.
Lower growth will make our fiscal choices that much scarier. Importantly, these big changes also mean that governments, pension funds, and even private savers are probably making unreasonably rosy assumptions about how quickly the economy and asset prices will be able to increase in the future. As endgame unfolds, the reality of these big changes will set in.
Three Structural Changes
Investors are good at absorbing short-term information, but they are much less successful at absorbing bigger structural trends and understanding when secular breaks have occurred. Perhaps investors are like the proverbial frogs in the frying pan and do not notice long, slow changes around them. There are three large structural changes that have happened slowly over time that we expect to continue going forward. The U.S. economy will have:
1. Higher volatility
2. Lower trend growth
3. Higher structural levels of unemployment (The United States here is a proxy for many developed countries with similar problems, so much of this chapter applies elsewhere.)
1. Higher Volatility
Before the crash of October 2008, the world was living in “the great moderation,” a phrase coined by Harvard economist James Stock to describe the change in economic variables in the mid-1980s, such as GDP, industrial production, monthly payroll employment, and the unemployment rate, which all began to show a decline in volatility. As Figures 4.1 and 4.2 from the Federal Reserve Bank of Dallas show, the early 1980s in fact constituted a structural break in macroeconomic volatility. The GDP became a lot less volatile. As did employment.
The great moderation was seductive, and government officials, hedge fund managers, bankers, and even journalists believed “this time is different.” Journalists like Gerard Baker of the Times of London wrote in January 2007: Welcome to “the Great Moderation”: Historians will marvel at the stability of our era. Economists are debating the causes of the Great Moderation enthusiastically and, unusually, they are in broad agreement.
Good policy has played a part: central banks have got much better at timing interest rate moves to smooth out the curves of economic progress. But the really important reason tells us much more about the best way to manage economies. It is the liberation of markets and the opening-up of choice that lie at the root of the transformation. The deregulation of financial markets over the Anglo-Saxon world in the 1980s had a damping effect on the fluctuations of the business cycle ... The economies that took the most aggressive measures to free their markets reaped the biggest rewards.
In retrospect, this line of thinking looks hopelessly optimistic, even deluded. We do not write this to pick on Gerard Baker, but rather to point out that low volatility breeds complacency and increased risk taking. The greater predictability in economic and financial performance led hedge funds to hold less capital and to be less concerned with the liquidity of their positions.
Those heady days are now over, and we have now entered “the great immoderation.” One can confidently say that 2008 represents a structural break, moving back toward a period of greater volatility. Robert F. Engle, a finance professor at New York University who was the Nobel laureate in economics in 2003, has shown that periods of greatest volatility are predictable. Market sessions with particularly good or bad returns don’t occur randomly but tend to be clustered together. The market’s behavior illustrates this clustering. Volatility follows the credit cycle like night follows day, and periods following credit booms are marked by high volatility, for example, 2000–2003 and 2007–2008.
The period of low volatility of GDP, industrial production, and initial unemployment claims is now over. For a period of more than 20 years, excluding the brief 2001–2002 recession, volatility of real economic data was extremely low, as Figure 4.3 shows. Going forward, higher economic volatility, combined with a secular downtrend in economic growth, will create more frequent recessions. This is likely to lead to more market volatility as well.
You can measure economic volatility in a variety of ways. Our preferred way is on a forward-looking basis. We have seen the highest volatility in the last 40 years across leading indicators, as Figure 4.4 shows. These typically lead the economic cycle. This only means one thing, higher volatility going forward.
For far too long, volatility was low and bred investor complacency. Going forward, we can expect a lot more economic and market volatility. We have had a strong cyclical upturn, but we will continue to face major structural headwinds. This means more frequent recessions and resultant higher volatility.
If we look at Japan following the Nikkei bust in 1989, we can see that volatility increased. Note that before the peak in the Nikkei, volatility had been largely subdued, with periodic movements corresponding to increases in the level of the market. As Figure 4.5 shows, following the crash, stock market volatility increased markedly, and volatility to the downside became far more prevalent.
Equity volatility follows the credit cycle. If you push commercial and industrial (C&I) loans forward two years, it predicts increases in the Market Volatility Index (VIX) almost down to the month. We should expect heightened episodes of volatility for the next two years at a minimum. (See Figure 4.6.)
Fixed-income volatility also follows the credit cycle with a two-year lag. Figure 4.7shows how the Fed Funds rate lags Merrill Lynch’s MOVE Index, which is a measure of fixed-income volatility, by three years.
Another very good reason to believe we’ll continue to have high volatility even after we recover from the hangover of the credit binge is that the world is now much more integrated. This is a paradox and may seem hard to believe, but increased globalization actually makes the world more volatile through extended supply chains! (See Figure 4.8.)
Production in Japan, Germany, Korea, and Taiwan fell far more during the 2007–2009 recession than U.S. production fell even during the Great Depression. Not only was the downturn steeper than during the Great Depression but also the bounce back was even bigger.
This is truly staggering. If you believed in globalization, supply chain management, and deregulation, you would have thought they would lead to greater moderation, but the opposite happened. This was due to the credit freeze that particularly hit export-oriented economies because trade credit temporarily dried up. It was not about globalization per se.
Why has the world economy been so volatile? One of the main reasons is exports. If you look at exports as a percentage of GDP since the end of the Cold War, you’ll see that in almost all countries around the world, exports have rapidly risen in the last 20 years. In Asia, they have doubled, in India they have tripled, and in the United States they have increased by 50 percent. This makes us all more interconnected, and it means that supply chains become longer and longer.
Longer supply chains have enormous macroeconomic implications. As the Economic Cycle Research Institute points out, we’re now experiencing the bullwhip effect, “where relatively mild fluctuations in end demand are dramatically amplified up the supply chain, just as a flick of the wrist sends the tip of a bullwhip flying in a great arc.” The bullwhip effect makes greater export dependence very dangerous to supplier countries, which only contributes to cyclical volatility. This is easily seen in Figure 4.9. That is why Asian countries had some of the largest downturns and steepest upturns in the Great Recession and the following recovery.
2. Lower Trend Growth
We are also seeing a secular decline over the last four cycles in trend growth across GDP, personal income, industrial production, and employment. You can see that in Figure 4.10.
Another view of declining trend growth is the decline in nominal GDP. Figure 4.11 shows that the 12-quarter rolling average has been on a steady decline for the last two decades.
A combination of lower trend growth and higher volatility means more frequent recessions. Put another way, the closer trend growth is to zero and the higher volatility is, the more likely U.S. growth is to frequently dip below zero. Figure 4.12 shows a stylized view of recessions, but as trend growth dips, the economy will fall below zero percent growth more often.
Higher volatility has very important implications for equity and bond investors across asset classes. Indeed, the last three economic expansions were almost 10 years, but in previous decades, they averaged four or five years. From now on, we are apt to see recessions every three to five years.
Your glad to be away from the cold analyst,
John Mauldin
John@FrontlineThoughts.com
Copyright 2011 John Mauldin. All Rights Reserved
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2)Israel shocked by Obama's "betrayal" of Mubarak.
Reuters
If Egypt's President Hosni Mubarak is toppled, Israel will lose one of its very few friends in a hostile neighborhood and President Barack Obama will bear a large share of the blame, Israeli pundits said on Monday.
Political commentators expressed shock at how the United States as well as its major European allies appeared to be ready to dump a staunch strategic ally of three decades, simply to conform to the current ideology of political correctness.
Prime Minister Benjamin Netanyahu has told ministers of the Jewish state to make no comment on the political cliff hanger in Cairo, to avoid inflaming an already explosive situation. But Israel's President Shimon Peres is not a minister.
"We always have had and still have great respect for President Mubarak," he said on Monday. He then switched to the past tense. "I don't say everything that he did was right, but he did one thing which all of us are thankful to him for: he kept the peace in the Middle East."
Newspaper columnists were far more blunt.
One comment by Aviad Pohoryles in the daily Maariv was entitled "A Bullet in the Back from Uncle Sam." It accused Obama and his Secretary of State Hillary Clinton of pursuing a naive, smug, and insular diplomacy heedless of the risks.
Who is advising them, he asked, "to fuel the mob raging in the streets of Egypt and to demand the head of the person who five minutes ago was the bold ally of the president ... an almost lone voice of sanity in a Middle East?"
"The politically correct diplomacy of American presidents throughout the generations ... is painfully naive."
Obama on Sunday called for an "orderly transition" to democracy in Egypt, stopping short of calling on Mubarak to step down, but signaling that his days may be numbered.
"AMERICA HAS LOST IT"
Netanyahu instructed Israeli ambassadors in a dozen key capitals over the weekend to impress on host governments that Egypt's stability is paramount, official sources said.
"Jordan and Saudi Arabia see the reactions in the West, how everyone is abandoning Mubarak, and this will have very serious implications," Haaretz daily quoted one official as saying.
Egypt, Israel's most powerful neighbor, was the first Arab country to make peace with the Jewish state, in 1979. Egyptian President Anwar Sadat, who signed the treaty, was assassinated two years later by an Egyptian fanatic.
It took another 13 years before King Hussein of Jordan broke Arab ranks to made a second peace with the Israelis. That treaty was signed by Israeli Prime Minister Yitzhak Rabin, who was assassinated one year later, in 1995, by an Israeli fanatic.
There have been no peace treaties since. Lebanon and Syria are still technically at war with Israel. Conservative Gulf Arab regimes have failed to advance their peace ideas. A hostile Iran has greatly increased its influence in the Middle East conflict.
"The question is, do we think Obama is reliable or not," said an Israeli official, who declined to be named.
"Right now it doesn't look so. That is a question resonating across the region not just in Israel."
Writing in Haaretz, Ari Shavit said Obama had betrayed "a moderate Egyptian president who remained loyal to the United States, promoted stability and encouraged moderation."
To win popular Arab opinion, Obama was risking America's status as a superpower and reliable ally.
"Throughout Asia, Africa and South America, leaders are now looking at what is going on between Washington and Cairo. Everyone grasps the message: "America's word is worthless ... America has lost it."
(Writing by Douglas Hamilton, editing by Diana Abdallah)
2a)Obama's Risky Idealism: Reversing the 'Devil's Bargain'?
If President Obama backs democracy in Egypt at the expense of stability, he will confront a host of potential dangers.
By James Kitfield
No place has clipped the wings of American idealism, and grounded it in the grimy compromises that pit interests against aspirations, quite like the Middle East. Even a president as preternaturally idealistic as George W. Bush was eventually brought to earth by the weight of the region’s double standards and trade-offs, ultimately abandoning his “freedom agenda” and reversing his own secretary of state by choosing “stability at the expense of democracy.” As Condoleezza Rice memorably warned in her 2005 Cairo speech, however, 60 years of that kind of realism in U.S. foreign policy had achieved neither stability nor democracy.
What’s truly extraordinary about the popular uprisings in Tunisia and especially Egypt is that they have flung open the doors to the cage of realpolitik, daring Barack Obama to match the soaring rhetoric of his own Cairo speech with action, with all the terrible risks that entails.
“No matter where it takes hold, government of the people and by the people sets a single standard for all who would hold power,” Obama told his audience of Egyptian officials and elites in June 2009. “You must maintain your power through consent, not coercion; you must respect the rights of minorities, and participate with a spirit of tolerance and compromise; you must place the interests of your people and the legitimate workings of the political process above your party.”
In scrambling to react to the radically altered landscape in Egypt and the Middle East, the president and his administration have certainly channeled their inner idealist, warning that the current political status quo is unsustainable and arguing for liberalizing reforms throughout the region. If the Obama administration truly breaks with 60 years of U.S. realist tradition and continues to back democracy at the expense of stability in the region, however, it will have to confront a host of potential dangers.
First and foremost, Obama’s call for democratic reforms will put him squarely at odds with the Egyptian government and military if they decide to finally settle the matter with a violent crackdown, the traditional trump card of Middle Eastern dictators that still remains a distinct possibility. The longer the protests spread chaos and unrest, the more susceptible they will be to hijacking by Islamic radicals, who similarly came to dominate during the Iranian revolution in 1979. The fires lit by the self-immolation of a Tunisian fruit seller also show every sign of spreading beyond Tunisia and Egypt, potentially threatening the world’s oil supply.
Even if all those dangerous pitfalls can be avoided, and the administration has so far skillfully negotiated around them, both the United States and Israel will have to come to terms with an uncomfortable new reality: More-democratic governments in the Middle East that give voice to the nationalist and anti-Western passions of the Arab street are likely to prove far less friendly and accommodating than chummy autocrats and pampered elites.
“The Obama administration has aligned the United States with progressive change in Egypt, and that reverses the devil’s bargain that we cut with authoritarian regimes in the region for 30 years,” said Aaron David Miller, a longtime Middle East expert and public policy fellow at the Woodrow Wilson Center, speaking with reporters on Wednesday. Stripped of its niceties, the venerable bargain held that as long as autocrats helped advance U.S. interests by maintaining stable relations with Israel, supporting U.S. actions in Iraq, containing Iran, and cooperating in counterterrorism operations, then Washington would stay out of their internal affairs.
“That bargain has now come apart on the streets of Cairo, which means that in the future Egypt will be a much less friendly ally in terms of advancing U.S. interests as traditionally defined,” said Miller, who has advised six secretaries of state on Middle East policy.
Whatever government emerges in Egypt is not likely to sever U.S.-Egyptian military ties, close the Suez Canal, or abrogate Egypt’s peace treaty with Israel.
“Those are all worst-case scenarios that remain highly unlikely,” said Miller. “But after watching events unfold in Egypt, it’s impossible to imagine that whatever political structure emerges will not reflect more secular nationalist and Islamist views. That will create a much narrower space for the U.S. to advance many of its regional goals.”
Whatever headaches that new reality creates for Washington, they pale in comparison to the migraines currently spreading through Tel Aviv and Jerusalem. “The Egypt-Israel peace treaty changed Israel’s fundamental security calculus and became the bedrock of the current order in the Middle East,” Nathan Brown, a Middle East expert and senior associate at the Carnegie Endowment for International Peace, told National Journal. “So for Israel, the events unfolding next door in Egypt have been like watching a train wreck, because they are reconfiguring the entire strategic environment in a very unsettling way. If you’re in the Israeli government, the only real question is how much more unstable and unfriendly Egypt becomes.”
In the short term, the democratic upheavals in the Middle East will almost certainly spread instability and cause furrowed brows in Washington and Tel Aviv. In the longer term, however, the strategic interests of both the United States and Israel could be well served by the death of the venerable idea that the only choice in the Middle East is between autocrats and theocrats.
“Regime change is coming to Egypt whether we like it or not, so for the Obama administration to continue to back an ill, 82-year-old dictator like Hosni Mubarak would have been both short-sighted and unwise,” said Michael Rubin, a Middle East expert and resident scholar at the American Enterprise Institute. The United States should instead seize a rare opportunity to embrace a mostly secular, democratic opposition that is on the march throughout the Middle East, Rubin said in an interview.
“If the United States doesn’t find a way to empower secular leaders in the region, we will create a vacuum that the Islamists like the Muslim Brotherhood will fill, which, given the scars of the Iranian revolution, remains our biggest fear,” he added. “The irony is that if Condi Rice and the Bush administration hadn’t walked away from the 'Arab spring' in 2005 before it had a chance to bloom, we would have a lot more leverage right now to channel these popular protests.”
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3)Listening to the Shale Revolution Often the only 'reform' needed is a plan to remove obstacles to innovation.By HOLMAN W. JENKINS, JR.
With turmoil in the Middle East comes the inevitable spike in oil prices, topping $90this week. Look for energy security to make one of its recurrent runs to the top of the national agenda. This time, though, we should listen to the shale gas revolution that has put an unexpected energy bonanza at our feet in places like New York, Pennsylvania and Ohio.
Any energy forecast a few years ago that failed to anticipate the shale boom and associated technological breakthroughs now mostly looks like a wasted effort. And that's the point.
Shale gas came painlessly into the world, though on paper the number of rich and powerful interests it upset would be nearly endless. Every owner of an oil well or coal mine or conventional gas well. Investors in the U.S. and Europe and Canada who spent billions building terminals to import liquefied natural gas (LNG). Investors in a long-planned pipeline from Alaska to the upper Midwest. Investors in the massive Russian Shtokman field, tipped for LNG exports to the U.S.
Just a few years ago, Russian leaders talked up the inevitability of a natural gas cartel more powerful than OPEC. Never mind. The U.S. last year topped Russia in natural gas production for the first time since 2001.
In 2003, then-Fed Chairman Alan Greenspan urged a rapid expansion of LNG imports to make up for a domestic shortfall. "We are not apt to return to earlier periods of relative abundance and low prices anytime soon," he said. Never mind. The U.S. is now building an LNG terminal all right, so it can export its growing gas bounty—nearly two Saudi Arabias' worth—to Asia.
Last month's stock-swap deal between BP and Russia's Rosneft might, a few years ago, have caused strategic jitters in Washington. Never mind. The Putin regime remains as odious as ever, but the balance of power already is perceptibly shifting away from the world's petrocrats to consumers, thanks to shale gas.
The organized interests whose world is being knocked for a loop by shale gas surely aren't happy about it. The quality on display here is freedom to innovate, also known as freedom to disrupt the rich and powerful who would prefer not to be disrupted. In the U.S., landowners enjoy mineral rights and are free to sell or lease those rights to drilling companies, whatever the neighbors might say. It wasn't the Exxons and BPs but smaller companies that figured out how to make shale gas pay.
Under U.S. labor law, these companies were free to take a chance on new workers without making a lifetime commitment. Also important, back in the 1970s and '80s, a series of deregulatory moves eliminated price and usage controls on natural gas, without which the business would never have been interesting to innovators and entrepreneurs. One company, Mitchell Energy, worked out how "slickwater" fracturing combined with horizontal drilling could free gas from dense shale rock previously uneconomical to develop. The firm's founder, George Mitchell, last year received the Gas Technology Institute's lifetime achievement award.
The U.S. shale boom has ignited a search elsewhere, from China to Central Europe. Poland alone is estimated to hold shale gas reserves equal to half of Europe's existing conventional reserves—a fact already altering the strategic balance between Europe and its soon-to-be-former energy overlord, Russia.
Europeans have also discovered, however, they lack some of America's institutional advantages, from private ownership of resources to flexible labor markets. In the U.S., says the Oil & Gas Journal, "Companies generally can develop shale plays located in the U.S. Midcontinent and East, where most land is owned privately, with minimal political wrangling. The fact that shale developments can cover entire counties means that royalties are spread among thousands of individual landowners, often aligning them with operators."
Before we wallow in self-congratulation, let's note the impossibility of equivalent transformations in other areas of American life. Our air traffic control system is controlled by government and has failed miserably to keep up with traffic growth. Our public schools are laboratories of stasis. Detroit is bound by a monopolistic labor regime from the 1930s. To touch on an especially sore point, federal and state regulation of health insurance has all but extinguished innovation in health insurance, even as government policy has made us more and more reliant on these third-party payers.
The shale gas revolution has been a surprise, in a sector where surprises are still permitted. Nobody "planned" it. There's a lesson here for every kind of reformer: Often the only plan needed is a plan to remove obstacles to innovation.
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4)Bubbles, Bubbles Everywhere
By Victor Davis Hanson
The 2008 financial crash originated with a housing bubble. Not long ago, the cheap money policies of the Federal Reserve, the infusion of trillions of dollars in new foreign investment, and the misguided policies of Freddie Mac and Fannie Mae all conspired to extend to millions of Americans lots of easy cash for inflated houses that they could hardly afford. Owning a house was seen as a "right" rather than the just rewards of household sacrifice, delayed gratification and budgetary discipline.
Builders, lenders, realtors and bureaucrats all got in on the easy-money Ponzi scheme -- until a few noticed that the emperor had no clothes and that rather pedestrian homes were hardly worth what unqualified purchasers had paid for them. Financial hysteria followed when shaky borrowers began to miss exorbitant mortgage payments, walked away, and lenders panicked. The subsequent meltdown is history.
There is a similar pension bubble rising as well. There is perhaps as much as $6 trillion owed in retirement pledges to Americans, $500 billion in California alone. That tab under present conditions simply cannot be met. For the last 30 years, politicians outbid each other to offer more lavish retirement packages to union members and public employees -- more eager for their votes than for ensuring the payment of what they had promised. Receiving a generous retirement package was considered a right rather than an investment predicated on past savings coupled with modest interest and dividends.
There may already be an immediate $1 trillion shortfall in meeting what is owed current retirees. Pensioners on the receiving end are becoming more numerous, older and more affluent, while the younger workers on the paying end are becoming less numerous and poorer. At some point, a city, a state or perhaps the Social Security system itself is going to announce there is no more money. Then, if there is not another financial crisis and Wall Street meltdown, the fantasy will end with workers paying higher contributions, retiring later and receiving less.
Then there is the higher-education bubble, as collective student debt nears $1 trillion with no guarantee that it will be paid back. Lots of poor college students and their strapped parents are floating huge government-subsidized student loans to pay for ever more costly bachelor's degrees that no longer ensure that the recipients are either well educated, will find a job upon graduation or, if employed, will be better-paid than the vocationally trained. Going to college has somehow become seen as a national right rather than a privilege predicated on superior academic achievement, financial sacrifice and continued academic discipline.
There are disturbing commonalities to these expanding bubbles -- and others like the recently enacted health care entitlement on the way. The rich and connected seem exempt from the impending reckoning, and the poor assume government will offer them debt relief. Those in between are on their own and will have to pay more for receiving less.
America is not creating enough wealth to justify the notion that everyone should go to college, get a higher-paying job than their parents, buy a nice, affordable house, and retire earlier and with more money than did prior generations.
We have forgotten what wealth is -- and how tenuous the good life is. Riches are created by educated and skilled workers who directly translate natural resources into commodities that make life easier. The nonproductive sector in government, law and banking must facilitate that process with efficient and transparent financial and political systems.
Instead, we are failing to provide our college graduates with unique skills that make them rare assets in the global competitive arena. Meanwhile, our more talented and better-trained workers are suing, subsidizing and regulating more than ever -- instead of searching for more oil and gas, supplying more water to productive farmland, fast-tracking nuclear power plants, manufacturing machines and consumer goods, or devising new and more efficient ways to help others to produce such food, fuel and products. In other words, we are living the good life in the abstract that we have not quite earned in the concrete.
America is a naturally rich country. Unlike Russia, China, Egypt or Greece, it is stable, transparent, tolerant and free of civil strife. The result is that we are not doomed to see these bubbles expand and burst with the attendant social unrest. We need only return to our old American creed that wealth is created only with hard work and delayed gratification. In other words, America must get back to producing real, rather than imaginary, riches and ignore pleasing rhetoric that masks unpleasant reality -- the faster the better.
Victor Davis Hanson is a classicist and historian at the Hoover Institution, Stanford University, and author, most recently, of "A War Like No Other: How the Athenians and Spartans Fought the Peloponnesian War."
4a)Investor's Business Daily Editorial: Mideast Dominoes Near Tipping Point
Instability: It began in Tunisia, spread to Egypt and might expand to Jordan, Yemen and even Saudi Arabia. Are we seeing the "untamed fire of freedom" George W. Bush envisioned, or a new Mideast Dark Age?
In his second inaugural address six years ago, then-President Bush, pointing to the liberation of Iraq, boasted that "we have lit a fire" that "warms those who feel its power, it burns those who fight its progress, and one day this untamed fire of freedom will reach the darkest corners of our world."
Egypt certainly resembles an untamed fire right now, but is it a fire of freedom? Egypt's President Mubarak is reviled by protesters as a tyrannical modern-day pharaoh, yet the great beneficiary of his waning power right now is the jihadist Muslim Brotherhood.
In spite of a government ban, it's the largest opposition bloc in Egypt's Parliament, getting its members elected as independents.
The Brotherhood has no more to do with democratic freedom than does Hamas in the West Bank or Hezbollah in Lebanon — two other terrorist organizations that exploit democratic processes.
Were the Brotherhood to gain power, the obvious comparison would be Algeria 20 years ago, when the pro-Shariah Islamic Salvation Front gained parliamentary dominance and the army stepped in to prevent "one man, one vote, one time."
Founded in Egypt over 80 years ago, this oldest and biggest of all Islamist political organizations has tentacles reaching virtually every Islamic nation and extending into the U.S. as well.
The geopolitical implications of the Brotherhood gaining power in the Middle East's most populous Muslim country are chilling — possibly the start of a well-organized pan-Islamist wildfire that could mean takeover of a whole series of Muslim governments by a unified political force adamantly hostile to Western civilization.
National Review's Andrew McCarthy, who as a federal prosecutor convicted the 1993 World Trade Center bombers, exposes the Brotherhood in his new book, "The Grand Jihad." The U.S. government "has long been in possession of the Muslim Brotherhood's playbook — in multiple iterations, as a matter of fact," he notes.
For instance, a 1991 Brotherhood memorandum obtained by the FBI outlined "civilizational jihad" — "eliminating and destroying the Western civilization from within," while a post-9/11 raid by Swiss authorities of the home of Brotherhood financier and suspected al-Qaida money launderer Youssef Nada yielded a 14-page, 12-point "master plan" written in Arabic.
Titled "The Project," it told how to "establish an Islamic government on Earth" by coupling terror with global strategies like immigration, propagandizing and political protest.
Yet Homeland Security Secretary Janet Napolitano, "along with her top aides, personally held two days of intensive briefings in late January 2010" with associates of the group, McCarthy writes.
And President Obama invited 10 Muslim Brotherhood members to his June 2009 Cairo University speech fictionalizing the history and philosophical and scientific achievements of Islam.
This is the group Jordan's King Abdullah met with Thursday after replacing his Cabinet on Tuesday. Jordan, like Egypt, was hit by street protests, but unlike Egypt, government power there is less centralized and demonstrations weren't directed against the king.
Still, Jordan does suffer both economic hardship and governmental corruption.
In Saudi Arabia, per capita income exceeds $20,000 a year, dwarfing that of Egypt. So presumably its danger of instability is less.
By treating the Muslim Brotherhood as statesmen, will moderate Arab leaders like Abdullah appease a group that seeks global Shariah? Or will the move backfire, set the dominoes falling and allow such jihadists to reset the Mideast playing board?
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5)Hamas blows up Egypt-Israel-Jordan gas pipeline. Supply cutoff indefinite
The pipeline supplying Egyptian gas to Israel and Jordan was blown up near the North Sinai town of El Arish early Saturday Feb. 5. Egyptian state TV reported "terrorists" had carried out the attack which caused a huge explosion and fire. Israeli Prime Minister Binyamin Netanyahu conferred urgently with Infrastructure Minister Uzi Landau and energy firms over the abrupt cutoff of 25 percent of Israel's gas needs and ordered security beefed up at energy installations.
The Egyptian and Israeli accounts are contradictory.
An Israeli official spokesman said the explosion was nowhere near the Israeli section of the pipeline and closer to the Jordanian branch. The Egyptian spokesman spoke only of supplies to Israel which he said had been suspended as a precaution because there had been several smaller explosions along the pipe.
The Israeli Infrastructure Ministry spokesman reported that Egyptian gas, which covers 25 percent of Israel's needs, had been cut off at 0900 Saturday morning. He did not foresee regular power supplies being disrupted.
Counter-terror sources report that the attack on the El Arish gas facility was planned on military lines by a special Hamas team which infiltrated Sinai from Gaza last week. It was a major Hamas operation against Israel (which incidentally supplies most of the Gaza Strip's power), and blatant Palestinian interference in Egypt's domestic unrest. It was also a fiasco for the joint IDF-and Egyptian military effort to police Sinai during the turbulence in Egypt and secure this strategic peninsula against destabilization by terrorists.
Muslim Brotherhood spokesmen in Cairo were quick to attach responsibility for the pipeline attack on disaffected Bedouin – a clumsy attempt, say sources, to clear their offshoot, Hamas, of blame for a well-planned act of which they must have had prior knowledge.
Jordan is badly hit by the loss of Egyptian gas which covers 80 percent of its energy consumption. The Hashemite kingdom will have to resort to the far more expensive heavy oil and diesel to keep its power supply running and raise fuel prices after the king yielded to Islamist-back protesters' demands to reduce prices.
The close rapport between the Muslim Brotherhood and the Palestinian and Lebanese terrorist organizations came to light earlier in the Hizballah-led operation to release Lebanese Hizballah, Palestinian Hamas and Egyptian Brotherhood convicts from Wadi Natrun jail north of Cairo.
While the Hamas and Hizballah escapees headed for Sinai and Gaza, the MB activists made straight for the hubs of disturbance in Egypt.
The embattled Mubarak administration in Cairo may well find it politic to indefinitely put off repairing the pipe and restoring supplies to Israel for two reasons:
1. The incident will support Mubarak's argument that his immediate departure as demanded by Obama would throw Egypt into chaos – and not only Egypt, but resonate devastatingly across the entire region. Not just Israel, but its second peace partner, Jordan, is badly hit too by the loss of Egyptian gas which covers 80 percent of its energy consumption. Amman will have to convert to the far more expensive heavy oil and diesel to keep its power supply running. Fuel prices will have to be raised shortly after the king dropped them to quell the Islamist-back protests shaking the kingdom.
2. Some of the opposition factions backed by the US for a role in future government, such as the Muslim Brotherhood, are fiercely opposed to Egypt's peace relations with Israel which he has promoted for 32 years. The sale of Egyptian gas to Israel has come under constant attack in the street, which has accused the government of undercutting world prices and defrauding the Egyptian treasury.
The Mubarak regime and Egyptian army may want to show they respect popular opinion and are not American or Israeli pawns by not repairing the pipeline and keeping the gas supply to Israel cut off.
Reports that the Israeli Infrastructure Ministry's assurance that no power disruptions were foreseen glosses over the serious repercussions of the loss overnight of a quarter of Israel's gas consumption for manufacturing electricity and its lack of gas reserves.
Israel's power stations will have to switch immediately from gas to heavy oil or coal, a complicated technical process that will have a bad effect on the environment. Energy officials said the power stations affected are Hadera, Haifa (which is partly gas-fueled) and the Tel Aviv Reading facility which was only recently converted to gas. All Israel's emergency electricity stations are also powered by gas.
Therefore, the Infrastructure Ministry's assurance may have been premature.
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